MySpace rules the web...

An article i was reading listed the 20 most popular websites where people spend time. I should admit i was pretty much surprized after going through the list. I was expecting Google to top the list but turns out that isnt true.

So, the big question is, where do we spend all our time online? Which websites are more successful in capturing our attention compared to others?

Lets go over some facts

1. The Top 20 Websites add up to 39% of all our time spent online.
   
2. MySpace, a social networking site owned by News Corp tops the list by a big margin.
3. Surprizing Yahoo YHOO is ranked #2, thanks to Yahoo Finance, Flickr and Yahoo portal.
   
4. Google GOOG is ranked #5 well below msn.com owned by Microsoft MSFT ranked #3 and eBay EBAY ranked #4. People spend 4 times less time on Google than Yahoo.
   
5. YouTube a popular video sharing website makes it to the list at rank #12
6. Adultfriendfinder.com also finds a place in the list suggesting need for a friend or two for the lonely Americans.
7. Some of the expected sites were Amazon AMZN, Craigslist.com and Wikipedia.org

Conclusion: Only 2.1% of our time is spend on Google. This stands out to surprize everyone. However if you think clearly you will realize that we end up using Google services like Gmail, Google Maps, Google search as quick read or look up. But we end up spending more time on social networking sites and portals with loads of contents.

Newspaper blogs beats newspaper news...

The number of visitors to the blog pages of the top 10 online newspapers grew 210% in the past year, far outpacing growth to the parent sites.

NetRatings Inc. NTRT found that while the unique audience to online newspapers grew by 9% in 2006 where as the number of visitors to blog pages at the top newspapers grew at 13% of the parent sites' total traffic.

Here are the most popular online newspaper blogs and links to their pages with their estimated December audiences.

USATODAY.com blogs, 1.239 million

The New York Times' blogs, 1.173 million

SFGate blogs, 515,000

Washingtonpost.com blogs, 433,000

Boston.com blogs, 388,000

Bet on high dividend stocks...

With the way the stock market is behaving, it is sometimes better to play with less volatile stocks. High dividend paying stocks fit the bill. For starters according to Investopedia,

Dividend is the distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives. It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.

High dividend stocks are safe bet among cautious investors. Even if the price of the stock goes down, the high dividend paid by the company will compensate for the loss. Most of the high dividend stocks do not fluctuate alot and infact few good stocks see a steady rise in the price.

High dividend stocks i recommend:

• Frontline Ltd. FRO with Dividend of $10.00/share and Yield of 30.70%
• Novastar Financial Inc. NFI with Dividend of $5.60/share and Yield of 25.90%
• New Century Financial Corp. NEW with Dividend of $7.60/share and Yield of 25.30%
• HomeBanc Corp. HMB with Dividend of $0.80/share and Yield of 25.20%
• Knightsbridge Tankers Ltd. VLCCF with Dividend of $4.00/share and Yield of 16.20%
• Nordic American Tanker Shipping Ltd. NAT with Dividend of $5.28/share and Yield of 15.20%
• TNR Technical Inc. TNRK.OB with Dividend of $4.75/share and Yield of 14.90%

The returns range from 30.70% to 14.90%. These returns are definitely lucrative compared to what the banks offer. I recommend my readers to do your own research about these stocks and invest accordingly.

Is South America the Answer ?

With emerging markets grabbing investor attention, many are turning their focus towards South American markets. Strong exports, high commodity prices and increased investments have been contributing factors to growth within many of the Latin American markets. As a result, many companies are working to capitalize across a variety of sectors such as DVD manufacturer Infosmart Group, Inc. IFSG in the digital media and tech market, ZAP ZAAP and Rotoblock Corporation ROTB taking advantage of the growing demand for alternative and renewable transportation, as well as GoldenPeaks ResourcesLtd. GL and other mining companies pursuing resource plays within Argentina and surrounding areas. Lets take an example of Brazil to understand where does the South American market stand.

Tech & Media Market
Computer sales increased more than 20% in 2006. This growth can be attributed to a variety of factors such as government incentives, a high level of Internet use and overall economic growth leading to increased consumer purchasing power.

DVD player market is also growing rapidly in Brazil. Brazil is one of the largest markets in the world with the population of over 180 million. Furthermore Brazilian people enjoy music and film, which leads to increasing sale of discs. This could benefit DVDR manufacturers like Infosmart Group, Inc. Somehow the local production has not been able to catchup with the growing demand, which has lead to increased imports especially from U.S. To get a big chunk of the pie Infosmart Group, Inc has decided to establish a production facility in Brazil. According to the company, the sales from their Brazil facility are expected to contribute approximately 40% of the group revenue.

Energy & Transportation Technology
45% of Brazil's energy production comes from Renewable/alternative energy. This has made Brazil less dependent on foreign oil. Brazil is the world's largest producer and exporter of sugar cane based ethanol. Ethanol from sugar cane has key benefits over corn based ethanol because it is more energy efficient and is easier to grow and process, thereby reducing overall costs.

Brazil's automobile has upgraded to run on pure ethanol or gasoline-ethanol blend. California based alternative vehicles developer and distributor ZAP has teamed up with local company in Brazil called Obvio! to launch such cars in the U.S. market. Rotoblock Corp. has teamed up with Obvio! to provide advanced propulsion systems for the engines.

Mining Opportunities
Chile is the largest copper producer in the world and with copper prices rising so is Chile's GDP. Argentina has abundance of natural resources and GDP growth of over 8% in the past few years. GoldCorp Inc GG, Golden Peaks Resources Ltd GL and Barrick Gold Corp ABX all have strong presence in Argentina and reaping-in most of the profits.

• GoldCorp Inc. currently owns 37.5% of a gold and copper producing property in Argentina.
• Golden Peaks Resources Ltd., an exploration and resource development company holds more than 385,000 acres of prospective land holdings in Argentina with main focus on gold projects.
• The world’s leading gold company, Barrick Gold Corporation, has global operations that include various South American locations such as Peru, Chile and Argentina and plan to invest more than $1.5 billion.

Conclusion: Emerging markets can be volatile at times due to the region instability, terrorism and political risk factor. However strong demand across sectors such as renewable/alternative energy, technology, consumer electronics, digital media, mining and transportation provide good long term opportunity. Many speculate that with already drastic growth in emerging markets, the future might not be great. However the demand in emerging markets is still strong and with continued political and economic stability, emerging markets is still a good buy.

Recommendation: I recommend to look into companies that have presence in the emerging markets and not tied down only by US market. As discussed in this article, companies like IFSG, ZAAP, ROTB, GG, GL, ABX all hold good promise for the future with their presence in emerging markets.

Seven Companies Announce Buyback

When a company announces a buyback, it means that the company is going out and buying shares of its own company on the open market. This is generally very bullish for stocks, since it shows confidence by executives in their own companies, reduces the number of shares outstanding. With the reduction of shares in the market the demand of the stock normally goes up. This is also good news for the existing shareholders since the earnings and dividends will be split up among fewer shares.

The 7 companies that announced buyback are

1. Bank of America BAC
2. Cypress Semiconductor CY
   
3. East West Bancorp EWBC
4. eBay EBAY
5. FreightCar America RAIL
6. Rome Bancorp ROME
7. Varian VARI

Camera + GPS = Simply Cool !!

Ricoh Corp. RICOY a leader in business solutions, is providing cameras with integrated GPS technology by releasing the 500SE GPS-ready digital camera. Developed for outdoor location-based photography, the 500SE has high resolution to meet the image quality and all-weather usability. The camera has capability to receive data streams from external GPS devices via its on-board Bluetooth radio.

This is the first of its kind. We have seen GPS in cellphones but this is the first one in cameras. Eventually time will come when every camera will be built with GPS capability. I see brighter days for this company.

Glimpse of NYSE

This is pretty cool. Tribute to the crazy day traders at NYSE

Ethanol After Bush's Speech

After President Bush's State of the Union Address speech, the shares of ethanol related stocks are moving higher. Bush is expected to promote fuel efficient vehicles, ethanol and new technologies for alternative energy to reduce the dependence on foreign oil.

The news caused stocks of Ethanol companies to go up. Xethanol Corp. XNL went up 28% in last 3 days where as Pacific Ethanol Inc. PEIX grew by 6.58%. Archer Daniels Midland Co. ADM went up by 2.86%. Also Andersons ANDE and Green Plain Revewable Energy GPRE made modest gains of 1.64% and 1.02% respectively.

Along with Ethanol companies, Solar and other alternative energy stocks will also benefit. Few of them to keep an eye on are

1. Solar companies are Sunpower Corp. SPWR, Energy Conversion Devices ENER, Evergreen Solar ESLR, First Solar FSLR and MEMC Electronics WFR.
   
