Wednesday, January 06, 2010

BAGAKOAA January 6, 2010 Retro-Spective Analysis


January 6, 2010 Retro-Spective Analysis

I reviewed a portfolio (Not Salve Lucrum) yesterday and was sadly surprised to find out I am not as good as I thought I was. Some of you are chuckling right now as you knew I was not as good as I thought I was. Wow, look how many times I used the word I in those sentences. Anyway this portfolio that should have been and I thought was up about 7.2% was actually only up 2.85%.

It took a few minutes but it was relatively easy for me to determine why my calculations were off. There were some “in the market too early” issues from 2008 and some bad picks that did not get executed according to the down 8% SELL strategy. A couple of stingers (VDSI and ATI) as well as more trading fees than I had imagined sucked about 5% in profit out of the portfolio.

That made me go back and carefully evaluate what I have been saying in this blog. The first official post (Migrating from e-mail based to blog based modality), was September 4th. In it I mentioned GILD, GSK, and RHHBY as a trifecta for the H1N1 ambulance chasing strategy. The mention was additions to the portfolio. GILD was originally acquired in July and eventually sold at an 8% loss in October. This was one of the trifecta that did not pan out. GSK is faring much better enjoying a nice 15% bump since its addition to the portfolio in July, as is RHHBY with about a 22% gain. I have trailing stops on the dollar gains in these equities assuring eventually profits. BTW, GSK also throws a nice dividend. I am looking for a solid performance by GSK through 2010. It is a 50 dollar stock at 41 a share. They have some innovative oncology drugs already approved. Analysts say they have the strongest pipeline of new drugs than all other pharms. RHHBY is a good stock but it will have a tough time keeping 2010 revenues up with 2009 because they sold so much Tamiflu product. It is a 45 dollar stock selling at 43 so I would not be increasing positions on this stock. Perhaps even taking some profit.

Then there was SQM, which was mentioned as a play on lithium. It turns out that it is a fertilizer play as only a little of their mineral production is lithium most of it is Chilean caliches which is high in nitrates. After my exposure to POT earlier in the year, I know Nitrates were not a bad place to be so I have hung on to SQM. It is up about 4%. There was an unintentional stop triggered in October, but the position was quickly reestablished. It is a 25.00 stock selling for 39 so I could not recommend buying it at the moment. Keep an eye on the potash and nitrate market. It should improve with global economic growth.

AAPL and GLD were mentioned but it has been discussed ad nauseum here in the blog. Of recent, the GLD position has been added to and I am looking for 1250 – 1300 Gold which will put GLD at about 125-130. AAPL as I mentioned is a 300 dollar stock so I am looking for 280ish.

In that post it was announced that we were back in RIG. Think deep water oil drilling platforms. I have been in and out of this stock so many times it is hard for me to keep track of it, but I have NEVER lost money on it. The purchase mentioned was stopped out in October for a small gain, and the position was re-established at the 85-86 range. This is a 115 dollar stock trading at 90. As the dollar continues to weaken and the economy improves, demand for oil will send the commodity up and 115 is going to be a low for this equity. Cash permitting I would add to my position. It is currently about 4% of the Salve Lucrum Portfolio. To give you an idea, they get more than $US500,000 a day for each deep water rig. They have existing contracts going out to 2018. XOM, CVX, BP use RIG platforms to reach the hard to get deposits. Easy cheap oil is either in a hostile territory or already discovered. Deep well projects are the way to go.

HON was also mentioned. It was mentioned that there were profits taken. It has not done much since then and I stopped out in November after hitting an 8% stop loss. For the year, there was about 6% taken on the stock. It is probably a 43 dollar stock selling for 40. I no longer own and could not recommend it. The FAA is leaning their way on a few system approvals but their revenue is way down (Almost 20%) and their margins are improving but not enough to cover the top line drop.

And I mentioned initiating a position on MRGE which was a speculative medical imaging company. I bought into this stock through the month of September and stopped out with an 8% loss in October. I feel it got no respect due to the health care debates. I will run some numbers on it and let you know if it’s a 10 dollar stock selling for $3 or a 1 dollar stock selling for three.

Salve Lucrum


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