Investments

Much to write about

2009-05-28T14:25:00.000-07:00

After getting no action on my trades last week, this week has been a rush of activity. On Tuesday, I opened 3 new positions:
CIT July 09 (Strike 2.5) @ 0.45
SNV June 09 (Strike 2.5) @ 0.25
ZLC June 09 (Strike 2.5) @ 0.20
I probably won't close these positions if given sufficient margin of safety as expiry approaches.

CIT is an interesting trade because essentially I am playing the opposite side of buying calls. Someone is buying up June and July 09 (Strike 5) calls on CIT, which is making the 2.5 puts more expensive.

SNV is a value play. Cheap stock, 2.25 is below the 52wk low. I feel safe.

ZNC was an earnings insurance play. I bet that the stock wouldn't fall more than 50% - it didn't. Great. I'm not too worried about this one falling through my strike either.

I've also been making a market in KEY. My positions have reached a critical point where I can make a small profit by buying the bid and selling the ask. However, it's useless to describe these trades because I'm usually out of them within 30 minutes (at least, I try to do that). I've traded KEY 5 times this week for a total profit of $0.10.

Flawed leaderboard

2009-05-23T08:52:00.000-07:00

My broker has an online trading network where investors can connect with one another, share experiences, ideas, and strategies, see what others are trading, and how they are performing. The performance leaderboard, which displays the performance of the top members on the network, is a flawed concept. The portfolio performance of people who take on risk through leverage and are rewarded for it will always be greater in the extremes than the performance of lower risk strategies. The amount of people who lose their entire investment through leverage is also high - after all, options expire with time. The leaderboard should show risk-adjusted returns. It scares me to think that people will try to replicate the strategy of some of the top performers without such outstanding returns.

If you're looking for a broker, send me an email and I will refer you to mine. Think of it as a way of showing blog appreciation. :)

It's time to get rich

2009-05-19T17:19:00.000-07:00

My last post was on September 13th, 2008. A lot has happened since then. We've seen the collapse and rebound of financial markets, although, let's face it, the market is nowhere near where it was during 2008. Let's talk about the elephant(s) in the room.

Why did I stop posting?
September 22nd, 2008 witnessed the crash of Ambac, by far the largest holding in my portfolio. Since I was losing money for the people who read and followed my advice, I stopped posting it. Yes, I was still outperforming the market, but what was the point of giving my advice if it lost you money?

Why am I posting this?
I'm outperforming the market so much that I am actually net positive since 2007. As of 5/18, the one year performance of the S&P is (34.7%). My portfolio is up 29.5%. I am going to be posting my trades again - and we will all get rich together.

Latest trades:
Sold YCRW July 2009 2.5 strike put @ 0.60
Sold CCRT July 2009 2.5 strike put @ 0.75

MET and AIG

2008-09-13T14:54:00.000-07:00

I bought up my odd lot of MET shares at 55.81; the final VWAP ended a few percentage points higher, as funds bought in to take advantage of the exchange. I'm looking to get out of RGA above 50, but I won't get my shares until next Wednesday. I'm hoping that it doesn't go down before then. I'm guessing that we're going to see some pretty big moves next week; the VIX is above 25, which means that blood is on the streets and it's time to buy.

I've been watching the AIG debacle with increasing interest. Lehman's problems caused a huge sell off in financials last week. I'm not entirely sure why, since it seems like they are firm-specific. Like Lehman, AIG is also facing losses on mortgages; it also has to pay out hurricane damages. Yes, these losses will happen, and they will be huge, but from a valuation standpoint, the equity looks great, and IV is through the roof, making it even more attractive.

Success with FMCN

2008-09-05T17:16:00.000-07:00

Although I did not get in at the bottom, FMCN had a strong rebound today. I sold my shares at 29.98. My return of 3.4% was excellent, and wiped out the losses that I realized when I entered into my CEDU trade.

I also exited my CEDU trade at 4.75 on Thursday in preparation for taking part of the MET tender offer next week. Overall, this week was a good one for my portfolio; unfortunately, I cannot say the same for the market.

