Archive for June, 2010

Stock Picks competition (Q2 Update)

By: ispeculatornew | Date posted: 06.30.2010 (8:36 pm)

Time to get to the results once more and things have not gone much better. It has certainly been a humbling year so far. After winning last year’s edition, things have been going terribly in the first half of the year. The only positive is that I did gain a spot in the rankings and now have some fellow bloggers (very slightly) behind me. When looking at the competition, it seems like almost everyone is having a difficult time apart from Dividend Growth Investor. There are 6 months left and hopefully more than one of us will be in positive territory when the year ends. Did we all go for broke? Some us did but I certainly don’t feel like my picks were that risky.  Thankfully, my performance in the long/short stock picks on this blog have been much much better.

I guess one theme that has affected my portfolio a lot is China. I had no idea when 2010 started that China would have such an impact on Google’s performance. Had I known that, Sohu would not have been my 2nd pick. They are different plays on China but both have had difficult years.

Here is a more detailed review for all of my picks:

JJN    -3.14% : This trade certainly looked the most promising when I reported Q1 results, the trade was actually the top pick among all bloggers. But like many commodities, it has been slammed as fears of international sovereign debt continues to spread across the system.

UNG     -26.79% : Among all commodities, this has turned out to be one of the worst that could have been picked. Fundamentals for crude oil and natural gas continue to be difficult to evaluate but in general this pick has been a complete disaster

SOHU    -29.71% : Like the whole Chinese market, Sohu has struggled so far this year. Apart from Baidu (BIDU), Chinese stocks have had a very difficult time and Sohu has been no exception.

GOOG    -28.24%
: Very difficult to imagine that Google could ever lose this much in a year, especially when nothing terrible has come out. It’s not as if an accounting scandal had come out. But there have been worries about China, about its lack of growth, about competition from Microsoft’s Bing and many others. I still think the stock is a great buy right now but clearly in this competition Google has not been my friend.

So is it over? Of course not. Catching up is very much a possibility, and while the #1 position looks far right now, a top 2 or top 3 rankings is very much a possibility thanks unfortunately to the difficult performances by all of us. Without further wait, here are the current standings:

[table “141” not found /]

Quick news – June 30 2010

By: ispeculatornew | Date posted: 06.30.2010 (4:14 pm)

Google (GOOG) confirmed its China search engine was being partially blocked right now
Google (GOOG) announced it would be promoting the use of Android for cheaper mobile phone in Asia
Rackspace (RAX) is rated a new “Sell” at Monness Crespi

Top Performer: Travelzoo (TZOO) +4.65%

Worst Performer: Monster WorldWide (MWW) -3.80%

Recap of a crazy day in the tech/mobile space (GOOG, BIDU, AAPL, RIMM, VZ, T)

By: ispeculatornew | Date posted: 06.30.2010 (4:00 am)

No doubt, today was not a day for the faint of heart. In a day where bad news and horrible US confidence numbers , most of the market moved in one direction..down. It was a bloody day and there were no exceptions to that. The best way to prove it is simply by looking at the best performer among my dashboard for yesterday in the quick news, Shanda Interactive which lost 0,80% of its value.

But while most of the market was looking at the big world economic picture, the tech and mobile industry had a lot to take in.

1-Google moves back in an attempt to remain active in China

With Google now threatened to lose its license to operate in China, it confirmed it would stop forwarding its Chinese users to its Hong Kong, unfiltered website. This was seen as a major attempt to get back into a positive relationship with the Chinese government. Is it too late? Maybe not because Baidu (BIDU) had a dreadful day dropping almost 10% in the day. Why? Because it could lose what is almost a monopoly in the Chinese search space. The conclusion is still some time away but Google would not take such action if it did not think it could get back into China’s good grace.

