Mostly Money Musings

China Integrated Energy, Inc. (CBEH) - Smallcap Chinese Oil Play

2010-01-17T13:45:00.007-06:00

I think it's fair to say that Chinese oil consumption is only going to continue it's upward trend in the coming few years. China has already surpassed the United States in car sales as more people relocate from rural farming communities into the cities. Many industries are expanding, bringing in more workers willing to commute longer distances. All of which points to increasing oil consumption in China. The question is, what is the best way to play this ongoing trend? Many Chinese energy plays remain undervalued at this time despite recent gains, giving many options to play the trend. While not to everyone's taste, I personally like to focus on smallcap stocks that I believe are undervalued.

One company that has caught my eye in recent months is China Integrated Energy, Inc. (CBEH), formerly known as China Bio-Energy Holding Group. The company is engaged in three business segments, the development, production, and distribution of bio-diesel, the wholesale distribution and processing of heavy oil and finished oil products, and the sale of gasoline and diesel at retail gas stations. Actually, the bio-diesel segment really doesn't excite me especially. The main reason I like this company as an investment is the growing network of retail gas stations.

The company recently announced the purchase of 2 additional gas stations in Shaanxi province, bringing the total to twelve at this time. CBEH also plans to acquire a further 5-7 gas stations in the coming 12 months. The company has the ability to provide stable supply to all of the gas stations in its network. Being a vertically integrated energy company allows the company to achieve higher profit margins, and the simplicity of the company business model is something I find attractive as an investment. As of September 2009, the company reported average gross margins of 13.3% for its retail gas stations, a figure which I would anticipate growing significantly in 2010 with increased sales.

So how do the fundamentals stack up? The company has a market cap of $276M, with very little debt and a current ratio of almost 9. CBEH boasts a return on equity of almost 25% and a price to sales ratio of just 1.08. The company has demonstrated a trend of increasing sales and revenues over several years and has established a strong cash position in order to undertake further acquisitions. The shares currently trade at $8.49 and I would anticipate a 12-month target of $11-13.

Disclosure: At the time of writing the author held shares in China Integrated Energy, Inc. (CBEH).

Chemspec International (CPC) - A Chinese Stock With All The Right Chemistry

2010-01-09T13:54:00.001-06:00

In recent times there has been a lot of focus in looking at overseas markets for superior gains and as a hedge against the falling dollar. One country which has received a huge amount of attention and investment dollars is obviously China, however, it appears to me that finding value in China is getting increasingly more difficult. There has been somewhat of a herd mentality with many people rushing out to buy stock in Chinese companies, with little or no regard to whether or not it represents a good investment. Some people who would normally spend hours when researching a domestic company as a potential investment seem to throw caution to the wind when it comes to overseas investments. To some extent "a rising tide floats all boats", but there are excellent opportunities in China and there are, how do I put it, "less than stellar" opportunities in China. When the inevitable correction comes we will see which companies are the real deal and which are just playing with smoke and mirrors.

One company that I believe is the real deal and represents true value for the investor is Chemspec International, Ltd. (CPC).

Chemspec is a contract manufacturer of highly engineered specialty chemicals and the largest manufacturer of fluorinated specialty chemicals in China. The company is headquartered in Shanghai, with four additional facilities in surrounding provinces. The company’s chemicals are used as building blocks for more advanced chemicals or to enhance the performance of the end products of its clients. It sells primarily companies in the electronics, pharmaceutical and agrochemical sectors. Chemspec was founded in 1996 and underwent IPO in June of 2009, with a price of $9.

The area of contract manufacturing has grown immensely in recent years, both domestically and overseas, with many companies choosing to outsource what would have normally remained in-house. Chemspec's blue-chip end-users include major global TFT Liquid Crystal suppliers, one of the world's top global agrochemical companies and four of the world's top ten pharmaceutical companies by sales.

Chemspec trades at a P/E of 7.1 and a price/book of 1.51 with a current ratio of 2.99. The company has demonstrated excellent profitability in the past, however has been affected a little by the economic downturn, resulting in reduced earnings. The management appear to be making all the right moves to navigate through these difficult times, focusing on R&D and expanding facilities. The stock currently trades at $7.31, up significantly from the 52 week low, but still well below the IPO price. I would anticipate a 12-month target price of $9-10.

Disclosure: At the time of writing the author held shares in Chemspec International, Ltd. (CPC).

Yanzhou Coal (YZC) - A Chinese Value Stock?

2009-06-11T21:37:00.003-05:00

I have been watching with interest from the sidelines as alternative energy stocks have skyrocketed in recent months, partly wishing that I was riding the wave and partly quite content in the knowledge that there will be plenty of opportunity to make money in alternative energy in the future. My biggest concern at this point is that not all alternative energy stocks are created equally, a good number of them will fail, and ultimately which ones succeed may come down to politics. I don't yet feel confident enough to separate the wheat from the chaff, particularly as many alternative energy companies are not yet profitable, so I will continue to watch with interest and research companies that I feel stand out from the crowd.

So if I'm not yet investing in alternative energy, what am I focusing on? While I fully expect renewable and green technologies to play an increasing role in energy production in the future, I am still a firm believer that coal, oil and natural gas will remain the major sources of energy in the intermediate term. I also expect nuclear power to feature strongly, but that is a topic for another day.

You see, the problem with alternative energy, while highly desirable, is that it is expensive. In comparison, coal is cheap - very cheap. Yes, it is dirty, yes, the environmentalists don't like it, and yes, there is pressure to reduce its use in the US, but I don't feel that any of those issues are going to matter until alternative energy can begin to compete on price.

The other huge issue is that China is the world's largest coal producer and consumer, and they are not going to stop burning coal any time soon. In fact, China plans to build stockpiles of the fuel in the eastern province of Shandong to ensure supplies and help stabilize prices. At this point China is self-sufficient in coal, but there may come a time soon when it is a net importer of coal.

If you are looking for a coal play that bets directly on China, then Yanzhou Coal (YZC) fits the bill. Yanzhou is one of China’s largest coal suppliers producing high-grade, low-sulfur coal, which burns cleaner and therefore fetches a premium price. Yanzhou Coal (YZC) is principally engaged in underground coal mining, preparation and processing, sales, and railway transportation of coal. The company is organized into three operating divisions: coal mining, coal railway transportation and methanol and electricity power. The company operates six coal mines: Xinglongzhuang coal mine, Baodian coal mine, Nantun coal mine, Dongtan coal mine, Jining II coal mine (Jining II) and Jining III coal mine (Jining III), as well as a regional rail network that links these mines with the national rail network.

So Yanzhou Coal (YZC) is in a great position to benefit from China's growing demand for coal, and also from any additional infrastucture investment, but what are the fundamentals like? Despite the recent upward movement in the share price, I believe that Yanzhou Coal remains a value stock with plenty of potential upside.

The company has low debt, has shown excellent growth in recent years, and pays a 4.2% dividend. Yanzhou Coal (YZC) currently trades at a P/E of 7.4 and a price/book of 1.8 with a current ratio of 2.83. The company boasts a return on equity of 26.9% and a gross margin of 50%. The company currently trades at $14.85 and I would be looking for a 12-month price target of $25-27.

Disclosure: At the time of writing the author held shares in Yanzhou Coal (YZC).

