rovo's Market Journal -- 2011

[IPAfan]

With the fall in ENH I'm still sitting on a 10% gain overall. My cost basis is $38. The point is that I'm willing to leave it here and maybe buy more. The fundamentals are still solid, but seems very likely that NAV per share will decline this year. There's a pretty wide margin of safety at this price IMO.

I think the business fundamentals are promising. Everyone is looking at NAV loss due to reinsurance cat losses while ignoring the super profitable Ag insurance business that grew premiums by 30% this year.

I think RE will make a profit in the very long term, but in the mean time this is a valuable specialty insurer that is being clouded by RE losses. Another thing is that it is VERY possible that ENH is being conservative in loss estimates to improve combined ratio in future years by releasing loss reserves. I have no idea if that's going on in this case, but it's definitely possible given the history at ENH.

Overall I think this is the time to be opening a small position. Get ready to load up if the price drops into the mid-low 30s. Again, I'm fully prone to being wrong. I'm wrong all the time. So act at your own risk. I've lost money before and will probably lose money on investments hundreds of times going forward through the rest of my investing career.

[IPAfan]

DI,

What MLPs are you looking at? I did a lot of research on MLPs in early 2009 but am not very familiar with the sector right now.

[rovo]

So I looking through today's results and I notice a couple of ratings changes on HI.

TheStreet now has it as BUY, Dated 5/22. Fundamentals
Ford Equity Research as HOLD, Dated 5/20. Fundamentals
Market Edge as LONG, Dated 5/27. Technical

I don't put a lot of faith into these analysis but I'd rather have them positive than negative.

[yclept]

"ENH is just getting hammered with natural disasters one after another. The year will almost certainly have a negative impact on book value per share. The question is whether the company is a good investment at this price even with this year's negative performance baked in."
"I could try to sell out and buy cheaper. I've messed this up on numerous occasions so I'm going to stick with my long term plan and hold the shares. If I can develop enough liquidity where I feel comfortable adding more to my stock position I will probably buy more. "

ENH, with it's low beta, appears to be a stock that one could trade in and out of using the 5-15-50 moving averages with little or no risk of being whipsawed. In fact going back over the last several years, it's volatility has been so low that one could have traded just the 5-15 crossovers and not been whipsawed. Just a thought, but this doesn't appear to be the type of stock one has to hold and take losses on the way down for fear that it will turn on a dime and race away from you. This is just a technical analysis observation on my part.
Fundamentally this stock would scare me to death! P/E is already over 12 (which in the old days we used to think of as low, but nowadays I think of it as high) and is bound to rise as claims eat into profits. This has been one of the worst tornado seasons ever and it's not over yet. The oceans are a tad warmer this year than they were last year which should make for more and larger hurricanes this winter and tornadoes next year. Hell, we even had a couple of small tornadoes out here this last week -- a phenomenon almost unheard of prior to this year. To me, that probably indicates the tornadoes will not only become larger over time, but will also expand the sections of the country they ravage. Property insurance seems a doomed business model to me. As risks are driven inexorably higher due to climate change, premiums will continually represent the risk a few years earlier, and competition is not likely to allow overpricing to allow catch-up for anticipated risk loss. Eventually I'd guess that rates will become so high that they are unaffordable (like earthquake coverage here in California) and customers will forgo coverage altogether.

[IPAfan]

yclept,

I think trading can be a perfectly good strategy, and I've done quite a bit of it myself. I've got a few reasons that I've decided to take a more passive approach:

1) I don't know that my trading has actually got me ahead overall. I've traded out of many investments only to see them go up 100-200%. I've avoided some losses too, but overall I think I would have done better with less turnover.

2) I've had a lot of time to devote to researching investments and managing my relatively meager investments to try to get better returns. Now I'm starting a law practice from scratch, and find that I'm working ALL THE TIME. If I can add 10% of "alpha" annually that's only worth about 4,000 a year. It takes a TON of work to get 10% alpha a year on investments (I've done better than 10% alpha over the past 10 years) and I could almost certainly make more than $6,000 a year putting in the same amount of work (investments are in a ROTH IRA so I'm discounting for taxes.)

3) I'm focusing on companies that I believe are undervalued AND can grow over a medium term (3-7 years). So I agree, ENH may keep falling in the short term, I agree that business fundamentals THIS YEAR look bad on NAV growth and PE basis (if you ignore the reduced share count and growing ag business). However, I think current shareholders of ENH will have north of $100 economic value in 5 years. I'm quite possibly wrong, but if I'm right I don't really care about the fluctuations.

