Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website!

I wanted to share with all of you this beautiful photograph from In The Headlights called "Water Colors".  As Riannan writes, the photo "..put me in a calm state immediately.  There is a Zen beauty and serenity to them that I find very pleasing."

But what does this have to do with my portfolio?---I can almost hear all of you asking that question.  My point is that my activity since my last Portfolio Update on April 6, 2008 has been nil.  It is not that there haven't been opportunities for selling or trading.  It is just like the comments about patience from Nonin Chowaney at the Nebraska Zen Center, who quotes from Lao Tzu:

"Do you have the patience to wait
till your mud settles and the water is clear?

Can you remain unmoving
till the right action arises by itself?

The Master doesn't seek fulfillment,
but not seeking, not expecting,
is present, and can welcome all things."

I am far from any kind of expert at things Zen, but the idea of waiting patiently for the right time to act seems apropos to me.  

In other words, my actions in the market are directed by my own holdings.  My sales generally have been made when prices dictate a sale, and my purchases are directed by other portfolio-initiated 'signals'.  And sitting calmly, avoiding the temptation of 'trades' and activity, my portfolio is working well to direct me to action or not.

Since I have been associated with the Covestor website, you can now visit my Covestor page and monitor my performance at least since I joined Covestor (June 12, 2007).  However, this website, while now including my blog entries on my Covestor Blog, does not monitor the performance of many of my purchases preceding my participation in Covestor.  Thus the utility of these reviews.

As a change on this review, I would like to post some charts of each of my six holdings and show the points at which I plan on selling shares, which for me includes plans for both sales on the upside as well as downside sales.

The holdings are listed in alphabetic order of their symbols, followed by the number of shares, date of purchase, price of purchase (cost basis), latest price (5/9/08), and percentage unrealized gain or (unrealized loss).

Copart (CPRT), 210 shares, 9/27/07, $33.73, $41.50, 23.04%

I have not had any sales of Copart on the upside or downside, and thus, my downside sale would be an (8)% loss or .92 x $33.73 = $31.03, or on the upside, I plan on selling 1/7th of my holding (30 shares) should the stock reach a 30% appreciation point (my first target for a sale).  This would work out to 1.3 x $33.73 =  $43.85.

Thus, the 'point & figure' chart on Copart from StockCharts.com:

Covance (CVD, 102 shares, 4/9/07, $62.61, $83.08, 32.69%.

I have sold shares of Covance once on 10/25/07, thus, on the downside my sale point is moved up to 'break-even' or $62.61.  On the upside, my next partial sale would be at a 60% appreciation target, which works out to 1.6 x $62.61 = $100.18.  At that point, I would plan on selling 1/7th of my remaining shares or 102/7= 14 shares.  Of course, on the downside, my plan is to sell all shares should the stock decline to that level. 

Let's take a look at the 'point & figure' chart on Covance from StockCharts.com (recall I am just posting the purchase point, the upside sale and the downside sale points on these charts.)

IHS (IHS), 140 shares, 10/1/07, $58.53, $67.23, 14.87%.

I have not sold any shares of IHS so my loss limit would be at 92% of the purchase price or .92 x $58.53 = $53.85.  On the upside, my first sale of 1/7th of my holding or 20 shares would be at the 30% appreciation level which works out to 1.3 x $58.53 = $76.09.  Thus, the 'point & figure' chart on IHS from StockCharts.com showing these points on the graph:

Morningstar (MORN), 103 shares, 11/22/05, $32.57, $73.90, 126.86%

Since purchasing Morningstar shares in 2005, I have sold portions of this holding four times: at 30%, 60%, 90%, and 120% levels.  On the upside, my next sale of 1/7th of my holding or 103/7= 14 shares, would be at a 180% appreciation level or 2.80 x $32.57 = $91.20.  On the downside, at 1/2 of the highest appreciation sale point or at 120%/2 = 60% appreciation level, all of my shares would be sold.  This works out to 1.6 x $32.57 = $52.11.  If we look at the 'point & figure' chart on Morningstar from StockCharts.com, we can see these points graphed:

 

ResMed (RMD) 150 shares, 2/4/05, $29.87, $40.28, 34.86%.

