Still trying to relearn the same lessons

One of the earliest lesson I've learned in investing is when to walk away. Sadly, it's a lesson that I seem to have to keep relearning every few trades. Take HRP for example, I knew I should've sold it when I had a chance, when the dollar averaged result was still a gain, or at least, not that big of a loss. But I decided that I was going to be smarter, and hold out for a little longer. End result, the stupid stock took a $0.20 drop at the end of the day, and now instead of having a break even result, I'm stuck with a loss for the moment and have to sit on the stock.

Another idiotic thing that I did was I bought FSLR by accident when I didn't pay attention to the condition I was setting. I can't believe it. Definitely not a good day for stocks. Well, at least April is over, so far, I can say this isn't a good year for stocks. The old lessons that I keep relearning:

1. Always know when to walk away.
2. Pay attention, because even a small mistake might cost a fortune.

Trading: April 29, 2008

Today I added First Solar to my portfolio for the first time. I'm not sure I have a good feeling about this since earnings are tomorrow. But it's a very small position for the moment, so we'll see what happens. But I have a feeling I should be divesting out of some of my solar stocks now just in case things go downhill. After all, the solar stocks have had an incredible uphill run. So, it wouldn't be surprising if things started going down a bit for now. It's a gamble, but a small one. Let's see where this takes things.

What happened to last week????

Well, like it or not, a week has gone by, and my portfolio isn't better for it. Although I bought into Apple again last week, I would've been better off had I just stuck with it and not moved into Intuitive. It seems like all the major moves have gone bad recently. But I did do some reshuffling, moved back into STP, have to see if the earning reports from First Solar can get me higher up, or if STP is about at its limit. The big concern there is that FSLR reports poor earnings and then it drags everyone else down.

Well, this will be an interesting week again. I have a feeling that I will dump at least one of the stock in the current portfolio. As long as it makes some money. I guess it's better than nothing for the moment.

Monday again....

I hate Mondays, they're both opportunities for the future and reminds me of the mistakes in the past. ISRG rises a bit more, and HRP seems to be dropping again, and Apple is starting to move too. So, in the hopes of not missing any more of the bull run, I added slightly to the Apple position, and may do so again tomorrow depending on how things turn out. The fear is of course two folds, first, Apple will disappoint, and drop largely, the second is that Apple will report and guide optimistically, but the news will already be priced in. Either way, we'll see shortly.

On the HRP front, we'll see where the stock goes in a few days, because ex-dividend day is Wednesday, and depending on how that goes, I'll likely be moving out on the position there.

Friday: April 18, 2008

I have this feeling before, it's as if somehow things are out of whack. I sold half the losing position on ISRG, and bought in some additional position on HRP today. Both turned out to be not the best move. It remains to be seen how things play out. Apple has continued to rise much to my annoyance, as has Visa, and other stocks that I've traded in and out of. I wonder if I'm missing a bull run session.

I hate losing: April 17, 2008

Well, my gambles didn't pay off. I doubled down my bet on ISRG, and while those guys came in with good earnings, their guidance didn't exceed expectations. So, of course after hours, the stock is hammered. Gawd, this is reminding me of the Apple disaster all over again. I wonder how much this stock has to drop tomorrow. Well, think in this case, I'll sit tight. My other prediction on Google was wrong too, the stock shoot up, well, can't win them all. But at least my Sunpower prediction was there, good thing I sold off STP. Depending on how things look tomorrow I might reenter the solar space again.

On the whole, I had better days in the stock market.

Trading: April 16, 2008

The image here pretty much depicted how I felt today. Although it's not at all obvious to me which of the animals should be slaughtered. The market has reacted surprisingly well to earnings so far in spite of the GE miss.

But I feel like I'm gambling a lot. I sold off Suntech today, probably not in a smart way since I sold it below what it was sitting at for most of the day. It was a sensible decision, but not done in a sensible manner. Tomorrow Sunpower reports, if it's good, then I think Sunpower's good news is already priced in anyway thanks to record high oil. If it reports poor earnings I get to go back buy another stock, may be First Solar.