[rovo]

Futures are currently green for the 3 indexes. Not exceptionally green but just enough to show interest. Just the way I like them on the eve prior to a market week.

Also, I still like the shape of the daily charts.

[rovo]

The end of May. This seems to have been a quick month. The portfolio dropped a few percent in value this month as my major holdings performed poorly. More on that in a bit. Current holdings by value are as follows:

F, HI, AAPL, TBT, MSFT, Cash, SIRI, SOXL, BRCM, ZSL, PSTR.

Ford closed April at $15.47 and May at $14.92.
HI closed April at $22.92 and May at $22.75.
AAPL closed April at $350.13 and May at $347.83.
TBT closed April at $35.65 and May at $33.17.

The rest of the holdings are almost insignificant to the top four and some of these guys were up for the month and some down.

[rovo]

Expectations:

Ford, F, has done terrible in the market but quite well as a company. There are still a lot of shorted shares of Ford, 4.5% as of May 15th. It would be easy to abandon this stock since all my shares are profitable but I'm still expecting a much better year for the stock than the current price indicates. I MIGHT start reducing my position when we get back up in the $18+ range and this should be within a month or two.

Hillenbrand, HI, hasn't done much of anything since I bought it. I'm profitable on all shares but I WILL be significantly reducing my position when the stock gets into the $23.50 - $24.00 range. 2.51% short interest as of May 15th.

Apple Inc., AAPL, is in the red in my account but just by a couple of dollars a share. This is another stock under performing the fundamentals. I have no intention of letting this stock go for less than $500 per share and I expect this price around the end of the year. A good indication of this years projected price will be if it reaches $400 by early July. 1.27% short interest as of May 15th.

[rovo]

Private sector job growth fell off the cliff in today's data and is pulling the market downward. The data I am awaiting is the auto sales for May and this data usually comes out at 12 noon.

Historical annual unit rate by month:

Month

APR

MAR

FEB

JAN

DEC

[/b][/tr]
[tr][td] Domestic Light Vehicles [/td][td] 10.1M [/td][td] 9.9M [/td][td] 10.2M [/td][td] 9.6M [/td][td] 9.5M [/td][/tr]
[tr][td] Autos [/td][td] 4.7M [/td][td] 4.8M [/td][td] 4.6M [/td][td] 4.0M [/td][td] 3.9M [/td][/tr]
[tr][td] Light Trucks [/td][td] 5.4M [/td][td] 5.1M [/td][td] 5.6M [/td][td] 5.6M [/td][td] 5.6M [/td][/tr]
[tr][td] Total (incl imports) [/td][td] 13.2M [/td][td] 13.1M [/td][td] 13.4M [/td][td] 12.5M [/td][td] 12.5M [/td][/tr][/table]



According to Automotive News, Ford (F) is now projecting sales between 12.3 and 13.3 mln units in 2011 while General Motors (GM) expects sales in the range of 12.8 mln units to 13.3 mln units. To put this in perspective, total sales in 2009 and 2010 were only 10.4 mln units and 11.6 mln units respectively.

[rovo]

GM sales fall as deals and fleet sales decline

June 1, 2011 11:35 AM ET.

By DEE-ANN DURBIN, TOM KRISHER


DETROIT (AP) - General Motors' U.S. sales fell 1.2 percent in May as it offered fewer deals to customers and it cut sales to rental car companies.

The largest U.S. car company says it sold 221,192 vehicles last month, led by smaller, more fuel-efficient models.

GM blamed the drop mainly on a decision to cut sales to rental car companies by 21 percent from a year earlier. Sales to individual buyers rose 9 percent despite a 10 percent drop in rebates and other incentives.

GM is the first major automaker to report sales on Wednesday. Analysts expect overall U.S. sales to fall 4 percent from last May due to fewer deals, a shortage of models because of the earthquake in Japan and uncertainty over high fuel prices. The sputtering economy also kept some buyers on the sidelines.

GM's sales were led by the new Chevrolet Cruze compact and the Chevrolet Equinox and GMC Terrain midsize crossover vehicles. Cruze sales were up 40 percent over the Chevrolet Cobalt, the lackluster model it replaced. Equinox sales were up 34 percent and Terrain sales rose 42 percent. Sales of GM's full-sized pickup trucks, however, were down about 13 percent.

