A look back in time...

I've been following the ups and downs of the markets the last few months and what's interesting about my analysis is I don't really feel like much has changed. It has to be the most perplexing thing in the world for me now in my over 10 years of personal investing. It's perplexing because things are changing (slightly) and for the market we've seen its slow ascent higher. But I still think the market sucks. There is a lot of downside risk and I STILL like Commodities, Technology, Wireless.


I am clearing through my papers and I was looking of the habits of investing for success. The purpose of this blog was to capture the main theme of that write up and that was to keep a diary, a virtual diary in my example. The things to try and remember to do are:

~ Review your holdings (probably not daily)
~ Remember you portfolio includes all your accounts: Stocks, 401K, and IRA accounts do matter and they make up your complete portfolio
~ Pick how you want to measure your success: Success can vary from investor to investor so what defines whether you're up...a percentage, a target goal, etc
~ Start keeping track

I hope these tools go a long way into to helping you build your own portfolio. For me I do these things and really don't review my portfolio very frequently. I care about how they are trading but I don't get to concerned on their moves up or down. A great example was when we bought Burlington Northern Santa Fe. If you go back to when this stock was first recommended you will see why I thought it was important and at what prices I thought it was attractive. By taking notes, I still remember I liked this stock in the mid 70s because I believed that one of the positive things to take away from where the economy was at the time was the importance in commodities and the shift in emerging markets needing those commodities. I kept up with things but often didn't watch its swings. Its hard to wait but the odd thing was when Burlington finally got bought out at over $100 a share it was my friend that called me and alerted me of what had happened...I didn't know right away.


Here are a few examples of stocks that we've recommended over time and waited and watched them pay off as the fundamentals developed:


Supertel (SPPR) - I originally bought this in 2005 when it was known at Humphrey Hospitality. In researching my blog this was sold roughly 3 years later for around a 60% increase.

Cytyc (CYTC)- One of my all time favorite stocks, they were one of the first stocks I recommended and one of the first that I owned to get bought out. Bought at $17 and held until they got bought out in the $40s I believe.

Ambassadors International (AMIE) - This one was a stock that didn't move much for a long time I bought in 2004 for $13. I wrote an article 3 years later finally selling after I recall it hitting a peak of $32 and coming back down and settling in the mid 20s.

OIL - My call to buy oil stocks back in 2005 in my inaugural post was fitting. Who would have known the ride this commodity was going to be on going forward. Oil Post

Clayton Williams (CWEI) - Based on my call in oil, this was the a stock bought at $42 and this went all the up into the $100s. This took years to develop but what a ride.

Collectors Universe (CLCT) - Here is the final and prime reason to not let go of a good thing. CLCT is not the best stock I've owned over time, but it was the most stressful one to own. I have owned this stock since 2007. CLCT POST The story behind this stock and why I still own is because of fundamentals. This stock was paying a healthy dividend $.20c a quarter back then and helped me build up my war chest. When the decline of 2008 hit this stock plummeted to $4 when management cut the dividend. The only thing that stopped me from taking a huge loss was reading the financial report that was put out by the company. The newly appointed CEO (because the company booted the last one) outlined that the company could afford to still issue a dividend however it is prudent to hold the cash during tough times. So I waited and waited through the darkest period in the market and true to his word they brought the dividend back when the stock was around $6 a share. So I was essentially buying the stock each quarter with the dividends and lowering the cost of what I had bought the stock in. So today even with the stock standing at mid $13s a share we are seeing a 25% increase.


This is why its important to take notes.



Now it is even more important to remember your blunders and boy have I had a few in my past. The easiest one I can remember is:

Zhone Technologies - I rode this stock from $1.10 to the $1.40s. Then the fundamentals fell and I waited to long. This cost me a bunch as I never sold until this stock hit .70c! Ouch, they didn't get approval to sell in a region in Europe which they thought they had locked down. So this taught me be careful with penny stocks and they are volatile and their business can swing based on contracts.


Not Shorting Housing - This would have made me a legend if I knew about shorting back in the day. This post proves why you should write down your thoughts...my first call on housing and I didn't nothing about it: Housing


Rite Aid (RAD): Just a horrible pick and I'm glad to notice that I wrote about getting out of this position and putting my capital to better use. Ha to bad that cash went to Zhone Tech. LOL


NOT Buying Apple (AAPL) - I wrote a piece on this based on a reader question, and never followed my own advice.

