My Picks in 2006

Profit/Loss

RMD - 10% Gain
CHCI - 35% Gain
HAL - 11% Gain
HANS – 33% Gain
AMGN – 9% Gain
WTR – 11% Gain
CME – 0% Push
DXD – 16% Loss
NTDOY- 21% Gain
LZB – 12% Gain
NFLX – 12% Gain
SIRI – 12% Loss
STP – 13% Gain
GLW – 11% Loss


Average Profit/Loss: 9%
Average Loser: 13%
Average Gainer: 17%
Amount Correct: 71%

So, how am I supposed to calculate if I hit my goal of a 30% gain for the year? Well, I need to figure out the average turnover for each stock and multiply that by the average P/L for each stock, and I get a good estimation of what my picks brought in.

I don’t need to make the assumption of how many stocks were in my portfolio at any given time to account for the amount of money used, because there is always 100% investment at all times. I realize that this is not always true, but I need to simplify for obvious reasons.

(901 Cumulative Days Held) / (14 Stocks) = 64.36 Days Held on Average
(64.36 Average Days Held) / (155 Total Days Traded --I started late in July) = 2.4 Turnover Rate
(2.4 Turnover)*(9% Average Profit) = 21.6% Total Profit

Gain since July 28th (The start of this blog)
DJIA = 12%
S&P500 = 12%
My Picks = 21.6%

(155 Total Days Traded) / (360 Days per Year) = 2.32 Annualizing Factor
(2.32 Annualizing Factor) * (21.6% Total Profit) = 50.1% Annualized Gain

I wouldn’t have liked to sell GLW so soon, but I think it’s the only fair way to end the year. I will probably re-add it for a fresh start in 07’. There were a few areas where I could have improved, but overall I think I did well.

In my next post I will start my portfolio for 2007.
Happy New Year.
-Chris

One More Day

The trading year ends tomorrow and I'm left with STP, SIRI, and the recently added GLW to my picks. STP is sitting on a 15% gain, SIRI a 12% loss, and GLW a quick 11% loss. I will close all three positions out tomorrow and start fresh in 2007.

In my next post I will review my trades for 2006.
-Chris

Two Thumbs Down

Let go of Netflix shorts when markets re-open on Tuesday, 26th.

With four more days of trading until the new year, I'm rolling up my positions. I will re-evaluate my two stocks left and look for more, as I battle the idea that the market could finish at an all time high.

If you shorted Netflix when I suggested at 29.50 you would have a 12% gain. The stock is currently at 26.20 and sitting just above 200DMA support and 50WMA support.

I still think this is a stock to short, based on two simple facts:
1. Competitors are emerging from everywhere
2. Downloading is the future of rentals, not mailing

I would rather not lose money we've already made if NFLX gets a pop based on technicals. Bank the money and lets look forward to a great 2007.

Merry Christmas
-Chris

Ho Ho Hold on...

Every now and again charts just don't work-- if they did, everybody would use them. Even after Corning re-affirmed fourth-quarter guidance, it broke through support and decided it wanted to hang around in the 19's. Normally I drop a stock that breaks a strong support, but GLW does not have enough flaws to make me drop it.

Assume the analyst at UBS is right and there will be a weaker demand for LCD monitors and big screens. Wall street will not care when they release Q4 numbers in January, and see potential growth. Charts still look pretty on the MACD side, so I will give GLW a month to cooperate. RSI is getting low, Slow STO is below 20, I don't see more short term free fall to come.

As a side note, STP could be looking to start a Cup-and-Handle. Lets cross our fingers and hope that Christmas comes on time.

Good luck to all of you and be careful, the DJIA charts still look UGLY.
-Chris

*edit* I caught this article after hours today on NFLX, which is the reason they took a 2.5% drop when the market closed.

Christmas Loves LCD's

Buy Corning Incorporated (GLW). Not only does this holiday season look good for Liquid Crystal Displays, it also looks promising for a shortage in fiber-optics. Of course anybody who knows GLW could tell you that, but I have other reasons for suggesting the stock-- always technical.

