rovo's Market Journal -- 2011

[rovo]

2&10, Well, the Intel snafu cost them dearly when the processors couldn't divide properly but, like most software errors, it wouldn't divide under a particular circumstance. I was an INTC holder at that time and it hit the stock for a while but they recovered.

I haven't read enough about the AAPL user tracking to know if it is a serious problem or not. I believe they can update the IPhones at any time so it wouldn't be much of a problem to disable this "feature". One of the apps let you show your location on a map, another, the nearest restroom, and yet another, the closest gas station. If these apps are using the "feature" then it seems like a worthwhile feature and should allow the user to disable it at will. Also, the 911 location feature may use this function for rescue and is also a value to the owner of the phone.

Is it a problem or a solution for the users? I don't know for sure but some rally against anything without thinking it through.

[rovo]

Ford is scheduled to report earnings before tomorrow's opening bell. The analysts are looking for $0.50 per share in earnings. Last quarter they were looking for $0.49, Ford did $0.30, and the stock has yet to recover.

I'd like to say I know what they will announce but I don't have a clue because of the turmoil in the auto industry. Plants being shut down due to parts shortages, certain colors unavailable because of paint shortages, and the list goes on. On the other hand, sales have been up throughout most of the quarter in the USA and that is very encouraging. I don't expect much out of the European sales numbers. Without sales there is no chance of doing anything good.

So Ford closed today at $15.54 +$0.11 and traded in the after hours four pennies higher. The stock price has been on an upswing the last five days from the local low of about $14.49. So we have had a dollar increase in five days but the volume has been below average on each of the five days.

I think if they make the $0.50 earnings we could see a pop of about $1.00 in the stock price because I believe there is a lot of concern and uncertainty over the earnings. A report in excess of $0.55 with a decent forecast for the rest of the year and then plus $2.00 on the share price. A miss with a number below $0.45 and we'll be lucky to hold $14.00. So, basically I'm saying the stock price is going to move big time tomorrow as the current price is just a place holder. The only question is whether the price will be moving up or moving down.

I have a ton of shares in Ford and tomorrow's report will make or break my portfolio for quite a while.

[rovo]

Some good news from Ford.

Ford hits the gas, profit up by $466 million7:15a ET April 26, 2011 (MarketWatch)
NEW YORK (MarketWatch) -- Ford Motor Co. said Tuesday its first-quarter profit rose to $2.6 billion, or 61 cents a share, from $2.1 billion, or 50 cents a share, in the year-ago period. Adjusted first-quarter profit totaled 62 cents a share. Revenue increased by $5 billion to $33.1 billion. Wall Street analysts expected the Detroit auto maker to earn 50 cents a share, on revenue of $30.5 billion, according to a survey by FactSet Research. Looking ahead, Ford said quarterly results later in 2011 may not be as strong as its first quarter. The company cited lower expected profit at its Ford Credit unit, increasing commodity costs, as well as investments in long-term growth plans.

Currently trading at $16.10 in pre-market activity.

[yclept]

Good for you. I'm sure I've expressed some concern over having too many eggs in one basket, but, hey, who am I to say; whatever works trumps any concerns I have to the contrary.

[rovo]

I think we will finish the day much stronger than the current values. Pullback started about noon and we are beginning to recover from it. Ford topped out at $16.18 this morning but I think it will blow past that number this afternoon. There was some major profit taking with Ford earlier.

HI is showing good strength going into the earnings report, scheduled for the 5th of May. I'll be selling off a lot of shares prior to the report but I'm going to hold at least 5K shares for the longer term. I just put 1K on the auction block at 24.77 against the current 22.84.

[rovo]

Ford dropped back and closed at the low for the day at $15.66. I'm not sure what is going on with Ford pricing. Good volume today on Ford. Oh well, I'll give it till the end of the week to straighten out.

Overall I'm doing pretty good this month. I'm still in the red but the gap is down to $-24K. This is the last week of the month and I don't know if I'll finish green or red.

[rovo]

I just put a buy order in for 1K BRCM which appears to be beaten to a bloody pulp. Closed yesterday at 40.41 and my buy price is 35.70.

[rovo]

The BRCM order filled at 35.70 so it is now allowed to reverse direction and go upward. LOL. Current low for the day is 36.51 but the charts indicate a further decline. This is a short term play for me, meaning days or weeks.