2. Wind energy companies are American Superconductor AMSC and Zoltek ZOLT
3. Fuel Cells companies are Ballard Power BLD and FuelCell Energy FCEL
4. Liquid Coal companies are Syntroleum SYNM and Rentech RTK

You can always buy PowerShares WilderHill Clean Energy Portfolio ETF PBW

Yahoo and the Panama buzz !!

The latest buzz around Yahoo YHOO is about their new Ad Ranking System called Panama. Currently Yahoo places a paid ad solely based on the amount you are willing to pay for the keyword, whereas Google GOOG uses both price of the keyword and a quality score to rank the ad. Yahoo is looking to rectify this with Panama. Shareholders, employees and advertisers are for obvious reasons, praying that Panama works. Positive comments and publicity are all good, but unless the system helps generate more revenue it means nothing, especially to the investors.

The company began to transition customers to Panama in mid-Q4, any revenue growth will likely come in Q1 at the earliest. The question to ask is whether this transition is going to have a positive or negative impact on their Q4 or Q1 revenue. If it is going to be negative, Google will gain on it.

According to Wall Street Journal, some small Yahoo customers have had to cut back spending significantly during the transition. Some mid-size companies were spending $10,000 to $15,000 a month on search-related advertising through Yahoo. After their account was transition, Yahoo declined to let them continue running some ads linked to specific keywords. In response these companies slashed their spending on Yahoo and increase their spending with Google.

Conclusion: For now, Google seems to gain with their existing system. Yahoo in this transition phase might lose out some revenue, and if they are not too careful might lose out on some loyal customers too.

Recommendation: I love both Google and Yahoo and see brighter future for both of them. The advertising pie is big enough for both. Google investors can enjoy steady rise in their stock prices, where as Yahoo investors might see light at the end of the tunnel after a wait for another qtr or two.

7 stocks of the day - 24th Jan 07

TradingMarkets.com Site Consultant, James Pelayo, gives you the 7 stocks you need to know about for Wednesday, 1/24/07. Find out which stocks will likely make significant moves on this day.

Where Is My Money !!

This one is really funny...

Life Cycle of an Investor

Check this graph out, its pretty cool. This cycle tells you what exactly an investor goes through after buying a stock.

7 stocks of the day - 23rd Jan 07

TradingMarkets.com Site Consultant, James Pelayo, gives you the 7 stocks you need to know about for Tuesday, 1/23/07. Find out which stocks will likely make significant moves on this day.

Global Markets: When U.S. Economy Goes Down...

There are alot of investing opportunities outside U.S. In the recent years, alot of portfolio managers are recommending their clients to invest in emerging and other developed markets. The reason being obvious is the concern over things not going well in the U.S. Everyone talks alot about China and India as good bets in the emerging market category.

How does China and India perform when the U.S. economy is lagging ?
I believe not. China and India rely highly on the U.S. economy. With U.S economy and markets performing poorly impacts Chinese hardware and manufacturing exports and Indian software exports.

So who performs well when the U.S. economy is lagging ?
Few developed countries that still do well are: Australia, Ireland, Norway & Sweden. These countries do well because they dont rely too heavily on the U.S.

Other emerging market is Chile. They rely on exporting copper, similar to Brazil. China is still a good bet even though it is reliant on U.S. Vietnam is also gaining alot of interest from investors. Spain also holds alot of promise.

Rule of thumb: While investing in foreign markets, there is always going to be some surprizes and disappointments. This has to be always taken into consideration beforing investing your money in those markets.

Another good way to get started by investing in foreign markets is buying Exchange Traded Fund (ETFs). If you do not understand what are EFTs read here --> EFT explained or wait for my upcoming post on EFTs. :))

Some of the EFTs i recommend are

• iShares MSCI Australia Index Fund EWA
  
• iShares MSCI Sweden Index ETF EWD
  
• Irish Investment Fund Inc. IRL
  
• iShares MSCI Hong Kong Index Fund EWH
• iShares MSCI Spain Index Fund EWP
• The India Fund Inc. IFN
• iShare FTSE China 25 Index FXI

China: Pollution Emission Targets

China is growing by leaps and bounds and so is India. Both countries are expected to have more than 8% GDP. It is a revolution in itself. That is the good story, but no one talks about the bad story. Both these countries have failed to meet with the pollution emission targets, especially China.

Eric W. Orts, professor of legal studies and business ethics at Wharton, says that

"Pollution in China, if left unchecked, will drag down the country's economic growth and result in huge healthcare costs. In addition, China’s pollution will, over time, erode its competitive position in the global economy.”

Lets go through some facts:

I found some interesting facts about China thanks to financial analyst Himanshu Pandya

• According to the World Bank, 16 cities in the world with the worst air pollution are located in China.
• The country’s Ministry of Science and Technology has estimated that 50,000 newborn babies a year die from the effects of air pollution.
• China’s emissions of carbon dioxide, the most important global warming gas, are expected to surpass those of the United States in 2009, according to the International Energy Agency.
• At a recent Marathon, the pollution Index read 149 (> 100 is considered unhealthy).
• Pollution in Beijing could be a major issue for the upcoming Olympics in 2008 if left unchecked.
  

What China is doing

• Beijing has relocated, or plans to relocate, more than 100 chemical, steel and pharmaceutical factories outside the city and replace 300,000 polluting taxis and buses with lesser-polluting vehicles.
• They intend to replace coal furnaces with natural gas furnaces and rushing builders to finish construction before the Olympic games so that dust from the building projects has a chance to settle.
• In 1998, Beijing recorded only 100 blue sky days with acceptable pollution. By 2005, the capital had tallied 244 Blue Sky days.

Conclusion: This means that companies operating in China who help overcome environmental issues will get a nod from the government with huge contracts for some players. So who these players. Lets find out.

Recommendation:

1. Fuel Tech Inc FTEK is a technology company active in the air pollution control and specialty chemical business. They focus on technologies to reduce nitrogen oxide and FUEL CHEM processes. Last week, the company was awarded $2.8 M contract by China. President and CEO, John F. Norris, added, “With China diligently preparing for the Olympics, efforts to reduce air pollution are taking center stage in Beijing and other Olympic venues. We believe this announcement will likely influence decisions made by other power plants". Fuel Tech is not only a great China play but also a great domestic play. Currently, Fuel-Tech equipment is used by less than 2% of the more than 1,500 coal-fired plants in the United States. So there is plenty of growth left in the United States as well.
   Technically their numbers are good with EPS = 0.33, a bit higher P/E = 74.86, Market Cap = $540M, Analyst recommendation = 2.1 and respectable institution investor presence makes this stock a good buy.
2. Suntech Power Holdings STP is a solar energy company that designs, develops, manufactures and markets a variety of photovoltaic cells and modules. It’s one of the biggest pure play solar companies in the world. It also provides photovoltaic system integration services in China. The company has already won the contract to provide 130KW solar energy system for Beijing’s Bird’s Nest Stadium for the Olympics. China recently announced plans to build the world's largest solar plant. There is strong possibility that Suntech Power will play a vital role in this solar plant. Technically their numbers also look very impressive with EPS = 0.56, P/E = 62.06, Market Cap = $5.23 B, PEG = 0.91, Analyst recommendation = 1.9 and 100 major institution investor holding their stocks.
3. There are a number of other companies that can benefit from Chinese spending to fix its air quality. General Electric Company GE will also play a role on many fronts. They can help with Nuclear Plants, Coal Plants and Wind Turbines. Another Wind Energy play would be American Semiconductor AMSC.
4. ADA-ES Inc. ADES develops and implements environmental technology and provides specialty chemicals for coal-fueled power plants to enhance air pollution control equipment. However i dont like their current numbers and i would recommend to stay away from this one.
   

7 stocks of the day - 22nd Jan 07

TradingMarkets.com Site Consultant, James Pelayo, gives you the 7 stocks you need to know about for Monday, 1/22/07. Find out which stocks will likely make significant moves on this day.

Tip On How To Build Your Finance

Paul Clitheroe founding director of ipac securities and leading media commentators on financial issues gives you advices on how to build your personal finance.

$140 trillion in Assets !!!

Yeah you heard me. World assets were all time high at $140 trillion (includes stocks, bonds and other financial assets) in 2005. McKinsey & Co. conducted a study mapping financial assets around the globe and seek the flow of these assets from region to region.

This study helps you understand where the investors as well as the banks are investing. It is clearly indicating that investors and banks are spreading their investment portfolio in diverse broader markets.

U.S is still the leader, taking in about 85% of the flow from countries that are net exporters of capital (like Japan, China and Middle East OPEC countries). This means that of the all the saving that citizens world-wide are willing to put outside their own country, the U.S gets 85% of it.

How Did They Perform !!

