My Farewell!?

Posted by: Dr. Ge on October 29, 2006 9:05 pm | In General thoughts | 1 Comment |

I have been very quiet for a while - because first I don't have much to write and second I was very busy with work and personal stuff.

I was singing the bullish songs when the market hit blue in the summer. Now the bears went back to the caves and the bulls are dancing on the street – I wish those who kept reading my encouraging posts in the dark days had done well. Most of the stocks that I mentioned in my posts have gone up 20%-50%.

I sold my Intel long positions in both options and stocks before the earnings and enjoyed a very good profit. Especially, I sold the 2008 $20 leap call option that I bought in the $1.85-$2 range (I did let you know!) at a decent price of $3.8 with a 90% return. I also did well with Walmart calls that I bought when the stock sold at $43.

We can finally close the arguments of INTC/AMD that started on my blog back in February. We started with INTC at $20 and AMD at $40 and now both of them are at $20. Long INTC does make money if you bought call options at the bottom as I did, and short AMD certainly makes money and a lot! - AMD went down 50% since I called it a short.

I bought Yahoo stocks and call options at its recent bottom ($23) and had a good profit at hand. I also bought Apollo Group Inc. (APOL) stocks and call options. Yahoo still sucks but it owns a substantial part of the Internet real estate and I think it's a good buy at current price. Apollo is a similar story.

I will start to work for Morgan Stanley next week and likely, I could be located in a branch close to your area. Send me an email to if you want to keep in touch. Finally I will be able to work full time for my clients but unfortunately, I may not be able to post as often and as freely in this blog as I did in the “good old” days. I have to check the policies and the laws and very possibly, this post may be my farewell to you, my friends! I am always grateful to your kind and warm words!

Please feel free to post comments on this site if my blogs have ever benefited you in investing and in the best, made you some good cold cash! If you register, you can post your thoughts and ideas here and share with fellow investors, too!

Thank you and good luck!

Feeling about CNTF

Posted by: diarmundo01 on October 6, 2006 9:43 am | In General thoughts | 5 Comments |

Hi,

 I was wondering if you feel that CNTF is still a good Long Buy. Lots of volatility recently ! Tanked since your last post. Might be a good time to get in again ?

 Would appreciate your thoughts ?

Regards.

Symbol Technologies Inc. (SBL) Will Be Bought at $15

Posted by: Dr. Ge on September 16, 2006 9:56 am | In General thoughts | No Comments |

From Saturday's Wall Street Journal "Symbol Technologies Nears Its Sale" (you need subscription to WSJ online to access the article):

Motorola Holds Key Spot
To Win $3.2 Billion Firm;
Auction Follows Difficulties

Symbol Technologies Inc. is winding up an auction to sell itself, people familiar with the matter said, which could result in a sale of the $3.2 billion wireless-equipment company in a matter of days.

Motorola Inc. is in the best position to win the company, though other bidders could also circle as the situation comes to a head, these people said. As in any merger negotiation, final talks could fall apart and a deal may not be completed. Indeed, Symbol, of Holtsville, N.Y., has been one of the most talked-about takeover targets for years, but has always managed to stay independent.

Exact pricing details for a deal weren't available Friday afternoon, though one person said that a deal could come in at a per-share price of roughly $15, which would represent a premium of around 20% to Symbol's trading price Friday. The company has a current market capitalization of $3.2 billion.

I have been trading in and out of SBL several times since last August when its CEO left the company for NCR and Symbol lowered its earning forecast twice. I even bought SBL short term out-of-money call options in the hope to profit if it's bought by another company at a premium. My price target was $16.

As I said in my post "Symbol Technologies (SBL) – A “Following-the-Formula“ Play that Yielded 55% Return",

Selling at $8-$9, market was discounting the worst scenario of SBL as what happened in 2002 when the company faced accounting problems and criminal investigations. However, what was happening in August 2005 was simply an inexperienced CEO hyped the earning expectation too high to deliver. All the company needed was a CEO who could execute. The worst scenario to the company would be that the company kept disappointing the market for next several quarters. But it might be the best scenario to a stock investor: someone would buy it out for Symbol’s enviable list of clients and collection of patents. HP could be a good suitor given its CEO Mark Hurd’s many years experience in the retail technology industry (NCR).

I sold my SBL shares and options to take the sizable profit. The stock may see further upside if RFID finally becomes hot in 2006.

But unfortunately, I don't have any positions in SBL at this time. I missed an opportunity that I foresaw 8 months ago.

