Saturday, April 14, 2007

LiveRocket Week 15 Performance - Up 1%



A good week for the market and LR - a lot of excitement going into earnings season coupled with upgrades (OCN for example).

After Alcoa and GE's earnings release, I am feeling very positive about our investment in infrastructure linked stocks.

For the imminent US economic slowdown, we have OCN. The secret to OCN lies in their business model as a collection agency getting both a fee and a commission. Note in their last earning sstatement that business is booming as of 3 months ago:
474K contracts in 2006 vs 369K contracts in 2005. That is almost a 30% growth in business BEFORE the subprime crisis began. I anticipate a flood.

TRID is our weak link but I hope that the market will finally recognize that the growth is worth owning.

Big movers of the week: ATW (4%), MDR (8%), DIGE (4%), IMA (-4%), OCN (6%), KSU (6%), PCP (-4%)


HIGH TECH
AMX
– A 2% move up. I want to see more as we go into earnings season. They are re-approaching their 52 week high.
CTSH – Up 0.7%. Its continued fall was halted by INFY. CTSH received a downgrade due to concerns over Indian labor cost increases. However, INFY showed that labor costs don't seem to dent performance (they beat expectations and were up 70% YoY).
NUAN – Up 1%.
PWR – Flat. They hit a 52 week high this week
TRID – Up 2.4%. They settled a lawsuit with MIPS. I had previously analyzed the lawsuit and reported that it was really a tactic to get TRID to license technology. I was 100% correct. http://liverocket.blogspot.com/search?q=mips
UCTT – Up 1% after a hard drop Tuesday.

OIL SERVICES/EQUIPMENT
ATW – Up 4%. Up every day regardless of the broader market.
CLB – Up 1.2%
ESV – Up 0.7%
MDR – Up 8%. The debt retirement I discussed this week really perked up interest.

BIOTECH
DIGE
– Up 4.3% on no news. This is ~10% in 2 weeks.
HOLX – Down 0.7%. HOLX has a lot of momentum behind them
Look at this chart and you can see a pattern. HOLX rises ~8% and then pulls back for 2 weeks before moving up again to a new high (only the recent Feb/March pullback affected this pattern). If I'm right, then HOLX is about to make it's big run up past $63.

IMA – Down 4.3% because of the lingering Biosite bid.
OTHER
KSU – Up 5.7% and hit a new high.
OCN – Up 5.8%. No news.
PCP – Down 4%. Pull back after hitting a new high.
TIE – Down 2.5%. Meaningless to me in th eface of Alcoa's huge wins. But it still begs the question: why does TIE not get any benefit? Article after article points out the ongoing and impressive demand for titanium.
TIE is now the Rolls Royce engine supplier. And TIE is expanding production. Fundamentals are not just strong, they are improving. projections for annual earnings have been raised 8%. Its competition (RTI, ATI) keeps growing. TIE stays flattish. Yes, I'm frustrated. Very.
I am thinking of ditching CTSH and putting it into OCN.

Friday, April 13, 2007

OCN up 6%

Piper Jaffray just raised ratings to outperform from market perform.
The demand for collection agency services is booming. GE, for example, announced during its earnings call that it is adding 700 debt collectors to its payroll.

This was nice and hopefully will be the beginning of a nice run up.

Infrastructure growth drives GE

"If you look at our infrastructure business today, we're in the very early phase of, I think, a long-term secular time period where we have high visibility, broad technologies, great global positioning, increasing margins and backlog on equipment and long-term service agreements that can span over the next 10 or 15 years," said GE Chairman and Chief Executive Jeff Immelt.

"Major equipment backlog jumped 32% to $37 billion. The company said major equipment orders were 50% greater than shipments in the quarter."

I read these developments as reinforcing my major theme: global infrastructure buildout. Invest in companies that are at the heart of it.

Thursday, April 12, 2007

Interesting day today

After a down day Wednesday, the market sagged before moving up.

