Showing posts from June, 2009

IB Net Payout Yields Model

Trade: Added Agrium

Bought Agrium (AGU) today for all 3 portfolios. AGU provides an investment for the portfolios that is tied into the agriculture market. A sector that has been greatly lagging and the prices are finally right. The Growth Portfolio is invested in FCStone (FCSX) that benefits greatly from the ag market, but AGU gives the portfolio its only real investment in the sector. Agriculture is a great place to invest now since stock prices have fallen greatly but the end user demand has only fallen in the short term. Low inventory levels of corn compared to long term fast growing demand especially from China and India and even renewable fuels such as the ethanol mandates in the US should considerably increase the demand for the fertilizer products of AGU. Agrium engages into retailing of agricultural products and services. It also produces and markets agricultural nutrients and supplies fertilizers in North America. Agrium operates through three segments: Retail, Wholesale and Advanced Technologie

Trade: Swapped More CSX for UPS

For transporters, the cost of gas will be a 'driving' force in future profits and the ability to transport more commodities and less retail products will be beneficial. For that fact, Stone Fox has decided to swap shares in UPS for a bigger focus on CSX. Both were favorites of the NetPayout Yield Portfolio for decent dividends and a history of buybacks. Unfortunately for UPS whether public perception or reality, the cost of fuel will likely continue to hinder the amount of products shipped going forward. Even if it doesn't, its likely to hold the price of the stock down and competition with FedEx and USPS is likely to hold down profit growth regardless. Not to mention that legal documents that used to be delivered via Express services will likely move to a sort of digital format reducing the need for UPS services because it can be done cheaper and is more economical and even greener. Fortunately for CSX, the increasing cost of gas and likelihood that it will stay higher inc

Gafisa Technicals Turn Bullish (For Now)

At Stone Fox, we're not huge technial analysts, but this market has gotten to the point that pays to check them out. Gafisa ( GFA ) has been one of our favorite picks so a while due to booming demand in Brazil for homes due to GDP growth and a huge lack of housing. As of close today, GFA as a very interesting technical setup. We're looking at a rare situation where the 20 EMA and 50 EMA are convering on the 200 EMA from opposite directions so this is about to make a very bullish or bearish move. At a closing price of $16.52, GFA now sits on the bullish side above all the moving averages with the 50 EMA now within reach of making a bullish cross of the 200 EMA. Unfortunately, the 20 EMA has come back down and any turn south could threaten to make this bullish scenario today very bearish. With the underpinnings of the world economy starting to show growth again and China being bullish on all things commodity related it seems so unlikely that a stock like GFA would suddenly turn b

Tween Brands Merges with Dress Barn

Tween Brands is up 30% today on news of the all stock deal with Dress Barn (DBRN). Its interesting that DBRN is up 10%+ on the news. Its very uncommon for an acquirer to increase on news of a purchase. Our take is that the market sees this as a steal by DBRN considering they were able to buy a premium brand for about 85% lower then its peak valuation. My only concern is that TWB has some stuff hiding in the closet for their BOD to agree to such a minimal price of $137M when they still have sales in the $1B range. Being that its an all stock deal they do still get the opportunity to participate in any further market rallies and to any rebound in the Justice line, though on a very diluted basis. In general your getting mostly an investment in DBRN going forward. Highlights of the deal: Stock-for-stock merger expected to be neutral to earnings in the first full year of combined operations and accretive thereafter Dress Barn, Inc. to add 908 Justice

Alvarion Signs Another Big Contract

This time they've one a deal in Italy. Aria owns a nationwide network so this is likely one of the $20M+ deals that ALVR management continuously discuss. ALVR continues to remain a very cheap stock especially now that they've announced 2 major contracts. Aria currently holds nationwide WiMAX licenses at the 3.5 GHz frequency bands in Italy. By using Alvarion’s Open WiMAX solution, Aria will be able to build a state of the art network with exceptional coverage to meet the growing demand for broadband services in the country. Analyst from CL King provides his view. While we agree the deal is likely worth more then $20M, we don't agree in how the analyst only comes to a target price of $5. Its easily worth $5 now with a target price more in the range of $10. The order is from Aria SPA, an Italian wireless Internet service provider. Financial details were not disclosed. However, Lawrence M. Harris, an analyst with CL King & Associates, said in a note to investors the valu

