I Got a Warrant...for AIG

Just a quick post for folks playing along at home. I won’t give you my thesis but my take is its time to take our huge profits in AIG. We recommended it here when it was unpopular in the $30s and I’ve taken my position off the table. My simple reasoning is that you should have stayed in the stock until Jan 13, 2011 when they issued warrants to shareholders on record. These warrants will allow shareholders to buy the stock at $45, whenever we want for UP TO 10 YEARS!!!

After that Jan 13th, sell the stock because they are beginning a recapitalization program. To me this is just a fancy term meaning they have to pay the US Government (technically Treasury) back. To do this AIG will take the US Treasury’s preferred shares and convert that into 1.7 billion shares of common stock. This will dilute OUR shares and likely drive the stock DOWN into the low $40 range. More new shares means my shares are now a smaller amount of the whole pie...people don't like that. That's why AIG is giving you warrants to stick around or comeback.

This is why I sold on Jan 14 and locked in those juicy profits. I hope to receive warrants because I was a shareholder as of Jan 13. I anticipate the stock price dropping and I will have to mark a new entry point on when I want to buy back into AIG which will eventually be a company free of government money in the near future. In the meantime I will still have warrants for the next 10 years that allow me to buy this story back in the event it takes off. (Kinda like a break in case of emergency that the stock took off w/o you)

Wish me luck and let’s hope this works. I will keep you posted on the warrants. And now I am wondering if this stock is available to be shorted on the ride down.

Questions on Technology Stocks

I wanted to post my high level thoughts on three technology stocks that I was asked to consider.

Applied Micro Devices (NYSE: AMD) - I am nervous about this stock because they’ve never been able to get over the hump. I tempted to call them a dog with fleas. There is reason to be concerned as the Board of Directors (BOD) canned the CEO because they thought he wasn't built for the next wave in the PC industry… tablets. It is mind boggling that the CEO may not steer the company in the right direction. How hard is the chip sector to understand, smaller devices (phones, tablets, netbooks) is the direction to go.

URB Recommendation – Pass on this pup



Coinstar (NASDAQ: CSTR) - I have really liked this stock for quite a few years now. This one qualifies as one that got away because I liked it back when it was in the $20 range. I won’t take any credit because a friend who is very loyal to Motley Fool uncovered this gem awhile back and has held ever since. Not many realize they are the brains behind Redbox, which everyone seems to be familiar with. There stock recently fell (roughly 25%), I believe out of concern that the company was being squeezed on their margins.

URB Recommendation – Need more research to identify buying opportunity


Netflix (NASDAQ: NFLX) – I learned from my Napster days if it’s so simple and convenient for people to adopt, then it will be a hit. And Netflix definitely qualifies for this category. I have not used the service but they took off and never looked back. This story definitely qualifies as one that I left get away and I’ve been watching closely. I don’t necessarily like what I see at this point: Plump valuation, hedge funds taking the opposite position, and new competitors popping up everyday. I see this now as a crowded space. They are facing new competition from Hulu, Apple TV, Google TV, DVR's, Redbox, etc.

URB Warning – The Chief Financial Officer (CFO) recently quit, which is strange?!?! Also, when the hedge funds came out shorting and talking bad about the company…the CEO responded….ODD, as CEO don’t you have anything better to do?!?!?

URB Recommendation – More tempted to short this stock, but don’t feel bad about doing nuthin!

It's A Long Way Up the Mountain: Iron Mountain

Iron Mountain (NYSE: IRM) was a recent recommendation that we've highlighted. Look back (using the search bar) at previous posts and you will see that we watched this stock as it violently fell to new lows and eventually hit a 52 week low, its lowest point for the year. We swooped in during these turbulent times and made solid calls to buy this stock as it was nearing a these lows and as we felt there was enough of a safety margin to begin buying. Once bought you must remember one of our fond URB Lessons Learned:

URB LESSON LEARNED ~ Monitor your holdings for underlying data that either 'supports' or 'rejects' your reason for buying the stock.

If there is evidence to reject your reasons for buying the stock, then while is hard to part ways you must dump the stock.

Recent Data from Iron Mountain:

~ Quarterly Dividend was raised 200% from 6c to a whopping 18.5c!!
~ Recommended by a well know investment analysis firm
~ The most recent earnings beat the estimate of Wall Street...and this has been the recent trend
~ And they have raised future earnings expectations. My experience is firms don't do this unless they believe those numbers will be reached

The dividend increase and the rise in future earnings are excellent signs to support our recommendation.

Dec 21 2010: Technology Stock Recommendation

There is a technology stock that has shown up on my radar for some time. I often do my research and wait until it hits my price targets that I think are critical. Because any stock may be worth a BUY at the right PRICE.

I'm transitioning to my new format where I will alert you all here of the recommendation. And then I will release the stock at a later time after I've had an opportunity to reach out to any that sign up for my new service. Stay Tuned!!!

Stock: ******
Technology
Software and Programming
Small-Cap
Hint: Penny Stock that appreciates the IPhone

Santa Claus Rally...

