BAGAKOAA November 30, 2009 Whacky day at least I got whacked.

BAGAKOAA;

November 30, 2009

Whacky day at least I got whacked.

The sell off this morning allowed me to continue my pruning efforts. I did get stopped out of Target after an 8% hit. Over the last couple of months I had taken a fairly strong position in Target in the 49 area. While I still feel that Target is sandbagging a bit about Holiday sales, I am out for the moment and will revisit by the end of the week.

I took myself out of BKE after a 9% loss there. If you remember I rated this retailer a 100 and had added to it since mid October. Because I rated it so high, I did not set a stop and let my emotions take it a point lower than usual. There are too many negative comments out there about retails sales that I just can’t hang with Lucky and Billabong brands. I am out but will take another look after Black Friday reports stop killing the sector.

Remember me pimping ACOM, Ancestry.com. Down 6% so I got out. I did not do due diligence on the stock. I will tear apart the financials and make a logical, not an emotional decision then. I did take advantage of the drop on Friday to add to my position in SQM and VZ. I also executed an April call option on Verizon at 28. I got it at 3.83. VZ is at 31 as this is going to post. This could be a fun leverage.

I also added to my position in Tesco, the UK grocer, retailer, banker and becoming all things to all people. Fundamentals are good and I like what I am reading in their reports and in the press. I also got back in the Schwab answer to the VIX, ticker VXX. I think the weak retail sales number and the dance in Dubai will cause some uncertainty. Uncertainty equals volatility. This is a trade not an investment. There has been some nice profit made getting in and out of this over the last 3 months. Let’s here it for sideways markets.

With a relative warm Thanksgiving and signs of a mild winter on top of the already huge Nat Gas glut. I took myself out of the FCG etf after a 4% loss. If you want to play gas, this is the way to go. Look for an impending cold streak, a drop in inventories and some political horsepower in DC to get Nat Gas back above the $4.00.

Here is a heads up. I do not own this stock but am looking very closely at it. GD, General Dynamics. It is down 2% today and do not know why. Their fundies look good. Take a look at the May 60 Call option selling for 7.90. You would need a 68 to be in the money. Also they throw a 2.5% dividend if you own it outright. I know at least two of you do. I would use the dip to add to your position.

Salve Lucrum

BAGAKOAA November 29, 2009 Eeny Meeny Miny Mo

BAGAKOAA;


November 29, 2009


Eeny Meeny Miny Mo


It was nice to have along weekend. I got a chance to look at about 5 Mad Money episodes, listen to some recent earnings reports, read the weekend’s Baron’s cover to cover, caught up on China Tech News, I am taking another gander at Cramers “Getting Back to Even”, read the Kindle version of the Financial Times and IBD, and know what the economic reports coming out this week are.


But at the end of the day, as a few of you have mentioned, what do I do to make money in the market? Great question. I too am overwhelmed.


How about a step back to basics. Let’s say you hear a good story on Cramer and he gets you all excited about a stock. Should you buy because he is all jazzed about it. NO NO NO and he will even tell you that. What about Baron’s, probably one of the most respected investment publications. When they pimp a stock, should you go out and buy it. NO NO NO and they would tell you so. So when do you buy a stock.


Before you buy a stock you need to do some basic homework and answer a few questions. If you do just react to a sound bite on Cramer or an article in USA Today, you are throwing money away in many cases.


Here is how you do some basic homework. Before buying a stock, know how the company makes money and what factors influence how they make money. You can easily find this by going to Google Finance or Yahoo Finance or Rueter's or Bloomberg and type in the company’s ticker. If you want to play along, I will be using Google Finance and Reuter's.


So there you are pumping gas on I-15 (for our int’l readers, that is a major highway in the western US) and you look up and see the Chevron logo and think that you are paying more for gas than you did 3 months ago. Then you hear Cramer pontificating about how great Chevron is. Then you read an article in the Wall Street Journal about oil shortages and possible oil price increases. So you know this is sign from above to buy, buy, buy Right? NO NO NO. Let’s do about 10 minutes of homework on the stock first to confirm our feelings.


Go to Google Finance and type in the ticker CVX. Ooo It closed Friday at $78.17 a share. This is not a cheap stock. FIRST Mistake, the price of a stock has nothing to do with the relative value of the stock. The price of a stock is the result of its comparison to its earning per share and the demand for that stock. So let take a quick look at the PE ratio. You calculate this by taking the last reported annual earnings estimates and dividing into the price of the stock. In CVX's case you can see a PE ratio of 12.72 and right below it you see EPS of 6.15. Just do the math. (6.15 X 12.72 = 78.17 or 78.17 / 6.15 = 12.72)


Now go down the screen and see all of CVX’s peers. You got XOM, BP, TOT, COP to name a few. Take a quick second and click on some of them and look at their PE ratios. XOM 17.56, BP 20.21, COP – no profit no PE ratio, TOT 16.77. So out of that list CVX is the cheapest stock regardless of the price. So now you want to BUY BUY BUY. NOT.


We do a little more homework. Like I said know how your company makes money. You think Chevron would be easy, because they sell gas. Scan down the page and you will see the description section. Give it a read and you’ll be impressed with what else your company does. At the end of the description section it says more from Reuter’s. Click on that link.


You will see a complete profile on Chevron. Now you know how your company makes money and you might be able to figure out what other factors influence the value of that stock. Now off to the left hand column, you will see a link called ratios. Don’t let it scare you,just click on it.


Hey look at that Reuter's says their PE ratio is 12.72 just like Google. Math is Math. Look at the column next to the 12.72 the industry average is 19.42 at this very moment it will be different when you look at it. But that means that CVX is selling for a 37% discount off the rest of the oil industry. It’s like a sweater being on sale so now you BUY BUY BUY, NOT. Let's look at few more numbers.


They throw a 3.48% dividend always a good thing. Recently I have been looking for stocks throwing dividend above 4%. Thanks TIM I am a slow learner. Now you can anguish over all those number, but I like to look at just couple that most value investors consider important. Go to Net Margin. Net Profit Margin is 7.53% The industry average is 4.12%. Think about this, you can buy a stock at a 37% discount to the industry whose margin is 82% higher than the rest of the industry. So now we BUY BUY BUY, NOT. A little more homework.


I look at the ROE or return on equity. In a nutshell it is a measurement of how management is utilizing the resources of the company. The higher the number the better. I like an ROE of more than 25. Look at the 5 year average for CVX’s ROE. Currently it is 13.86 but its 5 year average is 25.75. Very nice. No don’t buy it yet.


Up there on the left of the page, you see a link called Financial Statements. Click on it. The first thing you see is an Interim (Quarterly) Income Statement. Here is what I look at and it only takes a couple of minutes. First off top line sales. Stocks rise short term when profits improve, they rise long term when you have both sales and profits headed up. You can see that in September 2008 they had 76 billion in revenues then they dropped to 43 billion by December. Remember oil was selling for 117 a barrel 3rd quarter 2008 and dropped to about 90 by years end before plummeting to 56ish by March 2009. Keep that in mind when you look at the quarterly revenue. Now take a look about halfway down the page to Net Income Before Taxes. AKA Profits. You can see a similar trend from 14 Billion down to 3 and back up to 6 for the last quarter.


Now back at the top where it says income statement click on the button that says “annual”.


