LJ International: Speculative Buy Recommendation

JADE - LJ International (NASDAQ) - (Closing Price of Friday: 6/15/08 - $3.50)

LJ International is a company I have followed for a few years and I have written about the company a couple of times on my website. I recommended the company as a short recommendation for a 17% gain last year and I also recommended staying away from the company a few months after I gave my cover recommendation.

In retrospect, my last post to avoid the company because of credibility issues was actually a bad call because I knew speculators were going to bid up the stock price in anticipation of the company releasing earnings. After I wrote my last post on LJ International the stock price more than doubled in just a few weeks. However, the company never reported earnings and the stock price has been meandering ever since. (more…)

Speculation in Oil

I read a lot of articles about the price of oil and I have read quite a few lately that quoted some moron claiming the steep rise in the price of oil has had nothing to do with speculation. These morons claim that oil is trading solely on supply and demand fundamentals. That is absolutely absurd.

Last Friday oil had its biggest one day gain ever and oil gained more than sixteen dollars (over thirteen percent) in just two days. Was there some major supply disruption? Nope. The catalysts for this rise were a call by a Morgan Stanley analyst for $150 oil by July 4 and a threat made by Israel against Iran. If a pump by a brokerage firm and a threat of a supply disruption don’t scream speculation I don’t know what does.

I find it very disconcerting that Goldman Sachs and Morgan Stanley continue to pump oil futures. I read in an article the other day that both of these companies own large amounts of oil futures through their hedge funds. This makes Goldman Sachs and Morgan Stanley no better than a boiler room operation pumping penny stocks. (more…)

Financials are Still Good Shorts

A few months ago on March 19, I wrote that financial companies still presented good shorting opportunities. However, about that same time I wrote that article there was an almost universal pump among the financial media that financial companies had reached a bottom. If you had shorted financials right after my recommendation you might have felt some short term pain as financials briefly rallied. However, most financial companies have sold off considerably since my short recommendation and I think they will continue to go down.

The same bearish catalysts that were present a few months ago are not going away any time soon and some are even getting stronger. The housing market is still far from a bottom, the economy is still on shaky ground, unemployment is rising, and commodities continue to set new record prices. Also, the Fed can no longer cut interest rates due the concern over inflation.

This means that consumers are going to have a hard time paying their bills and foreclosures and loan defaults are going to continue to increase.

I think the pain is going to continue for financials and I don’t see a bottom in the near future. I also think it is only a matter of time before some banks go under.

Here is the price of the stocks I mentioned in my last article and their current price:

                           March 19                  Today’s Closing Price            Return

LEH                       $42.24                          $32.29                              23.56%
NCC                      $9.48                            $4.95                                47.78%
UBS                      $26.65                          $23.91                              10.28%
WM                       $9.83                            $7.53                                23.40%

Disclaimer: I do not have a position in any of the companies mentioned.

Free Stock Picks - June Report

AIXG – Aixtron (NASDAQ)
Aixtron reported Q1 results on May 8 and reported flat results. However, the company reaffirmed guidance which means the company should report considerable improvement in future quarters. I would continue to hold your shares.

CAAS – China Automotive Systems (NASDAQ)
The stock price of China Automotive Systems had a big jump after the company released impressive Q1 results but has sold off since. I think the stock price of CAAS has the potential to go much higher so I would be patient and continue to hold.

DTLK – Datalink (NASDAQ)
There has not been any major news released about Datalink. A positive article was written about the company though. I still rate the company a hold. (more…)

New Stock Recommendation: FEED

FEED - AgFeed Industries (NASDAQ) - (Closing Price on Friday 5/30/08 - $15.37)

AgFeed Industries is a company that has experienced strong growth over the past year and the company is forecasting even stronger growth in the coming year. The company has given tremendous guidance for 2008 and if the company can meet its numbers the stock price should continue its rapid ascent.

AgFeed operates two integrated business lines in China: premix animal feed and hog production. The company is currently the largest premix feed company in China in terms of revenues and the company distributes its feed through over 700 independently owned chain stores. AgFeed expects to have a total of 1,000 independently owned chain stores by the end of 2008. The company also distributes feed directly to over 600 large commercial hog farms across China.

In addition to its feed business AgFeed has been rapidly expanding its hog production business. The company has acquired quite a few hog farms in the past year and the company raised money through a couple of stock sales in April to acquire even more. AgFeed currently owns controlling interest in 24 commercial hog farms throughout China with annual hog production capacity of 550,000 hogs. (more…)

Has Oil Peaked?

