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Showing posts from March, 2010

Hartford Financial Removes TARP Shackles, Looks to Breakout

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Just minutes ago, Hartford Financial announced that they has repaid the US Treasury the $3.4B that HIG had borrowed during the crisis. With this out of the way, the stock price should now be free to breakout above the current range. Looking at the chart $28.50 has been strong resistance so any solid break and close above it would signal a higher range going forward.

The Hartford paid $3.4 billion to the U.S. Treasury to repurchase the preferred stock, plus a final dividend payment of about $21.7 million. The Hartford funded the repurchase with proceeds from its recent equity and debt offerings, as well as from available resources. The U.S. Treasury continues to hold warrants to purchase approximately 52 million shares of The Hartford’s common stock at an initial exercise price of $9.79 per share. The company does not intend to repurchase the warrants from the U.S. Treasury.

OPEC Revives Projects Now that Oil Prices Have Recovered

Considering that oil has traded in the $80s range for months now, it shouldn't be that surprising that OPEC would revive projects shut down in 2008-2009. Apparently ever project is now moving forward though that wasn't conveyed by Foster Wheeler (FWLT) and other energy engineering firms in their Q4 reports. Maybe its a sign that we'll see some awards in the next 6 months.

Today OPEC announced that some 150 projects are now moving forward to increase annual production by 12M barrels by 2030. Of those projects, some 35 were canceled/delayed and have now been restarted (other reports suggested that 135 projects were delayed). Either way the E&C firms should see higher order rates in the near future if true.

Another big issue during the crisis was financing and I'd expect with oil maintaining at these levels that will soon disappear as an issue as well.

Members of Opec, the oil exporters’ group, have revived the oil projects they put on hold when oil prices collapsed to c…

Synovus Smashed By Analyst Downgrade

Synovus Financial (SNV) was hit pretty hard today by the FBR analyst downgrade. The stock slid all the way down to $3.17 or over 8% at one point. Evidently the downgrade caught some investors off guard as it didn't highlight anything new and basically just offered a different opinion to that provided by management. One that should've been a concern of any investor.

FBR claimed that SNV wouldn't be profitable this year as management claimed and that the bank wouldn't likely be bought out. Not really sure who would buy an unprofitable regional bank on a buyout hopes other then small retail investors. The whole reason to buy SNV is that they trade very cheaply compared to normalized earnings (see Tom Brown for more detail).

With the economy turning and the real estate sector likely bottoming out, I'm not sure why FBR is so eager to fight the trend. Clearly management at SNV is too be questioned so I think the fact that it only trades at $3.25 now confirms that concern. …

Tax Advantage of Stock Buybacks Should be Favored with Higher Taxes

Some good points today from Barry James of James Advantage Funds. With the expected repeal of the Bush Tax Cuts and the future Medicare Tax of 3.8% on unearned income will favor stocks that buyback stock over dividends. During the crushing losses in the 2008 bear market, we've alot of negative comments about companies that bought stock at much higher prices. It seemed alot of investors were leaning back towards dividends, but the higher taxes could very well favor companies that buyback stocks as investors won't be taxed on those.

Our Net Payout Yield Portfolio has always sought a balance between dividends and buybacks to provide cash flow for clients from dividends but also to limit any tax burden with companies that buyback stock. Besides history has shown that the combined yield is much more predictive of returns then dividend alone. It very much appears that the buyback portion could shift back into focus starting in the 2nd half of this year.

In the past stocks like Caterpi…

New 52 Week Highs for Apple, AerCap Holdings, and Sears Holdings

After such a reversal yesterday its surprising to see the market up much less 3 stocks that we own in the Growth and Opportunistic Portfolios hitting new 52 week highs today. Especially considering the reversal on Apple (AAPL) yesterday seemed to foretell lower prices. AerCap (AER) and Sears Holdings (SHLD) remain very cheap value plays while AAPL would be considered a cheap growth stock.

Not sure I'd chase them today, but it further highlights how stock selection can beat the market.

