Saturday, October 31, 2009

BAGAKOAA October 31, 2009 Speaking of trick or treat


October 31, 2009

Speaking of trick or treat. October is our fist down month in the general market since February. On the week alone, we were down 3.9%. I am embarrassed because the correction I was sure was going to happen and mentioned on several occasions in August September, has now set in.

Personally I have had some major stops trigger, taking profits, but on the downside, creating a 2009 tax burden that has made me stop and think about my stop strategy.

In August I converted most of my manual stops to trailing stops. (Courtesy of wikipedia-A trailing stop order is entered with a stop parameter that creates a moving or trailing activation price, hence the name. This parameter is entered as a percentage change or actual specific amount of rise (or fall) in the security price. Trailing stop sell orders are used to maximize and protect profit as a stock's price rises and limit losses when its price falls. Trailing stop buy orders are used to maximize profit when a stock's price is falling and limit losses when it is rising.)

Well it worked, but a bit too broadly than what I intended. As you know I was heavy in AAPL, (about 8% of my portfolio). My average entry prices was 136 My trailing stop was a percentage trailing stop of 8%. AAPL topped about a week ago at 209ish creating a trailing stop of 191.36. Well we hit that on Friday, creating a nice chunk of change and tidy profit. BUT, (Behold the Underlying Truth), I can’t say I am proud of the move.

Here is why. AAPL is poised to easily be a 230-300 dollar stock. I encourage you to read the Q4 conference call notes. There is no down side.

So now I am faced with having to get back in and decide how to do that. Do I get back in at the level I was before or average my way in as I did in April-June? To answer that question I looked at why the stop out was so bad. What would I have done differently?

Let’s use some numbers so we can understand my thinking without telling everybody how much money I actually invested. Let’s say I averaged into the 136 price with an eventual total of 100 shares. In due time (after a 20% gain), I put an 8% trailing stop on all 100 shares in at the house of Chuck. It triggered and now I am out of AAPL, I paid Chuck to get out of AAPL, (I also found out that trailing stop orders are market orders, shame on me?), and now I have the gain which I will share with The firm of Reid, Pelosi, and Obama next April. I still want to be in AAPL.

Having considered everything, here would have been a better play. Once I hit my 20% gain, put a normal stop at the 8% down side for all one hundred shares locking in a 12% gain for sure. As AAPL hit a 25% upside, take the number of shares equal to the value of the 5% additional up and put a trailing stop on those shares only. Continue this all the way up keeping and possibly adjusting the regular stop on the initial investment dollars.

OK I just wrote that and it seems confusing. Here is how it would look. As AAPL hit 163 (20% gain), a stop on 100 shares at 150 (8% off the current price) is set, “locking in” at least a 12% gain on the initial investment. When the stock hits 170, 25% up from the entry point, put an 8% trailing stop on 20 shares of AAPL leaving 80 shares with a stop at 150. When the stock goes up another 5% to say 176, change your trailing stop order to 23 shares and consider bumbling your remaining stop order of, now, 77 shares to say 160 now guaranteeing you a 17% gain with more upside on the 23 shares with the trailing stop. If you continue this pattern, adjusting each week, last Friday here is how the picture would look.

You would have stopped out of 28 shares of AAPL instead of 100, you would still have 72 shares left with a regular stop in the 175 range (guaranteeing you a 28% gain on the initial investment), and you would share ONLY the gains on the 28 shares with R,P, and O Inc.

Ok I read it twice and it makes sense, to me. So let me get to work resetting the remains stocks I have with a formula like this.
BTW on Friday I was also stopped out of HON for a 16% gain. Good stock and I did not want to get completely out. I will listen to the conference call and probably get back in.

Say Hi to all the goblins tonight.


* New comers that means Boys And Girls And Kids Of All Ages

** New comers that is a rough translation from the Latin “Hurrah from Profit”

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Thursday, October 29, 2009

BAGAKOAA Oct 29 Checkin out AES


 Oct 29 Checkin’ out AES

One of our readers asked AES?  Yeah that was about all they said.  AES?  So assuming all the right stuff, they have good health and disability insurance, they are fully vested in their Company’s 401 K, yada yada.  And they are looking for a 12-18 month window and they are looking far at least a 5% growth, here is what I think about AES.

The AES Corporation (AES) is a global power company. During the year ended December 31, 2008, the Company owned a portfolio of electricity generation and distribution businesses on five continents in 29 countries, with generation capacity totaling approximately 43,000 megawatts (MW) and distribution networks serving over 11 million people. In addition, AES have more than 3,000 MW under construction in 10 countries. The Company operates in two lines of business: generation and utilities. In the generation business, the Company owns and/or operates power plants to generate and sell power to wholesale customers such as utilities and other intermediaries. In the utilities business, the Company owns and/or operates utilities to distribute, transmit and sell electricity to the customers in the residential, commercial, industrial and governmental sectors in a defined service area.

Keeping in mind that the sector and industry drive much, some times more than half the value of a stock, this sector, utility is not pretty right now.  IBD, (Investors Business Daily), rates the sector 164 out of 197 with 1 being the best.

Let’s look at the equity itself.  Up 5% today, but what isn’t.  It is trading at a 14.7 multiple.  Double the industry at that level.  ROE, or how management uses the resources available to it is 13.80% which is not great.  Net margin is 10.1 which is higher than its 5 year average, but lower than the industry avg of 13.8. 

Now for the statements.  Steady top line income growth for the last 5 years, I like that.  The last two quarters are trailing down.  It will be tough (improbable they will surpass 2008 revenues of 16 B.)  Cash from operations are a bit sporadic, not unusual for utilities.  16 B in long tern debt with 2.1b income is not a pretty situation.  I like to see LTD paid out of income in less than 5 years preferable in two years.  I’d have to read the conference call or the sec filing to see if the LTD is operational or financial in nature.  Do they have a lot of notes or preferred out there or are they building infrastructure? 

2010 EPS estimate are at the 1.22 range.  Given that, with their current multiple of 14.7, you are theoretically looking at a $17.93 equity.  Argus, Ned Davis, and Schwab all like the stock.  2010 Price targets are in the 21-23 range.  I have the reports if any want to review them with me.  OK If it were me, I’d look for a more sold utility like FPL, they throw a nice dividend (3.7% yield), can clean up their debt in under a year.  I’d listen to the last conference call on each

Then make a choice.  I do not own either and right now would not recommend either, of the two I prefer FPL.  Hope that helps


Wednesday, October 28, 2009

BAGAKOAA Oct 28,2009 Stop it, it hurts so good


Oct 28, 2009 Stop it, it hurts so good.

Another stop triggered this morning.  The deep ocean driller RIG, eroded on the commodity weakness.  I am out with 3.5% in my pocket.  When the dust clears, I will be back in.  I also got caught in a sell off of SQM.  I am down 1.2% on that trade.  Again, I will be back in very shortly.

I hope I get a holiday card from Charley Schwab, he is the only one making any money this week.  MMMMMM  schw at 17.50 a share?

