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The Proficient Investor

Stock Market News, Contrarian Investing, Stock Picks

Archive for April, 2009

Small-caps BARE, OREX and GMCR up around 40% today

Posted by SmallCapInvestor.com On April - 30 - 2009

News that Chrysler will be filing bankruptcy is causing stocks to seesaw through Thursday afternoon.

At 2:35 pm ET, the Russell 2000 (NYSE:IWM) is up 0.28%, while the Dow is up 0.25% and the S&P 500 is up 0.32%.

Small caps flying high today include Bare Escentuals (Nasdq:BARE), up 42% after its Q1 results topped the Street’s view. Also higher are Orexigen Therapeutics (Nasdaq:OREX), up 44% on heavy volume, and Green Mountain Coffee Roasters (Nasdaq:GMCR), up 37% after the small cap boosted its FY sales and EPS view.

On the downside, Build-A-Bear Workshop, Inc. (NYSE:BBW) is 20% lower today after posting a Q1 loss, and small-cap Oshkosh Corporation (NYSE:OSK) has falledn 19% after projecting a loss for 2009 and suspending its dividend.

******Bank of America (NYSE:BAC) shareholders voted to remove Ken Lewis as chairman of the board. But he remains CEO, at least for a little while. As much as I railed against Lewis, I must acknowledge that he is a something of a victim.

Now, don’t get me wrong. I have no sympathy for the CEOs who over-leveraged and mismanaged their companies during Wall Street’s greed bonanza. And Lewis was right there with the rest of them.

But when it comes to the Merrill Lynch acquisition and the surrounding events, it’s pretty clear that Fed Chief Ben Bernanke and former Treasury Secretary Paulson hung him out to dry. In other words, I believe Lewis’ assertion that Bernanke and Paulson strong-armed him into the Merrill acquisition and encouraged him to keep his mouth shut about Merrill’s $15 billion fourth-quarter loss.

The one question – and this gets right to the heart of the matter – is why did Lewis play ball? He had to know that his shareholders would be irate. And that’s the point – CEOs ultimately work for their shareholders. And bank CEOs for the most. . .

Chrslyer Bankruptcy, Consumer Spending Win Out Today

Posted by Kirk On April - 30 - 2009

What a great emotional reversal of the markets we watched today. Opening the day we had optimism and the irrational thoughts that we would shoot higher and shrug off the bad news. Then all the investors out there started to think about the reality - i.e. the market is over stretched. We went from a 2% gain to just over-broke all in 1 day. As you can see on a chart of the NASDAQ which has a very dim outlook, we hit again hit the underneath of the major trendline in black. My target is somewhere around 1,500 during late May or Early June.

 

nasdaq1

 

Now, being the professional that I am with the experience I have, I advised everyone this morning that this was nothing but “HOOK-LINE-AND SINKER” for all the investors who listen and follow the media and news. This is why I started this blog - to help everyone not get trapped by these false ideas each day! Most of the people who make up this great blogging community realize that now, but still some are too far gone. Case in point - I got an email today at 11:15am, just minutes after the top today, telling me that he was going long 50% of his portfolio! Of course I tried to tell him otherwise, but people will make their own decisions I guess. So what’s the point Kirk right? The point is this that the charts have all the information you need and all the expectations already priced in. If it hits the news you are too late - period.


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Not So Fast There Bullz!

Posted by Kirk On April - 30 - 2009

I said this morning that this would happen. And here we are with a real battle on our hands, yet the morning pop that we all thought would send us to 1,000 on the S&P has fizzled out fast! Clearly looking at the chart of the DOW below, we have gone from up 2% to virtually no gain…incredible how this happens. Of course, our shorts are enjoying the ride down as I am seeing mostly green on my trading screen.

 

dow


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Smithfield Foods Releases Letter to Employees

Posted by James Wilcox On April - 30 - 2009
In a Letter to Employees released today, Smithfield Foods($SFD) confirmed much of what we are hearing in the media is sensationalized news designed to keep people glued to their televisions instead of finding out the real facts of this outbreak of H1N1 (Swine Flu).

