Saturday, February 26, 2011

Micron Technology, Inc. The Three Stooges?

 The Three Stooges/ Founders of Micron Technology?

While surfing at the top 10 volume of the Nasdaq, I notice one interesting stock that stands out among the rest. I decided to do some studies about it on this stock and it is none other than Micron Technology.
While surfing for more info on this stock, the above picture came out and it mentions that the 3 person above are the founder of Micron Technology. I dont know whether it is real of fake because the 3 persons look like 3 stooges to me. That is how the heading came about.

Another picture that came out while surfing for Micron Technology is the young beautiful chinese lady above which is the promoter of one of the Technology Road Show in Asia. Nice Body!



 Click on the above image to enlarge

Looking at the long term chart, this chart shows that Micron Technology is currently in the range bound trading of between $11.50 and $6.80. Micron is currently testing the very strong resistance at $11.80 and it has failed to overcome it.

Both the MACD and stochastic do not show any recovery or upward signal. Instead, it shows that more consolidation is about to come and bring this stock lower.

 Click on the above image to enlarge

The short term chart shows that this stock might be heading lower to test the 1st support at around $9.40. Although the last 2 candlesticks that show a positive signal, I am not convinced because of the low volume and also the 2 important bearish technical signals which is MACD and stochastic.

The recent 2 up candlesticks may be the work of traders trying to cover back the short position which was aggressively carried out for the past 1 week.

The last 2 candlestick also shows that a candle which is almost simliar to the bullish engulfing pattern, however, I am still not convince this is the change of a recent downward trend, however, I believe this is merely a very short term correction.
What Does Bullish Engulfing Pattern Mean?A chart pattern that forms when a small black candlestick is followed by a large white candlestick that completely eclipses or "engulfs" the previous day's candlestick. The shadows or tails of the small candlestick are short, which enables the body of the large candlestick to cover the entire candlestick from the previous day. (http://www.investopedia.com)
Looking at the chart, my analysis and sixth sense are telling me that the recent downtrend is just the beginning. More punishment will come for this stock going forward.

Based on the fundamental analysis, Micron recently announced  the 1st quarter EPS of $0.15 which is very much below the analysts concensus of $0.28. This recent earning is a whopping 40% below the estimates. Now it really gives a reason for the continuos punishment of this stock.

Conclusion:
Based on the long and short term technical analysis, the fundamental analysis and my sixth sense, I believe this stock will continues to head downward after a 2 days of weak correction. Therefore, my recommendation is to go short for this stock for the near future.

I currently do not own any stock in Micron and I do not to enter any position in this stock as I am currently heavily invested in AXT Incorporated.

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Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 
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Friday, February 25, 2011

Can you Trust This Chinese Company? AXT Inc.


Today stock pick is a chinese company listed in Nasdaq.This growing company is non other than AXT Inc. Can this chinese company can be attactive as per the chinese model above. Maybe....



 Click on the above image to enlarge

As usual my analysis will begin with the chart. The chart of AXT shows that this stock has dropped from the recent high of $12 to the current level of about $7. This is a whopping 40% drop in less than 2 weeks. I believe that this stock is ready to move upward due to the short covering by the speculators and also the attractiveness of this stock at the current level.

Technically, this chart shows an oversold position as per the MACD and stochastic. The recent downward gap with huge volume also indicated that there is a big changes in the stock ownvership from the seller to the buyer. I believe all the selling on this stock has been conmpletely absorbed by the buyer and no more selling for the coming near terms.

The chart also indicate that this stock might be heading for a good rebound up to the $9 level which is the 1st resistance. If this stock can break the $9, I will do another stock analysis for this stock again.

I have recently bought a whopping 12,000 stock in AXTI due to the bullish harami pattern. Please refer to below for the explanation for bullish harami. AXTI clearly shows a bullish harami pattern and it manage to convince me to jump into this stock. And true enough, after I took my position in this stock, it end the day with a 3% gain from my average entry price of $7.23.
Conclusion:

I am very convinced that this stock will head to the $9 level for at least a 20% gain. I also believe that the recent sell down in this stock is very much overdone and also it is definetely the work of the stock operator who go short on this stock. I think that it is time for the stock operator to cover their position in this stock which inevitably will help to push this stock higher.

AXTI is a seasonal stock which the price of this stock can fluctuate greatly. Now is definetely the time to go long on this stock for the coming near future, as the overall US economy is poised for a serious rebound.

What Does Bullish Harami Mean?
A candlestick chart pattern in which a large candlestick is followed by a smaller candlestick whose body is located within the vertical range of the larger body. In terms of candlestick colors, the bullish harami is a downtrend of negative-colored (black) candlesticks engulfing a small positive (white) candlestick, giving a sign of a reversal of the downward trend.

Investopedia explains Bullish Harami
Because the bullish harami indicates that the falling trend (bearish trend) may be reversing, it signals that it's a good time to enter into a long position. The smaller the second (white)  candlestick, the more likely the reversal.


AXTI has recently announced an earning per share of $0.15 which is 1 cents below the analyst estimates. I believe that the selling panic over this stock has been overdone, as I believe that the earning per share for this stock will continue to grow in the coming quarters, although the next quarter estimates will be lower than analysis estimates.

