CEPH Receives a Hostile Bid

Had my eye on this one (CEPH) since November '09. Kept it in my watch list into February '10. Pulled the trigger on November 24, '10 at 64.10.
Today, CEPH received a hostile bid from Valeant for 73.00 per share. With a trading price of about 75.20, it is a good time to exit.

Sure, hostile takeovers may attract other suitors and higher bids... but then, the deal could fall apart.

Sudden spikes concern me and, with gains of 17.30% in four months, I would not hesitate to cash in.
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An Update on CSCO

Today's article from thestreet.com reinforces a view published in this blog about CSCO on 2/10/11:

http://www.thestreet.com/_yahoo/story/11053420/1/cisco-the-case-for-buying-the-stock-now.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Closing at 17.39 yesterday, this may be a good time to own or double up on this giant and consider it as a long term investment.
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Do Not Sell Into a Panic!

History has proven that panic selling is not a wise move.
The markets are off about 2.5% this morning, for those who have the intestinal fortitude, this may be the time go long in the market.
Read this article just published:

http://www.marketwatch.com/story/it-rarely-pays-to-sell-into-a-panic-2011-03-15?siteid=yhoof

Stay calm and take advantage of the investment opportunities out there.
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Stocks to Watch - March 7, '11

Watch list for March 7, 2011

BX------------18.18
STO-----------27.67

BX is into asset management; I still like STO.

We'll be checking the performance of these picks in a few weeks.
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Results for "Stocks to Watch - Oct 17, '10"

It has been a while, four and one half months to be exact, since I wrote about a stock watch list.
Unpredictable turn of events led to choppy markets and a more difficult environment for a stock picker.

For the period of 10/17/10 thru 3/4/11, this was our watch list and outcome:


Stock Symbol-------10/17/10------------------3/4/11

AVT------------------27.63-------------------34.18 (up 23.71%)
STO------------------22.08-------------------27.67 (up 25.32%)
WATG----------------10.07--------------------6.85 (down 31.98%)

The outcome was not so good, WATG has been on a slide and was the only pick that kept the average returns down, bad choice.
Our average gain for this period was 5.68% while the S&P 500 rose about 12.32% in the same stretch of time.

We'll sharpen up our pencils and try to do better.
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Ooooops! CSCO Takes a Dive

For the third time in six months, Cisco Systems, Inc. (CSCO) has gapped down in a significant way coupled with huge trading volumes.

Cisco Systems, Inc. designs, manufactures, and sells Internet protocol (IP)-based networking and other products related to the communications and information technology industry worldwide.

Again, some Wall Street analysts downgraded the stock, citing concerns about higher competition and lower margins.

My belief is that the selling is overdone and that CSCO is not going away. Trading this morning at 19.17, closing in on a short-term support at 19.00; this could be an oportunity to get in at a good level.

Obviously, CSCO has shown to be very volatile and out of favor; with a contrarian view I am inclined to call this one a buy candidate.
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The "Dead Cat Bounce" Theory

Over the years, traders have been searching for consistent behavior in stock prices.
One of the theories is the "Dead Cat Bounce" syndrome.

My take on the "DCB" goes like this: If a stock goes down drastically (10-20%), over a short period of time (1-3 days), with extremely heavy volume (300%+ the average daily volume); chances are that within the mext 6 months or so, the stock price may bounce back to retrace to a level halfway up the gap... That did not sound right. Did it?

For example: a stock closes on a given day at 40.00 with an average daily volume of 500 thousand shares/day. Next trading day, it goes down to 34.00 (off 6.00 or -15%) with a volume of 2 million shares on bad news (such as disappointing earnings); it is possible that, in the mext 3-6 months, the price could fill the gap to its halfway point (approx. 37.00).

Now, this is only a theory and a very risky way to invest. The risk to reward ratio are somewhat commensurate.

The bad news that drive the stock price down cannot be so negative that would have a long term effect on the stock valuation. In fact, it could become a bargain if there is an over-reaction by the sellers and the news are viewed as short term.

Having followed this theory over a period of several years, I have gone one step further and "honed out" this approach. The parameters are: two gaps down (10% or more each) within a period of four months, on heavy volume (3x the average daily volume), then consider buying the stock within one week after the second drop. The company should show consistent earnings and trade a minimum of 300 thousand shares on the average.