Instead of seeing 5 quarters of Income statements you are seeing 5 years. You can see the ups and downs and you can see that they finish 2008 at 268 billion. If you go back to the quarterly numbers and add up the last 3 quarters, you know they will need a 100 billion dollar fourth quarter to hit their 2008 number. Now what is real pretty about their annual number is the growth of the Net Income. Look at that 5 year trend. That gets high points in my book. So we BUY BUY BUY, NOT.


Sales are good profits are good but cash is very important. Let’s take quick look at their annual trend of how they handle their checkbook. Go to the top, leaving the chart on annual, and choose Cash Flow Statement from the drop down menu. What you want to know is, do they make cash from running their company. So go to the line that says Cash From Operating Activities. There too you see a nice trend upward and they have gobs of cash. NO NOT YET BUT CLOSE


You got sales, you got profits you got cash. All set. The US Government has lots of cash and all they sales you could possibly imagine (Taxes). Would you buy stock in the US government? Let’s look at the debt of CVX. Leaving the chart on annual, and going to the top again click on the drop down box and choose Balance Sheet. The accountants out there are getting all excited right about now. About two thirds of the way down you see current liabilities. What you are looking for is Long Term Debt. That would be anything they don’t plan on paying off in less than a year. OMG, they have 5 billion in long term debt. Terrible, well not that bad. Think back to the Income Statement. They made 42 billion in 2008. So in essence they could pay off their long term debt in about a month and half out of most recent earnings. Not to Worry. Great Stock BUY BUY BUY. Yes.


But before you go buying, what is a good price to buy in at? $78.17 was the closing price on Friday. Its high was $78.73 its low was $77.26, but there is a bid price there of 74.44. I would watch the Asian indexes the night before and look at the Dow futures around 5:30 AM. If the market looks like it is going to head down, put in a LIMIT order just below the closing price. Let’s say 78.00.


Your not done yet because all you did was buy a good stock. You need to have an idea of where to get out. What if this whole Dubai thing gets really ugly and for what ever reason everyone feel safe with the US dollar and the dollar gets stronger sending all of the commodity prices in the toilet. Chevron starts heading down to $70, a 10% loss. Be sure to protect yourself the minute you own the stock. My rule is a stop order at 8% below my buy in.


Also determine where you might want to get out or at least take a profit. Where will that stock be in the spring or next year. You can kind of look into the future. Let me tell you how. Go back to the Reuter’s page and at the top left you will find a tab called Estimates. Click on it. There you will see what all the experts (remember I am not an expert. Just a cute, funny, chubby, guy who has no life.), think how CVX will perform over the next 3 6 9 and twelve months. I like to go to the end of the following year as these are the most complete and conservative estimates around. Now you can see there are 20 experts covering CVX. Their consensus for 2010 earnings per share is $7.53 a share. Now think about how we calculate PE Ratios. Earnings time the multiple determines the stock price. So 7.53 times current PE of 12.72 mean that CVX could be worth $95.72 a share in 2010. And if you use the industry standard PE ratio of 20.12 times the analysts estimates, or 7.53 time 20.12, you are looking at 151 a share. Is that possible, sure in May of 2009 this was a 100.00 a share stock.


So I would be looking for 92 around the first quarter of 2010. And 100 by years end. So go ahead and buy at the 78.00 price range, put a stop in at 70.00 and use a limit order to start taking profits next year around the 92.00 range.


Now if you thought this took too long to read and the analysis will take too long to do, (it takes me about 10 minutes to run preliminary scans of a stock before I start getting serious about buying a stock), then you really should not be buying stocks. Buy an ETF or mutual fund where people with no life like me do crunch the numbers. Ok I am going to watch the fourth quarter of the Baltimore Pit game.


Salve Lucrum

BAGAKOAA November 27, 2009 Skoo Be Doobe Be Doo Dubai

BAGAKOAA;

November 27, 2009

Skoo Be Doobe Be Doo Dubai

Well the markets getting close to wrapping up early today after taking a hit today because of some serious jitters over in Dubai. Their government has an investment corporation and when Oil was 90-120 a barrel, they went kinda crazy and over leveraged themselves. Without boring you, the U.A.E. is a government made up of seven Sheikdoms, the largest being Abu Dhabi. Dubai World investments is the one currently defaulting. They are asking that interest on more than 60 billion in debt be pushed back. Well that is sending investors all over the world to safe harbors. So you see equity market closing lower. (although the FTSE and the European market bounced back at the last minute this morning). You are seeing the dollar climb as it is considered a relative safe harbor. Because the dollar is strengthening, you are seeing commodity related stocks and ETFs adjust down a bit. Just look at your gold stocks, oil and oil related stocks today.

So are we in for another Armageddon? Probably not. There are going to be some banking stocks getting stung, like RBS, HSBC, Barclays, Lloyds, Standard Charter (sorry Douglas), and ING. So how do you play this news? Abu Dhabi is probably playing tough love with its neighboring Sheikdom Dubai by not immediately bailing them out.. To the UEA and Abu Dhabi, 60 Billion is like the cost of a used couch. We might have to think about it but it is not going to kill us if we buy it.

Unless the UAE as a whole abandons it brothers in Dubai, this should be addressed in a couple of weeks. So here is how I would play it. Keep an eye on what is going on with the WSJ, Bloomberg’s, and Baron’s coverage for the latest and greatest. Play the VIX (Chicago Board Options Exchange measuring the volatility in the market) trade, for the next few weeks as volatility will be in everyone’s mind. VXX, the Schwab VIX offering was up 5% today. I am in and will look for another 5-10% over the next week or so. On top of that look at your portfolio and look at the ones you love that might be taking an unrelated hit to this news. For instance GLD was down a tad, grab some as Gold should continue its rally. Oil stocks like CVX and RIG are both down today because of the stronger dollar. I added a few shares today on the dip. Large industrials took a small hit today so it was a good time to add some HON and BA and GD to the portfolio, IF you have done your homework. Adding to your bank holdings right now would not be advised. While most of the collateral damage in the Dubai defaults impact UK banks, the banking industry is so incestuous, it may take a while to figure out who might get hurt. If you have a bank you like, (HBAN, BAC, STD, WFC) hang with it and keep an eye on your stops.

Hope everyone had a great Thanksgiving Day here in the states and for the few readers outside the US, get to work, what are you doing reading this blog on your job.

Salve Lucrum

BAGAKOAA November 23, 2009 Here is another option

BAGAKOAA;

Here is another option

November 23, 2009

Oooh.  Options, scary options.  Spooky Scary Options.  Well, let me tell ya Pilgrim.  They ain’t that scary and they are a very effective trading tool.  There are a lot of ways to use options.

You can protect a current position with options.  You can benefit from a rise in an equity price without having to buy the underlying stock.  You can buy a stock below its current price.

Let’s say your not Warren Buffet and your biggest concern in life is how to invest 43 Billion in cash.  In fact let’s say you only have 1,000 left in your portfolio in cash and want to get it working.  You could buy 2 shares of Google.  Or you could buy 5 shares of AAPL.  Or you could buy about 50 shares of Ebay.  Or you could buy 10 shares of NCR.

Call options allow you the right (not the obligation) to buy those stocks at a future price on a future date.

Let’s say you love love love EBAY.  (Never love a stock, when they are done with you they never call never write.)