Don Johnson, GM's vice president of sales, said consumers are continuing to take a wait-and-see attitude as prices continue to fluctuate around $4 per gallon.

Even so, he feels consumer confidence over the long term remains strong and sees pent-up demand among drivers who kept their vehicles longer than usual during the economic downturn.

"All things considered, we continue to believe the recovery remains on track," he said.

The economy may test that optimism. Recent reports have been discouraging, raising worries among economists about the strength of the recovery.

Private trade groups reported Wednesday that employers added fewer jobs than expected in May, while U.S. manufacturing activity expanded at its slowest pace in 20 months. The government also said construction spending remained weak in April.

Payroll processor ADP said Wednesday that private employers added just 38,000 jobs in May, down from 177,000 in April. It's the weakest result since September.

The Institute for Supply Management said Wednesday that U.S. manufacturing activity expanded in May at the slowest pace in 20 months, thanks in part to the sharp rise in energy prices. And the government reported that construction spending remained weak in April.

Normally, buyers can count on deals in the summer as automakers try to clear out old inventory and make way for new models in the fall. But this year, the deals will be hard to come by.

More buyers are seeking fuel-efficient cars with gas prices still high. But there aren't enough cars in the marketplace, since Japanese automakers had to cut production after the March 11 earthquake and domestic automakers can't produce cars any faster. Automakers are also raising prices to make up for the higher price of steel and other commodities. As a result, the deals are disappearing, and experts are advising people to delay their purchases if they can.

"If you don't have to buy, wait until fall. If lease a car, extend it," said Edmunds.com chief Jeremy Anwyl. "There will be deals this summer, but they will be fleeting because of imbalances in the market."

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

[rovo]

Ford May US Sales Dip 0.1% Amid Lower Truck Sales
12:17p ET June 1, 2011 (Dow Jones) Ford May US Sales Dip 0.1% Amid Lower Truck Sales

DOW JONES NEWSWIRES

Ford Motor Co.'s (F) U.S. new-vehicle sales edged down 0.1% from a year earlier in May, as higher car and sport-utility volumes offset a drop in truck sales.
The auto maker's sales decline compared with a 22% increase in May 2010. Ford, the only member of Detroit's Big Three auto makers that didn't file for bankruptcy reorganization in 2009, has largely outperformed peers for more than two years, returning to No. 2 domestically behind General Motors Co. (GM) in the process.
Earlier Wednesday, GM reported U.S. auto sales fell 1.2% amid lower fleet sales, though retail sales rose amid strength in passenger cars.
Ford, meanwhile, reported it sold 192,102 vehicles in May, compared with 192,253 a year earlier but up 1.2% from April. The Ford brand posted a 5.3% increase in sales while the smaller Lincoln brand saw sales fall 4.6%. A year ago, Ford sold 9,128 Mercury vehicles, a brand it has since phased out.
Company-wide, car and sport-utility vehicle sales rose 8.8% and 2.8%, respectively. Truck sales fell 11%, and the company said higher gas prices likely caused some buyers to defer purchases.
Shares recently traded at $14.52, down 2.8%. The stock is up about 27% the past year.

-By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; [e-mail]

(END) Dow Jones Newswires
06-01-11 1217ET
Copyright (c) 2011 Dow Jones & Company, Inc.

[jarhead1976]

Rovo, What effect will the Fukushima disaster have on auto stocks? Is this the reason for the decline in sales?

[rovo]

Ford did better than I expected in May sales. GM dropped 1.2% and Ford dropped 0.1% year over year. The problems with production in Japan probably bolstered the U.S. manufacturers in May.

Ford stock is currently being punished and is down 3.3%. GM stock is down 2.45%. Ford dropping more than GM makes no sense to me. We'll have to wait for the market close in order to get a firmer take on both of these stocks. A half hour after the release of data does not give the market time to digest all the info. That combined with an overall market decline just muddies the water when looking at a couple of specific stocks.

[rovo]

Jun 1, 2011 11:33:40 GMT -5 @jarhead1976 said:

Rovo, What effect will the Fukushima disaster have on auto stocks? Is this the reason for the decline in sales?

Sales of U.S. brands in the U.S.A. were expected to be helped by the problems in Japan providing the U.S. manufacturers were not too dependent on Japan for parts. Some engine sensors, spec'd in by U.S. auto companies, are manufactured exclusively in Japan and have hurt overall sales. I've read several articles where the companies were directing the available parts to the most profitable vehicles.

It is expected for Hyundai to reap major growth at the expense of Japan's faltering production.