Days like this happen

2008-09-04T10:44:00.001-07:00

The market is doing terribly. That's why selling options is great; it reflects the fact that stocks do not always go up. In fact, if a stock rises too quickly, that is usually time to be fearful.

As the market sold off, so did FMCN. I think that today would be a stupid day to sell it.

Ambac strikes again

2008-09-03T12:18:00.000-07:00

My largest holding has outdone itself once again. That's right - ABK is up 25% on news that regulators approved Connie Lee.

As my stocks have bounced, I have continued to sell calls on my holdings. I sold Oct 08 calls (strike - 5) on WM for $0.45. I was also lucky to sell Sept 08 calls (strike - 12.5) on ABK for $0.25. Whenever a stock rises very quickly in a very short amount of time, volatility goes a little crazy. This is a good time to sell options. I remain bullish on all of my holdings (obviously) which is why these calls are out of the money. Some I am more bullish on than others.

I also had a good day trade on LUV today; shorted it at 15.93 and bought back at 15.65. It seems like there is strong selling interest (or weak buying interest) at and above 16. This is the second time that I have done this trade.

I believe that China is particularly oversold. I'm not sure why; I am going to overnight FMCN today if I can get it at a good price. (Update - I got in at 28.9).

Yesterday was a perfect day

2008-08-29T08:16:00.002-07:00

Small personal aside before I talk shop: yesterday, I went to Pavillon de la Grand Cascade for lunch and had an amazing 8-course meal with my mom and grandparents. The meal was incredible, truly haute cuisine. Then I came home and had a very happy GDP day - all of my stocks were up, and my entire portfolio jumped 23%, again, mostly due to ABK.

Good time for selling covered calls. I sold some SLM October calls with a strike of 20 for $0.45. I am ready for a big upswing, but at the same time, I recognize that another 20% rise by then would be a huge move for SLM. I hope that they will report earnings after my calls expire, but I do not have a problem with buying back if earnings are earlier than I assume.

I also sold some BBX September calls with a strike of 2.5 for $0.1. Free money.

I cannot take credit for this idea, but it is a good one:
MetLife (MET), the insurance giant, is doing a voluntary exchange offer in which holders of MetLife stock can tender in their shares to receive shares in a publicly traded subsidiary called ReInsurance Group of America (RGA). MET is doing this to distribute its 52% interest in Reinsurance Group's B shares (which currently are not listed). You can find official details of this offer at the information agent's website. To encourage participation in the exchange offer, MetLife is going to give holders of MetLife stock the three day volume weighted average price of MetLife stock + 11% of value of the three day volume weighted average price in Reinsurance group class A shares. So just as an example if the VWAP price for both stocks were $50, you would receive 1.11 shares of RGA.B for each MetLife share tendered into the offer. Subject to a limit of 1.3071 shares of RGA.B for every one share of MET.

This offer has an unusual provision for odd-lot holders. If you own less than 100 shares of MET, you will not be prorated should the offer be oversubscribed. It is safe to assume that giving a free 11% premium to rational stockholders will result in oversubscription.

Tata Motors (TTM)

2008-08-21T07:24:00.000-07:00

TTM is another ADR that I like a lot. It has been beaten up by rising Indian interest rates, which have been rising because of anti-inflationary policy by the Reserve Bank of India (RBI). I think that this is an indirect rate play - we have seen the price of oil drop from $145 to around $115, which should lower the inflation outlook by the RBI and perhaps even encourage it to lower rates, which are currently at 9%.

TTM also recently announced that they were decreasing the size of their proposed rights offering. I believe that this announcement has yet to be disseminated into the market as the stock is trading on very low volume today and is actually down for the day.

Full disclosure: long TTM (calls).

Shameless earnings play: CEDU

2008-08-19T15:17:00.000-07:00

I sold out of FMCN at a 2% loss; I could have booked a 1% gain today but I forgot to put in a limit order. So it goes; I am not abandoning my strategy, I just desperately wanted to buy more CEDU.

