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DSW - Step into this Growth Retailer
2007-03-28 03:08:00
DSW Inc (DSW) is a retailer that sells brand name dress and athletic shoes for men and women. It operates 215 stores in 32 states with 30 new stores opening every year. It is announcing its Q4 and year-end results this Thursday and I think you should buy this stock ahead of the earnings. Here is why:DSW specializes in designer footwear and buys from over 300 brands including Kenneth Cole, Via Spiga, Calvin Klein, Gucci and Addidas. Their business model allows them to sell such footwear at 20% to 50% less than department stores. The company's inventory system allows it to sell 80% of its inventory without markdowns and keep the merchandise turn-over at over 4 times a year, double the turn-over at department stores. A typical store carries over 30,000 pairs of shoes and runs a successful loyalty program with over 6 million members.In addition to its own stores, DSW runs 240 leased departments for other retailers, including Stein Mart. In fact, starting January, DSW became the exclusi...
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Bankrate looks like a cool short
2007-03-25 20:43:00
RATE has not pulled back much considering how mortgage companies have rolled over. A huge chunk of Bank rate's business comes from mortgage companies who were willing to pay up huge for online referrals. With so many of these guys struggling, RATE will lose much of its pricing power and this will hit their earnings in the current quarter. I recommend shorting RATE for the short term despite the possibility of rate cuts later this year. -- Faisal LaljeeFull Disclosure: I do not have any position in RATE but my position might change anytime without notice.
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Correction on USG
2007-03-22 19:21:00
It has been brought to my attention that my previous post on USG contained some incorrect information. I mentioned that Buffet's cost basis was $45. The fact is that his cost basis is a lot lower. Buffett acquired majority of his stake when the company was emerging from bankruptcy last summer. However, this does not change the point I was making, because he did acquire over 1 million shares on the open market at just under $46 last year. This reflects his conviction regarding USG. Despite owning the stock at much lower levels, he increased his cost basis by buying on the open market.My apologies for the misinformation, but I maintain my position on the stock.-- Faisal Laljee
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Should Regulators Have Their Way with Mortgage Lenders?
2007-03-19 04:50:00
As if there isn't enough talk of the sub-prime mortgage business already out there, here is another post concerning the subject. Why is this post different than some of the others? For one, living in Los Angeles means I have some friends in the mortgage arena so I know a thing or two about the business, and for another, the investor side of me presents the other side of the coin.So whats the problem in sub-prime? To understand that better, lets start with what is sub-prime. Every lender has a different criteria for sub-prime but mainly, people with Poor to Good credit are considered sub-prime. Usually, this translates to a FICO or a box score of between 500 and 700. Some lenders have prime mortgage products for those that have a credit score of 640-700, but for the most part, this area is considered Alt A, which means prime product for a sub-prime borrower. For a business, sub-prime loans are risky in that they have a higher tendency to default, however, these loans have higher pro...
More About: Mortgage , Have , Should , Gage , Ender

USG Charting a Rollercoaster
2007-03-16 21:11:00
It happens so often that one buys a stock for the right reasons but sells them for the wrong ones. I make that mistake frequently, but with USG, I am going to keep reminding myself why I own it.Here is a stock that is practically flat since last summer, while the rest of the market has seen a significant move up. In December, the stock finally hit $58, up from around $45 in summer, only to fall back to $52 by January even in the face of positive market momentum. By February, USG hit $58 again but the market declines pushed it down to that coveted $52 level. Just when one would have expected the stock to stabilize for the next move up, the company frustrated investors by making a share offering of some 8 million shares at $48.60, so guess what, the shares are now at $48.60.Normally, this kind of behavior is reason enough for me to sell, and I often kick myself for doing so. This time around, I have actually written myself sticky notes and stuck them to my monitor to remind me why I o...
More About: Hart , Roll , Chart , Coast , Char