[rovo]

HI has been very strong this week and is helping to chip away at the deficit for this month. I'm only 16K in the hole as of today's close. Two more days in the month and I could very well be positive by Friday's close. Note: Deficit was caused by pulling out 97K for taxes.

[soycapital]

I've owned stocks like HI before, drives you crazy. It struggles, moans, and complains even on good days and then as soon as you sell it guess what: that's right up early milks the cows, makes very nice run up. Meanwhile, you say oh well we just didn't get along I guess.

[rovo]

So I picked up some triple plays back on 28 Feb. for a short term trade and I kind of got stuck with them as the market dipped and bounced around. I bought 1K of SOXL at 69.51 and 1K of TQQQ at 86.51. Today the closing prices were 61.84 for SOXL and 93.00 for TQQQ.

In addition to looking at the daily charts I usually look at the weekly charts for at least 1 year. Sometimes macro trends can get hidden in the noise of the daily charts. Both of these plays look fine on the weekly charts and OK on the daily charts.

I currently have sell orders in for both ETFs: SOXL at 75.00 and TQQQ at 99.50 but for sure the prices are subject to revision.

I'm also holding 800 shares of AAPL and this is another stock just wandering around of late looking for direction on the daily charts. But again, the picture is much clearer when looking at the weekly charts and the direction is upward. This is a fairly high priced stock with a share price of $350.15 as of today's close. I see the latest earnings have been factored into the PE with the new value being 16.7. This PE is amazingly low for AAPL. A PE of 20 to 25 is more typical from a historical standpoint for AAPL. One of two things will happen: the company is falling apart or the price is about to adjust upward.

[livinincali]

NASDAQ 100 rebalancing takes place on May 2nd. AAPL is going to be rebalanced to a much lower percent of the QQQ so it's going to be experiencing some selling pressure from index funds. Once that's done it might be able to trade on fundamentals again, but it's already widely owned so there's not many people left to buy it. There's always a widely held can't fail stock out in the market and they always run into a wall at some point. MSFT, KO, CSCO are all examples of can't fail grow forever stocks that eventually run into a growth wall. AAPL no doubt will be the same at some point and there will be a new can't miss growth stock out there that everybody wants to own.

[rovo]

I don't disagree with Cali about a stock not being able to grow forever but I don't think AAPL has reached this point. Over the last couple of years the share price of AAPL has flattened a few times. At the transition from 2009 to 2010 (Nov, Dec, Jan, Feb) it bounced around $200. The period from May to August in 2010 also saw stagnant prices at about $255. Now we are seeing Apple hang around $345 starting in Feb. of this year and it is still there. The end of the run? Maybe, but I don't think so. Revenue and profit gains are too strong for Apple to be topping out.

[2kids10horses]

rovo, I agree with you on the prospects for AAPL. It's growth is still accellerating. Once it stops accellerating, and merely starts to grow, that's a good time to lighten up.

[clarkrl2]

One thing that confuses me about large cap tech companies is people seem willing to pay up for IBM(14.33 PE) but not MSFT(11.32) and INTC(10.6). All have about the same growth rate but INTC(3.18), and MSFT(2.4) have a higher yield than IBM(1.52). IBM(9.19) has a higher P/B than AAPL(5.22).

I think AAPL, INTC, and MSFT all have better valuations than IBM. I currently own shares of INTC, have a credit Put spread on MSFT, and am looking at AAPL as a possible buy next week probably with a call spread.

[danshirley]

I have IBM as well as MSFT and INTC on my list of companies that I do spreads on, and in fact I rate IBM much higher than the other two.
Why is that?
My answer is depth.
en.wikipedia.org/wiki/History_of_IBM
It's funny because I used to hate IBM.
When I was a VP of Inf Systems back in the 80's I was constantly bombarded by IBM sales people who took the approach that IBM was the 'safe' decision and choosing to go with the newly emergent mini computers was risking your job.
I remember one meeting in particular where we had to move the meeting to a bigger room because so many IBM people showed up there wasn't enough seats in the meeting room we scheduled. I was so pissed at them that I really lambasted IBM through the whole meeting and I remember that IBM changed our sales rep immediately after. I hope she wasn't fired.