I also took myself out of a Chinese Pharma TPI.  There trade was so small that stops would have taken me out anyway.  I Took a 17.4% hit on that stock.  Very small dollar, but I am ashamed of the percentage loss.  I’ll be drinking cheap single malt tonight.

On the bright side, my prediction of 9527 by years end is looking brilliant.  Who needs money when you got brilliance?  I am down a lot more than the general market with most of my hits in tech oil and commodities.  A lot of work to do tonight.

Salve Lucrum


BAGAKOAA October 28, 2009 Oh Yes it's Buyin' Time Again


October 28, 2009 Oh Yes it's Buyin' Time Again

And the stops they keep a comin’, every minute of the day.

I got stopped out of a fairly heavy position on Corning and took a 4.7% hit.  I also got stopped out of a decent size position  in WU, Western Union. After taking a gain big enough to pay schwab and have a nice bottle of wine tonight.  The one that hurt was a good size position in Intel, which cost me 3.4%. 

As I  mentioned, I am going to ride the wave to shore and watch the next set to see what it might bring.  Everything I have stopped out of were solid promising equities and I will be back in may of them. 

I do have a new position in VZ, as mentioned I did buy more AAPL, GOOG and SQM.  I will be looking to increase again if this new homes consumer confidence bad news market keeps values down through out the day.  I am also initiating a position on GD.  I mentioned in a blog last week.  “GD is one of the most solid military contractors. I have not looked at their fundamentals in a while but back in may their margins we good and income and cans flow were good. Its EPS should improve and this has the makings of a 75-80 dollar stock assuming we get more assets into Afghanistan and Washing keeps its commitments to homeland security. There is a rule in DC right now. If you want to get re-elected support homeland security. Stop the stock at 60 ish and look to get out mid year 2010 at the 80-90 range.”

They reported a better than expected but lower profit this morning, yet the trade is down bumping a dividend yield close to 3%.  I like it and I am in.

Let’s see what the afternoon brings.

Salve Lucrum

Tuesday, October 27, 2009

BAGAKOAA Oct 27, 2009 The cool aide tastes a little funny


Oct 27, 2009 The cool aide tastes a little funny

Ouch.  The stops are hittin and now we must think what to do next.  In the last few days I have been stopped out of PBS, a media ETF up 3.6%.  I will re-evaluate and get back in shortly.  I have been stopped out of CMN, a health care stock after an 8% whack.  I have been stopped out of FCG the Nat gas ETF after a 6.9% gain.  I have been stopped out of GILD because of an ugly bear option spread close and had to take a 9.4% hit.  I still think the stock has an upside, but I will wait for Nov Option Chains to clear.  Come on you big money guys, am I reading this right?  I pulled out of ADTN because I could not remember why I bought it.  That usually means it was a Cramerism I acted upon before doing the homework.  I took a 2.8% loss on that little thing.  I got stopped out of Aeropostel today because of the low consumer confidence report.  It whacked all of the retail stocks.  I took a 4% hit on that today.  I got stopped out of a huge position on MDRX,  Allscripts, my third largest holding.  I got out with a 29 % gain.  I will be back in on this very soon.   I also got stopped out of APC Andarko petroleum because of the weekness in Nat gas.  I enjoyed a 3.9% gain.  I will get back into both APC and FCG to play on what will be 6-7 Nat gas next spring.

So what is going on in this market?  I was drinking the cool aide a couple of weeks ago.  I think I still am, but it tastes a little funny.  Flashback 1978, Georgetown, Guyanna.  NOT.  There is so much money headed into the bond market either in bonds and mutual funds which will make it to equities that the market still has an upside.  My Jan 09  prediction of a 9527 Dow by year end will be low.  This earning season is soft but everything is soft compared to last year. 

Here is my guess, all the money managers who have been hesitant to get back into equities will see this latest down turn as an opportunity to get their portfolios in tip top shape by years end.  Most are going to want to expand their risk, maybe not for the 09 numbers, but for the 2010 potential.

In the last few day I have picked up some Jan 55 BP call options, some Jan HAS call options, increased my position in CHU on the recent weakness, picked up some dec 2009 CR call options, added to my FLIR by picking up some Jan 25 call options, added to my GLW positions with some Jan 12 dollar call options, initiated some PCLN Jan 165 call options, and initiated some Jan 15 call options on EBAY.

Tonight I am going to buy into the weakness of AAPL and GOOG.  I will also pick up some more SQM on the weakness.  A recent downgrade was the result of someone at JPM thinking that the lithium price decrease will have a significant impact on SQM.  I don’t see it as Lith is only about 7-8 % of their revenue.  I like the stock.  Keep a close eye on the dance taking place between POT, BHP and SQM.  I will also bump up my position in TGT.  This is a no loose proposition for me because of my wife’s aggressive reinvestment program.

Please remember your stops.  I has let me take a lot of green off the table in the last few days. Before you ask, my realized gains YTD are now at 4.1% and unrealized gains are down to 12.2%.

Salve Lucrum   


BAGAKOAA Oct 27 2009 A Balanced Portfolio


Oct 27 2009 A Balanced Portfolio

I recently gave some ideas to one of our readers about their portfolio.  This is a retired couple, relatively conservative and an experienced investor.  Ideally the ideas were to protect capital, earn some dividends and hoepfully enjoy some growth.  (5-12% is what I was shooting for.) 

20% in GLD

20% divided in CVX and in RIG

20%  divided in BA and in GD and inFord

20% split in VZ and in AMT 

20% split in HBAN and in WFC  in STD

GLD is a gold commodity based ETF. It actually buys gold bullion and issues baskets of 100,000 blocks of shares as demands warrants it. It closely tracks the performance of the commodity itself. There are no fundamental to worry about, it is a pure play on GOLD. I suspect there is at least another 17-20% upside on gold for the next 6 to 12 months. My argument is based upon the weakling dollar, a recovering world economy, demand for the commodity especially in the BRIC nations (Brazil, Russia, India and China). The ETF is trading at 103, I would buy in blocks of XX shares at a rate of XX shares a week until that holding gets to about XX thousand. This will allow you to balance any positive or negative volatility in the ETF over a months period of time. Once at that level, put in an 8% stop and look for a 20% swing upwards and then reset your stop protecting and guaranteeing a 12% gain.

I am sure you know what Chevron is so I won’t bore you. Fundamentally it has a pleasant PE ratio and throws a mean dividend yield of about 3.5%. It has a healthy profit margin, being better than the industry and almost at its 5 year average. Their revenue growth is good, their 5 year NIBT is strong, cash flow is good, and their debt is very manageable. I would look to get it the current price of 75-76. I am looking for oil to go up profits to go up and their PE to go up. Look for 95 to 100 by Q1 2010 and a possible double by this time next year. Set a stop at 69 to protect your back end.

RIG is the world leader in deep sea ocean oil drilling platforms. They have a back log of contracts going out 5 years. Their price is tied to oil. Fundamentals are very solid. I rate them an 84 on my list. Look to get in over the next month buying in blocks to an average price of 91-93. I am looking for 125-130 by Q1 2010. Set a stop at 83.75 to protect your back end.