Will the Sub-Prime Mortgage Issues Have an Adverse Impact on the Markets
2007-03-13 18:11:00
This is a question that most investors are pondering, including myself. Will Sub-Prime Mortgage Issues Impact our Financial Market s in a Way not seen since the Enron scandal? While I am not sure of the answer, here is my point of view.It all started with HSBC warning of higher delinquincies in their mortgage business and was quickly followed by New Century (NEW) announcing that they would not make a profit for the foreseeable future. All that now seems so far away. Making a profit is the least of New Century's worries as higher delinquincies and controversial lending has prompted an investigation into its business, not to mention that the company's almost $3 billion market cap has been wiped out.Last week, Countrywide (CFC) stopped offering 100% financing. Option One and some others followed suit. If this tightening flow through to other areas of the finance spectrum, with auto makers and credit cards, it could spell the end of the fierce consumer spending seen in the US these la...
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Japanese Caterpillar Komatsu Bulldozes its Way to the Top
2007-03-10 00:44:00
Komatsu Ltd. (KMTUY) is a Japan ese entity that engages in the manufacture and sale of construction and mining equipment, industrial machinery & vehicles and electronics products. It is also expanding its businesses into other areas such as housing, transportation and logistics equipment. One could consider Komatsu the Japanese version of Cat erpillar (CAT). The stock trades on pink sheets here in the US, but that should not deter investors looking to capitalize on the multi-year expansion currently taking place in Japan. In March 2006, the company reported an annual earnings increase of 77% over 2005. Komatsu is not an obscure operation that you've never heard of. In fact, it has been marketing its products in the US since the 1960's. In 1970, it established a North American operation and is the second-largest manufacturer and supplier of construction equipment in the world today with nearly 2000 employees just in North America. Lately, the company has been taking steps to strength...
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Stocks to Buy from Warren Buffett's Portfolio
2007-03-08 20:58:00
Last week, I posted Warren Buffett 's most recent portfolio. This week, I did some analysis to gage his cost basis for each of his holdings so I could figure out how much gain he is sitting on for each of these holdings as of right now. If you look at the table below, it is obvious that Buffett hardly ever owns a stock for less than a triple digit gain. So for investors who don't want to do their homework and want to shadow his moves somewhat, I have highlighted the ones that are recent additions to his portfolio that have not appreciated as much as much. What this means is that these stocks will probably do well over the next 3-5 years and could may well be his AXP, KO and PG. Do you think one of these is more attractive than the others? I'd love to hear from you.-- Faisal Laljee
More About: Stocks , Portfolio

Media Wars - Response to Reader Comment
2007-03-08 10:28:00
Reader Linda N recently commented on my post titled " Media War s Part 2 of 2: Focus on Content and Easy Digital Distribution "Faisal, I think you're missing some important points about VOD. Right now, I'm downloading independent films from Unbox, in about 40 minutes to my ZEN. I can watch on the train or plug it into my TV and watch in DVD quality. This allows me to watch sophisticated independent films, that I could only get from Netflix in the past, except now I don't have to wait for the mailman and I can take my content where ever I want. It's simple to use and less expensive that buying DVD's at retail stores. Amazon got it right with Unbox. The also have content from all the studios except Disney and I don't know many adults that care about Disney films anyway. ZEN is awesome - best quality image and awesome features not found on video iPods. HP will give Walmart a great platform for downloading and offer tons of titles not available on iTunes (who currently don't have ...
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New Features Added to the Blog
2007-03-07 02:33:00
You might have noticed a few changes to the site. I just want to highlight these changes:A new blog has been added to the site called Trader Pad. This is a place for me to jot down my thoughts on stocks and markets during the day. These posts will be 2-3 liners at most and the subject matter, while being stocks, will be different than the detailed and longer posts on the main blog.The Top 5 This Week shows 5 posts which have been clicked most often in a given week. This gives you an idea of the most popular posts.Recent Comments highlights your comments to me.Last but not the least, I have added Multi-lingual support for those who prefer to read this blog in their native tongue. Although I must warn you that the translated text seems to be out of context on occasion and might even be a little funny.Drop me an email and let me know what you think of the changes.-- Faisal Laljee
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Shorting The Market? Here is How I Recommend It
2007-03-06 06:49:00
I try to avoid shorting the market, but if you feel compelled to do so, I recommend QID and SDS. QID is an ETF that shorts the Nasdaq. It is the anti-QQQQ's with a kick in that it magnifies the movement in QQQQ by a factor of 2. So for example, a 1% down move in QQQQ implies a 2% gain in QID. Similarly SDS is QID's counterpart for the S&P 500. If you think the stock market is heading lower, and I don't argue that, I recommend you play these for the short term.-- Faisal LaljeeFull Disclosure: I do not own any shares of QQQQ, QID or SDS but my position might change anytime without notice.
More About: Market , Men , Here , Mark , Short

