Monday, July 31, 2006

Dead Cat Bounce For ORCT?

ORCT bounced up 12.8% today. I can see absolutely no reason for it. They are down because of Japanese customer pushing back major order and (I assume) the Israeli conflict. Certainly neither of those were resolved today. Perhaps they were just oversold?

Good day overall for me as MFI was up about 0.5% (overall portfolio was up 1.5% as my non-MFI portfolio is trouncing MFI... must be lucky).

MGLN had another solid day, up about 5.5%, up about 25% in total. FTO was up about 5% and is up 23% in total. PNCL was down as airline stocks and the transportation indices continue to get pummelled.

I am starting to strongly believe that the best MFI approach is to follow a list of stocks that you are considering to buy and then be patient. Track them for one or two months and then when they get pounded (as seems to happen to all of them eventually) buy, buy, buy! Not that I am qualified in any way to give stock advice, but I'd be thinking about: DLX, LRW, ORCT, OVTI, PALM, PNCL, TGIS and ELOS.

I am continuing to gain on break even and the IWV. Just keep thinking up.

Late news *flash*: NSS (Nice) Reports Earnings (NS Group Reports Second Quarter 2006 Results). I was very pleased with what I read. They beat revenues with 192m vs 182m estimates. They beat EPS by 6 cents. The CEO said:

"We are very excited about growing the higher value added segments of our business. The recent addition of Ultra Premium Oilfield Services combined with the announced expansion of our capacity for manufacturing seamless tubular products and heat treating provides us with the foundation for profitable growth and industry-leading customer service. We now have the people and the assets to compete successfully in the rapidly changing North American drilling environment where challenging unconventional resource plays have become a substantial portion of total drilling activity"

I am not an MBA, but Value-Added Segments sounds positive. This is really a company firing on all cylinders. What burns me is stupid headlines, I have to wonder who writes these things. Here are three samples:

NS Group 2Q Profit Falls
AP (Mon 6:17pm)
InPlay: NS Group beats by $0.06 (Mon 6:01pm)
NS Group Q2 earnings fall

Now note that two of the three headlines are negative, "profit falls". How can this be? Well it is all in Uncle Sam and taxes. Last year, pre-tax income was $40.3m vs $51.6m q2-2006. But last year NSS just paid $3.1m while 2q-2006 taxes were above $19m. Remember though that all MFI calcs are pre-tax. So NSS will be even further up the MFI list with these figures. I am excited about their future earnings potential.

Saturday, July 29, 2006

Seeing Pink

Pretty funny. I have started our family summer vacation at the Fairmont Hotel in Dallas (what a great hotel!). The funny part is that the International Mary Kay convention is here right now. Lot of women in Pink Dresses.

This is a quickie update, a few more stocks had excellent earnings (MGLN - I'm Gellin') and MSTR (of the Universe) giving me a most excellent day yesterday. Here is where I now stand (doesn't seem "that bad").

Stock Cost Current Gain
NCOG $19.39 $27.05 39.5%
UST $39.36 $51.58 33.9%
PCU $78.13 $97.73 28.6%
MGLN $38.34 $45.55 18.8%
FTO $28.76 $33.62 17.0%
MTEX $13.11 $14.46 10.9%
NSS $45.89 $50.43 9.9%
CHKE $37.55 $39.34 6.4%
TRLG $17.02 $18.07 6.2%
ISNS $13.17 $13.48 2.4%
KG $17.31 $17.20 -0.6%
TGIS $10.34 $9.98 -2.3%
PGI $7.71 $7.52 -2.5%
EZEN $2.84 $2.72 -4.1%
PTEN $27.74 $26.30 -4.9%
RAIL $58.18 $54.94 -5.6%
PACR $32.53 $30.30 -5.9%
PNCL $6.68 $6.19 -7.3%
MSTR $94.36 $84.83 -10.1%
IVII $10.93 $9.77 -10.6%
ANF $61.13 $52.63 -13.6%
FDG $34.03 $28.25 -14.4%
ELX $17.85 $14.88 -16.6%
PONR $32.97 $26.21 -20.5%
TBL $34.50 $25.51 -26.1%
PTSC $1.31 $0.94 -28.2%
OVTI $27.79 $18.72 -32.6%
DLX $26.36 $17.05 -33.8%
HW $37.42 $22.49 -39.9%
ORCT $11.83 $6.83 -42.3%

Total Gain/Loss
Benchmark Gain/Loss
Annual IRR

Small Gain/Loss

Large Gain/Loss


So I am now down about 5%, a couple of good weeks and who know? Take care!

Thursday, July 27, 2006

Faster & Furiouser

Okay, I took a little literary license with the title. Three more of my MFI companies report this morning as I prepare to not think about stocks for two glorious weeks.

HW - they are struggling, but at least they got their earnings report out 1st. They earned 58 cents, it seems consensus was 60 cents. They said they'll likely earn between $2.00 and $2.15 for the year as section 29 (some sort of gov't subsidy) is phased out. Y'know, for a stock trading at $20.85, you'd think the bad news is priced in. But it'll probably take more lumps today. I did see last night on Kudlow that Congress is looking at an energy bill. If there is anything there to promote coal to diesel technology, HW could bounce right back towards $30. Don't count 'em out yet (Headwaters Incorporated Announces Results for Fiscal 2006 Third Quarter).

DLX - Actually did a little better than expected. More importantly, they announced a 25 cent dividend, down from the 40 cents previously, but not as bad as I had feared (Deluxe Reports Second Quarter 2006 Results; Declares Quarterly Dividend).

RAIL - Had a blowout quarter, they earned $2.86 per share vs estimates of $1.69. The backlog did drop a bit, that is what started their spiral from last quarter's earnings (FreightCar America, Inc. Reports Record Performance ).

UST - very solid quarter (UST Reports Second Quarter 2006 Diluted E.P.S. of $.83).

