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December 2007

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More Picks, FTEK, AMAT

December 31, 2007 – Comments (4) | RELATED TICKERS: AMAT , FTEK

FTEK - A lot of controversy around the competitive threat Fuel Tech's FTEK specialty chemical business faces from GE and other rivals this is premature considering the size and low penetration rate of the market. However, because the success of Fuel Chem is important to their success, I think it is important to monitor. Fuel Tech is not the first or only company to offer a slag-reduction product. Vendors have been trying to sell a variety of chemical applications to utilities for years to address boiler slag. Most of them had little success because their products were ineffective. Fuel Chem differs because it has a proven record of success. To date, no industry authority has disputed the product's effectiveness. That is not to say that other technologies won't try to compete with Fuel Chem. In the long run I think it will only capture a fraction of a market share. Increasingly stringent air quality standards and more acute concerns about slag formation have unlocked a huge market opportunity for Fuel Tech. With more than 1,500 coal-fired plants in the United States, there is a huge market potential for Fuel Chem's proprietary slag-reduction technology even if it captures only a fraction of what could be a $1 billion-plus market in the U.S. alone. The capital intensity of Fuel Tech's businesses is very low. Most of the high-margin, front-end engineering work is done in-house, while the more capital-intensive construction activities are outsourced to subcontractors. Green Thumb for me
AMAT - promising and potentially lucrative solar equipment opportunity at the firm.  Also a wide economic moat.  What do you all think?  [more]

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VIMC

December 31, 2007 – Comments (0)

Vimicro designs semiconductors providing multimedia functions that are used in consumer electronics and mobile phone end markets. The bulk of Vimicro's revenue is from the PC and notebook webcam chip market, which the firm has come to dominate with more than 60% share.   [more]

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New Picks NCI, QI, MCHP

December 31, 2007 – Comments (0) | RELATED TICKERS: MCHP , NCI

NCI - Navigant is one of only a few large consulting firms in the U.S. that focus on helping corporate customers through the litigation process. These customers' options in looking for help are limited for a few reasons. First, with large amounts of money at stake, they are unlikely to take any chances; they look primarily to larger firms, like Navigant, that have a trustworthy reputation. Additionally, with about 2,000 consultants, Navigant has enough flexibility to quickly tackle larger assignments that smaller firms can't handle. Finally, through its experience, the consulting firm has developed long-standing relationships with corporate clients and law firms that help ensure that Navigant is their first call.  [more]

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New Picks PLCM, EXBD, MGI

December 31, 2007 – Comments (0) | RELATED TICKERS: CEB , PLCM , MGI

PLCM - most people say that their products will lose demand due to bandwith concerns, I want the highest quality stuff, bandwidth is getting cheaper and cheaper, I don't know where they are going with this????  [more]

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New Picks ACN, UTX, KOF

December 31, 2007 – Comments (0) | RELATED TICKERS: ACN , UTX , KOF

Some new picks  [more]

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Zimmerman

December 19, 2007 – Comments (3)

Firstly I like the industry that they are in.  The have one of my favorite things that I like in a company, a wide economic moat not only this but they are a in a nice industry.  Their industry has HIGH barriers to entry.  Their niche in the medical devices market comes from a manufacturing and marketing prowess.  I see definite returns in the long run for this stock.  For those of you who don’t know they are a leader in knee and hip replacement.  This is stable because they have a team of loyal surgeons.  [more]

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RDWR

December 19, 2007 – Comments (0) | RELATED TICKERS: RDWR

These guys are a player in one of the hottest niches in the networking industry, application switching.  The stock has taken a hit due to their constant reorganization of sales.  My valuation leaves a healthy margin of safety for this.  In tech we are seeing companies go from mission-critical applications to web based platforms, applications or content switches have emerged to allow enterprises and service providers to securely manage network traffic.  As opposed to tradition network hardware which simply routes traffic based on addresses, these traffic management devices examine each data packet to optimize traffic movement across the network.  they are basically traffic cops, which prioritize the various forms of traffic. thus maximizing efficiency.  Radware is at the high end of this.  They mainly focus on high-bandwith solutions.  This gave them a following in the ISP community (ISP's represent 35% of sales).  Most of their growth has come from Europe and Asia.  They do not do a good job of developing their sales channels and it has trouble articulating the benefits of its confusing product lineup to customers.  I like what they did in 2006 with hiring the new exec to spearhead these problems and get them fixed.  They way they are fixing this is well firstly they sell a wide variety of traffic-mangement solutions and in the past they just provided customers with different boxes for different applications rather than selling complete solutions.  They just released the next generation APSolute operating system and this OS Is a standard on all of its products.  This gives them an end-to end solution that I think will be easier to articulate to customers and channel partners.  The demand environment for these products is pretty solid.  I see sales increasing 7% over the next couple of years at least depending how they manage these sales channels.  Gross margins are high right now but will be hurt in the next couple of years due to more competition.  I like all the tax advantages.  [more]