Burnt burnt burnt...!! Isnt it weird that even after you have a strong feeling about the direction of the market you go ahead a make some real silly trades ? How many times have you got sucked into buying a stock thinking its reached its bottom and the prices will rise from here, but it never does. Instead it keeps falling till the sharks eat every innocent investor up for grabs. What surprises me is that i made 3 important points last night and all of them turned out true.

1. Tech sector might be a risky bet considering the current trend.
2. Metal prices will see some positive number.
3. IM and MU are value stocks and will see better numbers in the longer run.
   

Stocks traded lower as the market took a hit from another sell-off in Technology sector. Oil prices again took a drop at point slipping below $50 and the Feds showed no sign of reducing interest rates. Disappointing Q2 guidance from Apple and drop in sale and profits from Intel brought the Technology and Computer Hardware tumbling down. Neither did Fed Chairman Bernanke help the market after he warned of a possible fiscal crisis and potential chances of a weakened economy. On a positive note, unexpected increases in monthly housing starts and building permits provided further evidence that the housing market has bottomed out, removing the worst of recession fears.

So how did the stocks i picked yesterday perform. Real bad, it broke my heart. Against investor sentiments no logic can apply.

COGT -0.25 (-2.31%)
DIVX -1.23 (-5.64%)
FLEX -0.14 (-1.17%)
SMOD -0.92 (-7.11%)
ZQK -0.23 (-1.56%)

Net Loss of -17.79%

Picks for 18th Jan 07

Cheap bargains are the best stocks to buy. I normally pick up oversold stocks who are fundamentally strong along with good EPS, P/E, Market Capital, PEG, Revenue growth and overall analyst recommendation.

I am betting on tech sector stocks which might be a bit risky considering the current trend.

My picks for 18th Jan are,

1. COGT - Sector: Technology > Industry: Computer Services
2. DIVX - Sector: Technology > Industry: Software & Programming
3. FLEX - Sector: Technology > Industry: Semiconductors
4. SMOD - Sector: Technology > Industry: Semiconductors
5. ZQK - Sector: Consumer Cyclical > Industry: Apparel/Accessories
   

With oil prices going up, metal prices saw some positive numbers too. Too early to jump into metal stocks yet, but we might see a good rally. Keep an eye on GG, HL, AUYand NXG

I also wanted to give my value stock recommendations. These are stocks that are not for day-trader but for long term investors. You might see some downward swing for a while but these stocks will go higher and higher in the longer run. Value stocks: IM (will be having their earnings report on 15th Feb) and MU

How Did They Perform !!

An amazing reversal of roles from yesterday. Energy sector made an upward movement where as the Technology and Transportation sector saw a downslide. Stocks closed lower today as mixed earnings and economic data left investors questioning valuations and earnings prospects, especially in the Technology sector.

Intel INTC was leading the downward slant in the early morning after posting a not so-good earnings and bringing the others along with it. Cisco Systems CSCO also had another bad run dropping by 3.78%

Fed's report released today showed inflation in control with modest pace growth. Oil prices were also the focus among investors yet again. Cold weather forecasts have renewed enthusiasm to buy the commodity which lead to oil closing higher than previous day.

ANSW +0.08 (0.66%)
CBK +0.15 (0.73%)
LQDT +0.09 (0.50%)
NEXT -0.25 (-2.18%)
STST -0.15 (-0.69%)
WIT +0.66 (3.86%)

Net Gain of +2.88%

Democrats for Stem Cell Research

Stem cell research has been a hot topic for quite a long time, but it has now become the center of attention as Democrats, who took both chambers of Congress for the first time in twelve years, have pledged to increase federal support for stem cell research. The House of Representatives passed a bill that would reduce restrictions on federal funding for embryonic stem cell research.

Besides favorable public opinion, local and state governments appear to be jumping on the stem cell bandwagon and will be pushing in my more money in the research.

So what is a stem cell ??
A stem cell is a generic cell that can make exact copies of itself indefinitely. It is also a precursor cell that has the ability to make specialized cells for various tissues in the body (such as heart muscle, brain tissue and liver tissue). Stem cell research is expected to impact advances in curing diseases such as Alzheimer’s and Parkinson’s disease, diabetes, spinal cord injury, heart disease, stroke, arthritis, and cancer.

There are 3 categories of stem cells:

• Embryonic stem cells (found in the embryo tissues and enables differentiating into specialized embryonic tissues)
  
• Adult stem cells (found in adult tissues and acts as a repair system for the body and replenishes specialized cells)
• Cord blood stem cells (found in the umbilical cord)

Controversy
As stem cells can be readily grown and transformed into specialised tissues such as muscles or nerves it has generated world-wide interest. However in U.S. there exists a widespread controversy over stem cell research due to the techniques used in the creation and usage of stem cells. Embryonic stem cell research is particularly controversial because currently it requires the destruction of a human embryo and/or cloning. Opponents of this research also argue that the practice is a slippery slope and experimenting with human cloning is against the natural biological process. Supporters of this research argue that it necessary to pursue embryonic stem cell research because the resultant technologies are expected to have significant medical potential, and that the embryos used for research are only those slated for destruction anyway. The ensuing debate has prompted authorities around the world to seek regulatory frameworks and highlighted the fact that stem cell research represents a social and ethical challenge.

Conclusion:With a strong support from the Democrats the stem cell legislation will see brighter days. With the inclusion of new non-controversial methods of obtaining stem cells, it is only a matter of time before stem cell companies end up with huge government funding for research.

Recommendation: With strong backing from the public and government, stem cell companies are expected to do good in the coming years. However these are early days for stem cell stocks and investors should be patient with them. Few companies i recommend to keep an eye on are Aastrom Biosciences Inc. ASTM and Stem Cells Inc. STEM

Picks for 17th Jan 07

After the 3-day break, the stocks didnt move either way as expected. Energy sector took a beating amid another sell-off in oil, where as Health Care and Transportation sector saw some upswing.

Investors were worried that the recent rally in Technology sector may not live up to the earnings expectations that have been priced into the sector over the last few months. Among noteworthy, Symantec SYMC dropped13% and Cisco CSCO lost plunged 3%

Oil prices dived 3.4% to 19-month lows after Saudi Arabia's oil minister surprisingly denounced the need for an emergency OPEC meeting and further production cuts.

My picks for 17th Jan are

1. ANSW (This one has been over-sold and shorts have won. But it has reached its bottom and i expect to see upward swing). Sector: Technology > Industry: Computer Services
2. CBK (EPS = 1.02, P/E = 19.92, PEG = 0.94, upgraded to outperform rating) - With such numbers you got to love this one. Sector: Services > Industry: Retail (Apparel)
3. LQDT (EPS = 0.31, P/E = 59.05, PEG = 1.17, Analyst Recommendation = 1.9) - Higher P/E is offset by excellent PEG. This one is a long term keeper. With prices dropping today it is an excellent buy for tomorrow. Sector: Services > Industry: Retail (Catalog & Mail Order)
4. NEXT (EPS = 0.54, P/E = 21.40, PEG = 1.16, Analyst Recommendation = 1.5) - Low volume trading but nonetheless excellent number. Sector: Technology > Industry: Semiconductors
5. STST (EPS = 0.87, P/E = 25.06, PEG = 1.23, Analyst Recommendation = 1.8) - The stats speak for themselves. Keep on getting alot of contracts. Sector: Capital Goods > Industry: Aerospace & Defense
6. WIT (They are coming out with their earnings tomorrow they are going to be excellent) Sector: Technology > Industry: Computer Services

State GDP = Country GDP

Fascinating stuff: This is an amazing map of the United States. Each state's economic output is analogized to another country's GDP

Few of the notable countries missing are U.K., Japan, Germany, China, Italy and India.

Hugo Chávez: Nationalize Nationalize

Venezuelan President Hugo Chávez recently announced he would nationalize power utilities and the country's biggest telecommunications firm CANTV VNT. After the announcement the share prices of CANTV tanked from trading around $20/share to $12/share. Ouch !!!

He also mentioned that he plans to nationalize the entire energy sector indicating there are more targets for take-over. But he said he would permit foreign firms to hold minority stakes in energy deals. It was not immediately clear whether he intends to nationalize the whole sector or moves against specific projects or companies.

Venezuela will have to judge how closely private firms must be connected to the country's oilfields, refineries, pipelines, gasoline stations and coal mines to count as targets for nationalization.

Companies at Stake
Huge oil service companies such as Halliburton HAL and Schlumberger SLB operate in Venezuela but Chávez gave no indication whether deals involving such businesses were now in his sights. Chávez also said Venezuela was almost ready to take over the foreign-run oil projects of the Orinoco Belt, which produce about 600,000 barrels per day. Those projects are run by U.S. majors including Chevron, Conoco Phillips and ExxonMobil, as well as European heavyweights such as France's Total, Norway's Statoil and Britain's BP. Chávez confirmed such firms could stay on as minority stakeholders after the state had acquired 51 %.

