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March 31, 2007

How to win an Investment Challenge

How to win an investment challenge

When it comes to winning an investment challenge, fundamentals or even knowing what the company does is important. Its about finding the most volatile companies and accurately predicting (and with a bit of luck) where when the stock has been overbought or oversold and when it has bottomed or topped.

In this entry I will discuss a strategy that I often use to trade in my portfolio. When using this type of strategy, which I call Volatility Trading your trading day should begin by looking at the daily gainers and daily losers of the NASDAQ. The reason you should look at stock who trade in the NASDAQ is because these companies are usually microcaps technology stocks. Not many traders now of these companies and even less analyst have recommendations on these stocks.
In the Daily Gainers and Daily losers part of Yahoo Finance look for companies with around 100,000 in daily volume. The most important thing to check if these companies had news that day or three days before. If there is now news on the company look at its competitors or if theres any news on the environment that these companies are operating in. For example, you dont want to long a stock that operates in Iran or short a stock that operates in an industry where major consolidation is going on.

This strategy is incredibly risky, its definetly not for the faint of heart or those who are looking to have steady flow of income from their investments. Volatility Trading should only be used by young and agile investors who don't have much to lose and have years to regain the possible loses that can happen by using this strategy. With that said, you can make a lot of money using volatility trading. I returned 42% last year with this strategy. There might be a day where your stock goes 60% the opposite way but then theres a day where you just hit it out of the ball park and make 100%, 200% in a couple of hours. Theres money to be made, all you need is a lot of practice in finding these stocks and a little bit of luck. Happy trading.



To find the Daily Losers and Daily Gainers follow this link
Posted by eamed at 02:26 PM | Comments (0)

Lets all drink Jones Soda! Its a buy!

Jones Soda (JSDA)

Jones Soda began as a garage company that made carbonated drinks for trend setters, environmentally friendly and "cool" clients. The sodas now sell in places such as Target and Starbucks. Gone are the days of Coca-Cola and Pepsi. Today’s youth (and adults!) are finding themselves apt to try “alternative beverages?, that is, soft drinks, with and without carbonation, in an effort to expand their pallets’ beyond the status quo. Jones Soda Co. is one of the smallest, yet fastest growing producers in the alternative beverage market. With the highest gross margin’s in the industry, great management, no debt, and an enterprise value of less than $600 MM, JSDA is an ideal acquisition for one of the major beverage makers.

With a notable increase in volume, it is becoming increasingly apparent that a takeover may be approaching. There have been a number of big hedge funds buying up with the stock with block trades of thousands of shares coming in every hour of the trading day. Even without the acquisition of JSDA, their cashflow, nonexistent debt, stellar management, percentage held by insiders and growth targets are ideal for any small-cap company.

Pros:
• Gross Margin (39.21%)
• Recently Announced Wal-Mart contract
• Very attractive take-over candidate
• Growth (180% Next year, 30% per annum for the next 5 years)
• Cash-to-debt ratio

Cons:
o P/E (106.45)
o Small-Cap volatility
o Limited product lines, multitude of competitors





To track the performance of DECK follow this link

JSDA Statistics


Copyright © Eric Medina


Posted by eamed at 01:53 PM | Comments (0)

March 28, 2007

Underrated HP

Hewlett Packard (HP) made two notable acquisitions over the last two weeks.
1. Tabblo, an internet printing company with connectivity features for uploading and downloading photos, books and “custom style items?
2. Polyserve, a software company that consolidates and virtualizes network attached storage (NAS).

For the last ten plus months, HP has been hit with a flurry of self-inflicted blows. First, the board room scandal, then the corporate spying on Dell, followed by cumbersome, uphill process, of repairing the company’s image in the media. Despite the external problems, HP’s stock has risen from $29.00 back in June to $43.72 in early January of this year. This was fueled by a series of acquisitions, mergers and alliances. Since January HP’s price has slid back to $39.81. The most recent drop coming on news of profits growing 26% in the first quarter. There are two explanation of this causation: 1) HP missed expectations on earnings or 2) the stock price deflating from profit taking. This is why HP is currently underrated.

