My updates will be delayed this weekend

Looks like we are heading for a solid performance this week: up ~1.4%

I am not around until late Sunday, so please be patient with me.
Lots of ground to cover, and not much time!

Quick thoughts

In general, the road will continue to be rocky. Don't expect that V shape run down followed by a run-up.

Looks like I did see something in the tech stocks - the market rolled in a bit. It might roll back more - frankly, these are value stocks at these prices. I don't like the hesitancy over TRID and ISIL. Frankly, it sucks that our stocks didn't benefit from today's run-up and that's worth a moment of thought. I did like RFMD's run today. Thank the possible mergers among wireless equipment providers.

TIE - We need more cowbell. Gotta have more Cowbell. (My thanks to Christopher Walken in SNL)

GHL - Nevermind the run-up, watch the insider selling. Those greedy bastards (worse than TRID) are selling millions of shares - 2M in the last 3 weeks. It's been creating downward pressure. (BTW - Yahoo Finance says that Insider Selling is N/A. If you look at the detail and add it up, it's 2M shares. Another reason to always doublecheck the free financial websites.)

WSO - Someone asked my buy-in. I previously owned WSO and was stopped out. I have had my eye on it and many other stocks, and bought back in Tuesday at $56. I did a lot of buying Tuesday. Most are positive. I did this a few weeks back with WIRE and netted 6.5% in a couple of days. It went up a few dollars before falling 15%. I consider that a win for the 1-2 punch of buying at a short term low and setting a tight STOP.

I owe the following:
1. Latest STOPs
2. LiveRocket Turbo Portfolio - it's coming. I am fine tuning the criteria. (It would have included TIE and TRID calls, plus a few 'out there' tech stocks like NUAN)
3. Other stocks. I'd like to thank everyone for offering up stocks to be considered/reviewed. I want to dedicate some time to doing just that. Someone also asked me what I own and I will fold that into this forthcoming blog entry. I own many more stocks than I present in LiveRocket. But my risk threshold is a lot higher than I recommend others consider. LR Turbo will be closer to my more aggressive style.

WSO

I own WSO and it is up 4%+ today.

WSO doesn't fit the model, but I like it for a few reasons
1. The story - They provide air conditioner maintenance and parts servicing. It is a fragmented market and at 7% share, they are a dominant player. They are aggressively acquiring others, an dthat can only lead to economy of scale gains.
2. It's Summertime. More homes and buildings = more demand for air conditioning service
3. P/E of 22 in the face of 20% growth expectations but 42% last quarter
4. Low P/S of 0.9
5. Possible downside tied to electricity prices and desire to conserve energy by shutting off A/C.

It feels fairly priced, but I like the acquisition strategy and wouldn't be surprised to see growth.

JLG Down Hard Today

JLG is down 6% today. I loaded up at $21 in my personal account and it's still crashing.
There is no news.

Frankly, I am concerned. It is down 38% from its high 1 month ago when it reported incredible earnings. There is no news. I disregard today's construction report. Only massive institutional selling could account for this. What do they know that we don't?

1. Overpriced? I don't think so. Current P/E is now 15. Profits doubled Y/Y. Guidance was raised for this quarter.
2. JLG's future is not that bright. Hmmm, JLG announced last quarter that rolling into this quarter they had ~$1B of firm orders, vs ~$650M last year. Expectations are for 50% growth next 12 months. Sales are expected to grow 31%

I conclude that either the company, after just reporting powerful earnings, is messing up and we don't know it but institutions do. Or someone is attacking the stock.

I am reluctant to sell a stock that has become this cheap and has this much potential. But I don't like being against market sentiment.

Playing the volatility

Until the next Fed meeting June 24th (or 25th?), volatility is here to stay.
* Extreme and sudden price movements
* Technical driven trading, not based on fundamentals

A common technique is to play a short term game: buy and sell at each trough and peak. That takes too much work for me.
A 2nd technique is to buy puts and calls and trade those.
I think that we should sit tight because I honestly don't see this getting any worse. We are past earnings season, consumer confidence was HIGHER THAN EXPECTED (it dropped much less than expected), and we are coming to the close of Q2.

Now is a good time to consider which stocks held fast during the recent flurry of volatility. That's a good sign of underlying strength.

