Friday, June 29, 2012

Riverbed Technology Analysts Battle It Out

As Riverbed Technology (RVBD) cratered to a new 52 week low on Wednesday, analysts were battling over the future of the company's main market. Several analysts, including Jefferies, see the main WAN Optimization market of Riverbed mostly tapped out, while Needham sees 20% growth in the next 3-5 years.

Why such a divergence in opinion? It all stems from whether the recent product transition is seen as a move leading to favorable dynamic in the second half of 2012 or an excuse for weak results. See previous article on the Q112 results, conference call highlights, and new products launched.

Positive Recap

To recap, Riverbed is a leading networking equipment provider that recently launched a host of new products. Management categorically denied the mature market theory suggesting that the market could be 10x the size of all the products previously sold. It also denied any loss of market share as the 3rd vendor has recently pulled back from the market and Cisco Systems (CSCO) appears less focused on this market segment.

Read the full article at Seeking Alpha.


Disclosure: Long RVBD and CSCO. Please review the disclaimer page for more details. 




Wednesday, June 27, 2012

Modern Fleets Win In Deepwater Drilling

On Friday, Pacific Drilling (PACD) announced a 5-year contract for the Pacific Sharav that amounts to over $1B in revenue. According to the presentation at Global Hunter Securities, the dayrate amounts to $555,000 for the term. The deal was hinted at during the Q112 earnings report so possibly the terms shouldn't be used to read too much into the current strength of the deepwater markets. Worth noting though is that the rig won't be delivered until the fourth quarter of 2013.

With its best-in-class drillships and highly experienced team, Pacific Drilling is a fast growing company that is committed to becoming the industry's preferred ultra-deepwater drilling contractor. Pacific Drilling's fleet of seven ultra-deepwater drillships will represent one of the youngest and most technologically advanced fleets in the world. The company currently operates four recently delivered drillships, has two additional drillships under construction and one on order at Samsung.

Read the full article at Seeking Alpha.


Disclosure: Long ATW. Please review the disclaimer page for more details. 




Don't Buy Alongside The Bristol-Myers Buyback

After the close on Tuesday, Bristol-Myers Squibb (BMY) announced a headline grabbing additional $3 billion share-repurchase program. With a market cap approaching $60 billion, investors quickly gravitated to the potential for a repurchase of 5% of the outstanding shares.

Not so fast! Further details in the announcement indicate that the last $3 billion repurchase plan hasn't even been completed in the two years since its announcement in May 2010. Not to mention research indicates that the net buyback will be significantly lower due to large amounts of stock options.

Figure 1 below highlights the actual net payout yields (net buyback + dividend) for the last five quarters. Not as appetizing as originally presented by the headline grabbing number.

Read the full article at Seeking Alpha


Disclosure: Long COP and KSS. Please review the disclaimer page for more details. 



Tuesday, June 26, 2012

Quoted In Fox Business Article

Just realized that CIO, Mark Holder, was quoted in a Fox Business article on common mistakes of first-time investors. See below:

A common mistake among first-time investors is that they lack a solid plan that will carry them through good and bad times, says Mark Holder, chief investment officer at Oklahoma-based portfolio management firm Stone Fox Capital Advisors.
"Following the herd tends to get [first-time investors] into the hot stock or mutual fund at the top," says Holder. "They'll end up panicking out of a stock during weakness because they don't understand the investment thesis."

SodaStream Makes Perfect Technical Bounce

SodaStream (SODA) finally has  a bullish looking chart after a disastrous last year. The home beverage maker traded as high as $80 last year, but it now only fetches $37. This though the stock trades at a forward PE of 13 with a long term growth rate that will exceed 25%.

While the market continues to debate whether this concept is just a fad or a long term growth story, the company has quiet but together some impressive growth and forecasts. Regardless of ones view on the long term prospects of the company, the stock bounced nicely off the 200ema this morning right around $36.40. For now, that is a good sign that SODA can be purchased.

Figure - 9 Month Chart on SODA
























The stock made a similar run to $48 back in February, but eventually blew up and traded down to $29 by early May. Investors should understand that trading at just the growth rate of around 25 would lift the stock to $67.50. Even in this market, stocks with that growth rate are trading at 30-40x earnings which would lift the stock to all time highs.