It is currently selling for 23.50 a share.  You want to own more EBAY that your 1,000 dollars will allow.  What to do? Mmm.  Let’s say that because of all the homework you have learned to do by reading Cramers’ Books and from this incredibly informative blog, you know in your heart that EBAY will be at 30 by the end of March 2010.  Here is what you can do.

Go to your broker’s website or Google Finance or Yahoo Finance and look at the link that says Option Chains.  Specifically you want a “call option” for April 2010.  There you will see a whole bunch of options.  Look for the “strike price”, (this is the price you are buying the right to buy the stock) a couple of dollars below the current price of 23.50.  let’s focus on the 22.00 strike price.  Today, (remember it was a good day in the market and call options rise and fall with the market), the April 17^th 2010 call option to buy EBAY at 22.00 would cost you $2.83 a share for an option contract.  A contract controls 100 shares.  So for you to have the right to own 100 shares of EBAY at a price of 22.00 a share, it will cost you $283.00.  That’s right, what would typically cost you $2,350.00 you can control for $283.00.

Now do the math.  When do you make a profit?  You paid $2.83 to own EBAY at 22.00 a share.  I’ll wait.  Got it.  You are “in the money” when Ebay hits 24.83 (22.00, the stike price plus the premium to buy the stock of $2.83).  At that point you could sell your option and break evenish.  Now let’s say you are right and the stock start its break for 30.  In March let’s say EBAY is selling for 28.50 a share.  You have the right to buy those shares now selling for 28.50 for 22.00 each.  Guess what your option is worth?  I’ll wait.  Yeah your option that you bought for 2.83 cents is worth about $6.50 or more because it is getting close to the expiration date.  You have just made a 267% profit.  You sell the option count your money and enjoy a nice bottle of single malt.

Can you loose money on a call option.  Sure I have done it many times.  Here is what happens.  Let’s say you bought the April 17^th EBAY option of 22.00 for 2.83 cents or $283.00.  And Glyde (Keep an eye on this one it could do to Ebay and Netflix what Netflix did to Blockbusters), catches on faster than everybody imagined and EBAY gets down graded by everyone and his mother.  The shares of EBAY get whacked to 11.00 a share.  Your option to buy the shares at 22.00 don’t look to hot.  But there is always a bigger fool out there so they might not be worthless.  But let’s say they are and you let the option expire in April you lost 283 dollars.  Sorry.  But imagine you had the money to buy the stock.  You would be down about 1200 bucks and still crying in your cheap beer.

Do some research.  Call options are a great way to leverage your portfolio, and get ahead of the game with less cash than you need to actually own the underlying equity.  And, yes you can put stops on options but flying through stops on options happens a lot more than flying through stops on stocks.

Salve Lucrum

BAGAKOAA INVESTORS START YOUR HOUSING November 23, 2009

BAGAKOAA;

November 23, 2009

INVESTORS START YOUR HOUSING

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

BAGAKOAA November 22, 2009 Homework and funny tasting Kool-Aide

BAGAKOAA;
November 22, 2009


Homework and funny tasting Kool-Aide


Well, no one sent me e-mails asking me where my posts were so I guess you didn’t miss me that much. I’d be worried about you if you did.


Devin and I have been busy doing homework, not stock homework, 7th grade homework. I am refreshing my algebra skills, Devin has been helping Jack understanding the days of the Medici’s, (he has actually learned more from Assassins Creed in the last week), I have new understanding of cell theory, and my favorite, name the twelve Apostles left to right in the Last Supper. Did anyone stop to consider that these guys did not really look like they do in the picture so why do we need to know them left to right in the picture. But I digress.


The last week the market closed a hair up. Tuesday HD beast estimates but then said it was going to be a tough fourth quarter. This with some less than optimistic comments by TGT and Pacific Sunwear kind put a damper on things. On Wednesday, Gymboree jumped on the pity party and forecasted a poor fourth quarter. That was also the day that the CPI went up a bit more than some had expected. Jobless claims on Thursday was still headed in the right direction, but we did not get down as much as hoped.


I was reading in Baron’s (Oh yeah by the way Baron’s is now available on the Kindle-Life is good), that there are still bullish trends but the Beadth, a spread between puts and call is not quite as robust as in weeks past. There is a concern that the S & P PE ratio, now around 18 is getting a bit too hot. I would have to agree.


My prognostication about a 9500 DOW by years end did get blown away, but it could be difficult to maintain this hot rally with in a rally. My suggestion would be to go back and check all of you holdings based upon their latest earnings report. If you still like your stocks, make sure your stops are where they belong, consider taking some profit off the table if you are up more than 15 or 20%, and look for these weak days to buy into the stocks you like.


Here is a good example. I have pimped ARMH for a couple of months. They are manufacturer and licensor of micro processors and embedded chips based in Cambridge, England. Intel has their eye on them real close now that they are done fencing with AMD. People in the industry who I respect speak highly of the Cambridge based innovative chip house. When Goldman downgraded Intel this week the whole sector went down on the mat. It was good day to to pick up an 8.50 stock for 7.50. (This is a 12.00 stock around Q 1 2010).


Other than that, my cash position has not allowed me to do much trading. That is a good thing as one of my “followers” got a peak at my primary account and said, “You got too many stocks.” They are correct. Between now and year end it will be pruning season.


Salve Lucrum

BAGAKOAA November 18, 2009 Shopping with Cramer and Buffet

BAGAKOAA;

November 18, 2009 Shopping with Cramer and Buffet

A few days ago I shared a list of stocks that were recently bought or added to the portfolio of one Mr. Warren Buffet, according to his recent 13F Filing with the SEC, with one of our readers. (He hates it when I say that, huh Ted?)

• Added 17.9 million shares of Wal-Mart (NYSE: WMT) to 37,836,642 shares


• Added 10.75 million shares of Wells Fargo (NYSE: WFC) to 313,355,657 shares


• Added 421,800 shares of Exxon Mobil (NYSE: XOM) to 1,276,290 shares (first disclosed today after confidential treatment with SEC expired)


• Cut 7.06 million shares of ConocoPhillips (NYSE: COP) to 57,430,168 shares


• New 3,400,000 share stake in Nestle (OTC: NSRGY)


• New 3,625,000 share stake in Republic Services (NYSE: RSG)


• Maintained 200,000,000 share stake in Coca-Cola (NYSE: KO)


• Maintained 151,610,700 share stake in America Express (NYSE: AXP)


• Maintained 96,316,010 share stake in Procter & Gamble (NYSE: PG)


• Maintained 138,272,500 share stake in Kraft (NYSE: KFT)


Anyway Ted did make a good observation.

“All these stocks are recession stocks. He must be anticipating huge interest rates increase and an adjustment in the market. These are mostly consumer products that do well in recessions. Doesn’t Cramer’s book say if a slowdown is evident in GDP then buy retail stocks? Next we should see a drop in housing. I recently spoke to a retailer friend who said they are anticipating a second wave of foreclosures because the banks have been hanging on to so much inventory.

Hmmmmm?”

OK some of these are cyclical, “recessionary” stock and some are not. Ted is referring to the chart in Cramer’s Real Money showing cyclical stock trades driven by the direction and momentum of the GDP.

