Down day in the market - looking for bargains

As I write this, the Dow is down .5%, and when it's sneezes, many stocks get colds. So far my dump Blackberry strategy is holding, they're down another 5% today. Time to put my eye on some that got hit and some who defy the market.

Ruth's Hospitality Group Inc. (RUTH) - up 5% today, looks like "due to a 4Q that beat expectations". They're showing an overall increase the past 2 years, but there's some drops in there too.  But the restaurant industry is kinda fickle in my book. Will keep an eye on them.

ZAP (ZAAP)

 - this up 7% today, but their graph looks like they're trying not to go out of business. I think this gain is a fluke. No news announced other than some federal filings.  Heck, I couldn't even figure out what they do.

NVIDIA Corporation (NVDA) - down 2%, which isn't a surprise, their 1 year chart looks like a snow-capped mountain range outline.  The Motley Fool wrote an interesting article about them, but I put absolutely not faith in the Fool. Not saying I think their lying, but I used to follow their recommendations and I didn't like the results. The article is long and has lot's of computerese, seems like they're saying NVIDIA is turning a corner. Maybe, I'll just keep watching.

Good Bye Blackberry

Ok, the experiment officially ended this morning. I bought Blackberry (BBRY)- formerly Research In Motion last week in hopes of riding any short term gains they might accrue as a result of finally rolling out the Blackberry 10.  As of today I'm down 18%, and that's to poor for my blood.  Maybe it will rebound, but I'm not willing to lose more to find out. Looking at their history, 10 years ago they absolutely owned the cell phone market. For those too young to remember, imagine today if either Apple or Google didn't get into phones, and there was only one of them. It would rule the market. Period. That's how Blackberry (RIMM) was 10 years ago. There was even a term for it: Crackberry, because it was so addictive.

What happened?

In 2007 Apple rolled out the iPhone, and a short time after Google started giving away Android. RIMM obviously thought it was a fad that would pass.  Put simply, they didn't realize their world had suddenly changed, like the final scene in Aplocalypto.  For the next 4 or 5 years RIMM had 2 co-CEOs who obviously could not find their own butts in the dark.  They ignored the onslaught (and profits) of iPhones and the ubiquity of Android phones, choosing to "stay the course".  The stock, once in the $160 range, cratered over 3 years.  That little rise at the end is hope that the new phone will sell. 

Anyway, my point is that you have to draw a line in the sand. Frankly, I don't believe they will have their "Act II". Never did. I bought hoping they could keep it together for 3 months. They still might, but I don't believe it at this point.  And I think I can find other uses for my money.  As the song says, you gotta know when to fold 'em.

5 Stocks I'm Watching

Here are 5 stocks I'm going to buy and why....

Delta (DAL)- Delta is up about 50% since September. Really quiet too. Over the last 5 years they haven't been too much higher than that, but I'm thinking as the economy continues to improve they might be able to ride that wave. This is a SWAG if ever their was one, but on a day like today when just about everything I'm watching is down, they're up 2%.

Nokia (NOK)- this company seems to finally be getting their act together too.  They had a strong 4Q and according to this article, they're ready to pop. At $4/share, they're back to where they were a year ago, but their historic high is in the $60 range. People still know the name so I doubt they're going out of business anytime soon.  If things go well, this could be a smoker....

Blackberry (BBRY)- Just rolled out a new phone. Finally.  A day late and a dollar short would be an understatement. Blackberry, formerly known as RIMM, ignored iPhones and Androids for the last 7 years and not only got their clocks cleaned, their watches, walls and minor children are also sparkling and springtime fresh.  Even though the reviews haven't been stellar, the phones are sold out in some areas.  Granted, maybe they only shipped 25 to some of those areas. Anyway, it remains to be seen if they can successfully un clusterscrew their business model. Nothing will really be known until the next quarterly earnings report.  Between now and then, I think the stock will move up on hope alone.  I don't see this as a long term play, unless they really blow the cover off everyone's expectations.

Facebook (FB)- Like I said last week, they've turned the corner now, the rose colored glasses have been taken off.  What we're seeing now is what people really feel like it's worth. I have no faith in Zuckerberg, and I suspect sooner than later he will put a grown up in charge.

Netflix (NFLX)- Yeah, I missed the 70% increase around January 25. Looks like the postal delivery cutbacks might help them, according to this article.  The math is weird, but it does kinda make sense. After getting burned by Starz a few years back, they're getting into producing their own content. On a separate note, my local Blockbuster, one of a few still open, is closing. Looks like Netflix won....

