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Tuesday, September 30, 2008

Maybe I mark the bottom

With all the recent market chaos, small caps have been completely out of favor. In fact, being long anything for more than an hour has been out of favor. The rules changed drastically from the first half of 2008 where I scored on some huge small cap wins (see top and bottom of right hand corner of blog for results). The second half of 2008 brought on an accelerated financial crisis as we now know all too well. Had to clear out the small caps and protect profits (TAYD NTIC VIFL and the rest) and in some cases get stopped out of the rest. TAYD and NTIC were 50-100% gainers, retraced and then had decent pops off lows. I was able to profit several times. VIFL was a stop out as the market tanked shortly after that buy. When the market psychology changes as drastic as it did, I cant hold on to mindsets that worked in times that were much more bullish.

That being said, I have had great success shorting financial stocks before the ban. It did not always feel right having successful trades while the entire financial system was breaking down. However, super-trades alerted 2 blog posts with nice short winners MER short call at $27 hit $17 within a week and LM short at $46 hit $40 within a week MER & LEH blog post. Also GGP was a super short from $21 to a low of $13's within days GGP blog post (most of the other mall REITS's from that blog post fell as well).

Then as you know, the SEC banned the short selling of approximately 800 financial stocks. The easy money shorting financials was taken away. Spreads on put options have been insane, making it more challenging to play the options, especially with the market down 300-400 one day and up the same the next. However, some REIT's and many homebuilders are not on the no-short list (yet). So when there is absolute horrific market news, I have been short scalping stocks like VNO, KIM, SPG (REITS), RYL, TOL , KBH (homebuilders). After the market has been crushed and it is obvious that a relief rally is in store, JPM, BAC, WFC, USB, (the super-banks) are usually steady long scalps.

The SEC is looking at making changes to FASB 157 (Mark to market rules), the FDIC is looking to raise the insurance on bank accounts, and we may see some form of bailout/rescue package. There are many schools of thought on what will happen with these moves. One thing I believe, is that these moves are the big 3 bullets (maybe the uptick rule would be a 4th for shock value).

Many of my trades lately have been fast scalps minutes or an hour at the most. I will continue to post blog ideas when I think there is some time for them to play out (Like the short calls on MER , LM , and GGP). Maybe the fact the I am mostly posting on short sells (when I am known for longs on small caps) will be the glaring sign that marks the bottom. That being said, capital preservation is key in these times and I wont make too big a trade on anything for long with this volatility.

Wednesday, September 17, 2008

Shopping Mall Glut

If financials keep getting hit, shopping mall REIT's may come in to focus as shorts. A building glut and tapped out consumer, combined with depressed prices in the commercial real estate market hurt further by LEH and others dumping assets.


Mall Glut to Clog Market for Years
Scarce Shoppers,
Lack of Tenants
Ding Developers

Shopping-mall owners have struggled this year with a darkening economy, slowing consumer spending and store closings by retailers. But they face another problem that may persist long after the economy bounces back: a decade of overbuilding.

Developers have built one billion square feet of retail space in the 54 largest U.S. markets since the start of 2000, 25% more than what they built during the same period of the 1990s, according to Property & Portfolio Research Inc. of Boston. U.S. retail space now amounts to 38 square feet for every person in those 54 markets, up from 29 square feet in 1983, the firm says. Read More Here

Tuesday, September 16, 2008

AIG - Don't Worry (Famous Last Words)

Wonder how worried "buddy" is now.

MER was a $10 point short winner and LM a $7 point winner from this post MER LM Blog Post

I have been short scalping financials - has been the easy money.

Stay tuned for more trades in this insane market.

Friday, September 5, 2008

Couple of Downgrades of Interest

Two stocks that could be going lower if market/financials going to tank big again.

MER - Goldman Sachs downgrade of MER (26.21 ) -Update : As mentioned at 6:35, Merrill Lynch was downgraded by Goldman Sachs to Sell. The analyst thinks that the co will likely incur fresh write-downs, in addition to those assumed after its recent sale of repackaged debt to Lone Star Funds. Analyst William Tanona also widened his third-quarter loss forecast for the world's largest brokerage, while adding the stock to his Americas conviction sell list. Tanona said Merrill's stock currently trades at the highest price to book multiple in his large-cap brokerage universe, despite having some of the most significant exposures to troubled assets like collateralized debt obligations, mortgages and leveraged loans. "We expect Merrill's multiple to compress over the coming weeks and months, as third-quarter earnings will mark the fifth consecutive quarterly loss for the company, and its prospects for fourth quarter of 2008 are not promising enough to warrant this level of a premium to book value," he wrote in a note dated September 4 to clients. Tanona widened his third-quarter loss forecast for Merrill to $5.75 a share from $4.75, citing expectations of higher gross write-downs, and higher compensation expense. He also widened his 2008 loss estimate to $11.55 a share from $10.25. The analyst cut his six-month price target on the stock to $22 from $28.50.