The price of oil has defied logic and has continued to rise in the face of many bearish catalysts. However, I think the current price of oil has had a significant affect on demand and this can no longer be overlooked by the speculators who have been bidding oil to stratospheric levels.

The morons such as the analysts at Goldman Sachs who have called for $200 oil seem to think that the demand for oil is inelastic (that demand will remain the same regardless of price). This is definitely not the case and it is fairly clear that oil at its current price is putting a considerable dent in demand.

Edward Meir, and analyst at MF Global UK Ltd. said in a research not that “if the present trends continue, we could be heading for the first annual drop in gasoline consumption in some 17 years.” Also, Asian countries are being forced to cut subsidies due to the soaring price of crude.

I think the price of oil has probably peaked and if it hasn’t I don’t think it will run up too much more before there is a sizable correction.

When this happens it would be wise to buy airlines and short pricey alternative energy stocks such as solar stocks. You can also short energy stocks such as MXC that have made ridiculous speculative runs.

Disclaimer: I have no position in oil futures, airline stocks, solar stocks, or MXC.

Wall Street Humor

EGHT Q4 08 Results

EGHT - 8×8 Inc. (NASDAQ) - (Closing Price on Friday 5/23/08 - $1.19) 

8×8 Inc. reported fourth quarter results on May 21 and the company continues to show improvement in its financial numbers.

8×8 Inc. reported revenue of 16.33 million and diluted EPS of 0.01. Revenue was up 14% YOY and EPS improved six cents from a loss of 0.05 last year. Gross margin also improved considerably from last year.

8×8 Inc. continues to be on the right track and I would continue to hold your shares or accumulate more. As earnings start to increase the share price should follow in tandem.

Disclaimer: I have no position in EGHT.

Converted Organics, Lesson in Speculating

COIN - Converted Organics (NASDAQ) - (Closing Price - $8.05) 

I wrote an article about the foolish speculating in Converted Organics a couple of months ago and just as I predicted the greed that was driving up the stock price turned to fear and the stock price took a huge dive. However, the stock price rebounded from its lows and held up for a little while but is now starting to sell off again.

The reason for the most recent sell-off is the company issued a dismal earnings report last Friday. Converted Organics reported revenue of 260 thousand and a loss of 2.4 million. That is pretty egregious. Some of the greater fools that are still buying Converted Organic are going to say that this earnings report is better than their last earnings report because the company actually reported some revenue. However, this company was actually a better speculative investment when it had no revenue.

If you do not understand this let me give you a lesson in speculating. When you buy a company such as Converted Organics you are buying the story not the actual stock. The reason Converted Organics made such a big run was because it had a small float and was in a hot sector. It also helped that the company was a “developmental stage” company and had no revenue. This meant that people could justify their purchase of Converted Organics because of the potential of the company.

Now however, the hype has faded away and the brutal financials have to be taken into account. The reality is that Converted Organics is no where near making a profit. On top of that the chart is starting to get pretty ugly. I wouldn’t be surprised to see the stock price of Converted Organics fall all the way back to the $2.50 range in the next several months.

The lesson here is to trade the story and the momentum when it comes to super speculative stocks like Converted Organics. When those to things start to fade away it is time to get out.

Disclaimer: I have no position in COIN.

Wall Street Survivor

I recently competed in my first stock market competition at Wall Street Survivor under the name Intspeculator and I did quite well. In the contest that finished in April I finished 17^th out of more than 23,000 participants. I generated a return of 84.62 percent in just a few months. My return would have been higher but I stopped putting much effort into the competition when I realized I probably wasn’t going to finish in the top three (only the top three earned money). I was in the top three at a couple of points in the competition though.

I generated such a big gain by making the same investments I recommended on my website: shorting solar stocks and financials.

Wall Street Survivor is currently having a new competition that started on May 1 and ends on August 29. The top ten players in two categories (investor and trader) earn prizes. Investors are the players that place less than fifty trades. Traders are the players that place more than fifty trades.

The top player in each category wins a vacation to Cozumel worth $6000 and the next nine players in each category earn cash prizes. There are also cash prizes given out to the top five players with the highest weekly return. If you are interested in learning to trade stocks without any risk you should try Wall Street Survivor. Even if you don’t think you can place in the top ten you could potentially catch a hot stock and win a couple hundred dollars for having the highest weekly gain.

If you are interested in playing Wall Street Survivor click on the Wall Street Survivor picture on the left side of my website and sign up. Even if you are not interested in playing but you want to support my site sign up through the Wall Street Survivor banner and place at least one trade. You will be rewarding me for the time and effort I spend on the site.