Friday, April 28, 2006

iShares Silver Trust (SLV) ETF

The iShares Silver Trust (SLV) ETF began trading today on the American Stock Exchange. Each share is equal to about 10 ounces of silver. The silver is kept in a vault much like the StreetTracks Gold Trust (GLD).

As a side note, Bema Gold (BGO) was upgraded today. It is a stock that I own and I know a few readers own because it is the one stock that I get the most questions about.

UBS Upgrades Metals, Microsoft Hit

Today UBS upgraded a few of the metal stocks (about time). The stocks upgraded include Freeport-McMoRan (FCX), Glamis Gold (GLG), Golden Star Resources (GSS), & Southern Copper (PCU). All were upgraded from "neutral" to "buy."

Microsoft (MSFT) is down after missing the quarter and guiding lower. You can also throw in a bunch of downgrades from CIBC, Morgan Stanley, Canaccord Adams, and Lehman Brothers. I think MSFT is a good long term value play. I personally, don't own it but I think you could see $30 a share one year from today.

Tuesday, April 25, 2006

After Bell Earnings

A couple of nice earnings reports from Checkfree (CKFR) and Encore (WIRE) both beating estimates. Amazon (AMZN) and Ezcorp. (EZPW) both disappointed.

From (AMZN) 36.05
(+1.41%) reported Q1 (Mar) earnings of $0.12 per share, excluding non-recurring items, in line with the Reuters Estimates consensus. Revenues rose 19.8% year/year to $2.28 bln (consensus $2.23 bln). Co issued in-line guidance, sees Q2 revenues of $2.03-2.18 bln (consensus $2.08 bln) and FY06 revenues of $9.95-10.5 bln, down from previous co guidance of $9.85-10.45 bln (consensus $10.06 bln). Co also stated that: "We are appealing a recent court decision that terminates our contract and are seeking a stay of the termination pending a decision on our appeal. While we believe we will prevail and that's claims lack merit, the timing and possible outcomes of this litigation are uncertain and possible effects of termination are not reflected in the guidance above. If we do not prevail, operating profit could be negatively impacted by as much as $50 million for the year, including by as much as $25 million for the second quarter."

Sunday, April 23, 2006

Oh Canada!!!

I remember going to Canada about five or six years ago and converting US dollars into Canadian dollars. At the time I was not knowledgeable about foreign exchange but I do remember things being "cheaper" in Canada. A nice dinner cost $80 Canadian dollars but when converted back into US currency the meal was much cheaper. I know for a fact that the Toronto Blue Jays paid and still pay their baseball players in American dollars. While their revenue continues to be primarily in Canadian dollars. This was something they always complained about. I don't think they will be complaining much longer.

The first chart compares the iShares Canada ETF (EWC) (Up 100% in 5 years), the Canadian dollar, and the S&P 500.
The second chart is of one Canadian dollar to US currency over the past five years.

Saturday, April 22, 2006

Just Pawn It!

Roberto over at NasdaqTrader brought to my attention that Pawn Shop stocks have been on fire lately. The three big ones are First Cash Financial Services (FCFS), EZCorp (EZPW), and Cash America (CSH). Below is some research I did on the three companies.

For comparison Walmart and Target had operating margins of 6.5% and 8.7% respectively in Q4 2005.
Just a reminder that gross profit margin measures a retailers markup over wholesale. The higher the better, unless you are a discount store like Walmart.

Growth Drivers
1. Higher spot gold prices
2. Reduced "holding" Period from 90 days to 60 Days
3. Higher gas prices, higher utility bills, & people needing a cash advance
4. Acquisitions
5. Franchising opportunities.