I really cannot stress how awesome this company is and how completely invisible it is to the rest of the market. Its online degree segment, which accounts for the vast majority of its revenue, has a gross margin of 79.3%. Its tax rate increased to 25% this year after China passed the new Chinese Enterprise Income Tax Regulation; however, the company should qualify for the status of ''new and high technology enterprise,'' subject to the 15% preferential tax rate. I do not really know how you could ever say that this company is not a ''new and high technology enterprise,'' and when they obtain approval from the Chinese government, that should provide a nice boost to shares. Oh, and did I mention 20%+ YoY growth and the fact that their clients (large Chinese universities) are tied into 20 year contracts?

Earnings came out after the bell and the company beat on EPS, beat on revenue, and beat on guidance. I am absolutely giddy.

Full disclosure: long CEDU.

Intraday momentum

2008-08-19T03:20:00.000-07:00

I have noticed a very strange arbitrage opportunity in this market: strong price movements (greater than plus or minus 5%) which occur in the first half of the trading day tend to be extended in the second half of the day. This is different from what I perceive as "normal" market activity; i.e., the market opens at a certain price and then trades around that price for the rest of the day.

In an attempt to try to exploit this arbitrage, I bought into FMCN yesterday. Of course, I also like the advertising business. I would almost never buy a stock whose business I felt was going nowhere. (As an aside - one notable exception to this is VNDA, which is currently trading below cash. The business is going nowhere, but I just cannot justify selling my shares at this level.) Since this is a short-term trade, I am hoping to make 3-5%. After I bought it, the market tanked, and the stock fell with it. Perhaps my observed intraday momentum is affected by the direction of the market. I will keep you updated with my experimentation with this new trading strategy.

Full disclosure: Long FMCN, VNDA.

Trash Cramer? Don't mind if I do

2008-08-06T02:28:00.000-07:00

I almost feel bad criticizing Jim Cramer, the host of Mad Money. However, I'm not going to talk about how his picks are awful, even though they have underperformed the market. I'm also not going to talk about his lackluster industry analysis, such as, "Ignore financials, they're terrible."

What I am going to talk about is his recent 5 part series, 'Playing Defense.' This set of 25 investment tips to "keep you from losing your money" range from the obvious to the downright stupid. I thought that I would pick out three of the downright stupid ones and talk about why they're wrong.

Tip #1: Diversify. Cramer says: always be diversified, and never keep more than 20% of your money in a stock or sector.
I say: It depends. Value investor Joel Greenblatt's The Little Book that Beats the Market describes, essentially, that if you have a portfolio of great companies, there's no need to diversify. I prefer to think in terms of valuation. If a stock or industry has an incredibly cheap valuation, there is nothing wrong in being overweight in it.

Tip #16: Don't sell call or put options. Cramer says: selling calls gives up your upside, and selling puts has unlimited downside.
I say: This is exactly what I thought when a friend of mine first told me about selling calls. Why would I want to sell my upside to someone? Then, after actually doing some research on options, I realized that options, like stocks, come in expensive and cheap varieties. Since then, I've focused on selling the expensive ones and buying the cheap ones. Call options are amazing. Sure, if a stock goes above the strike, you're not making that profit. Nevertheless, you're not losing anything, either, and you still get to keep the options premium. Moreover, selling calls decreases your cost basis and acts as a hedge against downside risk. Cramer's advice is just foolish.

Tip #17: Never use margin. Cramer says: if the price of a stock drops, you will get a margin call and it will be painful.
I say: This is basic financial accounting. If your return on equity (the return of your portfolio) is greater than the rate that you pay to borrow money from your broker (the margin rate), margin yourself up and watch your portfolio grow. That being said, don't ever margin yourself to a point where you could receive a margin call that you won't be able to meet.

A note on analysts

2008-08-04T15:29:00.000-07:00

I'm sorry that I have not been posting for a while. My investments were losing money at a very rapid pace and although I continued to invest, I felt like my advice had lost a great of credibility and, perhaps, verity. However, with my recent success, completely attributed to Ambac (thanks, Michael Callen!), I feel invigorated enough to start posting again.