Interesting movers:
AAPL - Down in after hours. They are delaying their OS release to October. AAPL has been sluggish the past 2 weeks.

AMX - Up 1.2% on low volume and then down in AH on even lower volume. No news.
Oil stocks are up: ESV (+ 2.25%), CLB (+1.5%), ATW (+1.8% on strong volume and a new high)

KSU - Up 4% on no news but above average volume. Looks like funds are accumulating

MDR - Up 5% after announcing that they paid off a $250M loan and they received $272M in a tax refund. This not only makes them virtually debt free, but they have eliminated $7.5M in annual interest expense. It raises an interesting question: why would they use cash to pay off a 3% loan when they could have sunk the cash into 6% notes and earned 3% off the net difference. I don't have a good answer although they clearly are awash in cash.

NUAN - Up 2.6% on very low volume. Then a big purchase in afterhours. This keeps happening with NUAN: several large trades are managed in afterhours. It suggests that funds are closing some big orders. I recently attended a forum on cell phones and spoke with a mobile search company. Guess what - they use NUAN. In fact, he said NUAN is now the standard and he laughed at Microsoft's attempt to buy market share for an MS voice system when they bought Tellme. We discussed Google and he said that GOOD is looking at th enext generation of natural language voice recognition and that this is far in the future. Which means that the current GOOG solution is based on NUAN technology. BUy Buy buy!!!!!

TIE - Down again on heavy volume. Announcements in th enews sated that titanium production is increasing. Ummm, yes. TIE will be making more money. Why the selling? I can't help but notice that the biggest April options out there are the $35 puts & calls: almost 60% of the open interest for April. Throw in April $40s and you get 80%. This also happened last month: the stock was trading above $35 until a few days before options expiration when it fell to $34. Spooky, because the $35 calls were again the big option open interest.
Only the paranoid would declare manipulation. The smart would look to May and notice that the $40 calls are the most popular open interest. If you follow my train of thinking, TIE is heading to $40 next month.

UCTT - Up 2% on low volume

INFY - Up 3% and straight up on strong volume. In fact, all other stocks moved in mid-day but INFYS moved up all day. Tomorrow is earnings release. Looks like word is out that things are good. Should reflect well on CTSH.

IMA - Bottomed at just above $40. I hope the Biosite purchase does not happen because it adds debt and wiped out 10% of IMA stock price.

DIGE - Up 2.2% It seems to be creeping back up.

CTSH - Up 2.8% on strong volume. I am thinking that INFY news will give them some bounce back.

MVL - Up 5% on Spiderman 3 hype. Remember that MVL makes $0 off the movie and depends on licensing. Considering the competition from Pirates 3 and Shrek 3, I wonder if expectations aren't to ohigh for Spidey toys. I think Shrek will be the surprise winner because it crosses so many age groups. But I'm also behaving like a bitter old man because I want in and they keep going up. Grrrrrr. Ironman is goingto be a runaway hit, I can just feel it.

RSH - Keeps going up. They made more money on drastically lower sales (down 13%). Expectations are the same for this year - falling sales. No company in the history of stocks ever stayed up for very long with falling sales, no matter how many accounting tricks they pull. And better positioned competitors like Circuit City are having problems. The hope is that they will be bought out.

TEVA - Easing down. They are priced with a much higher P/E than RDY, which is also lagging. Hmmm. Opportunity at RDY?

TTI - I'm glad I held on. They have been on a massive roll since march - up 22%. If it breaks out above $28, then we really may be on a long term run up.

Interest Rates not coming down anytime soon

According to Fed minutes, there is no interest in dropping interest rates.
They are signalling that inflation is the problem to be addressed, not a housing meltdown.

At the same time, in defense of the dollar, the Fed Chief Bernanke gave a speech declaring that China wouldn't dare dump their dollars.

