Tuesday, February 3, 2009

ROK/Balancing Risk & Reward on SNTA/Buy 100 NSSC at $1.02/Electronic Medical Records & the Stimulus Bill/M & DKQ

Australia unveiled a 26.5 billion dollar stimulus plan that includes cash to low and middle income earners and infrastructure projects.  MarketWatch

I just say no to Motorola.  I have yet to buy one of their bonds that I have previously discussed in a prior posts.  
 MOT's last earnings report explains some of my reasons.    Yahoo! Finance
This is not to say that I would never buy XFJ, the TC with a senior bond from Motorola maturing in 2028.  I am saying that I am will need more of a reward than the security currently offers me, a lot more. XFJ Stock Quote - Corporate Backed Tr Ctfs Stock Quote - XFJ Quote - XFJ Stock Price
Another company in the same doghouse is Dow Chemical.  MarketWatch

Rockwell Automation, another one of the industrial companies on my monitor list, had another bad day yesterday, after it reported a 25% slump in 4th quarter profits and lowered its guidance for 2009.  MarketWatch   This company will undoubtedly suffer during the current economic slowdown which is why I jettisoned my shares at more than double the current price.  But, I do believe that it will be quick to recover once some light is seen at the end of this dark abyss.  ROK noted that orders just fell off a cliff in the second half of the 4th quarter.  In November, it had cut its forecast for 2009 to $3.1 to 3.60.  It now sees $1.55 to $2.25.    Yahoo! Finance  Links to its earnings call transcript and its earnings release are as follows:   Seeking Alpha   Rockwell Automation Reports First Quarter 2009 Results: Financial News - Yahoo! Finance  The company did say that it was maintaining its cash dividend of 96 cents and had ample cash and credit to weather 2009.  I have a favorable opinion of ROK and look forward to buying my shares back at some point, just not today or this week  but possibly during the first half of 2009. 

The FED reported yesterday that all the banks are putting the squeeze on just about everybody.  No banks made it easier to borrow. MarketWatch I am just glad that I do not need them for anything. 

In the past, I have sold my position in SNTA at over 9 and then bought it back in the 5 to 7 range.   My prior post on the subject said that my last sale was in September at 9.87. OLD GAMER HATCHES A PLAN AROUND 1 P.M TODAY I then started buying those shares back with the last purchase at 5.5.   I am conflicted about it.  I am playing with the house's money with SNTA which sometimes generates the animal spirits in me but that is hard to do now and it has nothing to do with old age.  On the other hand, I have been successful trading this one in a range.  I know for certain that a failure of SNTA's main drug candidate, elesclomol, would just about take away all of my profits to date in just one day.   I know that I do not know whether that drug will succeed or fail.  I do know that most drugs for metastatic melanoma ultimately fail.  I do know that many experts believe that elesclomol will succeed while others, possibly a minority, have a contrary opinion. This is a link to an article about a skepticYahoo! Finance The BAC analyst is not only skeptical  about elesclomol, but has a $5 dollar target on the shares ($5 might be optimistic in the event the drug fails in phase 3 trials but the latest Barclay's report from 11/13/08 points out some of the downside protections).  Ultimately, its success or failure is just unknowable at this juncture to someone in my position and overall lack of scientific or medical expertise, which is admittedly just about nil.  I tend to think elesclomol will succeed but I really do not know.  So that is more of a hunch than anything else.   Approval by the FDA and a successful launch would be huge event for this small company.  The risk to the stock price connected with this one drug has been reduced by SNTA's recent deal with Roche which is why I bought more shares at 5.5.  This is my black swan/risk analysis/ risk-reward investment process just on a small position. I know certain things about the company for certain.  I know that other events are just unknowable.  I know that I have no background in science or medicine.  So, after balancing everything back and forth, I made the decision that I would only consider selling one-half of the 100 shares owned, which using FIFO would be my highest cost shares purchased at 6.69.OLD GAMER HATCHES A PLAN AROUND 1 P.M TODAY
Unless some really bad news comes out, I am also likely to keep the other 50 bought at $5.5 and just see what happens.   I have yet to sell those 50 shares, however, and I may not unless I get a price closer to 10 for them.   I would expect a pull back based on the close to 100% recent rise in the stock price. 

