Gold & Silver Keep Chugging: But a Top In Sight?

Nymex spot gold closed at $586.70. Spot silver closed at $11.71. The run up in metal prices reminds me a lot of what happened to the energy stocks last year. The big question is where are we in the cycle. A short term top in energy stocks occurred during the weeks following Katrina (September 30th). Some energy stocks still have not recovered since. So is March 30th the top in metals? I doubt it but I have been wrong before.

$8 Billion Isn't Enough?

After the close Google (GOOG) announced that it will may sell up to 5.3 million shares in a stock shelf. This could give Google an additional $2 billion in cash. Google must have a game plan for some massive spending since they were sitting on $8 billion at the end of Q4. Either that or they are burning lots of cash. This would be the second time that Google is selling shares to the public since its IPO in August of 2004.

Note: I am long Google (GOOG)

Taking Profits In New River (NRPH)

Today I closed my position in New River Pharma (NRPH) to book a nice 30% gain. The valuation of their new ADHD drug has gotten too pricey and reminds me of what happened to Cephalon (CEPH) (dropped from $80 to $60 in about 10 days). Plus I was burned badly in Axonyx (AXYX) last year and will not make the same mistake in another speculative biotech. I don't feel that New River's 1.17 billion dollar market cap is justified for a drug that could easily get the "Class II" black labeling, making it no safer than Shire's (SHPGY) Adderall XR. I see 10-15 points of upside if there is a favorable ruling and 10-15 points of downside for an unfavorable FDA ruling. I could have held onto my shares and bought puts, but I would rather just take profits. It should be noted that New River is also working on a safer version of Vicodin, but that drug alone is not significant enough to justify the current market cap if their ADHD drug fails.

Silver Wheaton (SLW) Report

Below is a little piece of research I put together on Silver Wheaton (Amex: SLW)

Silver Wheaton (SLW) is completely unhedged and pays no corporate income taxes. All silver trading is performed by Silver Wheaton Caymans Ltd. and is not subject to income taxes. SLW does not carry any debt. Silver cash costs are $3.90 per ounce. According to SLW, a $0.50 increase in the price of silver will add $6 million in net income for 2006.

Silver Wheaton (SLW) owns 15% of Bear Creek Mining (TSXV: BCM). SLW bought 4,821,905 shares of BCM on the open market for $3.03 CDN. SLW also bought 540,000 shares of BCM during a private placement for $3.25 CDN with the right to purchase 270,000 additional shares for $4.25 CDN within 2 years. BCM shares are currently worth over $6.00 CDN.

Earnings estimates for 2006 are currently $0.25 per share. My own calculations are getting net income for 2006 of $55 million based on no production growth. There are currently 184 million shares outstanding plus a secondary of 14 million shares.I am getting EPS of $0.28 for 2006 if silver prices can average $10.81.

Note: I am long SLW

Silver Wheaton Corp. (SLW)

I used some of the weakness this morning to pick up some shares of Silver Wheaton Corp. (SLW). The stock is up a lot but I believe it will go higher. I closed my position in Motorola (MOT) for a small profit. I believe Silver Wheaton can offer 10-20% returns for the next couple of years.

Robert Kiyosaki Bullish on Metals

Famous author Robert Kiyosaki of "Rich Dad, Poor Dad" is bullish on gold and silver. Here is a passage from his article.

One of the reasons why I'm bullish on gold and silver is because the American public is still sound asleep to this asset class. Most Americans have no idea how or where to buy physical gold and silver. The outlets that sell gold and silver I have visited are already low on inventory.

If and when the American public wakes up to the reality that their dollars are not money, but a currency, the panic and stampede will begin. Should that happen, today's prices for gold and silver will look like bargains.

Today, very few people realize that Warren Buffett reportedly holds one of the largest caches of physical silver in America. He purchased silver in the late 1990s, when it was cheap -- and while others were criticizing him for not investing in tech stocks.

To view the full article click here.

Mining for Silver Stocks

I have been looking at three silver plays, which all hit 52-week highs today. The first one is Silver Standard Resources Inc. (SSRI). SSRI was mentioned in a Marketwatch.com article on March 11th as being a top newsletter pick. The other silver plays I am looking at is Silver Wheaton Corp (SLW) and Pan American Silver Corp.(PAAS). If I were to buy one of these stocks it would be Silver Wheaton Corp. But further research is needed.

Tim Horton's (THI) IPO Update

I am getting information that Tim Horton's (THI) priced 29 million shares at $23.162 each. This was above the original range of $18-20 and just above the midpoint of the second range ($22-$24). The stock should begin trading on 3/24/06.

