Friday, July 29, 2005
Cobra bites its skeptics
I had expected that PCTI would carry the ball today after last night's terrific earnings report. Even though the stock did close today 50 cents above the price at which bought it in afterhours trading yesterday, I was on the whole disappointed that it didn't move even higher.
However, where PCTI left off, COBR took off. Cobra is one of my biggest holdings and it didn't disappoint this morning when it delivered a stellar earnings report. Once traders had digested the good news, the stock moved up 25 percent. As I normally do in situations like this, I took some profits, selling 1/3 or my position.
I find that this sort of selling rule works well for me: if a stock moves up nicely, I take some profits by selling between 1/3 and 1/2 of my position. If the stock comes back down, I repurchase the shares that I sold for a profit. If the stock keeps moving higher, I sell the remainder of my shares for an even bigger profit. Either way I win.
Thanks to COBR, today turned out to be the one of the strongest days of the year, as my portfolio gained more than $9,000 to finish at $507,032, up $14,824 for the week, and up 11.3 percent for the month of July, handily outperforming the NASDAQ and the S&P 500 (which marks the 12th consecutive month that I've outperformed the S&P). However, as one reader mentioned to me in an email, regression to the mean is a fact of life in financial markets. Though the my portfolio continues to perform very well, I still believe that luck has as much to do with it as skill (in fact, probably more so). Thus, I doubt that my winning streak against the S&P 500 will last much longer. Have a great weekend everyone!
However, where PCTI left off, COBR took off. Cobra is one of my biggest holdings and it didn't disappoint this morning when it delivered a stellar earnings report. Once traders had digested the good news, the stock moved up 25 percent. As I normally do in situations like this, I took some profits, selling 1/3 or my position.
I find that this sort of selling rule works well for me: if a stock moves up nicely, I take some profits by selling between 1/3 and 1/2 of my position. If the stock comes back down, I repurchase the shares that I sold for a profit. If the stock keeps moving higher, I sell the remainder of my shares for an even bigger profit. Either way I win.
Thanks to COBR, today turned out to be the one of the strongest days of the year, as my portfolio gained more than $9,000 to finish at $507,032, up $14,824 for the week, and up 11.3 percent for the month of July, handily outperforming the NASDAQ and the S&P 500 (which marks the 12th consecutive month that I've outperformed the S&P). However, as one reader mentioned to me in an email, regression to the mean is a fact of life in financial markets. Though the my portfolio continues to perform very well, I still believe that luck has as much to do with it as skill (in fact, probably more so). Thus, I doubt that my winning streak against the S&P 500 will last much longer. Have a great weekend everyone!
Thursday, July 28, 2005
Didn't anyone notice PCTI?
If I had to single out one mistaken belief about the stock market that most traders share, it would be that the "market is always right". In fact, the market is almost always wrong. Case in point: PCTI. The company reported stellar earnings after the close, blowing away analyst estimates. You would have expected traders to immediately jump in with cries of "'Mon back", accentuated by sounds of a truck backing up. Nope. While the price did move somewhat higher in afterhours, the trading was very light. According to the NASDAQ website, only 4,300 shares traded hands. Fortunately, I was able to get my paws on 1,800 of those shares, buying 1,000 at $8.61 and another 800 at $8.71. On the whole it was a decent day for my portfolio, as it gained another $1,400.
Wednesday, July 27, 2005
The bull is back
Up $1200 today. I must admit that this market is much more solid that I had thought it would be. Over the near term, I think the major indices can go much higher. Despite the big run up over the past 2 months, the NASDAQ is barely positive for the year; still plenty of upside.
Over the longer term, I remain very bearish. As I've mentioned before, valuations are severely stretched. About one quarter of S&P 500 earnings are attributable to the financials (if one includes financial entities like GMAC and GE Capital). If the yield curve continue to flatten, this will hurt the banks and other financial institutions. Of course, tech will be less affected, but since the P/E ratio on the NASDAQ is close to 40, many tech stocks are already priced for perfection or close to it. Not my sort of odds, but unfortunately in this environment every asset class (bonds, housing, stocks) seems overpriced, so you just have to take what the market gives you.
