Bullish on auto and energy industries

I am really bullish on auto and energy industries. Households in the US spend anywhere between 3000 - 4500 USD on gas per year per 2 cars. That is a lot!!! When I categorize my expenses for the year, it is our biggest expense. There has to be a way of reducing our dependence on expensive energy sources. Auto companies ought to be able to make the changes needed in their assembly lines to move in that direction. Prices are still very high but they will come down every year. TSLA might be a great buy.

So still bullish on solar and very bullish on auto industry as well.

Buy Solar stocks

Solar is incredibly pressured downwards right now so if you buy, know that all these companies are down big over the last 2 months. It's a combination of excess inventory, Europe backing off incentives due to the financial turmoil and what analysts see as forecasts that need to be brought down. Governments are very interested to support their companies when solar achieves grid parity and there is a huge ramp up in production. Solar will see a hockey stick effect at some point. You want to be into the solar play ONLY if you believe in this story.

Two top solar picks in the industry.

Bought FSLR close to market lows in the low 60's. It is an excellent buy at these prices. These guys have the most predictable earnings due to the large utility projects and have some of the best margins.

TSL is the only other stocks I'd recommend from the China angle. China stocks count on Europe sales which are very low right now. Expect it to survive a harsh climate in the short term.

I expect to see a few more solar companies to go bankrupt. So buy low cost producers with enough money on their balance sheet to avoid this situation.

GRMN and MWW are fundamental shorts, NFLX is a valuation and market sizing short

Also, may I add that both GRMN and MWW are fundamental shorts. Means something is wrong or outdated in their business models.

NFLX on the other hand is a valuation and market sizing short.

Monster WorldWide stock (MWW) is overpriced

So Monster Worldwide, the company we all started posting our resumes to when we started our careers, is back with a bang or so it seems as per the last trading session. One look at their revenues and its a sad story. Stock peaked in 2007 and has been down ever since. Monster in it's best days made revenues of 1.35 Billion and profits of 146 million. They some how kept up the act in 2008 but made lesser profit and in 2009 they collapsed due to the poor job market and poor demand. Q3 has been good and Q4 has been another 25% growth yoy.

Recovery looks good but is expected. What I don't expect is for Monster to have the same growth rate as they once did after all their business recovers this year. Next year will continue to be challenging because of the tight competition that LinkedIn is offering. So while monster's stock collapsed, linked in more than doubled to 2.4 billion in the secondary pre-ipo markets because it is straight up a better product, a more web 2.0 experience and is a fantastic site to browse and navigate. While monster has tried to bring a web 2.0 look and feel, their website is still unfriendly to users, their products seem all over the place without any focus and they will continue to lose market share to companies such as LinkedIn. At a recent conference I went to for Payments companies, almost each recruiting head said Monster is passe and LinkedIn is the way to go.

Let's do some numbers. Say MWW recovers the business they lost in 2009, they will be at a 1.2 Billion run rate for next year given they aren't fully recovering and job market is still weak. Profitability is still off. There is no way to price the stock if you remove the 25% growth they got this year from next year's expectations. I don't understand why expenses have to be so high quite frankly so I guess that will need some more research. The short ratio is at 17% and so you can't really expect some great short covering rally.

My 2 cents is get in with a short or a put after waiting for three days. Why? Because I like to see big moves play out and you are always too early on a short after a big move where you were convinced this will head back down. If it goes below 17, wait for it to come back up. If it any time it goes back to mid 18's or 19, short it. The reward on this will be next year more so than this year. Also, MWW short can be a great part of your hedging strategy, so keep that angle in mind.

GRMN is a short on fundamentals

Garmin has a fundamental flaw in it's business model. It has another company that offers a big part of it's service free of cost and is constantly working on innovating in the GPS area. It gets scarier when the company offers that service for free. Just go online and read about the services that Google is offering. There are several articles that tell you exactly how you can use this service.

