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 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