Wednesday, October 31, 2007

Perhaps I should Whine More Often

Appreciate everyone tossing in their 2 cents yesterday (even though I am footing the main bill) on my decision on no new money into MFI. Appropriately, I then got great earnings from MSTR which shot up 13% today (MicroStrategy Announces Third Quarter 2007 Financial Results). This is now up 40% for me. Nice to have good news for a change. I gotta run as I am on vacation and it is halloween.

Tuesday, October 30, 2007

Getting Pretty Frustrating

I don't know, I have now fallen more than 7% behind the benchmark. That is getting pretty frustrating. I know we're supposed to give it at least 3 years. I am now 20 months into the expirement. I will stay the course, but no more new money. I looked the other day and I was basically flat YTD in MFI and up 22% in my non-MFI portfolio.

Does everyone believe it works? Are we just seeing a bad stretch? Or is the fact that the book was written make it less likely to work? Or was the book not based on enough data?

Wednesday, October 24, 2007

Will the Market go Nuts?

BBSI announced their earnings after the bell (BBSI Announces Third Quarter 2007 Operating Results). They did "miss" as Breifing.Com mentioned none to subtlely (InPlay: Barrett Business misses by $0.03, reports revs in-line; guides Q4 EPS below consensus, revs below consensus).

In happy hour trading, they're down 5% to $21.40 after being down 3% during the day. People need to take a step back sometimes and ask whether the company is doing well.

  • Revenues were up from 69.4m to 82.9m. That is pushing 20% up.
  • Income before taxes was up about 12%.
  • 4th quarter guidance is for revenues up 5% and income up 0 to 6%.
Not barn burning, but given the weakness in the economy and the fact that the stock was already trading 15 to 20% below the 52 week high. Does it deserve to go 5% lower? We'll see.

DGX announced their earnings this morning, Forbes wins contest for best headline. (Quest Diagnostics Not Feeling Well). In actuality they beat by a penny and guided the rest of the year inline. Their reward? Down 4.6%. Guess they're not the only ones not feeling well.

Tuesday, October 16, 2007


Well the good news is that my stocks actually held up well in a dreary day. I am the closest I have been to the benchmark in over a month. JTX was up over 7% and UNTD and CHCG were up over 4%. Not sure why the tax preparer was up 7%.

I say "Crud" because I am not exactly starting earnings season with a big bang, TGIS announced their earnings after the bell (Thomas Group Announces Third Quarter 2007 Results). I had high hopes that they would have strong earnings and get back towards their $12 from early this summer. Sadly it wasn't to be, I thought the report was dreadful. No longer are they talking about the 2nd half of 2007 having stronger revenues than 2nd half of 2006. Instead the 3rd quarter was about 15% shy of 3q 2006 and the CEO was talking about delayed contracts and increased competition. Not eaxctly positive buzz-words. Could easily be a 10 to 15% drop tomorrow. Surprisingly it only traded off marginally AH, but I gotta believe the broader market tomorrow will not treat TGIS gently. Ay-yi-yi.

I am tracking the other stocks I considered buying when I recently bought HSII. HSII has been solid, up 4.4%. The stocks I considered on average are up 4.6% led by the surprisng HLYS (up a snappy 24.6%). It does show how (if you have courage) you can buy some stocks that are greatly out of favor and do okay. Another example is MTEX, which had been hammered by lowered guidance and AG suits. It was on my watch list in mid September and is up since then by 36%. Is KG the next greatly out-of-favor stock to pop? It is a lowly $10.63, about 50% off the 52 week high.

Stay tuned.

Monday, October 15, 2007

Bonfire of the Vanities

If people haven't read Tom Wolfe's great book they should. The movie didn't do the book justice. My portfolio held up well today in a down market.

Taking Stock, a few random thoughts about MFI stocks.

MSTR - I always think of Master of the Universe when I see this symbol, though it actually stands for Microstrategy. This is my second dance with MSTR. The first time I made a nifty 36%, buying around $96 and selling at about $128. It turned out that $128 was pretty close to their 52 week high (not all time high though as this was a bubble highflier that got as high as (ready for this?) $1,388 in January 2000 and then fell as low as $5 in June 2002! Those were giddy days. Anyway, I digress. I bought them a nose under $70 in September when they re-appeared on the charts. Today they spiked 10% (for no reason I see, though they did get an upgrade) to about $87.