An Excellent Market Timing

Posted by: Dr. Ge on September 5, 2006 7:32 pm | In General thoughts | No Comments |

When I posted “Is Market Timing Important to Value Investing?” (also featured in TheStreet.com's 9/1/2006 "Friday's Daily Blog Watch" column) on August 29, China Techfaith Wireless Communication Technology Ltd. (CNTF) was trading at around $7.5.  As I said in that post

I am bullish on the company in longer term because

• it has 2000 skilled and cheap engineers ($500/month for an experienced programmer);
• it has a good established relationship with 2 mobile software powerhouse – Qualcomm and Microsoft;
• it's still the No. 1 mobile design company in China;
• 3G in China will come, probably in 5-6 months;
• it has plenty of cash and a beautiful balance-sheet;
• the company is controlled by the CEO and he hasn't cashed the majority of chips yet;
• the company is buying back its stocks  - rare for a Chinese company and good for investors;

I think price at $7 or below may be a good entry point for CNTF.

It’s indeed a very good buy at $7s. Today the stock closes at $9.34 and that’s an excellent 25% gain in only 4 trading days. In my opinion, despite the recent stock price gain, the company is not out of woods yet. Thus the stock is more likely to behave as a high volatile low-float trading stock in the short term. In long term (2-3 years), the investment thesis that I detailed in my last post still holds.

Electronic Arts Inc. (ERTS) has been doing very well recently. Readers of my blog may remember that I was a buyer at lower $40s. Indeed, ERTS was one of my top holdings (15% of portfolio) in the last several months.  ERTS is exactly the stock I am interested in – the stock of an absolute leader in its industry sells at a deep discount compared to its historic valuation.

One reader asks me whether the home building stock is a good buy now. My answer is that my guess is as good as yours but please be cautious. If you look at how these home builder stocks did in the last housing cycle, today’s price may not be that attractive. The low P/E ratio does not matter because it can drop from a very attractive 5 to an ugly negative number in a very short period if there will be a housing market meltdown.

Yahoo! Sucks!

Posted by: Dr. Ge on August 31, 2006 9:18 pm | In General thoughts | 4 Comments |

Yahoo just messed up its Finance Message Board totally a month ago now it took away the real time quote. I really don’t understand how the people at Yahoo can make such stupid, ill-advised, ridiculous decisions. People in charge of Yahoo!Finance deserve to be fired many times!

Several months ago, when Yahoo went down to $32 a share, a reader asked me whether it’s good time to buy. I said no. Now YHOO trades at $28. I have been a Yahoo user since 1996 and I never see that Yahoo has become such a mess that no one even cares about fixing so many so obvious problems. People there have nothing productive to do so they keep changing things from good to BAD. Everyone hated the new Yahoo message board but Yahoo went for it anyway. Now Yahoo took away the real time quote that everyone loved and made its portfolio tool useless.

I hope Google take advantage of this godsend opportunity. It’s rare to see this kind of mistake made by your main competitor!

Stockpickers.org and TheStreet.com

Posted by: Dr. Ge on August 29, 2006 7:50 pm | In General thoughts | No Comments |

TheStreet.com included my post “Are We in a Bear Market?” in its August 11th "The Daily Blog Watch" column. Thank you, James Altucher! The readers who bought the stocks mentioned in my post should have done very well.

Stockpickers.org now has 30+ registered contributors but no one except RMA and I post regularly. Please contribute your thoughts, ideas and it indeed helps yourself as you write down before you buy.

Stockpickers.org recently installed Dr. Dave’s Spam Karma 2.2 and it “ate” all the comment spams alive. I highly recommend this plugin if you run a WordPress based blog site.

Is Market Timing Important to Value Investing?

Posted by: Dr. Ge on August 29, 2006 7:23 pm | In General thoughts | 5 Comments |

The fat hen sings again. If you were one of what I called “chicken flu investors” and bought some of the chicken stocks at the bottom, you must have done very well. Gold Kist Inc (GKIS) sees its stock almost doubled from the April low. Sanderson Farms Inc. (SAFM) reported a better than expected earnings today and the stock surged to near $30 level. Long term readers of this blog may remember that I was a buyer of SAFM (stocks and options) in the April low and sold everything out in the June pop. If you bought SAFM at the bottom and still hold the stock, this may be a good time to sell. Chicken Flu is still a serious threat. No one knows what will happen in the next flu season – I am sure there are still plenty of avian flu viruses alive in some corners of the world.

