Stock Ideas

Hey everyone, just writing because I was curious if there are any stocks you all have been watching or think are good picks.

Today on CNBC someone recommended Terex Corporation. I don't know if any of you have heard of this company but it looks like a solid company. P/E of 6.75, recently reported great earnings, was trading in the 70's just a couple months ago and is currently at $47. They are a "diversified global manufacturer of capital equipment focused on delivering reliable, customer relevant solutions for the construction, infrastructure, quarrying, surface mining, shipping, transportation, refining and utility industries." Should rebound nicely when the markets turn around and confidence jumps back in because this stock seems pretty cheap with such a low P/E...and their wasn't much of a spike after reporting good earnings.

I also like LDK Solar. They make the "solar wafers" which are apparently the main component of solar cells. It's a pretty volatile stock, but should be interesting to see what happens as earnings are released in August.

V also beat expectations by a decent amount but the stock doesn't seem to want to get back up to upper 70's. $70 seems to be some pretty good support so watch when it gets close, could be a good time to buy.

Just some thoughts

Today... we wait.

Housing sales hit ten year low today? Everyone is saying the market is still weak. A cabot letter got me thinking. They say that they look at high volume trading with a price jump as an indicator that the institutions, that (arguably) control the market, are buying back in. I don't mean to sound like a retard, but how exactly does one do this? Create a watch list, and on your preferred financial website there is a place to watch the volume? So as far as an indicator of when to come buy back in, we have a) Andrew says the next time there is "really bad news" (would the economic reports on the housing market count?), and b) when we see a rise in price of the stocks on our watch list in congruence with an increase in trading volume? So I think we know when to get back in, but who should we be watching? Financials still? Banks? Insurance? How about adult education like ITT and strayer and all those. They seem to be back on the rise, and should benefit from the restoration of the credit market (student loans). Value Line was hot and heavy on them at the beginning of the year, but of course they were hurt by all of this economic turmoil. Any opinions about this sector? 

The House That Paulson Built

"Obviously, it will go on beyond months with some of the issues in the housing market, but I believe we can get to the point within months where we turn the corner on housing," Paulson said in a televised interview with Fox Business Network.

This is the turn that must take place before a market recovery in financials and when we should be looking to get back in. The bad news that comes out hurts these companies unfailingly and the bad news will keep coming until we make it around the bend. The question is: How to spot stability in the housing market? We can look at foreclosure rates, new home purchases or a number of other indicative numbers but by that time it may be late in the game.

I think that the next significant drop in the market on bad news is the buying opportunity we have anticipated. I don't mean that the next day in the red will signify the proper re-entry point. Paulson even said that it will be a matter of months (and he is supposed to sound hopeful). So don't rush it, but the next terrible day on the Dow and I will be looking agressively for buying opportunities. This may not be this week or the next, but it is coming and coming soon.

The Price of Oil and World Events

About a month ago Andrew recommended to me the book "Fooled by Randomness." Although he might be better at describing the central points of the book, the main thing I take from it is that people look for connections in everything, when in fact pure randomness is actually controlling a large part of what is happening.

Something that hit me just now was the fact that no matter if the price of oil goes up or down by 3 cents or $3, there always seems to be a consensus as to why it made that move. Today oil is down because fears have been eased surrounding tropical storm Dolly. Previously there was news about Iran (I think concerning there missile program). And before that, around the time oil started making its fall, America reported good numbers around its supplies (which is pretty legit). I don't really have any idea as to whether there is good correlation between these world events and the price of oil...but I suspect that "Oil falls as there are more sellers than buyers" would not make the top headlines. Or how about..."News concerning sh*tloads of new drivers in Asia means we need more oil." That might be the most accurate.

Alternative Energy/Financials

Well there's no doubt it's good to see financials recovering a little. I think it's probably too early to say we've hit bottom and the worst is over. Like it was posted earlier, there is a good chance more writedowns will come and rumors of bankruptcy for various banks will probably continue. I didn't get a chance to really follow what was happening in the markets today, but my impression of these last two days is that people are recognizing the sell-off is overdone and confidence is creeping back....lets just hope oil stays under control to keep this going!

I like the idea of watching wind power related stocks as well. I feel like solar energy has been hyped up so much that other alternative energy methods have been neglected slightly. As for the list Cramer (ahem) I mean Andrew provided, I definitely think the companies like Owens Corning and Thomas & Betts that produce the electrical components for wind power will benefit from an increasing interest in this form of alternative energy, but I like Woodward Governor and Broadwind Energy for some good possible gains. Broadwind has clearly ran up significantly over the past year which means it will probably be pretty volatile, but it sounds like their company is pretty focused on only manufacturing parts that go directly to creation of wind turbines. Woodward, from a technical perspective, has a pretty attractive chart and has made solid gains over the past ten years, maybe indicating it is a well run company. Again, I haven't really done any research but I plan on looking more into what makes these companies possible winners. That's just my thoughts.

I'll definitely be watching Yahoo closely tomorrow, this fiasco has been going on for so long now--I think Icahn's patience is wearing thin and Microsoft has billions in cash sitting around and has the ability to make it happen, and clearly wants to make a move...problem is ordinary investors will miss the big gain if your waiting for news...so invest now if you're feeling lucky...or wanna gamble.

JPM

JP Morgan is a perfect example of the current oversold market.

JPM reports earnings 52% down from last year and the stock shoots up as they beat analyst expectations. There are huge buying opportunities in the financials but they are still not doing well.

