Monday, November 23, 2009



November 23, 2009


Nice day today in the market.  It was such a good day that I started my pruning.  Removed were MTNOY, APC, VIV, AMX, BP, (a small tracking stock for a portfolio I am helping with in the UK), took some profit but did not exit from SPNS, GOOG, IBM, and GLD.

It would be nice to get rid of about 6 more equities to be back in a manageable portfolio.  Thank you Ted, for pointing out my evil ways.  All said, I took about a 4% net profit off the table today.  There were a couple of marginal losses their but the gains in SPNS, GOOG, IBM, and GLD more than made up for it.

The housing report this morning in conjunction with and ever declining dollar as well as some nice economic news out of Asia last night made for a great start.

One of the stocks getting pimped by this blog is AMT, American Tower.  Personally I like it because of the explosion of 3 G network coverage all over the world.  Their PE is North of 60.  That makes them relatively expensive.

Just a little review for anyone who wants it or needs it.  The Multiple, (“PE ratio” is the true gauge if a stock is expensive or cheap) is determined by taking the current stock price and dividing it by the current years earnings per share estimate.  For this example AMT is selling for 40.80 a share and current estimated year end earnings per share is .62.  That makes their multiple or PE ratio 65.80.  This is expensive when compared to other players in that sector.  When you do that, it is hard to find a clean play in the tower segment that is showing a profit.  (You need to have profit to have profit per share and have a denominator for your multiple).  If you do find another semi clean play for towers like CBB, SVR, you will see smaller multiples in the 15-17 range.  If you want a gauge of how AMT compares to a broader market look at the PE of the S & P 500.  In March it was about 13.8 and now it is flirting with 20.  That still makes AMT look expensive.  And it is.

I still like it because of its global coverage, it is best of breed, and is better positioned than any other player.  Even looking forward into 2010, estimated earnings, (extremely conservative by almost any measurement) is .84 which will bring the multiple down to 48.57 is still rich, but it’s the best play of this industry.

On the downside of this rally of the hour is the fact that it was a very light volume day.  When you drill down into the housing report, you can see this a rush to get in before the “cash for cottages” program comes to an end.  All regions except the west showed double digit increase in new home sales.  If this was last weeks new construction report we would really have something to cheer about because it would mean people were employed building new homes filling them with washers and dryers and copper pipes and cement.  Remember this report is just about sales not construction.

Tomorrow look for a revision in the GPD report.  It will be adjusted down, but where to could be the problem.  Have your stops in place to protect the gains from today.  If GDP get adjusted below 2.8%, it will seriously whack the market.  If it stays above 3.00%, we could see this Holiday rally continue.

In closing, Devin and I went to see Blind Side.  Great Movie.  It’ll make you feel good when you walk out unless if the GDP is like 2.2 and you loose half of your portfolio because you didn’t have stops in place.

Salve Lucrum


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