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Qualcom

December 19, 2007 – Comments (1)

One of the reasons I am really hot on Qcom is that a little over a month ago Samsung said it decided to use broadcom chips in its new line of phones.  Also a federal judge helped them get reimbursed with 8.5 million in legal fees.  The main thing with them is that they own a ton of the intellectual property behind the dominant standard in the wireless industry CDMA.  The patents are being looked at very closely but the federal judges decision gives me some hope that they are fine on that front.  I think that they are going to benefit from CDMA on a global scale (hence the deal with Samsung).  Their intellectual property and patents gives them a wide economy moat.  I like how their business model focuses on the use of CDMA from two primary revenue streams.  1. design and manufacturing CDMA chips.  2. royalties.  They get a one time licensing fee and then reap a low single digit percentage out of the selling price of each CDMA phone sold.  This is a great business model and helps give it the moat it has.  The wireless industry is going towards 3G.  (third generation).  Cdma 2000 and W-CDMA.  which are derivatives to CDMA.  this means that QCOM will get royalties on nearly every handset sold.  This transition could drive QCOM's addressable market four fold.  You also have to look at how 3G phones will be more expensive than existing models and which will help slow the decline in handset prices and boost QCOMS royalty revenues.  You have NOK, Texas Instruments and Broadcom complaining that royalties are too high and does not offer some of its patents on reasonable terms and that they offer lower royalty rates to handset customers that buy QCOM chips.  The remedy that they are thinking about is spinning off its chip business.  This could take a long time to sort out in the courts but they have VERY GOOD legal team.  Ultimately I think that 3G is going to see more adoption by wireless customers over the next couple of years, which will fuel increased sales growth and earnings leverage over the next couple of years.  Earnings growth will probably come from India and China and Europe's move to W-CDMA, erosion in handset and chip prices as well as increasing competition in semiconductors may offset this but I own a couple SC companies.  Its like me owning an oil company so when the price of gas goes up my gains from oil offset my losses at the pump.  I don't expect this to be a 10 bagger but it has a wide moat and GREAT management I have a decent amount of this in my portfolio.  I am going to sit back and watch operating margins expand, and watch faster sales growth.  In the next year there will be pressure on operating margins because of legal expenses.  I don't like the stock option dilution and that takes my fair value from 52 to 48.  I like the price of 41.  Not too much risk, a wide moat and great management why wouldn't you want to own this stock?  [more]

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AMX

December 19, 2007 – Comments (0)

I am hot on international stocks right and expect a ton of revenue growth about 17% in the next couple of years.  They astound me with their growth, not just the strength of it but they are beginning to increase Average revenue per user in most countries, they have broken into latin america out of just mexico.  They have about 46 million subscribers in Mexico more than double of the amount of fixed line customers as Telemex (the company they spun off off).  Telemex claims about 70% of wireless users in Mexico so there is a ton of room to grow.  They have huge cash flows with which they are using to build the largest wireless network in latin america.  They bought verizons business n the DR and Puerto Rico.  They total about 137 subscribers in about 16 countries.  This size allows them to get better deals with suppliers and keep more of their customers on their own network.  Look at their subscriber base numbers and its growth.   I am looking for this to go to 100+.  The only real risks here are political, economy and regulatory because of it being in Latin America.  They could overpay for acquisitions because there are less available.   with that there is the argument that there is less ARPU than a wireless carrier in a developed country but they are not in a developed country, and this number is improving......  [more]

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Why I like Sandisc

December 19, 2007 – Comments (0)

