January 27, 2010 Salve Lucrum Portfolio

January 27, 2010 Portfolio Update


Ticker           Name                   % OF               %+/-


AAPL          Apple Inc.             10.8%               7.9%
CASH                                        10.1%
INTC            Intel Corp.            9.3%                0.05%
RIG             TransOcean          6.4%                  -1.2%
CVX            Chevron                6.2%                  5.9%
GIS              General Mills         6.0%                12.8%
ARMH         ARM Holdgs           5.0%                 26.9%
GME           Game Stop            4.2%                -14.3%
IBM                IBM                    3.9%                 13.8%
AMT          American Tower     3.5%                 9.8%
GLD            Gold (ETF)            3.3%                  2.9%
VZ             Verizon                  3.1%                -4.6%
GD           General Dynamics    2.8%                .58%
VOD           Vodaphone             2.3%               -3.3%
RHHBY     Roche Holdngs         2.3%                18.6%
NEWN        New Energy            1.7%               -1.7%
GSK          Glaxo S & K              1.7%              11.9%
WU          Western Union          1.5%                -2.9%
VXX*         Barclay's VIX            1.3%                 8.3%
TSCDY      Tesco PLC                 1.3%                 4.1%
FLIR         Flir Systems               1.2%                 5.0%





The balance of the portfolio is made up of various options and 30 GMAC Smartnote 6% Bonds representing about 4.4% of the entire portfolio. Total realized gains for 2009 amounted to 6.7% 
*New since last post.

BAGAKOAA; AAPL Late Night Jan 26, 2010

BAGAKOAA;

AAPL Late Night Jan 26, 2010

Just a quick heads up that Apple is announcing a new product tommorrow.  No one knows what it is, OK everybody knows what it is.  Anyway, Cramer did a great intro tonight on MM and gave an important heads us.

Historically after every major new product announcement AAPL tanks significantly.  (Mostly those big fund managers just having their way with us fluffy day trading casino monkeys.) We are talking 5-12%.  I know quite a few of you who have AAPL and if you follow my lead you might be back stopping or trailing stopping the stock at the 8-10% range.  I am taking my stops off AAPL and putting in a buy order at 192 a share.  Food for thought.

This is a great stock with a potential upside of 300+.

Salve Lucrum

BAGAKOAA; January 26, 2010 Lookin’ through my back porch screen.

BAGAKOAA;

January 26, 2010 Lookin’ through my back porch screen.

Well it has been 5 days since I bothered you all. It was a stinky cheap scotch drinking week. The main portfolio lost most of its gains in 3 days. It got stopped out of a few positions, got out of a few financials after the words of encouragement from The White House, and a couple of spec stocks got in and out of my portfolio based upon my 8% down sell rule.

There will be an updated Salve Lucrum Portfolio posted shortly.

In a nutshell, sold off the BAC+D preferred for BAC, the GS+A preferred, stopped out of the spec BURKF, got out of the solar diffusion maker ASYS, sold out of the lithium play WLCDF- Western Lithium of Canada, got stopped out of BMY after a profitable run, got stopped out of Flowserve FLS, and got stopped out of SQM (Still a great stock-materials got clobbered over the last few weeks so my trailing stop kicked in).

There was some buying opportunities this last week too if you had some cash to invest and the guts to do it. With all the heebie jeebies in the market, VXX got added to the portfolio. That is Barclay-Schwab’s tracking ETF for the CBOE VIX. As you all know, that is the volatility index fund. When things are spooky and volatile the VIX and various other VIX tracking fund goes up. When all is calm and good, its down. I got in the VXX in the 28 range and will wait to see what other brilliant ideas our leaders come up with before I sell out of the VXX. I am guessing a jump up to at least 35 possibly 40. I got in and of a very speculative stock called WAVX. It was a penny stock I had heard something good about, checked out the 10K and 10Q’s and got scared to death and got out. This is a gambling stock only bet it if you can afford to loose it. The portfolio picked up more ARMH on the dip in prices. It also picked up more RIG and CVX in the dips in prices. It also picked up some more VZ, VOD, INTC, and APPL (Not for the main portfolio but others). The SL Portfolio has a ton of APPL and is way overweight on the stock.

So while all of this carnage was taking place, I have been playing around with stock screens. If you haven’t I suggest you do. Here is why I say this. If you can use screens to determine criteria, it forces you to understand the criteria.

Rather than hearing about a tip from Cramer, your CIO, or some drunk in a bar and acting upon it, you can use various screen to determine a stock based upon criteria you deem important.

Right now, I have been focused on PE ratio (between 5-14 as a general rule), Retrun on Equity (Above 15), Retrun on Capital or Return on Invested Capital (Above 10), and little or no long term debt. The ROC or ROIC are difficult to find in a screen, but they are out there.

Well in my search for a great screen, I went to Yahoo (Very good), Baron’s (good), WSJ (good), Schwab (VG), Financial Times (VG), Reuters’s (VG), to name a few. One of the best I ran across was FINVIZ.com. At a glance you have about 400 criteria across all indices to screen from. More than 13,000 equities are populated in this site. Their Mission Statement is “To provide leading financial research, analysis and visualization.”, and they do. Besides the screen, you can set up screens and save them for your own evaluation of each stock. This will be handy when I want to kick the tires on a stock using my own criteria.

As it has been said here and in countless other articles. If I can remove myself from the equation, I can be a better trader and investor.

Art Cashin of UBS’s Cashin Comments always has some great stories and even better intel. Today he shared the Glen Beck interview of Dick Bove to explain the comparisons of the Obama policies and those of Chavez. You should check it out. Cashin also has a trivia question at the end of each document. It is an idea worth stealing.

Here is the first Cronin Challenge:

Where did the gesture of “giving the bird” or “flipping someone off” originate from?

Send your answers to brian.cronin@padi.com

Salve Lucrum

BAGAKOAA January 21, 2010 Cry, Drink, or Laugh

BAGAKOAA;

 January 21, 2010 Cry, Drink, or Laugh

Well, licking my wounds today. The portfolio is off about 5% this week. Ouch! So what are you gonna do.

Crying is not going to help and its way to early in the morning to drink. So I thought I would entertain myself by telling you how I do what I do.

On a day like today, I got up in plenty of time to take the dogs out, provide them nourishment, take my self out (you know what I mean), and still be in front of the terminal by 6:15 to review the Asian headlines and see what impact their news had on the opening of the market.

Then I look at the 11 portfolios I am intimately involved in. First I look at the ones that are not mine as this is not my money and I feel penultimately responsible for making sure these people don’t cry and start drinking at 6:15 in the morning. After all that is my Job. Then I check the kids and other family member accounts. Then and only then do I open the Salve Lucrum Portfolio.

As I have established, I am a Fluffy Day Trading Monkey In a Casino. I look down the list of a diversified and much to long and confusing portfolio. I ask myself what is a ASYS and why did I buy it? So I look them up on my valuation spreadsheet because I would never buy a stock until I had made sure it met my parameters. There it is on the 212 line spreadsheet ASYS. It is in the list with 43 other stocks to run the numbers on. I look them up in Schwab and Oh Yeah, they are the people who make the diffusion furnaces for the solar photovoltaic cells. Gotta to look them up. It’s up 3%. Perhaps I should not do the research. This week it seems to work better.

Then I see BURKF, what the heck is that and why did I buy 1000 shares of it at 24 cents a share. Don’t feel bad if you are looking for it because I couldn’t find it either. I actually had to Google it. They are an oil and gas exploration company. I really don’t remember buying it. I know I lost 2 cents on it today when I sold it. Checked the blog and thank God I have not mentioned it anywhere.

Then I discovered all of my paper losses are in calls due to expire in March and April. I got a January 2011 call on Valero that is down 88%. The strike price is 30 and the stock is at 18. What the heck was I doing? But I have 12 months to lose the other 12% of my money.

Then there is the March 41 dollar Best Buy Call which is 84% down. See I told you these Call options are special. BBY is at 37.67 right now so I only need a 9% increase in the stock to get back to a break even. That’s All. Please, everyone go out this weekend and buy anything at Best Buy.