This rally came too early to be called a Santa Claus rally this year!! To have a quick flashback you will recall that we recommended increasing our holdings of stocks to take advantage of certain actions earlier in the year like Quantitative Easing (QE). Looking back, I agreed with the thoughts of many other investors and economists that it was time to move up in the risk spectrum. At that time, I believe QE would negatively impact bonds and favorably impact stocks. Our picks ranged from: 1. Dividend Stocks 2. Commodities 3. Large Cap 4. Our Usual --Down and Out Stock w/ Great Upside Potential.

Urb Lessons Learned: Keep some skin in the game on speculative stories that perform well.

This year I learned to trust my instincts but I wasn't consistent with my usual strategy of keeping a little bit of a well performing stock. The following stocks fit our Down and Out Stocks w/ Solid Upside, however we sold early and didn't keep any to enjoy this even more of the upside:

~ Boston Scientific (BSX): Bought this down and out and eventually accumulated this stock at a dollar cost average of $6.20s. Looking back we sold this stock around $7 and now it boasts an asking price of $7.82. Things that make you go hmmm.

~ Audiovox (VOXX): This consumer technology play was a solid call after it clear our down and out strategy with great upside. Consumers are coming back and they make the great Xmas devices that are on people's wishlist. Bought around 6.40s, sold around $6.8os because I got jittery and this stock now trades around $8.45!!! Wow

This reinforces my lesson learned in 2010, keep some in the game, you'll regret it less later!

Here is a look at other nice calls since our shift away from bonds:

~ American International Group (AIG): Gone from $30s to $50s and it looks like the upside is just beginning. This was part of our down and out call, no dividend so the upside needs to be significant

~ Collectors Universe (CLCT): Maintained our position here from levels that range from $ 4 to 9 bucks. This stocks boasts a healthy dividend payout of 32.5 cents a share and keeps the income stream coming in. Management has cash so the dividend looks solid. And the ride up to the $14-15 dollar level has given us nice appreciation.

~ Iron Mountain (IRM): This stock is a quiet surprise because its seen good upside very quickly. Roughly a 20+% move, this was a down and out stock that boasted good dividends.

~ Republic Services (RSG): Waste management has never looked so sexy. I personally think this stock was battered for tough reasons, which gave us a great entry point and this stocks has a dividend.

~ Oracle (ORCL): I don't write often about this stock because I have never sold it since in 1999 or 2000. Yes, I have loyally owned it for 10 years. I never owned a lot and perplexed as to why I never bought more but its now gives out a small dividend which allows me to reinvent in ORCL.

UNDERPERFORMERS for 2010

~ Radisys (RSYS): The reason why this stock is listed in the underperform section because it hasn't gone down but its basically DONE NOTHING! If you don't believe me, check out my dog and largest shareholder David Nierenberg's letter to RSYS: Letter

Note: Please read this letter. Nierenberg has asked RSYS to take a number of steps to improve the stock price. It appears that RSYS just announced one of those actions, however it comes on the heels of RSYS trimming its 4th Quarter Outlook.

STAY TUNED FOR 2011

American International Group (AIG)

On a positive note today, we saw the shares of AIG rocket up 14%! As you have noted, we have recommended and are still bullish on AIG. The skinny:

~ AIG plans to repay the Federal Bank of New York

~ AIG is selling key assets, like their Asian life insurance, unit to drum up cash for repaying their loans

~ The market is reacting positively because it begins the process the US Treasury converting their shares to common stock

~ On the heels on GM, it LOOKS more feasible that the government may find receptive investors that want to snap up shares on a possible turnaround story

While there is still more room for this stock to run up, we have had a nice move here. I think with the developments highlighted above, this will DEFINITELY be a mainstay for my portfolio going forward with strategic buys going forward.

Tax Cuts...Yes or No??

I am a market guy but I must write here in this article that I am surprised about how often every issue that the administration embarks on is severely attacked. The rule of thumb is you have reached a good level of compromise on Wall Street or in Washington when you pass a bill that has both sides of the debate a little unhappy. So my perspective of the Tax Cut debate is simple. We've officially reached the level where we have too many whiners and not enough leaders. Especially ones that will tell the truth. In my opinion, President Obama has done a decent job of navigating the water of a highly politicized atmosphere and prime example are the tax cuts.

This deal and its timing are both solid! First both people on the left and on the right are complaining, check. Second, unfortunately since you can't believe the moving lips of many in Washington listen to outside people. I'll listen to Mohamed El-Erian, CEO of Pimco, who has a great perspective on the markets. He points out that the market is headed in the right direction and even increases his overall outlook for next year, DUE to the actions of the White House. The tax cuts are extended for every for the next 2 years and while that may not be the smartest move for the deficit, the KEY element for also extending the cuts for the top 2% (which is what the Republicans want) was getting a series of main street and business tax cuts that STIMULATE the US economy going forward. Tag on the extension of unemployment benefits and this may truly be a multi -pronged jolt that our economy needs to beef up growth. Look at the reaction of the markets...they are responding well hope, now lets hope us folks on main street feel the shock. To be fair, he notes two main themes are the results of a higher outlook:

Fiscal Policy - This would be actions led by President Obama on tax cuts, which contain many parts that will stimulate our weak economy.

Monetary Policy - This would be the Fed's QE2 money printing policy which juices the markets.

This is a great move by President Obama to turn the political posturing into an economical bang for our economy.