I noticed that there was $1600 of cash in my IRA account, exactly enough money to buy another 2000 shares of DRDGOLD Ltd. (NASDAQ: DROOY). Done. (Hopefully this is too tiny of an investment to jinx the company. I've had really bad investing luck the past year.)
DROOY is one of those companies you really want to call by its pronouncable ticker symbol and not by its corporate name. And the new name sucks, I liked the name a lot better when it was Durban Roodeport Deep.
Pogo Producing Company (PPP) was bought out only a few days after I purchased the stock! I only made a small profit off this deal.
I sold my PPP today and invested the money into Chesapeake Energy Corporation (CHK) instead. CHK has a low P/E ratio and management predicts increasing production.
Celebrate Express, Inc. (NASDAQ: BDAY), seems to be a struggling company, but underneath dissappointing earnings is a very strong balance sheet, with $3.70 net current assets per share, even after a $1.25/share special dividend was paid out in April. The company also has growing revenues. Activist shareholder Stephen Roseman of Thesis Capital management has been buying a lot of shares during the last few months. A while back, some big investors (including Stephen Roseman) announced they were going to try to sell the company or take it private, but that didn't pan out, so the stock price sank to the bargain it is today.
Another stock pick for you: Media Sciences International (NASDAQ: MSII).
This is a rare case where I recommend a growth stock and not a value stock. The problem with most growth stocks is, how do you really know that the stock will keep growing? As soon as a company demonstrates it's no longer growing, the share price plummets and investors get burned.
Media Sciences International sells generic refill cartridges for color laser printers. They have this market to themselves. There are companies selling generic refills for inkjets and for black and white laser printers, but none have ventured into color laser printers, so MSII has a big head start.
At this point in time, it's a no-brainer to predict that this market is growing. Color laser printers are coming down in price, and gaining increasing penetration into businesses as well as homes. I'd buy a color laser printer, myself, if only I had the room for it.
The only dangers for MSII are (1) some other company enters this market; and (2) MSII loses patent infringement lawsuits (Xerox has sued them)--and even though MSII will probably win, the lawsuits are a drag on earnings for such a tiny company.
I've long followed Bill Fleckenstein, but I've begun to suspect that his advice is bad. After all, he always screams "sell sell sell" yet somehow the Dow is pretty close to an all time high.
CXO Advisory Group has the bad news. Bill's recommendations have been right only 24% of the time. In fact, if you always did the opposite of what Bill says, you'd do pretty well. Few stock market gurus reach a 76% accuracy rate!
Bill writes in his most recent column:
I don't know when the party in the stock market is going to end. But given all the leverage, and given all the trend-following, risk-seeking, quick-triggered, hot-money operators out there, I don't see any way that we can avoid a crash or crashlike experience. I cannot emphasize strongly enough that the leveraging up of America is over. But the de-leveraging and the problems associated with that have only just begun.
It sounds pretty scary, but given Fleckenstein's lousy track record, I have my doubts.
After selling off my oil and gas investments, I had a lot of cash lying around, and I realized that TD Ameritrade was paying me a really lousy interest rate. I thought about putting all of it into a short term bond ETF, but then it occurred to me that a great investor like me can surely do better than that. So here are some of the stocks I purchased:
Tyco Electronics Ltd. (TEL) - Tyco Electronics just split off from Tyco International. This purchase is based solely on the fact that the electronics part of Tyco has a low P/E ratio. Management is predicting a low growth rate. A basic value stock. This is a rare case where I invested in a large cap company.
Empire Resources Inc. (ERS) - A tiny company (99.86 million market cap at this moment) that resells semi-finished aluminum. Why don't the buyers just skip this middleman and go directly to the aluminum mills? I don't know, but Empire Resources seems to have a history of steady income and a low P/E ratio. It's one of those value stocks that big funds with billions of assets can't invest in.
Pogo Producing Co. (PPP) - Wait, didn't I swear off oil and natural gas stocks? Well, I suppose it was a mistake to want to be completely out of this sector. PPP has a low P/E ratio compared to its peers and recently completed a favorable sale of some of its non-core assets.
Spherion Corp. (SFN) - A temporary and permanent staffing company with a market cap of $525 million. It seems to be a poorly run company, but it's really cheap from a balance sheet perspective, and it's not losing money - in fact it had eight consecutive profitable quarters - so it seems like a good opportunity to buy and hope that management improves or the company is purchased by someone else.
I will post even more stock picks later this week.
Oil is surging. I sure regret selling my oil stocks.
The current price clearly represents a risk premium associated with the British soldiers being held by Iran. The worst case scenario (or best case from the perspective of investors long oil) is that a war with Iran results in Iran cutting off oil supplies from the Persian Gulf, which would cause an unprecedented spike in oil prices. I’m not the only person who knows about this worst case scenario. It’s factored into the current price.
Holding these sailors hostage is a pretty dumb diplomatic move. If Iran’s goal is to obtain nuclear weapons, Iran ought to be laying low until such weapons are finally ready. Then Iran can act all belligerent and say, “Ha ha, we have nuclear weapons, what are you gong to do about it?”
It also doesn’t make sense to piss off the British. When Argentina pissed them off by taking over the Falkland Islands, they went to war against them.
The most likely resolution is that Iran will give the sailors back, there will be no cutoff of oil, and prices will retreat.
Since I purged my portfolio of oil and gas stocks, the stocks I sold have gone up, while the ones I kept (half of HEC, TRLG, LIZ) have gone down.
So I have no doubt that, by now, no one is listening to my advice.
Today I got rid of more of my HEC. There are sill 20,000 shares in my IRA, but at the current low price of 0.40 that's worth bubkes.
The theory still remains that the global recession to be caused by the coming crash in real estate will cause the price of everything to go down.
Bill Fleckenstein says that the economy is tanking, on account of the collapse in the housing market.
I wonder if he's still bullish on gold and silver?
Today I sold off nearly all of my oil and gas stocks. I still have a few shares of HEC and a pink sheet stock that's hard to unwind, but that's it. (This is sure going to be painful a year from now when I have to pay capital gains taxes on everything.)
People who followed my recent advice to buy HEC and EPEX lost money. Sorry.
This was a pretty tough decision, because I've been bullish on oil and natural gas since 2000. That's seven years of bullishness. But I suddenly realized that the oil and gas sector has been in a bear market for a year and a half now. I don't want to ride a sinking ship down further.
Some might think "ah ha, here is the final capitulation of a long time bull, and that means the market has bottomed." I sure hope that's not the case. I saw Phil Flynn on CNBC this morning being bullish on oil, so I would think that means I'm not the last person to capitulate. Phil admitted that oil will tank if the economy goes into recession.
The unraveling of the subprime mortgage lending market ought to be a clear signal that a recession is coming. Alan Greenspan said recently that there was a one third chance of a recession. And he has been an eternal optimist for ages. So while, in the long run, oil and gas are great investments because of the Peak Oil theory, in the short run it's a bad investment because of the coming recession.
That's my take. If there is now a huge surge in the oil and gas sector, I surely know that my investing magic is completely gone.
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