I also notice something going on at Apple.
AAPL, STX, MVL - all are down. Perhaps the market is expecting bad news from the iPod. Or perhaps the market is also wondering about Apple's ability to keep growing iPod sales (not units - sales $) and PC sales.

Buying JLG....again

We were stopped out of JLG at $22
Buying 409 shares @ $21.50

Buying

Bought DO 150 shares @ $82.7
ESV 150 shares @ $48.2
ZRAN 400 shares @ $24.48
GRP 200 @ $45.4

Buying today - waiting for entry point

Another day of the market fretting. I am watching to see better entry points today.

Fundamentally, I think most of the bad news is out that is going to come out. The housing bubble is not priced in, and that does concern me.

Excellent day to buy

Stocks to round out the portfolio

We have ~$43.5K in cash right now. I continue to like energy stocks and semiconductor stocks.

ENERGY
I haven't seen a good alternative energy play. I think that solar is actually a great place - there are square miles of rooftops on commercial buildings (airports, shopping centers, and so forth). But for now, it is still talk. And most alternative enrgy companies do not have solid numbers.

HIGH TECH
I noticed the following PEG ratios for select semiconductor companies:
TRID 0.82
ZRAN 0.99
RFMD 0.96
BRCM 0.94
MRVL 0.79
NVDA 0.87
As a reminder, PEG Ratios are the ratio of the P/E versus the growth rate. In general, companies trend towards a P/E of 1. The reasons are basic math. In the days of dividends, the expectation was that an investor would expect to recover the investment in 10 years. That drove stocks to an average 10 P/E. Some stocks grow fast, and return that investment faster.

This is my theory, but it seems to hold true. The market uses 10 years as a constant, so a fast growing stock will get a higher P/E. In that way, the 10 year mark is held constant. The P/E and the expected growth rates must also balance out to keep the 10 year constant. That is why the PEG tends towards 1.

The key mystery factor is the G in the PEG. The P/E is known. The future growth is estimated. For small cap stocks especially, there aren't many analysts covering the stocks so the G can be incredibly off. MSN and Yahoo will report the PEG but use it with a grain of salt. One way to check is to look at analyst estimates and consider the range. A good rule of thumb is that, for companies reasonably covered and less prone to surprises, analysts fall within a range of <20%. For more mature companies, the range is even less.
GOOG 20%
CSCO 10%

So, when the PEG is <1, that often indicates an oversold stock. In this case, it looks like quite a few semiconductor companies are not valued as highly as their growth justifies. So either the market doesn't expect the growth to be as high as the analyst's expect, or it's an oversold situation. I think the semiconductor companies are oversold and that the Fall will see sector rotation piling back in.

STOCKS
Diamond Offshore Drilling (DO)
Zoran (ZRAN)
WIRE
Ensco (ESV)
GRP because it has been beaten down (otherwise I'd buy TTI)

Stop Limits for LiveRocket Portfolio

Here are the STOP orders for the portfolio. Most of them are going to be very close to recent lows.
ET $22.9
DIS $26.9
JLG $22
JOYG $47
NTRI $63
TIE $34
ISIL $25.5
RFMD $7
TRID $21

Week 29 Performance - LiveRocket up 0.79%

Week 29 (versus previous week)
Dow 1.21%
S&P 1.03%
NASDAQ 0.73%
LiveRocket 0.79%

YTD
Dow 5.24%
S&P 2.56%
NASDAQ 0.23%
LiveRocket 27.97%

Since Inception (Nov 4, 2005)
Dow 7.2%
S&P 5%
NASDAQ 1.9%
LiveRocket 40.15%

We continue to hold about $40K or just under 30% of the portfolio in cash. Really, that is because I see continued nervousness and volatility - which means opportunities.
To be honest I was surprised by the extent of the recent volatility. Not that we were experiencing it, but that the degree was as severe. In just 2 weeks:
* BSE and Sensex (India's exchanges) dropped 20% in 3 days, falling almost 10% in one day, and trading was halted. This was after a 20% runup from February to April.
* NASDAQ lost 8% before recovering
* Saudi Arabian stock market is down 50% since the beginning of the year, 25% in May alone.
* Indonesia was down 6%
* Russia was down 5%

WHAT IS GOING ON
Several things emerge. There is a lot of global money sloshing around and pursuing very few quality investments. Saudi Arabia and India are obvious examples of this. The crash of these markets is driving a 'flight to quality': sending money to gold and dollars and the US exchanges. In fact, one could argue that the crash of developing world stock exchanges has bolstered the US exchanges. The US is strong because of flight to strength, and that creates a virtuous cycle as the strength became self-fulfilling.