I have sold portions of ResMed twice, at 30% and 60% appreciation levels.  Thus, on the downside all shares of ResMed should be sold at 1/2 of 60% or back to the 30% appreciation level.  This works out to a sale at 1.3 x $29.87 = $38.83.  On the upside, the next sale would be 1/7th of my holding or 150/7 = 21 shares at 1.9 x $29.87 = $56.75.  Reviewing the 'point & figure' chart on ResMed from StockCharts.com we can identify these points:

Meridian Bioscience (VIVO), 171 shares, 4/21/05, $7.42, $28.08, 278.49%.

VIVO is my most profitable stock having sold portions 8 times already, at 30, 60, 90, 120, 180, 240, 300, and 360% appreciation levels.  Thus, on the upside, my next partial sale would be at a 450% appreciation level (!) which works out to 5.5 x $7.42 = $40.81, at which time I would plan on selling 1/7th of my shares or 171/7 = 24 shares.  On the downside, at 1/2 of the highest appreciation sale recorded, this would work out to a 360%/2 or 180% appreciation level.  Calculating this, we have 2.80 x $7.42 = $20.78.

Here is the 'point & figure' chart on Meridian (VIVO) from StockCharts.com showing these points:

Thus, I am still at 6 positions.  As I have previously noted, my minimum for my portfolio is 5 positions with a maximum of 20.

The current market value of my securities (May 11, 2008) is $45,056.74, with $234.87 in the money market portion of the account.

As of 5/10/08, I had $(4,534.09) in realized net short-term losses, and $3,283.50 in realized net long-term gains, for a net of $(1,250.29) in realized losses in 2008.  In 2008 I have paid a total of $(221.13) in margin interest and have total income of $53.82.

My account, as of 5/9/08, has $14,289.41 in unrealized gains.

Thanks again for stopping by!  I hope the more detailed view of my positions and my current 'inactivity' is explained.  Of course, I shall step up my trading activity as my own portfolio dictates.  Meanwhile, I shall be trying to exercise the 'Zen' of trading patience!

If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

 

Bob 

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Tags: technical analysis, stock market, intermarket analysis, relative strength

Can a fund's performance predict the stock market? I'll line up a few charts to ponder...John Hussman's Strategic Growth Fund...hedged...
____________________________________________________
Ten-year treasury note price. Looks eerily similar to the recent Hussman Fund action.
__________________________________________________________SP500...correlated inversely to the Ten Year...
______________________________________________________Gold continuous contract...pretty much inversely correlated with the SP500 recently.
__________________________________________________________SP500 to Gold relative strength
________________________________________________________SP500 to 10 year notes...as Yogi would say, "sometimes you can see a lot by just watching."

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.
Comment or Read More at Technically Speaking, Market Analysis and Theory

Peter Bernstein, author of such books as Against the Gods: The Remarkable Story of Risk, has an interesting piece in the Sunday NYT, titled, When Should the Fed Crash the Party?.

"In the darkest days of the Depression, Treasury Secretary Andrew W. Mellon, one of the richest men in the United States, opposed any government action to stem the tide of plunging business activity and soaring unemployment. Instead, he urged a policy of supreme indifference.

“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” he said. “It will purge the rottenness out of the system,” he added, and values “will be adjusted, and enterprising people will pick up the wrecks from less competent people.”

John Maynard Keynes, for one, thought that prescriptions like Mellon’s were preposterous. The economist called those who held such views “austere and puritanical souls” who believed that it would “be a victory for the mammon of unrighteousness” if general prosperity were not “subsequently balanced by universal bankruptcy.” Keynes perceived too much good in prosperity to treat it as the enemy, and he revolutionized economic theory to prove his point.

Keynes won the argument, and government intervention to overcome rising unemployment and falling profits has been standard operating procedure forever after. Nevertheless, the debate over intervention is not ancient history. It replays in today’s headlines."

Its an interesting debate, but I read Bernstein as discussing the wrong debate. He is reviewing criticism of the treatment of the problem, namely, the Fed's clean up duties. But there is a debate brewing on preventative measures, also.

What makes this go round somewhat different is that the Fed's intervention was forced large numbers of people who were exceedingly reckless. Even by comparison to LTCM or the S&L crisis, the risk embracement was unusually widespread.

As we have seen, there is a cost to this.