To Our Employees:

Like you, I have been closely monitoring all aspects of the H1N1 influenza outbreak (this is the official name of the mis-named but widely quoted “swine flu” since it has been determined by health officials throughout the world that the illness is a mutation of a number of strains). Unfortunately, the media and bloggers have jumped to conclusions based more on fear than fact and have sensationalized a serious illness.

As of this writing, there are still a number of facts about H1N1 that remain a mystery, including where the strain originated, how it is spreading, how far it will spread and when it will run its course. Hopefully, answers to these questions will soon be resolved. However, let me share with you some facts we do know at this time…namely, what Smithfield has done, is doing and will continue to do about keeping our workers and pigs healthy.

Earlier this week, when news of the virus first became public, we reported that we had found no evidence of the presence of the influenza virus in any of our pig herds or our employees at any of our worldwide operations, including those in the United States. Yesterday, we also announced that because so much attention was being given to the joint operation we run with a Mexican company in Veracruz (and it was believed by some that the initial outbreak of H1N1 flu originated with a little boy in La Gloria, a town not far from a farm that our joint venture partner operates in Mexico), we ran additional tests of pigs at that facility. The results of these independent laboratory tests should be available in a few days and we will, of course, announce the results. As you probably also have learned, Mexican health authorities, working with U.S. and health officials from other countries, have also inspected our farms in Veracruz and found no evidence of H1N1 flu at all.

As we have always said, our first priority as a company is to ensure the health and safety of our herds and our employees so that consumers can trust our products. Today, more than ever, and despite the fear generated by those who are not well-informed, I can assure you that consuming pork products is safe, and that Smithfield’s brands, in particular, still stand for the highest quality.

It is an unfortunate fact of life these days that until more hard evidence is available from health officials, the public will continue to be bombarded by unfounded opinions, non-scientific statements and unrestrained internet media, rumor and speculation. Thus, it might be helpful to review some of the facts:

    --  According to The Centers for Disease Control and Prevention (CDC), the
        H1N1 influenza virus is not transmitted by food, so you cannot get the
        disease from eating pork or pork products.
    --  The CDC also stated that while the virus is contagious from humans to
        humans, it has not found any evidence to indicate that any of the
        illnesses resulted from contact with pigs, hence, the decision by the
        Government to rename the virus H1N1 makes sense and helps remove the
        "fear factor" from pork products.
    --  Secretary of Agriculture Tom Vilsack confirmed that there is no evidence
        at this time showing that swine have been infected with H1N1 influenza.

In addition to conducting the recent tests I mentioned above, let me remind you of our policy regarding the health of our pig herds and employees. All of our herds at all of our operations, including at our joint ventures in Mexico and elsewhere, are tested regularly for instances of various bacteria and disease, including influenza. We routinely administer flu vaccines to our herds in order to protect them from potential viruses and conduct monthly tests to examine the presence and identity of different flu strains. At no point have any of these tests revealed this strain of the influenza virus in our herds in any country where our company operates.

As we have previously said, we are cooperating fully with health officials and aiding in their investigation into the source of the H1N1 outbreak, and have allowed exhaustive testing of our hogs to ensure that this virus has not infected our farms. These actions were taken voluntarily by the Company. We will also continue to maintain rigorous safety procedures at all of our operations, including limiting farm access to necessary personnel, preventing access to personnel who have recently returned from international travel, and enforcing essential personal hygiene practices.

I am hopeful that the cause of the outbreak is soon found. Unfortunately, an epidemic such as this is difficult to contain, but we can pray that health officials and doctors around the world will find answers soon. For us, it is particularly important to remain focused on our immediate responsibilities. Every single one of us plays a critical role in demonstrating our uncompromising commitment to the safety of our products.

Thank you for all of your efforts. I will continue to update you as I can.

C. Larry Pope

With sales of $12 billion, Smithfield Foods is the leading processor and marketer of fresh pork and packaged meats in the United States, as well as the largest producer of hogs. For more information, visit www.smithfieldfoods.com .

    Contact:
    Keira Ullrich
    Smithfield Foods, Inc.
    (212) 758-2100
    keiraullrich@smithfieldfoods.com

SOURCE Smithfield Foods, Inc

I’m still long on $SFD because I am sure with all the coordination between the CDC and the WHO this pandemic is going to be solved like other flu strains have been in the past. H1N1 cannot be transmitted by food which means pork products are safe to eat and I love me some bacon!