BUYING ETFs - I will write here. Do not buy ETFs as an investment. I would only use these purely as hedges in your portfolio. They are difficult securities to own due to their calculations and just because oil is going up doesn't mean the ETF is going to do up also. Also, anything super levered (Banks x3) is just not smart!!! Repeat do not buy unless you are hedging your portfolio!!!

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.

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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Playoffs...

"Playoffs...Don't talk to me about playoffs" is the infamous line in the Coor's commercial by coach Jim Mora. And even though its early in the year you have to treat your portfolio like its the playoffs. Its game time this weekend for the National Football League (NFL) and only the best of the best are around to fight for the title. And this is the approach that must be taken with your portfolio...only the best of the best will be accepted. The current market conditions: the value of the dollar, the credit crunch, the housing bubble, higher unemployment, deteriorating earnings, high gas, and the threat of inflation are just a few of the strengths working against you...kinda like the opponents defense in a playoff game. So the past week has seen me actively paying attention to the market. I gave you Bear Stearns (NYSE: BSC) just a few days ago as a momentum play as James Cayne stepped away from the company. That was a tough day for stocks you could have gotten in BSC anywhere from $71-$77 dollars. At all of these levels you would still be showing a profit at this point. I am not a huge fan of owning any financial companies at these levels.

My formal recommendation is to SELL Bear Stearns. However, informally if you got into Bear Stears near the 52 week low, I would licking my lips and thinking about keeping holding at those levels.

The next thing I recommend at this point is to closely watch analyst revisions and warnings of certain industries and companies. For instance, if you don't understand that the credit crunch is the real deal at this point and that ALL retailers are being affects EXCEPT for your discount and low cost retailers than you are napping on the market and deserve to be invested in index and mutual funds.

My next move this past week was to part with any RETAILERS that I own with a gain. The only retailer that I owned was BEST BUY (NYSE: BBY). BBY was sold for a small profit but this is an retail darling that I would keep a close eye on. As this stock continues to reach low levels and nears its 52 week low I would take our old price point and build in a 5-10% margin of safety. Our old price was 43.95 (need to verify that) and then I would think about buying in. I personally will lean towards a 5% margin because I think people with still shop at BBY for CDs, electronics, video games, and all discount priced electronics.

My formal recommendation, SELL BEST BUY (NYSE: BBY); look for points of reentry later

Lastly SELL gains with limited upside or in industries that will continue to lag the market. The following stocks are formal SELL recommendations:

Maximus (NYSE: MMS) - limited upside here after large institutional investors sold their stakes in the company...I walk when the big money walks!!!

Online Resources (NASDAQ: ORCC) - Sold after it soared to $12 and showed resistance at those levels (this was a nice gain in two months of over 20%)

Supertel (NYSE: SPPR) - I have owned this for at least a couple of years now. It was originally Humprhey Hospitality. Limited upside at this point (nice gain of over 60% in over 2 years)

Remember only go into the playoffs with the best players for your team. Now some of the best players can be guys that have performed in the clutch for you in the past. I say this because I am a believer of this philosopy. Need proof, check out Buffett's additional purchases of Burlington Northern Santa Fe's stocks at levels where he originally purchased the stock. My only wish is that I would have sold this stock (which we bought around $77) when it hit $86 and now we would be in position to buy again. So sell non-performers and hold cash for the Michael Jordan's, Magic Johnson's, and Larry Bird versions of stocks. My FORMAL BUY RECOMMENDATIONS will be a good number of stocks because the market is getting crushed here and I think plenty of stocks will surface with attractive values:

Burlington Northern Santa Fe (BNI) - Buffett's back and so am I love at our old levels of $77

Best Buy (BBY) - This sector (retailers) is getting crushed so wait for proof that the bad times are over and catch this stock, further build in a margin of safety so you can sleep easy at night; consider buy with a safety @ 40, give a hard look @ 42

Maximus (MMS) - This is an attractive stock with mostly buy and strong buy ratings by analysts. The biggest long shot of my buy group; buy at my old post rec price of $29 & 30 dollars.

Online Resources (ORCC) - We loved this stock when the CEO promised he would put up his own money to buy shares of this stock. And we bought around $8.9 dollars a share. Anything under screams BUY

Radisys (RSYS) - Guess who's back! This stock was a 50% gainer for us last year, when we dollar cost averaged our purchase prices on this stock at levels between $10.60-13. We sold when it hit @17 and smiled all the way to the bank. Well it hit my STOCK SCREEN AGAIN, and I will be adding Radisys back to my portfolio. The recent 10 - 15 low is $12.25 and that is where I will set my buy target. This stock closed at 12.19, and with this stock back to my old buy recommendation levels, I am RE-Recommending this stock. I truly don't believe it will test its 52 week low of $10.50 and we have the help of an earnings release in early February that could propel this stock forward.

