Drinks & Dividends - Recent Investment Club Meeting

We had another of our monthly investment club dinners this week. Thanks to all who attended. We are going to get much more serious about this, so please stay tuned. (If you have not been able to attend, please note that I am hosting a monthly investment get together the first Thursday of the month in San Jose.)

Many stocks were presented for review:
AAPL
BBBB
TIE
GC ( doesn't seem like the symbol exists....)
LCRD
MRVL
ASEI
SIFI
SLAB
NLS
WLSF
MDT
PJP
NXG
GOOG
PETM
HIG
SLB
SLW
RGLD
PCU

Some pretty exciting companies and some pretty risky companies. Most of these don't fit my model, but the ones I want to look into are
Lasercard (LCRD)
Silicon Labs (SLAB)
Petsmart (PETM)
Schlumberger (SLB)

Of these, LCRD is most interesting to me. SLB and SLAB overlap our current holdings.

Week 22 Performance - Up 4.5%

Week 22
Dow 0.1%
S&P 0.08%
NASDAQ -0.04%
LiveRocket +4.52%

YTD
Dow 3.76%
S&P 3.85%
NASDAQ 6.08%
LiveRocket 16.43%

Since Inception
Dow 5.7%
S&P 6.3%
NASDAQ 7.8%
LiveRocket 27.52%

Another good week with a solid 4.5%. There were some concerns about inflation - mostly because of emplyment strength - and fears that more interest rate hikes are coming. So the market pulled back. I see it as gathering strength for a nice run.

FINANCIALS - The financials weathered today's hit, and that was nice to see. You would think that Financials would suffer in the face of interest rate pressures, but in fact they looked good. Possible signs of sector rotation into finnacials, which wouldn't surprise me given the recently strong reports out of the big financial houses.
ET – Flat for the week after a strong 4% week last week. It was up today on a major down day, and on good volume too. This week ET set a new 52 week high, again. Over the past few weeks, AMTD and ET are showing the same signs and movement patterns. Except that ET is performing better at the moment. It's trading in a very narrow range of 4%, something to consider for your stop.
GHL – Up 4.5% and it set a new 52 week high, again. It has hit >$70 the past 3 days. Possible sign of a breakout. GHL and LAZ performed identically this week, except that LAZ tanked today while GHL held up well. One interesting bit of news - GHL started an investment fund.

COMMODITIES & EQUIPMENT
GRP – Up 34% after a nice run last week. Considering the pop up in oil, I would have been worried if it didn't pop up as well.
JLG - Down 4% after a flat week last week. No news, but I don't like it.
JOYG - Up 5%. It hit a new 52 week high. All is well
MDR - Up 3%. Hit a new 52 week high, again.
TIE – Up 3.5% after a solid week last week. It hit a new 52 week high and even touched $53 the past 2 days.

HI TECH
STX – Up 4%. And on good volume
MRVL – Up 10%. I mentioned that MRVL was a screaming buy and it looks like someone else saw it too. Up 10% this week. It broke through $60, but barely.
TRID – Flat after touching $31, it backed down again.

HEALTH
NTRI – Down 1%. AFter the wild run its had, I'm not surprised. Down on incredibly low volumes, so it may not mean much.
TEVA – Down 3%. Partly because of Merck, but frankly I don't like this stock's performance. It isn't TEVA's fault: their competition (BRL) is behaving the same way. There are too many winners out there for us to wait for TEVA to move. They get one earnings cycle to wake up the analysts, and we'll cut them loose first chance we get to make 5%~10%.

A good day to buy?

The market has been looking to pull back all week, and I think it's consolidating before another run up.

In early February, the DOW bounced around 10,800 and then shot up to 11,000 without a backwards glance.
It spent 19 trading days bouncing around 11,000 before lunging for 11,200. Throughout this period, the DOW would hit 11,100 before pulling back and closing around 11,000.
Since March 15th, the DOW has been solidifying around 11,200. It has been at this point for 17 trading days.

Now, here's something interesting. I looked at the daily trading volatility (the range of high and low in the DOW).
Before jumping to 11,000, the DOW had 8 out of 9 trading days with volatility around 180+ (the first 2 weeks of February).
After hitting 11,000 the DOW volatility fell and hit 180+ ranges when it fell below 11,000 and rebounded (March 3rd and 6th - Friday and Monday). Essentially it trades as low a range as 42 and generally around 150 or lower.

