Stockcoach's Corner

Up 0.1 percent today. On the whole, it was not a good day for my portfolio. Without IFON, I would have been in the minus column for the day.

I bailed on GV. My initial motivation for buying the stock was that it was excessively oversold. Although it didn't bounce as much as I had hoped, I am prepared to take my 12 cent profit on 5000 shares and move on. This is not a stock I want to hold long-term. Their exposure to the real estate market in Florida and concerns about how much electrical construction business they'll have next year given the quiet hurricane season so far leaves me worried. I'd rather stay on the sidelines and wait until the price becomes more compelling from a risk/reward standpoint or there is more clarity about what their order book will look like next year.

Despite a big move in OLGR yesterday on news that the company was being bought out, my portfolio managed to eke out only 0.1 percent. Today was better, however, with the portfolio gaining 1.0 percent.

I sold half my shares in obesity drug maker ARNA today. I am not sure why the stock was up. Perhaps it was due to all the stories in the news today about the latest obesity study showing that Americans are getting more ..um.. voluptuous (fat chance, you say?). At any rate, I was getting sick of watching the stock bop up and down and decided to lock in some profits while I still had them.

I also added to my EWEB position yesterday. I know all the rule books say you shouldn't double down on a losing position (or in my case, quadruple down). But then again, I don't really care much for rule books. EWEB is trading well below its cash value. The company didn't renew their contract with Dutton Associates and didn't even bother to release a press release for last quarter's earnings. I figure that management has thrown in the towel and are looking to take the company private. There are enough large minority shareholders in the stock that I think they wouldn't dare offer anything below $2.50 per share. Obviously I could be wrong, and I certainly have been wrong on the stock so far, but I still think there is more upside than downside here.

It was a fairly sleepy week for the markets and for my portfolio. All in all, my portfolio gained $1934 (0.3 percent), which compares favorably with the S&P 500 (down 0.6 percent), NASDAQ (down 1.1 percent), and the Russell 2000 (down 1.7 percent).

The only transaction of significant was my decision today to sell all my shares in LKI. Although the stock have been showing some strength in recent days, I really didn't like their last quarter nor the tone of the letter to shareholders in the annual report.

Anyway, that's it for now. Have a nice weekend and as Dehtrader would say, over and out.

Down 0.5 percent today. Yeah, I know watching my portfolio go nowhere for the past four months hasn't been too fun for you or for me. But sometimes reality is boring. Part of the problem is that traders seem to have lost interest in microcaps. However, if the market continues to recover, I think we'll see a lot more interest in the microcap realm. There's a definite order in these things. First the big caps stock go up. Traders get more confident, and as they get confident, they start buying up more small more speculative companies. That's been the pattern in the past, and hopefully it will continue to be the pattern in the future.

Down 0.2 percent. I picked up 5000 shares of GV at $1.09 today. This is my fourth trip on the GV Express in the past year (The GV Express stops at only two stations: Pumpsville and Dumpsville; make you sure you get off at the right one). I think the stock's fundamentals are good enough that it is unlikely to fall below a dollar. On the flip side, the first inkling of a hurricane hitting the Gulf Coast should send the stock up 20 to 40 percent. If that that happens, flip I shall.

Nice day today: Up 0.3 percent. I sold half my shares of CRWS last week and I'm regretting it. That stock is a beast!

My portfolio gained $16,491 (2.3 percent) for the week. Obviously, that's a nice gain, but the fact of the matter is that I still underperformed the Russell 2000 by a wide margin (the Russell gained 4.8 percent for the week). Still, I'm not going to cry any crocodile tears. Sixteen grand is a lot of money, much better than a sharp stick in the eye as one of my good friends in high school would say. So I'm inclined to see the glass as half full rather than half empty.

Like all of you, I'm still learning about markets and trying to improve the way I trade and invest. One thing I'm realizing is that it's important to think strategically. Let me give you an example. Linktone reported earnings this week and the stock sold off. A few months ago, the Chinese government introduced new rules that will have an adverse impact on the profits of LTON and its competitors like KONG and TOMO. Linktone came out with a press release saying this would have a significant adverse impact on near-term earnings. Yet, in the five weeks following this disclosure, the average analyst consensus for FY06 and FY07 earnings barely changed. Meanwhile the stock drifted lower and lower.

When the company reported earnings this week (surprise, surprise) they guided below consensus for the forthcoming quarter. Anyone who followed the stock could have predicted this since the consensus estimate had never been adjusted to reflect the new reality. I had an inkling that the stock would sell off after earnings so I unloaded two thirds of my position at the close on Wednesday but then I proceeded to buy back those shares near the close of trading on Thursday. Why? Because the majority of sellers on Thursday were retail investors who thought the company "missed" its numbers (this chart bares this out: notice how the ratio of blue to red is higher today and Thursday than on Monday, Tuesday, and Wednesday). And now that the stock is trading near cash value and all the bad news has been priced in, I think it will move higher. The fact that the company has started a large new buyback program should also help.

