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Barron’s Summary Feb 19, 2011

· The king of bonds” - Jeffrey Gundlach is profiled in Barron’s – he is pretty bearish on US equities, calling for the SP500 to hit 500 in the next few years.  He foresees more downside for muni debt and is pretty cautious on the US economy.

· Housing is a lot worse than people think – using numbers by Core Logic, which claims the headline National Association of Realtors existing home sales is inflated, numbers and trends in the market are worse than expected.

· INTC – article notes that Fred Hickey has become positive on INTC, due to a cheap valuation and decent fundamentals.

· Teton Advisors CEO Nick Galluccio – interview – pos. on FNFG, QLGC, GDP, ESIO, WASH, FFIC, HXL, WWD.

· NVDA, ARMH – negative comments – investors are getting way too enthusiastic about tablet growth forecasts; both these stocks are very expensive.

· MSFT, INTC, DELL – pos. comments; all these stocks are pretty cheap and reflecting pretty dire forecasts.

· HPQ – Barron’s says the Vertica purchase by HPQ raises conflict of interest questions as HPQ’s nonexecutive chairman, Ray Lane, owned a piece of the small software firm via his involvement w/VC shop Kleiner Perkins Caufield & Byers.

· Tech firms, inc. AAPL, MSFT, GOOG, CSCO, and INTC, should start paying 3% dividends.  They all have way too much cash, something investors aren’t giving them any credit for.  If INTC, one of the most capital intensive companies in tech, can pay a high dividend, than others should be able to.

· MF – pos. comments; as Corzine transforms the company, its stock price could climb to >$10.

· OMX – positive comments; the stock slumped after its earnings; but valuation is cheap and expectations are low; the results weren’t even that bad and mgmt could be conservative w/the guidance.

· LAB – one shareholder in LAB isn’t happy w/the terms of the deal and thinks the company is worth closer to $6.

· Cotton – the price may be vulnerable to a near-term correction although longer-term fundamentals remain positive.

· BioGaia – the Swedish biotech firm could become a takeover target for the likes of Nestle, DuPont, or Yakult.

· AGU – the stock could have more upside ahead – the shrs could hit prior highs of $115

· CVX – the stock could continue climbing as oil prices rise; the shrs could approach $110

· GIS: General Mills is mentioned positively by Barron’s. The article is positive on the company’s pricing power and R&D/innovation (among other things) and says that the stock could be up ~20% during the next 12 months (while also having a 3% dividend yield).

· NFLX: Netflix is mentioned cautiously by Barron’s. Barron’s had a negative call on NFLX in its Dec. 27th issue, and says, “while we have lost some (OK, a lot of) confidence in our timing, we think those concerns are still valid, and that Netflix, which fetches 53.7 times this year’s estimated earnings, could trade sharply lower in the next 12 months”

J.C. Penney Cheating the Google System

There was an article in the Times around how J.C. Penney (JCP) has been cheating Google’s (GOOG) search system.  Search terms like “dresses”, “bedding”, “area rugs” were all coming back with the same result at the very top of the list- J.C. Penney.  Other generic terms like “skinny jeans”, “home decor”, “comforter sets”, “furniture”, “tablecloths” were bringing up J.C. Penney’s website near the top of the search results.  Furthermore, specific terms like “Samsonite carry on luggage” were returning J.C. Penney, even ahead of Samsonite’s website itself.  The retailer’s holding the top spot lasted for months, and notably during the holiday season when online shopping becomes a more popular activity.

At first glance, one might applaud J.C. Penney for having great search optimization techniques.  In the SEO world, there exists what are called “white hat” vs. “black hat” approaches.  The former are acceptable tactics, the ones used by marketing/consulting firms to increase visibility.  The latter are techniques that are not necessarily illegal, but frowned upon, designed to cheat the system.

Now, Google does not discuss in detail how their search algo works.  But they do mention that one of the main criteria is links from one site to another.  J.C. Penney’s “black hat” approach exploited this very idea.  Supposedly, someone paid to have thousands of links show up on hundreds of various websites, and all of them linked directly to J.C. Penney’s home page.  J.C. Penney denied it was done internally and that they are currently working on taking down the links (I’m sure they’re taking their time with that).