Another noteworthy company that has operations in Venezuela is Crystallex International Corporation KRY. They are engaged in the production of gold, including exploration, development, mining and processing. The shares also took a plunge with the announcement, but it recovered after the management responded that nothing had changed the status of their mining operation.

Recommendation: For now i would not touch these stocks. They are high risk stocks and will depend on the intention of the Venezuela government.

Computers Will Act More Like Humans

Speech recognition is the process of converting a speech signal to a sequence of words. Speech recognition applications that have emerged over the last years include voice dialing, call routing and simple data entry (like entering a credit card number). This is a very fascinating technology and a market with huge potential. However after decades of development, speech recognition applications still hasn't fully evolved. There is plenty of risk at stake.

Importance of speech recognition:
Early applications were termed big flop. However that is changing now. Computing time has reduced, the storage capacity has increased and become cost effective, and the technology itself has been refined. There is now a huge market for speech recognition applications, not to mention text-to-speech applications. Applications include, internet, cell phones, in-vehicle navigation and communication, consumer electronics and a list of computing devices.

Additionally the chip size is getting smaller and smaller, and so are the devices. How do we fit in the numeric keypad ?

Speech recognition could be the answer we are looking for. Instead of asking humans to act more like computers, the computers will act more like humans.

• Just for starters, think of everything that is driven by touch-tone menus. Those will be voice-driven someday soon.
  
• Many companies have made web-based content such as stock quotes and entertainment information available via speech.
  
• Booking airline tickets and tracking packages are just a few more examples of applications already in place.
  
• Drivers in many metro areas can access information to help them through the commute by talking their way through voice-driven real-time reports on traffic conditions and public transit.
  
• Back office/call centers would benefit from this technology through automation.

Conclusion: It may be a few more years before speech-recognition becomes a mainstay in our lives, but the businesses built around this technology are making progress and it's hard to deny this will eventually be a huge market.

Recommendation: I believe the speech recognition industry is going to see solid growth in the coming years and is definitely a worthy buy. One of my personal favorite is Nuance Communications NUAN. Nuance is one of the leaders in speech recognition software. They have survived the rough times, but now they have pushed themselves into profitability. They have also entered into partnership with AT&T T to automate it's 1-800-YellowPages to raise their profile with investors.

Technical Analysis
Analyst are predicting EPS = 0.47 in this qtr. from 0.37 last qtr, with the sales expected to rise to $559 million from $389 million. The earnings growth rate is expected to average 22% over the next five years.

Is Ethanol A Good Buy

Before i dig deep into the details of ethanol, let us find out what exactly is Ethanol and why is everyone talking about it.

Accordingly to Wikipedia, Ethanol, also known as ethyl alcohol and grain alcohol, is a flammable, colorless, mildly toxic chemical compound with a distinctive perfum-like odor. Ethanol can be found in alcoholic beverages. Ethanol can also be used as a motor fuel and fuel addictives. Additionally Ethanol creates very little pollution when burned. To keep it short, Ethanol can be used as an alternate source of energy/fuel, hmmm...interesting. Does that mean Ethanol companies are good buys ? Is this a good time to invest in Ethanol companies ?

Lets go through some facts:
US farmers would face a real bad time without massive subsidies and trade protection from the government due to global competition. In a free global market, nobody would want US crops because they’re plain too expensive. Luckily, with the help of you and me (tax-payers), the US farm industry has been able to survive. But in the past few years, US farm industry has come under intense pressure from their trading partners and their ability to compete is diminishing.

In recent years, Ethanol has gained importance with the US dept of agricultural for the obvious reasons. Ethanol provides a partial route out to the US farm industry; redirect the expensive corn away from international markets to US-based ethanol processing facilities, put in place the right regulation to boost ethanol demand, and keep the low-cost ethanol producers like Brazil away with tariffs. What do you get in the end ? A booming ethanol industry...voila...!!! There are approx 110 factories producing ethanol in the US, who are ever-increasing their capacity. It is expected that the industry’s capacity will thus grow by 113% by the end of 2008. However there are those who are disputing these growth forecasts, stating that the numbers are underestimated. They believe that the consumption of corn for ethanol production will be way higher than predicted. Now this is bad because, with less corn in the market the prices of corn will rise. The end result would be a sensitive debate on food against fuel. (Farmers and ethanol industry v/s environmentalist and general public)

Ethanol is also the political favorite among alternative energy sources. There are signs that the new Democratic Congress wants to move ahead with the ethanol economy. However experts raised concerns that politicians should not close the door to air pollution, climate changes, foreign oil dependence and a dying farming industry by blindly believing in Ethanol.

Conclusion: Whether one likes ethanol or not, it was without a doubt one of the top alternative energy stories, and will remain a biggie in the coming years. While some people are hailing the growth in the ethanol industry, there are some very significant and immediate concerns with corn-based ethanol that will have to be addressed. These concerns could, under a bearish scenario, diminish growth in the sector.

Recommendation: I believe that Ethanol will do good over the coming years and will be a good buy. However the significance of ethanol will phase out with the advent of better solutions for alternative fuel. Therefore the investors should be extremely cautious when dealing with ethanol stocks. Few of the good ethanol related stocks i follow are MON, SYT and my personal favorite VSE.

How Did They Perform - 14 Jan 07

My picks for 12th Jan 2007, didn't turn out as expected. I will not be trading tomorrow due to the 3-day break in the market. After longer break it is difficult to understand investor sentiment. Only after strong earnings report, stable oil and positive economic indicator will help understand the market.

COGT 0.14 (1.3%)
DELL -0.31 (-1.15%)
NUAN 0.00 (0.0%)
MED -0.15 (-1.44%)

Net Loss of -1.29%

Netflix v/s Blockbuster

Last year Netflix NFLX has fallen 14%, while its arch rival Blockbuster BBI is up 67%. So what changed? Let us first understand what do they do and what are their business models.

What does Blockbuster do ?
Blockbuster is one of the largest movies and video games rental chain in the world. However they lost $1.6 billion in 2002, almost $1.0 billion in 2003, and $1.2 billion in 2004. In 2004, they introduced an online DVD rental service just like Netflix. Currently they have a collection of 65,000 titles and has about 2.2 million subscribers.

What does Netflix do ?
Netflix is the largest online DVD rental service, renting DVD's at a flat monthly rate depending on the plan. They have a collection of 70,000 titles and has about 5 million subscribers. Currently, Netflix spends about $300 million a year on postage to ship 1.4 million DVDs a day.

What changed at Blockbuster ?

• Blockbuster launched its Total Access program in November '06, which enables subscribers to return movies rented online to a local store and in return, pick up a free in-store rental. As soon as the trade is made, the online store knows automatically that you have returned the rental in the store and without waiting to receive it at their distribution center, they send you the next movie in your queue. So you could potentially have 6 movies out at a time while signed up for 3-at-a-time service.
• Additionally, Blockbuster still gives subscribers two coupons for free in-store rental of a movie or video game every month. This has helped Blockbuster add 700,000 new subscribers, which is a 47% increase over their previous subscriptions.
• Additionally, through their media campaigns outlining the benefits of Total Access over Netflix, they have managed to snatch some of Netflix's casual customers over.
• With their success of Total Access program, Blockbuster has also managed to increase the traffic to their stores (which was their basic business to begin with) which adds to higher retail sales of DVD's, magazines, video games and movie munchies.
• Blockbuster has set up a sign-up terminal at the stores allowing them to add subscribers who would not otherwise do this at home or over dial-up.
• Blockbuster also allows their 2 coupons a month to be used for video games. Now this is an additional bonus for those gamers who wouldnt want to spend 50$ over a game.

So what is next for Blockbuster?

• They are predicting 4 million subscriber by the year end.
• One should not forget that Blockbuster owns stores (property), which will grow over the years if they decide to sell them off bring in loads of $$$

What changed at Netflix ?

• Nothing much, they seem to be running out of steam.
• Their subscriber growth seems to have slowed down considerably, and it will slow even further with Blockbuster's onslaught.
• Recently, Blockbuster has started to offer incentives for Netflix subscribers to switch over.Netflix intends to offer movie download service via set-top boxes. Now this is encouraging but it faces stiff competition from XBox 360 and soon to be release Apple TV.

Conflicts between Netflix and Blockbuster

• In April 2006, Netflix filed a lawsuit alleging that Blockbuster's online DVD rental program violates the patents held by Netflix. Blockbuster issued a statment saying that the claims are without merit and that they intend to fight them.
• Also in fall 2006, Blockbuster signed a deal with The Weinstein Company, that gives them exclusive rental rights for the studio's films, beginning on January 1, 2007. This means that Netflix will not be allowed to make future Weinstein Company DVDs available for rental, although they can sell them.

