Friday, January 20, 2012

BOUGHT 100 HUWHY at $17.84/Terex CLGX Intel/Sold Remaining MSFT at $28.47/Sold 50 INZ at $20.74/BOUGHT 50 NVTL at $2.98-LT/

I am not convinced that this rally has legs and is sustainable.  I am not a net seller of stocks into this rally, but I am shifting the stock allocation into different sectors.

Bank of America reported better than expected earnings yesterday.  That report is discussed in a number of articles and I have nothing to add to those discussions. MarketWatch Bloomberg I thought that I had sold all of my remaining shares of KRBPRD, but still own 50 shares which are held in a taxable account. I also own several "principal protected" unsecured senior notes issued by either Merrill Lynch or BAC. I also own 100 shares of the non-cumulative equity preferred floater BMLPRJ  and 50 shares of CPP.  The later security provoked a long dissertation by our LB. Bought Back 50 CPP at $21.35

Terex (TEX), a recent LT purchase, was upgraded to outperform by Baird yesterday. Their price target was raised to $24 from $20. Given the spurt since my purchase at $12.68, I may elect to harvest the gain. TEX closed at $18.75 yesterday, up 4.28%. I also own 1 Terex bond. Bought: 1 Terex 8% Senior Subordinated Bond Maturing on 11/15/2017 at 96.947

CoreLogic (own senior bond) jumped in after hours trading after the company announced that it would report better than expected earnings.  I no longer PJS, a trust certificate containing as its underlying security a senior bond issued by First American, now known as CoreLogic, but did well with that bond. (see snapshots at Trust Certificates: New Gateway PostBought PJS at 7.2-October 2008Bought 50 PJS at 17.95 August 2009Bought 50 PJS at $17.8 in Roth August 2009Sold 50 of 300 PJS January 2010Bought 50 PJS at 23.73 June 2010Added: PJS at 24.72 October 2010Bought 50 PJS @ 24.6 November 2010Sold 100 PJS @ 25.2 May 2011Sold Remaining PJS at 25.15-Roth IRA September 2011. Instead of owning PJS, I now own only the underlying bond in that TC. FINRA

The initial claims for unemployment fell to the lowest number since April 2008. ETA Press Release: Unemployment Insurance Weekly Claims Report For the week ending 1/14/2012, the seasonally adjusted initial claims for unemployment fell to 352,000, a 50,000 decrease from the prior week's adjusted number.

CPI for December 2011 was unchanged on a seasonally adjusted basis. Consumer Price Index Summary

1. Sold 92+ MSFT at $28.47 Last Tuesday (see Disclaimer):  After selling my highest cost shares a few days ago, I decided to unload the remainder of my position last Tuesday.  

2012 MSFT PROFIT +$403.87
Hopefully, I will receive an opportunity to buy back these shares sometime this year at less than $25.

Microsoft reported its fiscal second quarter earnings after the close yesterday.  SEC Filed Press Release Revenues increased 5% to $20.89 billion.  E.P.S. was 78 cents up from 77 cents in the year ago quarter. The expectation was for 76 cents.

2. Sold 50 INZ at $20.74 Last Tuesday (see Disclaimer): I just bought those shares at $19 (December 2011). I sold them for the reasons explained yesterday. Item # 4 Sold IDG at $20.42  I am going to need more clarity about the European sovereign debt and banking problems before electing to hold European hybrid securities for more than a few days or weeks.  

ING HYBRIDS: Links in one Post

ING Groep N.V. 7.20% Perpetual Deb rose 31 cents in trading yesterday to close at $21.07.

3. Bought 100 HUWHY at $17.84 Last Tuesday (see Disclaimer):  Hutchison Whampoa is a conglomerate based in Hong Kong.

Hutchison Whampoa Profile Page at Reuters
Hutchison Whampoa Key Developments Page at Reuters

In the U.S. there is an unsponsored ADS traded on the pink sheet exchange under the symbol. HUWHY

The Chairman of Hutchison Whampoa is Li Ka-shing, one of the richest people in the world and a high school dropout. 