Over the longer term, I remain very bearish. As I've mentioned before, valuations are severely stretched. About one quarter of S&P 500 earnings are attributable to the financials (if one includes financial entities like GMAC and GE Capital). If the yield curve continue to flatten, this will hurt the banks and other financial institutions. Of course, tech will be less affected, but since the P/E ratio on the NASDAQ is close to 40, many tech stocks are already priced for perfection or close to it. Not my sort of odds, but unfortunately in this environment every asset class (bonds, housing, stocks) seems overpriced, so you just have to take what the market gives you.
Tuesday, July 26, 2005
CXO Advisory on Cramer
It was just a matter of time since someone tried to comprehensively assess how well Cramer's stock picks perform after the fact. The preliminary conclusion, based on in-house research at CXO Advisory, is:
This is just one of the many great examples of interesting research that you can find on this website. I recommend it highly.
In summary, Jim Cramer's assessments of viewer-proposed stocks probably have no economic value. His typical viewer would be better off in a broad index fund.
This is just one of the many great examples of interesting research that you can find on this website. I recommend it highly.
In the red today
My portfolio wasn't able to stay above water today, falling above $200 in value. No major problems with any stocks; just no strong moves to the upside in any of my major holdings. Oh well, can't win them all. I sold my position in ASYS. The stock is up more than 100 percent in the past few months, and I think it was time to let it go.
Monday, July 25, 2005
Good start to the week
It was a good start to the week. My portfolio gained almost $3,000 thanks to strong moves in my security stocks (MACE and VII). Both companies are involved in the manufacturing and distribution of security cameras. Given the tragedies in London and Egypt recently, I think these stocks have plenty of upside. Moreover, I think it's finally dawning on the American people that investment in homeland security has been inadequate, as demonstrated by the fact there are few cameras in New York subway cars and buses. As someone who lived and studied in London (when I was a grad student at LSE), I can personally testify that U.S. cities have far to go in many aspects of security.
Friday, July 22, 2005
Weekly wrap-up, $25,000 cash deposit, and ZEUS
Today was another strong day as my portfolio gained about $4,500 to finish the week up $11,471 (2.5 percent), outperforming the NASDAQ (up 1.1 percent), the S&P 500 (up 0.5 percent), and the Russell 2000 (up 1.8 percent).
I also deposited $25,000 that I have saved up from work over the past year into my Ameritrade account. I figure that it's better to put that cash into my investment portfolio because at least it will earn a slightly higher interest rate than what I get my checking account at my local bank. However, as a result of this deposit, I now have over $80,000 in idle cash in my investment portfolio. This will make it a bit tougher for me to continue to outperform the indices as long as the markets keep going up. Needless to say, I calculate my returns on a net basis, so cash withdrawals and deposits into my investment portfolio do not have any impact on the "results" column on the left of this blog.
Finally, I added ZEUS to my "Good news bear" portfolio. This marks the first time that I have added a stock to this experimental portfolio. Smith Barney upgraded the whole steel sector this morning, and considering how beaten down steel stocks have been recently, I think ZEUS could make a strong move to the upside next week. I bought a bunch of shares at $15.20.
I also deposited $25,000 that I have saved up from work over the past year into my Ameritrade account. I figure that it's better to put that cash into my investment portfolio because at least it will earn a slightly higher interest rate than what I get my checking account at my local bank. However, as a result of this deposit, I now have over $80,000 in idle cash in my investment portfolio. This will make it a bit tougher for me to continue to outperform the indices as long as the markets keep going up. Needless to say, I calculate my returns on a net basis, so cash withdrawals and deposits into my investment portfolio do not have any impact on the "results" column on the left of this blog.