IVAC - also had a nice day today, up about 6% though still a big loser for me. Again, not sure of the reason for the spike.

TGIS - I am antsy waiting on their earnings report on Wednesday. This stock dropped from $12+ back in July to about $8 after a poor 2nd quarter which saw them show negative growth in the 1st half of 2007. They have fought back over $10. I re-read their 2nd quarter earnings report and their CEO said he expected the 2nd half of 2007 to show growth over 2nd half of 2006. If they hit that and look like a growth company once again, they could move back over $12.

KG - I have had such good success with the 2nd dance with MSTR, I have started to court KG. I was also fortunate with them, posting a nice 20% plus gain my 1st year. Since I sold them over $21 they have fallen to a nose over $10. I can't believe there is much downside left and any good news will likely result in a quick 30% gain. I know they are partners on some bio tch drugs that have promise.

Wednesday, October 10, 2007

Deja Vu All Over Again

TGB announced that they sold $45m of stock at $5.20 to raise money (Taseko Announces Bought-Deal Public Offering & Private Placement Financing to Raise Up to $45 Million). It was really strange as they had just said the day before how strong their cash flow was due to the high price of copper. Then why are they selling stock to raise additional $ at a price below market? Sound familiar? CHCG did the same thing 2 months ago, with adverse results. TGB traded down early today about 8% but ended up down under 2%.

LRCX kind of announced earnings this evening (Lam Research posts partial Q1 results). "Kind of" as they are doing a study on whether they will need to restate earnings due to options back-dating. Since the earnings were "kind of", I wasn't sure if they were "good". The stock did trade up AH.

AEO announced their same store sales were down about 2% (American Eagle Sales Drop in September). The stock dropped AH due to this news. I found this interesting as insiders bought a ton of AEO stock in September... clearly they had no insight on Sept. sales (of course they do have a limited window to buy). If they drop 2 to 3%, is that a buying opportunity? Sept is not exactly a critical shopping month.

Tuesday, October 09, 2007

So Tempting

TGB is on its way to becoming my best MFI stock yet. It is my best in $ gain, but not in %. It is up about 129%, while PNCL ended it's first year for me +155%. It is extremely tempting to sell TGB. We all have that instinct to want to "lock in" our gains as losing a paper gain is psychologically painful as Ken Fisher reminds us in his recent book.

But I am resisting the temptation as I do want to try and follow the rules AND I am not eager to pay ST capital gains taxes. And who is to say whether what I would swap into would do better? TGB does have some wind at it's back (Taseko Highlights Q4 Sales). The one thing I don't like about TGB is they seem to self-promote a lot. I did like one quote in today's release though by the CEO:

"With the combination of expected ongoing strength in metal prices and planned production growth, we believe Taseko is poised to continue to generate significantly increasing cash flow from operations."

Hmm, strange though... they were down 9% after hours for no reason I can see. They closed at 4pm at $6.05 and the bid/ask is $5.54 /$5.64. Not quite sure why, though message board suggests they are issuing more share which may dilute earnings. Not sure why they'd do that given comment on "strong cash flow". I'll wait until tomorrow, as likely as not just some rumor.

Friday, October 05, 2007

Best Week of the Year

Important not to get too ecstatic, but my portfolio had it's best week of the year capped by a marvelous day today. Got a great jobs report (Strong 3rd-qtr US job growth eases recession fears) and that really boosted KFY, HSII, BBSI and GVHR for me.

  • KFY was up 8.6%.
  • CHCG went up 10% today putting me well in the green when considering my double down.
  • TCK and TGB were both up 5%. TGB is now up 119% for me, a clear double.
  • KSWS was one of my few losers as they were downgraded to sell (Ahead of the Bell: K-Swiss Dips).
Today was the last day for ASEI. It ended up 40% for me, that makes it my 8th stock to close over 40% (others were UST, NCOG, NSS, AVCI, PNCL, PGI and FDG). So hooray ASEI!

