Did You Say Narcos...Or Anadarko

Interesting?!? When they interview sports stars, is it odd they often say: "If I could do anything else I would be a rapper.   Then the big NBA game comes on and I see E-40 cheering on Golden State, Drake court side in Toronto, and YG and 2 Chains on the court at the end of Los Angeles games.  Well to take a page from their playbook, investors wanna be both!  My investing game in basketball terms feels like I'm in a zone.  Or maybe more like I'm playing zone...like the defense.  The zone defense is known to be safe or even cautious as it does not require the players to exert a lot of energy when defending but requires you be consistent, diligent, and opportunistic.  I am cautious on the markets as they continue to grind higher.  I still think the business climate (due to the tax cuts) and job hiring is trending up. Further, I think the market will melt up even more IF a deal with China (any deal) gets done.  But I think signs in housing and other areas tells me, the dynasty is almost over.  So what does my zone defense look like?  Well here is a run-down of my zone defense portfolio in Game 5 of a 7 game series:

Coaching (Doc Rivers, Phil Jackson, Lenny Wilkens) - Like the great coaches listed here, I try to remain level headed, even zen like, on where the market currently is. I feel like we are in Game 5 or 6 of a 7 game series. So I'm coaching my team (oops my portfolio) to be ready for the downturn...we don't like being blown out.

Guards (Chris Paul, Damian Lillard) - Like CP3 and Dame, my PG is small but packs a punch! So my point guard is Collectors Universe (CLCT), this is a small cap company that I have been overweight for a VERY long time. And they don't seem to disappoint. They had a bad quarter and Wall Street punished them awhile back dropping them from $30 to eventually below $15. If you've been following us here you'll remember when we picked then up during the recession of 2008 at the $4 dollar level. And for us they mint coins...almost literally and grade "mint-condition" baseball cards and collectibles. So that means steady cash streams coming in, a nice dividend and an appreciating stock.  If you read the previous conference calls, part of the bad quarter was slow China demand and a big time investment in a new corporate HQ. Well guess what, those costs related to the HQ are behind them and the last two quarters have been positive. I picked up more shares after the HQ build-out because for a small cap company I felt it made a difference in their earnings. I like my PG so much that I bought more Collectors and put it in my 401K plan for the long-haul. Cheers to CP3, Lillard and CLCT!!

At the other guard position, I rotate the Young Guns. This group is spring loaded and receiving trade offers as other teams want my players. If this were International football (or what Americans call soccer) these players are hitting the the transfer window, or season where other teams pay top dollar for my players:

Anadarko Petroleum (APK) - I picked on Andarko as Chevron was showing interest and now there is a bidding war that has ensued. And look who jumped into the fray... my mentor Warren Buffet is lending money to Occidental Petroleum to outbid Chevron. If was just announced because some investment firm tracks jets and saw that the Occidental jet flew to Omaha...really who has that much free time!!! The Narcos are circling Anadarko. Looks like my draft pick may get bought out soon.  My guess is Occidental wins out with a sweeter bid and the Buffet brand name (we'll see).

Arconic (ARNC) - An earlier trade fell thru but this player has been working on his skills. Dropping down to about $18, and putting up big numbers by bouncing back to the $22 range. I may be getting suitors coming to the table soon and now they pay more than the $23 range to buy this stud out.

Tesla (TSLA)- Like the Nets Guard De'Angelo Russell, everyone has an opinion. So after the terrible earnings call, I took a chance here. Some may second guess my value call, but along with Ron Baron, and others, I just personally think Tesla is a transformation company that will explode. Mr. Russell who was left for dead...is now a NBA All-Star this year due to his hard work and transformation. For example, I drive a Plug-In Hybrid BMW X5 e40 (fully loaded 😎and 600 mpgs) and trust me the experience is nice, I'm sure the Tesla models are even nicer because they dominate the electric vehicle space.

Qualcomm (QCOM) - When I want to play a savvy veteran, I turn to QCOM. Again some questioned the value here when they were battling Apple the goliath of the tech industry. I wish I would have gave QCOM a bigger contract because they went to Game 7 with Apple and won a $4.5B settlement!! A stock in the mid-50s exploded up into the $80s leaving me happy for the player and bummed I didn't invest even more. What a shocker.

JD.com (JD) - This stock is like a chance on the player suspended for taking performance enhancing drugs, TWICE. First, the tariff issues with China took all the steam out of this stock. Then the 2nd item was the CEO was accused of assault and battery. The stock was hovering around $30 and then tanked into the low 20s. It appears the Minnesota prosecutors did not choose to prosecute after new videos surfaced recently appearing to help the CEOs case.  Now basically breakeven, this player may spring back into Player of the Year discussions if the China negotiations with Trump are finalized.

