December 7, 2010 | In: Technology

Is CSCO Rebounding?

CSCO had a very interesting day today. It was upgraded in the morning by Oppenheimer (an independent investment company). CSCO went up almost 2% (36 cents, highest intraday was $19.60) by the end of the day on lower than average volume. This means that he official rebound is not there yet. However, if you look at the Google chart, you will notice that a huge buying happened at 15:56 (almost 1.7 million shares), lifting the stock’s price in the after hours by 8 cents. Whoever bought this amount of shares is not stupid at all.

I have been watching CSCO closely for the last week or so as I own some shares myself, and I’ve noticed that there was a huge support at the $19 level. A lot of automated buy orders were triggered at this level, and the stock went up almost 10 cents nearly 15 minutes after it reached this new 52 week low.

CSCO is a really strong company in an outperforming industry and has few competitors, and it’s really undervalued at the current moment, but investors are punishing it for reasons that are way far into the realm of negative speculation and fear. Oppenheimer said that the worst has passed, and is already included in the stock price, and it said that the stock’s normal price in order to be at sync with the market is $23. That’s $3.5 from where we’re at.

Let’s see how much the stock will close by the end of the year, I can easily say it will be no less than $22.

For some reason CSCO reminds me of NVDA, a stock that I refused to buy at $9 (and that went down for the same reasons), even when I thought it was way undervalued. NVDA is now trading at the $14.51. Well, live and learn…

2 days ago I have written about BIOS, and how it was at a bargain price, yesterday the stock almost touched $4 (apparently there is strong support at this level), and today, the stock reversed the downward trend on 2 times the average volume and it went up 10%. Take a look at the stock chart.

Now that the stock is up that much, the bullish sentiment is back, and tomorrow you’ll have a lot of investors entering the stock at the $4.50 level. It’ll be interesting to see how high can the stock go by the end of this week, again, if the bullish sentiment is maintained (which, judging by the today’s volume, most probably will).

BIOS was trading at almost $6 (a bit over a month ago) after it fell to the $4 level end of July.

This is a strong pharmaceutical company, and with a price so cheap, it can be easily bought by a mega pharmaceutical, at the price of $20/share, perhaps? Very possibly, this is the M&A Gold Rush.

GOOG fell down sharply today, nearly $27 or 4.5%, on the news of a European Antitrust Investigation and the rumors of the closing of Groupon deal, which someone at Google, thought it was worth $6 billion, and apparently managed to convince others that it’s really worth that much.

So I went to Groupon (I refuse to link to this website) for the first time in my life to see what it was, and why is it worth $6 billion, here’s what I saw:

Groupon Snapshot

The image before looks great, with the exception that I’m not visiting from Ottawa, I’m visiting from Montreal, which is by all standards at least the third more important city in Canada, and far more important than Ottawa, unless you work for the government (Ottawa is known to be the playground of all government jobs in Canada). Now of course this is nothing, but for $6 billion, you’d expect perfection, and also, for $6 billion, you’d expect most people in North America to know about this site, today was my first visit, and my background is completely technical. For some reason, this deal sounds like the AOL-Bebo one a few years ago, which ended with AOL’s sale of Bebo for a fraction of the original amount (just over 2 years after they bought it). I bet that Groupon’s CEO will be muttering the word “Suckers” all the way to the bank, just as the Bebo’s CEO(s) did a few years ago. Most investors believe that the rumors of this deal is the one behind this huge punishment of GOOG today.

Now let’s go back to the European Antitrust Investigation, which is more or less a sort of 21st century blackmail of an American company operating in Europe. Pay us money, or you can’t operate here. They did it (among many others) with Microsoft, they did it with Intel, and now they’re doing it to Google. Here’s the story…

Apparently, the EC (European Commission) is investigating Google for “unfair practices”. They claim that Google block Adsense publishers from displaying ads from 3rd party. Well, in Google’s defense, almost all of the other advertising networks have scammy ads (you know, ads like teeth whitenining, acai juice, scammy competitions benefiting mobile operators, etc…). Google just doesn’t want to be associated with these ads (if you see a Google ad on a web page, you assume that all the other ads are from Google, and other advertising networks strive to make their ads similar to Google’s to deceive the potential buyer). Additionally, Google does allow publishers to have other ads displaying on their web pages, as long as those ads are not “context sensitive“. Google, when it comes to this issue, is doing the right thing in my opinion, and it is very fair, not to mention that Google is, by far, the highest paying advertising network out there. Now who’s practicing these “unfair practices” now? It seems to me that it is the EC.

