Sunday, July 8, 2007

About the only good 'Short'-sighted Idea I can find

There are many ways to earn money these days. One of them is the stock market. But, wait, that's a risky proposition, you say. I don't know anything about stocks, you say. But, you do know about photography, I say. Invest based upon what you know.

I know a thing or two, and one of them is that, like Medusa, whatever Getty Images does turns their stock into a stone, sinking to the bottom. Now, I'm no broker, I don't have shares of stock in them, but I do know a bad investment when I see one. So, how to make money on them when they are loosing? It's called, the short. Shorting a stock means that, rather than making a stock buy and hoping it increases in value, you are allowed to borrow the stock and then sell when it's dropped in price, and you profit from the difference between what the stock was when you borrowed it at, say, 55 a share, and then sold it at 50. This can kill you though if you short a stock at 55, and it rises to 65, you're on the hook. It's more complicated than this, of course, so check out this link for a better understanding.

Let's assume you have $5k to invest, and you wanted to involve Getty in your profit objectives. Forget shooting for them, under the WMFH terms they have, that's a day-laborers' game. This you can do from the comfort of your easy chair while watching Wheel of Fortune.

Say you wanted to invest $5k on November 1, 2005. For this exercise, we'll always use the opening price of a stock. You'd have bought 60 shares of Getty (GYI). You also planned to sell at the opening bell of the second day after they reported their quarterly results.

On January 26, 2006,
Getty reported their results from their Fourth Quater of 2005
. On January 26, anticipating their 4th Q results, their stock peaked just over 90, with trading above average at over 500k traded. The next day, when traders were able to let what was reported sink in, the stock dropped to a low of just over 81, an 11% drop, before closing down over $5 a share, with a whopping 5 million-plus on heavy trading. Instead of having bought those 60 shares, you shorted the stock with $5k to cover your trades, having 55 shares at $89.15, and the opening price on the second business day after this report, January 30th (a Monday), you would have earned about $313.50. (check this link for the prices that day.)

On April 20, 2006, Getty reported their 1st Quarter 2006 results, and they closed at 76.13, down nearly 10% from the previous quarter's results. Not to be underdone, expectations were not met (again), and on heavy trading, again, 5 million-plus, it dropped 14% to $65.66 at the end of the next day. It continued to fluctuate downwards, closing even lower by the end of that week. Shorting that $76.13, it had an opening 2 business days later at $65.66, earning you another $680.55.(check this link for the prices that day.)

On October 24, 2006, Getty Reported their 3rd Quarter 2006 results, and the trend seemed to be what folks were anticipating, as, stocks tumbled prior to the announcement, before dropping from just over 48.50 to just under 42, at 15% plummet once again. With $5k, at the 10/24 close, you'd have 108 shares to work with. Shorting that stock from 45.96 to the $41.90 as the opener on the second business day of $41.90, generating $438.48 in your pocket.(check this link for the prices that day.)

On January 29, 2007, Getty reported their 4th Quarter 2006 results, and you'd have taken a few licks, as the stocks seemed to recover a bit, moving up from just over 44 to just over 48. Could it been that the analyists liked the fact that it was reported that they canned dozens of employees days before the October 24th results, so as to have reason to say that things will be changing heading into the 4th quarter? Here, shorting the stock at $44.44 and selling again on the 2nd business day, at $49.25 would have cost you $538.72.(check this link for the prices that day.)

Again, even with the hearlded aquisition of WireImage, Getty again lost money, causing a drop of almost $1 a share, dropping again the day they announced the finalization of that acquisition, on April 26th.(check this link for the prices the day they announced the aquisition.)

On May 1st of this year, announcing their 1st Quarter 2007 financials, with that same $5k, shorting at 51.52, you'd have 97 shares to work with. Selling at the opening on the second business day later, at the $50.00 opener, you'd net $147.44. (check this link for the prices that day.)

Where does this leave you? Summarizing the above net figures, you'd have earned over $1k ($1,041.25) shorting their stock, just because you know how bad they are doing with all their decisions they are making. So, look to their next quarterly filing date, and see if maybe a short is right for you.