BA has a nice yield, acceptable and improving fundamental and nice blend of industrial tech aerospace and military products. They will complete the dreamliner some day and it will make them money. Look to get in using blocks of buys over a month period and look for the 50-52 price point. Set a stop around 46 and look for 65-70 by Q1 2010. If travel and the economy picks up and unemployment improves in the second half of 2010, this is a 100-120 dollar stock. Note there are a lot of “ifs” in that sentence.

GD is one of the most solid military contractors. I have not looked at their fundamentals in a while but back in may their margins we good and income and cans flow were good. Its EPS should improve and this has the makings of a 75-80 dollar stock assuming we get more assets into Afghanistan and Washing keeps its commitments to homeland security. There is a rule in DC right now. If you want to get re-elected support homeland security. Stop the stock at 60 ish and look to get out mid year 2010 at the 80-90 range.

Ford is the best of breed of American Cars. The stock is at 7. New car sales in 2010 is expected to be up by 8-15% depending upon who you talk to. Ford is well positioned for that growth and the new Taurus is getting a lot of attention. Fundamentals still suck. A true value invetor would not buy this dog, but I think it has an upside. I do not own it but may be getting in it with you. Put a stop around 4.5 or 5.00. Lets get this up to 10-12 by Q1 2010. This could be a double by this time next year.

VZ is the countries largest cell service provider. They are doing their best to compete with iPhone by AT&T. Rumor has it they might get the iPhone next year. It makes sense for VZ and Apple. The only one who won’t like will be T. It has a nice 6% yield as I mentioned yesterday. Buy it in blocks and get your average price around the 29 bucks it is at now. In other words start buying and buy into any weakness over the next month. This will be a slow steady climber. Look for 32-33 by Q1 2010 and 40 if they get the iPhone next year. Put a stop in to cover your backside around 26.

AMT is a player in the Cell tower business. The explosion of the 3G and 4G cell phones requires good coverage in all areas. American Tower is the best of breed in that category. At 38-40 a share it looks expensive. Its PE is a whopping 65. What you are seeing there is the analysts long term growth rates of 16-40% which I feel are conservative. Get in at and average price of 40ish. Set a stop at 36.50. look for a Q1 2010 of about 48-50. I don’t think this throws a dividend, but should do well as just a growth stock.

Banks are squishy, get into HBAN at the 4 and change mark. Keep an eye on as it’s a little to small and volatile to stop. If you want a stop, put it in at 3.00. Get in to STD at the 17 and change mark. Put a stop in at 14.50. Look for 20 by Q1, 2010. It has a nice dividend and should be able to pay it and improve it.

Salve Lucrum

BAGAKOAA Oct 27 A Flash Back to January 2009


October 27, 2009

A Flash Back to January 2009

A Little trip down memory lane is helpful in a market like this. Here is a note I sent to one of our readers back in January 2009. The exact date was January 28, 2009. The market opened at 8,149 the next morning to give you some perspective.

From: brian.cronin@XXXXXXX
Date: Wed, 28 Jan 2009 10:45:39 -0800
Subject: Might be a good day in the market


As I mentioned a week ago, as details of the stimulus package are released, we might see a 600-700 bump in the market. Over the last two days we have seen it headed that way and today looks impressive. There are some balanced earning reports coming out of Wall Street and this is promising as well. The housing start numbers on Monday were promising but I think a one off. I’d like to see 3 in a row.

As I mentioned, aligning your funds with where the money is going is important for the next 2-5 years. It might not be as entertaining as Cramer, but here is a link to a WSJ article that does a great job of outlining where the 900 Billion is expected to go. The President’s visit to the House yesterday was historic and I must say there was a great deal of give and take. His movement on the AMT (Alternative Minimum Tax) levels was really important. It does not impact people at our income but it is huge to a family making an AGI of 220,000 plus. It will save them about 22,000 in taxes. That is money they can spend in the economy.

So right now we are deep in the honeymoon period and the euphoria is helping the market. By the end of March, when first quarter earnings wash through and all the announced layoffs make their way to the official numbers, the honeymoon will be over and we could see 6500 or below on the Dow. After that it is anybody’s guess, but here is mine. (The Dow bottomed on March 9 at 6,547)

By July, mid year real estate and bank balance sheets will stabilize, earning reports will be based on real numbers in a somewhat stable economy. People and business will be able to borrow money again. The estimated 2.6 trillion sitting on the sidelines will slowly enter the market again. People will become more employed and finding their 401K programs. Our biggest economic concern will be inflation. The value of the dollar will adjust down to some degree. The Dow will end the year at. . . . drum role . . . . . . 9257.

Anyway here is the link. The map is interactive so you can see where and how the money might be spent.

Salve Lucrum

Friday, October 23, 2009

BAGAKOAA October 23, 2009 End of the day


October 23, 2009 End of the day

Wow. What happened? I got hit for more than a full point today. Ouch! I did not get stopped out of anything but have come close on a couple of holdings.

CHU, China’s 2nd largest cell provider (BTW China broke 500 million cell users this week) is down 4.6% since I got in. It intrigues me as to why. The start selling the iPhone next week, they just got 1 Billion from Spain’s largest phone company, Baidu, China’s answer to EBAY just announced a cell phone app exclusive to CHU. This baby has to pop soon. I am going to screen the financials again and probably increase my vast holdings on Monday. It is my 5th largest holding and about 4.6% of my primary portfolio.

I just added to GILD and it is down 4.3% since my entry. I am still liking this stock. Cramer reassured this in the Lightining Round Skee Daddy last night. It is my 8th largest holding at about 3% of my total.

It is sad that all the positive earning reports got ignored today. Except for a couple of winners today, MSFT and AMZN, everything else was down. The dollar tightened up a bit today which made commodities and materials soften. I got wacked pretty good on RIG and CVX. A mixed housing report did not help either.

I hope everyone is protecting their gains with stops.

In an earlier note I indicated that I was almost done with Cramer’s new Book getting Back to Even. I did not give it a strong recommendation. After the most emotional baseball game I ever attended (Go Angels), I got home about 9:30 pm and realized I had intentionally skipped over a couple of chapters about options.

You see I got burned on some options late last year and earlier this year. Well I lost about 4% of the monies I had played in call options. That is why I skipped the chapter. Last night I glanced at the chapter and I swear, Cramer explained the mistakes he first made playing the call option market way back when dinosaurs roamed the earth. It was exactly what I had done back late last year and earlier this year. He does a great job of explaining, in very simple terms all the stupid stuff I did in November through February.

I was buying “out of the money” call options because they were cheaper that at or “in the money” options and in the declining market of Nov-Mar, while my losses were minimized because they were options, they were losses. His book explains the benefits of paying more, to buy options that are in the money.

Here is a brief explanation. I was buying an option to buy 100 shares (One option) of abc stock, currently selling for $10.00 a share 3 months from now at a price of $12.00 for about $2.00. That means for 200 dollars I was controlling the 1000.00 worth of abc stock between now and 30 days from now. If the stock stayed at 10.00 I lost the 2 dollars per share, if it hit 12 dollars I broke even, and if it went to 14, I made 2.00 a share.

