Dumped most of my V for GNK and NUE

Yesterday, I decided to exit most of my position in Visa (NYSE: V) for a healthy 35% gain.  I’ve had valuation concerns on Visa the whole time I held it, and I think now’s the time to lock my profits and move to positions with greater upside potential.

While I think Visa’s a great company, it’s shares are trading at much too high a P/E to continue the rise it’s had.  I suspect being added to indexes and ETFs has and/or will help keep the stock up in the short to mid term, so I have held on to a small position just in case.

With the proceeds, I reupped my position in GNK, making it my 2nd highest holding now.  As I have written a few times recently, I’m very bullish on GNK through 2009, which was corroborated by some analysts just yesterday!  With the announcement yesterday of the acquisition of three more ships this year, all my earlier analysis can be bumped up a little more.  I need to dig into the announcemnt to see just how much of the purchase price is being financed to determine a new estimated price.  For those who missed my earlier analysis, it’s here.

A coworker of mine tipped me on Nucor (NYSE: NUE).  I had an eye on U.S. Steel (NYSE: X) and Mittal (NYSE: MT) for a while, but never paid attention to NUE for some reason.  Steel’s another great industry play, with short and mid term demand not going away and very little competition left in the game.  I liked the fundamentals on NUE better than X and MT, so I went that direction to get exposed to steel.

Still bullish on anything and everything attributing to global growth and supplying global demand.  Shipping and steel are the two I put my money into today.

Posted by dan.uyemura Posted in: Trades No Comments » May 2008

GNK Earnings Analysis

I’ll just post my email to Jay here so I don’t have to rewrite it all:

Dude, earnings out today - and the results look VERY good for the future man, I’m gonna dig in more, but from what I am reading this looks GREAT.  Here’s some bullets:

Posted by dan.uyemura Posted in: Tips 1 Comment » May 2008

Flipping From AGU to POT

Earlier this year (pre-blog) I was a POT holder but decided to flip to AGU for valuation concerns.  At the time, I sold my POT shares for $155 and change and bought the AGU for $65 and change.

I forgot to blog about it when I made this move, but on April 30th. I decided to get flip back from AGU to POT.  It was clear that the valuation was not a matter in investors eyes, even though comparatively speaking AGU is a much cheaper stock.  In this type of a market, you want to stick with industry leaders, so I felt better owning the darling of ags, POT, as opposed to the stock always mentioned as an afterthought.

The reality is in the timeframe I was holding AGU, they traded almost identically - with a max return of 28.75% for AGU and 27.9% for POT.  I sold with a realized gain of 16.25% on AGU (versus a 16.21% return I would have had holding my original POT shares).  So all in all a wash.

I sold AGU at $80.38 and got into POT at $185.59.  So far, it’s paid off, as POT has outformed AGU a tad.  Either way, I’m happy to be continually exposed to agriculture.

Recently GNK posted some great earnings too, I wrote up a mini-analysis that I sent to Jay, the other (yout-to-post-I-am-too-busy effing bull), which I’ll post up here later.  I am goign to be adding to my position of GNK sometime soon.

Posted by dan.uyemura Posted in: Trades No Comments » May 2008

Took a position in FCX today

After making a few blunderous short term option trades, I decided recently (like yesterday), to stop trying to make a buck daily - and start looking at everything (including options) on a longer timeline.  The market might knock the wind out of a stock on a day to day basis - but over a nice period of time, things generally trend - so picking winners in a longer timeframe is a tad easier.  Look for leaders, in hot industries and go for the ride!

I’ve had my eye on Freeport McMoRan Copper and Gold (NYSE: FCX) for my SEP IRA for quite a while. Freeport has been on my radar since about the time they acquired Phelps Dodge (to become the largest copper miner on the exchanges).  I had been interested in buying it at about $100 for a while, missed it as it dipped to $80, and watched it storm all the way to $120 recently.

FCX is all of the above - the largest copper miner on the market (who just so happens to mine gold — a projected 1 billion - yes with a “b” ounces in 2008).  Metals are hot, though maybe due for a little cooldown.  As I like stocks which contribute to the “global growth” story, copper is in high demand right now due to construction in China and India (among others).  While gold prices might not be able to push much beyond $1,000 per ounce, there’s no expectations for copper to plunge anytime soon.   

All that said, today I picked up one Aug 140 call on FCX.  I would have liked to be a little closer to the money, but I just did not have funds to pay the premiums.  I normallhy like to trade my options in pairs, but since I did such a masterful job buying AAPL puts going into their earnings (which they nailed) - I only had funds for one, and at a strike a little further out than I would have liked (given the current price of 112 and change when I bought).

