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Showing posts from August, 2007

Motorola Upgrade Questionable

Lehman Brothers upgraded mobile phone maker Motorola Inc (MOT) to overweight from equal weight, saying improvements in operating expenses should help the company's phone unit return close to break-even by the fourth quarter.

Operating expenses are important but so are compelling products and Motorola is lacking in buzz at the moment. Motorola does not have anything close to the iPhone, for example, and the RAZR, while still a good seller, does not have the cachet it once had.

If buzz isn't the strategy, then heading in the opposite direction and dominating the low-cost market sector is a viable alternative. Motorola has not been especially successful in this area either, having admitted it can't match competitors prices. To make matters worse, Sony-Ericsson is now entering this market and that will only make the sector more competitive and more difficult for Motorola. Given that growth is so strong in emerging markets where high-end devices are not necessarily in highest dem…

DRAM memory vendors to face tough times

Samsung, Hynix, Infineon (IFX), Quimonda (QI) and Micron Technology (MU) are among the biggest producers of dynamic random access memory, known as DRAM, the most common type of memory chips used in PCs.

Shipments up, prices downMarket research firm iSuppli reported that prices for DRAM chips will decline starting in September. This could wipe out the small gains seen by some of these DRAM manufacturers during a brief two month period earlier in the year when the pricing scenario was firmer. iSuppli sees the coming price decline hitting double digits.

Looking at 2007 in its entirety, iSuppli expects that it will be a strong year in terms of bit growth (81%) and unit growth (49%). Nevertheless, inventory overhang and pricing issues have made it difficult thus far for vendors to increase margins. iSuppli projections currently show lower bit growth (only 60%) for 2008 but double digit revenue growth, a significant improvement compared to this years' expected revenue growth of less than …

VMWare - still the center of attention

After its much-discussed and over-subscribed IPO, VMWare (VMW) remains a subject of attention. Even when the topic is not VMWare, they become part of the story. Some of the items I have seen floating around the blogosphere include the following:

Citrix (CTXS) recently announced that they were acquiring XenSource, an open source server and desktop virtualization vendor. As one of the only competitors to VMWare that actually has viable products and customers, VMWare became part of the story.

In discussions of Microsoft's effort to develop and release their virtualization solution, it has been pointed out that Microsoft (MSFT) is devoting significant R&D funding but has not yet released the software and is said to be behind schedule. An interesting side note is that Microsoft and XenSource inked an agreement last year in which they would work together to ensure that Linux and XenSource software will operate with the Microsoft Veridian "hypervisor" virtualization engine. T…

Weekly Market Update - bulls trying for a comeback

Weekly Market CallThere is no doubt investors were more optimistic this week. All the averages put in strong showings with all but the Russell 2000 racking up more than 2% gains.

The week was reasonably free of bad news so investors had an opportunity to focus on what good news there was: durable goods orders surged and new home sales for July surprised to the upside. Bank of America taking a stake in Countrywide Financial was looked at as a vote of confidence that the worst in the real estate sector might be over. The VIX eased and so did Treasuries.

This is not to say that there weren't some disappointments this week. There were more announcements of other lenders with liquidity problems (Thornburg Mortgage) and a number of financial firms closing their mortgage units altogether or announcing layoffs.

There was a bit of merger news to remind investors of the good old days. E*Trade and TD Ameritrade are said to be talks, Rio Tinto is still bulking up for acquisitions and the Duba…

Sprint - Why WiMAX?

I was somewhat surprised when I heard that Sprint Nextel (S) was building a separate network based on WiMAX technology. This is not a replacement for its 3G cell phone system but in addition to it. Why would they do such a thing given the scale, complexity and cost? Are they doing this in the hope that if they build it, they (customers) will come?

So first of all, what is WiMAX and why is it significant?Technically speaking, it is a 4G wireless broadband network that uses the mobile WiMAX (Worldwide Interoperability for Microwave Access) IEEE 802.16e-2005 technology standard.

Why is that good? Because you can get high-speed Internet access with it for devices ranging from phones to PCs and devices we haven't thought of yet. And in this case, WiMAX "high-speed" is significantly faster than typical Internet access via current mobile phone technology. It will be a real data network, not a data pipe bolted onto a telecommunications network.

What could this lead to in the future…

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. 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 fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas.

Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing what to lo…

Bank stocks may be getting ahead of themselves

With bank stocks rising for over a week now, we have to wonder whether this rally has staying power.

Looking at the KBW Bank Index ETF (KBE), for example, it's hard to believe that it is up almost 8% from its recent low, going from around $50 to $54. The more broadly based Select Sector SPDR Financials ETF (XLF) is also up around 7%.

Three news items I saw today put me in a cautious frame of mind.