Obviously in the Nov-Mar time frame this did not work out to well. What I could have done is buy and in the money option, which means buy abc stock with a future strike price of $8.00 and it would have cost me a bit more than 2.00 a share to control abc. If the stock stayed at 10.00 I would be out 200 bucks if it went down to 8.00 I would be out two hundred bucks but if it went to 12, I would be up 200 bucks. I am over simplifying, but Cramer does a great job of explaining this.

If you want to play along with out spending anything, I just bought 8 call options for EBAY with a Jan 10, 2010 strike price of 15.00 for 8.38 each. EBAY closed down today at 23.56. So in order for me to break even, Ebay has to get to 23.38. So I am already in the money, (assuming my limit order takes Monday). So for 6,700 bucks I am controlling 18,848 dollars of EBAY. So let’s see what happens.

Again, I would get Real Money and then GBtE. Good books.

Everyone have a great weekend. After a crummy day like today, I am going home to a cheap single malt (an oxymoron if I heard of one) and be kickin the dog and lookin at next weeks earnings schedule. Got to find a winner.

Salve Lucrum

Thursday, October 22, 2009

BAGAKOAA Oct 22 2009 This BUDs not for you


Oct 22 2009 This BUDs not for you

Recently one of you asked me about HINKY, Heinekens.  It is interesting aht Cramer had done a segment about a month ago concerning the Beer wars and the consolidation in Brewer’s had lead to rpice increases.  That coupled with lower energy and commodity costs made the whole sector look interesting.  Well, after this request, I did some homework.

I looked at BUD, CCU, HOOK, TAP, SAM and few others and found a decent little brewer you might go kick the tires on.  OK with a market cap of almost 60 billion its not little, but ABV seems well positioned for higher prices, and is a bit more diversified that some other brewers.  They have other carbonated and un-carbonated drinks and they focus on the emerging markets of Brazil and Latin America.  They also are a major Pebsi Bottler.  Fundamentals are healthy and forward looking estimates at its current 20 times earning implies a 180 dollar finish line for this 95 dollar stock.  I will run it through the Cronin number Cruncher over the weekend, but any comments are welcome.

Salve Lucrum

BAGAKOAA October 22 2009 FLIR HBAN HAS BKE ARMH and other stuff

BAGAKOAA October 22 2009 FLIR HBAN HAS BKE ARMH and other stuff


October 22 2009

There was a lot of action the last few days in my portfolios.  You’ll be updated in a minute about that , but first let me tell you about the reading I’ve been doing.

The book Getting Back To Even, by Cramer is good, not great just good.  You can tell by the company references he uses he wrote this circa April-July this year.  It was a volatile expanding market at that moment.  We are now settling into what many are considering a 3-5 years secular growth market.  (I still think we are do for a correction by years end, but we’ll see.)  Anyway, about the book I would recommend you get Real Money by Cramer if you have not already read it and then you will benefit more from Getting Back to Even.  If this is truly a secular growth pattern we are entering, overall you’ll get more out of Real Money book than GBtE.

Here is how it might be described in terms of religious publications.  Security Analysis by Graham in 1934 would be the equivalent of the Papal Vulgate written by St. Jerome in the 5th century and would become the basis for the King James Bible of the 17th century just as The Intelligent Investor by Graham and Dodd was based upon Grahams earlier work.  Now as many theologians used the KJ Version of the bible to create their own interpretations and bible studies, Cramer uses Graham and Dodd books as the foundations for his show and his own publications.  Did I just compare Cramer to a theologian?

Ok, yesterday the Federal Reserve released the latest issue of the Beige Book.  Here is a link to it if you want.

BTW, it is available in a PDF format so you can send it to your Kindle for reading later.  Yes Ben M, not Bernanke, I do need a life.  Words like moderate improvement and stabilization are followed by depressed levels, so it only did a little to tickle the market.  Baron’s summed up the report much better than I: “Overall, the Fed's Beige Book reports a sluggish economy that is slowly moving along recovery. Sectors are mixed with the consumer sector soft but stable. Housing is improving from low levels of activity but commercial real estate appears to be in decline. The biggest positive is the moderate rebound in manufacturing. With few signs of inflation, the Fed is able to maintain its current policy stance-very low interest rates-for some time. Today's Beige Book does little to change the view that the economy is in a slow recovery.”

In a quick review of what I did in my bag of tricks over the last week, I added to my positions in HAS, TGT, AMT, TPI, ARMH, GOOG, BKE (New position this week), RIG, CHU, MTNOY, and VALE.

I stopped out or took profits in HBAN, GME, GS and EBAY.  I stopped out of EBAY and do not know why it crumbled as it did.  More homework tonight.

There was a energy grid stock mentioned by Cramer last week called Itron Corp.  They make remote read metering systems for the utility companies.  The market is huge as there are 250 million plus meters and only 7% are currently remote readable.  I do not own this and have NOT done the homework yet so if you get to it before me leave a note on my blog.

The mortgage banking info release yesterday was not positive and will be followed tomorrow by existing home sales figures which will probably not be impressive.  Check you stops and protect your gains. 

I have not gone through the notes from the SEC investigation of Galleon, but will do so over the weekend and let you know if I found any inside insider trading secrets.

Salve Lucrum


Wednesday, October 21, 2009

BAGAKOAA October 21, 2009 EBAY and Beige book


October 21, 2009 EBAY and Beige Book

Just a quick heads up as there is a lot to report about the last day or so.  I got stopped out of a couple of positions and took some profits.  I will be doing some reading tonight and find relevant stuff, but first I am going out and playing 9 holes of golf and have a glass a wine with my buddy.  Then I’ll look into the Beige Book release today and confirm that the good news is really good news about the economy.  Also I will look into why Ebay got kicked in the PE ratio today.  Lost of reading tonight.  Plus I am still plugging away at Cramer’s new book Getting Back to Even.  AND thanks to Cramer and Monday nights show, he suggested reading the SEC Formal Charges against Galleon Management LLP.  It is 34 pages longs and gives insight into what happen but also explains some to the tells the big boys use to know want might be happening with a stock, when the don’t have the benefit of insider information.  The link to download the complaint is attached.

Salve Lucrum

Monday, October 19, 2009

BAGAKOAA October 19, 2009 Late Night AAPL update


October 19, 2009 Late Night AAPL update

Well AAPL has reported. A 47 % increase in profit surprised even our boy Cramer. As he mentioned and I confirmed, there reports of shipping problems during the quarter, but Apple managed to sell a half a million more units than the same period last year. (CHU, China Unicom doesn’t even start selling them ti October 30, 2009). MAC Book Pros and MACs were selling off the shelf as well. This is one of those when you see it believe it stories. How many times in the last three months have you been at a Mall and the ONLY busy store in the mall was the Apple Store. The stock is up 14 points in after hour trading.

