2 Buys and Equal weight rating in 2 days

Yesterday
Lehman started VRAZ with a Equal Weight rating.
Jefferies started VRAZ with a Buy and a price target of 8.

Today
Credit Suisse started them with a Buy and a price target of 10.

I am not sure who is selling at these levels. Almost feel like ECI or someone big is selling out. I can't imagine this being shorted at this level.

Long time people! How about a new stock tip :)

It's been ages since I posted anything last. Work got a little busy!!


Here's a new company to think of - Veraz Networks (VRAZ) - Strong Buy

Disclaimer: I own this stock.

The company just went IPO around April 10 or so. What do they do - in their own words.
"Veraz Networks, Inc. provides Internet protocol (IP), softswitches, media gateways, and digital compression products to wireline, wireless, and broadband service providers worldwide."

In short, they provide ways and means Veraz products allow service providers to quickly and efficiently migrate from traditional voice networks to all-IP without making expensive hardware purchases.

The company reported earning yesterday. Keep in mind Veraz was in a different business a few years back. They sold Digital Circuit Multiplication Equipment to Telecom providers. They had hundreds of customers. Today they are selling their IP softswitches to the same Telecom providers.

Let's break down the numbers -
Revenues = 27.45 Mil

• 17.65 Mil IP softswitches revenues
• 5.134 Mil DCME products
• 4.671 Mil Services

Okay - IP softswitches revenues and the Services revenue are what matter and they both grew year over year by 98% and 84% respectively. DCME product revenues are going to keep reducing as stated in their prospectus. They are obviously executing well on the IP softswitches sales to the telecom providers.

Last year they made about 99.6 Mil in revenue and lost 15 mil and that's about 4 mil a quarter. This quarter they lost only 1.2 Mil. With revenues growing a 100% in their core area this is peanuts and easily controllable. Revs for the year are expected to be 120 Mil. Again don't get fooled by the growth year over year which is only 20%. Keep in mind that their core product's revenues are growing at a 100% and that has been the case for the last 2 years (look at the IPO prospectus). Even if the growth this year is only 20% as DCME revenues ultimately become really small, next year will be at a 100% if you just look at the revenue trend and the fact that they have sold to only to about 60 IP customers.

Again, let's break down the numbers. Stock is at 6.75, market cap 270 mil. 72 mil in cash and so we are saying that the company is valued at about 200 mil for 120 mil in revenues that will grow at about 100% in 2008. I hope someone understands the absurdity of this situation. Compare this with other companies that just went public and are growing

The market makers scam: Hmm the interesting stuff. This stock's volume is extremely low even for it's low market cap. You have a daily volume of about 41000 stocks and if you follow this stock closely there is absolutely no liquidity on this stock. The stock is showing no interest because retail investors don't understand the company or if they do, they don't have any conviction in their understanding. If I am a market maker, all I have to do is sell about 40,000 stock on the day after earnings and make sure there is no momentum from traders in the stock. Why? Because the stock went up 6% yesterday on a volume of 100,000. Imagine what it could do if momentum trader's volume get's added to it. The price will go up a buck. Traders catch a stock that is moving up after earnings. They don't try to understand an earnings statement. So a market maker can sell say 40,000 stocks today and keep the price low and the momentum traders out. This in turn gives them a chance to accumulate at a low cost basis over the next 3 months until earnings are announced. They keep the cost price low and retail investors will sell thinking this stock isn't going anywhere. No wonder it's low today.

I feel as confident about this company's prospects as I've felt about my call on NFLX at 10 bucks and just like UAUA at 30.

Sorry: Reversing AMD position

Sorry folks. I have to reverse my position on AMD. There is incessant selling on the stock and seems like their new products are not superstars and are getting poor reviews in comparison with Intel. This is still a good buy long term but short term has some serious problems.

Goldman added AMD to it's least favorite list.
http://chip.seekingalpha.com/article/21595

Got to back out for now.

Might be a short trap

Be careful about shorting due to today's market drop. It might very well be a head fake. The economy IS doing well and market reversal might very well take place only next year. If shorts load up today, they really might get squeezed. If the market stays at the lower levels reached today for the next 3 days then we can expect a down trend.

