rovo's Market Journal -- 2011

[lovetobike]

Daily Ag stock update:

DE did well today. I sold ~30 shares to take some profits. I still have 70 left. My fert stocks did well too.

DE: +2.27% (total gain: 148%)
AGU: +2.68% (total gain: 7.84%)
MOS: +3.57% (total gain: 12.97%)
POT: +2.81% (total gain: 36.4%)

F is in the red. If it goes down again, I'll buy some more and then sell the shares I bought at $18.50 once it reaches that price again.

I've got a lot of cash and need to make some decisions. Sigh.

[yclept]

"I've got a lot of cash and need to make some decisions. Sigh"

Here's a table of what should be undervalued stocks that I am investigating for potential buys:

Value - Compared to Market
02/01/11
Ticker	Name	Last	Rank	MktCap	PEExclXorTTM	PEGLT	Pr2SalesTTM	Pr2BookQ	PEG
AEG	AEGON N.V. (ADR)	7.4	99.79	12785.44	6.86	0.09	0.2	0.38	0.09
OC	Owens Corning	33.47	99.06	4172.27	4.19	0.93	0.84	1.1	0.18
SOL	ReneSola Ltd. (ADR)	10.57	98.93	431.56	10.06	0.37	0.43	1.79	0.18
SOLF	Solarfun Power Holdings Co.,	8.48	98.91	622.53	9	0.29	0.62	0.87	0.18
SLM	SLM Corporation	14.41	98.09	6997.36	14.32	0.83	1.03	1.71	0.23
KT	KT Corporation (ADR)	19.68	98.03	9821.49	13.05	2.28	0.56	1.04	0.23
KYO	Kyocera Corporation (ADR)	103.51	97.89	19907.61	13.52	0.25	1.29	1.14	0.24
AEL	American Equity Investment Li	12.68	97.8	743.75	11.07	0.92	0.63	0.69	0.24
BAH	Booz Allen Hamilton Holding C	18.66	97.41	2250.81	5	0.86	0.43	0.41	0.25
LNC	Lincoln National Corporation	28.84	97.27	9135.38	13.75	0.73	0.9	0.67	0.26

It is one of the decent liquidity screens I've been using lately, though more of my actual buys have been in lower liquidity screens that back test better, but can sometimes be hard to get in and out of.

A backtest of this screen from 9/17/10 (the last time the 5-15-50 moving averages I track all turned positive) to the present produced a 37.6% gain (rebalanced weekly). During the same period, the S&P500 produced a 15% gain.
Of course, in order to re-balance, one has to be able to run the screen (I use Stockscreen123.com, which is a paid screening service). But this may still prove a decent starting place for stock selection.
I have modified this screen from the original "canned screen" on Stockscreen, but their original description ran as follows, and I have not removed any of their selection criteria, only added a few of my own, sorted by PEG, and confined the screen to the top ten selections. Their blurb:

Overview This screen is one of a series that focuses on a single important investment style: in this case, value. This particular version of the value style focuses on market comparison. For all factors, the screen requires that the company rank in the better half relative to all others. So it's not impossible that the highest-ranked stocks might be those with fairly high PEs if this is a time when market valuations as a whole are elevated. Conversely, in a weak environment, PEs that would normally seem modest may miss the cut if too many others are lower. Value is, perhaps, the most basic form of stock assessment. Stocks analysis begins with the Gordon Dividend Growth model, which uses three factors (dividend, required rate of return and growth rate) to determine a fair price for a stocks and pretty much everything that's come out since then in the area of financial theory has had a similar goal: to calculate a fair price. These formulations are often not usable in the practical world, since they require impossible-to-guess factor inputs (for example, in the Gordon model, growth means a projected dividend growth in perpetuity. But practitioners recognize the importance of having some rational measurable connection between the price of a stocks and the characteristics of a company thus leading to the ratios with which we are so familiar; PE, Price-Book, etc.