No stock tips in this post - just a short rant. I find Fortune's recent article on Oppenheimer & Co.'s Meredith Whitney to be borderline hilarious. For some reason, Fortune loves Whitney, naming her their #2 stock analyst of 2007 (whatever that means). My question is, why does Whitney get so much praise? We are currently in a bear market. She has been making bearish calls. It should be no surprise that at least one analyst that gets it right, because there are predictions across the board. Forbes notes that her stock picking record has been average.

There is a great Russian joke on this subject:
Reagan has 100 bodyguards, and one of them is a terrorist, but he doesn't know which one.
Mitterrand has 100 lovers, and one of them has HIV, but he doesn't know which one.
Gorbachev has 100 economic advisers, and one of them is right, but he doesn't know which one.

IDCC straddle

2008-04-24T14:44:00.000-07:00

IDCC's earnings are coming out May 7. I think that a straddle is a good idea for two reasons:
1) There is a good chance that the stock will actually move more than 15% in either direction after they report earnings.
2) The VIX dropped below 20 - I think that we will see a rebound. This is just a hunch - it seems low when compared to the last 6 months.
The details:
May '08, Strike 22.5 call @ 0.35
May '08, Strike 17.5 put @ 0.40

New, exciting activity

2008-04-21T12:32:00.000-07:00

I sold IDCC because LNG dropped 35% on no news and I felt like I would be missing a great opportunity if I did not buy more shares. The nitty gritty:
Sold IDCC @ 19.50. I have had a good return on IDCC: 0.5 from price appreciation and 0.75 from selling calls for a return of 6.6% since Feb 14.
BUY LNG @ 7.1466, sell May '08 call (strike - 7.5) @ 1.45. If the stock goes above 7.5, I will be getting a return of 31%.

LNG CC

2008-04-17T12:19:00.000-07:00

I have been following this company after an analyst recently downgraded it, and I decided to sell a covered call after the IV went above 150. I bought in at 10.80 and sold a call for 2.20 (May '08, strike - 10). If the stock stays above 10 (which is below the 52wk low), I will make a 16.2% return on a cash on cash basis - slightly less than 200% annualized. Awesome.

A note on earnings

2008-04-10T16:53:00.001-07:00

ETFC and SLM both announced that they will be reporting earnings next week - I think there is significant upside potential, so I have bought back my options on both of them for 0.05 per contract. I definitely do not want my upside capped during such a market-moving event.

ARQL CC

2008-04-02T13:23:00.001-07:00

1 minute before the market closed, another one of my orders got filled - I sold an April '08 ARQL covered call (strike - 5) for 0.15. It was funny because I had just raised my price from 0.1 to 0.15 and it got filled very soon after. I'm not sure what to do with ARQL. Including this covered call, I've had a return of 16% since 2/21. But I have no long term interest.

More option sales

2008-04-02T08:47:00.000-07:00

ETFC had another nice jump today so I sold an April '08 covered call (strike - 5) for 0.10. On a cash on cash basis, I'm making 2.5% with IDCC (37% annualized) and 2.2% with ETFC (47% annualized). The cash on cash numbers may look small but on an annualized basis, they're HUGE. If you like money, sell calls.

Happy April Fools!

2008-04-01T13:56:00.000-07:00

I tried to sell calls against all of my holdings today, but unfortunately the bids are too low for me to justify selling April calls on a lot of them. I'm unwilling to sell May calls right now, because many of my holdings have earnings coming up, and I'd rather be naked through earnings to maximize my portfolio volatility.

I did sell an April '08 covered call on IDCC (strike - 22.5) for 0.50.

IDCC CC

2008-03-08T08:38:00.001-08:00

There are a lot of C's in that title, but that is no mistake - yesterday, I sold a March '08 covered call (with a strike of 20) on IDCC for 0.25, taking advantage of its strong rebound. It is fully possible for the stock to appreciate another 12% in the next two weeks, but in that case, I would be more than happy to sell my shares and buy it again on a dip.

