Ride the Rails

I continue to be upbeat after reading that CSX Corporation made the Zacks.com buy list. I believe Burlington Northern Santa Fe (NYSE: BNI) will share in the positive new about the railroad stocks.

This write-up was provided by Zacks.com:

CSX Corporation (CSX) shares received a very nice little pop when the company boosted its first quarter guidance on Mar 31. This news came on the heels of the company's very solid fourth-quarter and full-year results in which its quarterly profit was up 5% from the same period last year. Put theses two factors together and you have a recipe for a stock that is on the move. CSX shares are up close to 30% on the year.

March Edition: URB in 60 seconds

March flew by and Easter was alot earlier than it has been in a long time. But the markets didn't disappoint and here are some things that are on my mind as we move into April. (no particular order):

Phillip Morris break-up: Yeah I know cigarettes are almost a thing of the past. You can’t even smoke in a bar/club…thank goodness for my clothes, hair, and lungs. But a new target is in sights for the tobacco industry. With less restrictions, tobacco companies are growing overseas and fueling growth for these companies. Now this is an industry that often gets labeled as a "sin" or "vice" stock/industry...no arguments from me but once Phillip Morris (NYSE: MO) spins of Phillip Morris International (NYSE:PMI) it will be off to the races. With double digit growth in the pipelines, many hope this will be a cash cow like its poppa in the US. There are some concerns with how the spin-off will be taxed so I won't be jumping in before that.
said.


WiMAX - Think wireless radio and other devices anywhere you go. Some say this new technology that provides wireless access acrosss metropolitan cities will be the wave of the future. Does this mean goodbye to Satellite Radio...we'll see. A number of big players are onboard, Intel, Sprint, Time Warner, Comcast, and Clearwire to name a few.

Private Equity Firms don't play nice - After getting my heart crushed by private equity (JC Flowers & others) dissing Sallie Mae (NYSE: SLM) and all my gains, these guys are at it again. Private equity firms just dissed Clear Channel and sent the stock spiraling down...guess the contracts just weren't written that tight in the first place!

Rebound in Financials and Mortgages - This rally spurned by the "life preserver" handouts by Ben Bernanke caused a rally on these stocks. But this is short lived in my opinion. Remember, consumer confidence is still very low, banks are still getting downgraded, and the housing situation is till a mess.

Federal Reserve Intervention - Nuff said on this topic, throw me a life preserver, playa.

Kenyan IPO – Safaricom (SCOM.NR) A good friend gave me the heads up on this telecom giant in Kenya. The window for the IPO opens March 28 and it should be interesting across many fronts. The IPO is priced to get a large local participation across the East African countries...not just Kenya. And like my idol Warren Buffet preaches, go with something you know. And after my trip to West Africa last year, I know that mobile phones are the hottest commodity in emerging markets (okay maybe not the hottest, but close). With costs being cheaper to put cellular towers up instead of wired phone lines many emerging countries are embracing cell phone. And with the ability to send someone minutes (almost like exchanging them as currency) this will be the backbone of technology growth across the world. But let's focus on Safaricom... its got the backing of Vodafone who is 40% stakeholder...which isn't a weak amount. And it has an 80% marketshare!!! Yeah take a minute to let that settle. I would be all over this like white on rice, but my brokerage firm said that they may not have access to this IPO, but note Morgan Stanley is a playing a role as a transaction advisor so if you can get in on through Morgan...make it happen.

Hey I Can't Swim...and neither can Wall Street

I am not a great swimmer, so why is the Fed throwing a life preserver to big companies and not me.

When the market starts flip flopping more than they say John Kerry did a few years ago I usually sit back and think it all through. What is really going on in front of me, did I get it right, and can I really see clearly now because the rain isn't exactly gone. To answer some of these questions here we go:

We have been discussing a Recession for a very very long time now, check out my post from LAST YEAR on this subject, where we weren't afraid to bring up the subject: (http://urbanomics.blogspot.com/2007/10/welcome-to-good-life.html).

Its good to know that most of the economists now finally agrees with us (what took so long?), and this article from last month shows a change in their stance: (http://money.cnn.com/2008/02/05/news/economy/recession/index.htm)

Now lets begin to make our way through the clouds and play out multiple scenarios to see what this all means:

Snapshot of a write-up by Bill Fleckenstein:

"Where will all this stop? Can those who behaved prudently afford to bail out those who behaved imprudently? Why should they have to? And is that what we really want? After all, this country's median income of roughly $49,000 can hardly be expected to service the debt of the median home price of $234,000, up from approximately $160,000 in 2000. Let's do a little math. Forty-nine thousand dollars in yearly income leaves approximately $35,000 in after-tax dollars. Call it $3,000 a month. A 30-year, fixed-rate mortgage would cost approximately $1,500 per month. That leaves only $1,500 a month for a family to pay for everything else! (Of course, in many communities the math is even less tenable.) This is the crux of the problem, and the government cannot fix it."

http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CateringToTheBailoutNation.aspx

Thanks to Bill's write-up here, we continue to not be afraid of going against the grain. Noticed he used a familiar line that I often use here at Urbanomics and that's "Do the math"...if it don't make dollars it don't make sense!

