Tuesday, June 14, 2005

Market and Portfolio Update

The PPI data came out this morning. The data was quite tame, which should calm some of the inflationary fears. The markets did not cheer this data. This suggests that the market participants are more interested in the CPI numbers due out tomorrow. The retail sales figure, which also came out this morning, fell more than expected. Perhaps this helped curb any enthusiasm that the PPI numbers could have brought about.

Don't ask Best Buy about the retail sales figure. This quarter, they absolutely smoked the estimates, posting an enormous upside surprise. Enormous, as in 0.51 actual EPS versus a consensus estimate of 0.30 EPS.

Been a while since we had a market check-up and portfolio update. Here are selected opinions and views on a few of my holdings...

RF Micro Devices (RFMD) - Looks like it's moving again. Nothing obvious that is driving the move, but I believe that generally, they'll be doing much better in the next few quarters. When they decided to re-focus on their core competency (power amplifiers) and exit their losing WLAN business, they did themselves a huge favor. Expanding and growing into other areas is a good thing, but only when it can be done properly. They weren't able to do it right, and so the decision to discard the losing side business, namely Resonext, was a smart one. Hope they can really show improvement and provide visibility in their next earnings call next month.

Harrah's Entertainment (HET) - Continues to make new highs. The Caesar's merger closed yesterday after everything was finally approved. Harrah's has an incredibly strong line up and such a strong brand name. It's really one of my strongest performers over the years.

Applied Materials (AMAT) - Still have this short position. It gave me a scare at one point when it went into the 17.40s. Didn't quite breach my panic point, and thus I still hold the position. Slightly out of the money, but not too worried. At the very least, it does help decrease the variance of my portfolio.

Dryships (DRYS) - Very disappointing start to this newly initiated position. Down a quick 10% here. Planning on holding for much longer-term, so I won't sweat the moves. That's part of the game.

Dow Chemical (DOW) - Initiated a position at about the same time as DRYS. At least it's ticked up about 2.7% since I entered.

Altria Group (MO) - Suffered a drop today having to do with timeliness of a court-ruling. However, it had a major courtroom victory the other day. A proposed 25-year $130 billion anti-smoking program was reduced to a mere 5-year $10 billion program. Department of Justice loses again. Their first major loss took place in February when an appeals court rejected the $280B sought under the Racketeer Influenced and Corrupt Organizations (RICO) Act. Basically, we're moving closer and closer to a time when big MO won't be as crippled by all this legal activity. This would then bring us closer to a break-up date. Altria Group will most likely be broken into 3 parts: Kraft Foods, Phillip Morris USA, and Phillip Morris International. It would make the most sense for them to break it up in this way, since they could then continue selling their tobacco products very aggressively in foreign countries, while being more careful when marketing in the US. Still a very interesting company with a lot of value tied up internally that will only be released when the company is broken up.

Solectron (SLR) - They broke $4 for the first time since I've owned them. Earnings are soon. That should really shed some light on the business. I'm looking for some big positives. As I said earlier, I believe strongly that contract manufacturing is generally improving.

Hibernia (HIB) - Still not sure if I want to let this convert into the cash and Capital One (COF) stock combination. Or, if I simply want to sell now and move the funds into another spot. While I think COF is not necessarily bad, I prefer a higher-yielding stock, since I prefer my portfolio to be balanced in this respect.


Anonymous said...

You stylin’ on the vice holdings. MO/HET/STZ are winnaz for you man.

As far as AMAT is concerned, allow me to correct you. You made it clear to me that your mental stop was @ about $17.10 or so. It breached that and then some when it hit $17.40s. Your “Didn't quite breach my panic point” comment is hogwash.

I feel the same way about RFMD. I told you right when they dropped WLAN that they are going to be in good shape. WLAN was a big drain on them but generated very little revenue. Now they get to focus back on power amplifiers and modules which is their core business. When it comes to Pas, RFMD is world leader.

Best Buy – I don’t think I’ve seen a company smoke estimates to that extent. Actual EPS @ $0.51 while estimates were @ $0.30. Wow. Jim Cramer has been very bullish on’em.

So you’re getting the Greek on DRYS, eh?

Solectron’s been hot ever since they hired a key employee we both know.

Make up your mind already on HIB. You’ve been so indecisive about it for a while now. You’re acting like a certain group of people.

Brute Force said...

Panic price and an intended stopping price are two different things. Also, I admit that it was careless of me to not follow through with my mental stop. I am usually good about that, but the momentum has shifted, so I'll wait this out a bit.