Urb Buzz --- July '07

Welcome to that ringing that won't leave your ear. I know you think I am talking about those annoying cicadas that were buzzing everywhere you went, but that buzz is Urbanomics in ya ear. The buzz combines my principles of using urbanomics to topics that are to hard to understand.

Topic 1 - Risk vs Reward

I am surprised myself that Lindsey Lohan makes my blog, but urbanomically I have to say something. What oh what is this child doing and why doesn't someone get her some real help. Simply the risk here doesn't match the rewards. If Lindsay was a stock we'd issue a huge sell at this point. Like the stock market you invest in something that is reliable and will appreciate over time. Lohan is far from reliable and she is way to risky. What's unfortunate is this chick is out there still driving and could hurt herself and even worse innocent people out there on the streets. But remember in the stock market a company can keep going as long as it's got the cash to do business. So what do we recommend her at the Urb...pull the plug. Yes its time for all of the parties involved to pull the funds from behind this underperforming stock we know as Lohan. Movie deals, endorsements, product lines, etc need to pick up their tents and move on. Many people forgave the first incident but the second time was a slap in the face. There are outcries against another celebrity and corporate america is almost ready to pull the plug (Nike has put his shoe on hold & he has be ordered not to report to training camp)...yep you guessed it Michael Vick. How about pulling the plug on Lohan's new movie, ohhh wait there may be too much money involved. Time to treat all these raggedy stars the same and sell they hype!

Topic 2 - Movie Night?

Netflix just turned "R" rated. Yes ladies and gents, all you movies watchers probably knew this before I did but I didn't pay attention to the signs. How about the fact that my sister used to rent through Netflix, but I noticed recently a switch back to Blockbuster. Why, because Blockbuster decided to give the farm away and you can rent movies online, but return them to stores for a speedy drop off. Genius move right, not exactly...Blockbuster has to be bleeding cash to pull this strategy off. But until then Netflix will be under pressure because margins are probably razor thin (not to mention that the dummies don't charge you for shipping). And to top if off, Netflix's website was down for most of today...great move when your customers can only go to one place to ORDER movies.

Dow take a Bow

Ok maybe more like a curtain call because the Dow Jow industrials has been on a tear. And for the first time ever, the DJ closed above 14000. It was just 3 months ago where the Dow was at 13000, so to put it simply that was a big move. Has this affected our readers here at Urbanomics...you bet.

Urbanomics Flashback:
I'm taking you back to a 2005 article I wrote. What names have we told you to buy, how about Microsoft which hit a 5 year high Don't believe me check out our article here: http://urbanomics.blogspot.com/2005/09/dynasty.html

Urb Homeruns
Check out this list by typing in the name or ticker in the search toolbar on your upper left hand corner and see for yourself how far they have come.

Avid Technology (AVID)
Collectors Universe (CLCT)
Maximus (MMS)

Urb Recent Picks
Our latest picks are in the black and we are seeing great momentum action
South Texas Oil Company (STXX.OB) - This is a low volume stock so like the rides at Six Flags you've got to hold onto your stomach. We've seen this stock dip to $8.95...do we panic, sorry real playa's don't flinch. This closed today at $9.33 and I am looking for company events to propel this stock over $10.
Radisys (RSYS) - Four business trading days ago this stock was at $12.41 and now they have topped $13. With earnings being released on July 26, I am hoping for a great momentum push next week.

Urb Misses
What did we miss this week: Applied Micro Devices (AMD); Intel, the chipmaker ripped through earnings and AMD would have been a great play today knowing that Intel performed well.

Urb Radar
These stocks are on my radar:
Cabela's (CAB)
Starbucks (SBUX)
Rural/Metro Corp (RURL)

Space Age Pimpin' - Space Age Portfolio

Ok folks time to get your portfolio Space Age Pimpin', well into the next few decades. What does this mean? By following the Space Age Portfolio, readers here at Urbanomics will finally be able to buy stock they are looking to hold long term. As most of you know I am your favorite Urban Economist and that's why you see my boys Eightball and MJG here ->




They were early pioneers in the rap game and I am pioneering the stock investment game with a little bit of Urban flavor. Yeah, I know that my boy Jim Cramer and the guys at Fast Money are pretty cool but they got nothin' on me. My strategy is like my basketball game...very versatile. I generally look for undervalued stocks that will experience some type of near term catalyst that will catapult the stock into a great momentum trade and turnaround story. Want proof, follow my recommendations that have been posted: MMS, CLCT, MOBE, each purchased in the last 6 months with returns over 25%. Need more, I own 2 stocks that will like be bought out this year after merger talks are over: Sallie Mae (SLM) & Cytyc (CYTC). But on to what you want to hear. What about the stocks that will have your back for the long term.

