Tale of two pigs...

Doral Financial (DRL), was purchased for the ol' portfolio on May 3, 2005 at $14.02. As you can see from the link, I am NOT really ecstatic over its performance. Doral needed to revalue some IO strips it held and restate earnings back when I made the purchase. I am still waiting for the restatements...

Still waiting for Doral to furnish some audited results since that time...

They did, however, manage to cut the dividend. God bless 'em.

They are, also, teetering on being delisted. Woo hoo!

I have little expectation of turning a profit here. However, stranger things have happened. I am just not going to chase it.

How the heck am I supposed to know what to do when there is no information, just indicators that the bank is in a cash crunch?

Aetna (AET), on the other hand, may be a different story. It got SLAMMED yesterday. Down in excess of 20%. For what?

They beat expectations on the top and income lines.

Costs are going up. Does that mean Aetna is chasing less valuable members?

Probably.

Does that mean the stock is worth 20 some odd percent less today?

In a word: NOFUGGINWAY!

My expectation is that Aetna will drift down a few more dollars which will make it an extremely attractive candidate for adding shares.

If I don't see you, have a great weekend. We can recap Monday.

Selective Insurance SIGI, Tellabs TLAB, Conoco Phillips COP Earnings

Since we are holding most of our positions for a long period of time, one quarter's worth of earnings may not mean alot. With that caveat let's take a look at today's reporters.

SIGI - beat estimates by 22 cents (1.28 v. 1.06). Nice, very nice. It is moving today on light volume. Do I appreciate this? Yes I do. Because in a few short weeks, there is a chance I can pick up some more shares of this stock on a pullback. The Mrs. and I started buying this eight years ago. I sold some around 2000, but the stock is a hard one to keep down. Put it on a list to consider after the earnings are digested.

TLAB - has been on a tear of late. I purchased this stock in June 2004 with a basis of 8.75. It tanked for a long time, I think I was sub 7 for a period. Then, business improved and the story got reflected in the price. This is the value case. Try to buy when things look bad, hang on if they get worse, and try to get out as the price gets too speculative. I am holding here.

COP - newly acquired this year, the story on this stock is you can get this integrated oil/gas play at around 8 times past earnings. COP did not disappoint but they did not beat today either. You are getting some play from the commodity market in that you might be able to get COP at crazy, crazy, low, low price based on what happens in the futures market. Nevertheless, I am in and holding until I get my price.

Thank you SIGI!

The mini-member of the ol' portfolio, the wife keeps getting on me to get rid of it. Why does Mrs. Friendly want me to get rid of this particular holding? Must be because, it's the last holding we have in our name, everything else is held in street name. What's the problem with that? Aaahhh, she's bent because we keep getting small dividend checks sent to us. How small? Well, it just covered my Dunkin' Donuts medium black.

I really should buy more shares someday...

Selective Insurance is a pretty good company.

Here's the thing...

Really strong week last week. The ol' portfolio ranged upwardly 3.37%. Thank you AVCI and RSAS. This compares to 1.98% and 1.96% for the DIA and SPY. QQQQ was down so there you go.

I am not yet prepared to declare myself King of the Markets but, fot the year.
Mr. Friendly is up 16.88%
DIA is up 6.03
SPY is up 5.33
QQQQ is up 3.93

Keep in mind that the ETFs shown do not include dividends.

Include them and we are still killing.

The problem with PLAY and SGTL is that both were dumped by AAPL. Can they make it back? Uuuuhhh,idontknow. I think both of these are very speculative. Not that that is a bad, but, I think I will wait for them to get a little "ahem" less speculative. If you know what I mean...

PXPL. Really, I don't know about this one either. Recent IPO that is restating earnings...Real crap shoot. If you believe their chatter on their cash holdings, it might be worth a shot. But that is two caveats in two sentences, I think we can do better.

NETM. This one looks good. Boring business with competition, however this company is making money. It's cheap. It's worth putting on a watch list.

Now if we ever get a little pullback, maybe we could put some money to work.