I can't prove it, but I think someone is manipulating Apple stock

Last week Apple announced quarterly earnings that were the 4th largest ever recorded. This is over a year after the passing of Steve Jobs, an event everyone thought would mean the demise of the company. In return, "the street" knocked 12% of the value of Apple's stock price. Say what you want, that makes no sense. I can't prove it, but I would not be surprised if someone made out like a fat rat.  The stock has slowly rebounded since this crazy drop.  By contrast, Amazon's earnings fell short of analyst's expectations... and it rose.  Yeah, The Street is logical.

Anyway, I missed the sub $20 price, but at about $29/share, I think Facebook might be a good stock to buy. I don't know what their expected earnings are going forward, but the fact that in the span of about 4 months they've risen about 50% after dropping 30% from their IPO price says to me that investors are behind them. 

Letting Go of a Stock You Love

One of the hardest things in investing is knowing when to walk away.  Especially when you're making money. Remember, a gain isn't a gain til you cash out. What was worth $50 yesterday can be worth $.50 today. I'm wrestling with this because my biggest and best performing stock has been getting trashed for about 6 months now. Apple once hit $700/share and is now around $500/share.  My purchase prices range from $100 to $385 so I'm still up, just not as up as I was a few months ago.

Why do I think Apple's been down when they're still selling iPhones, iPads, iPods & Macs like crazy?  Not to sound like a broken record, but a lot has to do with analyst's published expectations, which have been and continue to be all over the place. In addition, Steve Jobs has been gone over a year and no one believes Apple can still innovate. Apple has gotten trashed the last 2-3 days because someone reported that Apple reduced it's orders for replacement parts for the iPhone 5, and someone made the logical leap that this means the current "Jesus Phone" isn't selling as well as previous versions.  But at the end of the day, no one's opinion of Apple really matters but mine, since I'm the one holding the bag.

As I type this on my MacBook Pro and listen to BBC Business Daily on my iPhone, my perception of the company hasn't changed in any negative way in the last 20 years. I remember when the stock was selling at $4/share and everyone was just waiting for the doors to closed. I remember when people thought the company's name was really "Beleaguered Apple" because that's what it was called in every article written.  I remember when I had the pleasure to meet Steve Jobs at the Boston Macworld Expo on 1997.  I remember when Microsoft invested $150 million just to keep Apple on life support so the Department of Justice wouldn't call them a Monopoly.  I remember my SE/30, upgrading the chip in my PowerMac 7500 myself, Systems 7, 8 & 9, the clones, the first iMac, the switch to Intel. I remember my user group and trying to tell my Windows-using family and friends that the Mac was a better machine. And I remember then politely tolerating me.

My point is, there are very few people who have loved a company more than I have loved Apple over the years. And Apple has loved me, not just with great products, but with a great return in the stock price.  But what trumps all this love is the fact that my goal for buying Apple stock was not to show them  love or to get the annual report. My goal for buying Apple and every stock I've owned is to get a return. To make money.  Unemotional money. Period.  To do so, the stock has to rise. And it has.  But I cannot forget that the most important factor in the continued rise of the stock is OTHER PEOPLE'S PERCEPTIONS of the future of the company. And people are not logical.  And they have short memories.

Blah, blah, blah.

Here's the bottom line. While I still love Apple, I don't think it's stock will rise over the next few months as high as some other stocks I may be able to find. I'm not saying it won't rise, I'm saying from a pure percent increase perspective, there may be better opportunities out there. At least right now.  I'm not going to sell it all, because it just might rise and I want to be in on that.  But I am going to take some money off the table.

Dollar a Week Challenge And Save $1,378

I can't take credit for this, saw it on Facebook, but it's a pretty interesting idea. Every week for 1 year, put away a little money into a shoe box. The first week put away $1, the second week $2, the third week $3 and so on up to $52 in the last week of you. If you do this each week, you will have over $1,378 by the end of the year.  That's $1,378 that you probably wouldn't even notice until the end of the year.

What's the challenge?  Simple. First, you have to remember to do it every week. Sure, you could make it up if you miss a few weeks, but the real challenge is in training your mind to remember this every week and to make a deposit, every week. Second, financially it will be a whole lot easier in the first half of the year when you're putting away only a few dollars a week, but come October when you're putting a couple hundred dollars a month into the shoe box, you will probably notice it.

Maybe you don't need $1,378. But can you train yourself to remember to do it every week. That's the real challenge.

As of today it's going on the 3rd week of January. Want to start now? Put $3 (1+2) in your shoe box. See how long you can keep it up....