Some value investors say that market timing is not important to value investors – you buy when you see the value. I would argue that timing is especially important to value investors – it determines how big the return will be. As I have confessed many times before – I tend to buy early and sell early. The last several months were extremely cruel to value investors who didn’t time the market well. I bought Cogent (COGT) in the $16s and saw the stock dropped to $9s (after hour) after the last earning report. It’s tough to handle a 40% drop. Valuation didn't mean anything in a poor market. COGT recovered quickly and it now trades at $14. If you were a lucky bottom fisher who had bought COGT at $9s, then you would have gained 40% in just 2 weeks. I always search for the real bottom where desperation can be smelled and buy gradually but many times, the bottom is far deeper than you originally thought.

I personally believe that in recent years, the proliferation of hedge funds and many quantitative long/short strategies directly contribute to such volatility that we saw in last several months. Therefore, the Buffet “buy and hold” strategy may not work in current environment. Instead, buying at a deep discount and selling at a reasonable profit may yield a better return. By the way, as patience is the most important virtue of value investing, very few people have the patience of Warren Buffet. Can you keep holding Coca Cola (KO) in last 5 years? I can’t.

China Techfaith Wireless Communication Technology Ltd. (CNTF) and OmniVision Technologies Inc. (OVTI) are the two companies that I wrote in last year (See my posts of OVTI and posts of CNTF) and both saw their stock prices doubled and thus reached my price targets in less than 3 months. I saw value when OVTI was trading at $11 and CNTF was trading at $9. OVTI then went up to $34 a share and far exceeded my price target of $20. I wrote in my blog that it might be a good idea to take some profits because the competitive position of the company actually didn’t change much but the stock price tripled. Now OVTI trades at $16s.

China Techfaith Wireless Communication Technology Ltd. (CNTF) is a totally different story. The stock reached $18 two months after I profiled the company in my blog and then it started a long and painful slide to current price of $7. If you remember what Benjamin Graham said “Investment is most intelligent when it is most businesslike”, the stock price of CNTF dropped because the business went bad. One of CNTF’s major customers NEC exited from the China market at the beginning of this year and CNTF’s other Chinese customers (major cell phone manufacturers) were killed by Nokia and Motorola from the high end and Chinese counterfeit manufacturers (so called "black" phones in Chinese) at the low end. I warned my readers about the problems CNTF might face when I saw that the cash flow from the operation decreased significantly in Q3 2005. The company soon shifted its focus from low end GSM phones to high end 3G smart phones but the transition process was not as smooth as the management predicted.

In my opinion, the company grew too fast in last several years and it lacks the human talents (few employees including senior executives can barely speak English) to deal with carriers in the U.S. and Europe, two major markets it hopes to break into. The company itself is transforming from a cell phone design house to a mobile software outsourcing provider. Therefore, the stock price may fluctuate further in the coming quarters. However, I am bullish on the company in longer term because

• it has 2000 skilled and cheap engineers ($500/month for an experienced programmer);
• it has a good established relationship with 2 mobile software powerhouse – Qualcomm and Microsoft;
• it's still the No. 1 mobile design company in China;
• 3G in China will come, probably in 5-6 months;
• it has plenty of cash and a beautiful balance-sheet;
• the company is controlled by the CEO and he hasn't cashed the majority of chips yet;
• the company is buying back its stocks  - rare for a Chinese company and good for investors;

I think price at $7 or below may be a good entry point for CNTF.

Good luck!

TheStreet.Com Featured An Article From StockPickers.org

Posted by: Dr. Ge on August 11, 2006 9:09 pm | In General thoughts | 2 Comments |

Jim Cramer's TheStreet.com featured an article posted by me on its July 27th "The Daily Blog Watch" column. Unfortunately, it's an article about picking the right stock at the wrong price and the wrong time. I wish it's the one that I got absolutely correct, like the article that I suggested to short AMD at $40 in February. Being featured on TheStreet.com did bring a lot of traffic to StockPickers.org. I have to agree that there are many more people following Jim Cramer than following me. He does get wrong on stocks many times but who else can do a better job if you have to talk about stocks, give stock tips in a entertaining way several hours a day on TV, radio and web? Jim Cramer did pump OPWV when it was at $17. I started to accumulate OPWV when it dropped to $11. In this way, even both of us were wrong, I did get a better price! Recently a lot of people have registered with stockpickers.org but only RMA and I post our thoughts here once in a while. Stock market is bad now and it's very difficult to pick an instant winner these days. The debut of stockpickers.org may not be at the best time but as the market improves, we will see many more activities. Have a great weekend!

Are We in a Bear Market?

Posted by: Dr. Ge on August 11, 2006 12:29 am | In General thoughts | 2 Comments |

I tried very hard not to predict the short term direction of the market. So if you are looking for the daily tips of stock trading, my blog may disappoint you. Let me be frank, I have no idea which way the market will run in the next couple of days. I guess the direction of the market each day for fun but rarely rely on it to make my investment decisions. I put my money in stocks which I believe are undervalued and will provide me decent 30-40% returns in the coming months.