A few days ago, I went back and looked at the devastation in some small cap names that I sold in the 2006-2007 time frame at a profit.  Buy of 50 Shares of GPX: Limit at 4 filled-investing only cash flow
One of the names was Napco Securities (NSSC).  At that time, I entered a GTC limit order to buy 100 at 1.02 when the stock was trading at over $1.2 per share.   I am more than playing with the house's money on this one with my last sale in August 2007.  The stock traded over 6 back then.   This small company manufactures security devicesNSSC: Profile for NAPCO Security Technologies, In - Yahoo! Finance
It is another micro, micro cap like National Dendex with very low volume most of the time.  Price to book is .4 and price to sales is .30. NSSC: Key Statistics for NAPCO Security Technologies, In - Yahoo! Finance  The company did earn money in the last quarter. NAPCO Reports First Quarter Results for Fiscal 2009: Financial News - Yahoo! Finance  For its size, Napco just completed a large acquisition, a company called Marks USA, a manufacturer of door locking devices.  The company noted in its recent earnings release that economic downturns traditionally result in an increase in demand for security products.  I suspect that is true but do not know it for a fact.  Whatever, it fits my general thesis of adding small caps now that are not directly impacted in an adverse manner by the current downturn, where the stock price has fallen substantially and risk/reward at the current price at least appears to be favorable.  The Marks acquisition cost 25 million:
As a consequence, the debt for this small company ballooned to 35.5 million as of 9/30/08 from 12.4 million on 6/30/08, and this is the rub.  NSSC: Balance Sheet for NAPCO Security Technologies, In - Yahoo! Finance
This kind of buy, a few bucks over $100, may just keep me busy enough that I avoid doing something that might actually cost me.  So I am staying both busy and out of trouble by focusing a lot of my attention on small buys that do not amount to a hill of beans.  World Wide Words: Hill of beans
NAPCO is scheduled to report earnings before the market opens on  Monday, 2/9.  Anything that is not a loss would be appreciated. 
Part of the stimulus bill has 20 billion for health care information technology.   There are several firms that may benefit from increased spending from more hospitals and physicians moving to electronic record keeping.  This linked article appeared over the weekend in Investor's Business Daily focuses on Quality Systems (QSII). Yahoo! Finance I have previously owned another called Allscripts which I sold for a profit prior to 2008, and I have stayed away from it after the merger announcement was made with a company called Misys.  That merger has now been completed and my interest in it has started to perk up.  The new company is called Allscripts-Misys Heathcare.   MDRX will also benefit from the July 2008 legislation called Medicare Improvements for Patients and Providers (H.R. 6331) which provides for incentives for doctors to utilize electronic prescribing and to require it by 2011.  I understand that Cerner (CERN) is moving into the field of electronic medical records for physicians after having concentrated on hospitals.  Another company, athenahealth (ATHN), is likewise in the IT medical records business.    I thought that I would concentrate for now on MDRX since I am already familiar with it and I at least understand the strategy of merging with Misys.  It does appear however that the current economic environment is stifling some demand.  Yahoo! Finance
See also the following articles:
I do not yet have a position.   

Moody's downgraded Gannett's debt Yahoo! Finance. MarketWatch

I noticed that the seven day yield on tax free money market funds has fallen to between .3% to about .8% with the Vanguard municipal money fund being the high part of that range. 

Alliance Bernstein downgraded Schwab (SCHW) to market perform, arguing that the retail investor generally goes into hibernation after a big sell-off until an upturn was well under way.MarketWatch  Schwab closed at a new 52 week low at $12.48.   A five year low is around 8 1/2.  I will place it on a monitor list.  The stock price cracked 10 in 1998. 

Cramer is saying don't touch tech claiming that outside of the four horseman tech is "definitely" in as bad a shape as retail.  He also claims that tech has underperformed the averages for 17 of the past 18 years during the period from 2/1 thru 9/30.  TheStreet.com    
Okay, Jim, I hear you but are you going to change your mind in a few weeks, then back again, and so on.  Besides, I am just barely touching them. 

I still own the senior bond issued by Macy's in TC form, DKQ, so I read the news about Macy cutting its common stock dividend and shedding 7000 jobs. Yahoo! Finance  I have no plans to even nibble on the common shares.  DKQ Stock Quote - Saturns May Dept Stores Co Stock Quote - DKQ Quote - DKQ Stock PriceDKQ did just pay me a semi-annual interest payment and currently yields close to 16%. As explained earlier, the underlying bond in DKQ was originally issued by May Department stores that is now part of Macy's.  TRUST CERTIFICATE MACY'S BOND DKQI do have a GTC limit order to sell my 100 shares at around 12 which I do not expect to see filled. 
If anyone is interested, this is a link to the prospectus: 
Par value is $25 with a maturity in 2032.   The link to the FINRA information is as follows: 
FINRA - Investor Information - Market Data - Bonds - Bond Detail  For the reasons previously given the FINRA data has to be used with caution since it only reports what is reported to it. 

This columnist from U.S. News & Report is concerned that the GOP is becoming Rush's party. (usnews.com)  He is concerned that the GOP will basically become known as the party of Rush and Sean with their assorted followers.   As you would expect, he is receiving the hate mail from those who do not have a clue about much of anything including the actual meaning of words like socialism and communism which are two of their favorite words.  You have to remember that many of the Republican faithful view social security and medicare as "socialism" but their leaders learned many years ago to avoid those labels when describing social security while their true believers still use those descriptive terms.    The phrase "spending my money" or its equivalent is also one of their more favorite aphorisms as if the deficits piled up under a GOP president somehow escaped their attention for the past eight years.   My only comment about this article and the true believers' comments to it  is that a growing number of people, particularly independents, are starting to identify the GOP with Rush and Sean, seeing the GOP in Rush's face, and this identification of oneness  between the GOP and Rush will likely continue, even accelerate in the years to come.   After enjoying some success and moving toward Rove's dream of a FDR type coalition for the GOP that might last 50 years, the GOP is now moving in the opposite direction rapidly as a perpetual weakling minority party.   I do regret it since the Democratic party needs a strong ballast to restrain their natural tendencies toward extravagances. 

  Many GOP spokesmen want Rush to be their guiding light and disagree with the U.S News columnist that this would be bad for the GOP. ABC News:

Pending home sales increased a seasonally adjusted 6.3% in December. arketWatch

PNC Financial announced that it will cut 5800 jobs.  Yahoo! Finance

As previously noted, I do own shares of Emerson Electric and it reported better than expected earnings this morning.  Reuters  Sales did decline 2%. 

There is a report that BAC had some of the details about the Merrill bonuses paid just before the merger was completed.  Reuters


  I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will.  In these posts, I am acting as an unpaid financial journalist and an occasional political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.  Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed.  These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities.   All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me. 

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