Thursday, February 17, 2011

17 February 2011 Is It Eight Seconds Yet?

BAGAKOAA; 17 February 2011 Is It Eight Seconds Yet?

We keep riding this bull, but it just don’t feel right. What is annoying me now is that the market seems to be ignoring bad news. The jobless number was worse than expected. While we didn’t call the jobless number we did call the CPI bump and the strong Philly Index number. We would have expected an adjustment for the inflation concern and the initial jobless claims. NVDA, which we pimped here not too long ago had a great day and the Philly index lulled investors into another winning day.

It was busy day today at PADI Land but between early morning hours and an almost lunch break here is the pin action for the main account. With Gold breaking out of its resistance point of 1325, we are back in again using some weekly call options on the ETN GLD. We are going to play these weekly a few weeks and see if we can take some nice very short term gains. Specifically, we stocked (bought) up on some Feb 25 $135 calls for .98 cents each. These expire next Friday so obviously we are looking for quick pin action. If we can pull a net 2-10% in a week on these, we will be happy. DO THE MATH. 2-10% in one week is about 100-500% annually.

After reading some good news in IBD and WSJ about Corning GLW we decided to get in with some March 19th 23.00 Calls. We got in at 76 cents a contract. We are looking for a 20-30% upside over the next two week then we will take those off the table. We are also chasing our spec AZ stock TUFF on every upward point movement. We added some more today. And we closed out of Waste Management position 2% down. The stock is not doing what we hoped and there is a lot IM (Institutional Monies) leaving the building. We will put it on the watch list and look for a better entry point. (We are looking for 35.75-36.00)

Ooops caught by a regular reader

Bob, one of our regulars dropped me a note today about one of my picks fo the day (AND recent new position.) Here is his edited note,

Hi Brian,

I was thinking of picking up some WCRX in my personal account. The question I have is why did management approve a huge dividend in September that was mainly paid by borrowed money? I would think dividends should be paid out by a company on an even keel method. Not giving away a huge almost pansy scheme dividend away. I mean it seems like any share holder who bought stock after the huge dividend ok you pay for the debt. While the share holders who got the dividend, how do you like your one time huge gift the company gave you.

First off that was a great catch by Bob. Secondly PLEASE READ MY Disclaimer and LIKE BOB, do your homework. We went through recent SEC Filings and discovered:

In looking at the series of notes they floated, the funds were not used exclusively for the dividend payment. They also purchased Enablex and a Pharm division of Proctor and Gamble. It is a lot of debt, but they bought some nice franchises that should pay off for them. The PG purchase is already a heavy contributor to the bottom line and when you back out the one time transaction costs and deal specific interest expense, they should have some strong quarter ahead of them. From the looks of all the new institutional interest in the company and yesterday’s 2011 guidance, there is a lot of support for this stock.

We still like the stock and will keep adding to the position as long as the earnings and the charts say it is wise.

Pick of The day

Let’s take a minute and talk about the pick of the day. This should be as useful to you as any other idiots stock tips or suggestion. Remember tips are for waiters and race tracks. We enjoy doing this and when we get one right great, but all of you can do this too if you have or make the time. Taking this pick of the day and actually investing in it without the appropriate due diligence is STUPID. I could be making all of this stuff up. Of course you know I plagiarize it and do not make it up. That was a joke, really. Please do your own research and I promise you will find better opportunities than what is put here. With that said, here is the POTD.

Ebix, Inc., together with its subsidiaries, provides software and e-commerce solutions to the insurance industry primarily in North America, Australia, New Zealand, India, and Singapore. The company operates data exchanges, which provide connectivity between consumers, agents, carriers, and third party providers, as well as enables the participants to carry and process data in the areas of life insurance, annuities, employee health benefits, and property and casualty (P&C) insurance. It also involves in the sale, customization, development, implementation, and support of its P&C back-end insurance carrier system platforms. In addition, the company offers business process outsourcing services, which include certificate origination, certificate tracking, claims adjudication call center, and back office support. Further, it engages in designing and deploying broker systems comprising three back-end systems consisting of eGlobal for multinational P&C insurance brokers; WinBeat for P&C brokers in the Australian and New Zealand markets; and EbixASP for the P&C insurance brokers in the United States. The company was formerly known as Delphi Systems, Inc. and changed its name to Ebix, Inc. in December 2003. Ebix, Inc. was founded in 1976 and is headquartered in Atlanta, Georgia.

We like em because their earnings are strong; their financials are very nice, not perfect but real nice. Not too much debt, their gross margin is a wicked 76% and operating margin is about half that, their ROE is a very firm 33%, management owns about 10% of the company so you don’t feel all alone as a share holder.

IBD and VectorVest both like the stock.  IBD gives it a 99 rating. The chart is looking interesting as well. Ok, after a couple glasses of wine tonight at Hanna’s, we are looking for patterns on this chart. We are seeing what could be a long cup and handle from the end of November to January 24th. (Or it could look like Ringo Starr’s left boot off the Abbey Road album.), which begins our recent upward move on February 3rd. We have put this on the watch list and will look for two or three upward days with volume above the 50 day average. Once we get that and we can get in below 26.50 we might take this of the watch list and put in the portfolio.

One Week Left

Ok you only have one week left to get me you picks for the first annual Salve Lucrum stock charity challenge.  Just pick at least 5 but not more than 10 stocks that you think would do well between March 1 and the end of the year.  Make an "on your honor" 20 US dollar or equivalent donation to the charity of your choice.  The winner, based upon total percentage increase over the course of year get's bragging rights and Devin and I will Contribute $20.00 for each participant to your charity.  Right now it looks like we have about 11 players, so its not too late to get in.  We are capping entires at 25 participants.

From The First Days In The White House Gallery

"During the first week in the White House President Obama did not realize he had people who would move his furniture for him.  Fortunately key staff members were qualified."
 Salve Lucrum


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