On the bench: I have one player preparing to pack his bags: Celgene (CELG) - they were acquired and soon we'll part ways with a nice contributor.

And Sprint (S), Sprint keeps getting offers to play overseas for T-Mobile but the FTC (like the stock version of the NBA Commissioner) is telling me that the deal is unfair. Funny he doesn't say that to Verizon or AT&T the biggest cell phone carriers. Let a player get his money Commish?!?!  Approve the deal and let me bask in the glory of my draft pick prowess.

Next time, I will go into my Development League team: Newell Brands (NWL), Stitch Fix (SFIX), and Colony Capital (CLNY)

Portfolio Spring Cleaning...

It is technically still spring, right? I know judging from the mid 50 degree weather here in Chicago that this seems about right! Although I have been really busy I am starting to understand my investing habits a little. I think I tend to get more interested in the markets when volatility begins to pick up. This could be it or maybe I am finally drinking my own Kool-Aid and using the volatility to find deeply discounted bargains. Well, lets hope its the latter because I have been tuning in alot more lately. I continue to write about the extraordinary run that we've been on lately. It started earlier in the year when one of our largest holdings was liquidated due to a buyout of Burlington Northern Santa Fe (NYSE: BNI). I felt good here because we owned this position for almost two years, and held strong (thanks to the dividend) through the downturn and watched the company get bought out by Berkshire Hathaway.

Next, we've seen positive moves in the stocks we screened so diligently during the market downturn and decided to keep. I've gone with a concentrated portfolio and this has served well since the market stabilized. Besides BNI, my concentrated portfolio includes:

Radisys Corporation (NASDAQ: RSYS) - Largest Position
BNI - Second largest, liquidated
Collectors Universe (NASDAQ: CLCT) Now second largest position.
Visa (NYSE: V) - Liquidated most of this position for a nice gain; Still retain a minor position
Boston Scientific (NYSE: BSX) - New, small position

I'll keep beating the drum on RSYS as it went from $4 to now $10. It was a rough ride but we should be seeing some upside as they outsource their production model and grow with new products.

Collectors Universe is easily my second largest holding and has been on an outright tear and we owe thanks to new management cutting costs and reimplementing the dividend. This has brought investors searching for yield running to this stock. It has seen a run also from $4 to now roughly $14 bucks. A recent increase in the dividend yield now it paying out a whooping 30c a share!!! This healthy dividend allows me to continue to grow ownership in the country.

Visa was a classic buy during the downturn as we began accumulating a large amount of shares at roughly the IPO price. This was a no-brainer as the downside risk could not have been much lower than the levels that analysts had expected for a public offering. So at one point V was my fourth largest position behind RSYS, BNI and CLCT, because I had a conviction that V wouldn't slip much further. After a nice return, I sold most of V but retained a small portion which I still hold.

URB Update: Visa is experiencing some downside risk in their stock due to some recent legislation. The CEO recently spoke about the amendments passed in the Senate and the affects they could have. Being in the industry I need to better understand what's in the potential amendment but it seems like there could be some additional regulation around the "interchange" or swipe fees that are paid by merchants. I do believe this could have the most impact in their bottom line because this is how they make their money on a per transaction basis. I think investors are concerned with this and with the fact that a major part of the amendment is limiting the fees around debit and even credit transactions. This part would only impact V if their issues see a significant decrease in volume.

My recommendation is to wait for this legislation to play out. V and other networks will not be impacted as much as issuers are. Keep the stock if you own it and use the dividend to accumulate more of a position. I will be keeping the small position that I own, however for the tracking portfolio I will take some profits.

Boston Scientific - I like this sector but my research shows that there may be too much risk involved in holding this stock. I may look to stay in this sector by finding a stronger company that offers a dividend.

I am exhausted but here are the stocks that I am still watching:

• Energy Partners
• Legg Mason
• Becton Dickinson
• CapitalSource
• Theravance
• ViaSat
• ADC Telecommunications
• Solar Capital

Lehman Brothers - Should I buy?

Now I hardly ever write about just one stock because I usually don't get caught up in one story. For instance if you ask me what's on my Wall Street playlist I could list a number of chart bangers like long ESIO, short BIG, long RSYS, long STV, long CLCT, long PBR, long BNI, long CSX, long FDX and a host of other names in a few minutes.

But I wanted to take some time out to comment on Lehman (LEH). Lehman is in a very tough position as it stock keeps plummeting to all time lows (down roughly 95%). They have well respected business lines like the investment banking and money management divisions. However, the trouble lies in their real estate and mortgage portfolio where they are unearthing a large portfolio of risky investments.