AMD is up slightly on high volume. This one is going up IMHO.

http://stocksharks.blogspot.com

Nice article on market share

http://news.zdnet.com/2100-9595_22-6130795.html?tag=nl

Great article covering market share.

Remember the one rule of the market. The underdog always deserves a high P/E when it has great products and has tons of marketshare to capture. Remember JNPR vs CSCO. JNPR commanded that P/E in the hey days but then Cisco came in with better products JNPRs price declined. AMD is in a sweet spot right now. Just checkout the gains in the server market.

Time to short Oil and Gas companies?

I never wanted to invest in Oil and Gas companies. Not that I am trying to be a prude but it is a prospect I haven't thought over. I did of course always think about shorting these companies :) Besides shorting is not investing.

This is not the best time to short these companies and may be the best time was some 3 months back. Having said that there are still a few companies where valuation hasn't caught up with the drop in oil price and the drop in growth.

One such company is UPL. It's a oil and gas exploration company with revenues doubling every year from 2003 to 2005. That's where it ends. 2006 growth is expected to be about 20%. Company does oil exploration in Wyoming and China. China growth is about 10%. If you look at the stock price it has gone from $3 to $50 in the last 5 years and is well off it's highs or $70. The stock has a 52 week range of $41 and $70. The P/E is very high for comparable companies at 32.78. The P/S )Price to Sale) is ridiculously high at 12.67 (almost 4 to 8 times higher than the comparable companies). If oil stays at these levels this stock might head down for a while. I see us revisiting 40 some time in the next 2 quarters. Note: The market cap is 7.5 Billion and sales are about 500 Mil in 2005 and about 600 Mil in 2006. Their profit margins are excellent. That is the one catch. If they spend more money in oil exploration that doesn't allow them the fantastic margins they have enjoyed then that is another reason this stock might head down. UPL has the best cost ratio per barrel of oil. That in my opinion will not improve any further.

Countries like Venezuela and Iran will not follow the OPEC cut downs and will produce and sell oil for under the oil price. The cost of a barrel of oil is about $2. Developing countries would not forego the margins they get with oil by cutting down on their production.

Oil might stay at these levels for a while and Oil companies need to factor in the lack of growth.

Could AMD be a good buy at these levels?

AMD has done exceptionally for the last couple of years. The stock seemed to have peaked in March of this year. Not unexpected as revenue for this year will be lower than last (due to Spansion spinoff) and Intel had the worst fourth quarter in 2005. Intel is kind of back and AMD will need to keep up this level of innovation and ramp production at the same time. Last year AMD gained at Intel's expense, got great margins and most importantly broke into Dell.

If you remember buying a laptop / desktop some 4 /5 years back, you would not consider buying an AMD. There has been a major shift in consumers where people realize that AMDs have great CPUs.

Intel now has low power consumption chips. Intel is also ahead in the race for lower nanometer production and has come up with the first quad core (2 dual cores together). Intel seems to be competing better but the biggest advantage that AMD has in my opinion is the traction they already have on Opteron and the fact that consumers are now open to buying AMDs a lot more that they were a few years back.

Vista will drive PC sales. AMD's market cap is lower than Nvidia. ATI acquisition was a smart move in many ways. They used debt since their stock had already taken a hit and that was a smart move.

I think the stock is very down (21.77) and is currently trying to fight through resisitance levels. Short term downward risk is about a dollar but upward move can easily be about 3 to 4 bucks in the next 15 days or so. AMD has set themselves low fourth quarter targets. I think they have an excellent chance of beating these numbers. I think they will be an excellent competitior for Intel over the next few years.

http://stocksharks.blogspot.com

Nice link to the asian markets

http://www.allstocks.com/markets/World_Charts/Asian_Stock_Markets/asian_stock_markets.html

All the stock charts in Asia.

Nov 15th Market action recap

I think I will try to do a daily recap henceforth.

Market really seems to be over bought at this point. The market might take a breather tomorrow as some earnings have been disappointing after hours. Also, tomorrow the CPI numbers come out. Fed meeting minutes that came out today had a clear message. If the Fed smells inflation, they will raise the interest rates. Raising Interest rates will surely be a killer. Market has been going up since PPI inflation data was well under control. On the other hand if the CPI data tomorrow gives us a shock (unlikely) then the market is definitely heading down.