Google Joining S&P: But Who's Next?

Google (GOOG) will be added to the S&P 500 index after Conoco Philips (COP) completes the acquisition of Burlington Resources (BR). According to Bloomberg.com, S&P 500 fund managers will have to buy $11.1 billion of Google's stock because of its inclusion in the index. Index funds will receive $1.7 billion for Burlington Resources shares.

There will be more space in the S&P 500 as Guidant, Cinergy, and Jefferson-Pilot are removed. I believe the Chicago Merc (CME), could gain listing in the S&P 500.

S&P 500 Listing Criteria
-Trade for at least 6-12 months
-4 profitable quarters in a row
-50% of the float available

The Google inclusion along with the Yahoo (YHOO) upgrade today should help lift the markets higher for a few days, especially anything internet related.

Stocks I'm Watching

Here are a few stocks that I am looking to go long.

Avanex (AVNX)
Biogen Idec (BIIB)
Equnix (EQIX)

Throw It Out The Window!

The market did a nice job today of ignoring the delayed Vista release. Microsoft (MSFT) said their new operating system Vista won't be ready until January 2007. This is the third delayed release from a big technology company. Microsoft did not have enough Xbox 360's during release, Sony delayed the PS3 until November 2006, and now Vista won't be ready until 2007. I was thinking of going long MSFT but I can't buy stock in a company that can't deliver promises and has no momentum behind.

Portfolio Update

YTD Return: 10.3%

Here is a look at my portfolio as of 3/21/06. I covered my short position today in China Natural Resources (CHNR).

Top Ten Holdings (% of Portfolio)
1. Broadcom (BRCM) 12.8%
2. Cerner (CERN) 10.7%
3. Etrade (ET) 9.8%
4. Bema Gold (BGO) 8.2%
5. Titanium Metals (TIE) 8.1%
6. Chesapeake Energy (CHK) 7.4%
7. Banco Bradesco (BBD) 7.4%
8. Gilead Sciences (GILD) 5.9%
9. Altria (MO) 5.5%
10. Citigroup (C) 5.5%
Other 18.7%

Time to Buy Some Biogen Idec (BIIB)

I have been pondering if I should buy into Biogen Idec (BIIB). They have a strong pipeline and I have a feeling that Biogen's MS drug Tysabri will be available in the second half of 2006. This can only be positive for Biogen's Stock price. I am considering exiting my position in Motorola (MOT) and covering my short in China Natural Resources (CHNR) to fund my purchase. If I do go through with the transaction, I will post it to the blog.

Google Launches Finance Website

Google Finance is finally here. The site is pretty good. The stock quotes are only delayed by about one minute and the charts are better than Yahoo Finance. Although the stock data such as short interest, enterprise value, price to book, and so on is not as good as Yahoo Finance

Beat You -- Mr. Cramer!

On Saturday I posted about buying into the Tim Horton's (THI) IPO. Hopefully, those of you who read got ahead of the Cramer crowd that will be calling their brokers Tuesday.

Tim Horton's (THI) IPO

Tim Horton's (NYSE: THI) is expected to go public on March 23, 2006. I believe this is an IPO worth buying into. With the success of Chipolte (CMG) and other fast food stocks in 2005-2006 THI is posied to go higher. THI is already well established in Canada and could expand their stores in the US (Currently under 300 stores in US).


($In Millions)
Market Cap $3,590.1
Revenues $1,277
Net Income $188

Price Range $18.00 - $20.00
Shares Offered 29.0 mm

Lead Underwriters
Goldman Sachs
RBC Capital Markets

Note: This is not advice. I am not a financial advisor, so buy at your own risk and consult your financial advisor.

Goldman Beats Lehman

Goldman Sachs (GS) beat Lehman Brothers (LEH) to $150 per share. Lehman has come under some pressure and has lagged Goldman in recent sessions.

Banking on $150

Are Investment Bank Stocks Undervalued?

Note: I am long Lehman Brothers

Online Brokers Looking Healthy

Etrade (ET) one of the leading online discount brokers, released its monthly business metrics today. The retail investor seems to be back in 2006. Etrade netted 82,782 new accounts in February. Retail deposits increased to $18.7 billion in February for Etrade. Retail DARTS (Daily Average Revenue Trades) increased to 187,570 trades in Q106 compared to 128,408 trades in Q105. Looks like the quarter should be good.