CryoLife Inc. (CRY) - A Value Stock... But Not One For The Faint-Hearted

2009-06-10T22:43:00.000-05:00

CryoLife, Inc. (CRY) is engaged in preserving and distributing human tissues for cardiac and vascular transplant applications and develops and commercializes medical devices. The human tissue distributed by the Company includes the CryoValve SG pulmonary human heart valve (CryoValve SG), processed using CryoLife's SynerGraft technology. The Company's medical devices include BioGlue Surgical Adhesive (BioGlue) and Hemostase, which the Company distributes for Medafor, Inc., as well as other medical devices. CryoLife distributes BioGlue, which is used in place of stitches, throughout the United States and in more than 70 other countries.

CryoLife is an interesting company that has been on my radar for a while now. The company has carved itself a nice niche in an almost recession proof sector and has been aggressively marketing its products. The market for BioGlue and tissue preservation services is only going to continue to grow as the population gets larger and older, and eventually the true value of the company will be recognized. My main concern is the wild rollercoaster ride that the stock price has been on over the years. That said, I do believe that the lawsuits are now behind them and that the company will continue to grow.

The company has been profitable since early 2007 and has been steadily increasing earnings and sales since then. CryoLife trades at a P/E of 5.0 and a price/book of 1.55 with a current ratio of 4.28. The company boasts a return on equity of 38.1% and a gross margin of 64.5% which is pretty impressive in the current economic climate. There was significant insider selling last fall when the company was trading at over $12 a share, although CEO Steven Anderson still holds almost 7% of the company, which I take to be a positive sign.

CryoLife currently trades at $5.82 and I would be looking for a 12-month price target of $11-12.

Disclosure: At the time of writing the author did not hold shares in CryoLife Inc., (CRY).

SmartPros (SPRO) - Time To Go Back To Value School?

2009-06-08T19:38:00.006-05:00

SmartPros (SPRO) provides learning and training solutions for professional markets, including accounting/finance, legal, engineering, securities and insurance, as well as information technology professionals. The company also provides corporate governance, ethics and compliance training for the general corporate market. It offers off-the-shelf courses and produce custom-designed programs with delivery methods suited to the specific needs of its clients. Its customers include professional firms and companies of all sizes. The company's e-marketing and e-commerce business sells ads on its website and develops newsletters and marketing programs for clients.

Depending on which numbers you choose to believe, unemployment currently sits somewhere between 9% and 14%. In these uncertain times I believe that companies such as SmartPros should do well as unemployment figures soar. Those of us lucky enough to be employed will most likely be looking for ways in which to become more valuable to our employers in order to retain our positions, and those of us who have suffered the loss of their job will inevitably be looking for ways in which to stand out from the crowd in the competition for the limited openings available. This is where SmartPros comes into its own. The company offers courses in the very skills that many people will be looking to add to their resumes.

The company reported excellent figures for 2008 and I expect a similar trend to be observed in 2009. As of December 31, 2008, the company had approximately $6.63 million in cash and cash equivalents, $5.6 million in deferred revenue, stockholders' equity of $12.1 million, and no debt. SmartPros trades at a P/E of 8.1 and a price/book of 1.17 with a current ratio of 1.36 and a gross margin of 57.9%. Also, the acquisition of Loscalzo last year appears to have been a smart one, leading to a number of cost cutting measures and an increase in ROIC.

In the company annual report Chairman and CEO, Allen Greene stated “We are proud to have finished the year strong and are looking to carry that momentum into 2009.” “We continue to show revenue growth year-over-year and our operating profits were at an all-time high. Further, we believe that operating profit and EBITDA numbers provide the best comparative narration because it removes the influence of interest rates and the tax benefit treatment.” Greene holds almost 5.6% of the company stock and is one of several insider holders. Also of note, real estate investor Zohar Ben-Dov announced a 10.5% stake in the company in March this year.

The company boasts a large course library and a large customer base, however, it is a competitive industry with a relatively low barrier to entry, meaning that the company has to continually strive to protect its niche. This being said, I believe that SmartPros represents good value at its current price of $3 a share and would be looking at a 12-month target price of around $5.

Disclosure: At the time of writing the author did not hold shares in SmartPros Ltd (SPRO).

3 Microcap Value Stocks Worth Considering

2009-06-06T14:34:00.008-05:00

If you are anything like me, you've probably spent many hours screening through list after list of stock tickers trying to unearth some as yet undiscovered companies that, just maybe, might turn out to be the next Google (GOOG), Microsoft (MSFT) or Walmart (WMT). This inevitably results in a collection of speculative smallcap and microcap stocks that you have never heard of before - after all, you're unlikely to find potential multibaggers among the highly researched megacap companies of the Dow Jones - companies that have already grown massively.

There are a number of things that must be considered when looking to invest in these smaller companies, not least of which is that there is often a lot less information available upon which to base your decisions, not to mention volatility and liquidity issues. So where is a good place to start? I personally like to begin my search by looking for value stocks with little or no debt that operate in niche markets. I also like to look for companies with good cash flow, high insider ownership, and a history of growth. It is a common misconception that most smaller companies will inevitably end up beginning run out of business by a larger one. In fact, many large companies are so slow moving that the smaller company eventually catches or even surpasses them! For instance, there was a time when the majority of people believed that Microsoft (MSFT) was invincible, until little Apple (AAPL) turned the tables and became a multi billion dollar enterprise.

So here are a three companies that I believe are worth considering further, along with a basic overview of each.

Image Sensing Systems, Inc. (ISNS)
Market Cap: $35.6M
The company develops and markets video image processing products for use in traffic applications, such as intersection control, highway, bridge and tunnel traffic management and traffic data collection. Its family of products, marketed as Autoscope and RTMS, provides end users with the tools needed to optimize traffic flow, enhance driver safety, regulate air quality and address security/surveillance concerns. Image Sensing Systems trades at a P/E of 8.6 and a price/book of 1.25 with a current ratio of 8.96. The company has been steadily increasing earnings and sales, and boasts a return on equity of 15.8%. The company has global exposure and wide potential with sales across North America as well as in Europe, Asia, and the Middle East. The stock currently trades at $8.92 and I would be looking for a 12-month price target of around $14-15.

RF Industries, Ltd. (RFIL)
Market Cap: $12.1M
The company is a provider of interconnect products and systems for radio frequency (RF) communications products and wireless digital transmission systems. Through six divisions the company supplies customers across a wide range of industries including aerospace, medicine, multi-media, and communications, as well as the military. RF Industries trades at a P/E of 9.4 and a price/book of 0.78 with a current ratio of 16.4. The company has demonstrated excellent profitability in the past, however has been affected by the economic downturn, resulting in reduced sales. As a result the company recently suspended its dividend payment in order to focus on product development and acquisitions. The company has a return on equity of 10.1% and the management appear to be making all the right moves to navigate through these difficult times. The stock currently trades at $3.95 and I would be looking for a 12-month price target of around $6-7.

Continucare Corporation (CNU)
Market Cap: $142.5M
Continucare is a provider of primary care physician services in Florida. The company through its network of 18 medical centers provides primary care medical services on an outpatient basis. It also provides practice management services to independent physician affiliates (IPAs) at 25 medical offices. The company trades at a P/E of 11.3 and a price/book of 1.34 with a current ratio of 4.8. The company has demonstrated good EPS and sales growth in recent years and has a return on equity of 12.8% with very high insider ownership. The stock currently trades at $2.40 and I would be looking for a 12-month price target of around $3.50.

Disclosure - At the time of writing the author did not hold shares in any of the companies mentioned in this article.