Suitability This screen is for investors who want to keep their feet on the ground, those who aren't willing to pay anything at all for shares of a company they like. The risks are twofold: one is missing out on a high flier that goes from being overvalued to much more overvalues. The other is getting caught in a value trap, a stock with a price that looks cheap but turns out to be no bargain as the company deteriorates. Nevertheless, tempering value with common sense can help one guard against those risks.
Edit

[rovo]

Hillenbrand Inc. (HI) will report earnings today after the market closes. The consensus expectations are earnings of $0.45 per share with a range of $0.43 to $0.47. This is a fairly tight range. Last quarter they beat by $0.02 with $0.40 reported vs. $0.38 expected. I'm not expecting anything exciting to the upside on the earnings but they had better meet expectations or they will be cut down to size in the share price.

My sources tell me the K-Tron division had a very good quarter and beat the previously established profit goals. The Batesville division is the big unknown and since this is the largest money maker, the result will depend on the Batesville division.

HI did win a court case against an importer of knock-off Batesville products in Mexico and this may help results going forward.

[rovo]

HI reported this evening and the following is an excerpt:

money.msn.com/business-news/article.aspx?feed=PR&date=20110202&id=12864517

Hillenbrand First-Quarter Revenue Increases 31%
February 2, 2011 4:26 PM ET.

Hillenbrand First-Quarter Revenue Increases 31%-- K-Tron revenue grows 17 percent over prior year; order backlog increases 19 percent sequentially.-- Batesville continues solid operating performance in a challenging business environment.-- Net income decreases 8 percent, primarily driven by acquisition-related items and taxes; adjusted EBITDA increases 13 percent.-- Hillenbrand reaffirms 2011 guidance.PR Newswire
BATESVILLE, Ind., Feb. 2, 2011

-- K-Tron revenue grows 17 percent over prior year; order backlog increases 19 percent sequentially.
-- Batesville continues solid operating performance in a challenging business environment.
-- Net income decreases 8 percent, primarily driven by acquisition-related items and taxes; adjusted EBITDA increases 13 percent.
-- Hillenbrand reaffirms 2011 guidance.

BATESVILLE, Ind., Feb. 2, 2011 /PRNewswire/ -- Hillenbrand, Inc. HI –

Consolidated Summary

For the first quarter of fiscal 2011, which ended December 31, 2010, Hillenbrand reported revenue of $211 million, a $49.5 million (31 percent) increase over the prior year, resulting primarily from the April 1, 2010, acquisition of K-Tron International. K-Tron generated revenue of $51.1 million, which was 17 percent above results it reported separately in the prior year, and Batesville's revenue declined slightly less than 1 percent to $159.9 million.

Consolidated gross profit margin was 43.2 percent in the quarter, a decline from 44.6 percent in the prior year, due primarily to increased commodity costs in the Batesville segment, particularly for steel and fuel. Both net income ($27.1 million) and earnings per share ($0.44) decreased 8 percent, primarily as a result of increased interest expense and amortization connected with the K-Tron acquisition, and a 36 percent quarterly tax rate, representing an increase of 200 basis points over prior year. Operating expense was also affected by last year's recovery of $4.1 million in overpaid sales tax, compared to recovery of $600,000 in the first quarter of 2011.

So it appears they missed by a penny. After hours the stock is trading down -$0.46 at $21.50 after closing today at $21.96.

[rovo]

I closed out my position in ATW yesterday afternoon. Profit % was all over the place as I had added to the position over time and at different prices. Anyway, sold 2K at +22.17%, 1K at +25.33%, and 1k at +67.66%. Overall I sold 4K at +34% gain.

[yclept]

Great timing! ATW is getting hit pretty hard today -- along with a bunch of others.

[rovo]

Yclept, I'm just trying to reduce my exposure to gas and oil for a while. Stock prices were very high and the earnings of some of these smaller companies have not been as strong as expected. Once in a while I get this timing thing correct but only once in a while.

