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Tuesday, July 6, 2010

The Big Thaw

June was the warmest June in recorded history for Washington DC.

We had 18 days of 90+ degrees
The next three days of July are expected to reach 100.

All this warm weather make me wish we had Snowmagedon again.

Back in the cold old days (December 2009 - March 2010) we had record snow falls and record cold temperatures.

Between November 1, 2009 and May 1, 2010 the DOW rose nearly 15% from about 9700 to over 11,300.

Like the record heat and the memories of all that wonderful snow, all the profits we experienced during this brief recovery have melted away.

The DOW now sits at 9686.

Bye Bye Snow

Bye Bye Profits.








Two months ago I was worried that so much of the market was at 52 week highs and all the bail out and incentives for economic growth were expiring that we were due for a correction.

Now, along with all that, and a record oil spill, folks are talking about a double dip recession.

And I am still worried, not because of the abnormal record highs, but because now so much of the market is either at, or approaching, critical low support levels; that if they do not hold, we will be dipping back into a recessionary pattern.

If some of the stocks on my July watch list pan out, and the support levels hold, we could see a short term rebound. If not, well then the thaw continues and we are indeed in store for a rough ride.

Hmmm, just in case you did not notice, I just said that I was either going to make money or lose money in the stock market... Profound wisdom if I do say so myself...

So, with that said, here is my July watch list with a new, and still evolving format, (I've decided to list the Stock along with a short reason why to buy it and one reason why not to buy it )to help folks decide the pros and cons to investing in any of these ideas.

STARTING LINEUP:

MDF - Metropolitan Health Networks
Why Buy? High inside ownership, Good Cash Flow, profitable, good return on assets, Maintaining valuation in down market.
Why Not? Still within 20% of 52 week high, Uncertainty in Healthcare field and increased risk with all the new regulations.
Reports August 2nd.

NBIX - Neurocrine Biosciences Inc
Why Buy? Still maintaining good money flow and relative strength. recently entered a deal with Abbott, which paid Neurocrine $75 million upfront, with the potential for another $500 million plus royalties still to come.
Why Not? May be cooling off of recent momentum swing and like any pharm company, their pipeline is always a gamble as to whether or not the product ever gets to market.
Reports August 2nd.

CKSW - ClickSoftware Technologies Ltd.
Why Buy? Money flow and Relative Strength are increasing, may be setting up into a reversal (double bottom or W) pattern after falling over 25%. A well run, profitable, not debt company.
Why Not? Pattern may not hold up and needs to be watched. Reasons for drop include economic crisis in Europe which accounts for a large portion of their revenue and two counter intuitive prospectus filings which worried many investors.
Reports July 15th.

CNU - Continucare Corp.
Why Buy? Near low support level of 3.4 – 3.5. No Debt. High inside ownership. Not under federal investigation.
Why Not? Federal investigations into other providers in the industry has driven all stock prices lower and may spook investors. May not bounce off of support levels due to selling pressures.
Reports September 6th.

COF - Capital One Financial Corp.
Why Buy? OK, how many of you said “what’s in your wallet”. Name Recognition. Federal Bail out. May be setting up a “w” pattern with buy in support near 38.
Why Not? Economy, debt and defaults are still a problem. Money flow, relative strength and trend lines are decreasing. The “w” pattern may not pan out and may actually be the signal of a reversal pattern. So this requires a close watch. Goal would to be buy at 38 and sell around 42.
Reports July 22nd.

DD - Du Pont
Why Buy? This is actually a good recovery stock to invest in over the long term – because the recovery will be long and choppy. Pays good dividends. Look for this stock to bounce off of a double support level close to 34.
Why Not? Market uncertainty and “double dip” recession will affect this global company and the 34 support level may not hold. Money flow and strength trending lower.
Reports July 27th.

IDCC - InterDigital, Inc.
Why Buy? wireless technology and patent company expanding overseas market which is one of the larger segments of this line of business. Currently at low support levels.
Why Not? Still under selling pressure with money flow and relative strength weakening.
Reports July 26th.

IPXL - Impax Laboratories Inc
Why Buy? Great generic drug manufacturer and distributor with opportunity to expand generic pipeline and nearing attractive price point between 17 and 18. No debt.
Why Not? Competition, patent infringement law suits, and current eroding of money flow and relative strength make this a gamble.
Reports August 2nd.