This is more than a question of creative Federal Reserve intervention. Right now, the nation is only beginning a debate on several related issues -- including, ansd perhaps most importantly, regulation versus deregulation. If unrestrained financial engineering can lead to catastrophe requiring massive Fed intervention with great costs to the public (inflation, debt, etc.) than the "re-regulation" of the financial markets is a very likely outcome.

This is an important issue worth watching as the election season progresses . . .

>

Source:
When Should the Fed Crash the Party?
PETER L. BERNSTEIN
NYT May 11, 2008
http://www.nytimes.com/2008/05/11/business/11view.html

Comment or Read More at The Big Picture

I have received a number of questions about the subscriber newsletter and I thought this might be a good time to address them.

First, thanks to all who have subscribed. I have been extremely pleased by the response to date. I appreciate all the support and am particularly encouraged by the fact that so far the renewal rate has been 100%.

In terms of content, the Sunday format has already been standardized. The typical Sunday issue is six pages long and has the following sections:

• The Week in Review – my thoughts on what constituted the important macroeconomic, fundamental, and technical news for the past week
• The Week Ahead: What to Look For – includes suggestions on earnings to watch, important government data releases, critical technical support/resistance levels, etc.
• Market Sentiment Update – a discussion of the readings and related implications from two of my proprietary sentiment indicators, the Options Sentiment Indicator (OSI) and the Aggregate Market Sentiment Indicator (AMSI). In some respects these two indicators are descendants of the VIX Weekly Sentiment Indicator (VWSI)
• Asset Class Outlook – where I update my outlook over the short-term (1-3 weeks), intermediate-term (1-3 months), and long-term (6-12 months) time frames for ten important asset classes that cover US equities, foreign equities, bonds, currencies, and commodities
• Current Investment Thesis – my take on what is driving the markets, in which direction, and why
• VIX and More Focus Model Portfolios – three different model portfolios (Aggressive Trader, Growth, and Foreign Growth) consisting of 5-7 stocks each that have returns of +18.0%, -2.7%, and +2.1% since the March 30, 2008 inception
• Stock of the Week – a single weekly stock selection that has a cumulative return of +48.5% since the initial March 30^th selection

The Wednesday issue is much more like the blog, but with a more detailed analysis and a place where I offer more in terms of conclusions and takeaways. It generally runs 4-6 pages and has three standard sections:

• Market Commentary – updates my thinking as laid out on Sunday
• Market Sentiment Update – similar to the Sunday section, but may drill down more on specific issues, such as volatility, put to call data, market breadth, volume, etc.
• Volatility-Based Sector Rotation Model – one of my current research interests is using volatility to time trades on a variety of ETFs, including sectors, geographies, commodities, and currencies. This is not a model portfolio, per se, but I have been providing commentary on what the model is suggesting in terms of sector rotation strategies, what geographies to be long or short in, as well as plays in commodities and currencies

In addition to the three standard sections, Wednesday usually includes several feature sections where the subject matter varies from week to week. Some of the features from the past three issues include:

• The VIX:VXV Ratio Continues to Perform Well
• NYSE Total Volume Suggests Rally May Have Run Out of Steam
• ‘Stock of the Week’ Averages Up 5% in One Day
• CBOE Equity Put to Call Ratio Remains Bullish (a shorter, updated version of this post went up on the blog a week later)
• A Long-Term Look at the VIX and the VXN
• Yield Curve Déjà Vu and Other Musings (a much shorter version of this post went up on the blog later)
• Is the Fed Done Cutting Rates?
• Market Breadth and Sustaining a Rally
• Highs and Lows in the S&P 500 Index

If anyone has any additional questions or comments about the subscriber newsletter, please feel free to email me at bill.luby@gmail.com or check out the subscriber newsletter blog.

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Following up on our recent post of David Bowie's 1974 appearance on the Dick Cavett show, here's a little added something from the same time period:

BBC's 1974 Bowie tour documentary, Cracked Actor.

If you watch David's sit-down interview with Dick Cavett, you'll hear the two discussing the idea that "the lives of the rock stars are really not as strange as the lives of the fans".






