Stockcoach's Corner

* Full year profits of $232,076, up 13.9 percent

* Fourth quarter profits of $78,183, up 109 percent

* Outperforms benchmark Russell 2000 by 21.5 percent for the year and 1.6 percent for the fourth quarter

* Announces $50,000 special cash dividend

Stockcoach today announced profits of $232,076 for 2006 compared to profits of $203,666 for 2005, an increase of 13.9 percent. For the fourth quarter ending December 31, 2006, profits were $78,183, an increase of 109 percent compared to the fourth quarter of 2005. Profits are calculated as the overall change in portfolio value, inclusive of realized and unrealized capital gains and losses, dividend receipts, commissions and fees, net interest payments, but exclusive of any cash withdrawals or deposits or accrued tax liabilities.

For the year, Stockcoach outperformed the S&P 500 by 24.9 percent, the Nasdaq composite by 29.0 percent, and the Russell 2000 by 21.5 percent. For the fourth quarter, Stockcoach outperformed the S&P 500 by 4.0 percent, the Nasdaq composite by 3.2 percent, and the Russell 2000 by 1.6 percent. Stockcoach's equity was $834,311 at the end of 2006, an increase of 38.5 percent over the preceding year.

To reward himself for his hard work, Stockcoach has declared a special $50,000 cash dividend payable to himself on January 1, 2007. Based on his conservative calculations, this money should be sufficient to fund one month's worth of expenditures at Babies R Us. Stockcoach also plans to announce another special dividend in March to help cover this year's tax liabilities.

"I would like to congratulate myself on another solid year," said Mr. Stockcoach, President, janitor, and spiritual leader of Stockcoach, Inc. "The completion of this quarter marks the tenth consecutive quarter that I have outperformed the S&P 500, the Nasdaq, and the benchmark Russell 2000 index."

Mr. Stockcoach continued, "I am excited about the prospects for 2007. While the outlook for the stock market in general, and smallcap value stocks in particular, is less favorable than it has been the past, I am hopeful that I will be able to continue my record of outperformance. As previously discussed, I intend to complement by value based investment approach with higher frequency trading, which I believe could further boost my returns."

Up 0.2 percent today. Tomorrow will be the last trading day of 2006. In the past, the last day of the year has brought all sorts of surprises for microcap investors. First, you have the tax loss sellers who procrastinate about dumping their losers until the final hours and then finally relent and send in market orders to sell at any price. As an investor who tends to buy stocks that are closer to their 52 week lows than to their 52 week highs, that often spells trouble for me. On the other hand, you also have hedge fund managers who like to run up stocks in order to 'mark to market' for higher fees. Plus, there are the early bird January effect traders who will be looking for bargains as the new year approaches. All in all, tomorrow should be interesting. I'll be back after the close with my 'annual report'.

Up 0.9 percent. Okay, give me a break. IFON announces some rinky dink contract to sell Lucky Goldstar handsets in Latin America and the stock is up 60 percent. Yes, as you can probably tell, I'm rather bitter, having sold the stock way too early this morning, thereby leaving lots of money on the table. Oh well, sera sera. In addition to IFON, SPOR helped me out. Still, depite these nice gains, the Russell 2000 once again outperformed me today. Grrr!

The portfolio managed to gain 0.5 percent today thanks largely to news that CPAK was being bought out as well a low volume surge in shares of Kentucky Fried Investors (KINV.OB). While my limit order to sell a few shares in KINV.OB was partially filled towards the end of the day, given all the insider buying in the stock, I wouldn't surprised if someone knows something.

Anyhow, I'm still trailing the Russell 2000 by less than one percent this quarter, so hopefully I can put together a few days of outperformance before the year is over.

Up 0.1% percent. Only the Bozo kept me in the plus column today. I'm starting to get annoyed with Scottrade's "real time" alert service. Today's alert notifying me that DAGM's price had risen to $2 arrived in my inbox about 40 minutes after the fact, by which time I couldn't act on it. I'm not sure if the issue has to do with my computer at work, or with Scottrade itself, but regardless, I'm not amused.

And again and again and again. The past 9 trading days has seen a slow but steady decline in my portfolio value. I'm down 0.7 percent so far this week. While it is unpleasant to see my accumulated profits for the year steadly evaporate, so far the damage has not been huge, and I am still well positioned to outperform the markets for the year (although probably not this quarter). In the meantime, I'm looking around for some loser stocks to buy in order to profit from the January effect.

The portfolio got whacked this week: down $7,912 (1.0 percent). Hopefully I can make it back next week. Have a nice weekend everyone!

The portfolio has declined each of the last 5 trading days. So far this week, it fell 0.1 percent on Monday, 0.3 percent on Tuesday, and 0.5 percent today. This does not bode well for my goal of gaining for 40 percent for the year. Still, I remain optimistic. This is the time of year when microcaps can really fly. So who knows what can still happen before the end of the year.