Conclusion: I think the DVD rental subscribers base will grow for both companies, but i see quicker growth for Blockbuster. I personally am a Netflix subscriber for the last 2 years and i have had no major problems with them. I hate their customer support sometimes since they dont provide any phone numbers (you are on the mercy of their email service support). Every once a while i get broken DVDs which needs to be shipped back for a replacement. On the other hand, with Blockbuster you could pick DVDs instore and avoid such hassles. Also it gives the customer the freedom to get the desired movie at any time rather than wait for the mail to arrive.

Recommendation: I think that by the end of this year, the Blockbuster stock will outperform Netflix.

Picks for 12th January 07

The market finished in strong fashion today as investors rallied around renewed optimism about the pace of economic growth. Today's report on the strong labor market helped to ease concerns. The jobless claims 26,000 this week to 299,000.

Biotech firm, Genentech DNA (+3.66) topped Wall Street estimates and raised its FY07 outlook, prompting several price target increases. Today even the tech sector swung high with Microsoft MSFT (+1.04) after Windows Vista was named Best of Consumer Electronics Show.

I feel with market closing high most of the stocks i follow have become a bit pricy. Oil prices is still a concern. Stock prices rose even though the oil prices dropped which makes you wonder about the investors sentiments about the economy. However i spotted 4 good buys for tomorrow.

1. COGT (EPS = 0.38, P/E = 28.25, Market Cap = 1.03 B, PEG = 1.25) - I dont like this one for a long time, but will make a good short term buy and sell trade.
2. DELL (EPS = 1.28, P/E = 20.97, Market Cap = 60 B, PEG = 1.51) - Excellent numbers, Brand name, with Vista launch this will go high.
   
3. MED (EPS = 0.40, P/E = 25.74, Market Cap = 140 M, PEG = 1.39) - Small cap with strong numbers.
   
4. NUAN (EPS = -0.14, P/E = N/A, Market Cap = 2.0 B, PEG = 1.15) - Negative EPS, but excellent PEG just offsets that. They are getting into speech recognization.
   

I am not shorting any stocks for tomorrow.

Stock Market Search Engine

Stock market search engine is useful to filter out information only related to the stock market.

Tax: Do You Really Get It

I am sure alot of us don't understand and don't even want to understand taxes. However having a basic understanding of the subject will help save some extra money to buy that Playstation 3 you always wanted.

For most of us, the taxes are paid on our behalf through our employers. Employers automatically withhold taxes from our gross earnings before giving us our net earnings. Your employer is also responsible for reporting your total income and taxes paid by submitting form W-2 to the IRS. You must then file your taxes-which tells you the total amount of taxes owed and the total amount of taxes already paid-and either pay the difference (if your automatic deductions were too small) or collect the difference (if your automatic deductions were too big).

Throughout the year, there are important tips to follow in order to prepare for your taxes. First of all, get organized. Experts recommend:

• Use of personal finance software to enter and maintain accurate records.
• Keep records of expenses such as automobile mileage incurred for business purposes
  
• Get receipts for charitable contributions.
  
• Maintain accurate records of the purchasing and selling of stock as well as stock options.
• Read and understand about 401(k) retirement plan. Doing so will let you defer the taxes you pay on your contributions and will allow your contributions to increase through compound interest.
  
• Consider tax-efficient investments such as tax-free municipal bonds or tax-efficient mutual funds .

I also wanted to point out few of the important taxes everyone should know.

• Capital Gains Tax: Capital gains tax represents the tax paid on the increase in value made on an investment. So if you make profits from trading stocks, you need to pay taxes on it too.
  
• Corporate Tax: The tax paid on the profits made by the firm.
• Income Tax: The basic direct tax on any income, this includes capital gains, wages, etc.
• Indirect Tax: A tax that increases the price of a good so that consumers are actually paying the tax by paying more for the products. (For eg. Fuel, liquor, and cigarette)
• Property Tax: A tax on any property owned by the local government. The tax is usually based on the value of property (including the land) you own.
• Payroll Tax: Tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee.
• FICA Tax: A deduction from paychecks and income that goes toward the Social Security program and Medicare. Both employees and employers are responsible for sharing the FICA payments. The act stipulates that there is a maximum that can be allocated to Social Security, while there is no maximum on what can go toward Medicare. The amount of the FICA payment depends on the income of the contributor, so the higher the income, the higher the FICA payment. (For example: 12.4% of your income goes toward Social Security and 2.9% goes toward Medicare, and you earn a salary at your company, half of the payment is made by you and the other half by your employer. This means you pay 7.45% (6.2% and 1.45%) of your income, while your employer pays the other 7.45%.
  

To be continued....

How Did They Perform - 10 Jan 07

The market today began the session with concern that oil's decline would hurt profits in the energy sector and scare off money from sources like hedge funds that have helped push stocks higher in recent months. The dollar was mixed against other major currencies, while gold prices fell. Light, sweet crude was down at $54.02 a barrel on the New York Mercantile Exchange. Prices have been hurt as unseasonably high temperatures have weakened demand in large parts of the U.S and Europe.

However thanks to some bullish news the market went up. US Airways Group Inc. raised its bid for Delta Air Lines Inc. by 20% to $10.2 billion. Good news from Apple, which unveiled long-awaited plans for a mobile phone, as well as by a solid profit report from Alcoa.

So how did the stocks i recommended fair ?

Longs
AA = +6.00%
COGT = -0.09%
FLEX = +0.43%
HAL = -1.22%
NTE = -1.77%
SMOD = +1.35%
Net Profit of + 4.70%

Shorts
FFHL = -8.39%
S = +2.29%
VPHM = +0.14%
Net Profit of + 5.96%

Net Gain of +10.66%

Picks for 10th January 07

For the last 2 days i have not traded in this market. I think it was a wise decision. The market is making dangerous swings, shorts have made quick cash and longs have been burnt. Cautious investors should stay from the market for a while. However tomorrow looks a good day to jump back in.

The best stock for 10th Jan is no doubt Alcoa Inc (AA). They reported their earnings after business today and it was good. Their Q4 profits rose 60%. The stock gained 4.8% in after hours trading.

1. AA (EPS = 2.414, P/E = 11.81, Market Cap = 24.7 B, PEG = 0.90) - Excellent numbers.
   
2. COGT (EPS = 0.38, P/E = 28.66, Market Cap = 1.03 B, PEG = 1.29) - I dont like this one for a long time, but will make a good short term buy and sell trade.
3. FLEX (EPS = 0.60, P/E = 19.40, Market Cap = 6.72 B, PEG = 0.68) - This stock is meant for greater things in life. UBS has upgraded this one to Buy.
4. HAL (EPS = 2.63, P/E = 10.90, Market Cap = 28.87 B, PEG = 0.66) - With such strong numbers and cheaper stock price you couldnt ask for more. This is a Jim Cramer recommended stock.
   
5. NTE (EPS = 1.28, P/E = 11.50, Market Cap = 643 M, Dividend = 5.6%) - Good price, good dividend.
   
6. SMOD (EPS = 0.61, P/E = 21.86, Market Cap = 785 M, PEG = 0.83) - A bit higher P/E, but all the numbers look solid.
   

Stocks worth shorting
VPHM, FFHL, S

Apple iPhone...Beginning Of A New Era

Analyst predicted that, Apple (AAPL) will go down in 2007. They cannot ride on the iPod success all day long. Apple released iPhone today and the stock price rose 8%. This surely will shut them up.

iPhone is a mobile phone that plays iTunes and surfs the Web and priced between 500/600$...hmm a bit pricy, dont you think ? Lets find out if it is worth the price...

The phone is rectangular in shape, and the entire front surface is a touch screen. All of its functions are activated by touch, but when you bring your iPhone to your face, a proximity sensor will turn off the touchscreen so you don't accidentally face dial. The phone has an inbuilt Mac OS X, will be able to download and play both music and movies with memory size of 8 gigs. The web-browsing capabilities is excellent. Apple will offer free push e-mail service from Yahoo (YHOO). The iPhone will operate on the GSM protocol, and will have 3-G broadband soon. Now what do you think ? Is it worth the price ? Hell ya...

Interesting Facts:

• Cingular Wireless, a unit of AT&T (T) will be the sole US partner for Apple. Stock prices of AT&T were up and i recommend investors to consider buying it at an appropriate price because of this exclusive multiyear agreement.
• This is bad news for BlackBerry maker Research in Motion (RIMM). Stock prices were down around 8%.

