Sell on the news

I think AAPL is setting up to be a sell on the news earnings event on Wednesday. I own the stock. I will sell between 1/2 to 3/4 of my position ahead of earnings. There is nothing wrong with the company and it probably has the best fundamentals its ever had right now. All I am betting on is a sell on the news event - then I'm a buyer again.

Buy SHLD

If you can stretch your time horizon out 5 years buy SHLD right here. Eddie has to do a deal because his company is going to hell. There is nothing to keep the story / stock alive right here. I would be a long term buyer. It may go lower so wait for support, but I think this one offers one of the best risk/reward imbalances available.

Don't buy M expecting SHLD to buy them though. They are having too much trouble as is, just keep it at SHLD.

I'm bored so I will post

The more time that goes on the less I seem to use my random thoughts website. Maybe the novelty of blogging wore off and I lost interest or maybe I just became consumed with the myriad of other factors in my life. Either way, I will say I plan to post more, but whether or not it will happen is still a mystery to me. In any case here are my thoughts for the day:

The market goes up. I specialize in shorting stocks and can't do it anymore. Stocks that I would normally short are getting bought out. Take a company like GCO. They sell Journey's shoes amongst other things in your mall. They were a terrible company. They would have missed their Q1 estimates by the proverbial 'mile' but the stock went to 50 some odd dollars on a buyout. I will say the person who bought them out will likely be successful as their problems are fairly apparent. That would have been a good short. The stock would have taken a 20% hit over the course of 6 months and then been cheap enough for the value guys to step in. But instead its a buy.

I hold the stock of NYX. NYX by all accounts is not that good of a company. The NYSE will have to cut its prices soon, the floor is dead, their execution is subpar, there is nothing really good there. Why do I hold it? Because they are going to make an acquisition and end up being the #1 player in world. I for some reason don't think they will get beat up on an acquisition. By the way, they should acquire ICE - its the perfect technological fit.

I will sell some of my AAPL holdings into their upcoming earnings. Its pure risk control, but I think a smart move.

I have set up a covestor account. Once I get the ball rolling there I will give you all the info so you can track my trades realtime.

I own DEPO. That one hurt last week.

You need to own an infrastructure / construction stock : CBI, FLR, JEC, FWLT...

I am so sick of hearing about the damn iphone, who cares!

I'm going to Vegas this weekend so I need to make some money this week in order to pay for the trip. I will keep you posted on my trades...if I remember.

PPD hasnt worked yet..

This stock just keeps on keepin on. It is a BS company but I havent been able to pull the trigger to short it yet and its probably not time for anyone else to either. Right now, I want to buy ICE, but I worry it will raise its bid. I own NYX, but am long put options too, because the stock is dogshit right now and wants to go down before it goes up. I owned puts on CMI but I have since the stock was at 99 and am just playing with the houses money at this point. ATI is a great stock. I think PETM is going to go down tomorrow. GES will be a great short...hopefully...after this next quarter. FWLT is going lower. But probably not before it goes higher. Will the market ever go down? I am long DDM and QID, look that up and see if it makes sense. I like CWTR and BEBE - to buy. SHLD to hold for 10 years. Roll the dice and buy HBIO. Probably wont post again for weeks. But hey, whats new?

Its been a while

I know I havent posted anything in a while and I doubt there are many who even check this any longer but a stock came to my attention that would probably be a decent short idea. PPD. It is a multilevel marketer for prepaid legal services. It is very similar to a pyramid scheme sort of setup. The CEO is pissed at the world because everyone shorts his stock now and has decided to cause somewhat of a short squeeze. The price is at 49.05 right now, it could go higher from here, but when the dust settles it will be below 40. Its tought to quantify it as this stock is erratic, but it is worth a look if you are looking for short ideas.

Positions

Short BEBE

Long CAB, ATI

Short ideas ABMD, ANGO, CUTR

Long ideas SPWR, CHL, IPGP, DIGE

Posting Breaks

As some of you know, I have had trouble recently posting to this site. Part of it was due to my own mistakes investing and my desire to not lead other investors astray and part was due to lack of time. Now I am back into the swing of things and will begin posting on a more 'regualar' basis. No promises though.

