Tuesday, January 31, 2006

Google Earnings Fall Short

Clearly Google (GOOG) shares were priced for a big earnings beat. The higher tax rate of 42% compared to 30% in Q3 hurt earnings. If you tax Q4 at 30% and add in the $90 million donation to the Google Foundation the earnings are about in line with estimates. I am getting about $1.62 in earnings if Google was taxed at 30% instead of 42%. You can add in about $0.10 for the one time donation to the Google Foundation. Google missed by about 4 cents. Don't let all the negative press mislead you.

$1.919 billion vs. $1.29 billion (Estimate)
EPS: $1.22 vs. $1.76 (Estimate)

Monday, January 30, 2006

Mad Money Coincidence???

Tonight Mr. Cramer was touting Acadia Pharmaceuticals (ACAD) on his tv show. I know nothing about Acadia except that over the past three months the average daily volume was 63,050 shares (not including today) (Source: Yahoo Finance). Today Acadia traded over 20 TIMES its average volume yet with little price fluctuation. There was no news today that would cause such a spike in volume. Acadia has only traded over 1 million shares TWICE in its company history (Since May 27, 2004). In after hours trading Acadia was up over 20% and did well over one million shares in volume. I am not saying anyone is at fault but I find it very suspicious that Acadia traded so many shares especially in a tight range around $10.30 today and is then up 23% a few hours later after Cramer recommended it.

A coincidence? I think not.

A Closer Looks at Quality Systems (QSII)

Quality Systems (QSII) announced a one time cash dividend of $1.75 per share today. The company is a technology/electronic medical records company that is loaded with cash. QSII has over $4.00 per share of cash on hand and zero debt. On the March 2005 cash flow statement QSII paid just over $19.6 million in dividends. But less the dividend payment QSII would have again produced positive changes in cash flow for the quarter. Insiders own 38.06% of the total outstanding shares, so investors will benefit from shareholder friendly practices (like special dividends). Plus 19% of the float is short, another driver of price appreciation.

October Article on Electronic Medical Record Stocks

Note: I am long QSII

U.S. Investment Banks

Reuters put out a bullish article on investment banking for 2006. Some interesting notes from the article is that bond underwriting has remained stable while M&A activity continues to grow. I believe M&A activity will continue briskly because corporations are loaded with cash and are facing slower organic growth, especially domestically. I am not a big fan of the P/E ratio but Goldman Sachs (GS), Lehman Brothers (LEH), Morgan Stanley (MS), Bear Sterns (BSC), and other invetment banks should see multiple expansion once the fed is done. In my opinion, they all deserve to trade at 15x 2007 earnings. That is about 20+% upside from current levels.

Long: Lehman Brothers (LEH)
Short: None
Options: None

Friday, January 27, 2006

Portfolio Update

So far things have gone well in 2006 for my portfolio. I have no "target" rate of return for 2006. My main goal is to make as much money possible while taking on a decent amount of risk. So far the trade of the year was "buying up" in Broadcom (BRCM). My last purchase of Broadcom shares was on 1/5/06. In 2006, I added Bema Gold (BGO) to the portfolio. I am not looking to add any new names to my portfolio unless something comes up. Although I might add a broker (ET, AMTD, OXPS, or TRAD) but I need to do some selling first.

2005 Annual Return: 10.5%
2006 YTD Return: 11.8%

Holdings (% of Portfolio)
1. Broadcom (BRCM) 14%
2. Cerner (CERN) 10.8%
3. Chesapeake Energy (CHK) 8.4%
4. Titanium Metals (TIE) 7.7%
5. Bema Gold (BGO) 7.7%
6. Banco Bradesco (BBD) 7.6%
7. Altria (MO) 6.0%
8. Gilead Sciences (GILD) 6.0%
9. Citigroup (C) 5.6%
10. Tesoro (TSO) 5.6%
Other 20.6%

Changes to come???
  • Looking to add to positions in NRPH, GILD, BBD, & AMX at the proper buy points
  • Stocks to be sold on further strength: MXIM & MOT
  • Maybe add a broker

