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|Thursday, April 24th, 2008|
Buy the Pullback
Energy is without doubt the place to be in this market. With the recent pullback of the major stocks in energy, the trading day Monday would be the ideal time to consider pulling the trigger on such solid names as Apache, XTO, and Occidental, just to name a few.
These pullbacks are nothing but people looking for some quick money pulling out of winning positions to free up cash to go hunting for more deals.
The money will undoubtedly return to these names.
For a rule of thumb, you should never have one stock take up more than 20% of your portfolio... so when winning plays do push over that number, taking profits and putting cash on the sidelines for the next opportunity is a smart and sensible move... and the sellers of the recent days have done something very similar to these stocks.
Another sector that has seen similar selling is Agriculture. Old Friend of mine, Potash corp, has fallen back quite a bit. There's no reason for the selling because they destroyed on their earnings and have nothing but a bright future as far as anyone can look out.
Any of the big Ag plays will do just nicely, Agrium, Mosaic, Monsanto, Potash, and so on.
If you've seen the news the past few days, you've probably heard of soaring food prices and food riots in poorer parts of the world. It's no mystery why when you take a good look.
Soaring commodity costs, from oil to soy beans. Fertilizer's going right up along with it. More people eating more food because they can finally afford it, and of course, the US.
First thing... we subsidize farmers for land they don't grow crops on. In essence, we pay the farmer to do nothing with the land. The subsidy should be suspended for the time being and force the farmers to grow more food until prices are so that everyone can eat.
Second, we subsidize ethanol from corn... if we're going to do that, we should be giving that money to algae based biofuels instead... they're a whole lot more promising.
Thridly, there's been no action by the government in any way to support the dollar. A weak dollar means higher prices across the board.
There's not a shortage of food... it just costs a whole lot more.
|Friday, April 18th, 2008|
Quite the week it was... After the GE disappointment that dropped the hammer on the market, we had a bunch of tech and industrials come out and show us that the world hadn't fallen apart like we had feared.
Intel, Caterpillar, IBM, and Google all met or soared past expectations and all said similar things... Overseas was big.
You have to remember that the US economy is not a free-standing entity. We are coupled to nations across the world. That being said, if the world's economy can hold up even as the US becomes a drag, it would prop us up perhaps lessening a possible recession.
So far, the theory seems to be holding up to the pressure.
What to do with Google. Today's 20% move was certainly special, but perhaps that was a bit much... or not.
For a trader, Lightening up on your shares of google would be a prudent move. Generally, Should a stock jump up so high in such a short time, it is very often followed by profit taking. When I saw the news and the share price jump, that's the first thing I thought.
I had loaded up on shares when Google was trading under 450 and am now seeing the green.
Taking profits has never lost anyone money.
For the long term investor, Google has been and will continue to be a no brainer. Hold on to them. It may take a couple years to hit 1000$ but it will certainly make it.
What about Google's Chinese Cousin Baidu? I'd say take the profits here and look for a better deal... and that better deal would be Google if you like the internet search sector. Google's valutation is a whole lot better.
Oil... this is a bull market that makes no sense. There simply isn't any reason on the surface that justifies oil's price. But unfortunately oil doesn't get prices based on what oil we have, but rather how much we will have.
And now it's a safe bet it seems that there's less oil in the ground waiting to be discovered to keep up the habit of downing millions upon millions of barrels a day.
So, oil trades higher on any simple reason to regardless of all the bearish news that comes out.
I'm looking for oil to hit 125$ short term and 140$ to be the high for the year. No rest for the weary.
The worst part is that I don't believe that Gasoline reflects the price of crude by a mile. I've already seen 3.50 at the Cumbie's up the road, and they the cheap guys.
|Thursday, April 10th, 2008|
Great IRA stocks
IRA's are certainly a great way to save for retirement, but you're probably looking into ways to ensure that your account will continue to appreciate even through tough markets like the current one. Most IRA's are invested so that they go up as the market goes up, so when the market tanks, your retirement takes a hit.
The first I'd like to point out is a massive dividend yeilder, and being in an IRA, it'll be tax deferred.
Frontline, FRO, pays a dividend of nearly 17%. Usually a dividend this high is a great sign of trouble, but not with Frontline. Their in the business of shipping oil... a very lucrative business with oil at these prices. Oil's not going away anytime soon and someone needs to get it to the markets that need it, and FRO is the best name in the business.
Second is the Penn West Energy Trust. PWE
Being an energy trust, you also have to pay taxes on it, but in an IRA, not until you withdraw the money. With a yeild of some 14% or so, you'll see some very nice growth in the amount of money over the long term.
