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Showing posts from July, 2007

Google still interested in wireless bidding?

The FCC has announced their decision on the rules governing the auction of a segment of wireless spectrum.

The "open access" provision favored by Google and other advocates of opening the airways was approved. This should allow more participants in the wireless space including software and handset providers.

The FCC was split on the other major provision and as a result, we will not see the winners of the auction required to provide access to their networks on a wholesale basis.

What will Google do now? Their official reaction is that they will study the rules before deciding whether to continue with their plans to bid.

In my opinion, they should save their money. The success of the "open access" provision ensures that Google's software and services will be available to users. This is a win for Google, who has already stated that the mobile market will be a focus for the company. Unless they are determined to create a "gPhone" and/or sell wireless service…

Unlock Stock Market Profits - Key #2

This is the second in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

With this second post, we will continue along the path of finding stocks that seem to have some potential. The first post in this series discussed how to use unusual activity to identify investing ideas. This post will focus on the use of stock screeners.

Key #2: if you think you know what characteristics make a good investment, use a stock screener to get a list of stocks matching your specific criteria.

There are two kinds of screeners: those that are pre-built and those that are configurable.

Among the ones that are pre-built, you will find that different sites provide different variations and it is worthwhile to know which site offers which screener. This way, when you are looking for a particular kin…

Blog Carnivals This Week

I wanted to announce a couple of blog carnivals that are taking place this week (starting July 30) and encourage you to check them out. I have submitted posts to both but there will be plenty of other good content available as well.

First, we have the Investors Blog Network 12th blog festival at The Wall Street Matador.

In addition, you should make a point of visiting the Festival of Stocks at Stock Market Prognosticator.

Happy reading!

Other shoe drops on REITs

REITs focused on commercial real estate have been dropping due to rising interest rates and the fear of a credit crunch that might put a damper on the lively pace of buyouts in the sector. With rates coming down, I expected these REITs to at least slow the rate at which their stock prices have been falling. As we saw this past week, though, selling actually accelerated.

What's going on? Opening the Wall Street Journal this weekend, I believe I found the answer. There is an article detailing the increase in delinquencies in the commercial real estate sector. Previously, delinquencies and foreclosures are things that were only being discussed in relation to residential real estate. Now it seems they are spreading to commercial real estate, as well.

There have been some articles in the business press about how vacancies are low and rents rising in commercial real estate. Thus, it initially comes as a surprise that there are delinquencies. In looking into the details, however, the cause…

Weekly Market Update - Nervous investors sink market

Weekly Market CallThe market did the opposite of what I expected this past week. I was looking for weakness early in the week and strength going into the weekend. Instead, the market held its own on Monday and then began drooping, spending Thursday and Friday in free-fall. Stocks fell hard and interest rates declined as investors fled equities and sent the bond market into buy mode.

Housing was the culprit again as increasing news of defaults, another large drop in new home sales, poor homebuilder performance and debt downgrades made markets nervous about sub-prime contagion spreading to other parts of the market.

LBO activity began to look shaky as loan placement for several big deals has run into resistance and, amid fears of a credit crunch, banks appear to be left holding the bag.

Suddenly risk is a dirty word. Markets could bounce early in the week but it may take a while before we see where the true trend is headed.

As for upcoming economic events, the biggest is probably the ISM In…

Using Inverse ETFs - have we learned anything yet?

When I first began writing this blog, I was fascinated with the ProShares Ultra ETFs. I believed that by using the TradeRadar software, I would be able to time the market with sufficient accuracy to profit in upward trending markets with the ultra long funds and profit in down markets with the ultra inverse funds.

The reality has turned out to be more difficult than I anticipated. As some of you who commented on those early blog posts knew, market timing is no piece of cake, even when you have a software tool to help. It seemed that I ended up chasing trends that did not play out with sufficient duration to make the trade worthwhile.
My trading record, such as it is...My record has not been encouraging. In my first attempt at using an ultra inverse fund, I purchased QID, the Ultra Inverse QQQ ETF, in early February, before the market broke down later that month. The NASDAQ began to recover soon after and I ended up losing over 5% on the investment because I held QID too long.

