Week 3 LiveRocket Turbo Performance - Down 2%

Turbo is intended to be the more volatile, high risk investments. We include options, for example. Options are in fact why this portfolio is hurting right now.
I am also going to add one more feature - margin trading.


AMX Up 6%
BMHC Puts (Dec $25) n/a
DO Up 3%
GRP Up 4.4%
NUAN Up 11%
RFMD Down 4%
STX Down 3%
TIE Calls (Dec 50) n/a
TTI Up 8.2%
ZOLT Up 11%
ZRAN Up 1.3%
TRID Calls (Jan 22.50) n/a

ZOLT is an interesting stock. They, like TIE, make a product that is in high demand for airplanes. In this case, a special composite fiber. Planes are ~57% composite. However, the main reason that I bought ZOLT when I did was the recent issue with a different area of their business: wind farms. Their product is perfect for windfarms. Sen Kennedy had taken unusual steps recently to block a massive windfarm project in Massachussetts using ZOLT components. This is incredibly stupid - block cheap, renewable energy at a time of energy concerns - but that's Kennedy. And politics. And political moves like this are always short lived. So we took advantage of the short term drop.

Notice that I am also heavy on some tech stocks (AMX, STX, ZRAN, TRID, NUAN, RFMD) and oil (GRP, DO, TTI). That is where the growth is. And this is a high growth portfolio.

Weighing the portfolio down is the Call options for TIE and TRID. We are down (-57%) on the TIE options and (-46.3%) on TRID. Why am I still in them?
TIE - I think the stock goes back to $40 after this quarter. The volatility associated with the stock as well as the 6 month window make me comfortable.
TRID - I can't believe where this stock has fallen. Why am I still hot on a stock that is down so much? Well, because every bit of evidence coming out supports the notion that TRID is sitting pretty in a very hot market.
* Flat Panel Sales are screaming hot. Circuit City just said so.
* Tier 1 manufacturers (Sony, Samsung, etc) are gaining market share. As they grow, so does TRID sales.
* TRID is gaining market share at the majors. They just got a major win at China's #1 manufacturer. A multi-vendor solution is actively pursued to reduce dependence on TRID, but currently the competition's quality is weak. At thi stime, holiday sales will be incredible for TRID.
Dragging the stock price down is
1. GNSS blowback - Most people don't distinguish between vendors. They don't see a loss for GNSS as a win for TRID. And GNSS is naturally pointing to lower sales and highe rinventory to back up their defense that weak sales is not their problem. However, they play in the low-end of the market which is losing ground to the high-end: that's the cause of any inventory problems for GNSS
2. Market slowdown fears. This comes from 2 areas: housing slowdown affecting consumer spending and slower than expected sales. There is a higher-than expected glut of flat panels because World Cup fans didn't buy TVs. Prices on screens are coming down fast. This is an incredibly price sensitive market and prices are finally approaching what the masses can afford. And volume is what counts for TRID. Drops in prices drive volume of units. From Q4 2004 to Q4 2005, prices for a 42" Flat panel TV dropped from $4200 to $2500. TRID sales doubled during that period.
Just as the iPod was THE product last Xmas, Flat Panel TVs will be THE product this Xmas.
3. Option pricing fears. Any impact is now baked in.

Put it this way - can TRID rise $4 in 7 months? That's a 20% rise for a company delivering 100%+ growth. If they hit targets, that's $0.90 in earnings - making a 20 P/E. Within 7 months, I would expect complete clarity on the unknowns as well.

Portfolio and STOP Prices

The portfolio today is as follows:
STOCK SHARES STOP PRICE
AMX 250 $29
DIS 350 $28.5
emt 600 $13.7
esv 225 $38
et 425 $20
grp 225 $38.5
isil 381 $21.5
jblu 650 $11.5
jlg 500 $18
mdr 200 $40
rfmd 500 $5.8
tie 300 $29
tti 370 $23
vol 200 $41
ZRAN 400 $21

-------------------
Editted to change GRP from 48.5 to 38.5

Week 33 LiveRocket Performance - Up 2.87%

Week 33 (versus previous week)
Dow -0.24%
S&P -0.56%
NASDAQ -0.42%
LiveRocket 2.87%

YTD
Dow 2.54%
S&P -0.32%
NASDAQ -3.81%
LiveRocket 22.54%

Since Inception (Nov 4, 2005)
Dow 4.4%
S&P 2.1%
NASDAQ -2.2%
LiveRocket 34.2%

Nevermind that the markets ended down for the week, I think some sanity is returning.