Adding Tabblo, a company acclaimed as, “potential to be the print image for the entire web? gives HP a comparative advantage over other print online services. HP’s print related services already account for 7% of the company’s $7 billion in revenue. This comes at a time when cell phones have more and more connectivity via data packages and grass route wifi’s. This is a long-term growth driver for HP, via superior market position.

More financial info on HP (HPQ)

Posted by jwbir at 12:54 PM | Comments (0)

Oil Is Gold Again

Late last year and early this year we saw oil prices drop from nearly $80 per barrel to just under $50 per barrel at its lowest point. This happened due to a number of different factors. One of those was over speculation. Funds of all types had been putting piles of money into crude oil driving prices skyward. As these companies started pulling their money out, crude prices rapidly deflated. On top of this pull out, the US experienced an unusually warm winter during the end of 2006 and into the very early part of 2007. This drove down demand for related commodities like heating fuel, which cause crude inventories to rise.

Since then, the winter in the US took a good turn for the Oil industry and a near month long cold snap increased demand greatly. This cause Oil futures to begin their recovery. Increased instability in Venezuela, a major supplier of Oil to the US, also contributed to the gains that Oil prices have had. Most recently, and perhaps most importantly, the situation in Iran is headed downhill. Talks have broken down, and the UN security council has passed sanctions to hurt Iran economically. In addition, Iran took British soldiers captive which increased the instability of the situation. Oil prices have rallied to nearly $65 per barrel, $15 higher than its lowest point. Part of that gain happened today after a report came out that an Iranian missile nearly struck a US vessel. This claim was denied by the US military, but the markets don't seem to care.

My forecast: $73 per barrel oil by June. Increase your gasoline inventories now, because prices are going higher.

Posted by jkill at 12:18 PM | Comments (0)

The Sub Prime Problem

Earlier today, Federal Reserve Chief Ben Bernanke went before a congressional panel. The biggest issue that he had to address was the sub-prime crisis that has been ravaging the market for the past couple months. Sub-prime loans are given to people with lower credit ratings. These people pay much higher interest rates than people in other segments of the borrowing industry. Due to the housing slow down, many people that were using sub-prime loans to purchase houses to flip are having trouble paying down their debts because they can't unload their properties. This inability to pay is causing an increase in default rates. Another part of the problem is that some of these sub-prime loans were initially interest only. With an interest only loan you only have to pay down interest for the first couple years; however, after that period is over your monthly payments can skyrocket several hundred percent. Those loans are now coming into that phase which is also contributing to this problem.

The question that Ben Bernanke was asked is one that has been on the minds of everyone connected to the financial markets. Will the sub-prime problem spill over into other parts of the economy? To this question, Bernanke says that the answer is likely no. He believes that it will likely be "contained". However, he also believes the situation warrants continuous monitoring.

Posted by jkill at 12:04 PM | Comments (0)

March 24, 2007

Stock Pick: GlobalSantaFe

title goes here


GlobalSantaFe is a international drilling contractor that provides offshore drilling services to the world’s leading oil and gas companies. This company specializes in contract drilling which makes up 80% of their business as well as providing turnkey services. This company has an excellent international presence which protects it from regional specific downturns.

With great financials compared to its competitors there are five specific reasons that GlobalSantaFe will outperform its competition in the next 12 months. To begin, for the current fiscal year, GlobalSantaFe’s tax rate guidance has been reduced to 12% from 13%-14%. This is a result of restructuring a subsidiary and higher international sales. Secondly, GSF has initiated a 2 billion share rerpurchase program currently in process in which $900 million can still be repurchased. GSF’s established presence in Africa has also given the company security against the underperforming Gulf of Mexico market. There are also consolidation efforts by top management which would enable GSF to take advantage of economies of scales and expand their international presence. Lastly, contract drilling rates have been increasing over the last 6 months and many analysts feel that this trend is liking to continue in the near future.

