December Monthly Report

• Volatility returns, along with a difficult investment environment
• In spite of a 11/16 Correction, the market and leaders continue to climb
• Why Microsoft is the sleeper stock of 2011
• Stocks mentioned in this report: AAPL (Apple Corp), Salesforce.com (CRM), F5 Networks (FFIV), Akamai Technologies (AKAM), Netflix (NFLX), Chipolte Mexican Grill Inc (CMG), Microsoft Corp (MSFT)

November turned out to be rocky with the after effects of more quantitative easing, mid-term elections, more sovereign debt concerns, economic uncertainty, and rising inflation risks. Some think it’s simply a matter of time before Ireland, Greece, Portugal, Belgium, Spain, and Italy default. It will take mathematic and economic miracles for these countries to recover. Germany, in its efforts to bailout these sovereign nations may also be in trouble if it doesn’t recover it loans. These Eurozone problems have made the US Dollar a flight to safety investment, in spite of our own problems.

The volitility may be throwing more head fakes and false market timing calls, as it did in this past summer. Investor’s Business Daily’s “market in correction” on 11/16 may be wrong as the market is continuing to trend up, along with many stock leaders, AAPL (Apple Corp), Salesforce.com (CRM), F5 Networks (FFIV), Akamai Technologies (AKAM), Netflix (NFLX), Chipolte Mexican Grill Inc (CMG). Be careful out there, we remain in a difficult, anything but normal investing environment.

The Microsoft today is beginning to remind me to the Microsoft of old. Having worked for BillG from 1995-2001 and keeping in touch with my old collegues, it seems the company is “buzzing” again with the recent release of quality products. The company may be running on all cylinders again with many of the flagship products being the best in nearly a decade. Windows Server 2008 is the most substantial upgrade since Windows 2000. Built from the ground up for todays 64-bit processors, security, virtulization (competing with VMWare for a fraction of the cost), and cloud computing. While Windows 7 is not considered a radical upgrade, it excels as one of the most refined, stable, and “user friendly” versions sinse Windows XP. The same goes for Office 2010. It just shows that while new features need to be added to make products appealing, it’s the everyday experience which translates to happy users and compamy profits. Probably the most compelling product of Microsoft’s lineup, if not the technology product for 2010, is Kinect for XBOX 360. Using your body as a controller will revolutionize gaming, just as the Nintiendo Wii did. Not only will this be profitable for the XBOX franchise for some years, but this technology is transferrabe to Windows and Windows Mobile devices. This is why I declare Microsoft Corp (MSFT) as “underdog stock” for 2011.

 

A September to Remember

 

· A September rally taking the major indices into positive territory for the year

· Strong leadership: CRM, FFIV, AKAM, VMW

· Gold hits alltime highs, Silver hits new 30 year highs

· The US Dollar continuing its fall and growing concern over a US government credit downgrade… possibly even bankruptcy

· Oracle is this month’s stock to watch

 

What a month! After getting faked out multiple times in May and June, the market finally decided to get its act together and act more like its usual self. The September rally has taken the major indices into positive territory for the year, and has produced several leaders discussed in last month’s report. These are the cloud computing stocks Salesforce.com (CRM), F5 Networks (FFIV), Akamai Technologies (AKAM), and VMware Inc. (VMW), online video renter Netflix (NFLX), and precious metals GLD (SPDR gold trust ETF), Silver Trust ETF (SLV). At the point, the market, along with many leading stocks, have every right to rest, pullback, and possibly make its next move higher.

Since 1945, the US dollar served as the world’s reserve currency,which has given the greenback worldwide clout. But with a GDP of about $14 trillion and growing debt, this is likely to change. While the government reported US debt at $13.370 trillion, this did not include off-balance sheet items. Factoring this in, the Peter G Peterson Foundation and Dallas Federal Reserve came up with more likely estimates of $63 trillion and $100 trillion, respectively – a level the GDP simply can not support. This not only brings up the real possiblity of a credit downgrade for the US, but also backruptcy.