AerCap/Genesis Lease Merger Finalized Today

Finally the merger between AerCap Holdings (AER) and Genesis Lease (GLS) will be finalized today creating the largest independent airplane leasing company. Its also creates a earnings powerhouse. For 2010, they expect to earn well over $2 with the stock trading below $11 now. A PE of 5 is absurd now that global growth has returned and most of their customers should see growth even in the US market. Not to mention that 5 years earnings growth is placed at 12.5% meaning a fair valuation would be around $25.

The finalization of this merger should hopefully bring much more focus to how cheap the combined entity remains. Both stocks have rallied big time since the March 2009 lows, but they still remain insanely cheap on a historical basis. The risks of airlines going bankrupt is greatly reduced now that the financial crisis is largely over. Also, the inability of Boeing (BE) to produce its new plane has helped reduce the competition for their existing planes. It will now be years before tho…

Trade: Bought Liz Claiborne

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Had sold a portion of Liz Claiborne (LIZ) back in early March as the stock got overheated. With it continuing to hold above the 20EMA, we used the early morning selloff to purchase our positions back in the Growth and Opportunistic portfolios. Unfortunately we missed the early drop and had to settle for $7.01.

With support it will hopefully breakout of the double top around $7.5 on its next run. After all it traded around $20 pre-Lehman and the retail sector is heating up. Its time for the CEO to show some results.

Saks (SKS) is approaching those levels and Coach (COH) has already zoomed past the pre-Lehman disaster.


Gafisa Raises $598M Just Below the Closing Price

According to this report if accurate, Gafisa (GFA) got a good deal to close the offering just below the closing price on Sao Paulo at $12.5 reals. Of course the general market has been very strong and GFA has been held down because of this deal so it shouldn't be too surprising that it priced so close to the close. Guess it's too late but my currency conversions aren't coming up as close to the closing US price. Hmm....

Took a gamble yesterday and apparently we'll win out with this pricing. Some of the details of why we're very bullish on this stock.

About 20 percent of the proceeds from Sao Paulo-based Gafisa’s sale will go to acquisitions and 35 percent will be used to buy land for construction projects, the company said on its Web site. Gafisa canceled a planned share sale last year. The projected sales value for new projects started in 2010 will climb to as much as 5 billion reais from 2.3 billion reais a year earlier, following a “strong improvement in market c…

Trade: Bought Back Gafisa

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After just trimming our positions in Gafisa (GFA) on the 17th, we jumped back into a full position in the Growth Portfolio on the drop to the 200EMA. Also, added it to the Opportunistic Portfolio for the first time. The drop from $15 to $14 didn't last long. Our average purchase price was around $14.13 and the stock is now around $14.77.

The stock has mainly been weak due to an expect secondary offering possibly after the close tonight. It might dip again tomorrow in the am but any weakness should be bought. GFA is a leading Brazillian homebuilder with decades of growth ahead.


HealthCare Passes the House But Will the Market Selloff?

At 10:45EDT the House of Representatives narrowly passed the Healthcare Reform bill. Logically it seems that the market would tank on such news. Honestly though, the reform bill was so narrowly passed (219-212) and it will likely cost numerous Democrats their seats at the November election. Politico has a good run down of the seats on the edge. Does this really give Obama the freedom to unleash his agenda? After all, that is the real fear in the market.

It all really depends on how the public reacts. If they remain negative, then its very doubtful that Democrats will commit career suicide my backing more unpopular programs like cap and trade. And considering the way the bill is being passed basically in the cover of the night almost in a secretive manner. The public voted for Scott Brown to stop healthcare reform and yet the Democrats strong armed it through. Giving special deals to gain support from the anti abortion group. This is exactly what the public doesn't want. How is thi…

Most Bullish Wall St Analyst: Binky Chada

Binky is the chief equity startegist at Deustche Bank. His target for year end is 1325 making him more bullish then us at this point. Listening to the clip we do agree to most of his ideas, but we're more concerned above stock prices towards year end if all these taxes on investment income actually increase. Gotta take into perspective that 1250-1300 only takes us back to where the market was pre-Lehman collapse. Yes, the market has come a long way, but he fell way too far.

