Thursday, May 31, 2007

What a game!

Cleveland just beat the Pistons in double overtime. Lebron James is amazing, what a game.


I picked up some apple today. I just don't see the down side to this stock. It has been on a consistent rally for the past few months in anticipation of the iPhone. I was wanting to buy this stock in the 80's but passed waiting for a correction. That was a huge mistake since I am now buying it @ $120. Live and learn. bp

disclosure: optimistically long


With the market hitting all time highs almost on a daily basis it is hard not to make money. Aflac (AFL) is no exception, recently hitting an all time high of $54 Aflac looks prime to head higher. Aflac has had consistent growth over the past five years and this trend does not appear to be slowing. With over 50 years of experience in the insurance industry Aflac is no newbie to the game. Here is a description of Aflac’s business summary provided by Yahoo:

Aflac Incorporated, through its subsidiaries, engages in the marketing and sale of supplemental health and life insurance plans in the United States and Japan. It sells cancer plans, care plans, general medical indemnity plans, medical/sickness riders, living benefit life plans, ordinary life insurance plans, and annuities in Japan. The company also sells cancer plans and various types of health insurance, including accident/disability, fixed-benefit dental, sickness and hospital indemnity, vision care, hospital intensive care, long-term care, ordinary life, and short-term disability plans in the United States. Aflac underwrites individually issued policies, and markets its policies through independent agents, as well as through independent corporate agencies, and individual agencies. The company was founded in 1955 and is headquartered in Columbus, Georgia.

According to AFL’s financials it appears Aflac is a pretty sound company. With nearly 19% ROE and 10% profit margin AFL is doing something right. The commercials are pretty funny too. This one is my favorite.

Wednesday, May 30, 2007


Surprisingly Canon (CAJ) is one of the leaders in producing environmentally friendly products. Being an environmentally friendly company has become very vogue on Wall Street. With the presidential election warming up and environmental issues being a huge concern it appears that Canon is ahead of the game. Investors are going to become more aware of green companies and this could be a huge plus for Canon.

Canon produces cameras, personal printers, business printers, scanners and other printing and photography equipment. Canon’s top competitors in the photography industry are Nikon, Sony, Minolta, HP, and Kodak, all of whom have a growing line of digital cameras. The competition in the digital camera industry is growing daily, but Canon has been able to find a niche with Digital SLR cameras and lenses.

CAJ is trading around $57 with a p/e ratio roughly 19. Canon has a forward p/e of 15 which makes it looks like a bargain at $57. This is a great large cap stock to hold in your portfolio for the long term. CAJ has annual revenues of over 35 billion with quarterly earnings growth over 21%. With very small short holdings the risk in CAJ appears minimal. Click here for statistics.
Disclosure: No position

Tuesday, May 29, 2007


Everyone knows what a TIVO is, but how many people do you know that actually have one? I don’t know one person that actually has a TIVO, which is probably why TIVO can not turn a profit. Where did TIVO go wrong? The have tremendous product recognition but every cable company or satellite company has there own version of a TIVO that comes bundled with the service. TIVO is to announce quarterly earning tomorrow and will likely post another loss. So how can TIVO become profitable? Well here are some suggestions to save TIVO:

1. Team up with the cable companies! If you can’t beat them, join them. TIVO should team up with a cable provider like Timer Warner, Verizon, or Comcast to reach a wider audience.

2. Model the business plan after the cell phone carriers and give the product away! The profit is all in the programming anyway, so give the units away for free. If TIVO required a one year programming contract with every unit they would be positive in no time. The base units (80 hours) are selling for $99.99, while the bigger 180 hour unit is selling for $199.99, and the steroid unit (300 hour) is selling for $599.99! No one in there right mind is going to spend six hundred dollars on a TIVO when the cable companies are giving them away for free! If you truly believe in the product than the customers will continue to use the service after the contract has expired.

3. Hire a new CEO. Having a CEO that has a vision of where the company should be heading is crucial to any company’s success. TIVO needs a fresh start with a new CEO that has not been sitting on the company’s board of directors like there current CEO Tom Rodgers.

Turning a company like TIVO out of the red is going to require some huge changes. TIVO is a tough stock to trade because they don’t have the financial stability or growth potential that most investors are searching for. TIVO’s best asset is there name recognition and they need to use this to turn the company profitable. I will keep TIVO on my watch list, but not in my portfolio.