Just take a look at these charts at 10AM or so…

2-Verizon confirmed as an Iphone carrier

As big of an impact as the Google news was, the impact of this one was much greater and affected many different companies. There had been rumors for years that Verizon would eventually carry the Iphone. It’s no secret that AT&T has not lived up to the expectations of millions of Iphone users who were frustrated but powerless as leaving the carrier also meant leaving their beloved Iphone, But it now seems confirmed that Apple’s exclusive deal with AT&T is about to end and Verizon will offer the device in January 2011!

That has a major impact both for the mobile phone carriers but also all of the other mobile phone companies. First off the carriers! You can imagine that the news was seen as very negative for AT&T (T) and very positive for Verizon (VZ). On the phone side of things, it would be seen as a positive for Apple (AAPL) and a negative for both Google (GOOG) and Research in Motion (RIMM). Both companies will now face increased competition from Apple as its users gain more choice.

Just take a look at these charts at 3PM or so…

3-Foursquare secures $20 million in additional funding

And finally Foursquare. The news out is that the social network secured funding that confirms that for now it will not be purchased by the likes of Facebook or Google. That would certainly have had a negative impact on Facebook if the stock was public. There is no doubt that Facebook would have preferred not facing competition from Foursquare but the price asked to do the deal must have been too high and not worth the investment.

Quick news – June 29 2010

By: ispeculatornew | Date posted: 06.29.2010 (4:08 pm)

Google’s (GOOG) Youtube will start introducing “skippable” ads later this year
Verizon (VZ) will finally offer the Apple (AAPL) Iphone starting in January
Apple’s (AAPL) Iads service might miss its July 1st deadline to open
CTrip (CTRP) was cut to “Hold” by RBS
Google (GOOG) says it will no longer redirect users to its Hong Kong website within a few days

Top performer: Shanda Interactive (SNDA) -0,80%

Worst performer: CTrip (CTRP) -12,06%

When to catch a falling knife? (RIMM) & (BP)

By: ispeculatornew | Date posted: 06.29.2010 (4:00 am)

You have certainly heard this expression a few times in your life as it can be applied to many different circumstances. Yesterday, when I went long on Research in Motion (RIMM) that could be a good description of what I did. Not only has Research in Motion been a poor performer throughout the year but it had its worst performance in a long time on Friday losing almost 11%. I argued that the market had it wrong and that the stock could not go much lower. Many others are saying the same about British Petroleum (BP), the oil giant. Of course the circumstances are very different.  So the question here would be: “When is it a good idea to catch a falling knife?“. Many would say never. I would argue that sometimes it can work.

What is a falling knife stock?

Before going further, it is probably a good idea to establish which stock would qualify. My two main rules would be:

-losing value quickly ( 20% within less than 6 months)
-underperforming the market significantly (loss at least twice that of the market – this one is to avoid considering the whole market during market crashes)

Short or long term

Just to clarify, I am talking about longer term declines. The game of buying assets in times of short time crashes such as the one of a few weeks ago is a whole other game and is much more like playing poker than investing in the markets if you ask me.

Hoping for a recovery

Why would an investor do such a dangerous trade? Simple. They hope for a major recovery. When stocks get crushed, and analysts downgrade them (causing further declines), the movement can become irrational and go much further than is logical. That is when smart investors can get huge bargains that are impossible to find in other circumstances. The returns can even be over 100% in a rather short period of time in certain circumstances.

Why it is happening?

When a certain stock starts to get beaten up, it can become very difficult to reverse the tendancy. Why? First off, technical traders are likely to see triggers reached that will become sell signals. Indicators such as moving averages and other momentum indicators will clearly signal that the stock’s general direction is downward which triggers more losses. That of course will cause more triggers to be breached, etc.

As well, the general psychological impact is important.  When the evening news discuss the decline of a companu like Research in Motion, they will explain it by stating everything that is not going well at the company. Now put yourself in the mind of a friend or family member and you can imagine why they are likely to think that more decline will come. As that happens, many longer term investors are likely to sell putting even more pressure on the stock.