With SP500 earnings expected over $80 now, 1325 isn't that far fetched. Especially went $95 for 2011 is becoming more realistic. $95 x 15 gets the market back to 1425. Might seem far fetched but when you review the real numbers surrounding corporate profits the questions should become 'Why Not?'.

With a name like Binky he better be good as well.


Very Weak Action in Our Small Cap Financials

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Not sure what to make of the very weak action in the stock prices of small financials like International Assets (IAAC - old FCSX) and Phoenix Cos (PNX) that Stone Fox Capital holds in the Growth Portfolio . Both were down nearly 8% today. Luckily we sold a good portion of IAAC earlier this week at $17.04. Unfortunately we didn't sell all of it!

Both stocks are only 1.2% of our portfolio and we'll look to add to those positions on Monday assuming a lack of negative news. The move down could be related to quadruple witching today. Charts look very weak so buying is risky. IAAC at $14.50 has a natural stop there and PNX at $2.50 to start or all the way down to $2.20.


IAAC is a commodity risk management firm that should benefit from a volatile commodity environment and fast growing emerging markets that consume alot more commodities. Unfortunately they make a significant portion of their profits from short term interest on customer account balances. Not so good when rates are histor…

Trade: Sold 50% of Gafisa and Foster Wheeler

In order to raise some cash for the Growth and Hedged Growth Portfolios we sold roughly 50% of our positions in both Gafisa (GFA) and Foster Wheeler (FWLT). Both stocks have traded weak of late with GFA dropping below its 20 & 50 EMAs and FWLT being unable to get above the 20EMA even with such a strong tape. Long term though we still like the macro situation for both stocks. Short term we let the charts tell us that the action might turn bearish.

GFA is doing an offering next week so that explains the weakness on that stock. With FWLT, its difficult to see why it remains so weak. The news seems bullish and it continues to trade at much cheaper levels then a competitor like Jacobs Engineering (JEC).

Foster Wheeler(FWLT) estimate changed at Barclays. FWLT 2011 EPS estimates introduced at $2.50, 2010 maintained at $2.30. Reiterate Overweight rating and $38 price target.

100 Followers on SeekingAlpha.com

While not a huge accomplishment it is at least a start considering my focus is on investing money and not writing, but alas sometimes writing is an ends to the means of attracting investors. Or maybe its just that I have an opinion on some matters and hope to at least be heard in some small way.

Thanks to everybody that follows me on SeekingAlpha.com. Now at 102 followers as I write this tonight. Still nothing compared to the top guy - Pragmatic Capitalist - wtih 28,250 followers. Its wasn't long ago that just a 1,000 was huge. SeekingAlpha is really taking off as the place to read up on investment ideas.

Future Stat of the Week: 300K Jobs Added in March?

One thing explaining the meltup in March is that some analysts are now expecting 300K+ jobs during March. This isn't really a future stat for this week, but its a crucial future stat. Its also likely the first major jobs gain in what could be the start of dozens of months of gains.

Brian Westbury from First Trust has a nice video about the expectations for March jobs and more specifically his estimate that we'll report 300K. Now what will that mean to the stock market? Hard to tell as we've had a huge run since mid-Feb. In general though, I still see lots of stocks trading below intrinsic values. Hartford Financial (HIG) trading way below book. AerCap (AER) trading at 5.5x 2010 earnings. Puda Coal (PUDA) trading below 10x their low end guidance of $1.10. Those are just a few examples of how cheap the market remains.

Trade: Trimmed Synovus Financial (SNV)

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Synovus Financial (SNV) has been on fire the last week As of this afternoon it was roughly 25% over the 20EMA and the RSI was 76. Both indications that the stock is extended so we sold roughly 33% of our shares in the Growth and Opportunistic Portfolios. We'll add the shares back as the stock cools down or approaches the 200EMA around $3.17.