I'm still sitting on a little bit of ISRG that I collected. This could be dicey since the company reports earnings tomorrow. ISRG has so far not ever let me down on earnings season, hopefully this one will be no different. Now, the real disappointment is still Apple, that stock continues to rise. Depending on Google earning report tomorrow, Apple could drop to $130 somewhere so I can buy it. I'm really hesitant to buy before earnings is announced next week, but on the other hand, I can't help but wonder what if Jobs decides that he has a good quarter, announces 3G iPhone and give good guidance all at the same time, it could shoot up up quite a bit. This one is a wait and see, since I can't make up my mind on not touching Apple before earnings come out.

The World's Biggest Airline...

News that Delta and Northwest are getting hitched is likely to set off a chain reaction in the domestic airline industry. The merger would create the largest airline by traffic in the world, although the same can’t be said for profitability. The US airlines have been bleeding red ink thanks to higher fuel prices and steady competition from low cost competitors. Since my writing on this subject three weeks again, there has been a spate of bankruptcies. Almost everyone is blaming the high cost of jet fuel for the industry’s woes, and the airline industry is a poster child for underwhelming performance.

But the airline stocks might not be so bad for a number of reasons, in fact, there might be good reasons to start bottom fishing for some of the beaten down companies. Here are a few I can think of:

1. The airlines are all trimming back on capacity, meaning lower operations costs, and from the market standpoint, improved revenue and profits.

2. Fuel prices are at unnaturally high, and with the economy in recession, the price of oil is likely to fall and thus relieve of some of the operating costs from the airline industry

3. The increased number of international routes that are both profitable and generally under served. This is especially true for the Pacific routes.

4. Increased travel demands internationally means that competition is generally still small and there is significant room for expansion.

5. Airlines are raising prices to combat fuel costs, and might not be so willing to cut back costs if there are less competition due to mergers.

I think these factors will allow the domestic airlines to improve their profitability. Especially if there is more focus on the international travel and paring back domestic routes which are under pressure from low cost carriers. Mergers will force airlines to cut staff and reduce number of flights in order to reduce operational costs and improve efficiencies. The merger between Northwest and Delta will likely to enable further consolidation within the industry, barring the unlikely event of regulatory concerns on market share.

Based on the assumptions that we will see further consolidation, I think the best stock in the airline group with upside is Continental Airlines (CAL). They are likely to be targeted United, and the consolidation there would make sense. The international routing of a combined company would benefit significantly, for the Pacific routes, each would bring in unique capabilities: Continental with India, and Israel, and United with several Southeast Asia routes including Thailand, Singapore, Vietnam, as well as Taiwan, Australia, and Kuwait. Then both also serve China which would allow increased frequency on very profitable China US routing. For Europe, Continental would add significant number routes for a combined entity, bolstering United’s lackluster offering. The comparable reduction in domestic routes would also make a merger between to two companies extremely attractive. Based on this, and the current Continental pricing, I think it is probably more attractive domestic airline stock out there for short term gains.

Trading: April 15, 2008

Added to my position in ISRG today, but then the stock dropped after hours, how annoying. The earning season isn't too bad so far considering Intel's results today, not the big drop I've been expecting. But Ebay reports tomorrow and then Google, so, tech is still in danger. I think the ISRG buy is a gamble, but at 25% of portfolio, it's time to stop and see if the gamble can pay off. The rest of the portfolio was more or less flat. One thing for certain, I need to get out of Genetech the next time it gets above water.

Taking a Gamble: 4/14/08

I sold my position in Apple, and let me say it was not the best choice in the world, I took a nice 25% loss on it and it stings. But the alternative is to keep the money there and worry about it going down during earnings next week. I don't doubt that earnings will be pretty good, I think Apple will guide conservatively as it has done in the past. Given its exposure to the consumers, this makes sense. I'm going to gamble that Apple will have some more to drop during in the next two weeks, and that I can enter at a lower level. No doubt in the long term, Apple is a good bet, so I hope this gamble pays off.

One other gamble late today was buying into Intuitive Surgical, I bought a small position, but I'm going to gamble that they have good earnings and that guidance will also be decent. I'm banking on the fact that robotic surgery will be cheaper in terms of cost compared to normal surgery when examined in the totality of the cost. That and Intuitive's monopoly on the space should keep earnings up as well as forecast. I may reinforce the position a little tomorrow morning. I don't know how much upside, but I think it would be reasonable to revisit the $350s if Intuitive manage to beat earnings and give good guidance.