If this run is finally for real, the stock could have a monster move. The stock went from $30 to $80 in 6 months with a lot less earnings support. Could a similar tun be in the near future?


Disclosure: Long SODA. Please review the disclaimer page for more details. 



Monday, June 25, 2012

When Will Dry Shale Gas Production Decline?

Even with nat gas prices hitting decade lows and the amount of rigs drilling also hitting decade lows, the production of dry gas from shales continues to rise. The Marcellus Shale appears to be the main if not only culprit of rising production according to the Chart from the EIA below.


Figure - EIA Monthly Dry Shale Gas Production















Oddly, the supposedly huge decline curve in shale producing wells was suppose to help quickly stem any price declines. Even with the amount of rigs drilling in shales plays down dramatically, it has had little to no impact on production. Possibly 1,000s of wells remained waiting completion and that has delayed the production declines for now.

Until this trend reverses, nat gas prices will likely remain low. Once reversed though, pricing could spike as existing wells deplete fast and new wells aren't being drilled. Until then domestic oil service firms such as C&J Energy Services (CJES) could remain weak. In theory, this reversal should happen soon enough.


Disclosure: Long CJES. Please review the disclaimer page for more details. 



Stat of the Day: Texas Manufacturing Activity Surges

With everybody on Wall Street talking gloom and doom, the Texas Manufacturing activity jumped in June to 5.8 from a -5.1 in May. This nearly 11 point jump caught most analysts off guard with the expectations of 0.0.

While generally ignored by the media, Texas remains a key figure in the manufacturing sector. The details were even more encouraging with production, capacity utilization, new orders, and unfilled orders up strong. While inventories and prices paid were down sharply.

Investors need to remember to research data outside the New York and Chicago regional feds that are primarily focused on by the media.

Some highlights:


  • The production index, a key measure of state manufacturing conditions, rose from 5.5 to 15.5, posting its strongest reading in 15 months.
  • The new orders index rose to 7.9, following three readings around zero, suggesting demand finally grew after staying flat since February. The shipments index rebounded to 9.6 after two months of near-zero readings. 
  • The capacity utilization index rose from 5 to 13.3, reaching its highest level since early 2011.
  • Employment grew at a faster pace in June, with the index rising from 8.5 to 13.7. Twenty-one percent of firms reported hiring new workers, while 8 percent reported layoffs.

Disclosure: No positions mentioned. Please review the disclaimer page for more details. 





Thursday, June 21, 2012

StockTwits 50: The Big Dogs


Every Saturday the StockTwits 50 report is released highlighting stocks with improving fundamentals and strong technical setups for the next trading week. Last week, Stone Fox Capital wrote an article on the underfollowed stocks in the StockTwits 50 report. The hope was to find stocks highlighted by the report that were cheap. The original conclusion was that the stocks didn't provide compelling valuations even though the sophisticated Seeking Alpha crowd doesn't follow them.
With this weeks report, the focus shifted to reviewing the bigger names on this list to see if maybe an advantage existed in companies where inclusion in such a publication would not move the price of the stocks.
The Big Dogs
Within the top 10 ranking this week were Hansen Natural (MNST)Under Armour (UA)Expedia (EXPE)3D Systems (DDD), and Whole Foods Market (WFM). Other than 3D Systems, all of these stocks have market caps larger than $5B and definitely qualify as big dogs in the stock market.

Read the full article at Seeking Alpha. 


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Wednesday, June 20, 2012

Walgreen's Deal Sounds Better Than The Reaction

On Tuesday morning, Walgreen (WAG) had a very busy set of announcements with Q312 earnings, a dividend boost, and more importantly the purchase of 45% of Alliance Boots for $6.7B. In reaction, the stock suffered a decline of nearly 6% on a day when the stock market rose roughly 1%. Apparently the market wasn't very happy with some of the announcements. Let's review the details:

The Deal

The company announced a deal to buy 45% of Alliance Boots for $6.7B. The deal is expected to be accretive by $0.23 to $0.27 in the first year following completion of the deal.