Understanding IPOs

Initial Public Offerings (IPOs) are the first time a company sells its stock to the public. Sometimes IPOs make huge first-day gains like Chipotle Mexican Grill (CMG) which was offered at $22/share and ended their first day of trading at $44/share. Wow. However there are times when the market is overall bearish and the IPO will flop like in the case of Vonage Corp (VG) which was offered at $17/share but has now dropped to around $6.5/share.

Unfortunately more than ever individual investors dont get access to the stock at initial offered price. Its the mighty institutional investors who do. By the time the general public can trade the stock, most of its first-day gains have already been made. However, a knowledgable investor should still watch the IPO market, because this is the first opportunity to buy these stocks.

Reasons for an IPO
When a privately held company needs to raise additional capital, it can either take on debt or sell partial ownership. When the company decides to sell ownership to the general public, they engage in an IPO. The most common reason for the company to go public is that capital raised through an IPO does not have to be repaid, whereas debt securities such as bonds must be repaid with interest. In return the current owners of the privately held company will lose a part of their ownership.

The company will load the burden of the sale of its shares to the public by hiring an investment bank. Once the Securities and Exchange Commission (SEC) approves of the company's profile, the investment bank and the company will decide on the price and date of the IPO; the IPO is then conducted on that date. IPOs are sometimes postponed or even withdrawn in poor market conditions.

So what can you as an individual investor do to make profit from IPO ?

• Online brokerages offer IPO shares to their customers. Unfortunately, these shares tend to be reserved for clients with the largest balances (usually $100,000 and up), and are thus out of the reach of many investors. Most brokerages will not allow investors to sell IPO shares within a certain time period (generally 60-90 days), which prevents any short-term gains.
• Buy carefully after they have become available to the general public. Institutional investors will not get as many shares as they want before the stock becomes available on the general public, thus, an individual investor can buy the stock as soon as its available, and count on the institutional investors to drive the price higher.
  
• Sometimes the stock is priced too low than it should be. This would be a good time to buy.
  

So how do i know is the IPO overpriced or underpriced ?

• As with any investment, proper education and careful research are vital to profiting from IPOs.
• Business, financial, and market risk are few of the factors that should be included in the evaluation process.
  

• Business risk = Examine the business model and the management team.
• Financial risk = Examine the financial statements, capital structure, and other financial data.
• Market risk = Examine current and future market conditions.

• You should also inquire about the purpose of raising capital through an IPO. If the corporation were issuing an IPO just to get out of financial problems, is investing in this corporation a wise decision? On the other hand, if the company has some smart plans for the money, then the IPO might be justified.
  

Recommendations: One should understand that investing in an IPO can be risky business. The investor must thoroughly investigate all available information to understand the value of the stock. I personally like buying IPOs of well known brands. My personal favorite being MasterCard Incorporated (MA) which was offered at $40/share and is now trading at $105/share.

Other Good IPOs: CMG, DIVX, BKC
Coming soon good IPOs i like: Aruba Networks, US Auto Parts, Vanguard Car Rental, Sterlite Industries, Oculus Innovative Scis

EBITDA...What Does It Mean

I have heard this "EBITDA" buzzword thrown around a couple of times, and i had no freaking clue what it meant ? I shrugged it off thinking one of those trading terms i will never understand...Few days back i read it in some of the message boards and decided to have a look at it. Turns out its an acronym which means Earnings Before Interest, Taxes, Depreciation and Amortization. Now that is pretty intuitive, isnt it ?

EBITDA = Revenue - Expenses (excluding interest, tax, depreciation and amortization)

EBITDA is used to analyze a company's operating profitability before non-operating expenses (interest and tax) and non-cash charges (depreciation and amortization).

Pros of EBITDA
EBITDA is useful to analyse the overall profits between companies you are comparing without taking accounting decisions into consideration. Now this can be useful to compare companies based on how to they operate and how much profits they end up making. Sometimes its useful to evaluate different sectors/industry, because it removes the impact of financing large capital investments and depreciation from the analysis. (For example: EBITDA can be used to compare the profitability trends of automobile industry v/s high-tech industry.

Cons of EBITDA
EBITDA is a good metric to analyse profitability but not cash flow. Cash flow is a better measure of how much cash a company is generating because it includes non-cash charges (depreciation and amortization)
and non-operating expenses (interest and tax). Any investor should understand the cash flow and not rely solely on EBITDA otherwise they might miss out important clues.

Recommendation: EBITDA is a good measure to use to evaluate the core profit trends, but cash flow is much more important. EBITDA can be used to compare profits between companies but it should not replace the measure of cash flow. Do not ever ever ever make any investment based only on EBITDA. And remember that the next time someone throws EBITDA at you, you know what are they talking about.

Splits v/s Buybacks

I have been monitoring this stock for a while, till yesterday it was priced around 10$ per share. Today it is trading around $5. What happened ? Did the shorts win big time today. But there is no bad news ? As you read up more about the stock you realise the company has opted to split its shares. So what is splits, and why do companies split their stock price ? If this interests you, keep reading...

What are Splits ?
A company whose stock is performing very well may opt to split its shares, distributing additional shares to existing shareholders. The most common split is 2:1, in which each share becomes two shares. The price per share immediately changes to half. Reverse split is when the number of shares decreases, ie 1:2

Why do companies opt for splits ?
A company will usually decide to split its stock if the price of the stock gets very high. High stock prices are problematic for companies because they make it seem as though the stock is too expensive. By splitting a stock, companies hope to make their position more attractive, especially to those investors that could not afford the high price. Stocks can be split 2:1, 10:1, or in any ratio the company wants.

Example: Say you own 100 shares of stock in ABC Corp. priced at $10 per share. ABC Corp. decides that $10 per share is too high of a price for its stock, so it issues a 2:1 stock split. This means that for every share that you previously owned, you now own two shares, giving you 200 shares. When the stock splits, the price will be cut in half (ie $5) since it is a 2:1 split. The investment you made will be the same, in effect, nothing has changed from your perspective.

But although technically nothing changes for the investor during a stock split, in reality often times there are changes. Not only does the split tend to increase demand for shares by making the shares more accessible to small investors, it also catches media attention. This tends to cause the price of a stock that has split to increase after the split. The split is interpreted by some as a sign that the company's management is confident that the stock's price will continue to rise.

What are Buybacks ?
A buyback is when the company decides to repurchase the stocks it had previously issued. In the case of stocks, this reduces the number of shares outstanding.

Why do companies opt for buybacks ?
Companies may decide to repurchase stock for many reasons. They may be attempting to improve the price to earnings (P/E) ratio by reducing market capitalization, or they may want to offer the stock as an incentive to employees . This is usually considered a sign that the company's management is optimistic about the future and believes that the current share price is undervalued.

Recommendation: Personally i like splits. More than once i have seen the stocks that have split have always gone up. One stock that i follow opted for split in July 06. After the split the stock has jumped up. I am talking about Infosys Technologies Ltd. (INFY)

More Facts About Housing

Housing activity is a function of several factors: Rates, the overall economy, supply, population growth, rental prices, sentiment, speculation, liquidity (easy financing terms, loans, mortgages) Over the past 5 years, rates dropped, supply expanded, population expanded, prices rose. That's normal. But then rates plummeted even further, prices rose more quickly. That is where we saw crazy boom. Now that we are seeing inflation problems, the Feds have raised rates and that is why we are seeing drop in prices.

Lets have a look at few interesting facts about housing/real estate.

• California is hit the hardest in falling home values in the nation. San Diego will drop more than 13% on average in 2007, Los Angeles more than 11% and Miami will have a 13.6% drop.
  
• However on the good side, Washington state and Utah are experiencing massive areas of growth. Texas is undergoing the largest growth in its history since alot of people are moving in from New Orleans due to Hurricane Katrina.
• In California, the standing unsold housing inventory is moving down rapidly, also a considerable drop in excess inventory in condominium conversions, with owners either selling out or reverting back to rental status. Town house and other low-density home building will continue normally, but there will be a cutback on high-rise development in urban cores.
• San Antonio was a market experiencing modest growth until recent times. It is predicted that it will appreciate 8.3%. Out-of-town investors flooded in, glutting the market with rental homes.
• In Colorado the record number of foreclosures has given it a bad rap. Home sales in Pitkin County, home of Aspen and Snowmass, were up 19% in 2006.
• Alot of borrowers are refinancing ARMs in the past six to eight weeks. One reason people are switching is that the difference in the rate on adjustable and fixed mortgages has narrowed. The rate on a mortgage that can adjust annually was 5.84% recently, compared with about 6.22% on a fixed-rate mortgage. Borrowers are opting to pay a little more for the fixed-rate mortgage to avoid the risk of a reset on an adjustable mortgage in the future.
• When the housing market goes bust, the rental market should expect a boom. But this is not the case right now. Developers overbuilt rental properties in recent years, leading to the highest vacancy rates in more than 15 years and forcing landlords to offer incentives. A big drop in the housing market could actually make matters worse. When home prices fall, foreclosures often increase rapidly, and many are converted into rental units until a buyer can be found. That only adds more rental supply to the market, creating oversupply problems.
• Decline in private residential projects caused a gain in private non-residential construction, reflecting increases in spending on transportation projects, hotels and commercial space, helped offset the decline in residential building.

