Wall Street Gold Medal

Going for gold might be replaced with the phrase 'Going for Phelps' one of these days. But if you are in the financial markets getting your Michael Phelps on has been difficult because the markets have been more volatile than a crazy ex-girlfriend. If you know where I am going with this she's up one day and then flying off the charts the next day in the other direction. The nice thing is I have been picking good girls lately as stocks and I haven't been whipped around as much as others have. If you followed our post just a month ago, I posted the steps to navigate these choppy markets --> http://urbanomics.blogspot.com/2008/07/navigating-choppy-markets.html.

One again the market has had two sharp day to the downside, however most investors feeling the brunt of that pain are people exposed to the financial sector. After recent articles spooked the investment community, investors have been selling off banks and Fannie and Freddie rather quickly. There have been articles that have highlighted that another big bank may go under due to the ongoing credit crunch. Then Barron's pointed out that there is a likelihood that the government may have to bail out Fannie and Freddie which could leave current stakes invested in the government sponsored agencies worthless. All this proves is that financials suck and will continue to suck for the forseeable future. Why people choose to ignore that fact is beyond me. In your 401K plan or in your IRA, I would stick with less volatile investments at this point like the Treasury Inflation Protection Securities (TIPS). This is still a solid pick because the Producers Price Index (PPI) was recently released and again inflation is steadily rising. And in my brokerage account I see myself steadily moving towards dividend yielding stocks, technology, transportation, and infrastructure plays.

And for a quick discussion on some of the stocks in my actual portfolio and/or in my stock tracker portfolio:

Collectors Universe (CLCT) - Although, you may want to smack this company like many others for spending without a conscious, they have announced a strategy to cut back on expenses now that their gem grading business is gaining traction. I hope that this business continues to take off like I observed after reading the last quarterly report and while we wait enjoy the 14% dividend this stock touts. I know the fear may be that the dividend will be cut due to such a high yield, but as long as the payments are made keep 'collecting' and participate in a dividend re-investment program (DRIP) to obtain more shares at these low prices.

Burlington Northern (BNI) - This transportation company has whethered the storm and continues to hold steady. Transports should benefit from the declining oil prices and stronger pricing power. I ain't selling until Buffet does.

Microsoft (MSFT) - Thank goodness the Yahoo mess is over and the world can move on and realize that MSFT is a world class technology company that continues to sit on an unbearable amount of cash. I would prefer that they start to increase the dividend amount so that I can get paid as I wait for great results from these guys. I would take dividends here and partipate in the DRIP.

Radisys (RSYS) - This stock reported great earnings and analysts raised the expected guidance for the next quarter by a whopping 9c! It holds steady on these tough days and usually outpaces the market on good days. It hit a bit of a rough patch after insiders sold in the last few weeks but the downside should ease and this stock should move higher.

EPD, ETE - This is a play on natural gas and I like the pipeline stocks in the future because there is good dividend insulation which should be re-invested for a great long term gain. The yield is around 7% here and is considered stable.

MOVE - This stock has rebounded from the dungeons of $2 after their earnings announcement and will move higher as real estate eventually rebounds way down the line from now.

China Digital (STV) - STV is like an ex-girlfriend and is more volatile than a Jerry Springer show. I think the international slowdown causes this stock to sag and the drop has been sharp. This stock rebounds when the market is positive and does so rather sharply. I would recommend adding to your positions slowly.

AK Steel (AKS) - I believe is still a solid company but get out of the way of the commodities. Its like trying to catch a falling knife and thats not too smart.

EWJ - Great play on the downturn in the international markets, especially Japan.

OPTR - Don't know a lot about this stock which met my screen. It was up sharply then retreated. I don't own this stock but would look to take profits after another quick run up.