Chrysler Bankruptcy & The Truth About Earnings Estimates

Posted by Kirk On April - 30 - 2009

There has to be something said about a market that keeps shrugging off bad news and focusing on the minor good news. The really big news this morning is the expectations that Chrysler is more than likely going to declare bankruptcy. Of course the Fed and the Obama admin is blaming the hedge funds for NOT coming in a buying up a company that has horrible sales. Clearly they are not going to buy up a company if it doesn’t make sense financially for them.

 

Now, let me tell you all the truth about what is happening with earnings this quarter. Since we had just absolute horrible earnings in the second half of last year, nearly all analyst have lowered their expectations and estimates so much that there companies are now “beating” estimates solely on the fact that the analyst is expecting the worst. Still, if you look at these companies a little deeper you would find that they are still struggling. Besides the GDP FELL 6.1%! That means the economy shrank! Think about it realistically - if we are shrinking then how can we grow?

 

Following last night’s Obama speech, the expectations have naturally gotten better. Everyone thinks that we will just shrug off all the bad news and keep going higher - won’t happen. Again, logic tells us that creating so much national debt in the past 3 months is not beneficial in the long term. Enough said about this, but remember that I worked on the inside for Wall Street’s big players. This hype is just “hook-line-and-sinker” to get people falling over themselves to buy stocks that are over-priced.

 

As for the markets today, personal income and spending are down. The futures have pulled back slightly but still signal a higher open. Again, how can the economy expand if consumers has less income and are spending less? Moving on, Oil is up this morning after NEARLY hitting my target range around $45 - which I still feel confident about over the next week or so. Member’s portfolio is still ultra short, but wouldn’t you rather be short a stock that’s had a 700% vertical move in the last month or long at the top of a 32% move up in the market? Don’t you think going long at these levels would be stupid? Of course it would be since the risk/reward is not in your favor.


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Weak Preformance Bullz – Great Entry On Shorts Members

Posted by Kirk On April - 29 - 2009

Honestly, that was an incredibly weak showing after the Fed decision. Granted we did break the recent highs but only for minutes before quickly falling right back down. Looking at the chart below which shows in green the trading following the FED decision. We jumped up above resistance for a couple minutes then down we went fast. Once again, I point out the fact that this market has over-extended itself in more areas than one. Mr. Market, you cannot keep going up every day.

 

spx15

 

For those of you out there who know how to make money in both directions - today’s actions presented huge opportunities. Members and I made nearly 3% today alone due to the Fed sell off on one of our shorts after entering the trade early this afternoon. So, that’s 3% in the bag after say about 4 hours! We are stacked heavy with shorts and I feel great about all their prospects!


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FED Behind Us Now – False Breakout?

Posted by Kirk On April - 29 - 2009

It’s been a fun ride thus far today as it usually is on these days. The market shot up after the meeting announcement but has since fallen back down to the critical 875 level on the S&P. Notice below that IF we stay lower than we are now into the close, this could be a very important false breakout. Regardless, members and I have entered into some more short positions - namely in restaurants - with HUGE profit potential. Trading Video to come tonight!

 

break


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Small caps in rally mode after Fed leaves rates unchanged

Posted by SmallCapInvestor.com On April - 29 - 2009

Stocks are soaring this afternoon after the Federal Reserve announced it is seeing a “somewhat slower” slide in the economy and left interest rates at a record low level.

At 2:37 pm ET, the Russell 2000 (NYSE:IWM) is up 4.53% at 494.26, while the Dow is up nearly 3% and the S&P 500 is up 3.05%.

On the data front this morning, the Commerce Department reported that the U.S. economy contracted at a steeper-than-expected pace in the first quarter, weighed down by sharp declines in exports and business inventories. The news did little to quell positive investor sentiment after the Fed left interest rates untouched.

Small caps flying high today include Town Sports International Holdings (Nasdaq:CLUB), up 35.5% on heavier-than-average volume, while Encore Capital Group (Nasdaq:ECPG) is up 36% after reporting a rise in Q1 profits.

*****We’ve reached the stage of this rally where bad is good. It started innocently enough in early March when Citigroup (NYSE:C) shocked the world by saying it was making money. A few earnings surprises have helped it along. But now, good news is running out, and to fill the void, investors are saying that bad news is actually good.