Everything I've done with my portfolio so far this week has been crap. If I sell it, it goes up. If I buy it, it goes down. I even managed to screw up with OCCF. And ya, I do notice the irony in all this after I wrote about the "George Costaza trading system" last week. I guess I'm George. Meanwhile the NAZ and Russell are both up over 4 percent and I ain't getting any of it. I'm taking the rest of the week off to sulk.

Lousy start to the week: down 0.6 percent. I sold my remaining Broadcon shares for a big fat loss. I have no idea what I'm doing when it comes to these large cap stocks. I still have my MRVL shares. Deep underwater with those too. Hopefully the stock will move up a bit so I can get out before they report earnings late this week, which I am sure will be crap.

My portfolio continues to tread water. For the week, I lost $4,875 (0.7 percent). This does, however, compare favorably with the rest of the market, which saw even deeper declines, with the S&P 500 losing 1.0 percent, the NASDAQ declining 1.3 percent, and the Russell 2000 shedding 3.2 percent.

For nearly a year now, I've been thinking of ways to compliment my longer-term focused investing with shorter-term trading. Because I have a full time job, one prerequisite is that whatever system I introduce has to allow me to enter orders when the market is closed and rely on preset limit orders to exit the position during the day while I am busy at work. Obviously, this limits my choices, but that's just the way it has to be since I really don't want to be distracted with the stock market during the day.

Since that lousy NTGR trade, I've basically gone back to the drawing board and put together a variety of "systems" to test out. While I'm not going to give away the details, all the systems I am testing have one idea in common. This idea is almost so simple that you'll laugh. It's common knowledge that beginning traders who have no clue about the stock market and no discipline in their trading decisions lose money. Who could argue with that? Fine. The idea is to isolate what these traders do and do the opposite (The George Costanza Trading System). Go long when they go short and go short when they go long. Exit a trade when they enter and enter a trade when they exit it. I have been following the market long enough that I think I have a pretty good sense of how beginners trade so coming up with ideas for a system to exploit newbies hasn't been all that difficult. Right now I'm paper trading a couple of systems, and one in particular looks very promising. I'll keep you posted!

I got my ass kicked today: down 0.8 percent. A reader asked my thoughts about the state of the market and where it's heading. I don't know if I have a good answer. In the near term, I think the market is more oversold than overbought and once August is out of the way, I wouldn't be surprised to see a nice rally. Longer-term, I think we are in a sideways market. I've believed that for the last two years, and I have been right so far. I don't buy the line of argument that we are in a secular bear market. Bears always sound convincing, but in my experience, are usually wrong. On the other hand, there are enough risks in the global economy that I doubt we'll see a big upwards move in equity markets. Thus, it will be a stock pickers market for the foreseeable future.

Up 0.5 percent today thanks largely to a continued surge in ENPT. Although I still think ENPT has a lot more room to run, I decided to play it safe and sold half my shares at $2.92.

I also started a new position in FNLY. Finlay is an interesting company in many respects. The company is profitable and the stock is trading at about 50 percent of tangible book (and book value will increase further when the company realizes a $20 million benefit from the sale of property and inventory next quarter). The stock also trades at a very low ratio of price to sales and price to gross profits.

But what really got me interested is the large inside buying from a private equity group. Could this be a precursor to a buyout? Perhaps. Given that the private equity group has already bought millions of dollars worth of stock on the open market, I doubt we'll see the sort of games one often see with microcaps, where a potential buyer shorts the stock into oblivion and then offers a "generous" premium to the closing price (which, incidentally, is what I suspect happened to MARSA).

Obviously, not all is rosy at Finlay. The company has lots of debt (always a bad sign) and I have serious concerns about the long-term feasibility of their business model. Still, I think the risk-reward picture here is compelling enough that I want to participate. I'm in for 1500 shares.

The portfolio got hit over the head with the ugly stick today. Down 0.9 percent. Blah.

I'm back from my brief vacation. As far as my portfolio is concerned, last week was pretty forgettable. I sold a few stocks (IFO and COBR) and bought a few stocks (a new position in JOB, and added to my positions in ACSEF and SCOP). All the trades were done through preset limit orders. I basically looked at the headlines for my portfolio before the market opened, put in a couple of orders, and then turned off the computer. All in all, the portfolio gained 0.3 percent last week, outperforming the major indices by a small margin.

This week began on a strong footing as ENPT, a position I opened recently, surged 50 percent after reporting an excellent quarter. Normally, I would take some profits when a stock moves so much in one day, but I think the quarter was good enough that there is still more upside than downside with this stock, so I'll hold my shares a bit longer. Still, despite ENPT's big move, the portfolio finished down 0.1 percent for the day as the overall weakness in the markets sapped into many of my other positions.

On an off-topic note, I finally finished reading Brian Greene's Fabric of the Cosmos. This is the sequel to Greene's earlier book, The Elegant Universe. If you are interested in cosmology (and if you're not interested, that's probably because you don't know much about it), NOVA made the Elegant Universe into a wonderful three hour series, which is available for free viewing through their website.