Starbucks - Down But Not Out
2007-03-06 00:20:00
Howard Schultz's memo to his associates shows his true mettle as CEO of a company that has seen its share price increase by 4400% since it went public in 1992.Recently, after hitting an all time high of $40 back in November, Star bucks (SBUX) has seen its share price drop over 25%. Despite growing earnings at just under 20%, and with aggressive plans to expand in Asia, the stock is trading at 27 times 2007 earnings - a multiple not seen in over 4 years.While it is true that the giant coffee company might need to slow its plans for growth overseas and is seeing slower growth in the US, it is not uncommon for companies to run into a period of slowing growth. Indeed Pepsi (PEP) took a tumble from $53 to $41 in early 2002. Considering it was a $80 billion company when the stock took a hit, Starbuck's correction does not seem that serious in comparison.Back in April of 2006, I said this about my post titled Stocks for the Long Run :Starbucks (SBUX) - Here is some information about Starb...
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Down Market Was Predicted and it Finally Happened
2007-03-03 01:06:00
Back on February 7th, in my post labeled Mark et s Marking Time, I said:Every month that the market moves forward gives me more reason to be less bullish. I am still cautious going into Feb and March and I recommend investors lock their gains before the selling hits - the market has to correct 5% or more before I can get all-hands-on-deck bullish. Back on that day, the Dow hit 12749 before closing at 12666. Today, a little over 3 weeks later, Dow closed at 12114, down 4.4% from the levels where I advised profit taking. The Nasdaq is down even further, down 4.9% .While I was right this time about the market direction, I was wrong about it from September through January, where on at least 2 occasions, I cautioned readers that the market had run up too much too fast. Just want to put that out there so you don't think I highlight just my good calls.What happens next? I mentioned yesterday not to trade this volatility and I maintain that you need to build your shopping list. Don't go sho...
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Warren Buffet's Portfolio
2007-03-02 03:48:00
If you don't already know, War ren Buffet shared with investors, his 2006 Berkshire Hathaway portfolio today. The list only contains companies that make up at least $700 million worth of investment in his portfolio. New additions for 2006 were Johnson & Johnson (JNJ), Posco (PKX), Conoco Phillips (COP), US Bankcorp (USB) and Tesco. Following are his holdings: While a couple of undiclosed names are missing, there are a couple of things I would like to mention. First that as long as Warren Buffet is ok, Berkshire Hathaway and all the stocks that are part of its portfolio will be ok. If something were to happen to Buffet (health wise), these stocks will be in some trouble. Until then, if you own any of these, you should be ok. The ones I lke from this group are USG (I have been bullish since the first time Buffet bought this), COP, WTM and PKX if you want to own anything from this list.-- Faisal LaljeeFull Disclosure: I do not own any of the stocks above except USG, but my position...
More About: Portfolio , Port

Don't Look to Day Trade the Volatility
2007-03-02 03:01:00
Wow what a day. Down 200, up a little and then finally settling a little below. What to make of this? I am staying put. No trades. As I said yesterday, wait for the market to figure out its direction. Add a few more names to your shopping cart. Above all, do not trade this volatility.-- Faisal Laljee
More About: Trade , The V , Look

Create Your Stock Shopping List But Wait for Lower Prices
2007-02-28 16:18:00
The market could go down further today, or even recover a little and then sell off. Most traders might use the slightest recovery to sell what they didn't sell yesterday. After all, it is not everyday that 498 of the S&P 500 are down. Wait before you start buying and try to hold what you have . Meanwhile start making your shopping list. When the market goes down further, you might want to put your cash to work. Some stocks to consider for your shopping list are:Companhia Vale do Rio Doce (RIO) - best iron ore producer and one of the largest miners. Commodities are not dead.New York Merchantile Exchange (NMX) - derivatives and commodities are becoming easier to trade. This is the sequel to Chicago Merc (CME)New York Stock Exchange (NYX) - largest stock market exchange. Down from $112 to $82 on no change in fundamentals. Stock is just above its 200 day moving average.China Mobil (CHL) - largest mobile company in China, huge market cap but still growing rapidly. Close to 300 million s...
More About: Shopping , Rice , Your , List

How to React to This Carnage - Buy Dow Chemical
2007-02-27 21:18:00
The last 20 minutes has seen the Dow Jones Industrial Average drop 200 points on top of the 250 points that it was already down this morning. I am almost afraid to look at my portfolio, which I was admiring just last night. Unless you are a day trader, you could not have sold fast enough to prevent the carnage that your portfolio is seeing today.What to do? Stop trading!!. Stop panicking!!. Go for a walk, clear your head and go back to the reasons why you bought the stocks you bought. We are in panic mode and it needs to be turned off. Above all, do not sell here.On a side note, I am thinking Dow Chemical (DOW) looks attractive here.-- Faisal Laljee
More About: How To , This , React