First Cash (FCFS)
Operating Margin = 21.5%
Gross Profit Margin = 41.0%

Cash America (CSH)
Operating Margin = 19.1%
Gross Profit Margin = 38.7%

"The company's pawn division has been benefiting in the March quarter from the robust merchandise sales and healthy scrap gold margins, the analysts say. EZCORP has gradually decreased its loan term from 90 days to 60 days, which the analysts believe is boosting the company’s sales."
Favored by IBD: Accumulation Distribution = A
Operating Margin = 13.6%
Gross Profit Margin = 66.1%

Other Cash Advance Stock: ACE Cash Express Inc. (AACE), Dollar Financial Corp. (DLLR)

Friday, April 21, 2006


Do you love the CANSLIM investing style? Well there's a mutual fund that follows the Investors Business Daily's "CANSLIM Select Group." The fund was launched in 2005 by Duncan-Hurst. I think the fundis worth a look for the growth part of your portfolio.

Expense Ratio: 1.70%
Minimum Investment: $2500
Ticker: (CSSGX)

Best Trade of 2005

I have made plenty of costly mistakes in my trading career. But my best trade of 2005 was selling Tyco (TYC) for a loss and buying Titanium Metals (TIE) on October 14, 2005. I bought two days after Long Bow upgraded Titanium Metals. They subsequently downgraded the stock on November 23, 2005 to neutral from buy. TIE closed at $28 after being downgraded. It is now over $63. TIE split 2 for 1 twice in 2005 and in May it will be twice for 2006. So is it time to sell? Are splits a sign of a top? We will have to wait and see. TIE is enjoying the great commodity bull run.

Thursday, April 20, 2006

Google & Broadcom Beat, Sandisk Misses

Plenty of action the past couple of days. How about the one day $2 drop in the price of silver. I would give the metals one more down day and then I would begin buying. My favorite names that I don't own are: (FCX), (GG), (GOLD), (FRG), & (NXG).
I am long (SLW) & (BGO).

Did you get played by the analysts of Portal Player (PLAY)?
PortalPlayer PLAY Stanford Research Buy » Sell ($14)
PortalPlayer PLAY Credit Suisse Outperform » Underperform
PortalPlayer PLAY Longbow Buy » Neutral
PortalPlayer PLAY JMP Securities Mkt Outperform » Mkt Perform
PortalPlayer PLAY Jefferies & Co Buy » Sell ($36»$10)
PortalPlayer PLAY Friedman Billings Mkt Perform » Underperform ($24 »$10)


Google (GOOG) 439.50
(+5.90%) Excluding non-recurring items and stock based comp expense, Google (GOOG) reported Q1 (Mar) earnings of $2.29 per share, $0.31 better than the Reuters Estimates consensus. Total revenues including Traffic Acquisition Costs rose 79.1% year/year to $2.25 bln vs. the $2.15 bln consensus. Revenues excluding Traffic Acquisition Costs came in at $1.527 bln vs. $1.44 bln First Call consensus. CEO Schmidt comments, "We are driving this growth through investments in our infrastructure and our people, product innovations that attract new users, and relationships with advertisers and partners around the world. The strength of our business model gives us the opportunity to invest in our business, allowing us to maintain and grow our market leadership."

SanDisk (SNDK) 62.19
(-5.11%) Co reported Q1 (Mar) earnings of $0.44 per share, excluding non-recurring items, a penny worse than the Reuters Estimates consensus of $0.45. Total revenues rose 38.2% year/year to $623.3 mln (consensus $623.9 mln); co reported gross margin 38% vs. 39.3 street expectation.

Broadcom(BRCM) 46.25
(+1.05%) Broadcom reported Q1 (Mar) pro forma earnings of $0.36 per share, which includes non-recurring charges and gains that analysts' excluded from their estimates as well as stock based comp expense that analysts were including in their estimates. After adding back in the stock-based compensation expense, BRCM reported earnings of approximately $0.22 per share, but it's not clear if that is comparable to the Reuters Estimates consensus of $0.19. Total revenues rose 63.6% year/year to $900.6 mln (consensus $870.7 mln). Looking ahead, BRCM sees Q2 revenues up 3-5% sequentially, or roughly $928-946 mln (consensus $906.0 mln).

