The Proficient Investor

After nearly losing their spot on NASDAQ earlier in the month and gaining a much needed $3 million cash infusion from primary shareholder George Soros, Bluefly and its shareholders approved a 1 for 10 reverse split putting the stock around $4.50. Since then, low volume has kept the stock from moving.

At this point its merely a waiting game. I wouldn’t advise buying any of this stock at this time.

I have shares of BFLY

Quoted from marketwatch:

Apple (AAPL) earned $1.05 billion, or $1.16 a share, on $7.51 billion in revenue for the quarter, compared with the same period a year ago when Apple earned $770 million, or 87 cents a share, on sales of $5.26 billion.

The results topped Apple’s forecast of a profit of 94 cents a share and $6.8 billion in revenue. Analysts surveyed by FactSet Research had estimated Apple would earn $1.05 a share on sales of $7 billion.

Apple said that it sold 2.29 million Macintosh computers, 1.7 million iPhones and 10.6 million iPods during the quarter ended March 31.

For its fiscal third-quarter, Apple Chief Financial Officer Peter Oppenheimer said the company expects to earn $1 a share on revenue of $7.2 billion. Analysts had previously forecast Apple to earn $1.09 a share on $7.23 billion in sales.

Shares in after hours trading lost $7 or 4.3% after the news on the lowered guidance for the second quarter.

I smell a bargain coming. The last time Apple took a nosedive I made $600. Wait for the pullback and pull the trigger when the action levels off. Apple is one of the few juggernaut stocks that always seems to work its way out of these slumps.

Earnings were in line but with lowered guidance (by about a penny per share) due to rising costs in advertising and shipping. There’s an article on Seeking Alpha about the possible correlation between the writer’s strike last winter and the increase in stock price that may be due to more people going online to rent and watch movies. Really? You think the only reason for the increase in stock price over the past several months is because of a slew or Re-runs on TV? That’s absurd.

I think if you are going to make a correlation it’s more likely that there’s just not much good television on. Lost is hit and miss and Heroes has been offline since the beginning of the strike but even before that, television just isn’t as compelling anymore. More people are watching cable channels and movie channels but if we look specifically at Netflix, you’ll find they are offering superior service over anyone else out there.

With 75,000 titles including blu-ray and more of those titles being offered for their instant viewing service every day, Netflix is giving subscribers the most bang for their buck. The original decline in stock price can be attributed to Blockbuster’s(NYSE:BBI) attempt to gain footing in the same market and ultimately failing. While at first wooing customers from Netflix to Blockbuster, the pricing packages were impressive and the ability to turn in an online rental for an in-store rental but ultimately not sustainable and Blockbuster began phasing out the program as well as increasing subscriber fees. This basically led to a surge in subscribers coming back to Netflix and subsequently a rise in stock price.

I’ve already written about the valuation of Netflix and my $40 price target which has come and gone. So where does Netflix go from here? Even with the .01 cent variance in guidance, Netflix has 25% growth over the next year and 29 PE. Remember that institutional investors are willing to pay twice the growth in PE so that means on the low end you still have an upside price of $39 and on the high side a target price of $52.

On this pullback, I’d be buying NFLX right here, right now.

I do not own shares of Netflix or Blockbuster

Selling into strength (prices moving upward) is the best way to ensure you are profitable. Solid stocks like Apple and Google are great examples of buying on the way down and selling on the upside. You don’t make any money until you sell.

One I really like right now is EMC Corp (NYSE: EMC). EMC owns 80% of VMWare which makes virtulization software corporations use for testing systems before they roll them out. VMWare IPO’d this year to great success but has since fallen from its 52 week high of $125.25 to around $55. So the VMWare play is pretty much over and if you want to bank on the success of that company you want to be buying EMC. Here’s the rundown.

EMC is growing at 18% over the next year which translates to a 36 PE institutional investors are willing to pay. Multiply that PE by the current EPS and you get a price target of $27. At the current price EMC is a steal since its trading at only 19 times earnings currently.

Although they don’t pay a dividend and there hasn’t been much insider buying, most recently 160,000 stock options were exercised. I like the fact that there hasn’t been any insider selling since December of 2007 when 100k shares sold at $19.

Another stock I think is too cheap still is Apple. Even at $154 it is far below the high of $200 set earlier in the year and with the iPhone SDK out now we should start seeing some creative applications becoming available. You can read more about my thoughts on Apple in my other posts.

Today, I bought 100 shares of Quiksilver (NYSE:ZQK) at $9.98 to backup my original purchase of 30 shares at $15 roughly. At the time I had expected the purchase of Rossignol to be a boon for the company but it just didn’t work out. Here’s what I like about ZQK. First, they just won a trademark case against Kymsta Corp. which was using their “Roxy” label as well as “Roxywear”. Kymsta has 18 months to remove the usage. This will help the Roxy brand gain solid footing which is popular with the surf-girl crowd.

Second, Analysts hate this stock and recently downgraded it. Since my investment style is mainly contrarian, that is to say I don’t follow the crowd, this is the perfect opportunity to buy up this cheap stock. In the most recent quarter, ZQK reported a loss of $.12 cents per share which missed analysts estimates of $.10 cents per share. So what! Here’s a company with 45% growth based on next year’s earnings projections. That’s unbelievable and I think at $10 the stock is just too cheap. Since it’s a cyclical stock in the consumer apparel sector you can expect sales to increase over the next couple of months as the summer rolls in. With the economic stimulus package coming in May and a brand that has been around since 1970. Its one of the most recognized brands in the surf industry and one of the biggest. ZQK also owns Hawk Clothing, the company started by legendary skateboarder Tony Hawk. Need I say more?

On the sell block is Netflix (NASDAQ:NFLX). This isn’t because I don’t like the stock. I recommended this stock in January when it was half the price it is now. Now I am saying, take some money off the table. At the current price and earnings, the stock is fair value. Now, some people like to buy stocks that are breaking new highs but I like to find the beaten down stocks of great companies and figure out where they should be. That’s how I set my sell target. Once I get there, I sell it and put it on radar. When a stock like Netflix is fair value and there isn’t much volume it doesn’t make sense to hold it hoping its going higher. If you’ve made money, take it. At least, take your original investment out and play with the house’s money. That’s what I’m doing with Apple.

I own stock in Apple, EMC and Quiksilver but hold no position in Netflix

Take my recent Apple (AAPL) trade. I’ve been saying how Apple is underrated and how it was way oversold after hitting a 52 week high. I bought 24 shares at $130.00 when I felt the downside had been taken out and sideways price alluded to a bottom. Today I sold those 24 shares for a profit of $497. Why sell now? Simply put, I don’t want to be a pig. I know in the long term Apple is going to go back to the $200 a share level but as it rises I want to be peeling off my positions that are profitable. This way I can stay in the game longer and I’m not being greedy.

It’s important to recognize that in order to make money, you have to sell your stock. Numbers are just numbers. Paper profits, meaning that if you bought a stock low and now show a potential profit (but haven’t sold yet) are meaningless. Also by ringing in profits on the way up, it frees up capital that I can invest elsewhere. This is the way I invest. Buy beat up stocks of good companies on the way down, and as the price moves back up, sell off these blocks when they are profitable. It’s the only way to win in this kind of market.

I still own shares of Apple.