TGIS got a nice write-up in MF as they pushed their hidden gems. Here is what they said:
"As investors, we all want our companies to generate cash and drive higher profitability. Well, Thomas Group, a Texas-based provider of process improvement services, helps businesses do just that. Judging by the 76 All-Stars that are bullish on Thomas (impressive for such a tiny company), Thomas seems to be pretty good at it, too.

Thanks to a capital-light business model and a blue-chip roster of clients -- including the likes of Pfizer (NYSE: PFE) and Motorola -- Thomas has consistently generated whopping returns on capital above 50%. When you consider that between Chairman John Chain and Director Edward Evans, the two own over 60% of the company, this type of efficiency is understandable.

With about $10 million in cash, no long-term debt, and a tasty dividend yield of 4.20%, TGIS looks intriguing."

Without further ado, here are my weekly charts:

Current Portfolio
Stock Purchase Date Cost Current Gain
TGB 4/16/2007 $2.64 $5.79 119.3%
ASEI 10/5/2006 $45.85 $64.25 40.6%
TCK 8/16/2007 $36.50 $50.46 38.2%
THO 3/26/2007 $40.30 $48.88 26.4%
MSTR 9/14/2007 $69.55 $80.88 16.3%
KFY 9/28/2007 $16.74 $19.05 13.8%
VALU 5/29/2007 $44.01 $49.75 13.7%
LRCX 7/3/2007 $47.51 $53.96 13.6%
UNTD 5/1/2007 $14.51 $15.81 11.3%
TGIS 11/30/2006 $9.18 $9.91 10.1%
DGX 3/17/2007 $52.11 $56.82 9.6%
CHKE 7/17/2007 $36.70 $38.85 7.9%
KSW 5/10/2007 $6.48 $6.98 7.8%
AXCA 9/21/2007 $19.53 $20.72 6.1%
BBSI 9/7/2007 $24.13 $25.57 6.0%
KSWS 7/27/2007 $23.94 $25.27 5.8%
VSNT 7/27/2007 $19.54 $20.61 5.5%
JTX 4/9/2007 $28.70 $29.84 5.0%
HSII 10/5/2007 $39.92 $41.45 3.8%
PNCL 2/9/2007 $17.07 $16.55 -3.0%
RAIL 2/16/2007 $45.54 $41.25 -9.1%
HGG 8/3/2007 $13.48 $12.22 -9.3%
AEO 7/10/2007 $28.42 $25.43 -9.8%
WSTG 5/15/2007 $14.98 $13.24 -9.9%
CHCG.OB 6/5/2007 $5.93 $5.33 -10.1%
UG 6/13/2007 $12.09 $10.65 -11.9%
NXG 12/20/2006 $3.04 $2.67 -12.2%
GVHR 9/12/2007 $15.91 $12.31 -21.9%
NOOF 4/27/2007 $8.59 $6.29 -23.9%
WNR 7/27/2007 $53.64 $40.49 -24.4%
PACR 1/3/2007 $25.46 $18.85 -24.7%
EGY 12/13/2006 $6.42 $4.77 -25.7%
IVAC 11/23/2006 $23.52 $17.02 -27.6%
USHS 6/25/2007 $11.22 $7.20 -35.8%

Gain/Loss Open Positions ($): $10,964
Gain/Loss Open Positions (%): 1.7%
Gain/Loss Closed Positions ($): $50,513
Gain/Loss Closed Positions (%): 9.2%
Total Gain/Loss ($): $61,477
Benchmark Gain/Loss ($): $91,533
Annual IRR: 11.0%
Total Gain/Loss (%): 10.7%

Thursday, October 04, 2007

Make It a Struggle

Well, I decided today to replace ASEI (which hits its one year anniversary tomorrow) with HSII. I appreciate everyone's input on the choice. I think the tie-breakers for me were these two points:
  1. They just initiated a dividend for the 1st time. To me that signals a company is comfortable with its future as once given a dividend is painful to take away.
  2. The 2nd point is that close to 50% of their revenues come from overseas. This is a theme I am trying to look for in my stocks as the US economy slows down.
Toss on top of these points the fact that they have had solid growth and they recently increased guidance. Given all these positives, it was amazing to me they were about 28% off their 52 week high. I bought them at $39.92.