YHOO

Yahoo sent out a letter to shareholders stating that they would sell to MSFT at $33 per share. With Carl Icahn buying up shares in YHOO and putting on pressure to sell, I think the $23 the stock is trading at now is looking cheap.

I look for a deal with MSFT to still take place and when it does to see YHOO see huge single day gains. This would be similar to the last time MSFT made an offer and the stock skyrocketed in a matter of hours.

Earnings

MSFT and IBM report earnings at the closing bell today. Both stocks saw strong days yesterday with MSFT up close to 4%. I won't be getting into either of these but I do often notice this run up of the price shortly before earnings announcements. To me it doesn't change the liklihood of beating annalyst expectations which means that you have more to gain from a short positition due to the temporary run up. It seems that the change in price is due to people hoping to gain from strong earnings reports.

IBM is up 17% already this year and I doubt there is a huge upside left but with such a strong company I don't like shorts either.

LEH, Gold, and Banks.

I don't know if you had exercised your option on LEH yet or not, but I wish we had bought in yesterday. I'm not really sure what to look for with the financials sector. I read about a hedge fund manager who criticized the SEC because their policies favor the corporation and not the investor in the context of releasing information. It seems to be a common complaint among people who lost big in the past few months. My dad always said, stay out of financials because you really NEVER know how deep the shit is. 

With that said, what is it we're looking for as for as this big turn around? I guess having had my head in a kaplan book all summer I really couldn't tell you what's going on with the economy, are their indications of a recovery? Or is it just the bad news that's driven down these stocks has seemed less and less "legit" lately, and is not substantiated?  

Now, I might be showing my own ignorance with this comment, but I'm a risk taker, what the hell. Cabot is recommending this gold mining company, Gold Corp. (GG) Only thing I've ever known about gold is that it's the "go to" during "tough times".  So acting on that recommendation, in my mind, would contradict our reasons behind investing in financials, which seem to be,, "it's really not as bad as they say". Thoughts? Was Gold something to buy back in October when the shit was just hitting the fan, or is there still money to be made there?

What about banks? Bargains? Still as safe as they used to be? 

 

Dead Cat Bounce?

What do you guys think about the massive upswing in financials today?

Personally I think they are going to give it all back and that there are more write downs to come, but on the other hand we should be on the lookout for these stocks to make the comeback I posted on this week. When the bulls return it will be the financials that make our returns phenomenal.

You can look at it one of two ways:
1.) Sure these are bargain prices but stocks will continue to fall and this is not the right time.
2.) This might be the turn around point and now is an excellent time to buy. Also, even if they do go lower the eventual gains will still be huge over the next year.


[Reply in the comments section and use new posts for new topics only.]

The Winds of Change

T. Boone Pickens, the Texas oilman, has recently started a national ad campaign aimed at shaking America from our oil dependence. He has invested heavily in wind and here are some companies that would benefit greatly from such a transition:

Trinity Industries
Thomas & Betts
Owens Corning
Clipper Windpower
Kaydon Corp
Broadwind Energy
Woodward Governor
MasTec
Vestas Wind Systems
Otter Tail

Let's take a look at these and pick two or three favorites of the group. General Electric could also be included as they are the largest producer of these wind-powered turbines, but their business is so broad that huge gains in their wind business would do little for total profits.

Fannie/Freddie and other Falling Knives

Hey everyone, thanks for the invite, I'm interested to hear about your investing opinions/knowledge.

Something I've been trying to understand is what the future of Freddie and Fannie holds. The government obviously has a vested interest in these enormous firms and they have outlined a plan to help out, but the shares are plummetting, down about 20% as I write. Many banking expert's are still speaking of gloom and doom despite the reassuring words that the government will come to the rescue, so that still makes me nervous. Like Andrew mentioned, just about everything financial has been getting destroyed but these seem like two stocks that could be very profitable in the long run as long as they hit that bottom soon...and the bottom isn't zero.

After following IndyMac's decline from about $5 down to $0 these past few months, it's pretty clear that unless your going short financial stocks, you're better off watching this storm pass. I just can't help but feel that this is getting a bit ridiculous. I've heard it said that while defaults on mortgages are very high, about 95% of people still make good on their payments (I think from the Nightly Business Report). Does anyone really understand how we can be in this crisis if those are the numbers?

What are the stocks that you guys are looking at other than financial? Small energy companies like PDO and MXC were obviously very profitable for some, but those opportunities seem to have passed.

Long Opportunities Coming in Financials

At times like these most people find it easy to be humble. Having seen their favorite stocks decline to 52 week lows and all their grand theories fall short, few people are left with the mindset that they are the masters of the universe. This is a good lesson and one that we would do well to remember when the Bulls return.

I cannot believe how low these financials are: GS, CS, MER, RJF, BX and FIG.

I am not putting a "Buy" on these stocks, but I am saying that these are all artificially low. Investment banks will be back on their feet before too long and GS and CS will skyrocket. RJF is a brokerage that seemingly has no exposure to the subprime meltdown but has been deemed guilty by association. Merrill is selling around $25 down from $90 about a year ago. Private-equity is a boom and bust business. BX went public at the tail-end of the biggest boom in the history of the industry and now they are in the heart of the bust. FIG will rebound at the same time when deal making takes off again.

Again, don't buy these now but do keep a look out. Better to buy them late rather than early because it will be a long ride back to the top. All those named will be high quality long positions in the coming months.