Stat of the Day: Richmond Fed Manufacturing Up Again

For all the noise about whether the economy is recovering or not. Whether we're seeing actually good news or just less bad. The regional manufacturing report is actually seeing good news. The report for June came in at +6 which means they are actually experiencing growth. Heck, I didn't even catch that they reported growth in May as well since this isn't one of the major regionals followed. Accounting for 9% of the manufacturing base it covers the central Atlantic and includes states such as the Carolinas and Virgina. This is much more then a 'green shoot'. This is actual recovery. Looking at the graph you actually can see a V shaped recovery which is exactly what most experts say isn't going to happen. The main highlights are that new orders increased at a fast clip, employment improved dramatically especially the hours worked part, and backlogs were up for the first time since Aug 2007. Now we just need the other regions to join in the recovery. Overview Manu

Growth Portfolio Ends First Year with 10.5% Outperformance

After a wild year that saw the market drop nearly 30%, Stone Fox is pleased to report that our Growth Portfolio outperformed the market by over 10.5%. The figure below includes 2% fees while Stone Fox only charges 1% hence the difference. Considering the Growth Portfolio typically outperforms in up markets it is encouraging that it did relatively well this last year. In fact, over the last 3-6 month periods it is up 30% more then the market. In real terms though, it was a disappointing year as nobody wants to lose 19% of their money no matter what the market does. We look forward to a much better 2nd year though it's started off just like last year considering the markets dropped 3% today. Lets just hope this isn't a repeat of last year. RETURNS Last Week -1.17% Last Month 7.57% Last 3 Months 52.41% Last 6 Months 35.44% Last 12 Months -19.98% Last 2 Years N/A Last 3 Years N/A Last 5 Years N/

Shifting of the Financial Center to Asia

Interesting comments from Jim Rogers. He has been a big proponent of the shifting landscape of the world for a while now and even moved his family to Singapore in 2007. Asia is the likely candidate if the emergence of China, India, and even Indonesia continues. In general though, its all the BRIIC locations that will cause the shift. Likewise Stone Fox has been heavy investors in BRIC countries for a while now. The shift is inevitable due to the sheer size of the populations in these countries. His quote below: Throughout history, the center of the world has shifted to where the capital is, where the assets are. You don't see any period in history where things are shifting to the debtors, and America's the largest debtor nation in the history of the world. Unless something's different this time, unless the world's changed very very dramatically, the center of the influence, the center of the power, the center of the earth, the center of the globe, is going to be shifti

Oversold Market

Unfortunately our portfolios weren't set up for an oversold condition in the market, but when the indicies drop 2.5% because the World Bank declares that the world GDP will be worse then they expected back in March you know the market has reached near term lows. More likely the market just wanted to take the path of least resistance down to the 50EMA around 897. Moving below 900 scares alot of people but it typically means nothing. Just about anybody following the market knows that the world economies have stabilized dramatically since March so any group claiming worse numbers now is because their system is using lagging indicators for prediction. Most leading indicators are up dramatically. Just over a week ago, we were looking for a breakout on the SP500 above the 940 range to signal a opportunity to make a bullish run to the 1,200 level. Well that didn't happen and looking back it probably isn't that surprising that the market took this chance to retest some levels and &

Growth Portfolio Closes out 1st Year on

Its been a wild and crazy year trying to track my investment concepts on On June 19th last year, I decided to start using that site to track my results to provide independent 3rd party verification to potential investors. If I'd known the market would be done 30% in that time period I might have found another job. The year started out with the portfolio underperforming, but it has ended much stronger. Constant reallocation into stocks that would benefit on an eventual rebound has finally paid off. On a relative basis, the Growth Portfolio should exceed the SP500 by 10% points. Not bad, but the results are still disappointing considering a loss that should be around 20%. In the industry we typically compare results to benchmarks, but losing money is losing money not matter how much better then the markets. I'll have updates this weekend on all 3 Portfolios including the Hedged Growth Portfolio that is up for the 9 month period of tracking. An incredible feat fo

How to Avoid Too Big Too Fail

Really seems incredibly simple. The answer is clearly to prevent banks from getting 'Too Big" or making the requirements that bigger banks have more capital or take less risk. This plan by Vernon Hill or at seems too simple to ever be approved. My only concern is how to prevent these huge banks from taking on more risk ala AIG when they must have a larger percentage of capital. In a perfect world the regulators would prevent that by time and time again they are asleep at the wheel. Posted in its entirety since it isn't that long or complicated....... The financial crisis has proven yet again (as if anyone should need further convincing) that U.S. financial institutions implicitly deemed “too big to fail” tend also to be too big to manage. That creates an unacceptable systemic risk. Citigroup, AIG, Wachovia, Washington Mutual, and Bank of America all provide good examples of the bad things that can happen when an institution becomes so large that manage