Then I got a Cramer tip that is burning my butt. Shame on me for not doing the homework. I have a March $45.00 on MELI, Mercardolibre. It is kind of like a Maexican Ebay wannabe without the profitable part of the company PayPal. Of course I did not figure that out until I bought these calls and have been using the rational that a lot can happen between now and March. That sounded great in December. It sounds rational in January. It is ganna sound stupid in February, but at 82% down, I have 2 months to loose the 18%. Calls are fun.

Then there is the March 42 dollar call for JPM, That would be JP Morgan whose earnings report did not go as well as I expected and now Obama want to make sure I don’t see any profit on that call. There are actual transcripts of Sheila Bair (FDIC)and the President and she said, “Mr. President, the banking rules you are suggesting are punitive and draconian.” To which the President replied, “I don’t care, Brian Cronin has a 42 dollar call out there on JPM and a couple of preferred banking stocks and I am going to stick it to him.” Well I haven’t actually seen the transcripts but I did here something about the regulations being a bit draconian.

Then I am looking at the long list of calls with all these red numbers and I see an April IBM call just in the money and it is down a little and right below it is another April IBM call way out of the money which is down 57%. Now who the hell did that? I know I am much too bright to accidently buy two of the same equity calls of the same expiration date at two different strike prices. The people who have trusted me with their money must really be feeling special right about now.

And as I gaze down to find my best performing stock, there it is, oh yeah it is not a stock. It isn’t even an ETF. It’s a damn bond. Yeah those GMAC Smartnotes I mentioned what back in October. (Thank you Doyle). They are up almost 40%. A Bond. You might be on to something Tim. Can I buy calls on Bonds!

Salve Lucrum

BAGAKOAA JANUARY 20, 2010 RED, BLUE, AND BROWN

BAGAKOAA:

JANUARY 20, 2010 RED, BLUE, AND BROWN

I got EBAY wrong, I got housing starts wrong, and I got the election in Mass wrong. No I thought Brown would win, I just thought the election results would be a boon to the market. Just like the republicans lost their ground in 06 and 07 by being aloof and arrogant, DEMs lost a stronghold in MASS. (Sorry I will try not being political here, but it must suck to be Harry Reid) But the market did not play out like I had imagined.

Sometimes I feel like a fluffy monkey day trader, oh yeah in a casino.

BAC report slightly lower and had little apparent impact on the market. I think (and that can be dangerous as proven in many of my posts), that the negative inertia was set last night (Yes I was watching late night Bloomberg), when China started saying they want to slow things down a bit by tightening credit. By 6:30 AM PST that had been translated into “China is going to raise rates, Chinese steel purchases will slow, and the sky is falling.” All of the helped the dollar early in the day which tanked energy and commodity stocks, then the general alarm was sent out that the recovery is questionable and techs started to slide and the sky is falling. As part of the commodity drop, Gold lost some of its luster today. GLD came down to 108 a share.

So what’s a fluffy monkey day trader to do? Well I followed Cramer’s lead. He was out early buying bunch’s of BAC. I don’t like the stock but have some preferred. The portfolio picked up more RIG, CVX, IBM, and GLD. If I had a little read button I would press buy buy buy!

Let’s see what tomorrow will bring. To quote Larry Gatlin, “I’ve done enough dying today!”

Salve Lucrum

BAGAKOAA Jan 19, 2010 CHU on this.

BAGAKOAA;

Jan 19, 2010 CHU on this.

Well Citi continued to disappoint with a 33 cent a share loss, the guess of 25 cent a share loss made here this weekend was way off. The stock came back later in the day.

IBM came in way below my grandiose expectation at 3.59 a share. (The idea was for 4.19 a share higher than all of the analysts) That is between the estimates and the whisper number so look for a sell off tonight and at the opening. Please read Palmisano’s comments and listen to the earnings call. This, Like INTC this is a strong well positioned expertly run company. If the stock drops more than 1.5 to 2.0%, consider picking up some. This is the 7th year of double digit growth. 15 billion in free cash flow, ya gotta love it. Margin is approaching 50%, sweet. This will be a stock to hand down to the grandkids.

With all the scrutiny on banks and financial organizations, it is easy to see how the competitive climate is changing and that their need for more IT infrastructure will be met. For obvious reasons IT cap expenditures were cut late 08 and all of 09. 2010 Should see a 6-7% increase in IT solutions. This bodes well for the likes of IBM. Once the manufacturing sector starts seeing demand for product post the initial pipeline fill, we should see yet another 5% in IT Cap spending. This should take us into first quarter 2011 and again support the likes of IBM.

AAPL was up today as they announced a product event next week. That is cool. All they do is announce a product event and their stock goes up. Of course the expectation is the new notebook, eReader, browser, 4G, diaper changing notebook. I have AAPL so its good news and a nice change to the upside after trading sideways, well downward sideways for the last 3 weeks.

As far as trades in the portfolio. I accidentally took a profit in Hasbro. The 15% gain in 3 months was accidental as this dopey guy was trying to set a stop and mistakenly set a limit order. Ouch! I will review and get back in as the Transformer franchise revenues should have done well over the Holidays.

Sold out of my position on FLIR with a teeny weeny gain. Cramer lambasted the CEO for being less than forthright about a recent appearance. The price had done OK because of the lap bomber incident. He felt the CEO knew they were going to disappoint but did not say anything during his last visit to Mad Money. Over the weekend I did my own homework and agree that stock probably did get a bump from the lap bomber, has not done a great job of integrating the various divisions of the company and probably does lack a clear vision of where the company should go. Anyway I am out and suggest others do the same before the homeland security threat calms and people figure out the issues as well. If that paragraph didn’t get a few visits from NSA and Echelon, nothing will. Fortunatley the site needs the visits.

I also got out of my speculative position in SPNS. They sell software to the insurance industry. I don’t remember why I bought it and have done Ok with it. I started with it in October at about 1.09 a share. In cleaning up my portfolio this weekend. It looks like a solid stock but the steam seems to have run out of it. Take the money and run.

I mentioned I pulled out of CHU after a disappointing run. China Unicom is still getting pimped by Cramer. I felt you should know that as he is convinced long term it is a good bet. I got out for various reasons including the GOOG issue and the rumor (Remember buy on the rumor sell on the news), that CHU was going to postpone the release of two GOOG phones with Droid software. Cramer still has his money of AAPL, the iPhone and CHU. He bought CHU big on this dip. Just wanted you to have a balanced perspective. Cramer might know a little more than this Monkey in a casino.

Salve Lucrum

BAGAKOAA Jan 18, 2010 The week ahead.

BAGAKOAA

Jan 18, 2010 The week ahead.

It was a great three day weekend and because I was attempting to have a life, (Football, golf, writing, movies, and a nice dinner with the wife.) I have not combed through Barons as of yet. Let’s take a look.

Tomorrow is a big reporting day. Citigroup C is reporting another loss tomorrow. They paid back their TARP funding and got an extremely favorable tax ruling from the IRS, but I don’t own the stock and do not know what the fundamentals are. The street estimate is -.32 cents as share and the Whisper Number – the one beat is -.27. My guess is -.25 but it still is considered valued at 5.50 a share, but I don’t get it.

CSX and Burlington report this week. I do not own them but like to hear how they do as it is a good tell on the economics here in the states. CSX is expected to come in at 76 cents a share but the big number to beat will be 78 cents a share. Burlington reports on Thursday and should come in about 1.22 a share. I can not find a whisper number on Burlington.

IBM reports tomorrow and I expect it to blow away estimates and the whisper number. ($3.47 and $3.76 respectively.) Again even if you don’t have skin in the game on this stock (and you should), listen to the call to get a feel about capital spending on office equipment, and enterprise software. I will go out on a limb here and peg their results at 4.14 a share. That would be huge, but it would not be as big a bounce in earnings that INTC had. That could drive the equity up to 138 very quickly. IBM is about 2.5 % of the Portfolio and is up 30.1%. There is an equal amount of March calls that are in the money.

Ebay reports on Wednesday but will have a difficult time keeping to the estimate of 40 cents a share.