I am up 38.86% with AAPL and it is my largest holding. As a result of my long meandering rant about retailers over the weekend two of you asked how I am doing? Fair question. I am doing well. I’ve put on a few of the pounds that I recently lost, but I did have a great meal at Antanello’s on Friday. I am sure that is not what you meant. Bob asked me point blank to post my portfolio performance. Unfortunately, I would not feel comfortable doing that as it would disclose more personal information than I should.

Also, I have responsibility for 11 portfolios including friends and family. Each have different goals and timelines. They range from a low of about 7% YTD for my mother in law’s account to my son’s which is up 34% (yes Bob it went up again today) For my primary account I have seen 4% in realized gains and 15% in unrealized gains YTD. My Goal this year was a 15% return which doesn’t sound like much now, but that was in the dark scary pre March the 9th bottom of all recent bottom days. From time to time or upon request, I will be happy to let you know how I am doing in the primary account.

One last thing, on the 9th I mentioned CMN, Cantel Medical. It reported and I was hoping for a 30 cent a share earnings. It came in at 26 and the stock is getting whacked pretty good. I have pulled my stop and will be reading the 10K and then will listen to the earnings report. Sorry if you followed me on this, but I did indicate it was speculative. I’ll report back after I do more homework on its year end reports.

Tomorrow I will tell you about a smart grid play I am looking at. If you were watching Cramer tonight he mentioned. He did not even discuss the fundies which is a bit unusual.

Salve Lucrum

Sunday, October 18, 2009

BAGAKOAA October 18 AAPL Alert


October 18 AAPL Alert

AAPL reports tommorow after the close of the market.  I have about 6 AAPL related blogs I follow.  On Friday's Mad Money, Cramer mentioned something I had heard but did not connect the dots.  There was a production issue on the iPhone over the last two months.  There was some small delivery issues, and this will impact the numbers being reported.  Cramer was warning that this could be a huge (5-10%) but temporary correction for the stock.  This is just a heads up in case, like me you have stop set that could be triggered.  I will probably cancel the stop and watch the stock.  Or move the stop up and take a ton of profits and reinvest in about 4 days after everything cools down?  What would you do?  Please don't answer if you are President Obama, Nancy Pelosi, or Harry Reid.  You would want me to stop out and pay taxes on the huge gains.  let me know what you would do?

Salve Lucrum

BAGAKOAA October 18, 2009


October 18, 2009

Well it took about seven and half hours to sift through the list of retailers sent to my by my buddy Ben. The list was printed in US News World report. Here is the hit parade.

Aarons, Aeropostale, Amazon, Buckle, Dollar Tree, Gamestop, O’Reilly Automotive, Priceline and Staples.

I would not necessarily put Priceline or Amazon on the list as they are not like a traditional retailer, but I ran the numbers anyway.

Here is how they turned out.

Aaron’s Inc., AAN got a 76 points on my rating scale. They have a nice history of growth over the last 5 years. Net Income Before Taxes (NIBT) has averaged about 11% growth over the last 5 years. They have struggles with cash flow on and off. Their 6% Net Gross margin is better than industry and their 5 years history. The price to book is respectable at 1.78 and overall this is not an expensive stock at about a 15 multiple. Their return on equity is weak at 13.41. While the business model seems to support the poor but recovering economy, it does not excite me. They can pay off their long term debt in about eight months. 2010 earning estimates indicate this stock could be headed to 32 dollars a share from it current 27. They do throw a small dividend. Here’s the only reason why I would not invest at this time. The Chairman and Founder Mr. Loudermilk is also the Chairman of an Atlanta Bank that is very close to folding. While the two businesses have nothing to do with one another. It could be a distraction for him and could shake investor confidence, and as you will see there are better bargains on the list.

Aeropostale ARO is a great find. This 41 dollar stock has a great set of fundies. 5 years solid revenue growth, NIBT looks great for the last five year, only missed a perfect score or 100 by a tiny miss of positive cash growth in 2007 and a little weak ROE. IBD, Investors Business Daily gives it a 99. My rating is 85, one of the highest I have charted in a long time. So what do you do, do your homework. I went through six months of The NY Times articles (That is where they are headquartered), and I could find no skeletons in the closet. This seems to be a finely run company. I am in Monday am at 41.25. I will be looking for 49 by years end and 50-52 by Q1 2010.

Amazon, AMZN is one I looked at in May and gave it an 82. I ran all the numbers and visited the last 10Q on EDGAR. They report next week and it should be good news with the success of the KINDLE. Unfortunately if you have been watching the news the last few days, Walmart is taking Amazon on in the battle of the Titans. The stock is selling at a 62 multiple that should scare most people off. The fundies look good with the only chink in their armor being a weak margin, one year of not positive cash flow and a high price to book. In a nutshell I am not buying this stock, the same conclusion I came to in May. I’ll save you the trouble of looking it up, the stock sold for $82.65 the last time I did not buy it. I missed a 15% ride, as its at 95ish now, but I am not sorry.

Have you ever tasted a 1961 Chateau Haut Brion wine. Me neither. It is rated by most as a 100. You don’t find these 100 much. They only show themselves once in a blue moon. In the last two years, using my rating system, I have only unearthed two of them, SQM and this next retail beauty. Buckle BKE slammed it out of the park. They have the brands like Guess, Billabong, Lucky, Hurley to name a few. Really you need to go and look at the financials on this company. They got it all, growth, cash no debt, great ROE, and read management’s discussion from the last 10Q. They are overhauling their on line presence and building a 10 million dollar, 250,000 square foot distribution center there in Kearny Nebraska. This is a great story. I am in on Monday at 36 a share. I am looking for a double this time next year. Please confirm everything here. I spent about an hour and a half looking for a flaw on this stock and I can’t find it.

Dollar Tree, DLTR has a lot going for it. Fundamentals are solid and I gave it an 85 only missing a great score due to a missed year of growth for NIBT and cash flow. ROE was not above that 25 threshold as I like it. I could see this at 57-59 over the next 12 months. BUT, I think as the economy improves people will not be supporting Dollar Tree as much as they are now. I am not buying in.

GME Gamestop Inc. Love it own it. Just added to it a week or so ago and let you know in BAGAKOAA. Actually my son found this stock. This 27 dollar stock is headed towards 32. Assassins Creed and a few more major titles will kick this stock up. The Beatles Guitar Hero game was huge at GME. Last time I rated this I gave it an 85. Like any good wine this still has legs. There is some angst with this stock, estimates from analysts are all over the place making hard to look forward. Depending up which set of estimate you want to use, your could looking at a 20 dollar stock or 45 dollar stock. There is some relative strength issues that have analysts concerned. I don’t feel its critical as GME is in a unique sub sector. The rental end of the business which is showing strong growth in the weak economy takes this stock out of the normal retail category. Another issue bothering some analysts is the charting. There are some technical resistance above the 29 dollar range. You know how I feel about charting. Ned Davis research has an interesting chart showing GME in relation to 93 other retailers. They are pegged very strongly based upon fundamentals and very low based on technical analysis (Charting). Go with the fundies.