I’m looking to exit this call if FCX starts to show resistance in the mid 120’s as it did earlier.  If FCX rises through the 120’s on strength, I will keep it with a trailing stop in place.

Happy trading everyone.

Posted by dan.uyemura Posted in: Options No Comments » April 2008

Of Lemmings and Men

One thing I never got is the whole “mob mentality” of the stock market.  From everything I have been told (am I the lemming?), the market is largely controlled by massive institutions that own millions of shares of individual issues.  These institutions are run by the cream of the crop - Ivy league MBA’s and gurus with 20+ years in the business. These managers get paid a ton of money to manage the funds.

If all that is true, why would a stock price sway so dramatically day to day on news that is not overly bullish or bearish to the overall big picture of the stock?

Case in point: Apple.

Yesterday (April 21, 2008)  Mike Abramsky from RBC Capital Markets predicted that Apple will beat Q2 earnings estimates (duh, how long has it been since Apple has NOT beaten the street) and raised his share estimate to $190 (from $175) and reiterated his “Outperform” rating.  As a result, AAPL was up $7.12.  

Today (April 22, 2008) American Technology Research analyst Shaw Wu downgraded AAPL to “Hold” from “Buy” stating that the recent price run up has caused valuation issues.  He also felt conservative guidance (something AAPL is notorious for doing in order to crush the street later) would be not received well in todays market.  Result: AAPL down $7.96.

Considering AAPL traded 51M shares today ($8.16B) it’s safe to say it was not mom and pops overreating to positive and negative news.  So what gives?  Are these institutional investors so spooked by analyst remarks they will buy up $8B in stock one day and sell off $8B of the same stock the very next day?  Don’t they know a good or bad story from their own research and analysis - do they actually take and sell positions in funds based on some analyst report?!  Someone make sense of this for me! 

DISCLAIMER: This EffingBull owns AAPL (and I’m not selling!)

Posted by dan.uyemura Posted in: Rants No Comments » April 2008

Bullish on Drybulk Shipping

Once a hot topic, dry bulk shippers have taken the back seat recently to other hot industries.  This has created a nice buying opportunity for many of the top shippers.

The environment for dry bulk is as good as ever.  Demand is strong as developing countries such as China need a massive influx of iron ore and other raw materials for construction.  Supply remains low as there simply are not enough charters available to move the amount of dry bulk demanded.  Since building new vessels takes years and the global growth of developing nations will persist for decades, we have a nice long term story here.

Here’s some of the players in the game to check out:

Genco Shipping (NYSE: GNK) - Between now and December 2009, Genco is expecting the arrival of 5 new Capesize vessels.  These would amount to about an estimated $91M bump in revenue in 2010.  Given total revenue for 2007 was $65M (with only 4 capesize vessels), earnings and revenue growth in the near future will be massive. GNK has its vessels locked up in long term contracts, taking advantage of a favorable rate market now, and shielding itself from the uncertainty of spot rate shipping. GNK currently trades at a P/E of about 17, with a forward PE of under 10 and a PEG of 0.25 (!!!).  Top it all off with a $50M stock buyback and a 5% dividend and this effingbull thinks Genco is a buy.  

Dryships (NAS: DRYS) - Dryships is the largest dry bulk shipper in the space, pulling in $582M in revenue in 2007 from their fleet of 38 ships.  DRYS is also expecting to take delivery of 4 new ships between now and December 2009.  The majority of DRYS fleet is operating on short term spot rates, so DRYS revenue can fluctuate depending on the daily spot shipping rates.  Recently DRYS has entered into an agreement to acquire an offshore drilling company (Ocean Rig ASA) - which to this effingbull is a red flag (similar to Blockbuster buying Circuit City).  Regardless, with an estimated revenue of $18 per share, DRYS is trading at a favorable PE of 6.  An industry leader at a reasonable price, but I’d be cautious of the foray into drilling.

Navios Maritime (NYSE: NM) - In terms of future growth, NM has a lot of upside.  Currently the company charters only four Capesize vessels, but has nine under contract for delivery between now and Q1 2010.  NM typically charters its vessels, so revenues are more predictable.  NM trades at a current PE of 4.5 with a PEG of 0.14.  NM also pays a decent dividend of 2.4%.  NM has a large float, hence the lower per share price - but still very attractive from a valuation standpoint.

Other notable shippers to pay attention to: Excel Maritime (EXM), Frontline, LTD (FRO)

DISCLAIMER - This EffingBull owns GNK at the time of this posting.

Posted by dan.uyemura Posted in: Industry Reports No Comments » April 2008