SNDK has a pretty strong competitive position in flash memory products and have the opportunity to hold and even strengthen its lead in this rapidly growing market.  This comes from strong intellectual property, cost-efficicent manufacturing technology and a grade A retail sales and marketing network.  The intellecutal property they have is patents on fundamental NAND technology that every manufacturer has to have to producte NAND flash chips.  I think that we are going to see a lot more flash memory and a little birdie tells me what AAPL is going to start using flash memory in their laptops.  These patents help sales from other manufactures to put a little cash in SNDKs bank account.  O yeah don’t forget Sandisk invented SD cards, so they get a little of each dollar from sales of that.  We are seeing gross margins of 100% here that make up 10% of total sales. I like revenue streams like that.  I like how they reduce risk in the joint venture with Toshiba and are making a new factory allowing them to make NAND chips cheaper.  This also adds quality control.  The thing that separates them from other NAND manufactures is not the patents its the retail sales.  They have a network of 200k stores worldwide and have planned growth in Europe and Asia.  They are a leader in most of their markets.  I see revenues growing at 30 % plus per year and xmas is going to be a huge seller of these cards with all the tech stuff bought.    [more]

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My New Favorite Pick Potash Corp.

December 15, 2007 – Comments (6)

For those of you all who don't know what this company does, they have 3 main products, potash, phosphate, and nitrogen, these are used in fertilizers animal feed and for industrial applications.  In North America they sell to retailers, and distributors, which go on to sell the product to farmers.  They mine this stuff at 7 places in Canada and one in Chile.  The Phosphate and Nitrogen comes from 12 faculties in the US and South America.  They operate in very tough industry.  I like that the CEO has been in the biz for 30 years. They control 75% of the worlds potash production.  This gives them the ability to manage the global supply and demand.  I expect their revenue to increase due to capacity expansions and the pricing power coming from tight global markets for all of its products.  Over the long run I think that margins will expand but in the short term I don't think that nitrogen and phosphates will be as profitable or at least continue their current ultra profitable levels.  To me this will be offset by strong potash pricing and volume trends.  I could see the top line increasing at 5-8%.  The thing with commodities is that most markets have low barriers to entry, allowing other players to enter the market easily when it is profitable.  This oversupply can crush margins.  This is why I tend to stray from most commodity companies.  What makes this one different in my opinion is that they have the majority control over the excess capacity and there is a large investment required for greenfield production, this gives them somewhat of a moat.  Commodities are all about supply and demand.  A world scale mine capable of producing 2 million metric tons of potash per year would require about a $2 billion capital investment.  Also it would take five years to reach full capacity.  POT can bring this capacity online at a fraction of the cost and much faster than it would take to develop a new mine.  This capability keeps irrational competitors in their place and allows POT to match supply and demand at its discretion.  Right now we are seeing the global agricultural markets turn a corner and farmers and China, India, Brazil to meet the worlds dietary needs.  They have got a shot in the arm from bio-fuel production.  This resulted in a demand-driven surge in grain prices, which gave the farmers some fat wallets.  There is a finite amount of land and a climbing demand for food, feed, fiber, fuel.  Farmers are going to be trying to maximize returns per acre, This means more fertilizer especially in China, India, Brazil where it has not been used in the amounts it could for decades.  The department of agriculture projects that U.S. farmers will plant nearly 70 million acres in corn over the next few years to meet rising demand for feed and fuel (I am unsure about how I feel about bio-fuel).  Looking on a global basis the amount of arable land per person or the amount of land that is suitable for growing crops, has been cut in half in the past 50 years.  The Potash and Phosphate Institue says that if you look at Potash application rates in Brazil, china and India, would need to double to match current rates in developed agriculture markets.  If you cant do the math this means a ton more demand growth in rapidly developing economies.  I have't said much about the company if you look at the balance sheet it is not to shabby, debt is 40% of total operating capital.  Operating income covered interest expense 10 times in 2006 and they generated 700 million in cash from operations.  [more]

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Ending and picking again

December 14, 2007 – Comments (4)

In my mind it is sensible in caps if you have an outperform pick that has lost 20 - 30% of its value to end and pick again in order to take advantage of the expodential growth if you are bearish because you are getting a much better entry.  I would rather have the negative 30 points on me and pick up and extra 100 later.

