Archive for April, 2008

New Stock Pick: AMR

By: ispeculatornew | Date posted: 04.29.2008 (11:15 pm)

AMR – American Airlines (NYSE) – (Closing Price – $8.53)

The stock prices of airlines have taken quite a hit in the last year as speculators sent the price of oil up to record levels. In the past few days oil has pulled back from its record highs and the airlines have started to rally. I expect oil to continue to sell off and I think buying airline stocks is a good short term play. There is also talk of consolidation in the airline industry so this should also bode well for airline stocks.

I think oil will continue to sell off for a couple of reasons. First, the Fed is expected to signal that it is going to stop lowering interest rates for a while. This will help the dollar strengthen and it takes away the major reason speculators have been bidding up oil (they have been buying oil as a hedge against the falling dollar). Second, the high price of oil and the sluggish economy is reducing demand for oil. I think future supply reports will show this.

I believe the entire airline industry is going to rally short term so you have a lot of companies to choose from. I am going to give a buy recommendation of American Airlines with a price target of ten dollars in the next month.

Disclaimer: I have no position in airline stocks.

SILC Q1 08 Results

By: ispeculatornew | Date posted: 04.29.2008 (10:04 pm)

SILC – Silicom Limited (NASDAQ) – (Closing Price – $9.50) 

Silicom Ltd. announced their first quarter 2008 results yesterday and reported an increase in revenue but flat growth in earnings. Amazingly, the stock price has dropped more than 25% since the news.

Silicom reported revenue of 7.70 million which was up 27% compared to Q1 2007 and up 3% compared to the prior quarter. EPS came in at 0.26 per diluted share. This was an improvement of 0.04 over last year but EPS has been flat the last few quarters.

I don’t think flat growth merited such a huge sell off considering the fact that businesses have been cautious in their spending due to the uncertain economic climate (flat growth could actually be looked at as a positive). Also, Silicom wasn’t trading at an expensive valuation before earnings so it shouldn’t have sold off so much after earnings.

I think the share price of Silicom may continue to trade flat or down for a quarter two if companies continue to cut back on their spending but the stock price will quickly rebound when the economic picture starts to look better. I think it would be wise to be patient with Silicom and I am going to recommend to continue holding your shares.

Disclaimer: I currently own shares of SILC.

The Fed and Commodities

By: ispeculatornew | Date posted: 04.27.2008 (5:21 pm)

The market is expecting the Fed to cut its key interest rate by a quarter-percentage point next week and then signal that it is finished cutting rates for the time being. However, I think the best action would be to leave the interest rate unchanged. This would help deter some of the rampant speculation that has been driving commodities to record levels.

The prices of commodities, especially oil, have veered away from supply and demand fundamentals for quite some time. The speculators in oil have seized upon the theory that oil should continue to go up as a hedge against the falling dollar, regardless of what the current supply and demand situation is. If the Fed were to take the unexpected move of leaving interest rates the same I bet oil would quickly fall to one hundred dollars, maybe lower. Other commodities that have reached bubble like levels would also pull back.

Leaving interest rates the same would be much more beneficial to the economy than another quarter point cut. The Fed has already caved into Wall Street demands and dramatically cut interest rates this year with a blind eye to the resulting surge in commodity prices. Another quarter point cut won’t do much.

However, I believe leaving interest rates the same with the threat of actually raising rates would send a strong message that the Fed is willing to strengthen the dollar to reign in commodity prices. This would change the sentiment of the speculators in oil and prices would pull back sharply. This would then provide much needed relief to the average American who is dealing with record high gas prices.

In my opinion leaving rates unchanged is the smartest and boldest option. However, I don’t expect the slow and foolish Fed to take it.

Disclaimer: I have no position in oil futures.

New Stock Recommendation: Aixtron (AIXG)

By: ispeculatornew | Date posted: 04.21.2008 (8:12 pm)

AIXG – Aixtron (NASDAQ) – (Closing Price – $14.22) 

Stocks that are related to “green” technology have been some of the biggest gainers over the past year. However, a lot of these stocks (think solar companies) have already had tremendous run-ups in price and they are trading at very lofty valuations.

I have found a “green” company that is experiencing strong growth, trades at a lower valuation than most “green” stocks, and even pays a dividend. That company is Aixtron (AIXG).

Aixtron is a German manufacturer of equipment used to make LEDs (Light Emitting Diodes). Aixtron’s equipment is also used for other applications but I think the growth in LEDs will be the catalyst for strong growth at Aixtron for the next few years. (more…)

Wikinvest.com

By: ispeculatornew | Date posted: 04.20.2008 (7:50 pm)

I came across Wikinvest.com recently and I think the website has the potential to be a great place to find information about stocks. Wikinvest is a “wiki” website (like Wikipedia) where regular people contribute the information to the site.

