Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Supercharged Small-Caps

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I've noticed that the IWM refuses to budge, even in the face of general market weakness. For instance, right now the QQQQ are down about 0.7% whereas the IWM is virtually unchanged.

Below is a line chart of the IWM, SPY, and DIA on an intraday basis for the past 120 trading days. As you can see, the IWM has defied any push downward. Since I am short mostly small caps, I certainly hope this gap gets erased.


Gaming Industry: Long GPIC, Short ASCA (by Dave Pinsen)

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Hey fellow Slopers,

Happy New Year.

On Wednesday evening, I mentioned to those on the market neutral trade notification e-mail list that I planned to short Ameristar Casinos Inc. (ASCA) and buy an equal dollar amount of Gaming Partners International Corporation (GPIC) on Thursday. It turned out that there were no shares of ASCA available to short Thursday, but there are options available for it, so you can establish a synthetic short position in ASCA.

Ameristar Casinos Inc.1 (ASCA), headquartered in Las Vegas, owns and operates casinos eight casinos spread over several states in the U.S. In August, the company announced that it was looking to be acquired, sparking a rally in the stock, but earlier this month the company announced it was no longer seeking to find a buyer — presumably, because it couldn't find a willing one at whatever price it was seeking.

Ameristar has an Altman Z"-Score of about 0.26, according to Short Screen (recall that Z”-Scores below 1.1 indicate financial distress). It also has a current ratio of 0.46.

Gaming Partners International Corporation (GPIC), also headquartered in Las Vegas, is a picks & shovels play on the casino industry: it manufactures casino tables, roulette wheels, gambling chips (including ones embedded with RFID microchips), and sells its products worldwide.

GPIC has Altman Z-Score of about 5.9, according to Short Screen. Recall that Z-Scores above 2.99 indicate financial strength. It also has current ratio of 3.91.

In addition to the contrast in financial strength, GPIC has a more attractive valuation than ASCA. Since ASCA has significant net debt, and GPIC has significant net cash, an enterprise value/EBITDA comparison seems appropriate. GPIC has an enterprise value/EBITDA of 2.93 versus 7.83 for ASCA (trailing twelve months, in both cases).

1Which apparently hasn't gotten around to building its website yet, and has its domain parked with Network Solutions.

Disclosure: No position in either of these stocks currently. My current brokerage doesn't allow synthetic shorting, so I haven't placed this trade yet. I may move the account to a firm that allows synthetic shorting, and place the trade there, but I won't be able to do that for at least a week.

Has Silver Finally Peaked?

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Although shorting silver has been a fool's errand for many years (said the man who sold his bullion brick at $9 per ounce), I still want to share a few charts. First, this chart of SLV shows the price mashed up against a very long-term price channel.


Second, a chart of the commodity itself, measured over decades, shows we are pushed up against a fan line. In the past, a rapid price ascent pushing against a fanline preceded a hearty fall.


Third, a cautionary chart – below is ZSL (the ultra-short on silver) in percentage terms. It is down something like 95% since its introduction.