If you look at technical analysis, you might see some signs. The MACD shows that the negativity peaked June 12th. The RSI shows overselling peaked June 1st and there's been a pronounced improvement since then. Volume is still light, so that could mean people on the sidelines need to be attracted back.

I also see stocks going up, especially the growth stocks. I think it will continue, with earnings on the way and Money Managers moving money into the right places.

We moved up this week, basically bottom fishing like the rest of the market.
We are also sitting on $336.02 in cash.

LATIN AMERICAN TELECOMMUNICATIONS
AMX Up 6%.
EMT Flat.

ENERGY STOCKS
I am quite excited to imagine energy stocks resuming their rise. The recent Anadarko acquisition could add some boost as well.
ESV - Up 5.2%.
GRP - Up 4.4%
MDR - Up 2.6%
TTI - Up 8.2%

HIGH TECH
These chip companies are still suffering concerns about consumer spending. That's ok - back to school in a few months, 5 months to holiday shopping.
ISIL Down 1.2%.
RFMD Down 3.9%.
ZRAN Up 1.3%

VARIOUS
DIS Down 3.4%. Cars has not taken off as strongly as expected. But I bet Pirates will. And we have yet to see the payoff of being an early adapter of iTunes video sales channel. Worth noting is that Disney is also in talks to open a park near Shanghai. That plus one in Malaysia - it adds strong revenue potential .....eventually. That's the only way to justify the high PEG.
ET Up 4.2%. I wonder how ET benefits from the recent crash. I know that I was forced to make trades as STOP orders were hit. That added to my broker's coffers.
JLG - Up 6.8%. I still think this is incredibly undervalued. caterpiller even announced the strength in their business.
JBLU - Up 2.4%. Summertime is the time for travel. Watch for higher prices, helping the bottomline. And JBLU always seems to pack their seats.
VOL - Up 3.5% Tight employment numbers are benefitting these companies.
TIE Up 1.3% Nothing but good news for this company.

AAPL Getting Challenged

I predicted a while back that Apple would face problems with iTunes because GOOD and YHOO can easily afford to offer free downloads.

Turns out, my crystal ball was working that day. GOOG just announced free movie downloads.
http://biz.yahoo.com/bizj/060623/1306639.html?.v=1
It's limited somewhat, the point is that iTunes dominance is very fragile. Supposedly Microsoft also has an iTunes killer ready for release.

I do not think that there are iPod killers yet. In his recent Sony presentation, Stringer did not debut a Sony pod. Maybe Apple, Sony and possibly others are saving their energy for the holidays. I don't care - all signs are that iPod market penetration has been successful and saturation is coming sooner than later.

With iTunes looking ripe for competition and with the iPod sales growth slowing, it's no wonder that Apple advertising is re-focusing instead on the Mac. Remember those great U2 ads for the iPod? Gone. Now it's Mac ads only. And those ads are great - effectively highlighting the advantages of Mac.

I do think it will work to Apple's advantage. I also think that expanding sales channels (Apple is going to sell through Best Buy) is a smart move that can only pay off.

Yes, I think Apple is executing fabulously - the iPod jump started interest back into the Mac. The only weak points are:
1. iTunes sales challenges: non existent challenge this quarter and possibly next.
2. iPod sales slowdown faster than expected: this is possible and likely, but the financial impact is less than the perception
3. Mac sales uptake less than expected: this is the wildcard. I am convinced that they will successfully challenge other PC makers for the consumer market. But Dell and HP will put up a very convincing fight. The guts of Macs and HP PCs are identical, for all intents and purposes. It's only software, and that software is costing at least $500~$1000 extra.

ZOLT

I discovered ZOLT during my TIE due diligence.
ZOLT makes a special carbon fiber used in planes to replace steel and aluminum. Like TIE it is limited in supply and used to enable better fuel efficiency.

ZOLT has one more trick - wind turbines. It performs better than aluminum and is in demand for wind farms. It has fallen in price because of politics - specifically a major wind farm development was blocked by Sen Kennedy.