Thursday, January 26, 2006

Random Readings

Broadcom (BRCM) Beats Estimates

Broadcom (BRCM) beat Wall-Street GAAP estimates by $0.06. Fully diluted GAAP earnings for Q4 were $0.50 vs. the $0.44 estimate. I was worried about the earnings because of the insider selling in January by CEO Scott McGregor. Broadcom also announced a 3-for-2 stock split and a $500 million stock buyback. Broadcom is up about 8% in after hours trading. We should see some price target increases as well as some upgrades on Friday.
GAAP Net Income
$411.7 Million $1.10 Per Share
$218.7 Million $0.63

List of Upgrades to Come
(I know Goldman has a buy but there are many bearish analysts on this stock)
Stifel Nicolaus Downgraded to Hold 12/19/05
Needham & Co Has a Hold 7/22/05
Friedman Billings Mkt Perform 7/7/05
CIBC Wrld Mkts Sector Perform 6/27/05

Note: I am long Broadcom (BRCM)

What is EBITDA?

Did you ever hear the word EBITDA on a conference call? Or see it on a quarterly report?

EBITDA = Earnings Before Interest Taxes Depreciation and Amortization

First, I must mention that EBITDA is a non-GAAP measure of profitability. EBITDA can make a company's disappointing earnings look not as bad or make great earnings look even more spectacular. EBITDA can also be used to compare a company to other companies within an industry.

Monday, January 23, 2006

AMD's Chips Better Than Intel's

Back in November CNET tested AMD (AMD) chips and Intel (INTC) chips. They performed several rounds of testing based on performance and price. AMD came out the clear winner. Here is the beginning of the article.

Link to end result of test.

By the way, AMD announced a $500 million dollar secondary after the close today. Half of the proceeds are expected to be used for paying debt and the other for corporate purposes.

Heavy Put Buying

Texas Instruments (TXN) reports after the bell. I wouldn't touch it with a ten foot poll (long or short). The volume on the February 30's (7,500 contracts with an open interest of 4,307) and the February 32.50 puts 8,647 with an open interest of 18,048 as of 1:15 PM ET. I bet TXN will report in-line and guide in-line. Clearly some investors are expecting a miss.

Saturday, January 21, 2006

Chipotle (CMG) IPO Update

Chipotle Mexican Grill (CMG) will be offering 7.9 million shares between $15.50-$17.50. The company looks to price/go public on January 25, 2006.

Chipotle SEC Filings

Other Information:
Founded 1993

Market Cap: $536.2 Million
Revenues: $582 Million
Net Income: $12 Million

Lead Underwriters: Morgan Stanley and SG Cowen

Google (GOOG) Oversold ???

Google (GOOG) looks oversold but the downside volume is not comforting. There seems to be some support around $390 a share. Time to buy some calls?

Preferred Stock List

For those of you looking to invest in preferred stock, I have found an excellent website. Quantum Online has a nice list. Yahoo Finance and some of the other online investing websites don't list preferred stocks separately. To use Quantum Online you must register for free and then click on "Income Lists" then click "All Preferred Stocks."

Good luck

Friday, January 20, 2006

Stock Market Correction

I am not surprised about the selloff in the market today. Once Japan had their big one day drop it was bound to happen in the US market. I think oil has a role in today's decline, but I believe options expiration played a larger role in the drop. Plus everyone knows how most traders think. When something starts dropping they think it's going to zero, panic, and then sell. I don't think this a buying opportunity. Forward guidance for earnings needs to above expectations for the market to advance further. Gold, energy, select healthcare, and select technology stocks will be good longs in 2006.

Thursday, January 19, 2006

Lehman Brothers Cup/Saucer & Handle

Brokerage stock Lehman Brothers (LEH) is breaking out today to all-time highs. A nice cup and handle chart has formed. Keep an eye on it.

Note: I am long Lehman Brothers (LEH)

Wednesday, January 18, 2006

Earnings: My Take

The recent earnings reports have been disappointing but should not be all that concerning or surprising. Intel is losing market share to AMD and it can be clearly seen in each of their Q4 earnings reports. Tech business seems good considering AMD's, IBM's, and Apple's recent earnings reports.