But the market in last several months certainly had behaved very strangely, and it has become cruel and impatient. It’s a treacherous market that can kill inexperienced investors mercilessly. But it’s also a good environment for value investors – especially many technology stocks are selling at unprecedented low prices – some are even lower than what were in October 2002.

AFFX, OPWV, CREE, VRSN, CYBX, COGT and WBSN are such stocks that I believe are extremely undervalued if you view them in a 2-3 year time frame. CYBX, in my opinion, will be bought by a larger medical device maker if the stock does not recover soon. WBSN is extremely cheap if you value the stock with EV/FCF (Enterprise Value/Free Cash Flow) ratio. The same as my arguments toward OVTI when it was at $10, WBSN will generate enough cash in next 3-4 years to retire all the outstanding shares if we assume the same level of cash flow and zero growth. WBSN itself may pass the rapid growth stage but if you simply value it as a cash cow, the current stock price is still an absolute steal. I believe the stock is in a distribution phase – value players are replacing the original growth crowd thus the stock price may be very volatile in short term. The company itself is using the extra cash to buy back shares.

People are fleeing from high-beta stocks (mostly bio and tech stocks) to play defensive in a possible economic slowdown. The market’s focus is on anything negative. Sooner or later people will change their mood from fear to greed and realize that things are not as bad as they thought and start to buy stocks again. I have no idea when this will happen but it will probably happen sooner than most of us predict.

Good luck!

Openwave Systems Inc. (OPWV) – Bottom Fishing or Bottom Snaking?

Posted by: Dr. Ge on July 7, 2006 2:54 pm | In General thoughts, Internet Stocks, Today's Market | 9 Comments |

Bottom fishing in OPWV has unfortunately become bottom snaking – instead of catching a good looking bass, I caught an ugly snake, and got bitten badly.

I sold all my interests in OPWV in 2005 for a decent profit because I didn’t see the growth story that people were expecting. From a business point of view, Openwave could be among one of the biggest failures in terms of its billions of dollars accumulated losses. It’s a dot com story that has never fully recovered. The hyped growth never becomes a reality. And also, I didn’t like its CEO David Peterschmidt  at all. He sold Inktomi to Yahoo at exactly the lowest point of the business cycle while Google and other search engines were making a powerful comeback.

I didn’t like Openwave’s acquisition of Musicwave because it signaled that the organic growth of its core business in the wireless software arena was slowing and a diversification into the content business didn’t make any sound business sense. In the mean time, Openwave issued a secondary offering of its stocks and further diluted its EPS. My guess was that the company was trying to buy the growth using the cash it just raised.

However, I started to accumulate OPWV when the stock dropped from $20s to $11s. I thought it’s an overreaction of the stock market to its option backdating problem and the possibility of losing a system deal. So I bought it expecting that it may bounce back quickly to $15 level as the general market condition improves. $11 a share was a bargain in my opinion given its attractive position in the wireless software market. I thought the revenue miss would be in the several million dollars range, but not as the shocking $30 million as the company reported yesterday.

The management didn’t give any reasonable explanation to such a dramatic drop in revenue this quarter as well its reduced outlook of fiscal year 2007 in yesterday’s conference call. They blamed that the large system deal – the business that Openwave has been pursuing for the last several years, caused the lumpiness of its revenue recognition. However, the lumpiness in system deal may affect one or two quarters, but shouldn’t cause the slowdown of its whole fiscal year of 2007, except there are many more problems within the company that the management was reluctant to discuss.

But I think $7s a share is a good bargain. The company has plenty of cash and a relative strong position in the wireless data application software arena. If it cannot recover on it own, someone will grab it. Therefore, I will continue to hold my shares and may add more as the dust settles.

Generally, I bottom-fish at the moment when the longs of the stock feel so desperate that the only thing in their mind is to sell, get out and be done with it. Meanwhile, when the insiders start to buy, it’s usually an extra plus.  Unfortunately I was not so patient on OPWV this time. I bought the stock at $11s partly because I had seen the up and down of this stock so many times – almost every time I made money when I bought at low – but this time the bottom is much deeper (30% more) than I thought.

The development of INTC/AMD story is almost exactly the same as I predicted in my Febrary post. Price war is a blunt weapon – it hurts both but it hurts AMD more. I am waiting for the days when the price of the two stocks cross – unfortunately for those faithful AMD longs, the day comes much sooner than they had ever expected.

The stock market drives everyone crazy these days except for the short term traders who long the volatility. Hang in there if you still believe the story. Otherwise take a rest and enjoy a good summer!