Interestingly enough, if you'd really like to see what Getty thinks of themselves, check out their latest SEC 10k filing here, and some interesting stuff appears on page 8 of the PDF, although on page 10, they say:

Some of our current and potential significant competitors include:
  • other general visual content providers such as Corbis Corporation, Jupitermedia Corporation, Amana Inc., Alamy Limited, Index Stock Imagery, Inc., Photolibrary Group Limited and Masterfile Corporation;
  • specialized visual content companies that are well established in their local, content or product-specific market segments such as Reuters Group PLC, the Associated Press, and ZUMA Press, Inc.;
  • other companies operating micropayment sites such as Dreamstime LLC and Fotolia LLC;
  • commissioned photographers; and
  • online search engines which provide for image search, such as Google, Yahoo and Microsoft.
There are also hundreds, if not thousands, of small stock photography and footage agencies, image content aggregators and individual photographers throughout the world with whom we compete.
Wow, we, individual commissioned photographers they see as a potentially significant competitor? No wonder they are trying to edge us out of access at concerts and sporting venues around the country!

Speaking of sporting venues, part of this post was prompted by my finding myself inside the Getty lair when they were throwing a "posh" party at a hip and trendy SoMA nightclub they had rented out on a Saturday night to entertain the masses on hand to work the all-star game in San Francisco. Two floors of a night club, with bouncers all in black and a red velvet rope-line kept the unwashed masses out. I had a beer, and looked about for the higher-ups, to tell them of my discovery that an almost surefire way to make money with Getty was to short their stock when they made their quarterly announcements, and to thank them for that reality, but, alas, I couldn't find anyone there to have that conversation with. I was surprised at the overindulgence of the Getty party planners, and I felt a bit like it was a return to the crazy-party days of the dot-com boom. Yet, Getty doesn't seem to actually get the picture (pun intended) and is spending money like, well, it's 1999. Who's minding the store as the stock has slid from a high of about $95, to approximately a 50% loss? Who's genius idea was it to buy another bad business model - iStockPhoto, and create a situation where their current images could have sales canibalized by this micro-stock site. Seems "Getty said its royalty-free images business, which sells the company's pictures to clients such as advertisers at set prices, grew 13 percent.", as reported by Reuters here. Isn't Getty forgetting to realize that royalty-free is a short term potential gain for a long-term loss? Heck, there's a hint right in part of the name of the category - "free"! As in, license it once, for a low-low set price, and never license it again! It's free! Don't they see that this horse is destined for the glue factory? While RF sales have grown 13%, the Getty-ites are busy parting like it's 1999, seeing reality through what I can only guess are their beer-goggles.
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7 comments:

Michael Czeiszperger said...

" Isn't Getty forgetting to realize that royalty-free is a short term potential gain for a long-term loss?"

Well, yes, except that iStockPhoto and the other royalty free sites are going to be selling images regardless of which one, if any, Getty buys. This way Getty at least realized *some* revenue.

Long term I'm sure Getty is thinking that the low end of the market is going to be taken over by royalty free, and there's nothing they can do about it. The market is going to be segmented into different quality levels, with iStockPhoto representing the bottom of the barrel, i.e. people who are happy to see their images being used for less than the price of a latte.

In the end, the erosion of the stock photo market is being caused by too many photographers willing to work for free. The ever growing number of royalty free image companies are just taking advantage of it, but would dry up and go away if they had no images to sell.

Anonymous said...

It's the end of the world as we know it.......and I feel fine.

REM

Remember that tune?


The key to beating them is for professionals to stop submitting work to them and to short the stock.

If enough folks do that they'll go out of business. Look at it this way; why shoot a SPEC or a WMFH job for them when you can take some of the money that you would lose doing this kind of work for them anyway, and short the stock with it? If enough folks do this, that little investment will grow quicker than your Getty royalty payments.

How sweet......making money while Getty looses their shirts.

But wait a minute......haven't they been doing this to us already?

Brady said...

shorting stock...
you didn't happen to read the NY Sunday times today did you?


re "invest in what you know" peter lynch has some good books on this.

argv said...

I had already covered this exact subject on Jan 17 this year, where I had just closed MY short position on Getty in the low 40s, when I'd opened up the position in the upper 70s.

My analysis, however, was (and still is) quite different. You can read about it here:
http://danheller.blogspot.com/2007/01/why-corbis-wont-go-public-yet.html

dan

Brian said...

"This way Getty at least realized *some* revenue."

LOL Now THAT's funny! That's precicely the same thing that photographers say when they allow royalty free use of their images for the grand sum of $5. Maybe Getty mistakenly drank the iStockPhoto Cool Aid.

jasphoto said...

John - the calculation you missed including was - at this rate of decline when would the close up shop? - !!!!

ella said...

When World War I came to a close in mid-November of 1918, many ideas were circulating in Europe as to what the peace settlement should entail.
--------------
Ella
sale by owner

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