The Proficient Investor

When looking for investments long term, there are many things that can determine whether a stock is a good buy or not but one of the main things I look for is always earnings. Based on the earnings you can figure out where a stock should be and where it is going.

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

Any sound investment strategy will have in place a plan for when to take profits. One of the biggest mistakes you can make investing is thinking that if you just hold a stock long enough you will make money. This is patently untrue and a dangerous way to play the market.

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.

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”.

Read the rest of this entry »

It’s been a while since I talked about Apple and why you should be buying it. Actually, you should have bought it when it was at $125 but if you missed that bottom, don’t worry. The price is still right and Apple is way too cheap.

Here’s a company with 22% growth over the next year and trading at 28 times earnings? Apple deserves a 44 multiple putting the stock at $200 where it should be. It’s going to go back there by the end of the year. Do yourself a favor and buy 5 shares for a 70 point gain this year.

iPods and MacBooks are still going to be the big sellers for birthday presents, Father’s Day, Mother’s Day, Christmas…not to mention if the iPhone prices go lower, that’s going to sell a lot more. The iPhone and the iPod touch are going to be bigger this year than last because of the new applications available. With Microsoft Exchange coming on board the iPhone, and likely the iPod Touch sometime after, it opens up the iPhone for corporate use.

That could be huge for Apple this year and would solidify the iPhone as a real competitor to RIMMs Blackberry. There’s too much going good for Apple to ignore it and the shorts are going to get caught with their pants down.

I own shares of Apple.

I check my spam folder on this blog every day. I check it because although Akismet is really good at catching nearly all the spam, sometimes legitimate comments get relegated to the trash pile.

In the past month I have had so many spam comments about Phentermine, it’s unbelievable. Phentermine I guess is a weight loss pill. Now, I don’t know why spammers have targeted my blog for this except that at some point in a post I probably mentioned losing weght and voila, now I’m a prime target for this junk.

Its sad enough that people think a pill is going to do what a good nutritional diet and regular exercise do naturally. There is no magic bullet or pill that is going to shed unwanted pounds, no matter how scientifically proven it is.

That being said, sometimes you don’t know what to write about and that’s where I got the idea for this post.

You want to make sure you check your Akismet folder as often as you can stand it. My eyes nearly blurred at all the same phrases I was seeing. One of the good things though is I didn’t see a lot in terms of content scraping. Either those idiots stopped pulling my feeds or they took down their blogs. That stuff is out of control. Many a time I have had to move comments back out of the Akismet folder so they would show up. I do wish however that I got some kind of notification…instead I just have to remind myself to check the folder.

None of this really has to do with investing…unless of course you own a pharmaceutical company that makes Phentermine. Read the rest of this entry »

If you are any kind of subscriber to a financial newspaper like The Wall Street Journal or Investors Business Daily, chances are you have also had your address sold to other similar news sources.

The problem is, some of these sources aren’t reliable and are only trying to get you to buy into a particular stock because it will benefit the people behind the pressing. I get these full color newsletters all the time. Almost always, these are OTC or Pink Sheet stocks that trade under $10. Most trade far under that, even going sub-penny (never a good investment).

Read the rest of this entry »

Here’s your chance to learn from one of the best penny stock traders in the business. Tomothy Sykes, author of An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund, is giving away his instructional DVD, Pennystocking.

This DVD is packed with detailed instruction on how to read penny stock charts so you can pick stocks that have the greatest potential to gain or lose on the day, allowing you to buy or short these stocks.

Timothy Sykes made a fortune trading thousands of penny stocks in his 4 years in college starting with only $12,415.00 and turning it into $2 million then started his own hedge fund called Cilantro Fund. If anyone knows how to win in the penny stock market, Tim does.

Now is your chance to win his DVD and learn his techniques first-hand. Normally, this DVD costs $297 but you can win it simply by commenting on this post. I’ve already commented, good luck to the rest of you.

My overall portfolio sagged today, but I wanted to mention two of my stocks here. First, Bluefly closed up .03 cents at .46 cents on the PR about the stock split. This is action from investors trying to boost the price a little higher pre-split to make the resulting price higher…probably so they can short it after it tops $5 a share.  I don’t care, I’ll have 347 shares after the reverse split.

Next, RUNU as I predicted dropped to .68 cents on just under 70k shares trading. I guess that $1 support level just couldn’t hold against the resistance. Rudy must not be pushing that PR train hard enough yet. I expect some crazy trading in this stock soon…keep an eye on it.

TGIF!

In accordance with the SEC, Bluefly(BFLY) announced a reverse split of 1-10 meaning for stockholders, every 10 shares will now equal one, which will move the stock to the $4 range…just under what is allowed for shorting and it will also change the amount of shares available from 134.3 million to 13.4 million.

Bluefly’s symbol will change to BFLYD to reflect the split for 20 days after which it will again revert back to BFLY.

This has been a long time coming IMO. Management should have seen the writing on the wall and done this much earlier. Although this is a move in the right direction to meet NASDAQ continued listing requirements, its no guarantee Qualifications panel will accept it which means ultimately that BFLY could be relegated to the OTC market until such a time as they can again meet the strict requirements of trading on the NASDAQ.

Does it matter? Not really. Even if they move to the OTCBB listings, its still a real company that you can track sales and figures on. It’s still speculative and the retail business hasn’t been doing well at all, but I’m sticking with BFLY.

I own shares of BFLY.

Here’s exactly why you should never trust anyone that claims to have a proven system to pick winning stocks.

http://www.msnbc.msn.com/id/23578967/

Crooks abound everywhere folks, and there’s always some sucker willing to give away their money. Anyone who says they have a sure-fire system that can pick winning stocks all the time is lying. You can make predictions and assumptions based on past performance and several other factors, but there is no sure way to win by trading stocks. If someone tells you they have information on such-and-such company and you could make a lot of money on their stock, just turn around and walk away because you’re more likely to go to jail than cash in.  That’s called insider trading and it’s illegal no matter how you look at it.

Hope your trading day was profitable. RUNU took a dive today but not much. I’m still waiting for the volume to pick up and edge over my average price.