ORLY, O’Reilly Automotive. I have to be honest here. I started looking at it and I just don’t like cars or anything having to with cars. I am sure it is my own inadaquacies under the hood. I took a quick look at the fundamentals and yes there are nice looking. Decent PE, Book value is fair, revenue growth and profit growth is very strong, a little weak on the ROE, long term debt could be paid off in to years from current operating profits, and cash management look normal. Do you homework if you like this sector in retail as I just did a cursory review and did not rate. I am guessing it would come in in the high 70s or low 80s.

PCLN, Priceline. Come on they have William Shatner as their spokesman. Enough said, sell everything and buy Priceline. Well ok, let’s do a little homework. Revenue is great, profit is great, no debt, great ROE, cash flow has always been great. This is not a retail stock. It could be an internet stock like Ebay or Amazon, or it could be a travel stock. I don’t own it and at a PE of almost 65, I would not buy it now. Travel is one of the worst sectors, despite some promising reporting from the cruise lines, so I would not buy PCLN.

SPLS, Staples. When I first looked at this back in April, I was not impressed. By now I was hoping some of the recovery going on across the industrialized world might have made people go out and buy pencils and legal pads. Apparently not. Fundamentals are weak. ROE is weak and debt is large but manageable. With any luck at all this 23 dollar stock might be a 23 dollar stock by Q1 2010. When hiring comes back, not a drop in unemployment but an increase in employment, this will be a nice place to be. It will happen but it should take at least six months. Based upon 2010 earnings estimates and the current PE, you are looking at a 24 dollar stock. I’d keep this on a watch list and unless if 3Q surprises, look for a 18-19 dollar entry point.

Ulta Salon Cosmetics and Fragrance, ULTA. This 350ish retail boutique salon chain has impressed IBD who gives it a 96. I ran my numbers and came out with 75.6. Their margins are weak. ROE is not impressive. Their 5 year growth is diminishing. I just read an article in the WSJ about millions of people going back to cutting and styling hair at home to save money. Until we see a drop in personal savings from the current 7.2% to the levels of 2 percent in 2006, I don’t think I want to park money with ULTA.

So there you have it. In the course of doing this excersize I ran across a few other opportunities that might be interesting. I’ll save that for another iteration of BAGAKOAA.

Salve Lucrum

Friday, October 16, 2009

BAGAKOAA October 16, 2009

BAGAKOAA October 16, 2009

I just initiated a position on a very speculative, but attractive Chinese Pharmaceuticals. I tripped over it doing homework on the Retail Stocks. TPI, is engaged primarily in the development, manufacturing, marketing and sale of modernized traditional Chinese medicines and other pharmaceuticals in China. They currently manufacture and market a comprehensive portfolio of 39 products, 22 of which are listed in the highly selective National Medicine Catalog of the National Medical Insurance program. We have an extensive product pipeline of 17 products which are pending regulatory approvals with the China State Food and Drug Administration. The fundamentals on this 3 year old company look impressive. Plenty of cash, minimal debt. Impressive revenue growth they throw a dividend, BUT it is very closely held. You have to sift through the notes of the balance sheet to figure out the trail of ownership, but is is about 76 % owned by one individual. This is very risky and not for the faint of heart, but promising. No retirement money on those one boys and girls. I am taking baby steps with this one with a small limit order for Monday morning.

Salve Lucrum

BAGAKOAA: Oct 16 took a profit MDRX


 Oct 16 took a profit MDRX

I had to take a profit on MDRX as its up 32% and I actually need the cash to better a couple of positions.  I sold about 14% of my holdings in this stock.  I still like and and feel its easily a 28-30 stock by Q1 2010.



Brian P. Cronin 


BAGAKOAA October 16 Friday wrap up.


October 16 Friday wrap up.

Wow, I am still reading the Cramer book, still plugging away at those retail stocks and there is so much going on in the market, I couldn’t help but to drop another note in the BAGAKOAA bucket.

I still have GILD as I bought it as part of my swine flu trifacta (GSK, BMY, and GILD), back in May. GILD reports next week, but RHHBY reported strong sales for Tamiflu which GILD receives a nice royalty from. I and my son used to own RHHBY but I took profits earlier in the year to get into these three. This should hit Q4 expectations for GILD which should play nice for next weeks reporting. Besides swine flu issues, GILD is well positioned against other type flu, a closely watched HIV drug, and Q1 2010, the hypertension drug Darusentan. It is trading at just over 15 PE with solid growth, at last check a strong ROE, and a healthy balance sheet. Of the three, it is my worst performing as I am even. The other two are up 14 and 10 percent. Do your homework, but this looks well positioned.

Everybody is talking about GE. Q3 profit is down 44%. Yeah I am real surprised. I was in earlier this year and after I actually looked at the voluminous 10Q report I got out with about 70 cents a share profit in July. This stock is a 6 dollar stock at best SEE THE JUNE BAGAKOAA note from earlier this year. How could anybody be surprised? Buffet and the Prince from Abu Dahabi are OK because they have a 10% guaranteed preferred position. We should all have that.

How about a stock with top line growth. GOOG had 1% top line growth. Net income is $5.13 a share. After some accounting adjustment this was a real beat of the analyst’s expectations by more than 50 cents a share. Benchmark, Barclays, Bernstein and FBR are all upgrading. Target prices are being adjusted up to 620-680 a share. It’s up 21 bucks a share, about 4%, but I would think that will settle aa little by the end of the day. I do own this and my average price is 468 a share.

IBM is getting whacked pretty good right now as their revenue and profit were disappointing. It did raise it’s total year earnings expectations. Most of the analysts are saying hold and 12 month target prices are in the 140ish range. I am very close to stoping (118) out. My average cost is 102.61. If I stop out I will wait a bit and get back in. Please protect your gains on this one if you have it.
 General Dynamics is getting some very positive air play. I tripped over them last night doing homework on FLIR, see yesterday’s BAGAKOAA late night edition. I will do the homework and let you know on GD.

BAC, as you know I am out, but several of you hold this beast. So here is a heads up. I hope you put the stops in last week as I suggested. It down 4% as of a few minutes ago and it is rightly earned. They were well below expectations and there is a lot of grey clouds around the financials of this Bank. Despite Cramer trying to put as much lipstick on this pig as possible, I can’t go with him on this one. It has to improve its credit costs, reserves, and watch the scary non performing loans. They did improve somewhat but only marginally. I can’t show much of what Cramer had to say this morning without plagiarizing while boring you to death, but in a nutshell, be patient is the message. My suggestions is, if you got out when I suggested, wait for an entry point of about 14.50. This has the makings of a 30 dollar stock by Q4 2010, but is not cheap at the moment.

The market is off its low for the day and it might have something to do with the positive Industrial Production report from a few hours ago. One more sign that we have something of a recovery going on.

Ok back to crunching numbers. BTW, Jack, my son and I went for a walk last night and he got me thinking of a new promising sector. Let me do some homework and I’ll let you know about it.