Nasdaq Stock Market (NDAQ) 42.59
(+0.83%) NDAQ reported Q1 (Mar) earnings of $0.16 per share, which includes $13.6 mln in expenses and may not be comparable to the Reuters Estimates consensus of $0.11. Revenues rose 119.9% year/year to $396.2 mln (consensus $359.8 mln); First Call consensus is $404 mln ( note: both revenue estimates are from a single analyst). To primarily pay down debt incurred to purchase the strategic stake in the London Stock Exchange, NASDAQ intends to proceed with a common stock offering.

Wednesday, April 19, 2006

Stocks Reporting Earnings

Yesterday the earnings were "better than expected." Today after the close Ebay (EBAY) and Juniper (JNPR) disappointed. Apple (AAPL), Freescale (FSL), Silver Wheaton (SLW), and Etrade (ET) reported better than expected earnings. Intel (INTC) reported inline.

* 10-yr note -11/32 at 5.03%
* Earnings reports better than expected (e.g. IBM, TXN, YHOO, PFE, KO, HON, UTX, JPM)
* March core CPI rose stronger than expected 0.3%, stalling enthusiasm about whether or not the Fed will end its tightening after just one more hike at its May 10 meeting
* Oil prices closed at new record above $72/pbl following an unexpected draw down in crude inventories

Note: I am long KO, SLW, & ET

Tuesday, April 18, 2006

Yahoo (YHOO) Shares Up?

Shares of Yahoo (YHOO) are up over 5% in after hours trading after producing an in-line quarter. Massive stock option grants hurt the bottom line in Q1. Yahoo beat revenue estimates of $1.08 billion ($1.09 billion). Yahoo guided revenue for the rest of the year in-line with estimates.

Personally, this stock has been hammered (Down 20% in 2006) and the fact that it met estimates was celebration for shareholders. There is nothing exciting about a company that loves to give executives enormous stock option plans while leaving shareholders in the dark with poor bottom line performance.

Note: I have no position in Yahoo

Monday, April 17, 2006

Border Security Stocks

Two interesting US Border Security stocks are Flir Systems (FLIR) and LaserCard Corp (LCRD). Flir makes thermal imaging systems and infrared camera systems. Some of their cameras are used in airports but they are also used by the military and the US Border Patrol. One of the greatest dangers to Border Patrol is the pitch black nights in the desert. The only way they can safely perform their jobs is with thermal imaging.

LaserCard makes optical memory "smart" identification cards. This would be a good play on a guest worker progam.

The US Border Patrol has been greatly underfunded for decades and FLIR and LaserCard could benefit from additional appropriations.

Note: I have no position in LCRD or FLIR

Commodities Stay Strong

Gold, silver and copper all continue to move higher. If you are diversified, today should not have been an ugly day. Citigroup put together a nice quarter beating estimates by $0.09. Schwab also had a very nice quarter. I am going to continue to overweight the metals until the trend is broken.

Note: I am long Citigroup (C)

Saturday, April 15, 2006

An International Stock Worth Researching

The first international stock that I recently came across is Ternium S.A. ADR (TX). Ternium is a steel producer in Latin America and recently came public in February. If you bought Tenaris (TS) at the IPO you would be doing really well right about now. I am not saying Ternium is the next Tenaris but the numbers look good.

Return on Equity
Steel & Iron Industry Average: 33.3% (Yahoo Finance)
Tenaris ROE = 42.6% (Up 281% in Past 12 Months)
Ternium ROE = 49.1%

Wednesday, April 12, 2006

AMD & Spansion Beat Estimates

Both AMD and Spansion (SPSN) beat estimates. Spansion guided higher and the stock is trading up about a dollar in after hours. While AMD guided a bit lower for the second quarter and the stock is off about a dollar. Nothing to get excited about.

