Stockcoach's Corner

Thanks to a nice move in GV, my portfolio gained almost 1 percent today. For the week, I came out $10,254 ahead (1.8 percent), outperforming the S&P 500 (up 1.1 percent), but roughly in line with the NASDAQ (up 1.6 percent) and the Russell 2000 (Up 1.9 percent). For September, my portfolio gained 5.6 percent, handily outperforming the major indices. September also marks the fourteenth month in a row that I have outperformed the S&P 500).

Okay, enough bragging; on to more relevant issues. Thank you to all who emailed me and posted a comment about what industries to watch in 2006. I received a range of views, but there seems to be a consensus that infrastructure stocks will tend to do well in 2006. I agree with this thesis. Refinery capacity is very low in the United States. The country's network of roads and bridges is lacking and needs heavy investment. The power grid is still antiquated and will require billions of dollars in upgrades. People also noted that homeland security will do well. I agree, and have already positioned myself to benefit from that (MACE, VII). Health care will also continue to be an important theme, and biotechnology should outperform.

As we look towards 2006, I will try to complement may bottoms up approach with a top down approach that overweighs my portfolio in sectors that are doing well and are poised for outperformance. Like many of you, I am rather embarrassed that I almost completely missed out on the multiyear rallies that we have seen in energy and commodities and until recently, housing. I will endeavor not to make that mistake again!

The NASDAQ staged one its strongest rallies of the year. A drop in oil prices? End of quarter widow dressing? Short-covering? I don't know. What I do know is that my portfolio didn't share in the fun.

GV issued a press release after the close saying that they will be involved in Katrina restoration. The stock has shot up twice in the past month on hopes that just such a press release would be forthcoming. Both times the company poured cold water on traders by issuing a press release saying that it did not anticipate being involved in the recovery efforts. Now that the tables have turned, tomorrow should be interesting day for GV.

Up about $2,000 today. FNLY shed 15 percent today after announcing that it would be closing 194 of its stores on account of May's merger with Federated. Still, the company's core business is profitable, and I am not ready to bail on this stock just yet.

DECT zoomed up more than 40 percent in early trading after announcing a deal with Chevron. I sold half my position at $5.76. We'll see what happens tomorrow. I am hoping that the daytraders are not done with this one just yet.

AEHR reported a good quarter and excellent guidance. The stock reacted accordingly, surging 40 percent. Unfortunately, I only have 1000 shares of AEHR, but I'll be looking to buy more on any weakness.

Up about $4,000 today largely due to a nice move in FCPO. What's a pig but isn't? Answer: Fresh Brands, which operates supermarkets primarily under the Piggly Wiggly banner. Okay, so the Wiggly One is not exactly Wholefoods. Indeed, it's the antithesis of Wholefoods. But the stock is extremely cheap. While WFMI trades at 2 times sales, FRSH trades at one twentieth times sales. Yes, WFMI is best of breed and FRSH is not. But with the exception of truly distressed companies that are on the verge of bankruptcy, EVERY stock is attractive if the price is right. And FRSH is just too cheap to ignore at these levels. I'm in for 1300 shares.

Up about $800 today. I sold my remaining shares of PDGE. I still think the company has a solid business, but the shares are up over 100 percent from where I bought them just a few weeks ago, and now that Rita has come and gone, the catalyst for owning this company is no longer there. Thus, I'd rather put my money somewhere safer.

And with safety in mind, I bought 2000 shares of DECT today. Dectron is a great little company, with improving earnings and revenue, and a solid balance sheet. Plus, it has lately become a favorite of daytraders, which means that the likelihood is high that I will be able to take advantage of a pump and dump in the near future and sell my shares at a hefty premium to the price at which I bought them.

Thank you everyone for your views on the "industries to own for 2006". Please keep your opinions and coming. I will compile them into a single post at the end of the week.

It was a tough week for smallcaps. The Russell 2000 fell 2.5 percent, underperforming the NASDAQ (down 2 percent) and the big cap S&P 500 (down 1.8 percent). My portfolio, which is exclusively smallcap (indeed, microcap) was not spared, falling $5,142 (0.9 percent) to $554,581.

As the fourth quarter draws closer, I have been thinking about what sectors will lead the market in the months ahead. Like many of you, my exposure to energy was relatively small over the last few years. Too bad since many energy stocks have risen tenfold in that time span. Although I think it's possible that energy will continue its run (I added a bit more to my position in AE today), I don't want to increase my exposure to energy stocks too much.

