Showing posts from November, 2010

Savient Pharma Announces First Shipment and Pricing of KRYSTEXXA

Today Savient Pharma (SVNT) announced the initial shipment to specialty distributors and pricing of KRYSTEXXA. These are two major milestones for a biotech stock basically left for dead by the market after a failed auction process back in late October. Now the key will be how many vials of KRYSTEXXA at $2,300 a pop SVNT will be able to sell with a limited salesforce. Considering they had thousands of people wanting sign up for trials and those people are desperate for the drug the sell shouldn't be that hard. If you have been suffering from gout without any relief from existing drugs, this product should be able to sell itself. The stock has been flat since the initial selloff. It is currently hanging out in the low $12s and offers substantial upside as the negative analyst community finally clues in that management is more then capable to go it alone having gotten the drug to market by Dec 1st nearly a month after announcing the failed auction process and a little over 2 mont

TARP Bailout to Only Cost $25B

And that assumes the cost won't continue to drop. The Trouble Asset Relief Program (TARP) continues to be scorned by most people costing many backers their political positions, but ironically it has turned into one of the most successful government programs ever. Ok, its very possible that the politicians lost their jobs due to the numerous other packages enacted after TARP that weren't nearly as successful. Anybody hear of any benefits from the stimulus package? Today the Congressional Budget Office (CBO) estimated that the $700B TARP program would only end up costing taxpayers $25B an absurdly low number considering the consternation when it was enacted. Back then lots of focus was on the $700B being a taxpayer cost instead of an investment in the financial system that was about to collapse. In fact, it would've been a lot more successful if the focus hadn't strayed to the weak companies like General Motors (GM) and AIG. Somebody explain to me how GM is back publ

Trade: Bought Lorillard and Lockheed Martin

Both Lorillard (LO) and Lockheed Martin (LMT) were added to the Net Payout Yields portfolio. This model is now available on Covestor . Lorillard provides a 5.4% dividend yield in addition to a generous buyback over the last 12 months making it's Net Payout Yield of 11.8% one of the highest yielding stocks with a market cap in excess of $10B. Tobacco stocks continue to pay high dividends as investors ignore them because of their social believes. At Stone Fox Capital, we strive for the highest legal return and if you wish any gains from a socially unacceptable stock can be given back to charity.  Lockheed Martin also provides a very generous dividend yield of 4.4% combined with a big buyback for a NPY of 11.8% as well. Defense stocks have been under pressure of late with expectations for cutbacks in the US. Apparently management disagrees whether they expect higher sales in emerging markets to fill in holes as the US cuts back or if the US just doesn't cut that many programs.

Trade: Bought Limelight Networks

Added Limelight Networks (LLNW) to both the Opportunistic Long Only and Opportunistic Levered portfolios. LLNW is a play on a faster internet and the potential for being the next Akamai (AKAM). Unfortunately it could be the ugly sister in that competition and thats never good for a stock. Some news today that triggered the move other then technical was the news that fast growing deal of the day company Groupon announced that they are using LLNW and have seen substantial improvement in their website speed. They also recently expanded an agreement with Netflix (NFLX). Both companies are at the leading edge of the web so its crucial that LLNW win these deals. Though the question remains whether LLNW can start making money on all these deals. Thats where the ugly sister typically comes into place. Sure they'll get dates, but its usually when the pretty sister is too busy or too demanding. The stock will soar if any of these new deals start dropping to the bottom line. Good inter

Bullish Case For China Recyclers interviews Joe Giamichael, managing director and head of China research at Global Hunter Securities, about his bull case for the recycling sector in China. A couple of stocks that we follow in the recycling area include Lihua International (LIWA) for copper and China Aramco (CNAM) for iron ore. Along with Stone Fox Capital, Joe is bullish on LIWA. He provides some great details on the discounts for scrap copper and how cheap the stock remains. CNAM continues to be a play that we follow though it continues to struggle with its recycling facility.

