URB Recommendations - July 31

Brooks Automation (BRKS) - As you know my screens often gravitate me towards down and out of favor stocks on Wall Street and the latest is no exception. From what I have researched BRKS was in deep doo doo. Yep you heard me they messed up and the Securities Exchange Commission got in that azz and began a probe. It ended in a settlement and as usual no disclosure of wrong doing needed to be made. With this stock trading close to a 52 week low, I see this a catalyst that the worst may be behind Brooks. Remind me to review the recent quarterly reports and new releases to confirm this but I did take away that the settlement will not be applied to the earnings which is great news for new investors. I got an early jump but this may be a great stock to pick up around the lows.

Recommendation ~ I am adding this stock to my portfolio and stock tracker

Enterprise Product Partners (EPD), Enterprise Energy Transfer Entity (ETE), and Enterprise GP Holdings (EPE) - These are natural gas plays and I like them at these levels. I don't think there is a big catalyst here with natural gas declining but you have two things in your favor. EPD is an infrastructure play and as energy continues to be expensive pipelines will be needed to move gas around the country and the world. Second I have learned the super importance of dividend stocks which limit the downside risk.

Update ~ I own EPD, and have added EPD and ETE to the tracker

Stocks I am watching like a hawk:

Home Inc (MOVE) ~ I love at the 52 week low @ 2.06
Asset Acceptance Corporation (AACC) ~ I love around the lows of 9.41
Medcath (MDTH) ~ I love at the levels of 18
Avid Technology (AVID) ~ Watch this one closely
Electro Scientific (ESIO) ~ I am holding out for below 14!
Rick's Cabaret (RICK) ~ I will keep you posted this one has been moving lower
Big Lots (BIG) I AM SHORTING THIS BAD BOY @ AROUND $31;
AK Steel (AKS) ~ I hope you got this when it dipped into the 40s if not it has skyrocketed again into the 60s

Navigating the Choppy Markets...

Now I know there have been a few movies over time that have taken place out at sea but I won't waste your time pretending that I even know what some of those movies are. But there have been many right...where man tries to master the sea but it comes at a cost like lost crewmembers, near death experiences, and doubting your capabilities. But then out of nowhere comes the light that leads man into shore.

Well the stock market is a lot like the sea, investors are similar to the boats and crews out there, and I feel like I am often not only the captain of my ship but also the lighthouse that can assist other people out of the choppy markets. What has been on my mind lately is that I have not taken advantage of all of the opportunities out there but I have constantly tried to keep myself out of trouble while looking for areas to gain from a stocks occasional misalignment. This year you've seen me part ways with mediocre performing stocks that I probably never should have bought in the first place and also hold under performing stocks where I believe that there is room to grow. Most recently, I have parted with my gains in the oil sector with my Oil Services Holders ETF pick (ticker: OIH). And too many times I have taken hits on the chin and lost money through recent picks like Zhone Technologies and mistimed short sales of Small Cap, Emerging Markets, and Financial Services stocks. I am somewhat pleased with the status of my portfolio and will share some of the things that I have learned this year.

Cut Your Losses - When you happen to make stupid picks or the fundamentals start to look fishy...CUT your losses right away. I have continued to learn from analysts that it does not take much from a stock to tell you when it is sucking it up. Learn to not fall in love with your pick and set aggressive limits that will create a floor when your prized pick drops. These limits should range from 7-15% but take it from me it is sooooo hard to recover once you have a loser on your hands. If you think the stock is still a gem, then at least you can reevaluate it and buy it at a lower price.

Day Trades - Day trading is for people that trade stocks for a living. If you don't have time to watch these picks around the clock they can get away from you in a hurry. And not to mention you begin to out think your trade. I have in the last month made money on trades in the Oil and Financial ETFs only to see them evaporate because I was too busy working and didn't notice my shorter term gains washing away. I would say don't day trade, but it you do and you are up use limits again to protect the downside.


Earnings Season - If you read anything from me, READ THIS... stay away from trading stocks the week before and after they release earnings. This is the most volatile period and so many factors are considered that you will eventually get burned. For example, I bought GameStop (GME) last November and it tanked right after the earnings announcement...rapidly. I quickly sold my declining position only to see the market reanalyze the news on GME and it proceeded to rise higher and higher the weeks after, which would have made a great profit. Even better, I am currently in a stock picking contest and I bought Visa (V) before the earnings and watched it move higher, even during after hours. Then the next day this stock proceeded to get crushed and my quick profits were gone. Stay away from earnings season.