Finally, I added ZEUS to my "Good news bear" portfolio. This marks the first time that I have added a stock to this experimental portfolio. Smith Barney upgraded the whole steel sector this morning, and considering how beaten down steel stocks have been recently, I think ZEUS could make a strong move to the upside next week. I bought a bunch of shares at $15.20.
Thursday, July 21, 2005
Booya
My portfolio gained about $4,500 today. Google's earnings report was good, but not as googly googly good as many traders were expecting. Actually, I though the numbers were strong. Depending on how you splice the data, they beat the analysts' earnings consensus by about 10 cents and blew away revenue estimates. I decided to play it safe and covered at $285.50.
However, I continue to maintain my view that Google is overvalued. This view stems not from the company's near term earnings momentum, which I think remains very strong, but rather by the company's long term prospects. Unlike EBay and Mircosoft, Google does not benefit from network effects. Thus, the company is vulnerable to competitors who may in the future create a superior product (remember Altavista and Webcrawler... how about Lycos and Excite?).
I also think that over the next few years, Microsoft will work feverishly to integrate search into Internet Explorer, and Google could suffer the same fate as Netscape. But all is not lost for Google longs. With a valuation in excess of $80 billion, there's still time for Google to buy Time Warner....
However, I continue to maintain my view that Google is overvalued. This view stems not from the company's near term earnings momentum, which I think remains very strong, but rather by the company's long term prospects. Unlike EBay and Mircosoft, Google does not benefit from network effects. Thus, the company is vulnerable to competitors who may in the future create a superior product (remember Altavista and Webcrawler... how about Lycos and Excite?).
I also think that over the next few years, Microsoft will work feverishly to integrate search into Internet Explorer, and Google could suffer the same fate as Netscape. But all is not lost for Google longs. With a valuation in excess of $80 billion, there's still time for Google to buy Time Warner....
Wednesday, July 20, 2005
Time to short Google?
Another lackluster day, as my portfolio gained only $30, once again underperforming the major indices.
My philosophy on investing is that the only certainly is that there is no certainty. No matter how good a stock looks, it can always go down (and often will), and no matter how bad a stock looks, it can always go up (and often does). The best that one can do is try to trade stocks where the balance of probabilities are in your favor. That way, as long as you have a diversified portfolio, you will make money on average.
With that in mind, I shorted 50 shares of Google at $315.50 today after the market closed. Actually, I shorted Google last year and lost $6,000. But that was then, and this is now. My intuition tells me that Google will disappoint when it announces earnings tomorrow. Don't get me wrong: I fully expect Google to beat the analysts' consensus. I just think that there is a high probability that the company will not beat the consensus by a wide enough margin. The last two earnings reports have been blowouts. Investors are expecting another.
I have read in a number of places that the stellar growth in the prices that advertisers are paying for search words has leveled off, and may be declining. Yahoo already disappointed, in part because revenue from contextual searches did not grow as quickly as expected. While this may be because Google was successful in taking market share, I think the more sensible explanation is that the overall market is not growing as quickly as many in the industry had hoped.
My philosophy on investing is that the only certainly is that there is no certainty. No matter how good a stock looks, it can always go down (and often will), and no matter how bad a stock looks, it can always go up (and often does). The best that one can do is try to trade stocks where the balance of probabilities are in your favor. That way, as long as you have a diversified portfolio, you will make money on average.
With that in mind, I shorted 50 shares of Google at $315.50 today after the market closed. Actually, I shorted Google last year and lost $6,000. But that was then, and this is now. My intuition tells me that Google will disappoint when it announces earnings tomorrow. Don't get me wrong: I fully expect Google to beat the analysts' consensus. I just think that there is a high probability that the company will not beat the consensus by a wide enough margin. The last two earnings reports have been blowouts. Investors are expecting another.