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Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 
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AXT and CalAmp: Two New Picks for 2011

AXT designs, develops, manufactures and distributes high-performance compound and single element semiconductor substrates comprising gallium arsenide (GaAs), indium phosphide (InP) and germanium (Ge) through its manufacturing facilities in Beijing, China. In addition, AXT maintains its sales, administration and customer service functions at its headquarters in Fremont, California. The company's substrate products are used primarily in lighting display applications, wireless communications, fiber optic communications and solar cell. Its vertical gradient freeze (VGF) technique for manufacturing semiconductor substrates provides significant benefits over other methods and enabled AXT to become a leading manufacturer of such substrates. AXT has manufacturing facilities in China and invests in five joint ventures producing raw materials.
The company experienced rapid growth during the internet "boom" years from 1998 to 2000, with sales growing steadily from $49 million in 1998 to $121.5 million in 2000. Thereafter, annual sales spiraled downward and bottomed out at $26.5 million in 2005. Large losses were recorded in each year from 2002 through 2005. Thereafter, operating results improved, with sales climbing each year until peaking at $73.1 million in 2008, and then falling back down to $55.4 million 2009.
Quarterly sales bottomed out in the first quarter of 2009 (low point of the recession) at $7.7 million, and have increased sequentially in each quarter thereafter, and totaled $26.8 million by the third quarter in 2010. The company returned to profitability in the third quarter of 2009 and net income has been growing with sales. Analysts are forecasting sales of $97.5 million for 2010 and $123.9 million for 2011. Current earnings per share estimates call for $0.60 in 2010 and $0.70 in 2011, which are up from small losses in the years 2008 (-$0.03) and 2009 (-$0.06). Generally, analysts having been raising their forecasts and management has been increasing its guidance in recent quarters. The company has a solid balance sheet with cash and equivalents of $41 million, total liabilities of just $12.6 million, and shareholder equity of $113 million at September 30, 2010.
With total diluted shares outstanding of about 32.5 million shares the current market cap is around $340 million. Operating margins have improved nicely after the first quarter in 2009. See our summary worksheet for AXT Inc. showing fundamentals and metrics for the 5 calendar years 2005-2009, and the first three quarters in 2010.
Besides a much stronger economy, the company appears to be benefiting from a number of managerial changes made in 2009: including the Board appointing Dr. Morris S. Young as the chief executive officer replacing Dr. Philip C.S. Yin, who resigned as chairman of the Board and chief executive officer on March 17, 2009. Additional executive changes were made in 2009 and continuing to date, including the termination of the Vice President of Global Sales and Marketing on December 31, 2010, “as a result of a change in the organizational structure of the company and the elimination of that position with the company”.
Recently, the stock price reached a multi year high and closed at $10.46 on January 7, 2011, which is near the high end of its 52 week range of $10.74 - $2.65. We established our long position from October 29 through November 30, 2010 at an average cost of $8.08. We would look to buy more shares if the stock pulls back to the $8.00 to $8.50 range. My target price for AXTI is currently $15 sometime in 2011, but this can be revised depending on the company’s future operating results.
A potential negative is that Bookings for Semiconductor Equipment Manufacturers, while still healthy, have been trending down in recent months (October & November 2010) from the highs reached in the months of July and August 2010, as reflected in the chart below:
January 12, 2011SeekingAlpha
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AXTBy taking advantage of the current tech boom and the resulting increased demand for its materials, semiconductor substrate producer AXT has benefitted from rising sales and profits. It's outpacing the efforts even of TriQuint Semiconductor (Nasdaq: TQNT), a notable outperformer that is riding the coattails of the iPad's popularity. In its latest quarter, sales at AXT were up 60% while profits doubled as smartphones and other intelligent wireless devices drove growth, helping some CAPS members decide that this was one hot stock.
With AXT's stock having tripled over the past year, CAPS member LoveMeSomeGreen says investors shouldn't worry about it going higher still.
Don't fear these stocks with big gains this year! Look at AXTI from the April highs thru today. The markets have gone practically nowhere, and these guys have managed solid revenue growth in this slow growth environment. Last time I checked, that was a good thing. This stock was trading at 25 p/e until these two back to back monster quarters. This is a still a golden pony.
Adding AXT to your watchlist allows you to stay on top of all the timely Foolish news and analysis.

Stock
CAPS Rating Sept. 7
CAPS Rating Dec. 7
Trailing
4-Week Performance
P/E Ratio
AXT (Nasdaq: AXTI)
**
***
7%
17.0


December 08, 2010The Motley Fool
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Wednesday, February 23, 2011

DJIA Will Now Tumble to 11,000. Can you handle this?

Is this current downturn in the world stocks market is due to the Libya civil war. The answer is yes and no, but it is more towards the no side.

The answer is yes because it is true that the current Libya civil war is bringing up the price of the oil, however, I do not see the oil price supplies will be substantially affected due to this. This is mainly a speculation and the work of the oil operators to push up the oil price for their own personal gain. Libya is the 15 world tops oil producer, unless Libya is no.1, then it will have a very high impact on the supply of the oil price. However, the oil operators is taking this reason of the civil war to push up the oil price and it indirectly does have the effect on the world stock market.

The answer is no because it is time for DJIA to tumble and to consolidate as it is very much overdue.
Based on the my latest technical analysis on DJIA, I am predicting that it will crash to the 11,000 level. The probability of it happen is very high because the recent upward surge in DJIA is overdone and overprice. It is only fair that DJIA must consolidate back to this level for a fair game. Otherwise, it looks really fake for DJIA to continue to go up without stopping and resting. Imagine, you start running from California State all the way to New York without stopping, can you handle it? DJIA, in this case, can't handle the pressure of its superb upward move.

I am unstoppable and I am going to eat DJIA alive!

Monday, February 21, 2011

This Product by Finnish is Finished.

This product is none other than Nokia. Nokia is from Finland and it is a Finnish's Company. However, I believe that this company by the Finnish is finished. The reason is simple, Nokia is not able to keep up with the new generation of the smart phone. Nokia has been producing shitty phone which were not able to compete with the likes of Apple and Samsung.

Click on the above image to enlarge

Based on the long term chart, Nokia has been tumbling from the $40 to the current level of $9.00. It explains why the CEO of Nokia has been sacked recently. And I think the board has made a good decision to change the CEO. Anyway, back to the technical analysis. I believe Nokia is currently trading between the range of $12 to $9. However, I believe that in the coming future, Nokia has a high probability to head below the $9 level after few months on consolidation under the current range.