Without an…

Millicom falls, TradeRadar software says SELL

Millicom Cellular (MICC) has been a member of our model portfolio for some months now, and had rolled up a double digit gain. Regrettably, MICC gave the TradeRadar SELL signal as of the end of trading on 7/25. Its closing price that day was $82.64.

Trying to be a disciplined investor (any system is better than no system, or so they say) I sold at the opening on 7/26, the very next day, and obtained a meager price of only $79.17, basically breaking even on the investment.

From a closing price of $97 on Monday, 7/23, the stock had dropped almost 20 points in less than three trading days.

What happened? On Tuesday, management reported worse-than-expected second-quarter earnings and spooked investors with talk of tough competition.

How bad were the earnings?Earnings before interest, tax, depreciation and amortisation (EBITDA) totaled $263 million, up from $160 million a year earlier but below an average forecast of $269 million given in a Reuters survey of analysts. EBITDA gains of 65% are ap…

Health Care Properties Plunges

It has only been a week or so since I recommended Health Care Properties (HCP).

After four days of relentless selling the stock has now completely reversed the TradeRadar BUY signal and plunged back into the SELL zone. Uncertainty in the credit markets and non-stop bad news from the real estate sector is wreaking more havoc on real estate stocks of all kinds.

Still, the fundamentals of this REIT remain attractive. Indeed, the yield has even improved and is up around 6% now.

Technically speaking, though, the charts tell a grim story. My strategy is to try to buy AFTER a bottom has been established. Unfortunately, it looks like HCP threw me a real head fake and has further to fall.

We will keep an eye on it and be prepared for when it does begin to turn around.

TradeRadar BUY signal for Starbucks

Starbucks may have reached an attractive entry point.

Here is a company that has been steadily growing earnings, often in double digits; however, its stock has continued on a downward path since mid-November of 2006.

From a technical point of view, the stock has recently appeared to establish a bottom and begin to turn around. At its lowest point, Starbucks hit $25.54 in June of this year. That was 35% off its highs.

The stock has fought back now to around $28 per share and is flashing a TradeRadar BUY signal. This recent rebound has been accompanied by heavy volume in both the stock and its call options.


[ Click chart to view larger image ]
Reasons for OptimismStarbucks is a solid company with an extremely strong brand. It continues to provide steady earnings growth, especially compared to many other stocks in the restaurant sector. Management indicates recent financial performance has been in line with its stated targets.

Starbucks is instituting its second price hike of the year. This wi…

Financials dragging market down

Has anyone noticed that the Financial Select Sector SPDR Fund (XLF) closed at $34.37 today, its lowest close since late September 2006?

We are now seeing the biggest divergence between XLF and the Dow Jones Industrial Average in four years (see chart below). Can the markets advance when the largest weighted segment, Financials, is lagging so badly?


[ Click chart to view larger image ]

Citi expenses still out of control

Citigroup recently reported 2nd quarter earnings and they were pretty darn good. Net income rose to $6.23B, or $1.24 per share, from $5.27B, or $1.05 a share, in the same period a year earlier, an increase of 18 percent. Revenue grew 20 percent to a record $26.63B from $22.18B a year earlier. International revenue soared 34 percent to $12.56B.

Much has been made of CEO Chuck Prince's cost cutting plans and how Bob Druskin has been assigned the tough job of reducing head count, moving staffers to cheaper locations and taking other difficult measures. A multi-billion dollar save was supposed to be derived from consolidating and modernizing IT systems.

In looking at the latest 8-K submitted by Citi, the Technology/Communications expense line, which typically shows low to mid-single digit percent increases, jumped 16% this quarter over the previous quarter or 22% over the same quarter in the previous year. Instead of a reduction here, we see an increase of $164M over the previous quarte…

Is Qualcomm smarter than we think?