Read the full article at Seeking Alpha.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 




Tuesday, June 19, 2012

Communications Stocks Flying Too High


Communication stocks completed another strong up week last week with both AT&T (T) and Verzion (VZ) rallying strong. As the world continues to fret over the problems in Europe, the perceived safety of the large dividends of these two stocks has attractive many buyers.
Even with these large moves of the last 3 months (see Figure 1), both stocks still pay dividends that exceed 4.5%. Naturally this level appears very attractive to most investors with the 10 Yr Treasury remaining around 1.6%. Why not jump at these yields?

Read the full article at Seeking Alpha.

Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



AutoTrader.com IPO Stinks On First Review

Normally not a huge fan of the Yahoo! Breakout group, but this new IPO filing for AutoTrader.com sure sounds like a rotten deal for the public.

In a lot of ways the IPO market has become a way to exit positions very much unlike the past. It use to be that the public markets provided greater liquidity and hence higher valuations for companies. Not to mention that being a public company provided a brand awareness for both employees and customers. Not now though.

In a general example, companies would go public worth $250M and trading at 10x earnings with the major shareholders looking to exit positions as the company grew to be worth $2.5B and trading at 20x earnings. In a lot of ways, the system was set up for the new public shareholders to gain with the company. The public markets provided that catalyst.

Now companies come public with multi billion valuations while trading at exorbitant multiples. This leaves very little room for gains in the public markets.

The below video from Breakout highlights some of the grand issues with the recent filing of the Autotrader.com IPO. As pointed out, nothing appears illegal. The company though stripped out any reason for buying the stock. Investors have been warned.






Disclosure: No positions mentioned. Please review the disclaimer page for more details. 





Monday, June 18, 2012

Body Central CCI Hits -602

In a sign of the extreme nature of this market, Body Central (BODY) has plunged 50% for the 2nd time in about 45 days. Amazingly the stock was trading above $30 as April was coming to an end and today it now trades for only $8.28.

The company warned for the 2nd time that comp sales were exceptionally weak and earnings would disappoint. Just 60 days ago analysts expected $1.52 for 2012 and now the company forecasts $1.09. Truly a big disappointment but an over 70% cut to the stock seems irrational.

The most shocking number from the below chart is that the CCI is sitting at a -602 for one of the lowest numbers ever posted. This number is even lower than the last warning back in early May. The RSI is also extremely weak sitting below 19. This though is about on line with the number from early May.

Figure - BODY 8 Month Chart



Unfortunately for investors the stock is likely to hang out in the $8-9 range similar to how it did last month in the $14-16 range. The stock might even dip down to $7.

After 2 warnings investors aren't likely to pile into this stock anytime soon. The fear now is management has no clue on the future making it possible that estimates for 2012 could plunge even further. Management presents at the Jefferies Global Consumer Conference on June 19th at 3pm EST. Bet a few analysts will be particularly interested in whats gone wrong with this story.

Regardless of the bad news, investors should keep an eye on this concept. Maybe visit the stores to see if the story has changed. If the company just got the Spring/Summer clothing wrong, this might truly be corrected with the Fall/Winter lineup.


Disclosure: No position mentioned. Please review the disclaimer page for more details. 



C&J Energy Services Headed Straight To $23

Definitely not a chart expert, but the below chart sure appears that with C&J Energy Services (CJES) breaks the current 200ema around $19.65 that the stock will quickly jump to $23. From there, it's anybodies guess where the stock goes as that has been major resistance for the last 8 months.

Typically resistance/support gets worn down by every additional attempt so one more run at that level might finally break the shorts. Time will tell.




The Eagle Ford Shale website is suggesting that up to 1,500 wells are awaiting completion which would be significant for an oil services company such as CJES focused on the Eagle Ford. Investors have been so consumed by the fears of slacking demand that the news keeps suggesting the situation isn't as bad as feared.


Disclosure: Long CJES. Please review the disclaimer page for more details. 



Sunday, June 17, 2012

StockTwits 50: Underfollowed Stocks

StockTwits publishes a weekly list called the StockTwits 50 that encompasses a list of stocks with strong fundamentals and technical characteristics. Read more about it here.

For anybody not familiar with it, the list provides a selection of 50 stocks with the highest scores based on their algorithm. Some well known names such as Under Armour (UA) appear on the list and others not known like Cyberonics (CYBX) made it. Even the largest market cap stock, Apple (AAPL), ranks in the middle of the list.