So what made the US market crash and send other exchanges down (Russia, Indonesia, etc).
Put simply, the US market has lost visibility. For almost 2 years, the US Federal Reserve has been signalling slow and steady rate increases. Moderation was the operating key word and the Fed was delivering.

Moderation came under attack last year with the oil price surge following Katrina. Stability re-emerged as the oil impact seemed minor and Iraqi stability began to emerge. Stability lent strength to the markets.
Now stability is again under potential threat. The key word being potential. The potential housing bust. The potential peak in the boom-bust cycle. The potential for more interest rate hikes. Potential inflation.
So...profit taking in the face of huge gains. And that leads to massive volatility - India had huge margin calls. Copper fell 11% May 23rd and then surged 7% the next day.

Uncertainty breeds fear. Fear brings opportunity.
The volatility that I remarked upon back in February had disappeared and now is back.

We sold at the higher levels and even took some losses. But we also bought back in at lower levels. The volatility has actually worked somewhat in our favor. (TRID is a major exception with a stock specific event.)
I am investing as if it is business as usual, at least for the next 3~6 month period.
I also think that the dollar will continue to soften. That will drive up the price of commodities which are quoted in dollar terms. TIE should benefit.

TRID is a very special situation. It drove our gains down 1.5%. In under 1 month, TRID went from $31 to $21, finally ending up ~$23. I did not leave this stock or leverage a STOP to get out higher and then re-enter. I should have. There is nothing fundamentally different about this company. It has what one analyst called an overhang - the stock option stink has raised shadows over the company. Again - uncertainty drives fear and that drives opportunity. I am tempted to buy even more and average down our average price. Several analysts have come out declaring this a $34 stock and commenting that this oversold price is an excellent buy.

I have been fighting for TRID respect for some time. I'm a lover, not a fighter, but this stock feels like a repeat of NTRI, and I think that a 6 month ownership window will prove to be worthwhile.

Although we did not enter at the absolute bottom, we entered at some pretty good price points. I think that some ongoing jitters will allow more opportunity, so I kept some cash.

FINANCIALS
ET - Flat after falling 12% over the week. We are up ~2%. ET announced strong activity for April. I think this recent volatility will add to it instead of driving away investors. Hey - it's the only game in town.

COMMODITIES/ENERGY/INFRASTRUCTURE
JLG - Flat. We are up 4%+.
JOYG - Up 2%. We are up 8%+. And that wasn't even the low point for the week!
TIE - Up 10%, we are up 20%. Could it return to $45 soon? Maybe not soon, but they could double again easily in 6 months when the new factory comes on line.

HIGH TECH
The theme here is the next wave of digital entertainment. I like chip stocks and am cherrypicking a couple while they are somewhat out of favor and down from their highs.
TRID - Down 15%, we are down 13%. Hang tight, it is going back up. Flat panel TVs are here, and TRID owns the market.
ISIL - Down 3%, we are flat. I like ISIL because they are willing to take a lower margina nd steal business from its competitors.
* Earnings growing 100%
* Margins strong
RFMD - Down 2%, we are up 1.6%. This is a cell phone and GPS play. Looking beyond the iPod, mobile entertainment will hit the cellphone very soon. That massive growth is showing up in RFMD:
* 88 P/E but a forward P/E of 15
* Next quarter expectations are 50% Sales growth and 1000% earnings growth. Four straight quarters of stock surprises.
* Margins: Gross margins are up from 29% to 36%
It has been outperformed by SIRF, but SIRF is incredibly dependent on GPS and RFMD has a broader product potfolio.

MISCELLANEOUS
DIS - Up 1%, same with us. Something I especially liked about DIS was its resiliency during the recent bout of anxiety.

NTRI - Down 7%. We are down 5%. Considering that it fell 17% at one point, I am not complaining. It actually speaks to strength behind the stock.