A LIttle Bit Better

The day started badly as Ezenia! announced their year-end earnings. It wasn’t a pretty picture. Not only was to 2006 year so-so, but they said there would be pressure on earnings in 1^st half of 2007. That was enough to initially drive the stock down 10%. It did end up down “just” 5.8%. I don’t know that I have the stomach to stay with these stocks under $100m. Then FDG had a press release discussing why the 1^st quarter isn’t going to be good. Seems FDG is the master of excuses. But things got better. Two of my newer stocks, PDS & AVCI went up over 5%. That tends to help as my 2007 stocks are typically larger $. With the jump across the board in oil-related stocks, I did sell my sidecar holding of PTEN at a profit and moved some $ into VPHM, which has dropped 22% in the past month. So for those keeping score, my sidecar is now OVTI, FDG, RAIL, VPHM and TBL. It is up about $24.5K, while my traditional MFI is up $37.5K. Still doing quite well considering it is just typically 5 or 6 stocks compared to 31 in MFI.

I have two stocks coming up for sale in early April: DLX & PGI. They have both quietly been fabulous stocks for me. PGI is up 41% and DLX is up 31%. April 2006 was a good month! Not sure what I’ll buy, but I am keeping an eye on MOT, which is down over 6% today. While I have taken my share of bumps lately, I do feel sorry for those caught in the PALM saga of late. It spiked up this week on rumors it was to be bought and now has sunk just as quickly. I know one poster on Yahoo board was already excited about his potential gains. Who knows, PALM may be a buyout candidate again tomorrow.

One stock that I kicked around last September was WNR. I ended up buying ASEI & VPHM instead as I already had FTO. That was a mistake. One of the other bloggers bought it as WNR had a bunch of insider buying (Jamie?). WNR has been a big winner, up 87% since then! Not that I have done poorly with ASEI (+16%) and VPHM (+20%).

Taxes , Buy Outs and Sub Par Performance

Been a bit busy lately. Doesn't help that my MFI stocks are sucking wind of late either. Hard to get pumped up to post a blog when the news is not so good. Just as recently as mid February, I was about 10K above the benchmark. I have given it all back and now trail the benchmark by about 5K. Seems like all the news and earnings have been disappointing lately.

A poster on the Yahoo board commented that MFI Canadian stocks (think FDG, TCK and BVF) have underperformed. At first I thought it was a small sample and just bad luck. Also Canada had recent law change on trusts that hit FDG. But then I started thinking (always dangerous). MFI measures earnings for both earnings yield and Return on Invested capital before taxes. That generally makes sense as tax rates can be all over the place. So when you are using MFI to compare a US company vs a US company, that seems like a smart factor to use. BUT when you are comparing companies from different countries, it may not be right to use earnings before taxes as tax rates vary between country. Thus MFI may overstate the ratios for companies in higher tax jurisdictions, which I am sure include Canada. Of course I have at least 4 CA companies: CREL, PDS, VPHM and FDG.

Finally, a slew of companies have been bought recently. SVM and THE for sure. Then PALM is a heavy speculative target. Of course I own none of these companies. Well, at least I am back in the green YTD, even if I am falling behind the Russell 3000. Tomorrow is a new day.

My Momma Told Me

My mother always told me, "if you don't have something nice to say, don't say anything at all". If I held to that, this would be a short blog. Here is the weekly graph. Ugh!

My Kingdom for a Good Earnings Report!

It is hard enough to make $ in this slippery market. To make matters worse, it seems I am on a losing streak with recent earnings reports. Let us count back:

(1) MTEX – down about 5% today

(2) TRLG – down about 5% today

(3) PONR – was down 4% yesterday

(4) ANF – down 2% on Feb 22^nd

(5) EGY – down 4% on March 2^nd

(6) OVTI – down 7% on March 2^nd

(7) PNCL – down 2% on Feb 27^th

(8) FTO – down 4% on Feb 27^th

I am sure I am missing one or two, but you get the picture! I think ISNS on the 23^rd was my last positive report.