Friedman Industries, Inc. (FRD)

2009-06-04T19:55:00.004-05:00

Friedman Industries, Inc. (FRD) is a microcap value stock engaged in steel and pipe processing and distribution. The company divides its products into two main groups: coil and tubular products. Friedman Industries, Inc (FRD) sells coil products primarily to steel distributors and customers fabricating steel products, such as storage tanks, steel buildings, farm machinery and equipment, construction equipment or transportation equipment, located primarily in the midwestern, southwestern and southeastern sections of the United States. The company's principal customers for tubular products are steel and pipe distributors, piling contractors and U.S. Steel Tubular Products, Inc. (USS).

The company comes with a great set of fundamentals, trading at a P/E of 2.5 and a price/book of 0.7 with a current ratio of 3.9 and very little debt. The company has been steadily growing earnings and sales over the past few years, and has paid a dividend for the past 10 years (currently 3.5% yield).

Despite the current economic slow down, I am confident that a company of the strength of Friedman Industries will be among the survivors, particularly as the manufacturing and construction industries begin to pick up in the coming quarters. Friedman Industries boasts a return on equity of close to 30% and a 5-year historical EPS growth rate of 31.7%. These are the kind of numbers that small cap value investors love to see. The stock price has already made a significant move upwards from its 52 week low of $3.82 in March, and has in fact just broken through its 200 day moving average, but I believe that plenty of upside still remains to be seen. I would be looking for a 12-month price target of around $12-13 as the economic outlook begins to improve.

Disclosure: At the time of writing the author held shares in Friedman Industries, Inc. (FRD).

Air T, Inc. (AIRT) - Microcap Value

2009-06-01T22:33:00.004-05:00

Air T, Inc. (AIRT) is a microcap value stock which operates in two industry segments: providing overnight air cargo services to the air express delivery industry through its wholly owned subsidiaries, Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc. (CSA), and aviation ground support and other specialized equipment products and services to passenger and cargo airlines, airports and the military, through its wholly owned subsidiary, Global Ground Support, LLC (GGS) and Global Aviation Services, LLC (GAS).

The company has the kind of fundamentals that Warren Buffett would love - if only he were able to trade a company this small. Air T, Inc. (AIRT) trades at a P/E of 4.4 and a price/book of 1.03 with a current ratio of 3.1 and very little debt. The company has been steadily growing earnings and sales over the past few years and pays a dividend of 3.7% which is pretty impressive for a company of its size. While there are a number of other microcap dividend payers, I have struggled to find one that I believe is quite as attractive as Air T, Inc. (AIRT). The company recently announced an annual dividend payment of $0.33 - an increase on last year's $0.30 figure despite the tough economic climate.

I find that significant insider ownership is often one of the most important factors to consider when looking to invest in small and microcap companies. Company Chairman, Walter Clark, owns around 6% of the company's stock giving me confidence that the company holds the interests of its shareholders as a high priority.

The company recently announced an order for 29 plane deicers, worth $11.5 million from the US Air Force as part of an ongoing multiyear contract with the US Air Force. The company also has strong ties with FedEx, operating a fleet of 95 planes as part of the FedEx distribution network.

While Air T, Inc. (AIRT) may not yet be a household name (it may never be), the most profitable investments are often the ones where you get in on the ground floor. I find it hard to believe that companies such as Wal-Mart (WMT) or Google (GOOG) will double or triple in size any time soon - they've had impressive runs already. However, a microcap value stock of the caliber of Air T, Inc. (AIRT) could quite easily double or triple over the next year or two.

Disclosure: At the time of writing the author held shares in Air T (AIRT).

2009 - Ideas For The Year Performance Update

2009-05-31T09:03:00.002-05:00

At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. The purpose of this exercise was to provide ideas for your own research, some potential opportunities for 2009, as well as some companies I feel are best avoided. We're five months into the year now and there has been a lot of movement across the board.

Interestingly, had I owned real life positions in a number of these stocks, I would've most likely gotten out while the going was good. For instance, shares in Anadys (ANDS) skyrocketed over 300% on positive clinical data before losing most of their gains a few months later following a poor earnings statement. A gain that large in the biotech arena would've been too much for me to resist and I would've been out of there right away! However, for the purpose of this exercise there will be no changing of picks, no matter what happens to the underlying companies.

So here are the performances for 2009 to date.

My Long Picks for 2009, with 05/31/09 closing prices

Himax Technologies (HIMX) - $3.63 (+125.47%)
Yanzhou Coal (YZC) - $12.63 (+67.95%)
Anadys Pharmaceuticals (ANDS) - $2.22 (+41.40%)
Quicksilver Gas Services LP (KGS) - $13.00 (+37.13%)
Urban Outfitters (URBN) - $20.42 (+36.32%)
Natural Resources Partners LP (NRP) - $23.66 (+35.59%)
Dorchester Minerals LP (DMLP) - $20.49 (+29.11%)
Ecology & Environment (EEI) - $14.22 (+18.70%)
Raven Industries (RAVN) - $27.46 (+13.94%)
Versar, Inc. (VSR) - $4.52 (+9.71%)
Chase Corporation (CCF) - $11.70 (+3.63%)
Highveld Steel and Vanadium (HSVLY) - $7.85 (+2.21%)
Hugoton Royalty Trust (HGT) - $13.88 (-13.52%)
UFP Technologies (UFPT) - $4.16 (-21.36%)

Shares in Himax Technologies (HIMX) continued to rise from $2.73 to $3.63 this month despite reporting a huge slump in earnings revenue. The company is expecting a recovery in Q2 prompting the move in the share price. The top performer of the month was Versar, Inc. (VSR) moving from $2.60 to $4.52, following the announcement that the company would receive stimulus money as part of an alternative energy study. Dorchester Minerals (DMLP) and Hugoton Royalty Trust (HGT) both put in significant moves this month. I continue to be bullish on commodities which I still believe will be one of the few sectors that will finish the year on a high note. Raven Industries (RAVN) announced a dividend increase this month, something of a rare commodity in these times, leading to a moderate movement in the share price.

Not so stellar was the performance of United Foam Technologies (UFPT), falling from $5.05 to $4.16 and currently sitting bottom of the pile in my long picks for the year. The move is largely due to a drop in sales and revenue, however, I still believe the company has a strong balance sheet and will emerge from the current crisis as a strong player in the industry.

My Short Picks for 2009, with 05/31/09 closing prices

Office Depot (ODP) - $4.66 (+56.38%)
Ann Taylor Stores (ANN) - $7.32 (+45.24%)
Red Robin Gourmet Burgers (RRGB) - $17.30 (+2.79%)
Build-A-Bear Workshop (BBW) - $4.48 (-7.82%)
La-Z-Boy (LZB) - $1.87 (-13.82%)
Bank of America (BAC) - $11.27 (-19.96%)
LaCrosse Footwear (BOOT) - $9.40 (-24.68%)
Citigroup (C) - $3.72 (-44.56%)
Mercantile Bancorp (MBR) - $5.65 (-46.45%)
Converted Organics (COIN) - $1.48 (-58.19%)
Circuit City (CCTYQ) - $0.021 (-84.62%) - Bankrupt
Smurfit Stone Container Corporation (SSCC) - $0.00 (-100%) - Bankrupt

As a group my short picks continued to rally this month, despite poor fundamentals. I think this is a trend that we will shortly see reversed as the bear market rally gives way to the next leg down. The biggest mover of the month was Office Depot (ODP) moving from $2.70 to $4.66 following a number of analyst upgrades, while La-Z-Boy (LZB) retraced most of last month's impressive gains. Office Depot (ODP) has made an impressive recovery from close to $1 a share back in March so I'm beginning to suspect that its days as a good short pick may be behind us.