GE and MCD report on Friday. I do not own either but I know a few of you do. GE is expected to bring in 26 cents a share and they really need to blow out 28 cents a share to make a statement. GE is hoping to spin-off the media division (NBC Universal) to Comcast, but that will not be reflected in this earnings call. The Leno debacle may ruin the sale anyway. It is impossible to think of a sector that they don’t compete in and in looking at the break up value of the company I can see and understand some of the valuations above the 25 dollar mark. I still don’t like the debt situation in GE Cap and they have more footnotes in their 10Ks than I have time to read. MCD has been leaking some good news about sales and with commodity prices just now starting rise we could assume their margins are in good shape. The will probably make and break their estimate of 1.02 a share. The whisper number is 1.04, and as usual they need to bow away those numbers to get a good kick to the stock. As I have mentioned in the past, this is a channeling stock, with the range between 52-62. It looks like that has shifted up to 54 to 64. If we break the 1/04 a share it should move toward the 64 price and then adjust down wards again. It is a nice stock to own and one of those that MIGHT qualify for the covered call sell strategy.

There is not a lot going on with economic news this week. The bank of Canada will not move its rates tomorrow. The State Street Confidence survey is out tomorrow. This is a technical survey not an attitudinal survey. It measures what institutional portfolios are doing with their money. There is not consensus figure related to this survey. It is what it is. My guess we will see more monies going into the equity market, a bullish trend.

Housing Starts and Producer Price Index reports on Wednesday. Look for a flat or slight increase in housing starts to the 579 thousand range. Builders are trying to manage their inventories ands are reluctant to build for the sake of building. The consensus for the PPI is flat. We might see a little increase in the energy sector but maybe not. And on Friday the Conference Boards Leading Economic indicator report comes out. Look for a little positive bump.

I’ll report back as the week goes on ad let you know how my guesses went.

In closing, you know I mentioned my attempt at making money in solar and got stung. Then I bought solar for the house and got stung. Solar is not going away but there are way too many horses to be on. Well if you are at the race track and you want to make a lot of money, get in the hay business. I initiated a position on a company that was explored on Friday on Bloomberg the company is Amtech Systems Inc. They make diffusion furnaces for many of the photovoltaic manufacturers. All of the companies need to fire their solar cells and many use Amtech Products. I will be running the numbers and let you know. ASYS like many other in the se4ctor are running at a loss, but have no debt. Do your homework, but this one looks like a good play in solar.

Salve Lucrum

BAGAKOAA Jan 18, 2010 There are options to the game

BAGAKOAA;

Jan 18, 2010 There are options to the game.

Yeah, I thought I’d give you all a break and not write anything for a few days. In reality, I did not know what to say. I was still reeling from the miscalculation on INTC. Don’t get me wrong. I still like the stock and I did add to my position on this dip. My frustration lies in having figured it out called the number and still have it come down 5% taking some wind out my sale.

Then there was the breakfast Saturday Morning. Enjoying a cup of coffee with someone who is very knowledgeable about the investment world and who was one of the first to call this last bubble. Someone whose opinion I respect. Finally I asked, “What the hell happen with Intel?” To which he just smiled. In the next 30 humbling minutes he asked me first off if I really thought I could know more than the guys and dolls in New York and Chicago who control billions of dollars. To which I replied that I did not, though the moment INTC reported, I thought I did. Then he explained to me the rules of the game.

He told me, by first prefacing his comments with, “Not to hurt your feelings.”, and then explained I was just one of the monkeys in the casino. Now I lived in Las Vegas for thirteen years and worked very hard not to be one of the Monkeys in the casino. I know a couple of the readers are monkeys in the casino so I know I am in good company. That is right, guessing the market, timing the trade, picking the right stock at the right price are all games in the Wall Street Casino. And just like some games have better odds than others (In 1995 the best odds for the player in all casino gambling was the don’t pass line of the craps table especially taking odds after a four or a ten had been established as the point.), there are certain things you can do to work with the house.

My breakfast companion then explained that just because a good quarter was reported did not mean the company had a good quarter. Most companies to some degree cook the books and then you have some that are just down right crooks. I was prepared for this comment as I scrutinized the INTC quarterly and the last 10Q (Filed quarter report with the SEC) and I looked for Net income versus pro forma figures, exclusions that seemed unusual, operating income comments, hard to understand stock options for key employees, off balance sheet footnotes, interest rate assumptions, revenue recognition, deferred income tax, related party transactions and all of the relevant foot notes. (The Book Financial Fine Print by Michelle Leder is a great tool for anyone who wants to do some forensic study on company financials.)

Then this investment sensei (I have many) started telling me about selling call options to cover a held position. I had heard of this strategy, but it was a bit technical when I first started playing options long and did well so I stopped there. He explained that taking a few wins buying calls was like taking a puff off a funny cigarette, you will want more, you will be main lining calls until you start getting them wrong. (I was beginning to think that he had looked at my portfolio last week.) And just like the bright lights and bells and noises from around the casino you will want to bet more. Then you become a monkey in the casino. He explained that selling a covered call option is a great way to protect a position you already own. That is why it is called a covered option.

Now I will not pretend to tell you I understand all the nuances about this strategy. I will be taking a lot of time to read two great books on the subject. The first is the Bible to Option Investing, Options as an Investment Strategy by Lawrence MacMillian. I have had this 985 page book for about 3 years. It is an everything you want to know about the strategy and mechanics of option trading. Chapter 2 defines how to execute covered calls as protection against an underlying equity. I can’t recommend it enough. The other book which is actually part of a college financial course is Option Spread Strategies by Anthony Saliba from the International Trading Institute. This is real nuts and bolts option stuff, but it does show you the point that my breakfast companion is trying to make. If you are going to put 10,000 on the black jack table, you probably would appreciate limiting the cards you can get to a range of cards that will help you win but at least limit your downside. Writing covered call sell options is one way to do this.

This is risky and it involves a lot of homework so if you want to live vicariously through me, as I learn it I will keep tabs of it here.

Salve Lucrum

BAGAKOAA; January 15, 2010 Whassup widatt?

BAGAKOAA;

January 15, 2010 Whassup widatt?

OK I got JP Morgan right, but that does not ease the pain of INTC.

If you have ever heard the saying “buy on the rumor, sell on the news”, this Intel reporting is the epitome of that saying. I went through all the published segments of the conference call I could find and I don’t see any reason for the pull back this morning. OK INTC was up 60%+ over the last 12 months. I noticed some swelling volume last week, about 70 million shares a day against the average of about 50 million. The import export report on the 11th had some nice things to say about the sector where Intel plays. (RUMOR=BUY) Volume trended about 70 for the next two days and the price went up about 5.1%over a three day period. Last night, after they reported, (NEWS=SELL) in after hour trading it was even higher. My calls were up 22% this morning at the opening I am now back to even on the calls and have given back about 7% of my gains in the stock itself.

I have to follow the lead of Cramer who about 9 minutes after the market number announced he was buying on the weakness. After my trade it will be my number two holding. Ha ha Jim you got in at 21.11 I got in at 21.09. (POST NOTE- Later in the day he got more even cheaper, I believe it was 20.65) I agree with Cramer’s assessment which indicates corporate spending on new faster systems is improving, I am hearing the need here at our office, the new year of the “Notebook” is booming, and Windows 7 will sell a few boxes this year. Most importantly, the forward looking multiple is cheap at 14.

OK we picked up a few new readers this week. One of them, Michael J sent me a nice note outlining his investment philosophy and recognition that we are all responsible for our own actions. He also, and I hope he does not mind, told me about one of his success over the last year. He got a triple with Fannie Mae. AND he took the profits. That is key. So many of us look at a triple (as rare as they are) and say there has to me more. Nicely done. I would assume he bought it right before or after March 09 in the 50 cent range and rang the bell at about a buck and half. Way cool. He is a braver man than I as the fundamentals would never get me into a stock like that. He admits that keeping this on his watch list is a whacky idea.