Wiki websites that don’t have a lot of contributors aren’t very good but Wikinvest already has a lot of contributors and quite a bit of information. Small caps and mid caps don’t have very much information provided but larger, well known companies have pretty extensive coverage. There are also “reasons to buy” and “reasons to sell” provided for each stock.

I am all for small investors helping each other out and I think Wikinvest is a great place to do this. As Wikinvest grows it should be a great place to find information and research stocks.

DTLK Q1 08 Results

By: ispeculatornew | Date posted: 04.16.2008 (9:30 pm)

Datalink announced Q1 08 results today and reported nice results.

Datalink reported 47.73 million in revenue and diluted earnings per share (EPS) of 0.04. Revenue was up 17% YOY and EPS was up from a loss of 0.06 in Q1 07. Datalink also reported its highest gross margin since the fourth quarter of 2004. The company gave guidance for revenue between 48-52 million and EPS of 0.05 – 0.09 for next quarter.

Datalink is continuing to show improvement in its financial numbers and I would continue to hold your shares. I think the stock price of Datalink will rebound quite a bit over the next few quarters as it reports further improvement.

How To Enter A Short Order

By: ispeculatornew | Date posted: 04.15.2008 (10:03 pm)

I received a comment on my previous post about how to short a stock through a broker so I will describe it here in case other people are confused.

When you go to enter an order you probably have a few options to choose from. I use Scottrade and I have the following options to choose from: Buy, Sell, Sell Short, and Buy to Cover. When you short a stock you would choose “Sell Short”. You would then enter the rest of the order: number of shares, stock symbol, order type (market or limit), and duration.

When you short a stock you are actually selling the stock. Therefore, if you want to place a limit order you would set your limit price higher than what the current price is. If you place a market order your order would get filled at whatever the bid price is (Unless your market order was for more shares than the bid offered. In that case you would take out more bids until your order got filled.) If you are confused about market and limit orders leave me a comment and I will write a post about them. (more…)

Should You Short Stocks?

By: ispeculatornew | Date posted: 04.13.2008 (8:05 pm)

If you are an experienced investor shorting stocks should be part of your investment strategy. Shorting allows you to profit when a stock goes down in price. In a declining market, such as the current one, it is a lot easier to make money shorting stocks than buying stocks.

When you short a stock you are actually borrowing shares of a stock from your broker and selling the shares. You owe the shares you sold (shorted) to your broker so you have to buy them back and repay them (cover) at some point. If you are able to repay them (cover) at a lower price than you sold them (shorted) you make money. If you buy (cover) the shares at a higher price than you sold (shorted) the shares you lose money.

I tried to explain that as clearly as I could but I will also use a rough analogy that I have read elsewhere to help explain what shorting is. Let’s say your friend has a bike that is worth one hundred dollars. You know that the same bike is going to be on sale the next week for eighty dollars. Therefore, you decide to borrow the bike from your friend and sell the bike for one hundred dollars (you just shorted the bike). The next week, when the bike goes on sale, you buy the bike for eighty dollars and give it back to your friend (you just covered the bike). You make twenty dollars. That is roughly how shorting works. (more…)

Any Stock Suggestions?

By: ispeculatornew | Date posted: 04.09.2008 (8:58 pm)

Every month or two I will have a post dedicated to stock suggestions.

If you know of any stocks that are undervalued or overvalued feel free to mention the company and why you think the share price will go up or down.

I would be particularly interested in any company that is quickly growing earnings and has a low valuation (based on PE ratio or book value). I would also be interested in companies that are not profitable yet, but are quickly cutting their losses and headed for profitability in a few quarters.

The comments on my site are moderated and I have to approve or disapprove them to show up. Therefore, they may not show up immediately. However, as long as your comments don’t have spam I will approve them.

SWIR Announces Acquisition of CradlePoint and Share Buyback

By: ispeculatornew | Date posted: 04.08.2008 (9:09 pm)

SWIR – Sierra Wireless (NASDAQ) – (Closing Price – $18.43)  

Yesterday, Sierra Wireless announced it agreed to buy privately held CradlePoint Inc, which develops and supplies wireless networking products, in a cash and stock deal worth about 30.2 million.

The company expects the deal to add to earnings by the end of 2008, excluding restructuring and integration costs. The deal is expected to close in July.

Two analysts who follow Sierra Wireless said positive comments about the acquisition.

The company also announced that it would seek regulatory approval to purchase up to 1.56 million shares of its common stock on the Toronto Stock Exchange and the NASDAQ, representing approximately 5% of the common shares outstanding.

If the approval goes through the share buyback will obviously be a positive development because the share count will go down and EPS will increase. The potential share buyback also shows that Sierra Wireless feels its stock is undervalued.

These announcements provide two more positive reasons for owning Sierra Wireless.

Disclaimer: I have no position in SWIR.