Right now, I am looking at the elections on tuesday as a catalyst to either get short or long the market. If the Dems take over, look out below.

Books to Read

I received an email the other day with the following question. Since I figured some of you may have a similar question I figured I would repost my response. I apologize in advance for any spelling or gramar errors, I didn't re-read what I wrote.

My question is: what books did you read (and are now re-reading, I suppose) when you were beginning that gave you the most help and insight?



Sorry for the delayed response. I often forget to check this email account and obviously havent updated my blog in quite some time. But anyway, there are a couple ways to go with regards to the book selection. First, it depends on whether or not you want to delve into the technical analysis or not. If you do I recomend starting with - How to make money in stocks - William O'Neil, How to profit in bull and bear markets - Stan Weinstein, How I made 2 million in the stock market - Nicholas Darvas, and How to trade stocks - Jesse Livermore. If you want to stay a little more fundamental I would read Peter Lynch's books, The warren Buffet Way, if you can stomach it (it is very long) Securities analysis, the intelligent investor. For added info I would go with Battle for investment survival, Come into my trading room, and market wizzards. I advise an approach of both fundamental and technical analysis. They are both important if only because people pay attention to both methodologies. Long term the fundamentals are more important but short term the technicals dominate. Also I can promise you will do better in the market if make yourself read every filing (10K, 10Q, press releases) from the companies you own and be sure to listen to the conference calls. Other than that let me know if you have any other questions.

Hmm

It honestly blows my mind how the market continues to go higher. I hear the reasons on why people think the market should go higher: tame inflation, Fed is taking a break, yada yada yada. Somehow, I think there has to be a good reason why I don't feel comfortable with this rally. I just don't see this ending well. Sorry for the pessimistic outlook.

Vonage

I'm watching Michigan vs. Notre Dame right now and just noticed that Vonage is sponsoring the pre game show. I am just wondering if a company that will never make any money should be advertising for a football pre game show? Who knows, maybe that stellar management knows what they are doing...they have a good trackrecord so far don't they...

Welcome Back

And we are off to the races again. I have increased long exposure over the past month and I am thinking it is getting to be time to sell some stocks. I am going to do some trimming, moving gradually towards a more negative bias. Sell into strength as there isn't a whole lot to move the market substantially higher. It has been a range bound market this year and I don't see that stopping any time soon. Not much interesting to say right now as I am patiently waiting.

Getin Outta Here

Its time to take a break for the extended weekend. I can already tell you that no one will be working on Wall St. in the next two days. The market will probably drift lower because of it. Volume is going to shrink over the next few days, the only thing that could cause some serious problems is this little country called Iran. If fireworks go off there tomorrow, the market will not end up in a good position at all. But to hedge against that you could always buy an oil stock. Take your pick - NBR, TTI, SLB, HAL, XOM (just avoid BP too much going on there).

I learned about a pretty cool product today. QID. It is a double inverse NASDAQ short.

CTC Media

This is a story in today's Investors Business Daily about CTCM one of my two stocks I am currently researching. Enjoy:

BY ALAN R. ELLIOTT
INVESTOR'S BUSINESS DAILY
In Russia, the word is puhlt. That’s what they call the remote control for a television set. Russia’s puhlts are being put to more regular use lately, as TV advertising takes hold and more former Soviet citizens grasp the value of a
mutebutton. A leading crusader in the rise of capitalist-style broadcast advertising in Russia is CTCMedia CTCM.
CTC owns and operates two broadcast networks:CTC and Domashny.
It’s the smallest company among Russia’s four major broadcast networks,
but it’s growing fast and set to get bigger. In June, CTC’s initial public offering
in the U.S. netted $105 million. The stock debuted at 14 and now trades near 23. The company’s second-quarter sales grew 83% from the prior year
to $102.8 million. Analysts polled by First Call expect CTC to earn 65
cents a share this year, with earnings increasing 35% and 27% in 2007 and 2008, respectively. “The financial returns they have been able to generate so far have been very good, and I think they’ll be able to continue that for at least
another couple of years,” said analyst Kevin Calabrese of Argus Research.
While Russia continues to grapple with various free-market growing
pains and economic problems, the country is increasingly comfortable
withWestern culture. “The broadcast market really feeds into that,” Calabrese said. CTC uses a lot of U.S. and European programming, with voices dubbed into Russian. It also has adopted a Western-style broadcast model.
“We have essentially taken triedand- true broadcasting techniques — in terms of program formats and broadcasting strategies — and imported them to Russia with great success,” Chief Executive AlexanderRodnyansky said during
asecond- quarter conference call. He and other company officials could not be reached for comment for this story. Soap Residue CTC, the larger of the company’s two networks, targets viewers from 6 to 54 years old. The network’s ratings advanced from third to second placeduring thesecondquarter, garnering a 14.7% share.
Growth was driven by the network’s original “Born Not Pretty” program, a 200-episode, soapopera- type series. The final episode aired in July.CTChas lined up new content to fill the spot, but the program’s departure could lead to a
slumpin market share. The smaller, Domashny network is aimed at female viewers and is available in 47 of Russia’s 52 major metropolitan markets. Its secondquarter market share was 1.3%, up a tadfrom last year.
In addition to the CTC and Domashny networks, CTC owns 17 local TV stations. The company reaches about 100 million viewers through 310 affiliate stations.


Ads Up National ad sales, handled by Russianadmarketer Video International
Group, generate nearly all CTC revenue. In July, regulators reduced the amount of broadcast ad time allowed per hour to 15% from 20%.
By the time the changes went into effect, Video International minimized
the impact of the change by renegotiating 85% of CTC’s contracts, increasing the price to reflect the reduced airtime allowance. Russian regulators have voiced concern that Video International has too strong a hold on broadcast
ad sales. The Federal Antimonopoly Service has threatened at various points to tighten regulation of Video International. While CTC faces stiff competition
from larger broadcast rivals, cable networks still pose little competitive
threat in part because most Russians still see television as a service that should be provided for free. That attitude will probably change over time, Calabrese says.

Small Milestone

Since I resumed posting, site traffic has been growing quite well and I just hit the 5 digit mark. Its all about the little things in life...

New Research Direction

I pulled the plug on VMI after a few moments of looking at the company. Sure it is an alright company, with one analyst that follows them, but I have re-evaluated my investment priorities. After essentially going back to my roots, and re-reading many of the first books I read when I was learning about investing, I have come to the conclusion that I will not pursue medicore investments any longer. For example - CMG - excellent stock, will beat earnings next quarter - but not by a wide margin - it is essentially priced for perfection. I am digging deep into the screens to uncover a stock that will double within 6 to 18 months. I have done no research on the following companies but they are my next two subjects: TTI and CTCM. TTI has the potential for 25% earnings growth for the next 4 years. I like the chances of a stock like that. CTCM is a brand new IPO Russian TV company. I have never looked at a single russian company so this should be interesting.

Observation: Oil was down today. How much do you want to bet that by week end it will be at least back where it started. IRAN will come through for the oil bulls. You have to figure that some fireworks are going to go off there and oil will rally. Let us wait and see.

The Reason Buybacks Will Hurt America

After reading this blurb in Investors Business Daily, I was inspired to share my two cents on the subject:

Flush with cash after a string of fat profits, S&P 500 firms bought back $116.7 bil of their own stock in Q2, says Standard & Poor’s. That’s a 43% surge over a year ago and 175% more activity than seen 2 years ago.

The Reason Buybacks Will Hurt America

Our countries largest corporations have enormous share buyback programs in place. These buybacks have the potential to stifle economic growth, business development, and our country’s entrepreneurial spirit.

I believe there is a common misconception about buybacks that plagues our society. We have been taught that a company will buy back its stock when it is sufficiently undervalued. Maybe that is true, maybe companies know enough about the stock market to time their purchases in order to invest in their future and generate returns as their stock goes higher. Unfortunately, I do not fall into this camp.

Contrary to the popular Wall St. belief, I feel that buybacks are bad for companies and more importantly bad for America. There is an opportunity cost associated with stock buybacks in the form of a trade off between business investment and equity investment. If a company spends billions buying back stock; that means it avoids spending billions on new business ventures. This leaves corporations vulnerable to the possibility that some company without a shortsighted “EPS view” of the world will create something truly unique. This, in turn, has to potential to supplant our nation’s corporations as worldwide powerhouses because they failed to focus on the future. Instead they wanted to please Wall St. today.