I don’t know how many of you have learned your lesson by uttering the phrase “It can’t get any worse.” I have. It seems that those five words have the power to conjure ancient gods that are full of wrath. Such is their displeasure with man that they will, rest assured, make certain that things do, indeed, get worse.

I now fear these gods are being awakened. Because there’s no way to explain the rally for stocks in the face of poor forward earnings guidance, continued weakness in home prices, and worse than expected GDP unless investors are saying that “It can’t get any worse.”

Repent, I beg you. Cast off your hubris before we get some serious gnashing of teeth.

*****Case in point: oil prices. Crude prices continue to remain strong despite falling demand and growing inventories. Of course, we all know that prices will rise eventually (and SmallCapInvestor PRO members have made good money on this expectation by buying small oil exploration companies). But timing is an issue.

Right now, oil is sitting in tankers because traders are convinced that the . . .

GDP Falls 6.1% – Markets Shrugging It Off For Now

Posted by Kirk On April - 29 - 2009

Okay, I told everyone that 875 would be the first big test for the bullz and here we are up hitting that level right on the dot. Check out the chart of the S&P below and you can see that we really need to break past the upper resistance zone. Our shorts are trading up - obviously - but not any big gaps or alarming moves. If anything, you should not be going long at these levels as there is way too much risk and very little reward. I’ll follow up after the FOMC meeting announcement.

 

spx14


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GDP Falls 6.1% – Fed Interest Rate Decision At 2:15PM

Posted by Kirk On April - 29 - 2009

This is going to be one of those days where news does have a very important effect on the markets. GDP was just announced and fell 6.1% which was worse than expected. Since the futures had a knee jerk down but are still up since consumer spending seemed to be the only bright spot in the GDP report. So not only do we have to deal with GDP news and trading volatility with respect to that, but the FOMC (Federal Open Market Committee) will announce it’s latest decision on interest rates at 2:15pm. Granted nobody is expecting it to change from 0.25% but the important thing will be their policy statement as it may signal when they expect to raise rates in the futures. Make no mistake, rates will have to go up at some point to counter act the inflation that is coming down the road.

 

Below is the updated S&P intra-day trading targets. I would watch 875 level today if we shoot a lot higher. After that, the 893 level would be a great area to short the market in general.

 

spx13

 

Members and I added some more shorts yesterday with huge short term profit potential - some over 25%. We are already in the green fractionally, so any upside today would be mute to say the least. Below is RT which again I will point out as an amazing shorting opportunity after being up nearly 700% in the last couple of months and hitting a major Fib retracement level. On another note: it’s the day before Chrysler must merge or declare bankruptcy. It will be interesting how CEO Obama - or the new “Visible Hand” - deals with the situation.

 

rt


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These Trading Ideas Could Make You Thousands Of Dollars

Posted by Kirk On April - 28 - 2009

Another boring day in the markets, but it gave me the needed time to go through hundreds of charts and gather up some amazing short trading ideas. Of course, this type of “hand-out” is not going to happen much, so enjoy it while it lasts. Members already have the best of the best. Still, going short over the next couple of weeks is going to make a lot of people (including myself) thousands of dollars.

 


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Swine Flu: Trade The Fear

Posted by James Wilcox On April - 28 - 2009
Smithfield Foods ($SFD) is one of the largest hog and pork producers in the nation and is trading too cheaply. The principal reason for this is the mass panic/fear that is gripping the market due to an outbreak of “Swine Flu” in Mexico. Although there have been many casualties of this outbreak, the fact remains that you cannot contract Swine Flu by eating pork products. Ignorance and fear always create opportunities which is why I bought 350 shares of $SFD today.

$SFD has a solid business and people aren’t going to stop eating bacon, pork chops, ham, etc. There has been no recall of any pork product on the market and as I said before you can’t contract this flu by eating pork. $SFD is off the highs of the week, but still far from the 52 week high of $32.18 which leaves plenty of potential for this stock. In the short term I expect a $12 price target, but over the long run this is going back to where it was in May of 2008.

There are bound to be other opportunities like this out there, you just need to be patient and do your homework before pulling the trigger.

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