The key to such lists is that it isn't biased by personal emotions. It favors the companies with the best fundamentals such as improving earnings combined with strong technical setups. Though one needs to understand that such data is only as good as the available sources or even the programming.

Read the full article on Seeking Alpha.


Disclosure: Long AAPL. Please review the disclaimer page for more details. 




Saturday, June 16, 2012

NII Holdings Already Active With 3G in Mexico?

Interesting comments from a Reuters report that came out after hours Friday. According to the report, NII Holdings (NIHD) already has 10 cities in Mexico with mobile broadband with the nationwide launch in September.

According to the Q112 conference call transcript, the CEO made it clear that NIHD would launch 3G services in select Mexico markets in late Q3. This news makes it sound like select cities have already launched.

Per the Seeking Alpha Conference Call Transcript:
We remain on track with our 3G deployments in Chile, Mexico and Brazil. We continue to work toward our goals of making 3G services available in Chile by midyear and in select markets in Mexico and Brazil by late third quarter and end of the year, respectively. Over the past several months, we have implemented a number of changes in how we manage the logistics and buildout of our 3G networks that are helping to keep our 3G deployments on track with our goals.

This news would be extremely positive for the stock that has been absolutely crushed over the last year.   The stock was trading in the low $40s, but delays in launching 3G services has led to bad results and an exodus of shareholders.

Either way, the question will be when will a selection of 3G phones be available for purchase in Mexico. Big difference between having service available and actual users. The stock will likely soar once investors become convinced that the networks are up and attracting high end subscribers. Will that be Q2, Q3, or even as late as Q4?

Buying this stock below $12 is incredibly attractive with a 3G launch in Brazil on the way as well. 2013 should be a great year and the stock just might reach back to 2011 highs around $45. The below 18 month chart shows just how far this stock has fallen.




Now the real question is whether to load up prior to the Q2 earnings report or after. That report will undoubtedly be very weak, but investors should soon start focusing on the future 3G ramp. If Mexico doesn't launch nationwide until September, the Q3 report might not be that exciting either. Stock is off the charts cheap though.


Disclosure: Long NIHD and looking to add more. Please review the disclaimer page for more details. 





Thursday, June 14, 2012

Dell's Dividend Announcement Might Signal A Dividend Peak

After the close on Tuesday, Dell (DELL) announced that the Board of Directors has adopted a dividend policy under which the company plans an initial dividend rate of $0.32 per share per year. Based on the current price, the dividend yield would be 2.7%.

Considering the recent history of share repurchases, this move towards a decent dividend highlights the shift in mindset for the market. Dell has repurchased 14% of its outstanding shares over the last four years and considering the company trades at a sub 6 PE the logic would suggest continuing that plan. Why start a dividend now?

The market, though, has increasingly stated that share repurchases don't work. Sure looking at Figure 1 below suggests that theory to be correct, but where would the stock price be if the company hadn't bought all those shares? The 2014 estimates around $2 would quickly drop to around $1.72 without the share reduction. Investors forget that these moves don't happen in a vacuum.

Read the full article at Seeking Alpha.


Disclosure: Long CSCO. Please review the disclaimer page for more details. 



Velti Attempts To Break Downtrend

Velti (VELT) traded around $8.6 prior to guiding up on earnings at the end of May. The stock has been crushed since then due to A/R concerns that never actually turned into major concerns. As the company clarified on a analyst call, the receivable numbers are consistent with the ad agency industry.

Regardless the stock has remained weak with it again bouncing off key support around $6 yesterday. From the finviz.com chart below, it sure appears that the 10% move in VELT today is an attempt to finally break that downtrend.

The amazing part is that this stock was over $14 back at the end of March and the mobile ad industry continues to show signs of major growth. VELT could just as quickly return to those levels and higher if the 'risk on' strategy returns.




Disclosure: Long VELT. Please review the disclaimer page for more details. 



Bottom Feeding With Icahn

Over the last couple of weeks, activist investor Carl Icahn has made a couple of attention grabbing bets in very beaten down stocks. First, he made a significant investment in the much-maligned Chesapeake Energy (CHK). Second, he added to his position in Navistar International (NAV) after the company's stock plunged following a weak quarterly report.

Should investors follow Icahn into these two stocks trading around the bottom for the last couple of years? Considering that both stocks have been on our list of stocks to follow, the moves caught our attention.