Two examples are: CSCO and SMCI (take a look at the one year chart)

It is good to remember that most of the capital at risk could very well disappear on additional bad news or a market downturn.
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TMO , Still a Favorite

Even though TMO has gained about 9.4% in just seven weeks and nearing its 52 week high, it remains one of my favorite investments.

Highlighted in this blog on November 22 '10, Thermo Fisher Scientific Inc. Co. (TMO) has performed in a very consistent manner. In my opinion, this one has some steam left and it can conceivably reach the low 60's in the next three months.

Last traded at 56.37, TMO should be considered an outperform/buy candidate.
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STO = Something to Own

STO came up in my search for undervalued stock with upside potential in mid October. Over the last eighteen months the stock price has found support at the 18.50 level. During the past two trading sessions it has crossed above both the 50 dma and the 200 dma.

Statoil ASA (STO) engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products. The company involves in the exploration, development, and production of crude oil and natural gas in Norway and internationally, as well as extraction of natural gas liquids. It also transports and markets natural gas and natural gas products; and operates 2,000 full-service stations in Scandinavia, Poland, the Baltic States, and Russia.

Positive aspects are:

1. Early developing chart pattern. Recent break up above the 50 dma and 200 dma.
2. Price support at 18.50, limiting the downside exposure.
3. Good average daily volume of about 1.7 million shares.
4. Estimated earnings are on the rise.
5. Forward P/E ratio is at about 9.
6. Dividend is at 3.6%.
7. Number of funds owning STO has increased over the last 4 quarters.

With yesterday's closing price at 21.88, STO may be worth owning.
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Grab the Dividend from ARCC

In late August '08 ARCC (then at 12.36) looked like a good prospect for profit. Since that time and until March '09, we experienced an uncontrollable downfall. The banking debacle and the dismal stock market behavior eroded the original investment, a good dividend and the chances for any possible gains.

We stuck to our guns, weathered the storm and now at 16.64, we have gained an annualized return of about 23.9% (including dividends).

Ares Capital Corporation (ARCC) is a private equity firm specializing in acquisition, recapitalization, restructurings, rescue financing, and leveraged buyout transactions of middle market companies.

Pluses for ARCC are:

•Acceptable chart pattern.
•Consistent uptrend and possible support at 16.50, the mid term rising bottom's line.
•A desirable average daily volume of over 1.4 million shares.
•A very nice dividend yield of 8.5%, ex-dividend date is only 13 days away.
•An 11.17 forward P/E ratio.

I find ARCC a good place to park some funds.

My thanks to Paul V. for bringing this security up to my attention in early April '10. Paul you were right on target.
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BCE is Still Sending Good Signals

I wrote about BCE about one year ago (see 11/17/09 blog). Since then, we have seen a gain of 31.6% (not including a 5.7% dividend), a very respectable return. On three ocasions BCE was highlighted in this blog's "stocks to Watch" list.

An updated view of BCE's attractive signs are:

•Fine chart pattern.
•Consistent uptrend and signifficant support at 32, the long term rising bottom's line.
•A good average daily volume of over 705,000 shares.
•A very nice dividend yield of 5.2%, ex-dividend date is only 14 days away.
•Forward P/E ratio is at 11.48.

At this point, I am inclined to increase a long position in BCE (trading this morning at 33.83).
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TMO is on a Steady Pace

On a day when many securities retreated, TMO went against the grain and kept above it's rising bottom's line.

Thermo Fisher Scientific Inc Co (TMO) provides analytical instruments, equipment, reagents and consumables, software, and services for research, manufacture, analysis, discovery, and diagnostics. In layman's terms, a company in the healthcare industry which provides medical instruments and supplies.

Barring any unforeseen major turn in the market, TMO (now trading at 51.53) is poised to reach the 55 level and beyond within the next six weeks.

Positive aspects of TMO:

1. Chart pattern shows a tendency for the stock price to stay above the rising bottom's line.
2. Consistent uptrend and rebound from the lows of August 31 '10.
3. Good average daily volume of about 2.9 million shares.
4. Earnings per share have increased during the past several years.
5. Forward P/E ratio is at about 12.88.
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HRS Rises as a Top Pick

HRS has risen to near the top of my list in a few weeks. With higher lows over the past four and one half months, crossing above both the 50 dma and the 200 dma and maintaining a rising bottoms line, this choice is worth a longer look.

