Buy TRID

TRID will be releasing earnings shortly.
There will be bad news - probably some margin or sales weakness.
But I remain focused on fundamentals: LCD TV market continues to soar and TRID continues to dominate. The competitors are unable to compete on quality, just price.

Some things I'll be watching:
1. Cash position - They should have ~$4 in cash per share by this quarter.
2. Options expensing - There will be no expenses for this last quarter or going forward for quite some time. That's margin positive
3. Reduction in expenses tied to SEC investigation - Even a $2M reduction in legal fees adds $0.03 EPS
4. Margins - TRID is trying to integrate multiple chips. This reduces unit sales while maintaining price/margins. We'll see. They did warn about falling sales for Q4.

I think the new CEO will own this quarter. She lowered expectations for Q4 and will raise them going forward.

I would like to deviate from the model this one time:
100 contracts, TRID Jan 09 Calls $7.50 exercise price. Cost $5500
(10,000 shares under contract at $0.55 each)

Update on Investing Tactics

You should have closed your short positions last week, like I said.
Here's what you do next.

1. Expect a 2 week bullish shift. Chalk it up to consolidation, bottom feeding, end of some liquidity problems, and some strong earnings news. Play it anyway you would play a shirt bullish run
2. From mid-February return to a Bearish position (aka buy puts). I say this because we will be returning to a state of fear and uncertainty: no re-assuring earnings will be coming out for 2 months and in the meantime lots more negative data.

Face the facts. Earnings are now getting more and more mixed. There are more sales and earnings misses. When companies beat, they aren't blowing away the results. That is typical of a slowdown.
Meanwhile, unemployment and inflation will pick up.

This is the background for investing over the next 18 months and it is a skeptical background. More bad news will happen than good news.

LiveRocket Month 1 Performance - Down 13.4%

Ok, so not doing STOPs was the dumbest move of the year. Fortunately, I think we will make up for that mistake and then some.

First of all, I am now able to return to giving LR the regular attention it deserves. I am going to follow a calendar of sorts - quarterly earnings reviews, regular economic event reviews, and then color commentary as always.

Secondly, a website is proceeding apace. That will help aid the navigation.

Now, I am noticing an upturn in stocks. For the market as a whole, this is somewhere between a dead-cat bounce, a partial consolidation, and a recovery. The problem is knowing which stocks fit which.

Naturally, I think ours are in the recovery segment.

Also, I am going to buy some more TRID tomorrow. If I could, I would buy calls. I expect great news this week and that the CEO will raise guidance.

AGRICULTURAL
Both Caterpillar (CAT) and John Deere (DE) have reported excellent numbers this quarter. The key reason: overseas sales. What troubles me is that CNH is reporting a drop in US sales. With ethanol booming, I expected more equipment sales.

AG – Had a really rough week last week when competitor CNH guided lower due to US sales. Fortunately, the US generates only 20% of AG’s sales. South America (Brazil) generates 20%, Europe 56% and Asia a tiny bit. Growth from South America and Asia should offset any dip in the US.
I remain positive because of Deer’s reported growth in Europe. That bodes well. However, the premise was that US ethanol boom would boost their sales. And if that isn’t happening, we need to exit.
Interestingly enough, AG has been trending up the last few days, more likely in response to over selling Wednesday due to CNH.

CF – After crashing to $90, CF is back above$105. Interest has returned to say the least

OIL EQUIPMENT AND SERVICES
NE had a great release. Almost fully booked for the year, and it was only the 3rd week of the year. So did Haliburton. HAL beat earnings and sales expectations. That included a $22M 1 time charge, meaning that margins and earnings were very solid.

ATW – Rebounding pretty strongly. The NE report helped. I can’t believe how cheap this company is. They have $3 per share cash and are generating $8 this calendar year. That gives them an 8 P/E. For 100% growth. Also, they are an acquisition target.

FWLT – Split, maintained price momentum, and received an upgrade. A pretty good week for FWLT.

IO – I hoped that we would see a response to HAL’s numbers. Lets wait for the numbers to come out and then decide.

NOV – After falling into the 50s, NOV is back in the high 60s. As with all the other stocks, the PEG is ridiculously low. They are sitting on $600M net cash, almost $2 per share. With a 15 P/E and expected growth of ~90% this year and 35% next year, this company is cheap.

INFRASTRUCTURE
FWIW - I consider planes infrastructure (transportation) and PCP is essential to Boeing planes.

MICC – Wow, barely above $100. If they hit their numbers this quarter, they will have trailing earnings of $4.30, giving them a trailing P/E of ~24. Current projections have them growing 250% this year and 40% next year. But a P/E of 24…..

PCP – I can’t fathom this. Great news and raised guidance, and they continue to drop. On heavy volumes. There doesn’t seem to be any news, so the answer is that funds are moving out. Possibly in anticipation of bad news from Boeing. Frankly, there is no bad news for PCP.