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Vitaly Katsenelson writes from the professorial background, and his book is excellent. Today he gives us a reminder (Hussman does the same) that a lot goes into earnings and today's higher-than-normal margins revert because capitalism works.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.
Comment or Read More at Technically Speaking, Market Analysis and Theory

Shiftwork?

John Hussman's take, Deja vu.

• Buy and hold longer-term action on the SP500 like to show 2-4% annual gains
• Previous markets have enjoyed bull and bear swings
• We are in a deleveraging cycle
• Fully-hedged
• High valuations exist relative to previous bear market bottoms (as one would expect in a credit driven market)

I don't read Hussman because I'm naturally pessimistic but because he looks at both price and time in an infinitely more sophisticated way than I can. We hear the 'other side of the trade' every day on television emphasizing the power of the central bankers and so on...with inattention (in general) to debt and deficits until smackage occurs. Only then do they bring out the negatives.

I want to be measured in enthusiasm at the peak of rallies and chomping at the bit to buy despair.

Sentiment
Mamis-Meisler breadth oscillator rolling over.
________________________________________________________________
New highs tepid. Another cautionary tale.

Good trading and great risk management to all.

Educational use only. Never intended as investment advice.
Comment or Read More at Technically Speaking, Market Analysis and Theory

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Think about Mom.

I never cease to be amazed by the trading community's willingness to share what they know and what they believe, within reason of course. Of course knowing what to do and doing it under stress as it were, are two different things.

Nonetheless, let's focus on some Cara 100 charts looking at 'setups' (multiple setups often exist)...with different meanings...using daily time frames.

Top ten by price.

GS, CEO, PTR...all made the narrowest range of the past seven days setting up price expansion (predicts price movement NOT direction)CNOOC (CEO) is above all the key moving averages, and has an "air pocket" that could run to the Fibonacci 1.27 extension at 200 or a retrace breakdown to 165. A thirty five point swing that could be your wildest dream or worst nightmare. Short-term there is a symmetrical triangle...will it point the way?
______________________________________________________ Google (GOOG)...I'd call this a high range flag. I don't trade GOOG, too much beta for my blood...the Fibonacci extension is almost up to 650.
______________________________________________________
Research in Motion (RIMM) is in the middle of the 'channel' and support about 128.25. Risk-benefit seems equal to me...ergo, no trade.
________________________________________________________________Suncor (SU)...extended...which is not per se a reason to be short. The red arrow shows the first pullback, the 1.27 Fib extension is about 126, and the Friday candle is a Doji star (indecision)...
I don't know how to trade this one...and won't.
__________________________________________________________
Westpac Banking is too thinly traded for me, so no point in even showing it.
__________________________________________________________Deutsche Bank (DB)...Trichet and the EU have a mandate for controlling inflation not growth. The pattern is a rising wedge (bearish), and there is already a pullback to the .382 level. Is the .618 retrace (circa 113) tempting with the stock oversold short-term? Or does the whole 'value trap' of the financials (what are these guys earnings anyway?) say stay away? You can be sure that if I get involved, it will be with options.
__________________________________________________________Millicom (MICC)...is this a false breakout on tame volume, a high range flag, or something else. If I got long, my target would be the recent high and my low would be the recent low 114.18. I don't know if I have the stomach for this particular trade...but it would depend on the intraday action...but it's not the kind of setup I want to short on...

That's the way I'm seeing these...and of course, that doesn't make it right.

Good trading and great risk management to all.

Educational use only Never intended as investment advice.
Comment or Read More at Technically Speaking, Market Analysis and Theory

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I suspect that much of my audience is male, although I really don't know. Trading skill knows no gender boundary...one of my favorite authors is Linda Raschke, and Louise Yamada's book is an absolute treasure. Citigroup bounced her technical analysis group and went into Dante's seventh level of hell, so perhaps she has the last laugh.

I wrote the following five years ago on Mothers' Day...in the final year of Mom's life.

May brings us Mother’s Day, which means thinking about Mom. Moms are special, as the sideline reporters catch the ‘Hi, Mom’ and nouveau riche athletes buy mom the dream house she never had. Even if Dad were teaching the fundamentals, everybody knows Mom was the law.