Click on the above image to enlarge

Based on the short term technical chart analysis, Nokia has just been punished with a big downward gap coupled with high volume. It is a very bearish signal. After the recent downward gap, Nokia try to consolidate upward, however, the buying is not enough to push the stock higher to cover the upward gap as evident by the declining volume. The declining volume shows that the bull is very weak in their effort to push Nokia higher. I believe it is just a matter of weeks before, the bear come dominating the bull again and send Nokia to break the long term support of $8.00. Although, both the MACD and Stochastic look oversold, however I am still not buying it as I believe that this company has not been fully punished yet. More punishment will prevail for this under perform company.

Looking at the recent quarterly earning announcement, I am surprised to see that Nokia reported an earning per share of $0.30 which is a great improvement from the previous quarter of $0.14. It shows that Nokia has actually show some improvement. I do not know how Nokia reported such a solid earning and from where the earning actually came from, because everywhere I go, I did not longer see any Nokia phone around, it is now dominating by I-Phone.

Based on my analysis and research as per the above, I would recommend a short position on this stock. I am predicting that Nokia will continue its market share in the phone industry and resume its downward trend, perhaps, to the $5 level and below.

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Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 
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Sunday, February 20, 2011

I will Shut Down My Blog if ....

 
Above chart is an example of a chart which 90% resemble to the Atmel Corporation chart during the consolidation period as per below. The chart above as per the highlighted boxes show the indications of the continual upward trend for this stock.

Click on the above image to enlarge

Yes, the above heading is correct, I promise all my reader here that I will shut down this blog which I have give in my 100% effort to help my fellow visitors here to make good money if I am wrong about my investment in Atmel. I am currently heavy invested in Atmel and I am down by around 4%.
If Atmel touches my stop loss and also broke the uptrend range line at $15.00 or if I lost more than 10%, then I will shut down this blog.

The reason I am doing this is because I would like to maintain a good reputation and also the accuracy of my prediction.

I am confidence that Atmel will continue its upward trend because:
1) the upward range line is not broken
2) the reducing volume indicates that the selling is over or fully absorbed by the buyer
3) the recent upward surge with a big gap and big volume is a good sign that powerful buying force is behind the upward move
4) the MACD indicator shows that the consolidation is over and now it is ready to resume its upward trend
5) the increasing quarterly earning that continue to beat analyst estimates for the 2 consecutive quarters.
6) my sixth sense

Will the World Greatest Mining Company Resumes its Upward Move?

 Well, another billion $ question. A regular visitor to The Market Oracle would like to seek some advise on one of the world greatest mining company Freeport Mcmoran Copper and Gold (FCX) whether the current run up will continue or is this giant going to tumble.

Click on the above image to enlarge

Well, as usual my technical analysis will begin with the long term chart. It appears this giant FTX has met the the Great Wall of Mining which is at $61. This level is also the multiyear resistance which is very hard to be broken. True enough, after it flirted with the $61 level, it begins to tumble badly.
Click on the above image to enlarge

Based on the short term chart analysis, which I think is more important than the long term chart, it shows that this giant FCX will head to the 1st support at $48. If I were to rate the possibility of it happened, I would say that I am 80% sure. In other words, it is 80% out of 100% that it is heading to the $48 level.

Both MACD and Stochastic show that this chart willl continue to tumble until these technical indicators finds the resting area below which is towards the lower side. Until then, it will not rebound and head further upward.

As can be seen from every one of the huge downward candle, it tumble with higher volume than the volume of the upward candle. It clearly means that the bear is clearly dominating the bull.

Also the upward trend line is currently clearly broken.

Click on the above image to enlarge

Based on this very simple and clear fundamental analysis, the quaterly earning shown an upward trend, the latest quarterly earning also successfully beat the analyst estimates.

Based on this strong improvement in the quaterly earning, this is one and only reason I will say that this stock will rebound after touching the 1st support at $48.

It is also a good reason for the stock operators to push the stocks downward and to clear the weak holders before it resumes its upward trend.

Whether or not this stock will rebound and move upward is a big question that is difficult to answer, however, to test the technical support of $48, I am very sure that it will definetely happen.

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Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 
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Wednesday, February 16, 2011

Will All Upside Gap Be Filled?


A Picture of a Nice River Gap in Between

Click on the above image to enlarge 
I have recently bought 7,000 stocks in Atmel Corporation at $16.40. I have dump almost all my savings worth around 100K ($25$ was taken out of my account to clear my off my housing loan) in this stock. The price of Atmel is now trading at $15.84 and  I have lost more than 3% as of today. Do I regret it?
Yes and No. Yes, because I should have bought at the current price of $15.84 and lower. No, because this stock can resume its superb upward move anytime and I may miss this bullet train. Whatever it is, it is all history cause I have already invested in it and all I can do now is to sit tight and wait.

However, I chooose not to sit tight and wait cause this is my life saving in here that I am betting on. I decided to ask myself a very important question which is, will the recent run up gap in Atmel be filled? If Atmel were to fill back the recent upward gap to $15.00 then I will lose more than 10% from the level that I have bought.
Although I believe there is always the possibility, but I believe that the probability is low.

I have seen more than few thousand charts during my last 13 years of trading the stock markets, some get filled and some dont. I believe in this case, Atmel recent run up gap will not be filled.

The reason is simple, the recent upward gap in Atmel is supported by the monstrous earning which they have reported in the latest quarter. Analyst from all over were upgrading this stock and raise its target price and earnings estimates. Moreover, the recent craze into the touch screen products have not ended. Indeed, some believe that this is the only beginning of more innovative touch screen products to be unveiled. People are all crazy about touch screen products now. Just look around you and the gadget the people are carrying, I be that 1 in every 3 person is carrying a touch screen product, whether is a phone, a MPS player, a Tablet or in the coming future, notebook will have touch screen on it.