First, it seems that the Fed's action to lower the discount rate has had the desired effect. The markets are calmer. The "flight-to-safety" bond rally is losing steam, even at the short end, as investors rotate back to equities. Nevertheless, the markets believe the Fed will further come to the rescue with a cut to its overnight funding rate by September 18 or sooner. As a result, investors are bidding up stocks across the financial spectrum. But why should the Fed cut? The discount rate cut seems to have achieved its objective. Cutting the Fed funds rate now could be construe…

BigBand Networks - sad to say, it's fairly priced at these levels

I have been a proponent of BigBand Networks (BBND) since I wrote a post that paired Cisco Systems (CSCO) and BigBand as a combined Pick o' the Month. In that post I described the networking powerhouse and the upstart and proposed that Cisco might someday buy BigBand.

Since that time BigBand has reported earnings twice as a public company. Both times have been a disappointment. The stock remains in the TradeRadar model portfolio under the assumption that it is an early investment in a company that will reward patient, long-term investors.

In the wake of BigBand's latest earnings report (and price decline), I thought comparing BigBand to Cisco might be an interesting way to develop an understanding of where BigBand stands at this time in its drive to become a company to be reckoned with. Clearly they are very different companies with one being huge and the other being small. So rather than looking at absolute numbers we'll focus on ratios.

Examining key ratios as provided by m…

Fed saves the day, what about tomorrow?

The Fed's reduction in the discount rate on Friday turned what was shaping up to be another bad day in the markets into cause for celebration and hope on Wall Street. And, of course, it resulted in a big rally.

The Fed's action had two immediate benefits:
It restored investor confidence and let Wall Street know that the Fed was willing to act to ensure proper functioning of financial markets and prevent damage to the economy
It provided another shot of liquidity in addition to the billions of dollars that the Fed had already provided through a series of reposThese benefits are desirable and even necessary but are they enough to get the bull market back on track?

My worry is that the root cause of the market's problems has not been addressed. That root cause includes the sub-prime mess but is not limited to sub-prime. There has been a period where risk has been virtually ignored in all kinds of lending. We are seeing the worst of it in real estate but there are also many exampl…

SmartAds should target email users

This month there have been a couple of interesting reports on Internet activity.

Nielsen/NetRatings provided July Internet usage statistics. Yahoo had 110,377,000 unique visitors. This was good enough to earn the portal 2nd place just behind Google as most trafficked site owner.

Also mentioned in this report is that Yahoo users spent way more time on the Yahoo suite of web sites (almost three hours) than users did on Google's (just over one hour). What are Yahoo's users doing during this time?

The answer can be found in an article at eMarketer .com that describes the most popular subdomains within each portal. 67% of Yahoo visitors are using email. This means Yahoo is getting a ton of traffic from the best kind of visitors: the ones who are registered at the site.

It seems clear that a good way for Yahoo to increase profitability is to get SmartAds deployed on the email subdomain. User's are spending plenty of time in this area of the portal reading and writing email, not jump…

Markets recover - is it time to celebrate yet?

Yesterday's post reviewed the situation on the charts of the major averages and came to the conclusion that there was a good chance we would see another leg down in the current correction.

For a while today it looked like we were going to see that decline immediately but at the last minute, the averages turned up and reduced their losses and in the case of the S&P 500 actually finished with a small gain.

The most significant development of the day was the resurgence of the financials. ETFs like XLF racked up 3% gains and REIT ETFs like IYR managed a 2.5% gain.

Still, I'm not sure this is a time to breath a sigh of relief. We have seen over the previous few weeks similar behavior where the averages would close with a flurry of buying that seemed to save the day. During this time numerous observers pointed out that the advance/decline numbers were troubling at best. The end result of this kind of market activity has been what we see now: the averages at or below their 200-day m…

Sold Agnico-Eagle

Agnico-Eagle Mines (AEMLW) has been a member of the TradeRadar model portfolio since the middle of June. Just a few days ago we were up 48%. The last few days have seen the stock plunge. With this market looking so grim, I decided to preserve capital and take what profits could be had. I sold during yesterday's 10% slide at $22.52 and was happy to get that price as AEMLW closed at $19.99.

Frankly, I didn't even wait for a strong TradeRadar SELL signal. A weak one had been flashed a week ago and that, combined with the slide of the last two days, was enough for me. We ended up with a 27% gain and I'm not complaining.

Dominoes falling?

Today was a day when the markets started looking like they are ready for a new leg down. Let's take a look at what the charts are saying.

The Russell 2000 fell again today and confirms it is unable to move up and penetrate the resistance embodied by its 200-day moving average.

Today the S&P 500 fell below its 200-day MA for the second time in as many weeks. It is now down about 9.4% from its peak and has gone negative for the year. Back in the beginning of this month, the 20-day MA made a bearish cross-over below its 50-day MA, and the average has been stuck below both of these chart lines ever since.