What we have are two different investment strategies. Buffet is a value purist. He looks for an under valued company with great management and long long long term growth possibilities. I won’t bore you with the basic criteria, but if you read the blog, you see very quickly what they are. Remember my comment about Buffet after reading the 867 page biography “Snowball”? His two characteristics that have made him successful are Focus and Patience.

Cramer is a value investor at heart, but he has a buy and homework philosophy. He has no aversion in selling on a significant dip, taking a profit when appropriate, and adding to a position on weakness, especially a sector drop on an equity he feels is undervalued. Cramer spends a lot of time on his show and in his books explaining the difference between investing and trading.

Buffet is not a trader. (Maybe a few exceptions like some investments he has made in Vietnam, China and the like.) He buys and buys and buys until he owns. Usually at an extremely good value (except for the Burlington Deal which I still can’t completely figure out?), or under terms that are extremely sided in his favor (GE and AIG).

In the long run, you don’t usually do too bad following Buffet if you can wait. Let’s face you don’t accumulate personal wealth in excess of 60 Billion making a lot of mistakes.

Regarding real estate, yeah I think there is more of a down side because of inventory, a less than stable consumer confidence, and credit squeezes. I think Buffet looks beyond this noise and sees companies that will shine after the housing market recovers, after inflation goes up, after the commercial real estate bubble bursts, and after he is dead and gone. These are solid quality value based stocks that 5 to 20 years from now will be generating more cash for Berkshire Hathaway.

Good observation Ted.


Salve Lucrum

BAGAKOAA November 18, 2009 Diggin for gold late at night.

BAGAKOAA;

November 18, 2009 Diggin for gold late at night.

I received a question early this morning from Bob H. asking about inflation Gold and the like. Thought I would share it with you.

“Hi Brian, I think Bear Stock Investors need to act like the predator. Lick their chops till the time is right, just like the animal does in nature.

Everyone is going gold nuts right now. The ETF GLD stock has gone nuts. I think Bernanke will want to have rates as low as he possible. But some time next year I think he will have no choice and start to raise rates. When Bernanke even hints at this I think DZZ the Bear Gold ETF will go nuts. Right now DZZ is the most beaten up ETF in the world probably. But I think times will change next year.

Just wondering what you think about this idea?”

I had never seen DZZ before, and never considered a contrarian to gold approach. Let’s focus on the underlying issue driving gold. It would be easy to say gold is up due to a weak dollar, but gold is up in nearly all currencies. Yes most other currencies had the dollar as a loosely rooted base, but there is a demand type issue driving gold at the moment as well as a weak dollar.

Please remember the post from November 11 about the world central banks and their foreign reserves shift to a higher balance in Gold. Again there are demand factors at play. One of my gold experts (David) might want to chime in here.

Now let’s talk about inflation. Bob’s subject line to me mentioned an “inkling of inflation”, probably referring to the slightly higher (but not surprising) increase in the CPI, Consumer Price Index. The base price for oil had gained over the period mentioned so there was an expectation of firming in the price index. When you drill down into the CPI you’ll see that it was energy costs and used vehicle pricing driving the slight bump in the index.

It was worth noting that less than an hour after the CPI rate announcement this article appeared in the WSJ today.

“NEW YORK -- If the Federal Reserve sticks to the pattern set after the last two recessions, interest rates will remain unchanged until 2012, a Federal Reserve official said Wednesday.


Assuming the recession ended this summer, Federal Reserve Bank of St. Louis President James Bullard said interest rate hikes could lie well into the future, assuming the central bank sticks to raising rates between two-and-a-half to three years after the end of a downturn, as it did for the past two recessions.”


Now, let’s take a look at Bob’s observation about GLD going Nuts. I have always found that to be a relative term. Year to date its up 38%, over 5 years its up 148%. The Dow is up 38% against last years (next week number), and fairly flat for 5 years. AAPL taking into consideration the 05 two for one split is up 279% over 5 years. So I don’ think gold is going nuts.

I am up about 27% on GLD and I have taken a bit of profit. I don’t think it is done. I think gold has another 7-11% up between now and Q 1. Then you will see the 80 dollars a barrel kicking in causing enough inflation to get the fed to think about increasing the prime rate and then you might see foreign reserves shift back to the dollar and shedding some gold. That is not to say I do not have some stops on the beast that I watch very closely. When it corrects, it will be quick and you could see a 15-20% correction in 24 hours.

Salve Lucrum

BAGAKOAA November 16, 2009 Beats, HiMan, and Whisper Numbers

BAGAKOAA;

November 16, 2009 Beats, HiMan, and Whisper Numbers

I hope you watched Friday’s edition of Mad Money.  Lennin’s great nephew (They actually do look a lot a like), did a terrific job of addressing why some stocks react well to good news, don’t react well to good news or react well to bad news.  He laid out the various scenarios explaining what it means to beat the street, beat analysts expectations, and how insider “Whisper numbers” set the stage for how a particular stock responds to various sound bites.  He also explained the importance of know who the key analyst is on any stock, how to find out who they are, and what to expect when a key analyst is the HiMan (The analyst with the highest expectations), and when results do not hit the HiMan’s expectations.  This was explained very well by Jim “Skee Daddy” Cramer.  Remember this is downloadable for free on iTunes.  (aapl at $206 today, almost back to its 52 week high.  I am liking the $240 Q1 price, but watch your stops.)

Friday you were warned to be ready for a correction if the retail report today was weak.  It was not.  Even after they got rid of “cash for clunkers” fallout, there was a .2% increase in sales, a small but important two month trend.  Food services and drinking establishments were up impressively.  (Yes that was probably due to me alone.) Housing and housing related retail sales figures are still the anchor.

The market did shrug off the poor Empire State Manufacture index report.  This is one of the few mfg sector reports not headed in the right direction.  It appears as though readers of the report must have been focused on the teeny tiny but positive hint of an improvement in hiring.

You probably know this but the fairly positive comments by Bernanke today helped get the Dow up another 136 points.  No one heard the IFS and SHOULDS and COULDS in his speech.  Of note in his talking points to the Economic Club (I wonder what dues are at the Economic Club.), was the threat of commercial real estate.  You all need to watch this bubble.

Let’s hope to keep this train moving down the tracks with a healthy Producer Price Index report tomorrow.  We should see a little increase tomorrow as 80 dollar a barrel oil is entering the market.  Also watch the industrial production report tomorrow which should improve, but not as much as in the last couple months because the cash for clunker program is over and plats slowed down.

In the various accounts, here is the pin action over the last few days.  I increased my position on VOD after reading and confirming a positive report in Barron’s over the weekend.  I hold the ADRs here and help manage an account on the London Stock Exchange.  Here is a highlight from the Barron’s article:” Still, Vodafone raised its interim dividend and now yields a generous 5.8%. The shares, which Friday closed at 135.80 pence ($2.74), trade at a forward price/earnings multiple of nine times.

All that leads Charles Luke, senior investment manager at Aberdeen Asset Management and a member of the team that runs the Aberdeen U.K. Growth Fund, to consider Vodafone undervalued. "Cash flow is strong, the dividend yield is attractive and the shares are cheap on an earnings basis," he says.”

With the huge release of Modern War Fare II, (9 Million copies sold), I increased several portfolios holdings of GME, Game Stop.  Again I owe this pick to my son Jack.  I also took a very nice profit on 4 Jan 2010 $25.00 call Options on Hasbro.  I still have 10 calls left on this but wanted to take some money off the table.  On Friday I caught my limit price on 3 Jan 2010 $55.00 calls on UPS.  I missed my limit price on a similar call for FedEx.

