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buffalonate (95.89)

April 2011

Recs

6

Market Due For A Big Pullback?

April 28, 2011 – Comments (32)

The DJIA and S&P 500 are about 10% off of their record highs.  I have a hard time believing that it should be close to that high with unemployment at 8.8%.  With oil at $112 I think it is inevitable that the market has a big correction in the next couple of months.  Inflation due to oil prices is already cutting profit margins.  GDP rose 1.8% which is anemic growth and the stock market shrugged and kept going up.  I think over the next couple of months earnings growth is going to continue to be modest due to inflation and the market will eventually modify their expectations and send the market substantially lower.  The only value I see is the auto companies and the banks and that is because they are unpopular at the moment.  I have pulled my money out of everything else.  I have started putting money into 3X Bear ETFs and I will continue to add until the market corrects.       [more]

Recs

3

Restaurant Growth Stocks

April 27, 2011 – Comments (2) | RELATED TICKERS: BWLD , CMG , PFCB

I am a big fan of smaller successful restaurant chains.  If you buy into the right ones you can make 15% to 20% gains year after year.  I have been looking to buy into this sector recently so I did some research.  I am a follower of Peter Lynch who believed that an earnings growth rate should equal p/e ratio so here is what I came up with in analyzing the smaller restaurant chains.  Buffalo Wild Wings is growing earnings at 18% and has a p/e ratio of 28.  You also have the prospect of an NFL lockout that could send this stock much lower.  Texas Roadhouse has a p/e ratio of 20 and a growth rate of 13%.  Texas Roadhouse announced that they are going to be significantly growing the number of their restaurants now that the economy has recovered.    Chipotle Mexican Grill has a p/e ratio of 44.5 and grew earnings at 23% last quarter.  BJ's Restaurant has a p/e ratio of 50 and and grew earnings 65% last quarter.  The Cheesecake Factory has a p/e ratio of 21.5 and earnings growth of 10%.  PF Chang's China Bistro missed earnings estimates pretty bad today but it grew earnings 21% and has a p/e ratio of 20.    [more]

Recs

4

Inflation IS Not Bad

April 26, 2011 – Comments (4)

Many people are pouring into gold and silver because they think that inflation is severe.  I believe that the inflation fear is being oversold.  The federal reserve has cpi at about 2.5% for this year.  There are many economists who prefer to follow the volcker method of inflation calucation.  They said that using updated methodologies they believe inflation is around 5%.  The Walmart CEO recently said that their company believes that inflation is around 5%.  Walmart should know what inflation is considering how huge a part of the economy they are.  Some people are also trying to say that food prices are out of control.  In 2010 food inflation was .8% the lowest amount of inflation since the 1960's.  This year the FDA is predicting inflation is between 3.5% and 4.5%.  http://www.bloomberg.com/news/2011-04-25/usda-retail-food-inflation-forecasts-for-2011-text-.html  There is obviously an inflation problem but it is not serious at this point.    [more]

Recs

0

2 Interesting Turnaround Plays

April 24, 2011 – Comments (0) | RELATED TICKERS: WOLF , LCAV

I have followed these companies for years and believe they will return to profitability.  The first one is Great Wolf Resorts(WOLF).  This is a chain of waterpark resorts that hasn't been profitable for a couple of years.  This company started off building smaller resorts and waterparks and have learned that this model isn't built for success.  They have since built a 2nd generation of larger waterpark resorts closer to population centers that are successful.  The problem is that they are the owner operator of 2 smaller resorts that will probably never be profitable.  These 2 locations drag down their results.  They have been subsidizing their mortgage payments for these locations with profits from other locations.  They are currently in talks with their bank to try to get the terms of the loan changed so these locations can be profitable.  The CEO has stated that if she cannot get the terms changed for these locations she will let the locations be foreclosed.  This is a win win for the company.  If they get better terms they are profitable.  If they let these locations be foreclosed these 2 dogs are off the books and they are profitable.  Great Wolf just sold off an underperforming location in Wisconsin that should help their profitability.  Great Wolf just signed plans to build a large waterpark near Albany, New York.  They will just be operating this resort so if it becomes unprofitable they can walk away.  They are also in the planning stages to build new resorts in Pittsburgh and near Disneyland.  The fact that they are planning expansion tells me they believe they will be profitable going forward.  Here is a report showing that their revenues have increased 14% year over year.  http://www.bizjournals.com/milwaukee/news/2011/02/23/great-wolf-lodging-stats-show.html?ana=yfcpc    [more]

Recs

3

Employment Is Increasing!