There are other energy trusts, but this one is consistent with it's dividend and has a very nice Foward PE of about 11, compared to its current PE of 40. So there's growth here, a huge dividend, and the stong possibility of a rise in it's shares.
Thirdly, there's Health Care REIT inc, HCN.
I'm a strong believer that health care is going to grow and grow as the baby booms become older and start to have all the little things start to go wrong with them. This surge of aging people, not entirely good for keeping your personal health care costs down, but good for this REIT who's value should go up as more old people start finding their way to the doctor's office.
The Logic behind this one is simple... the more old people, the more medical care is needed. The more medical care is needed, the more valuable hospitals themselves become, triggering a rise in this REIT.
This one also comes with a 5.7% yeild.
|Monday, April 7th, 2008|
The news stories that came out today touted the rising demand for steel in China that will offset any decline in the US or Europe, which will result in Higher Steel prices.
This will of course benefit the Major Steel makers.
As you might have seen if you watch any of the business TV, US Steel is on a tear, touching new highs and shows no signs of stopping. Next up are some of the smaller, less known steel makers will see their stocks rise as well.
A rising tide lifts all ships.
Nucor NUE is probably the second best play on the sector behind US Steel. Then I'd put Gerdau Ameristeel in Third.
The Recent correction in Commodities was just consolidation in the market and the next leg upward is beginning.
Look for Steel stocks in general do very well over the next few months as rising prices coupled with high demand keep these stocks on the move.
Consider looking into shares of X, NUE, and GNA
|Friday, April 4th, 2008|
I saw this on CNBC the other day and thought it was pretty awesome.
It's a website called updown.com.
It's a virtual stock trading site that gives you a fake one million and if you beat the S&P, you earn real money.
In essence you get paid for real if you beat the S&P with what amounts to Monopoly money.
If you lose fake money, who cares?
|Tuesday, April 1st, 2008|
Cramer is pushing natural gas stocks, particularly domestic onshore, but I'm pretty sure he'll miss this one.
Natural Gas Services Group, NGS
They work with 'unconventional reserves.' These reserves don't just flow up when you drill a hole, you need a pump of some sort to coax it out of the ground. As Natural gas becomes the preffered energy source because oil will never come down again and ethanol is proven to be a waste of time, this company will benefit.
Natural gas is in the beginning stages of a bull run. No way around it. Oil cost too much, coal is too dirty, and if democrats win in November coal is going to hurt bad.
As the price goes up, these unconventional reserves become more and more economical and demand for NGS's product and services goes up.
Some proof of the increasing demand for NGS's products taken from Businesswire.com:
Natural Gas Services Group Inc. (AMEX: NGS) provides rental and service of high quality rotary screw and reciprocating compressors. NGS earned its place on the Earnings and Margins profit track with net profit margin of 17% and a Zacks #1
Rank. The company reported that fourth quarter and annual net profits increased by 56% and 62%, respectively; fourth quarter net profits amounted to $3.6 million and the overall net profit for the year was $12.3 million. Furthermore, the EPS growth rate for Natural Gas Services Group was 53.03% over the past year.
Growth, out of favor on wall street for some time now, will come back into the limelight... And NGS has it.
The only ugly aspect of this stock is that it trades on the AMEX, which is the Junior Varsity team when compared to the Nasdaq and NYSE.
On any kind of pull back I want to pull the trigger on this one.
|Tuesday, March 25th, 2008|
Today's terrible consumer confidence news somehow didn't manage to drag the markets down too badly. Most likely because it's the 'yeah, we know' state of mind predominating.
I'm not even sure how they come up with how confident I, being a consumer, am about buying things but, sure, they have a way.
There certainly was no shortage of weakness today, and the weakness was seen in GPS. Not Gap store, but yeah, they aren't exactly good.
But GPS, the location awareness technology, hasn't exactly had it good of late. Garmin has lost half of it's market value, now trading at 60$ a share, and the primary maker of GPS Chips, SIRF, is looking at perhaps laying off some of its workforce to keep costs under control.
I was once touting the growth behind sirf, which is there, but competition has really put a dent in the profits so much so that they've actually posted losses. Today's news dropped them some 28 or so percent.
If investing in GPS, I would avoid the Chipmakers themselves. They are the one's getting hit hardest by the now intense competition. Garmin is the leader, will be the leader, and probably won't be challenged. But the dust hasn't settled around the chipmakers.
Big players like Broadcom are getting into the act, putting pressure on Sirf. STMicroelectronic also has entered the GPS arena.