Here on the daily chart one might suggest that GLW is below both 200 and 50 day resistances (mainly right below the 50). Although it could be a resistance for the stock, the plus side is that a stock close to a support/resistance invokes volatility. Add volatility to a stock that's crossing the zero line on its MACD, and you have a good possibility of a breakout upwards. I don't like the high SlowSTO, but perfect charts are hard to come by. Also, as annotated on the chart, there is a good support not too far away if the 50DMA buffers the stock.

Similar story on the weekly chart, a 50WMA resistance approaching while the MACD is ready to cross the zero line.

The risk/reward is excellent here, and I will be adding GLW to my personal portfolio tomorrow.

I hope you're all enjoying the holiday,
-Chris

Lazy Stocks Part II

Take profits on La-Z-Boy (LZB) and sit tight as I scour the market for another stock. I hate to leave only 3 stocks in the portfolio, but I'm pretty sure we can get back into LZB at a higher price. If you shorted La-Z-Boy when I suggested at 13.29 you would have a 12% gain. The stock is currently at 11.85 and nearing some moderate support from it's uncorrelated MACD. I've been a bit busy lately, but I expect to find a gem to add to the list soon.

Have a great weekend.
-Chris

Time to sell Nintendo and DXD

Take the good with the bad, and sell both positions today.

First off, Nintendo's hype is at its peak after its official launch ended today. I don't want to become victim of buy on the rumor sell on the news. Once we find out how great sales were with the initial launch, some investors may pull out. If you bought NTDOY when I suggested it at 23, you would have a 20.75% gain. The stock is currently at 27.75 with loads of momentum investors packed in. Sorry for the ugly Yahoo chart, but Stockcharts.com doesn't have ADR stocks listed.

Time to eat our loss on the UltraShort Dow30 (DXD). The Dow wont listen to reason and I don't have the time to sit on a position losing money. I'm throwing this sucker back in the pond and finding a better opportunity. If you bought DXD when I suggested at 69.5 you would have taken a 15.68% loss, as it now trades at 58.6. I still think we are overbought, but when so many people have money sitting on the sidelines and the market is the only place they want to put it, then your going to see a lot of people paying up for mediocrity.

Have a delicious Thanksgiving.
-Chris

Huge set of updates today!

I’ve been loaded with exams and essays, but I’ve done a good amount of stock research today to do some portfolio adjustments. First, lets start with the stocks I want you to let go of.

Amgen (AMGN) has finally got something to step in the way of it’s mojo. With the democrats taking control of the house and senate, all channels of communication are saying, “Drug companies will take a hit.” Well thank you for your self fulfilling prophecy. Amgen has been slowly sliding a bit, so its time to lock in the gains. I suggested Amgen at 66 and it’s time to sell now at 72.05. I will send this one off with a 9% gain.

Aqua America (WTR) took a major jump in October, and things have gotten a bit more unpredictable lately. For the short term investor I am suggesting to lock in gains. I would NOT sell this stock if I was a long term investor. Aqua America has much room to grow, and the sell I’m suggesting today is for the trader only. I suggested WTR at 21.70 and it now trades at 24.15. Lock in this 11% gain.

Chicago Mercantile Exchange (CME) looked horrible from chartist’s perspective and sadly it still does. I can’t hold onto a short if investors don’t agree, and that seems to be the case. I suggested shorting CME on a day when the stock had a 30 point jump. This means you could have shorted the stock at the top of its range and made a profit, or got in too early and lost. I will call this one a push, even though I did end up shorting myself at 517 and the stock is now at 502. For records sake this stock has been a break-even 0% gain.