Other than that I am just watching the green and resetting stops and trailing stops.

One more thing.  Back in August one of our readers asked about GMAC SmartNotes.  They were rightly concerned about the reliability of the Bonds, now rated Junk.  After doing some homework on them, I mentioned here and Bought some for myself at 520 a note.  They are now selling for 630 and will have a 14% yield if I hold them till maturity.  They are a bit hard to find, but you might take a look at these 6% 2019 Bonds.  Call Investor relations at the company now overseeing them.  You’ll be impressed with what they tell you.

Salve Lucrum

BAGAKOAA November 13, 2009 Planes, Gains, and Gas

BAGAKOAA November 13, 2009 Planes, Gains, and Gas.

Didn’t post last night as we were enjoying a nice dinner with some friends from Colorado, and possible new readers of the blog.

Well, I am now hypersensitive about being called a “day trader”. I went back and looked at all of my activity since October 1, 2009 AND, “almost” guilty as charged. There has been a lot of in and out moves, several of them in one day due to the sizable correction a few weeks back. (Oct 31 post). My actions do not reflect the volume of trades that a day trader might execute and I am not playing the minute to minute changes that a day trader might react to, but (Behold the Underying Truth), I am trading more than I need to. I should use the same discipline as I am in assisting a friend in The UK as trading there is obscenely expensive. Popping in and out of positions in the UK (Barclay’s) eats up all the profit. A nine dollar trade at Schwab is an 18-24 dollar trade in the LSE, ouch.

Speaking of across the pond, BA is merging with Iberian Air. How do two profitless capital depleted companies decide to get together and say, this would work. Especially when one of them (BA) has a threat of crew and fight attendant work stoppages (a bit redundant to me) looming and their Pension debt is larger than their market cap. No Butch that is not something you wear. I’ll explain later. Anyway it’s a 7 billion dollar merger. Glad I fly Virgin. Although, I am Glad they got rid of the purple flight suits from several years ago. I looked like a 300 pound teletubbie. But I digress.

I ONLY have one new trade. I started a small position on America Movil, a large Mexico based cell provider. I ran across it looking for iPhone opportunities in Brazil. It appears (I am doing homework) that two networks in Brazil are becoming the backbone for the iPhone (Claro and Vivo), Claro is owned by AMX (America Movil) They have close to 200 million cell phone users in Central and South America. I am working on the fundies, but it looks impressive with an ROE of 47.38, very healthy and improving net margin, good annual and quarterly top line growth, a little inconsistent in the 5 year NIBT, impressive cashflow, and they can pay off their long term debt is about 15 months from earnings. VIV is another iPhone play in Brazil and I will probably take a position in it before day’s end. More on that as I research it.

The Int’l trade report came out earlier today and while it was about 2 billion wider than expected, look at those exports. Hey we are making and shipping stuff, what a concept. Could it be a real recovery? We’ll see. The deficit was higher than expected mainly because the weaker dollar is bring the cost of oil up and we are using more oil. Maybe we used more oil making and shipping stuff.

For those of you with gas, of course I mean Nat Gas either the ETF like FCG or straight stock plays like APC or XTO, the inventory came in higher than expected (25 vs 19 billion cft) taking any momentum out of the commodity. I still like it, once the industry starts paying the right people in DC to get there point across. It will happen in time.

The hiccup we had this morning in the markets was from the less than stellar, Ok it sucked, consumer confidence report. The Reuters/UOM report dropped rather severe. The down turn was short lived because lots of pictures of the President playing nice in Asia made everyone feel good. Disney had a good earnings report, (it needed it to support its current 30 dollar price). That along with some advances from MCD, UTX, and DuPont got the market back up and again. I am a little worried about JC Penney and Abercrombie and Fitch (remember when that was a classy place to shop), reported such horrid numbers. That could be a tell about Monday’s retail report. (BTW, I will be listening to the DIS earnings Call http://biz.yahoo.com/cc/8/106978.html AND go and see Christmas Carol in 3 D)

Speaking of that report, keep an eye on the Asian markets Sunday night along with the S & P futures for Monday’s opening. If they are all in the red and we get a bad retail report, we could be looking at a nasty correction on Monday. Tuesday is Producer Price Index and Industrial production. Wednesday is Consumer Price index and Housing Starts. Hell of a week ahead. This is fun.

If anybody has any new equities they want the group to look at or kick around send them to me brian.cronin@padi.com or post them as a comment. Have a great weekend and put your stop in it could be a wild ride next week.

Salve Lucrum

BAGAKOAA November 11, 2009 Late Night

BAGAKOAA;

November 11, 2009 Late Night

Caught today’s Mad Money more about that later, or not. 

After a quiet reporting day in the markets, tomorrow picks up a bit.  Keep an eye on the weekly mortgage bank applications report and hope they go up lending support to the homebuilder and one of the engines driving this “rolling bull rally”.  My guess is flat or even down as all of the euphoria for the government home buying stimulus shakes off.

Then we have the weekly jobless claims report.  If you pick up on all the tells about production being up and a slightly more optimistic shipments report from fed ex along with the big jump in shipments leaving Asia for the west coast of the US (Baltic dry Index report), one could conclude the initial claim numbers could continue to ease downward a bit.  Let’s hope so.

Then in the late morning here in CA its time for the fed to check its checkbook balance.  Year to date September the Fed is overdrawn to the tune of 1.42 trillion.  (Yes that is more than I make Douglas.)  On average for 5 years October usual has about an 80-90 billion dollar US deficit.  Haha, the consensus for tomorrow is 150 billion dollars US.  If it gets over 170, it could have a nasty impact on equities.  Then in the afternoon if you are running a coffee high and want to chill down, the Fed show you its undies.  They publish the balance sheet so you kind of see where all of the money goes.  CAUTION:  Don’t read this while driving it will cause drowsiness.

BTW in the last day I added to my BKE, ID, SQM, GME, and ARMH positions.  I made a couple of option plays but I’ll save those for tomorrow if I get a chance. 

Salve Lucrum

 

BAGAKOAA November 11, 2009 Priceline at the right Price

BAGAKOAA November 11, 2009

Sorry about the email blast yesterday thought I was posting it here. Hope you all are having good run up in the market over the last few trading sessions.


As you all can read, the Fed is committed to low rates which should help drive the current rally. It was nice to enjoy Mad Money last night and not have to worry about the flood of economic news over the last couple of weeks. There was nothing being reported today other than some earnings reports. (Macy’s kicked the department store sector in the groin, ouch.) TGT is off due to the report, could be an opportunity to add to the position, assuming you have one.


If you caught Mad Money last night Cramer described a believable theory that he called a rolling bull rally. I encourage you to download it off iTunes and watch it, but in a nutshell he describes a rally that started in March with the financials, then went to tech, then went to oil, then went to industrials, then went to retail, then went back to financials and around again. It actually kind of describes what happened since March. This strongly supports the essential need to be well balanced. BOATS, Banks, Oil, Aerospace (or industrial), Techs, and Speculative (including small cap, int’l and commodities).