The Dow also plunged today and ended up sitting right at its 200-day MA. A dismal forecast is developing, with its 20-day MA making a bearish cross-over below its 50-day MA, it could be moving down further. As of today, the Dow is down about 9% from its peak though it is still positive for the year.

That brings us to the NASDAQ. On the basis of strength in technology stocks, the NA…

The Kids Portfolio

Every once in a while it's a good idea to check in with the kids and see what products and companies they like and respect. This is always a fun exercise and, with the market looking so grim lately, it's something I thought might cheer us up.

The following list is filtered through the sensibilities of a 13 year old boy who knows what he likes. In no particular order, here is the Kids Portfolio:

Zumiez (ZUMZ) - probably the strongest stock in the bunch, the Zumiez store is a favorite destination. Already up around 25% or so this year, the company seems to have avoided the weak same-store sales problems encountered by its competitors. This stock is worth a look.

Volcom (VLCM) - my kids really love the skater chic but the company has missed earnings targets and the stock has wiped out.

Billabong (ASX:BBG) listed on the Australian exchange, Billabong has lots of attitude but it may not be easy to get the shares in the US. Then again, you might not want to as the stock price recently t…

Qualcomm advances on lawyer's resignation

This weekend I wrote that Qualcomm's stock price would bounce should the CEO be replaced. Well, that didn't quite happen but it was announced today that the general counsel, Lou Lupin, resigned. The stock did indeed bounce, though only about one point.

So, is Mr Lupin the scapegoat or is he taking responsibility for the legal mess in which Qualcomm finds itself?

It's hard to know how much Paul Jacobs, the CEO, set strategy for the legal team or whether the legal team provided bad advice to the CEO. Someday, someone should write a book on this debacle.


Disclosure: QCOM is part of our model portfolio

Qualcomm - should you buy on bad news?

The old saying is that you should buy on bad news and sell on good news. Qualcomm (QCOM) has been pummeled with bad news lately.

A judge has doubled punitive damages in one of the patent infringement cases Qualcomm is embroiled in with Broadcom (BRCM). Apparently Qualcomm offered inaccurate testimony which also served to earn the judge's antipathy.

The White House failed to overturn the ITC ruling banning imports of handsets containing Qualcomm chips that infringe on still other patents held by Broadcom. To get around the problem, Verizon (VZ) broke away from the pack and inked an agreement directly with Broadcom.

The latest issue to crop up comes to us via Nokia (NOK). Qualcomm has been battling in the courts with Nokia for years over the level of royalty payments. Qualcomm licenses its CDMA 3G cell phone technology to Nokia who just happens to be the supplier of approximately 40% of the handsets sold worldwide. Nokia has just announced that it will no longer be manufacturing its o…

A step closer to correction

Last week I wrote a post where I took the position that stocks were headed for a correction and that we were nearly there. I haven't seen anything this week that would change my mind.

Even though the major averages managed to end this week a bit higher than last week, I find it hard to be optimistic. The markets started the week off moving upwards nicely but took a pounding on Thursday that nearly erased the previous days gains. We were incredibly lucky to see the averages close with only small losses on Friday after starting the day off with downward gaps.

This week central banks around the world injected cash into their banking systems in an effort to keep credit markets functioning. CDOs backed by sub-prime mortgages have been blamed in England, Germany, France and Australia for hedge fund problems. It is amazing to me that so much sub-prime debt even exists and is held by investors in so many different countries.

Charts continue to look awful. In an interesting divergence, we see…

REITs trying to establish a bottom?

With the overall market plunging over 2% yesterday, I was surprised to see REIT ETFs remain firm throughout most of the day.

The two ETFs that I watch are an admittedly small sample of the REIT universe but they both acted very similarly yesterday: they were down only fractionally which was a sign of strength compared to many other market sectors. The iShares Dow Jones US Real Estate (IYR) and iShares Cohen & Steers Realty Majors (ICF) ETFs both fell less that 0.2% which means they held on to most of the gains they made on Wednesday.

Of the two REIT stocks that I watch, their performance was completely divergent. Ventas Inc. (VTR) just announced earnings that beat expectations and its stock prise actually rose over 2% yesterday. Health Care Properties (HCP) lost about 2%.

Among other well know REITs, the same divergence was observed. Duke Realty (DRE), down 3%. Boston Properties (BXP), up almost 2%. Taubman Centers (TCO), down less than 1%. Acadia Realty Trust (AKR), up almost 2%. Ar…

Cisco wants to be more than Cisco

The markets just jumped on the back of a good earnings report and good guidance from Cisco . John Chambers has described how the company has become more than just a networking company. The vision he has put forth ranges from Internet infrastructure, enterprise networking, consumer products, TV set-top boxes, various kinds of software and more.