Thursday, May 24, 2007

Nike 20 years ago (UA)

Under Armor (UA) has come on very strong, no pun intended, in the athletic apparel market and the momentum does not seem to be slowing. Founded in 1996 by Kevin Plank (a former college football player) Under Armor was designed with one purpose in mind, to design the perfect work out shirt. Today UA has a growing product line that includes not only apparel but cleats, sunglasses, duffel bags and an assortment of equipment. Here is a blurb from UA’s website:

“It started with a simple plan to make a superior T-shirt. A shirt that provided compression and wicked perspiration off your skin rather than absorb it. A shirt that worked with your body to regulate temperature and enhance performance.”

With a p/e ratio of 58 UA appears overpriced currently trading arouund $47, but if you can get in on a correction UA is a good stock to have in your portfolio. UA has a forward p/e around 38 and a quarterly revenue growth of over 40%. Like many growth stocks the short float is over 32% making this a very volatile stock. Trade this one carefully. Good analysis here. Nike and UA analysis here.

Wednesday, May 23, 2007

Bo Knows Stocks (NKE)

What do Michael Jordan, Labron James, Tiger Woods, Bo Jackson, Kobe Bryant, and Lance Armstrong all have in common? Nike (NKE). Nike has been able to stay hip through decades. As a kid growing up, I remember having a six foot long horizontal poster of Michael Jordan palming two basketballs in my bedroom. Nike is responsible for making some of our favorite players larger than life. Nike is well represented in just about every sport including football, basketball, tennis, golf, swimming, baseball, hockey, cycling, and soccer. Recently Nike has begun to produce skateboarding shoes in hopes of getting into the alternative sports segment. If your heart is pounding usually you are wearing some sort of Nike product.

Today’s Nikes are much different than the old Nike Airs of the 1980’s. Technology has played a large role in the Nike revolution. Today you can go online and get a pair of Nikes in two different sizes, for that goofy longer left foot, and customize every color including the swoosh. You can even get your name stitched on your right toe if you so desire. Check it out here. Nike has also teamed up with Apple so you can now get a transmitter that will attach to your customized Nikes and talk to your iPod. This transmitter will tell you everything about your run including your distance and average mile speed.

If you are still reading this and not on the Nike web site making an awesome pair of gold shocks than you must be ready to talk about the stock. Nike has been on an upward trend all year and recently hit an all time high of $55. NKE has a respectable p/e ratio of 20 and an impressive profit margin of nearly 9%. Good analysis here. What else is there to say besides Just do it!

Tuesday, May 22, 2007

Buyouts and Mergers

In honor of the announcement today that has been purchased by CBS for an undisclosed sum (rumored to be around 5 million) I will take a look at some other companies destined for a buyout. The investment guru himself Warren Buffet has announced that his holding company Berkshire Hathaway (BRK-A) is in the market to acquire another company. So with all these buyouts and mergers who is next? Here are a few interesting possibilities from the retail sector..

1. Borders Group, Inc. (BGP) has been rumored to be in talks with Barnes & Noble (BKS) about a possible buyout. BGP with over 567 locations may be attractive to Barnes & Noble, but Borders has a lot of baggage. BGP has revenue of $4.11 billion but has a disappointing profit margin of -3.68%. This may be a good fit for BKS, but will they be willing to pay a premium for this company?

2. Polaris Industries Inc. (PII) is a good candidate for a private equity firm or even someone like Berkshire Hathaway (BRK-A). PII has reasonably strong earnings with a p/e ratio of 19 and total annual revenue around $1.7 billion. PII is a great target because it is profitable and has a market cap of 1.86 billion. If someone was to buy PII with a premium of say 10% they would still be right around the 2 billion dollar range. $52 (current price) X .1 (10%) + $52 (current price) = $57.2 (purchase price per share) X 35,760,000 (shares outstanding) = $2,045,472,000 (purchase price)

3. Radio Shack (RSH) has rumors flying that Dell (DELL) may be interested in a buyout. This is a little troubling knowing all the problems Dell is having with its accounting and regulatory fillings. Dell is interested in finding another form of distribution, but RSH seems like a long shot. If Dell wants to use an outside distribution method similar to HP (HPQ) why not use Best Buy (BBY) or Circuit City (CC) where the consumers can compare and contrast the different products?

Disclosure: no position

Monday, May 21, 2007

Crocs may be a Croc

Crocs (CROX) are the top story on the local news here in Dallas! This trend may be drying up. Usually the local news is not the best place to get your fashion tips! With a p/e of nearly 40 surly a correction is in the near future. I don't want to be a total bear on this stock, but it just seems like it is grossly overpriced. You be the judge...

Here is the Tease: "Do you walk in crocs? Some very good health news and some that's not-so-great on the shoes. Get the real deal on crocs... Tonight only on news 8 at ten."