Salve Lucrum

Thursday, October 15, 2009

BAGAKOAA October 15, 2009 Late Night


October 15, 2009 Late Night

Hope you got to see tonight's Mad Money.  Besides a teaser for his new book, Getting Back To Even, Jim was on fire tonight.  He lambasted two stocks he has been hawking since April.  JNJ and YUM.  They both reported this week and Cramer got sucked in by the "beat expectations" report.

Please get on iTunes and download this segment as it is one of the best explanations of how to read through and listen through an earnings report and see the truth and not the media sound bites.  This is the type of homework he keeps talking about when owning a stock.  He says sell, sell sell ,on both equities.

Recall, I stopped out of YUM after collecting it for 3 months and took my 8% hit and walked away.  I got out in early September.  Jim is recommending MCD.  A week ago I told you I was selling MCD short.  I just put in a limit buy out of the short position.  I will take another look at MCD Long, though at 58, it looks more expensive than it did a week ago.  I will let you know.

I should finish the valuations on the retails list I mentioned earlier this evening sometime tommorow.  I did add two new positions to my portfolio.

FLIR, hawked tonight on MAD Money.  It is not my usual style to jump in a Cramer rant the night he talks about it, but the fundies are sweet, the sector is hot, (Homeland Security) and the product are those cool night vision goggle and thermal imagining.  I am in a little until I can crunch all the numbers.  They report next week and itcould be exciting.

ADTN, Adtran is a designing, manufacturing, marketeting and servicing network access solutions for communications networks kinda company.  I got in Monday Night because of all the under the radar companies reporting on the 14th, I liked it the best.  Earnings beat estimates but not enough to get anyboday excited.  I wanted in below 25 and got a 24.48.  I am looking for a 30-31 for this Q1 2010.  I am out at, come on play along, tell me, thats right 22.50 and I go home.

Back to the Cramer book now.  Goodnight

Salve Lucrum

BAGAKOAA October 15,2009

BAGAKOAA October 15,2009


October 15,2009

Have you missed me?  Sorry I haven’t posted in a couple days, but (Behold the Underlying Truth), I have been reading Cramers new Book, Getting back to even.  It was like Christmas on Tuesday the hardback arrived at the house and by 6:00 PM I had the Kindle Version delivered.  I will finish it and give you the scoop.

There has been quite a few hours spent on researching retail stocks as well.  My buddy Ben has sent me an interesting list and I will be looking at that as well as other retail opportunities.  As I mentioned there were several strong retail reports this week.  People seem to be spending again, at least a little.  I will let you know how the analysis works out.  One of them I own and have mentioned several times is GME, Gamestop.  It is doing well but one of the directors sold 2.3 millions shares and it has everyone a little scattered.  I would take this as a buying opportunity.  This guy might want a house or have some tax issues.  The business model and fundamentals is still solid.

Lets see how I did on the reporting’s that came out this week as per my note from Tuesday.

WDFC, reported well and is up almost 4% since my note.  I did not buy this it just looked nice.

GWW reported a strong bottom line but weak revenues but the stock still came up,  It closed up another 2% today.  Get your stops in on this one.

HDB, got the bump I called as its up 6.25%.  I do not own this either.

ABT did beat the 90 cents a share they needed as they reported 92 cents a share.  It has had a nice 5.4% bumb since I posted the article.

And in closing, The department of Labor reported Consumer Prices and they are staying well below the Fed’s Inflation guidance figure of 2%, so there is little concern about them bumping interest rates.  In support of a flat inflationary period, The fed also let retirees know there will be NO COLA, we note talking beverages, here in 2010.  Another good sign they are not concerned about inflation.

Salve Lucrum



Tuesday, October 13, 2009

BAGAKOAA Oct 13, Market update am


Oct 13, Market Update AM.

JCI is reporting as I write this, and accounting changes has a lot to do with them meeting expectations which is why the stock is trading south east.  Sales in the automotive sector was a strong 13%, but auto margins are in the toilette at 1.2-1.5%.  They cooling and HVAC sector is getting back on track.  I am sure Cramer will do 10 minutes on the details on tonight’s show.  I don’t have this stock though I have looked at it closely several times.  Cramer has been pushing this since late last year in the 12-14 dollar range.  He got another double.

AAII, the American Association of Individual Investors survey has shown a shift south with 41% of its member now having a bearish outlook.  Only 35% see it going up.  As I mentioned, watch your stops close.  With that said, its worth noting that the overall market (S&P 500) peaked at 1561 in October 2007.  We are now at 1075.  The September October 2008 drop from 1255 to 899 was only a year ago.  There is a lot of technical resistance at 1200.  Even ignoring that, from a fundamental standpoint, values (PE ratios) are creeping up.  “Cheap” stocks are getting harder to discover.  Please protect you gains.

Last week I mentioned the ICSC-Goldman Store Sales and this week we have that as well as The Redbook Retail Sales report.  They reported this morning and both are trending up and the trend seems to be strong.

Tomorrow the Mortgage Bankers Association reports mortgage applications.  That will tell us if more homes are selling but not about the value of the deals.  I am guessing the number should rise.  The Department of Commerce also reports retail sales tomorrow, for the month of September.  There should be a drop as a result of the end of cash for clunkers.  The question will be how big a drop.  Import and export prices report tomorrow as well.  Look for import prices to be up and export prices to be down as the value of dollar continues to slide.  And august business inventories report tomorrow as well.  Look for inventories levels to continue to drop.  Retails are managing their inventories very tightly.

I have been watching earning reporters close this week and am disappointed I missed a good one.  ADTN, is engaged in designing, manufacturing, marketing and servicing network access solutions for communications networks.  Their fundamentals look very strong and I have a feeling their report tomorrow will be healthy.  The bad news is I should have seen this last week.  Friday we could have gotten in at 24.  Now its at 25.05.  The current PE ratio is 21 which is a bit rich.  Their fundamentals are attractive.  If they can surprise to the 32-43 cents a share earnings tomorrow you could squeeze another 1buck a share out of this stock.  I am putting a limit buy at 25.00.  I am looking for a 30-31 dollar stock by Q1 2010. 

ABT also report tomorrow but will need something better than the 90 cents a share expected.  I do not own ABT.

HDB, and Indian banking concern reports tomorrow.  It could be a nice pop.  Do your homework.  Its PE is 35 and the price is 119 a share.  It could be an interesting play in the Bombay financial market.

GWW is reporting tomorrow.  There are a couple of my portfolios that have this.  What can we expect tomorrow.  If you remember, Grainger bought a Japanese distributor earlier in the year.  That should through another 30-40 cents a share to the bottom line this quarter, but I believe that has been built into the current share price.  The stock has gone from 88 to 94 over the last 5 days.  If you got it set your stops.  I am not sure I’d buy at this level.  Most of my ins were in the $75-$77 range.  It is a good dividend thrower as well.

WDFC, aka WD-40 is reporting tomorrow as well.  What a nice little stock.  Do your homework.  You might like what you find.

Hopes this helps.  A couple of you have asked me about specific stocks.  I really enjoy kicking the tires on your ideas. 