RGR - Sturm, Ruger & Company, Inc.
Why Buy? This took off for a 40% run the last time I put it on my watch list in March and has since fallen back off of its peak. Deserves a watch to see what happens price wise between 12 – 14. Recent economic downturn and favorable court ruling make this worth another entry on to the watch list. Profitable and no debt company.
Why Not? Although it is approaching another support point, trend lines have not completely stopped their downward movement off of the high points. The 12 support level is critical and is still more than 10% difference.
Reports July 26th.

SCL - Stepan Company
Why Buy? Well run specialty chemical company making investments world wide to expand capability and efficiency of delivery to a global market.
Why Not? Payoffs to these investments are at least a year away and current economic issues weigh, like other stocks, on the price of this investment opportunity.
Reports July 26th.

BENCH:

CEU - China Education Alliance, Inc.
Why Buy? at critical low support level (triple bottom pattern with not a lot of upward momentum support) - risky play to bet going back up but worth a watch. No debt, high profit margins, and inside investors.
Why Not? The Motley Fool has articles posted galore about this stock.. ;-) . Seriously though, this is an out of favor industry lately and they do face a fair amount of competition over seas.

CMFO - China Marine Food Group Limited
Why Buy? has been falling lately but an uptic in money flow and ownership might indicate the beginnings of an upswing - watch
Why Not? There have been rumors and accusations regarding fraud with this company however the fact of the matter is that many of their actions are concerned with “empire” building and stock price rather than building up tangible value in the company. This may all pan out in the future but for now this is purely a short term bet.

GFRE - Gulf Resources Inc
Why Buy? at a low support level - look to see if it drops closer to 8 - recent article about china investing in oil reserves to help support growing economy - may be time to buy into this. No Debt, high insider investment, high rate of return on capital and assets.
Why Not? In addition to the low support level, the stock has also failed to break top resistance either and this might be a sign of continued weakness.
Reports August 9th.

ABC - AmerisourceBergen Corp
Why Buy? A financial management company in an out of favor industry that has a good dividend yield an good profit margins and is nearing a historical low point. Definitely one worth watching in my book. This falls into my ideal contrarian mold.
Why Not? A fair amount of debt, lower than ideal profit margins and low insider investing.
Reports July 26th.

AMGN - AMGEN INCWhy Buy? A big, I mean really big pharm company at a low support level with a good pipeline of prospects makes this a stock worth putting on the watch list.
Why Not? As with any pharm company, not everything in the pipeline will succeed nor is it immune from competition and patent infringement lawsuits.
Reports July 29th.

BBY - BEST BUY CO INC
Why Buy? If an economic recovery kicks in, this is a great stock to have. It is currently at low support levels and looking as an attractive buy.
Why Not? Well, if nobody gets jobs, then the economy will stall, and people will not buy stuff from Best Buy. Carries a fair amount of debt which could also put it at risk.
Reports September 14th.

CEPH - Cephalon, Inc.
Why Buy? Just like AMGN - good returns, pipeline, expanded research and all time support low
Why Not? It has been mired in lawsuits and patent infringement cases throughout it’s history.
Reports July 27th.

CRVP - Crystal Rock Holdings, Inc.
Why Buy? Well, penny stocks so rarely make my lists that I just had to take a closer look at this one. For a penny stock they have decent numbers and are at the bottom of a well established trading range.
Why Not? I do not see any long term expansion plans, or new marketing plans. Therefore not huge amounts of growth. However, they could be bought out by a large cap competitor but this is the equivalent of winning the lottery.
Reports September 13th.

MSFT - MICROSOFT CORP
Why Buy? The stock is approaching an attractive buy in price and they have recently entered into a new product upgrade cycle with Windows 7, which has good reviews, and Office 2010. Business will upgrade to these new and improved products.
Why Not? Though attractive price it has not reached a support level nor is there any guarantee exactly when business will feel compelled to spend the money on upgrades. This is obviously dependent on the economic recovery.
Reports July 22nd.

SNDK - SanDisk Corp
Why Buy? Approaching good support and buy in price of 40 with anticipated future demand for chips in the Tech market a buy for this stock.
Why Not? Tech stocks are particularly susceptible to market and economic sentiment, especially bad economic news.

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