This is truly a madness for this technology and Atmel is truly a montsrous ready to roar!

Click on the above image to enlarge

If you look at the above chart for Crus, you can see that there are actually 2 upward gaps which have not been fillled. Once Crus have the first run up gap, it consolidated on the upper gap level until it is ready to rocket further. Same goes to the second upward gap, it is also not filled and this stock continue to roar forward ahead.

I believe that the current consolidation above the gap is Atmel is a very good sign, as long as it does not come down to fill the gap at $15.00, this stock have a 90% chances to power ahead. If it does come down to the $15.00 and go below, then this stock should be sold as further downtrend is expected. In other words, the stop loss should be at the $14.50 level to be accurately confirmed.

However, based on my experience and my sixth sense, I believe that this stock will continue to consolidate at the upper side of the gap and above the $15.70 level and once it has consolidates and flush out the weak holder, this stock will definetely resumes it upward trend. Moreover, any good news or analyst upgrade on this stock will easily serve as a catalyst for this stock to resume it upward run. Somehow, it happens many time that usually before the stock resume its upward move, good news or upgrade will suddenly pop up. Is it a coincidence or stock manipulation? I don't know the answer to it, you will have to figure it yourself, but I believe the stock operator will know this answer very well.

I believe now is a very good time to catch this train if you are currently not riding on it. Once the train start moving, you will be able to catch it unless you willing to pay higher for the train ticket at the next station.

Good luck and happy investing!

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Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 
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Monday, February 14, 2011

The Future is Atmel Corporation

Click on the above Image to Enlarge
This stock has been consolidating for 3 straight days, the more it consolidates, the more this stock is waiting like a rocket ready to thunder upward. Although it seems like it is in an overbought position, but 3 days of consolidation were not able to bring this stock down, instead it remains strong and calm while in the consolidation mode. I believe the time is ripe for this stock to thunder ahead and reach $20 level within 2 weeks time and probably, $50 within a year. As long as touch screen is the future, Atmel will be our future.

Yesterday night, I only slept for 3 hours, my head feels a little dizzy and headache right now, do I regretted it? The answer is a big no. I am very happy cause I have spent more than 6 hours of my sleeping time researching for a stock which will help me reach my target of $1 million. I think I have finally found it. It is none other than Atmel. I am still very blur and dizzy while typing on this blog and sharing this very good news to my loyal visitors to my blog. I hope the info posted here will help you gain at least 50% and above. I, on the other hand is hoping for a 100% gain.

I have researched almost 50% of the stocks in NYSE and NASDAQ yesterday night and Atmel is my top pick and also my 1 and only pick.

So why did I pick this stock? The answer is simple, because it is my future and our future. The analogy is simple, Touch Screen is the future, Atmel is the future because it supplies the technology for touchscreen, The Market Oracle is the future because it highly recommends a buy on Atmel, and I am the future because I am heavily invested in Atmel and I will make more than 100% gain riding on this future technology provider company - Atmel. This will be our future because I sharing this wonderful and important research on this superb stock with you all here.



This stock has delivered 2 powerful quarterly earning that beat the serious shit out of the analysts estimate. I believe this is not it, there will be more even thunderous earning that will be announced by Atmel in the coming quarter. This time it will not only beat the analysts estimate, but I believe, it might put the analysts who covered this stock out of their job and send them straight to their grave for not giving a respectful earning estimates for Atmel.

In future, more than 80% of our products will have touch screen on it, there won't be anymore button for you to push. You just need to touch. And you can be assured that Atmel will be there to supply this technology.








"Atmel® touch innovation, maXTouch™ is the next-generation controller technology for touchscreen applications that delivers both superior performance and low power consumption. The technology enables touch interfaces that identify, qualify, and track the user’s contacts with exceptional precision and sensitivity. With maXTouch unlimited touch, users can enjoy a sophisticated interface that is smart enough to ignore unintended touches. Atmel touchscreen chips are small enough to fit the most compact mobile devices and powerful enough to accommodate the larger screens on products such as digital tablets. The result: peerless touch interfaces that are intuitive, flexible, reliable, and battery-friendly".
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Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 
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Happy Valentine's Day 2011

For all those love birds out there, The Market Oracle would like to wish you a Happy Valentine's Day 2011.

Saint Valentine's Day, commonly shortened to Valentine's Day, is an annual commemoration held on February 14 celebrating love and affection between intimate companions. The day is named after one or more early Christian martyrs, Saint Valentine, and was established by Pope Gelasius I in 496 AD. It was deleted from the Roman calendar of saints in 1969 by Pope Paul VI, but its religious observance is still permitted. It is traditionally a day on which lovers express their love for each other by presenting flowers, offering confectionery, and sending greeting cards (known as "valentines"). The day first became associated with romantic love in the circle of Geoffrey Chaucer in the High Middle Ages, when the tradition of courtly love flourished.

Modern Valentine's Day symbols include the heart-shaped outline, doves, and the figure of the winged Cupid. Since the 19th century, handwritten valentines have given way to mass-produced greeting cards.

Historical factsNumerous early Christian martyrs were named Valentine. The Valentines honored on February 14 are Valentine of Rome (Valentinus presb. m. Romae) and Valentine of Terni (Valentinus ep. Interamnensis m. Romae). Valentine of Rome was a priest in Rome who was martyred about AD 269 and was buried on the Via Flaminia. His relics are at the Church of Saint Praxed in Rome, and at Whitefriar Street Carmelite Church in Dublin, Ireland.