OK. So some of you guys are quite expert at reading the charts. What do you see for Ford? Have we bottomed? Is it going to hit the 200 SMA? I need some opinions here.

[mtntigger]

OK. So some of you guys are quite expert at reading the charts. What do you see for Ford? Have we bottomed? Is it going to hit the 200 SMA? I need some opinions here.

I think it has, mainly due to the quick recovery after the Ford recall news this morning.

[tyfighter3]

ROVO, I called the bottom yesterday in the Stock pick of the week thread. Needs to hold over the 15.50 area today to confirm it. Volume looks good.

[livinincali]

OK. So some of you guys are quite expert at reading the charts. What do you see for Ford? Have we bottomed? Is it going to hit the 200 SMA? I need some opinions here.

Highly doubtful F is bottoming right here for the long run. It might bounce here but based on the weekly chart it should continue to drift lower for some time. It broke down out of a huge multi year wedge. At best I figure it chops around for a couple of weeks and then makes another leg down. It broke through important support too easily. Every time in the past when the weekly MACD has crossed this hard has lead to a minimum of 6-8 weeks of decline.

[tyfighter3]

If a Chart was the only thing you look at, at where a company is, I would agree with you Cali but F is doing the right things and its PE is only 8x. This earnings period has been a little different in the way company's have been trading. Look at what Hedge Funds have been driving these stocks down just to buy them back. JMO

[rovo]

tyfighter3, Let us not get into an argument over this item. For sure there are fundamental issues which may not be accounted for in the charting analysis. I was looking for some opinions on the technicals as I already have my opinions on the fundamentals. The market is imperfect and I'm just trying to see how low the shares MAY go based upon the technicals.

[tyfighter3]

If it doesn't hold 15.50 it will go down into the low 13's. It has bounced .70 from it's inter day price on heavy Volume today. There is good support at this level and the stocks fundamentals does support this. JMO I wasn't trying to be argue mental because I highly respect Cali's Technicals expertise.

[rovo]

I'm very curious to see what GM earns when they announce next week. I would think / hope they have low-balled the expected earnings of $0.47 but I have a nagging feeling they are going to miss to the downside by a substantial amount. If they miss, percentage wise, more than Ford did, then I think it would benefit Ford as Ford would be shown to be the better performer. It also depends on what GM would say for any deviation from expectations.

[livinincali]

I'm not offended at all. I have no position and don't intend to establish one as I don't really understand F's accounting or balance sheet. It's just not a company I want to invest in. For a purely technical stand point it looks like it's got a multi week decline coming ahead although the bulk of the price might already be realized. I see 14.50 as the next major support level but I could also see F chop around and drift down to that level over the next 4-6 weeks.

If I had to a make a trade on F right here it would be short/put after this bounce starts topping.

Long term fundamentals are still probably solid and the longer term moving averages are still headed up, so you could buy it here for the long term but I'd give it another month or two. I think you'll be able to get a better price and/or more favorable technicals. Basically out of the money Feb and March calls are probably dead money. June calls might be ok but it's too early to say.

[rovo]

I picked up a few shares of Ford this morning at $15.30 and just sold them off at 15.62. Netted enough on the trade to make it worth the time.

[livinincali]

Looks like we might have a break out in TBT. Still a little early in terms of confirmation but this might be one of the better looking long setups I've seen recently.

[rovo]

I have an order in for TBT at $40.20. I don't know if it will fill and I'll probably end up adjusting it a little.

I picked up a little more Ford today at $15.72.

I also have orders in for SOXL at 66.20 and TQQQ at 167.40. Trying to catch some dips.

[rovo]

There is no hope for the stupid. I placed some orders this morning and I mistyped the price for a buy order for TQQQ. Within seconds of posting the order I saw the error but it had already filled. As it stands I am the not so proud owner of 800 shares of TQQQ at $172.82. I was trying to enter 171.52 and instead put in 175.52. Oh well, maybe it will be OK.

