Tuesday, March 02, 2010

BAGAKOAA March 2, 2010 A swing and A Miss


March 2, 2010 A swing and A Miss

They say that Babe Ruth’s best batting Average was .378. He retired a 22 season career with a .342 average. Well I had been doing pretty good with the earnings calls over the last couple of weeks. I was batting well over 500. Today I got a screwball. SPLS, Staples surprised everybody and missed their call by 6 cents share. Expectations were in the 38 cent range and they reported 32. Ouch. The stock is lamenting at the 23.50 range right now. My closing price of 26.50 looks terribly embarrassing. But what is important to note, the analysts know there were about 6 cents a share in restructuring charges and the stock is down mostly because of the cautionary statements mad by the CEO. As I mentioned, this stock is a good litmus of the overall economy for small businesses. His words were not motivating.

As most of you know I have no life so when I get a chance to kick the tires on someone’s portfolio I jump at the chance. Recently one of the readers of the SL blog sent me their, “itching to pull the trigger list.” It was about 50 equities long. Below was my reply to this person. It is shared with you because it would fill some space on the blog and there might be a nugget or two of wisdom. Before we get to it, it is provided along with some assumptions. That the investor has some good medical insurance and disability insurance, that their portfolio is well balanced, and they are willing and able to do the hour a week of homework on any stock they choose to invest in. It goes without saying, but I will say it anyway, only buy what you know, know what price you want to get in at and more importantly when to get out and at what price to get out. Strongly consider taking your losses at 7-8% and learn from that mistake. Consider putting some stops in protecting your gains above 20%. Now here is some of the feedback provided to this reader.

“Thanks for the exercise. It has been a while since I had to tackle a list like that. Quite frankly, I don’t think I have ever reviewed so many stocks in one sitting. Quite a few I did know so I went from recent research. Anyway here is how I looked at this. First I will give you the stocks which I think are the scariest and where you could hurt yourself. Then the Ok cool just be careful and then here are the ones I have moved to my watch and buy at the right price list.

The Ugly

UNG, I have been in and out of it for more than a year. Until congress moves LNG into the energy plan, it is doomed to stay moribund in the 4-6 dollar per btu price range. Until then, UNG is stuck in the same rut. When LNG makes it to the big times, UNG is the way to go. I think I was in at 11 and out at 10. Even at 8 and change I don’t like it.

TBSI is an ugly play for the transport sector. Too much debt, not enough income even if they finally make a penny a share next quarter which will be a stretch. There are a lot of insiders at the 7.00 a share price so it’s at a good support, but that would not get me to buy it.

FTK from Texas. A nice little drilling and drilling supply stock. That is if your idea of nice is a blood oozing hemorrhaging sales lacking profit lacking leadership lacking stock. It is loosing money almost as fast as the US Government. When it’s not loosing money it is being sued. Stay very far away. The 1.20 stock has all the makings of a penny stock.

FSLR is a 90 dollar stock on a good day. All the hopes of huge government money going into solar are just not going to happen anytime soon. Coal is getting 4 billion and Nuclear is getting 15 Billion, but solar, with no lobbyist in Washington to speak of. Ain’t going to happen. At 105 it is trading at a reasonable multiple of 15. If you have it, hang on to it but stop it at 100. There is no resistance below 100.

DRYS is another dry goods bulk carrier. Since there were several in this sector, let me just give you a heads up who I think is best of breed. Take a look at ACLI and SFL. They both have a possible future and should do well in 2010. Almost all bulk dry goods shippers have some debt, these two seem to have manageable debt loads.

Now for your winners, aka The Good:

SWKS the maker of power amps and front end cellular solution looks very sexy at 15 and change. That makes for a nice multiple. They have little debt. They raised their earning outlook earlier today. I like it. I might buy it once I do my homework. Cramer gave it a nice plug tonight (3/1/2010).

SNDK, Sansdisk maker of all those little flash memory cards I have laying all over my house and office just raised their outlook today and the stock was up. I do not think it is too late to get on this train. This has been on quite a few buy lists since last November, but I still see room to 40 a share. Profits are good, debt is minimal; growth looks impressive with a forward looking PE ratio of 12.7. (Ok just a remedial sidebar: forward looking PE takes the anticipated earnings per share, annualizes it and divides that by the stock price. Example: Next quarter estimated earnings per share are 25 cents. Annualized, that is 1.00 EPS. The stock is selling for 20.00 a share so the PE or multiple would be 20.) Most of the S & P is about 16 right now. Buy Buy Buy

PNRA, Panera Bread is a Cramer favorite. I can see why. No debt, nice profit. Good growth story. They are opening more stores while still managing growth. Cramer keeps talking about a 100 a share. I guess they could do it. Good stock Buy Buy Buy.

AXL American Axle is a great play in the automotive sector. At 10 bucks a share its multiple is 7 and it has no debt. The analysts will be climbing on board soon. This is a buy buy buy. Look for 15 by July. This should pop nice tomorrow with the auto number report which should favor us manufacturers. I hope so because I just bought some July calls.

Almost all the others are ones I have mentioned at some time in the last 6 months in the SL blog. I hope this helps."

If any of you want an opinion, a non-professional opinion on your stocks, a non-professional irresponsible free opinion, an opinion worth about as much as an opinion rendered by a guy who has made more money that lost in the market after 24 years. Seriously, if you want me to kick the tires on a stock list let me know.

Salve Lucrum 


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