Well, I will review the list again at the end of June to see how my picks and pans are performing. Until then, happy investing!

Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), Yanzhou Coal (YZC), UFP Technologies (UFPT), and Versar, Inc. (VSR).

It's The End Of The World As We Know It...

2009-05-14T05:52:00.003-05:00

...And I feel fine?

Actually, I don't know about you, but I have an ever-growing sinking feeling that this house of cards we've built up around us is about to come tumbling down! As I sit here drinking my early morning coffee and musing over the latest round of disappointing headlines, I'm beginning to see that despite all the vain attempts by the Federal Reserve to plug their finger in the levee, there are just too many holes and cracks to even think about stopping the floodwaters now.

I find all this talk of the "green shoots" of recovery a little insulting, it's kind of like the emperor's new clothes - everybody is too afraid to tell the mighty emperor that he is in fact naked, and those magnificent garments are just a figment of his overactive imagination! I have no idea how we managed to have such a great rally during March and April, I figure that many people decided that "it couldn't really get much worse" and just jumped in regardless! The bank stress tests were little more than a sick joke and a waste of tax payers money, even the so called "worst case scenario" that they incorporated is a better state of the economy than what is actually happening in reality right now!! I'm sure that makes sense to someone somewhere, but it seems like a another cover-up to me. I've just about had enough of all the smoke and mirrors, let's just bring the facts out into the light and deal with them.

So, moving on. Retail figures anyone? Er...yeah, they're less than pretty. With consumer spending continuing to drop, we should be expecting another round of corporate losses, missed earnings, and falling stock prices. Add into that the continuing increase in unemployment figures, which are not going to improve anytime soon in the light of continued corporate bankruptcies and cost cutting exercises and you will soon realize that we're in for even lower consumer spending and a fresh wave of home foreclosures and credit card defaults. In fact, while the stock market was putting in a huge rally during March and April, the number of home foreclosures surged to a record high according to RealtyTrac. If it was the bursting of the housing bubble that got us into this mess, then I find it hard to imagine getting out of the mess without a significant improvement in the real estate sector and I don't see this happening for a few years yet. Yes, I did really say YEARS. I don't subscribe to the permanent mantra of "we should expect to see recovery in ...insert time 2 quarters away..." That's just not realistic. The huge wave of mortgage losses and loan defaults that we will continue to see is going to finally expose many banks as being little more than bankrupt shell corporations. The government cannot save them all, and really shouldn't try.

Actually, given the huge shortfall in the funds needed to pay Social Security and Medicare to the millions of baby boomers retiring this year, I wonder in the Federal Reserve should really be trying to save any company, period. I think the latest estimate for the shortfall is somewhere north of $50 trillion which dwarfs many other economic issues right now. We already know that the Chinese and Japanese have taken on just about as much US debt as they are likely to, so the Federal Reserve can't just keep on running the printing presses without decimating the US dollar which is only going to harm the country further. We've already started to see the beginnings of the unraveling of the dollar, and I'm sure there is much worse to come.

So where do we go from here? Down.

Disclosure - At the time of writing the author held shares in ProShares Ultrashort 20+ Year Treasury ETF (TBT) and Direxion Financial Bear 3X ETF (FAZ).

Selling Out On China?

2009-05-13T20:31:00.006-05:00

On Tuesday morning, Bank of America (BAC) announced the sale of 13.5 billion shares of China Construction Bank, representing a 5.8% stake in the company. Bank of America (BAC) raised around $7.3 billion through this sale, which was required in order to meet capital requirements following on from last week's stress tests.

So what's the big deal you might ask? Well, where do I start? There are a number of interesting observations that you could make.

* The shares were sold at around a 14% discount to China Construction Bank's previous closing price of HK$4.91.
* Back in January, Bank of America (BAC) had already sold around $2.8 billion of China Construction Bank shares.
* There is no shortage of buyers for the shares, with a private fund headed by Fang Fenglei, picking up the lion's share.
* Rather than plummeting, the stock price actually rose slightly following the huge sale.

In fact, this year overseas financial companies have sold over $15 billion of Chinese financial stocks as they are forced to try to repair their shattered balance sheets. I see this in a lot of ways as counter-productive. They are being forced to sell valuable assets that will inevitably see tremendous growth in coming years and yet will have to hold onto a lot of the toxic assets that got them into the mess in the first place. Bank of America (BAC) was obviously very desperate to sell their shares, as they had to offload them far below market price, and I'm sure if they weren't locked into holding the remainder of their stake (around 11% of CCB) until 2011, that they would've attempted to offload much of that too.

It would appear that there is good liquidity among Chinese financial stocks, with this huge glut of shares being absorbed relatively quietly by a small group of investors. Where US financial institutions are resorting to desperate measures to try to raise capital, Asian bargain hunters are snapping up golden opportunities at great prices. It appears to be yet another example of the Chinese propping up the failing US economy. The Chinese are already the largest holders of US government debt, and now have the opportunity to use their vast cash reserves to buy up Chinese assets held by overseas institutions, as well as continuing to fuel their insatiable appetite for commodities.

I am confident that China will continue its amazing growth story, despite the recent global economic downturn. The reduced US demand for Chinese goods will only cause temporary harm to the Chinese economy as manufacturers will be forced to focus more on intrinsic growth within China rather than being dependent on foreign economies. This will fuel the next stage in the growth of China, resulting in a stronger, more independent, economic superpower which no longer needs to rely on the economies of the West. It is a little ironic that overseas institutions are being forced to sell out of such great Chinese opportunities as they are forced to take their cash off the table now.

Disclosure: At the time of writing the author did not hold shares in Bank of America (BAC).

2009 - Ideas For The Year Performance Update

2009-05-01T20:49:00.004-05:00

At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. Well, it's that time again and there's definitely been a lot of movement this past month!

So here are the performances for 2009 to date.

My Long Picks for 2009, with 04/30/09 closing prices

Himax Technologies (HIMX) - $2.73 (+69.57%)
Anadys Pharmaceuticals (ANDS) - $2.50 (+59.24%)
Quicksilver Gas Services LP (KGS) - $13.46 (+59.24%)
Natural Resources Partners LP (NRP) - $24.09 (+38.05%)
Yanzhou Coal (YZC) - $9.91 (+31.78%)
Urban Outfitters (URBN) - $19.14 (+27.77%)
Ecology & Environment (EEI) - $13.43 (+12.10%)
Dorchester Minerals LP (DMLP) - $17.63 (+11.09%)
Raven Industries (RAVN) - $24.64 (+2.24%)
Highveld Steel and Vanadium (HSVLY) - $7.45 (-2.99%)
UFP Technologies (UFPT) - $5.05 (-4.54%)
Chase Corporation (CCF) - $9.70 (-14.08%)
Hugoton Royalty Trust (HGT) - $11.10 (-30.84%)
Versar, Inc. (VSR) - $2.60 (-36.89%)

The top performer of the month was Yanzhou Coal (YZC) moving from $7.17 to $9.91. I continue to be bullish on commodities which I believe will be one of the few sectors that will finish the year on a high note. Urban Outfitters (URBN) also put in an impressive month, moving from $16.37 to $19.14, although I am still interested to see what this months Q1 figures look like.

