June 16, 2010 200 and counting

BAGAKOAA June 16, 2010 200 and counting

Well last night’s post was the 200th post of The Salve Lucrum Blog, since the middle of October 2009. That is ALMOST one a day. Proof I have no life.

Follow the Linkage

Sorry none today. I was really looking too and again it’s hard to make a separation of 3 links from a piece of news to a good stock play. I read a lot about Boeing tonight thinking I could make a third degree separation from the 737 production increase to their key suppliers to sub supplier or commodities.

No such luck. Here are key suppliers to Boeing who might see a pop because of BA production boost and there are some very sound stocks on the list. Mitsubishi, Kawasaki, Honeywell, General Electric, AZX International Corp., (Private I think), Bridgestone Corp., Cytec Engineered Materials Inc., (Private but keep an eye on them),Deharde-Maschinenbau H. Hoffmann GmbH a German company and no ADR that I could find, and Frontier Electronics Systems Corp., (Private).

The only other linkage, I would have to give Cramer credit for and that is the impact of the banking regulations and how it might make a huge play for Barclay’s and Duetche Bank. That is news not linkage since the Lenin look alike did ten minutes on it last night.

Under the category of "Damn I’m Good", the market did pretty much as we had indicated on Sunday night. We said housing starts would be off. We estimated 600-610M against a forecast of 650,000. The number came in at 593,000 units and much to my surprise by the end of the day, the market took the news with little volatility. We also called the beat by Fedex, ($1.33 vs $1.32) but the CEO had some wet blanket forward looking comments concerning their pension plans to take the stock down.

 Happy news for AAPL holders today. AT&T were beating customer off with a stick today selling more than 600,000 units of the iPhone 4G. It actually crashed (the say they shut it down) their servers. So AT&T can’t hand calls or internet traffic. AAPL was up almost 3% today.

 We did add to our UNG position on a dip early in the day and picked up some more FLS on the 1.2% dip today. Remember to ease into your positions in this WTF market. (Thanks Megan I stole that from you now that I know what it means. For those people who live under the rock with me WTF means What The &*@%)

Since I had no linkage to discuss today I will leave with a nice wine tip. Last night Devin and I enjoyed, well we ate, some meatloaf premade by our grocer who will remains nameless PAVILLIONS. It was far from the best meatloaf I have ever had but scads better than the gasoline fumed stuff my mom used to make. Don’t worry she does not read the blog, she passed in 1992. Anyway I was in the mood for a big cab and have been learning more and more about the Yakima/Walla Walla area of Washington State. I chose a 2003 Woodward Cab and it was incredible. Deep dark black purple in color. Clingy and thick on the glass, almost jammy. (I know, not a word, made it up) On the nose there was a smoky meaty smell, some florals but not exotics more like wild flower type smells kinda like a potpourri type of thing. In the mouth, it had some spice and earthy tones to it as well as the currant dark berry taste you would expect. It was terrific. I’d have to give it a 91. The meat loaf got a 43, but the wine was knock your socks off. If you see it, get it. The 2003 I had to get at auction (winebid.com) but I will be looking for the vintner from this point forward.

Speaking of auction, yesterday a 1937 bottle of Glenfidich Single Malt went for 37,000 Pound Sterling to an anonymous bidder and I just wanted to say thank you to who ever it was for remembering my birthday next month, July 20th. What a thoughtful gesture.

Salve Lucrum

June 11, 2010 Glad I was wrong, but was I?

BAGAKOAA;

June 11, 2010 Glad I was wrong, but was I?


Sunday night we predicted a 3% drop in the DOW this week. (I say we because of all the voices in my head.) That prediction was based upon the lack of influential economic news being released this week as well as no Bellwether earnings report this week. That left us at the mercy of the negative tones coming from Europe and watching oily pelicans being picked up off the beaches of the Gulf of Oil. So we were supposed to suffer another week down.


Again keep in mind we were at the mercy of news mostly outside the US. Three pieces of international news did keep our market from falling 3%. (The market was actually up.3% for the week also known as FLAT). This week we had a good positive surprise about GDP growth in Japan followed by some great export news out of China, and some reassuring words out of China about their support for the Euro. All three were basically surprises and drove the market off its probable negative course. So I was wrong and I was right.