Stat of the Day: Philly Fed Index Outlook Surges

As this economy has seen in many other reports, the outlook for the Philly Fed Index surged to 15 year highs. The last time this Index saw these same levels for the 6 month outlook was at the end of the 2003 recession. The current activity was also one of the highest seen in the last 19 months. And many a analyst has claimed that 'green shoots' are becoming 'yellow weeds' well the outlook data just doesn't support that theory. Broad indicators of future activity showed significant improvement this month. The future general activity index remained positive for the sixth consecutive month and increased markedly from 47.5 in May to 60.1, its highest reading since September 2003 The survey's broadest measure of manufacturing conditions, the diffusion index of current activity, increased from -22.6 in May to -2.2 this month, its highest reading since September 2008 when the index was positive for one month (the index has been negative for 18 of the past 19 months, a

Alvarion Signs Largest Contract in History

As hinted at yesterday including on my instablog, Alvarion (ALVR) officially announced a deal that will exceed $100M over 5 years. Now the deal is with Open Range instead of Clearwire which is a company I've never heard of so I was skeptical at first. After reading up on them and understanding that a large part of the funds is coming from the Rural Broadband portion of the stimulus plan, I'm a lot more comfortable like the market that this is a solid deal. Not to mention that ALVR has a history of being conservative. Oddly I was planning on doing a writeup about the $7M Nigerian deal that they announced a few weeks back. That deal was important to me because of the growing importance of Africa and specifically Nigeria. It also had the potential to ba a $20M deal down the road. This deal though trumps that in a large way. It also gives ALVR some exposure to the US market which always seems what the stock market wants. Odd, considering that the emerging market story has been h

Savient Pharma gets Thumbs Up from FDA Panel

Savient (SVNT) got an overwhelming 14-1 approval from an FDA Panel today that reviewed their new gout drug named Krystexxa. This approval should alleviate most of the concern surrounding the feared side effects and allow for approval of the drug on 8/1/09. The stock was trading up some 25% in AH around $11.75. Savient Pharmaceuticals, Inc. (Nasdaq: SVNT - News ) announced today that the Arthritis Advisory Committee appointed by the U.S. Food and Drug Administration (FDA) recommended by a vote of 14 to 1 that KRYSTEXXA(TM) (pegloticase), a biologic PEGylated uricase enzyme, be granted marketing approval by the FDA for the treatment of refractory chronic gout. Refractory chronic gout or treatment failure gout (TFG) is gout in patients who have failed to normalize serum uric acid and whose signs and symptoms are inadequately controlled with conventional urate-lowering therapy at the maximum medically appropriate dose or for whom conventional urate-lowering therapy is contraindicated. Th

The Next BRIC: Indonesia

Most investors are familiar now with the BRIC notation standing for Brazil, Russia, India, and China as standing for the 4 economies with huge populations living on sub-standard per capita earnings, but huge political desires to lift themselves up to European or US standards. Based on the list below, all 4 countries have populations in the Top 10 in the world so its not surprising that a big movement in their per capita earnings combines with the population size could have a huge impact on the world. What is surprising is that several other countries like Indonesia, Pakistan, Bangladesh, and Nigeria appear on the Top 10 list, but aren't global economic powers. Morgan Stanley thinks that at least one of them should belong with the other growing global powers based on this snippet on Bloomberg . The country is Indonesia and to most peoples surprise they are the 4th most populated country in the world yet they only have the 19th largest economy. This only means more pressure on the li

Savient Pharma Soars on FDA Note

Savient Pharma (SVNT) has been in the Growth Portfolio for several months after it and other small biotechs like Rigel Pharma (RIGL) didn't surge with the soaring market in March. Luckily both have been hot in June. SVNT had a positive note from the FDA today. See this AP note . SVNT has the drug Krystexxa up for FDA panel review on Tuesday. Analysts have been very divided on the approval of this drug as it clearly helps treat gout, but fears exist over the potential severe side effects. The biggest support for Krystexxa is that the population largely impacted by gout typically has severe medical issues beyond the gout problem so it isn't all that surprising to have patients see these cardiac issues whether they take the drug or not. The FDA note seems to signal that the benefits of this drug out weigh the side effects. Logically they'd get approval with some sort of label warning so it has been perplexing that several analysts had such negative comments such as the stock d