Valentine of Terni became bishop of Interamna (modern Terni) about AD 197 and is said to have been martyred during the persecution under Emperor Aurelian. He is also buried on the Via Flaminia, but in a different location than Valentine of Rome. His relics are at the Basilica of Saint Valentine in Terni (Basilica di San Valentino).

The Catholic Encyclopedia also speaks of a third saint named Valentine who was mentioned in early martyrologies under date of February 14. He was martyred in Africa with a number of companions, but nothing more is known about him.

No romantic elements are present in the original early medieval biographies of either of these martyrs. By the time a Saint Valentine became linked to romance in the 14th century, distinctions between Valentine of Rome and Valentine of Terni were utterly lost.

In the 1969 revision of the Roman Catholic Calendar of Saints, the feastday of Saint Valentine on February 14 was removed from the General Roman Calendar and relegated to particular (local or even national) calendars for the following reason: "Though the memorial of Saint Valentine is ancient, it is left to particular calendars, since, apart from his name, nothing is known of Saint Valentine except that he was buried on the Via Flaminia on February 14." The feast day is still celebrated in Balzan (Malta) where relics of the saint are claimed to be found, and also throughout the world by Traditionalist Catholics who follow the older, pre-Second Vatican Council calendar. February 14 is also celebrated as St Valentine's Day in other Christian denominations; it has, for example, the rank of 'commemoration' in the calendar of the Church of England and other parts of the Anglican Communion.

Romantic legends
Saint Valentine of Terni and his disciples.The Early Medieval acta of either Saint Valentine were expounded briefly in Legenda Aurea. According to that version, St Valentine was persecuted as a Christian and interrogated by Roman Emperor Claudius II in person. Claudius was impressed by Valentine and had a discussion with him, attempting to get him to convert to Roman paganism in order to save his life. Valentine refused and tried to convert Claudius to Christianity instead. Because of this, he was executed. Before his execution, he is reported to have performed a miracle by healing the blind daughter of his jailer.

Since Legenda Aurea still provided no connections whatsoever with sentimental love, appropriate lore has been embroidered in modern times to portray Valentine as a priest who refused an unattested law attributed to Roman Emperor Claudius II, allegedly ordering that young men remain single. The Emperor supposedly did this to grow his army, believing that married men did not make for good soldiers. The priest Valentine, however, secretly performed marriage ceremonies for young men. When Claudius found out about this, he had Valentine arrested and thrown in jail.

There is an additional modern embellishment to The Golden Legend, provided by American Greetings to History.com, and widely repeated despite having no historical basis whatsoever. On the evening before Valentine was to be executed, he would have written the first "valentine" card himself, addressed to a young girl variously identified as his beloved, as the jailer's daughter whom he had befriended and healed, or both. It was a note that read "From your Valentine."

Wednesday, February 9, 2011

Warren Buffett: Why Do Public Companies Sometimes Sell For Less Than Private Companies?