Today we did start out with some negative news about retail sales. I found it interesting that all of the media called it “The Largest Drop In Retail Since September”, in fact it is the only decrease since September. If you boil down the retail figures, it was not all that bad. By mid day people were figuring that out and the market started to comeback. Then we had some positive consumer sentiment news which helped up finish up for the day and flat on the week.


If you were reading this blog in early June, I did something I don’t normally do. We bought into a Cramer Pick called Accenture ACN. They had a conference call today unveiling their new strategy for cloud computing. (Credit Suisse had a great white paper report in mid May about virtualization and cloud reporting. If you can get it’s a great read.) Anyway ACN has a very aggressive growth expectation for their cloud computing software. They announced a 30% coumpounded annual growth factor for next 4-5 years. They are also partnering with the likes of CRM, Salesforce.com. They also expect to improve margins for their software and consulting business.


They are a 50 dollar stock selling for 37.50. Now I know a few of you would buy a 50 dollar bottle of wine for 37.50 so do your homework and take a good look at this one. Credit Suisse has a target price of 55 dollars. If you look at the average analysts estimates profit per share number next year times the current and conservative P/E of 19 you to can arrive at a 55 dollar value. I will be adding to the position Monday morning in the 37.50 neighborhood.


SBUX, which I stopped out of at a profit during the flash crash, got an upgrade today. We might want to revisit that stock. If you remember from the blog here back in March and we got into the stock because they had pulled the trifecta of shareholder’s yield. They issued their first dividend, they eliminated their long term debt, and they bough back shares. Let’s look at the stock again this weekend and I’ll post whether we are back in again.


MCD’s got it’s TP adjusted down by BofA/Merrill because of its Euro exposure. They are still a buy for most analysts but BofA dropped the target price from 80 to 79. They closed today at 69 and change.


Ok I saw a really cool video yesterday about new video gaming system called Project Natal from company called Microsoft. You remember them don’t you. They are based in Seattle and, OK you know who they are. I’m looking at getting into the MSFT pool. I am not sure why other than they are cheap cheap cheap. Here are all the reasons not to buy MSFT. Cloud computing will challenge and possible cripple MSFT if their cloud computing soft ware format AZURE does not take hold. Cloud computing could make Windows operating system obsolete. Google's suite of products can eat more of MSFTs lunch.  So why am I talking about MSFT? I don’t think Balmer can screw things up that badly and this Project Natal gaming system made me do some homework on this ancient giant. They still have 40 billion in cash and virtually no debt.


I think that any company considering going to cloud computing platform cannot do it without taking into consideration their existing computer networks which are 78% MS based. MS will have a great product and will quickly figure out the need to shift from software in a box to software in the clouds and discover software consultancy as a service revenue stream.


Windows 7 is doing quite well and getting good reports and should provide significant revenue and profits to the company for years to come.


Also, cloud computing on the scale that will develop over the next couple years can only be serviced by a handful of companies. (Think Amazon, Google, CRM, ACN, to name a few.) MS can and will be a player in this market if for no other reason than the IT infrastructure support they can and will deliver. A key benefit of cloud computing is virtualization or virtual networks. Windows has a server software which is one of the best if not the best in the industry called Windows Server R2. It will be a good and profitable product for the company in the next few years.


Many analysts value MSFT at 32-34 a share. It is currently selling at 26 a share. We will be looking to start a position on Monday around 26 and change with a stop at 23 and change. We (who are these poeple anyway?) will be looking for a slow and gradual growth to the 40s in 24 months.


Now despite the bullish tone of the market today, please remember this blog was explaining that there are a lot of special interest factors who do not want you feeling good about the market. Work hard to look for the true data. Here is some good data; Rail carload volumes has been tracking positive all of this year and year over year volume was up 6.9%. If you look behind the news you will see the data. “The Largest Drop In Retail Since September” really meant it was the first month in 9 not to show an increase. In closing I will now end the longest post of this blog, since yesterday.