With all these bad news i recommend staying away from housing stocks. If you really love real-estate learn more about REIT. I will post more about REIT soon. This could also mean a good time to jump into buying a house as an investment in growing cities which is expected to see boom in the near future.

Recommendation: These are few of the stocks I follow and recommend to keep away from it or think about shorting them. HSOA, RSTO, BLDR, BECN, FUR, TOL

Which Sector Are You In...

There are alot of stocks to invest in ?
How do you decide which one to pick ?

The best way to start is to decide which sectors to invest in. Decide for youself which sector you think you like and is going to do well in the near future. Once you pick the sectors you like, look into sub-sectors. Now inside this sub-sector look for companies with good EPS, P/E, PEG and market capital.

Everyone should make a like it - dislike it list, and STICK to it.

I will go through few of my personal ones.

Like it...

• I like Gold/Silver stocks (metal prices might swing, but the love for gold doesnt)
• I like Tech stocks (companies with unique products, brand, outsourced cost cutting operation)
• I like Semiconductor stocks (manufacturing chips for prefered consumer products)
• I like Health Care stocks (with strong sales)
• I like Real Estate stocks (but i am bearish about them this qtr)
• I like High Dividend stocks (the divendend can compensate against any downward movement)
• I like Emerging Market stocks (way too much growth and its rightly justified)
• I like stocks with rock solid EPS and strong strong PEG
  

Dislike it...

• I dislike Copper stocks. (less demand, too much supply)
  
• I dislike Airline/Transportation stocks (less margin, high operating cost, too much competition)
• I dislike Auto industry (too many job cuts, competition from overseas)
• I dislike Tech stocks (bad management, just another product)
• I dislike Wireless/Communication service provider stocks (again too much competition)
• I dislike Biotech stocks (especially when their drug might be rejected by FDA)
• I dislike Oil or Energy stocks (global warming, geopolitical scene)
• I dislike stocks with negative EPS and below par PEG (too volatile to trust)

Once the sector selection is done, it makes life much easier to decide which stocks you want to focus on. My reasoning for liking and disliking sectors are solely my opinion, and i would encourage everyone to do their own homework.

Housing Boom Or Bust

Strong housing sales is an indication of strong economy. With increase in interest rates, the mortage rates also are up.

Rule of thumb: High mortage rates = Slow housing sale

Pending sales of existing U.S. homes fell 0.5 percent in November but held above the low hit in July, suggesting the housing market is stabilizing.

The Pending Home Sales Index is pointing toward fairly stable home sales in the near future. Home sales climbed the two months after September.

The index covers pending sales of existing single-family units, condominiums and co-ops. A home sale is pending when a contract has been signed but the transaction has not closed.

Shares of homebuilders is all down, and i do not recommend holding it this qtr. Some of the stocks make for good shorts like Toll Brothers (TOL), DR Horton (DHI), Pulte Homes (PHM), Restoration Hardware Inc (RSTO), Home Solutions of America Inc (HSOA)

I am bearish about Real Estate/Construction stocks this quarter, but the second half of 2007 looks more promising for housing.

Gold Rush: The Correlation With Dollar

Love it, hate it but can't ignore it. I am talking about Gold. Like i mentioned in my early blog, when the dollar becomes stronger, gold will see a downslide. This was true this week with dropping oil prices and resurgent dollar. Gold prices tend to fall when energy prices drop, as the yellow metal is generally seen as a hedge against oil-led inflation.

Gold is trading around 606$. The dollar climbed for a second straight day, gaining support from a recent run of upbeat economic data that has lowered expectations the Federal Reserve may cut interest rates in coming months. Recent economic data show economy is slowing, but there is no sign of sharp slowdown.


According to commodity experts/analyst, gold will be higher in the latter part of the year, but short-term sentiments are a bit shaky. It is believed that gold will be in demand with the unresolved situation in Iran and tension in the Middle East.

Silver is trading around 12.60$, with platinum around $1,120 and Palladium laround $338 an ounce.

Recommendation: Keep close watch on gold/silver stocks. You will find alot of cheap stocks.

Gold Stocks: GG, NXG
Silver Stocks: CDE, HL, SLW

How Did They Perform - 5 Jan 07

How did the stocks i recommended fair, considering the fact that today was definitely a bad day for the market. Such days, no analysis stand true. All of that goes out of the window. But these days are few and one should not make any conclusions based on it.

Longs
FSYS -0.56 (-2.62%)
HAL -0.23 (-0.79%)
IDEV +0.10 (1.48%)
IRBT -0.10 (-0.56%)
MU -0.21 (-1.52%)
SMOD -0.29 (-2.20%)
Net Loss of 6.21%

Shorts
HSOA -0.23 (-3.90%)
SLW -0.17 (-1.77%)
ORBC -0.06 (-0.63%)
WIRE -0.49 (-2.24%)
Net Profit of 8.54%


Net Gain of 2.33%

I do not recommend for beginners to short stocks. This is risky business and your brokage can force you to sell some stocks you wouldn't want to unless you have adequate money in your brokage account.

What Happened Today - 5 Jan 07

What happened to the market today ? Pretty disappointing day ?

Question is why it happened ?
For starters investors would love to see the interest rates go down. Businesses thrives more with lower interest rate, but Feds showed no sign of cutting interest rates any time soon to control inflation. This lead to a panic and sell market. Add to that the previous few days the stocks were up and it will time for the shorts to jump in. Unfortunately a strong job report didnt get the nod from investors either. However with dropping oil prices, consumer confidence grows and we will soon see an upward trend. The current interest rate stands at 5.25%.

Who got hit bad ?

• Tech stocks got hit the hardest. IBM, Intel, Dell, Oracle, Ebay, Motorola all down.
• Gold was down too, with trading around $606 an ounce.
  
• NYSE: Stocks going up v/s down was 24% v/s 74%
• NASDAQ: Stocks going up v/s down was 30% v/s 69%
• Positive note was that dollar improved over euros.
• Oil trading at 56.35$

All is not lost. With alot of stocks getting cheaper, there are alot of good buys. Dont let one bad day dishearten the slaughtered ones...What goes down sooner or later goes up...

Commodity Trading: Copper is Down...

I am not a big fan of copper and copper stocks but some of them are really worthy to own. But copper has had a rough rough ride. Copper prices reached their lowest level in 9 months thanks to resurgent dollar.

The New York Mercantile Exchange (NYMEX) is the world's largest commodity future exchange where commodities like Gold, silver and copper is traded. Copper was trading at 2.55$ to 2.66$ down 21%. This is really bad news for copper stock owners including me. Good news is that analyst expect the downslide to stop around 2.50$ where the market will stabilize.

The problem with copper companies right now is that they have big stock pile with slowdown in demand. This surplus has become a problem. The bigger the stock pile gets along with increasing warehouse cost will only make the investors more nervous and drive the prices down.

Rule of Thumb: A stronger dollar makes dollar-denominated assets like copper more expensive for overseas investors. The euro was down nearly 0.6 percent at $1.3084 in late afternoon trade in New York.

Conclusion: For now, stay away from commodity stocks. My personal favorite is TGB and it got slaughtered. TGB has EPS of 0.22 and decently priced P/E of 10.62. They posted solid earnings this qtr. Nonetheless it wasnt enough to catch all the big boys attention.

Picks for 5th January 07

Here are my picks for 5th Jan.

Few of the important factors i used are listed to support my picks.

• EPS
• P/E
• PEG
• Market Capital
• Analyst Recommendation
• Earnings growth current qtr v/s next qtr.
• Earnings growth current year v/s next year.
  
• MACD
  

1. FSYS

• EPS = 0.53 (Decent earnings)
  
• P/E = 40.28 ( A bit higher than my liking)
• PEG = N/A
• MCap = 320 M $ (speculative stock)
  
• Analyst Recomm. = 1.0/5.0 (strong buy)
  
• Current Qtr = 450% v/s Next Qtr = 4.2%
• Current Year = 188% v/s Next Year = 40.8%
  
• MACD = Bearish
  

Sector: Consumer Cyclical > Industry: Auto & Truck Part
Conclusion: I like the stock for short term, due to strong current qtr and decent EPS. However i wouldnt touch this stock for long term.