ABK @ 12.4

2008-03-04T18:42:00.000-08:00

I got into ABK again and held on for a little too long (i.e. more than 5 minutes). I'm unwilling to sell for a loss, since I'm confident that this deal is going to happen. And a 40% short float is pretty attractive. I've basically gotten fucked for 4 days in a row as Financials have crashed. ABK is going to be a great catalyst for the sector's comeback.

I also feel like I missed out on covered call writing this month. I kept trying to time the market and catch the big rebound, but it never came. I should have just sold the calls and collected the time premium. A good lesson!

ABK, revisited

2008-02-25T12:43:00.000-08:00

I am absolutely fascinated by market volatility, and ABK is a prime example. Any stock that can have daily swings of 20% is ridiculous in my book. So today, I did the reverse of what I did on Friday - instead of shorting it, I bought it when it dipped after hitting 12.50 (11.485). Less than an hour later, I sold at 12.50 for an 8.8% gain.

This time, I knew what was happening, and got paid. Information is power.

New investing hypothesis!

2008-02-22T21:36:00.000-08:00

The implied volatility of options is well correlated with the CBOE Volatility index. When the VIX is high, sell options - when the VIX is low, buy options. I'm going to do more research on this idea.

My dumb trade of the day

2008-02-22T13:20:00.000-08:00

I am bored as my financial accounting professor is talking about present value, and I saw ABK go up by 20% in minutes. I look around to see what happened and I find this article. Good news for the insured bond market, to be sure, but a 20% rise in ABK? Gleefully, I shorted ABK @ 10.30 with a target of 10, only to be forced to cover @ 10.90 (for a loss of 5.8%) as the stock rose to new highs. Little did I know that the reason for ABK's jump was actually this.

I think the most important lesson is that this demonstrates the value of information - don't trade until you feel like you know the stock and what is going on with it. An important lesson for me is to take advantage of the market to sell what I've bought at market lows - not to speculate on future negative price movements. A much better move would have been to buy ABK when it briefly dipped below 10, but hindsight is 20/20.

ARQL CC

2008-02-21T10:35:00.000-08:00

Another sweet covered call trade:
Buy ARQL @ 4.74
Sell AQK CA @ 0.75 (March '08 exp - strike of 5)
Cost basis of 3.99 - max return of 25.3%. Generally speaking, buying into a stock below the 52-week-low and at an 18.8% discount is pretty nice.

ETFC @ 5.05

2008-02-19T19:18:00.000-08:00

I am back into ETFC, for the same reasons as before. I will sell a call when the stock continues to rise (such as on the CEO announcement), or I will make a quick buck if it goes above 5.30 tomorrow.

IDCC @ 19

2008-02-14T10:54:00.000-08:00

I got my tax return, freeing up some more cash for another position. I have been bullish on IDCC for a while. It services market darlings like AAPL and RIMM but does not carry the same nosebleed valuations. IDCC comes out with earnings on Feb. 28. Guidance should be good as we are entering the 3G cell-phone era. I will probably sell a call on it when shares rebound.

Options

2008-02-11T13:35:00.001-08:00

Ironically, the day after I make a post about not updating this blog daily, I have another update in mind. Predicting short-term trends is difficult, if not impossible. :)

I was recently talking with a friend of mine who had just made his first options transaction. I argued that he had made two serious mistakes. First, he bought short-term options. Second, he bought options whose implied volatility was higher than the historical volatility of the underlying. (If you did not understand the previous sentence, an excellent introduction can be found at IVolatility.com.) Allow me to explain why I felt that these were mistakes:

1) Short-term options (generally) have higher implied volatility than long-term options.
2) Options and their underlying do not necessarily trade in tandem. Options are just like stocks - their prices change based on demand. You should only buy the contract when the implied volatility is lower than historical volatility, or else you are paying too much for your options.

A note about updates

2008-02-10T08:44:00.001-08:00

I will probably never start updating this blog daily. I am not Jim Cramer - I would rather take a page out of Warren Buffett's book and make you money while keeping transaction costs low.

$80 base for oil?

2008-02-09T14:11:00.000-08:00

I was unhappy to learn that OPEC ministers said that they would cut production if oil fell below $80. Judging by proven crude oil reserves, OPEC controls 69 to 84% of total reserves, making it difficult to argue with them.