In order for Sirf to keep it's market share, it's had to start cutting prices to customers who once paid prices that Sirf Dictated.
GPS is going to be a big winner, but now everyone is taking on the front-runner and is really having an effect.
|Tuesday, March 18th, 2008|
I think that we should take a hard look at why CSX is doing so great when ex today, the market itself is doing terrible.
Yeah, you bet today's 420 point move in the Dow and 91 move in the Nasdaq is something to feel good about, but the financials have led us into recession. So, logic would then say that the company responsible moving all those things that makes the economy go would not be touching 52 week highs today, but rather hovering around the lows.
CSX is the gravy train we've all been looking for. Trucking companies are getting pinched by fuel more so than trains. Truck drivers are in short supply, so payroll for truckers is up. Also, increased use of coal and ethanol - both things best moved by train - is a boon for the rails.
Consider this... to move 120 truckloads by truck, you need 120 truck drivers. To move 120 truckloads by train, all you need is 2 engineers.
In each, fuel, personnel, and volume, rails have truckers beat. It's a good thing for truckers that rail lines don't go everywhere.
I've been behind CSX since the Mid 30's, and now it's pushing into the mid 50's and all during the toughest market in quite some time. Just imagine how well this company is going to do when the economy returns and the markets get into another bull run.
|Sunday, March 16th, 2008|
Bear Stearns is all done, now belonging to none other than it's Knight in shining armor, JP Morgan. For a stunning $2 a share, or 236 Million.
It's unsure what's going to happen to the 14000 BSC employees worldwide, because JP Morgan has quite a bit of overlap with BSC. Less importantly, The Bear Stearns name may not survive... a sort of a blow to their pride.
Since This kind of a thing hasn't happened since the 1930's, during the Great Depression... If there was a trade that bets that no one knows how to trade this, I'd put my money there. Certainly not saying that we're heading into a depression. That would require a global economic collapse, and as long as there's BRIC, no one need worry too much.
So, Bear Stearns is gone. It's now one of the many things that belongs to the late JP Morgan and the company that bares his name.
|Friday, March 14th, 2008|
BSC down nearly 50%
We all knew Bear Sterns BSC was in more trouble than the rest, but today BSC showed us all in how horrible of shape they were really in.
Earlier, I was looking through the options market and found what I thought at the time were some rediculously stupid bets, and they were Bear Sterns at 30.00 before long. I laughed a little thinking that it just wouldn't happen, unless of course, they tanked.
Well, at the market's close today, BSC was at exactly 30.00. And yes, they did tank. If it were not for JPMorgan riding their horse to the Fed, BSC is out of business.
Well, whoever had those options is a whole lot richer today.
BSC is the first of the big to fall, and perhaps not the last. In today's trading, another big investment banker/broker, Lehman Brothers fell 15% as the vultures circle around that company too. If one more is to fall, this is the most likely.
BSC's collapse is nothing but an oppertunity for JPMorgan. They're in a position to just take for pennies on the dollar the juciest parts of BSC. JPMorgan was once in talks to buy parts of their business. All it has to do now is fend off other companies looking for a piece.
|Tuesday, March 11th, 2008|
Finally, something to feel good about
Today's rally was different from previous rallies in this market. Instead of heavy selling into rallies, traders kept loading up on stocks as the market was advancing, on above average volume. Another encouraging sign was the the Dow closed at the highs of the day.
The trigger for this rally was the latest action by the Fed, in a somewhat creative move, is going to pump 200 Billion dollars worth into the Financial markets. The hope is here that it will provide much needed liquidity to the markets and get us back to something closer to business as usual.
On the News, beaten stocks like Cisco, Intel, GE, Microsoft, and even later on, Bear Sterns pushed upwards very nicely in convincing fashion. Citi pushed nearly 10% higher, which helped the Dow Soar.
The biggest winner today is the Nasdaq, which was up some 86 points today. Technology is without a doubt the growth sector of our age. The Nasdaq is home to the likes of Cisco, Intel, Google, Amazon, and Microsoft which have all been hurt far to much and were due for a huge upside move. All the needed was a catalyst to make it happen.
Is this the beginning of the end of the bear market? Probably not. In every bear market there are these periodic rallies. Investors are looking for some sort of good news to get them in the buying mood. But the reality still is that by any common sense metric, we're in a recession.
|Thursday, March 6th, 2008|
Brace for this
today we had the Nasdaq hit a new 52 week low and the S&P break through a very important technical level that the media pretty much dwelled on.
With the S&P breaking through the January lows, we're geared for another drop in all the major averages.
Unless there's a miracle of a jobs report coming up, get ready, the bear market it really going to get it's grip.