One of the main drivers behind the shortsighted behavior of companies today is the nature of Wall St. Companies need to make their quarterly numbers. If they don’t, their stock will (more often than not) go down. To make numbers, companies are often forced to slash their R&D budgets and cut back on taking chances. They attempt to streamline operations and avoid jeopardizing quarterly numbers. This is bad for our future as Americans. This is bad for the long term health and prosperity of these corporations.

Complicating this issues is the use buybacks as a form of earnings per share (EPS) management. Often times, when Wall St. analysts model a companies EPS, they are grossly inaccurate at determining the shares outstanding for the quarter. What happens is a company has 20 million shares outstanding and it announces a buyback. When a company notices conditions are starting to deteriorate and that they might miss expectations with 20 million shares outstanding, they opportunistically purchase 1 million shares. This transforms the quarterly headlines into “XYZ beats EPS by $0.01-shares rise” instead of “XYZ misses by a penny - shares plunge.” Unfortunately, this is the game companies are forced to play.

Taken a step further, I view buy backs as a sign of a deteriorating business environment. Instead of acquiring a small distributor, a company buys back 500,000 shares. Instead of investing in fuel efficient vehicles, a company shrinks its float by 2%. How does this benefit the investor? Maybe it limits some of the downside, but as an investor I prefer upside relative to limited downside. Simplistically, the best way to achieve that upside is by inventing a new product that people actually buy. The best investments in the world were not created because a company bought back its stock. They were based on ideas, innovation, and entrepreneurial spirit that in the end translated into sales.

Microsoft performed best from 1985 – 2000 when it worked to create the operating system that nearly ever computer in the world uses. Now the company has turned to buybacks to generate interest in its shares and has pushed it stock up with its most recent buyback announcement. However, I ask you to question which move was more meaningful; the multiple thousand percent increase MSFT had from its IPO date, or the 15% pop it got from a buyback. Maybe if MSFT had spent some of that money investing in people, technology, and research, Vista wouldn’t have been delayed as many times as it has. Gains generated from buybacks do not last. A buyback is simply a form of throwing in the towel without letting Wall St. know.

I could not imagine what the world would be like if companies took the initiative to invest for the future. Take Exxon Mobile for example. Year to date, XOM has generated $25 billion in operating cash flow, paid out nearly $4 billion in dividends, and repurchased $12 billion worth of shares. I am not expert in this field, but I would imagine that with $12 billion, some sort of advancement in alternative energy could be produced. Better yet, from XOM’s perspective, if the new technology they produce is viable and effective, sales and profits will invariably follow. However, our society rewards them for not taking chances. It is tough proposition for a company to take on because if the idea fails, the stock will be relentlessly punished. This sort of thinking is bad for America.

If record setting buybacks continue, down the road America will be faced with some very dire consequences. Our country was built on new ideas. We need to rejuvenate that spirit and encourage our corporations to innovate, take chances, and help build a better America.

I hope this article at the very least encourages people to think about why companies may buyback stock and avoid the common groupthink response, buyback = good. I welcome any feedback @ randommarketthoughts@gmail.com

How Ironic is This?

Credit IBD for the article:

Pete Coors, vice chairman of MolsonCoors Brewing and ’04 Senate candidate, pleaded guilty in Colorado to driving while impaired, a lesser charge than the DUI count filed against him after his May arrest.He was sentenced to 24 hours of community service.

Warning Signs

Credit Investors Business Daily with the following:

Digene (DIGE) plunged 4.75, or 10%, to 42.68 upon the resignation of Charles Fleischman, the company's co-founder, CFO and president. Volume swelled more than eightfold to its greatest level in more than two years.
The shake-up comes two months after the chairman and CEO, Evan Jones, said he would retire in fiscal 2007 after a successor is found. The maker of disease screening systems is looking for a new CEO while it's replacing Fleischman with a senior vice president as of Oct. 1.

-Please don't own a stock like this that executives are jumping ship as quickly as they can. I can almost guarantee you its not because the company is doing well...