I believe that to generate consistently positive returns you have to buy stocks with little downside risk. I don't know what will happen to oil prices but if they were to fall, it is certain that energy stocks will fall as well. And as we've seen with housing stocks, the resulting downdraft can be swifter and uglier than most had suspected.

With that in mind, I am turning to you, my readers, to suggest what sectors will lead the markets in the months and years ahead. I've already mentioned on this blog that I think voice over internet (VOIP) could generate some investor excitement, which is why I have carved out nice positions in stocks like CALL, MNDO, VTEK, BOSC, and PCTI.

Another possibility is 'clean stocks' that cater to alternative energy. I personally don't own any of them since past experience has shown that most of those companies will fail. Please leave a comment with your ideas (you can also email me but I would prefer that you keep your ideas public by posting a comment so that all the readers of this blog can benefit).

Okay, uncle, uncle! I just can't catch a break. Down another $300 today, on a day that the market actually managed to stay in the black. The only stock that's working for me is PDGE (how can it NOT work? The company's business is environmental and disaster restoration in Texas!). However, I just have too few shares of that highflier to offset losses elsewhere in my portfolio. Well, as they say, tomorrow is another day. But the way things are looking now, this is shaping up to be a bad week for good 'ol Stockcoach.

I sure do. Down $3,500 today. The only saving grace in my portfolio was PDGE. However, since I own only 2,500 shares of the company (having sold half my position last week), PDGE's nice move didn't do much to salvage the day. Like most of you, I'm hoping that the storm will pass (both literally and figuratively), and the market will gain some traction. In the meantime, I'm selectively trimming some of my positions in order to build a larger war chest so that I can do some bargain hunting in case stock prices keep falling.

A lousy day for my portfolio: down $2,100. To add salt to the wound, OUTL (a stock I recently sold) surged 30 percent on a great earnings report.

Did anyone notice that Orwellian moment during yesterday's episode of Mad Money when Cramer declared that the housing bubble has popped? Wasn't this the same Cramer that was telling viewers earlier this year that there was no housing bubble (they're landbanks I tell ya). Well, at least now we know why Cramer was such a successful hedge fund manager.

Despite a nice move in EEI on account of news that the company will be involved in the Katrina clean up and a five percent jump in shares of TRT (which is my second largest holding after COBR), my portfolio buckled to market pressure and declined $300 for the day.

How about that NGAS? I sold my shares on Friday and the stock went crazy today, surging 15 percent to a new 52 week high. Oh well. Can't win them all.

I started a new position in Finlay Enterprises (FNLY). Finlay operates jewelry stores in nearly 1000 locations in various department stores around the United States. Jewelry retailing is a cut-throat business and the company is not without its problems, most notably the imminent closure of some department stores in which it operates. Still, the stock is trading at tangible book value, one quarter of gross profits, and less than five times expected 2005 earnings. As such, I don't see much downside at current prices. I'm in for a 1000 shares and will double down if the price keeps heading lower.

The week began on a sour note as shares in FCPO (one of my bigger holdings) lost more than 15 percent on a weak earnings report. However, thanks to nice moves today in WSCI, GV, and PCTI, my portfolio managed to squeak out a small gain for the week, increasing by $770 (0.1 percent), which compares favorably against the S&P 500 (down 0.3 percent), the NASDAQ (down 0.7 percent), and the Russell 2000 (down 0.9 percent).

I added a new stock to my portfolio: Rex Stores (RSC). The company is profitable and the stock is trading well below tangible book value. Motley Fool recently did a nice write up about the company. I also sold my shares in NGAS. I don't know if energy prices have peaked, but I do know that I am up about 80 percent on this stock in just a few months, and that no one ever went broke by taking a profit.

I've also decided to pull the plug on my "experimental portfolios". Quite frankly, my heart was never quite in it. My value based investment approach has yielded stellar returns and as they say, if it ain't broke don't fix it. That doesn't mean that I will refrain from using other investment strategies in the future. As I've said before, there is a paucity of good value stocks out there, and those stocks that are undervalued by traditional valuation metrics (price to book, price to earnings, etc.) are not nearly as undervalued as they were several years ago.