Well, Ben, maybe not yet. But will they continue to accumulate our funny money? Don't be dsitracted by recent trade announcements and semi-protectionist moves by the US against China - those affect very little trade and are more for political show. Behind the scenes everyone knows that China and India are responsible for keeping inflation low in the US. The real discussions are about the dollar and keeping folks from buying the Euro which has a better return: up 10% vs the dollar over the past year and 5% YTD.

Dollar weakness is a mixed blessing. It is great for exports - US products look super cheap. But it boosts inflation by incresing the price of imports. Especially fuel.

The implications are
1. Overall economy 1 quarter away from technical recession: GDP and inflation almost equal each other at 2.3%
2. Some sectors already in recession: autos, residential construction, and home supplies are already in a recession. Banking is heading for a recession
3. Some sectors are booming: select materials, oil exploration, extraction & production, biotech, mobile phone services and semiconductor materials
4. Consumer spending in the US will be hit hard in 6 months as the bills come due

Monday, April 09, 2007

KSU up 5%

In response to Warren Buffet accumulating ~11% of Burlington, KSU is up.
Burlington is about 10X the size of KSU and the largest railroad company in the US.

This frequently happens when Buffet makes a move, and I don't know that it will last. But I see no reason to sell before earnings.

Sunday, April 08, 2007

JNPR

As an employee of CSCO, I can't really comment on either JNPR or CSCO.
It's just too tricky.

LiveRocket Week 14 Performance: Up 1.9%


First of all, I posted last week that all STOPs are off until I can fix the STOP model again.
That post did not in fact post, so let me repeat: no STOPs for the time being.

Nice rebound for a short week. We performed in line with the markets.
All signs point to a strong economy. For example, 180,000 jobs were added to the payroll. Or so they reported. I don’t believe it – too many indications are that employment is heading down not up. But since they only published data that is massaged – as opposed to raw data – we won’t really know.

HIGH TECH
AMX – Nice big jump from their proposed stake in Telecom Italia
CTSH – Continued weakness. It keeps bottoming. Waiting for earnings.
NUAN – They bought another company. GOOG is moving rapidly into voice recognition to enable mobile search (“find me pizza”). The rumor is that they are using NUAN. That’s huge if true.
PWR – Target price was raised
TRID – They have returned from the NASDAQ delisting deadline. Continued strong Circuit City and Best Buy flat panel TV sales just scream good news for TRID. Someday, right? http://blogs.barrons.com/techtraderdaily/2007/04/04/consumer-electronics-best-buy-circuit-city-lower-after-feb-qtr-results/
Quoting from Barrons:
Flat panel TVs: Best Buy had “strong double digit comparable store sales gains.” Circuit City cited “double digit comparable store sales growth…offset by double-digit comparable store sales declines in projection and tube televisions.”
UCTT – Moved up a bit.
OIL SERVICES/EQUIPMENT
ATW – Waiting for earnings.
CLB – Big one day move on no news (up 3% Thursday). And on major volume (4x normal)
ESV – No news.
MDR – Hmmm. Good news all over the place but price has trended down. They sell a business unit (hello, profit) and TXU now says that they will in fact continue with coal plants. Here’s an article from the Street that praises the company.
BIOTECH
DIGE – Up everyday. Looks like we returned just in time.
HOLX – The week started off with a bang: up 4% Monday. Then, for the 2nd week in a row, a negative article hit HOLX. This time it was a review of the HOLX equipment. Turns out, everyone is laughing at the release. The study focused on old technology (CAD) and not the digital imaging that HOLX dominates. HOLX stock price returned.
IMA – The week started so well and then IMA decided to compete for Biosite. I don’t know enough to have an opinion
OTHER
KSU – No news
OCN – Down on low volume.
PCP – Up a bit on no news. Set a new 52 week high. The last time they were at 100, they split. I’m looking forward to the earnings release.TIE – Nice movement – stayed above $37 this week. Bank of America said Titanium fundamentals look good for 3 years (aluminum for 2 and steel unclear).
http://www.platts.com/Metals/News/6372639.xml?sub=Metals&p=Metals/News&?undefined&undefined