Harris Corporation (HRS), together with its subsidiaries, operates as a communications and information technology company that serves government and commercial markets worldwide.

Some of the good points:

1. Early developing chart pattern. Recent break up above the 50 dma and 200 dma.
2. Consistent uptrend and rebound from the lows of July 1 '10.
3. Good average daily volume of about 950,000 shares.
4. Earnings per share have increased during the last eight years.
5. Forward P/E ratio is at about 10.
6. Dividend increased to 2.2%.


With Friday's closing price at 46.18, HRS could be poised for a smooth ride.
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WATG Makes the Cut

WATG has been in my short list from late April. Since then, in early May, the stock value took a 40% tumble (from about 12 to 7). Finally, in the past five months, it found a base at around 8. Meanwhile, it maintained a range above the 200 dma and on October 11, it rose above the 50 dma in a definite manner. In my view, these are positive technical signals.

Wonder Auto Technology, Inc.(WATG), in the Chinese auto parts sector, through its subsidiaries, engages in the design, development, manufacture, and marketing of electrical parts, suspension products, and engine components.

Heavy short positions may be forced to cover if the uptrend continues, thus catapulting the stock price.

Positives are:

•Good chart pattern. Recent break up above the 50 dma.
•Consistent uptrend and rebound from the lows of late August '10.
•Good average daily volume of about 520,000 shares.
•Forward P/E ratio is at about 11.


Closing yesterday at 10.40, WATG appears to be an attractive prospect.
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Primed for Picking: CEPH

Cephalon's Inc. (CEPH) stock price has shown a consistent improvement over the past six weeks, in addition, it has formed a solid base spanning three months at the 55 level.

Cephalon, Inc., is a biopharmaceutical company, which engages in the discovery, development, and commercialization of products for central nervous system, inflammatory disease, pain, and oncology therapeutic areas.

Positives are:

•Good chart pattern.
•Consistent uptrend and rebound from the lows of late August '10.
•Excellent average daily volume of about 1.2 million shares.
•Increased fund interest since June '10.
•Forward P/E ratio is at about 9.

Trading at 64.10, CEPH seems to be a good prospect.
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Stocks to Watch - October 17, 2010

Watch list for October 17, 2010

AVT-----------27.63
STO-----------22.08
WATG--------10.07

AVT distributes electronics, STO is a Norwegian oil and gas company, WATG is a Chinese auto parts manufacturer.

We'll be checking the performance of these picks in a few weeks.
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Results for "Stocks to Watch - Sept 13, '10"

For the period of 9/13/10 thru 10/15/10, this was our watch list and outcome:


Stock Symbol-------9/13/10----------------10/15/10

BCE------------------31.85-------------------33.57 (up 5.40%)
FMCN----------------20.36-------------------24.00 (up 17.88%)
NVS------------------54.42-------------------59.02 (up 8.45%)

The outcome was very good, our average gain for this period was 10.58% while the S&P 500 gained about 4.84% during the same interval of time.
We are back on track.
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Being Patient With Covidien

We noticed Covidien (COV) at 36.05 on June 13, 2009. Since then, it had a good run and hovered at the 52.00 level between January 20 and April 20 of this year. Not bad, if you chose to sell; but we are not going to talk about "what could have been". If you are still holding on to the stock, all you have to show is about 1.9% in dividends plus a 5.1% gain in stock value, that is still alright in this day and age.

Yesterday COV's stock price touched the 50 day moving average at 38.27 and closing just below it at 37.90, I expect the move in the next two days to be up and break above that line, if so, we can see a sharp increase in price in the following week or two. Good time to buy again or increase our long position in Covidien.
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Stocks to Watch - September 13, 2010

Watch list for September 13, 2010

BCE--------31.85
FMCN------20.36
NVS--------54.42

Rather than issuing a new list at the begining of each month, I think it is better to let market conditions dictate the timing in which we pick the stocks which show a hint of a positive outlook.

Still like NVS, a foreign drug company; BCE, a Canadian telecom and FMCN, a Chinese advertising firm.

We'll be checking the performance of these picks in a few weeks.
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Bouncing Back

It is still early but we may have been right on our call of August 12, 2010. The S&P500 index held its ground at around the 1050 level (closed at 1047.22 on 8/26/10) and since then, in nearly four weeks, it has gained about 6% from those lows.

Technically, I could see a continuation of the uptrend for at least the next quarter. This may be a good time to pick up some bargains.
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