Net Payout Yields Model Live on Covestor

The second of three models is now live on . The second model is the Net Payout Yields portfolio that focuses on SP500 stocks with large net payout yields which are the combination of dividends and stock buybacks. Companies with the highest yields have historically outperformed the market by a large percentage with no additional risk then investing in an SP500 index fund. This model requires a $5,000 investment and charges 1.1% pa. Also, in order to sign up with Covestor it requires $10,000 to establish an account via Interactive Brokers. Then your able to diversify that $10K with multiple models via the $5K investment or just one model. So even with only $10K you can have 2 models replicated. Great opportunity to diversify. For more information on Net Payout Yields please see the article I wrote a few years back The Advantage of Net Payout Yields . Also, see the virtual portfolio I've been tracking at over the last 2+ years for practical history

Massey Energy Directors May Challenge CEO on Sale

While I've been a fan of how the CEO of Massey Energy ( MEE ) has handled the investigation of the Upper Big Branch ( UBB ), it does appear that his leadership places the company to direct odds with MHSA. Mr. Blankenship has done a great job of showing that government ventilation plans may have been the cause of the UBB explosion. Rolling over and taking all responsibility didn't work so well for BP in the Macondo explosion and oil leak. According to the WSJ it appears that he BOD is willing to vote agains the long time leader of MEE. Typically this doesn't happen as the CEO usually controls the BOD like pawns. If true, MEE is likely to be sold in the near term for a nice premium. Sure the stock has run lately, but it's also below the March high. The WSJ speculates that Mr. Blakenship might be the only vote against a deal. He appears to be arguing that MEE will be more valuable when the company emerges from their recent problems. Maybe so, but the time value of mone

Atwoods Oceanics Drops 5% on Solid Results

Last night Atwoods Oceanics (ATW) reported Q3 results of $.99 that easily surpassed the estimates of $.92. Revenue came in slightly ahead of expectations all suggesting the stock would pop today. Well, evidently the huge 3 month gains and possibly a better understanding by the market that 3 rigs were cold stacked caughtt the street off guard. As far back as the end of October, ATW had made it known that three of the lowest specification rigs, Southern Cross, Seahawk, and Richmond, had been cold stacked. Maybe it caught Wall Street off guard that they don't expect any deals near term as they aren't even actively marketing the rigs. Some analysts only get news from the quarterly earnings reports and calls so maybe this was the first time getting the official word. Although these 3 rigs aren't huge contributors to the bottom line, it is ironic that one of the companies least involved in the Gulf of Mexico was so heavily impacted by the Macondo accident. With rigs moving

Updated Portfolio Names

Anybody that has followed this blog or follows my trades over on has probably noticed the names I use for the different portfolios that I track. When I originally started tracking these portfolios, the typical names were either growth or value, domestic or international, small cap or large cap, etc. Sinc I typically invest aggressively and for a high level of portfolio growth I tended to follow that logic for the names. But the names Growth, Hedged Growth, and Aggressive Growth never seemed to fit because I invest a lot of money in stocks like a Hartford Financial (HIG) that was based on a deep value play and not growth. Sure my portfolios have stocks like Riverbed Tech (RVBD) were the goal was for huge growth, but ultimately my investment style is to take what the market gives. Find value or growth stocks that are mis-priced. Whether the stock is trading below book value or below its growth rate, it doesn't matter to our management style. Not having restrictions is

Terremark Worldwide Signs Up FCC for Enterprise Cloud Offering

More good news from Terremark Worldwide (TMRK) on landing the Federal Communications Commission (FCC) for their Enterprise Cloud platform to support its strategy to leverage cloud computing, including the agency's plan to host its web site in the cloud.  This is yet another sign how the governments need to cut budgets either forces them or makes it more likely that they'll move more services online and ultimately into the cloud. Where they might have been more reluctant in the past to outsource into the 'cloud' it now makes economical sense and the lower costs are out ruling any concerns on security.  TMRK is a proven government provider and a leader in the federal market. Look for more and more government agencies to move not only online but to the cloud via TMRK. is yet another feather in their hat.  TMRK remains a core holding of the Opportunistic Portfolios including the Long Only and Levered.  Terremark’s highly secure Infrastructure-as-a-Service (IaaS

Stat of the Day: Philly Fed Index Crushes Estimates

So much for that much bally hooed double dip recession. The Philly Fed Index for November came in at a surprisingly rich 22.5 up from a 1.0 in October. It was also much higher then the 5.0 consensus estimates. The 22.5 reading was the largest number since last December. Leading the way were huge increases of 15 points in new orders and shipments. The main negative continues to be higher input prices due mainly to the sharp rise in commodity prices. Inventories saw a big jump of nearly 13 points, but the overall number remained a -5.9 still showing that for the most part manufactures maintain very lean inventories. Hence, the likely huge jump in orders. Firms continue to underestimate the strength of this recovery. The stock markets were already up strong from the potential Ireland bailout and the GM IPO. This news helped push the SP500 back over the 20ema around 1,192. Currently trading at 1,198 the markets appear poised a back a likely definitely run towards new recovery highs a