Well, it is midday and this will be my last posting for a bit. I gave Deluxe the lead picture today becuase (get ready for this), DLX is the leading gainer as of righ now on the NYSE, up over 20%. Now to put that in perspective, I am still down 36%. But it does appear that there is hope.

Actually, my entire MFI portfolio is smoking, perhaps the MFI gods didn't think I'd be checking in today?

DLX + 20%
ISNS +13% (I said yesterday they had good earnings)
HW +4% (see comments above)
PCU +3.3% (I felt their numbers were solid yesterday)
RAIL +13% (I hope they can hold it this time... for a company that can earn $2.80 in a quarter to be selling for $55 a share is silly).
UST +2.5% (just a solid smokeless tobacco qtr).

Here is a quick graph update.

Wednesday, July 26, 2006


I know, I know, I highlighted a Joni Mitchell album previously, but it is what I know. Actually it is what I am as well. I do believe in JG's MFI approach. Actually I feel like the Cowardly Lion, "I do believe (in spooks), I do believe, I do believe!" I believe JG tested it. I believe he is trying to help the little guy (or gal).

However, it seems that the MFI stocks have had a tremendously crummy run in quarterly reporting. Let us look at the track record:

  1. DLX - don't get me started, warned severely for the next decade.
  2. FDG - was disappointing last week.
  3. HW - warned severely.
  4. ORCT - bad guidance.
  5. OVTI - bad guidance.
  6. TBL - bad earnings today.
  7. TGIS - hit hard last week by income tax charge (overblown IMHO).
The Fast & Furious
I had four companies report earnings today.

TBL - pretty much met expectations, losing about 20 cents per share(Timberland Reports Second Quarter Results). I don't think this was a surprise, but the stock sold off $1.04. They did guide the full year at the low end of previous range, with the 3rd qtr not looking great. They do expect some improvement in 4th quarter... not sure I'll still have the stock to witness that.

PGI - wow, went up 5& today. (Premiere Global Services Reports Second Quarter Results). Overall revenues were down, but it seems that ongoing revenues were up 7%. They beat expectations, 13 cents with 18 cents, though I am a little fuzzy on some of their adjustments, not sure if excluding equity-based compensation is proper. They did confirm 2006 and said they continue to expect steady growth in 2007. Nice.

PCU - I am always confused with their earnings (UPDATE - Southern Copper quarterly net rises 41 percent) as they always appear mid-day as I think they are also traded in Mexico. As the headline mentions, they made 41% more despite a 13% drop in sold copper (due to a strike). It was noted that the price of copper more than doubled in past year from $1.53 to $3.37 a lb. They did not say when the strike would be resolved. The EPS of $2.98 seems below estimates of $3.08.

ISNS - hot off the wire, ISNS seems to have had a stellar quarter. (Image Sensing Systems Announces Second Quarter Financial Results). Net income was up 40% Y o Y. Revenues are up 29% in 1st half of 2006 vs 1st half 2005. They have been having success in Asia. I am pleased.

Rearview Mirror

Here is how some sample portfolios are faring:

February 24th - Down 6.1% (benchmark -1.9%)
April 7th - Down 15% vs benchmark -3%
May 12th - down 5.7% vs -2.6% benchmark
June 1st - down 4.3% vs -1.1% benchmark.

Let us face it, the MFI isn't working for this iteration thus far. It is not a question of whether you are down, but how much you are down. Will it change? Stay tuned to this same Blog Channel at the same Blog time.

Ok, that is it for now. I will try and post a quick comment tomorrow, but then I'll be going offline for a couple weeks as I'll be taking a summer vacation. Maybe my portfolio will do better without the pressure of daily scrutiny. I do give myself credit for not having sold anything.

Have a great two weeks!

Tuesday, July 25, 2006

Burning Orc

Well, the good news is that over the past two days I have staunched the bleeding and have made some micro progress towards even-steven. It is hard to believe that just 2 weeks ago that my MFI portfolio was about even with the benchmark and cash... how fast it can go! Down to the benchmark about 20K now assuming 10K invested per stock. Yuck.

ORCT reported earnings yesterday (Crummy ORCT Release) and they were okay, but guidance was miserable. Here is what they said:

"As a result of lower demand for our products in Japan this year, we are reducing our guidance for 2006. For the year ending December 31, 2006, we expect revenues to be in the range of $62.0 million to $68.0 million, net income to be in the range of $2.9 million to $6.0 million and net income per diluted share to be in the range of $0.17 to $0.35."

Not very promising as I shall explain. So far this year revenues are about $40m. So they're saying $22m to $28m for the final 6 months. So far ORCT has made 36 cents per share in the 1st 6 months. So they expect to lose 1 cent to 19 cents the remainder of the year. Double yuck! In response, the stock dropped yet another 12%.

Not to be down on MFI, but I am almost certain I could have found 5 stocks (of my 29) that could have dropped less than 33% in under 6 months:

Stock Cost Current Gain
DLX $26.36 $13.68 -46.6%
HW $37.42 $21.32 -43.0%
ORCT $11.83 $7.47 -36.9%
PTSC $1.31 $0.85 -35.1%
OVTI $27.79 $18.19 -34.5%

Good thing I have an entire portfolio to cushion these losses. It should be noted that sans (some fancy French) these 5 chiens (more fancy French) I would still be in the red, but ahead of the benchmark.

Of my 15 non MFI stocks, I only have two down more than 10% (PFACP -17% and STP -14%).

Let us see what the smart talking heads are saying. Jubak wrote an artile saying basically that China is going to implode(China Economy out of Control). Geesh, I wish he could could be more cheery. At least he sadi it might take until 2009.

"In a train wreck, there comes the moment when it's no longer possible to avert disaster. Pull the brakes as hard as you can, the momentum of the train is so great that disaster is unavoidable.

