Monday, December 13, 2010

13 December 2010 Got My Mojo Workin’


13 December 2010 Got My Mojo Workin’

This is one of my favorite Elvis Songs. Originally recorded in the mid fifties by one Ann Cole then covered by Muddy Water in 1956. Elvis was jamming with his new formed road band (Ronnie Tutt on drums, James Burton of Ricky Nelson fame on lead guitar, Glen Hardin on Piano, Jerry Sheff on Fender bass, and I believe Johnny Wilkins on rhythm guitar) when Felton Jarvis the album producer let the tapes spin and they caught a great jam session on this cute tune. They just don’t write lyrics like that anymore:

"She’s long and lean and lanky, as mean as she could be. Hands off of her, less you want to deal with me."

That’s what I’m talkin about. Great lyrics. Well we had our Mojo Working today as 13 of you know. (That’s how many of you went to the blog. I guess you could be just reading the e-mail and not going to the blog? I didn’t think of that till just now. Show of hands as to who just reads the blog via e-mail and does not actually go to the blog site. Ok that helps.) Not only did we call the market as being basically flat, we had a couple of nice take aways in some options.

HRL, Hormel announced a twofer (Financial term I just made up for a two for one stock split.) and the March 50 dollar call we told you about back on November 23rd had a nice 32% gain. We took it.

We took a loss on a February PUT for RBC, Regal-Beloit Corp as despite the negative guidance we told you about on 2 December the stock continued to go up. The clock was ticking as it was only about 45 days out and I could see this 40% loss becoming an 80% loss real quick so we got out.

Our decision was quickly rewarded as we saw out June CVX, Chevron 95 call escalate up 31.8% and we took the money and ran. Yes we probably left some money on the table, but that don’t bother me.

As we described in the blog last night we did pick up some shares of PFE, Pfiser at 17.15 a share. We are looking to chunk our way into a 2-3% overall position in the portfolio. We said we were going to look at the company a little closer, though I was sure Barron’s did a good job of analyzing the stock. Click Here to see the October 3rd 10 Q from PFE.

Here is what we liked in the fundamentals. Debt is manageable, they have a 4.19% yield although their payout ratio is 94% which means they are straining to pay that dividend. Their forward looking P/E ratio is 7.1. When you back out the 2.90 a share for free cash, the P\E goes to an absurd 3.2 a share. Ridiculously low. Most of the target prices are in the 20-22 range giving us a decent margin of safety. The price to book (just like it sounds the price of the stock divided by the book value of the company. The book value is determined by taking all of the company assets and subtracting all of its liabilities then dividing by the number of outstanding shares.) is 1.57 which is extremely low for a well known brand.

If you are into charts, this one seems to be getting prettier. See where the 50 dropped below the 100 which dropped below the 200 in the big circle. You see the stock start correcting downwards. Now you are seeing a reversal of sorts where the 50 crossed the 100 in the first little circle, then it crossed the 200 in the second little circle, and then the 100 passed the 200. They are all aligned in a bullish pattern green over red over blue. If you are into that crap. We are not but it killed a minute or two.

 Overall I feel this is a well valued stock with a long term gradual growth pattern assumed. Most if not all of the bad news is priced into the stock. We will be an accumulator of this stock. Do your homework.

In other Salve Lucrum portfolio pin action, I am expecting PIR Pier One to report well later this week and ass such picked up some March 11 dollar calls at 1.12 each.

Same is said for Fedex so we got some April 105 dollar calls at $2.15 each. It is estimated that Fedex will carry one billion packages today, there busiest day of the year.

We added to our position in SDIX Strat Diagnostics at 1.85 each.

We bought some April 37 dollar call options in WM for $1.00 each. We own some of this long and like the value. They report next week I believe and feel it will be a good report. If they hit their numbers we might sell off a few of the calls and keep the rest to add to our position later.

And in researching one of our winner’s NAK Northern Dynasty Minerals we ran across another possible mineral play. AXU Alexo Resources. We picked up some April 7.50 calls for $1.60 a contract. This is just to take advantage of what I think will be another hot day in commodities tomorrow until we can do proper homework.

The rest of the week ahead.

Those that checked out the aniblog by Salvay and Loocrum seemed to really enjoy it. If you have not looked at it I encourage you to do so, especially with all of the news about China tapping the breaks in their economy.

Here is the link again.

So we took you up to Tuesday. On Wednesday we have the CPI, Consumer Price Index. Now if you are familiar with the components of CPI, you might know the story of Richard Nixon when he asked then Fed Chairman Arthur Burns to come up with another measurement of inflation called core inflation so that those things that were getting expensive like gas and food would not skew the inflation figure. After all who actually uses gas and food. The new measurement became the CPI and the Core CPI. Anyway the number will be out on Wednesday and the street number is .2% for the CPI and .1% for the Core CPI. At .2% that would give us an annual rate of inflation of 2.4%, well with in the feds range. We are thinking that we will see .25% CPI giving us an annual rate of 3%. That should eliminate any fear of DEFLATION.

Wednesday will also see the Industrials Production Number improve as well as factory utilization. We thinnest it might improve more than expected and it should be a nice little bump for the market.

Now Thursday we have the new housing start numbers. This one is tricky as we want it to be DOWN. That is right, DOWN. It may sound contrarian, but part of the real estate problem is the 10.5 month inventory in the US. We have to stop making new homes in order to clear out some of the inventory. Now new homes do drive durable goods (Think refrigerators, air conditioners, washer and dryers.), but until we can get the value of homes back up we will have a problem getting a true picture of the financial industries situation. So its kind of a loose loose.

As it relates to earnings Wednesday we will see JOYG Joy Global which engages in the manufacture and servicing of mining equipment for the extraction of coal, copper, iron ore, oil sands, and other minerals worldwide. In looking ahead and reading between the lines, we are liking what we are hearing enough to look for some 90-12 calls in the 80.00 range for JOYG. DO YOUR HOMEWORK.

Thursday look for some exciting news out of FEDEX, we talked about that earlier. Orcale, one of Cramer’s faves reports on Thursday as well. We also have Winnebago report and believe it or not they should have good numbers. All in all I am guessing this week we could squeeze out another 2% out of the market.

When one thinks of a Man with Mojo, Sean Connery comes to mind. Here he is on a day where he left his Mojo on another set:

Salve Lucrum


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