Out Fox The $treet

Never heard of Michael Purves of BGC Financial, but I like his concept of trading like a wolf. I'd go for fox instead of wolf, but thats besides the point. His best quote is "you have to be agile and short-term and cannot just sit on stocks and hope". Now I don't agree as much with the short term concept, but I'm in full agreement with the concept of not just buying a stock and hoping. If the reason for buying a stock changes, then dump it. Thats the whole theory of being opportunistic. Unfortunately too many of these traders have zero focus on the damage short term trades can have when the tax man cometh. Now the Breakout Crew at Yahoo is interesting. First time to watch their work and I'm amazed to see Jeff Macke appear again. He of the famous melt down on CNBC. Jeff appears to remain very negative and seems to be chomping at the bit to short this market. Nothing has changed even since the bottom. Watch if you've got a few minutest to waste....

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. ...

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...

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 ...

On Thursday, purchases MedcoHealth Solutions (MHS) for the Net Payout Yield Portfolio. As mentioned back on Aug 23rd [ MedcoHealth Solutions: Ultimate Net Payout Yield ], MHS was on the radar for addition to this portfolio. It almost ran away from us after hitting bottom just one week after writing that post, but this recent pullback touch the 50ema and gave us an entry point. MHS is on a massive stock buyback spree signaling not only a financially strong company, but also a cheap stock. Just bought a half position at this point as typical for this portfolio size. Note: This portfolio will be available soon at Covestor.com under Mark Holder. It will be the 2nd model I offer after the successful Opportunistic model that currently has 16 subscribers. This portfolio has consistently beat the SP500 by 6% since being tracked first by hand since the start of 2007 and then the last 27 months at Marketocracy.com . The important key to this portfolio is that it has a Beta of 1 and involves...

Catching up on trading from yesterday. Trimmed half our position in Caterpillar (CAT) in the Net Payout Yield Portfolio after a weak reaction to a positive earnings report. Also after the huge run and the lack of a buyback implemented by CAT leaves the NPY at only 2.4%. This is not significant enough for this portfolio so discipline requires us to sell. CAT has been a long term holding of the portfolio, but the gains in the stock and the limited payouts suggest the stock may be topping. Not to mention the negative action in the stock from bullish earnings. From the chart, its apparent that at least the short term action is negative.

Copper has been hot so we've used this opportunity to trim about 30% of our position in leading copper producer Freeport McMoRan (FCX). FCX has had a huge run up over 50% since our last purchase in the Opportunistic model. Not to mention this model is highly levered so trimming a few positions are prudent after a big run the last few months. With copper back up to the $3.78 today, FCX could easily run back to the highs around $120 back in 2008 before the financial crisis. 70% of the position is being held due to these prospects. Not to mention the potential shortages of copper going into 2011 could even push prices much higher the the $4/lb saw back then.

Bought MF Global (MF) in the Opportunistic and Growth portfolios to rotate into a financial that underperformed over the last month or so. MF is particularly interesting because they hired former Goldman Sachs (GS) Chairman and ex-Governor of New Jersey to be their CEO. He has taken an aggressively path to move into investment banking plus they reported a strong margin expansion in Q2 due to cost cuts. Q3 will be as impressive due to the slow market, but now is likely the time to build a position. This is mainly a move that Corzine will be able to use his experience and influence to make MF into a major financial player. Especially at a time when the major players like Goldman Sachs (GS) and Morgan Stanley (MS) continue to face massive regulation pressures. Whether MF will be able to overcome such pressures isn't clear, but if anybody is going to make it happen its a Democrat like Corzine. The position was entered around $7.2 and is definitely being entered based on technicals....

As the market remains in overbought levels, purchases the Drexion Small Cap Bear 3x (TZA) to hedge some of the long positions we have in the Growth, Hedged Growth, and Opportunistic Portfolios. This was done in order to protect and extend capital gains in stock that we expect to continue higher while providing some protection for a downturn back to the breakout levels around 1120 to 1130 on the SP500. With the SP500 only having one major down day in the last 3 weeks, it was just time to hedge. This is on top of a short in LULU and some pruned positions in ICICI Bank (IBN) and Riverbed Technology (RVBD) over the last few days. Now looking at some positions to add to the portfolio on the next drop which we don't expect to be more then 2-3% before the market enters the traditionally strong November to April period of a mid-term election. Of course, you never know with October so keep a close high on whether support holds.

Sold roughly 30-40% or Riverbed Technology (RVBD) in our portfolios after the stock has ramped from $30 to $45 in weeks. RVBD is now trading at over 30x 2011 earnings which is getting pricey. Not that other stocks like Open Table (OPEN) aren't more expensive, but its getting risky to hold onto such huge gains. Still keeping a good percentage of the shares so we're not negative on the stock just the short term valuation. RVBD had become the largest position by far in both the Growth and Opportunistic portfolios so pruning some shares became prudent for diversification purposes. 

Shorted lululemon athletica (LULU) for the Opportunistic Portfolio mainly as a hedge for some short term over bought stocks. LULU also has a huge gap back to the $37 range so it provides a great opportunity for a stock likely to get whacked if the market sells off. The trade was made around $43.9 and any close above $44 would likely trigger covering this short. Again nothing wrong with the company except being highly priced now at 30x earnings and wanting some hedge for a portfolio still levered at 1.5x.