Now onto the good stuff, I found a new short sell to add to the portfolio, Netflix (NFLX). I have been waiting patiently for this stock to get high enough, and it finally has. Its last earnings report was a good one, but this shouldn’t last. The whole concept around Netflix is great. For a monthly fee, you get to receive DVDs through the mail without late fees. Wonderful if it weren’t so easily outdated. Let me give a few examples of new and future technology that will steal Netflix audience:

1. Handhelds like PSP are selling their own special DVDs
2. Microsoft will start selling hi-def through Xbox Live
3. Amazon.com will start selling downloadable movies
4. Apple is starting iTV in 2007 to download movies
5. Blockbuster’s TotalAccess is similar to NFLX but allows returns directly to stores

Even if Netflix started selling downloadable movies, the question you have to ask is “Can Netflix compete with Sony, Microsoft, Apple, Amazon, and Blockbuster?” My answer is no, not a chance.

Competitors aside, the charts look bad. This two-year chart shows a major resistance at 30, along with a lower MACD. I will be short selling Netflix in my personal portfolio.
-Chris

Stay Put For Now

No trades today, the positions suggested are all set to win this winter; with the Democrats sweeping the elections, I’m staying with the DXD position to offset potential losses. Since my objective is to make a profitable portfolio, I don’t see a reason to add or drop any of my positions just yet since they are all doing fine (minus the DXD so far, which has been acting as an insurance stock). Happy trading, and good luck out there.

Checkout this article on the election and how it affects the market
-Chris

Things Cooling Off

Time to take another look at the Dow. Charts show some bearish news, as the MACD has pulled back to levels from the 1st of October. I annotated with a dotted line where the stock price should be at. I like the fact that the Dow broke its mid Bollinger band line (previously it's support). But I don't believe that we will fall below the 50DMA. Too many bullish nuts out there.

STP is for me. There is no way around it, solar power is undervalued. This is one of the only types of power that will never go out of style. Coal emissions will only get more strict, Nuclear Plants are not wanted near cities, populations keep growing. I don't see a more viable clean, efficient, renewable energy source anywhere. Long term players should stock up on STP at these levels. The stock is about a point above the long standing support around 23. This is no time to go soft on solar. I would stock up on Monday if I didn't already today.
-Chris

Eagle Materials

For the past few months I've had my eye on Eagle Materials (EXP). This company has taken a big hit down from its 52-week high. It has had a very pessimistic sentiment because of the decline of the housing bubble. Over the course of this stock's entire life, it has had great life. It wasn't until the past 9 months that it experienced a very large jump, which was followed by a similar decline.

EXP just released their earnings today, which were pretty close to being in line with expectations. More importantly, they gave guidance for FY '07. These numbers are above analysts expectations for the most part. This should bring a much needed increase in sentiment for the company. Already in after-hours trading, the stock is up 6%. This gives us an indicator on how the market views the earnings results.

EXP knows their business a lot better than any analyst could. Analysts will raise their estimates in the coming weeks in order to make it look like they know what they're doing. These raised estimates will give the stock even more momentum.

Positive earnings reports can have an effect on stocks for months to come. A market anomaly known as Post Earnings Announcement Drift (PEAD) often times occurs. PEAD is when a stock releases an earnings surprise and the stock proceeds to drift in the same direction for the next months to come. This should happen with EXP.

EXP has reached a low point where it has shown support. Heavy buying keeps it from falling below this level. Check out the latest insider transactions. They all show strength at these levels. At these levels, it makes me believe that there is more chance of upside than downside.

The valuation of this stock looks good as well
P/E: 10.38 for EXP , 13.78 for Industry
Qtrly Rev Growth (yoy): 26.9% for EXP , 15% for Industry
Operating Margins: 28.5% for EXP , 16.66% for Industry

Lower P/E, yet higher revenue growth year over year and high operating margins? Bargain.

Watch for the trend on this one to finally shift back to positive.
-Sam

Short-term Thoughts

Amgen (AMGN) is nearing resistances so I would be a seller around 80. If you are long term, keep the stock. I just think it will be bouncing around those levels for enough time that the short-term trader could put their money elsewhere for a bit.

Suntech Power (STP) is showing some positive developments, as it has gotten above its 50DMA and has formed an attractive flag pattern. I illustrated its previous flag also.

Aqua America (WTR) is nearing resistance at its 50WMA, but has good MACD movement about to cross the zero line. Earnings come out on November 1st; the stock could get pushed down, but since most earnings have been good this quarter, I'm sticking with it.

