Archive for June, 2011

Stock panic. Yet again.

June 15, 2011

I’ve been losing money these past weeks… but I’m buying more the more they fall. I think financials for instance, are greatly undervalued at this point. I’m not a trader and I’m horrible at timing the market, but I seem to be good at picking undervalued companies that move on my direction after a few months. USB, WFC, STI, BAC, C… they are all cheap. Even if basel 3 is applied to them, they are oversold.

Tech sector seems to be in a similar situation, NVDA, APPL, GOOG, ARMH, AKAM, INTC, MSFT… it’s just wonderful time to pick them up. Apple might surprise to the down side which would push all of them down but the truth is that mobile devices are selling like ice cream on summer and people don’t realize that not only Apple manufactures those devices. If and when iphone5 is announced, wait for an Apple bounce. Also any mobile device selling means ARMH should get income. Any new tegra2 or tegra3 chip selling means NVDA. Increase on mobile is always good for GOOG, and any news on Intel and its new mobile chip will push its stock up. Akamai should move higher, last time I’ve checked we are not reducing our internet usage. And Microsoft is the king of undervalued, even with no growth, they just need to release anything that produces a bit of income to move that stock up. Windows for ARM chips could be a catalyst.

And then don´t get me started on BRK. It has never been this undervalued as long as I can remember.

So sleep tight and buy cheap while you can. Just don’t put money you are going to need in the short term into this. I leave the market timing to brighter minds.

My latest stock comments

June 13, 2011

I haven’t posted on a long time since I’ve been more busy with the personal blog. Check http://www.joaquingrech.com to see what I’ve been up to.
Nevertheless, I figured it’s not a valid excuse to be busy to not update my blog. Not much of a blog if I don’t post entries right?

After a pretty “relaxing” 2010 on the stock market (by relaxing I mean it went mostly up), now we are back into panic mode. I enjoy these periods because they are usually the best for picking up undervalued great companies. I love in particular one index, the IBEX-35. I’m from Spain and live in Spain, the IBEX-35 is the spanish index of 35 biggest companies. Nobody likes Spain’s economy nowadays, but most importantly, nobody even in Spain thinks this is going to improve at any moment. I believe this is a great buying opportunity. For a long time I didn’t like the IBEX, it just didn’t make sense that with the economy on a 20% unemployment we almost had a correlation of 1 to 1 with the S&P500. The US stock market was up 50% and so was the IBEX, but clearly our economy was not even close to that level of improvement. What did happen? The IBEX has tanked for most of 2010 and fell out of favor. It’s currently at the 9,991 level at which great companies such as Banco Santander, BBVA, Telefonica and Iberdrola are at almost their 52 weeks low while providing dividend payments of 5% and above.

I own all those companies and I’m also buying EWP, which is the Spanish index from iShares. 5% dividend payment while growing with the Spanish economy as a whole. Will I be wrong? who knows, but I just can’t bet against Spain when the fear of collapse is so high and the economy has tanked for such a long period of time. To me it seems to be completely overdone at this point with armageddon already priced in.

What other picks did I comment on during the year?

First, let me say that I almost never short stocks, so eventhough if I mention that a stock is horribly priced, the most I usually do is buy put options on it. Risk/rewards are not good for short sellers on most occassions. Having said so, my latest comments at Fool.com:

China Biotics, CHBT. Recommendation: Sell. Recommendation at $7.57, current price $4.26. (profit so far 45.84%)
“Already 2 serious sources indicate this to be fraud. You can see the stock price just keep going down the more reports come out.
So far nobody has been able to identify their customers. The list of customers that they made public, were contacted by researchers and none were able to confirm operations with them. The company states to have about 400 employees but visits to their offices were not able to see more than 30-50 people.
All in all, it seems that although operational, they have vastly overstated production, income, earnings and most other important figures.”

TBS International, TBSI. Recommendation: Sell. Recommendation at $1.53, current price $0.93. (profit so far 39.22%)
“I was majorly hurted by this purchase. I went into it without even reading the 10k just based on what other people was saying. Biggest mistake of the year, i’m down 50% on real $. I took the time to pull out the 10k and analyze it in detail before deciding to sell/buy it and this is my conclusion:

This company is burning cash, way too fast. The issue is that due to a slowdown in the sector they are not generating cash flow. To finance themselves they’ve pulled a bunch of loans but what they used to be long-term debt are not short-term debt. To give you an idea they ended 2010 with $332mm debt due this year and only with $18mm cash and total current assets of $80mm. Basically the only way to raise the cash with their income is to begin selling assets quick. You know that’s not a good sign already.

If they are able to raise some cash to survive this year, they might be able to not go kaput, but as an investment that’s highly speculative. Looking at the debt, assets and market cap, the company is worth more dead than alive, and I don’t feel it can beat the market at this moment.

I’m flipping my outperform (wihout analysis) to underpeform (after looking at it myself). Conclusion, do your own reseach so at least when you get burned you learn something from your mistake.”

Rino International, RINO.PK. Recommendation: Sell. Recommendation at $2.00, current price $0.54. (profit so far 72.95%)
“seems to be on the way to bankruptcy”

JBI, Inc. JBII.PK. Recommendation: Sell. Recommendation at $0.65, current price $3.90. (lost so far 496.17%)
“wow, i have a negative 400s score on this one… that’s why i almost never short stocks on real life.
In here though, I have the time to be proven right without going bankrupt and I just don’t see the numbers adding up for this company.”
I will write more about this stock in next post since it’s a perfect example of why not to short stocks. This stock reminds me of Wicked’s soundtrack “Defying gravity”: http://www.youtube.com/watch?v=0eF06fNK3Ng
Even if I’m proven right later, imagine a 5 times your investment lost. It would have wiped out all your gains from previous investments.

Kraft Foods, KFT. Recommendation: Buy. Recommendation at $25.05, current price $34.15. (profit so far 36.80%)
“valuation”

SunTrust Banks, STI. Recommendation: Buy. Recommendation at $26.63, current price $25.40. (lost so far 4.38%)
“valuation”

US Bancorp, USB. Recommendation: Buy. Recommendation at $22.96, current price $24.28. (profit so far 6.06%)
“valuation”

General Electric, GE. Recommendation: Buy. Recommendation at $14.68, current price $18.40. (profit so far 25.54%)
“valuation”

Johnson & Johnson, JNJ. Recommendation: Buy. Recommendation at $53.81, current price $66.22. (profit so far 24.04%)
“valuation”

Pfizer Inc, PFE. Recommendation: Buy. Recommendation at $14.24, current price $20.52. (profit so far 44.08%)
“valuation”

Becton, Dickinson & Company, BDX. Recommendation: Buy. Recommendation at $64.87, current price $84.98. (profit so far 31.40%)
“I trust Buffett” (not exactly the best analysis, but hey, at a P/E of 10 with Buffett backing it… I kiss it blindfolded).

And that’s all for a quick summary.