ICICI Bank (IBN) shot up 6% today placing the stock in a severe oversold position. Hence considering the market being up 8 of the last 9 days, Stone Fox used the jump to unload our stock in IBN in the Opportunistic Portfolio. The more long term focused Growth Portfolio cut back its position by roughly 15% as well. IBN still has long prosperous future ahead, but the market and particular the stock were ahead of itself short term. The RSI was an off the charts 82 and the CCI hit 262. Both numbers that can typically signal a short term top. Hopefully the stock will swoon back to the low $40s soon and we'll re-enter the position. 2:20 Update:  Trade was just below $48. So far the stock and the market have held up better then expected from over bought conditions. Would imagine the stock does dip back to mid $40s, but at some point i'd expect a breakout above the current ranges in the SP500 to leave a lot of people expecting a pullback that doesn't happen.

With the SP500 up 3.5% in the last 2 trading days, decided to take a small hedge going into the jobs report tomorrow. Shorted roughly a 5% position in Drexion Small Cap Bull 3x (TNA). This stock has shot up from $32 last week to $38.5 today. Also these 3x ETFs tend to be long term losers so being short will work out unless the market surges. Regardless the main goal is to buy some protection in the Opportunistic Portfolio that was leveraged at 1.8x. TNA will provide good protection because the short will win in either down or flat markets. Only an extremely bullish market does this ETF lose and we're already set up to profit from a big market move up. Will hold onto unless the jobs report is extremely bullish tomorrow and markets regain the 200EMA around 1,093.

Bought Cisco Systems (CSCO) for the Net Payout Yield portfolio after its follow thru selloff this morning. CSCO was down roughly 10% yesterday following what were decent earnings especially compared to their value. Does valuation matter anymore? After hours on Wednesday we wrote a little note [Cisco Whacked 7% on 18%+ Guidance] . At that point, we mentioned potentially buying the stock considering how cheap it has become so after letting the market over react we made a purchase today when it was down nearly 1% again and it closed nicely at breakeven. Way too much pain for a generally strong quarter. Remember, in the long run its not whether or not they beat revenue estimates that drives the stock, but whether or not revenue and more specifically earnings expand. CSCO has great potential on that front. The reason CSCO was purchased for the Net Payout Yield portfolio was two fold. First, we needed better technology exposure in the fund as Microsoft (MSFT) just isn't cutting it and we...

Bought Lihua International (LIWA) at $8.76 for the Opportunistic Growth Portfolio. LIWA is a producer of refined copper products in China. Yesterday they announced the opening of a new copper smelter that will double capacity. Today the stock fell to below the opening price prior to the announcement so we used the weakness to buy right at the moving averages. As I'm about to report on, the China markets have made a dramatic move off the bottom this month yet China stocks that trade in the US continue to lag. LIWA is a primary laggard and trades at roughly 4.5x the estimated 2011 earnings of $2. Considering LIWA makes around $1.2 on existing capacity I'd expect earnings for 2011 to double with capacity. Doesn't really matter with the stock price stuck below $9 whether they earn $2 or $2.5.

Postings have been slow of late because of moving into a new house. Regardless, we've been focused on taking advantage of the drop in the market. Yesterday, the Opportunistic Portfolio bought Massey Energy (MEE) and China Armco Metals (CNAM) and covered the short on Research in Motion (RIMM). Unfortunately besides a small short on RIMM, we missed reducing exposure on the drop, but we're confident that we picked up MEE and CNAM on the cheap yesterday. Last check that portfolio is up nearly 8% today. The basic theme was to buy what China needs and the met coal from MEE and the recycled steel from CNAM were the just the ideal options. It doesn't hurt that the stocks are down 40-60% from recent highs. Its become evident that China is going to protract any rate hikes due to the issues in Europe and hence the market is likely to flock back into the China theme which means more commodities. More on this subject later.

Shorted Research in Motion ( RIMM ) for the Covestor - Opportunistic Portfolio as its becoming more and more apparent that they are becoming a laggard in the smart phone wars. Or at least that's the perception in the markets. With their failure to break the 200EMA just above $69, took the opportunity to short them and hedge alot of my long exposure. On a valuation basis, RIMM isn't overly expensive trading at roughly 13x 2011 estimates. Just have to wonder if RIMM will meet those estimates considering the success of the iPhone and Android products.

In the wake of the of the Goldman Sachs (GS) fraud case, Stone Fox capital decided to use the opportunity to unload the remaining shares in the UltraShort Russell (TWM). It just doesn't pay to hold these ultrashort shares and we don't see the fallout from a 2007 fraud case being long lasting. The case may gather steam and cause more damage then I expect, but we'll stay tuned next week. We added back to the Foster Wheeler (FWLT) shares that we sold for the Growth and Hedged Growth Portfolios last month and started a new position for the Opportunistic Portfolio. Technically FWLT is in a position to breakout with the 20ema crossing the 200ema and we like the future prospects for infrastructure growth. Asia and the Middle East (OPEC) should be ramping up now that world growth is flourishing. Best of all, FWLT is still considerably below the $80 high they hit in 2008. On the earnings front, FWLT made $3.73 in 2008 and they likely will retest those levels by 2012. The estimate fo...

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.

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.