Warren Buffett: Why Do Public Companies Sometimes Sell For Less Than Private Companies?
Someone who reads my blog, asked me this question:
“What do you think is the significance of the Buffett blurb on the Washington Post? To me, it doesn't take great insight to realize there were bargains in 1974. Its just another example of Buffett's tenet that you should be greedy when others are scared. I don't think you can get a lot of valuation insight from it. I think the blurb on (Disney) is similar. Your thoughts?”
I totally disagree.
I agree these were very simple bargains. But I don't agree they were just stories about being greedy when others are fearful. They were stories about thinking like a businessman.
Those stories – about his investments in Walt Disney, The Washington Post, and Western Insurance – are the key to understanding how Warren Buffett invests.
Here’s what Buffett is doing in those stories.
Buffett is contrasting thinking like you’re buying a stock and thinking like you're becoming a junior partner in a private business. His point in both the Disney and Washington Post stories was that these institutional investors didn't want to own the publicly traded stock. But, if this had been a private company and they had been offered a – totally unmarketable 30% block in the company – they would have happily bought in at prices higher than the public stock traded. But because they were publicly traded – there was actually a liquidity discount being applied to these companies.
Which is bonkers.
A quoted property should never be less valuable just because it’s quoted. If you don’t like the quote – if it’s giving you ulcers – just close your eyes. Eyelids are the only body part that’s absolutely essential to value investing.
I’ve talked with people who told me: “I knw the company’s worth more than I sold it for, but…”
- The stock just went up without any news
- It’s already a double for me, so I sold half my position and now it’s a free ride
- I don’t want to be greedy
- I just don’t want to own an (insert industry here) stock right now
- It got to be too big a part of my portfolio
And none of the quotes I gave you right there are from traders. Those aren’t growth investors talking. Those are things hardline Graham and Dodd value investors told me.
The institutional investors who were selling Washington Post stock to Warren Buffett didn’t disagree about the value of the company. They disagreed about what it meant to own a stock. They disagreed about whether when you think something is going to keep going down in price for 3 months or 3 years you should sell it and try to buy it back later. They disagreed about their ability and willingness to stick their fingers in their ears and hum when Mr. Market named a price they didn’t like.
That's classic Ben Graham.
Ben Graham didn't buy net/nets because you could liquidate them. Ben Graham bought net/nets because they were marketable stakes in public companies that were selling at a discount to non-marketable stakes in private businesses.
A net/net is just a private value acid test. Basically, Graham was saying since historically profitable private businesses don’t sell for less than their current assets minus their total liabilities, historically profitable public businesses – stocks – shouldn’t trade for less than their current asset minus their total liabilities either. After all, a stake in a public business should be worth more than a stake in a private business – since a stake in a public business comes with an option to either buy or sell at some price every day.
An option has some positive value. And a stake in a private business has some positive value. So a stake in a public business – which is really just a stake in a private business with an option attached – should sell for at least as much as a stake in a private business.
In other words, if you always just value public companies like private companies, you will get the same returns private investors get plus you’ll get the option of marketability thrown in.
All you have to do to be successful in public markets is to be a good private investor and be able to ignore the option of marketability except when it’s mispriced in your favor.
That’s what Ben Graham taught Warren Buffett.
Here’s a good example of Graham – the teacher – in action:
“A&P shares were introduced to trading on the New York Stock Curb in 1929 and sold as high as 494. By 1932 they had declined to 104, although the company’s earnings were nearly as large in that generally catastrophic year as previously…In the business recession and bear market of 1938 the shares fell to a new low of 36. That price was extraordinary. It meant that the preferred and common were together selling for $126 million, although the company had just reported that it held $85 million in cash alone and a working capital (or net current assets) of $134 million. A&P was the largest retail enterprise in America, if not the world, with an uninterrupted record of large earnings for many years. Yet in 1938 this outstanding business was considered in Wall Street to be worth less than its current assets alone – which means less as a going concern than if it were liquidated.”
Stop right there.
Graham just said that America’s biggest retailer was worth more dead than alive. It’s hard for folks reading this now to understand just how important a company A&P was in 1938. But if you had used Phil Fisher’s scuttlebutt approach back then, you would have heard only good things. If you had asked my Grandma or Grandpa – 60 years later – about A&P, they’d remember it. And they’d muse about how the waves of history could erode something as great as A&P – like they were talking about the dismantling of the British Empire or something.
In 1938, A&P was a sexy company. It just wasn’t a sexy stock.
If you read Ben Graham’s A&P quote and then you read Warren Buffett’s quotes about The Washington Post, Disney, and Western Insurance – you realize what Buffett’s stories are really about.
These are Mr. Market stories.
They're about how if you just think like a business owner – if you really imagine Mr. Market walking into your office and pitching you the whole business at that price – that's how you make money in the stock market.
If you just buy public companies at discounts to their private values, you'll make money when Mr. Market has a mood swing. You don't have to judge his mood. Eventually, a marketable stake in a public business will sell for at least as much as a non-marketable stake in a private business. If you like the terms of a private deal, you shouldn't care that you have to endure the indignity of getting absurd quotes thrown at you on the stock day after day. Let Mr. Market taunt you. You don’t have to trust his price. You’re still entitled to your own appraisal.
You don't mark your house to market every month. A restaurant owner doesn't sell off 10% of his establishment every time he gets antsy, just because he needs a quote. That's how stock traders think. Not how business owners think.
When Warren Buffett tells students about The Washington Post or Disney, he’s saying that publicly traded shares are priced both as pieces of paper with prices that wiggle around from day to day and as companies. If you just think about them as companies, you will win in the end. Remember, the Washington Post's stock did go down. The institutional investors who sold to Buffett were right. Over the next 3 years, the stock went down. Over the next 10 years, the stock was up 30% annualized. Buffett was wrong about the stock but right about the company.
Traders call that being wrong. Investors call that being right.
Those stories Buffett told college students about Disney and the Washington Post are very significant. They offer real insight into the way Buffett actually thinks through an investment. And it’s not the way analysts do it. And it’s not the way most authors think Buffett does it.
Warren Buffett’s approach is totally different from how most people model the way he thinks through an investment. Buffett doesn't make 10-year projections or do discounted cash flow calculations. In those stories he told college students, he didn't talk about future numbers at all. He just appraised the properties. He included the earnings only in the sense that some properties get their value from their earnings power.
But he looked at them as businesses. He looked at what he was getting today as the owner of that business. He worked in a way very similar to Mario Gabelli or Joel Greenblatt –You Can Be a Stock Market Genius not The Little Book That Beats the Market – in that he valued the business as if it was one of many houses on the same street. Buffett did an appraisal. Not a projection.