Homework - Jim Cramer calls it doing homework, I follow the Buffet mantra and say that you constantly research info about the stocks you own and evaluate whether the fundamentals have changed. If they have turned for the worse...BOUNCE! Remember Zhone, the management told us a MONTH before the earnings that it would miss, so do your homework and sell. I not only sold the loser, but made a back some money by shorting the stock.

Patience - After evaluating your stocks frequently, show restraint for the stocks where the fundamentals have changed. I have owned Radisys for second time and this has been one of the wildest rides in my investment career. The first time I bought this stock I watched it go up and then turn around and fall sharply. I did my work and felt that the fundamentals had no changed much. So I held on and watch it hit the 52wk high last year, where I promptly sold the stock so that I would be greedy. Now as you now I have re-recommended Radisys and since that recommendation I again watched it dropped. I thought I was soooooo smart because I bought it while it was approaching the lows of the year, however the stock kept dropping. And in the mind of Buffet, that means I am getting this stock at a discount...IF the fundamentals haven't changed. So I kept buying and the most recent earnings announcement was news to our ears. We watched Radisys report excellent earnings and the stock has been on a tear. It is my largest holding and I am pleased that analysts have raised next quarters guidance by an astounding amount, double what it currently is.

Short Interest Rises

I love how some leaders and analysts love to say that we are not in a recession. They often want the market to meet very strict criteria before they officially define it as a recession. However, many of us don't need a definition to tell us how bad things feel. The thing I tell people is if you don't like it set yourself up to fight back. The way to fight back is to make sure that you can profit when the market is up and also more importantly when the market is also down.

We have discussed a number of times that shorting stocks is not easy because I think it goes against peoples natural instinct. I find it very hard to root or bet for something to go down. But again you have to be very disciplined as an investor and take your emotions out of it. You have rarely seen me recommend shorting stock but I think this is a strategy that is too important to miss out on.

I found this article this weekend and even traded emails on a few of the stocks mentioned in the article with other investors as recently as this morning. I want you to look at one of my favorite stock research websites, Seeking Alpha, and examine the following stocks mentioned in this article: http://seekingalpha.com/article/84613-nyse-short-interest-hits-record-highs-again?source=wl_sidebar

My goal is to keep this short so here is how to get better at shorting stocks.

~ Follow the market and recognize when every is feeling bad about stocks

~ Trade on information that acts as a catalyst. The article above or the approach I took when I shorted Zhone Technologies on bad news are examples of catalysts that could trigger selling

~ Set limits and walk away with positive gains.

Now I hate reading something and not acting on it right away but who knows one day I may grow some balls. I have been vocal that I think the financials suck and if you would have SHORTED the financials on this list as of today you would have seen the following percentage declines:

ZION -23.20%

WM -34.75%

MBI 2.31% This would have been the only stock to lose you money today.

ETFC -9.56%

FHN -24.78%

AVB -3.53%

NCC -14.71%

MTG -5.30%

HBAN -17.20%

I will wrap up by saying keep it simple, follow the money and use important indicators like what we found here to assist you no matter what direction the market is in. REMEMBER, you are betting stops will drop so these negative signs are your friend. I'm out! And even though I didn't get to buy these guys all today my previous recommendations on shorting Financials through ETF's SKF and SEF have come through in a big way.

Fact or Fiction

Freddie Mac and Fannie Mae were off roughly 45% this week.

- FACT: These are Government Sponsored Entities (GSE) that engage in mortgage purchasing and providing funds to mortgage lenders, respectively. Their stocks prices have tanked this week from fear of going bankruptcy. However pay close attention because many on Wall Street believe that some type of government bailout will be necessary to save these firms.

Inflation on the rise.

- FACT: Inflation or at least the fears that your dollar is stretching thinner and thinner continues to rise. Normally during times of inflationary concern, investors would flock towards a Fannie Mae, Freddie Mac or government bonds but that is not happening. Should you be concerned, YES, because you must follow the money and Wall Street is telling you to be concerned because the price of GOLD is rising, OIL has pushed through record prices, and ohhh I forgot the housing and auto industries are collapsing. Don't believe me, see the lastest story about Indymac, which became the largest US bank in history to be seized by the government.

You should feel good about the market, and keep holding on to your stocks.

- FICTION: Sorry folks for the first time ever my outlook is very dismal from here. If you are a gunslinger, then please at least hedge your portfolio against further downside risk. For the rest of us, continue to sell most of your winners, cut your ties with losers, and get defensive!!!

