Wednesday, August 29, 2007
I was really disappointed with VSNT. After what I felt were good earnings, VSNT proceded to drop 5.1% on this green day. I am sure over the long haul it'll get where it should. AEO did the same thing the day after it's earnings and it has gained it all back plus same. I am just amazed sometimes how negative the market can be post-earnings and then within a week reverse itself. I mean they earned about 50% more than a year ago, gave good guidance and yet trade at about 10x ttm earnings. Weird.
ASEI has been on an absolute tear through all the muck. Since the end of July it has rocketed from $55.07 to $71.00. ASEI will have a shot at being my 2nd best MFI stock (based on $) to PNCL. But can't count my chickens, TGB was actually approaching PNCL a few weeks ago when it had doubled, but now has dropped substantially. I believe AVCI is actully my 2nd best stock, though I only held it 2 months.
Tuesday, August 28, 2007
VSNT had solid earnings for the quarter (Versant Announces Quarterly Net Income of $1.9 Million). Revenues were up 36%, these guys are really clicking.
Not much else to say except that I expect the sun will still rise tomorrow.
Monday, August 27, 2007
I was surprised to see that S&P put LRCX on credit watch, one step away from junk status (S&P Puts Lam Ratings on Watch). I didn't understand it as they have virtually no debt. Does that mean they're not paying their bills? Is it related to the internal study on options being done by Lam? I took a look and they have fallen off all lists. It is because their 2nd quarter results have no detail as they undergo their review. They would most likely be high on the lists as they had a tremendous 2nd quarter from a sales standpoint. I still don't understand the credit rating. Not sure if it really impacts them, but if they want to borrow money (say to buy a competitor) it could be costly.
BBSI and VPHM come up one their one year anniversaries in early September. BBSI is up 30% for me and VPHM is down 17%. They're both on the top 25 list, so I expect I'll keep 'em both for another year. I should buy some more VPHM to bring it back to "par". I do know VPHM has been a wild ride. I bought 'em at $12.11. They got up to $18.39. Then dropped as low as $7.51. How do you spell relief? R-O-L-A-I-D-S.
Finally Cramer had opinions on quite a few MFI stocks. He actually profiled AEO and said to buy them (finally).
When looking at retail stocks, Cramer keeps an eye out for insider buying and low evaluations. Cramer found both of those in American Eagle, which he said is "worth buying."
The company's total sales were up 17% to $703.2 million in the second quarter year over year, and it trades at 12 times next year's estimated earnings.
Cramer said that American Eagle is undervalued but not yet at its low point. Investors should wait until next week at the earliest to decide about buying in. The price Cramer has in mind is somewhere between $22 and $25.
Friday, August 24, 2007
Here is my weekly graph.
Then here are my current holdings:
|Gain/Loss Open Positions ($):||($4,621)|
|Gain/Loss Open Positions (%):||-0.8%|
|Gain/Loss Closed Positions ($):||$36,284|
|Gain/Loss Closed Positions (%):||7.8%|
|Total Gain/Loss ($):||$31,663|
|Benchmark Gain/Loss ($):||$55,038|
|Total Gain/Loss (%):||5.5%|
Monday, August 20, 2007
Markets seemed a little more "normal" today. That was a relief for me. I did add some shares of CHCG to round out my position. $5.50 seems so cheap to me. I still do not understand the haircut from $7.35 to $5.45 post earnings.
Cramer actually highlighted one of my stocks today, UNTD (Cramer's 'Mad Money' Recap). The last time I recall him talking up an MFI stock (VGR), it shot up 10 to 15% the following week and has never given it back. It is weird, he said the stock is "too cheap to ignore" but then said to wait for it to fall to $14 before buying. Hmmm. OTOH, I see where Barron's says that Cramer's picks have fared no better than the general market. That doesn't surprise me.
Not much more to say tonight. Think I'll go check out the stars.
Starry, starry night.
Paint your palette blue and grey,
Look out on a summer's day,
With eyes that know the darkness in my soul.