Remember, the Warren Buffett who bought Coca-Cola (KO) in 1989 is the same Warren Buffett who was heavily into REITS in 2000. He’s the same Warren Buffett who bought junk bonds. He's the same Warren Buffett who bought banks and insurers. The idea that he's doing some sort of 10-year earnings projection with a discounted cash flow calculation – that doesn’t even seem practical.
Buffett works like an appraiser.
Now, Buffett only buys businesses he likes. He doesn’t want to buy a house in a crummy neighborhood. He doesn’t want to buy a house with a river running through the back yard. He wants high returns on capital, a moat, good management, and a simple – preferably recurring – business.
But once he’s in the right neighborhood in terms of checking all those boxes – once the house has the good schools, and the pool, and whatever – he just appraises the damn thing.
Here’s an example from Warren Buffett’s1959 letter to partners:
"Last year I referred to our largest holding which comprised 10% to 20% of the assets of the...partnership...the Commonwealth Trust Co. of Union City, New Jersey. At the time we started to purchase the stock, it had an intrinsic value of $125 per share computed on a conservative basis. However, for good reasons, it paid no cash dividend at all despite earnings of about $10 per share, which was largely responsible for a depressed price of about $50 per share. So here we had a very well managed bank with substantial earning power selling at a large discount from intrinsic value. Management was friendly to us as new stockholders and risk of any ultimate loss seemed minimal.
Commonwealth was 25.5% owned by a larger bank (Commonwealth had assets of about $50 million - about half the size of the First National or U.S. National in Omaha), which had desired a merger for many years. Such a merger was prevented for personal reasons, but there was evidence that this situation would not continue indefinitely. Thus we had a combination of (1) Very strong defensive characteristics; (2) Good solid value building up at a satisfactory pace and; (3) Evidence to the effect that eventually this value would be unlocked although it might be one year or ten years. If the latter were true, the value would presumably have been built up to a considerably larger figure, say, $250 per share...
Over a period of a year or so, we were successful in obtaining 12% of the bank at a price averaging $51 per share...Commonwealth had only about 300 stockholders and probably averaged two trades or so per month...Late in the year we were successful in finding a special situation where we could become the largest holders at an attractive price, so we sold out block of Commonwealth, obtaining $80 per share although the quote market was about 20% lower at the time."
That sounds more like what people think of when they think of Mario Gabelli or Joel Greenblatt or Marty Whitman. Buffett is comparing one bank to other banks. Banks he and his partners know. He's thinking a bank like this should trade around 12.5 times earnings (or maybe some book value multiple), but it doesn't because of the lack of a dividend, which is important to investors. So the stock isn’t trading at the right price relative to the company’s value. The problem here is that investors pick their bank stocks on the basis of dividend yield – and this bank doesn’t have one – so there’s a mismatch between the stock’s value and the company’s value.
A control buyer probably wants to own this. The value should continue to compound over the years – hints of Marty Whitman here - and it's got defensive characteristics.
Buffett doesn’t do any projections.
His only projection in that whole story is an extremely vague statement that the bank will likely double its intrinsic value per share over 10 years. But remember, Commonwealth wasn't paying dividends, and it was already earning $10 per share. So, over the next 10 years it would have increased its intrinsic value per share from $125 to $225 just from retained earnings. And 8% growth over 10 years in a bank that doesn't pay dividends isn't hard to predict. In fact, I'd say all Buffett is doing is saying that banks compound over the years with the economy so it's not like you can have a bank retain earnings and keep the same low intrinsic value for 10 years. This isn't some tract of unimproved land in Montana or some bond or something. At the very least, the stock’s going to grow its coupon and compound its value the same way a savings account does.
Reading those 3 discussions - Disney, Washington Post, and Commonwealth - along with things like Western Insurance gives a better impression of the similarity between Buffett and Graham. Buffett was just thinking like a business owner.
Both Graham-Newman and Buffett's partnership did control investments. They took a large stake in a business and held it for a while. If you think the way Buffett and Graham did about picking stocks, it’s natural to also make control investments. And when you make control investments, it’s natural to think of your other investments more in terms of appraisal value than market value.
I’m really looking forward to Alice Schroeder’s next book about the way Warren Buffett invests. Because I feel stuff like the Buffettology books have reinforced the idea of Buffett as a discounted cash flow calculating growth investor who’s just a bit stingy on price.
The way Buffett actually thinks through an investment is both less conventional - and in a sense - simpler than what analysts do and what authors think Buffett does.
I want to make clear that what Graham was talking about with A&P and what Buffett was talking about with The Washington Post, Disney, Western Insurance, and Commonwealth is a rare occurrence.
Markets are not perfectly efficient. Big stocks like A&P get badly mispriced in the Great Depression. Although most of us forgot the 1938 recession, it was very scary for those living through it. They didn’t know the depression was almost over. Investors were having flashbacks. It was a scary time. And A&P had gone public just before the crash. It was terrible timing.
The Washington Post also went public at a bad time for stocks. And it got worse from there.
Disney had a huge hit in Mary Poppins. It couldn’t repeat the same performance next year. Everyone on Wall Street knew earnings would be down. Warren Buffett didn’t care.
Obviously, Western Insurance and Commonwealth were obscure stocks. And Commonwealth wasn’t paying a dividend, which was very weird for a bank stock.
The stock market – like the racetrack – doesn’t price every pony perfectly. It gets a lot of them roughly right. But there are some races where it clearly misprices things. You don’t need to know the future to see the mispricing. Any expert appraisal of companies like A&P, The Washington Post, Disney, Western, and Commonwealth would have shown the stock market was not valuing the company correctly.
In each case, the reason was a mismatch between what investors were willing to pay for a publicly traded stock and what investors would have been willing to pay for a privately owned business. Pain came with owning those stocks. You had to see the quotes. You didn’t have the luxury of looking at the balance sheet and income statement just once a year.
Here’s a current example of this phenomenon: George Risk Industries (RSKIA).
I own this stock.
And I was recently talking to another blogger who I thought owned the stock. It turned out he sold it at some point.
George Risk trades at $6.50 a share right now.
When I told him I figured George Risk was worth at least $10 a share, he asked if I thought it deserved a premium valuation. And I said:
“I don't think I value George Risk's business at a premium. Their 14-year average nominal EBIT is $2,911,786 and they have 5,054,668 shares - so that's an EBIT of $0.58 a share. They have $4.56 a share in cash and investments. So, a valuation of $10 a share is $10.00-$4.56 = $5.44. And $5.44/$0.58 = 9.38 times EBIT. So that's just under 15 times after-tax income if we take the last 14 years as the right number.
I think the business - excluding cash - is worth about $6 a share and I think the investment portfolio is worth $4.50 a share. So, the stock is probably worth $10.50.