Stat of the Day: Ratio Between Oil and Nat Gas Hits 18 Year High

CNBC has a little article on this ratio going back nearly 20 years. The ratio historically averages in the 6-8 range and anything outside that range suggests that one commodity has moved to much or the other is lagging. When ratio hits a 20 year high its something to take note of. Basically the use of oil is now so much more then natural gas that anybody possibly able to switch will whether using compressed natural gas in vehicles or such which in turn helps rebalance the price ratio. It's important to note that the crossover of use is very limited. Natural Gas is a domestic fuel not widely transported beyond the borders of the US. Any pickup in demand will have to come from the US and the growth in compressed natural gas being delivered to the US has increased the worry that pressure will exist on prices. Oil on the other is a global product where the prices are determined by the demand in China and Europe and the US. Supply can also be more impacted by political issues in OPEC o

Petrobras Deploys Riverbed Equip on Oil Platforms

While Stone Fox Capital has never been that big about investing in a stock based on individual customer deals, this win by Riverbed (RVBD) made us take notice. Petrobras (PBR) has become the global leader in oil exploration and one of the most respected companies in the world. The Deepwater oil that they've found recently has set off a huge capital expansion program into Deepwater drilling. For them to use RVBD Steelhead appliances on 40 Off-Shore Oil platforms is worth noting. The data collected from these platforms is mission critical and they'd likely spare all costs to find the best equipment around. They chose RVBD over likely competition from Cisco (CSCO) and all others in the industry and alternative sources of just hooking up more bandwidth. Best of Breed companies typically used Best of Breed vendors. RVBD has clearly set themselves apart from the competition. RVBD has been a favorite stock in our Growth Portfolio going back into 2008. They continue to shine and show

Rigel Pharma Target Set at $33

Rigel Pharma (RIGL) has been a investment for the Growth Portfolio for several months now. It's started to get some interest not that it's Arthritis drug is nearing the end of Phase II trials. This drug has blockbuster potential so it's amazing how cheap the stock got back earlier this year. Its also just about unheard of to see a price target suggesting a 230% gain and the stock only jumps 5%. The following information about the upgrade from Rodman & Renshaw was posted here . Rodman & Renshaw analyst Simos Simeonidis gave the stock an "Outperform" rating and expects shares to reach $33 over the next 12 months as the drug candidate R788 advances through development. It is currently in midstage clinical trials, with study data expected in July. The drug candidate has the potential to "become a significant player" in the rheumatoid arthritis market, he said, in a note to investors, citing its effectiveness so far in trials and oral administration.

Texas Instruments Raises Guidance

Texas Instruments (Txn) announced a very significant raise in guidance roughly an hour ago. They've gone from a very wide range to guiding at the very top if not higher then the previous range on revenue and earnings are now expected to soar beyond the prior estimates. They've evidently cut to the bone that any incremental increase in revenue will lead to sharply higher earnings. The new median range is 80% above the street estimates. TXN is not a market mover like it was back in the 90s, but they still should provide some nice upside to tech stocks tomorrow. It had been one of the worst performing stocks in the NetPayout Yield Portfolio, but this should help jazz up its returns. 4:30PM Texas Instruments raises Q2 outlook ( TXN ) : The company currently expects its financial results to fall within the following ranges: Revenue: $2.30 - $2.50 billion, First Call consensus is $2.21 bln, prior guidance was in the range of $1.95 - $2.40 billion; EPS: $0.14 - $0.22, First call cons

Buying Farmland Abroad

Very interesting article at about the huge transactions taking place in Farmland mainly surrounding Middle Eastern or China buyers of affordable, unproductive farmland in Africa. Most striking is the deal where Saudia Arabia is leasing land from Ethiopia and shipping the food back home. Some day this trend will likely reverse as Ethiopia catches onto the game and grows the food themselves and ships it to the Middle East for huge profits. Food is likely to be more scarce then oil/energy supplies in the future. Not to mention that the World Food Program provides Ethiopia with food that could just as easily get from the land they've just leased out. What about using that money for it instead as well? Hmm... All of these deals highlight the need for food in parts of the world and the available land in other parts. The investment increases in Sudan alone are enourmous. Stocks from farm equipment companies like Deere (DE), fertilizers like Potash (POT) and Mosiac (MOS), al

Hedged Growth Portfolio up 9% since 10/1/08 Inception

The Hedged Growth Portfolio has done exceptionally well. This portfolio outperformed nearly 99% of the portfolios on the website thru the 6 months ending March 31st. As of June 4th, the portfolio is up 9% and over 27% better when compared to the SP500. It'll be interesting to see how it performed over the 9 months ending June 30th. Too many funds are either all long or all short and would've underperformed the market during parts of the last 9 months while Hedged Growth has consistently done better. The concept of this portfolio is to keep pace with the market on up markets as it has in the last 6 months and to outperform during downturns which it did extremely well back in Oct and Nov. As you can see from the results posted from Marketocracy, this portfolio is on pace for a 38% annualized beating of the SP500. Not to shabby for just starting this concept. RETURNS Last Week 2.50% Last Month 2.47% Las