My point is, once the DOW hits a number, it will face resistance. That resistance is experienced as a large trading range because the level is being tested. What that really means is that a lot of folks are cashing out and taking profit and a lot of folks are buying because they think the market is moving up. When the level holds firm despite the volatility and pressure, then we have consolidation.

When the DOW lunged from 11,000 to 11,200, there was some but not much volatility. The trading range was around 160. However, 3 of the last 8 trading days have been ~180.

So that's my thinking about consolidation. Now, why do I think the market is about to go up?
Partly because the daily highs have been around or above 11,300 on 13 out of 16 of the last trading days. The DOW wants to break out to 11,300 and keeps falling back.

So a Dow ~11,100 (today) when we see that it really wants to go to 11,300 is a buyer's opportunity.

What do I like? Anything that has pulled back >3% or not at all. Strong pull back is a buyer's sign. No pull back means that the market really digs this stock.
Of the stocks that I follow or own, that would include:
Strong pull back: CELL, TIE, JLG, TTI
Minimal or no pull back: ET, GHL, NUAN, STX, PCP, ESRX

Avoid misleading statement of results

Integrity is key. My efforts are about actual results of investing the way I do in the stocks I do.

To that end, I track an actual dollar investment.

Motley Fool is not as honest, and it is typical of most newsletters that I have subscribed to or read. Motley Fool publishes stocks they like, easily 200+. They also track a preferred list of these gems.

When they publish the gems, they also publish performance and compare to the S&P. And they average the performance and show you how they achieve 37%+ versus a paltry 15% for the S&P.

The first thing to beware is that their average is not an annual average. That is, these stocks were purchased at various times over the past 2+ years. A longer time frame lets them put out a better performance. The annual performance is actually lower. Here are their top performers:
STLY - Motley bought 11/04 and claims a 33% growth since then. Growth in last 12 months = 20%
MIDD - Bought 12/04 and claims 88% growth. Last 12 months = 66%
CMN - Bought 12/04 and claims 12% loss. Last 12 months = 50% loss.
And on and on and on. In other words, actual 12 month performance is much worse than they are reporting and probably a lot closer to 20%, about the S&P performance over the same time.

In addition to manipulating the timeframe to distort the actual performance, Motley Fool does not track actual performance. They are tracking only the stocks they continue to follow. Along the way there have been underperforming stocks.

It works because new subscribers don't have the historical view of actual Motley Fool stock picking. The equivalent would be if I dropped all underperformers and spoke only about the hot stocks I've picked.

A more honest approach is to track the performance of an actual dollar investment. That's what I do and that's really all that matters. If you invested exactly as I did, you would have a 5 month 26% yield at a time when the broader market is ~7%.

No distortions. Just integrity.

Watching the movement

The last few days have seen some strong buying. I chalk most of it up to pre-earnings excitement as well as post-Bernanke relief. It was as if the market had held its breath.

The positive movements seem to be picking up a bit

GHL - Up 4.5% in 2 days. And on strong volume. I think we might be breaking out at last. It hit a new high and closed near that high.

GRP - stuck in a range, which I don't like to see given the oil price strength. I see it softening again before finally breaking through resistance at $44.

JLG - Up 4% in 2 days and on strong volume. It is close to its 52 week high.

JOYG - Up 6.5% in 2 days on incredibly strong volume. Set a new 52 week high and stayed close to it.

MDR - Up 4% in 2 days and on strong volumes. Also close to its 52 week high. It looks ready for a run up.

TIE - Up 6.5% in 2 days. I don't think that this is a commodity sector play per se. Gold rose much less than TIE in the same period. This isn't speculation but actual shortages.

MRVL - It was up ~5.5% on Monday before sagging back down. It just doesn't have the support, which is strange because everything I see says that it's a screaming buy. The only thing I can imagine is that sales to Apple are sluggish (which coincides with Apple's weakness).

STX - Up 15% in 1 week. Up 6% today alone. Volume was more than 2x the average volume. Considering that it finished near it's 52 week and stayed near its high for the day, I think STX is going to break out.

TRID - Nothing. Nada. After rising 100% in 6 months, I still think TRID has git the muscle.

TEVA - Up 4% in 2 days. The FDA reported today that generic drugs are an economic positive because they bring down costs. Well, thanks for wasting taxpayer money proving the obvious. With 800 generics getting the slow track at the FDA, this report is a play for more resources to speed up approvals. TEVA has spent over 3 months trading in a narrow range ($41~$44). Not surprising after a 6 month 50% rise. It's catching breath before going on anothe rrun.

NTRI - After a 10% rise last week, NTRI held on to it's gains. That's a very important sign of investor strength.