Shares of Anadys Pharmaceuticals (ANDS) fell off a cliff after reporting larger than expected expenses in their recent earnings, demonstrating once again the volatility of the biotech sector. I still believe that Anadys has great potential, however, had I been sitting on a real life +300% gain from a biotech stock I would've sold right away! Anyway, let's not dwell on this, moving on.

My Short Picks for 2009, with 04/30/09 closing prices

Ann Taylor Stores (ANN) - $7.39 (+46.63%)
Red Robin Gourmet Burgers (RRGB) - $22.71 (+34.94%)
La-Z-Boy (LZB) - $2.85 (+31.34%)
Build-A-Bear Workshop (BBW) - $5.13 (+5.56%)
Office Depot (ODP) - $2.70 (-9.40%)
LaCrosse Footwear (BOOT) - $7.79 (-37.58%)
Bank of America (BAC) - $8.70 (-38.21%)
Mercantile Bancorp (MBR) - $6.41 (-39.24%)
Citigroup (C) - $2.97 (-55.74%)
Converted Organics (COIN) - $1.52 (-57.06%)
Circuit City (CCTYQ) - $0.021 (-83.85%) - Bankrupt
Smurfit Stone Container Corporation (SSCC) - $0.00 (-100%) - Bankrupt

As a group my short picks continued to rally this month, despite poor fundamentals. I think it's a classic case of "a rising tide floats all boats". La-Z-Boy (LZB) put in a particularly impressive month moving from $1.25 to $2.85, but I really have no idea why! In my opinion the company has poor valuation and fundamentals and I don't expect them to survive the year. Build-A-Bear Workshop (BBW) missed analyst earnings estimates with a pretty unimpressive set of figures which has since been reflected in the share price reversing most of last months gains.

Well, I will review the list again at the end of May to see how my picks and pans are performing. Until then, happy investing!

Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), Yanzhou Coal (YZC), UFP Technologies (UFPT), and Versar, Inc. (VSR).

80% Discount at Restaurant.com

2009-04-28T11:36:00.002-05:00

Well, for a few days only the guys over at Restaurant.com are giving their best deal ever, this time for an additional 80% off, meaning you can get a $25 value for just $2. The code at checkout is: LUCKY which is valid until 04/30. Happy Eating!!

Disclosure: At the time of writing the author was bullish on food!

A Bull In China - Jim Rogers

2009-04-15T22:28:00.006-05:00

A Bull In China by Jim Rogers is an excellent book for anyone interested in investing in the huge potential of China. The author explains why China is growing and why it will continue to grow. He starts out with an overview of the different classes of Chinese shares and some of the history of the Chinese economy, and then breaks down all the major sectors of the economy.

The author discusses everything from real estate to agriculture to the Chinese space program, and accompanies each chapter with dozens of companies with brief descriptions of each. Now, a number of these example companies are not open to investment by the average overseas investor, however, many of the companies are traded on US exchanges.

The author stresses that investing in China is a long term process with ups and many downs along the way. He does not specifically recommend any company in the book, he only mentions them to give the reader a broad understanding. I highly recommend this book as it gives the reader a real appreciation of the huge growth potential available through investing in China. I personally have compiled a list of interesting companies that I plan to research as I would like to increase my own exposure to this great country.

70% Discount at Restaurant.com

2009-04-14T07:22:00.003-05:00

Well, the guys over at Restaurant.com continue to provide a steady stream of discount dining certificates, this time for an additional 70% off, meaning you can get a $25 value for just $3. The code at checkout is: FEAST which is valid until 04/20. Happy Eating!!

Disclosure: At the time of writing the author still loves to eat!

Quicksilver Gas Services - KGS

2009-04-04T08:03:00.002-05:00

Quicksilver Gas Services (KGS) is in the business of gathering and transporting natural gas and liquid natural gas through its pipeline assets and processing facilities in Texas. These services are provided under fee-based contracts, whereby the Company receives fixed fees for performing the gathering and processing services. Quicksilver Gas Services (KGS) does not take title to the natural gas or associated natural gas liquids that it gathers and processes and thus avoids direct commodity price exposure. This is what sets Quicksilver Gas Services (KGS) apart from similar pipeline companies.

Quicksilver Gas Services (KGS) currently trades at a trailing P/E of 13.81, and pays a dividend of 11%. The company has demonstrated good levels of earnings and revenue growth, depsite the economic slowdown, and I anticipate a 12-month price target of $18-20 as the economic outlook improves in the second half of the year. My major concern about the company is the increasing level of debt that the company is taking on.

Disclosure: At the time of writing the author did not hold shares in Quicksilver Gas Services (KGS).

2009 - Ideas For The Year Performance Update

2009-04-01T06:02:00.002-05:00

At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. The purpose of this exercise is to provide ideas for your own research, some potential opportunities for 2009, as well as some companies I feel are best avoided. At this point I am just going for a brief overview, I may get into some more in depth analysis later in the year. I will focus on specific companies in this instance, although later in the year I may look in more depth at specific sectors, or the economy as a whole.

So here are the performances for 2009 to date.

My Long Picks for 2009, with 03/31/09 closing prices

Anadys Pharmaceuticals (ANDS) - $6.79 (+332.48%)
Himax Technologies (HIMX) - $2.80 (+73.91%)
Quicksilver Gas Services LP (KGS) - $13.25 (+39.77%)
Natural Resources Partners LP (NRP) - $22.33 (+27.97%)
Ecology & Environment (EEI) - $13.15 (+9.77%)
Urban Outfitters (URBN) - $16.37 (+9.28%)
Dorchester Minerals LP (DMLP) - $16.33 (+2.90%)
Highveld Steel and Vanadium (HSVLY) - $7.85 (+2.21%)
Yanzhou Coal (YZC) - $7.17 (-4.65%)
Raven Industries (RAVN) - $20.78 (-13.78%)
UFP Technologies (UFPT) - $4.4899 (-15.12%)
Chase Corporation (CCF) - $9.30 (-17.63%)
Hugoton Royalty Trust (HGT) - $9.56 (-40.44%)
Versar, Inc. (VSR) - $2.29 (-44.42%)

The top performer of the month was Himax Technologies (HIMX) moving from $1.65 to $2.80. Also of note was Yanzhou Coal (YZC), moving from $5.68 to $7.17. I imagine that oil and commodities will continue to improve in the coming months which should lift struggling pick Hugoton Royalty Trust (HGT). I am considering increasing my stake in HGT, as I feel it is one of the most undervalued royalty trusts.

My Short Picks for 2009, with 03/31/09 closing prices

Build-A-Bear Workshop (BBW) - $6.07 (+24.90%)
Red Robin Gourmet Burgers (RRGB) - $17.63 (+4.75%)
Ann Taylor Stores (ANN) - $5.20 (+3.17%)
Mercantile Bancorp (MBR) - $7.2999 (-30.81%)
LaCrosse Footwear (BOOT) - $8.03 (-35.66%)
La-Z-Boy (LZB) - $1.25 (-42.40%)
Bank of America (BAC) - $6.82 (-51.56%)
Office Depot (ODP) - $1.31 (-56.04%)
Citigroup (C) - $2.53 (-62.30%)
Converted Organics (COIN) - $0.84 (-76.27%)
Circuit City (CCTYQ) - $0.0075 (-94.23%) - Bankrupt
Smurfit Stone Container Corporation (SSCC) - $0.00 (-100%) - Bankrupt

As a group my short picks rallied a little in recent weeks, particularly in the financial sector. The big surprise for me is Build-A-Bear Workshop (BBW) which is up almost 25% for the year. Converted Organics (COIN) continued its fall into penny stock territory.