Stocks are moving up purely on momentum. Take a look at the RIMM's move - Research in Motion (Blackberry maker). Market cap is 23.6 Billion. Compare that with Motorola 53 Billion. So you have a company with 1/10th the sales of Motorola at just half Motorola's market cap. Expectations are high due to the BlackBerry Pearl for personal use. Pearl has some bad reviews on Amazon and does not have the QWERT keyboard. Add to that competition from the likes of Motorola that just bought GOOD Technologies (Mobile email space). This sucker is going down. RIMM is a short in my opinion.

Another potential short is CROX (crocs shoes).

Having said that both RIMM and CROX seem to have a lot of momentum. Look for a confirmed reversal if you want to play it safe. If RIMM goes higher then look to buy Puts for Jan although they are expensive.

Salesforce.com (CRM) reported after hours. One time expenses ate all their profits. The company is valued at 4.76 Billion and sales are increasing about 10% quarter over quarter. CRM is another short IMHO.

Guess what's back in play. OVTI - excellent value for money. Earnings on Nov 30th and stock has begun to move. If you decide to dip in then please sell before Nov 30th earnings. Last earnings had lower margins. The company is excellent value for money. 980 mil market cal, 380 mil in cash, 100 mil cash flow every year and 30 - 40% growth. It's a dream buyout.

Buy March 07 puts for CROX

This stock is very over bought. Market cap is huge for it's revenues. Worse still, company guidance for the next quarter actually shows negative growth which is unbelievable considering the company grew almost 100% quarter over quarter.

You can't short the stock as it's not available to short. What you are seeing is a typical short covering rally. Take a long term short stance and I think this is a winner.

Digital Angel rescheduling 3rd quarter earnings call

Digital Angel is rescheduling the earnings conference call. Key words to note here are "Strategic Alternatives".

Digital Angel Corp. (DOC.A: Quote, Profile, Research) on Friday said it is rescheduling the release of its third-quarter results to update shareholders on strategic alternatives for the company.

If you revisit their recent history they just got a patent on glucose sensing microchip on diabetes. Before that stocks was at a 52 Week low. My feeling is that they are announcing a strategic alliance or may be a buy out. They might have the patent but they can't do it alone cause they don't have the money for it. They are small in market cap and their revenues aren't bad for a company in this industry group at this point in the company's evolution.

I could be completely wrong and "Strategic Alternatives" may mean the company is figuring out how to get more funding also. They have enough cash though so I doubt that but you get the point. Could be anything but most likely it's good news.

Cheers,
Ahu

Could this be the perfect trade?

CVS bought CMX today. CVS will give CMX 1.67 shares of CVS in an all stock transaction today.

CVS is at 28.73 and CMX is at 47.3. Simple calculation would suggest that CMX buy out would be at 28.73 * 1.67 = 47.98. We therefore see a CMX cheaper by 68 cents at current prices.

Is this normal? Yes - You usually see a 30 to 40 cent discrepancy before the buyout actually takes place and the gap gets lesser as the buyout date comes closer. There is a huge difference here though.

1. CMX is at a 52 week low although earnings have been great (Walmart competition is the biggest reason).
2. CVS is also quite low but they have had good earnings as well.
3. "Could this be the perfect trade": Forget points 2 and 3 and think about this trade. Short CVS and buy CMX. This way if CVS goes down you make money on the short and lose money on the long on CMX. If CVS moves up then you have the opposite reaction. Either way you still stand to make your 68 cents.

If you were to chose to go in any one direction, choose CMX buy. Reasons: Deal might not go thorugh as some analysts think the offer is quite low. This might require CVS make a higher offer. The important thing to note here is that as per points 1 and 2, if the deal is canceled some how both stocks will still go up over the long run considering the levels they are at from a 52 week chart and earnings perspective.

Point 3 is the safe trade. Buying only CMX is the riskier one but could give greater yields. Let me know what you guys think.

CVS and CMX merger

CVS is buying CMX for 1.67 shares per CMX shares. If this deal goes through you have a company that can leverage some 400 Mil a year in cost savings. 2006 revenues will be upwards of 75 Billion USD. Big step in the Pharma industry. Check out all the news articles on it today. Both stocks were sold off yesterday. I would say the stocks are a buy and certainly CMX today since they might come back with a sweeter offer as currently there is no premium.