Read the full article on Seeking Alpha.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 




Wednesday, June 13, 2012

Investment Report - June 2012: Net Payout Yields


This model was down 7.7% in May versus a 6.3% loss for the benchmark S&P 500. In a rare occasion, the model underperformed the market by more than 100 basis points. While disappointing, this does happen sometimes. The benefit is that the stocks with large buybacks are able to purchase more shares at these cheaper prices.

Trade
Only one major position change was initiated in May with the addition of Ameriprise Financial (AMP) in two transactions. The company has a spectacular net payout yield exceeding 15% with the dividend portion at nearly 3%.

The other major transaction was switching out of Phillips 66 (PSX) and back into a full position on ConocoPhillips (COP) after the spinoff back in April. After some research, ConocoPhillips provides the higher guaranteed yields while Phillips 66 remained uncommitted on buybacks.

A half position in Home Depot (HD) was sold to reduce exposure to the home improvement sector since both Home Depot and Lowes (LOW) had become top holdings. Home Depot was selected to sell as it had the smaller yield.

Bottom Performers

Not surprising with the weak stock market in May, but several stocks lost over 10% for the month. Such a large drop is highly unusual for this model made up of stocks averaging market caps over $20B.

The bottom performers were Lowes, Goldman Sachs (GS), Cisco Systems (CSCO), and Accenture (ACN). Some of the stocks had mildly disappointing earnings, but in general the losses are due to these stocks being some of the higher beta ones in the model.

Conclusion
The European issues continue to hit the markets and threaten to cause major disruptions for a third straight summer. It seems so unlikely that the market would repeat the collapse of the last two years now that most investors expect it. It usually isn’t that predictable.

Regardless of the markets, the average stock in this model yields greater than 10% with the majority of yields coming from buybacks. This provides huge support if the market remains weak. 



Disclosure: Long all positions mentioned. Please review the disclaimer page for more details. 



Tuesday, June 12, 2012

Does Domino's Offer An Investment Option Into India?

On several occasions it has been pointed out that Domino's Pizza (DPZ) has one of the largest global restaurant operations in India including this recent mention on Mad Money with Jim Cramer. As Cramer points out, Domino's might provide the investment option into India that Yum Brands (YUM) provided with China.

With fast growth ahead for decades and limited investable stocks in the US, any stock with a large percentage of revenue from India could be very attractive to the markets. One thing to remember is that although India provides huge growth opportunities, the economic base is much smaller than China and especially the US. So could any large U.S.-based retailer actually derive enough sales from India to make a difference?

Read the full article at Seeking Alpha.


Disclosure: No positions mentioned. Please review the disclaimer page for more details.




Friday, June 8, 2012

Ulta Beauty Shareholders Dodge A Bullet (For Now)

Remaining an investor in Ulta Beauty (ULTA) has to be akin to playing Russian roulette. Prior to earnings the company was trading at nearly 28x next year's estimates of $3.14.

No indications exist that Ulta will have a massive blowup similar to fellow retailers Fossil (FOSL) and Body Central (BODY) or any of the numerous stocks that plunged 20, 30, or even 40% during earnings. Of course, neither of those stocks showed signs of weak results ahead of plunges either. Considering Ulta trades at a lofty multiple, any whiff of disappointing numbers could result in a significant drop.

Good Enough

After the close on Tuesday, Ulta reported Q113 numbers that slightly exceeded estimates. Net sales hit $474.1M, which only slightly exceeded the $473M estimates. Earnings also beat by $.01.

Read the full article at Seeking Alpha.


Disclaimer. No positions mentioned. Please review the disclaimer page for more details. 





Thursday, June 7, 2012

Strong Results From Stocks With Disappearing Shares

Widely ignored by the market are the stocks that continuously reduce shares outstanding via buybacks. Buybacks routinely obtain a bad rap due to the focus on high profile failures such as Cisco Systems (CSCO) that have had stock blowups after buying at higher prices.

Not focusing on the total population of stocks makes such analysis invalid. On balance, companies that reduce outstanding shares provide for higher earnings per share and stronger rewards to shareholders. Naturally the price paid is crucial, but any company that is actively buying back shares over multiple years will ultimately dollar cost average at attractive prices.

