The Proficient Investor

Last week I bought 35 shares of Marvel Entertainment Inc. (NYSE:MVL) because I know this summer is going to be a big one for the two films the company is releasing this year. Iron Man proceeded to break all box office estimates earning over $100 million in the opening weekend. Most analysts predicted $70-$80 million. I knew the film was going to be huge after seeing early footage at Wondercon in January.

Looking at the chart over the past few months it was essentially flat but showing resistance at $28. Once it broke through that barrier, I knew it would continue. Current estimates place the stock fairly valued at $36 which is where I have my GTC sell order.

Next year, Iron Man 2 is slated for production with a release in 2010 and two other films are in the works. Captain America and a new Avengers project. Things are looking good right now for Marvel. The self produced Iron Man has shown the industry that Marvel can deliver on its promises. The next big test is this summer’s The Hulk. Edward Norton leads a solid cast but audiences are still trying to recover from Ang Lee’s disastrous version starring Eric Bana and Jennifer Connelly.

If The Hulk is as successful as Iron Man has been, you just might see MVL top $40 this year.

Next on my sell block is Apple. I’ve been “schnitzeling” this one as it has run a lot, but I’m letting the remainder of my shares go to $200 where I think it should be based on earnings and this year’s outlook. Earnings actually point to a $201 stock price but I like to sell into strength instead of waiting for a “top”.

Yesterday I got to thinking about the huge blockbuster season that happens in Hollywood every summer, and starts this month with the release of Iron Man.

May is traditionally the month the biggest films of the year come out. I’m talking about the huge movies like Transformers, Star Wars, and of course this summer’s Iron Man.

Marvel, the entertainment juggernaut behind Iron Man and also the upcoming The Incredible Hulk is set to make a killing on these two movies. The hype machine has been hard at work for Iron Man but not a lot has come forth about The Incredible Hulk except for a few interviews with stars Tim Roth and Edward Norton. Both films look amazing but what does it mean for Wall Street. Can Marvel make you some money this summer?

Marvel Entertainment Inc. (NYSE: MVL) is a multi-media company. They make movies, comics and video games. Most people are familiar with their Icons like Spider Man, The Incredible Hulk, The X-Men and Iron Man. They also license these properties out to video game makers and television producers. Franchising is a major part of any entertainment company and Marvel is going to cash in this summer. There’s both an Iron Man game and a Hulk game coming out and new comics for both of these characters are already on shelves.

The stock is trading at 18 times earnings and looking at about 10% growth over the next year. At $30 a share it’s nearing the 52 week high once again and should it break that level we could be looking at a $40 stock. The average 10 day volume is around 700k shares so its thinly traded and not very volitile. They also don’t pay a dividend but the 52 week low was only $21. With a 10 point swing in either direction this is a solid performer and I see a short term price of $32 before the stock is even value. I don’t normally recommend buying a stock after it has run as much as this has, but I do see some opportunity here for a quick profit.

Bluefly will report results for Q1 May 7th, 2008 at 5pm.

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

I love when the pundits come out of the woodwork trying to figure out why a stock like Netflix (NASDAQ:NFLX) can’t hold a fair valuation price. Everyone has an explanation as to why the stock plunged over $8 in one day after earnings were announced.

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

Bluefly (NASD: BFLY) reported a loss of $.04 cents per share compared to a loss of $.03 cents per share the previous year. Revenue increased 10% and increased 30% year over year.

Essentially, revenue is growing for the company but they are still operating at a loss because they haven’t been able to meet inventory demands and do not take backorders for inventory. Delays created losses to gross margins due to the inability to meet sales demands.

Marketing and Advertising expenses included a “shift in speding to support our partnership with Project Runway”.

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RUNU announced today in Las Vegas they are teaming up with Canteen Franchise Group which operates more than 110 franchisee branches nation wide and is the largest national vending operating company.

Canteen will market distribute Rudy Nutrition’s healthy sports drink and “Rudy” branded products such as Rudy Revolution.

This press release should give a lift to the floundering RUNU which saw a decline from the $63 on February 7th, to the sub-dollar range it sits at now. This is pure momo speculation that I bought at $1.25 and then a second order at $.74 cents. The volume is picking up and with a float of only 29k shares and the fact the stock is below the short price bears would like to play it at, the only pressure right now is upward. It wouldn’t surprise me to see another huge spike in price but again, it’s a bit of a crapshoot. You could make a fortune trading this, or you could lose big…but at least a stock can only go to zero. I’ll be looking for a double or triple at least here but as long as momentum is upward to $5 (where the shorts can come in if they can find shares to short) I’ll be on board.

If you are speculating with a stock like this you don’t want to commit a whole lot of capital to it, just in case it goes south. Speculation requires extreme discipline. For example, I’m only playing with 135 shares here because its such a gamble. But, 135 shares at $60 (should it get that high again) is $8,100.00 which would erase all my losses for the year. That’s just wishful thinking but it could happen.