It has been noted that Cisco has invested in the VMware IPO. It is less well known that Cisco has plans for taking over the datacenter itself. Cisco envisions the eventual replacement of local devices with shared network resources. This is a trend that is underway already with the advent of storage area networks and network attached storage, both essentially comprised of banks of disk drives that can be flexibly deployed as needed. Server virtualization as implemented by VMware and others has become the next major advancement in abstracting datacenter devices into a resource pool configurable by software.

Cisco has begun to define the capability …

McDermott Intl earnings soar

For those of you who read the second post in the series on how to unlock stock market profits you may remember McDermott International (MDR).

As part of our discussion on using stock screeners we worked our way through three different web sites, finally ending up with a short list of stocks derived from the Zacks.com screener. McDermott was one of them and we focused on the company as one of the most interesting on the list.

Today McDermott announced blow-out earnings. Their profit tripled, they exceeded analyst expectations and announced a two-for-one stock split. The stock gained 4.2% today.

I hope readers will continue to experiment with stock screeners. Today's news on McDermott shows screeners can point you to some top-notch investments.

Disclosure: I own no shares of MDR

Unlock Stock Market Profits - Key #3

This is the third 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 third post, we will continue further along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. This post will focus on using lists of new highs or new lows to find investing ideas.

Key #3: New highs and new lows can point to stocks with momentum or stocks ready for reversals.

Looking to ride an existing trend? Know a good stock that is being unfairly punished?

New highs lists can identify stocks in a strong uptrend. If you believe in momentum, the ability of a stock to continue to move in the same direction until some event causes it to r…

Markets are in a correction now

Markets have been down three weeks in a row now. For those of you who use the TradeRadar software, I'm sure you're seeing SELL signals all over the place.

I often check ETFs to gauge the health of various sectors as well as the overall market. After this run of bad news it seems like a good time to take a more comprehensive look at the markets.
SELL signals everywhereToday I looked at ETF performance over two time periods: from the June-July 2006 low point to the present and from the early-March 2007 low point to the present.

The ETFs corresponding to the major indexes (DIA, SPY, QQQQ, IWM) are all showing TradeRadar SELL signals with about 80% strength over the longer time period and about 70% strength over the shorter time period.

I consider 80% signal strength to be pretty significant and 60% to 70% modest.

I keep reading that tech is holding up pretty well so I checked a group of tech ETFs. Networking: IGN and PXQ -- modest SELL. Semiconductors: IGW, SMH and PSI -- not quite a …

IWM not pointing the way down

The iShares Russell 2000 Index ETF (IWM) is once again below its 200-day moving average. This is the sixth time this has happened since 2004. To make matters worse, there has been a TradeRadar SELL signal generated on IWM. Other major averages and their corresponding ETFs have also fallen though not quite so far.

Should we be worried?

Currently, IWM is only about 1.3% below its 200-day MA. None of the other major averages or their corresponding ETFs are below their 200-day MA. Things look shaky but we are not getting a serious bearish confirmation from the other indexes.

This looks like more of a confirmation of what some analysts have been saying: there is a rotation out of small caps and into large-caps.

There is also a greater sensitivity to risk sweeping the markets these days. Traditionally, small caps, which make up a large part of the Russell 2000, have been regarded as inherently riskier investments than their large-cap brethren.

On the plus side, earnings season is winding down a…

Google phone is a reality - cat's out of the bag

I have been intrigued with Google's strategy of extending their reach to cell phones. I have written a couple of posts about the topic already. In the first post, I wondered if Google was thinking of leveraging their GoogleTalk application to provide instant messaging and VOIP services on cellphones and partnering with wireless carriers. In the second post, I suggested, but dismissed as unlikely, the idea that Google might offer what I dubbed the "gPhone". It is clear that I was not nearly bold enough in my predictions.

Today's much quoted article in the Wall Street Journal ("Google Pushes Tailored Phones To Win Lucrative Ad Market") confirms that Google is indeed looking at bringing a phone to market.

In fact, there has been considerable work done on prototypes and specifications have been developed encompassing hardware and software -- Google software, of course.

There are two important aspects to this: open platforms and open access.

Google, to their credit,…

Two paths to targeted marketing - Google and Yahoo

Yahoo has been attempting to move toward what some advertisers regard as the ultimate manifestation of marketing: ads tailored to the individual. With the announcement of their SmartAds product, Yahoo is claiming that they can target narrower groups of individuals and target ads more directly to the characteristics of that group. By analyzing users past web behavior combined with what a user is currently doing, Yahoo says they can more accurately determine the kinds of ads that a particular group of users should see. Yahoo's new technology will then cobble together the appropriate pieces to present a complete banner ad tailored to that group.

Google has chosen to pursue a different path and has announced that they do not intend to pursue behavioral targeting. They have opted instead to refine their flagship technology around search ads. The enhancement they are currently testing includes the previous search terms as well as the current search terms to determine what ads to show to …