[rovo]

GM, Ford post May U.S. sales declines
12:39p ET June 1, 2011 (MarketWatch) SAN FRANCISCO (MarketWatch) -- General Motors Co. and Ford Motor Co. on Wednesday posted May U.S. car sales declines, setting the tone for what looks to have been a tough month, especially for Japanese auto makers.

GM said it sold 221,192 vehicles, down from 223,822 a year ago. Edmunds.com had forecast a 2% gain for the Detroit car maker.

"With the shortages in some key vehicle segments, as well as some added uncertainty around price increases, incentive reductions, the industry's volume was actually down from the first four months of the year and down a little bit -- probably 3% to 5% -- year over year," GM sales chief Don Johnson said in a conference call.


Cadillac sales took the biggest hit, down 5.7% to 11,623 units, and Chevrolet sales declined 3.5% to 161,401 vehicles. Buick sales increased by 23.8% to 15,579, and GMC sales rose 8.1% to 32,589.

U.S. May sales of existing lines would have only declined by 0.5%, when factoring out last year's brand sales of Hummer, Pontiac and Saturn, which have since been discontinued.

Ford said U.S. May sales were off by 0.1% to 192,102 vehicles, compared with 192,253 in the year-ago period.

Sales of the Focus rose 31.7% to 22,303 vehicles, while Mustang sales declined 35.4% to 6,607 vehicles. Ford's best-selling F-Series trucks declined 15% to 42,399 vehicles. Escape rose 20.5% to 23,140 units, and Explorer sales more than doubled to 13,318 vehicles.

The rest of the industry will report throughout the day. The full brunt of Japan's March 11 earthquake and tsunami will likely become most apparent when Toyota Motor Corp. and Honda Motor Co. hand in their results.

By the time the final sales numbers are tallied, the auto industry is expected to have endured its worst month of the year.

[rovo]

Nissan US May Sales Fall 9.1% On Drops At Namesake, Infiniti Brands
12:59p ET June 1, 2011 (Dow Jones) Nissan US May Sales Fall 9.1% On Drops At Namesake, Infiniti Brands

DOW JONES NEWSWIRES

Nissan Motor Co. (NSANY, 7201.TO) posted a 9.1% drop in U.S. auto sales in May on declines at both its namesake and Infiniti divisions.
The decrease was larger than those of some of the Japanese auto maker's Detroit rivals, as Ford Motor Co. (F) and General Motors Co. (GM) reported respective declines of 0.1% and 1.2% for the month. Nissan has been hurt by Japan's March 11 earthquake but has said it plans to resume full production at its factories earlier than peers and last month reported it swung to a profit in its fiscal fourth quarter.
Wednesday, Nissan reported it sold 76,148 vehicles, down from 83,764 a year earlier but up 6.5% from April. Car sales fell 7.2% while truck sales dropped 13%.
May had 24 selling days, two fewer than the year-earlier month.
Sales at Nissan's larger namesake division fell 7.8%, while Infiniti saw a 21% plunge.
The Altima sedan was a bright spot, posting its second-best May ever as sales rose 16% on the year.

-By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; [e-mail]
(END) Dow Jones Newswires
06-01-11 1259ET
Copyright (c) 2011 Dow Jones & Company, Inc.

[rovo]

Chrysler US May Sales Up 10% On Strong Truck Volume
1:12p ET June 1, 2011 (Dow Jones) Chrysler US May Sales Up 10% On Strong Truck Volume
DOW JONES NEWSWIRES
Chrysler Group LLC's U.S. sales rose 10% in May on higher truck volume and robust growth at the Jeep brand.
It was the 14th consecutive month Chrysler reported overall growth from prior-year levels. Sales in 2010 grew 17% on the year, rebounding from the 36% drop seen in 2009. So far this year, Chrysler's sales have climbed 20% from the like period a year earlier.
Meanwhile, the broader U.S. auto industry suffered its first significant setback in more than 18 months, with higher vehicle prices, Japanese supply shortages and economic jitters. Earlier Wednesday, larger U.S. rivals Ford Motor Co. (F) and General Motors Co. (GM) reported respective sales declines of 0.1% and 1.2% for the month. Nissan Motor Co. (NSANY, 7201.TO) saw a 9.1% drop.
Chrysler reported it sold 115,363 vehicles in May, up from 104,819 a year earlier but down 1.6% from April. Truck sales jumped 17% from a year earlier while car sales fell 4%.
Sales edged up 0.8% for the Dodge brand and jumped 55% for the Jeep brand. The namesake line's sales were down 21%.
Chrysler finished the month with a 65-day supply of inventory. It also estimated the industry's U.S. sales in May at a seasonally adjusted annualized rate of 12 million.