Verizon (VZ) has made a deal directly with Broadcom (BRCM) to pay royalties of $6 per phone in order to bypass the import ban on phones containing Qualcomm (QCOM) chips that infringe on Broadcom patents.

There is speculation that other carriers may be negotiating with Broadcom, as well, in order to avoid disruption of their supply chains.

If the carriers make their own deals with Broadcom, Qualcomm can continue to hang tough and pay nothing while continuing to sell their chips to the handset makers.

Making this an even smarter play on the part of Qualcomm, is the fact that Broadcom set limits on the agreement with Verizon. Payments would be capped at $40 million per year and $200 million over the lifetime of the patents involved. No limits were offered to Qualcomm, who could have needed to make royalty payments greatly in excess of $200 million.

This is unprecedented behavior. It is very unusual for retailers (the wireless carriers selling the handsets) to pay what are essentially patent …

Is Google serious about wireless?

Google (GOOG) is considering making a bid for a swath of RF spectrum that TV broadcasters are vacating as TV moves toward digital high def. The FCC intends to award wireless licenses within this frequency spectrum as soon as rules governing the auction and use of the spectrum are finalized.

As announced in a letter to the FCC, Google has certain pre-conditions they wish to see met before they enter the bidding. The pre-conditions relate to "openness". According to the Wall Street Journal, Google is requesting that the FCC require that winners of licenses covering a large portion of the spectrum "let consumers use any compatible wireless devices and software and open the network to resellers and other service providers." Google is requesting that the draft rules, which do include similar language, be made more specific and enforceable.

The Journal further reports that "Google wants the spectrum owner to operate it at least partly on a wholesale basis, requiring t…

Weekly Market Update - See Saw Market

Weekly Market CallInvestors received a load of economic data and continued earnings reports and the market did indeed go through some gyrations. In spite of hitting records during the week, the major averages finished down with the Russell 2000 turning in by far the worst performance and slumping 2.3%. Economic news ended up providing no major surprises, coming in fairly close to expectations. The market was driven primarily by earnings (decent, so far, with a few misses by high profile companies roiling the market) and continued bad news related to sub-prime CDO downgrades. In the ensuing flight to quality, many investors turned to bonds, driving the interest rate on the 10-year Treasury note down below 5% for the first time in weeks. For this week, we can expect more of the same. In terms of our market indicators below, we could see weakness earlier in the week and the averages moving up by end of week.

Upcoming economic news of note: Existing home sales and Fed Beige Book on Wednesd…

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. (Click here to read the original post)

There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position.

This first post in the series starts at the beginning: getting good investment ideas.

Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets.

As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professionals and …

VMware IPO - good opportunity but be aware of the risks

Like many investors who follow tech stocks, I have been watching the buzz gather around the upcoming IPO of VMware. As some of you may remember, VMware was acquired by EMC back in 2004 when VMware was still a private company.

Now, EMC is going to sell about 10% of VMware, or just under 38M shares, to the public at $23 to $25 a share. The reason there is so much buzz around this IPO is that VMware has been growing by leaps and bounds and the investing public would love to have a piece of this growth story. An added vote of confidence comes from Intel who is spending over $200M to purchase 9.5M shares.

VMware had record sales in 2006, growing revenues 83% during the year to $709 million. It finished the fourth quarter of 2006 with year-over-year revenue growth of 101%, delivering accelerating year-over-year growth for the fifth consecutive quarter and putting it on track to become the fastest software company ever to reach $1B in annual sales. In the last quarter, VMware's sales doubl…

Are patents a predictor of stock performance?

The Wall Street Journal has a recurring feature where they analyze a number of technology companies and list the number of patents they have been granted in a rolling 13-week period. The Journal further goes on to rank the companies by calculating several other measures such as "Science strength", "Innovation cycle time" and "Industry impact". They then list the companies with their associated stock performance.