Gaming the Earnings Season

It’s that time of the year again… and the bear is already starting his feast. But if GE was the appetizer, the main courses are all coming up, on deck this week are some of the leading indicators for the rest of the industries. We have Merrill Lynch, Citigroup, Wells Fargo for the financials, Google, Ebay, IBM to name a few of the tech heavy weights, Caterpillar, Johnson & Johnson, Schlumberger, and a host of others that represent the first wave in this earnings season.

Everyone already knows that the US economy is in a housing induced recession, and the consumers are starting to feel the pinch. This coming week is likely to mirror last Friday’s monumental drop punctuated by bad economic forecasts and reports. So how to play this period of volatility, there are a few sectors that I’m particularly keen on, and I think will bear watching.

First, my favorite, the solar sector, Sunpower, one of the leading solar companies is set to report on Thursday. It will definitely set the tone for the rest of the solar companies, I’m going to guess that its report will be fairly good, but the stock will be slaved to the trends of Wall Street until Thursday. With its recent run up, I think the stock has a high hurdle to clear even with good earnings. So my strategy would look to buy stocks in the sector after earnings come from Sunpower on Thursday. If the earnings are good, the entire sector can go up for a few days, providing an opportunity for a quick flip. Alternatively, if the earnings are bad, it’s a great opportunity to buy in to a good company.

Then, there is Google, if I had the guts, I’d short this stock. My guess is with the consumer weakening at this point, its revenue for click based searches have been dropping. So, when it reports on Thursday, I’m guessing the stock is in for a good drop. Unless they have some other blockbuster news that can divert attention, growth is slowing for Google. This wouldn’t be an opportunity to buy into Google, but it will definitely affect other tech stocks, such as RIM, Amazon, Apple, and depending on the level of the drop, it might be a good idea to get in on those next week, after Apple’s report.

On the financial sector, I expect a slew of bad news on the earnings. I can’t imaging Citigroup, Wells Fargo or any of the others having good earnings. But I think the flip side is that the market may have already factored in the bad news, Citi for example is almost at its lowest point in a decade. So, unless there is another Bear Stearns in the mix, the financials might be a buy at this point on the theory that most of the bad news has been wrung out of that sector. Again, I think the best play is to buy these guys after earnings, Citi has had a nice run up recently, so better to play this one a little more cautiously.

Finally, there is a personal favorite here, Intuitive Surgical, reporting on April 17th. I am personally looking to get into the stock before any announcements. But I have to say, I’m scared. Intuitive is near its all time high, but it’s a great company, has locked in a nice monopoly for its robotic surgery system. The market is expanding, and it’s also got a nice revenue stream in the form of a razor blade model through the selling of disposable parts on its surgical system. What’s not to like here. But if there is a hint of slow growth, then it’s over. My strategy for this would be to hold out until the last day or so before earnings, if it goes down sufficiently, buy it at that point. Then a good earning report should give back some decent gains, even with the recent run up.

Microsoft, Yahoo, and You

Ever since the Microsoft announcement of its intent to takeover Yahoo in February, the drama has been ongoing. To date, others have gotten involved, including Google, Time Warner with AOL, and if you believe it, News Corp. The battle on the surface seem to be for a larger chunk of the search market, but one has to wonder what else there is beyond this takeover.

To start with, the offer is more than fair, on January 31^st (just prior to the announcement), Yahoo closed the day at $19.18, and the unsolicited Microsoft offer at $31 a share cash/stock offered a huge premium. The price is unlikely to be matched by anyone else, Google wouldn’t care since it already owns the search market (77.7%) compared to the Yahoo (12.06%) and Microsoft (3.25%), no one else realistically has the money. The only reason that Jerry Yang and the Yahoo board has held out is that they’re greedy.