Things conspiring against us:
Oil at 105, a record level
The entire commodities complex on the rise
A very weak dollar
A Fed that's behind the curve, to say the least, and is now picking it's poison. Inflation or negative growth.
A dual bubble burst, the first in housing and the second in the Financials.
And the worst of all, a weak consumer.
I do believe in the Recession, and I don't believe it'll be gone by the summer. We have issues and we will do a good deal of damage to the world economy before we're done with this.
In summary, I am short all markets, the Financials and discretionaries in particular.
As for something I'm sticking with, it's the obvious: Energy and other commodities, Consumer staples, and Agriculture.
|Wednesday, March 5th, 2008|
Bill Gates, after thirteen years atop the financial pyramid, has been knocked off by none other than genius value investor Warren Buffet.
He's now worth in excess of 60 Billion. Which is quite a staggering number.
His new found status as world's richest can be attributed to the rise of shares of Berkshire Hathaway, which at current prices, will take 139,000$ to own just one share.
|Saturday, March 1st, 2008|
I'm long CSX on this pullback. This is a company that's managed to keep chugging along despite the economic slowdown and housing collapse. Ethanol and Coal are holding the company's bottom line up nicely. Since Ethanol is the same thing as is in whiskey, it's corrosive and can't be transported by pipeline.
CSX didn't just keep it's head above water in the fourth quarter, it beat its earnings.
I've liked this one for a while now, and have pulled in quite a return when I first picked up shares in September when the price was in the upper 30's.
CSX hit a 52 week high last week and has fallen back 9% since. This is a good time to buy.
This has been an easy market to trade, and if the pattern holds through to Monday, we'll see one more down day before the market heads back up.
I've made some good use of the Dow 30 Short ETF (DOG) with this last downturn. Also, it's a world easier for homegamers and beginners to short the markets using the ETF.
|Friday, February 29th, 2008|
|Tuesday, February 26th, 2008|
Google's been taking a beating of late in the markets, pushing very close to 52 week lows at points today. Todays push downward was caused by a report suggesting that Google's paid clicks (the Highlighted links and the links along the right side) were down.
It's tough to say exactly what caused this drop, should there be one. It could be that people just aren't clicking on them. A crackdown on Advertisement Fraud, or companies aren't bidding on as many search terms.
Some analysts have lowered their first quarter Earnings estimates and full year profits. Some others suggest that this fear over a drop in paid clicks is overblown, saying that revenues per search may mitigate the drop in searches.
So, each click makes more money, so as many clicks really aren't needed.
As a value investor first and foremost, I can't help but think what a godsend a steep drop in Google is. Google is now trading at a PE of just under 35 and a PEG of .67.
Google under 500 is cheap. Google under 450 is a steal. A further drop in Google is nothing but an even greater opportunity to get in on the company.
I don't believe that a Yahoo/Microsoft alliance, should it happen, will do anything to hurt Google. No one alive has ever yahoo-ed anything.
Very few Companies have ever become a verb. There's only three I can think of, and they're Xerox, Google, and Tivo.
Google, over the long haul, winner. No doubt about it.
|Thursday, February 21st, 2008|
Canada is one of those nations that down here in the States, we don't really care about. The only time I really paid attention to Canada was back at the end of High School planning out senior trip To Montreal because you could drink at 18.
But there's more to Canada besides Minors from the States drinking and Polar bears. Canada by sheer size is guaranteed to have massive reserves of just about any commodity. The US relies very heavily on Canada for all sorts of things. The US imports more oil from Canada than from anywhere else. Timber, which is really Canada's thing, is sent in large part to the US. Potash is another one, and led me to find Potash corp a while back and made a truckload off it. Uranium is another mineral Canada is loaded with.
Well, the picture should be clear. Canada has a lot of stuff. Rather important stuff.
Canada has a new found wealth as well. The Canadian Dollar, long considered a joke in the States, is now at Par with the US dollar.
If only the French Canadians got the hint that the Speedo isn't exactly a pretty site on a Cape Cod beach, we'd be all set.
Who to invest in up north... Today, Goldcorp, a Canadian mining Giant spiked on some good news on expanding it's gold reserves... Sounds like a solid play as long as Gold keeps going skyward.
Potash Corp. On a sizable pullback would I consider picking up shares of Potash corp.
Anglo Minerals, an up and coming potash producer, should benefit nicely from the Agriculture bull market. Potash one, a similar company offers similar potential.
Endeavor Mining Capital... this company finances up and coming mineral producers. I believe that once the US comes out of it's slump, Endeavor will be poised for a spike upward.