I fear that China's economy passed that point of no return in the second quarter of 2006.

Today, I'm going to tell you why I think China's economy is headed for a train wreck. Not tomorrow, but in the reasonably near future. I'd say 2009."

Hmmm, that would not be good for the world economy.

Cramer said nice things about CSX. His opinion is that railroads are entering a golden era. Certainly made me feel better about my RAIL holding.

"In the old days, railroads [like CSX] only carried stuff that stopped shipping when the economy slowed down," he said, but the world has changed since then.

Now 25% of the shipping volume is coal - a product that America will need to keep using no matter what because "it's the cheapest fuel around." The other products hauled by CSX are grain (12% of the total), road aggregate (12% and benefiting from high spending by government) and waste (10-12%), he noted.

"CSX is now more than 60% non-cyclical," he said. "I think CSX is now a secular growth story."

Oh well, on to another day tomorrow... I don't think we're out of the woods yet.

Monday, July 24, 2006

Whitewater Rafting

I went whitewater rafting on the Ocoee River this weekend. I had never tried it before. We put the raft in the water and immediately went into a class IV rapid. It was exhilerating! If you haven't ever tried it, I highly recommend it. Just $34 for 3 hours of great fun. We used Quest expeditions (Quest Expeditions). Note: I am not in the picture on the left, though I was certainly in that situation.

My MFI portfolio has been in whitewater of late as well. It was an absolute disaster on Friday. I had mentioned on Thursday that the earnings by TGIS didn't seem all that hot despite their spin. Well, the market must have agreed as it got soaked, down 15 to 20%. So it has gone from being +50% just a few short weeks ago to under (ahem) water (get the theme?) now. But you know what? The earnings were not that bad. They had a bunch of positive items (including revenues up 33%) and at $10.25 TGIS is a steal.

I have to confess that this MFI approach has been taxing. Without it, I would have sold many of these stocks during the past few months, I hope the approach begins to pay dividends soon. Well, technically it has been paying dividends all along, but you know what I mean.

Going on the Ocoee River was good for me and my morale though. We did make it to the end of the whitewater eventually and with a successful conclusion. I still believe the same about my MFI portfolio. The things I learned going through the whitewater is you don't want to abandon the raft when going through the rocks. Understand?

Have a great one!

Thursday, July 20, 2006

It's Five O'Clock Somewhere

There is the latest graph... front center. I'll be gone tomorrow, so I figured I'd do my weekly update a day early. All I know that the past two weeks have not been kind to my portfolio, that is why I am glad that "It's 5 O'Clock Somewhere!". Not sure who sings that song, if it isn't Jimmy Buffett (no relation to the Oracle), then it should be.

As the market and my portfolio are doing so poorly, maybe we should take this time to list the top 10 drinking songs.

  1. She's Acting Single (and I'm Drinking Doubles)
  2. One Borbon, One Scotch and One Beer
  3. Margaritaville
  4. Tequilla Sunrise
  5. Whiskey River
  6. Friends in Low Places
  7. It's Five O'Clock Somewhere
  8. She's Got a Drinking Problem (that's me)
Ok, enough. I said I was right about FDG 2 days ago, but the market fully realized it today as BTU reported earnings and warned on possible lower coal prices. FDG sank another 6.8%. (my non MFI coal company CNX was down 7.3%... it was a bad day).

Luckily, don't have to harp on it being a bad day as I am going whitewater rafting tomorrow with my 2 oldest kids. It'll be a good day irregardless of Mr Market.

TGIS reported their earnings this evening (TGIS Announces Second Quarter Earnings). 43 cents a share. They are so small, there is no "estimate", but here are my takeaways:

  • Revenue up 17% Q o Q and 33% Y o Y
  • First 6 months earned 43 cents per share vs 28 cents last year
Wait, hold the presses. I am liking this less. They are really spinning things with words that make it sound good, but when you dig it looks so-so.

Income from continuing operations before income taxes for the second quarter was $4.1 million, or a 37% increase from the previous quarter and a 17% increase when compared to the second quarter of 2005.

I don't like this wording as they say "before taxes" to make things look better. After taxes they are actually down about 16%.

"For the first six months, we continued to increase revenue over comparable prior periods and generate a 54% increase in fully diluted EPS over last year, despite being fully taxed in 2006"

Again, note that here the numbers are after tax, but they use a 6 month comparison instead of 3 months. Hmmm, guess I shouldn't pick apart the announcement too mcuh... TGIS is after all my 2nd best stock. If they keep up the strong growth and watch expenses they should do well the next 9 months, but I fear they may sell-off a bit tomorrow, but heck... I am used to that!

Wednesday, July 19, 2006

My Feet Are Smiling

I know, pretty obscure album by Leo Kottke... I'll bet most of you have never heard of it. I always loved the title though. Actually, I can barely remember any of the tracks myself, the last time I heard it was pre-CD on vinyl. Wait, I do remember a song... "Louise". A very sad song.

"Sometimes a bottle of perfume, flowers and maybe some lace
Men brought Louise 10-cent trinkets
Their intentions were easily traced"

I think someone else sang it recently, maybe the Dixie Chicks or Bonnie Raitt.

But today even my feet are smiling. This was my 2nd best day of the year (MFI stocks up 2.2%). The best was June 29th, so it shows that volatility is really on the rise. I did mention yesterday that a lot of people were short and that a catalyst could ignite things. If we get decent numbers from MOT, AAPL etal tonight, I suspect we'll have another banner day tomorrow.

Here are some notes on my stocks

FDG - I was right last night. It was a mediocre quarter. FDG sold down 1.5% even with today's positive mood.

PTSC (+11.4%), MTEX (+9.1%) and OVTI (+5.2%) were my big gainers. PTSC and OVTI had really been oversold, so not a big surprise. I am stil waiting to see PTSC report on quarter closing May 31st. I am flummoxed, bamboozled, mystified and perplexed on where their report could possibly be.