2. HAL

• EPS = 2.63 (Rock solid earnings)
• P/E = 11.10 (Completely under valued)
  
• PEG = 0.68 (It couldnt get any better)
• MCap = 29 B $ (wow...just wow)
• Analyst Recomm. = 2.0/5.0 (Buy)
• Current Qtr. = 19.2% v/s Next Qtr. = 37.8%
• Current Year = 33.8% v/s Next Year = 20.1%
  
• MACD = Hold

Sector: Energy > Industry: Oil Well Services & Equipment
Conclusion: You got to love this one. Its beaten up down and getting cheaper to buy. Jim Cramer also recommended this as a value stock to have. Super strong EPS and PEG.

3. IDEV

• EPS = -1.02 (negative earnings)
• P/E = N/A
  
• PEG = N/A
  
• MCap = 390 M $
  
• Analyst Recomm. = 1.8/5.0 (Buy)
• Current Qtr. = N/A v/s Next Qtr. = 4.2%
• Current Year = 18.6% v/s Next Year = 36.1%
  
• MACD = Bearish
  

Sector: Healthcare > Industry: Biotechnology & Drugs
Conclusion: I dont like stocks with negative earnings, but this one shows steady growth. Analyst recommend it. Jim Cramer recommended it. This definitely deserves a look. Keep following it, this stock is cheap.

4. IRBT

• EPS = 0.23 (Will gain more interest when EPS goes up)
• P/E = 78.56 (Not good, shows sign for over-value)
  
• PEG = 4.28 (This will get better with strong earnings)
• MCap = 426 M $
  
• Analyst Recomm. = 1.9/5.0 (Buy)
• Current Qtr. = N/A v/s Next Qtr. = -33.3%
• Current Year = 9.1% v/s Next Year = 141.7%
• MACD = Bullish

Sector: Technology > Industry: Computer Services
Conclusion: EPS is good, but P/E definitely needs to come down. What caught my eye is the next year projected growth (141.7%). Heard alot of good reviews about the stock. Again Jim Cramer recommended stock.

5. MU

• EPS = 0.72 (Decent earnings)
  
• P/E = 18.92 (Perfect P/E one should look for)
  
• PEG = 1.11 (Good future growth)
  
• MCap = 2.8B $
  
• Analyst Recomm. = 2.8/5.0 (Hold)
• Current Qtr. = 375.0% v/s Next Qtr. = 41.7%
• Current Year = 196.0% v/s Next Year = 44.6%
• MACD = Bullish

Sector: Technology > Industry: Computer Storage Devices
Conclusion: One of those stocks with ideal EPS, P/E, PEG, MCap. Current Qtr. was excellent. However future predications show lesser growth. I would definitely own this one.

6. SMOD

• EPS = 0.61 (Decent earnings)
  
• P/E = 21.76 (Perfect P/E one should look for)
  
• PEG = 0.82 (Excellent future growth)
  
• MCap = 780 M $
  
• Analyst Recomm. = 1.7/5.0 (Strong Buy)
• Current Qtr. = 40.0% v/s Next Qtr. = 37.5%
• Current Year = 30.9% v/s Next Year = 20.2%
• MACD = Bearish

Sector: Technology > Industry: Semiconductors
Conclusion: Another stock with ideal EPS, P/E, PEG, MCap. Analyst love this stock, and future growth is in line.

Stocks worth shorting are
1. HSOA 2. SLW 3. ORBC 4. WIRE

Lets see how these stocks fair tommorow.

Where Are All The Skilled Labors ?

According to CNNMoney.com

The biggest problem with job growth right now isn't too few new jobs. It's too few skilled workers.

Interesting fact:

• Job growth rose by 132,000 in 2005.
• Job growth rose by 115,000 in 2006. This indicates 11% drop in job growth even though in 2005 we had 2 horrible hurricanes.
• The overall the unemployment rate stands at 4.5 percent.
• There were 4.2 million job openings in October, up 8.8 percent from a year earlier, while hirings rose just 1.5 percent. Meanwhile, the number of workers quitting, retiring, getting fired or laid-off grew only 0.6 percent.

Experts say that job growth and the economy would be significantly stronger if employers could find the skilled workers they really need. There would virtually be no long-term unemployment for skilled workers. The employers are quoting that their inability to find the workers with the skillset they need is one of their top problems. Most employers are looking to grab such skilled worker from other employers to fill their void, or hire them from outside the country, or hire someone without the desired skills. All this leads to drop in productivity level of the company. Alot of employers are holding on their workers and throwing in incentives to keep them. Experts think this trend will continue for a longer period (say a decade), with alot of Baby Boomer start leaving the work force. There will be some relief in 2012-2015 when demographic trends should start to help.

Now this is good news for the working class. This adds more stability to their life. However possessing right skill-set would be a super super edge right now...

This is bad for most companies, especially auto industry. I would definitely avoid those stocks...

Recommendation:

• Keep away from Ford Motor Company (Ticker: F) with EPS of -3.35 and Future EPS = -6.06
• Keep away from General Motors Corp (Ticker: GM) with EPS of -16.93

How Did They Perform - 4 Jan 07

So i recommended 13 stocks yesterday. How did they do ?

BEAS +0.64 (5.21%), BECN +0.22 (1.18%), CELL +0.51 (3.77%),
COGT +0.20 (1.83%), FLEX +0.14 (1.23%), DIVX +1.38 (6.30%),
IDEV -0.17 (-2.45%), IRBT -0.12 (-0.67%), NEXT +0.03 (0.27%),
SMOD -0.07 (-0.53%), STST +0.79 (3.70%), VPHM +0.17 (1.19%)
ZQK +0.13 (0.84%)

That adds up to net increase of 21.16%

10 went up and 3 went do. Fair enough...

Oil Prices: Understand Their Movement...

Oil prices are sliding. It stands around 56$ per barrel. There are rumors it might fall below 50$ too if there are OPEC production cuts and declining crude supplies.

So why did oil prices fall ?

• Stable geopolitical scene.
• Slowing economic growth in the United States.
• Higher-than-normal temperatures that generated less demand for heating oil.
• Big drop in crude supplies (the drop was considered temporary due to thich fog around the ports)
  

However energy experts suspect the slide is over, otherwise OPEC will be nervous. One will not see any rally in prices unless the demand for oil picks up. Next few weeks are going to be really interesting for oil prices.

1. So which way does the dollar stride when the oil prices fall ?
Up up up...
Reason: Thats very simple, the cheaper the oil to import, less dollars go out. Using the simple demand/supply equation, the dollar becomes more valuable.

Rule of thumb: Oil down = Dollar up

2. When the dollar goes up what happens to Gold/Silver stocks ?
Down down down...
Reason: When the currency becomes weaker, people buy more gold/silver. They believe gold/silver metal will generate more value than the currency (USD). Weaker dollar is also an indication of weak economy and bearish market. What is the best thing to invest in weak economy ?? Its always metal. Stronger dollar is an indication of strong economy and bullish market. This where people want to sell off metal and buy back strong dollars since it has more value. This is why gold prices jump up and down depending on dollar strength.

Rule of thumb: Dollar up = Gold/Silver down

3. When the dollar goes up what happens to Tech/Telecom/Semiconductor/Consumer stocks ?
Up up up...
Reason: Like i said before, when dollar is up, economy is doing good. Oil prices are low. There is more job growth, individuals spend less money on oil to buy more of consumer goods.

Rule of thumb: Dollar up = Tech stocks up.

Conclusion: Keep a close eye on oil prices. The stock prices will move accordingly.

BEAS Looks Attractive

So whats good about the stocks I picked. Let us start with BEAS first. The ticker stands for BEA Systems Inc. What does the company do ?

There is alot of information you can find about it on the internet. To keep it simple it provides enterprise apps and service infrastructure software. The company offers BEA Tuxedo Product and WebLogic Platforms for mission-critical systems, automates their client processes such as supplier and distributor relationships. They have clients in vertical domains like telecom, commercial and investment banking, securities trading, government, manufacturing, retail, airlines, pharmaceuticals, package delivery, and insurance industries.

The stock price is 12.28.
EPS = 0.36
P/E = 34.02
Market Capital = 4.8 Billion
Analyst Recommendation = 2.6/5.0
Earnings Growth this Quarter = 18.2%
Earnings Growth next Quarter = 25.0%
MACD is above the signal line which indicates it is a bull market.

The EPS is positioned very well. P/E is a bit higher than i like, but definitely not over priced. The earnings growth for future quarters is well on track. BEAS is not a small cap stock with a market capital of 4.8Billion USD which ensures more stability.

Tips For 4 Jan 07

Keep an eye on the following stocks. They have seen an unusual activity recently.

1. BEAS
2. BECN
3. CELL
4. COGT
5. FLEX
6. DIVX
7. IDEV
8. IRBT
9. NEXT
10. SMOD
11. STST
12. VPHM
13. ZQK

All of them have a reasonable EPS and P/E.