Today was a very bad day for Google, and I think that the stock might slump to the $500 level (which may be as early as next week) before rebounding again. The European thing will be solved by a bribe (call it a tax) that Google (the cash cow) has to pay to inject some billions into the much needy European economy. The Groupon thing, despite what others might think, should not happen, investors just don’t want it. The billions spent on this idiotic website will be much better spent elsewhere, maybe buying large stakes in a much, much better website. But then again, apparently money, especially when it’s in the billions, can burn a hole in your pocket.

November 30, 2010 | In: Financial, Opinion

BAC and Wikileaks

Wikileaks, a famous name that almost every politician hates, is now making itself a name in the financial sector. Apparently, Wikileaks claim having the hard disk of a BAC executive. According to Wikileaks, the hard disk has about 5 GB of “classified” information revealing the unethical practices by the Bank of America. Due to the ingenuity of the Wikileaks team, the stock is now being hammered and is trading at the $11 level (down almost 3% from yesterday). Wikileaks managed to make the whole of Wall Street an instant enemy. I’m sure though that someone shorted the stock prior to the Wikileaks announcement.

As one Forbes writer said, BAC’s stock price is at an absurd level, and even lower than the cash on the current banks’ balance sheet.

The Bank of America is a very strong bank, it got out from a huge storm, neither Wikileaks nor any other gossip website (publishing information, that may or may not be true, or may or may not be altered), can bring it down.

Stupid, fearful investors are now fleeing the stock, good for you, but when there will be a time next year when all these investors will be running to buy the stock at the $25 level.

Time will heal, and time will tell.

November 29, 2010 | In: Healthcare

BIOS at a Bargain Price

One of the stocks that I really love is BIOS, and with a P/E that is less than 5, what’s not to love. BIOS is the ticker for BioScrip Inc., a pharmaceutical company that is actually making money, unlike (most of) the rest in this industry.

The pharmaceutical industry is now generally bullish, but, as with other industries, it is suffering the “end of year” effect, where small investors tend to sell their stocks in order to claim capital loss on their tax filings. This has even a bigger impact on BIOS due to the following:

- The company’s small size: market capitalization is around $220 million at the current stock price.
- The 44% drop in the stock price since the beginning of the year: This is very major as investors can claim substantial amounts for capital loss if they sell this stock.

BIOS has also other problems of its own, such as withdrawing the guidance and changing its CEO.

The stock may drop more before it rebounds by mid December (this is when small investors tend to get out). I think the stock might even double in price as early as January. Sticking with these small, but strong companies is definitely worth it.

November 28, 2010 | In: Energy

HOU and HOD

I am starting now to shift into commodities as the predictability and the stability are much better than other equities (finances, pharmaceuticals, etc..). Two stocks I have discovered and started trading lately are HOU and HOD.

HOU is the Horizons BetaPro NYMEX Crude Oil Bullish Plus, HOD is the inverse of HOU, and is Horizons BetaPro NYMEX Crude Oil Bearish Plus. Both ETFs are issued by Horizons BetaPro.

HOU and HOD are priced in the Canadian Dollar (which is a great way to invest your Canadian Dollar money while avoiding exchange rates). Here’s how (theoretically) these two stocks work, if oil goes up, let’s say 1%, HOU goes up 2%, and HOD goes down 2%. Realistically, however, since HOU and HOD are both stocks, they are also subject of supply and demand that may not be proportional to the supply of the demand of oil, and, needless to say, they are also subject to speculation. For example, oil goes up 1%, but investors think that there’ll be more good news coming (demand on oil is higher due to low reserves or harsh whether, for example) so HOU goes up 4%, and HOD goes down 4%.