That block was removed. read about it here.
http://news.yahoo.com/s/ap/20060621/ap_on_go_co/cape_wind;_ylt=Aow.6jt0OLe9yhvR0cDGEotvieAA;_ylu=X3oDMTA5aHJvMDdwBHNlYwN5bmNhdA--

A rising tide floats all boats

Yesterday was all about a market breathing relief. The market went up, so a lot of stocks rose.

Going forward, that strength will not continue and only the truly strong stocks will grow.

TIE

Consider this.
Speculation drove a lot of stocks up and just as quickly ran away. or so it seems.
Look at PCU, a copper supplier. Copper is a material that is actually used, unlike gold and silver. It is more a reflection of the global economy than investment alternatives like the pricier metals.

PCU Hit $110 before the market sell-off, settling down to $74 yesterday. That is the same price in early february. Essentially, the market eliminated 4.5 months of price. A 33% hit in total.

TIE hit $48 before falling to $31 yesterday. Also a 33% drop from the high. But an important difference is that this drop reflects only a 6 week price erosion.

But while Gold spot prices dropped, Titanium spot prices did not.

This is why I like TIE - it was speculated into orbit only recently. The speculators left but a lot of hard-core investors remain. They believe in this company. I own 50 contracts - the TIE Dec $40.

But is it worth a 32 P/E? Several things are at play. First is the ongoing migration to higher prices. TIE depends on long-term contracts, only some of which are consistent with current world prices. That means that margins will continue to grow as higher ASPs can be charged. Next is the world pricing. It isn't coming down. There is no spot pricing - long term contracts have locked in all supply. In the event that oversupply emerges, then the long term buyers will buffer for a while, discretely dumping excess on the world market. That will be first sign.
But that isn't happening.
What is happening is that TIE is building a new sponge factory which will increase sales 50%. if they can do that AND prices stay somewhat stable, then they deserve a high P/E today.

That more long-term contracts are moving to move to the much highe rprices, the average ASPs will rise

Why I bought today

I believe that the economy is strong and that we witnessed a sell-off driven by Bernanke (for reasons I won't bother going into at the moment).

I believe that with any sell-off, we see over selling, panic and fear-based selling. The only question was timing the re-entry. I had pulled the trigger early, ~3 weeks ago. I watched growth stocks become value stocks.

I believe that several triggers would at the minimum create a floor and possibly even drive stock prices back up
* Earnings season
* Strong results as indicated directly by early announcements (Lehman Bros, Circuit City, TRN) and by the utter lack of negative guidance (outside of housing companies)
* Money managers positioning for the next quarter
* Acceptance of Fed direction and impact
* Weak hands shaken out, no more selling
* Option day expired

Last week we saw some up days, and that was an indication of a bottom. On Monday I saw some slumping but also some select stocks beginning to advance. I wanted to wait for the Housing report, which was fairly positive.
I considered buying yesterday but I wanted to see how the day would end. I wanted to see more strength.

I bought at market opening and it turned out that today was an up day.

To the suggestion that I should have bought on a down day, I totally agree. But that applies in a normal market. When the market has been down for 35 trading days, who is to say that it won't be down the 36th? TIE hit 30 and I thought that was a great day to buy, and then it went down to 28. After throwing away money on stocks that continued to go down, I preferred to wait for signals of the bottom.

Coincidentally, I jumped in when everyone else decided to do so as well. Except that I jumped in first thing this morning and made a little bit more money than the rest of the herd.

After buying in, the portfolio yielded an additional 2.3% today.

The key for me is that this feels like we have bottomed and will be rising from here. Maybe there was an additional 1 or 2% had I bought yesterday or one day last week on the worst day of all. I pulled the trigger today because the market was heading up based on the last few days activity. I got tired buying when the market was heading down.

Meanwhile, I own a buttload of TRID stock and options.

New Portfolio

Bought at market open today
VOL 200 shares @ 44.2
EMT 600 shares @14.88
TTI 370 shares @ 24.81
MDR 200 shares @43
JBLU 650 shares @ 12.39
AMX 250 shares @ 30.93
TIE 300 shares @32
ZRAN 400 shares @ 23.18
ISIL 381 shares @ 24.09
ET 425 shares @ 21.28
JLG 500 shares @ 18.06
ESV 225 shares @ 40.83
GRP 225 shares @ 41.69
RFMD 500 shares @ 6.38


In my personal account, I own these plus NUAN, PCP, ZOLT, and TRID among others

Didn't buy today

The volume backing the trades today lacked conviction.
I will look at tomorrow.