Hartford Financial to Repay TARP

After the close Hartford Financial (HIG) announces plans to repay TARP. They owe $3.4B so they've chosen to do a combination of equity and debt financing. Considering the equity portion is only $1.45B this appears bullish to us.

The offerings announced today will consist of $1.45 billion of common stock and $500 million of mandatory convertible preferred stock, represented by depositary shares. The debt offering related to the repurchase of the government's preferred stock will consist of $425 million of senior notes. In addition, the company will pre-fund the repurchase of its senior debt maturing in 2010 and 2011 through the issuance of an additional $675 million of senior notes.Considering how cheap HIG is compared to book value and EPS, this move could finally unlock that value as shareholders have been hesitant to load up with TARP hanging over them.

HIG is one of the largest investments in our Growth and Opportunistic Portfolios an…

Nice Reversal on Riverbed Technology

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Even the downgrade by Piper Jaffray couldn't keep the stock down today. Riverbed Tech (RVBD) looked like it would break below the 20ema at $27.44 but it was too strong to remain weak closing at $27.99.

“We anticipate the company will continue to execute well, and upside to March quarter and 2010 estimates is highly likely, but we believe this is already priced into the stock,” he writes. “Given the upside scenario already priced into RVBD shares, we think it will be hard for the stock to outperform on a relative basis.”
RVBD is the biggest holding at around 7% in our Growth Portfolio and one of the largest holdings in our Opportunistic (CV.IM) model. At this point, we're happy to hold a stock that can hold support especially on a downgrade.

Puda Coal Cools Off But It'll Heat Up Again

China is the largest user of coal and now they've become a major net importer in the last few years. Although China has embarked on several programs to focus on renewable energy sources such as solar and wind they will rely on coal fired electricity for a long time with some sources estimating that China will nearly double coal use by 2030.

The coal industry in China is very fragmented. Many of the coal mines have been operated by small companies leading to very inefficient mines and a high injury rate with several tragic mine accidents. Hence, the government has embarked on a mine consolidation plan in order to move the majority of the mines into the hands of larger operators that will be more efficient and easier to regulate. The program will reduce the number of mine operators from 1,000 to 100 while also significantly shrinking the total number of mines.


Mine Consolidator
Puda Coal (PUDA) is one of the selected mine consolidators. It's virtually unknown by investors as they r…

Covestor Model Up 17% in Less Then 6 Weeks

In less then 6 weeks the Covestor Model is already reporting strong results. The model is already up 17% versus a little under 5% for the market. Not bad considering the model was down 4% on its first day of February 3rd. A day the market dropped over 3% so not great timing there. Also remember that the model is up over 150% since it began in Dec 2008, but CVIM only counts the record since I became live on their Interactive Brokers platform. They do have the link to the history though for verification.

Of the 46 managers on the CVIM site, our Opportunistic Model ranks 2nd in the MTD results (click on MTD in the upper right corner) at over 13%. Check on Monday morning when they update the results from Friday and it'll be up 14%. We're proud of being 2nd because although this is an aggressive portfolio it is up against several daytraders and undiversified portfolios giving them alot more leverage for out sized short term gains.

Please email us at stonefox27@ymail with any question…

Chart of the Day: AerCap Holdings

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AerCap (AER) has one amazing chart over the last couple of months. The merger with Genesis Lease (GLS) should be finalized on the 25th reducing the risk and finally allowing the stock to move forward.

Hard to understand what caused the stock to collapse from $11 to $7.5 and then rebound right back to $11 today. Is it now a double top? Likely not, but it does need to consolidate the recent gains. See the RF chart from yesterday as thats the likely scenario for this stock.

Trading at only 5.5x the $2 in earnings expected this year the stop at $11 will likely only be short term if at all.





Disclosure: Long AER and GLS

Trade: Bought Direxion Small Cap 3x Bear

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Slow to report this but yesterday we bought the Direxion Small Cap 3x Bear (TZA) in the Growth, Hedged Growth and Opportunistic Portfolios. The purchase in the Hedged and Opportunistic Portfolios amounted to nearly 10% of the portfolios though the Opportunistic purchase was just to offset the margin currently in that count bringing the net bullish investment to just 100%.