Last year I got stuck “holding the bag” on a penny stock I had after making quite a bit of money in several days.  Then in mid-february it was announced this company had sold the remaining interest in another company it held in exchange for $2 million in convertible notes. That is to say, in lieu of cash they took restricted shares of stock that can be converted into common stock at some point in the future.

What stock? I’m talking about GBVS and RUNU.

GBVS is a joke of a company, though it is a real company. They are a beverage distribution company based in Maryland. RUNU is the holding company for Rudy Beverage Co. Owned by none other than Rudy Reuttiger.

RUNU is also a joke. The float on this stock is 29k shares because of a 9000-1 split recently. The great thing is with such a small float, and the stock being under $5 it can’t be shorted. Though it isn’t moving terribly quickly, it is on the up and I’ve made a small bet on this MOMO (momentum) play. This is pure speculation and not for the faint of heart.

Stocks like this can make you a ton of money but they can also break your bank, so be warned. Should you decide to play a stock like this, realize that it can go to zero…but hey, at least that’s as low as it can go!

Its insanity out there.  Stocks that were juggernauts just a month ago are selling off faster than the Fed-Ex guy could finish a commercial in the 80s.

I’ll talk a little about the Fed rate cuts, but first…what the heck is going on at Google? By the 8% downturn after hours today you’d think Google execs announced they were losing money hand over fist but they actually reported Q4 2007 revenue was  51% higher than the same quarter last year. After adjustments, they earned $4.43 a share. Analysts expected $4.44 a share.

Ok, hold the phone!  Just stop it right there!  Google misses by a penny and everyone jumps ship? Are you kidding me? So you really think that $314k makes a difference to a $1.5 billion company? Really? Heck, sell the damn thing, I’ll just get my shares cheaper.

Let me paint a picture for you. Google is at $564 down from almost $750 in November 2007. It wasn’t a straight line but it’s down nonetheless. If you look at their earnings though, and I hardly call 1 cent a catastrophic miss. Based on growth of 38% in the next year, this stock should have a PE of at least 75. Multiply that by the current EPS and you have a $960 stock.  Dare I say, $1000.00 stock when momentum gets going. Of course you can blame the price action on recession worries and people that made money but forgot to take it off the table panicked on the news Google missed by a penny.  Or maybe it’s the Fed. Yeah, blame them. They don’t know what’s going on anyway right?

Well, lets talk about the Fed. How do the Fed rate cuts apply to you? That’s a trick question.  They don’t apply to you. The federal funds rates that are being cut affect how banks loan money to each other. This isn’t going to affect your mortgage or the price of groceries. Your mortgage rates are tied to the Prime lending rate banks use. Currently its around 6.5% and you can bet that’s not changing much anytime soon. No doubt you’ve been hearing about all this sub-prime business. Sub-prime rates are those that are given to more risky borrowers because the bank has a greater chance of losing money if the borrower defaults on the loan.

It’s this situation, banks not following their own rules designed to protect their bottom line that led to so much trouble. Loans were being given to individuals that had no right to borrow that kind of money and with no real plan to afford it in the first place.

The lesson to learn here is you need to do your research when you buy stocks. I see something like Google drop like this and it looks like a fire sale to me. I say keep driving the price down so I can get it around $200 (I know that’s not going to happen). Then I can make out like a bandit when i hit my $950 target next year.

I do not own stock in Google.

Shares of Apple Inc (AAPL) gained 3% to close at $180.22 after a report from the Associated Press announced the Apple iPhone would be available to French consumers through carrier Orange.

Consumer law in France requires Orange to sell “unlocked” mobile devices able to work on any carrier. Unlocked handsets will cost about $965.32 in France. It costs about $149 to have a handset unlocked independently.

Customers using SIM cards from Orange’s rivals in unlocked iPhones run the risk of not being able to use all of its features or seeing their phones malfunction after software updates.

Orange will offer locked iPhones for about $593 - the same price as T-Mobile in Germany - with two-year service subscriptions, which offer unlimited access to email and the Web.

The title of this post says it all.

The market is pretty much in chaos. The Dow is down, Nasdaq is down, big names like Apple and Google are barely moving. So what do you do in a market like this? You wait. You either sell what you can and stay in cash, or if you are fully invested like I am, you simply wait.

My trades are usually over a 6-18 month timeline but there are a couple stocks I own that are longer term than that simply because I like the companies and I think their potential hasn’t peaked yet. If you trade shorter term then you want to be in cash. The great thing about being in a cash position is you can take your time and decide when to pull the trigger on that stock you really like.

One other thing I typically do in these kinds of markets is look for dividend paying stocks. Dividends can boost your overall portfolio growth and reinvesting those dividends can grow those good stocks faster than they otherwise might.

Now is a good time to be in defensive stocks like Lockheed Martin and Coca Cola or Proctor & Gamble. You want stable large cap stocks or cash. Cash as they say, is King.