In this case, Microsoft is the one taking the risk, $31 a share would suck up a sizeable portion of Microsoft’s existing cash pool, the integration is fraught with danger, and should the bid be successful, integrating operations and keeping the remaining talent at Yahoo will be a tricky proposition at the best. I don’t believe the Ballmer red herring of trying to compete with Google. That just doesn’t make sense. Why would the number two and number three player merge and hobble themselves in the process to try to compete with the dominant player?

But Yahoo does own some other attractive pieces of property, for example, Yahoo’s email service still holds the largest market share, Yahoo Sports is a fantastic site that is also a wonderful money generator for the company, then there is Yahoo’s stake in Alibaba and Yahoo Japan. There are also other nuggets which Yahoo has acquired through its operating history. May be Microsoft is trying to buy enough assets to spin them off in the future, or gain presence in the Asia market, whatever the strategy, search is likely not a part of that big picture Steve Ballmer has formed in his head.

It’s obvious that Ballmer has pegged the price he is willing to pay and is unlikely to up the bid. The Microsoft ultimatum to Yang and company on April 1^st is timed to coincide with the Yahoo earnings announcement on April 22^nd. Three weeks to the day when Microsoft believes that Yahoo will either have to come up with great earnings, or just plain give up before Microsoft carries out the threatened proxy fight or lower the bid (which would just put a good majority of Yahoo shareholders in open revolt).

So how does this play for Yahoo and Microsoft stocks? For Yahoo, holding on to its stock at this point is a losing proposition, if you bought the stock on January 31^st, it should be sold because it isn’t likely to go much higher. As for Microsoft, if it doesn’t buy Yahoo, the stock will definite go up, but if it does get Yahoo, then it will face a tough challenge integrating the parts. But it really isn’t worth the gamble. So, the best choice there is to sell the stock if you can take profits now, or hold on and hope the takeover doesn’t go through, because if it does, you’ll be in the stock for the long haul.

Trading: April 11, 2008

Yesterday was definitely a bad day for the market, GE went out and essentially killed everyone. So, I took the advantage and made this a buying opportunity. I bought up STP in the morning, and then it promptly went further down. This could be a mistake considering that Sunpower (SPWR), a major solar play will be announcing earnings next week, if it misses or guides down, it’s likely to take the entire solar sector down with it. So, STP could be a quick sell if it rallies a little enough for any type of profit.

I also doubled up on my HRP shares, this one at least has a dividend, and I may buy in a bit more if the market drops during next week. My biggest disappointment of the day though had to be Apple, down a lot, definitely a sell candidate if it drops any more. That means taking a large loss from when I bought it last year. But I’ll take the chance since I don’t want to just take the elevator ride down again. Overall, not a good week, but waiting on next week for some buying opportunities.

Is it the beginning?

Basically today was a bad day for the portfolio, but a good start for what I think is going to be a long down trend for the market as stocks go down. I look at the coming earning season, and I think for the most part it's going to be a wreck with people either having negative earning surprises (which will dominate) or poor earning guidance. The only thing that would help stock is if all the bad news are priced in. Somehow I don't think we're quite at that point yet.

Things will still hold up, if the bad news aren't as bad as expected. Case in point, Boeing was strong today, up $3.58 because it's bad news about 787 wasn't quite as bad as it sounds. Although I think Boeing is kidding themselves, the stock will stabilize, but I'm betting there is still more negative surprises to come, too much open items for Boeing, and a weakening economy means that airlines are not likely to buy as many airplanes.

The one point I'm kicking myself on is STP, I should've bought it back on the day I sold, solar stocks have crept back up thanks to higher oil prices. Again, it's very tough to tell, oil has gone
really far up, everyone says a pull back is inevitable. The only question is when, if oil goes down, so down the rest of the energy stocks, and so I'll play it safe for now and wait for the drop again. Tomorrow will likely be modest move up or down. But starting next week, I think we go into triple digit territory again. And I'm betting it won't be good news.

Trades: April 8, 2008

Sold RIM for slightly lower gain than I should have. How annoying, this is starting to become a pattern here, after I sell the darn thing it goes up. The same is true with RIO and Visa, it seems like I pick them just a little too late or too early and sell them a little too fast. So, of course, along those lines, my HRPT and Dendreon has been dropping, I may reinforce those positions later on, especially HRPT before the ex-divident date.