So, clever or just wrong?  If searching the  internet is supposed to represent relevancy, then I say, yes, “black hat” strategies are lame, cop out approaches.

My Trading Plan 1-24-11

Good Monday morning to you from a brutally cold Englewood, NJ. Not much fun waking up in 4 degree weather but it is what it is. My plan today is to employ a scalp strategy to my trading. I do not have a great thesis on which direction I believe the averages will trade in, so when I scalp I am making smaller proftis with less risk and more trading throughout the day.

I will have a live student coming in today so that will take a bit of my focus away from the trading from 11-2 but other than that there are no distractions and I anticipate having an excellent day trading. The nasdaq took a real pounding on Friday but we saw it more in stocks than in the index so I am interested to see how that resolves itself and DOW names continue to show relative strength.

Happy Trading!

Barron’s Summary

  • BRK – pos. Barron’s cover story on Berkshire – the co has never been in better financial shape and could have close to $50B in cash by year-end; the firm may even start paying a dividend if it is unable to find another “elephant”-sized acquisition like BNI.  The stock is reasonably priced and could hit new all time highs of >$150K/shr within the next 12 months.  Fundamentals are strong and the BNI deal looks like it was one of Buffett’s best.
  • NVDA – pos comments – the stock could double from current levels due to strong demand for its core graphics chips and its new Tegra processor; INTC’s new Sandy Bridge combination CPU/GPU won’t mean much competition for NVDA’s discrete chips
  • Buybacks – don’t actually provide much benefit to investors beyond a brief pop in the stock
  • CRM – neg. comments based on the co’s valuation.  Competition also is rising.  Fred Hickey is neg. on the stock.
  • Credit Suisse in March will launch what it calls the Light Pool, a trading venue for mutual funds and institutional investors that purposely puts high-frequency traders at a disadvantage
  • Volatility could spike – Barron’s says risk premiums are currently too low given the “cross-currents roiling the surface of the stock market”
  • AAPL, GOOG – both stocks seem tired lately, but investors should stick with them as each has excellent fundamentals and strong balance sheets
  • ASML – pos. comments; will benefit from current tablet war
  • ARMH – neg. comments on the stock; largely focused on valuation
  • Munis – “savvy” cross-over buyers have stepped in, finding risk/reward compelling at current levels
  • Barron’s round table – Zulauf – pos on VIX futures, Uranium Participation; neg on Italian gov’t bonds and European banks.
  • Barron’s round table – MacAllaster – pos. on MFC, HIG (recommends buying the HIG TARP warrants), WFC, MET, DAL, and AWH.
  • Barron’s round table – Gross – pos. on PTY; also likes NLY.
  • Barron’s round table – Hickey – pos. on PHYS, AUY, NEM, EBAY, and MSFT; says sold out of Apple long after Jobs news; also likes Canadian gov’t bonds.  Says tough to short so long as Fed liquidity rush remains in full swing.
  • APTG – Barron’s was positive on the stock, citing sum of the parts based on its proven reserves.
  • ITT – Barron’s was positive on the stock, saying there is still more upside in shares following the announcement of spin-offs.
  • CAT – Barron’s was positive on the stock, saying emerging market sales and the depreciation tax credit should drive demand in 2011.
  • PCS: Mentioned positively, saying the stock could appreciate 20% during the next year. The article mentioned that weather in late December was likely a factor in the company’s Q4 subscriber numbers.

Barron’s Technology Recap: 1-23-2011


Barron’s highlights that Nvidia’s Tegra was a major hit at this year’s Annual Consumer Electronics Show, appearing in roughly four out of five of all the new tablets, including Motorola’s Xoom (MMI), Dell’s Streak (DELL) and some of the planned units from Acer (2353.TT), Toshiba (2353.TT), HTC (2498.TT) and LG (066570.KS).

  • Barron’s notes that Nvidia’s GPUs are either standard or available options in most Apple (AAPL) Macs and many other makers’ personal computers.
  • Barron’s argues that Intel’s (INTC) decision to end its legal battles with the firm shows that Intel needs Nvidia’s expertise and technology to integrate graphic capabilities with its CPUs, its core business.
  • Barron’s highlights that Nvidia’s most exciting effort right now is in mobile computing, through an alliance with U.K.-based ARM Holdings (ARMH).