Zhone Technologies (ZHNE) - I am going to recommend Zhone Technologies and believe that dollar cost buying down at these levels will have positive upside. This has buy a roller coaster ride and hopefully after the short sellers have to recover there will be huge swings to the upside for this stock.

The Proof is in the Pudding

Now if anything else was inside my pudding I would be afraid, very afraid. Its almost sounds like something Bill Cosby would have mentioned in one of his Jello Pudding Pops commercials. This annoying phrase was hammered into my head when I first started my career. And I think this catch phrase is used when people want to emphasize focusing on just the facts (i.e., you can’t confuse chocolate pudding with vanilla). So in the last three months the proof is in the our recent investment decisions.

Here is a summary of some of the decisions that we’ve made recently:

Positions with positive returns:

Best Buy (NYSE: BBY) – Up roughly 18% in 3 months
Burlington Northern Sante Fe (NYSE: BNI) Up roughly 12% in 3 months
Medcath (NYSE: MDTH) – Up roughly 7% in less than 1 month
Online Resources (Nasdaq: ORCC) Up roughly 13% about 1 month
Zhone Technologies (Nasdaq: ZHNE) Up roughly 11% in less than 1 month

Positions with a flatline or negative return:

Adaptec (Nasdaq: ADPT) – Down less than 1% in around 3 months; since early recommendations I am down 4% in more than 6 months

Rite Aid (NYSE: RAD) I will give a few scenarios for this stock b/c you would have likely experienced one of these situations (See my social picks tracker to the right to verify these percentages)
- If you’ve been along for the ride since the beginning of my RAD recommendations and sold your entire position based upon my November 21st posting (http://urbanomics.blogspot.com/2007/11/drink-and-my-2-step.html) you are down roughly 16%
- If you’ve been along for the ride since the beginning of my RAD recommendations and reduced your RAD position based upon my November 21st posting (http://urbanomics.blogspot.com/2007/11/drink-and-my-2-step.html), the portion you still own is down roughly 7%
- If you got lucky and only started following RAD since my October 26th posting (http://urbanomics.blogspot.com/2007/10/it-must-be-butter.html), you are actually up roughly 2%

Here is my note on RAD, so that I continue my ways of completely disclosing the truth. Some people may feel that it is unfair to list multiple outcomes of how things would have turned out if you actually owned RAD’s stock, but I have to do this because everyone’s decisions to BUY, SELL, or DOLLAR COST AVERAGE DOWN may not be consistent with when I post for my readers to take those actions. If you would consistently followed my postings you would have bought RAD at least twice:
- Initial BUY on October 6th and a Dollar Cost Average Down BUY on October 26th

To further complicate things I gave 2 recommendations on my November 21 to ‘Outright Sell” all your position or “Reduce Sell” some of your position in RAD. How you pay attention to my recommendations based upon your situation would have given you one of the three outcomes listed aboved.

My Actions: I chose to sell outright ALL my positions of RAD on November 21st for a 16% loss. This was because I had made the mistake of having to large of a position in the stock and it was negatively affecting my portfolio. I felt that I could better use that capital on my next 2 picks (MDTH & ZHNE) and I was right. If I didn’t have two new picks that I could have earned a better return on, I would have just reduced my position and I would experiencing the middle outcome of only a 7% decline so far. Notice that’s why I did not sell my RAD positions in my tracker portfolio (Socialpicks) located on the right side of my blog, because I still believe in the stock and its ability to still give readers a strong return.

Soon to come here @ URBANOMICS
I will outline how to trade based on my postings in case this has ever been a concern of yours. (This could be the case because Jim Cramer wrote a book for his viewers on how to trade based on his shows)
Finally I will highlight this year’s performance and the good, bad, and downright horrible decisions we made this year.

Why fly to tech...

Because, I'm like a bird I wanna fly away. That was my best version of Nelly Furtado and it was darn good. I can't go pop so time to get back to the basics. You wonder why previously I said their has been flight. You usually here the statement: "There has been a flight to quality". And all of a sudden the industry that we all have been running away from since 2001 is now the one that we are flying back too now that the financial bubble begins to rear its ugly head.