It will go against you at first

An important point to remember when buying a stock like RIMM is that it is likely to go against you at first. Why? Because if it’s been declining for months, what are the odds that you picked the exact date where a reversal takes place? Slim to none! So you should expect the position to initally go against you and it’s better to know in advance how much of a loss you can sustain. Setting a stop loss limit will keep you disciplined. It would be too easy to remain in the trade all the way to 0$ by convincing yourself that a reversal is upcoming.

Is the company worthless ?

I think it is a fundamental question to ask yourself. When a company’s stock is diving, it is usually for one of two reasons. Either growth has slowed much more than anticipated or the company’s survival is in jeopardy. In that case, you must realize that there remains a lot of downside. While BP might jump back up and get back to tens of billions in annual profits, I don’t think anyone could argue that bankruptcy is a short term possibility. No matter how optimistic you are about its future, it is impossible to deny the possibility that the US government could take down BP. I would say that Research in Motion is in a very different situation. It is generating lots of profits and in the short to medium term, that will not change so the downside is a lot more limited.

When it turns ok: Priceline (PCLN) : BusinessWeek recently revealed that Priceline was the top performer in the S&P500 in recent years and if you look at the chart you will see that Priceline looked very bad about 5 years ago but someone who purchased near those lows has been a big winner.

When it doesn’t: Nortel (NT) : Nortel was once a telecoms giant but was not smart with its resources and is now in bankruptcy with no hopes of ever coming back….

Rimm’s example

So the big question is does Research In Motion have potential to turn things around? Honestly, I do think it does have that ability and potential. RIMM has the leading position for all corporate accounts and remains in the race for personal phones as well (even though like everyone else, it trails Apple badly). I don’t think anyone expects RIMM to go down anytime soon so i consider that there is very limited downside from this point on.

How about you, would try catching a falling knife? Or have you already?

Best and worst ETF’s in June 2010

By: ispeculatornew | Date posted: 06.28.2010 (4:21 pm)

Just a very quick post, I thought it was interesting that among the top 3 ETF’s this month, only 1 of them is leveraged as the two others, Coffee and Sugar are not. Guess it was a good time to buy Coffee and Sugar ETF’s instead of stopping by Starbucks!

Here are the top 3 ETF’s so far this month:

[table “139” not found /]

And now the 3 Worst Ones:

[table “140” not found /]

Quick news – June 28 2010

By: ispeculatornew | Date posted: 06.28.2010 (3:07 pm)

Apple (AAPL) sold 1.7 million Iphones in this weekend’s launch
Amazon (AMZN) was cut to neutral by Sushehanna
Microsoft (MSFT) announced it was planning to open an app store to compete with Apple (AAPL) and Google (GOOG)

Best performer: Blue Nile (NILE) +1,60%

Worst Performer: Adobe (ADBE) -3,79%

New Stock Pick: Long Research in Motion (RIMM) & Short Monster WorldWide (MWW)

By: ispeculatornew | Date posted: 06.28.2010 (4:20 am)

Counter-trend is surely one way to describe this trade. On Friday, Research in Motion (RIMM) dropped nearly 11% after announcing revenues and projections that came slightly below projections. How bad are things for Research in Motion? Not that bad actually. Profits did increase 20% to $769 million. But the dips and analyst downgrades (8 of them on Friday) were mostly based on revenues. How bad are revenues? They increased from $3.42 billion a year ago to $4.24 billion in the last quarter. Analysts were expecting $4.32 billions. Just seems incredible that a miss of such a small magnitude generated a 11% loss for the stock.

RIMM is still the leader

While Research in Motion might not have the momentum that other players like Apple and Google (through Android) have, it is still the leader in commercial smartphones and unchallenged in that regard. Go to your city’s downtown area and you will see tons of Blackberry users. Ask them what are the odds that one year from now they will be using another type of phone and they will tell you the odds are very slim. Which they are.

Just take a look at Friday’s bloody action:

And now a chart almost as scary, the year-to-date chart:

Where is Research in Motion failing?