Speaking of commodities, please get a hold of today’s WSJ. Check out the commodity report by Carolyn Cui. With the help of a cool chart from World Gold Council she describes the Global Banks influence on a new world gold rush. In one interesting paragraph she explains that the world average holding of gold in foreign reserves is about 10%, that is to say that of the assets held by countries in their foreign reserve accounts, on average each country holds about 10% in gold bullion. The US has 77.4% and China had 1.9 %. Many countries are increasing their gold ratio because of the weakness in the US dollar. IF China were to want to get closer to the world average, they would have to buy 180 billion dollars worth of gold. That would be two years worth of current world production. You could prognosticate a $6,500 an ounce price according to Ms. CUI. Anyway the article is solid empirical support for 1200, 1300 1400 dollar gold. BTW GLD the gold ETF is my largest position.


Though I have been accused recently of being a day trader by at least three of you, (Ouch), I did want to tell you how easy it is to see what each morning might bring. Just watch the global indexes when you go to bed. Turn on Bloomberg if you have it or check their site and see the Asian, and if your up really late, the European indices and you get a good feel for what the US market will do in the first hour of trading and with a little proactive what sector will out perform each morning.


And to close, a little success story to share. If you look back on Oct 12 in the BAGAKOAA blog, I panned Priceline as a bit pricey (About 160 a share.). That week after reading an article about PCLN and some contract they got from a hotel chain and hearing 2 celebrities actually say they booked on Priceline (Jessica Alba and I forget the other), I said what the hey and bought two January 2010 165 call options for 21 dollars and as noted a week or so ago added to that another option at 14 on tells that they might have a nice earnings call (Thank you Mr. Cramer). Needless to say I was pleasantly surprised yesterday as they blew away analysts expectations. I did take the profits.


SALVE LUCRUM**

BAGAKOAA; NOVEMBER 09, 2009 WHAT A DIFFERENCE A DAY MAKES

BAGAKOAA;

NOVEMBER 09, 2009 WHAT A DIFFERENCE A DAY MAKES

WOW, it was a great day in the market today. It is interesting to listen to the catalyst for the surge. After a 10.2% unemployment report on Friday, we should have seen a dump on Friday and today. It’s not the case. There is even casual talk today about 12-13% unemployment figure for first quarter 2010 and the market kept rising. The why? is hard to find.

It seems as though there are some looking back at last Thursday’s nonfarm labor and productivity report. The number came in at more than 30% above expectations and there is quite a bit of talk about it today on Bloomberg and in the Journal. It is confusing since this info is now 5 days old and no one is mentioning that last Thursday everyone explained the jump away because of cash for clunker and the new home subsidies. So, why the euphoria today? It is anyone’s guess.

It didn’t hurt that the G-20, you know all those head of state and bankers from all over the world, having met in Scotland indicated they will continue a stimulus mentality. That might indicate that people who missed the March to November surge are looking to get in before it is too late. Looking deeper at what is actually being done by certain members of the G-20 this “stimulus mentality” rally may be short-lived. (The UK is talking up an additional 2.5% bump in VAT, they, Germany and US are talking about new tax brackets for high earners, and there are indications that European central bank is rumoring about prime rate hikes. The Fed and BOE-Bank of England, will find that hard to ignore.)

I set some training stops on my gains in GLD, IBM, GOOG, and CVX. I am finally in the money with a huge block of CHU. As I mentioned, my short on MCD is headed in the wrong direction quickly. In listening to the earning report, I discovered top line revenues were up 3.3 percent. Most of their forward looking optimism had come for cost cutting and low commodity costs. Now that I see 3+ per cent growth, I had to close my short position (a 2.6% loss) and see a possible top at 65-66 a share. I also took a nice profit on a January call of BP.

There was a 15% bump in Radio Shack. Remember I called RSH way up on June the 12th. Ok I know it had nothing to with the fact they will be the next distributor for the iPhone and I got out of RSH in August with a stinging loss of 6%. The question is will this mean Verizon is not getting the iPhone next year? I do not own RSH at the time and did not like the fundies in June when I bought it.

So tomorrow what will this crazy market bring. Keep an eye on the consumer confident report released out of Germany as that might set the mood for the opening tomorrow as we wait for the Labor Department to report job openings and turn over. Other than that, protect some of the nice gains we made today.

Salve Lucrum

BAGAKOAA; November 6th, 2009 What do you want to know?

BAGAKOAA;
November 6th, 2009 What do you want to know?

The last week was interesting in the market. While the overall market recovered some of its losses from the week. . . Ok I know I am starting sound like all the other Investment Wall Street news pieces. Thank you goes to a couple of people who mentioned this to me.

One of you recently asked me why I write this blog formerly know as the BAGAKOAA newsletter. I do it to keep myself honest. I do it to put my thoughts down on paper so I can make sense of it. I do it because there were a growing group of people who I would talk to about stocks and I wanted to make sure I had a record of who I told what, and not give one person information and forget to tell someone else. It is also helpful to have a narrative reasoning to some of the decisions I make when I look back. That is why I do it.

In looking back at some of the posts, I agree that I am in many cases just regurgitating the news of the day that you can find almost anywhere. There will be an effort made to make it more relevant although I know there are a handful of you who have been doing this stuff a lot longer and better than I and there a few of you who are just now considering making your first investment.

For example some of you know the details make up of Core PCE inflation, some of you are going right now to Wikipedia to look it up, some of you don’t care, and many of you stopped reading at the top of the page when I said “The last week was an interesting week in the market”. (Core PCE inflation is the measure of inflation without some of the volatile component like gasoline, food and utilities.)
When we consider that Core PCE inflation has been consistently below the Federal Reserve’s target price of 1.7-2.0%, what I try and remember is that this means that the Fed probably won’t bump interest rates which usually plays well for the overall market. We also need to keep in mind that a prolonged low inflation level can lead to deflation, where the purchasing power of the dollar increase but not for good reasons. Lower prices begets, lower production, begets lower employment, begets lower prices, begets lower production begets, you get it. Anyone regardless of their investment experience can get that and realize that we might see an upside short term, but we must protect our gains aggressively.

There was a lot of economic news to digest this last week. We had the ISM Mfg index, construction spending, motor vehicle sales report, several retail sales reports, factor orders, mortgage applications report, several employment reports, wholesale trade report and of course the unemployment report from today. Yesterday I predicted that anything above a 10.1% would whack the heck out of the market and I was wrong. The 10.2% did not have much of an effect.

The week ahead looks light. I will anxiously look forward to getting my Baron’s Magazine to confirm that it will be a light week of economic info, but here is what I know is due out: the usual retail sales reports, new jobless claims on Thursday, petroleum inventories, and the most relevant one would be the international trade report on Friday. It’s called a trade deficit report because we are usually in a deficit position we import more than we export. We should see a drop in the deficit next week because of lower fuel demand and some sizable airplane deliveries from Boeing. The continued erosion of the dollar doesn’t hurt either.

I see no significant changes in my portfolios over the weekend. One of you called me a day trader this week. Ouch! I did add to my new position in Ancestry.com. And I did take a short position on MCD at 61.61. I did this about 4 weeks ago and got burned. This is a risky attempt to prove my channeling strategy for MCD. I am in at the 61 and will get out at 64 or take my gains at 53.

Salve Lucrum

BAGAKOAA; November 5 (actually the 6th) , 2009 Who’s your daddy?

BAGAKOAA;

November 5 (actually the 6th) , 2009 Who’s your daddy?