Tradstation (TRAD) reported a 46% Year over year increase in DARTS for February and a 16% year over year increase in client assets.

optionsXpress (OXPS) daily average revenue trades (DARTs) of 29,200 were 64% higher than February 2005. And ending client assets of $3.7 billion were 76% higher than February 2005

Note: I am long ET

Random Reading

Cash Flows Gauge Firm's Operational Strength

Better than Google Analytics

Google News Credibility Foiled By 15-Year Old

Saddam Had WMD: The Missing Dots

Gasoline Futures Surge Nearly 7 Percent

Sony Shares Drop on Report PS3 Delayed Until November (Update1)

Goldman Sachs & Google

What a great quarter for Goldman Sachs (GS). I have been recommending Goldman since I started writing this blog. I have no position in Goldman but I own some shares of Lehman Brothers (LEH).

On a side note, there has been a lot of talk about a new search engine called Acoona. They have over $100 million in venture capital. A potential Google threat? Or an acquisition target?

Fiber Stocks

Here are some of the more speculative fiber plays.

Avanex Corp. (AVNX)
Bookham Inc. (BKHM)
CIENA Corp. (CIEN)
Finisar Corp. (FNSR)
JDSU (JDSU)
MRV Communications Inc. (MRVC)
Optical Cable Corp. (OCCF)
Oplink Communications Inc. (OPLK)
Stratos International Inc. (STLW)
Sycamore Networks Inc. (SCMR)

New Position: Etrade Financial (ET)

This morning I finally added a discount broker to my portfolio. I had been looking at Tradstation (TRAD), OptionsExpress (OXPS), Schwab (SCHW), and Ameritrade (AMTD). Fundamentally and technically Etrade (ET) looked like the best out of the group. I closed out my position in Tesoro Petroleum (TSO). I am also close to covering my short position in China Natural Resources (CHNR).

Titanium Metals (TIE) Insider Buying

Again Harold Simmons is buying more shares of Titanium Metals (TIE) on the open market. Simmons is Chairman, Director, and 10% owner of Titanium Metals. He purchased 88,000 shares with an anverage price of $39 per share on March 8th. If you bought everytime he bought you would be well off.

Note: I am long TIE

Google Buys Word Processor

Don't be surprised when Google annouces an acquisition. As of 12/31/05, Google was sitting on over $8 billion in cash & marketable securities. In their latest attempt to takeover the world and take on Microsoft, Google bought Writely, an online word processing company. See article below.

Google lays foundations for Office rival

Chinese Manipulation

The charts say everything. Two stock that are unrelated except for the fact that the same person is manipulating both of them. Don't get me wrong, there is plenty of stock price manipulation on Wall Street, but none this bad. Taking a stock with a market cap under $10 million up 400% in a few weeks is criminal. Somebody was buying, but it sure wasn't me.

Note: I have been Short CHNR since $17

Gold Looking Oversold

Nymex spot gold looks oversold from a technical standpoint. There seems to be some short term support around $540. The next level of support seems around $520 and then $490. Keep an eye on gold the next couple of days.

Shifting to Defensive Stocks

Recently there seems to be a lot of rotation out of semiconductors, brokers, metals, and Brazil/India and into more defensive names. Roberto over at Nasdaq Trader likes to look at stocks that are positive (in the green) on days when the market is down. I have noticed a lot of the more defensive stocks pop up. Today there is relative strength in what I consider to be defensive stocks such as Proctor and Gamble (PG), Coke (KO), Pepsi (PEP), Microsoft (MSFT), Bank of America (BAC), UST Inc. (UST), General Mills (GIS), & Kellogg (K). Keep an eye on the defensive names.

Top in Commodities

Roger over at Random Roger's Big Picture has a nice article about a potential top in commodities and emerging market stocks. I personally tried to go long Southern Copper but was luckily stopped out. I still have significant exposure with Bema Gold (BGO), Tesoro Petroleum (TSO), and Chesapeake Energy (CHK).

AT&T to Buy BellSouth

at&t (T), the stock formally known as SBC, is making a $67 billion bid for BellSouth (BLS). SBC recently closed its acquisition of AT&T and subsequently changed its name to at&t. I wouldn't be surprised if this deal gets shot down the government. But the then again, Baby Bells have been friendly with Washington.

Stocks to watch: Cincinnati Bell (CBB), Qwest (Q), Alltel (AT), Sprint Nextel (S), and Verizon (VZ).

Goldcorp Reports Record Earnings

Goldcorp (GG) reported record quarterly earnings Sunday. Fiscal 2005 earnings increased 460% to $286 million ($0.91 Per Share). Q4 earnings were $102 million ($0.30 Per Share vs. $0.22 Estimate). Q4 revenues $268,300,000 vs 239,700,000 ( average estimate). Looks like a very solid quarter for Goldcorp.