Take a look at the monthly charts for both HOU and HOD:

HOU 1 Month Chart – Courtesy of Google Finance

HOD 1 Month Chart – Courtesy of Google Finance

You can easily notice a pattern, if HOU is around $6.30 (I would buy HOU even at $6.50), then it’s a strong buy, if HOD is around $8.50 (I would buy HOD even at $8.70), then it’s a strong buy as well. HOU has excellent support at $6.20 (which is more or less when oil is around $80), and HOD has excellent support at $8.00 (which is when oil is in the high 80s). HOU, in my opinion, is highly representative of the stock market health (when oil goes up, it means that the dollar is going down, and the markets are going up, this is the case for the last few years anyway).

You can also easily see that every day there’s either a dramatic fall or surge in one of these stocks. Although this seems very risky, if you enter the stock at the correct price, you won’t have to suffer, just don’t buy HOD above $9 and don’t buy HOU above $7 and you should be OK. Of course, these prices are good when oil is set to hover in the 80s level (it is very obvious that there is very strong support at the $80 level set by oil producing countries, such as OPEC, and large investment firms).

The key to these stocks is patience, and faith. When these stocks go down, buy, they will ultimately go up, and you will make money on your investment.

Some words of caution: don’t panic, don’t buy a lot, don’t get greedy, don’t hold these stocks for a long (or even medium) time (just sell when you can), and don’t play this game with money that you will need in a couple of months.

Note: HOU stands for “Horizons Oil Up”, HOD stands for “Horizons Oil Down”.

If there is one scary stock out there, it’s AIB, it’s completely unpredictable, it can go up 10% or down 10% in one day, it can play between -10% and +10% in one day, it can trade in the after hours at 10% less or 10% more the stock price, and it can start the next day by trading in the complete opposite direction of the last 10 day, either erasing gains, or erasing losses. I have pondered a lot about buying AIB but it’s just too scary for my taste.

Now we know that the whole of Europe is in panic mode because of Ireland, who continuously refuses (and rightfully so) to be bailed out (some say the Irish are just blackmailing the Eurozone), others say it’s the Irish sense of nationalism playing. But with the exception of the Irish and (maybe) the Europeans, who cares why Ireland is doing this?

The most important thing right now for the Europeans (governments, not people, the people now hate the Euro) is to save the Euro, Ireland is not Greece, nor Portugal. Ireland is a hub, and there’s a lot of real (not real estate in a near-perfect weather, like Greece) international investment in Ireland. The fall of Ireland is definitely the beginning of the end of the Euro, we know it, and they know it. Of course, in the long term, the fall of the Euro is better for everyone, but in the short term, it will mean that a lot of investors (and to a larger extent, countries) out there will have to reassess their position of the Euro, and more importantly, the dollar.

So how can Ireland threaten the Euro? Well, for starters, they can get out of the Eurozone (which is very, very tempting) and start printing their own money. The confidence in the Euro will disintegrate, and the Euro, in no time, will be worth almost nothing.

The more of these things happen (Greece, Portugal, Ireland, Spain, etc…), the more I feel that the Euro is this bad relationship that is supported artificially by fake emotions, and there is no reason whatsoever for that relationship to exist anymore. But who am I to judge a currency, and the countries adopting that currency?

Now let’s examine AIB. If you check the volume of AIB in the previous days, you will notice that it is at least 30% below average, this stock have investors confused. Everyone knows that a European bailout will happen and to the Irish terms, but apparently nobody wants to touch this stock until a process on how the bailout money is spent is mapped out. AIB will continue to be very volatile, probably more on the upside, when Ireland (and consequently Irish banks) is bailed out.

AIB will be fun to watch in the next few weeks, and with a market capitalization of $690 million, Allied Irish Bank is way undervalued, if it survives this mess.

Few years ago, Nokia was the number one seller worldwide of mobile phones, it was also a leader in the dawn of smartphones. This is no longer the case, as Nokia’s sales are shrinking every quarter. Why is that?

Apparently Nokia is sticking with Symbian, an outdated and now annoying operating system for mobile phones, instead of moving to Android. Nokia even said the following about Android: “Android is like peeing in your pants to get warm in the winter”. How can Nokia be so shortsighted? Can’t they see that Android is taking their market share and people in droves are moving to this OS, which is even threatening to Apple?

