Tough Day

No doubt about it, it was a tough day on the street, down nearly 200 points. Most of the portfolio held up well. But of course, Dryships was a disaster. Somehow that's not much of a surprise right now, given that this was one of those stocks that have been moving up in anticipation of earning, and now it decides to drop. No choice but to hold on to this for a little while and see how it plays out, since it's a small position, no big loss. Closed out the position on RIO though, although not at the most favorable price, this is also one that has had a bit of a run.

On the other hand, WGOV has been a disappointment just like DNA, and ENER looks like its stuck in a trading range just like AAPL, and ISRG. FSLR on the other hand had a not so bad day given the state of the market. Asia looks like it is dropping again for Wednesday, so it will likely mean a down day for stocks yet again. Given the continued currency weakness, it is likely that energy stocks will continue to surge. This should be the overriding theme of this year. Meaning, the portfolio might have to switch from its tech focus to more of an energy focus for the rest of the year.

Monday: May 19, 2008

Today was rather interesting. Pulled some money out of Gushan (GU) and then made a m0ve into a transport Dryships Inc (DRYS) and just a small position back into First Solar (FSLR) thanks to the big drop today. Tomorrow is likely to be a down day, Asia is showing some signs of weakness. This may be time to move out of a position like Apple (AAPL) at least for the short term since momentum seem to have stalled there for the moment.

The DRYS move this morning was likely a mistake, got caught trying to turn a quick buck even though the stock has been on a tear lately and has nearly doubled. FSLR may also be a mistake since there is a good chance this one goes back down to $280, but a small position at $292 won't hurt. Unless the demand for oil suddenly drops, the alternative energy play will continue to remain a good one for the long term. So, if there is a lot more weakness this week, it may be an opportunity to further add to the positions, especially if in companies like FSLR and GU.

It's Friday... and the market isn't too bad

All in all, it wasn't a bad market this week. Added a couple of new positions this week, removed one position, and noticed something interesting. First Solar (FSLR) position was closed on Wednesday, and then added Energy Conversion Devices (ENER) and Woodward Governor (WGOV) on Thursday. Both the later have been in the news lately, ENER having just announced a great quarter, and WGOV was mentioned as a great wind power play. But the theme is pretty obvious, alternative energy is all the rage, and Gushan (GU) bought last week apparently had a decent enough quarter that it continues to move up. All this thanks to the oil run up and Goldman's $200 per barrel oil prediction, it wouldn't be surprising if oil hit $130 a barrel next week.

This would call for a new trading strategy though for a good part of the portfolio. The theme is all going to be based on the fact that higher oil prices are inevitable. Therefore, the alternatives are all going to be in hypergrowth mode. The question is which are the right ones to pick to maximize returns. Part of the reason FSLR was sold was due to the recent runup. The runup is based on the premise that it's the only game (for thin film solar) in town, which is untrue. But FSLR is the largest name in play right now.

For the future, FSLR will likely track oil much more closely than before, and has a higher chance of pull back given the recent run up. So, FSLR would be a buy on a dip. Probably below $270 or so, but the major opportunity for growth will likely be found elsewhere.

Random Thoughts

What an interesting trading day that I can't take advantage of. One of the problem with having success is that you want to hold on to it. Now, the problem is more real if you only have one success to really hold on to. Apple is good right now, and the one part of me says to sell the darn thing. Another part looks at the last sell action on Apple and RIMM and thinks what a bloody mistake that was. Of course, I do wish I have some money now into the down stocks, my poor Intuitive Surgical and First Solar. Both are momentum stocks, hopefully, I can ride the upward momentum for a bit and make a bit of money that way.

One thing for sure, my trading strategy need to change a little bit. Wonder if the market will be good tomorrow.

How not to negotiate a deal

One of the most enjoyable class during the course of my MBA was negotiations. One of the first concept that you learn is BATNA (Best Alternative To a Negotiated Agreement), basically, BATNA is the only standard which can protect someone both from accepting terms that are too unfavorable and from rejecting terms it would be in your interest to accept. So, if the BATNA is better than the agreement you would reach, then you would not go for the agreement. How is this related to stocks and business?

The most obvious example is the now defunct Microsoft/Yahoo deal. For Yahoo, and more specifically, the chief Yahoo (defined in Dictionary.com as an uncultivated or boorish person; lout; philistine; yokel) Jerry Yang, there were really two simple options:

Negotiated agreement: That leads to Jerry walking away rich, and with his reputation intact while Microsoft is stuck with hopelessly trying to incorporate the mess that Yang and his predecessor Terry Semel left behind into its organizational structure.

BATNA: Keep Yahoo independent, and the face the litany of horrors that includes:

1. Angry shareholders in revolt, and if they succeed, Yang's legacy with Yahoo will be one of humiliation.
2. Even lower offers from future suitors if Yahoo can even find one.
3. An advertising system that is obviously not working well, why else would Yahoo outsource its search advertising to Google.
4. A continued decline in stock price if Yahoo income doesn’t show improvement next quarter.

So, when you look at the alternatives, it’s really simple. It’s understandable why Yang wanted to squeeze a few billion more from Microsoft, but that should never have been done at the cost of losing the deal. So, even if he took the deal as it was on February 1^st, he would’ve been better off than the BATNA.

As for why I think Yahoo is in a weak position, just look at Jerry’s statement on Monday. It’s like saying: “we’re sorry we're so stupid, please take us back.” Losing the deal was a mistake, but owning up to it is an open invitation for your already pissed off . So, in the end, may be Yang and the Yahoo board could’ve benefited a little more from some MBA classes. That’s why I think the definition of yahoo on Dictionary.com would greatly benefit from a picture of the Jerry Yang, the self professed Chief Yahoo, talk about an apt description.

Trading: May 6, 2008

The trading today was interesting. I knew what I wanted, but the execution was poor. I wanted to dump HRP, and it happened. I wanted to get more GU, that also happened. But in both instance, neither was optimum, the puny amount of GU I bought up was not worth the effort. The HRP move out was not bad, mainly because I didn't want to be around when they reported earnings on Thursday, we'll see if this is a good call or not. GU is something I've been meaning to move into a little more over time. The stock is coming off of its lows, so definitely worthy of some excess attention, still don't know when the earnings report come out.

As for the others, Apple, Intuitive, First Solar and Genetech are all riding on momentum for now.

Comparing against the past

I've done this BLOG for a little over a month now, and I've compared my end of March results to end of April results. And I was decidedly unhappy. Had I kept the exact same portfolio I had at the end of March until now, I would be actually about 10% better off overall. I guess that's the change in fortunes.

Looking at the current list of stocks, I wonder may be if the better idea is to hold onto the brand names. Apple is certainly worth it. And stupid me, by selling when I did, I missed essentially $20 of gain on 500 shares, yep, there goes $10K. But now that I've bought back in, I think I'll just hang on for the ride. Visa, another example of a badly timed sell, 400 shares went up another $20 from when I sold, there's another $8K. These were definitely bad choices. RIMM was another one. My pick since then, ISRG and FSLR have both flopped. HRP hasn't done any better... so far, not a good month.

I think this calls for a sit down and a re-evaluation of strategy going forward. Oh, trades of the day, I pulled in a little bit of Gushan Energy. I heard a little about this stock, decided to put up a small position in it, and see what happens. Let's see if this one is a flop or a not.