Salve lucrum

BAGAKOAA June 8, 2010 I’m goin’ up, I’m goin’ down

BAGAKOAA;

June 8, 2010 I’m goin’ up, I’m goin’ down


Mathis James, “Jimmy” Reed must have written the song, “Baby What You Want Me To Do”, for a day like today. The rest of that verse goes “I’m goin’ up down round oh baby where you want me to go, yeah, yeah, yeah.” Well, that is what the market did today, passing the centerline more than 13 times before finding some positive energy in the last hour of trading. The techs stayed moribund, but the DOW and S & P were both up about a point.


Nice comments about the economy by Uncle Ben Bernanke may have been the catalyst to get the number up a bit and the small business optimism report was optimistic. Despite my comments to the contrary on Sunday night, there was some equity news today that helped the market. Dollar General, had strong top line and bottom line figures. And MCD was up more than 2% today as same store sales were impressive. It made me glad we have been collecting the stock on the dips.


Cramer was out pimping the good news about McDonalds today in his Action Alert Newsletter, (one of the best for the money), and he had some interesting insight into MCDs growth in Europe and Asia. With a yield of 3% or better, it might be one to add to your pouch if you don’t have any.


We took advantage of the early dips in the day to pick up more AAPL, INTC, UNG on its first drop in several days, BA and FLS. Other than that today was a day to sit on the rail and watch the rodeo, while making sure your name wasn’t called to get on the big bull or big bear or was that a bull?


I did a reality check today and looked at our realized gain or loss since January first. The Salve Lucrum portfolio was down .3% also know as flat. A little disappointing but not bad.


Salve Lucrum

BAGAKOAA June 6, 2010 No haya noticias es buena noticia

BAGAKOAA June 6, 2010 No haya noticias es buena noticia


Loosely translated, “No news is good news.”, en spanol. If you recall back on January 4, 2010 this blog prognosticated:


“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 (2009) year end close of 1113, I am looking for a year end (2010) S & P 500 of 1335, almost a 20% increase. This will take two critical elements that must happen. Consumers 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.”


Well Boys And Girls And Kids Of All Ages, we are almost at mid year. Those two critical elements SEEMED to have been improving stimulating the decent rally we had between February 19thish and late April/early May, May 7th by my estimations. Friday we were bushwhacked by a dismal employment report. We, the fluffy day trading casino monkeys, had been led to believe that there was going to be solid employment numbers. There were tells from the Whitehouse, the treasury, and even commerce that the job report was going meet or beat expectations even after adjusting for the slew of people hired for the census project. Apparently this expectation went well beyond us lower primates of the investment world as it appears a bunch of fund managers and financial advisors were all sipping the same cool aide prepared by the powers that be.


While many on the west coast were just waking up Friday morning, the employment figures hit the street with a thump! Private sector hiring was a dismal 41,000 people. That is in comparison of two months over 200,000.


So how can consumers play in the game if we are not getting people back to work. They can’t. Look at same store sales for the retailers who have reported over the last few weeks. The numbers are very sporadic. If you are optimistic like me, you could deduce a slightly positive trend. The data concerning real estate is just as funky. You here some good news in certain sector and certain price points, but then you hear some scary foreclosure stats.


That means my prognostication is probably going to be way off. So what does that mean to us fluffy day trading casino monkeys? Caution. BUT don’t do what I did the week following the flash crash. I spooked after re-establishing my positions and sold on the scary Euro debt picture. It gave back some of the gains that were triggered by the Flash Crash. It would be very easy after a cataclysmic drop of 3% to scatter and run for the hills.


Instead, here are few other options to consider under three possible scenarios.


Scenario one is you have little cash, but some unrealized equity gains. Take some of the profit now, (Monday morning). If you are up 10% on a stock, take 10% off the table now, ASSUMING you still like the stock which might require you to go back and do the homework as to why you bought it in the first place. Then when the market corrects further on the downside this week, WHICH IT WILL (I’ll explain shortly), take some of those gains and buy back the stocks you love at the lower prices. Obviously if you don’t love the stock any longer, get completely out and invest in some of the accidental high yielders that Cramer, WSJ, Morningstar, and Barron’s talk about everyday.


Scenario two, some gains, some losses, some cash. Take a look at your gainers and follow the instructions for scenario one. Take a look at your losses and make sure these are stocks you still love, in other words do the homework. If you sre still in take your cash and some of the gains you just just generated and slowly and gently gain more of a position on these stocks you love as the market adjusts down this week WHICH IT WILL.