Trade: Added Regions Financial on Management Shakeup

Bought some more stock of Regions Financial (RF) in the Opportunistic (Long only) portfolio. Only had a 2% position and I doubled it to roughly 4% to bring it in line with the position weighting in the newly started model on that will be launched to the public in about a month. RF was down some 9% at one point today after announcing management changes in the credit risk department. Naturally the stock dropped on news of a shakeup in management especially with several individuals 'retiring' in one department . I'm sure most sellers assumed more bad news on the way or possibly even some yucky fraud situation. (ok its not that natural to always shoot first without understanding the news but thats how the market works). Whats so bad about the Chief Risk Officer and Director of Credit Risk leaving when they were the risk leaders when the problems occurred? What risk did they help mitigate anyway? This is another example of the market flying off the handle before

Dicks Sporting Goods Jumps on Strong Earnings

Dicks Sporting Goods (DKS) remains one of the best retailers around. As they continue to expand their US footprint they can market share and have become the 80lb gorilla in the sporting goods sector. Heck, I'm a big investor in DKS, but I still can't even shop at their stores other then Golf Galaxy. DKS reported Q3 earnings of $.22 that beat estimates of $.17 and above the $.16 from last year. Same store sales jumped by 5%. Much better then the 1-2% they forecast showing that management continues to UPOD (under promise, over deliver). DKS also guided up for the full year and Q4 stating that they expect strong demand in Q4. The top retailers continue to perform in evident ignorance that the economy is suppose to be weak. Apparently though, good retailers aren't short of shoppers. DKS will remain a core holding of all the Opportunistic Portfolios (Long only, Levered, Hedged - more to come on name changes). Via PR : -- Consolidated non-GAAP earnings per diluted sha

Dow Worth 15,000?

Does the Dow trading at 15,000 sound crazy? That's probably the general consensus in the market these days. The Dow currently trades at 11,201 at the close today.  A 3,800 point jump to get to 15,000 amounts to a 34% gain. What's interesting about he concept of the market currently being worth X amount higher or the future value hitting X in a year is that the market commentary is almost completely void of future predictions with the market higher. It's very bullish to turn on the TV or pull up a blog and see the latest prediction of the SP500 plunging to 900 or 600 or even lower. After a decade of the market being basically flat (ok it was very volatile in that period), most market pundits seem fixated that the market won't ever go higher. Corporate earnings have peaked if you listen to them. Heck, if you had listened to the pundits corporate profits would've never rebounded so sharply. This brings us to one of our favorite economists, Brian Westbury at First T

Terex Cashes in on Bucyrus Deal

As the largest shareholder of Bucyrus (BUCY), Terex (TEX) is a big beneficiary of the buyout of BUCY by Caterpillar (CAT).  TEX owns 5.8M shares now worth over $500M. Not only do they get the appreciation from the 30% gain today, but more importantly TEX gets to cash out their shares that they acquired via the sale of their mining division to BUCY at a premium. Having the $500M in cash on hand is a lot more valuable to them then stock in BUCY. TEX provides one of the best stock picks for the global rebound. At $25, TEX provides one of the few remaining stocks that hasn't rebounded. The stock still remains roughly 75% below 2008 highs while some stocks have already eclipsed those highs ala BUCY. The crane industry is still struggling to recover from the financial crisis, but signs are emerging that 2011 will the recovery year and TEX likely plays catchup with the market. TEX now enters the recovery phase of its business cycle with a rock solid balance sheet. After the close of t

Starting to Look A Lot Like Christmas at Massey Energy

More reports over the weekend of companies lining up to bid on Massey Energy (MEE). MEE has reportedly been on the auction block for a month now with rampart reports from Alpha Natural Resources (ANR) buying the company to Coal India buying a mine. Neither make much sense considering the size of ANR and lack of benefit to MEE from selling just one mine. MEE has been struggling under higher scrutiny and regulation since the explosion at the Upper Big Branch (UBB) mine back in April. The benefit to suitors is that MEE has the largest reserves of met coal needed for the production of steel in the US. With reserves of roughly 1.3B plus another healthy 1.5B of thermal coal, MEE offers a plethora of valuable assets to potential suitors, Considering the combination of management under attack and valuable assets, its no surprise that the acquisition news is heating up. Over the weekend, the WSJ leaked news that ArcelorMittal (MT) had been reviewing a bid for MEE for months now. MT as a sui