Let’s take a quick look at the fundies. ICKY! Two quarters of huge losses has put the company into conservatorship. The CEO was asked to resign (Should have been tarred and feathered and had at least one episode of AMW-America’s Most Wanted- just on him), and is now replaced by Herb Allison formerly of Merrill Lynch. He is talented and experienced. Unfortunately the company has burned through 60 billion in capital and is sitting on 194 Billion of underperforming loans. (That would be a bad thing for any of you in the US Senate and Congress, not the State assembly or city councils-I have at least two of those reading this so I must tread carefully.) Most analysts have this stock value at, hold one let me calculate it, ok take the negative numbers, add them to the other negative numbers, subtract the debt, and probable losses times the negative growth rate, and you have, oh yeah $0. That’s right analysts value this at 0. I don’t think I have ever seen a zero before. Michael, I’d say this isn’t even good enough for a watch list.

As you can see, I republished the Salve Lucrum Portfolio with the recent changes. Today was stinger. The S & P 500 was down 1 %. The proftolio was down almost 2%. I’m bummed. Looks like cheap scotch tonight. Yeah get out that dusty old bottle of Clan MacGregor. I think it can be had for about 9 dollars a bottle. Pure got rot. But hey, when you take a hit like I did today, you are goin’ for quantity not quality.

Salve Lucrum

BAGAKOAA; Jan 14, 2010 Tell Me What I’d Say, Tell Me What I’d Say

BAGAKOAA;

Jan 14, 2010 Tell Me What I’d Say, Tell Me What I’d Say

I love that song. So it will be hard not to sound like Cramer, but tomorrow wait and see what he has to say about Intel. Now I mentioned the estimate was 31 cents a share, the whisper number (Really the one to beat if you’re going to get the attention of the big boys.) was 33 cents. Now a great report would be 35 cents. Now that does not seem like much, 2 cents a share until you do the math. INTC has a market capitalization of more than 118 Billion with a B dollars. Take 118 billion dollars divided by the current price (exploding by the minute) and you have 5,501,165,501 shares. Now take 2 cents a share times 5,501,165,501 shares and you have $110,023,310.02 over what was estimated. But that is not what happened. They reported 40 yes 40 cents a share profit blowing by the whisper number by 7 cents a share. I’ll let you do the math.

It is a grand slam (Got my notice about spring training for the Angels so I thought it would be OK to do a baseball metaphor.) of financial reporting. Sales up 29%, margins up and 2.28 billion in profit. After hours trading has the stock up almost 2%. It should open strong. I expect to see a 35% uptake on my calls and then I will close them and take it to the bank. I still have a respectable position in the stock itself. Look for 1-1.5% bumps in AMD, Broadcom, and my other little sleeper ARMH. Cramer is going to go crazy with this tomorrow. I am sure he will position it as the second coming.

And I must apologize as I lead you to believe JPM was reporting today, they actually report tomorrow. Sorry about that. I’ll keep my money out of the stock but thinking it is not going to hit its mark.

The New Beige Book is out the New Beige Book is out. I hope I am not the only one who thought of Steve Martin in The Jerk. But I digress. The Fed released the Beige Book. It is available in HTML or PDF. Yes you can send it to your Kindle. I like it because I can cut and paste it and plagiarize it all to death because it is public information. Here are some of the highlights FOLLOWED BY MY COMMENTS-BEN LOVES IT WHEN I COMMENT-IN CAPS:

Reports from the twelve Federal Reserve Districts indicated that while economic activity remains at a low level, conditions have improved modestly further, and those improvements are broader geographically than in the last report. FOR FUN, GO BACK AND COMPARE THIS TO THE 2009 JANUARY REPORT. THIS SOUNDS GREAT BY COMPARISON.

Ten Districts reported some increased activity or improvement in conditions, while the remaining two--Philadelphia and Richmond--reported mixed conditions. THAT IS UP FROM 8 DISTRICTS AT LAST REPORTING.

Most Districts reported that consumer spending in the recent 2009 holiday season was slightly greater than in 2008, but still far below 2007 levels. I AM TRYING TO FIND OUT OF THIS INCLUDES ON LINE SHOPPING. THIS IS A GOOD SIGN.

Reports on tourism were mostly flat or weak, but for two Districts whose ski resorts enjoyed early season snowstorms. I KNOW THE ROAD FROM LAS VEGAS TO ORANGE COUNTY WAS PAINFULLY SLOW.

Toward the end of 2009, home sales increased in most Districts, especially for lower-priced homes. Home prices appeared to have changed little since the last Beige Book, and residential construction remained at low levels in most Districts. REMEMBER, WE NEED TWO THINGS TO SUSTAIN THIS RALLY. CONSUMER SPENDING AND A BOTTOM IN HOME PRICES. WE ARE GETTING CLOSE.

Consumers were variously described as cautious, price sensitive, and focused on necessities, but sometimes willing to spend on discretionary purchases. NOW THAT’S WHAT I’M TALKING ABOUT. DISCRETIONARY, LIKE SCUBA DIVING?

Boston reported widespread positive activity in advertising, consulting, private equity firms, healthcare, biotechnology, education, and government services. High-tech service firms reported favorable conditions in Kansas City. New York reported a general pickup in activity. Health care providers reported increased demand in the San Francisco District. THAT’S THE WAY AHA AHA I LIKE IT AHA AHA.

Manufacturing activity has improved since the last report in six Districts. New York reported a general pickup in activity, broad optimism, and some increase in employment. Production was stable or slightly up in the Cleveland District. Firms in the Cleveland District expect greater export opportunities going forward, but steel firms expect slow growth in overall demand. Manufacturers in the Chicago District cited gains at firms tied to the auto industry (F) and those benefiting from an increase in exports to Asia. Firms in the Boston District also cited Asian exports as well as defense work as sources of their positive demand, but identified weak demand for exports to Europe and for products related to energy sectors (RIG) and commercial construction(FLOUR). San Francisco reported a modest net improvement in manufacturing activity, with semiconductors (INTC, AMD, ARMH) strengthening and aircraft and parts stabilizing at moderate levels. Metal fabricators and housing products have also stabilized, but at very low levels. I FELT THAT WAS PASTING THE WHOLE SEGMENT AS THERE IS GOOD NEWS IN MANY CATEGORIES. THIS EXPLAINS WHY EARING MULTIPLES ARE TRADING AHEAD OF THEMSELVES. BECAUSE THEY MIGHT NOT BE.

Homes sales increased toward the end of 2009 in most Federal Reserve Districts, except San Francisco, where demand for housing has been steady, and Kansas City, where residential real estate activity has eased since the last Beige Book. GOOD NEWS CONSIDERING THE LAST 18 MONTHS.

Federal Reserve District Banks reporting on agricultural conditions generally indicated that cold weather at the turn of the year had adversely affected crops and stressed livestock. Atlanta noted damage to citrus crops from the cold, and Chicago and Minneapolis reported that winter storms halted corn harvesting, and impeded tillage and fertilizer application. THAT WAS FOR YOU COMMODITY PLAYERS. I DON’T THINK WE HAVE ANY BUT I AM AFULL SERVICE BLOGGER.

Production of energy-related materials has risen moderately since the last Beige Book. Atlanta reported that oil production has continued to increase. Minneapolis reported an increase in oil and gas exploration, and Kansas City and Dallas reported increases in drilling. San Francisco noted an increase in extraction of natural gas but a continued low rate of oil extraction. CVX RIG MUR CON

Labor market conditions remained soft in most Federal Reserve Districts, although New York reported a modest pickup in hiring and St. Louis reported that several service-sector firms in that District recently announced plans to hire new workers. In the Richmond District, temporary employment agencies gave mixed reports, but some noted increased demand for administrative and sales workers, laborers, and warehousing and distribution workers. HEY WE’LL TAKE THAT, WON’T WE?

Now you can read the entire thing at http://www.federalreserve.gov/fomc/beigebook/2010/20100113/default.htm

Ok I am going to wrap up here but wanted to let you know about a couple of relevant upgrade down grade news.

Credit Suisse upgraded GOOG’s target price from 620 to 675. They must think GOOG is bluffing about China. (I personally think they are but some damage has been done. Bloomberg announced today the some on line advertisers have already switched to Baidu over in China.) I’ll stay clear a few week and see what happens.

UBS, gosh I like those guys. Boosted some positive comments about Boeing. What I don’t get it the upgrade notice says they are looking for 50 a share and its selling at 61. m m m m

Barclays was liking AMZN today. They raised their target price to 160. I hope so because I got a few calls that could use the lift.