From the time a boy or girl is old enough to crawl, Mom is usually the one who rolls them the first ball. With time and practice, the little one starts to enjoy their first game with the rolling ball, the precursor to chasing some other ball on the diamond, the court, or the field. Mom probably signs them up for T-Ball and Little League, and does more than her share of driving to and from practice. Moms even earn the special moniker of ‘Soccer Moms’, a ‘focus group’ for political parties, a constituency of van-driving, referee-baiting power.

Mom always tried to make a game of everything, Spelling Bee or Math Rounds during washing the dishes before there were dishwashers, and Scrabble or cribbage to sharpen a young mind. She introduced me to medicine, too, with a book called ‘The Great Physicians’ at age 12, where I learned of Galen, and Vesalius, whose grave-robbing exploits revealed the circulatory system, and the wonders of Morton and Pasteur.

Sometimes mothers become the catcher, or the goalie, or the batting practice pitcher. I remember how Mom’s sister was the athlete, who could play ‘catch’ with ambidextrous ease. Still Mom was the one who got dinner out early, and never complained as we wolfed it down to get to practice or games on time. Mom was always my biggest fan.

Mom would make sure the uniforms were clean, and that we had spikes, or cleats, or sneakers, even when money was tight, which it always seemed to be. There was never any question about hustling on the field or on the court; it was very obvious that Mom and Dad hustled to make ends meet. When progress merited it, there were a couple of years where the ‘rents’ scraped up the dough for me to go to Sam Jones’ basketball camp. I still can’t understand how Sam could put four quarters on the back of his hand, turn it over, and catch them individually, as though he were a machine.

Mom and Dad would make the traveling appearances to watch a game when they could, ‘night games’ mostly, because they worked, and there was only one car anyway. They’d sit on hard bleachers in cold weather to watch their son pitch or hit, or try to field. They never could make it to any soccer games, but tried to go to every basketball game, even when I didn’t really want them there. They came to the “Tech Tourney” games in the Garden, and were rewarded with a photo of their son kissing the Division I North trophy along with his smiling teammates. They came to Wakefield, Winchester, and Waltham in sweltering heat to watch the Inter-City League games, and even after Dad had passed, Mom still came to watch her ‘little boy’ try not to embarrass himself as a forty-year old in the Wakefield Twi-League of twenty-somethings. She smiled a lot, even though she started to feel the pain of advancing age, just like her son the pitcher.

Mom wasn’t perfect. A meticulous housekeeper, she was a neat-freak nightmare beyond any teenager’s belief. She was a domestic tyrant. If displeased, she unleashed a stream of undeleted expletives which let you know where she stood. Those times made it easy for a son to find comfort at the ballpark, the gym, or the library, safe with teammates and books. She never had a lot of friends, and her outbursts kept those at a distance. Her Irish temper had a volatile and short fuse, and too often she sought refuge at the end of a bottle. But through it all there was a constant, a devotion to her children and their success in making it in a hostile world.

Mom no longer has the inquisitive and sometimes scolding eyes; she sees her world with an indescribable emptiness and often vacant expression. Her face is kinder now, exposed to a brave new world. Her mind and body dwindle, ravaged by Alzheimer’s Disease and cancer. Her biggest comfort comes from the further mind-numbing effects of pain medication in the nursing home, not from the visits of caring friends and family. Nobody should have to live as she does, and she deserves five words which she hears but cannot remember. So, if you can, tell your Mom “I love you” and “thank you”, while she still knows you care and she knows your name.


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I referred the following quote in the comments during the week but in a video on Bloomberg Stephen Roach said that no country has ever devalued its way to prosperity and the US won't be the first.

A few times since the tech bubble burst I've heard or read people pointing back to some very specific indicators/factoids from when the bubble was inflating with the tone being that an extreme bursting was obviously going to happen.

Sometimes I get the feeling that we are now confronting things that come the middle of the next decade people will look back and say things like "with an $8 trillion dollar deficit of course the market..." and then they'll fill in with whatever does in fact happen. Another one might be "well the dollar cut in half in just ten years so of course..."

My stance on this line of thought has been the same for a while which is there is visibility for lower, but still positive, stock market returns, higher interest rates than we've had for most of this decade, like maybe ten year treasuries in the sixes or sevens and the slow realization that the US will not be the most important economy in the world in the 21st century.

