The Proficient Investor

Activision Inc. was expected to report full year earnings for the year ending March 31st but has said it will be delayed because of “restatements tied to a review of its historical stock option granting practices.”

It would appear that Apple Inc. wasn’t the only hi-tech company stung by poor options practices.

But let’s look at their current numbers because I think think they look quite good. Growth over the coming year is projected at 77%, the stock currently trades at a premium of 74 times earnings. Although that may seem high, it is still under the 52 week high set on May 5th and if you consider that institutional investors pay up to 2 times the growth rate in PE, this stock should be at $30.

That alone isn’t necessarily a reason to invest. Activision also has 3 major franchises going for it which include Spiderman 3, Shrek 3 and the Call of Duty games. Call of Duty which has been extremely successful on all platforms has another sequel (number 4) coming out. The difference this time is that CoD4 is going to be modern warfare. Fans of the series have been waiting for years for a good modern warfare game like CoD to come out. The 4th one may just be the charm.

Another potential moneymaker for the company could be Transformers The Game. If the movie is successful, as I think it will be…the game is going to do even better which means more profit for Activision.

So, with these things in mind, the stock down below the 52 week high and a huge growth rate, I see no reason NOT to buy this. Buy Buy Buy.

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Markets were higher this morning, then dropped mid-day. The NASDAQ has held strong throughout the day. A string of deals has helped keep the market up. Oil is trading lower today, the entire energy complex is down as well. However, we have seen the market correct mid-day once again. Lately the markets have not been able to keep strong gains throughout the day. This may mean the markets are getting tired.

We have seen this type of activity for the past week or so, this activity has me thinking that we may be close to the end of this bull move to the upside. I think we correct, but the big correction is not here as of yet. In my view, it will be a event-driven event that takes us down hard. For the better part of a year, I have been very cautious and downright bearish on the markets, even though the markets have been on fire since then.
Although I think we are a quarter or so away from a very large, sudden and swift crash, it appears that right now the markets may try to meander from these levels in the short-term. I am overly hedged some would say, but still profiting that of the overall market.

Good news for contrarian investors playing the online movie rental game. Netflix (NFLX) was downgraded by Piper Jaffray citing pressure from Blockbuster. Again, these analysts are getting the overall picture wrong.

This is exactly the kind of thing I like to see as a contrarian investor because it allows me to average my price down in a stock I really like. I have said time and time again that Netflix, over the long run is going to win in the online movie rental business. Blockbuster’s “triple play” isn’t going to work long term because it’s costing them too much money. While Netflix subscribers now have the option to watch movies right from the website, Blockbuster users still have to return their movies via mail or through a brick and mortar store.

Where I think Blockbuster does have an advantage is in renting video games. These games can be rented in stores throughout the country, but the margin is much smaller.

Netflix is still the leader in my opinion. Their pricing is right. Shipping is fast and consistent and I really don’t care for going to the store to change out my DVDs. I prefer to just get them as they come, and if I want it sooner then I can just watch it online right from the site. How much more convenient can you get?

All three major indexes took a pause today and closed down at the end of the day. The S&P 500 which has flirted with record highs it hasn’t seen since 2000. Both the DJIA and NASDAQ were also down at the end of the day.

A boon in the start of new homes sent the dollar up against the Euro and the housing sector overall gained on the day. What we are really seeing here is a reaction to some of the news from former Fed chairman Alan Greenspan regarding the expansion of China’s economy.

I don’t agree with Mr. Greenspan here because China’s economy is growing faster than we can really keep up. Companies like Starbucks have been very aggressive over the past year in terms of their own growth overseas and the government is fully behind the expansion.

Economically speaking, things have only been good in this country in pockets. The 5 year long wars in Afghanistan and Iraq are taking their toll on the American Public and the evidence can be seen in how consumers are spending, or rather how they aren’t spending their money.

Where I live, there are houses for sale everywhere but nobody is buying them. Overinflated prices are keeping the real buyers away and with the meltdown of the sub prime sector still fresh, potential “flip” projects aren’t being considered as much as they had been in years past.

So with this correction and some profit taking, it may seem like the trend upward is over. I don’t think so, but don’t be a pig. If you have had a good run in some of your stocks and you haven’t “schnitzeled” you should do so. Put that money to work elsewhere. I would also take this opportunity to buy anything you have been holding out for on the dip.

Sold my Build A Bear Workshop position @ $30.76, profit of 7.15%
Still own call options on the security.
Added to my Ultra-Short NASDAQ position (qid) @ $46.82

I think the market will go into profit taking mode in the near future.

Internet giant Google is buying Feedburner for a reported $100 Million according to Tech Crunch.  The deal is for all cash, which is rare in purchases such as this but we all know Google has the buying power.

What does this mean for RSS feeds using Feedburner? Well it could mean that Google plans on using it’s Adsense platform to deliver advertising through RSS feeds much like Text-Link-Ads currently do.  This could boost Google’s adsense reach even further thus strengthening revenue forecasts.

The deal should close in about 3 weeks.

Leading the cyclicals higher is the footwear sector and everyone’s favorite Crocs (CROX). Up 1.31% at $78.00 in intraday trading, Crocs continuted the move upward after announcing 3 new shoes at the National Restaurant Association Show on the 17th.

After a rough early morning start as investors likely took profits off the table, the stock is once again in the green and moving fast.

I wouldn’t be surprised to see Crocs hit $80 this week.

Shares of Amazon (amzn) continue to rise in the face of more and more pessimistic views climbing on the company. Amazon got it right last quarter, something which surprised (short amzn) me and most on Wall Street. The shares today are 4% on what appears to be a technical break-out of their recent short-term trading range.
Insiders have been selling the shares recently in the face of a more than 40% stock advance in just a couple months. Shorts have had to cover their losses which is one of the main reasons why you are seeing such buying here at these levels. At some point the stock will come back down to earth. The company in my view has priced itself for perfection, and anything shy of that will crater the stock back, the shorts will rush to this stock.

Monday’s early rally led many sectors higher on news of takeovers across the board.

Arch Coal (ACI) was up nearly $2 in early trading, Crystallex International (KRY) hit a new 52 week high today at $5.05, Goldman Sachs (GS) continues to move up.

Overall there is good sentiment on Wall Street and the news of Goldman Sachs’ private equity group is acquiring Alltel in a deal worth roughly $25 billion. GE is selling it’s plastic division to Saudi Basic Industries for $11.6 billion.

The M&A activity since early 2007 has created a surge in the Dow Jones Industrials which for a lot of investors is positive news. Much of the investments in mutual funds would be affected by moves in the DJIA. Earlier in the month, Rupert Murdoch’s bid for DJ caused a flurry of activity in the stock, but rumors on the street are that the talks have halted.

I believe today’s action is an indicator for the week. Record highs are going to continue to be set this week so if you are in the money, remember to take a little off the table especially if you have already hit your target.

At the time of publication, Mr. Wilcox was long GS, ACI and KRY