When focusing on large, financially strong companies instead of the speculative growth stocks the results are typically better. Investors should look for stocks that year after year reduce the outstanding shares and in essence slowly take the company private. Without lifting a finger, shareholders own a much larger percentage of the earnings of the below stocks as cash flow is used to buyout shareholders not as excited about the future.

Read the full article at Seeking Alpha.



Disclosure: Long CB, DTV, GPS, TRV, WLP. Please review the disclaimer page for more details. 






Attractive Financials Trading Below Book Value

Most financial stocks haven't recovered from the financial crisis even though the business has returned to solid profits. The growth doesn't exist like it did prior to the crisis but income shouldn't be ignored.

The insurance sector remains one of the most undervalued sectors in the market. Stocks like Hartford Financial (HIG), Lincoln National (LNC), MetLife (MET), and Prudential Financial (PRU) trade significantly below book value. The group consistently traded at over 1.5x book value prior to the crisis.

Though all of these companies have variant business lines, the stocks have traded in an incredibly consistent pattern. Some such as Prudential have already significantly exceeded the book value per share from before the crisis yet the stock trades at a paltry 0.59 of book value.

Read the full article at Seeking Alpha.


Disclosure: Long HIG and LNC. Please review the disclaimer page for more details. 



Wednesday, June 6, 2012

C&J Energy Services Makes Accretive Deal

C&J Energy Services (CJES) remains one of the cheapest companies yet after the close the company announced an accretive $272M deal for a complementary wireline service provider named Casedhole Holdings. Not only is the deal expected to be immediately accretive, but the deal also provides exposure to new oily basins and large E&P operators not previously used by CJES.

Per the press release, Casedhole is a leading multi-regional, independent provider of cased-hole wireline and other complementary services for energy producers in the United States.  With 12 district locations, Casedhole provides premium services in the most complex and demanding operating environments focusing on oily and liquids-rich basins.

After hours the stock jumped 1-3%, but it still remains down for the day. When the sector turns, this would be the top pick. The company remains a cash flow machine with top of the line margins. The $22OM credit line being tapped to pay for this deal will quickly be paid off via profits.

Details on the deal:

  • The addition of Casedhole to be immediately accretive to C&J's 2012 earnings and cash flow per share.  
  • The transaction is expected to close prior to June 8, 2012 upon satisfaction of customary closing conditions. 
  • An expanded geographic presence in 10 of the most active U.S. areas, including the Williston and Uinta Basins and the Marcellus, Utica, Avalon and Bone Springs shale plays where C&J currently does not have a presence;
  • A loyal and expanding customer base of leading E&P operators which is largely non-overlapping and complementary to C&J's existing customer base;
  • A seasoned management team with extensive large-cap oilfield services management experience, as well as a full roster of skilled engineers and field-level personnel that bring extensive technical expertise and domestic and international basin knowledge; 
  • Premium, custom-built assets, including 58 wireline units with an average age of less than three years, compared to an industry average of 10 to 15 years, and 11 pumpdown units that were added during the past five months;
  • Industry leading EBITDA margins and significant revenue growth that since June 2009 has outpaced the U.S. land rig count growth by more than 8 times.  Casedhole's trailing 12 month revenue as of March 31, 2012 was $156.8 million, with substantial equipment additions occurring throughout the 12 month period.
  • C&J is funding the purchase of Casedhole through $220 million drawn from the Company's senior secured revolving credit facility, with the remainder paid from cash on hand.  The credit facility was increased to $400 million from $200 million in connection with the signing of the definitive purchase agreement and was led by Bank of America and Wells Fargo. 

Besides the obvious benefit of an accretive deal, the exposure to new basins and shales with new customers could be huge for CJES down the road. The company isn't much more than an Eagle Ford play now and expansion into the Marcellus, Utica, and Williston plays to name a few could be hugely positive.

The stock isn't likely to act all that well tomorrow with more follow up from the Haliburton (HAL) margin problems, but it remains one of the best deals in the market sub $20.


Update 3pm: From the conference call, the company confirmed that guar prices are not impacting margins to any major extent. In fact, the CEO mentioned being surprised by the Haliburton announcement.


The revenue run rate for Casedhole was $50M in Q112 and EBITDA margins have hit 30%. The deal appears very positive, but the market could only give it $.10 today. The stock is now down $.45 in the last 2 days even though the company disclaimed the HAL weakness and announced a bullish acquisition. 