Beyond this, I added a little bit of VM ware to my portfolio today. Just a little bit, although I seem to have missed out on a nice $10 run in the last two weeks, this puppy still has some room to run, at least until earnings come out. We'll see how well this one does. Apple is just stalled out it seems, the last couple of days, it seem to be stuck around the mid 150s range. Hope it doesn't drop too much.

Both RIO and Visa are on the watch list, as are the solar stocks, I wonder when these will start up their drops.

Trades: April 7, 2008

Sold Suntech today under a standard trailing point order. Good thing too, solar stock seem to have dropped a bit today. This is probably because the entire sector has been going up like crazy in the last two weeks, so it stands to reason that there should be a bit of a correction. Will have to look for an entry point a little later on these stocks. RIM should have been sold off today too since all it has been doing since earnings is go down. It would be a good idea to possibly take some profits for tomorrow.

It seems that there is a lot of run up to stocks prior to earnings. This might indicate that the run for Apple, Google, and a lot of tech names would be good up until a day or two before their earnings. I think especially for companies like Google, there is a lot of downside to this stock.

Both risk plays from Friday have dropped, if they go further, there might be a new entry point somewhere down the road. The financials keep going up, and that's interesting, it makes me regret selling Visa a little bit, I will probably have to get back in to that one sooner or later. But I have a feeling that the market will likely see a few more ups and downs in the coming weeks as earnings start to go out. The market has been doing just a little too good lately.

Trades: April 4, 2008

I have to say, I don’t get this one, in an up market day, somehow RIM managed a loss. May be it’s because the recent gain has already factored in the excellent quarter and the good earnings guidance for the rest of the year. This one might have to be just sold, I doubt if I have enough gain to have a contingent sell put in that would be useful. STP on the other hand had a pretty good day, and for this one I did decide to put in a contingent sell though since I want to be sure to lock in the gains, and besides I am still nervous about that particular industry.

I did do two other trades, both are high risk speculative trades, HRPT Properties (REIT), and Dendreon (risky Biotech with Provenge). HRP with a low at $6.58, but the mitigation here is a nice dividend yield and of 12% thanks to their low stock price, and today announced $0.21 a share with a ex-dividend date of April 23. So, there is a potential to go up a bit more on this stock.

Dendreon is quite an interesting story, it’s a biotech with a one shot prostate cancer drug that is awaiting the results of FDA phase III studies. This stock had a wild ride last year, bolting up to $25 at one point before coming back down to earth. The stock has been as low as $4.15 in the last few weeks and is only just now climbing out of the hole. I think I probably bought a little too high here, but the news was that some anonymous investor bought 8 million shares at $5.92, so this is a risky but worthwhile shot.

There is no doubt both are risky, if they go lower, I may reinforce the positions.

Taking a bite out of someone else’s Apple

The man shown here is probably worth at least $40/share of the Apple stock price, probably more. Call it the Steve Jobs premium, but it is not undeserved for someone who has managed two large paradigm shift in just the last decade, first dominating the MP3 player market and changing the way music is sold on line, and then shifting the way the consumer cell phone market works. Oh, and lest anyone forgets, Apple still derives a of its revenue and profits from the Mac, which was essentially an industry wide joke a little more than a decade ago. All this for a 53 year old, it ain't bad.

In the case of the iPod and the iTunes online store, Jobs had taken a music industry to a different level, and you could say he has effectively obsoleted CDs. Apple has just been ranked the top music retailer and that’s just using a virtue store. The market for the iPod isn’t just about music either, with the iTouch and video capability, it is likely that online videos will also be a target for Apple down the road. It doesn’t hurt that that Macs also provide a great avenue for the video market.

Shortly after the iPod, Jobs launched another coup by changing the way the cell phone market works. Before he introduced the iPhone, everyone was selling phones like disposable razor blades, and the idea of paying equipment marker a part of the subscription fee for the consumer market was crazy. But along comes Jobs with the iPhone and everything is turned upside down. All the hype, and Apple hasn’t even really starting selling in Asian markets yet where the iPhone has already reached iconic status. Then there is the expected iPhone push into the enterprise market, RIM territory. The iPhone seems like it is on just the beginning of a very profitable growth trajectory.