VIP – Rising again. They just got the loan needed to buy GLDN. Time to buy some calls.

OTHER
IMA – Another month, another acquisition. Too bad the stock sank 11% on the news. This company has been on a purchasing binge that is taking on a strange shape. Starting as a maker of pregnancy tests, IMA has shifted to a general diagnostics test company and now a new focus on women’s health. Matria is linked to women’s health. I see confusion and shareholder dilution. I don’t like it

MVL – Holding very strongly. No news but the impending IRON MAN movie promotions should generate good buzz.

TRID – Continues to bounce around just above its cash position. But news continues to be only positive.
LCD TV sales grew 58% in 2007.
The future also looks very promising. http://www.digitimes.com/displays/a20080124PR200.html
* Samsung expects 40% growth this year in TV units.
* LG expects unit sales to double
* Corning announced strong sales into the LCD market and raised 2008 guidance accordingly. Importantly, prices held strong while volumes surged: a 11% drop in prices vs a 30% rise in volumes.
http://www.chron.com/disp/story.mpl/ap/fn/5492410.html
China is offering a subsidy to people to buy refrigerators, washing machines and TVs. Seriously. Talk about a surge in energy consumption
http://www.chinadaily.com.cn/china/2008-01/20/content_6407120.htm
And CES did wonders for promoting the quality TVs that TRID sells into.
http://www.zacks.com/newsroom/commentary/index.php?id=6789
There are only 3 public companies that make the chips enabling LCD TV picture quality: GNSS, PXLW and TRID. Only TRID is profitable and GNSS is being acquired.

The TRID Calls are calling me. Jan 09$7.50s for $0.55 or July 08 $5s for $0.95 or July 08 $7.50s for $0.35.

What to expect this week in the market

The first question - is the pain over for now? I think so. At least, I think the most dramatic pullbacks have happened. Stocks will gyrate on the basis of more economic news or specific corporate earnings releases, but I think overall the big drops just happened and we will see a slow, steady sinking with a few false rallies along the way.

The market mood will be to second guess the Fed and to wonder how bad the pain is.

Supporting the theory that the big swings are done for now is a theory about last week's major dive. There is speculation that Societe Generale, a major French bank, had to unbundle a lot of positions after finding a $7B fraud on its books. They were accountable for 10% of all trades the day the market dipped ~500 points.

Which goes back to what I have been saying - a lot of this mess continues to be driven by funds and financial firms that need cash to cover their positions. Cash is flowing out and not in to the markets. This won't reverse for at least another quarter (say, April).

The market will gyrate according to some economic news events this week:
1. New Housing Sales (December results) - I doubt this will bring any surprises

2. Durable Goods Orders (December results) & Car Sales - This is a very key event. Folks are watching to see if the recession is biting and consumers are pulling back. Also, this would be where we would start to see signs of export growth. I would expect to see nasty consumer belt tightening and some signs of export life, even in the non-airplane sector.
For planes, Boeing messed up and delayed its flagship 787 Dreamliner, the new plane. So there could be some dips here.

3. Petroleum Report (for last week) - We care about this because oil price fluctuations do have some blowback on our oil related stocks. Fundamentally, the question that is being asked each week is whether a US slowdown will drop oil consumption.
An example of how skittish the market can be - oil dropped from $100 a barrel to $90 a barrel in early January because reserves shot up. The reason reserves shot up: importers delayed shipments by a few days because of the tax year an dthen had the ships dock all at once, creating a spike in supplies. But the market reacted to the absolute number without looking at the cause.

4. Fed FOMC meeting - This is probably the biggest event. The Fed just lowered rates 0.75% and there is speculation that they may do so again. Actually, I am thinking that they may do nothing or even start to consider re-raising rates.

That is, I think that they have overshot - too much rate drop too soon. The question is: what do they see? In 6 months they have gone from a Goldilocks scenario to panic. I think they are comfortable with a regular recession but the fear of widespread housing foreclosures has them spooked. I don't think they care about Joe Sixpack - they care about the banks and companies that used loans to prop up business (like car companies).

Dropping rates handed lenders billions back exactly at a time when their cost of business was rising. For example, Acme Corp. is running on fumes, very dependent on cash flow. Moody's is about to downgrade them, which would raise their costs of borrowing and threaten their ability to stay afloat. That downgrade will still happen, but the interest rates themselves are suddenly 2%+ lower, which basically neutralizes the impact of any downgrade.

In any case, the market is on pins-and-needles as it awaits the Fed's view of economic life.

5. Jobless claims - Each week it is up or down a trickle, but ignore the actual number. The data is not a real reflection of current events because it gets massaged and tweaked. Focus instead on what we are reading. Every week there are major layoffs and store closings, not major expansions. That is the real data that matters.

Some key earnings releases that could help us:
Halliburton - lots of overlap and sector compatibility with IO, FWLT, NOV, and so on
Corning - Think flat panels and then TRID

This week should bring us TRID and MICC earnings releases.