Stock remains absurdly cheap, but for now the market just doesn't care. No matter what the company says, the market completely discredits it. 



Disclosure: Long CJES. Please review the disclaimer page for more details. 






Tuesday, June 5, 2012

Mobile Marketing In Canada Tells Us About Wireless Devices


The below infographis from JUICE Mobile probably tells the market all it needs to know about the wireless market and especially the demise of Research in Motion (RIMM).

Being one of if not the most important Canadian technology companies, Research in Motion always had a dominant hold of that market. Now JUICE is showing a dramatic increase in Android OS phones. Also, the iPhone is the number 1 phone by far. The dominance is all but gone in their home territory. Yikes!

That last part clearly highlights the issues facing Research in Motion. While it has a majority of the phones in the Top 10 devices, the demand is spread out amongst several different options making support very costly for RIMM. While Apple (AAPL) on the other hand has one phone with 24% of the market share.

Now it appears that Samsung is having major success with the Galaxy brand. Not to mention that tablets now make up 7% of the market. All of the competitors are chipping away market share faster than RIMM can produce anything new. The future clearly was dim for RIMM, but by year end it appears that RIMM will no longer hold a dominant position in Canada. In fact, if this trend continues it might drop all the way to 3rd place for operating systems.



Somebody please tell me why I close that short position in RIMM last year. Depressing to have been correct and not have benefited.


Disclosure: Long AAPL. Please review the disclaimer page for more details. 



Obama Drops to 54% Chance Of Re-Election

Intrade might be one of the most watched websites as the year rolls along in 2012. The odds of Obama being re-elected in 2012 will be very key for the markets. After the weak economic data of late the odds have dropped from over 60% in late April to 53.6% today.

Investors would be wise to check out these odds every week.












Disclosure: No positions mentioned. Please review the disclaimer page for more details. 




Splunk Gets Splattered On Earnings


Splunk (SPLK) reported earnings after the close Thursday that easily beat analyst estimates. The stock though plunged down 16% on Friday. Whether this was due to the weak market or disappointment that the company didn't guide even higher is difficult to determine. Either way it shows the difficulties of owning high valuation IPOs going into the first earnings report.

Previously hot IPOs such as Jive Software (JIVE), Millennial Media (MM) and even InvenSense (INVN) plunged after disappointing earnings reports.

Clearly investors expected too much out of these stocks as even 80% revenue growth for Splunk wasn't enough to keep the stock higher. All of the previously mentioned stocks have collapsed roughly 50% from post IPO highs, so the downside risk in Splunk could be substantial. A similar drop would be another $9 for the stock.

Read the full article on Seeking Alpha.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 




Monday, June 4, 2012

Finding Treasure Among The Russell 1000's May Trash Pile

May was one of the worst months on record for the major averages with a decline of more than 6% for the Russell 1000. Not only was the decline severe for the major averages, but numerous individual stocks in the index dropped more than 25%.

In fact MEMC Electronic (WFR) and Green Mountain Coffee (GMCR) were crushed over 50%. The key now is to determine if these drops were justified or if the sell off presents a buying opportunity.

Bespoke Investments prepared the below list of the worst performing Russell 1000 stocks in May.

Read the full article at Seeking Alpha.


Disclosure: Long ANR. Please read the disclaimer page for more details. 







Top 10 Net Payout Yield Stocks For June

After a big selloff, the advantages of Net Payout Yield stocks really comes into focus. These companies benefit from the strategic ability to repurchase shares and issue dividends. The market is currently enamored with dividend stocks, but those stocks don't exactly benefit investors when the stock drops.

Investors are stuck with capital losses while collecting dividends, but the company can't do anything with the lower stock price to benefit shareholders. Companies that participate in large buybacks though have the ability to repurchase shares at much cheaper levels now.

This benefit has largely been ignored by the markets over the years with the general sentiment that share repurchases aren't effective. The key though is that most investors don't focus on net share repurchases. Companies that greatly reduce the stock float provide more earnings for shareholders.

Read the full article at Seeking Alpha.


Disclosure: Long AMP, COP, DTV, GPS, GS, KSS, and TWX. Please review the disclaimer page for more details. 