There it is... Canada, more than speedo wearing French people on Massachusetts beaches and Polar bears.
|Wednesday, February 20th, 2008|
We've got some issues, and we all know it. Oil at 100 is most certainly a huge pain. Gas in my town shot up in a matter of days from 2.70 to 3.05 (at Cumbie's, which is always cheaper). There's no way that you don't think about how much money you're spending just going to and from work.
What's the future of oil futures? With oil at 100.00+ and no strong downward movement similar to the last push to this level, it's not out of the question to watch oil go to 110.00.
There's a number of bearish factors that could knock the top off the price of oil. The problem is the more the traders hear about the bearish factors and oil doesn't drop, the news just becomes irrelevant. It's the whole "yeah, I know" kind of attitude.
Speculators are, without a doubt, driving up the price. Geopolitics is back into play. Nigeria, Hugo Chavez, the nutjob in Iran... and now Kosovo.
There's a lot of writing on the wall that's not being read when it comes to Kosovo, Serbia, and Putin. Russia, being the No. 2 producer in the world of oil and the US being the No. 1 consumer of the stuff, any added tension between Russia and the West could be a disaster.
The US has a bit of a philosophy when it comes to solving problems... and it's throw money at it. We see it all day long. Stimulate the economy.. easy, cut interest rates!. This devalues the dollar, causing commodities of all kinds, including oil to go up. Weak dollar means expensive oil, strong dollar, cheaper oil.
All in all, oil is trading on the 'what if's' of the world. What if Chavez follows through with its threats? What if Nigeria falls into civil war? What if OPEC cuts production?
Oil's fundamentals suggest a 75-80 dollar range. Expensive still, but better than 100. As long the world needs oil, outright needs oil, it will forever trade as if there's an impending crisis about shake the world.
|Thursday, February 14th, 2008|
The market's turmoil without exception creates some of the best values out there. As the market drops, some good stocks and solid companies get taken down with them. Sometimes, for no other reason than broad selling.
I would define a cheap stock as:
1. PE ratio on par or less than peers in the industry
2. Revenue Growth at or above it's peers
3. Price to earnings growth Below 2.0. If it's under 1.0, sweeeet.
Those are three metrics I like to use to help me find undervalued, beat up, depressed, or unnoticed companies in a sector. These rules aren't set in stone and aren't followed with absolute rigidity, they act as screeners filtering out many stocks and leaving me a handful to work with.
I plugged in these metrics and came up with some very down and out stocks that everybody knows, that I believe are trading way too low, and they're in the Tech Sector.
1. Intel Corp. INTC. I want to buy this stock at under 20.00. If it doesn't drop well below 20, I'll let it go.
2. Cisco Systems CSCO. This stock, Beat earnings, then met earnings, but got pommeled for being cautious. This was WRONG. PE under 20, PEG at about 1.2, and all the while Juniper Networks, it's closest rival trades at a PE above 40.
I want to buy Cisco under 25.00. The lower it goes the better at this point. The turn around will come and Cisco will be there.
3. Microsoft. MSFT, Everyone's favorite company to hate except mine. Comcast gets that honor. Microsoft got beat down over the Yahoo! thing, but it got hit harder than it should have.
Apple, it's main TV ad critic, would have you think Vista sucks and Mac OS is better, but I find them both to suck equally. Windows Mobile is selling like nobody's business, Xbox finally made a profit, and Microsoft is making some nice acquisitions to help it get into the online ad space (Yahoo! will belong to Bill Gates soon enough).
Under 30.00 I like this stock, plus has a hefty dividend for a tech name.
Buy stocks you like as they go down, Don't buy all at once, and if the stock goes above where you want to buy it.. just let it go.
Value investing is the best practice you can have. Trying it any other way is something incomprehensible to me. Warren Buffet returns 20% or so a year to his clients by value investing which doubles their money every 3 and a half years or so. If he does it, why would you do something else?
|Sunday, February 10th, 2008|
If going long only isn't enough to keep you interested in the market, then here's the ETF for you.
The Dow 30 Short proshares is designed to short the the DJIA... ticker DOG.
Being an ETF, it's much easier than trading options in individual stocks.
It shorts for you all the stocks in the Dow. So if you got the gut feeling (hopefully there's more to it than that) that the market's about to take a hard downward turn, this ETF will shoot it's way upward, at about twice the rate the Dow falls.
There are other ETF's that short the market in a variety of ways. From Japan to retail to homebuilders to the S&P.
DOG, among other ETF's that short the market can help you keep your portfolio looking up when the market's down.