The lord giveth...
AVCI up over 84% yesterday...
And the lord taketh away...
SNDK

I will give an update on the portfolio numbers on Monday, but we had a niiiiice week.

I am trying to build a little cash stash, but that doesn't mean we can't look for something nice and pretty.

Check out: SGTL, NETM, PXPL, PLAY. See if there are any diamonds in the rough.

That is all. Have a great weekend.

P.S. If you are looking for ideas, here is another one: Check out stocks hitting 52 week lows. They can't all be pigs. Gotta be at least one winner there, right.


Riiiiiight.

More really lame book reports


This here book gives you a whole heapin' portion of profiles on TRADERS, not investors. But, if that is the way you want to go, start with this book and get into these guys' heads.


Zweig has rules too. He also gives you a good primer on top to bottom analysis.


So anyways, Frank has an excellent approach even if you skip his advice on margin. Look to how he creatively determines different definitions of value. This perspective is priceless.

Really Lame Book Reports

I found the following to be very helpful in becoming a better investor. Ask me for my copy or go to the library.


Lynch is not a super sophisticated writer. However, the axioms presented here DO give you a leg up on beating the market. This is a MUST read on getting your head on straight.


Okay, what would a financial book report be without citing this popular tome. Everyone recommends, no one reads. Check it out. The stockpicking rules are worth noting BUT, they need modification for today's markets. NOW THERE IS AN IDEA FOR A FUTURE POST.


Give Dreman a chance! I know he rights like a nerd but, his advice is sound and his evidence bears out his. Fight the urge to look him up, drive to his house, and give him a swirly.


Another perennial favorite, the legendary thoughts of Jesse Livermore are still entertaining and edumacating to this day.

I hate these up to the minute portfolio updates...

But I have to mark yesterday as a red letter day. The ol' portfolio racked up nearly 2.75% gains!

Yay team!

Keep in mind that now may not be the best time to pick new stocks. Let's wait for a little retracement.

Reporting today (or last night): JPM, PFE, TXN

Til later.

I have to do this
Even though it is less than 2% of the entire portfolio, I still feel like the King Of The World.

RSAS opened up about $1.80.

That's over ten percent for you and me.

Sorry, I just had to do it.

Earnings...

Last night, RSAS, MAT, DHI reported...

RSAS surprised by a penny. After introduction into the portfolio last July at 11.87, we stand at 16.82 and look for some solid movement today.

MAT has so-so quarter. Including a one time tax benefit, MAT reports 8 cents a share profit. Prediction: we are going down, down, down into that Ring of Fire. I purchased these shares in July of 2004 for 17.78. Do I need to tell you that the 16.65 tries my patience.

DHI reports record revenues and profits. Hohum. Again. Bought these last November at 31.08. At 33.40, they still rate a buy. In my humble opinion, this is a premier company in the homebuilding industry. It sells for less than 7 times earnings, less than 2x book (remember this industry carries mega debt), and less 3/4 of sales. Line up, buy up, and forget about it. Twenty years from now, you will thank me.

JNJ and WM later today. See you then.

I haven't forgot, I am just looking for the right one.

My last few picks, Disney, Conoco Phillips, adding to Johnson and Johnson, adding to Citigroup, has left me thinking I need to strike out and find a nice little small cap. So the search is on for something cheap and small.


Earnings season is upon us and nothing real exciting yet. C reported a 2% surprise today. Hohum, C is up .5%.

For a weekly recap, all holdings rose about .8% in a market where the indices were generally down.

This kind of thing kills me...

Ok, you are a big deal oil refiner. You even retail your gas.

Then you do something stupid.

Like be net short on your inputs, namely oil.

This shouldn't hurt TSO in the long run but I am really stuck on how this happens.

Maybe it's me, I probably don't understand the business.

I don't understand the business: It seems that Tesoro sells the contracts to hedge some long haul oil they buy for their refineries. Hopefully, this loss will turn green in the next quarter as that oil is processed and sold.
But I know what a hedge in oil is: futures in crude. Contracts that TSO were holding went up $6 last month. This had the effect of reducing earning estimates by 20% for the quarter? If oil went up and TSO lost, can't I conclude that they were betting that oil was going down further?