Finally, there is the Mac, virtually declared dead about ten years ago, thanks to Wintel, Mac has clawed back its share of the PC market to more than 8%, this is coming back from a market share of under 5% and declining in the late 90s. With the introduction of the various Mac models, Apple is continuing to focus on the PC market, although it is likely that this push is aimed partly at the overall home electronics industry. With a phone, a portable music player, it is only logical that eventually Apple will try to merge the Macs in some way, shape, or form to TVs.

Apple has gotten rich by eating the lunch from everyone else’s plate. The music industry was a test, since one could say that the sales and distribution model was a dying form, once he had succeeded. Jobs moved on to cell phones where the competition is a lot stiffer. It’s anybody’s guess what Apple will do next.

The last decade for Apple is nothing short of stunning, and most of the credit can be attributed to Steve Jobs. His vision has managed to push Apple not only into the music business, but the cell phone business as well. Jobs is also a master at marketing, after all, how else can one attribute the frenzy around the iPhone. To such an extent that a shortage of iPhones in Apple store can be construed as a sign of Apple's imminent move to a 3G platform.

In terms of Apple stock, the earnings will be announced on April 23, I expect a very good quarter. The downside is that Jobs and company tend to be conservative on their guidance, this is something they did in January, and it tanked their stock by $20/share. With the high exposure to the consumers, Apple might guide conservatively again. Apple has bounced back from its sub $120 price after dropping nearly 40% from the high of $200 in the beginning of the year. The stock can probably go higher, but the guidance will be the killer in this mix. If you’re like me who bought too high, the only thing to do for now is to wait, and hope Apple guides sufficiently well to have stock price go up again. But if you have the cash, buying the stock now might not be such a bad idea.

Bad choices: April 3, 2008

Yesterday, I sold off my shares of Visa. It was a bad choice, because today, Visa shot up from the opening, and ended trading about $4/share higher than where I sold it yesterday. I could kick myself, actually, I'm sure my wife will do that for me. The trade I should have made was on Suntech Power. I think solar has gone about as far as it can for the moment, and while there might be a bit more upside, I think it'll drop soon, especially if oil goes.

On the other hand, I guessed right about RIM earnings and got lucky on the guidance. It is up nicely, I hope this means a few upgrades here and there, and with luck, the stock price can pop a lot more than where it ended trading today. Beyond this, there are a couple of risky biotechs and even a REIT with decent yield that may be worth buying. We'll see how it goes.

Trades: April 2, 2008

Today was interesting, I divested my Visa holdings. I should've probably done that a few days earlier, but didn't think it through. On the other hand, I added to my RIM position before market closed. This turned out to be not so bad a move since RIM came out after the bell with better than expected earnings and increased forward guidance.

The big question for tomorrow is what happens to RIM. After hours, RIM was up slightly, but not the big move that typically accompanies RIM every time the company announces good earnings. So my guess from a week or so ago was not too far off. Now, if I can make money with RIM, then it'll be a different story.

For the next few days, I will have to look at whether or not there are other Financial companies I want to take a stake in. But the thing that is really concerning is Apple's earnings on April 23. I expect that they will probably have a good quarter, but if Jobs decides to play conservative again, then Apple might lose some of th gains. Unfortunately, I have to hold on to Apple since I stupidly bought the thing near its high during end of December. Other interesting plays coming up in the near future will be Intuitive Surgical, and Google. One I'm interested in taking a position on, the other I'd short if I was truly rich.

Trades: April 1, 2008

Added to my RIM position today, although did it in a very stupid way. After hours is probably not a good way to buy in additional position if a stock is going up, I really should've bought early this morning or yesterday. But tomorrow will be earnings announcement, and we'll have to see just how well RIM does. I think it'll be the forward looking statement that could perhaps be the most dangerous area for RIM. So, I may end up selling half the position tomorrow if things move up sufficiently in the morning for some type of profit.

The downside is that Visa took a big drop today, definitely not a promising sign, may be I should sell it tomorrow before it goes down further. Given the day the stock market has had, I wouldn't be surprised if we moved down from here tomorrow.