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.

TRID - Lawsuit by MIPS

You know that you've made it when you get sued for patent infringement.
It's like a coming of age event - every Silicon Valley company of significance has a lawsuit of some kind.

Wall Street is naturally beating TRID down 4%. Now, let's be serious. Will a MIPS lawsuit cost TRID 4% of it's earnings? That would be considered excessive royalties by any stretch of the imagination, and that's assuming that 100% of TRID products must pay a royalty.

No, this is typical over-reaction (aka buy opportunity).
And it's one other thing. It's a sign of continuing Wall Street negative sentiment towards TRID.
It's almost 3 quarters since Wall Street showed any interest in TRID despite mammoth growth. I am patiently waiting for Wall Street to stop penalizing TRID and start rewarding them for stellar growth.

Perhaps that will start after Best Buy releases earnings.

TRID Testing Lows

TRID fell below $19, that is below it's recent low on Nov 9th.

What is going on? There seem to be 3 events of concern here
1. Options backlash:
The CEO and Chief Accounting Officer are out. The cost of the due diligence is $7M to date. There are lawsuits. Also, and more dire, there has been no earnings statement since March.
To keep things in perspective, their situation is mild compared to others. Even Apple and Whole Foods are under the same options cloud. I remain dismayed that they still can not get their finances cleared up - this is a relatively small company. Perhaps firing the Chief Accountant is a step towards finishing things.

2. MIPS lawsuit. This is noise. It was estimated by Jefferies that the exposure is less than $500K per year.

3. Concerns about future business.
An analyst said that there is a flat panel slowdown. That means sales will fall from a brisk 40% to a still brisk 35%. LCD makers see a 3.4% drop in volume production. Time to panic? Hardly. First of all, GLW still expects to grow 25% for the next year, and that is factoring in price cuts. (GLW makes the actual glass).
Second, the slowdown is from PCs not TVs. Standalone LCD monitor sales grew 16%. Laptop sales 25%. LCD TVs are pushing the growth to 40% this year and 25% next year.
BBY even reported strong TV sales amidst cut-throat competition with Circuit City, Costco, and Walmart.

In short, there is nothing but great news for TRID from the business side. For the last 12 months, sales are ~$210M vs $100M for the previous 12 months. Forward projections are for $350M in sales and $1.35 eps. That would be a 25% growth against company expectations of much higher growth.

All problems stem from the options overhang.

LiveRocket Week 4 Performance: Up 2%

A solid week with almost all stocks up strong.

I am not including STOPs at this time. I am adjusting the model to optimize the STOPs.













A lot of economic data is mixed. Unemployment moved up slightly, but jobless claims went down. Manufacturing went down. Are we heading up or down?
I’ve said it before (last week in fact): housing and autos are tanking, all else is fairly stable.

Housing is crashing and burning.Even the NY Times questions the validity of statistics that report mild price drops. One thing is clear: another 30,000 housing construction workers were laid off in November and almost 17,000 workers that made housing products were laid off. That’s not all. Ownit, California’s 11th largest sub-prime lenders, went bankrupt this week and fired 800 people. http://online.barrons.com/public/article/SB116554091799444154-swmkmppqGO0aEcaUu_8z3fHdm1k_20071209.html?mod=9_0002_b_online_exclusives_weekend

The bleed is everywhere and will accelerate.
I even had a real estate broker call me after 2 years to ask if I was in the market. Smell the desperation? We talked and she finally admitted that business was slow and she had a 2nd job working for a local bank dealing with offloading their foreclosures.

The rest of the world seems pretty strong. India and China are still growing 9%+. Japan and Europe are also growing. The EU even raised interest rates.

In addition to global strength, inventory management is the key behind this soft landing. From oil to copper to silicon wafers, prices are high because supply is low. Supply is low because of underinvestment and better global inventory management. As a result, many manufacturers don’t need to suddenly slash prices or fire lots of people.
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Pre-earnings excitement/anxiety
We are now at the period where we will see pre-earnings announcements. Expect enormous focus on consumer spending. Best Buy reports and I expect to hear about LCD TV mania.
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Oil drilling and consolidation
Oil drillers were handed a present: the Gulf of Mexico was opened to more drilling. Additionally, rumors of consolidation are picking up. There really are very few similarly cash rich, low PE companies out there.
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So here is the weekly stock results
HIGH TECH & SERVICES
AMX – Up 3.5%. No news. One interesting thing was the performance on a down day: barely budged. Lots of strength.
CTSH – Flat. No news.
INFY – Up 4%
NUAN – Flat (was up 4% early in the week). Down after announcing a purchase of MobileVoiceControl. This enables better entry into the cell phone market. This was a very smart play. They are branching out into cell phones and opening up a totally new business

SEMICONDUCTOR
TRID – Down 1% (was up 5% early in the week). The Chief Accountant was fired and MIPS fired off a lawsuit. I call this a great buy opportunity.
UCTT – Up 2%. Strong consolidation at $13.

OIL EQUIPMENT/SERVICES
ATW – Up 2%. Earnings were released.
Earnings up 350% ($0.22 vs $0.74) but they missed expectations by 7%
Revenue up 77% and they beat expectations by 2%
The conference call is delayed to Monday, but I’d like to know why the earnings missed. On the other hand, the spread of estimates was huge (from $.70 to $0.93). I’d also like visibility to cash flow. One thing is clear – there is strength here when a company misses expectations but still rises.
CLB – Up 3.5%
ESV – Flat but intraday trading was always negative.
MDR – Down 2%. No news except for being awarded a contract to build 2 wellheads in Qatar.

FINANCE
CSH – Up 4%. Wachovia rated CSH as an outperform, putting it ahead of EZPW. The basis for the rating is the belief that CSH is better positioned in a downturn. Basically the reason we bought it. http://biz.yahoo.com/ap/061207/specialty_finance_ahead_of_the_bell.html?.v=1
OCN – Down 1%

BIOTECH
DIGE – Down 5%. Piper Jaffrey downgraded because they have hit price targets. At the same time, the #2 French insurer has approved the HPV test as standard. I suspect that the downgrade would not have been released if Piper knew about the upside. Once a procedure is 100% reimbursed, expect millions of women to have it done.
HOLX – Up 3%. No news.
ILMN – Up 6.5%. No news, but I think the rise is a response to the overselling of last week.
IMA – Down 1.5%

AEROSPACE & RELATED
PCP – Up 2.5%+. This is a rock solid stock. As long as Boeing is doing business, PCP will be successful. And Boeing keeps picking up more and more orders.
TIE – Up 5%. There is a lot of resistance above $33.5.