Digital Angel Corporation awarded patent for breakthrough Glucose-Sensing RFID chip

Digital Angel Corporation awarded patent for breakthrough Glucose-Sensing RFID chip

http://biz.yahoo.com/bw/061025/20061025005372.html?.v=1

This news is big. Sure it will take them a while to sell it commercially but it is definitely a huge revenue driver. This company's market cap is 113 Mil and stock is at 2.51. It has it's losses in control and it's poised for a big move when this technology gets commercialized.

List of ETFs

http://messages.finance.yahoo.com/Technology/Computer_Services/threadview?m=tm&bn=20360&tid=725381&mid=725381&tof=13&frt=2

Cheers,
Ahu
http://stocksharks.blogspot.com

Make money in the last hour on the options expiry day

Ever thought you can make money in the last hour of options expiry. Keep an eye open for the following prerequisites while making this trade.

1. It needs to be the day of options expiry and the open interest should be really high.
2. The volume on the options (options that are in the money) should be low. Approximately less than 30% of open interest.
3. The stock should have moved higher / lower in recent sessions (your trade depends on whether you bought calls or puts). Therefore a few people might have made money on the move up/down and are holding to see at session highs/lows since options make a lot of money even on timing the entry and exit points.

Most brokerage houses automatically exercise or sell options that are "in the money" by 3 PM EST. Options traders know this and so if the stock has maintained a flat / slightly bullish line, they start exercising options a little before that. e.g. If a lot of call are open, traders start exercising the calls (buy stock). This buying spurs up the stock price.

To see a recent example of this, check out:

http://finance.yahoo.com/q/bc?s=AAPL&t=1d and look at the move in the last 1 hour. Also, see the options page for October expiry and see the open interest for Calls with $75 Strike price.

I've seen a move like this last year in OVTI for the last day of options expiry for the month of November.

Cheers,
Ahu
http://Stocksharks.blogspot.com

United Airlines (UAUA) is way undervalued

Wonder if Airline stocks are worth investing into? All airlines have gone through bankruptcy in the last few years except Southwest and American Airlines.

United Airlines IMHO is a diamond in the rough. We only have data from a couple of quarters after bankruptcy and that suggests that the airline is extremely undervalued. The balance sheet has debt but has plenty of Cash as well. Airlines, due to the nature of their business can carry debt against their huge property and infrastructure.

UAUA has a market cap of 3.23 Bil. They might hit 18 - 20 Bil in revenues in 2007 and are in a good position to increase margins just a little so they can earn more income. Taking estimated $6 a share earnings for next year UAUA is trading at a future P/E of 5.

There is another factor that might benefit margins in the short term. Gasoline prices have dropped 16% in September and if you believe in the conspiracy theory that Republicans are ensureing the pricing stays low until the elections get over, then these prices might stay for a while.

Even without this bonus the economy is really improving and Airlines might be have emerging from a very risky environment over the last few years where people can now understand the risks of airlines, accept them and yet invest in them.

All UAUA has to do is keep up their current earnings performance and we should see a 50% appreciation in the stock price in 6 months.

Cheers,
Ahu
Stock Sharks

YHOO downgrade timing questionable

Yahoo was downgraded this morning. The downgrade came in after Yahoo had already hit rock bottom over the past few days. This truly was a shameless ploy. Yahoo is being accumulated in my humble opinion. The day started with YHOO already opening low. You can drive a stock lower on low volume by pre-market trading. Stop losses might have triggerd for the brief dip and there on there is a consistent strong buying all the way into the close.

We keep talking about how individual investors are disadvantaged in the stock market. Situations like these are examples of how individual investors will benefit from maniplation as long as you understand the play.

I feel YHOO will go higher from now until earnings.

Switch to a Mac - Excellent article

http://switchtoamac.com/site/preview-apples-q4-2006-financial-earnings-mac-sales-increase.html

Excellent article. Check it out!

Apple about to announce wireless video i-Pod?

Apple about to announce wireless video i-Pod?

http://www.engadget.com/2006/10/10/apple-about-to-announce-wireless-video-ipod

Cheers,
Ahu