April 23, 2011 – Comments (4)

I keep seeing people write that employment is going down and that is obviously incorrect.  These same people also refuse to believe the unemployment rate put out by the government.  Here is a national employment report put out by payroll processor ADP showing that private employment went up by 208,000 last month.  http://www.adpemploymentreport.com/pdf/FINAL_Report_March_11.pdf    [more]

Recs

5

Stay Away From Yongye International!

April 20, 2011 – Comments (5) | RELATED TICKERS: YONG

They have been attacked recently by short sellers on several occasions.  I have 3 reasons I have found that make me want to stay far away from this stock.  The first is their exceptional rate of growth.  They claim they have gone from distributing to 1000 stores to 26000 stores in around 2 years.  This type of growth strikes me as highly unlikely.  If this was a tech company maybe I buy their story but this company just makes fertilizer.    [more]

Recs

2

Ohio a Big Oil Producer?

April 19, 2011 – Comments (0) | RELATED TICKERS: CHK

http://finance.yahoo.com/news/Ohio-Is-The-New-Saudi-Arabia-twst-2212157633.html?x=0&.v=1  In this article an analyst talks about how he thinks Ohio will be a big oil producer in the future.  He mentions Chesapeake Oil and Ev Energy Partners as drilling there.  I know the Marcellus Shale is only in the very eastern part of the state and it doesn't hold much oil.  I know the Utica Shale is much shallower in Ohio than Pennsylvania so is that what he is talking about?      [more]

Recs

1

Great Time to Buy Banks!

April 19, 2011 – Comments (7) | RELATED TICKERS: FNFG , STI , FITB

The banking stocks have made a significant pullback in the last week.  Many are trading at 3 month lows.  I think investing in banks is safe now because their tier 1 credit ratings have been improving and foreclosures have been going down for several months.  I prefer investing in the regional banks because they have higher volatility. If you think investing in individual banks is too risky you should consider a bank etf.  Proshares Regional Bank ETF(kre) or the leveraged Proshares Ultra Regional Bank(kru) is worth a look for the brave.      [more]

Recs

8

Oil Prices in 5 Years?

April 17, 2011 – Comments (5)

I just watched an oil executive on CNN talking about how India and China will increase their oil demand by 10 million barrels per day in 5 years.  I was wondering if we would have close to enough oil to fill that demand.  In the U.S. oil demand decreased 2% last year in a growing economy due to more efficient new cars.  Our new cars are so much more fuel efficient I think you can safely assume that we will continue to reduce our demand every year just by buying new cars and retiring old ones.  Also big rigs and corporate and government fleets make up 25% of our oil demand and they are rapidly switching to natural gas.  Natural gas is so much cheaper that I think you can expect half of our transportation fleet to be switching to natural gas in 5 years.  They are also currently pushing a natural gas transportation bill through congress that has a lot of support.  I think you can safely estimate that we will reduce our oil demand by 15 to 30% in the next 5 years.  The U.S. is also expected to increase its oil production by 40% in the next 10 years due to horizontal hydraulic fracturing in Texas, Colorado, and North Dakota.  Iraq claims that it will be the world's largest oil producer in 10 years when its oil infrastructure gets built out.  There are also huge deposits of oil currently being drilled deep off the shores of Brazil.  I was wondering if there was some oil expert out there who could give an educated guess as to what the oil prices will be in 5 years given all of these variables?        [more]

Recs

5

The Best Run Bank in the Country!