Finally, I'm glad Sirius (SIRI) decided not to break it's only support. It gained over 5 percent today, hopefully not just a knee jerk.
-Chris

Toxic Shock

After the Cameco screw up (CCJ), I have to advise selling Liberty Star Gold Corp (LBTS) which I suggested about a month ago for the risky investor. The disruption of uranium should allow a good price to take money off the table. Also the charts show some resistance ahead. If you bought when I suggested the stock at .62 you would have made 98% on your money.

I also suggested Glencairn Gold Corporation (GLE) at .58 and it is now at .51 and I would hold off on buying more if you picked it up. These two weren't added to the picks list since they are too risky for the average investor.
-Chris

Interest in Shorts

Today I'll throw out a few stocks I'm looking at with interest. I haven't done my due diligence, so these are just ideas for those who are looking for oddball stocks.

Pre Paid Legal Services (PPD) has a short interest of 69.92%. This means that out of all shares held, about 70% are from investors who are short the stock. You could interpret this in two ways:

1. Investors are right, and this stock will take a tumble

2. The stock has been climbing so Short Interest Theory will take hold, pushing the stock higher.

To the right is a one year weekly chart showing the high SlowSTO trying to consolidate. Expect volitility.

Next, is a stock that I'm considering adding to my picks as a short sell candidate, Netflix (NFLX). It's short interest is also high (although nowhere near PPD) at 22%. The mid-Bollinger band is looking to be its new resistance line; the 200WMA will be the real test. This is also a one year weekly chart.

Third is a stock we all love to hate, General Motors (GM). Short interest is a moderate 12% so don't look there for clues. The charts, however, show a short story worth of information.

From the beginning of the year GM has managed to climb all the way up to 33, but the past three months investors have been apprehensive about putting in new money. The problem is hovering above the 200WMA at 35. This line in the sand is a second strong resistance from a year ago that could send the stock right back down even if it crossed its 200WMA.

The daily chart is showing a lot of negative MACD correlation. The main thing keeping me from shorting GM is what could be construed to be a flag pattern on the weekly chart above.

I'm curious to see how these three will pan out. Time for some pumpkin pie.
-Chris

*Edit* Short Interest Theory holds true as PPD hits over 10% intra-day, NFLX reports good earnings causing shorts to panic upwards of 18% (afterhours included), and GM adds over 5%.

No, It’s Not Just Me

After catching the first two hours of CNBC, it became clear that it’s not just me. All of the analysts booked to speak had a similar opinion; the Dow is being exuberantly irrational.

• Talking head #1 told how his firm had the year end price of the Dow at 12,100; we touched within 50 points of this today.

• Talking head #2 explained why he wouldn’t advise clients to put money in at this point, explaining that they would be chasing money that was already made (too little too late argument).

• Talking head #3 enlightened viewers as to how the Dow is not factoring in everything from rate hikes to terrorism anymore.

Heck, even Jim Cramer is speaking to the fact that there are no shorts left, making at least a 200 point correction inevitable. Jim Cramer is being cautious?

So call me crazy when I confidently say that you should short the Dow, even if it’s only for 200 points. That’s four percent if you buy DXD, and any money is good money.

Yes, I was wrong about a double top in the Dow, but I’m not a stupid trader (although that’s debatable) my portfolio has been right overall, and I am not selling any DXD in my personal portfolio. Becomming even more overbought will make me liable to trade some puts in the Dow mini-futures.

Dear Stock Market,
Don't make me trade futures just yet.

-Chris

Updates Galore

This morning the core PPI came out much hotter than expected at .06%, raising inflation concerns and burning the indices.

Chicago Mercantile Exchange
Big news today, as CME Bought the Chicago Board Of Trade for $8 Billion, making even the commentators on CNBC confused about how CME went up. As we all know, the acquirer usually drops, while the acquired jumps (The stock began up 6% and is now up 2%). We are slightly better than break-even on CME at this point and I am holding my short position because the charts still look bad.