Salesforce.com (CRM)

  • Barron’s does not believe potential growth for the company justifies its current share price noting the 92% increase over the last year with the shares currently trading at 300x an expected $0.44 in f11 earnings.
  • Bulls on the stock note discounted cash flow and earnings that exclude employee stock option expense while highlighting 20%-25% annual revenue growth.
  • Barron’s does admit they have been wrong on the shares since a negative article written when the stock traded near $40/share but says even a small stumble now could lead to a sharp decline.

Barron’s Profile features Allison Thacker, a co-manager of the RS Technology Fund
Thacker is bullish on software-as-a-service (SaaS) companies, such as Ultimate Software (ULTI) and Concur Technologies (CNQR). Ultimate is a payroll-software play that competes with Automatic Data Processing (ADP) and Paychex (PAYX).

  • Thacker owns lesser-known names like LogMeIn (LOGM), Ultimate Software and comScore (SCOR) paired with fast-growing, well-managed, established names like Apple (AAPL) and Oracle (ORCL).
  • Thacker has also has identified successful internet plays, such as Ancestry.com (ACOM).
  • RSIFX’s top 10 holdings include; Apple (APPL), Google (GOOG), IBM (IBM), Oracle (ORCL), DirecTV (DTV), Net App (NTAP), F5 Networks (FFIV), Microsoft (MSFT), Synopsys (SNPS), Amazon.com (AMZN).

Market Analysis - VIX, S&P, AAPL in the near-term and long-term, and GOOG action this week.

HedgeFundLIVE.com — The VIX is halting its downward slide in the 15 to 16 level. There is huge resistance here, with lows at 15.23 on 4-12-10. When that happened last April, the VIX consolidated for a week (the S&P acted similar) and then shop up correlating with a major market correction. I don’t think the market will have such a large correction like that again, but keep it in mind. The ovals on the VIX chart correspond to the ovals on the S&P chart. The thing to understand about market volatility is that low volatility can only move to high vol, and vice-versa; there is no negative volatility. Point being, this is very low vol, so guess where its going…

Apple daily chart

If the VIX breaks through the 15 level, it should be considered a HUGE bullish indicator. The last time the VIX was sub 15, was pre-market crash. Check out the weekly charts, the levels on the VIX are interesting, especially heading into the new year.

I’m personally looking for the VIX to consolidate for a week or two and then move to the 27 level some time in January, and the S&P to correlate.

S&P grinding higher




The third chart is AAPL. Technically this is at a huge inflection point. I’m looking for this stock to keep rising. Apple products are no longer for a specific group of hipsters and college kids, everyone buys these now. For example, I bought my dad an iPad for christmas… the guy just signed up for his first email address about a year ago, so make what you want of that. In relation to this, the iPad is seeping into industries previously dominated by very few companies, healthcare in particular. My dad, who is a physician, will be able to use the iPad to write prescriptions and then instantaneously send them to the pharmacy. This reduces fraud and mistakes on all ends; I assure you the stigma about doctors having poor hand writing is true. My brother, who works as a doctor in one of Detroit’s biggest E.R.s, is able to use his iPhone to quickly assess symptoms. He has mentioned that he would love an iPad in the ER for prescription writing, and has asked the hospital to look into it. Previously, only specific and VERY expensive equipment was available to help doctors, now they can use iPhones and iPads with FREE apps…I bet most hospital accountants will catch onto this quickly for cost-cutting. Obviously this analysis if for a long-term position, but I’m bullish on AAPL in near-term as well.

VIX moving lower


I’m also selling GOOG Wk4 calls at strike 610. They expire in two days, and will bring a nice holiday bonus. If the underlying moves strongly above 603, get out.




RIMM: The water is turbulent

RIMM is trading up 2% after hours after reports revenues were up 9% from Q2 and 40% from the year-earlier period, at $5.49 billion and EPS was $1.74. Analysts had been looking for $5.4 billion and $1.65 in EPS.  Gross Margin came in better than expected at 43.6%, versus a forecast of 42%.