Salve Lucrum


Monday, October 12, 2009

BAGAKOAA October 12,2009 A Quiet Day

October 12,2009 A Quiet Day
Quiet day today in the market. Columbus Day had me fooled as I thought the markets were closed. At 6:30 this morning I was enjoying my cheerios and low and behold the bell on Wall Street was ringing. That means I missed my chance to readjust my stops. I will get to those tonight. I was looking at all the news from last week and trying to figure out, what was the catalyst for the bump is stock prices. There was some good retail news, but that was probably expected. If I had to pick one thing, it would be the reserve Bank of Australia’s surprise decision to raise its prime interest rate. It might have been a wake up call to money fund managers that this recovery is strong enough to have to worry about raising interest rates to slow it down. It could be a tell of how strong this recovery might be. NOTICE the word COULD and MIGHT.
Salve Lucrum

Sunday, October 11, 2009

BAGAKOAA October, 11, 2009 It was too small a world.

October, 11, 2009 It was too small a world.

OK. It was a nice day today. The family and I were headed to Disneyland. There was no traffic on the freeway and it only took twenty two minutes to get to the happiest place on earth. THEN it took two hours to fight the traffic and get to the ticket lines which ere immense. We chose to get out of line and enjoy lunch at ESPN. “So what?”, you might say.

If we are at 9.8% unemployment, (actually higher in Orange County), where are all of these people getting 72 dollars to fight these huge crowds to stand in line and dump another 34(last known “gate” for Disney attendees). It got me thinking.

Has the economy rebounded enough to take another look at DIS. We have been in and out of the stock since 1985. It was actually one of the first stocks we ever bought. I remember my wife calling me at work to say buy more DIS they just bought ABC. So let’s take a look.

My last trade of DIS was in March of 2000. I got out in the low 40s. It’s now at 29ish and it doesn’t look like I missed anything except a drop in value and some dividends. It has been a while since I took a look at what DIS owns, so let me review.

DIS is a global entertainment company. They have media networks like ABC, Buena Vista, ABC Family Productions, ESPN, 233 TV and Radio Stations, The Disney Channel, about 30 massive websites, several global phone networks, theme parks, cruise lines, record companies, huge libraries of films, about a dozen magazine and hundreds of consumer product divisions.

Let’s lay some value for the company. Its PE is just under 17 which are lower than it’s 5 year high of 25.6, but better than the industry. I believe that would be the media industry. It is much lower than the S&P PE at 45. That still seems extremely high, the S&P that is. (And it is. I just checked the S&P 500 component website and 2009 estimated PE will finish about 19.) Price to Book is a reasonable 1.52 and even might be considered low considering how popular the name and brand is. The Return on Equity is 9.46 which I consider weak. Management efficient use of resources is in question at that level. Net Profit margin is 9.6 which is better than the industry, but not great compared to historical levels. 5 Year revenue growth is very impressive with year to year gains despite the bath the media industry has taken and is still stuck in. NIBT showed improvement year after except of last year. 2008 was about 4% off from 07 levels. That is respectable considering the economy. Cash flow has been steady generating about 5.4 billion for the last several years. They can pay off long term debt in about a year and a half from 2008 earnings. That is great considering much of their operations are capital intensive.

More recent revenue trends are tracking for a drop of about 9%. I think this could turn out to be a nice surprise as media is coming back on multiple platforms like TV, Radio, web, and DIS is well diversified.

If what we just saw at the theme park today, is any indication, that could be a nice surprise as well. The bad news is that the 28 dollar price is reflecting a 16 PE ratio based upon earnings estimates in 2010. Some price targets put it at 33-35 dollars a share next year. If Media recovers, and if consumer discretionary income recovers I think this could be a decent stock. There are just too many Ifs in the equation.

I am going to pass and put a limit buy in at 26.50. That would be an interesting entry point.

Salve Lucrum

Saturday, October 10, 2009

BAGAKOAA; October 10, 2009


October 10, 2009

Had a great morning after visiting briefly with my golfing buddies. I enjoyed breakfast and finally finished reading Katsenelson’s Active Value Investing. I mentioned this book about a month ago, but I got distracted with Dan Brown’s The Last Symbol. Great Book. Better than DVC, and almost as good as Angels and Demons.

But I digress, Katsenelson’s book, subtitled “Making Money in Range-Bound Markets”, could be very relevant in the next 12-18 months. The author suggests that the next 10 to 20 years will be extremely volatile and will end at a place not much higher than today’s relative values.

Can’t say I agree with anyone prognostication 10-20 years out, none the less three quarters out, BUT, (Behold the Underlying Truth), the market has had a robust recovery to almost halfway off its 07-08 highs. Looking back, most would agree we were running hot back then and equities were well overvalued.

If you subscribe to that thought, as I do. We are at a place where values are headed back to maybe where they might belong. If that is the case as I suspect, understanding equity values becomes more important than ever before as you must find solid values that ideally pay you to play via dividends.

After a nice historical perspective of the markets, the author spends the second half of the book on very practical and fairly easy to understand equity analysis techniques and familiarizes us with terms like Absolute P/E Ratios and P/E ratio compression. Then he defines three approaches to valuation, Quality, Value and Growth or QVG components.

It is a great read and very informative. It should belong on anyone’s shelf next to “The Intelligent Investor”, “Security Analysis” and Cramer titles. Here’s a deal for you. The first person to comment on any posted blog can have a free copy of the book. I am buying a few for people I know will use it.

Salve Lucrum

BAGAKOAA Oct. 10, 2009 Cramer's Portfolio?


Oct. 10, 2009 Cramer's Portfolio?

Someone had asked about Cramer's Portfolio on  Here was the reply I posted.


You repeatedly tell us to not own more than 5-10 stocks, lest we become like a mutual fund. I was just curious, how many stocks do you have in your action alerts charitable trust portfolio? Is it like a mutual fund? If it is, why aren't you practicing what you preach? Is it because the trust has a lot more money in it than you think we have invested as individual investors, and you don't want too much money in any one stock?

Here is my answer:
Currently the portfolio has 30 holdings. He currently has about 22% return compared to the S&P of 17%. If you want to know more, I suggest you ante up and join and real money silver. Remember that he does have a staff of analyst whose only job is to review the numbers listen to the conference calls.

Also keep in mind that he has certain trading restriction on what he can buy and sell in relation to when he mentions his trades. Those restrictions would and probably does keep the charitable trust from taking advantage of many market opportunities. I have been “in the game” since 1985. When I first heard of Cramer, he drove me nuts and I wrote him off as some failed writer, failed law student, whose theatrics drove people to the show.  One day I heard him describe a very subtle but macro economically relevant upgrade in terms that made absolute sense. Jim is an intelligent intuitive trader/investor (as he tells us there is a difference), but that is probably not his strong point. He is a phenomenal educator. If you enjoy investing and want to get better, you would be a fool not to buy his books and watch his shows. Not for the stock tip, buthis reasoning in his decisions. So lighten up on the guy, besides he loves it when you pick on him, its like heroin to the guy. Just listen and learn.
Salve Lucrum