Tuesday, July 27, 2010

Watching BP and DOW

We were buyers of British Petroleum (NYSE:BP) as she fell into the low 30s and after this recent quarterly report, we're happy. Like we stated a month ago, a year from now no one will be talking about this, as it will be on to the next story. People will be talking about what a great buy it was at these levels. The dividend is coming back a lot sooner than people think and buyers at $33 are going to be seeing a 10% yield soon. Maybe not all at once, but soon. This is one of the largest companies in the world and there was talk of bankruptcy! Yeah right. They have real revenues and assets, not Enron revenues.

As far as Dow Chemical (NYSE:DOW), after the DuPont (NYSE:DD) numbers, we feel well positioned here.

The plan we put in motion from last March is still in play. We like companies that are going to directly benefit from the recovery, especially those that pay nice dividends. Check the 2011 Model Portfolio. We've trimmed some, but still hold the primary beneficiaries.

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Sunday, July 25, 2010

The government's plan for Citi needs work

The treasury just announced it would be selling another 1.5 billion shares or so of Citigroup (NYSE:C). This doesn't makes sense, why? The stock underperformed after the announcement and I think this is the 3rd such announcement. Why not just make once announcement that's you'll be selling all your shares over the next 6 months and be done with it. The stock would take a hit, but as usual, people would forget about it and move on.

I guess it's asking too much for the government to get it all right.

Anyway, has anyone else noticed the huge increase in earnings estimates for Cliffs (NYSE:CLF) and US Steel (NYSE:X)this year and next. Not long ago they were both losing money, now CLF might earn over $8 per share this year.

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Friday, July 23, 2010

Earnings look good and the commentary sounds great

Just looking at some of the names that have come in so far, Citi (NYSE:C), General Electric (NYSE:GE), Intel (NASDAQ:INTC), IBM (NYSE:IBM), and Apple (NASDAQ:AAPL) I'd say the coast is clear, but of course this market is neither rational or fair.

The services and business sectors look good (IBM), the consumer looks better (AAPL & INTC), the industrial and manufacturing sectors look good (GE), and the financial services sector looks a whole lot better (C). Loan loss reserves are down at Citi, GE is raising the dividend and AAPL had the biggest quarter in history. Not to mention, you can still get a 3% yield on INTC and almost the same on GE.

In a normal market, I'd say what's not to like, but of course the big computer algorithm in the sky, or rather the one collocated next the the exchanges has final say.

We called the summer dividend hike in GE a couple of months back and we're still waiting on Dow Chemical (NYSE:DOW) to do it's thing.

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Wednesday, July 21, 2010

Is the short side getting over and why hold stocks anyway?

Something occurred to me recently. With all the madness and suspect behavior by traders, especially those who short stocks. I wonder if any of the rules are being followed, such as paying dividends when you're short. If they don't even have to borrow legitimate stock then how are they paying dividends on the stock they short? Sometimes they're shorting stock that doesn't exist - 'phantom shares'.

Also, someone commented recently that maybe the average person shouldn't invest in equities. That's a very good point and worth examining. I won't go into a long write up today, but our markets have definitely been corrupted by speculators and those who can't see past next week. Fundamentals mean very little which means the market is more of a casino than anything else.

I think it may take another meltdown before anyone in a position to do anything actually does something. I'd stay away from options, currencies, ETFs, and anything that tends to show up in the media too often. Dividend plays look safe, as do some special situation stocks.

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Friday, July 16, 2010

Days like today are becoming too predictable

Yes, another one of those days where all things traded are down, except for government bonds. Look to the derivatives pit once more, as that's where the real action is. Stocks, metals, grains, oil all hit hard down over 1% as I write this.

Let this be a lesson, don't buy in the week before options expire. Take up those long positions on the Friday they expire. This isn't fool proof, but it seems to happen about 75% of the time.

By the way, did you catch the news that Deutsche Bank fired their quant trading team in Japan. Why you ask, because they did to that market on 1 Jun what traders did to our market on 6 May. Does it alarm anyone else that speculators around the world wield such power over the largest financial markets in the world.

And yes, then there's Vivus (NASDAQ:VVUS). Remember, that was the advisory board, not the final decision and it was close. That was going to be a lose lose outcome, as the vote was so close. Had they recommended approval with a 9-7 vote, the stock would have sold off. We'll wait until I think October and see what happens. We're still leaning towards approval, but we've hedged our bets with Arena (NASDAQ:ARNA).

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Thursday, July 15, 2010

The panel says no to VVUS

The FDA advisory panel voted 9-7 to reject VVUS's weight loss drug. There's good and bad in this. The bad is it's a "no". The good is it was 9-7, there's more data due out, which was one of the panel's concerns, and this bodes well for Arena (NASDAQ:ARNA)

Stay tuned.

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So much for a double dip

First Alcoa (NYSE:AA) and then Intel (NASDAQ:INTC) does its thing. This is shaping up to be another big quarter. Granted, the AA numbers were just ok, but the INTC numbers were phenomenal! Throw in a 3% yield on INTC and what's not to like about that stock.

We're paying close attention to GE and Citi on Friday, as they are good barometers for what's going on in the overall economy, top to bottom. We also love GE and Citi at these levels.

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Tuesday, July 6, 2010

Countdown to V day

The next potential big mover on the radar is Vivus (NASDAQ:VVUS). If their weight loss drug gets the okay then up we go. It's the first of three weight loss drugs up for approval this year.

The 15th is the day and we think they get a recommendation from the advisory board, but I wouldn't be the farm at this point, as this market makes little sense these days. Remember, this little biotechs are concentrated investments. A little goes a long way.

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Friday, July 2, 2010

2011 Model Portfolio Update 2Q10


Yes, the second quarter wasn't a nice quarter, but our model portfolio is still way ahead of the market. The S&P has returned about 23.7% since March 2009 and our portfolio has returned about 79%.

So our portfolio has beat the market by better than 55 percentage points.

Notable moves include dropping Research In Motion (NASDAQ:RIMM). We've talked about it for months now and we pulled the trigger in the mid 60s. We've got our eye on Mosaic (NYSE:MOS). That entire industry is struggling and the consolidation we thought would happen hasn't happened at the level we thought it would. There are still too many players in that space.

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Thursday, July 1, 2010

Reminds me of last year

Those days of indiscriminate selling appear to be back. Stocks down, oil down, gold down, etc.. This is one of those reasons this market is so difficult, no where to hide. This is also one of the reasons we believe this will be short lived, as it clearly has nothing to do with the real economy.

So the recovery is uneven. You can't draw a straight line from the bottom up and not expect there to be bumps along the way. Hysteria has set in again, but this to shall pass. Professional traders live this stuff.

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The Vix

About This Blog

Where we rant and rave about the market and of course give our opinions on stocks we love or hate. We're not advisors and urge you to conduct your own due diligence.

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