With my gain today, I am now down 6.1% so far. In my large cap vs small cap race, small is winning the race down 2.7% vs 7.9% for large caps.

Cramer was pretty funny tonight. He made fun of chartists (a point we agree on). He spoke about how the market had a classic head and shoulders pattern and the proceded to shampoo his bald head with head & shoulders shampoo while listening to "Head, Shoulders, Knees and Toes". For a multi-millionaire, he is a wild & crazy guy!

I am not an economist, but this is my blog so here goes. Is anyone out there worried about foreclosure rates? Everyone keeps talking about how the high price of gas is pinching consumers. How much does an extra $ per gallon cost consumers? If you filled up once a week with 15 gallons that would be $15 per week.... say $70 per month.

But how about higher interest rates? I read where adjustable rate mortgages made up 30 to40% of loans in 2004. They were going 2 points below fixed loans, so say 2.5%. The current rate must now be at least 6.5%. If you borrowed 300K a 4 point hike would be about $12,000 a year or $1,000 a month. Now that is serious money compared to the $70 pop for gas. According to NPR, foreclosure rates are up 38% in the 2nd quarter of 2006. People who extended themselves too far in the housing gorge have to really be feeling the pinch, and if they just put 5 or 10% down, their home has dropped in value and the A.R.M.s are making the monthly payments hurt I gotta believe they just send the key to the banker and walk.

Enough doom and gloom on this mah-velous day. Take care!

Tuesday, July 18, 2006

Wild Roller Coaster Rides

When I was younger, I loved riding on roller coasters. Kings Island (near Cincinnati) had a great one called "The Beast". And Dallas has the Texas Giant. The old wooden ones really rattle you to your bones. As I have gotten older, I like them less. My back and neck ache when I get off.

We had a real roller coaster ride today in the stock market. In fact, if you looked at the market 30 minutes after it opened and then when it closed, you might not know what happened in between. I was down more than 1% at one point, but ended the day up 0.8% to close ever so slightly on the IWV.

With the MFI approach though, your hands are pretty much off the steering wheel after you have placed your bets. That is probably for the best because frankly I have no idea what to do right now regarding investing. All my decisions of late have been wrong (in the short term).

Lots of chatter about some of my favorite MFI stocks.

PTEN - as I mentioned, Cramer picked NBR over PTEN last night because of "superior management" though he called the entire sector cheap. Jubak today announced he is selling his drillers and replacing with Oil production companies as he thinks drilling day rates have peaked. Not what I want to hear. (Jubak on Drillers)

PONR - as much as I ignore analyst opinion, CIBC initiated coverage on PONR today, I believe there comment was that their price was below liquidation value (CIBC on PONR). Point of No Return went up 3.5% on the news.

ANF - Target gave a bleak reading on retail and AG Edwards downgraded ANF (for the 2nd time in the 5 months I have owned them). This caused a 4.8% decline.

TGIS - went up 13% on no news that I could fathom, this must be a great stock for day traders as 5-10% moves on a daily basis seem to be common.

UST - was up 2.9% and is now up 25%, my best (not saying much) MFI stock to date.

The roller coaster ride today tells me that people on both sides are nervous. There are a lot of people shorting tech stocks right now. If the CPI is low tomorrow or some tech companies give some positive guidance, things could turn on a dime... or should I say semi-chip?

A little financial news this evening. I see where Yahoo is getting slaughtered tonight. Down 13.4%! Yikes! I wonder if Cramer will mention the drop on Mad Money as he has been hyping YHOO for quite a few months. Guess he'll be in "the house of pain". I know I am already there, though I did have a little green today.

Here is a recent list of MFI stocks (best 25 at 50m or more):

Name (in alphabetical order) Ticker Market Cap
($ Millions)
Pre Tax
Earnings Yield
Pre Tax
Return on Capital
Most Recent
Quarter Data
Aduddell Industries Inc ADDL 65.92 24% > 100% 07/17 03/31
Anika Therapeutics Inc ANIK 100.43 14% > 100% 07/17 03/31
CallWave Inc CALL 68.86 35% 75 - 100% 07/17 03/31
Cellstar Corp CLST 59.42 16% > 100% 07/17 05/31
Deb Shops Inc DEBS 353.76 15% > 100% 07/17 04/30
Deluxe Corp DLX 747.47 15% > 100% 07/17 03/31
EarthLink Inc ELNK 985.49 19% > 100% 07/17 03/31
Fording Canadian Coal Trust FDG 4,204.20 18% > 100% 07/17 03/31
FreightCar America Inc RAIL 569.04 21% > 100% 07/17 03/31
Intervideo Inc IVII 137.75 20% > 100% 07/17 03/31
King Pharmaceuticals Inc. KG 3,991.41 17% > 100% 07/17 03/31
Korn/Ferry International KFY 752.74 13% > 100% 07/17 04/30
Mannatech Inc MTEX 321.56 17% > 100% 07/17 03/31
OmniVision Technologies Inc OVTI 943.87 18% > 100% 07/17 04/30
Orckit Communications Ltd ORCT 135.76 15% > 100% 07/17 03/31
Palm Inc PALM 1,500.30 12% > 100% 07/17 05/31
Patriot Scientific Corp PTSC 288.20 24% > 100% 07/17 02/28
Pinnacle Airlines Corp PNCL 145.51 43% > 100% 07/17 03/31
PortalPlayer Inc PLAY 218.76 156% > 100% 07/17 03/31
Security Capital Corp SCC 117.03 22% > 100% 07/17 03/31
Syneron Medical Ltd ELOS 421.07 15% > 100% 07/17 03/31
United Online Inc UNTD 693.82 14% > 100% 07/17 03/31
Vaalco Energy Inc EGY 481.58 15% > 100% 07/17 03/31
ViroPharma Inc VPHM 535.67 22% > 100% 07/17 03/31
World Air Holdings Inc WLDA 193.53 35% > 100% 07/17 12/31