The bad earnings from the banks is expected with a flat/inverted yield curve and a housing bubble.

Tuesday, January 17, 2006

Intel Misses Earnings

Intel (INTC) missed Wall-Street estimates of $0.43 and reported $0.40 for Q4. AMD and other chip stocks are trading slightly lower in after hours trading. Intel's stock is down 7% in after hours trading.

IBM (IBM) beat estimates of $2.11 vs. $1.94 (estimate).

Keep an eye on Yahoo (YHOO) which reports at 5 PM ET.

Monday, January 16, 2006

Stocks Reporting Earnings

These are the widely held stocks reporting after the close on Tuesday. Stocks will react to the Intel's earnings, so I won't be doing any trading. It is also options expiration week creating more volatility.

Intel $0.43
IBM $1.94
Linear Technology $0.35
Yahoo $0.17

Friday, January 13, 2006

Betting on Bema (BGO)

I sold my remaining shares of the Nasdaq Stock Market (NDAQ) and rolled that money into Bema Gold (BGO). Gold has been hot in 2006 and I believe gold stocks can continue their run. Just like with the Oil and Gas M&A in 2005, gold companies will be doing the same in 2006. Bema Gold is an excellent takeover candidate, which is under heavy accumulation.

Thursday, January 12, 2006

Waiting for More Selling

My next purchase will probably be a gold stock on weakness. Goldcorp (GG) looks overbought.

Other Gold Stocks that I am watching:

Bema Gold (BGO)
Glamis Gold (GLG)
Meridian Gold (MDG)
Randgold Resources (GOLD)

Wednesday, January 11, 2006

Guidant Takes J&J's Revised Bid

Guidant (GDT) accepted a revised bid from Johnson and Johnson (JNJ). J&J will pay $23.3 for Guidant, which is lower than the $25 billion bid from Boston Scientific (BSX). J&J's bid is higher than their previous offer of $21.5 billion in cash and stock. Look for Guidant's stock to sell off a bit Thursday morning and keep an eye of St. Jude Medical (STJ) and Medtronic (MDT) to trade higher on the news.

Technology Stocks Leading Market

Technology stocks continue to lead the market higher along with oil service and the brokers. Lehman Brothers (LEH) and Bear Stearns (BSC) hit an all time high today. Merrill Lynch (MER) is at a 52 week high. I hate to say it but I say the Yahoo (YHOO) pullback coming. While watching the tape it was mostly trading in small 100 and 200 share lots while advancing. A sign to me that it has little institutional support above $41. While AMD (AMD) had many large lots (30K, 50K, 150K) while the stock continues to outperform Intel (INTC). Lots of good action in Broadcom (BRCM) (UBS upgrade) today.

Long: LEH, AMD, and BRCM.
Short: None
No Position: BSC, MER, YHOO, INTC

Monday, January 09, 2006

Dow 11,000 And More

If you haven't caught the news yet, the Dow closed above 11,000 for the first time since June of 2001. If I got a dollar for every time CNBC said Dow 11,000 today I would be rich.

Anyways with Dow 11,000 aside, Some of my stocks have made nice moves since January first. Cerner (CERN) jumped today ahead of its 2 for 1 stock split. In other recent transactions, my additional purchase of Broadcom (BRCM) and new position in Marvell Technology (MRVL) have paid off quite nicely. On the other hand, I screwed up the Goldman Sachs (GS) Jan 125 call. I was too quick to cut my losses. I can't worry about past mistakes and must continue to find winners like BRCM, MRVL, and CERN. I am looking to add to my position in New River Pharma (NRPH) on a pullback.

Good Luck and Keep Trading!

No Position in GS

Stock Watch: Quality Systems (QSII)

Take a look at Quality Systems' (QSII) chart. The recent move up has been with light volume, generally a bearish sign. I am looking to get into the stock but would like to see a little more volume as it moves up.

Friday, January 06, 2006

Stocks Making A Nice Move

Not a bad start for the stock market in 2006. Tech, energy, and metals all leading the charge. Homebuilders look weak, glad I am out of Lennar (LEN). I am ready to commit more capital if the Dow can breakthrough 10,970 on heavy volume.