Sorry I had this prepared for last night but was not feeling too well.  A Bowl of Cheerios (I own GIS), and in bed by 9:00PM


Who’s your daddy? How about your great grand daddy. How about the address where your GGgrand father lived in 1893? Cool? Well I have been into Genealogy, (Thanks Dennis) for about 22 years. I have watched on line genealogical website come into mainstream genealogical work and I can tell there is none better than Ancestry.com.

They had a an IPO today which worked real well for them. They raised 100 million and will use the proceeds to pay donw some debt and continue investing in DNA projects and digitization of even more records. There should be a surge in this hobby as we get into 2011 as a new set of records, the 1940 census will be put on line. My generation is getting older but living longer. This is a very popular hobby and internet based searches makes it easy and fun.

I got in today, (Not on the preliminary as shcwab did not have a piece), but bought in at 14.75. I do not know all the financials as of yet. I know the company, the product and the management team, and for now that is good enough for me. I think we are looking at a 24-26 dollar stock by mid year 2010.

Salve Lucrum

BAGAKOAA; November 5, 2009 Well it at 10 again.

BAGAKOAA;

November 5, 2009 Well it at 10 again.

Yesterday the Fed said they would keep rates low.  Yet there was quite a bit of good economic news today.  Retail sales as reported by the commerce department was positive.  Though anecdotal, I was at the Spectrum Mall in Irvine California over the weekend and guess what?  It was busy and even more surprising, people were leaving store with bags full of merchandise.  I agree people are spending.  The Monster (as in Monster.com) job indicator went up a tick meaning there was some hiring going on.  The Bank of England agreed with the US Fed and left interest rates alone, as did the European Central Bank.  For nine weeks, the initial jobless claim numbers were down 20,000 people last week.  All good news.  Productivity numbers were healthy, but since it is a ratio of production for hours worked, it is not a great factor and improves only if production goes up or employment goes down.  There are two significant reports coming out tomorrow worth watching.  The household survey on employment gets released tomorrow and is expected to creep upwards to 10-10.1 %.  Anything below 10% would be good news anything above 10.1 could whack the heck out of the market.  Make sure your stops are in place.  And to close the week out, the consumer credit report comes out tomorrow.  The consumer credit number has been collapsing since July.  This means people are charging less on their credit cards.  I am guessing we will see a small increase in consumer credit.  Last night after a wonderful dinner at Hannah’s, (with one of our readers) I managed to get home and make a few changes to my portfolio.  I also had a few changes today, due to stops.  In summary, I was stopped out of BKE after an 8% loss.  (Retail got hammered pretty good today), I took some profit on GLD as it had run up 21%, I also took some profit on IBM as it was just north of 20%, I got out of my volatility play with VXX, it was up 3% and as the economic news gets better the VXX will come back down, I also got back in to Gamestop and got jack back in it as well as Kristin.  There are major titles coming out on the 17^th and it should be a great 4^th quarter for the company.  And I have one more for you later tonight.  A little more homework first.  Look for the post “Who’s your daddy?”

Salve Lucrum     

 

BAGAKOAA November 3, 2009 Putting the stocks to bed

BAGAKOAA;

November 3, 2009 Putting the stocks to bed

British Airways is playing down a possible crew strike.  An article in the WSJ mentioned this news about the fact a crew strike of British Airways crew might go on strike.  I have had a few chances to fly BA.  A strike might not be a bad thing.

The Unite Union might be doing the crew a favor getting a Holiday.  I remember that my BA fights were no full of cheery happy willing to go that extra STEP to help their customers crew.  I think they get their training from former AA crew members.  But I digress.

Anyway, the day was a great day.  I bought some more Jan $15.00 Ebay Options.  Added to my Intel position even though they are getting beat up in the press.  And color me stupid but I added to my already huge position in CHU.  This will go down as one of my greatest or dumbest positions.  Some of you remember be collecting GE stocks last September through March.  I kept buying all the way down.  Once I go my buck profit, I was out.  More about that later.  I bought another January 2010 165 call option for Priceline.  I am sucker for William Shatner, what can I say.  And feeling a little goofy today I added to a position on a penny stock SPNS, this is a risky speculative play, but I could not pick up lotto tickets today so this will satiate me.

Before I close and let you go to bed, one of our readers asked me about his big position in GE.  Well I say reader because he gets the e-mails, but if he was reading this blog he had a good idea how I feel about GE.  It is a great 7-8 dollar stock selling at 14.00 a share.  However, if you look at what is going on with NBC and Comcast, forgetting that if the deal is done it’s a debt on debt deal you can looking at a break up value of GE in the 22-26 dollars a share range.  It is the only thing positive I could say about GE.  I recommended they reduce there GE percentage from 50% to 10 % if they really like it.

I had a note from someone on Stockpickr.com ask me what made me think I was so smart.  I am not so smart, Right there under that gorgeous picture of me on this blog is not a disclaimer, but a true blue fact.  Here it is,

“I am not a professional investment advisor. Anybody reading my blog and investing accordingly must be out of their minds. I have made more money than I have lost. There are many more qualified people than I to actually tell you how to invest your money.”

I am having a good time and making a couple of bucks.  I hope you are reading this because occasionally I share “Other’s” good idea in a cute and sometimes funny way.  Come on, the Yankee thing was cute and original.  Anyway this Stockpickr person asked what stocks I am doing well in.  Which is really kinda dumb as I could make up anything, but as of closing earlier today GLD my Gold ETF is up 13%, IBM has me up 18%, GSK is up 11% (Major kick this week because of the Lupus drug), a January $55.00 call on BP is up 44%, and my long position on the stock BP is up 11%.  My unrealized gain is 3.32%.  I did, as I mentioned, got stopped out of quite a few large profitable position last week.

Salve Lucrum

 

BAGAKOAA November 3, 2009 Buffet takes the train

BAGAKOAA

November 3, 2009 Buffet takes the train

Now I know those of you reading the blog realize just how influential I am regarding the overall market. But even I had no idea. About two years ago a friend of mine named Betty was at an event in Las Vegas where she spent some time with Warren Buffet and Bill Gates. (I’ve see the pictures so I know it’s true). Before she left for the NetJets event, I was talking to Betty about how to get from one place to another. In the course of that conversation, I may have said, “Then there is always the train.” I am confident that this tip must have made its way to Buffet as his initial investment in Burlington was weeks after the NetJets event. So there you have it. It must have been my tip.

The market is making big hay about the very unusual Berkshire stock offering for Burlington. Some are calling it definitive proof that the economy has absolutely bottomed. Anybody buying into that logic, only needs to read the 800 page 2008 Bio on Buffet called “Snowflake”. He never buys anything that is not dirt cheap, a great value with a great management team and where he isn’t guaranteed a phenomenal return. (3 Billion in GE was all in preferred status with a guaranteed 10% dividend.) So don’t read too much into the Burlington purchase other than Buffet doing what Buffet does best. In this case he is doing it for the Class A shareholders as it will be a challenge to get his money out of this purchase (They are assuming 44 billion in Debt) in the balance of his lifetime. But he makes no secret of that.