I have read in a number of places that the stellar growth in the prices that advertisers are paying for search words has leveled off, and may be declining. Yahoo already disappointed, in part because revenue from contextual searches did not grow as quickly as expected. While this may be because Google was successful in taking market share, I think the more sensible explanation is that the overall market is not growing as quickly as many in the industry had hoped.
Tuesday, July 19, 2005
You. Me. Let's make some money!
...but not by buying YHOO and INTC, two of Cramer's favorites, because they got creamed after the market closed tonight. As for TWX, my "Cause Cramer said so" portfolio pick, the stock missed out on today's broad market rally but is still trading slightly above the $16.20 price at which I bought it. All in all, it was a lackluster day, as my portfolio gained $2,000, underperforming the S&P 500, and especially the NASDAQ. However, given the haircuts some of the marquee tech names received after the bell, tomorrow is not shaping up to be a good day to be in the markets.
Monday, July 18, 2005
Chinese penny stock?
My portfolio managed to squeak out a $200 gain today. I also opened a new position in a little Chinese bulletin board company whose shares are trading at only about 35 cents. Yeah yeah, I know what you're thinking: Chinese penny stock.. say goodbye to that money. But the company seems legit so I took a gamble and bought 10,000 shares.
When it comes to penny stocks, there are three thing that I require before I even consider buying the shares. One, the company has to be fully reporting to the SEC. Companies that don't report often have something to hide. Two, the company has to have a history of profitability. The easiest way to discern that is to look at the retained earnings line in the balance sheet. Three, there can't be any significant dilution over the past year. This one is critical. My advice to you is to avoid any penny stock where management is diluting existing shareholders by issuing new shares. Remember, even if a stock is trading at 35 cents, it's still a 100 percent loss if it goes to zero. Finally, please let me remind you to read my disclaimer if you are thinking of replicating my trading and investment decisions (which I strongly discourage and completely disavow).
When it comes to penny stocks, there are three thing that I require before I even consider buying the shares. One, the company has to be fully reporting to the SEC. Companies that don't report often have something to hide. Two, the company has to have a history of profitability. The easiest way to discern that is to look at the retained earnings line in the balance sheet. Three, there can't be any significant dilution over the past year. This one is critical. My advice to you is to avoid any penny stock where management is diluting existing shareholders by issuing new shares. Remember, even if a stock is trading at 35 cents, it's still a 100 percent loss if it goes to zero. Finally, please let me remind you to read my disclaimer if you are thinking of replicating my trading and investment decisions (which I strongly discourage and completely disavow).
Friday, July 15, 2005
Nevertheless, a good week for my portfolio
Despite fumbling the ball with BOSC (and then running the wrong way after the kick-off), my portfolio managed to have a strong week, increasing in value by $12,810 (2.9) to $455,738, which compares favorably with the S&P 500 (up 1.3 percent), the NASDAQ (up 2.1 percent), and the Russell 2000 (up a mere 0.2 percent).
I also opened a new position today in VII. The company is losing money but they have a good balance sheet and are investing heavily in new technologies in digital surveillance. Given the unfortunate events in Britain last week, I think companies like VII will stand to benefit over the long haul.
I also closed my short position in HOTT for a modest 10.3 percent profit. I'll put the winnings in my "short the pig" portfolio. The other two stocks in my experimental portfolios, AE and TWX are still open positions (though honestly I think AE no longer qualifies as a "momentum stock" since its price has become welded to the 21 dollar range. I'll keep track of what's happening in my experimental portfolios in this post, which I will update as events warrants. Have a great weekend everyone!!!
I also opened a new position today in VII. The company is losing money but they have a good balance sheet and are investing heavily in new technologies in digital surveillance. Given the unfortunate events in Britain last week, I think companies like VII will stand to benefit over the long haul.
I also closed my short position in HOTT for a modest 10.3 percent profit. I'll put the winnings in my "short the pig" portfolio. The other two stocks in my experimental portfolios, AE and TWX are still open positions (though honestly I think AE no longer qualifies as a "momentum stock" since its price has become welded to the 21 dollar range. I'll keep track of what's happening in my experimental portfolios in this post, which I will update as events warrants. Have a great weekend everyone!!!