Huge Reversal in Natural Gas

After what appeared to be a very bearish Nat Gas inventory report this morning, Nat Gas (UNG) plunged. Notice though that it hit right around the recent lows and rallied hard. This huge reversal is usually a bullish signal that the shorts are out of ammo. It signals the all clear sign for longs and provides a nice tidy point for a stop loss. Notice the highest volume for the month on this ETF as well. Unfortunately we bought shares in the Growth and Hedged Growth funds yesterday instead of today. Even with the wild price swings our funds are up 2% on this position. Glad we didn't spend much time viewing them in the morning (down 10% might have depressed us).

Trade: Added Gafisa and Natural Gas

Quick update: Bought Gafisa (GFA) on the dip to $16.08 just around the 200EMA. See post on for more detials. Added to Growth Fund. Bought United States Natural Gas (UNG) just above $14 on the 10% pullback today. The disconnect between oil and natural gas is very high. If the economy is in fact going to recover, then UNG is the better play at these levels. Huge cutback in drilling combined with more industrial use could squeeze the prices higher. Added to both ther Growth and Hedged Growth Funds.

Trade: Sold Coventry Health

Sold Coventry Health (CVH) shortly after the open and not long after the Aetna warning. Aetna is in the similar health insurance sector and warned of much weaker results. Based on this and the not so promising future for health insurance due to pressures from Obama Administration I'm not bullish on the sector. We originally bought CVH based on cheap PEs and the desire for exposure to the healthcare sector with the market still in crisis. Unfortunately, we should've pulled the trigger at $20 close to the 200EMA. Luckily though we got out with a nice gain around $18. This sector is still cheap so we'll look to re-enter if the market gets hit hard. Edit 6/4: CVH initially rebounded yesterday making us wonder if the sell was prudent. Maybe Aetna wasn't that applicable to CVHs results. Maybe it'll hold the moving average after all. Well today, CVH sold off on a up 1% day and closed below the 20EMA at $18.10. This was a very bearish move and validates our sell. It's

Stat of the Day: Private Data Shows Building Soared in May

A private research firm names Sageworks published a report today picked up by Reuters showing that private firms increased building in May by a whopping 4.6%. It was significantly higher then the gains in March and April and let to the first 3 month increase in 6 months. Our great government was reporting construction numbers from April today. Aren't they efficient. Those construction numbers showed a larger then expected increase, but this report from Sageworks is even more bullish. One caveat though is that I know very little about the accuracy of this report or its history. Its a very bullish data point for CAT, MTW, and TEX. It also shows how the naysayers have been so wrong about this rally. The momentum just continues to feed on itself. The stock market goes up so more people buy stuff, then more stuff needs to be built, then the government reports turn out bullish, then the stock market goes up. This pattern continues until the Fed makes monetary changes to slow down the gr

Cisco and Travelers Added to the DOW

Not much of a surprise to see GM removed from the Dow Industrial average today with their BK filing, but I was surprised to see Citigroup (CIT) removed and replaced with Travelers (TRV). Both were long overdue, but the additions could be debated for a long time and highlights the weaknesses in owning indexes. In both cases, Dow Jones editors waited until the stock being removed had cratered and replaced them with stocks that help up relatively well in this economy. Definitely selling low and buying high. Also, they tend to lack the future growth prospects that one would want. Zacks has a good article about the better options for the index. Both Google (GOOG) and Monsanto (MON) would provide better growth over the next 10-20 years. We've been a big investor in Baidu (BIDU) instead of GOOG as it has the lions share of the China search market. Still both options are probably better for investors and give the index a better fill for the future economy instead of being so focused on th

Riverbed Surges to 52 Week High

Riverbed (RVBD) continues to move upwards as the market becomes more and more convinced that they have better products then new DOW component Cisco (CSCO) and Juniper Networks (JNPR). Only 50 or so NASDAQ stocks have hit 52 week highs today so its impressive indeed to be on that list. Though most companies like RVBD are still down 50%+ from the recent highs if not all time highs, RVBD was one of the first companies to bounce back. Stone Fox continues to hold RVBD as a likely candidate to eventually return to its highs in the low $50s.