Scenario three, no cash, losses on all of your stocks. Hopefully you have some stops in place but if all of your stocks are down right now I am betting that you do not use stop orders, shame on you. Put some stops in Monday, at about 10-12% below Friday’s closing price, go to Amazon.com buy a Kindle, downlaod a few books and don’t look at your portfolio till August 28th. There ain’t nothing you can do without some cash for the next 2-3 months. So don’t try. Relax and forget about it.


Here is why we are confident that next week will not be pretty. Look at the economic calendar . (I use Barron’s but it is subscription based so I have attached a link to Yahoos which is very good and very free.) for the next 5 working days. YAWNNNNN.


Monday you have a consumer credit report, YAWN. It will probably contract a bit more meaning people are spending less, but no number on this report regardless of how good it might be is going to positively impact the market. In fact, most people are poised for more downside so if the report is week it will be reason for them to sell.


Tuesday you have Goldman and Redbook retail numbers. YAWN. Again don’t expect anything here to help the market but expect the market to feed off any weakness.


Wednesday you have a mortgage bankers report on mortgage applications. YAWN, nothing there, I am guessing bad news. Later in the day we have the Wholesale trade report. YAWN. I am guessing mediocre news at best. Even later we have oil and gas inventory reports. YAWN. My guess is there will be plenty of oil lying around and that will put even more downward pressure on the commodity. Then at 2:00 EST The Department of Commerce publishes their latest best seller, the continuing saga of The Beige Book.  Ok its not a best seller because its FREE. I attached link for you in case you have insomnia Wednesday Night. YAWN


Thursday we have an early international trade report. This could be the only wild card next week to pump up the market. Without getting into a long explanation about trade imbalances, the impact of cheap oil, the value of the dollar against the Euro, a drop in our trade balance is a good thing since we usually have a negative trade balance. So a drop in our trade balance means going from a minus 40 billion to a minus 39 billion and that would be good. I am guessing a very slight improvement most of which would be attributed to a stronger US dollar. If the trade imbalance improves immensely, which I doubt, we could see a nice spike in the market. At the same time Thursday (8:30 am EST), we have jobless claims which I don’t see improving significantly or getting much worse. YAWN. Then we have a nat gas report which should indicate we have GOBS of the stuff. Hello Washington are you listening. GOBS of it. YAWN. We also have the Treasury budget report on Thursday. YAWN. (News flash, we spend more than we make in the US?) Double YAWN.


Friday, we have Retail sales which I am guessing will be mixed or negative helping close the week down another 3%. That’s right I am guessing the overall week will be down another 3%. So for you Dow Fans, Look for a Friday Closing of 9,633 and for you more astute casino monkeys the S % P will be at 1,029. (If you did the math, I dinged the S & P at a 3.25% drop versus 3.00% for the Dow. I have my reasons.


Why all of this negativity. We’ll there is very little influential news coming out of the US this week so we are at the mercy of International news. How do you think that is going to play out this week? Portugal and Spain are doing a bond offering this week. Do you think they will be giving higher or lower rates to sell those bonds. I’ll give you a hint. Its going to cost them a lot more to move bonds because of the debt issues. Hungary is now getting ready to beg for money. And as far as the other Euro countries, mom always said, “If you can’t say something nice about a person, don’t say anything at all.” So we can talk about China. China is cooling. It is an intentional cooling, but a cooling none the less. We can feel the cooling in the price of certain commodities like copper and oil. So as China goes so goes the rest of the world.


There are also hardly any relevant earnings announcements this week as we get to the end of earnings season. I have attached the link to Yahoo’s earnings reports so you can look for yourself, but there are no Players that can generate an upside to this market, this week.


I spent a lot of time looking for some good news in this weeks Barron’s and they are hard to find. I even take exception to Andrew Bary little article about BP indicating it could be a scary but profitable play. Don’t get me wrong, I think BP will be in play soon, but Bary's closing paragraph was pimping RIG. Deep water moratoriums KILLS RIG. They are cheap, (About a 5.5 PE) because they are dead in the water, pun intended. I even dallied in the SEC website Edgar on lIne ands looked at the 13 D filling as to who is buying and selling what. We all look confused.