I think we differ more on the nature of the management/ownership situation at George Risk. You talk about poor capital allocation - but I don't see that. They just don't allocate the capital. It's not poor. Poor capital allocation would be if they issued shares or made acquisitions. They just pile up the cash. That's value deferment not value destruction. Something like Fair Isaac (FICO) from 1999-2007 is bad capital allocation. They effectively sold off close to 40% of their original business by doing a merger of equals. That destroyed value. Also, I don't think the Risk family overpays themselves. I think they just know how to run this business and don't know anything about allocating capital or running a public company. That's pretty common. It's just they've been so successful in earning so much on capital that they have retained this incredible pile of cash that does nothing.
George Risk looked like a Ben Graham stock to me. It looked like National Presto.
This used to be pretty common. I collect Moody's Manuals. If you flip through companies - even names you'd recognize like General Electric - from the 1910s or so they all kept investments on hand. There were no corporate raiders or activists. This is just what you have to deal with in these sorts of companies. But I see it as being the junior partner in a family firm where the family may be irrationally conservative or whatever. But I don't see them as destroying value. And I calculated what would happen if they did nothing for 10 years and I figured if I got stuck in the stock for 10 years, I'd survive. I'd do as well as if I held bonds or something. That's the downside, they do nothing.”
Now, you can love George Risk or you can hate George Risk. That isn’t the point. The point is that I said it was worth at least $10 a share. The guy I was talking to – a blogger who follows microcaps closely – figured it was worth at least $8 a share. This is a stock that was trading at $4.50 a share earlier this year. And hundreds of thousands of shares traded at prices like that – so we’re talking about something like a half a million dollar investment opportunity at the very least. Totally unsuitable for fund managers. Totally suitable for mild mannered bloggers and sundry individual investors.
The point isn’t whether George Risk is a good investment or not. Obviously, I think it is. I own it. The point is that it’s been written about by several different value investors. I have no problem admitting I didn’t find George Risk. Ravi Nagarajan found this stock for me.
Ravi – the author of Rational Walk – first wrote about George Risk in January 2010. I don’t remember reading this article when it was first published. I doubt I would have forgotten it if I had read it. Then, Ravi wrote about the company again in July 2010. I read that post and decided I absolutely had to buy the stock.
A similar thing happened when I found an old guest post about Solitron Devices over at Greenbackd.
That makes it sound like I’m easily impressed. Actually, the opposite is true. I must have read thousands of blog posts in 2010. George Risk and Solitron kind of stuck out since the stocks were trading for less than net cash and the businesses were both historically profitable. In other words, you bought the investments and got the business for free.
That’s unusual. Even in micro cap land, those two stocks jumped out in a way almost nothing else did.
And that’s what we’re talking about when we talk about inefficient markets. We don’t mean the stock market is mispricing 10,000 stocks a day. We mean the market is getting some a little right and some a little wrong.
Very, very occasionally – I can’t emphasize enough how super rare this is – you get something like George Risk or Solitron Devices or Commonwealth or Western or Disney or The Washington Post or A&P.
And if you’ve spent your whole adult life searching for these kinds of things – like Graham and Buffett and, yes, even me – you can’t help but look at them and say that doesn’t look right. That can’t be right. The market is mispricing this thing. And it’s obvious. And I’m going to make money on it.
And you kind of sit there and wonder how in a world with other people picking stocks this could happen. But there it is. And you put in the order. And it gets filled. And you’re thinking: who the heck is selling this thing? I literally can’t imagine who would sell this business at this price, and then…
Oh.
It hits you.
It’s not a business.
It’s a stock. They’re selling you a stock. And then you understand why it’s mispriced.
They don’t want to own this stock at this particular moment.
And that’s the game. That’s investing.
It's taking advantage of folks like that. It's taking advantage of Mr. Market.
That’s what Graham taught Buffett. And that’s what Buffett was teaching those college students when he told those stories about Disney and The Washington Post.
He was just saying you look at a stock as a piece of a private company, you value it, you check the price, and if Mr. Market gives you an absurd quote, you take advantage of him.
Why do public companies sometimes sell for less than private companies?
1. In the case of A&P: “First, because there were threats of special taxes on chain stores; second, because net profits had fallen off in the previous year; third, because the general market was depressed.”
2. In the case of Disney: “In 1966 people said, ‘Well, Mary Poppins is terrific this year, but they’re not going to have another Mary Poppins next year, so the earnings will be down.’”
3. In the case of George Risk, it’s hard to trade and it’s family controlled.
Well, a private business is impossible to trade – and unless you’re the majority owner – you don’t get any say in how its run either. No one’s implying there should be some huge premium on George Risk because you can trade it. Some people are just saying maybe it shouldn’t sell for less than the price you could liquidate it for considering it’s a consistently profitable, high return on capital business.
But, in 2010, there were times when George Risk was selling at less than the price you could liquidate if for. And in 1938, there were times when A&P was selling for less than the price you could liquidate it for.
That’s kind of weird. Since both companies had competitors and customers who would tell you those companies were actually pretty good at what they do.
Markets are mostly efficient. But then they should be. If reasonably intelligent people get together in a room with real money on the line, they should be pretty good at handicapping any situation. They should be pretty good at finding patterns and making sense of the game. Humans are wired for that.
That’s not the weird part. The weird part is that there are sometimes things like A&P and Disney and George Risk and The Washington Post where people don’t disagree about the quality of the company. People don’t really disagree about the value. I mean, sure, they disagree – but they disagree at much higher prices than where the stock trades.
What’s weird is that sometimes people know what a business is worth, they like the business just fine, and yet they refuse to buy the stock. They even sell the stock.
That’s the real lesson Warren Buffett was trying to teach:
“No one would have argued about the value of American Express. They just didn’t want to own it for a while. That’s why you’re buying periodically. They didn’t want to own the Washington Post in ‘74. All you’ve got to do is find one, two or three businesses like that in a lifetime, load up when you do, and not do anything in between.”

Tuesday, February 8, 2011

Ford Motor will Tumble to the 1st Support at $14.40


Based on the Chart above, Ford Motor will consolidate to the $14.40 level. The recent decreased in volume indicates that the current small uptrend is losing its steam. The MACD and Stochastic also indicate a bearish signal.

Even though the MACD shows that the blue line is curving upwards to cross the line, but it is still not confirmed that it will eventually cross over.

The stochastic shows a slight positive upward sign, but it is not convincing enough for this stock to go higher.


The current dissapointing earning is also a catalyst for this stock to move lower at least another 10% to the 1st support of $14.40.
The concensus estimate for the 17 analyst covering this company is $0.48. The actual earning is only $0.30 which is a 38% lower.
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Disclaimer : This is not an investment advisory, and should not be used to make investment decisions. Information in The Market Oracle Blog is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The charts provided here are not meant for investment purposes and only serve as technical examples. Don't consider buying or selling any stock without conducting your own due diligence. 
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