********************* N E W S F L A S H ! ! ! ************************************

FDG reported earnings this evening. (FDG 2006 second quarter earnings results) I don't know, maybe I am getting "coal" feet but I am having trouble getting "fired up" about the numbers. Here are some highlights:
  1. They earned $1.03 per unit vs $1.10 a year ago and $1.37 last quarter.
  2. The price of coal is up ($119 vs $94 Y o Y). (but they are producing less).
  3. Demand for their high quality metallurgical coal for steel mills has been down.
  4. They expect the price of coal to drop further.
  5. They expect demand for the high-quality coal to ramp back up as the steel mills have used their reserves.
  6. They will be paying a $1.00 dividend.
  7. Transportation costs up 10%.
Still, if they earn $4 a year and they trade at $29 that is not bad. But without any accelerating growth, I look for FDG to be stuck around $30 a share, possibly dropping lower if coal prices deflate (a strong possibility as Coal's big competitor, NG is so cheap).
Now to call it a "blog" with a closing thought from Mr Greenblatt:

"So why do share prices move around so much every year when it seems clear that the values of the underlying businesses do not? Well here's how I explain it to my students: who knows and who cares?

Maybe people go nuts a lot. "

Monday, July 17, 2006


I have just two things to say:
  1. UNCLE!
  2. I am glad I don't use margin.
The DJIA was up today, but I sure didn't see it in my portfolio. I was watching some talking heads today and they were saying late 4th quarter or early 1st Qtr 2007 before the market bottoms. That is a depressing thought. Poor people on margin, having to sell into this decline.

MY MFI portfolio was down another 1.1% today, it is not holding up well in a bear market.

  • PTSC - continues to get slammed, down another 4%. I sure hope they announce quarterly earnings soon and have some good news.
  • PTEN - down 6% to 23.38, I suppose as a derivative to lowered NG prices. Cramer said he'd pick NBR over PTEN, but both seem dirt cheap to me.
  • FTO - down a massive 6.7% today. Not sure why, though it had gone up last week, so I suppose people felt like profit taking. I see HOC was down 5%.

I wish I had some good news. The CEO of HW was on Mad Money and to be frank, he didn't sound very inspiring.

Let us see if JG has any comforting words... hmmm, can't even find the book right now. Pretty typical of the way things are going right now. Have a good one! It does help me to type out my misery.

Saturday, July 15, 2006

Palm of Your Hand

I have a Blackberry. I have only had it since March, but I think it is a great tool. My youngest son loves Brickbreaker. No that is not my son in the stock picture on the left. I understand that the Palm Treo is competing with RIMM. Since PALM is on the MFI list, I thought I'd sneak a peek.

I wonder what the critics say? Here is some feedback I found:

  • I utilized the Blackberry for 13 months before moving to the Treo 650. My complaints were voice level, color, and the control wheel. On the 650 I enjoy the touch screen with setting sections quick to access. In my opinion I feel the PDA function of the Palm is superior. The Treo, also has a handy download, Volume Care, that increases the voice and ring levels greatly which has been a benefit. I have read of phone shut-offs yet this has not been a problem for me.
  • I find the palm to be a far more useful and flexible device. I have owned and used both.
  • In a new report from research firm Brandimensions, the Treo has scored higher in customer satisfaction versus the rival Blackberry.

    According to the report, the Palm Treo had a customer satisfaction rating of 3.61 out of 5 versus the Blackberry which scored a 3.31. BlackBerry seems to be lagging behind," said Mark De Paoli, the author of a report. Brandimensions uses Internet forums, blogs and discussion forums to assess the buzz surrounding a product.

How do the stock values compare? PALM sells at 13x next year eps. RIMM is at 19x next year EPS. PALM almost always beats estimates by 10%+; while RIMM is more in the +5% range.

PALM is bigger than I realized with $2B in estimated sales for next years vs $3.1B for RIMM.

Now look at the PALM graph over past 3 months (I am using a new tool that Nick, a fellow blogger told me about called FastStone Capture. It lets me pretty much paste anything into Blogger as a picture so it won't change).

Now that is a bad graph. Really shows the pressure that Tech firms have been under. Down almost 40%, man why does that ring a (OVTI) bell? RIMM has held up better, down about 20%.

PALM seems to have dropped the ball in Europe per this MF write-up: (Palm's European Vacation). Palm does have over $5 cash per share (against their share price of $14+. They seem to have a decent balance sheet with a current ratio just under 2.

Looking at their income statement, their gross margin declined this last quarter as they seem to have spent more on R&D. We have seen what declines in margin have done to OVTI. I guess I am having trouble getting fired up over PALM. The biggest plus seems to be that people like their PDA. But I know at my company, we are in an upgrade cycle and we're staying with the Blackberry. I think these purchases tend to be by corporations and they will tend to stick with what has worked in the past with their systems. I think that RIMM as first mover has the advantage.

I thought after the horrible week, we could use a pick-me-up. So here is a JG quote:

"In a similar way, our level of confidence in the magic formula will determine whether we can hang on to a strategy that may be both unpopular and unsuccessful for seemingly long periods of time."

Amen to that, I feel the pain.

The Good, the Bad and the Ugly

As Charlie Brown would comment after another tough loss in a baseball game, "the sun will still come up tomorrow". And so it is. I am awake early Saturday morning and (to borrow from the Beatles), "Here Comes the Sun".

I now only have 8 of my current 29 MFI stocks in the black. Let us look at these "uncommon values" (aka "the good").