Here goes, the goal of this portfolio will be to pick stocks across a diverse group of industries, that are best in class, and have the opportunity for both price appreciation and income potential. Let's start with my favorite industry so far, OIL. With this group I have to go with ConocoPhillips...yes I am

piggybacking their most recent upgrade by Bank of America and it does hurt that they just disclosed a stock buyback program of roughly 15billion.

ConocoPhillips (COP)


Next, I am going out to one of my long term income potential plays. You will benefit because real estate stock is a REIT and those dividend payments can help grow our portfolio. GGP also operates in two segments retail and master planned communities. So you get retail, land owner, and landlord all in on. Real estate has taken a little bit of a beating so jump on board, now.




General Growth Properties (GGP)




No long write up for this one, because I've already told you why to own it but add this retail player to your portfolio.


Best Buy (BBY)

Wrap up your portfolio with exposure to Utilities. Why?...Because it is too damn hot outside. Man and with this heat wave out there what is every one doing at home turning up the Air Conditioner. And when the A/C goes on, the utility man gets PAID. Ka-Ching. So load up with this exchange traded fund (ETF):



XLU

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

Your Best Bet is "Best Buy"

I read a pretty interesting article on one of my favorite retailers, Best Buy (BBY). Morningstar is an industry leading financial analysis firm and recently included BBY in an article called “The Market’s Got It Wrong On These 5 Stocks”. I want to bring BBY to the attention of all the Urbanomics followers out there.

People often ask me, “What’s Your Strategy?”. And often I can’t give them a polished and insightful Wall Street response. My strategy is quite simply to follow in the mantra of Rick Ross, “Hustlin’”. Everyday I am hustlin’…hustle smarter and in some cases harder. So I keep my ears to the Street…literally and look for themes that I often agree with. I don’t recreate the wheel, I pay homage to those who have come before me and use the tools they put in place to learn how to ball out of control. I will admit that the stocks I have normally gravitated towards are deeply undervalued stocks that will benefit from the momentum of the market to catapult them to the returns that I am looking for. I know, I know…I am new school too and too much yapping and not enough proof is what we all want. Let look at a few of my purchases in the last few years, which have been consistent with this theme:

I am including a link to the Morningstar article so that you can read one of their writer’s views on why the street has this stock wrong. I agree with most points raised in this article. Best Buy has some of the key things I look for when I follow Warren Buffet, Peter Lynch, and the Urbanomic strategy.

Buffet Likes Because: This is a best in class stock that is undervalued. The stock has been beaten down and thanks to a poor earnings release, hammered even more (I know, I’m getting excited). This creates a good entry point near the 52 week low and what I think is some margin of safety (I’d rather by BBY on the way down then when they are up).

Lynch Would Be Proud Because: You buy stocks that you know and are familiar their product or business. I practically know where everything is in a BBY store.

Urbanomics Is Hustlin’ Because: Buffet and Lynch like a number of things about this stock. Urbanomics also like the fact that this stock is beaten down (like they stole somethin’), best in class, and there is a catalyst. BBY is raising its dividend payout and implementing a share buyback. Finally, we get a chance to buy this stock ahead of the winter season. And we all know retailers, will be cashing in during the holidays and earnings will see a much brighter day.

Morningstar article:
http://news.morningstar.com/articlenet/article.aspx?id=197250&pgid=wwhome1a

Mama Africa - Sweet Sierra Leone

The beautiful continent of Africa goes by many names. In keeping with my hip hop roots I had to pick the title of an Akon song made about his roots to West Africa. Akon is from "Senegal" to be specific, and if you haven't heard Mama Africa you should check it out. I have a very special connection with Mama Africa, West Africa, and Sierra Leone in particular. This connection led me to complete a personal dream of mine and that was to travel to Africa. I was able to make my trip to Africa earlier this year. The most common statements that I heard before/during/after my trip was people telling me that they have never met anyone that has actually gone to Africa. So obviously, everyone wanted me to give them an account of everything I did.