I also entered an order for AAPL at $345.50 as I think this stock is very much under valued.

[rovo]

Ford is looking strong this morning. I guess the announcement they are boosting production by 13% in Q1 has raised expectations of performance. With the recent additions to my Ford holdings, a $0.10 increase in the stock price increases the port value by $5,000. So far, so good. Ford is now a very major part of my portfolio, perhaps too much so but I'll be reducing the position as the price rises.

[tyfighter3]

Ford, HHUUMM

[rovo]

Feb 7, 2011 10:35:45 GMT -5 tyfighter3 said:

Ford, HHUUMM

I believe this is a case where the fundamentals will trump the technicals. Ford did look weak for a while as the earnings miss chased out a lot of players. Now the question I have is .... will Ford rise to fill the gap created at about $18.00?

I don't want to get to optimistic here but I think I made the correct play when I added 20K shares to my existing 30K shares. Time will tell but so far it looks like a good move. Tomorrow it may look like the stupidest thing I have ever done. The market is a fickle beast indeed.

[rovo]

Placed a sell order for the TQQQ I bought this morning. Sell 800 at 175.52. This appears to have turned out OK despite my error this morning.

[rovo]

That didn't take very long as I am out of TQQQ with a handsome trading profit. I would have increased the sale price but it moved so fast I couldn't get the to the order in time. In 800 at $172.82, out 800 at $175.52. Net $2,160 less commissions.

[livinincali]

The fib retracements for F are right around 16.60, 17.00 and 17.50. The 50 day moving average is 17.08 right now. I figure this bounce makes it up to 17.00 at a minimum but then I expect another leg down. I know you guys like F from a fundamental perspective and I won't argue that but how many times have you seen a stock decline 25% in a week quickly recover. This one has all the signs of an intermediate top from a technical perspective but I could be wrong, I just don't think I will be.

[rovo]

Cali, No argument from me on the technicals and I try to use them whenever I can. I just don't know them as well as you do. So, you think this bounce may go near or to the 50 day SMA of 17.08 and then a retrace. How much of a retrace (drop) would you expect? I ask because I'll probably try to play the dip if I can providing it is a significant dip.

[livinincali]

Cali, No argument from me on the technicals and I try to use them whenever I can. I just don't know them as well as you do. So, you think this bounce may go near or to the 50 day SMA of 17.08 and then a retrace. How much of a retrace (drop) would you expect? I ask because I'll probably try to play the dip if I can providing it is a significant dip.

I really don't know how far it might decline. I've said 14.50-14.70 was the significant breakout so it might want to go back and retest that level. That's probably the area that I'd start nibbling but I'd need to see how the technicals look at that level. It could fall down to the 200 day moving average at 13.25 or it might have already bottomed although I doubt it. I think it will drift down at this point rather than make a swift move down. I think a lot of people are trying to buy the dip here and they'll likely be disappointed because they're early, but I don't know that for a fact.

It would be rare for a stock that moved down as hard and swiftly as F did to just be a single wave down. At a minimum we should probably see one more leg down. The second wave down would likely correspond to a market correction that is a bit overdue. Maybe after Feb OpEx we'll see the market correct somewhat.

[rovo]

I'm trying to get out of my GLL, 2X short gold, at $30.00. It is currently trading at 29.92 but will probably catch my order sometime today. This sale would represent a 5% loss. Gold is just too erratic for me to remain in a short position.

[danshirley]

seekingalpha.com/article/247027-gold-a-bad-investment-and-getting-worse?source=yahoo
:-)

[soycapital]

Dan, some pretty interesting/entertaining posts on that thread! Personally I don't think PM's have finished their run but I'm not going to get all excited about it. I hold about 8% PM's/miners. Of course ALL commodities are rising not PM's only, the same thing I believe is pushing them up; the printing press worldwide. I do not see that ending right away.