Companies Phoning It In - Krystal

For the 2nd time ever, I recently went to a Krystal fast food.  I had to do some digging, but Krystal is owned by Argonne Capital Group, which is HQ'd in Atlanta, although Krystal's headquarters remains in Tennessee.  Why do I say Krystal is phoning it in?  First, their drive thru menu is a hot funky mess.  Sure, people who frequent there will probably know the menu by heart, but if they do then they don't need a menu. Who needs the menu?  NEW CUSTOMERS!

Ok, why is it a mess?
First, it's way too busy. It's like the person who built it played a lot of Tetris.
Second, it's trying way to hard (and too obvious) to steer you towards the combo meals.  All I wanted was a single burger and it wasn't listed. But every combo meal you can imagine was listed. I had to ask how much was a Krystal burger ($.79 in case you're wondering).  I consider myself to be reasonably intelligent, so I can imagine more than a few potential customers have given up and pulled off.  When I got to the drive thru window I commented on the mess of a menu. The response I got was "I agree, that's why I go to McDonalds."  Not oh snap. Double oh snap.

You might ask, how can I evaluate a whole chain based on one visit to one location?  Simple, and I'm going to make a few assumptions....

• The drive thru menu was not designed by the location I went to. Any company worth more than $20 would have menus at all locations consistent, so the menu board is the same at every, if not most of their locations. Someone in the corporate office signed off on this box of 64 Crayola Crayons. I think it is blatantly designed to push you towards buying combo meals. Did it even go through consumer testing?  
• The location is within 50 miles of Atlanta, where the parent company is headquartered.  If you let a location this close to the mother ship go, I can only imagine what more remote locations are like. Again, one of the employees felt no concern in referring a competitor. That says to me that there is no consistent hidden shopper program to assess quality. If there where, this employee would never have said that to a customer.

For most of my analysis, I consider 2 corporate models : Apple and Bradlees.  Why? Apple is doing it right, at every Apple Store, every minute of the day. Bradlees, before it closed down, was a perfect example of employees going through the motions (at half speed) and a corporation just trying to hang on long enough the distribute senior exec bonuses.

Avis used to have a slogan "We're #2, we try harder." I don't know where Krystal falls (not in the top 10) but I don't think their trying harder. They exchanged owners last year, so it might be that they are in the process of a massive redesign. The scary part is the current image was most likely part of some massive redesign.

As for an investment opportunity, Krystal is not publicly traded so even if I wanted to invest I could not. Why even write about it? Because the problems it has are not problems that would only be seen in a privately held company.  Sears (full disclosure, I used to work there) (SHLD) was $200 a share a few years ago, it's now $44. Have you been in a Kmart lately? Yeah, exactly.  I digress.
My point is if you consider investing in a company, one thing you need to consider is the customer experience.  When companies stop caring about what the customers experience, they've taken their eye off the ball. But I would imagine the corporate bonus structure is probably still intact.

Oh yeah, the burger was pretty good.

The Cost of Money

Because of the recession (and maybe even a layoff) there are a lot of people who find themselves in a lot of credit card debt, and trying to increase their savings.  How do you decide what should take priority?  Conventional wisdom with credit cards is that you pay off those with the highest interest rates first,  because they are carrying the highest cost of renting money (when I say renting money, understand that every time you use a credit card, not a debit card, you are renting money from the issuer of that card.  The interest rate is their charge for that money rental.), but you should also consider what return you can get on savings. It may be better to not try to save so much when the return is minor (around 2% in savings accounts) and you are borrowing at 19% or 29%.

For example, if you have a credit card balance of $5,000 at 29.9%, if you make the minimum payment it will take you 29 years and cost you over $18,000 in interest alone. If you have $5,000 in your savings account, you might be tempted to leave it there to collect interest. But unless you've found that unique bank that pays interest of 30%, you will lose a whole lot more than you gain by paying the minimum. By making the minimum payment you suffer "death by a thousand cuts". Each month over 80% of the minimum payment goes toward interest.  Read that again. The lender takes their cut first. Then pays off some of your balance.

The bottom line is this: If you can't lend money (invest) at a higher return than you can borrow it, then pay off your debts first.

Facebooked

It's been a couple months since its IPO and Facebook is looking like a shiny turd. Ok, maybe not too shiny. Did I see this coming?  Well, I won't say I saw it coming because there's no accounting for the crazy of the stock market, but I never could figure out a few things, like.

• How does a company making about $1-2 billion a year, warrant a valuation of $100 billion?
• Running a startup is one thing, running a real company is another. Everyone assumed Zuckerberg was up to it.Why?

I listened to a Planet Money podcast a few weeks back and it was pretty interesting. Talked about 2 guys who bought ads on Facebook and it's questionable whether it was worth it. They also talked about Facebook "Like" farms where, for a price, people will "Like" you. Kinda destroys the whole model.  Anyway, I didn't get in on the IPO or after, and I predicted in 4 years Google would buy Facebook for $4.