Here is what the Salve Lucrum portfolio looked like after closing on Friday. So as you can see I am feeling the pain as well. My plan this week is scenario one. I also look to improve my nat gas plays, MDR, UNG and WPRT. President Obama used the words natural and gas in the same sentence two more times since Thursday.

Salve Lucrum

BAGAKOAA June 3, 2010 Great Minds Think A Like

BAGAKOAA;

June 3, 2010 Great Minds Think A Like, or do they just read my blog?


I have to tell you I am so excited. I just watched today’s Mad Money and, well I think Cramer must have read my blog. Ya see I have been tagging my blog with the key words. Yesterday I did the spiel about oil, oil storage, and Natural Gas. Cramer did a whole segment on Nat Gas because on Tuesday, yes I missed it, our very own President Obama said, “. . . advocate for rolling back "billions of dollars in tax breaks to oil companies," expanding the nation's fleet of nuclear power plants and tapping into natural gas reserves,” This is one of the first up front statements he has made in support of Nat Gas. He will get behind the Clean Energy bill, and if this guy can pass the piece of crap legislation like the health bill and the yet to be defined financial regulation bill, even I think he can pass a sensible clean energy bill. Face it, not too many senators or congressman are going to stop a clean energy bill while we sit at the dinner table watching oil covered pelicans being pulled from oil gunked up marshes every night for the next 6 months. It will pass. Maybe Obama read my blog as well the night before and that is what got him behind the clean energy bill, yeah that’s the ticket.


Enough about me. How do we make a buck with this speculation? Well, again Cramer had a couple of good names and as usual some good logic behind the names. Remember I don’t usually care for many of the stocks he calls, but I always respect his logic. Today he had two to take a look at.


WPRT, Westport Innovations Inc. the research, development, and marketing of engines and fuel injection systems that use gaseous fuels, including natural gas, liquefied petroleum gas (LPG), hydrogen, and hydrogen-enriched compressed natural gas for the on-road commercial vehicle sector primarily in North America and Asia. The company offers engines utilizing gaseous fuels for transit and shuttle buses, conventional trucks and tractors, and refuse collection trucks, as well as specialty vehicles, such as short haul port drayage trucks, material handling trucks, street sweepers, and vehicles for selected industrial applications; direct injection LNG system for heavy-duty trucks; and engines fuelled with LPG primarily for the OEM forklift market. It also provides alternative fuel engines, and relevant parts and kits for use in automobiles, heavy duty trucks, power generation, and shipping applications; and cryogenic tanks for compressed natural gas or liquefied natural gas. The company was founded in 1995 and is headquartered in Vancouver, Canada.


CAUTION, this company has never made a profit. It has plowed every dollar earned and more into R & D and future growth. They were the first to put LNG buses on the roads of China. Even china was smart enough to know there is not enough oil to fuel their future growth. The clean air act will provide incentives to companies and municipalities to utilize clean energy fuels. Please read all you can on Westport BEFORE investing. I am going to initiate a small position tommorow at 17ish. I first looked at this stock in January when the CEO was on Mad Money. I almost pulled the trigger at 10.75 a share. The lack of free cash flow scared me away. I am feeling better now. The President is now talking about Nat Gas. I think its time to get on the bus.


Mad Money also talked about MDR McDermott International, Inc., through its subsidiaries, operates as an engineering and construction company worldwide. It operates in three segments: Offshore Oil and Gas Construction, Government Operations, and Power Generation Systems. The Offshore Oil and Gas Construction segment engages in the front-end design and detailed engineering, fabrication, and installation of offshore drilling and production facilities; and installation of marine pipelines and subsea production systems. It also provides project management and procurement services. In addition, this segment operates a fleet of marine vessels used in offshore construction and various fabrication facilities. The Government Operations segment manufactures and supplies critical nuclear components, fuels, and assemblies for government and commercial uses, as well as provides various services, including uranium processing, environmental site restoration services, and management and operating services for various U.S. Government-owned facilities primarily within the nuclear weapons complex of the U.S. Department of Energy. It also supplies research reactor fuel elements for colleges, universities, and national laboratories; offers uranium-based products used for medical isotopes; and converts or downblends high-enriched uranium into low-enriched fuel for use in commercial reactors to generate electricity, as well as provides heavy fabrications for industrial use, including components for defense applications. The Power Generation Systems segment supplies fossil-fired boilers, commercial nuclear steam generators and components, environmental equipment and components, and related services. It designs, engineers, manufactures, constructs and services utility and industrial power generation systems, including boilers used to generate steam in electric power plants, pulp and paper making, chemical and process applications, and other industrial uses. The company was founded in 1923 and is based in Houston, Texas.