Patterson-Energy (PTEN) returned to the top 50 today after a month long hiatus. I do think it was data-related as the ratios came in pretty close to where I had estimated. So it is justified being in my sidecar, even if it has gone nowhere.

I did replace SHOO today in the sidecar with VRGY. This is a stock I have been watching since it had stellar earnings 3 weeks ago. It seems to have settled down at a reasonable price. My sidecar has held up much better than my overall MFI portfolio. I am up about $21,500 in the sidecar (I think I got as high as $25,000), while my MFI is now just up $28-29K (it was up over 50K before the slide). Of course the slide has been pretty wide and my sidecar wasn’t fully invested at the start of the hemorrhaging (yes I did use the spell check).

Current Portfolio
Stock	Purchase Date	Cost	Current	Gain
PNCL	5/4/2006	$6.68	$17.51	162.1%
ISNS	7/7/2006	$13.17	$17.80	35.1%
PGI	4/7/2006	$7.71	$10.32	33.8%
DLX	4/3/2006	$26.41	$32.15	26.1%
VPHM	9/11/2006	$11.79	$14.69	24.6%
CHKE	5/16/2006	$37.55	$42.32	19.9%
BBSI	9/6/2006	$19.56	$22.52	15.8%
ASEI	10/5/2006	$45.85	$52.24	13.9%
TGIS	5/1/2006	$10.34	$11.17	10.4%
FTO	5/15/2006	$28.76	$31.35	9.4%
MTEX	5/22/2006	$13.11	$14.10	9.4%
KG	5/31/2006	$17.31	$18.86	9.0%
AVCI	2/20/2007	$8.65	$9.34	8.0%
BLDR	9/18/2006	$15.91	$17.03	7.1%
CREL	2/26/2007	$12.50	$12.94	3.5%
IVAC	3/6/2007	$26.12	$25.84	-1.1%
ANF	3/5/2007	$74.81	$73.62	-1.6%
PACR	2/26/2007	$28.26	$27.46	-2.3%
LRCX	2/26/2007	$46.66	$45.54	-2.4%
PDS	3/1/2007	$22.58	$21.97	-2.7%
ORCT	6/2/2006	$11.83	$11.46	-3.1%
PONR	5/9/2006	$30.48	$28.86	-5.3%
DGX	2/26/2007	$52.11	$48.97	-6.0%
SHOO	1/17/2007	$32.36	$29.82	-7.8%
TRLG	6/13/2006	$17.02	$15.51	-8.9%
HW	2/27/2007	$24.00	$21.58	-10.1%
RAIL	5/26/2006	$58.18	$50.11	-13.6%
FDG	5/31/2006	$34.03	$22.41	-27.0%
EGY	2/5/2007	$6.42	$4.61	-28.2%
EZEN.OB	6/19/2006	$2.84	$1.90	-33.0%
OVTI	5/31/2006	$27.79	$12.15	-56.3%
Gain/Loss Open Positions ($):				$14,951
Gain/Loss Open Positions (%):				3.8%
Gain/Loss Closed Positions ($):				$14,457
Gain/Loss Closed Positions (%):				9.8%
Total Gain/Loss ($):				$29,408
Benchmark Gain/Loss ($):				$27,979
Annual IRR:				10.5%
Total Gain/Loss (%):				7.7%

Earnings x 3

Busy Earnings Day

Looks like I have three stocks report today: PONR, MTEX & (gulp) TRLG. PONR was this morning and was “ok” (Pioneer Announces 2006 Results). Stock is down 7% at lunch, but that seems a bit of an over-reaction to me. They made in 2006 about $99m of Earnings Before Income Tax (EBIT). Their enterprise value is about $355m. So that is an earnings yield around 27%! I will probably add to the blog this evening after MTEX & TRLG report.

