Friday, August 18, 2006

 

Weekly Summary: A glass half full

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.

Comments:
Coach, I was wondering which stocks in your portfolio you would like to buy if you have assuming 100% of the cash levels. The reason I am putting is to know what could be attractive buys from your currently holdings. Goodluck.
 
Coach, I was wondering which stocks in your portfolio you would like to buy if you have assuming 100% of the cash levels. The reason I am putting is to know what could be attractive buys from your currently holdings. Goodluck.
 
DYNT would be my top choice (it's also my largest position).
 
Your blog is one of the best. Though I was wondering if it could be possible for you to share your Average cost on each holding in your portfolio. I know I am asking too much but if you are comforable please share. Thanks.
 
To be honest, I don't know the cost basis of most of my positions because I am always scaling in and out of positions and so my cost basis is freqently changing. However, if you have a specific stock in mind, I can give a rough estimate of my cost basis for it.
 
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