As devices get more connected, everything from refrigerators to cars will be connected to the internet. Cars in the next year or two will be fully connected to the internet. Apps on these cars will be everything from navigation to gas station finders to making payments from your car for the pizza you are about to pick up. Marine and aviation can easily be covered as well but will be a little delayed. An "ipod runner" or something can easily come with a gps system to track your workout specifics. Garmin has everything to lose here.

GRMN will have a tough time to stay ahead of that curve. Short GRMN on any big pop. It's market cap is 6.25 billion that will someday go into everyone else's pocket.

Short NFLX

I think Reed Hastings did a fabulous job building this company and I recommended this stock on this blog several years back when it was at 10.

A hedgie friend once said, never short a stock because of how expensive it is. Agreed and lesson learned :) That said, I do think that if you combine how pricey a stock is with market sizing you have a good short opportunity.

How many households in the US:115 Million
How many households in the US have televisions?112.8 million
Given Netflix's current price $172, what percentage of households should have Netflix to justify current price: 50 million: THIS IS CRAZY. This is where market sizing comes up. To think Netflix will be in every 2nd household is nuts in my opinion. Can they eventually improve margins by saving postage? Yes but content deals are expensive. They would be really underestimating their competition.

For streaming service NFLX can quickly rollout worldwide: Marketing efforts will need to expand. Plus there is initial resistance and numbers will be slow.
They are expected to strike great deals and win against content creators, Apple, Amazon and every cable service out there.

31.6% shares are short

Quote by Alex Jacobsen

"Good traders think of ways not to lose money. Bad traders think of ways to make money."

Conuntrywide (CFC) financials

It is an interesting time in the markets what with the major correction last week. Sectors that are clearly in trouble are financials and retailers. Oil and technology have done quite well again in 2007. At this point we start wondering what sectors would do well for 2008. Hell you wonder if you had only invested in emerging markets you wouldn't have to rack your brains for 2008. I haven't given a lot of thought to what sectors would do well but I have been thinking about individual companies.

Countrywide (CFC) comes to mind. The stock is trading at 8.42 down from around 40 it was trading at last year. This company is trading at a third of it's book value. They claim they will be profitable in their fourth quarter and for the year 2008. If the market only believed this, these guys would be at 3 times their current stock price. The mortgage mess hasn't cleared but if people think that there is hope it will clear in the next 6 months to a year, then this stock is an excellent buy. An argument put forth is "there is no reason to catch a falling knife". Just get the stock on it's way up. True - You will limit your gains but it feels more sure. Besides who is to say it won't dip further. This is where your analysis of the company's financials will come into play. The stock is hit such a low that the financials are creaming buy. Just go to Yahoo Finance and look at their revenues and profits for the past few years. Revenues for 05 - 15.6 Bil (profit 2.5 Bil), 06 - 24.9 Bil (profit 2.6 Bil) and 07 (first 3 quarters) - 18 Bil.

Company's market cap - 4.87 Bil.

Fed is making an increasing amount of money available to being auctioned off. Stock feels like a buy.

Crash this week.. may be on Monday

Expecting a major correction this week. I mean a big crash. Most likely on Monday. Just a strong gut feeling.

Call volume for $35 July calls

Check out the volume on the July calls for VRTX (28.51)

$30 strike price trader 1995 calls.
$35 Strike price traded 5285 calls. - Some one bet $26,000 that VRTX price will go higher than $35 before EOD July 20th.

I checked almost all the other expiry dates for the $35 strike price and the volume is high only on July. This means it's not like someone is moving the calls to a later date. A sure way to tell is if the Open Interest in the $35 strike price goes up to about 14700 tomorrow.

VRTX - Vertex Pharmaceuticals is a buy

VRTX which is currently at 52 week low is a strong buy based on technicals, valuation and a probablility of the drug coming to market before 2010.

Look at the trading in the stock and the volume. It's at a great place technically. See the strong volume on up days. Today it picked up in the last 45 minutes or so on very heavy volume. There might be a rumor of a buy out but surely don't trade based on that.