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Bears Winning

December 14, 2007 – Comments (2)

It looks as if the bears are winning this morning (slightly) and I might end the week with my CAPs score in a great place.......

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My options play on GOOG

December 13, 2007 – Comments (0)

GOOG has VERY high option prices right now and a current trade I am in as is follows.  I wrote Jan 08 710 puts and picked up 40 for the premium (with my broker as margin right now), if it rallies I keep the premium, if it goes down.  It gets put to me and I am long stock.  I will then sell a March ATM straddle.  Picking up hopefully around 45 for a premium on each leg (net 90).  If it sits still I am long stock but the premiums have already offset the losses for the first drop in price.  If it rallies I am called for the stock which I will give up and keep the Call and Put premium (Net profit 3 premiums).  If it Falls and the stock is put to me I will have doubled my long stock position, and then will write 2 calls.  This is some of the systematic writing I do but I will tell ya'll how it ends up.  [more]

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Never seen so much young dumb money chasing real estate

December 13, 2007 – Comments (2)

I had an interesting conversation with my dad a couple of days ago, (still trying to get him to play CAPS, though he is not a computer guy).
I will quote my dad on this one after he took a trip to Phoneix, LA, San Fran, Miami and Ft. Lauderdale, 
The conversation went like this:
Me: "How was the trip?" (he went on to give tell me the following)Dad: "Good but I will tell you one thing, I have never seen so much dumb money chasing real estate."Dad: "George there are all these young kids out there chasing real estate they are building the condos in dumb locations and really don't know s**t."  Most of these kids don't know s**t because they have never been through a crash.  I survivied the mid 70's and lived through the 80's and have been bankrupt and seen all my hard earned cash go to zero."Dad: "George, you don't know jack s**t about investing until you have lived through a crash, it will change the way you analyze an investment and look at risk."
What I took from this was learn from other peoples mistakes.  [more]

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Short Covering

December 10, 2007 – Comments (5)

you have to love the short covering and anticipation of bens rate cuts that kills my CAPS score. :)

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Prices and Probability

December 08, 2007 – Comments (0)

“It is a mistake to think one limits ones risks by spreading to much between enterprises about which one knows little and has little confidence, ones knowledge & experience are defiantly limited and there are seldom more than two or three enterprises at any given time in which I feel myself entitled to pull full confidence”   [more]

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Whats a CDO (interactive demo) very good.

December 05, 2007 – Comments (1)

Copy and paste this into your URL.  Take a look it is a pretty good demo.
http://www.portfolio.com/interactive-features/2007/12/cdo

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Lennar looks bad even with the 50% haricut

December 05, 2007 – Comments (1)


"

Now that I have had a chance to actually go through what Lennar's (LEN) transaction is about, I have a lot more to say. Here goes...  [more]

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Chains of Habit

December 05, 2007 – Comments (0)

Chains of habit are too light to be felt until they are too heavy to be broken.
- Warren Buffett

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Bush Entourage for Traveling

December 04, 2007 – Comments (5)

Talk about wasting money this is what bush takes with him when he travels:(click on the image and it will appear larger)

Free Image Hosting at www.ImageShack.us

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Investment vs. Speculation

December 02, 2007 – Comments (3)

INVESTMENT VS. SPECULATIONby Robert Sacco

There are some insights that investors would do well to follow in order not to cross the boundaries between investment and speculation.  [more]

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Conservative Investors Sleep Better

December 01, 2007 – Comments (3)

Today’s Lesson: Philip Fisher
Conservative Investors Sleep Well

In 1975, growth investing pioneer Philip Fisher published a short investing manual called: Conservative Investors Sleep Well. It contained Fisher’s ideas about selecting a focused portfolio of high growth potential businesses-- which, along with Fisher’s 1958 book, Common Stocks and Uncommon Profits, is credited with influencing Warren Buffett and Charlie Munger as they moved from a pure Benjamin Graham net asset valuation method to include softer analysis of management quality, branding and franchise value, and earnings growth potential.  [more]

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Milton Friedman on the "strength" of the US economy

December 01, 2007 – Comments (1)

check this video out.  It is a little long but is great.  Lots of arguments about US debt and inflation. copy the link and paste ito your brower
http://youtube.com/watch?v=2wRMNhqKnBg&feature=related#.

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