My one plea here on Urbanomics is that people take time to open a book and learn about different cultures. I heard so many strange comments about Africa before I left for my trip that often I found it hard to even respond to some of the those comments. Note to readers, everything you see on television...especially the Discovery Channel doesn't reflect life in every city or country in S. America, Africa, Asia, or even Europe for that matter. So here is my quick version of Urbanomics mythbusters:
1. People in Africa wear clothes
2. Not every person in Africa lives in a hut
3. Animals are not running loose everywhere
4. I am more afraid walking in Chicago, NY, or LA than I was in Sierra Leone
5. You won't go hungry from lack of food and water

My experience in Africa was so fulfilling that literally all you could do was soak up the entire experience. All my senses were on alert, and the heat I encountered coming off the plane was the first thing I noticed. My eyes immediately followed the Coca-Cola sign that welcomed all visitors to Sierra Leone. Then the sounds of people soon followed. People were speaking Krio, and for first time a sense of familiarity swept over me. A language that I had grown up listening to as a child was being spoken rapidly throughout the airport (yes, they have an airport!). Then the wave of emotions as strangers rush up to me, hugging me and repeatedly calling my name. Yes, strangers to me, but people that could pick me out of a lineup because they have followed my growth from a baby to a boy to a man through pictures and letters. Those persons where no strangers they were family and then it all made sense. All those heightened emotions soon relaxed and everything was calm. Calm, you're thinking yeah right in the midst of all that chaos. But seriously, I felt very calm throughout my entire trip because I had this overwhelming feeling finally being home...comfortable, surrounded by family, and by the love from my family, from strangers, and from Sierra Leone.

I could go on for days about how I ate mango, pineapple, fresh fish, and rice. I drank the local beer Star beer and rekindled my love soda out of the bottle especially orange (don't you want to Fanta). Then there was the beach, and the market where you buys cultural gifts, and I can't forget the trip to the countryside. A trip that took me away from the hustle and bustle of the city and reminded me of the simple necessities one needs from life.
If you've had any interesting trips abroad, I would love to know if you had a similar experience. Here are a few pics from my trip:

Reader Response – Qualcomm, Apple, AT&T

Thank you reader for holdin’ the West Coast down and keeping up with my blog and some of the big names in the stock game. Here is my response to your comment from the June 1 Stocks and Locks post:

Qualcomm – Being that my strategy normally addresses momentum plays QCOM has definitely been on my radar. But trying to catch QCOM is like a magician trying to catch falling knives…it might look like magic until you need surgery. QCOM recently got pimp slapped by the US International Trade Commission, who voted to partially ban phones imported to the US with chips involving an ongoing dispute with Broadcom. So sorry to break the news but:
1. ITC ban will affect QCOM’s bottom line
2. Any possible licensing agreements cripple QCOM business (kinda like Snoop’s character in Training Day)
These two things indicate this is a poor momentum play in the near term. The only positive thing that QCOM has on its side, is that so many US wireless carriers use phones with QCOM chips in it. They will lobby on behalf of QCOM to remove the ban. So unless you’ve got some friends at the ITC I would stay away from this stock until more news is released. The good short term momentum play here is Broadcom (BRCM). Broadcom stands to gain the most through an outright ban or some possible settlement or licensing agreement. And I will give you one more Urbanomic head’s up…check out the executives at the company. More than one executive in the last week has sold the stock playa!! They to are taking their money and running until this blows over!!!!

AT&T – I’ll make this one short because there is a lot of hype surrounding the I-Phone. That would normally be good for my momentum strategy of beaten down stocks…but the trick is you need to know something that the rest of the public doesn’t know. I would argue the run up in AT&T may already reflect the growth from the new I-Phone. Secondly, T isn’t a pure play in wireless…you’ve got broadband and fixed line businesses that also impact earnings. I will tell you when evaluating T, one important factor to look at is churn rate. They are second in the major 4 wireless carriers in keeping their customers which is good, but they haven’t been adding new customers at an alarming rate. So you will probably point at that the I-Phone will increase subscribers with over 1 Million people already on a wait list. I concur with your comment but also point out that you don’t know how many of those customers are already AT&T customers (which boasts to have one of the largest wireless customer bases). So with that unknown variable and the fact that this product will sell out because Apple (AAPL) wants to sustain the hype by not flooding the market…there won’t be that much new subscriber growth. I do believe their will be that growth in the future but for now AT&T is a long term play. Look for a short pop around the release of the phone for a quick play but your best bet is to wait for some pullback and load up on this stock for the long haul.

Apple (AAPL) I think you are asking about AAPL not APPL. So I will analyze Apple. This is the Wall Street darling that everyone has an opinion about and some of us missed the great ride. I will admit I thought the I-Pod was going to be a novelty item and it steam rolled AAPL to consecutive quarters of great earnings. Now the I-Phone is poised to do the same. But as you read in my analysis on AT&T, I think AAPL already reflects some of the value from the I-Phone. Again with a limited number of phones being produced initially the only thing AAPL stands to gain from is the pricing power. They are selling the phones for $499 and $599. Lastly, find out how well received their new operating system upgrade will be. I do believe AAPL still has room to run, but wait for a pullback in the stock and ride the I-Phone and OS upgrade wave to higher earnings.