Tuesday, October 19, 2010

19 October 2010 Focus and Patience


19 October 2010 Focus and Patience

Kinda weird day. We had some good earnings reports early on but the rate hike out of China and spooky news about BAC must have had some people taking profits. (Are you smelling the methane form the BAC oil platform yet? Last week was a good time to get out.) We tried to load up on AAPL at the 300 level in the pre market market, but those limit buys were passed instantly. We did pick up some AAPL later in the day in a few portfolios (Not the main SL Portfolio) in the 309 range. That should still be a decent entry point. We added to our position on RINO on the 7% drop. We like the huge insider ownership (even if a lot of it is the Chinese Gov’t), Great ROE, Great Sales Growth, Great Earnings Growth. I am sure the Chinese currency news had to be a factor in the move today. The argument could be made with a higher Yuan, the plants and factories and municipalities buying the RINO anti pollution products will suffer. We are thinking phisha or is it fisha (financial terms meaning we don’t think so) as the Chinese GDP growth rate is one of the fastest in the world. Whether they grow at 11% or 9% will not put a serious dent in these companies’ earnings. This was a great buying op.

We also doubled our bet on VXX with more of the December 18 calls 21 dollar calls. We are expecting more of an adjustment in the market by 18 December so we are considering this a cheap insurance bet. We also bought more Microsoft on the dip. We inadvertently took a little profit on KO as we must have had a small stop order that got executed today. We will re-establish that position soon. On this one (KO) I will agree with Cramer as he was pimping the stock today.

Check the Score Card

Well we said the housing start would be poor and they came on strong reporting 610 thousand news home starts. It did not help the market.

We called a beat by GS as they were expecting 2.28 and we said 2.32 a share. They came in huge at 2.98 a share. The M & A and wealth investment division had real strong showings. All other sectors were very disappointing.

We were expecting a miss out of BAC, but they had a heck of a beat coming in at 27 cents a share income versus and estimated 14 cents a share. That did nothing to qualm the fears about their foreclosure buyback situation.

Things go better with KO which we almost nailed as for their beat of 89 cents a share. We guessed a 91 and they came in at 92. Darn we are good some times.

Before my crystal ball faded last night, I pegged JNJ income at 1.20 a share versus the estimate of 1.15. The actually came in at 1.23 a share. Now I did say my crystal ball was fading.

Follow the Bouncing Ball

I know I killed most of you with my pharm analysis from last night. One of my good friends acknowledged my blood, sweat, and tears by saying, “Dude, you need a life.” I can say I actually enjoyed the exercise. We learned a lot about pharms and the FDA and different diseases. But most of all we found that the run up in the market over the last year has taken a lot of the bargains off the table. We started with 120+ pharms and screened them down to the 15 we posted about. Of them we could only suggest two for you to do your homework.

This goes back to the title line of this post. In this market, patience and focus will win the day. It is getting harder and harder to find the companies of value or should I say with a great margin of safety. We are staying with our known winners and buying on the dips with a disciplined approach.

A Look into the Crystal Ball

Tomorrow is a quiet day for economic news, but like a scene from “The Jerk”, if you are around tomorrow about 11:00Am you will see me running down the street saying “The New Beige Book Is Here, the New Beige Book is Here.”

Yes the Fed’s Beige Book is out tomorrow and many will be looking for tells about employment and housing. My guess is we will hear about “modest improvement”. Beyond that, we will see some petroleum figures but there should not be any surprises. The level of inventory should support the current price or a slight move upward. We might see 85 dollar oil by years end.

We have some earnings tomorrow so let’s rub that ball and see what they will bring. WFC, another bank we just dumped, will probably beat by 4 cents to 59 a share. ABT, Abbot Labs one of the pharms we took a peak at will miss by at least 5 cents making that number 99 cents a share income. I see eBay coming into the crystal ball, I don’t know why, we don’t own it and quite honestly have not used the site much anymore. (Can you imagine what that company would be if they had not bought PayPal?). Anyway our ball is saying a slight miss with PayPal holding the place together. Look for a 2 cent miss to 35 cents a share. Boeing will miss and everyone will get spooked and it will drag the market down some more and the wise people will buy. Look for a 4 cent miss to $1.01 a share income.

And the crystal ball is fading.

From the "I have heard one too many political television ad!" gallery.

Salve Lucrum!


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