Cyberonics Looks Depressed
2007-02-27 08:57:00
By some measures, Cyber onics (CYBX) is a volatile medical device maker. God knows the management have had their share of trouble with issues ranging from the options scandal to FDA approval of its core product, but things can't get much worse at these levels. Cyberonics makes a neurological implantable device that provides electric stimulation to a major nerve. This device is has been approved to treat epilepsy and depression. The latter application has generated controversy amid concerns the Food and Drug Administration granted approval in 2005 based on insufficient data. The Cyberonics VNS Therapy System consists of an implantable generator that delivers an electrical signal to an implantable lead attached to the left vagus nerve, a cranial nerve that extends from the brain stem through the neck to organs in the chest and abdomen. Stimulation of the left vagus nerve in the neck modulates various structures and alters blood flow bilaterally in various areas of the brain. device de...
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Media Wars Part 2 of 2: Focus on Content and Easy Digital Distribution
2007-02-26 01:53:00
In the previous installment of this series, I blogged about how Walmart's entry into the video download market would not impact companies like Netflix and Apple.In this post, I will disclose the stocks that I believe are poised to succeed from the convergence of digital and traditional media.Yahoo (YHOO)I have been bullish on Yahoo for a long time, but only with limited success. Indeed until recently, when Yahoo surpassed the coveted $30 mark that it had flirted most of last year with, my call had been fruitless and at certain points even painful. With the current launch of Panama, and a management shake-up, Yahoo has nothing to lose and everything to gain. Once a dominant force in online search, Yahoo got beaten hands down by Google who came out of nowhere to grab market share that belonged to Yahoo. However, one needs to understand that while Panama will positively impact Yahoo's paid search capability and revenues, it has equally significant components in other areas of the onl...
More About: Media , Wars , Distribution , War , Content

Online Search and Shop Market: Google Faces Choppy Waters
2007-02-22 06:32:00
Being that I am a Market ing professional in the financial sector, I have information that might be interesting to the analyst community regarding the online search business.As you are aware, Google (GOOG) and Yahoo (YHOO) have cashed in big time from the mortgage boom. Direct lenders, conventional banks and lead aggregators like Lending Tree, Nextag and LowerMyBills.com have all paid top dollar to drive online traffic to their site. Keywords like mortgage and refinance have gone for as high as $20 to $30 per click during peak times.The spate in the mortgage business started last year with interest rates rising, ARM's resetting and consumers starting to default heavily. This was the tipping point that had a lot of real estate and mortgage investors worried. This year, the problem has been exacerbated further with HSBC's (HBC) recent announcement regarding a jump in delinquincies, New Century's (NEW)similar woes and Novastar's announcement just earlier today regarding no taxable i...
More About: Faces , Search , Water

Cubist Pharmaceuticals Wages War Against Bacterial Infections
2007-02-20 05:39:00
By Yahoo's definition, Cubist Pharmaceutical s (CBST) is a biopharmaceutical company, engages in the research, development, and commercialization of pharmaceutical products for the acute care and anti-infective markets. In other words, Cubist develops anti-biotic drugs to fend bacteria that resist existing anti-bacterial medicine.In U.S. alone, almost 2 million people get bacterial infections every year, of which almost 5% succumb to the infections. Bacteria l infections are a relatively smaller focus for biotechs and drug companies, who usually look to develop blockbusters that can rake in a few billion rather than the millions that Cubist is looking to bring in with their focus on the abandoned market of anti-biotics. Cubicin is the first major anti-biotic in over 13 years and is the most successful one of its kind ever, bringing in $350 million in revenue so far.On the flip side, CBST’s earnings have not always yielded the result investors have hoped for. The last 4 quarters hav...
More About: Mac , Infection , War

The KNOT - Bound and Gagged
2007-02-13 23:46:00
TheKnot .com (KNOT) reported earnings today and they were good. I mean really good. However, analysts were expecting higher sales based on the Wedding Channel acquisition from last year and the numbers were soft in that area. Internet companies are only as big as their sales and considering the stock's huge run this last year (over 100%), a pull back on the faintest of disappointment was inevitable.For those who remember, I had recommended KNOT back in July of last year around the $16-$17 level, and recommended profit taking around $28 a couple of months back. While the stock advanced into the low thirties this year, this pull back vindicates my move to sell. While the stock still remains a take-over candidate, the market looks a little weak - specially Internet. This stock will probably see $22 before $30. On a pull back to $22, I might considering buying, but it depends on how the rest of the market and sector is behaving.-- Faisal LaljeeFull Disclosure: I do not own shares of KNO...
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Boston Scientific is Compelling at these Levels
2007-02-01 07:40:00
I think Boston Scientific (BSX) is headed to $20, so if you are an options player, this is a good short term play. I would sell it in two weeks if it does not get to $20.-- Faisal LaljeeFull Disclosure: I have long positions in BSX but this might change anytime without notice.
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MEMC Electronics Up on Great Numbers
2007-01-26 16:46:00
MEMC Electronics (WFR), is up 15% this morning on some great numbers released after the bell yesterday. I have been recommending this stock since June . I believe it is wise to sell at least some of your shares considering you are sitting on 42% gains if you bought it at my recommendation.-- Faisal LaljeeFull Disclosure: I do not own WFR, but I can change my position anytime without notice.
More About: Great , Numb , Numbers , Tron