Shadows on the hills,
Sketch the trees and the daffodils,
Catch the breeze and the winter chills,
In colors on the snowy linen land.
Friday, August 17, 2007
I am a whole 0.8% up and am well behind the indices... however, I am still a believer in MFI. We'll see how things look a year from now, I have trailed the indices before. I guess I don't have much else to say. My commodity stocks took a huge hit this week as fears that global growth would slow. So for history, my graph and individual stock performance are listed below. I sincerely hope this is the low water mark for both.
Then here is my list of current holdings:
|Gain/Loss Open Positions ($):||($37,722)|
|Gain/Loss Open Positions (%):||-6.2%|
|Gain/Loss Closed Positions ($):||$41,502|
|Gain/Loss Closed Positions (%):||9.2%|
|Total Gain/Loss ($):||$3,781|
|Benchmark Gain/Loss ($):||$39,336|
|Total Gain/Loss (%):||0.7%|
July 20th - "Today We Sell". In hindsight, a brilliant call. He did temper it by saying we'd still be at 14.500 by year-end. But I know I wish I had sold July 20th.
July 23rd - Safety in SanDisk. Cramer makes the argument that tech will be immune from downturn. Down about 10%, I think tech has been hit harder than Cramer intimated.
July 24th - "Pepsi Refreshing in Downturn". Superb call. Up about 3%. A rock in turbulent seas.
July 25th - "PC Cruisers, HP and DELL" Again, pretty good advice as they have not been trashed like MFI stocks.
July 26th - "Shelter from the Storm" He comments we're no where near the bottom. He recommends selling CFC (hard for him to do as I think he knows the CEO well). He also says to sell if company is almost entirely domestic and to sell if company is dependen on borrowing money. Again, he was quite correct.
July 27th - "Antidotes to Sell Off" Cramer listed good stocks for these tough times: PEP, K, NCX, SGP, CELG and EMC. Again all-in-all good advice. Finally BA and LMT. BA is off about 10% and LMT is down about 5%.
July 30th - "Doomesday Scenario" He says diversified portfolio for Doomsday is K, KMB, CELG, MHS and SLB. Again, pretty solid advice.
July 31st - "Wild About Defense". Mentions ATK, which is up about 3% since then.
Thursday, August 16, 2007
Someone noted that LMS got a buyout offer today. I know credit is a bit scarce, but some of these stocks are incredibly cheap and anyone with a wad of cash has to be thinking about going shopping.
Good debate on K&C this evening. Should the govt be doing something to diffuse the current credit crisis? If they do so, are they in essence bailing out hedge funds and mortgage lenders who took too much risk? Certainly there is a precedent, when LTCM had it's liquidity crisis they were bailed out by the fed as they were in the process of going hat in hand to King Greenberg and King Buffett. In addition, many S&Ls were bailed out after they made rashes of bad loans in the late 1980s. I think if they get bailed out, the govt has to attach some strings regarding investing by hedge funds. They use so much leverage that they place our economy at risk when things get rough. And perhaps the mortgage companies need some rules as well, or at the very least they need to pay the govt back (with interest) after the crisis passes.At least that is how I see it.
I am hoping for a good up day tomorrow. My graph has gotten beyond ugly. OTOH, Chicago has been great and I am having a relaxing summer vacation. On Saturday, we start the 2nd week of our vacation in the Rockies. The wealth effect (or reverse wealth effect) has my wife a bit worried. But I think we can still have a nice vacation.
Wednesday, August 15, 2007
I labelled this blog "Trifecta" beause I had three stocks report earnings last night and this morning and they all got trashed by the market today.
TGB - down 12.4%
USHS - down 8.4%
CHCG - down 12.8%.
I can almost understand the TGB drop. I really had gone up too quickly. While their earnings were ok, they didn't seem blow out as suggested by the stock run up.
The USHS drop was be-fuddling. They had dropped 50% from early June after their last earnings report. I thought perhaps the drop was fear that they had a bunch of bad debt from financing people. But that wasn't the case. Their earnings were down a bit, but not sure it justified any more than the 50% drop. Yet another 8% drop today.