Leapfrog

Three months ago I bought some Leapfrog enterprises, they make the children's LeapPad toys.As for the why I bought it, here's their one year chart:

Yeah, talk about missing a train. It's tripled in a year and no one was paying attention.  It came to my notice because it's been in my watch portfolio for years and they reported earning that the analysts didn't like so they got punished. Not bad, but as I've said before, the fact that the stock price changes ANY day due to what an analyst says is about the stupidest thing I've ever heard.  No, I don't respect analyst's opinions very much. It's like looking in a kitchen through a window and describing what the food should taste like.  Yes, I know they do all kinds of interviews with "the supply chains" yet they still miss stocks that take off. Then they blame it on unknowns in the market. Newflash: It's all unknown!  And don't get me started on target prices. Kinda like telling someone the day, hour and minute they're going to die, then ignoring that statement when your wrong. As for how LP has done the past few months since I bought it....

Bam!  I'm up about 18%. 'nuff said....

Even a broke watch is right twice a day....

This week Wellpoint announce they would be buying Amerigroup. By way of full disclosure, I used to work for Amerigroup. I bought the stock a while back and pretty much sat on my +100% return.  When the Wellpoint announcement came out this week my returns shot to over 200%.

I had no idea this was going to happen, and I may not be the smartest bulb on the shelf, but I ain't the dumbest either. I bought at $28.78, the price is now $89, Wellpoint offered $92. Sell, sell, sell.   The question becomes, am I selling too soon?  Here are the possible outcomes I see.
1. The acquisition goes through and the stock goes for $92. I lose about $4 a share.
2. The acquisition doesn't go through and the stock falls back to about where it was before, about $63. I lose about $28/share.
3. Amerigroup decides it doesn't want to be acquired. Not likely, I would imagine this has been discussed for weeks if not months.
4. Another suitor jumps in and offers a higher price. Possible, but I also think not very likely.

So, take the money and run. Yes, even a moron can make money in this market if they are lucky.

Read this article on Netflix. Thinking of buying some stock, but gonna keep an eye on them for now.

Looking for investment opportunities....

Just read these 2 articles on Facebook & JC Penney. Both interesting. My take on Facebook is that bow the hoop dee doo is over I think it will be a generally adequately performing stock over the long run.  I think I might pick up a few shares in the next few days. As for JC Penney, apparently, they just jumped on the screwed train.  I'll wait for them to drop some more before taking a chance. I don't think they'll go bye bye anytime soon, but I don't see them at bottom yet.

My new darling at the moment is Leapfrog (LF). Even though this article says it's "trying to turn a corner" the stock has been buck nutty the last 10 months, I'm talking tripling in that time.

Even Apple hasn't done that! That's right, over the last 10 months this stock has outperformed Apple (see 2nd chart below) and nobody's talking about it. Granted, back in 2004 it was selling in the $50 range, but it seems someone figured out something last year and its kicking.

Inside Job

This is a great podcast on what happened when the markets collapsed! Very easy to understand.
http://www.thisamericanlife.org/radio-archives/episode/405/inside-job

Should we take the money and run?

My biggest barometer into how the stock market is doing is my Apple stock.  But over the past month or so, it's not been the only holding of mine that's down. "The market" itself is down about 100 points.  I don't see much reason for it at the moment, but I think it's a real good time to develop an exit strategy.  I wouldn't put it past this market to hit us with a 3-400 point one day drop and have everyone pooping bricks.

Should you leave stocks along?

Just read this article from USAToday, it talks about how people are turning away from stocks as investments after getting burned badly in 2008-2009.  Let's we honest, these people got burned because they weren't paying attention to their stocks. Yes, the stock market tanked in about 2 days back then, but there were more than enough warning signs. I got smacked a little and jumped out. When the be can or whup booty showed up, I was already on the sideline, and able to jump back in.

The moral is, you have to watch your investments every day, and keep your ears open.

The Return of Apple

Yesterday Apple shot up about 7% after losing 13% over the last few weeks. Yes, Apple, the darling of all investors was slowly losing market cap. I had been watching this phenomenon (and crying) and trying to figure out why. I spent a few days searching but came up empty. Then on Tuesday Apple announced quarterly earnings. Sales of iPhones and iPads were ridicu-stupid. I mean iPad sales up 150% year over year. That's WTF territory.  But why had the shares been dropping? 