For those of you sitting on the sidelines, perhaps not liking individual stocks or wanting a little more hand holding or lower expenses, I did see a new approach today that is quasi MFI. Wisdom Tree has launched some new ETFs. The one that caught my eye was EEZ. The fund basically looks at the S&P 500 and picks the top 100 trailing earning yields. They then invest in those 100, with the weights determined by the earning yield. They have back-tested and found it to out-perform the S&P 500. I think it is a novel approach and may consider some of my kids’ college funds to go into this ETF. It can tend to get over-weight as for example Energy did well in 2006 and many of them have higher earning yields. There are several key differences between this approach and MFI. Obviously, ROIC is not a component of the ETF. They use market cap rather than enterprise value for earning yield, so companies with a lot of cash might not score as well. The ETF only focuses on top 500 stocks, so it is more of a large cap play, while MFI tends to be smaller cap. Finally, unlike MFI, this ETF does not give everything equal $ weight, so a company with an earnings yield of 25% would get 2x more invested in it than 12.5%. JG says that you also need to know if it is a good business, not just whether it is cheap. That being said, the expense ratio is just 0.28% and it seems like a great way to get the diversification if you don’t have a large bankroll. It is interesting that these “mechanical” approaches from Wisdom Tree are gaining acceptance. It lends credence to MFI in thinking you can out-perform the market by being mechanical and taking the emotions out of trading.

FTO did get upgraded today by Goldman Sachs (Frontier Oil upgraded by Goldman Sachs) - from a “Sell” to “Hold”. As always, I don’t get excited about what the analysts say, but it often does have ST influence on a stock. Let us see when they placed the Sell rating…wow, looks like it was August of 2005. Guess they don’t change very often! I am guessing that downgrade in August, 2005 was a bad call. Wow, their price then was $18.22 and now they’re north of $31. See even those brilliant guys at GS mess up.

Wish I owned that stock! PPD is a stock that I first listed in my tracking portfolios in May of 2006 (at $33.26). It re-appeared in December at $40.21 and was on the January 26^th, 2007 list at $38.63. Right now it is at $56.35! That is a 46% pop, since the end of January… not many stocks have done that. They actually issued a bulletin today to the NYSE saying essentially they did not know why their stock has spiked upwards (Pre-Paid Legal Services Has No Comment on Recent Trading Activity)… hmmm, must be some rumors swirling! (note, PPD only ended up about 2.5%).

I sold SHOO from my sidecar today. It reached the psychological barrier of $30 and I was happy to bank a decent profit.

Waiting for MTEX & TRLG to post. It looks like the market isn’t very confident, they both dropped on a green day. Not that the market knows. I saw that ARO posted nice earnings today. That took me back to early November (“I Can See Clairely Now”) where I commented on JG publicly saying that ARO, AZO and CLE were all “cheap”. ARO was around $28 back then and now they’re $38. You could do worse than pile in on his recommendations. CLE also went up, I did ride that train (made over $2k) as I bought a lot of shares. Let us see how AZO has fared… nice, about $110 to $125.

Okay, TRLG just came in! (True Religion Apparel Reports 2006 Fourth Quarter and Full-Year Financial Results) Hmmm looks pretty much on target. Sales up 17%. Made 21 cents per share. They say sales in new stores have exceeded expectations (that sounds good). Gross margins went from 51.1% to 54.1%, that is big. EBIT is up about 16%. Doesn’t appear to be a train wreck. I wonder what AH trading is doing and the 45% of the people short the stock?

Last note, MTEX had their earnings (Mannatech, Inc. Reports Record Fourth Quarter Sales). Revenues up about 5%, they are making investments in new products. Pretty much as expected.

Ok, I am off to watch my Hoosiers vs Gonzaga. Probably no better 4 day strecth during the year than the 1st four days of March Madness.

Quickie

I'll keep it short today. I did start a new Blue Light Special portfolio this morning. As a reminder, there are 3 criteria for being a blue light special:

1. The stock has to be on current 100 stock / 100M list
2. The stock has to have been on the list in one of my monthly tracking portfolios over the past 12 months and
3. The stock must be down at least 15% from when it was in the tracking portfolio.

