Tuesday, March 01, 2011

1 March 2011 Real Real Our Gains Are Real


1 March 2011 Real Real Our Gains Are Real

If you recall we were happy to report that we had enjoyed 5 months of gains as of the end of January. These would be realized gains, the type you actually cash out and put in your pocket or in our case your contractors pocket. February turned out to be month 6. We enjoyed a 8.65% realized gain. Our 6 month average stands at 11.5%. Our annual goal is 7%, so we are happy with the gains. In doing a forensic of all the accounts, we discovered something amazing. The conservative accounts that we are Limited Power of Attorney on are enjoying much larger realized gains. Of the four we help manage, they averaged 20.68% in February. Now the funds are smaller, but in taking a more conservative approach (Fewer call options, few trades in general, few positions, taking profits sooner, and dumping loosers quicker is out performing the main portfolio more than 2 to 1. Possibly a lesson learned.

In the subordinate accounts most of the gains in February came from calls on IDCC, AXL, GLW, NVLS, SMOD, GLD, and a Put on AMGN. There were also gains on long positions sold for BOH, KO, IBM, ZION, and JJG. The good news is that everyone of the set ups and trades were mentioned here in the blog so if you were playing along you might have made some money. (I think we missed SMOD and said sorry about that.)

Here was our comment from Sunday night about today’s action, “Tuesday we will see another strong and positive ISM Manufacturing index. Unfortunately more chaos in the middle east will keep the market in check. Look for a low volume flat day. Gold will probably break through the 1,425 resistance point with its eyes on a 1475-1500 price range next.” Wow!  That was pretty good except the part about the market being flat. The down day we expected yesterday hit us today.

The prevailing explanations were that Gadhafi did not roll over and play dead like he was supposed to, so oil pierced and stayed above the $100 a barrel mark and the market got spooked. Despite Bernanke’s best effort to keep the market calm about inflation, we saw a selling day in weak volume. (Oh yeah we called that too.) Our guess is that IBD will report 5 distribution days for all three indexes tomorrow morning.

Our suggestion would be to look at the post from last week where we suggested you go back and look at all of your weak positions and consider pulling the plug. Buying should be done very gingerly and ONLY with very strong growth oriented stocks.

On a day like today we like to look at our watch list and look for a contrarian stock, one that is not paying attention to the noise in the market.

We found one today and it was our POTD on the 17th of February. Here is what we wrote:

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.”

Now what we really like is the chart below. It is a classic cup with handle and we can see that it broke out of its base today.  It is jumping off its 50 day average which is another good indicator.  Now with the market probably seeing a 5th distribution day today, buying in the morning may be a bit risky, but we like everything about the stock. We will get in as close to 27 as possible, put a stop in at 24.75 and look for 35 by July-August. The we will take another look. DO YOUR HOMWORK.

And From Crimes Against Humanity Gallery:

You will pull my finger now or I will make you wear this outfit.

Salve Lucrum


Anonymous Anonymous said...

Hahahaha love it! Did you take advantage of the gap fill on EBIX a few moments ago?

March 2, 2011 at 7:49 AM  

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