It'll be "interesting" tomorrow to see what the jobs report shows for September. A good report and I might see my trifecta of GVHR, HSII and KFY go up nicely. Another negative number and well...

The hard part in the decision was being a little concentrated in similar stocks (toss in BBSI as well). But I think that goes with the territory in MFI as certain sectors do fall out of favor at the same time (check out the refiners). Also, in the grand scheme I do have a great deal of diversification.

My little China Group (CHCG.OB) is trying to be the little train that could... "I think I can, I think I can...". As faithful readers may recall, the stock dropped off the table last month from over $5 a share to as low as $2.85 as rumors were swirling. I did step in an increased my holdings 50% a notch over $3 a share (wish I'd bought more). It is now at $4.84 and I think it still has plenty of upside... one good earnings report, not to mention moving off the bulletin board. So with my cheapo purchase, despite the sharp stock price drop I am virtually back to break even and any more upwards movement is gravy. I should note that the additional shares I bought are not counted in my MFI portfolio as I don't double-down there.

Wow! Great news. Check out this headline this evening for KSW: (KSW Awarded Two Downtown Projects Totaling $14,600,000). That is big stuff for a company that had $19m in revenue in the quarter ending June 30th. If there was a "Jason's Bubble Gum Company" in the real stock market, KSW might be it (or else CHCG). These are both cheap companies that have good returns on capital AND room to grow, they can turn that income into more China stores and more GC opportunities. I get goosebumps just writing about it! Anyway, I see KSW closed at $6.83 and has a bid/ask of $6.95 and $7.59. Could easily be up +5% tomorrow.

Wednesday, October 03, 2007

Good News for TGB

TGB had more good news today. As you might recall they recently commented that one of their mines has about 25% more gold and copper than they thought. Today they announced that they're getting metal out of the ground very efficiently (Taseko's Q4 Copper Production Increases by 33% Over Q3 to 16.8 M Pounds).

33% more is a lot. And at near record high copper prices, that has to be good as they are totally unhedged (unlike NXG). Stock went up 20 cents on the news making TGB up about 106% for me. Wish I had a few more TGBs.

Otherwise just another day in my marathon MFI portfolio's life. I use the marathon analogy as I ran my first ever 5K today with my wife in support of Breast Cancer. Didn't set the world afire, but it felt good to accomplish my goal.

I appreciate Tony's thoughts on VPHM. I guess this weekend I'll give my next purchase a good think. Maybe I will find another TGB. Here is the current list of eligible bachelors...

Top 25 companies with a minimum market cap. of $101 million
Companies are listed in alphabetical order
Name (in alphabetical order) Ticker Market Cap
($ Millions)
Pre Tax
Earnings Yield
Pre Tax
Return on Capital
Most Recent
Quarter Data
Aspreva Pharmaceuticals Corp ASPV 723.30 33% > 100% 10/02 06/30
Avici Systems Inc AVCI 146.37 25% > 100% 10/02 06/30
Axcan Pharma Inc AXCA 1,139.65 11% > 100% 10/02 06/30
BP Prudhoe Bay Royalty Trust BPT 1,625.76 11% > 100% 10/02 06/30
Biovail Corp BVF 2,902.81 18% > 100% 10/02 06/30
China 3C Group CHCG 224.90 15% > 100% 10/02 06/30
FTD Group Inc FTD 448.64 10% > 100% 10/02 06/30
FreightCar America Inc RAIL 501.31 49% > 100% 10/02 06/30
Frontier Oil Corp. FTO 4,525.32 17% > 100% 10/02 06/30
Gevity HR Inc GVHR 272.41 12% > 100% 10/02 06/30
Heelys Inc HLYS 223.53 40% > 100% 10/02 06/30
Heidrick & Struggles International Inc HSII 710.70 11% > 100% 10/02 06/30
Holly Corp HOC 3,417.73 17% > 100% 10/02 06/30
ICF International Inc ICFI 400.32 14% > 100% 10/02 06/30
Intevac Inc IVAC 361.03 22% > 100% 10/02 06/30
King Pharmaceuticals Inc. KG 2,844.51 27% > 100% 10/02 06/30
Korn/Ferry International KFY 805.76 16% > 100% 10/02 07/31
Labor Ready Inc. LRW 875.18 13% > 100% 10/02 06/30
New Frontier Media Inc NOOF 150.94 14% > 100% 10/02 06/30
Pacer International Inc PACR 678.47 13% > 100% 10/02 06/30
Replidyne Inc RDYN 169.73 25% > 100% 10/02 06/30
Thomas Group Inc TGIS 105.50 15% > 100% 10/02 06/30
USA Mobility Inc USMO 474.75 17% 75 - 100% 10/02 06/30
Vaalco Energy Inc EGY 289.91 24% 75 - 100% 10/02 06/30
ViroPharma Inc VPHM 654.17 33% > 100% 10/02 06/30