Aqua America
Good price action has been going on as buying volume has been picking up. The stock is reaching near its 200DMA; I believe it will eventually get over the hump, but expect some testing and retesting at this level. The AP wrote this article yesterday on water companies.

La-Z-Boy
Last Thursday LZB cut the company’s earnings guidance by 10 cents per share. The stock shed a few points and we are now in business as far as the short trade is concerned.

Nintendo
This stock is showing a possible Cup-and-Handle pattern and with Sony’s recent screw-ups, Nintendo should be able to take some market share (or investor dollars) to keep its momentum this holiday season.

As a side note- Amgen reports on Monday, read the comments section of the last post for my thoughts.

Have a great week,
-Chris

Ready for a fresh new start?

In order to bring more frequent postings and another perspective on the market, I’ve added a partner to Big Money, No Whammies. This person has an eye for detail, especially for IPO’s (I can remember him suggesting to me Volcom, Under Armour, and Crocs all at very profitable points).

He is known in the Business College of Central Michigan University for frequently winning Stock-Trak, the financial simulator for students to compete in the stock market (usually 300+ business students). After shorting Natural Gas Futures he is again at the top of the crop this year.

I wouldn’t have asked him to join the blog if he wasn’t smarter than me. I’ll stop now because you get the point, and I don’t want his head to get too big; so without further ado, Sam Scherf’s first posting starts now.

It's been plastered all over the media that the stock market has been reaching record highs. Regardless of if you're a believer in a bull or bear market, you can't deny that the market's getting more positive attention than usual.

When people see a boom, they want to jump in on the ride. For this reason, I decided to take a look at which investment advisers are doing well. Diamond Hill Investment Group Inc (DHIL) has caught my eye as a good catch.

Price
This is a company that has a quarterly revenue growth of 285% year over year. Their trailing P/E ratio is 25, making them below the average P/E of 27 for Regional Investment Brokers.

Economies of Scale
The company currently manages over $3.1 billion in assets. Last year at this time, they managed $1.15 billion. Financial service firms don't need to increase their costs by too much more when managing larger sums of money, yet will receive much larger commissions.

Stability
Although the stock has already had a huge (and justified) run up for this year, it's showing stability in its price. The company has shown consistent growth throughout its life, and the present should be no different.

The fundamentals of this company look strong. I would recommend this stock as one to hold on to for the long term. Investment management companies are showing no signs of slowing, and this pick shows promising attributes to take advantage of that trend.
-Sam

Come Back on Monday

Nothing to see here folks, just riding out my portfolio through the week. Check back in on Monday morn'.

Notes Before the Open

I’ll be sticking with the eight picks I currently have for a few weeks; I don’t intend to add or drop anything this month unless I see a clear imbalance. If a turnaround doesn’t occur soon, I will be seriously confounded and concerned. Here's a quick read for Monday.

Technical Issues:

• I understand that Internet Explorer users can’t see the page correctly, so I’ll work on this to get things looking right. If you use Firefox like myself, then you should have no problem.

• Also I received an E-mail on Nintendo, so I’ll reiterate that the Yahoo Finance quotes I use don’t allow ADR’s so Nintendo will not show up, but it is one of my picks.

Windy City Ready to Topple

Today I found a short that I’m willing to endorse wholeheartedly. On Friday short sell Chicago Mercantile Exchange Holdings (CME).

I'm not merely suggesting CME because I believe that the stock market as a whole will drop, although this would hit CME extra hard. Quite simply, this stock has way too much room to fall.

As today’s article in Fortune Magazine states:

“The Merc's highflying share price makes us wonder whether there's a cheaper way to get exposure to the booming market for futures, options, and other financial esoterica. Goldman Sachs, for example, has transformed itself from a traditional investment bank devoting most of its resources to underwriting securities and advising on mergers into arguably the most sophisticated trading machine on Wall Street. Goldman's earnings growth over the past four quarters exceeds the Merc's -- 88% to 31% -- and yet Goldman's P/E is nine, compared with 48 for Chicago.”