TZA was purchased because it was and is extremely oversold having an RSI of 25 yesterday and a CCI below -100. Both signs that a reversal is likely. Small caps have just been too hot lately so we expect at least a minimal pullback.

For the Hedged Growth Portfolio this is on of the first hedges/shorts that we've used in the last year since the March 9th low.


Regional Banks on Fire Today

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Most importantly to us, Regions Financial (RF) and Synovous Financial (SNV) our both up sharply today. For RF its clearly partly technical as they hit new 52 week highs and breakout from a double top. For SNV its like just a move with the sector today. Cramer was bullish on banks yesterday and in general the tone seems to be improving.

The Opportunistic/CVIM Model is doing the best today as it has a higher concentration in those 2 stocks while the Growth Portfolio is also gaining in large part to a high concentration in the financial sector at roughly 20%. Though it contains much more of Hartford Financial (HIG) and ICICI (IBN) then these 2 regional banks.

The chart on RF looks similar to how we expect the SP500 to go over the next few weeks. Initial weakness at the recent high (Jan in the case of the SP500) and then support from the rising 20ema and an eventual push to new highs on the 3rd try at 1150.



SP500



Finally the chart of SNV. Not as impressive as RF. Still need to work thru seve…

One Year Later

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Being the anniversary of the Bear Market low on 3/9/09, today seems like a good day to review our performance since then.

When March started last year, we were about ready to give up. So many stocks were unbelievable buys yet the market kept spiraling down. A year later we feel vindicated as all 4 portfolios have easily beat the market since we started tracking them back in 2008. The Opportunistic Model had the biggest gain in the last 12 months at 165% (200%+ by our calculations) followed closely by the Growth Portfolio.

Going forward, were looking towards another strong year as the markets likely provide another solid gain in the 2nd year of this bull market. Its very unlikely that a bull market dies after only one year. As always we'll adjust the portfolios if it appears that the market won't continue the rally. At some point in late spring or summer we're like to finally face a true 10% correction so 2010/2011 won't be as easy as the last 12 months.

Growth Portfolio

Th…

Covestor Model Manager

As of last week, Covestor Investment Management (CVIM or cv.im) began offering my portfolio as one of their Model Managers. This is a great opportunity to expand investors to the group that typically invests in mutual funds. It gives investors with only $5K the opportunity for individually managed accounts that in the past required at least $100k and in most cases $250K to open an account.

Unlike a mutual fund you get the opportunity to see current trades and portfolio holdings and you have visibility to your assets via 3rd party brokerage Interactive Brokers (IB). So anybody worrying about giving their money to an investment manager ala Madoff no longer has to fear never seeing that money again. The money remains in your name and you alone have discretion over transferring in and out. CVIM only obtains the ability to execute trades and collect fees.

How CVIM works is that I make trades in my account at IB and then the CVIM team replicates those trades within 2 minutes to investors that…

Earnings Preview: Dicks Sporting Goods

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Dicks Sporting Goods (DKS) reports before the market opens tomorrow on the 9th. In general, analysts expect them to easily surpass earnings as the cold weather drove high sales in the higher margin outerwear category. My main concern is that analysts seem completely fixated on the outerwear business that clearly benefits from snow and cold weather, but what about the golf division. The unusual snow in Texas and cold weather in Florida would have an impact on the golf division.

Regardless, we're very bullish on DKS long term. They trade at 19x the $1.32 estimate for this year. Not overly cheap but assuming they beat estimates and as the focus moves toward the 2011 (Jan 2012) estimates I'd expect a much higher stock price. Just don't expect a big ramp on beating estimates tomorrow.

Reported earnings of outwear makers like VF Corp (VFC.N) and Columbia Sportswear Co (COLM.O) as well as suppliers like Under Armor Inc (UA.N) and Nike Inc (NKE.N) suggest heightened demand for col…

Apple Hits All Time High! Hooplah Just Starting?