I don't know, I might have to go with good old KG again. FTD is another strong option. I may need to look more at LRW (I owned them many years ago with bad results) and HSII (though with GVHR & KFY I am a little heavy in this area... and I have a problem with a stock that has the word "struggles" in its name).

Ok enough typing, let me get out the epson salts.

Tuesday, October 02, 2007

MFI Stocks Post Merger

WNR has dropped a ton since August. I figured, "hey, it must be pretty high on the lists now". But nowhere to be found. So I did my own cals and came up with about a 14% earning yield (okay) and a 28% return on capital. Together, clearly not an MFI stock. "What happened?", I wondered. They had a blow out earnings report in August AND the stock has tumbled.

I noodled over it and then had my Eureka moment, a point I don't think anyone has made before. WNR went through a merger with Giant Industries that just took effect. So the merger takes affect and the balance sheet etc is now post merger but the trailing twelve month earnings just reflects WNR. That combination drives WNR off the list. Ideally, you should take the ttm earnings of WNR + GI for any calculations.

The same thing happened with FCX and PD. They were both MFI stocks until the day of the merger, at which time the PD price equaled what FCX was paying. But then the next day, FCX fell off the list, for that same reason.

Not sure what to do with this thought. But I'll be keeping an eye on WNR as I feel it is still an MFI stock.

Now that people seem to think a recession is less likely due to strong fed action, I am looking for my business service stocks like GVHR, BBSI and KFY to start moving upwards. I can dream, can't I? I did see where VPHM went up a lot today, I was hoping to buy it back post ASEI sale next Monday. Otherwise, I'm considering FTD as well. Flowers anyone? It pays a 4.4% dividend.

Monday, October 01, 2007

Thor - The God of Thunder

Wow, I had almost forgotten that my stocks can have GOOD news. THO announced their earnings a little past noon on the 1st day of the 4th quarter (Thor Reports Record Net Income, E.P.S. in Quarter). It would have been a good day to have a quick trigger figure with the earnings announced at 12:12 pm. THO quickly spiked a $1 on the news and ended up $2.94 on the day. I am now up about 22% on the stock including my "special" one time $2 dividend.

HGG, EGY, GVHR and KSWS were all up more than 6% along with THO on this strong day. WNR was my outlier, down about 4%. The refinery movements seems so silly to me in the 18 months I have been following them. In the spring/summer they rocket up as demand for gas (and refining) is high due to driving season and in the fall/winter they drop (though admittedly higher lows). I sold my FTO recently anticipating this seasonality. I plan to buy FTO (or another refiner) back later this season but in my IRA and will sell next summer at the peak. We'll see if the seasonality play continues to work. I suspect it will as the market has become nore and more short-sighted and can't see past the next earnings quarter.

Oops. I think Reuters messed up this morning. They listed the following news article with BBSI (Barrett Business Sevices): Barratt to let buyers defer deposits . Note Barratt has a 2nd "a". The artcile had nothing to do with BBSI. Oops.