Chart Of The Day: S&P500 Yield Ratio Near Record

Incredible to see any ratios matching the 2008 levels, but as Treasury Yields have plunged to record lows this shouldn't be much of a surprise.

Considering the stock market remains considerably above the March 2009 lows, the ratio of the S&P 500 dividend yield to the 10-year Treasury Yield shouldn't be this high. Companies continue to raise dividends and no signs of a crisis exist outside a few banks and countries in Europe. Why all the panic?

The news from Greece and even Spain shouldn't be shocking by now. American banks are all much more comfortably capitalized and prepared for a crisis. Maybe the bond market is correct as usual, but this level of fear is clearly off the charts again. Last time though it came from a near collapse. This time it is just the fear of the collapse that has pushed the ratio up.

Below courtesy of Jack Hough's SmartMoney.com blog:





Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Saturday, June 2, 2012

Stat of the Day: May ISM New Orders Jump

This actually applies to yesterday's May ISM Manufacturing report, but yesterday was such a busy day in the markets that I'm just now getting around to writing about it.

The headline ISM numbers were slightly disappointing coming in at 53.5 versus the estimate around 54.8. Honestly though, the 6 month moving average is 53.6 so the report is inline with the trend. Considering all of the other negative news, this report was actually very solid.

The interesting component in the report was the New Orders that jumped to 60.1 from 58.2. In March, the number was only 54.5. Somehow businesses continue to order more products when the economy is slowing.

The other encouraging number is that Inventories remain too low at 46. This number has remained consistently below 50 during this slow expansion the last couple of years. Back in March, it had jumped to 50, but it has begun trailing off again.

Lastly, the Employment component remained high at 56.9 which doesn't match up with the Establishment survey showing only 12K jobs created in the sector.

Not sure how the report calculates the headline number as Prices Paid would appear that a lower number would be a positive while the previous 61 would be negative for Manufacturers.

Regardless, the New Orders stick out as a sign of future strength. The bigger question is where are all these orders coming from?


A PMI in excess of 42.6 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the PMI indicates growth for the 36th consecutive month in the overall economy, as well as expansion in the manufacturing sector for the 34th consecutive month. Holcomb stated, "The past relationship between the PMI and the overall economy indicates that the average PMI for January through May (53.6 percent) corresponds to a 3.7 percent increase in real gross domestic product (GDP). In addition, if the PMI for May (53.5 percent) is annualized, it also corresponds to a 3.7 percent increase in real GDP annually."


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Friday, June 1, 2012

Dismal Reaction To Jobs Report

Again, the market is trading with little to no rationality. This action is similar to the bottoms of the last 3 years.

Don't really want to rehash all the news today except to say that the BLS report is continuously incorrect due to seasonal adjustments that are faulty. Normally that is why the jobless claim numbers are used for the leading indicator calculations.

Combine the steady jobless claims with the strong ISM employment index and the Household survey and the jobs picture is a lot stronger then perceived by the market.

Below is a graph from the Calafia Beach Pundit on the jobs data. Does this look like a data point to fear?



The jobs market continues to make steady progress. Anybody using the Establishment survey as the only tool for investing is very misguided.

Will the market bottom next week is impossible to tell? The above data tends to be pushed to extremes and nobody knows what is going to happen with Greece. The jobs data is the US just isn't a reason to sell this market.


Disclosure: No position mentioned. Please review the disclaimer page for more details. 




Apparently Everybody Hates Tea Now

Just about this time last year, almost every investor thought Teavana Holdings (TEA) was the tea version of Starbucks (SBUX). The IPO was hyped and the stock started strong. Fast forward to today, and the stock is falling to new all-time lows more than 50% below the initial closing price.

Wednesday alone, Teavana crashed 17% on news that Q1 2012 revenues came in slightly below expectations, though 27% higher than last year. Earnings were in line, so clearly investors expected the numbers to beat to punish the stock this much.

Company versus Stock

This stock is a perfect example of the difference between corporate results and the action of the stock. While Teavana the company has performed mostly in line with analyst expectations, the stock has been crushed as a lofty post-IPO valuation left investors expecting estimates to easily exceed.

Read the full article at Seeking Alpha.


Disclosure: No positions mentioned. Please review the disclaimer page for more details.