Your defensive plays are:

OIL : Problems in Iraq and Israel & Iran, disruptions in Nigeria and Russia ALL mean oil will continue to rise. I don't believe speculators play a big role in the price and I don't think the potential of domestic drilling will impact the short term price.
GOLD: Gold is on the rise and so are future prices, which means that investor faith in the dollar continues to decline.
CASH: Cash is always KING and have cash in your portfolio ain't always a bad thing. Wait out this storm, because it could be awhile.

Politics and Your Portfolio

What does politics every have to do with your portfolio?!? I hope your answer is a lot because good Wall Street analysts factor in "future" events into the price of stocks that will be affected. After the 4th of July, the markets sent the price of oil lower, mainly due to the fact that there wasn't any breaking news and Iran had indicated that it would be more cooperative with its nuclear program and consider the demands of five of the largest members of the United Nations . Well what a difference a few hours make, because the latest reports have Iran rejecting the claims of this group and even mentioning their intent to begin War Games, which are preparing for combat readiness against potential threats. This is huge because they have even threated to block the Gulf, which is the primary waterway for transporting oil from that region. This threat will send the futures contracts for oil higher and I am recommending that you buy ETFs USO and OIL at the open tomorrow. USO already appears in my stock tracker, so lets monitor the performance.

Obama made an interesting comment that sums up my take on politics and the stock market. Obama mentioned that harsh talk to Iran appears to contribute to the rise in the oil markets. A better approach may be tough diplomacy which makes us investors more certain about future events.

RECOMMENDATION: BUY USO or OIL at the open of the market. I know I will be for a short term addition to my portfolio.

Is Anything Recession Proof?

I don't know the true answer to that question but I can tell you there are better places to park your money in times of distress. As you have learned from my last article, I recommend being very nimble in markets like this. I have not given up on the buy and hold strategy because I think the ultimate goal is to find deeply discounted value in your portfolio. But I also suggest that you pick and choose your battles wisely and not be afraid to walk away from poorly performing stocks. Now I know that sounds hypocritical when investments like Clayton Williams (CWEI), which was down roughly 30% in our first two years of ownership, rebounded and have returned us gains of over 150%. But notice CWEI had no fundamental changes in the company's operations and was in a perfect sector to outperform the market in the long run (CWEI was just waiting for its deeply valued stock to get mainstream attention). But I'm never too proud to part ways with a poorly performing stock like Zhone Technologies (ZHNE). ZHNE is a stock I love but the fundamentals changed and I was forced to sell the stock for a BIG LOSS. I was able to OFFSET this LOSS with a timely SHORT SALE (Betting the stock will go down) of ZHNE.

RECESSION PROOF
I have already mentioned buying infrastructure stocks of oil producers see the OIH recommendation. This is an excerpt from a recent article about the value in investing in Natural Gas Pipeline stocks. If this analyst is correct, my stock screen is identifying a timely move into energy infrastructure stocks.

This is a taken from Seeking Alpha's article: http://seekingalpha.com/article/83856-spectra-energy-gas-pipelines-make-great-recession-proof-stocks?source=side_bar_long_ideas

Seeking Alpha on why gas pipelines make great recession proof investments:

"It has been said before, but pipeline stocks are like railroads for natural gas. Simply put, the demand for natural gas is up and correlates somewhat with oil prices, but the upside with pipelines is that they do not have the competition from other forms of transportation. In order to move and significant volume of natural gas a pipeline must be used.
Pipelines are traditionally managed very conservatively, as is Spectra Energy, and make their money through cost-of-service contracts and other required services. This means that cash flow is relatively stable and predictable when compared to the market as a whole. This can be referenced by viewing the Beta coefficients of pipeline stocks which show significantly less volatility than the broader markets.
I have stated before, and I will state again that pipelines are great recession proof stocks.
On top of preserving and likely growing capital, investors can collect a healthy (and growing) dividend yield."

Investor Be Nimble, Investor Be Quick

If you are just starting out your investing career what better time to get started than in a turbulent market that we face right now. What we are witnessing will be written in economic and history books years from now. Oil just peaked again at $146, jobs are declining at a decent clip (6 straight months), the average consumer has huge amounts of debt, mortgages are foreclosing at alarming amounts, peoples income (real wages) are not increasing, consumer confidence is at a 28 year low and inflation is causing prices across the board to inch higher.

Things are so bad tough that politicians are even talking about a second economic stimulus package being give to consumers!!! Now I won't complain about getting another 600 dollars but lets try to chip at the issues that will reverse this downtrend. I won't get into policies that our government and Federal Reserve should take to turn us around but something will need to be done.