The Hype

The hype comes in all shapes and forms. For most of us avid Wall Street fans we may read or hear about it through our favorite shows, blogs, or newspapers. And the hype reminds you of the teams like the New England Patriots. A great team that was poised to win it all. Many people overlook the fact that there were a number of games that New England could have and should have lost during the regular season and post season before the let down loss in the Superbowl. A number a games would have told you not to believe the hype like the Indianapolis Colts or New York Giants regular season games that exposed the Patriots. Now lets take a similar view to the market right now. Yes, people are excited because the markets are moving up and the Dow even touched 13,000 recently. But how quickly we forget what brought us to this point. The market is still suffering from the stuff that that gave it upset stomach in the first place. The hype is people like Henry Paulson coming out recently and saying that the market turmoil or upset stomach could soon be over. That's like saying that you can give the markets Pepto and this will all be over. Sorry folks, that is not the case and unemployment is now at levels that mirror the last recession in 2001 and many economists believe that it will continue to deteriorate. The financial markets are still a mess...don't believe me, as Citigroup who is throwing up and selling businesses left and right. And I am sorry for the analogies but I want this point to sink in, the markets are don't with us yet.

I won't change my stance at this point and like most of the stocks that are on our radar or that we have recommended here at Urbanomics. Take Ricks Cabaret (NASDAQ: RICK) which is up rough 13% today, H&R Block (NYSE: HRB) which took out new 52 week highs, and Coinstar (NASDAQ: CSTR) which exploded after their earnings announcement as proof that we are picking timely market plays. Ricks Cabaret is a great small cap stock that probably continues to do well even during a recession catering to big wigs who spend big bucks at their "higher-end" (no pun intended) establishments. And H&R Block should probably be coming of a strong tax season as people are eager to file and qualify for the great tax rebate check that our government came up with to stimulate the economy. It will do one thing and that's stimulate bill paying and retail business. Lastly, Coinstar is doing well after a great earnings season and they are benefitting from increased sales in their DVD kiosk business through a big contract with Walmart. I hope you also love the sector specific plays and REALIZE that high commodity prices are here to stay for awhile. Clayton Williams (NASDAQ: CWEI), AK Steel (NYSE: AKS), the exchange traded fund OIH (AMEX:OIH), and others are all great plays and make you feel a little bit better when you buy gas at the pump or buy something made from steel.

Enjoy the weekend and holla back!

Sell the Rally!!!...

I am sitting here because I got the chance to get home early and watch my main man, crazy Jim Cramer. And he is attempting to go after the infamous question of when you sell stocks. His main points are to sell into the rally for big winners, and also for losers that have gone up due to the momentum of the market. During his show, Cramer talks about taking on unnecessary risks (due to things such as your stock going up too much) and your portfolio not being diversified. I do agree that it becomes a tough situation when you have the following scenarios:

1. A great stock does very well for you and now consumes a large amount of your portfolio
2. You made great choices on an industry or sector like oil and own a number of stocks in that industry/sector
3. You have a loser or dog of a stock and it begins to rally when the market rallies

URBANOMICS ANALYSIS

Cramer responds to these situations by saying that you need to take a little bit of the table and stay diversified, have cash on the sidelines, and sell a dog into a momentum rally.

I am torn between this stance because you know I am an avid follower of Warren Buffet, who believes buying a stock at a discounted price and paying attention to the fundamentals, not the stock price. My position is that you should never be afraid to sell a portion of a big win and definitely sell a dog that begins to rally. However I will lean toward Buffet and his position on owning, holding, and selling stock. I will give my interpretation of his opinion:

Owning a few really good stocks, is similar to being an agent and signing some very good college hoop stars. Some of these athletes will go on to be professional basketball superstars and if you are the agent then your agent fees will grow and one of your major superstars will become a big portion of your income.

Here comes the kicker --> For me to tell you that you should sell your really good investments is like me telling you, as an agent, to get rid of negotiating Michael Jordan's contract because he's so good that his bigger and bigger contracts are bringing you in so much money that its dwarfing your other clients.

No! Holding on to superstars, and investments:
- Reduces your transaction costs
- And it increases your after-tax returns

You would never let go of Jordan and therefore you should not sell an investment just because you've gotten huge returns. Keep the superstar investments until the fundamentals change.