This is a link to the interim report for the six month period ending in June 2011: hutchison.pdf. Total revenue  for the first six months of 2011 was HK $187,359 million, up 26% from the same period in 2010. Profit rose to HK $46,296 million or HK$10.86 per share  

On 6/30/11, one Hong Kong dollar was worth about $.1285, which is very close to the current exchange rate. The HK dollar is pegged to the USD which takes away the currency risk as long as the peg remains relatively constant. (see discussion of peg at Businessweek) The approximate value of a HKD  $10.86 E.P.S. is $1.4. USD.   

The average target price among analysts is HKD 84.8 for the ordinary shares, which gives the stock a P/E of around 4.96 according to Marketwatch: Analyst Estimates, Hutchison Whampoa Ltd. ADS  

This is a link to the HK traded share price: 0013.HK: Summary for HUTCHISON At the time of my purchase the HK listed ordinary shares had closed at 69.7 HKDs or $8.98 U.S.Ds. Again, since 1 ADS is worth two ordinary shares, I need to multiply the USD value by 2 which produced a $17.96 value for HUWKY shares at the HK closing price for the ordinary shares. 

Since it takes two ordinary shares to equal 1 ADS, the analyst target price for the HUWHY ADS shares would be HKD 169.6 or $21.85 USDs. I thought that was a rationale 12 month upside target given the current low valuation of this stock and the dividend support to the share price.

This is what the confirmation for this purchase looks like:

HUWHY closed at $18.66 yesterday.

4. Bought 50 NVTL at $2.98 as LT Last Tuesday (Lottery Ticket Basket Strategy)(see Disclaimer): Possibly many years ago, I may have bought and sold Novatel Wireless when the company was enjoying some success. After piling up several quarterly losses, the stock can be purchased under the Lottery Ticket strategy, which limits the amount of total exposure to $300 plus any realized gains and/or dividend distributions related to the security in question.

NVTL has an ugly looking chart. I suspect that many investors have given up. The company was launched during the Nasdaq Crazy Period and hit $220 per share in early 2001. NVTL Interactive Chart The maximum period stock distorts the action for the past five years, so I will just focus on a five year chart. Chart In 2007, the stock rose quickly from around $11 per share to $27.75 by June 2007 and then a double top at $26.42 shortly thereafter.

The Near Depression period was not kind to the stock, pretty much a waterfall type decline to a bottom just above $3 in March 2009. The stock then rallied to almost $13 by September 2009, whereupon it commenced another descent.

This kind of price action, by itself, would tell me to be careful. The smashing of the stock price is practically a prerequisite for LT selections. The inconsistent and volatile movement presents enhanced risks and opportunities. I would emphasize the risk side of that equation more than the opportunity side.

As with many other LT purchase, NVTL was bought primarily on statistical data, rather than an understanding of the business fundamentals or products. Currently, the price to sales ratio is .23, the price to book ratio is .56; and the total cash per share is $1.73. NVTL Key Statistics

I did spend a few minutes at the Novatel Wireless website looking at their products. I also reviewed the Profile and Key Developments information available at Reuters.

I checked the current E.P.S. forecast which was for a loss of 18 cents this year. That was not encouraging.

One of Novatel's products was listed by a columnist among the top seven gadgets previewed at the recent consumer electronic show in LV. TheStreet

Novatel Wireless closed at $2.99 in trading yesterday.

5. Intel (own):  Intel reported adjusted earnings of 69 cents per share, up from 59 cents in the year ago quarter, on a 21% increase in revenue. The consensus estimate was for 61 cents.  Emerging markets is a major source of growth, as more consumers in those markets can now afford to buy a computer.

I quit reinvesting the dividend paid by Intel.  My unrealized profit, as of 1/19/2012, was $2,134.61 on 273+ shares.


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