Thursday, July 14, 2005
Screwed up with BOSC
I should have seen it coming. I was upset all day yesterday and didn't even have any desire to post to the blog. I still haven't come to terms with the loss of my mother and sometimes I just get overwhelmed with sadness. Those of you who have lost a loved one know how it is. Anyway, not exactly the best time to be trading.
Oddly enough, as far as my portfolio is concerned, today started off well. BOSC released some good news prior to the market's open and the stock shot up 30 percent. I decided to sell half my position at the open (1,500 shares for $2.98 each) and then sold the remaining 1,500 shares at $3.45 each. Midway through the day, I checked my portfolio from work (something I try not to do but at times can't resist) and noticed that BOSC's shares were trading well above $4, up 100 percent for the today. I am not sure which is worse: buying a stock and watching it go down, or selling a stock and watching it go up. Both suck as far as I am concerned.
Then I did something very stupid. I lost my cool and for no good reason bought 1,000 shares back at $4.38. Very amateurish. I'm embarrassed to even admit it, but I figure there's no point in writing this blog if I can't be 100 percent honest with my audience. As I should have expected, the stock came down towards the close. Needless to say, the big lesson here is to trade using intellect, not emotion. The former will make you money, the latter will leave you broke.
Oddly enough, as far as my portfolio is concerned, today started off well. BOSC released some good news prior to the market's open and the stock shot up 30 percent. I decided to sell half my position at the open (1,500 shares for $2.98 each) and then sold the remaining 1,500 shares at $3.45 each. Midway through the day, I checked my portfolio from work (something I try not to do but at times can't resist) and noticed that BOSC's shares were trading well above $4, up 100 percent for the today. I am not sure which is worse: buying a stock and watching it go down, or selling a stock and watching it go up. Both suck as far as I am concerned.
Then I did something very stupid. I lost my cool and for no good reason bought 1,000 shares back at $4.38. Very amateurish. I'm embarrassed to even admit it, but I figure there's no point in writing this blog if I can't be 100 percent honest with my audience. As I should have expected, the stock came down towards the close. Needless to say, the big lesson here is to trade using intellect, not emotion. The former will make you money, the latter will leave you broke.
Wednesday, July 13, 2005
Cramer told me to buy TWX
Until today, I had yet to put a stock into my experimental "Cuz Cramer said so" portfolio. I am not sure if Time Warner is a good pick for this portfolio. On the one hand, Cramer made this company his pick of the week a couple of weeks ago and on today's show, he said TWX reminded him of the days when everyone was piling into Etoys when the real bargain was Toys R Us. On the other hand, it seems that his focus has turned to tech (where the pin action is). Well, good enough I suppose. All in all it was another strong day today, as my portfolio gained $2,700 thanks largely to continued strength in my energy holdings.
Monday, July 11, 2005
Bonso is no Bozo
I don't know what it is, but I can't read the word Bonso (BNSO) without seeing Bozo. But good 'ol Bonso proved that it was no clown today as shares surged 20 percent thanks to a very strong earnings report. This helped my portfolio gain $4,800 for the day. Frankly, I'm disappointed BNSO's stock didn't go higher. However, if the stock can hold $6, I think it has a good chance of going to $9 in the next few weeks. In other news, I did some shopping today, picking up 2,500 shares of ACSEF and 2,000 shares of EDGW. I also added another 1,000 shares to my position in COBR, which now makes COBR my largest holding.
Friday, July 01, 2005
A nice start to July
A good way to start the latter half of 2005. My portfolio gained about $3,000 today and finished at an all time high. I know I've been rather negligent about doing anything with my "experimental portfolios", but I've been very busy at work lately, and so I haven't had much time to think about the stock market or new investment ideas. I will try to remedy that over the next few weeks. Have a great weekend everyone!