So now I rate them higher than the other two because they have revamped their business to put it on a more competitive and contemporary basis (e.g. their consulting services) and have a greater variety of strengths that they can rely on as the world evolves.
en.wikipedia.org/wiki/IBM_Global_Services

Even though , back in the 80's I was one of the people that choose HP and DEC (DEC was bought by Compaq which was bought by HP) over IBM and put IBM into it's almost fatal death dive. It was good for them.
en.wikipedia.org/wiki/Digital_Equipment_Corporation

[yclept]

Wang will rise again!

[rovo]

I changed my sell order on TQQQ to 93.60 because I want to exit the position today. Since they are re-weighting the Qs over the weekend I think it may be wise to not have any money in the Qs or the triple Qs. It will probably take some time for me to see how the new Qs react when they start trading.

[rovo]

I exited the TQQQ trade at 92.75. Bought at 86.50 so the gain is $6,250 or 7.2%. For sure it wasn't a very good trade. At least it is done.

[IPAfan]

So I guess Zachs put out a Strong Sell on ENH (my #2 holding.) Not sure what the rationale is, or if it's related to the Japan EQ.

I'm planning to just hold this one for the long run, but I thought I'd alert others here.

[yclept]

Whatever's happening with ENH is pretty strange. The fundamentals look pretty good to me:
P/E 6.94
PEG 0.67
Price/Revenue 0.90
Price/Cash Flow 4.76
Price/Book (MRQ) 0.74
ROA 4.66%
ROE 12.19%
Current Ratio (MRQ) NA
Total Debt/Equity (MRQ) 0.19
NOTE: MRQ - Most Recent Quarter

But the Zach's ratings have been hilarious. On March 15, they rated it #1 -- strong buy finance.yahoo.com/news/Zacks-1-Rank-Additions-for-zacks-1409101457.html?x=0&.v=1. Thereafter, the stock vacillated, but basically did nothing. Then, as you say, on April 25, Zach's rated it #5 -- strong sell finance.yahoo.com/news/Zacks-5-Rank-Additions-for-zacks-3722012500.html?x=0&.v=1, with no intervening ratings changes (not that there were enough days to take it step by step unless they were going to re-rate it every other trading day!). Absolutely hilarious! The stock did nothing for 4 days after the downgrade and then yesterday for no apparent reason dropped a few percent. Zach's, be still my heart, what a joke!

There are 10 days worth of shorts that might need to cover one day soon as the RSI is getting oversold. If it was me, I definitely put this one on my "go away in May list and it before this Friday, but that's just me, and I'm sure you've researched it far more deeply than I have.
The market is a balance, not a scale. If the casual fly-by investor (like me) cannot find enough to compel him put his mass on the pan of this stock versus some other, the balance beam is not going to move anytime soon.

[rovo]

Earnings on ENH are due this week and it is expected to show a loss for Q1 of $2.32 per share. Last four Qs were: $0.98; $0.96; $2.14; $2.04. Going forward into 2011 the expectations are: $-2.32; $1.54, $1.14; $1.55.

39.7Million shares outstanding. They expect a loss from the Japan earthquake of $125M or $-3.15 per share. Other areas must be positive because the expect quarterly results are less than the loss from Japan.

It will be interesting to see what the earnings report has to say about "going forward". If all of the Japan losses are included in Q1s report, then if the stock takes a big dip after the report it could be a good time to get into the stock. Still, even the above forward earnings expectations are well below the results for 2010.

[yclept]

Bin Laden -- shot in the head until dead. Reckon the market will fly tomorrow, let's hope it's not all gap-up and then retreat.

[IPAfan]

I'm expecting a loss for ENH too. However, if I can own it at or around book value I'm happy because I think it will grow nicely over time despite these sorts of setbacks. I'm sure if I was good at trading I might be able to sell and buyback lower. That goes against me more often than not so I will stick with what works for me. If it drops much below NAV I'd consider buying more. However right now I'm seriously deleveraging my portfolio.

I've gone from about 23% debt to capital down to only about 3%. Also I've gone from a low of about 5% cash up to about 18%. All this is just holding the portfolio I have. Trying to build liquidity so I can grow my business and take advantage of a larger investment when the time is right.

I would consider leveraging up to buy an office building for the business at the right CAP rate. I figure to get a commercial loan I'll probably need 40% down which would be way more cash than I'll probably have on hand for several years.