  1. FTO has been the star performer, up 23%... I guess refiners are humming.
  2. UST is up 21%. "I want my Smokeless Tobacco!"
  3. PCU is up 17%. Copper prices are up a ton in past 18 months.
  4. NSS is up 15%, there are billions being spent on pipelines etc, so NSS will get it's share.
  5. MGLN (I'm Gellin') is up 13%, even in tough times, people need healthcare.
  6. CHKE is up 4%, not sure if it can hold on as retail is getting pounded.
  7. TGIS is up 3%, only up because it was up over 50% just a week ago. (quick, Q: how do you become a millionaire? A: First get a billion dollars...)
  8. TRLG is up a scant 1%... I guess baby does still have her blue jeans on. I suppose the TRLG jeans are so expensive ($170 when I looked) that the people who buy them are not going to be cutting back because of high gas prices.
I hate to list the Ugly, but the bottom 5 are:
  1. DLX down 44% (I was right to worry that not even granny uses paper checks any more).
  2. HW down 40% (profit warning and reducing of gov't subsidies sank HW).
  3. OVTI down 37% (don't get me started on them!)
  4. PTSC down 34% (I expected to see their earnings this past week?)
  5. TBL down 26% (those darned Europeans slapped a tax on the shoes).
Here is the overall listing from top to bottom:

Stock Cost Current Gain
NCOG $19.39 $27.05 39.5%
FTO $28.76 $35.23 22.6%
UST $39.36 $46.38 20.7%
PCU $78.13 $88.63 17.0%
NSS $45.89 $52.97 15.4%
MGLN $38.34 $43.68 13.9%
CHKE $37.55 $38.45 4.0%
TGIS $10.34 $10.56 3.3%
TRLG $17.02 $17.21 1.1%
ISNS $13.10 $13.00 -0.8%
KG $17.31 $16.85 -2.7%
PNCL $6.68 $6.48 -3.0%
PGI $7.71 $7.43 -3.6%
PACR $32.53 $30.46 -5.4%
IVII $10.93 $10.25 -6.2%
MTEX $13.11 $12.19 -6.4%
EZEN $2.84 $2.65 -6.5%
PTEN $27.74 $24.87 -10.1%
FDG $34.03 $29.52 -10.6%
ANF $61.13 $53.30 -12.5%
MSTR $94.36 $81.09 -14.1%
ELX $17.85 $14.95 -16.2%
RAIL $58.18 $46.77 -19.6%
PONR $32.97 $26.00 -21.1%
ORCT $11.83 $8.90 -24.8%
TBL $34.50 $25.53 -26.0%
PTSC $1.31 $0.86 -34.4%
OVTI $27.79 $17.57 -36.8%
HW $37.42 $22.36 -40.2%
DLX $26.36 $14.32 -44.2%

Total Gain/Loss
Benchmark Gain/Loss
Annual IRR

Small Gain/Loss

Large Gain/Loss


TRLG did update their arbitration with the Indigo Group (hopefully not a subsidiary of the Indigo Girls). I am not sure what the expectations were, but the stock jumped 3% in AH trading as Wall Street hates uncertainty, and I guess this ruling removes the uncertainty.

True Religion Apparel Provides Update on Arbitration Proceeding

Friday, July 14, 2006

Bad Day

Sheesh! Another bad day, ending a very bad week. At least so far it isn't a bad year. The only "good" news is that my overall portfolio for 2006 is somehow above water at 4%.

Cause you had a bad day
You're taking one down
You sing a sad song just to turn it around
You say you don't know
You tell me don't lie
You work at a smile and you go for a ride
You had a bad day
The camera don't lie
You're coming back down and you really don't mind
You had a bad day
You had a bad day

You'd have to be a bit sadistic to look at my chart below. It is indeed an ugly chart, though I do know that "things are never so bad that they can't get worse".
My MFI portfolio is down 7.7%, remember:

Green: Invested Amount
Magenta: MFI Returns
Blue: Benchmark Returns (actually held up well).

Thursday, July 13, 2006

The Perfect Storm

Anyone who saw the movie knows that the fisherman caught in the Perfect Storm didn't fare so well. I see where analysts are saying we have the "Perfect Storm" in the stock market right now, and that is not perfect in a favorable way.

  • All sorts of global uncertainty with Israel, Iran and North Korea to name a few.
  • Global tightening of interest rates
  • Growth prospects don't look so hot.
  • Earnings so far have been lackluster.
Now to be clear, we are not yet in a bear market. The DJIA isn't even 10% off its 52 week high. The QQQQ is about 15% off its 52 week high. I am beginning to think that we'll have to hit -20% before things finally stop falling. Kind of depressing, I wish I had a few more defensive stocks, things like CVS and GIS have held up well.

Jim Jubak had a positive note about FTO this morning. He was commenting that refiners who can handle Heavy Sour Crude are well-positioned to make $$$. Here is an excerpt:

"Frontier Oil (FTO, news, msgs) is a fraction of the size of Valero Energy -- throughput of 162,000 barrels a day for Frontier versus 3.3 million for Valero -- but it is even more focused on heavy sour crude. Both of the company's refineries -- in Kansas and Wyoming -- can process heavy sour crude. In 2005, according to Friedman Billings Ramsey, about 70% of the oil Frontier refined was heavy sour crude. (Compared to 60% at Valero.) Wall Street is predicting an even more abrupt drop in earnings for Frontier Oil than for Valero: After increasing by 72% for the second quarter, Wall Street sees earnings at Frontier Oil dropping by 17% in the third quarter and 15% in 2007. With production of heavy sour crude ramping up in Canada, the company seems to me to be very well positioned (Frontier Oil also owns a 38% interest in a crude oil pipeline in Wyoming) for the next decade -- as well as the next six months. The company is due to report second-quarter earnings per share on Aug. 7."