The company has exposure in every segment of logical energy choices. It engineers and installs fossil fuel to gas conversions in plants and factories. It should be a prime beneficiary in any clean energy bill. I am looking at a small beginning position in the 20s tomorrow. Again read and do your homework on this one. Fundamentals on this one are much more impressive. Annual growth like WPRT is impressive, but they have a great margin, no debt and their Return on Equity is enviable. They forward looking multiple is 10 which makes it affordable.


UNG and FCG are two other ways to play a gas speculation. FCG is an index fund of a group of companies that derive most of their income from the exploration and production of Natural Gas. It is kind of like a mutual fund of Natural Gas producers. Some of its top holdings are Mariner Energy, Cimarex, Pioneer, EOG and Ultra Petroleum.


UNG, on the other hand is a prue commodity play via this ETF. It trades in relation to the near term futures of Nat Gas on the NY Merch Exchange. These are future contratcts not spot prices so keep that in mind.


The portfolio has owned both and I personally prefer the commodity priced UNG. It is up about 8% since President Obama added the words Nat Gas to his vocabulary. At 8.00 a share, I am getting in and this will be a 12-24 month play good or bad. It will take at least 3-5 years to get a meaningfull mass of LNG users, but then you should see the commodity go from its current $4-5 per million CF to 8-10. This ETF should see 20ish in two years.


Salve Lucrum and if I don’t post tomorrow, have a great weekend.

BAGAKOAA June 2, 2010 One Barrel, Two Barrel, Three Barrel, Four

BAGAKOAA;

June 2, 2010 One Barrel, Two Barrel, Three Barrel, Four


We got a house and a car today. There was good news on the pending home sales number which was up 6% after being up 7% the month earlier. Auto sales were strong as well. This was enough, strangely enough to kick all the market up about 2%. Of the 14 equities in the portfolio, all were up today except our new position in ACN. Accenture was down a few cents today because of their heavy weighted European business base. Cramer even sent out a special alert today saying not too worry and I agree. Gold and silver, which we hold was down, but again that was more due to the strength of the dollar than true demand issues. In fact we might pick up more gold in the GLD etf in pre market trading tomorrow if the opening shows more weakness.


The leak in the gulf is a huge wake up call. Without pontificating, I feel it may be the wake up call we all need to reevaluate where our next abundant supply of energy will come from. Think about it. Norway, Saudi, North America, parts of South America and parts of Asia are implementing or considering implementing moratoriums on deep water drilling. That means (the possible end or TransOcean as we know it), but also the last round of easy money oil is off limits for a while. The next abundant oil source is shale oil, but that is really messy business. As the current supply of oil gets used up, we as a country and I would expect the world will migrate towards the next most abundant, relatively clean, relatively safe energy source, Natural Gas.  Take a look at nat gas ETFs.


If you agree, how do you make money on that premise. Yesterday’s WSJ had a great article about fuel storage companies. In essence the article by Lananh Nguyen explains that commodity traders have been hoarding oil for months now and there is a premium for storage production facilities. This trend should continue a while longer as oil should stay below 75 bucks a barrel. As the commodity creeps up these traders will start unloading the black stuff. The two elements of this scheme is that construction costs are low for building the storage facilities and the price of oil will increase at some time in the future. Now the giant in the industry is Vopak out of Amsterdam. Unfortunately there are no US ADR available to trade because if you do the homework on Reuters’ or FT, their fundies look real pretty. Another possible play is Noble Energy NE.


It has an attractive value at 5.9 times earnings, but has some drilling and exploration exposure besides its storage capacity. Another interesting play is NuStar energy which is a stronger storage play, but its financials are not quite as pretty. At 16 times earning it is more expensive, BUT its throwing a nice dividend at 7+%. Keep in mind both of this were up big today on the market advance. Do your homework and wait a day or two to see if there is a correction down a bit. We own neither but a looking very close at them.