Thursday, January 05, 2006

Trade Update: Broadcom (BRCM)

I added to my position in Broadcom (BRCM) this morning. This will make Broadcom (BRCM) my second largest position in my portfolio. It is nice to see the stock finally break $50 a share. Earnings should grow between 15-30% at Broadcom for 2005 and 2006.

Option Trade Update

I quickly cut my losses on the Goldman Sachs (GS) option trade. It is one of the few stocks that has not acted well in 2006. I screwed up and I admit that I made a mistake.
So far the Marvell Technology (MRVL) and Cerner (CERN) trades have worked in my favor. Right now I am eyeing Broadcom (BRCM) and contemplating whether or not to add to my position.

Wednesday, January 04, 2006

Option Trade

Bought a Goldman Sachs (GS) Jan $125 Call Option. I believe the stock is oversold compared to the broader market.

Tuesday, January 03, 2006

Are Stock Splits Good ?

I have never been a big fan of stock splits but the data out of the University of Illinois is compelling for at least me to reconsider my anti-stock split mentality.

"David Ikenberry of the University of Illinois in Champaign found that stocks rose 3.5 percent in the trading session following a split announcement, and gained another 9 percentage points more than similar stocks in the next year. The average number of shareholders in a company rose 20 percent in the 12 months after a split, according to a 2004 paper by Ravi Dhar and William Goetzmann of the Yale School of Management and Ning Zhu of the University of California at Davis."

No matter how you feel about stock splits; the article from Bloomberg is an interesting read.

Ishares Africa (EZA) Cup and Handle

I am kicking myself on this one (EZA). Missed the Cup and Handle at $90 when I was looking at the chart 12% ago. This ETF is a big metals play.

Tesoro (TSO) Looking Overbought

I am long Tesoro (TSO) but I am feeling it is starting to get overbought. Valero (VLO) still looks okay but some of the other energy stocks look short term overbought.

Stock Purchase: Marvell Technology (MRVL)

I bought some shares of Marvell Technology (MRVL) this morning for a separate account that I don't track on the blog. I am testing out using more technical analysis and felt that $56 was the proper buy point.

For the account that I track on the blog I am waiting for Gold to pull back. I am a little frustrated with Goldcorp (GG) that I have been waiting to buy. The stock refuses to pull back and is up over 7% today. I guess I should have bought last week.

Monday, January 02, 2006

2006 Media Predictions: A Google PC ?

The LA Times ran an interesting article that I suggest you read. Some of the speculations are that Microsoft (MSFT) might make a bid for Yahoo (YHOO) to strengthen its internet search. Another predication is a cheap PC or laptop produced by Google (GOOG) exclusively for Wal-Mart (WMT). I believe US internet growth will be driven by cheap PC's and lower broadband internet costs. All sounds very interesting.

Stock Chart: Saint Jude Medical (STJ)

Looks like St. Jude (STJ) is ready for a bounce off the 50 day moving average. Keep an eye on it over the next couple of days.

Good luck to all in 2006! It should be interesting how the first few weeks of January are for the stock market.

Sunday, January 01, 2006

Investment Portfolio Recap 2005

Well 2005 turned out to be a disappointing year for the US indices but I was still able to return over 10%. Here is how the books closed on my account for 2005.

2005 Return: 10.50%
(Includes Dividends, Commissions, & Option Trading)

Portfolio Breakdown:
Cerner (CERN) 12.52%
Chesapeake Energy (CHK) 9.47%
Titanium Metals (TIE) 7.26%
Altria (MO) 6.85%
Banco Bradesco (BBD) 6.69%
Citigroup (C) 6.68%
Gilead Sciences (GILD) 6.03%
Motorola (MOT) 5.81%
Tesoro (TSO) 5.65%

Cash 5.42%
Other Stocks 27.62%

Goals For 2006:
  • Return At Least 10%
  • Be more disciplined: use charts more often
  • Make more concentrated investments: reduce total number of stocks