Here is the new portfolio of 15 stocks:

Slip Sliding Away

Slip sliding away, slip sliding away
You know the nearer your destination
The more you're slip sliding away

Today puts my 2007 MFI portfolio firmly in the red. Pretty depressing. Can’t really point a finger at one stock today, it was a group effort.

I did manage to have four stocks in the green today. ORCT was the big surprise, up over 7%! That was actually good enough to place it in the top 10 of all the Nasdaq stocks. Hmm, no notes on why it was up. I have been hopeful that they would get a big contract in Japan, perhaps that is getting close? EZEN, FTO & PDS also managed to be green today. MTEX had good news, raising their dividend by 12% but got sucked down with the general market.

On days like this it is good to remember to be thankful. I for one am thankful that I didn’t have any direct exposure to these sub-prime lenders. NEW has dropped from $51 to $1.66 since last summer. LEND is off from $66 to $4. Reminds me of those internet bubble days. Some babies are being tossed out with the bath water though. I see WM is down 5% today, I gotta believe that at $39 and change they are a buy.

I noticed a couple of weeks ago where Thomas Ko of MSN Strategy Lab Fame had one of those stocks (shudder) in his portfolio. I hope not too many people followed his ill-advised lead. Let us look and see if he still has it… ouch, he isn’t doing very well. I don’t know that MSN is doing anyone a favor by posting his portfolio selections. He has four stocks and his “winner” is NBIX, down only 19%. Overall he is down 28%. NEW is down 67%, probably only because it seems to have stopped trading.

Well, tomorrow is another day. Perhaps we’re on our way to that 10% correction Jubak says we need. Wouldn’t that be great!?

Wow, I see where Pfizer is now on the Magic Pformula List. Under $25 a share! It is a little tempting in these uncertain times to go with them and their 4.6% dividend. But I promised no moves for the month. So I wait.

I did sneak a peek today at my March 29^th 2006 MFI tracking portfolio. Remember, the first two beat the indices during their 1^st year. In his book, JG says we can only expect to beat the markets 7 of 12 months, so we must keep our expectations realistic.

It looks likely that MFI will make it three for three. My portfolio last year of 68 stocks (not sure why so many) is up 8.9% (whoopee!) while the Russell 3000 is up 6.7%. PNCL (146%), TPX (88%), FTD (79%), DECK (75%) and PCU (70%) are amongst the big winners. Are you convinced yet?

Not So "E"-Z

Bad day for stocks with the letter "E"

EGY - continued the slide I predicted a couple weeks ago. Has now gone from $6.93 on February 22nd to $5.05. That must be about 25%! Ouch. Not much to do here though, I am committed for my year. I don't think (knock on wood) they can go much lower.

EZEN - very strange, dropped 13% today, my big loser. No news, but heavy volume. What gives? Always easy to think someone knows something you don't when that happens. Let us see if anything filed with SEC. Hmmm, they did have some filings today. But I don't see anything earth shattering, just some officers getting some stock options. Maybe it was the number of options, looked like about 400,000 in total with $2.15 strike price. I expect to see EZEN bounce back.

The big drop for EZEN pretty much ruined my day. Oh well, I expect I'll be able to sleep.

Final word: Let's hope my Hoosiers can beat Gonzaga! A little OT, but it is my blog.

Another Week in the Books

Another week in the books. Started off badly as my MFI portfolio dropped 10K on Monday, but battled back to a draw. Who knows where the markets will go from here? I expect a lot of volatility for the next 6 months. A bigger correction could really rock the people on margin and the hedge funds. Jubak has a very good article about the likelihood of a correction (Jubak Article) and the necessity for a correction. With MFI, I have a plan. We’ll see whether it is a good plan after we get through the rapids.

Some one posted a study that investors who don’t react daily to news and market movements actually do better. I have to say that that doesn’t surprise me. I rarely make savvy moves when they are emotional and quick. Sometimes I think it is a wonder I make $ at investing at all.