CHCG announced earnings this morning (China 3C Group Reports Results for Q2 FY '07). I can't imagine that people were looking for much as the stock hasn't exactly been a pocket rocket. I thought the numbers were great:
- revenue up 125% Y o Y
- net income up 140% Y o Y
- Re-affirmation of 2007 guidance (0.50 to 0.54)
Good night everyone!
Tuesday, August 14, 2007
TGB - announced earnings this evening (Taseko Announces Third Quarter Results for Fiscal 2007). They looked ok to me, not sure why their revenues were down, but earnings were up. The stock did trade down AH, but what do they know?
USHS - announced earnings after the bell. The stock is down about 45% since the prior quarter's earnings, so expectations must have been pretty low (U.S. Home Systems Reports Second Quarter 2007 Financial Results). They were basically down about 5% from last year. Considering the housing slowdown, not exactly a disaster. I'd look for this stock to recover by next summer... and I can wait.
HGG - This is a stock I added a couple of weeks ago (hhgregg, Inc. Announces Operating Results for the Fiscal Quarter Ended June 30, 2007). I thought their numbers were terrific. Revenues up 25% and 10 cents per share vs a 5 cent loss from a year ago. HGG sells high end consumer products (think home theater) and provides much more service than a Best Buy, so the have differentiation.
UNTD - announced they are spinning off their Classmates.Com (Will the Classmates.com IPO make the grade?). Not sure what that means to stock holders, I guess we don't get any shares of the spin-off. They were one of my stocks in the green, so I guess investors were pleased.
Finally, I'll just mentioned I started a new book today, "The World is Flat". It discusses how the world is changing as many jobs can be located anywhere, which means people in the US are competin with the Chinese and Indians for jobs. And from what I have read so far, the Indians and Chinese seem a lot more motivated than us. Stay tuned.
Sunday, August 12, 2007
There was a real good article on quant funds. It suggested that many had similar approaches, including buying low p/e stocks and shorting high p/e stocks. Sound familiar? I don't know if that was the only cause of our crunch as some value indices were going up last week while MFI was dropping, but it could very well be that some quant funds were focusing specifically on MFI stocks, and using leverage. When margin calls came, they had to liquidate some positions.
A positive comment was in 13d filings. It appears that an activist fund is taking a position in KSW. Might be interesting to watch.
I see Korean and Japan are up early tomorrow (today for us). That is good to see.
Saturday, August 11, 2007
A tracking portfolio of 50 stocks set up by blogger Marsh_Gerda went up 2.5% led by stocks such as
AXCA + 22%
GIB, KFY +8%
FTO, IVAC, JAKK +7%
In Marsh_Gerda's personal portfolio UNTD went up 15% along with the nice gains from FTO & IVAC. But he was hurt by bad news from VPHM (ViroPharma Whacked by Data) which dropped 15%. He commented, "when VPHM dropped 20+% earlier this week, I toyed with doubling down on it. Thankfully I did not. This drop shows the perils of these smaller MFI stocks that are dependent on just a few sources of income and why diversification is important."
EGY released their earnings on Friday morning (VAALCO Energy Announces 2nd Quarter 2007 Results). Marsh_Gerda was unimpressed. "Their YoY income continues to drop sharply. Unless EGY announces a new source of oil in the next 6 months, this is a dead stock. However, I am unsure how it could go much lower."
Marsh_Gerda also shared his chart of current holdings along with individual performance:
|Gain/Loss Open Positions ($):||######|
|Gain/Loss Open Positions (%):||-4.0%|
|Gain/Loss Closed Positions ($):||$45,723|
|Gain/Loss Closed Positions (%):||10.4%|
|Total Gain/Loss ($):||$21,577|
|Benchmark Gain/Loss ($):||$44,399|
|Total Gain/Loss (%):||3.8%|
Thursday, August 09, 2007
I am almost speechless about today's stock market. The unfavorable bias towards MFI stocks continued. I show the Russell 3000 down 2.5%, while the median in the stock contest was down 3.4%. Pretty consistent with moi. I do plan to just ride it out. Everyday I get an itchy finger to change "something". But I know that I really don't know what to change, so no sense using a slot machine approach.