UDN (PowerShares DB US Dollar Bearish Fund) is the play on the falling dollar. The price gains on above average volume are cues of institutional accumulation as it forms the right side of its cup formation. For now, its best to wait until this formation complete before considering a purchase.

ORCL (Oracle Corp) is trading near a nine-year high and a 26.73 cup buy point after vaulting 8% on Sept. 17 following a strong quarterly report. The software giant is getting a boost from its acquisition of server maker Sun Microsystems, and announcements that it is looking to acquire chip makers. Oracle is following Apple’s model of creating custom hardware and software to create innovative products, and have the potential to become industry leaders in cloud computing and virtualization.

 

August 2010 Investor Report

August 2010

The charts referred to below can be viewed at http://www.ibdinvestor.blogspot.com/

August 2010 Monthly Report

· Another Failed Rally

· Stocks to watch Salesforce.com (CRM), F5 Networks (FFIV), Akamai Technologies (AKAM), VMware Inc. (VMW), Netflix (NFLX), GLD (SPDR gold trust ETF), Silver Trust ETF (SLV)

· Risks of a double-dip recession, or the “d” word is on the rise

Figure 1

Another month, another failed rally as shown in figure 1. On the S&P 500, it is the fifth time since May this index has bounced off of the psychological “tax” or 1040 support line. A break below this may find the index down to 1000. Leadership did show up as cloud computing stocks Salesforce.com (CRM), F5 Networks (FFIV), Akamai Technologies (AKAM), and VMware Inc. (VMW), and online video renter Netflix (NFLX) posted double digit runs. Monitoring these through this correction will provide valuable clues to their strength on the next market rally. Look for signs of low volume selling and high volume buying, or for the weekly price action to be flat. Buying leading stocks in this wild market has been difficult as many breakouts have lead to break downs. Thus, the longer term approach for this portfolio has been GLD (SPDR gold trust ETF), which we have held since ???. An position in Silver Trust ETF (SLV) was also initiated. Both have made strong runs this month (figure 2).

Figure 2

Despite government efforts to stimulate the economy, unemployment remains high at 9.5%, with other estimates as high as the 1930’s depression level 25%. GDP growth also is reported at a disappointing 1.6%. Fed admitted that “the pace of recovery in output and employment has slowed in recent months.”. The country is getting fed up with current monetary policy of printing money, and the markets also showed disapproval with a near 3% drop on 8/11, on reaction to Bernanke’s QE2 announcement, which will dig the nation deeper into debt.

QE2 is a plan to prime the economy’s pump, by reinvesting principal payments from agency debt and agency mortgage- backed securities (from the stimulus and bailouts) into longer term Treasury securities. This money, which was created out of thin air, will earn 25-50 cents on the dollar, will then be used to help fund the nation’s budget deficits, now about $1 trillion a year. Add this to the $2 trillion pumped of stimulas, which only provided a temporary economic boost, and it appears the risk of a double-dip recession, or even the “d” word is growing.

Netflix (NFLX) is a good example of the “N” in CANSLIM. A new product or service to fuel company growth. Put another way, a better mouse trap. I took note of the company in my 1/2010 blog when it announced deals to make downloads available on TV’s, DVD players, Playstation 3, XBOX 360, Wii, iphone, and just recently the ipad. Since then, the stock has jump over 135% this year in anticipation of Blockbuster plans to file for bankruptcy protection in Sept. The movie studios are also jumping on the Netflix wagon as they see demise of video rental stores. The deal with Epix will allow timely showing movies from Lions Gate (LGF), Viacom’s (VIA) Paramount, and MGM. That means Netflix could potentially stream some of the big summer hits, such as "Iron Man 2" and "Dinner for Schmucks," at the same time DVD retailers and premium cable channels show it. This agreement will fuel already stellar growth, with the company adding more than 1 million net new customers for third straight. The 15 million users it had at the end of June was up 7% from the first quarter and 42% from a year ago.