So what else is going on out there? The bears have taking a nice step forward over the last 3 weeks. If you track the CBOE Put to Call ratio, the 21 day moving average has gone from .79 to .59, a 33% change meaning that investors are buying more puts (Downward pressure) that they were 3 weeks ago. If you noted this blog last weekend, I initiated a position in VXX, a volatile play because no one really knows what is going to happen in the post earnings season. I can’t help but think of the advice my father would give to me in uncertain situations “Whatcha you Ass!” which I think he may have adopted from an Italian friend of his in Queens.

I mentioned my concerns about CHU, the second largest mobile carrier in China who has the first exclusive for the iPhone. It is not performing as well as I had hoped (Down 11.2% now). I read everything I could last night and it looks as though I got in a little too late. The Chinese government gave 3 3G licenses away in January. CHU was one of the recipients. Almost immediately AAPL gave the agreement to CHU, so this knowledge was on the street in April. I was way to late to the party. Now it appears as though CHU and the other to carriers have to gear up for the 3 G network. That means they have to spend a ton of dough and take on debt to build and wire towers all over China. China is a big place. Go to a wall map and look at it. I’ll wait. . . . See it. It’s that big county there that looks like a chicken, actually a rooster. Come on you must see it. You know the thing that hangs of the neck of a rooster, its called a waddle. Well the waddle is the Korean Peninsula. But I digress. Anyway CHU will be burning through cash and possibly getting in debt and the value of the stock might continue to drop. I am staying in until a 22% drop if necessary. This goes against everything I have done in the last 9 years of investing. Don’t do as I do, do as I say.

Speaking of gearing up for cellular, AMT reported this morning and met expectations, which were aggressive. As I mentioned here, I was hoping for 22 cents a share expectations were 17 and we got 17. I will be listening to the conference call tonight. It’s up about 3% today.

Salve Lucrum

BAGAKOAA November 2, 2009 Back in the market again

BAGAKOAA;

November 2, 2009 Back in the market again

As I mentioned, I have changed my trailing stop strategy. I also added a few positions last night and was success in getting to most of them. Just to keep you up to speed.

I have added to my positions in ID and FLIR.

I have added to my positions in Intel, now one of my top 5 holdings.

Got back in AAPL, not as large a position but I will be adding to it over time. Dumbest thing I ever did was to stop out of that entire position. Please read my post about the change I have made in stop strategies, as it might be helpful.

Added to my VXX which is a Barclays ETN following the VIX Volatility trade.

I increased my position of Verizon

I added to American Tower. We are hoping for nice report tomorrow morning. The estimate is 17 cents I am hoping for 22. We’ll see. They are the predominant cell tower builder in many markets.

I started a position in Flowserve today. Please see the blog from Sunday regarding FLS, HON, and PFH. You’ll see why I liked it.

On the drop in value I added to SQM.

There are a few holdings I am worried about in this crazy market, (why I bought VXX), such as BKE, fabulous brand well run company so why is it down almost 6% since I got in? I am down 11.25% on MTNOY, the south African cell provider. I will take a look tonight and probably get out. This is well below my 8% rule. I am breaking the rule for CHU, China Unicom. I have set a stop at 15% down instead of 8%. We should wait and see what if anything a month of selling the iPhone will do for this stock. It is the second largest cell provider in China. It should pay out well for them.

Salve Lucrum

BAGAKOAA November 2, 2009 1929 all over again

BAGAKOAA;

November 2, 2009 1929 all over again

Ok I am not a big baseball fan, but I read an article in this weekends Baron’s magazine that got my attention. The last time the Phillies won the World Series back to back was 1929 and 1930. “So what?”, you say. Well as you know I have no life so I did some investigating and here are some important facts to consider.

The manager of the 1929 Philidelphia Ahtletics was a guy named Connie Mack. There was a guy working in the mail room of the New York Stock Exchange named Mack. Coincidence you say, then consider this.

On October 29, 1929 the market dropped almost 31 points. In game 3 of the Phillies Cubs game, there were 31 balls fouled out of the park. Coincidence you say, then consider this.

In game 2 of the 29 Phillies game against Chicago, the loosing pitcher was a guy by the name of Pat Malone. There was a Pat Malone serving beer the night of October 29, 1929 at the Famed Flariton Lounge in New York City. Think about it. Ok consider this.

The winning 1930’s Phillies each received the unheard of sum of $5,038. That is the same exact amount that Albert Wiggin, head of Chase Bank in 1929 paid for his 1929 Duesenberg Derham Convertible Coupe.

We should all be routing for the Yankees because there were a lot of parallels between the market of 1929-1930 and the Phillies of that day and age. It could happen again so please route for the Yankees so we do not repeat the economic upheaval once experience long long ago.

Salve Lucrum

BAGAKOAA November 1, 2009 Hydraulic battles PH vs HON vs FLS

BAGAKOAA;

November 1, 2009 Hydraulic battles PH vs HON vs FLS

A question was posted on stockpikr.com and it got me hunting.  Here are the results.

In my humblest of opinions, PH, (which I do not own) has PE of 25+ which seems a bit rich. PB below 2 is acceptable. It’s throwing a decent an average dividend with a yield of 1.89. It’s net profit margin is higher than industry average but half of its 5 years average. ROE is a weak 7.2. Quarterly revenues are tracking in the wrong direction and NIBT is not improving in recent quarters. 5 year income statement review is sad, based on current income levels they could pay off their long term debt in 4 years or less which is not too shabby. IBD pick FLS way over PH 95 versus 45, if that matters.

Schwab likes it, Argus Likes it, Ned Davis Likes it. Argus moved its target price to 65 from 55 and notes is advantage over competitors, but does not explain those advantages? They go on to explain their 12,000 touch points helps customer service and satisfaction. The target prices seem a bit aggressive as 2010 EPS estimates seem to be in the 1.90-2.00 range. At current and estimated PEs of 25-26, its hard to justify a 65 target price. 2011 EPS estimates are in the 3.00 range which supports that thinking.

HON is one I own. Its PE is 12.37 and throws a nice 3 something and change yield on its dividend. Net Profit margin is double industry average and double PHs and above its 5 years average, ROE is a respectable 22.72, PB, is 2.89, a little rich for me but it get’s talked up a lot, quarterly revenues are flat, but not going down (off from last year), same with NIBT on a quarterly basis, annually both rev and NIBT track very nice over the last 5 years, and they can pay off their LTD in about 16 months from income. Very nice fundies which is why I own it. IBD gives it a 48 but has it in diversified industrials. Argus is not as bullish on this as PH and attributes about 50 cents EPS to pension schemes it will have to settle. Argus is not giving a TP, but do the math and you got a 36 dollar stock. Personally I think they will surprise and be a 40-42 by Q1 2010.

FLS is one I have never looked at. PE is 12.8 similar to HON. Net profit margin is attractive at 9.02 and above industry and 5 years averages. ROE is great a 27.66. Quarterly revenue tracking is sideways which in their environment is not a bad thing. Same with NIBT. Wow, the annualized picture is even prettier. Nice growth in both revenue and profit. They can pay off their debt in one year from current income and there seems to be no games on the balance sheet. Credit Suise, Ned Davis and Rueter all like the stock. Argus does not report for some reason. There are a couple of target rates above the 112 to 115 range.

Thanks for the question. I am going to listen to the last conference call on FLS and might initiate a position. It might have some legs to it.

So to answer your question, I like HON, FLS and PF in that order for the next 12 months.

http://scenicroad.blogspot.com/

Salve Lucrum