OK let’s see what the market brings tomorrow. I will hopefully be bragging about the 35% jump on my INTC calls. I’ll let you know. Tomorrow or this weekend I will republish the portfolio as I did liquidate a few things this week.

Salve Lucrum

BAGAKOAA Jan 13, 2010 I did win 35 dollars

BAGAKOAA;

Jan 13, 2010 I did win 35 dollars

OK so there I was routing for the Philadelphia Eagles. They lost to the Dallas Cowboys. Then on Sunday I am routing for the Green Bay Packer’s to kick butt on the Arizona team whatever their name is. About ¾’s of the way through the game, I start thinking. “Did I Pick Green Bay or Arizona”. Alas I look at my picks and I picked Arizona and I picked Dallas. So instead of being 2 for 4 I am 4 for 4 and win $US35. Don’t ask me how.

Alcoa’s disappointing report seems to be history as the market recovered a little bit today. Tomorrow we have INTC reporting as well as JP Morgan. I bought some INTC calls on the 11th so you know how I think their reporting is going to go. Remember those trade deficit numbers. One of the strong numbers included industrial supplies. Guess what micro processors are included in those figures. I am thinking INTC, Broadcom, and AMD are going to report strong. I have been looking for a whisper number for INTC. I finally found it at .33 cents a share. The estimate is 31 cents a share. I am going to take a shot and say they should see .35 a share which should bring a nice spike to the stock. That guess is driven from some of the reports out of San Pedro and Long Beach California and the types of imports they have been seeing from Asia. Again my April calls should bode well at 35 and above. If not, I will take a beating.

JPM is reporting tomorrow. I do not have any skin in the game, but the estimate is 62 cents a share sand the whisper number is 65. I don’t see it happening but I really don’t know. Let’s just watch and see.


Mid last year I made a nice little profit playing the VIX. That of course is the volatility as measured by the Chicago Board of Option Exchange. The VIX is trading and staying below 20. I would keep an eye on this and when you see it peak above 19, Consider getting a little as if it brakes 20 it has a smooth ride to 28 according to many technical experts. (Chart Watchers). Food for thought.

As far as the SDalve Lurcum Portfolio,I pulled out of GOOG. There were two reasons for this. I called investor relations and asked about the options repricing for employees in March 09. The answer made my head spin. I did not understand what they were saying ands there was NO denial that it was dilution of value. They did indicate 2 Billion was exaggerated. I asked how much then and could not get a straight answer. I then found out I needed some cash to invest in my back yard (pool Project) and then I heard about the China issue with GOOG and I pulled the plug at a 17% gain. It was 4 % of the portfolio and now makes AAPL my biggest holding. I also added a small speculative position in BURKV, (Long shot I need to do more homework.), I took some profits in VZ as well as SQM. Like GOOG I got out of CHU, which was a big position in the portfolio, but I had recovered to a 7% loss and wanted out. I also added to a cheap cheap cheap RIG. You really need to look at this stock, it is pretty.

I just had a couple of glasses of wine with my buddy Ben and tried to read this month’s Beige Book from the FED. Sorry it will have to wait for tomorrow.

I owe you more, but its 9:52 and I am tired. Good night and

Salve Lurcum

BAGAKOAA Jan 12, 2010 Harley, Vegas and The Road Ahead

BAGAKOAA;

Jan 12, 2010 Harley, Vegas and The Road Ahead

Had a great lunch today with a bunch of great guys. They are our fearless sales force for PADI here in North and South America. I have known many of them for 15 years. They are at, what we call the pointy end of the stick. Some of us talked about stocks today so they have been invited to join here in the land of Salve Lurcum. Because they are employees I had to make them swear an oath that I am a moron when it comes to investing and that anything they read here is complete bullocks and should not be used for investment strategies or trades. Most would agree I am a moron and left it at that.

One was bragging about owning Harley, the stock not the bike although they have had Harley’s and still might own one. At this point in time, I’d say owning the bike is a better wager than owning the stock. It’s current PE is 24 and forward looking price to earning is an obscene 37. Almost all analysts have a hold or lower rating on the stock except for Argus who even though they have lowered their 09 and 2010 earning estimates, at the new lowered 2010 earnings estimate of 1.28 a share and the current P/E, you got a 30.00 stock. Their reasoning seems sound. First off the better economic climate should help sales. HOG did slash the hell out of expenses. They also abandoned their planned move from PA to KY when the PA union took concession that will save the company some serious dough. (An estimated 100 million to be exact.) They are also dropping the Buel and Augusta product line to focus on HOG products. They will probably be able to pay off their long term debt in 3-4 years out of free cash and income, but I still think the stock is too rich at multiples of 24+. I will put it on a watch list, and might scope out some April calls, but the dividend is an anemic 1.8% yield. I’ll pass.

Another was saying they owned Las Vegas Sands. Having spent 13 years there one night, I have watched and invested in many of the Vegas stocks. I traveled sideways with LVS earlier this year trying to time the good news about the gaming license in Macau. That did not work out well for me as I bough at 9ish and sold at 9ish and missed the double to the current 18. Let’s look at the value. Ned Davis and Argus love the stock. Because of their recent loss, you can’t make a P/E ratio work. The Sands company primary profit engine is the Venetian and that is due to the tie in to the convention properties. Sheldon Adelson does not make too many mistakes and like Kikorian and Wynn are masters of the strip at making money. As the economy recovers and rack rates continue to improve, the Palazzo should be on par with the Venetian as very profitable properties. On the down side, the company has about 12 billion with a B betting on the Asia market. The company did over extend and did a huge offering in 09 which has taken the stock down from 100 a share area to its current price of about 18 a share. It looks as though the analysts are pricing in the “if come line” on the IPOs in Macau. The hopes are as far as I can see is that the Sands China IPO in the next couple months will generate 2.5-3 billion in cash. I am thinking that there are a lot of Ifs built into that value. If I had held onto my 9 dollar Sands, I’d take 9 dollars off the table and play with the house money.

We did have a couple of relevant Upgrades and Downgrades today. I call them relevant because they are in one of the portfolios or ones I know you have.

MGM Mirage got a nod upward from Goldman saying the worst is over so come on back to Vegas.

AVON got kicked around a bit by UBS. I know none of you have AVON stock but I know one of you who has about 3220 AVON Bottles. You know those hideous little bottles of toilette water that look like cars or guns or flowers. Imagine having 3,000 of them. Scary. I am not worried as I know this person never reads page two of my blog.

GME, Gamestop got bumped at Credit Suisse to a new target price of 28. I need that as this stock is getting trounced because of the WMT factor. I am looking for 32-35 on this stock.

Speak of the Devil, LVS got upgraded by Goldman saying the shares should be trading at high multiples. Forward looking multiple is high. They did not give a target price.

And in a trifecta of casino plays, Wynn got upgraded by Goldman. They gave a new target price of 64.00 which is weird because the stock is trading for 67.00. If that is an upgrade then what is a downgrade. The analyst must be a contrarian.

Salve Lucrum

BAGAKOAA; Jan 12, 2010. All the lower fruit. . . .

BAGAKOAA;

Jan 12, 2010. All the lower fruit. . . .

Well Alcoa set the tone Monday night. They missed. If you recall the estimate was 6 cents a share, the whisper number was 7 cents a share and they came in at a penny. Much better than the 28 cent loss from last year but still disappointing. Everyone on Bloomberg was talking about it before the bell. Despite that, the market did close up Tuesday, but as Art Cashin at UBS (Thanks Tim and Mark) pointed out the 46 points on the DOW was due to three stocks CVX, UTX, and CAT.

So here I am sitting with less cash than I would like, because I know there are bargains out there. But are there? The PE ratios of companies have really taken off. There are no real cheap stocks. OK there are a few, RIG comes to mind, but it is starting feel a lot like late 2006. We have been seduced by the 40 % gains we have seen since March. In talking to several people in the business, we are SLOWLY seeing retail investors who made the move from money markets, to debt (bonds, bond funds, bond etfs), to equities. At first this sounds like a good thing, however my concern is that once the pros see the money making that shift, they may take it as a signal that almost everyone is in the pool and they will start to get out of the equities that are up 30% or more.