Is Tech Healthy?

I would wait until AMD and Spansion (SPSN) report after the bell today to get a better gauge on how the technology companies are doing. AMD has become one of the better indicators for the technology sector. If AMD does blowout the quarter then you should see further price appreciation in Seagate (STX), Western Digital (WDC), Rackable Systems (RACK), and HP (HPQ).

Tuesday, April 11, 2006

Metals Look Good

The fundamentals of gold and silver stocks on a longer term basis look good. Some of my favorites are FCX, GG, BGO, NXG, & SLW. I would look to add to my position if there is any weakness tomorrow. A lot of the earnings expectations are too low in my opinion. Precious metal stocks are underowned by most mutual funds. A lot like how the energy stocks were underowned by many of the mutual funds in 2004 and early 2005. I think GG, FCX, and NEM will become popular with funds because of their large market caps. Newmont (NEM) reminds me a lot of Exxon (XOM) in the gold sector. And SLW reminds me alot of Chesapeake Energy (CHK).

Note: I am long BGO & SLW

Saturday, April 08, 2006

Gold and Metals Signaling Trouble Ahead

The more I think about the increase in the price of gold and the other metals the more it makes me wonder where the US market is going. Roberto over at Nasdaqtrader has been bullish on gold for sometime and hints the rise in gold to a future world conflict (Iran, North Korea, terrorist attack...). I would pay more attention to unusual put/cat volume in the airlines, gold stocks, and insurance stocks. Roger Wiegand also has an interesting view on the metal stocks. His article is worth a read.

The $9 trillion dollars in US debt and the Fed policy would not make me a buyer of bills, bonds, or notes. The US in my opinion cannot afford to get involved in another war. We would need significant financial support from other nations. If we were to engage in another war I believe the US dollar will weaken significantly.

All this makes me a buyer of gold. If we can get a pullback in the metals I would be a buyer of Silver Wheaton (SLW), Goldcorp (GG), Bema Gold (BGO), or Northgate Minerals Corp. (NXG). I believe Northgate is one of the most undervaled metal stocks on the market. I already have over 27% of my portfolio in three metal stocks (BGO, TIE, & SLW).

Mining for uranium? Take a look at Fronteer Development Group (FRG)

I currently own shares of Bema Gold (BGO), Silver Wheaton (SLW), and Titanium Metals (TIE)

Thursday, April 06, 2006

Lehman Brothers Breaks $150

Congratulations to those holding Lehman Brothers (LEH), Goldman Sachs, or Bear Stearns. All three hit all-time highs today. Lehman was able to break the $150 price level. LEH announced a 2-for-1 stock split today. On March 3rd I declared a race to $150 per share between Lehman and Goldman Sachs (GS). Goldman broke $150 on March 18th. Bear Stearns (BSC) is playing catch-up, now nearing $145 per share.

Note: I am long (LEH)

Gold Stocks Breaking Out

Gold stocks continue to climb as the price of gold broke $600 an ounce on the NYMEX today. The three gold stocks that I have been watching for technical breakouts are (GG), (FCX), and (BGO) (which I own). The OBV looks very solid for all three gold stocks. FCX also has some exposure to the price of copper, not just gold.

Note: I am long Bema Gold (BGO)

Wednesday, April 05, 2006

Looking for Asian Exposure

My two favorite ways to play the Asian markets are through the iShares South Korea Index (EWY) and the iShares MSCI Japan Index (EWJ). 24% of the EWY is in Samsung, which is the only way for US investors to buy Samsung other than through a mutual fund or on the international market. I would let both the EWJ and EWY ETFs come in a bit before buying.

Tuesday, April 04, 2006

Market Continues Upward & Google Hits $400

The markets look pretty good and I believe a lot of people still have a lot of money on the sidelines. Google (GOOG) finally closed above $400 for the first time since February. Funny how the bearish Barron's article about Google was the "bottom" of 2006 for Google.