I did have 4 stocks in the green. Woo-hoo! Three more than the Dow could say. UG (I knew that 20%+ drop yesterday was overdone), KSWS, CHCG & WSTG.
The dour mood of the market was reflected in how WNR was treated. WNR had ungodly numbers, much like FTO yesterday (Western Refining Reports Record Second Quarter Results). Think about the numbers. For the 1st half of 2007 they made $3.22 per share versus $1.04 last year. In the past 3 months they had operating income of 241.5m vs 126.6m last year. Then think about this... (Western Refining sees higher throughput in third quarter) WNR expects to process even more barrels in the 3rd quarter. How many more you may ask? Not 5% more. Not 10% more. Not 20% more. 42% more! It boggles the mind! 42% more on what was an all-time record quarter! Granted, that is 42% more barrels, not 42% more income. But it illustrates how the purchase of GI has turned WNR into a monster. Sure spreads are down a little bit right now. Exact same thing happened last August. And as sure as the sun will rise tomorrow, the spreads will rise next spring. Why? There is limited capacity.
How did the market treat WNR for this wunderbar news? Down 7.3%! As JG says, the market just goes nuts from time to time. PACR, TGB & VPHM were all down over 10% on no news at all. I will just sit back in my lounge chair and wait for the market to normalize. I am sorely tempted to use a little margin. But I do have a big tax bill due September 15, so I'd best stay a little liquid, despite the temptation.
I appreciate all the commentary on my hypothesis yesterday. I still think it is true.
Below I list 10 "Blue Light" stocks that I placed in a tracking portfolio on July 24th. Now recall, a stock has to be down at least 15% AND still be MFI to make the BLS. Since then, the portfolio is down a stunning 15.6% vs about 5% for Russell 3000. Ouch.
|-||-||-||-||84,433.42$84,433.42||Total (USD):||-||-||-||-15,644.51 $15,644.51||15.63%|
Wednesday, August 08, 2007
Past 8 Trading Days: My MFI is down 2.8% S&P Small 600 is up 1.2%, S&P mid 400 up 1.2%
Past 13 trading Days: My MFI is down 10.8% S&P Small 600 is down 5.3%, S&P mid 400 -4.9%
What is going on? Why this 4 to 5 point differential with comparable indices? That is a big difference over such a short time frame. At first I thought it was a flight to quality. But when I look at this and see the difference exists in mid and small caps, it is more than that.
Today it seemed exacerbated. I saw PACR and UNTD, both of which I felt had strong earnings go from being nicely in the green early in the day to ending in the red. They were both down over 6% in the middle of the day. VPHM and GVHR were both down about 10% on absolutely no news on a big green day. What gives?
It isn't a sector. It isn't small caps. The only thing all these stocks have in common is MFI. Here is my hypothesis. JG himself suggested the same. The MFI stocks fell so much faster than the averages at the beginning of the correction that it has shaken people's faith in MFI. So since then, people have been selling on up days, pushing the MFI stocks into the red. I think a lot more people had been buying MFI stocks (and now selling) than perhaps we realize. And in addition, some of these stocks are not exactly high volume stocks, so if a small fund is unloading, it can really depress the price.
What does it mean if this is true? If you still have faith in MFI, it means this under-performance is temporary and we can expect the stocks to bounce strongly back. In fact, it implies that this is the best MFI buying opportunity since I started. What do readers think? Are investors giving up on MFI? If so, is that perversely good for those of us who stay the course?
FTO - had an absolute blow out quarter (Frontier Oil Reports Most Profitable Quarter in Company History). I can not understand how the stock only went up 2%. Strangely, WNR (which did not report) was up 9%! FTO has an EV of about $3.5b. In the preceding 4 quarters (which were not shabby) FTO had EBITDA of $675m. In this quarter alone, their operating income before depreciation and taxes was 510m!!! That is ungodly. Yet the stock closed today at $36, essentially the same price from 12 months ago. Go figure. People will crunch the numbers and the stock will rise.