-By Matt Jarzemsky, Dow Jones Newswires; 212-416-2240; [e-mail]

(END) Dow Jones Newswires
06-01-11 1312ET
Copyright (c) 2011 Dow Jones & Company, Inc.

[rovo]

Some days it doesn't pay to be in the market and today was one of them for me. BIG HIT to the port today with Ford down $0.69, HI down $0.16, and Apple down $2.32. I haven't looked at the port yet but I think it is down around $50K for today. Ouch.

[soycapital]

Yeah, auto sales were the least of our worries weren't they? I don't think I'm even going to log in and look at my account. I skip a few days when it does this. Have been doing some selling lately so all is not lost.

[rovo]

Wow !! Silver is tumbling. It is too soon to predict anything as the metals are very resilient but the chart looks ugly for SLV. Conversely, ZSL is rocketing upward. \

ETA: Disclosure --- I'm long ZSL

[IPAfan]

Nice to see you making some profits on the short side Rovo. I've had one or two lucky experiences (buying PUTS on FRE to offset my NLY position in 2008....NLY went down 10%, the PUTS were up a couple hundred percent in days) on the short side, but mostly pain and tears.

I'd definitely be open to hedging my portfolio, but I'm all inside ROTH IRAs so actual short selling is not available. I can buy PUTS, but I don't like paying the premiums as it really eats into returns.

[2kids10horses]

beer,

You can probably buy the short ETFs inside your Roth. Look into those.

[IPAfan]

The thing I like about actual short selling is that I could keep my core investments and then sell short. To go long an ETF I have to sell off my long holdings which is not my intent.

I'll continue to focus on my long game. I think there's enough money in making good long investments, remaining cautious, and staying mostly invested. I definitely change allocation though. I was 20% leveraged going into the year and now I'm sitting on 20% cash. I haven't sold many holdings, but have not been buying more stocks.

I may even take a year or two hiatus on investing more in stocks. I honestly have so long until retirement that I could probably pull it off just on what's in my ROTH accounts right now.

I think the avg. person is going to have 3-4 great buying opportunities for stocks in their lives so it's important to have lots of liquidity when stocks are dirt cheap.

[2kids10horses]

beer,

So, I get it. One thing you might want to look into is selling covered calls in the Roth against your long holdings. The good thing about doing something like that in a Roth are there are no tax consequences. Long term/short term, no difference!

[soycapital]

I've decided to get a little more "cashy" the last week or so while I'm still looking at some green instead of letting it ALL turn red. Traded for some more cash today actually. Not fond of it but better than where we are going I think. What is your take on the downdraft guys/gals? I'm not seeing much good news on the horizon. I think the market has been overvalued for some time with the Fed pumping all that cash. I'm going to lay low and try some alternative investments I just don't like the feel of the landscape. Don't take my word for it tho! Do what is right for you!

[tyfighter3]

It's time to take a look at NOG. Their production is to big to ignore and the price is right.
www.theflyonthewall.com/permalinks/entry.php/NOGid1441348/NOG-Northern-Oil-and-Gas-upgraded-to-Strong-Buy-from-Add-at-Capital-One
www.marketwire.com/press-release/drill-baby-drill-northern-oil-and-gas-and-royale-energy-boost-production-nyse-amex-nog-1524234.htm

[rovo]

HI is showing a nice pop today. This seems to happen once a month on high volume. Somebody accumulating mega-shares?

[Driftr]

Jun 8, 2011 13:48:33 GMT -5 rovo said:

HI is showing a nice pop today. This seems to happen once a month on high volume. Somebody accumulating mega-shares?

Not me. I'm still just sitting on the ones I bought on a whim last year.

[architecto25]

re: AAPL.
I just watched a 21:13 length video (over on Yahoo) of Steve Jobs making a surprise presentation to the Cupertino City Council about their new planned office building. Circular in plan, looks like a space ship, and will hold 12,000 employees. A real state of the art Apple Headquarters. This presentation was yesterday (June 7th). Click over there; you'll probably enjoy it, too. His schedule is to break ground (if I heard correctly) sometime next year.

[rovo]

I have 11K shares of HI for sale at various prices but it stopped rising just short of my first sell order at 23.10.