I made a list of some strong momentum names:

VMI
TEK
LMS
CTCM
ABAX
TTI
TRMB
VOL
AZN
TNL
FORM

These guys are moving huge in both directions these days. For example look at the intraday price action in FORM. The stock opened at 46.15, went up to 48.45, then crashed out to 43.7, closed the day at 45.18. Its a day traders dream, but get real, who can stomach that kind of volatility.

If I could sum up my feeling on the market in one word FRUSTRATION would be it.

Random Stock Market Thoughts

Over the past few weeks I have been reading "The Battle for Investment Survival" by Gerald M. Loeb. In this book Loeb paints a broad picture of his investment philosophy in hopes of making the reader able to invest profitably. There were two things he said that were incredibly interesting to me: 1.) Don't buy a stock that you don't think will at least double and 2.) cut your losses quickly.

His reasoning behind #1, is that as investors we make a tremendous amount of mistakes and by purchasing a stock that we think will at least double, it gives us some chance that we might actually make some money on it. This makes sense, because I can think of countless times where I have bought the QQQQ or something similar in hopes of making a fraction of a point and ended up losing. This method gives an investor a margin of error that will without question benefit him. From now on I am going to try to follow this rule more closely.

Cut your losses quickly! This is the #1 mistake I have made this year. Prior to this year I followed it exclusively, but now I have become lax in my implementation of this rule. I think it was a combination of overconfidence and outside influences that led me away from this rule; however, now it is back in full force. It is so important to clear out your losing stocks I find it difficult to express it in words. Can you imagine how your portfolio would have done if you had sold that stock down 15% instead of riding it down 60%. You realize that once a stock goes down 50% it has to double to get back to break-even. Do you know how impossible that is to achieve? Don't ever let a stock fall more than 20% in your portfolio. It will do irreparable damage to it. Trust me 99 times out of 100 selling the stock is the right thing to do.

Oil Patch

I can't imagine a more bullish short term (roughly one month) picture for oil. You have Iran saying it won't listen to the UN (big surprise). You have at least another month of hurricane season. You have a never ending war in Iraq. You have broken pipelines in Alaska. You have a lack of refining capacity. You have summer demand. You have strong bullish technicals. You have traders who will panic on a dime. You need to buy an oil stock for the next month, I think it will make you some money. I am not going to give names with the exception of NBR, but other than that, I would focus on oil refiners, field services, integrated oils, or explorers. The drillers aren't performing well but I still like NBR.

New Fund Ideas

Today I was looking through a few new mutual fund ideas and found two funds I really liked. FMIHX and SCMLX. They are both relatively new funds, which thus far have impressed me tremendously. Both of them have very reasonable fees and more importantly, excellent returns. The track record for both of these managers is impecable and I would feel comfortable holding these two funds for a number of years. I would consider adding either of these to a retirement account as a passive portfolio management technique.

Check out more information on these funds here:

http://quicktake.morningstar.com/Fund/Snapshot.asp?Country=USA&pgid=hetopquote&Symbol=FMIHX

http://quicktake.morningstar.com/Fund/Snapshot.asp?Country=USA&pgid=hetopquote&Symbol=SCMLX

Mistakes

One thing I have noticed about my words lately is that I have been wrong about many of my statements. I find it difficult to be wrong in this business, because not only do you have the negative mental effects of being wrong, but I lose money. The combination of punishments does not bode well for the self esteem. (Luckily it works in reverse as well and when you are right there is no better feeling in the world.) Now its not that I have been really wrong about things and have gotten slammed by it, but the little mistakes bother me. Maybe I have tried to just come up with a large quantity of ideas instead of focusing on the quality of ideas. Maybe I have just lost my touch. Maybe I just got overconfident. Maybe its time to relax and make some money.

The Problem

Right now I know that I should own stocks. But I know that underneath the market, stocks are on shaky ground. So what do you do? I wish I had the answers, but as for my plan, I am going to slowly add more long exposure. Its against my better judgement but I am not arguing with the market any longer. I am going to avoid margin. I am not going to get too aggressive either way. Believe it or not, I am learning to be flexible. And I that note, I am going to get to work finding some names.