Apparently, "analysts" were concerned that sales of iPhones to US carriers were slumping.  Maybe they were, but overseas Apple turned this muthuh out.  What's sad is that for the last 2 weeks Apple's stock price, and the millions of investors who own APPL have seen their assets decline because some analysts had a gut feeling. A gut feeling that was wrong. They were only looking at one aspect of the company. Kinda like saying GMs in trouble because blue Chevy Volt sales might be down in Chicago on Tuesdays.  The US market is not the end all and be all.

Too bad that these same analysts will be making more predictions today. Even worse, people will be listening.

Etch-a-Sketch: The stupid continues

I've said before, many times, that the stock market is NOT logical. There are whole networks, websites, blogs (like this one) and every other kind of social media devoted to explaining, predicting an "understanding" the stock market. And just when everyone starts believing they got it nailed down, stupid rears it's ugly head.

This past week, one of the officials for one of the presidential candidates mentioned "Etch-a-Sketch" during an interview on TV. I can't say that was the total cause, but on Thursday Ohio Arts (OART.PK), the company that owns the Etch-a-Sketch, went from $4/share to $9/share. And they hadn't made any announcements.  And the volume that day was about 800 shares traded. That's not a typo. What about the PE ratio? What's Ohio Arts' beta?  Did the sector see a boost? None of that mattered. As it never has.  The stock went up over 100% because it's product was mentioned. Period.  Nobody necessarily bought any more Etch-a-Sketch's, the company didn't announce record earnings. Their product got mentioned. And somebody with 800 shares sold them and made about $4,000.

Today the stock is back around $4. Stupid went back to sleep.

Unexpected Consequences

Recently the restaurant across the street from "my office" (Panera Bread) shut off their free wifi for about 2 weeks.  Since my office only allows you to be online for 30 minutes at a time (to cut down on traffic), it's common knowledge that if you have to stay online longer you log onto the other restaurant's wifi (I'm on it now) and surf all day.  I wonder if Panera saw a decrease in business over the last 2 weeks, and if so, did they realize it was because of a competitor?

Smackdown

I don't know why, but the market opened and is down between 1-2% in 15 minutes. Good time to look for bargains. Those stocks that are getting beat down because the rest of the market is.

Linsanity: there's gold in them thar benches

Jeremy Lin is the hottest ticket in NY right. You know the story, this guy was undrafted, cut from 2 teams this year, sitting the bench, got a chance and has been averaging over 20 points a game every since.  The Knicks have only lost once in their last 10 games, prior to that their record was 8-15.  Now the question everyone is asking is "how did so many teams miss that he was that good?"  I'll tell you how. The same reason coaches flock to the NFL Combine every year looking for the next great talent, but miss on pretty much 90% of their picks. Here's an article on the top 100 worst NFL picks. Granted, it's just someone's opinion on how bad these picks are in the realm of badness, but there's no disputing none of these guys set the world on fire. Yet they all went to the Combine and they all did well in it. 

Coaches missed Jeremy Lin because instead of looking for talent they played it safe. They had certain players that were highly paid so they went with them.   The Knicks had Carmelo Anthony and Amare Stoudemire but could only win 8 of 22 games. This guy comes off the bench and leads them to 7 out 7, including a 38 point performance against the Lakers.  Is he all that special?  Not really, there have been many players who have led their teams to a string of victories. But how many people have dropped 38 points on Kobe Bryant's Lakers?   Every team has their 7 man rotation, meaning unless the game is a straight up blow out, these are the only guys who will get any meaningful minutes. How do you evaluate a performer who's getting 4 minutes a week out of a possible 240?  You don't. You pick your 7 and let the rest of the team get scraps, garbage minutes.  You focus on your starting 5 against your opponent's starting 5 instead of using all 10-12 of your players to attack his 5.  You can't tell me a fresh, hungry Troy Murphy is not better than a tired Pau Gasol.  If not, why is he on the team? When the Dallas Cowboys had their last great Superbowl run (2 of 3) it was mostly because Jimmy Johnson was rotating players every down. As a result, they were always pretty fresh, facing guys who had been pounded on for the last 6-7 straight plays.

My point is that if more coaches coached instead of "giving the fans what they want" (newsflash: fans want wins.) more coaches would probably find more gems on their benches.  Guys who could change the team for the better if given the opportunity.  Had it not been for fluke injuries, Jeremy Lin would still be sitting at the end of the bench, or at home, and the Knicks would be looking at yet another really, really bad season.  Instead, the word "Playoffs" is being not whispered, but yelled in MSG.

Why is this important to investors? Because it's easy as an investor to have this same play it safe mentality..  Pick one or two stocks and let the rest of your portfolio languish. Remember, every stock has the opportunity to be a star.  Watch them all, and act accordingly.