I was curious about how this data might look on a graph. Being a believer in technology and creativity, my expectation was that companies with the most patents should show better than average stock performance. The chart below tells a different story (the magenta line is Number of Patents and the black line is Change in Stock Price).


[ Click chart to view larger image ]

IBM has the most patents but their stock price appreciation over the last 52 weeks, while quite solid, is not a standout among this selection of stocks. Apple (AAPL), with fewer paten…

10 keys to better investing for regular people

Where does a regular person get investment ideas and how does he or she differentiate between the good ideas and the bad ones? I will present 10 tools that can help. And you don't have to be an investment professional to understand them.

Getting good investment ideasGood investment ideas come from many sources. The key is to always be on the lookout. The five sources below cover a lot of ground:

1. Stocks with unusual behavior - this is one of my favorites. This category could include stocks with higher than normal volume, price spikes, options activity, crossing moving averages, breaking trend lines or resistance/support lines, gaps up or down, etc. There are a number of sources for lists of most active stocks (Schaeffer's Research, Wall Street Journal Online, Quote.com, etc.) Briefing.com's InPlay feature (available here at Yahoo Finance) is great for stocks showing unusual price or volume activity, breaking resistance/support, reacting to various corporate news events, et…

Weekly Market Update - New highs again!

Weekly Market CallOut of nowhere the market exploded to new highs this week. Amid continuing concerns over the sub-prime situation and the state of the economy, investors were able to seize on a few glimmers of good news. Retail sales were not as bad as expected and the news that Rio Tinto is buying Alcoa demonstrates that the buyout game continues with exuberance.

By the end of the week, investors had absorbed ratings agencies marking down more sub-prime debt, more lackluster retail sales data and higher oil prices. Still, the market held its gains. The Dow was the prime winner this week, gaining 2% and making its biggest percentage move in nearly four years. The S&P and NASDAQ turned in respectable showings of 1.4% and 1.5% gains. On a somewhat troubling note, the Russell 2000 only managed a 0.04% gain.

What's coming up for the market this week? Plenty of potentially market moving data will be reported including the following: NY Empire State Manufacturing Index, PPI, CPI, I…

Is CNET worth a look?

I was reading the 24/7 Wall St. blog today and I was surprised to see that for the month of May, CNET is the number 10 most trafficked web site on the Internet.

I consider myself reasonably savvy on Internet matters. I was familiar with their flagship site cnet.com where they provide reviews of PCs, cell phones, MP3 players and other consumer electronics products, downloads of free or shareware software, etc. I had kind of noticed that they provide news on the electronics industry and I had seen references to a few blog posts that came from CNET writers. As a former software developer I had also used their ZDNet and TechRepublic sites. I had no idea, however, that the CNET company (not to be confused with the cnet.com web site) also owned a ton of other web properties.

So I thought I might do a quick profile of the company and try to determine if we have an overlooked investing opportunity.

To give you an idea of the breadth of their properties, they own Chow for foodies, GameSpot, TV.c…

Site ranking changes to impact online ad spending?

As reported by the AP news service, Nielsen/NetRatings, a leading online measurement service, will discontinue ranking web sites based on page views. They will now begin tracking how much actual time visitors spend on web sites.

What effect will this have in the ongoing battle between Internet heavyweights like AOL, Yahoo and Google?

The following quote describes how this new approach will reorder how these sites are ranked against each other:

"Ranking top sites by total minutes instead of page views gives Time Warner Inc.'s AOL a boost, largely because time spent on its popular instant-messaging software now gets counted. AOL ranks first in the United States with 25 billion minutes based on May data, ahead of Yahoo's 20 billion. By page views, AOL would have been sixth. Google, meanwhile, drops to fifth in time spent, primarily because its search engine is focused on giving visitors quick answers and links for going elsewhere. By page views, Google ranks third."

Under …

Some REITs are better than others

I have been writing for some time now about REIT ETFs. For the last few months I have been negative on these funds due to valuation and interest rate concerns. There is, however, one corner of the REIT universe that might be worth a closer look: health care REITs.