Well, I wrote the perfect storm component this morning. I didn't expect to be so right. Geesh, what a nightmare day. Down 2.7%. TBL was my only stock to eke out a gain. ISNS was flat. I keep telling myself that this is a long term proposition, but it is starting to wear on me a little bit. I am now down 6.7% while IWV is down just 3.4%. It seems remarkable to think that exactly a week ago, I was actually slightly above the benchmark. It can change quickly in either direction.

At the end of the day tomorrow I'll publish the graph... it isn't looking pretty.

Wednesday, July 12, 2006

Baby's Got Her Blue Jeans On

It is not a PC song, but it does have a nice beat:

Down on the corner, by the traffic light,
everybody's lookin', as she goes by,
they turn their heads and they, watch her till she's gone.

Lord have mercy, Baby's got her blue jeans on!
up by the bus stop, and across the street,
open up their windows, to take a peek,
y'all she goes walking, rockin' like a rollin' stone.

Heaven help us, baby's got her blue jeans on!

She can't help it if she's made that way,
she's not to blame if they look her way,
she ain't really tryin' to cause a scene,
it just comes naturally, lord the girl can't help it.
Good to be humming an upbeat song like that as the market continues to meltdown. My MFI portfolio continues to underperform the underperformance. I now am about $8,000 out of $305,000 invested behind the benchmark IWV. And the IWV is about $5,000 behind cash. So I am about $13,000 down, roughly 4%. Still early in the day so to speak.

Speaking of blue jeans (yes I had a reason for the tune). I have been doing a little research into TRLG. The first item that caught my eye was in that renowned business magazine: People. They mentioned that Jessica Simpson was being sued by a clothing line she represents because she wasn't wearing their clothing as promised. What has she been wearing per the article? True Religion Jeans! (True Religion Jeans) Amen!

The other TRLG story of note was that they are opening their first Manhattan store (TRLG Signs Lease for New York Store). I see these notes and think that TRLG has great growth potential. Man, I just opened one of the TRLG sites, their jeans are not cheap. I'll stick with my Wranglers, though Mrs. Justadrone might like some.

Now if only I can translate some of this potential in various MFI stocks into $$$.

ORCT took another 5% haircut today dropping to $9.26. My thoughts about ORCT being tied to Israeli stability certainly beared out today. I gotta believe this is a short-term flare-up like so many others for Israel. I still have ORCT marked down as a double and the drop should be perceived as a buying opportunity.

OVTI is down to $18.70 today in after-hour trading. Not sure what is causing the activity, perhaps it is from CREE who reported a shortfall AH and is down 15%... though their problems were production-related.

Finally CHKE was down about 5% today. I can only assume that it is fear whether the American consumer will be buying in the 2nd half of 2006. I don't know, I suspect that is a bit over-blown but time will tell.

OK, gotta run. Early flight back from NY tomorrow morning.

Tuesday, July 11, 2006


When I was in college, Steve Martin was considered the funniest guy around (ok, maybe Richard Pryor as well). His skits on SNL were watched by everyone. He had one number called "Excuse Me!". It became a national catch phrase, and so I borrow it (in French for respect for his role as Inspector Clousseau) today.

I did some soul searching over the recent market volatility and the fact that some stocks I like (ie OVTI & ORCT) have been pummeled over the past 6 weeks. I need to embrace the volatility. If the market did not mis-value stocks, then we should all buy an index fund and whistle past the graveyard.

So I have stopped hyper-venilating. Yes, I have had another sub-par day, but no I am not worried. The key is to recognize when the market has under-priced stocks. And then to pounce. Smart money guys like Charlie Munger keep billions in T bills just for such moments. I am not in that league, but I do have some dry powder and will likely look at this period a year from now and wish I had pounced even more.

Split personality update: The other day I mentioned that FTO had gone up like a rocket since splitting. Ironically, that same day Cramer spoke about the 4:1 split by HANS. Here is what he said:

Hansen Natural's (HANS - commentary - Cramer's Take) 4-for-1 split took effect on Monday, Cramer told a caller, but the near-term hit to the stock should only last a couple of sessions.

Cramer said when companies historically do 4-for-1 splits, people who own the stock usually sell one of the four shares in the first couple of days after the split.

He estimated the pain to last two more days. Although he emphasized that it's not set in stone that this will necessarily happen, he said history supports his belief that the stock will stabilize in the next couple of days after the market digests the company's additional shares.

Where does he get this stuff from? He is a bright guy, but I'd be amazed if people typically sell 25% of their holdings after a 4-for-1 split. That would just be stupid. At least he did state this will not necessarily happen. It didn't as HANS was up about 10% yesterday.

I am on Wall Street today (Wednesday AM). I think I'll go get a bagel and some strong coffee.

Monday, July 10, 2006

OVTI Prediction - Write it Down!

Has anyone been following Thomas Ko in the MSN Strategy Lab challenge (Ko Entry)? The kid is uncanny. As I mentioned before, he put 50% of his capital into PFACP (frozen foods). It jumped immediately up about 40%. At the time, he said it had dropped from $20 to $5 (where he bought it) becuase they suspended their dividend. At the time, he said they were likely to begin paying the dividend again. Sure enough, last week they announced a 43 cent dividend starting shortly. They are still cheap at just $8.38. 43 cents quarterly on a $8.38 stock is a 20% annual dividend yield. I have to admit that I am tempted.

Many analysts are saying this is a good time to get defensive... is there anything more defensive than frozen foods? I know I will still want my Swanson Hungry Man dinners, whether I have a job or not! I think under $8.00 I may be a buyer... perhaps make up for some of my MFI losses. If nothing else, PFCAP is on my watchlist.... wait correction!!! PFACP.

I am hopping mad.

The rumors of OVTI's demise are greatly exaggerated. I am getting tired of Herb Greenberg and like bashing OVTI. They are down over 30% since I bought them in May and down 44% from their 52 week high. What is the cause of the demise? "Lower margins".