I got out of the market in late 06. This is partly because I am brilliant and because we had other plans for the money. Home Improvements and over inflated PE ratios made me look like a genius. Yes I did miss the peak, but remember never try and time the market and when people are falling through your second story deck, you should fix it. Needless to say, it is hard to find true value in companies. I am guessing that the S & P average earnings, now at high 15s could get to 17. That gives us about 5 more % on the upside. Play it accordingly. Don’t be a afraid to take some profits at 25% or better.

Keep in mind, you can take 3 hits at 8% loss when you take your profits at 25% or better. Do not expect another 40% on top of what you have seen in the last 9 months. Think about what you would make in a nice safe cash account. Perhaps a point. I know of a Gold Trading company where if you open an account ($10,000) minimum and promise to trade, you can get 2.85% on you residual cash. That is one of the best deals I’ve seen without tying up money in a Bond. If you want Bonds, have I got a guy for you. Let me know.

So when you compare the market in the next few months, 5% starts looking good. So how do we get there this week. I had a nice profit on GOOG, but there is some concern about the employee stock option issued last March (perfectly timed) and it might dilute shareholders equity by almost 2 billion dollars. I hope to contact Investor’s Relations today. Regardless, that would make a probable 1000-1200 dollar stock worth 900-1100. (Great article in Monday’s WSJ that has people checking their GOOG value). The main rub was they re-priced the options and the timing is awkward. If I don’t get a satisfactory response, I will take some nice profits. Too bad since I just bought the new Nexus. (Cool so far).

Because I have no life, I get to read a lot of great blogs and newsletters regarding investing. Again thanks to Tim T at UBS, I got one on Monday I wish I could share with you. It is put together by Jeremy Zirin, CFA, strategist, David Lefkowitz, CFA, strategist, Joseph Anthony Sawe, strategist at UBS. It is called the Dividend Ruler List. It does a fabulous job of sector analysis and seeking high yield (Cramer might call them accidental yield) equities. If you know someone at UBS ask them to get you on the list it is a great pub. I can’t tell you much more or Tim won’t get me anymore UBS Golf Balls. I can get you in touch with him, but you’ll need the big check book.

The trade deficit increased today and exceeded estimates. Ok now pay attention as this gets tricky. An increasing deficit means we are importing more than we are exporting. Now exports went up as well, just not as fast and imports. This is good news. We are consuming more indicating the economy is improving and we are shipping more overseas. (Mostly due to a cheap dollar which is correcting.) Making a dent in our exports were autos (Think Ford), farm products (Soy Beans), and industrial machinery (Think CAT, John Deere, computers and semi conductors). Oil was imported heavily as a dollar amount but about flat volume wise. Makes sense since oil is up about 11 % in the last month.

Our next big day this week should be Thursday as you have Intel reporting and JP Morgan reporting. I’ll get you whisper numbers on these if I find them. Also you have the Fed’s Beige Book coming out. I have been reading the beige book for more than 20 years now. It is one of the few government publications that is relatively unbiased, accurate and easy to read. It is now downloadable in a pdf so I can get it on my Kindle. Anybody in business should get this and you see what is actually going on in the economy. I’ll give a brief summary on Friday.

Salve Lucrum

RIG TransOceans

RIG TransOceans

What can I say? Back in 08 I had some XOM and was reading a lot about the oil stocks and how they found oil and brought it up. I kept running across the name TransOcean. RIG which is a very appropriate ticker as they build the big ass ocean rigs the oil companies use. Their market cap is about 30 Billion. They get about $500,000 a day based upon current oil values (70-90). They were getting long term contracts for 700,000 a day when oil was 110 a barrel. The portfolio did quite well earlier this year with the stock. I got back in around September. It is about 3.5% of the Salve Lurcum portfolio and is even at the moment. It currently has a forward PE ratio of 8 which is cheap cheap cheap. Most analyst have target prices in the 100-120 range. I am a buyer on dips of this stock and consider it a bargain at any PE below 14. Recently there have been some great new 36 month and 60 month contracts signed with BP (Deep Water Horizon and the Sedeco Express) and some other interesting contracts for what are called mid water exploration. I am looking for $115 by mid year. At a PE of 15 I will take some profits.

BAGAKOAA January 9, 2010 Curses Foiled Again AA

BAGAKOAA;


January 9 2010 Curses Foiled Again AA


Alcoa reports on Monday. The estimated earnings are .06 a share. The Whisper Number, in other words the one to beat, is .07 a share. It is hard to guess what they will report, but aluminum prices are still low. The cost of making aluminum (mostly water and electricity lots of electricity), is rising. So there is no reason to believe that AA will blow way the .07 number. On the other hand and looking more forward, AA serves the aerospace industry, automotive industry, transposition industry, building and construction, all of which poised to move ahead. As a side note, some of the major aluminum smelters all over the world are shutting down traditional plants in Europe because of the energy costs and carbon emission issues and moving their operations to the middle east. The idling of those plants could be good for AA and Rio Tinto. There is quite a bit of aluminum inventory all over so it could take several months to absorb the glut, but when it happens, AA will be best positioned to score. I would wait but be ready to buy on a probable down (Never time a market or a stock-shame on me!) The 5 year trading range for AA’’s PE is 16-27. Split the difference. 21.50 is a rich PE. Let’s say they report .10 a share. This is how I would look at it. They blew away analysts estimates by 42% (10/7) Most estimates for 2010 earnings for AA are in the 65 to 85 cent range. So if you take 75 cents as a midpoint and the stock is selling for 17.02 it gives you a forward guessing PE of 22.6. The 5 year midpoint is 21.5 so you would be in the ball park, IF YOU BUY NOW. If AA announces a 10 earning the stock is bound to go up and so will the PE. You have another option and that would be an option. You could buy an in the money 14 or 15 dollar option for 2-3 dollars. If they hit the 10 cents, you are off to the races. If not you have time to see how the economy treats aluminum prices and AA stock. Hence forth, “Curses Foiled Again”


Salve Lucrum

BAGAKOAA; January 8, 2010 Not a “Whole Lotta Shakin’ Goin’ On”

BAGAKOAA January 8, 2010

Not a “Whole Lotta Shakin’ Goin’ On”

US job losses were more than anticipated. As I mentioned yesterday, that should drive market inertia for the next few days. Well it didn’t drive anybody anywhere. November employment numbers were adjusted up December came in worse than expected so it was kind of a wash. There was no volume in the market (as of about noon), no strong direction, just a lazy day. Ever get the feeling people know more than they are supposed to know? Do you think maybe the big money folk have access to some of these numbers before you and I? Any way December employment numbers have at least two more modifications and in many cases the final number won’t be available till February and might not look anything like what was reported today. Still the Official 10% and real 17.3% unemployment figure sucks.

Elvis would have been 75 today. So what! It would be interesting to imagine a 75 year old Elvis. He’d probably be touring, have a slew more hit songs, but not be worth what he is today. Even Col. Parker could not have negotiated 5 million for the song “A Little Less Conversation”, which was the estimated amount for the 1968 B side on the cheapo Camden label in 2008. Lisa Marie sold 85% of here interest in her dad’s estate to CKXE owned by Bob Sillerman. It used to be Sport Entertainment. CKXE is a one dollar stock that owns American Idol and the rights to the songs and images of EPE, formerly know as Elvis Presley Enterprises. The stock is overvalued at 5.00 a share.

Back on Nov 16 I mentioned my purchase of some Jan 16 UPS 55 dollar calls. The dismal holiday retail numbers drove down some retails as well as UPS and FDX. I was actually getting concerned this week as the UPS calls were which I bought for 2.49 were down to 1.39 at one point. This morning UPS announced a few layoffs and an upward adjustment of 2010 forecasted earnings. The stock went up 7% this morning and I had a double on the calls. I took all the profit at 5.00 a call this morning. I’ll admit that I was getting worried. Cramer was pimping the stock hard this morning in the Real Money Silver Newsletter. If I tell you anymore I will have to block you from my blog.
Speaking of my blog, we had 28 visitors between last Sunday night and Monday night. I only went in 3 times so we had 25 folk actually look at this crap. Cool!