These companies finance, own, and lease health care related and senior housing facilities including nursing facilities, assisted living facilities and hospitals. To my knowledge there isn't an ETF targeted precisely on this sector so I will describe two individual REITs that appear to be poised for a comeback.

The first company is called Ventas Inc. (VTR) The market cap is around $4B and the company is trading around $38 per share or about $10 (almost 20%) below its all-time high of $48. It is currently yielding 4.9%.

The second company is Health Care Property Investors Inc. (HCP) The market cap is over $6B, it is trading at around $30 per share or $12 (about 28%) below its all-time high of $42. It is currently yielding 5.4…

Should REITs Rally?

The last few trading days have seen REITs rallying. Yesterdays article in the Wall Street Journal described an environment ofrapidly rising rents in a handful of high profile cities. This trend is driven, they say, by all the new private equity owners of office buildings that have changed hands during the recent buyout boom. These new owners have onerous debt burdens and they need to raise rents in order to pay down debt.

What was unusual about yesterday's activity was that REITs went up (based on the WSJ article?) even as interest rates rose. Usually, I thought, rates and REITs are uncorrelated; ie, they usually move in opposite directions.

They chart below shows how a REIT ETF, the iShares Dow Jones US Real Estate ETF (IYR), and rates on the 10-year note have moved over the last two years. As you can see, the last time rates were this high, in the summer of 2006, IYR was trading under $70 per share. Yesterday it closed over $80



Also displayed in this chart is the yield on IYR. Yie…

Bug found in TradeRadar Install Program! New version available.

To my great embarrassment, I discovered a problem in the Full Install of version 1.3 of the TradeRadar software. The version 1.3 Update Install works just fine but I see that many of you downloaded the full version.

In actuality, I found not one but two problems. The first problem is in the traderadar.ini file. There should be just one simple word in it: TradeRadar. Instead, it contains TradeRadar-test. This slipped into the install from my testing environment. This is a problem that is easy to fix and some of you may already have done so. It is mentioned in the help file that the name in the INI file must match the name you set up in the ODBC Data Source Administrator. If you followed the instructions in the helpfile, just go into the traderadar.ini file using Notepad and remove the "-test" and save the file. That should make the error at program startup go away.

The second problem is that the program is actually version 1.2 instead of version 1.3! No easy fix here. You w…

Why I haven't abandoned BigBand Networks

BigBand Networks, Inc. (BBND) develops, markets and sells network-based platforms that enable cable operators and telephone companies to offer video, voice and data services across coaxial, fiber and copper networks. The stock first showed up as a pick in the TradeRadar model portfolio (read the original post) back in March 2007 just after the company went public in a well-publicized IPO. There was a good deal of buzz about the company at that time and it was even discussed by Jim Cramer on TV.

Still, after an initial run up, BigBand's stock price has lately been rapidly declining and I have been wondering why. There has been no particular bad news since its 8-K earnings report was filed back on May 3 and its 10-Q quarterly report on May 9. Since that time the stock has been in a free fall despite positive news of new contracts, good product reviews, etc.

Looking at the chart, it now looks like a classic head-and-shoulders top was formed and confirmed in early June when the price fi…

Yahoo! shakes up advertising

Putting aside the arguments over what it means for Jerry Yang to take over Yahoo! now that Terry Semel has resigned, it still seems that the company is doing a better job of "sticking to its knitting" lately.

It is well known that Google is the leader in search advertising and that Yahoo! is still playing catch-up in that space despite the recent release of Panama, their new search advertising engine. On the other hand, for many years Yahoo! has derived a tremendous revenue stream from display ads whereas it took Google's purchase of DoubleClick to get Google into that game in any sizable way.

Now comes news that Yahoo has developed a significant improvement to their display ad technology. Display ads, otherwise known as banner ads, comprise a significant portion of Internet ad buys but have been losing luster as many Internet users automatically ignore them. As a result, there has been a continuous raising of the bar in terms of the creativity, animation and interactivity…