The current recommendation for GSF is a buy with a current price target of $74.


Posted by jcip at 01:17 AM | Comments (0)

March 21, 2007

Another Brick for the Bridge, This One Starts with a ‘G’

When the rumor mill started churning the winds of the iPhone, Apple’s stock experienced marginal gains. Stock price is a function of action (i.e. talk is cheap, rumors are free). Apple, Nokia, Samsung and just any company remotely related to cell phones are currently entering the mobile hardware market, the question is why?

If you want to buy a cell phone, there are two tiers and a considerable gap between the tiers. Consumer grade phones are the cute phones prevalent in the soccer mom and teenager stereotypes. Business phones are the keys cards in corporate America, in the suit pockets of all industries. Business phones offer constant connectivity to content but at times lack in style as well as broad functionality. Consumer grade offer the basic phone functionality bundled with lifestyle features such as voice recognition and cameras. Consequently, there is a gap with certain niche smart phones filling the gap between consumer and business. This market can be expanded at a rate of $299 per phone, quite the metaphorical carrot.

Rumors started early last week about Google producing a phone, similar to the iPhone, but targeted for the more mainstream market. The high price tag and the lack of functionality will limit the iPhone to niche markets where the applications of its specific advantages justify the price.

Google confirmed in a Spanish interview late last week that 100 Googlers have been investigating methods to expand Google’s presence in the mobile search market. The goal, more user connectivity equals more searches which generates more advertising revenue for Google. So what makes Google’s entrance into the smart phone market any different from Nokia or Apple? Google’s applications, search, business models, internal operations, all symbolize one adjective: simple. Google’s email Gmail turns the complex world of email into a simple web based application. Google’s calendar web app consolidates all appointments across an infinitely large team into one streamlined, easy to interpret display.

Only Google can offer bundling with a suite of web-based applications. Microsoft mobile is nice, but data remains in a solitary location, with Google presentations, documents, spreadsheets are readily accessible from anywhere that you have cellular service. This is functionality that appeals to both consumers and firms, this is why Google will not only complete the other side of the Apple coin. Google owns the metaphorical coin.

Posted by jwbir at 12:50 PM | Comments (0)

Uranium

In the beginning of 2006, we saw a huge run up in commodity prices around the world. With the housing boom in the US, demand for copper for pipes and wire increased by an amazing amount, which caused a huge run up in price. Gold and silver also saw large run ups in that time period. All of these have since cooled off because producers have been flooding the market with supply, and, as the housing market in the US has cooled, demand for metals like copper have greatly declined.

Uranium is the next big thing. It is a resource that is hard to find, and, as a result, it has an extremely limited supply. As populations expand and more energy is needed it is clear that a large efficient source of energy is necessary. That source is nuclear power. Coal and gas fired plants are coming under fire for the immense amounts of pollution that they generate. This too makes nuclear power an attractive alternative.

What does this mean? More competition for an extremely limited supply of nuclear fuel. One of the largest mines in the world, Cigar Lake, controlled by Cameco, is currently out of commission after suffering a major flood. Taking this mine off line is to the Uranium market as taking Saudi Arabia off line would be to the oil market. This will cause further upward pressure on prices. Additionally, by buying into Uranium companies now, you would be able to take advantage of hedge fund speculation that is currently going on in the market. Funds have been buying up uranium and having it put into storage for quite some time now.

Uranium is a great play, get in now before it is too late.


Posted by jkill at 11:54 AM | Comments (0)

March 19, 2007

Why DECK is a buy!

Decker Outdoors (DECK)

Some say their boot was just a fad, but this sheep skin boot is here to stay! We see their products everyday, women parade in these shoes rain or shine, snow or hail. They praise their comfort and their style. UGGS is the brang of our generation.