On UG/DG news (Upgrade/Downgrade), I know a few of you have KO, Coke. I do not, but just a heads up they got downgraded today at JP Morgan. They are saying it’s a 62 dollar stock. Because they do business in 200 countries, the improving dollar will make it difficult to keep margins in place. It is currently selling for about 55 a share.

Barclays down graded Verizon to a 35 dollar price target. It is trading at 31 and change. Their 2010 earnings estimate was maintained at 2.40 a share so if you do the math with their current forward looking PE ratio it is a 38 dollar stock. (16.2 X 2.40 a share = 38.88) Glad I own it and it throws a nice dividend.

And from the back to basics corner. I highly recommend Christine Benz Article series on Morningstart called 30 Days to Financial Fitness. It is a great step by step guide on basic financial management. Can’t recommend it enough.  http://news.morningstar.com/articlenet/article.aspx?id=321113#day1


Also, way back on September 23rd, I spotlighted a book called Active Value Investing by Katsenelson. I just want to reiterate what a great read it is. Because we are going a bit sideways in the market and there is an expectation that we will be for some time, this book is a good guide on how to make money in a “Range-Bound” market. I have a few copies if you want one let me know.

Salve Lucrum

BAGAKOAA January 7, 2010 Let’s get a little SIDEWAYS

BAGAKOAA;

January 7, 2010 Let’s get a little SIDEWAYS

The market is definitely moving sideways in anticipation of the Friday job’s report. It seems to be split as to whether we will see a small jobless claim or an actual job gain. All the big money (based upon volume number, in other words in the Dow an average day is 200 million shares and the S & P is 4 billion shares. In recent days the market is at or below its average. You and I can “get in the game” all day long and not really impact the inertia of a sluggish market.) Make no mistake tomorrow’s job number will dictate the market for the next week or so.

The portfolio got clobbered today with GOOG down 14 dollars a share. There is no good reason for this unless people think it was getting too rich. I see this as a buying opportunity, and put a limit buy of a few more shares at 590.00 I doubt it will strike as there is HUGE technical resistance at 594. (But there was quite a bit of resistance at 601 as well.) We’ll see. The new Nexus phone was selling well enough (I bought one), that there is now worries about the impact on 3G and 4G bandwidth. MMMMM time to add more AMT. If you got in with us at 36.92 you’re enjoying a 19% bump. Look for that to expand as this phone, the new Prix and iPhone get’s wider distribution. Look for more demand for cell towers.

There was some interesting upgrade/downgrade news today. Remember RPM mentioned here December 12, 2009. They are the parent company of DAP. I was suggesting the the Obama home energy improvement stimulus is a “Cash for Caulking” program and I suggested RPM as a play. Credit Suisse must have agreed as today they raised their target price from 15 to 21 it jumped to 20.75 today and is throwing a nice 4% yield. Based upon its current forward looking PE of 13.4, 2011 estimates make it a 22 dollar stock. This is not an exciting stock, but should be a steady Eddie.

UBS is betting that Ford is a 13 dollar stock. Not that tough a bet if you ask me. Alan Mulally seems to be doing everything right at Ford. He was a great leader at Boeing and he must be admired for what he has gone through at Ford without bail out dollars. Look for more market share gains.

Analysts had mixed reviews about VZ, Jeffries raised their target to 37 and Goldman lowered their target to 36. It closed today at 31.73 so both number make ya feel good about owning the high yielding (5.95%) equity.

A few of you have B of A and B of A Preferred so it should be noted that Credit Suisse consider B of A the cheapest of the large cap stocks (remember that has NOTHING to do with share price it has to with the multiple). They have moved their price target to 21. BAC closed today at about $16.94.

Remember we need two things to kick the market in gear this year. They would be consumers spending and housing to settle. BBBY was a great tell for consumer spending. Their revenue was UP 11 %. It was up 7% today, but there is still room in the pool. More than half of the analysts following the stock have this stock rated hold or less. They will be jumping in the pool shortly and this stock should see 45 before you know it. That would be another 10% from where it ended today. More importantly, consumers are spending.

To keep you enthusiasm in check, I joined AAII in October. No Ben, that has nothing to do with Alcohol consumption, it is the American Association of Individual Investors. They have some great publications, interesting educational offerings, and some great screening tools. They do a survey of their huge membership (150,000+) and get sentiment readings. In recent weeks, the bearish numbers has been drifting downward to a point that statistically is an anomaly. (It is actually two standard deviations below its one year average.) The bullish sentiment is at an uncomfortable high. This all sound positive BUT (Behold the Underlying Truth) it is hard to argue with mathematical algorithms. It could be due for a correction. Make sure your stops are in place.

If it looks like a stimulus and smells like a stimulus. . . . The US House of Representatives will be helping is again. They won’t call it a stimulus, but they want to spend another 100 billion. It should be called the 10 by 10 giveaway. 10 percent unemployment and 10 months to election. But before I digress into a political diatribe, let’s look for a way to make some money. The key element of this vague giveaway is 50 Billion on infrastructure. Think water projects, highways, and airports. Take a look at GVA, GWW, and FLR. Cramer has been pimping FLR lately. I like GVA, but got stopped out earlier this year (pre-blog) when the last stimulus 770 billion was supposed to be spent on infrastructure.

OK get out the gambling money. This is scary speculative! Don’t try this at home kids. You know I’ve been looking for a pure lithium play. Thanks to one of my very expensive newsletters, I may have found one. The Company is called Western Lithium Canada Incorporated. WLCDF. It is a $2.00 a share stock. It is debt free and have a market cap of 70 million US. Now the stock is up about 50% since I first read about it so it could be getting pushed by some viral marketing and I am falling into a trap. Only put into this what you can afford to completely loose. Count on loosing this money. You will loose this money. There I have done my due diligence. I am out at a dollar and will re-evaluate it at 3 dollars. Have fun.

Salve Lucrum

BAGAKOAA January 6, 2010 Retro-Spective Analysis

BAGAKOAA;

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

BAGAKOAA Jan 5 2009, Not much Pin action today

BAGAKOAA;

Jan 5 2009, Not much Pin action today

Unlike yesterday, the market did not really do much today. The afternoon picked up a bit even though there was bad news on the Pending Home sales. Ford had a great day and had great news about sales dispelling the myth (I bought into it) that the cash for clunkers sales spike would suck sales out of December. Ford looks hot and could even get hotter getting market share from everybody. Do your homework on Ford and Ford Preferred. Doyle, you were way ahead of a lot of folk on that one. Be proud of the profits you took in early December there are more on the way.  Cramer was really pimping F on the show today. 

GOOG launched its new Nexus phone and AAPL tried to take some wind out of their sales by announcing the sneak peak of their new tablet later this month. This is going to be the battle of the tech titans. I like bothe of them. I can see and 800 GOOG and 280 AAPL in our near future (12-24 mos). The retailers report this morning was also positive with and nice 2.5% increase in same store sales. Remember, the prognostication of a 19% increase in the S & P 500 in this blog is based upon two things, consumer spending and a housing recovery. Well we got one and lost one today.

In the portfolio, as mentioned I increased the position in GLD, added some more GIS, and bought 3 more April 2010 IBM 125 calls. These were the same calls I made the quick profit on on the 28th of Dec. IBM was down today and it looked like a good buy opportunity even though I am paying a time value premium and I am 4 dollars out of the money. I think its a good gamble and it is speculative.

Salve Lucrum

BAGAKOAA; Jan 4, 2010 Is there Gold in them there hills?

BAGAKOAA;

Jan 4, 2010 Is there Gold in them there hills?

I was talking to one of our readers today who said, “Maybe Gold was a bad investment?” because they had to wait 30 years to see such a good return. This statement is a vivid example of how a buy and hold strategy hardly EVER works. I don’t know the exact numbers and it’s not really important, but I have known these people since I was 15 years old making them friends of 38 years. They bought gold in the late seventies and from the reference value of about 450 an ounce, that would peg the exact time about December 17, 1979.