Meanwhile, it seems pretty obvious that home builders are rushing to complete the homes and unload properties fast. They know the good times are over. That's the message I took away from the housing report. Homebuilders are not looking to build many more homes - applications are down.

Waiting to Buy

I haven't pulled the trigger yet but I think the pieces are falling into place. I need to study the housing report, but the signs are that we have mostly bottomed.

I am very shocked by the TRID downgrade. The analyst says that he expects a lower revenue, whereas TRID raised guidance 4 weeks ago. Meanwhile TRID gained a major customer. All in all, I have been incredibly wrong on TRID. It's very puzzling.
* Circuit City has announced that sales of flat screen TVs are strong
* The analyst who downgraded TRID also said "In our view, Trident continues to be the strongest among display semiconductor competitors with its dominant positions at tier one customers and product road map. "
This is the message: sales are going through the roof, TRID is the best positioned supplier, but we should downgrade.

Anyway, I am watching certain stocks today, but everything still feels like it's in a trading range. I'll post what I buy

Bear, Bull or.....?

In a Bear market, everyone gets hit. And, frankly, everyone is getting smacked down.

The question on my mind is whether this was a correction or the first phase of a Bear market. I still think that this is a correction and it swung too far. If I'm correct, then the earnings will matter. In I'm wrong, well, in a Bear market, the earnings just don't matter - nothing brings money into the market.

Supporting the Bear verdict:
1. Economies are past the boom stage.
2. market sentiment is negative. Some great earnings have been announced but to no avail - prices continued down.

Supporting the contraction
1. Economies are still strong
2. Market is waiting for signs of strength and predictability

I want to go long. I see some amazing buys, where growth stocks have become value stocks. the housing report tomorrow will certainly provide some direction. A goldilocks scenario is desired - nothing too weak, nothing too strong. I don't think it will be just right. We've had too many signs of a sudden slowdown.

It's hard to predict what will happen tomorrow, and frankly, I don't care. The market will have to respect strong growth. I am buying tomorrow.

TRID

Right now, I am feeling confident about TRID's earnings. On the one hand, Circuit City came out today with great earnings and pointed to flat panel TVs as the reason for strong sales. On the other hand, TRID just one a major Chinese account, pushing GNSS out of more of the market.

Hanging over the earnings is the Stock Options subpoena. Yep, they were just subpoened. And the usual shareholder class action lawsuits have erupted. The actual impact on earnings is slight. But the distraction is material and so are the legal costs.

Preparing for the week

The massive overselling of the past five weeks is over. Friday as a down day was, I believe, more a sign of options expiring than a retreat. As such, I am of the opinion that all weak hands have been shaken out and money managers and hedge funds will be moving back in.

Tuesday will be an interesting day - the housing figures for May are released. We already know from home builders that the market is softening faster than expected (it always does). If the numbers are significantly worse, that's good news and bad news. It's good news from the inflation standpoint - lower demand for raw materials leads to softer prices and less reason to raise interest rates. It's bad news because it signals downstream problems for durable goods purchases and other economy drivers.

I believe that this economy is strong. We are operating at over 3% GDP AFTER the ratee hikes. And the other world economies are similarly strong. I am going to go long this week, and I am taking the following strategy:
1. Avoid financial institutions. I don't like the impact of a slowdown in financing
2. Avoid anything related to housing infrastructure
3. Continue to focus on energy

First, I looked for stocks that have shown resilience in the face of the last week. I wanted mid-cap or large-cap companies with average daily trading volume at least 300K shares.


JBLU - this one looks especially solid
T - expect more revenue as the regulations solidify
BIDU
VOLT
VALU
GOOG
DIS
MDR
SIMC
OMNI
EMT
TTI
MIG
BSY
CELG

Second, I looked at stocks that appear to be rebounding
GRP
ZRAN
EXPD
CCJ
TIE

I also want to continue to suggest ZOLT and JLG. ZOLT was recently told that their wind farms interfered with US military efforts. That is political and will go away, adding to the company's value. JLG looks to be the best buy I can spot out there, after TIE and GRP. In any case, after 5 weeks of massive selling and no news, I think this one will re-bound after this quarter's results.

I also still love DO & ESV because their business is so rock solid, as well as JOYG and GRP.