Well, I will review the list again at the end of April to see how my picks and pans are performing. Until then, happy investing!

Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), Yanzhou Coal (YZC), UFP Technologies (UFPT), and Versar, Inc. (VSR).

Are We Headed For A Credit Card Meltdown?

2009-03-28T08:07:00.000-05:00

Everybody likes to point their fingers at the government, or blame the banks for the economic mess that we currently find ourselves in, but maybe we as consumers have helped facilitate things more than most of us like to admit. Everybody likes to accuse the banks of being greedy, but ultimately they are in the business to make money for themselves and their shareholders, not to be charitable to the general public. We are all grown adults, and those of us that have made poor financial choices should take responsibility for them, learn from them, and move on.

The current financial crisis stems in part from people over extending themselves in the real estate market, obtaining mortgages that they couldn't really afford to pay, for assets that were declining in value. Not to mention the individuals using their property as an ATM to fund their indulgent lifestyles. The rapidly depreciating real estate market led to many individuals being in way over their heads, leading to foreclosures, short sales and the like. Many of us want to blame the banks, but they didn't force anyone to buy a house they couldn't really afford, they didn't force anyone to borrow beyond what they could feasibly pay back based on their incomes, they didn't force anyone to take equity out of the homes to spend on luxuries they didn't need, they simply helped facilitate what the consumer demanded.

Now don't get me wrong, I am not supporting some of the banks actions - they were irresponsible and reckless at times. I believe that if we knew more of what goes on behind the scenes and off the balance sheets at many banks, then the markets would fall much more than we have already witnessed, but I do think we need to take part of the responsibility.

Now we are left with a situation where those of us that were responsible with our finances, and made "smart" choices, are the people having to bail out the irresponsible and greedy! The scariest part of the situation is where we are headed from here.

The government and the media seem to be painting an overly optimistic picture of the current economic environment, saying that the worst is over and that the Federal Reserve has everything under control. I don't think we could be further from the truth, as two further bubbles are readying themselves to pop. I have already touched on the treasury bubble in a previous post, so I will not discuss it here, but the other bubble that is looming large is the credit card bubble.

Credit card companies have been seen to be raising interest rates, cutting credit lines, and closing inactive accounts. This serves to reduce consumer spending and confidence, and is a self-feeding cycle as it leads to reduced FICO scores, leading to reduced access to credit which in turn causes a further reduction in spending, hurting the economy further in the process.

The worrying thing is that with the level of unemployment still rising, we are seeing more and more people using credit just to survive and make essential purchases. People have already cut back significantly on large purchases such as houses, cars and vacations, they have also cut back on luxuries, electronics and the like. People are now relying on credit for essential, day to day purchases such as food, clothing and energy. Now, I don't know about you but I find this scary! Credit card companies have been reporting increasing numbers of delinquencies, and I fear the worst is still to come.

The Federal Reserve already has it's hands full with the banks, auto makers, insurance companies and the like, it cannot start bailing out individuals too! With rising unemployment, and reduced access to credit, the economy is close to a tipping point where the whole house of cards could come down at any minute.

Disclosure - At the time of writing the author held shares in ProShares Ultrashort 20+ Year Treasury ETF (TBT) and Direxion Financial Bear 3X ETF (FAZ).

Musings About Treasuries - Can We Make Sense Of Them Anymore?

2009-03-22T14:43:00.013-05:00

A term which you are going to hear a lot in the coming weeks is "quantitative easing" which, put very simply, refers to the practice of central banks creating money. On March 6th, The Bank of England announced £150bn of quantitative easing, increasing the risk of inflation in the UK and now the US is following suit. The FOMC announced this week that it would purchase $300 billion worth of longer term US treasuries over the next six months. Unsurprisingly, this announcement caused the US dollar (USD) to fall, particularly against the euro (EUR), and the price of gold to jump.

The Chinese government has the world's largest holding of US treasuries and has recently openly expressed their discontent over the devaluing nature of the US government's activities toward their investment. If they were to fear that the value of their holdings was going to decline, they would most likely be obliged to sell them off and salvage whatever value they can before the market for US treasuries crashes. Which leads me to an interesting supposition, that the Federal Reserve is not going to be buying freshly created treasuries, which would have a strong inflationary effect, but in actual fact is going to buying existing treasuries from China! This in turn carries with it the implication that the Chinese will not be purchasing any more new treasuries from the US in the near future, increasing speculation that the Federal Reserve is set on devaluing the US dollar (USD), thus inflating asset values.

Of course, there are deeper implications to this as this effectively gives China the chance to increase its share of the global market and continue with its incredible economic growth. The credibility and influence of the US government over China is weakening, and attempts to coerce China into allowing the yuan (CNY) to appreciate will likely fall on deaf ears. There is even the scary possibility that China may decide to devalue the yuan (CNY) as the US dollar (USD) begins to slide. This will effectively bolster the Chinese economy and increase global market share. Of course, in practice it cannot be that simple, as the US government can always retaliate by increasing import taxes on Chinese goods and before you know it, the global depression is worse than it was to start with!

I believe that the discussion of the Chinese yuan's (CNY) valuation is going to be high on everyone's agendas in the coming weeks, particularly following the FOMC's move to devalue the US dollar (USD). Added to which we are likely to see some real fireworks in the treasury market. The outrage following the AIG bonus scandal will soon pale into insignificance in the light of more important events with much more dire consequences. I don't for one second buy into the heavily touted deflation banter and think that we're in for steady paced inflation in the upcoming months.

I expect continuing increases in the price of oil, gold and other commodities, and I ultimately fear a collapse in the treasury market. The collapse when it comes leaves me with the fear in the back of my mind that there is a strong probability that the US will have to default on its debts, as they cannot keep on printing money indefinitely. I do anticipate that the eurozone will crash first, which may somehow enable the US to crawl from the wreckage intact, but either way I don't believe the ride is close to being over.

Disclosure: At the time of writing the author held shares in ProShares Ultrashort 20+ Year Treasury ETF (TBT).

How To Win Friends & Influence People - Dale Carnegie

2009-03-22T07:32:00.007-05:00

Originally published back in 1937, How To Win Friends & Influence People by Dale Carnegie is a book which, despite its age, retains its usefulness today. The study of human nature is an essential element in finding success in life. There will always be someone smarter than you, stronger than you, faster than you, better at this skill or that one, but that should not halt your success. If you can learn to express ideas in a way that fosters enthusiasm, or know how to assume leadership in a sincere way, then you will go far.

Dale Carnegie was a firm believer in soft skills which could use a revival in this day and age, such as making people feel appreciated, being a good listener, smiling, and remembering people names. I hope these things don't sound too trivial to you, because remembering to do these little things right could be the difference between winning or losing a promotion, a big sale or a contract. This is a very insightful book that provides techniques you can use to get to know the people you interact with on a daily basis. For some people, being open, friendly and honest doesn't necessarily come naturally, but there is more to it than that, it's about identifying what makes a person tick and then using that knowledge to communicate more effectively with them.

The book has gone on to become an international bestseller, and a book that in my opinion should be an essential read for just about everyone. Whatever your position in life, there is something in there for you - unless you are a total recluse and never have to interact with another person for the rest of your life, you will no doubt learn something from this book! I highly recommend it.