Let’s see what the charts are telling us:

The daily chart shows two resistances lines just above the current price. Also the Slow STO has been high for too long, and will eventually follow suit as the arrows show. The RSI is getting too high but the MACD looks normal.

The weekly chart is more interesting (and as always, more important). The MACD has been sinking for almost six months, while the stock price has stubbornly been holding on. This never turns out well for the stock price and we will eventually see a reconciliation of the two. Finally, On balance volume is relativly lower as the stock goes higher.

If all of this technical gibberish means nothing to you, then by far the greatest argument that the CME is at or near a top is the sheer amount of shares sold by insiders. The Chief Technology Officer as well as the Chief Executive Officer sold half of their total shares last month. Directors, Officers, and members of the General Counsel are all selling. You don’t see this amount of insider selling in a short three month period very often.

Again, if you're not sold on the "hard landing" argument for the market, then at least stay away from CME.

Twilight Zone

What a great run today; we closed the DJIA at 11,850. Patience is now my game plan; I will double down on my DJIA shorts if the daily RSI hits 80 or the weekly RSI touches 70. Either way our positions are well set for the 4th quarter.

I was watching as Sirius third quarter subscribers numbers came in above estimates for the 5th time.

"Sirius Satellite Radio, which is based in New York, says it added 441,101 subscribers to reach a total of 5.1 million for the third quarter, a 135% jump from year-ago levels. This came in above the average estimate from analysts of 418,000 new subscribers. The company reaffirmed its target of reaching 6.3 million subscribers by the end of the year."

Shares dropped 3% on this news? Looks like the XM Director resigning and BofA securities analyst comments spooked investors.

Aside from this, Lazy Boy gains 8% today on news that a board member is leaving and that they are getting sued.

I feel like I'm taking crazy pills.

Pulse of my Predictions

Time to do a checkup and review of my suggestions.

SIRI – Buy on July 28^th
Price then: 4.03
Price now: 3.92

Very little price action here, Sirius is still waiting for holiday season I assume. I used the weekly chart because it shows the supports/resistances better. Also it gives a good picture of its rising MACD action. SIRI will have to trade with its MACD sooner or later; lucky for you if you haven’t had a chance to pick up shares yet, now is your opportunity.

DXD – Buy on July 31^st
Price then: 69.5
Price now: 64.7

I suggested this one as a hedge to make sure you’re not caught when the market drops. I’m still unwaveringly suggesting it. Some can call it stubborn, I’ll call it safe. DXD is now over 1/3 of my personal portfolio.

AMGN – Buy on August 15^th
Price then: 66
Price now: 71.53

Smooth sailing with Amgen. If you’re still iffy on this one, consider this: The stock is showing a pennant pattern, it has a new 200DMA support, and the 50DMA is ready to cross the 200DMA (technical jargon meaning the uptrend will continue). This is a triple threat if I’ve ever seen one.

STP – Buy on Aug 20^th
Price then: 30
Price now: 25.83

Suntech Power is down about 4 points since suggested. This is a volatile stock, and will likely pop back above its 50DMA soon. Last week showed a very large after hour trade when the stock went below 24. I’m wondering what institution/big money investor decided that the price was too cheap? Either way I agree.

NTDOY – Buy on Aug 9^th
Price then: 23
Price now: 25.85

Still soaring and it’s not even the holiday. Nintendo will continue to do well.

I’ll allow LZB and WTR some time since I suggested them so recently.
Overall not bad, It looks like I have more losers than winners but that's only because the stocks I've closed out are not included.

Here are my closed positions:
RMD - 10% Gain
CHCI - 35% Gain (or break even if you bought before earnings)
HAL - 11% Gain
HANS - 33% Gain

If I stop now, I would have six gainers out of nine, so I'm keeping pace at 2/3 correct. But of course amount correct means nothing if you have larger losses in trades that went the wrong way. In this case, the average loser is 8% while the average gainer is 18%.

So far, so good. I'll take another look at the big picture when the year is over.