In other news, LRCX had a good quarter, TRFX will report later today. SNDK will become one of the S&P 500. Woo hoo Free Money!

One last thing, our man in the field flyingDane turned up PXPL. He likes it and I think I might take a look if I get a chance. Short story is it sells for a small premium to the cash on hand. Big argument against is their current restatement of revenues. I have NO position on this one and I suggest you do your own due diligence, blah, blah, blah.

If anything interesting pops up, I will report back.

PHILOSOPHY 101

Ok, last July I bought a share of Schnitzer Steel. The selection was not purely by the numbers, but it was pretty close. Since metals, at that time, were already feeling pricing pressure and there was/is always the expectation that cyclical companies should be bought in a "reverse value" method, I was a little antsy. But here were the reasons I bought the company:
1.) PE under 10
2.) Current Ratio over 1.5
3.) Price to Book under 1.2
4.) Long Term Debt to Equity under 2
5.) Five years of positive earnings
6.) Last 12 months of earnings greater than that of five years ago
7.) Pays a dividend

These criteria are pretty close to Graham's arguments for a Enterprising investment. So, on the one hand, I felt pretty good. Yet, I always have buyer's remorse and this time I thought I had good reason: extension of metals market puts pressure on steel industry; high earnings in steel that will not be sustained.

So what happens. I paid $24.65 for SCHN in July. Since that time, SCHN has risen to a high of $44. However, Monday the bomb was dropped. SCHN missed their number ($.72/share) by 4 cents mostly for the reasons stated above.

So what do we do? We currently have a 55% return in a little over 8 months. Keep in mind this happened at point when the stock should have tanked further. Additionally, we must consider whether or not the quarterly miss was germane to buying/selling/holding. Consider:
1.) PE is still at 8. Forward PE is at 8
2.) Current Ratio is over 1.5
3.) Price to Book is at 1.9 getting high
4.) All debt to Equity is less than .2
5.) Earnings are still positive
6.) Current 12 mos. earnings greater than that five years ago
7.) Dividend is intact.

With the exception of Price/Book, this company is still a buy. Go Figure.

Consider also, that mighty oaks do not become that way overnight. Also, I can't afford to pay heavy transaction costs to get in/out of any trade. So I expected to hold SCHN for a number of years when I purchased.

So, I rate SCHN a HOLD at this point.

Keep in mind that I may be absolutely wrong due to abject ignorance.

Good Luck.

P.S. You know, earnings seasons is generally a really poor time to make a decision to sell since, many companies that disappoint, even slightly, get slammed.

Last Friday, I added some shares of Apache Corp. (APA) at $66.58. You might ask
"Mr. Friendly, why did you do that?"

Funny you should ask.

I give you the pros:
1.) About a 15% retracement of recent high.
2.) Earnings are stable in the $8.30-$8.40 range for the next two years.
3.) This makes the P/E around 8
4.) Oil and gas appear to be in secular bull. Apache is about a pure a play as you can get. Aside from actually buying oil and natural gas.

Cons:
1.) Oil played out?
2.) Earnings are then spiking and not a normal reflection of the company's long term earning potential. Thus the low P/E is an aberration and will rise in the future thus reducing the "bargain" factor.

I guess you can see where my analysis played out. This marks the fourth position I have in the oil industry. The others are TSO, COP, and EGY. Also, I own some oil shippers OMM, FRO, SFL. I guess I am more bullish on oil than I originally thought.

As per usual, APA represents about 1.5% of the entire portfolio. I plan on holding it until it hits the price of $130 or so. Or goes bankrupt.

************************************************************
With respect to the portfolio link, I can send you the percentages if you like. Email me at mrfriendlyalb at yahoo.com

DISCLAIMER

Hey.
I am not a money manager.
Don't have an MBA, CFA, or BFD.
Any positions I tout here are probably positions I already hold.
This here blog is for entertainment purposes only.
Remember, I have a real job where I make real money.

Read Away.