For Q4, the company forecast EPS of $1.74 to $1.80, versus $1.61 expected, on revenue of $5.5 billion to $5.7 billion, versus $5.46 billion expected.

Subscriptions were on the low side of the company’s expectations, adding 5.1 million new BlackBerry users, versus a forecast of 5 - 5.4 million. Shipments of BlackBerry devices in the quarter were 14.2 million units, which is about in line with estimates.

Average Selling Price (ASP) came in at $315, in line with the street.

Lets quickly move on from the numbers cause who really cares, the fact is RIMM has some serious competition and with the stock trading at roughly 10.8 times forward earnings it seems the street is well aware of slowing growth over the next years.  Check out this article:  What’s really wrong with Blackberry.  The story for this quarter was Jim Basillie’s rant during the RIMM conference call.

Just a little background on Balsille, for years he has been telling the public and investors that everything is “AWESOME” and there product line is way ahead of the competition.  As everyone knows RIMM hasn’t produced shit over the last few years while HTC, Apple, and Motorola have stepped up.  So, today a JPM analyst asked Balsillie how RIMM expects to stay competitive with Apple and Google.  Balsillie’s response was that RIMM is “way ahead” of Apple and Google especially with the Playbook which will be out next quarter.

Here’s his word for word comments on the Playbook

“I think the PlayBook redefines what a tablet should do. I think we’ve articulated some elements of it, and I think this idea of a proprietary SDK and unnecessary apps — though there’s a huge role for apps — I think is going to shift in the market, and I think it’s going to shift very, very quickly. And I think there’s going to be a strong appetite for web fidelity and tool familiarity. And I think there’s going to be a rapid desire for high performance. And I think we’re way ahead on that. And I think CIO friendliness, we’re way ahead on that.”

Sounds like Jim is betting that growth to his bottom line will come from a product that they couldn’t even get working into for the unveiling, pretty big joke as there is no way in hell a Canadian company can compete with Silicon Valley or Asia when it comes to technology.

Balsillie should focus his time on talking to bankers rather than bidding for NHL teams because  there’s a hole in this ship and the captain better act fast.

HMCS PlayBook

Google Nexus S

With the help of Samsung Google just announced the newest Android Phone, the Nexus S.  The Nexus S will be the first phone to run Android 2.3, formerly known as Gingerbread.  Gingerbread has some ground breaking features, like support for voice-over-IP  and near-field communications, which turns your phone into a device used for in-store purchases.
This phone is supposed to be a “pure google’ experience, meaning all of the GOOG Apps are preinstalled and there will not be any trace of MSFT’s Bing.  The Nexus S will be on sale December 16th in the US and December 20 in the UK.  The phone will be available unlocked but will also be available via contract at T-Mobile.
Newest Member of the Android Family.
Really looking forward to check this phone out.   As of next week I will become another statistic that has moved to Android from Blackberry and I’m looking forward to it.  Also looking forward to moving back to VZ from ATT.

GOOG (Google) - 12-2-10

HedgeFundLIVE.com — GOOG is presenting a nice option trading opportunity. After falling from recent highs and nearly closing the earnings gap, options are expensive. All of this analysis is based on implied volatility vs. hist vol. from the CBOE website’s Volatility Optimizer (which I highly recommend, it is under the Tools section).

Google moving slowwwwww

Selling Dec 18 calls at 640 and higher looks to be low-risk cash in my pocket. I do not see this stock hitting a three year high (over 630) before the expiration date. I would not enter this strategy by selling any contracts with exp. dates further in the future, as holiday trading volumes can be low and cause volatility to be high.

One more trading idea on GOOG is to again sell calls with a strike higher than 630 but also involves opening a long straddle at 540. However, this strategy depends on the underlying falling to this level. The gap created on 10-14-10 from the earnings report is providing downward pressure to the 540-545 level. More downward pressure is being provided by Google’s latest bid for Groupon, which analysts believe is overpriced at 6 billion.If this level is reached it presents a nice opportunity for a longer term position. Look for this trade now and after the new year.

Approval Ratings for Top Tech Execs

Below is a chart of the approval rating for major tech CEOs thanks to Silicon Alley Insider.

Check the entire story out HERE.