In my opionion, I am gonna go out on a limb and say that the recession continues for awhile as the Federal Reserve continues to unnecessarily interfere and "bailout" the financial companies...instead of the financial markets. Free capital market thinking says that these companies that took risky investments understood those risks and continued forward with their strategies. I also argue that the Federal Reserve's strategy continues to do very little for 'average person' it aims to protect. I am not calling for a bailout for consumers and homeowners across the country but I am calling for a strategy to achieve balance out of all this mess. That policy would be further assistance for homeowners, increased scrutiny in lending practices and regulatory oversight of the banking institutions that lend and package loans, and finally a policy that focuses on fighting inflation, low economic growth, and a falling valuation in the 'dollar'. And this isn't just the Fed's responsibility, the SEC, FDIC, and government need to step in and do their part.

I fear the current policy gives reassurance to the investors and Wall Street but it simply realigns the financial power on Wall Street (See Bear Stearns), rather than fixing the problems. Again I go back to when Urbanomics called the current environment a true RECESSION, last year. The numbers didn't lie then and thats why we recommended readers to stay away from financials and homebuilders especially after we identified the housing bubble. No one is going to bail out the investors of those mortgage companies so lets not bail out the companies themselves.

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.

Say Hello...

to Bad Guy. And no this isn't some lame play off of the movie Scarface. Instead I was listening to a track by Jay Z, from the American Gangster album. Here are the lyrics from the last verse of the song:

"We ain't thugs for the sake of just being thugs
Nobody do dat where we grew at, brotha, DUH!
The poverty line, we not above
So out come the mask and glove cause we ain't feelin' the love
We ain't doing crime for the sake of doing crime
We movin' dimes cause we ain't doin' fine
One out of three of us is locked up doing time
You know what that type of shit can do to a brotha mind?
My mind on my money, money on my mind
If you owe me ten dollars, you ain't giving me nine
Ya'll ain't give me 40 acres and a mule
So i got my Glock 40, now i'm cool
And if Al Sharpton is speaking for me
Somebody get him the word and tell him i don't approve
Tell him i'll remove the curses
If you tell me our schools gon' be perfect
When Jena 6 don't exist
Tell him THAT's when i'll stop saying bitch---BIIITCH!"

Now I've barely edited these lyrics, but it should give you a pretty good idea of what the song was about. Now I don't agree with what everyone does out there but he is also saying that things are done for a reason, unfortunately many times for reasons that we don't want to admit to. Now my mission here at Urbanomics isn't to glorify violence or getting ahead 'no matter who gets hurts'.

My mission at Urbanomics is to empower people to become financially independent and to give back to those that are need it the most in the process. Now I know this isn't profound and sometimes not the most popular way of thinking, but there are others who truly believe that the more that you give to others the more you will receive in return. Just take a moment to tune into what Warren Buffet and Bill Gates have been saying and doing. Its no mistake that the Number 1 & 2 wealthiest man are also respected for their ability to give BIG. Speaking of giving big, how about a shot out to Oprah's Big Give, which is empowering everyday people like you and me doing bigs things for others. So some of the ways I hope to help people is to share my thoughts on how to manage your personal financial wealth and to remind you that...the best way to continue to grow that cheese is to give back in many different ways.

I wanted to highlight a hedge fund The Children's Investment Fund (TCI). This is hedge fund founded by activist investor Chris Hohn in 2003. TCI is unique because it is know for actively agitating change at the companies it invests in. The twist that I like is that The Children's Investment Fund Foundation is managed by Hohn's wife. A portion of TCI's profits go to The Children's Investment Fund Foundation making a large charity foundation in the UK. What a great concept by Mr. Hohn and he is making people give back whether they want to or not. So if you find some great picks here, feel free to use a portion of those profits to do something big or little, like giving back (Just send me a shot out on the check).

And you know I had to give you a stock pick out of all of this, (courtesy of streetinsider.com) take a look at one of his recent investments in TransAlta (TAC).

Say Hello to the Bad Guy. How long ago was I pointing out that the economy was struggling. Now every major network is complaining about rising inflation, a very weak dollar, and a US economy that just isn't growing. Interesting how they've changed their stories so quickly, because they can't hide behind the data. From my previous post I've given you the plays and in this market even I may be a little more diligent in monitor my portfolios progress.

I truly believe that you:
Short Financials
Long Commodities like GOLD, OIL, STEEL
Sell nice moves up in your stocks and by the positions i've outlined above on the dips

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

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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