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Incredibly Apple (APPL) hit another new all time high today. Ok, it's not really all that incredible to us considering we've suggested $300 and $1,000 [Apple to $1,000] targets during 2009.
Still its very rare for a tech stock to exceed the 2000 high.





Part of the reason for the jump today was just the overall market, but it didn't hurt that Cramer was pushing the stock last night on his Mad Money show. Cramer is bullish because the new Apple iPad product is gaining key corporate support especially in the Healthcare and Legal areas. Read doctors and lawyers. That could really feed into Mac sales as well.

With the cash on hand and what could be yet another strong product with the iPad, AAPL is likely a must own for the next couple of years.









Japan Paying $200/mt for Coking Coal?

Amazing report if its true. Looks like Japan is having to pay up get assets such as coking coal used to make steel away from the grips of China. Alpha Natural Resources (ANR) is likely our best play with their decent supply of coking coal. Puda Coal (PUDA) is a great speculative play in China. More to come on that stock.

This is the difference between coal and natural gas. China needs coal. China doesn't need natural gas.

JFE Holdings Inc. reportedly agreed to pay $200 per ton for coking coal in a three-month deal with Australian coal miner BHP Billiton Ltd.The amount was higher than expected, said William Burns, an analyst with Johnson Rice & Co. Burns, who expected JFE and other companies to pay only about $150 per ton, said this shows how aggressive countries have become in competing with China for natural resources."China has become a black hole, and the Japanese steel makers are trying to lock up their supply," Burns said.

Stat of the Day: ISM Services Hits 53

ISM Non Manufacturing (Services) report came in at 53 today versus the 51 estimate and the 50.5 for January. In fact, most economists were likely expecting the number to dip below last month considering weak economic reports such as consumer confidence and intial jobless claims and the severe snow storms in the east.

The business activity (54.8) and orders (55) suggest a V shaped recovery is indeed on the way while the employment index at 48.6 provides for great profits opportunities. This may not be good news for your neighbor that is unemployed, but it should help corporate profits and hence stock prices. After all, if your activity/orders increase but you have less people/costs your profits should soar.

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Worldwide. "The NMI (Non-Manufacturing Index) registered 53 percent in…

Trade: Sold 50% of Liz Caliborne

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Liz Claiborne (LIZ) has been a favorite stock of Stone Fox Capital for a while now. The stock was looking extended on the both the CCI and RSI measures. It was also approaching a double from October so we pruned 50% of our position in the Growth Portfolio at $7.26 leaving 2,000 shares. We'll be looking to buy that position back if the shares trade back to the 20EMA which is at 6.32 today.

It's also discouraging that the stock is down in an up day. Another sign that it might need to rest before trying to breakout of the double top.


Performance Review: Growth Portfolio Outperforming By 13.5% Annualized

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Just a little update on the Growth Portfolio that now has over a 20 month history. It's now up 125% over the last 12 months which is 69% more then the SP500. This leads to a 13.5% annualized return in excess of the SP500.


* All below returns are actually 0.75% higher on a annualized basis then the below numbers due to our tracking system at Marketocracy.com assuming a 2%+ annual fee versus the 1.25% for this portfolio.


RETURNSLast Week2.44% Last Month9.23% Last 3 Months8.56% Last 6 Months24.61% Last 12 Months124.50% Last 2 YearsN/A Last 3 YearsN/A Last 5 YearsN/A Since Inception8.15% (Annualized)4.71% S&P500 RETURNSLast Week0.75% Last Month4.15% Last 3 Months1.11% Last 6 Months13.28% Last 12 Months55.18% Last 2 YearsN/A Last 3 YearsN/A Last 5 YearsN/A Since Inception-13.40% (Annualized)-8.11% RETURNS VS S&P500Last Week1.70% Last Month5.08% Last 3 Months7.45% Last 6 Months11.34% Last 12 Months69.31% Last 2 YearsN/A Last 3 YearsN/A Last 5 YearsN/A Since Inc…