If it is not clear, I do not believe the US will be some sort of post-apocalyptic outpost where we barter with gasoline or whiskey. I even wonder whether many of us will even notice. In fact if this turns out to be correct I suspect history would say this shift started in the late 20th century, maybe with the Plaza Accord?

Something that should be obvious toward this point is that capital has clearly flowed into other countries. Look at the five largest companies in the world and the US does not dominate as it used to; Gazprom is on there along with a couple of Chinese companies.

A skeptic might note that part of the problem with the tech bubble was all the companies that were larger than $100 billion. I don't think $100 billion is the key number anymore, maybe its $200 billion or $250 billion but maybe this is an issue; Gazprom made a high on Friday in dollar terms and has a $347 billion market cap. Or maybe it isn't; Petro China (PTR) is down 47% and according to Yahoo Finance has a market cap of $253 billion.

The market cap issue is something to be aware of. Petrobras (PBR) is up to $283 billion, China Mobile (CHL), client holding, is down to $334 billion. The more important thing is that significant capital has rotated into these countries during this decade and I doubt any of us are surprised. At the same time the US market has had a big round trip to nowhere.

The ascendancy of these countries, possibly at the expense of the US, is a big, big macro theme and however you are capturing it now you may need to capture more of it. Don't take that as bigger bets but maybe the path is more smaller bets. Instead of owning three or five other countries maybe you need seven or eight.

I write about this a lot but I think it is becoming more obvious that this will be important for our financial futures.

The picture is from Phantom Ranch which is at the bottom of the Grand Canyon.
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• How to Be a Man
  (tags: man toread philosophy)

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Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

It is the weekend and I really would like to get this review done.  Last weekend one thing led to another and I never got one out for the blog.  And now I am another week behind....so not really a look a 'year ago'...more like a year-and-a-half!  In any case, let's get down to business and review the picks from the week of October 16, 2006.  Two weeks ago, I reviewed the stock picks from the week of October 9, 2006, so let's see how the two selections from the following week turned out! 

These reviews assume a buy and hold strategy for investing with equal dollar amounts assumed invested.  In reality, I advocate and practice a disciplined portfolio strategy--selling declining stocks quickly and completely and selling appreciating stocks slowly and partially.  This difference would of course affect performance and should be taken into consideration when considering these performance evaluations. 

On October 16, 2006, I posted Angeion (ANGN) on Stock Picks Bob's Advice when the stock was trading at $10.75/share.  ANGN closed at $6.26 on May 9, 2008, for a loss of $(4.49) or (41.8)% since posting.  I do not own any shares or options in Angeion.

On March 17, 2008, Angeion (ANGN) reported 1st quarter 2008 results.  For the quarter ended January 31, 2008, the company reported revenue of $7.5 million and a net loss of $(675,000) or $(.17)/diluted share, compared to revenue of $10.6 million and income of $489,000 or $.12/diluted share last year.

With this poor quarterly pereformance,

ANGEION (ANGN) IS RATED A SELL

Looking at the Morningstar.com "5-Yr Restated" financials on Angeion, we can see that revenue growth peaked at $39 million in 2007 and has come in at $35 million in the trailing twelve months (TTM).  Earnings peaked at $.38/share in 2006, dipped to $.24/share in 2007 and is at a loss of $(.05)/share in the TTM.

Free cash flow remains positive at $1 million.  And the balance sheet remains solid.

Reviewing the 'point & figure' chart on Angeion from StockCharts.com, we can see that the stock peaked in January, 2007, at $18.50/share only to decline with an acceleration in the drop in April, 2007, when the stock broke through support at the $14.50 level.  The stock is currently struggling to find a new level of support at the $6 level and has some 'work' to do to get above resistance and into new positive territory. 

On October 19, 2006, I posted Alliance Data Systems (ADS) on Stock Picks Bob's Advice when the stock was trading at $60.43.  ADS closed at $59.11 on May 9, 2008, for a loss of $(1.32) or (2.2)% since posting.  I do not own any shares nor do I own any options in Alliance Data Systems.

On April 23, 2008, Alliance Data Systems (ADS) reported 1st quarter 2008 results.  For the quarter ended March 31, 2008, revenue increased 7% to $499.3 million vs. $466.3 million for the same quarter in 2007.  Income dipped 3% to $62.7 million in the quarter vs. $64.7 million or $.78/share down from $.80/diluted share in the prior year.  (These results were adversely affected by the one-time costs associated with the cancelled sale of the company to the Blackstone Group.) 