[IPAfan]

"The market is a balance, not a scale. If the casual fly-by investor (like me) cannot find enough to compel him put his mass on the pan of this stock versus some other, the balance beam is not going to move anytime soon."

That's one of the reasons I'm not selling ENH even though there may be better places for my money (in May or any other time). This is one of the businesses that I believe is well run and oriented on growing shareholder value. I'd have to find another place for my money.

I've got a small group of companies where I'm comfortable leaving long term investments. I've made outsize returns investing in some risky stocks, but I've also been burned numerous times. I think ENH will do well over the long term and so I'll keep invested here. From personal experience, sometimes I sell a stock before a short correction,but fail to buy back in before the stock rockets upward. I'd have done best to have kept my winning investments like QLTI, EROC, BBEP, and GSL and put up with the fluctuations.

[IPAfan]

My take on ENH. I looked at the earnings today, and there was a loss as expected. The company is reporting diluted shareholders equity of 51.50 per share, down from 52.74. However, this figure includes $200 million of preferred stock which works out to $5 per share of equity. So we're really looking at a NAV per common share of $46.50.

The Reinsurance segment had a horrible quarter. However the impact on NAV was not devastating, and the shares are still trading below NAV.

I see several green shoots. The insurance segment (as opposed to reinsurance) still had a profitable underwriting quarter and posted HUGE revenue growth of 29%. This business has been growing gangbusters and is a real jewel for ENH. I hope that the reinsurance market hardens somewhat because of the Japan quake.

All said this has been a bad quarter, but that's to be expected. I think ENH has done a good job stewarding its capital. I'm comfortable owning shares here, and would really like to add more if I had more cash to devote to stock investments right now.

[IPAfan]

Actually I need to double check my numbers. I'm not sure if the preferred stock is included in the NAV per common share. If it's already taken out then the $51.50 number is accurate and we're looking at a nice discount here.

[yclept]

I'm becoming very suspicious of the whole Bin Laden story. No body, when they supposedly had it in their possession. I understand the whole argument for going in with people rather than bombing that building to smithereens was to be able to count coup and be sure they got him. Assuming they release pictures eventually, they won't be convincing to me -- any kid with photoshop could produce a picture of Bin Laden having sex with a goat while a squirrel pulls nesting material from his beard. Proof would be his head on a pike on the White House lawn.
Proper Islamic burial rites! Like we should give a rat's arse about that. Islam is the most hateful of the three major despicable monotheistic religions. Bin Laden had issued a fatwah calling upon all moslems to kill all westerners wherever they find them -- and we're supposed to worry about proper burial rites for him? I think they disposed of the body the way they did because it was a 4'-8", skinny, 11-year-old camel jockey. Pakistan and Afghanistan are pretty backwards places, I doubt they have the mechanical jockeys used for races in Saudi and the Emirates -- they're probably stuck using the 10 and 11 year old kids.
Maybe all the big boys in the market know or suspect it's not true and just used the story to suck some money out of anyone who took a gamble this morning (Yclept raises his hand sheepishly). What the heck, so I threw about $35k at a triple long and lost a few hundred when I sold later. I won't get mad, I'll get even.
Those institutional horses are "loaded down with fat men and iron, they'll never catch Little Blackey" (Kim Darby in the original True Grit).

There, I feel better. I think I got my $400 worth of angst out. This post is way too political, or if not political, then it's way too much something else. Delete at your pleasure.

[rovo]

I have my small holding in TSTC on the auction block at $7.69. This is mostly a place holder order and I may adjust the price as needed to maximize the return. It hit 7.34 this morning so my price is not out there in left field. Also, the volume has been huge the last two days as the price has been rising. I consider this a good indication for further price increases.

[lovetobike]

It's been really busy at work these past few months. I sold all of my AGU on Monday for 13% gain. I also bought some BHP a couple of months ago and sold it Monday for a 19% gain. I have some F - it's in the red right now. My MOS is also in the red, which is why I didn't sell it on Monday. I think with time will go back up and I have the time to wait it out. A couple of months ago I closed my WHX position for a 34% gain.

Monday I bought some TMF with the thought that people would begin moving into bonds this month. So far my theory has worked. This will be a short term trade.