Deckers Outdoor Corporation engages in the design, production, and brand management of footwear for men, women, and children in the United States. Its products include slides, sport sandals, thongs, amphibious footwear, trail running shoes, hiking boots, rugged closed-toe footwear, sheepskin boots and slippers, and other casual footwear. The company provides its products under Teva, Simple, and UGC brand names.

The DECK management team has consistently beat earnings, they have overdelivered on their earnings projections for the past 5 quarters. Last week the company reported a 94% increase in earnings from the previous quarter.

Another aspect of the company that DECK has come to master is the art of inventory. The problem many shoemakers and retailers make is overbuying, DECK management has won a gold medal managin inventories effectively.

DECK is also growing their sales tremendously in Asia and Europe. Another part of the business that is growing exponentially is the UGGS men's division. Just last week my roomate purchased a pair of ugg slippers and I have to admit they are very comfortable.


Gross margin rose to 46.4% in the fourth quarter which is amazing for such a small company. They are very efficient.
DECK and UGGS are there to stay. They may be a fad, but one that will make us a lot of money.




To track the performance of DECK follow this link

DECK Statistics

Copyright © Eric Medina




Posted by eamed at 01:26 AM | Comments (0)

March 12, 2007

Why Invest in Brazil

Brazil (EWZ)


In his state of the Union, President Bush called to eliminate our dependency on foreign oil. President Bush emphasized that alternative fuels should replace oil as a major source of energy. Particularly, the president emphasized Ethanol. In the US, ethanol is derived from corn. This can be mixed to create motor fuel and fuel additive and even though it produces 30% less energy than oil, the president as well as the House and Congress are pushing for major reforms to increase spending in developing the technology.

US can produce ethanol, but when it comes to comparative advantage, Brazil is king. Brazil's ethanol is derived from sugar cane, it contains a lot more energy than corn based ethanol and because its produced in Brazil (where land is abundant and labor is cheap) its a much better alternative than US produced ethanol.

Recently, President Bush went on a trip to visit many Latin American countries. Socialism is growing in Latin America because of Hugo Chavez in Venezuela and Morales in Bolivia. This pushed the President to turn to one of the few (economic) allies the US still has in the region, Brazil. The US has all the intentions of using ethanol and Brazil is the biggest producer and exporter.

The export of ethanol will in all likelihood improve economic conditions in all of the areas of the Brazilian economy. The increase in exports will cause foreign investors to increase their capital expenditure in this country giving way to long term economic growth.

I am bullish on Brazil as a whole. The best way to play this is to buy the Brazi ETF ticker, (EWZ). There are many risks to consider when investing in emerging markets but based on risk/reward, EWZ is definite buy.





To track the performance of EWZ follow this link
Stock Price and Key Statistics.

Posted by eamed at 02:59 AM | Comments (0)

March 10, 2007

Cisco (CSCO) Undervalued

Cisco has been quite lately with the exception of coming to an agreement with apple over the copyrights and royalties from the name iPhone. Here is the recap: Cisco has had the copyrights to “iPhone? for it’s internet phone line since early 2000’s. Apple and Cisco were in negotiations for a joint agreement, an agreement could not be reached, when Apple needed to announce its iPhone product (January, this year). After announcing the product with Cisco’s copyright, Apple was forced to make an agreement with Cisco. Recently the two companies came to an undisclosed agreement. With all the leverage from Apple’s public announcement, Cisco must have received generous compensation. Since the fruits from the agreement are widely unknown, the effects have not been priced into Cisco’s stock. Thus, Cisco is currently undervalued.