Let the four winds blow BUT, we have our first tropical storm of the season. So far more than 180 people have perished as a result of this beast hitting the Central American coast between Guatemala and Mexico. I only share this info as I am sure we won’t hear about it here in the states until the wind blows down a tree atop of someone’s Lexus.


I was asked recently if I have a hobby. I like to play golf, but I don’t call it a hobby. In thinking about the question, the stock and portfolio homework I do every night is like a hobby to me, except it helps pay some of the bills. I don’t know of many hobbies that fall into that category. Stamp and coin collecting, I guess might qualify, but even after you do all the homework of findi the right coin at the right price, you have to find a market it for it. The same effort could be put into finding a good stock or bond, making the investment, and then with a couple of clicks, you tell a bunch a million people that you want to sell at a price you determine. Some friends of mine have favorites sporting teams they follow and it takes them hours a week to know all the players and the stats, but you can’t make money on that info. (Trust me I know as I spent 13 years in Las Vegas one night.) So yes I have a hobby that let’s me keep abreast of the market, keeps me up to speed on relevant news, keeps me informed of the macroeconomic information I need to be a good boss, and so far has made me some decent returns. It’s a good hobby. Now get out there and make some money.

Salve Lucrum

BAGAKOAA May 31, 2010 Trading vs. Investing the REAL difference

BAGAKOAA;

May 31, 2010 Trading vs. Investing the REAL difference


Hope you are all enjoying the long “Decoration Day” weekend. Memorial Day had its roots in the former Northern States of the US post the civil war in 1868 and it was known as Decoration Day as that was the day people would decorate the graves of those fallen in battle. Michigan was the first state to actually make it a holiday in 1870. Though the term Memorial Day was not used till sometime after World War I, by the end of World War II it was the common name. In 1968 the Congress passed the Uniform Holiday Bill which defined Memorial Day and set the date for the Holiday. We hope you took a minute to think of those who have given the ultimate duty to your country.


It is a fairly quiet news weekend as far as the market seems to go. The Turkish market was very wobbly today as Israeli troops clashed with pro-Palestinian demonstrators aboard ships carrying Turkish flags. The Turkish market ETF TUR was down today in international trading by 2%. Barron’s just did a brief article about TUR indicating that it was one of the best Euro bets going because of significant immigration, a low debt to GDP ratio, and over all economic soundness compared to the region. So does this one day skirmish warrant a 2 % drop creating a buying opportunity? It could be, but as we say, only use the Vegas cookie jar on that bet. It is trading just hare above its 200 day average and this current news should take it down to just that level. It was as high as 64 in April and will probably be down to 51-52 tomorrow. This is an ETF reflecting the Turkish Stock Market action. This is strictly a market play. Do your homework and good luck.


Saturday, after a beautiful round of golf, well the weather was beautiful, my game was stinking up the place, but I digress. After the game I had a few minutes to get caught up with some Cramer episodes and read this weeks Barron’s. I’ll get to Barron’s in a minute.


Friday’s Mad Money was a classic. If you have iTunes, please do yourself a favor and download the episode. His opening dealt with the FACT, that buy and hold is no longer a prudent investment strategy. He gave actually historical performance criteria to support his statements. He calls the idea of buy and hold, “Buy and Forget”. We know we are all guilty of that or at one time in our investment lives we were guilty of that. He goes on to say holding a stock in an IRA or a 401 K and ignoring it is not a sound money management scheme. I know several of you have funds that you say you can’t or don’t want to touch. That is a shame and you might want to reconsider that line of thinking as this volatile market we live in is no place to leave equity money lying around.


Now I cried and moaned after the Flash Crash of May 6th. I was mad as hell and wasn’t going to take it anymore. I got stopped out of almost every one of our positions and most had a handsome profit. All I had were gains and resulting taxes. Well, it turns out that was huge blessing in disguise and just further supports the argument that long forever can be gone for ever. That flash crash helped me avoid the worst May in the market for 60+ years. We now have cash, have gradually reestablished new positions on our favorite valued stocks and are doing our homework to find others.