Here is what gets me. I can understand if you are selling diamonds and your margin drops. That is a bad thing. But if you sell diamonds and then also begin selling opals, which carry a much lower margin, causing your total margin to drop... is that necessarily a bad thing?

I say no! The goal of a company should be to be increasing profits, aka "the bottom line". Even with their margin decrease, due to product shift mix,OVTI made 39 cents per share vs 30 cents from 2005 a year ago. They are projecting revenues to keep increasing with "solid sequential Q o Q growth this upcoming quarter and through 2006 and beyond". They expect to earn between 38 and 43 cents (before FAS 103) vs the 24 cents earned in 2005. This is a company that is doing well.

Yet HG & Company keeping beating their doom and gloom drum, causing another 4%+ drop in stock price today, around $19 as I type. At $19 OVTI is a slam dunk. They will easily be $25 to $30 within a year. I am calling this blog my "OVTI Prediction - Write it Down!" so 52 weeks from now we can see how right I was/am/will be (I hope).

Split Personality: Very strange, Free To Own (aka FTO) split on June 27th, just 9 short trading days ago. Since then with no discernable news, the stock is up about 27%. Other refiners such as HOC and VLO are only up about 10%. Is the rest because of the split? I find a split to be nothing more than just optics... some people (for whatever reason) feel a $30 stock is a better buy than a $60 stock. Not that I am complaining, but perhaps I should find another stock about to split?

Ford Rearview Mirror: I am glad I sold my FORD last week at $6.10 for my quick 5% gain. It is down over 5% today to $5.32. I don't need any more anchors than I currently have.

Well, I think that is enough pixels for the night.

Sunday, July 09, 2006

This Week on Wall Street

First, congratulations to Italia for winning the World Cup. I had never watched it before, but found it fascinating. I had had dinner last night at our favorite Italian restaurant and the Maitre D', Giovanni, was so excited about the upcoming game.

New week in the market, I am looking for a little upward momentum to get me back in the black for the first time since June 2nd. I think we will have a good week or two before people start worrying about the August Fed meeting.

I wonder if people are heeding Cramer's comment to "buy NSS if it drops a dollar" as it dropped $1.60 on Friday. It is a screaming buy for all you home gamers out there... not that I am qualified to give stock advice.

I figure PTSC will be reporting their earnings this week as their quarter ended May 31st and they have 45 days to report. I am very curious to see what they have to say, it will either be very good news or not very good news. They have been very closed about what all these agreements have been worth to them.

Not that it matters, but I will actually be on Wall Street this upcoming week on Tuesday & Wednesday. I don't know if any of you have ever been to Wall Street before. It was very disappointing the first time I saw it. I guess I expected some gold-bricked boulevard. But it is actually quite a narrow little street that doesn't go very far... about 5 to 6 blocks Wall Street Map

Ok... guess I am going to drink a little Asti Spumante to celebrate the win...Buonanotte!

Saturday, July 08, 2006

The Stock that would be King

Anyone ever see "The Man Who Would be King?" Terrific movie set in the 19th century in Pakistan and Afghanistan starring Sean Connery and Michael Caine as two British soldiers who perform a "miracle" and are perceived as King/Gods.

I have a stock that would be king, King Pharmaceuticals (KG). It was part of the group of stocks I bought at the end of May that have stink, stank and stunk. (keeping my Grinch theme). I had argued for KG as I felt it was a defensive stock. In a sense I was right as it has beaten the other stocks:

Stock Cost Current Gain
OVTI $27.79 $19.90 -28.4%
FDG $34.03 $31.90 -3.6%
KG $17.31 $17.31 0.0%
RAIL $58.18 $51.48 -11.5%
ORCT $11.83 $9.58 -19.0%

What caught my eye about KG is that is such a hated stock. Of the 12 analysts that follow it per Yahoo:

Current MonthLast MonthTwo Months AgoThree Months Ago
Strong Buy 1111
Buy 1111
Hold 7999
Sell 1000
Strong Sell 2211

That isn't much love. Does it bother me? Heck no! Not a single analyst was below "Hold" for 3M, yet they issued a warning Friday and dropped a ton. You saw yesterday where the C analyst for PCU was dead wrong not once, but twice. In fact, in a weird way I'd rather have the analysts all down on my stock. That means there is much more room for upgrades and less room for downgrades.

Looking back at my chart above of the 5 stocks I bought at the end of May. They are down an average of 12%! If I had not made those purchases when I made them, I'd be in the black. A little more than a month has passed, so the jury is still out on whether they're good or bad. None of them have crashed & burned at least, they just appear to be in "disfavor".

Cramer actually had some positive things to say about ANF on Friday, I like it when he agrees with me.

Cramer said his viewers need to think about buying Abercrombie & Fitch because he believes the value investors know what they are doing. Same-store sales don't matter, he said. Abercrombie & Fitch didn't change its guidance, its inventory is not too high and
Hollister, one of their franchises, is the "biggest force in teen retail," he said.

"Fashions might change, but Abercrombie & Fitch is here to stay," he said. "I like J.C. Penney, but if you have value on your mind, Abercrombie & Fitch might be for you."

Did he say "value on your mind?" The Mad Money king using the "V" word? Well knock me over.

Changing gears, I am really excited about ISNS. Here are some key points from last quarter:
  • Net income for the quarter increased 26.7% to $503,000
  • Revenues for the first quarter were $2,589,000, a 21.7% increase from the comparable period a year ago.
  • International sales were flat as we were unable to complete shipment of a large order for Korea in the quarter, which would have increased our sales substantially. The shipment was completed in April and will be reflected next quarter.
I think I am excited because they are a small company in what is a niche industry. Not to mention profitable. Well, I think I am going to call it a night. Check out my profile, I uploaded my picture. Go Italia!