Stocks of Note

TRLG was down about 5% today. It has really been going up or down in a classic long-short tug-o-war. I did see an article suggesting that TRLG will be guiding lower. I didn’t really follow the logic (I don’t understand specifically the earnings target in Collins’ contract and why that suggests a shortfall. It could just be that Collins wanted an easy hurdle in his 1^st year) but have posted it here:

"We remain cautious on shares of True Religion as the company continues to make significant changes to its business plan and management structure," Mintz wrote in a research note. "Although we believe the appointment of Peter Collins as chief financial officer could enable it to better handle issues relating to Sarbanes-Oxley compliance, we are concerned about the number of changes the company is currently undertaking and believe that they could have a near-term impact on performance."

Mintz added that an earnings target that was part of Collin's employment agreement indicates 2007 earnings will be below his estimate. Since his estimate is below Wall's Streets consensus to begin with, the company could guide 2007 earnings below current consensus on its upcoming earnings call, Mintz suggested.

Not quite sure how this Mintz guy got the contract, I don’t see it posted with the SEC. Guess we’ll know more next week when TRLG posts their Christmas quarter.

EGY continued to fall off the table, down another 10 cents. Since their earnings report, which I didn’t like, they are off about 18%.

TGIS bounced back about 4%. I have commented many times in this blog that TGIS is an excellent day-trader stock. When it gets around $10.00 to $10.50 that is a solid bottom.

Standard weekly graphs and charts below. They don’t really tell the story of a topsy-turvy week.\

Current Portfolio
Stock	Purchase Date	Cost	Current	Gain
PNCL	5/4/2006	$6.68	$17.37	160.0%
PGI	4/7/2006	$7.71	$10.62	37.7%
ISNS	7/7/2006	$13.17	$18.00	36.6%
VPHM	9/11/2006	$11.79	$15.29	29.7%
DLX	4/3/2006	$26.41	$30.57	20.1%
CHKE	5/16/2006	$37.55	$42.34	19.9%
BBSI	9/6/2006	$19.56	$23.28	19.7%
MTEX	5/22/2006	$13.11	$14.95	15.9%
ASEI	10/5/2006	$45.85	$52.91	15.4%
BLDR	9/18/2006	$15.91	$17.72	11.4%
TGIS	5/1/2006	$10.34	$10.99	8.7%
KG	5/31/2006	$17.31	$18.54	7.1%
FTO	5/15/2006	$28.76	$30.60	6.8%
CREL	2/26/2007	$12.50	$12.85	2.8%
IVAC	3/6/2007	$26.12	$26.69	2.2%
TRLG	6/13/2006	$17.02	$17.38	2.1%
ANF	3/5/2007	$74.81	$75.16	0.5%
AVCI	2/20/2007	$8.65	$8.66	0.1%
PONR	5/9/2006	$30.48	$30.46	-0.1%
PACR	2/26/2007	$28.26	$27.58	-2.4%
LRCX	2/26/2007	$46.66	$45.51	-2.5%
PDS	3/1/2007	$22.58	$21.92	-2.9%
DGX	2/26/2007	$52.11	$49.72	-4.6%
HW	2/27/2007	$24.00	$22.88	-4.7%
ORCT	6/2/2006	$11.83	$10.95	-7.4%
SHOO	1/17/2007	$32.36	$29.39	-9.2%
RAIL	5/26/2006	$58.18	$48.35	-16.6%
EGY	2/5/2007	$6.42	$5.26	-18.1%
EZEN.OB	6/19/2006	$2.84	$2.10	-25.9%
FDG	5/31/2006	$34.03	$22.59	-26.5%
OVTI	5/31/2006	$27.79	$12.34	-55.6%
Gain/Loss Open Positions ($):				$20,199
Gain/Loss Open Positions (%):				5.1%
Gain/Loss Closed Positions ($):				$14,457
Gain/Loss Closed Positions (%):				9.8%
Total Gain/Loss ($):				$34,656
Benchmark Gain/Loss ($):				$32,619
Annual IRR:				12.9%
Total Gain/Loss (%):				9.1%