Reasons To Short Stocks

2009-03-15T09:22:00.006-05:00

I was recently asked by a Mostly Money Musings reader about reasons that I would look for in order to consider shorting a stock. Rather than just post a comment reply, I thought this raised an interesting thought for a regular posting.

Put simply, when an investor goes long on an investment, it means they have bought a stock believing that its price will rise in the future. Conversely, when an investor goes short, they are anticipating a decrease in the share price.

Shorting is the process of borrowing a security, then selling it with the belief that it will fall in value so you can buy it back at a lower price before returning it to its rightful owner. The security will be loaned to you by your brokerage, either from their own inventory or from another client. It will be sold and the proceeds credited to your account, and after a time you will be required to buy the shares back and return them. A lot of the time, you can hold a short for as long as you want. However, you can be forced to cover if the lender wants the stock back for any reason.

The key difference between going long and going short is the potential loss in each case. If you go long, your potential for loss is limited solely to the money invested in the stock should its value fall to zero. If you go short, your potential for loss is unlimited, since the price of a security can (in theory at least) rise forever. In practice, this does not happen, however a shorted stock can easily rise enough to wipe somebody out! I'm sure that many short sellers lost their shirts during the technology stock bubble.

So, why short any stocks at all? The most common reason to short is to profit from an overvalued stock or market, although some will use shorting as a means of hedging - to protect their long positions.

What should you look for when considering a short sale? I believe that the most important factor to look at is deteriorating fundamentals. Ultimately, it is strong fundamentals that cause a stock price to rise, as they are the foundation of a company or market, conversely deteriorating fundamentals damage the foundations of the company or market.

In particular, you may wish to consider factors such as rising debts, rising inventories, falling sales and revenues, over-valuation. You may also wish to look for outdated technologies, companies that fail to keep up with the times. You may wish to consider the effects of changes in management or keep a watch on the amount of insider ownership.

In addition to looking at deteriorating fundamentals, it also pays to look at technical factors too, as they offer a clue that all the buyers have bought and there is no-one left to hold up the security. In this case, a price drop would be expected, and a short sale could be possible.

Disclosure: At the time of writing the author did not hold any short positions.

China Fire & Security Group - CFSG

2009-03-11T20:29:00.005-05:00

China Fire & Security Group (CFSG) supplies industrial fire safety products and systems to companies in the iron and steel, power and petrochemical industries in China. The company today announced fourth quarter results which beat analyst estimations, showing increased revenue and earnings. The company is in a strong financial position with no debt and a healthy cash flow.

In the past, China has not been known for its strong track record in the arena of health and safety, but as the country continues to show tremendous growth, it makes sense that they will endeavor to protect their investments. Companies like China Fire & Security Group (CFSG) should flourish as a result. Interestingly, the company has a high insider ownership and yet has almost a 10% short interest.

China Fire & Security Group (CFSG) has been on my watchlist for several months as it is in a strong position to benefit from any government infrastructure spending and stimulus efforts in China.

Disclosure: At the time of writing the author did not hold shares in China Fire & Security Group (CFSG).

80% Discount at Restaurant.com

2009-03-11T18:59:00.001-05:00

For those of you that like to eat, but missed your chance to get the certificates last month, you now have another chance. Restaurant.com is offering $25 gift certificates for just $2. Just use the discount code:MENU when you go to check out. The offer runs until March 15th and the certificates are valid for a year once purchased.

Disclosure: At the time of writing the author still loves food!

Ann Taylor Stores - ANN

2009-03-07T08:09:00.004-06:00

Ann Taylor Stores (ANN), one of my short picks for 2009, reported a set of pretty appalling results yesterday, including a staggering loss of $6.66 per share. This hardly came as a surprise to me, as I feel the company caters mostly to the section of the population most affected by the current economic climate. It is significantly more expensive than a number of discount retailers, but it is also far from high-end fashion. I don't see things improving for the company for some time yet as people seem to have significantly less disposable income available at present. Investors greeted the news by sending the stock price down 38%!

Prior to these results, Ann Taylor Stores (ANN) was the only one of my short picks to have posted a stock price gain for the year, now all of the picks are in negative territory.

Disclosure: At the time of writing the author did not hold shares in Ann Taylor Stores (ANN).

AIG - A Money Pit

2009-03-02T21:57:00.007-06:00

Ok, so I don't know about you but my head is spinning! Not only has American International Group (AIG) posted the worst quarterly results in the history of the stock market, but it has been rewarded with more government bailout money! The insurance group managed to lose an historic $61 billion in just three months, and has just been granted access to a further $30 billion from the US government.

It is a mystery to me that American International Group (AIG) can still be a publicly listed company, it is a mystery to me than any single individual would go anywhere near their shares, and it is a mystery to me how they didn't see this coming!

Only the government can provide insurance where private companies cannot - after all, they are the only ones with enough resources available. Essentially, American International Group (AIG) got into the business of insuring a significant amount of the world's financial system against the consequences of a global financial meltdown. The US government had to step in and bail them out because AIG was totally incapable of delivering on that insurance. Ultimately, American International Group's (AIG) business of selling credit default swaps was a huge scam, as there was no way they could ever pay out on them.

The total bailout for AIG so far is in the region of $170 billion, which blows my mind. The worst part of the whole thing is that, I very much doubt that that will be enough. With American International Group (AIG) so intertwined in the global economy, they pretty much have the US government held at gunpoint whenever they need more money because of the disasterous repercussions following potentially bankruptcy of the company. Simply put, the government cannot afford not to bail them out, which is a really scary thought! If AIG were to fail, then the entire global economy would end up in a lot of pain, and very very few individuals would not feel it in some way or another.

Disclosure: At the time of writing the author would not touch shares in American International Group (AIG) with someone else's barge pole.

2009 - Ideas For The Year Performance Update

2009-03-01T08:14:00.009-06:00

At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. I started out posting further thoughts about some of the picks, but failed quite miserably to add much new stuff over the past month. I'll try to fix this over this next month! The purpose of this exercise is to provide ideas for your own research, some potential opportunities for 2009, as well as some companies I feel are best avoided. At this point I am just going for a brief overview, I may get into some more in depth analysis later in the year. I will focus on specific companies in this instance, although later in the year I may look in more depth at specific sectors, or the economy as a whole.

So here are the performances for 2009 to date.

My Long Picks for 2009, with 02/28/09 closing prices

Anadys Pharmaceuticals (ANDS) - $6.12 (+289.81%)
Quicksilver Gas Services LP (KGS) - $12.20 (+28.69%)
Natural Resources Partners LP (NRP) - $20.73 (+18.80%)
Urban Outfitters (URBN) - $16.64 (+11.08%)
Ecology & Environment (EEI) - $12.49 (+4.26%)
Dorchester Minerals LP (DMLP) - $16.31 (+2.77%)
Himax Technologies (HIMX) - $1.65 (+2.48%)
Highveld Steel and Vanadium (HSVLY) - $6.742 (-12.21%)
Chase Corporation (CCF) - $9.12 (-19.22%)
UFP Technologies (UFPT) - $4.10 (-22.50%)
Yanzhou Coal (YZC) - $5.68 (-24.47%)
Raven Industries (RAVN) - $18.18 (-24.56%)
Hugoton Royalty Trust (HGT) - $9.93 (-38.13%)
Versar, Inc. (VSR) - $2.44 (-40.78%)

A pretty dismal performance from my picks this month. Shares in Anadys Pharmaceuticals (ANDS) skyrocketed last month following the release of promising HCV data and have maintained a steady run. Highveld Steel and Vanadium (HSVLY) was the best performer of the month, although still sitting at a loss for 2009.