Until then I hope you are following our recommendations and putting yourself in a position to be nimble and quick to change your strategy. It's time to get tight like Phil Ivey, a good poker play would.

URB Recommendations:

~ Rebalance your 401K to a more defensive strategy. This would be ONLY where you have existing gains, and you should if you have been listening to my strategy of overweighting your 401K plan towards international and emerging market stocks in your 401K. Take those gains, ALL of it, and move into the safest but highest yielding plan. For me, I was able to move my old 401K plan into a Money Market account. And for my IRA plan, I was able to find a PERFECT fund called the Treasury Inflation Protection Fund (aka:TIPS) which take your basic money market rate and protects you as inflation creeps in by increasing the yield at the rate of inflation.

How to play the market during these times, turn defensive:

~ Big Pharmaceuticals

Some experts say big pharma like Forest Labs and Schering Plough are great defensive plays but I am not very good at evaluating big drug companies. The logic makes sense that you still have to buy drugs, but I not one that visits the pharmacy much so I don't know if the average person skips picking up their meds during tough times.

~ I recommend oil, natural gas, gold, steel, and select technology plays.

BUY Enterprise Product Partners (EPD) @29.05 or below...it even hit 28.76 today. I am also slightly bullish on pipeline companies. A few have surfaced on my screening and this sector may be signaling a timely opportunity to buy. I like Enterprise Product Partners (EPD) and Boardwalk Pipelines (BWP).

BUY or reBUY AK STEEL (AKS) @ 54 because steel is strong and their latest report on passing on big surcharges or fees to their customers is a good thing because it means that they are not footing the bill, although it could scale back demand.

Get out of the Zhone...

Timing is always of the essence. So I am typing fast. Last night I read that Zhone Technologies will be guiding their forecasts lower for the next quarter...BAD NEWS. A deal gone bad is not good news in this environment for anyone let alone a stock trading around a dollar.

RECOMMENDATION: I am SELLING all my positions in Zhone @ the opening. You will see this reflected in the stock tracker.

RECOMMENDATION:Further, I am taking a risky position and shorting the stock ZHONE at the OPEN. That is opening a SHORT SALE (bet the stock will fall) and I will look for a quick 10% gain and they close this position.

Here is my comments from the stock tracker last night, when I stumbled upon this news:

This stock will be headed lower, after management announced a sale that didn't go through and will affect next quarter's result. They hope to get punished earlier by making the announcement almost a full month in advance.

Mystery Market

Right now the market is like a victim on the tv special 48 Hours Mystery or Dateline. If you are are a bullish investor your portfolio gains are disappearing faster than Star Jones weight...I know amazing. That is why I have to say, without hesitation, that we are in the midst of an ugly recession that has many forces against it. Whether its a slumping housing market, skyrocketing oil, expensive food, vanishing jobs, or a weak dollar, we all seem to be affected in our wallets and now in our portfolio.

I haven't taken this stance in the few years that I have been investing but I am going to go on record and say "like a good poker player" you should tighten your game up right now. If you have big gains sitting out there keep a watchful eye out on those positions and look to sell to the upside. Capital on the sidelines can definitely be your friend when this all turns around. And for new stock positions or stocks that are currently trading at a loss you may want to set a floor, or stop loss, that limits your downside risk. It will all depend on how much you can stomach but I will remind you that it when you take a loss in a stock position, you actually have to gain "MORE" than your original loss to "JUST BREAK EVEN". Don't believe me run the number's...Let's say you buy a stock for $10 and it falls to $5, you just lost 50%. Now calculate how much you have to earn on $5 to get back to $10...try a 100% return!

My recommendations:

~ Take cover and move your 401K benefits to a safe investment like a money market fund or even better I found a inflation protected bond fund to hold me over until the market gains its footing

~ I believe that exposure to the commodities (oil, gas, steel) is a good hedge to the downward pressure. As you can see I have increased my tracking portfolio to see how GOLD and OIL perform during these turbulent times. I am also slightly bullish on pipeline companies. A few have surfaced on my screening and this sector may be signaling a timely opportunity to buy. I like Enterprise Product Partners (EPD) and Boardwalk Pipelines (BWP).

~ The international and emerging markets are no longer a complete safe haven. Many countries are feeling the effects of higher prices of food and oil and are also reeling from inflation. And as international countries raise their interest rates to combat inflation...earnings may be under attack. If you have moderate gains, take profits here for safer investments.

~ Set stop losses or floor limits for new stock positions and current positions that are at a loss. It is harder to break even from deep losses