On Wednesday I was ready to celebrate another $10K+ week but then that sneaky Mr. Market snuck up behind me with one of those WWE type metal chairs and ...thump, I had lost the majority of my accumulated weekly gain. PAM, NYER, PDEX, CHK, DAGM, they all ganged up on me today. Still, the portfolio gained $4,047 (0.5 percent) for the week. Not as good as the Russell 2000 or any of the other major indices, but a gain is still a gain. Besides, you can’t beat the market all the time, right? Have a nice weekend!

Up 0.4 percent today. I am always struck by stories like these that remind us just how small (though not necessarily insignificant) our world is in the great scheme of things. There are at least 100 billion stars in our galaxy and at least 100 billion galaxies in the visible universe. And standard cosmological models of inflation suggest that if the entire universe were reduced to the size of our solar system, the visible universe (the part that we can see with our telescopes, which is about 26 billion light years across) would be smaller than a grain of sand. And on top of that, our entire universe, which string theory suggests may have 9 spatial dimensions, may itself just be one in an infinite number floating in a larger "hyperspace". You see how small one feels when one think in these terms.

When I was a teenager, I remember being enthralled by the notion that time can not be measured in absolute terms. If a light bulb goes off in the middle of a train that zips by you at high speed, the light from the bulb will be seen instantaneously by passengers at the front and back of the train. But from your perspective, the light will reach the back of the track before it reaches the front. Everyone has a "now list". But my "now list" may be different from yours, especially if you happen to reside in another galaxy. Indeed, if you live in a distant galaxy that is moving away from ours, you may legitimately claim that it is not the year 2006 on earth, but 1006!

I was also struck just by how malleable time is. If you get into a rocket that is constantly accelerating at a comfortable 1G (the gravity here on earth) not only will you have a smooth journey (the force of acceleration will make it feel as thought you never left earth) but you will be able to travel one trillion light years (as measured on earth) in about 55 years in the rocket (try this applet for fun)!

Indeed, once one realizes that space and time are so intricately linked that you can not really understand one without understanding the other, the notion of something as basic as life and death gets a bit blurry. In some sense, none of our loved ones have really died. They just live in a different corner of spacetime. And since general relativity does not prohibit traveling back in time, who knows what amazing things await for humanity.

Up 0.3 percent today. I sold my remaining 600 shares of TSTC. The stock made a big move today along with many other "China" stocks. While I was impressed with TSTC's momentum, especially towards the end of the day, I usually think it best to sell a stock that moves up 25 percent on no news. Even a cursory look at the 2 year chart for TSTC suggests that the stock has never been able to hold a large gain, so hopefully I will be able to buy my shares back in the low $4 range.

Up 0.4 percent today. It was another one of those days. I was happy to see my portfolio rise, but a little annoyed by how much better the Russell 2000 did.

One blogger that I follow quite a bit is Charles Kirk (I like his site so much that I even pay $50 to be a member. In fact, his website is the only trading resource that I pay money to use). His style is quite different from mine. I tend to base my trading decisions on a company's fundamentals whereas he leans towards technical analysis. He is also much more short-term oriented that I am.

I must say that his trading record is nothing short of amazing. Yet, with success comes a price that I think many short term traders have not considered (although I'm sure Charles has thought about this many times). You see, if you are successful, your account will grow very quickly, but as your account grows, it will become increasingly difficult to deploy that cash on a consistent basis. This problem is particularly acute for daytraders. Imagine having $1 million in an account and having to trade that much money every day, always closing one's positions before the end of trading. Unless you are trading extremely liquid stocks, it will be impossible to get in and out without moving the price against you. That poses a problem because the best risk/reward scenarios are often in smaller less liquid stocks (this is also true for fundamentals-based investing, which is why I focus on smallcaps).

Thus, I find that many short-term traders who have large accounts are often sitting on huge cash hoards. Even though they can still make big profits on the trades that they make, because their average trade size is a small fraction of their total account, they still have trouble outperforming the indices in percentage terms.

And speaking of a few good trades, ENPT soared this morning after reporting a very strong earnings report. Unfortunately, just like CBTE, this was a small position for me. I had sold half my ENPT shares a few months ago and so as of this morning, I only had 2500 shares to my name. I sold 1750 of them for an average price of about $6.40 during early trading. My decision to sell most of my shares was based on the fact that while headline EPS was excellent, revenue did decline year over year, the company paid no income tax, and I have concerns about just how “clean” those earnings really were (if they included one-time benefits, etc.). We won’t know the answer to the latter question until the 10Q comes out. Still, make no mistake, this was a great quarter for ENPT. Moreover, I was very impressed with the huge trading volume today. I suspect we haven’t heard the last about this stock.

Thanks to ENPT, PDEX and EGR, the portfolio gained 1.4 percent today, to close the week up $15,135 (1.9 percent). Have a nice weekend everyone!