Looking at the fundamentals, Cisco trades at a multiple of 25.17, exhibits a PEG of 1.22, and is 11% off its 52-week high of $28.99. A beta and short ratio of 1.88 and 0.7 respectively, indicates positive market sentiment and that growth by Cisco will be priced in quickly. As far as the long run, 68.40% is held by institutions; another 1.11% by insiders demonstrates a high probability of a solid long-term investment. Currently, debt to equity is .241 resolving limitations on future growth. A current ratio of 2.482 indicates a bulk of assets that will be moving in the next year relative to current liabilities, hence, Cisco is far from the “cash cow? segment of the company cycle. Future activity seems very high with $20.68B in cash on the balance sheet; this shows that Cisco will need to invest its cash in something, most likely an acquisition, within the next year.

Relative to competitors, Cisco has quarterly revenue growth of 27.30% (yoy), which is greater than its major competitors, as well as greater operating margins and net income. Combined with the fact that Cisco trades at a multiple lower than its three leading competitors while having the lowest PEG of the group, Cisco is undervalued and should be bought.

Reported figures on Cisco

Posted by jwbir at 11:17 PM | Comments (0)

The Carry Trade

The carry trade is a strategy that many investment managers have been using for some time, and the amounts of money involved in this trade are astronomical. The Carry Trade is basically this: investors borrow yen in Japan where the interest rate is only .5%, and then convert this yen into US dollars in the Foreign Exchange Market. This change causes a subsiquent decrease in the value of the yen, which is advantageous because when you go to buy back your yen to pay the loan it will cost less to get yen. The US dollars are then used to purchase US securities or bonds (which have a yield near 5%, much great than the .5% and with almost no risk).

After the market drop last week many investors that have been using the carry trade have been unwinding it (selling securities and paying back their loans). The unwinding of the trade has caused the yen to increase in value by almost 4% in the past two weeks, a massive move by currency standards. No one really knows exactly how much money is involved in the carry trade, but some estimate it at around $1 trillion. This could make owning yen a very attractive thing, and it may be a very bad thing for those with assets in US dollars. Similar decreases have been seen in the British Pound Sterling. No one knows how long the process of people unwinding their trade will last, but one thing is for certian, the value of the US dollar is going to face serious devaluation pressure vs. the yen until the majority of the trades are unwound.

Posted by jkill at 04:45 PM | Comments (0)

March 06, 2007

Stock Watch: Amgen

title goes here


Amgen is a biotechnology company that attempts to discover, develop, and manufacture therapeutic drugs. Recently it has been hit hard as a result of negative news surrounding their production of an anemia drug named Aranesp. Just today, Medicare plan decided to drop this drug from coverage. The stock has drop from around $75 dollars per share to its closing price of $62.30 today. Some analysts feel that the worst is over for this company and that it could potentially be a prospective buy if it does not incur any other major problems. Other analysts feel that this stock could be a potential acquisition by dominant pharmaceutical companies such as Pfizer. Some major pharmaceutical companies have been trying recently to tap into the Biotech market. Analysts price the stock for buyout at about $90 per share. If a deal is made in the future this stock has the potential to make a big move.


Posted by jcip at 11:27 PM | Comments (0)

March 04, 2007

The Market Correction

Last week, on Tuesday, we saw one of the largest single day point drop on the Dow Jones Industrial average since the terrorist attacks of Sept. 11, 2001. This followed a 9% sell off on an important Shanghai index, and subsequent sell offs on other Asian and European markets. The Nasdaq and S&P 500 indicies also suffered major losses. 496 out of the 500 S&P stocks were down on Tuesday. Much of this drop took place in a matter of a few seconds due to trading problems at the New York Stock Exchange.

Many think that this is the first step in a larger market correction that we may have been overdue for. The VIX, a market volatility indicator, increased over 60% on that Tuesday and increased an additional 16% on Friday. This indicates a great deal of uncertainty in the market. This currently appears to be a market isolated occurrence rather than an indication of major underlying economic problems. While growth is expected to moderate and a recession is a possibility, it is unlikely that this market drop is an indicator or even a result of this. It is much more likely that the correction is due to unusually high valuations in the market. Only time will tell how far this correction will go.

Posted by jkill at 02:18 PM | Comments (0)