Android, in my opinion, is probably one of the best (and very few) things that came out of Google.

I own both a Nokia phone and an Android (Sony Ericsson) phone, and here’s my comparison between the two:

- There are unlimited applications for the Android phone due to the open nature of the OS. The number of applications for the Nokia (Symbian) are a few and they are shrinking by the day, as developers move to the new Android system where they can actually make money.
- The Android OS has a great look and feel, while the Nokia one is now very outdated.
- It is easy to port your data between Android phones, try porting that data to a Nokia phone, or even from one Nokia phone to the other.
- Nokia doesn’t have anything remotely similar to the Android market.
- Android works closely with the users, and listens through official message boards, etc… Nokia rarely, if ever, listens to its user base.
- Try finding an SMS in a Nokia phone when you have over 3,000 of them…

I would like to stress again the importance of making money in the Android market, some developers even made developing applications on the Android system their full time job, because of the lucrative potential. Exciting and fun applications are being released every day on the Android. Nokia is completely distant from the developers when it comes to developing applications, it doesn’t even try to organize applications into its website (try searching for “Nokia Games” or “Nokia Applications” on Google, and the first results are shady websites that no sane person should trust), and has a very hard system to develop on (as if they don’t want programmers to develop application on their phones in the first place).

The list can go on and on, my point is that if Nokia remains stubborn, then it’s going to lag well behind in this market. The only thing that is keeping Nokia afloat at the moment is the huge sales of cheap phones to 3rd world countries, but even in that area they have competition, and this is not where the real money is anymore. Nokia doesn’t seem to get the point, people like openness, they like easy integration with the web, and they like using familiar and intuitive OS, something I cannot say about the Symbian OS. A lot of people were loyal to Nokia (buying only Nokia phones), but these same people are now feeling that Nokia’s phones are dull and unintuitive, and thus they are migrating either to Android phones or to IPhones that are fulfilling their expectations (and sometimes exceeding them).

Expect NOK to retreat considerably in the next year, if they still refuse to adopt Android, at least in future models.

The Canadian government, in an unpredictable move, decided to block BHP’s bid for Potash of Saskatchewan. The reasoning was that the sale does not provide a net benefit for the Canadian economy, as jobs may be lost (it seems that locals have complained to the local government who then passed the complaint to the federal government), and a foreign company will start exploiting Canadian resources for a limited price (even though it was $40 billion).

To be honest I don’t want foreign companies to have access to Canadian resources without the government overseeing the exploitation, that’s my personal opinion, but this is not what’s important now. What’s important is that the move by the Canadian government will destabilize the trust in Canadian equities in general, and will block the injection of the (apparently not very much) needed money in the Canadian company (that’s $40 billion).

Many Canadian stocks are going up because there are rumors that these companies may be acquired, and usually the acquiring companies are not Canadian, and may very well fire employees.

A perfect example of such stocks is RIMM, that has gone up 12% last month alone, returning to the July level of the stock. RIM is valued at $30 billion, any bid for RIM would be at least for a $100/share, which is over $52 billion. Will the Canadian government also block this deal? Maybe not, but that doesn’t matter anymore, because capital is a coward, and does not approach countries where heavy governmental regulations are in place.

I thought Canada was working hard to attract investors, what happened? PS: the number again is $40 billion, and to keep things into perspective, Saskatchewan’s population is just over a 100,000.

It’ll be very interesting what’ll happen to RIMM and POT (a stock that I thankfully didn’t buy on Monday) in the next few days.

I’m watching the elections today very closely, even though I’m not a US citizen, but what will happen today will have a considerable effect on my investments. Personally, it is in the interest of probably anyone who is bullish on the market, especially financials, that the republicans win. Why is that?

Most of the financial companies, including Bank of America, Citigroup, JP Morgan, and the likes are currently being tackled by the current administration on the sub-mortgage crisis, and asked every day from more concessions, penalties, and not to mention of course, the newly imposed restrictions. This is having a huge weight on the stock market and is dragging all the financial stocks down, especially BAC. A republican win may block new measures and reverse previous measures that Wall Street think was not fair.

We haven’t even mentioned BP yet…

Let’s see…