Gold closed today at about 1123 an ounce. So if I bought $10,000 worth of gold in December of 1979, it would be worth $24,955 today. Which unadjusted for inflation is about 4.95% a year. When you adjust for inflation, according to the US Bureau of Statistics, you would have earned about 4.14% a year over that 30 years. The same 10,000 invested in the S & P 500 in December 1979 would be worth $103,539. So yes it would have been a better investment.

But the reason why the gold investment is poor is not because of the performance of the commodity, it was the latent nature of holding the commodity for so many years. If an investor said in 1979, “I will buy 10,000 worth of gold and sit on it till I die.”, then it does not matter what the commodity does. An active investor must have a goal in mind before they buy anything. They should have an in and an out in mind.

In 1979 the Prime rate was 20%. An investor could conceivably say I want to make at least 15% on a 10,000 investment in gold every year. So for the 450.00 dollar an ounce they invested they would be looking for a sale price of 517.00 an ounce. Guess what? They would have hit it two weeks later, the last week of the year in 1979. They would have made 1,148 dollars in two weeks or almost 400% annualized profit. They could have taken 1200 profit and let the 10,000 ride looking for another 15%. They would have had to wait another 4 days before the spot price hit 594 on Jan 3, 1980. They could have taken another 1200 profit, and waited for another 15% gain. They would have to wait all the way to January 15 to take another 1200 profit. Now they would have to wait all the way to January 17 1980 for gold to hit 786 to take another 1200 profit out. Now with each profit taking the investor should re-examine their 15% goal and their exit point. They bought in at 450 they have taken 4800 in gains, have a new profit point of 904 and say an exit point of a 10% drop to get out. So they would plan on taking more profit at 904 and getting out at 707. They would be out of gold in February with a nice total profit of 10,511 in about three months. Not too shabby.

If you were an active trader in 1980, you would soon see gold trading sideways from March till about July. You would see that the prevailing interest rates had not changed much and you still wanted to get 15% on your money. You might have bought in on the late may dip of 502 an ounce looking for 577 for a profit take or 451 for an out. You would have to wait almost a month before you would have hit 577 allowing you to take 1500 in profit and then be looking for 663 for your next profit point. You would have hit it on the July 4th weekend 1980. You would then be looking for 763 or an exit of 596. The exit would come December 19, 1980. You would have taken another 4800 in profit in 1980. By 1981 there was a lot of sideways trading in Gold so attaining 15% would not come easy but loosing 10% would not be that easy. Over the next several years interest rates would subside and so should the investors expectations. 15% gains would have to modify to 10 and eventually 5%. Trading gold over the next 20 years would provide opportunities to beat those expectations but protect gains. The reward of active trading versus buy and hold are enormous.

So what do we do with gold now? It is trading a 1123. Whisper numbers are 1300-1400 and ounce. The S & P 500 is expected to gain between 15-25% in 2010. Figure out your entry point and exit point. If you want to make 10% on your investment this year, buy in at 1123 and take some profits at 1235. Set your stops at 1023 (8% down) and see what happens.

Remember there are some special tax considerations when you sell coinage and even some hard metal versus selling ETFs like GLD. Check with your tax person. My guess is there is more upside in gold in 2010. I am adding to my GLD position in the Salve Lucrum Portfolio. If Benanke blinks and talks about an interest bump, look for a 1500 gold price and huge adjustment in the market to the tune of a 10-15% correction. Like any good Boy Scout, Be Prepared.

Salve Lucrum.

BAGAKOAA Dec 3, 2010 The Year Ahead.

BAGAKOAA

 Dec 3, 2010 The Year Ahead.

As some of you know by February first, I usually prognosticate how the DOW will end the year. In 2010, there will be no prognostication about the Dow for 2010. On February, 14th, 2009 to be exact I figured the DOW would finish 2009 at 9420. The market was at 7800 and a few folk thought that was ridiculous. In looking at the DOW, it is not a good litmus for what might be going on next year.

There are ONLY 30 stocks in the DJIA. You know probably all of them. There are some great companies on the list and there are some real dogs. Alcoa is basically a one commodity pony with a ton of debt. Recently they have changed strategy to be more of a miner and refiner than selling product, but it comes way too late (BHO and Rio Tinto are eating their lunch). Their cash flow is lower than, well lower than any records I could find. AX is on the DOW. There is a stock that will need job growth and a shift back to frivolous spending. I don’t see that happening in 2010. B of A is on the list this week (See if that changes this year). Yeah they paid back their TARP money and they might have found a new CEO, but they have so many preferred shares, no one knows the dilution of the 15 dollar stock. 2010 is not going to be a great year for B of A because of probable regulation and devaluation by at least 30% of their balance sheet for residential and commercial real estate. I Like Boeing Cat and Chevron, but they all need top line growth. (CVX will get it with further devaluation of the dollar and demand for gas and improved nat gas pricing.) Farther down the list you got GE. Who knows what GE is really worth. Buffet has 5 billion in preferred and a sheik in Abu Dahabi has another 8 Billion. The recent spike in the stock could be coming from a break up value calculation. I like IBM. Merck will be muddled by health care reform and an apparent lack of new drugs. MCD, will continue to “channel” between 52-64 as it has since 2007. MSFT will take another year to figure out how to make money with Yahoo. (Ironically this week’s Baron has a great article about cloud computing. Gate’s book The Road Ahead circa 1995 described cloud computing. Balmer should have read the book. Someone at GOOG did.) PFE has similar issues to MRK with a better apparent list of new drugs. Coke should do Ok with emerging markets blooming again. HD will do well if and when the housing market recovers. VZ I like and will like it more WHEN they get the iPhone. WMT will continue to suck the life out of their vendors, have predatory pricing, but the wild card will be what the health care bill will do to their labor costs?

So in 2010 the index to watch will be the S & P 500. Since my Feb 2009 prognostication the DOW went up 33% and the S & P 500 went up 26%. There are 500 stocks in the S & P 500 and many have revenue growth as well as cost cutting strategies. The S & P 500’s forward looking PE ratio is about 16. With the year end close of 1113, I am looking for a year end S & P 500 of 1335, almost a 20% increase. This will take two critical elements that must happen. Consumer need to start spending be it frivolous or value purchases. And we need to see a bottom in real estate. If both happen by mid year, the 19 % improvement in the S & P 500 is real. If not it will be difficult if not impossible. You could extrapolate a DOW around 12, 500 based upon that guess, but I wouldn’t bet me life on it.

Salve Lurcum

GIS General Mills

GIS General Mills

In all honesty, I had to go back into the history on the SL Portfolio to try and figure why I bought into GIS. From what I could tell it might have been from Cramer who was pimping his about to be released book “Getting Back To Even”, timed with a mentoring session from Tim T., who pontificated as only he can about buying stocks with dividends. You see, GIS is what Cramer would labeled an accidental high yielder.

For what ever reason, after doing my valuation homework, GIS came in the high 80s. They had an attractive Return on Equity, a PE of 15 which was cheap no matter how you looked at it. They could pay off their long term debt in less than 3 years out of current income. What caught my attention was their margin. They blew away the industry average and was just a hair short of their 5 year average.

So we (Who is this we?) started adding it to the portfolio in July 2009 at 57 a share. The position was increased in August and October. Erin Swanson CFA and analyst for Morningstar is very bullish on the stock and predicts margin improvements in 2010. After the dollar a share drop on the last trading day of the year, I will be adding more to the Salve Lucrum Portfolio on Monday the 4th 2010. There are some interesting call options for April. You can buy a 70 dollar call for 2 and change. Also worth noting is some huge open interests in the 90 dollar range. There is also a lot of institutional monies going into the stock. The last quarter earnings were $1.66 a share. Using the current PE of 14.74, that makes a 92 dollar a share value. The industry average PE is 20.3. When you do the math, that makes for a 132 dollar stock. I am not that optimistic, but GIS is a value brand in good times and bad. I am looking for 85 by midyear 2010.

Oh yeah, don’t forget that dividend, regardless of the stock value. The company’s cash flow should support existing dividend level and probably be cause for a jump.  After the trade on Monday 4 2010, GE will be 5.1% of the Salve Lucrum Portfolio.