NOOF - what a disappointment (New Frontier Media Reports 2008 Fiscal First Quarter Results and Announces New CFO). Down 15% on subpar earnings. With these small companies, revenues can be extremely lumpy. I am not ready to throw out the bath water yet, but it was depressing.
UG - Ugh. You know it is bad news when the headline is bragging about how they have done in the past 6 months as opposed to the past quarter (United-Guardian Reports Strong Six-Month Sales & Earnings). Sure enough, when you strip out just the quarter it was just flat, this caused a 22% decline in the stock price. Y'know though, looking at everything, the 22% hit is ridiculous! I may step on the ledge (don't jump!) and claim that UG at $8,75 is extremely appealing.
Some one the Yahoo Board was clever. He said we all need to go home and download some porn while buying some Heelys. HLYS has been on the lists the past month or two and was down an unbelievable 48% today. I didn't study the report, but I can't believe the company is worth 1/2 today what it was yesterday. Ouch, my sympathy to those of you caught in that meatgrinder. Maybe I should not go to the top 25 approach.
Finally, I have switched my blog to a new color (green) to see if we can't get things going in the right direction again. Good investing everyone!
Tuesday, August 07, 2007
My earnings thus far have been quite good. When I look at earnings, I now try to do so with a bent towards MFI. I am really interested in how Operating Income after Depreciation the current quarter compares with the same number a year ago. Because the difference between those two numbers will be going into the MFI calcs. I am also interested in how the enterprise value changes, driven largely by changes in cash and changes in debt.
- ASEI - as I mentioned last night, they released their earnings and indeed they were very positive. The stock was up 8.5% today.
- GVHR - they reported earnings this morning (Gevity Reports Second Quarter Earnings Results). While I wasn't blown away, it is clear that expectations were quite low as the stock had fallen in the past month from $18.78 to $14.07. The report was good for a 6.5% bump.
- SHOO - reported earnings this morning as well (Steven Madden, Ltd. Announces Second Quarter Results). I that they were lukewarm, but the early traders liked them and the stock quickly traded up over 6%. It was all quickly given back and the stock finished down 1.4%.
- PNCL - Reported earnings this morning (Pinnacle Airlines Reports Second Quarter 2007 Financial Results). They just aren't able to match last year's numbers. Not bad numbers, but certainly not inspiring. The stock traded down 1%
- PACR - reported after the bell this evening (Pacer International Reports Second Quarter 2007 Financial Results). While the numbers were worse than a year ago, they were actually not that far off and the CEO made some noises about intermodal volumes improving. The happy hour crowd seemed pleased, and the stock traded about 14% up this evening.
- TRLG - pretty much reported in line (True Religion Apparel Reports 2007 Second Quarter Financial Results). What really amazes me about this company is that they're expanding their sales network, but at the same time increasing their gross margins. I do think they're setting the table for some big numbers down the road.
- UNTD - I was sorely tempted this afternoon to sell a chunk of my IRA and buy a bunch more UNTD. The stock was down 6.6% mid-day and had fallen in the past month from over $17 to below $12. I thought they reported a very nice quarter (United Online Reports Second-Quarter Results). They pay over a 6% dividend and what is very interesting is they are "transforming" (did you watch the movie?) from an ISP to a content company. Content & Media grew 29% YoY (13% QoQ) and is now 38% of all revenues. That segment gets a lot of advertising dollars and generates a lot of earnings with little capital (think Google). If that keeps growing, some one may want to buy UNTD just for that component as the company is priced like an ISP rather than a Facebook or Youtube. The stock is up about 6% AH.
Here is a tracking portfolio that I set up on July 24th. It pretty much tells the story of the past 2+ weeks (note the portfolio is down a whopping 10.4% while the Russell 3000 is down 3.8%... sound familiar?):
|-||-||-||-||90,031.11$90,031.11||Total (USD):||-||-||-||-10,046.83 $10,046.83||10.04%|
Happy investing everyone! The MFI approach will rise to the top over the long haul.