Obviously, if the stock has performed so badly, it is because all is not well. Research in Motion has spent a considerable amount of energy trying to gain regular personal consumers to add to its strong “corporate” consumer base. That is where it is struggling against Apple and Android powered phones. But that is not where most of RIMM’s revenues and profits come from and it’s easy to put too much emphasis on the consumer part of RIMM’s business.

And now the short side

It is not the first time this year that I go short on Monster WorldWide (MWW) and the first time was very successful. The stock continues to look overvalued compared with other internet players. The continued slowdown in US employment as well as pressure from more specialized job websites (such as those from Dice Holdings – DHX) is not helping Monster’s numbers.

You can see Monster’s less than impressive traffic stats according to Compete here:

Financial Ramblings

By: ispeculatornew | Date posted: 06.26.2010 (5:57 am)

The US team will be in action later today and hopefully they can pull off a big win against Ghana! I’m certain that some big bets will take place on the bet but probably not as big as Warren Buffet! Did you know that he actually made $30 million when France got eliminated from the World Cup!! You can read about it on Bloomberg.

BP builds artificial island to get around offshore drilling ban @ ClusterStock
2 things investors don’t want in a dividend stock… @ TheDividendGuyBlog
Best investments for retirement income @ WealthPilgrim
Essential to preserve capital in dividend investing @ DividendTree
UK emergency budget @ TheBigPicture
At 55, is it too late for retirement planning? @ TheFinancialBlogger
Landlord math – Cap rate and return  investment @ MillionDollarJourney
Why asset allocation is so important @ GreenPandaTreeHouse
Should you use index funds or ETF’s? @ CanadianCouchPotato

One ETF fits all (ONEF) ????

By: ispeculatornew | Date posted: 06.25.2010 (4:11 am)

I recently read about a new ETF called One which aims to be a one stop solution for investors. How so? The aim is for investors from 30 to 50 years old to own one ETF that will give them an exposure to equities around the world. No need for single names, rebalancing, adjusting as years go by and as the economy changes.

Too good to be true?

As you probably know, I am a big fan of ETF’s and certainly think that a portfolio can be built easily. As always, I think it’s important to specify that I am talking about a retirement portfolio here. I’m personally a believer in a fairly conservative retirement account for all investors. Then, when I have enough saved up during a year, I can start funding a more aggressive and speculative portfolio with active or passive investing. All the long & short picks described on IntelligentSpeculator would obviously be done in the speculative portfolio.  I wrote a more detailed post about this here.

So back to ONEF

The ETF claims to give exposure to the entire Global Equity market but provides that at a high price. It charges 0.51% of annual expenses which does not sound that bad. But these fees are added to the ones charged by what is inside the ETF. In fact, I would say that it is very similar to the target date ETF’s although those are maybe even a little better. I had written a review about target date ETF’s and how I was against them. Basically, they save you a little work but charge you a lot more to do so.

Instead of buying a target date fund or ONEF, I think investors should simply use the 5-6 ETF’s such as SPY, VWO, etc. These will provide the same exposures but at much lower fees and you gain additional control over your investment

Even less flexibility than target date funds….

With target date ETF’s, the asset allocation varies with time. As the retirement date comes up, assets inside of the ETF become geared towards safer, less volatile plays. That is generally a good idea and what you would end up doing if you invest on your own anyway (in almost all cases) but with ONEF, that cannot be done as easily as the target is simply the “average investor”, no matter if he is 30 or 50 years old.

Because of that, the fund is too secure for most investors in my opinion. Take a look at what is inside here.

I don’t think that a young investor should onlyt have 5.11% of his portfolio invested in emerging markets. And owning about 70% of your equities in US holdings also seems high considering everything that is going on in the world and all of the growth that is happening in Asia and elsewhere.

Too good to be true…

You know what they say. If it sounds too good to be true, it usually is. And investing in only one stock certainly sounds too good to be true. I do think that at some point target date ETF’s could become a viable option if costs came way down but for now, I would stick to the 5-10 ETF portfolio.