As Commodities Fall, Tenaris Remains in Doubt
2007-01-10 02:28:00
I feel sad going neutral to negative on Tenaris (TS), but I believe it is time to take profits. My recommendation back in June has realized readers a gain of 38%, not including dividends and I would like to close the chapter on this stock while profits are still in tact. Frankly, I am surprised the stock has kept up in the face of falling commodity prices.-- Faisal LaljeeFull Disclosure: I do not own any shares of TS but my position can change anytime without notice.
More About: Commodities , Doubt , Comm , Fall , Modi

Fuel Tech on Fire
2006-12-06 05:31:00
Fuel Tech Inc. (FTEK) is not a stock most people know of, but it is up almost 100% since October. Fuel Tech makes equipment that helps power plants reduce air pollution and burn fuel more efficiently. With democrats winning the elections last month, the stock has gained added momentum and looks like it will end the year near an all time high.FTEK is not for the faint hearted. It sports a very high valuation and its price/volume action demonstrates plenty of volatility. However, considering that democrats are against big oil and pro environment, Fuel Tech is poised to stay in favor for a while, although, it is a stock completely levered to market's momentum. Over the next couple of weeks, those who own it will make money, but the stock is up too much too quick (support is at $18) to be a core long term holding. I bought the stock yesterday after I sent the note to readers, but its a small position and is meant to catch the quick move I expect between now and the end of the year. Tho...
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The MySpace factor
2006-10-12 21:51:00
While everyone is talking about Google (GOOG) and YouTube, I would like to bring your attention to News Corp (NWS) and MySpace .First lets consider what News Corp was before the buyout - an old media conglomerate with the lowest ranked of the big 4 networks (Fox), a second stream newspaper (New York Post), a low margin cut throat business in Direct TV and a string of other successful but far from their prime businesses.With the acquisition of MySpace over a year ago, News Corp made perhaps the single best investment that could have been made by a media company. They paid a mere $580 million for MySpace which pales in comparison to what Google just paid for YouTube. With anywhere from 20 million to 43 million "active" members (some even whisper 100 million but thats just ludicrous), the News Corp/MySpace relationship resembles the one between Time Warner/AOL - except that MySpace has an exclusive relationship with Google (and now YouTube) and most MySpace users are impressionable teen...
More About: Myspace , Fact , Pace , Factor

Retail Stocks Move Higher
2006-10-05 16:11:00
With the same store sales reports coming out strong, of the first 44 retailers to report September results, 32 topped analysts' expectations and 12 fell short, according to Thomson Financial. Both Zumiez (ZUMZ) and Abercrombie (ANF) up big today and over the last few weeks. I have been bullish on both of these for a while, so it is nice to be vindicated.-- Faisal Laljee
More About: Stocks , Retail , Stock , High , Move

Take a Second Look at Take-Two
2006-09-29 09:40:00
Take-Two Interactive (TTWO) has been the bad boy of the video gaming industry and has been punished severely over the last year for its adulterous indiscretions in Grand Theft Auto and the options scandal. Since last June, the stock fell a whopping 70% to a low of $9 just two months ago. Since then, it has bounced back and gained over 50% and currently sits pretty at under $15. The rollercoaster ride encountered by TTWO is typical of small caps, specially those that get enveloped in scandals.I believe that the stock has a lot more room to run. Here is why:For one thing, its GTA franchise still stands strong and is the yard stick which others like Eidos and others are trying to measure up against through ventures like Just Cause and Saints Row. Second ly, all eyes are currently on Electronic Arts (ERTS), which I have seen everyone from Pat Dorsey of Morningstar to Jim Cramer speak favorably of. Meanwhile, TTWO has been left for the dead, with everyone still denouncing it. I like it be...
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TheKnot.Com Breaks Out
2006-09-26 10:37:00
I recommended theKnot .com (KNOT) back in July at around $16.50. Since then, the stock moved had up to right below its all-time high of $21.67 and broke out beautifully today on more than twice the average volume. The stock closed at $22.07 and investors who got in at or after my recommendation have already seen gains of up to 40%. I believe the stock still has room to run but I recommend stop losses along the way.-- Faisal Laljee
More About: Break , Breaks , Brea