Reviewing the Morningstar.com "5-Yr Restated" financials on ADS, we can see that revenue growth is intact, earnings have dipped in the trailing twelve months and 2007, shares are stable, free cash flow is solid, and the balance sheet appears adequate.

With most of the financial data intact,

ALLIANCE DATA SYSTEMS (ADS) IS RATED A HOLD

Let's take a look at the chart.

Reviewing the "point & figure" chart on Alliance from StockCharts.com, we can see the recent sharp decline in price performance from a peak at $80 in October, 2007, to a low of $40 in January, 2008.  The stock is fighting back and recently broke through a resistance level but has a lot of 'work to do' to get back into a positive technical pattern (imho). 

So how did I do with these two stock picks from the week of October 16, 2006?  In a word, mediocre!  Both declined in price from the selection price and had an average decline of (22)% since posting!

I do believe that these types of stock performance support my own belief in the need for disciplined management of holdings and that the 'buy and hold' proposition is far too risky for me!

Thank you again for dropping by!  I hope you all have a great weekend.  If you get a chance be sure and drop by my Covestor Page where you can monitor my own trading portfolio (which has been very stable for the past month or so), my SocialPicks Page where you can view my past stock picks and how they have been doing at least from early 2007, and my Podcast Page where you can listen and download mp3's that I have put together on some of the many stock picks on this blog!

If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

 

Bob 

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America may well be only halfway through the house-price bust; so says this week's Economist:

Mr Bernanke's maps use figures from the Office of Federal Housing Enterprise Oversight (OFHEO). Its statistics have broad geographic reach and track repeat sales of the same house. The monthly national index suggests average prices have fallen only 3% from a peak in April 2007, and the quarterly figures are still positive (see left-hand chart).

But OFHEO's figures include only houses financed by mortgages backed by the government-sponsored giants, Fannie Mae and Freddie Mac. By excluding subprime and jumbo loans, they leave out the top and bottom of the market—where prices rose fastest during the bubble and where the mortgage mess was most severe.

Thus OFHEO's figures probably understate the scale of the housing mess, particularly in states such as California and Florida. Another set of indices, developed by Robert Shiller and Karl Case and produced by Standard & Poor's (S&P), a rating agency, includes all types of houses and, not surprisingly, show house prices rising faster during the boom and falling faster now. As of the fourth quarter of 2007, the S&P/Case-Shiller national index was down 10% from its peak, and an index of ten large cities had fallen by almost 16% by February. Although the Case-Shiller figures are not perfect—they miss many rural areas—they are a better gauge of price declines in big cities.

Note: As mentioned earlier this week, Fannie Mae data is ex-foreclosure, also.

The graphs say it all:

Changes in House Price by County

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Source:

Map of misery
The Economist, May 8th 2008
http://www.economist.com/finance/displaystory.cfm?story_id=11333030

Comment or Read More at The Big Picture

I mentioned last week Briefing runs lists of options that deviate importantly from their historical volatility.

What I was trying to say is highlighting the disconnect implies there's some sort of edge when there's this disparity. And generally there's a reason for the pricing. That's not edge so much as it's a bet as to whether the options fully price in the magnitude of a move or not.

But hey, guess what, they also run followups to the lists. My bad.
Comment or Read More at Daily Options Report

While I was on my break, I added a link on the right hand side to Xearn. I think this is a pretty neat site, and would encourage every one to take a look at it.

What they do, is allow you to create a paper portfolio with $100,000. You can base it on your own portfolio, or go a completely different direction. Xearn will keep track of everything. You make the trades real-time, just like you would with your broker. If you are good, you will be able to get subscribers to your portfolio. And if you are really good, you can charge those subscribers a fee to see that portfolio. Xearn will also keep track of that, collect the fees, and pass them onto you. Obviously, they take a small percentage of those fees. It's a great deal however, as I know full well how much it costs to set all that up yourself, and it looks much easier to go this route, in my opinion.

Either way you go, please check it out (Xearn). The site owner has asked for feedback, so please let me know what you think, and I will pass it on to him.
Comment or Read More at Stock Insight