It’s all in the Mirrors - TXN

Texas Instruments is definitely on my short list and has been for years. Texas Instruments (TXN) is best known for making those complex calculators that we all had to buy for our college algebra classes at a $100 bucks a pop, but those calculators make up only a very small portion of TI’s annual revenue. TI’s main bread and butter is its semiconductor business. TI supplies millions of tiny chips that operate our favorite little friends, the cell phone. Two of TI’s biggest customers when it comes to chip consumption are Nokia (NOK) and Motorola (MOT). Although domestically Nokia has become a discounted brand, likely used as a prepaid phone, they are still a world leader producing millions of phones annually, which equates to millions of chips annually.

TI’s most recent success story is the DLP television. “It’s all in the mirrors” is TI’s ad slogan for the new DLP TV’s because they use millions of mirrors to create the intense clarity. DLP’s do have some disadvantages when compared to LCD and Plasma as far a picture clarity, contrast, and viewing angle, but for the price DLP is awfully competitive. The biggest disadvantage that DLP’s have is that they are projection TV’s. No smooth looking flat panels here, but that has not stopped TI from successfully marketing this product.

Analog chips are not quite as sexy as DLP TVs or high tech cell phones but these chips make up 40% of TI’s business. This is a huge global market in which TI dominates. Used in computers and other electronic devices analog chips are used to communicate and convert information to digital format. Let’s turn to Business Weekly for a better explanation:

“Analog chips measure "real world" inputs—from the temperature in a room or the sound of a voice to the touch of a button—so they can be converted into a digital signal that a computer or other device can understand”

So what is the stock play for TXN? TI is one of those companies that tend to stay in a pretty narrow window as far as stock price goes. I have traded in and out of this stock between $28 and $35, but recently TI has begun an upward trend holding pretty strong at $36. I am waiting on TXN right now to retreat a little to add on to my position. TXN is trading at 12.75 times earnings and has a one year target of $39.

Saturday, May 19, 2007

Get a Life-time (LTM)

Grab your bike shorts, goggles, running shoes, tennis racquet, and iPod, let’s discuss Life Time Fitness (LTM)

Today I am officially on the life Time bandwagon! This place is amazing. With first class amenities and a helpful staff (you know who you are) life Time has produced a top of the line club atmosphere. Life Time’s core competences include cleanliness, friendliness, and the ability to consistently exceed the customer’s expectations. These clubs are enormous and have enough machines to satisfy the most demanding members. Not only does Life Time have the standard gym equipment they also have a full salon, deli, childcare, indoor and outdoor pools, indoor basketball, racquetball, rock climbing wall and a field of tennis courts. From an investors point of few LTM is a great growth stock. One of the best things about LTM is that they own much of the real estate the clubs sit on. This is a great asset for the company and investors have taken notice.

Obesity is a huge problem in America and the only way to really fight this epidemic is to exercise (LTM) and eat healthy (WFMI). With over seven million people in America 100 pounds or more over weight the time for change is upon us.

I am not the spokesman (officially) for life Time, but as member I am quite impressed with the facilities. As a stockholder I have a few concerns with LTM. One of the downsides to this company is the overexpansion of clubs. This type of growth is unbelievable for a company of this size and although growth can be very beneficial to stockholders, it can be detrimental to a company. With so much expansion it is hard to analyze the profitability of a company like LTM. LTM should continue to grow and open new clubs but they need to make sure quality is not jeopardized in the process.

LTM has 60 fitness centers, as of December 31, 2006, and has plans to open 8 new centers in 2007. Net revenue jumped from 390.1 million in 2005, to 511.9 million in 2006. For the complete 2006 annual report click here. LTM is currently trading for around $50 a share and has a P/E ratio of 34 and a forward P/E of 23.

Disclosure: actively trade long
Note: See for charts

Thursday, May 17, 2007

How Secure is the Fortress (FIG)?

When fortress decided to go public in February, 2006, instantly millions of investors were able to invest in an instrument that has been reserved exclusively for the rich. A hedge fund is very similar to a mutual fund in that it is a pool of capital that is managed with the goal of beating the market. A hedge fund differentiates itself from a mutual fund in that the risks are much higher and the investment instruments are much more complex. So what are the benefits and disadvantages of investing in a publicly traded hedge fund one might ask? Well here you go..

1. Anyone can invest! Hedge funds, although not regulated by the SEC, have to abide by a few regulations including but not limited to accepting only accredited investors. This means that if you don’t earn a minimum amount of money annually and have a net worth of $1 million, along with a significant amount of investment knowledge you can not invest with the elite.
2. Easily redeemable. In a normal hedge fund you are usually required to keep your money invested for a set period of time, usually one year. Many hedge funds will also only allow investors to enter and exit the fund twice a year. This is done in order to minimize professional fees and maximize the management’s investment opportunities without having to exit positions early.
3. Great way to hedge yourself against your long positions. Hedge funds invest in many complex instruments that the normal investor may shy away from including, derivatives, options, and shorts. They will also leverage up aggressively going uncovered or “naked” on many positions. Although a hedge fund may not out perform a bull market it will usually greatly out perform in a bear market due to its ability to short on leverage.