Now let's fast forward to my interest in LEH. I am attempting to make a calculated bet here knowing all the pieces that have fallen into place in the last year. Bear Stearns, Fannie, Freddie, and numerous banks allow me to come to my own ODD conclusions of how this may play out. Well I do know a little about the financial industry and Bear Stearns, Fannie and Freddie were all to important for someone to just sit around and let go under. But the problem is that Wall Street and our government preach FREE MARKET CAPITALISM and this doctrine is supposed to allow the market of investors to decide the fates of these firms without interferences. Now here comes the glitch, the markets spoke and nearly drove all these firms to a state of BANKRUPTCY!!! So our government went against the FREE MARKET PRINCIPLE and stepped in and negotiated the Bear Stearns deals which lead to JP Morgan Chase buying that company out at a ridiculous price and more importantly the government assumed the liability of the risky assets that did Bear Stearns in. Then you have the Freddie and Fannie debacle, which are public companies but they are also government sponsored entities. If this doesn't make any damn sense to you either then raise your hand. Freddie and Fannie are owned by stockholders and when the stock began free falling the FREE MARKETS were telling us that there was lots of doubt around the financial health of these firms. Once again, going against FREE MARKET PRINCIPLE the government bailed out these firms by basically injecting the firm with loads of cash...and leaving the stockholders left holding an empty bag. Now many argue and I will agree that Fannie and Freddie couldn't be allowed to fail because they are too vital to our economy...backing roughly 1/2 of the country mortgage investments. I agree with these critics but then question why you would ever let a government entity of such importance ever trade PUBLICLY!!!

Knowing this lets move to Lehman. Lehman is just as important as Bear Stearns and signals to our country, economy and the global markets that our financial system is in BIG Trouble. The only problem is after bailout of Bear Stearns, Freddie and Fannie...the government can't afford to use MORE TAXPAYER money to rescue bad investments like it did with the other three firms. This point is very critical because it is what many believe is stopping Lehman from being acquired. Now bring the Federal Government back into the equation...because of the importance of Lehman (and what it means both locally and globally) the WANT a deal done to acquire Lehman. And WHAT THE FED WANTS THE FED GETS.

After analyzing this crazy turn of events I am taking a huge speculative bet and going LONG on Lehman's shares. Yup, I would take a little bit out of the piggy bank and buy Lehman because of the following reasons:

1. The Fed wants a deal done b/c Lehman signals financial disaster
2. The Fed will not use taxpayer money to buy bad Lehman assets (this will not cause the stock to become worthless like Freddie and Fannie)
3. Some parts of Lehman's business are actually worth buying

My shrewd calculations tell me that a deal gets done b/c the Fed says so and the stock with not become worthless b/c the government will not be injecting the cash. Very important b/c this is what left Freddie and Fannie shareholders crying. With some actual value still left in the company like Neuberger Berman, the headquarters it has to have some intrinsic value. My last support of evidence is the Bear Stearns collapse. The deal was initially negotiated by the Federal Government for $2 a share, which was the equivalent of handing a Lamborghini with a tiny scratch to a potential buyer for say $5,000...and the buyer was JP Morgan. Long story short, the government was forced to raise the value of the deal to roughly $10 a share. Now all things being the same...could Lehman go for $10 a share!!! I am willing to make that bet, however the only thing I struggle discounting is that RISKY BAD DEBT that the government won't buy...what's going to happen to it and who's left holding that worthless piece of investment (note: its looks like the Fed is strong-arming all major investment banking firms to pitch in and buy the bad debt). All that being said it I think an acquisition gets done, it may not be $10 but it should be higher than $4...right?!?

See How It's Done...

Then watch me do me. Hopefully I didn't lose you but what I am yapping about is that my plan is to stick to what I know and what I do best. That's keepin' it real 24/7 and my assessment on how to beat the market. I told you that 2008 was in for a rough ride. I still think I owe you a write up about my recession fears for the economy, so I will have to find my notes written on the train sometime and post them. So as usual when the market is going through its rough moments...I usually sit back and get my PAC-MAN on...and that's chomping data day after day to get an assessment on what the heck is going on out there. So for anyone that tunes in I apologize for the gap in postings but thats what I've been doing, camping out in the financial trenches. What do I do for these silent weeks and how can you get in on it:

~ Get your PAC-MAN on with lots of data from newspapers, online financial stories, and economic reports. Recent new stories that you should be aware of:

• More weak data on the economy was just released (i.e., Manufacturing & Economic indicators)
• The price of oil passed the infamous $100 a barrel mark
• Reports show jobs are being lost (unemployment claims are lost), and companies are cutting their workforce
• Gold is breaking through new levels
• International stocks have suffered but have done well on days the US economy is down

~ Pay attention to earnings reports

• Many companies are reporting that as they look through their crystal ball...it ain't looking pretty
• Investors are hammering stocks that report a negative outlook going forward
• The few good companies are getting rewarded for producing positive future earnings

So I try not to panic and reassess what this means to me. And what I got so far is the economy sucks, stocks are getting killed, and "sell the rips and buy the dips" (taken from an analyst on Fast Money on CNBC...I believe Jeff Macke). This has been consistent with my view of the market for the last 3-4 months so I am not making very many changes to what I do...Umma do Me (I'll explain in a sec). But I am listening to the last thing that I have learned and that's sell into positive gains in our stock positions and buy when good stocks tumble hard...and that's sell the rips, buy the dips. This lesson has been learned the hard way this year b/c we've experienced something kinda unusual and that is our companies are not being rewarded for good quarters, rather the analysts are focusing more on future outlooks. Radisys (NASDAQ: RSYS) reported blowout numbers but got hammered because their outlook was not going to be as good. The same can be said for Crocs (NASDAQ:CROX), the plastic flip flop maker. And the last thing I am noticing is that the poor performers are getting absolutely punished. AVID Technology (NASDAQ: AVID), Collectors Universe (NYSE: CLCT), and maybe even Zhone Techonologies (NASDAQ: ZHNE) have all seen death sentences.

Umma Do Me
I plan on doing me by evaluating my current portfolio and trying not to make drastic changes unless needed. I will sell the rips and buy the dips.
Burlington Northern (NYSE: BNI) - Railroads companies are hot, so I am not touching this position but watching it closely
RSYS - Should have sold before the earnings when it shot up to the $14 range. Got hammered after earnings by over 20% and I buying into the dips and creating a new price point @ the 52 week low. I like anything below $10.50 and placed my point @ $10.10
AVID - This stock also was running up before earnings if you recall hit $28, got crushed and saw lows of $17. I have bought in on the dip here and like the range of under $20, especially in the $19 range.
CLCT - Their earnings report was disappointing but I am still confident that private equity will closely watch the direction of this company. Also they have muscled the company into paying a handsome dividend to shareholders. So each quarter we are getting almost a handsome check to offset some of the losses @ almost a 8-10% yield on an annual basis (Most companies yield 1-2%) So buying into the dip will be difficult here. I bought in at $9.50 but recommend $9 or a really aggressive stance here and see if this touches the 8 dollar range.
ZHNE - Gets the heartburn of the year award because just last week it shot up to $1.18 and we were in very good shape. Then in one day the market took 20% cut into the stock. There have been active buys into this stock and if it gets to levels of $1.01 or lower I am a buyer again.

Disclosure: I own RSYS, and rebought RSYS at stated price point, CLCT own and rebought, AVID own and rebout, ZHNE own, CROX I do not own

So people ask what am I going to do, and I keep it simple: "UMMA DO ME" (courtesy of ROCKO):

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Money In Bank - Collectors Universe

Lil Scrappy raps "Money In the Bank" but if you read my June 1st Stocks and Locks post (click here -> http://urbanomics.blogspot.com/2007/06/june-week-1-stock-and-lock-picks.html ), you'd think my recommendation Collectors Universe (CLCT) was the one 'collecting'...all the way to the bank. CLCT, which authenticates precious metals, was literally a hidden gem when we found it. It has risen from $13 to settle to just about $14. There were indicators that told me that CLCT still had a way to go and we tipped our hand to the loyal readers here at Urbanomics to buy CLCT. Not only did they already represent a great turnaround play, but I am a firm believer that management was persuaded by activist investors to increase the already healthy dividend in this stock to a level that I have never seen before. The dividend payout was doubled almost overnight. I believe activists knew this, and as I've written before this produced the catalyst that we needed. Smart investors flocked to this stock for the chance to get paid twice:
1. As the stock appreciates
2. As fat dividend checks are paid out

Once, they made this announcement to the public, investors went nuts over this huge dividend payout and for the last two days the stock has appreciated roughly over 7% last Friday and 9.9% today. We collected over 15% in two days!

Here is a quick summary of CLCT's release from the Associated Press:

Collectors Universe Inc., which provides authentication and grading services to dealers of collectibles, diamonds and gemstones, said Friday its board raised the company's quarterly cash dividend to 25 cents per share from 12 cents, previously.

Keep gettin' your Urb on...cause this ain't a game