Cramer’s comments last Friday were helpful in understanding that we as investors must be well educated, nimble, and responsive to what goes on in the news and market everyday. He echoed much of the content from the book Active Value Investing by Vitaliy Katsenelson, which we have quoted in this blog on many occasions commencing with one of the first posts back in October 2009. Katsenelson’s usage of the term Active Value Investor is just another word for a responsive trader. So what is the difference between an investor and a trader.


When we hear the word trader, we picture the person sitting behind 3 monitors and reacting to every click of the market. I have done that and quite honestly did it as late as last week at 6:30 in the morning guessing which way the VXX (iPath’s derivative of the CBOE’s VIX). I have done live trading on several other occasions. It is not my cup of tea and quite honestly I have this thing called a full time job that precludes me from staring at the live feed from streetsamart.com on Schwab.


Now a trader, not a day trader, but someone who does the required homework and looks for opportunities to buy on the dips or non strategic weaknesses in a companies stock price and has a window of investment of between 12-18 months, is a trader or as Cramer and Katsenselson might say “an value active investor”. Then you might have a subset of those people who are astute enough to buy a value stock that has a good yield and long term promise and keep those stocks or a solid position in that stock for years. They are a long term investor. They could be and probably are an active value investor with a time frame in excess of a couple of years.


Do not confuse any of these trader/investors with the buy and forgets. I know of at least a couple of readers who bought into RIG when I was pimping it last year and earlier this year. Despite our mention of having well thought out and strategic stop orders in place, there are those people who still have RIG TODAY, despite a 40% drop in market value. The Salve Lucrum Portfolio got out of RIG , TransOcean with in hours of the explosion once I heard the oil leak estimates. RIG only does one thing that made it such a competitive proof company. Deep deep oil rig drilling services. If you are Exxon, Chevron, BP, etc there is only one company that had the expertise to drill below 3000 feet. But it was what set them apart. That business model is in critical condition as Norway, The US, most of Asia, and even the middle east have ceased any new deep water rig orders.


So if you are going to get in the market, that is buy stocks long, be prepared to do the homework and stay on top of your list of stocks you own, but be ready to buy when there are dips in there value because of non-strategic noise in the market place, and be prepared to take a profit when they become impressive, and be prepared to know when you decisions to buy a stock no longer exists. Trade or invest its up to you as long as you are making money.


This weeks Barron’s was good, bit not as great as the last several. There was much opining about the miserable May, Greece, Korea, Oil Spillage and a less than favorable feel to the magazine this week. If you are a fan of the take over executive Carl Icahn, Andy Bary had a good piece in there about how to invest with Carl. (The guy has a net worth of 10 Billion so he probably gets it right more times than wrong.) It appears to be a fairly quiet week ahead for economic news and we are nearing the end of reporting season. Let hope it is a stable week in the market and folk can get back in the game.


In Friday’s post I through out some Water Metering companies to take a look at. I hope you did. Here is what I found out.


ITRI  is not a pretty picture. According to everything I could find, their margins are weak, income is just starting to return, and thave significant long term debt, which I did not even bother to get the details on. I’d keep this on a watch list and read their press releases. As water and electric utilities go to remote metering ITRI could be an interesting play.


BMI on the other hand is a lot more promising now. They have no debt and they throw a little (1.2% yield) dividend. Their multiple is running a little lot at 23.6, but I am guessing that is because they could be best of breed. Earnings per share growth is 3 times the industry average and their ROE, (one of my favorite factors) is an impressive 24.6. Free cash flow has tripled in the last 3 quarters. Did I mention they have no debt. After reading the last 10 Q. I like what I see. CAUTION, There are some negative reports out there. Schwab shows them as an F, strongly under perform. I can only see two reasons for that and it would have to do with a changing of the guard at the Board level and the first quarter revenues being 5.7% even though their margin improved and their profit improved. Ned Davis Research also has them as a sell citing some market fears and the over value of the stock. I don’t see it as forward looking PE ratios are at 16 which is far from over valued. They have cash and no debt and what should be a strong second quarter. I am liking it below 40 a share. I will get in slow staying below the 40 thresh hold and acquire a 1% of my portfolio position and wait and see what the 2 nd quarter results brings. I am on my own with this pick but I like it. There will be an 8% down side stop put in once we catch and below 40.00 price. I am looking for a 42.00 stock by the end of summer.


So to all you traders and investors,


Salve Lucrum