April 14, 2011 – Comments (5) | RELATED TICKERS: FNFG , MTB , PNC

I believe First Niagara Financial Group(FNFG) is the best run bank in the country and I think it is at a great price.  This bank is based out of Buffalo and stayed profitable through the financial crisis.  Not only did it manage that but it also made several acquisitions and has now doubled its bank branches in the last 2 years.  It has recently moved into the Pittsburg market by buying National City branches.  It bought out Harleysville Bank in Philly and is in the process of buying New Alliance Bank in Hartford.  It has a p/e ratio of 19 which seems rich but the CEO says it will grow at a 15% clip going forward and it has dividend yield of 4.6% which makes it cheap in my book.  I think anything under $14 a share for this bank is a great price especially considering how exceptional their management is.  There are about 10 stocks that I know of where you can buy them and never pay attention to them again because you know they will just keep going higher.  This is one of those stocks. The only large banks that I think hold a candle to FNFG is PNC Financial and M&T Bank.  Both are great companies but are twice as large and don't have as much room to run as FNFG.         [more]

Recs

2

Good Time to Buy Laser Makers!

April 12, 2011 – Comments (1) | RELATED TICKERS: IPGP , RSTI , IIVI

All of the companies in the laser industry are growing like crazy and the recent pullback in their stocks has made them a great buy.  Rofin-Sinar(RSTI), Coherent(COHR), and IPG Photonics(IPGP) are all expected to grow earnings and revenue at more than 50% this year.  Their p/e ratios are all considerably lower than expected earnings growth this year.  They all have huge order backlogs that will keep them busy for awhile.  The laser industry is quickly trying to switch to fiber lasers because they are much more energy efficient.  IPG Photonics has the obvious lead in the fiber laser market and is growing the fastest of the three laser makers.  The laser makers are seeing demand improve significantly across all of their markets.  IIVI(IIVI) is a company that supplies the laser makers with mirrors and infrared lights to build their lasers.   IIVI is expected to grow revenue 40% this year and earnings 80%.  I think all of these companies are a great buy right now.    [more]

Recs

4

A123 Systems Finally a Buy?

April 11, 2011 – Comments (2) | RELATED TICKERS: AONEQ

I think A123 Systems' stock(aone) is finally down to a price where it makes sense to buy.  Its market capitalization is less than three times its expected revenues for 2011 which seems like a decent value to me.  The analysts believe that this company will grow revenues by over 100% the next 2 years.  The DOE gave A123 Systems a grant to help build the largest lithium ion battery factory in the country.  The CEO says that they are not only relying on mass production to bring down costs but they are also investing significantly in production innovations to be more economical than their competitors.  They probably won't be profitable until 2013 but they have doubled capacity in the last year and I can't imagine that they would do that if they didn't see the product being economically viable in the near future.  They recently announced in their quarterly report that they will be supplying batteries for a start-stop hybrid system for one of the big three auto companies in 2013.  Here is the link. http://blogs.edmunds.com/greencaradvisor/2011/03/automakers-doe-tap-a123-to-develop-smaller-battery-for-hybrids.html  The CEO also seems very optimistic about the demand for their product and their ability to bring down costs as you can see from this interview.  http://www.just-auto.com/interview/qa-with-a123-systems_id108513.aspx  I can't guarantee this stock won't go lower in the short-term but for the long-term I really like their future.        [more]

Recs

4

Most Overpriced Stocks?

April 10, 2011 – Comments (3) | RELATED TICKERS: CRM , OPEN , QIHU

My votes go to Qihoo 360 Technology(qihu) and Opentable(open) and Salesforce(crm).  Qihoo 360 Technology is a Chinese search engine with 8 million in profits and a 2.9 billion market cap.  Opentable makes online restaurant reservations and has a 2.5 billion market cap.  It is growing revenues at 40% and has a p/e ratio of 190.  Salesforce is a cloud computing software company that grew revenues last year 27% and earnings 50%.  It has a p/e ratio of 286 which makes this company overvalued by about 5 times by my numbers.  If you guys know of any other crazily priced stocks I would like to hear your ideas.     [more]

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