Huge Alpha Today in Risky Portfolios

Don't post daily results that often, but it's worthwhile to point out days were our portfolios end up positive and the market is very negative. These are the days were the outperformance or alpha of this portfolio really takes shape. More importantly it isn't achieved by being short the market. Below is the results from the Growth Portfolio as tracked by Beat the SP500 by 0.67%, but more importantly SFCG was up 0.25% on a broadly negative day. The Opportunistic Portfolio was up a more impressively 1%+, but unfortunately I don't have a way to post those results on a daily basis. Note the columns are shifted over one column. The 0.25% should be under the 'Today' column. Beating Today MTD QTD YTD SFCG   0.25% 6.16% 10.82% 25.41% S&P 500 -0.42% 3.11% 7.03% 11.19% DOW -0.65% 2.15% 5.27% 8.91% Nasdaq -0.90% 2.85% 8.87% 13.65% Please contact me at with any questions about investing in these portfolios.

Lihua International Sees Strong Demand for Copper Products

Prior to the open today, Lihua International (LIWA) posted earnings that beat analyst expectations. With only a couple of analysts following LIWA, that generally isn't that worthwhile. While news that the company is upping full year guidance and that they see strong demand in 2011 is extremely useful. LIWA reported revenue of $96.3M which was 135% over last year. EPS was $.33 versus $.13 last year. Margins were lower due to the new copper anode products having lower margins but they provide a higher return on invested capital leading to a larger bottom line and huge growth opportunities. LIWA is a leading value-added manufacturer of copper replacement products for China's rapidly growing copper wire and copper replacement product market. LIWA is one of the first vertically integrated companies in China to develop, design, and manufacture lower cost, high quality alternatives to pure copper magnet and pure copper alternative products. Except for CCA wire, all other products

Petroleum Inventories Plunge

While the markets focus on just the oil/crude inventories, it's more important to look at the gasoline and distillates as well. The market expected a net 2.1M decline. Instead the inventories plunged by 10.2M barrels. Thats a major decline and much, much higher then expected. The market will typically just focus on the major miss by the headline grabber crude. Losing 3.3M barrels versus the expected gain of 0.8M barrels was a substantial miss in it's own right. Still petroleum inventories and especially crude remain at very high levels. See info from Bespoke . Though its very key to note that these graphs show average numbers for the last 20-30 years when storage facilities and demand was lower. With gasoline and distillates plunging at an alarming rate, look for the next few reports to be critical to whether the inventory trend is finally much lower. If so, energy demand might finally be placing supply questions into the forefront. 10:34 AM   EIA Petroleum Inventories

Hot on Puda Coal!

Typically I don't post videos of companies that are mentioned on TV, but its rare to see somebody talking about one of the small caps that we own. Puda Coal (PUDA) is a leading coal mine consolidator in China and met coal washer. Last night on CNBC Aisa, the CEO of Pacific Sun Investment Management did a great job of discussing the bright future of PUDA. As he mentions, PUDA remains a very cheap stock even  with the huge run the last month. PUDA is a top pick in both the Growth and Opportunistic portfolios. Earnings will be on Friday and we're looking forward to hearing about the mine consolidation process. Disclosure: Long PUDA

Trade: Bought Chubb Corporation, Sold NYSE Euronext

Bought Chubb Corporation (CB) today for the Net Payout Yield Portfolio. CB has a current yield of 13.6% based on a 2.5% dividend yield and 11.1% buyback yield. More importantly CB has been more aggressive in the last 6 months on the buyback leading to an attractive investment potential. CB provides property and casualty insurance for both business and individuals. Interestingly insurance companies seem to have the best yields these days whether via Wellpoint (WLP) in health insurance, Medco Health Solutions (MHS) in pharmacy benefits, or CB in property and casualty insurance. CB is the only one of the three with a dividend that has the 10%+ yields in the insurance sector. Sold NYSE Euronext (NYX) to partly pay for this purchase, but mainly due to NYX no longer buying back stock leaving the yield low for this portfolio at just 4%. Also, for the new Covestor model it's a requirement for stocks to have a market cap of $10B leaving NYX short of that requirement so we've chosen