1. There is only one public hedge fund. If you wanted to invest in oil you have numerous different options including ETF’s, Futures, Stocks, and Mutual Funds, but if you wanted to invest in a hedge fund Fortress is your only option. With no competition to pull comparisons it is very difficult to discern if you have made the best investment decision.
2. Fees, Fees, and more Fees! Hedge funds are notorious for charging huge fees including a fee for capital under management (usually around 1 percent annually), and a profits fee (usually 20%). This is why the “Forbes 400 Richest Americans” list is loaded with hedge fund managers. Most investors are willing to pay these outrageous fees because the fund is still producing 20-40% rate of returns.

So will a publicly traded hedge fund be able to produce the same type returns on capital as the privately held funds? A publicly traded hedge fund is going to have to deal with the effects of Sarbanes Oxley and other SEC regulations which will likely have a negative impact on the bottom line. Fortress announced its first quarter earnings this week which had fallen 50% due to professional fees involving its IPO. Fortress is trading today (5/17/2007) at $29.07 with a P/E ratio of 24. It appears the verdict is still out on this new investment instrument, but with more IPO's expected in the near future it will be interesting to watch what happens.

Wednesday, May 16, 2007

Where is the Luv?

Southwest Airlines Co. (LUV) said today it planned to buy back an additional $500 million worth of shares. Luv has taken a beating lately with fuel prices skyrocketing. This is one stock that I have been actively trading for a long time and am quite familiar with. With a p/e ratio of 22 compared to Jet Blue (JBLU) with 211 this stock is way undervalued (and JBLU is way overpriced). Luv is know for its unbelievable oil futures trading and this has allowed the company to stay profitable while others have had huge problems with rising fuel costs. I recommend Luv as a buy, especially in the 14's.

Disclosure: Long LUV

Whole Foods for Half the Price

Whole Foods (WFMI) has had tremendous growth in the past few years beating expectations continuously. After missing market expectations last quarter the stock took a tumble dropping to the $40 range. This may be a steel for a great company with a ton of growth potential. My wife and I eat nearly every meal from Whole Foods. They have almost a cult following. With a huge variety of pre-cooked meals ready for consumption to the incredible wine selection WF has something that nobody else has, a buzz. People love to talk about what they got at WF's, and people don't feel guilty eating soy ice cream or organic pizza. This is something that many people overlook, people enjoy the foods they buy from WF not only because they taste good, but because they feel they are doing something good for themselves.
Disclosure: Long

Tuesday, May 15, 2007

Apple iPhone 5/16/2007

Apples new iPhone may be the most anticipated phone to hit the market ever! I can hardly wait myself for the iPhone to hit the market. I know many people who are waiting to upgrade their phones because they want an iPhone, and I am one of those people. Why spend $250 on an iPod and another $300 on a PDA phone when you can have them both in one device for $499? Many people are turned off by the high price of the iPhone, $499 for the base model (4gig) and $599 for the big brother (5gig), but for all the features the iPhone has how can you go wrong? Now that everyone is sold on what a huge success the iPhone is going to be, what is the stock play for this new device? Apple (aapl) is the obvious play with all the success of the iPod, but AT&T (T) may be the best play for the iPhone. AT&T has the exclusive rights to sell the iPhone for at least a short period of time. T is currently hovering around $40 bucks a share with a p/e ratio of 20 and a 3.6% yield. Place your bet and see what happens..

Todays Market 5/15/2007

The market is closed for the day and it looks like another record breaker for the Dow! If you told me three weeks ago that we would be at 13,383.84 at the mid point in May I would think you were crazy. Sell in May and go away! what has happened to this investment strategy? Will 2007 just be an anomaly year? Before we jump to conclusions it looks like the market wants to go bearish tomorrow. With Walmart coming out after hours saying they do not think they will meet Wall Streets expectations and the Dow futures looking lower it could be a down day in the market. The market appears strong, but a correction will likely occur sooner than later. Don't hold me to this, but I could see a 1,000 point correction by the end of June putting the Dow down to around 12,500. There are still some undervalued stocks out there mainly in the mortgage industry (CFC), and some of these REIT'S that look very cheep for the long term investor. These are great for an IRA that does not have to pay taxes on the huge dividends that the REIT's will pay.