I guess that asking for $60 per barrel is probably wishful thinking. Nevertheless, there are still many factors that have the potential of significantly reducing the price of oil - a strengthening dollar, a US recession, or some invention of an alternative energy. In addition, I remain bullish on Southwest in light of upcoming mergers in the airline industry.

Show me some LUV

2008-02-01T11:45:00.000-08:00

The outlook seems to be getting better for the economy and the airline industry. It may be terrible now, but remember, the stock market is a forward-looking indicator. LUV had great earnings but the stock has fluctuated around 12. So, I doubled my LUV options today and reduced by cost basis by 25%.

Trading update

2008-01-31T09:09:00.000-08:00

Covered calls are amazing. If they expire out of the money, you just sell them again. Although my January ETFC calls expired OTM, I sold February CC (strike - 5) at $0.4 each today. I have no problem with making a guaranteed 10%+ return from the calls in a mere 16 days, and if they expire OTM, I'll sell my golden goose a third time.

Update (12:47 pm): In the same regard, I just sold an April CC (strike - 25) at $1.15 on SLM.

I was right: WU

2008-01-20T17:22:00.000-08:00

I hope that none of your are choosing to sell your positions at lower prices than what they should be worth. These are crazy times! As you might remember, I recommended WU on 05/18/2007. It hit 24 on 12/21/2007.

The verdict is still out on my last buys. I've taken hits on all of my positions, but my long-term outlook remains excellent.

2007-12-22T11:15:00.000-08:00

I realize that I haven't posted in a while, and, for what it's worth, I'm sorry. I am very excited about my new investments. Let me tell you about them, in no particular order:

1. CEDU @ 8.64: This company provides online degree programs to already existing Chinese universities. This is pretty cool from a branding standpoint because the company doesn't need to convince people that its program is actually legit - unlike the University of Phoenix (ha-ha). Spending on education in China is growing at a blistering pace as the government tries to educate a billion people. And, since education is a normal good, as the GDP grows, education spending will grow.
Risk: moderate
Holding time: Who knows, it just IPO'd

2. EFTC @ 3.32: I bought a covered call position (strike price: 4) that expires in January. I think that these distressed mortgage companies will rebound, bolstered by the January effect. I don't really know about a long-term holding here, but I am willing to sell covered calls all day as long as the implied volatility is greater than 100.
Risk: moderate (with CC)
Holding time: until the CC expires (Jan @ 4) or if I feel like holding it afterwards if the call is OTM

3. SLM @ 21.83: Another covered call position. SLM has a great business model, where the government foots 95% of their loan losses. That is a LOT better than the 60% of value that banks are able to get off of foreclosures on mortgages. I think that the last conference call proves how difficult it is to be a public company - say the wrong thing, and the market punishes you. Have any of their fundamentals changed? No. Is cutting the dividend a problem? No. Is it going to get worse? Maybe.
Risk: moderate (with CC)
Holding time: until the CC expires (Jan @ 25) or if I feel like holding it afterwards if the call is OTM

4. LUV Jan '09 call 15 @ 1.61: I bought into this position right before the Fed's interest rate cut which was a ridiculously foolish thing to do - had I waited a few days, I could have saved myself a good 25-30%. This is a play on cheaper oil and industry consolidation - I am very confident that both are coming. I may exit this position if there is a large run up in the stock price but I have no qualms about holding it for a year.
Risk: high
Holding time: Until expiration or a large change in IV

Western Union Co. (WU)

2007-05-18T21:44:00.000-07:00

WU's earnings just came out and they lowered guidance because of less illegal immigrant activity. This was pretty obvious as it was the subject of the State of the Union. However, the company itself is awesome. It's just a hot IPO. The stock hit 24 earlier this year and I wouldn't be surprised if it hit it again in the next 6 months.
Holding duration: 2 earnings reports
Expected return: 11%
Risk: low

I was right: VIAC

2007-05-01T14:12:00.000-07:00

On Monday, April 23, I advised to short VIAC. Today, VIAC fell 10.7%. If you shorted it at 6.5 like I said, you would have made a cool 14%. Not too bad for a week's work. What will happen now? I can see the stock falling below 4, but it won't be as abrupt as this move. That would also be an excellent time to pick it up - around 3.5-3.75.