Reliant Financial Networks ticker has changed from RHWC to RFNS

Do take a look at this article. http://www.reliantfsc.com/news/Reliant%20Press%20Release%20-%20Reliant%20Now%20Fully%20Accessible%20under%20the%20Filogix%20System%20and%20an%20Increase%20in%20Mortgage%20Origination%20is%20Anticipated%20-%20May%208,%202007.pdf

" When the system was activated May 4, 2007, the Filogix system had archived 109 mortgage applications that had been submitted for Reliant's underwriting for a total of $33,170,471.77 in mortgage applications submitted. "

This is for a company that has 8 Million in Market cap. They expect to turn a profit by the 3rd quarter.

Take a look at this article. http://www.investorshub.com/boards/board.asp?board_id=5251 and look at the ludlow report. It paints a very rosy picture and expects an 8 cent stock to potentially go up to 12 bucks if they meet targets. Take it with a pinch of salt because everything they talk about is yet to be proven from an earnings perspective.

I think the train has started just based on the new mortgage apps it's processing and it certainly is good news for those of us trying to get in at this point.

Cheers,
Ahu

Blackstone (BX) Opportunity

Does anyone here remember the GOOG IPO and how the IPO price came down from $115 - $120 to $85. GOOG opened at about 100 went to 113 and then back to 98. No one can claim Blackstone to be another GOOG but the way it's trading is almost remeniscent of the Google IPO.

A few things to keep in mind: BX has given a Investment Return of 25% - 30% over the last 20 years. That is right - 20 years. It means that it has legs to ride out any so called debt crunch that the market is imposing. Money Managers in every area are aflush with funds and leveraging (leverage is required for every private equity deal) has become expensive. Markets are overly concerned with the debt leveraging that has been done.

Two things will affect BX. The tax rate issue (15% vs 35%) and they are lobbying against it. The other one would be earnings. In my humble opinion investors will be shocked by how good the earnings will be. Read their prospectus and look at their growth.

BX has fallen from their IPO price. If you buy now, you get a better deal than the Chinese goverment (they bought 3 Bil dollars worth BX). Buy BX.

Buy GILD

GILD - Gilead Sciences.

Financial Amalysis: The company had 1.32 Bil, 2.03 Bil and 3.03 Bil in revenues for 2004 - 2006. Current estimates for the year are extremely low (3.95 to 4 Bil). The company has exceeded revenues quarter over quarter every time. current estimates are for no Quarter over Quarter growth. They have beaten estimates conprehensively and for a 40% growth rate, their Future P/E is only 23 (given current low estimates). The technicals for the stock are great and they are hovering around 50 day EMA. Look for the stock to climb over 81.5 for a continued run and over 84.47 for a real unabated run. If stock rises into earnings then sell options prior to earnings (high premium) and sell stock after earnings. Option activity today is definitely favorable and in anticipation of a positive earnings surprise.

The stock has an excellent pipeline of drugs and just recently got approved for ambrisentan for treatment of pulmonary arterial hypertension, to be marketed as Letairis. This one feels like it's going to a 100.

Cheers,
Ahu

Penny stocks anyone?

I've been researching RHWC for the last few days and this one is a strong speculative buy.

This is one of those stocks that can multiply your return. I am quite tired today and so I won't be writing a long piece on this. It just got into the most feared business of sub-prime mortgage lending but in Canada. When the market expects the worst in a business area is when you find great deals.

This is a penny stock at 11 cents. Returns will multiply quickly if they can pull it of. Canadian real estate has done very well over the last year and expected to continue to do well. Big Canadian banks are washing their hands of the sub-prime business after watching the US debacle. Sub-prime is a valid business model and this is the perfect way to benefit from it. Look at how you can avoid high risks by going through this analyst report.

http://www.beaconequityresearch.com/report/RHWC.pdf

The company is projecting a net income of 15 million for 2007 and expects profits in the third quarter. Hmm.. I think it's a difficult ask. Having said that, their Market cap is 9.6 mil. Surely, if it makes even a fourth of their expected income, the stock is way underpriced.

And you thought I'd never recommend a penny stock :)

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.