Recent picks I hope you like:
~ OIL HOLDRS ETF (OIL)
~ AK Steel (AKS)
~ Medcath (MDTH)
~ Burlington Northern Santa Fe (BNI)

On the URB Radar for acquisition at the right price:
~ Ricks Cabaret (RICK)
~ NY Times (NYT)
~ Move Inc (MOVE)
~ Asset Acceptance Corp (AACC)
~ China Digital Holdings (STV)
~ Coinstar (CSTR)
~ H&R Block (HRB)

Picks based on recent Posts

Here is the detailed write-up on the picks that I like based on my most recent posts. Although I am holding steady with my current stocks, I would be a purchaser of these stocks:

Medcath (NYSE:MDTH)
This company owns and operates hospitals specializing in the diagnosis and treatment of cardiovascular disease. As this country continues to get unhealthier and older, there will continue to be a need for this type of specialization in healthcare. After their most recent earnings release, it has been trending down and taken out its 52 low in the process. I think a base has been formed around 19.50s and should move higher from here. There is some support from private equity and a majority of the analysts have MDTH rated at least a BUY. I have recommended MDTH in the past, and re-recommended it now.

AK Steel (NYSE:AKS)
The buzz on AK Steel is too much to ignore. Every stock analyst is talking about the impact of steel…everything from high demand to reliance on steel for infrastructure projects like Exxon Mobil’s $25 billion dollar infrastructure investment. The play here is AKS along with US Steel.

OIH or PXJ or XES - Oil Services (check out these Exchange Traded Funds)

You can’t miss the impact of oil at the pump or across the world. I don’t like oil stocks as a whole partly due to the run up they’ve already had but the oil refineries have done a whole lot of nothing…see Tesoro’s (NYSE: TSO) stock price. So the play in oil should be behind the scenes with the companies that service the oil sector.

Do you have hops? - Price Hops

I am sitting back, watching a basketball game and I would never ask Kobe Bryant this question..."Hey man you got hops?" Because he and anyone within 100 feet would probably come running up to me, smack me, and then ask why the hell I would ask a dumb question like that. Of course Kobe has hops, he can jump out of the gym!

Well that is not the only thing that has hops lately. For example, most of the things people buy on a daily basis have experienced a term I call "Price Hops". That means that the price has been skyrocketing, off the chain, through the roof, or flat out way too expensive. Take a few basic staples - cheese, milk, eggs, bread, and gas and you tell me that when you go shopping or driving that the you are pulling out more cash. I call it "Price Hops", but you might here the market call it INFLATION.

This definition was provided by Investorwords.com:

Inflation - The overall general upward price movement of goods and services in an economy, usually as measured by the Consumer Price Index and the Producer Price Index. Over time, as the cost of goods and services increase, the value of a dollar is going to fall because a person won't be able to purchase as much with that dollar as he/she previously could.
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Urbanomics Constant Reminder: Don’t dismiss the facts that are in front of you (trust yourself)

I came up with a term called "Price Hops" and its no wonder that the price of the things that you are buying on a regular basic are costing you more. Inflation is on the rise and market is taking notice by watching the Producer Price Index. And even if you take food and gas out of the measurement, the index would still rise.

Some of the factors affecting inflation:

The price of oil keeps rising - Upcoming inventory data and weather are big factors

The demand of steel, copper, wheat (commodities) is rising (Wheat is at an time high)

The prices of things America imports are up roughly 13% (highest levels since the 80s)


How to profit during a tough economic period (follow the industry buzz):

Buy Large Cap companies, especially Multinational Companies
Buy the Commodities that keep rising - precious metals, mining, wheat, oil
Buy the Equipment Maker of agriculture and oil refiners
Buy the stuff people buzz about even in tough times

I know you want names:
- AK Steel (NYSE: AKS) - great play on the rise in steel
- Celanese (NYSE: CE) - roughly 2/3 of sales come from outside of US
- Use Exchange Traded Funds (ETFs) - JJN, USO, GAZ (examples of funds for nickel, gas, oil, gold, steel)
- Buzz items - No matter how tough the economy is people can't do with those darn flat tv's, dvd's and entertainment programs; I picked up on Zacks.com momentum picks...and for two days in a row they recommended Liquid Crystal Display providers:
AU Optronics (AUO)
Corning (GLW)
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URB UPDATE: The beauty of DOLLAR COST AVERAGING pays off and Avid Technology (recent rise allowed me to recoup all of my loss and I sold my entire position to break even. (More to come on how we turned a bad stock into one that didn't hurt us)
Disclsoure: I sold AVID