Note: I am have no position in Goldcorp.

Banking on $150

Both Lehman Brothers (LEH) and Goldman Sachs (GS) have been favorites of mine for over a year. I own some shares of Lehman. The question is who will get to $150 first. The next question is who will split their stock first. Goldman, Lehman, and Bear (BSC) are all near record highs and they continue to be market leaders. I have my money on Lehman.

Tracking Danoff and His $65 Billion

I have read and heard many positive things about Fidelity Contrafund Manager Will Danoff. He is known for picking growth stocks in their early stages. Danoff is one of the best stockpickers of all-time, especially considering he has to manage $65 billion.

Here are some new positions for the Fidelity Contrafund (FCNTX) as of 12/31/05. This is not a complete list. Danoff generally does not buy all at once, so I would expect him to keep buying these names.

BioMarin (BMRN)

Cerner (CERN)
Exelixis Inc. (EXEL)
ICOS Corp. (ICOS)
JDSU (JDSU)
Medarex (MEDX)
Viasys Healthcare (VAS)

UPDATE: 3/3/05: Here are a few more.
NutriSystem (NTRI) 279,000 Shares
Coca Cola (KO) 2,271,800 Shares
Hansen Natural (HANS) 80,104 Shares
Bank of America (BAC) 4,026,200 Shares
Shinhan Financial (SHG) 603,290 Shares
Gol Linhas (GOL) 1,501,800 Shares
Nuveen Investments (JNC) 128,900 Shares

Note: As always, invest at your own risk. I am long Cerner (CERN) & Coke (KO). This information may be out of date or inaccurate; please do your own homework.

Moving On Abnormal Volume

JDSU & Chesapeake Energy (CHK) had heavy volume today and big price spikes without any upgrades or earnings. "Volume never lies." Keep them on your radar.

Note: I am long CHK & looking to go long JDSU

Portfolio Update

So far things have gone pretty well in 2006 for the portfolio. Lately, tech seems to be king and I am starting to wonder if we are at a top in technology stocks (BRCM, MRVL, CIEN, JDSU, GOOG, AAPL...) & emerging markets (EEM, IFN, IIF, HDB, UBB, BBD...). The buying frenzy is getting ahead of itself. Maybe I am approaching things too cautiously because I did not follow the markets during the "bubble/boom 90's." Anyways, I will still continue to stay overweight stocks.

2006 YTD Return: 13.6%
(Includes Dividends, Commissions, & Realized Net Loss from Option Trading)
2005 Annual Return: 10.5%
(Includes Dividends, Commissions, & Realized Gains from Option Trading)

Top Holdings as of 3/2/2006

1. Broadcom (BRCM) (13.4%)
2. Cerner (CERN) (9.4%)
3. Bema Gold Corp. (BGO) (8.4%)
4. Titanium Metals Corp (TIE) (7.9%)
5. Banco Bradesco ADS (BBD) (7.9%)
6. Chesapeake Energy (CHK) (7.5%)
7. Short: China Natural Resources (CHNR) (6.3%)
8. Gilead Sciences (GILD) (5.6%)
9. Altria Group (MO) (5.2%)
10. Citigroup (C) (5.1%)

Other (23.3%)

Two Dying Generals

General Electric (GE) and General Motors (GM) continue to underperform the Dow (both near 52 week lows while the market climbs). I admit GM looks like an interesting value play with $16 billion in cash and a market cap of only $11 billion. Oh, then there is the $286 billion in debt and the company hasn't reported a profit since the fourth quarter of 2004. I will pass on GM, but I do like Tata Motors (TTM) and Toyota (TM).

General Electric is very profitable yet is "“over-owned" by Wall-Street. It is difficult for a 346 billion dollar company to continually have EPS growth of 20% per year. In general, conglomerates like GE are too diversified and make over achieving difficult.

Note: I have no position in any of the above stocks.

Market Recap & Today's Activity

The broader markets finished higher today, as the Nasdaq gained 1.46% to close at 2314.64. The Dow closed up 0.6% to 11,053.53. The S&P 500 finished up 0.83% and closed at 1291.24. The volume was weak on the ETF's (QQQQ, SPY, & DIA), but most stocks finished near their session highs for the day.

I used today's market strength to close my Marvell Technology (MRVL) March 60 call for a small profit. Tomorrow will be national Google Day (analyst day) so lots of volatility is expected. I doubt Google will give guidance since they never have in the past. It should be interesting to see what new technology they launch or what some top executives have to say.