As usual I try to do the one thing most stock pickers don't do. All the websites and TV shows recommend picks but they don't do one thing that would have been helpful for me when I first got started and that was to recommend great entry prices. There have been a few simple concepts that have made a huge difference in how my returns affect my portfolio. Over the years, I have come to realize that entry price, transaction fees, dollar cost averaging, dividends, and earnings releases/market news have been important in understanding the stocks I pick and how much I buy and how long I hold. I would like to say that I am on the cutting edge by actually recommending an entry price but there is probably someone else out there making a bold leap and doing the same. But even some of my favorites, Jim Cramer, Fast Money crew, and Jim Jubak recommend picks but not exactly the entry price. Jubak probably comes the closest by disclosing he will purchase the stock three days (I think its still three) after he has noted that he will be buying the stock. So here goes my take on good ole' technology:

Adaptec (ADPT) $3.40 – Every portfolio needs a little risk and here is mine. This beaten down warrior blasted through its 52wk low. I see momentum action here that will create a floor and push this stock higher. If this stock every dips back to my recommendation price Superman that stock. I got in at $3.54 and since then this stock has gone up $3.82. It has come back a little and due to the markets negative outlook. I would accumulate at $3.50s if it dips and ride the short term wave to a nice quick gain. Save a little in the tank as this will be a great long term play.
Risk – Medium - High
Time Horizon – Short Term

Advent Software (ADVS) $39.25 – Another area not hit by the credit woes is technology. This company reported earnings in August and sales of their software geared towards investment companies and non-profit organizations grew at a decent clip. With the adding of new customers and management’s willingness repurchase the firms shares when they are trading at a discount, this company will continue to be rewarded for growth and look for an exit point of $45 to $47. My quick update is this stock is volatile and a little patience will be rewarded if this stock gets down back to my recommendation price.
Risk – Moderate
Time Horizon – Moderate Term


Zhone Technologies (ZHNE) $1.10 – Many well known investors note they would probably be small cap traders if they could start all over again in today’s world. And I don’t disagree with them. Small cap gives you the opportunity to accumulate a large number of shares just as a private equity firm would accumulate a large number shares for their investment portfolio of today’s medium and large cap stocks. The practice is to load up on a good thing (most funds hold a majority shares in the top 10 companies) and ride the great returns. But the problem with small cap stocks is risk… or should I say the perceived risk that in one quick swoop your $1 stock can become worthless. The way I recommend playing small cap stocks is find your entry point and give yourself some margin of safety to buy the stock. For example, I have indicated a target price for ZHNE of $1.10, but this is the margin of safety price after I noticed momentum at the $1.15-1.17 range over a month ago. On Aug 16, the death day of the market I got my margin of safety price of $1.10 and rode ZHNE for a few days and sold at $1.20. Well more momentum action is occurring at $1.20. I would say this consistent action should reduce our margin of safety and I would re-recommend ZHNE here at a range of around $1.15 to 1.17.
Risk – High
Time Horizon – Short Term

Ohh and I almost forgot my favorite tech stock of the moment, Radisys.
RSYS - This stock has tested the limits of the faint of heart. Many people watched this stock dip below the 52 wk low and thats when a technique that we discussed above came in handy. Dollar cost averaging allowed us to continue to buy this stock as it fell. The price here would be around the mid 10.80s. The "Superman that stock" price would be where I got lucky and repurchased the stock at 10.50s. If this stock drops to 10.50 I repeat...bring out the 18 Wheeler and jump all aboard. Notice the recent news of RSYS acquiring technology platforms from Intel has fueled a nice rally today. It could have been picked up today at around $11 but the nice upside move is just what the doctor ordered. It was reported the new acquisition will be completed in a little over a month and add around $50 million to the bottom line. Music to the ears of us buyers here at this point in the stock. Look for the completion of the acquisition and if as earnings begin to be revised upwards by analysts covering the stock...get ready for takeoff.

I'm Out....PEACE

Flight To Technology

As I commented before, with the turbulent markets reeling from the financial industries woes there has been a flight to technology. This is understandable as many investors still search for growth and safety. I will apologize ahead of time because I have bought a few names but here are the stocks I will bring to your attention. Some are technology plays while others show positive momentum action in this crazy market.

Adaptec (ADPT)
Zhone Technologies (ZHNE)
Advent Software (ADVS)
Lamar Advertising (LAMR)
Gatehouse Media (GHS)
Wachovia Corp (WB)

I should have more on these companies later.

Disclosure: I recently purchased Adaptec, and Advent Software. I recently bought and sold Zhone Tech for a profit.