I don't monitor that many stocks, so if you want me to look at a stock for you, just ask! I'd be glad to check it out. Moreover, I am always on the look out for bargain buys.

Home Inns & Hotels Management (HMIN)

2007-04-24T12:53:00.000-07:00

This Chinese budget hotel is hot stuff. Explosive growth is in the works – HMIN is expanding like crazy and will get a big boost from the 2008 Olympics. The problem is, HMIN is too expensive to consider buying at this point. Although there is nothing wrong with paying a premium for growth, there is a problem if that premium is ridiculous. 160 trailing P/E and 60 forward P/E is just too much. I am not at all surprised by HMIN's recent drop from 35 to 32 - it would probably be a safe bet to pick it up around 28.

ViaCell (VIAC)

2007-04-23T07:47:00.000-07:00

There are two stocks that I can talk about today – Administaff (ASF) or ViaCell (VIAC). ASF had a 15% fall today after it lowered earnings guidance. I would say that the drop is justifiable – however, I think that the company’s business model will pull it through its recent problems – look to pick up the stock around 30 or before its earnings report on May 1. In contrast, VIAC’s recent rise from 5 to 6.5 on no news is not so justifiable. My pick of the day is to short VIAC. I believe that the earnings report on May 1 will quicken the inevitable fall.

Yahoo! (YHOO)

2007-04-19T19:31:00.000-07:00

Stock prices have two components - growth expectations and the underlying value of the company. Since Yahoo’s last earnings call, the stock has been moving up because growth expectations have been increasing. This earnings call proved that the belief was unjustified. So the stock fell. Yahoo is still a great company. It has the most popular online portal in the world and I believe that Panama will be highly successful in boosting earnings. I would buy it sometime between now and the next earnings call. I am looking for it to drop some more - 25 would probably be a good time to pick it up.

My investing philosophy

2007-04-18T16:17:00.000-07:00

There is nothing more important in making a buy or sell decision than a stock’s price.
I should not criticize a company’s business decisions – I take it for granted that they know their business better than I do.
Buy low, sell high. Stocks are volatile. Critical in deciding what is “low” versus “high” is to look at the past performance of the stock and its competitors.

I expect that this will change as I become a more experienced investor.

Tata Motors (TTM)

2007-04-17T10:24:00.000-07:00

Bought at: 16.59
Target: 20-22

The SENSEX is really volatile. After being fairly in line / outperforming the SENSEX for two years, TTM has seriously diverged from the index in the last year. It seems like a great distressed value play. There has been no change to the fundamentals of the company since January, although the stock has fallen from 22 to 16 in the meanwhile. I believe that the recent run-up is from the rupee strengthening against the dollar (16 to 17.5).

I think that the price will go back up after TTM's next earnings call and once we start seeing the cash flows from their really cheap car ($2500, to be produced in 2008). But who knows? It might hit 20-22 before then and I'd have to reconsider.

Welcome

2007-04-17T09:49:00.000-07:00

My Introduction to Microeconomics professor once said that you should never use the word "need" in his class - people never need anything. Nevertheless, if people want to increase their amount of capital, they need to invest. The reason for this is simple - consume less now and you'll be able to consume more later.

My words come with a note of caution. I believe that it is important to smooth out consumption over one's lifetime. Hence, it is important to spend the money that you receive from investing. A caution from Karl Marx: All of the things which you cannot do, your money can do. It can eat and drink, go to the dance hall and the theatre; it can travel, it can appropriate art, learning, the treasures of the past, political power - all this it can appropriate for you - it can buy all this for you: it is the true endowment. Yet being all this, it is inclined to do nothing but create itself, buy itself; for everything else is after all its servant.

Deep. What is the goal of this blog? To attempt to achieve above average returns for your portfolio. I'm sure a million other blogs exist with the same purpose. So it's really up to you whose advice you take.