LM - Legg Mason: Downgrade details (47.37 ) : As mentioned at 6:58, Credit Suisse downgraded LM to Underperform from Neutral Following the restructuring of some of the large structured investment vehicles (SIVs) and a rebound in the LM share price. Firm says the stock's positives (attractive valuation, operating margin opportunity, potential for M&A) are offset a number of risks. Furthermore, firm adds that over the next year, they expect that LM will (1) miss EPS ests (or face negative revisions) and (2) experience the highest level of net redemptions as a percentage of AuM among the public managers.

Monday, September 1, 2008

Why I think VIFL should Double or More Over Time

When I first bought TAYD and expressed my belief in the Company, I heard from many all the reasons (some valid and some ridiculous) why TAYD will never move.

1) The Company is small
2) The Company is a piece of garbage
3) The stock never moves
4) The volume is low
5) The Company is too quiet

and many more. Well afterhours on Friday TAYD hit $8.95 from my original entry in the low $5's. It did take some time as it initially moved to the $7's when I bought it and then back to the low $5's before this move to the $8's. The point is that my research was correct in my opinion and all it took was some vision to see the Company and circumstances for what they were. (Increased earthquakes will bring demand and attention, low float with a niche business, strong case for momentum etc.)

I believe I have found another stock like TAYD at the ground floor (but like TAYD, this is a BUY AND HOLD for me and NOT A DAYTRADE):

VIFL 2.8m Shares outstanding and 2m Float per Bloomberg

Company Website

VIFL is a small (13 Employees and record first half 2008 revenues of $1.2m) yet profitable ($0.05 EPS for Q2 and $0.08 EPS for first half 2008). Read More Here

1) The Company well positioned to profit on food and medical device irradiation.

Food Technology Service, Inc. CEO Dr. Richard Hunter said, “I am pleased with our growth in revenue and income during this year. Customer demand for medical sterilization continues to grow and there is increasing interest in food irradiation. The Company remains well-positioned to take advantage of that interest as food producers recognize the food-safety benefits of irradiation.” Read More here

2) The FDA recently approved lettuce and spinach for irradiation and some large producers are considering it Read More Here

The industry group wouldn’t name salad suppliers ready to start irradiating. But it expects niche marketing to trickle out first - bags of spinach and lettuce targeted to high-risk populations such as people with weak immune systems “who right now may be afraid to eat uncooked produce,” said GMA’s chief science officer Robert Brackett.

“It’s one big step forward in improving the safety of fresh produce,” he added.

California-based produce giant Dole Food Company confirmed it is considering irradiated lettuce. “We are currently doing extensive testing with irradiation and it looks to be very promising,” said spokesman William Goldfield.

3) VIFL is one of a handful of facilities that are approved for food irradiation and is considered a leader in the field

"But most U.S. irradiation facilities treat medical products, and only a handful are set up for food."

"You'll see gradual adoption and early adopters … who convince others to try," says Richard Hunter, CEO of Food Technology Service, a 13-employee food-irradiation company in Florida that's considered a food-irradiation leader but which relies on medical devices for 70% of its revenue.

Read More Here

4) VIFL has been expanding capacity and expected growth before the new FDA approval for lettuce and spinach

As previously mentioned, the Company installed additional Cobalt during the second quarter at a cost of approximately $530,000. The Company paid cash for this Cobalt. Management anticipates increased revenue during the remaining quarters of 2008 based on growing demand for irradiation services. Read More Here

Summary : The possibility exists that in the future the FDA will expand this initiative to other vegetables and ready to eat foods. However, keep in mind that food irradiation is an intensely debated subject and widespread rapid adoption is unlikely. Also, some customers may not want to advertise their use of irradiation. The challenge with all small caps is whether or not the management is ready to get a facts based story to the street to enhance shareholder value or play the small meek Company that only releases earnings and doesn't keep the street updated on contract wins and other good news.

That being said, with the small share structure of VIFL and the already profitable existing business, it would not take much for this Company to throw off some growth and strong EPS. Food borne illness outbreaks as well as contract announcements could bring strong momentum to low float VIFL. With the Company doing $0.05 EPS last quarter and growth forecasted, they could easily be on a $0.25+ EPS run rate if that growth comes to fruition along with some new spinach and lettuce contracts. I believe the stock should be valued at $5 based on current EPS ($0.05 EPS last quarter X 4 = $0.20 EPS plus growth = $0.25+ EPS with a 20 P/E as the Company is a low float with a unique niche. At any rate it is undervalued here in the $2's. Depending on circumstances playing out (contracts, outbreaks), it is my opinion that VIFL could become a strong momentum play in the future that could take it even higher.

That is why I am in VIFL. This is all in my opinion and not investment advice, please see the disclaimer at the bottom of the blog.

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Welcome to, blog home of Superman. Purpose of this blog is for me to discuss my trades and stock ideas (As well as opinions and rants on stock market related issues). I will mention the date and price I enter. As far as exits, I always try to take half off when I have some profit and if I believe in the stock, let the rest run further. I always also use mental stop limits, at which time I would exit and minimize any losses. I do not like to give price targets unless I can support them by P/E in some way or by comparison to another stock. I just post stock trades and ideas that I believe will go higher (or lower for shorts) and the reason I believe that. Individuals should have their own strategies for managing profits and losses. My stock picks tend to NOT be daytrades at all and many take time to move. I am not an investment advisor and this blog should not be considered or followed as investment advice.