My Short Picks for 2009, with 02/28/09 closing prices

Ann Taylor Stores (ANN) - $6.58 (+30.56%)
Red Robin Gourmet Burgers (RRGB) - $14.21 (-15.57%)
Build-A-Bear Workshop (BBW) - $3.62 (-25.51%)
LaCrosse Footwear (BOOT) - $8.5185 (-31.74%)
Mercantile Bancorp (MBR) - $5.94 (-43.70%)
La-Z-Boy (LZB) - $0.90 (-58.53%)
Converted Organics (COIN) - $1.27 (-64.12%)
Office Depot (ODP) - $1.05 (-64.77%)
Bank of America (BAC) - $3.95 (-71.95%)
Citigroup (C) - $1.50 (-77.65%)
Circuit City (CCTYQ) - $0.007 (-94.62%) - Bankrupt
Smurfit Stone Container Corporation (SSCC) - $0.00 (-100%) - Bankrupt

Well, as a group my short picks worked out a whole lot better than the long picks. The banks in particular had a rough month, with Bank of America (BAC), Citigroup (C) and Mercantile Bancorp (MBR) all suffering big drops. The one jewel among the short picks is Ann Taylor Stores (ANN) which is up over 30% since the beginning of the year. In fact despite the economy, certain retailers seem to be holding up a lot better than most people expected.

Well, I will review the list again at the end of March to see how my picks and pans are performing. Until then, happy investing!

Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), UFP Technologies (UFPT), and Versar, Inc. (VSR).

80% Discount at Restaurant.com

2009-02-22T20:17:00.001-06:00

For those of you that like to eat, but have found that the economic climate has cramped your style when it comes to dining out. Restaurant.com is offering $25 gift certificates for just $2. Just use the discount code:DINE when you go to check out. The offer runs until the end of February and the certificates are valid for a year once purchased.

Freakonomics - Steven Levitt & Stephen Dubner

2009-02-21T07:56:00.011-06:00

Freakonomics by Steven Levitt & Stephen Dubner is subtitled "A Rogue Economist Explores The Hidden Side Of Everything" and that pretty much sums up the book in a nutshell. It is a fast, entertaining read applying the laws of economics to some highly unusual topics. If you were ever curious as to what school teachers and sumo wrestlers have in common, or why drug dealers still live with their moms, then this is the place to come and explore the answers! The main take home message of the book is the danger of mistaking correlation for causation in regression analysis, but you won't find yourself caught up in reams of long economic theory.

Particularly of interest to me was the study of incentives. What motivates people to do things, and how can you provide the right kind of incentive to get the outcome you want. It offers an unconventional look at conventional wisdom, and often comes up with some surprising answers.

This really is a light, entertaining read and if you enjoy the book, the authors also have a Freakonomics blog.

Experian FICO Scores

2009-02-14T08:24:00.000-06:00

Happy Valentine's Day everyone! Rather than sending flowers or chocolate, Experian has decided to send Joe Public as nice big slap in the face! In its infinite wisdom, Experian has decided to pull out of its agreement with Fair Isaac and will no long allow them to sell FICO scores to consumers. Lenders will still be able to get FICO scores based on Experian data, but consumers will not, putting us at a big disadvantage.

So, if you want to check your FICO score based on Experian data, I'm afraid that your chance has gone. If you want to apply for credit from a lender that uses Experian’s data to determine credit worthiness you will not be able to check your score before you apply. This decision came into effect today, sorry.

Learn How To Become Poor!

2009-02-10T20:41:00.005-06:00

Well, a number of you may read the title of this post and think to yourselves "Why on Earth would I want to learn how to become poor?" or "Why don't you just tell me how to be rich?" or "I'm struggling with money enough already without your help, thanks very much!" And my answer would be along the lines of "You want to learn how to become poor in order to avoid it!" There are many things that a lot of us do each day without really thinking much about which actually cause us a lot of financial harm. This post is aimed at highlighting a few of them.

1) Spend more than you earn.
Well, this first one is something of a no-brainer really, but you'd be surprised how many people fall into this trap. In fact, looking at the state of the economy right now, many businesses seem to fall into this trap too! It doesn't matter if you earn minimum wage flipping burgers, or you are the CEO of a multinational conglomerate, if you follow this rule, sooner or later you're going to end up poor.

2) Buy what you can't afford.
Another somewhat obvious statement, but once again a trap that many people fall into. It's not a bad thing to want to have nice stuff, but it is important to have the discipline to wait until you have the means to pay for it. I could write a whole series of posts about the dangers of debt, but just look at the state of the economy right now! Think of all those people that bought property valued way higher their earning capacity. All the cars, big screen TVs, extended vacations. It's all nice stuff, but if you don't keep debt under control, sooner or later you'll be a slave to it.

3) Invest in things you don't understand.
A good way to become poor is to invest your hard-earned cash in things that quite frankly, you just don't understand. If you don't understand options trading, you'll probably lose your shirt. If you don't understand how a business operates, how can you truly know if they are any good at it? There are many excellent, easy to understand opportunities out there, why take the risk on something else? You'll be better off with a lottery ticket in most cases!

4) Sit back and dream.
Sit back and dream. Watch life pass you by without a care in the world. Don't put in any hard work or effort of any kind. Be lazy and carefree without any form of discipline. This is a good way to end up poor. There is no such thing as a free lunch, if you want something you need to be a doer, not a dreamer. Otherwise, you'll end up falling into a cycle of debt that will stop you from ever building wealth.

5) Don't plan for the future.
After all, Uncle Sam will take care of you, right? Er... maybe! Well, the pessimist in me says that Social Security and Medicare will probably not even be around by the time I make it to retirement, but even if they are that may not be enough. Another really good way to end up poor is through a lack of planning. Why think about retirement planning now? You're still young, right? Well, that's a good recipe for poverty! Living below your means now gives you the prospect of a much better future. It also gives compound interest a chance to work its magic. But hey, live for the moment, you want to be poor right?

6) Don't don't where your money goes.
Another good way to be poor is to have no idea where your money goes. Just spend it. Don't get receipts, don't budget, don't worry about it! After all, there's another paycheck coming next month... right? But what if there isn't...

2009 - Ideas For The Year Performance Update

2009-02-01T08:26:00.004-06:00

At the beginning of the year I made a list of picks and pans for the year which I planned to review at the end of each month. Over the past month I have also tried to post further thoughts about some of the picks, I'll try to continue this through the next month also until I've covered each one. The purpose of this exercise is to provide ideas for your own research, some potential opportunities for 2009, as well as some companies I feel are best avoided. At this point I am just going for a brief overview, I may get into some more in depth analysis later in the year. I will focus on specific companies in this instance, although later in the year I may look in more depth at specific sectors, or the economy as a whole.

So, without further ado, here are the performances for 2009 to date.

My Long Picks for 2009, with 01/31/09 closing prices

Anadys Pharmaceuticals (ANDS) - $5.21 (+231.85%)
Quicksilver Gas Services LP (KGS) - $14.00 (+47.68%)
Natural Resources Partners LP (NRP) - $23.39 (+34.04%)
Dorchester Minerals LP (DMLP) - $19.00 (+19.72%)
Himax Technologies (HIMX) - $1.68 (+4.35%)
Urban Outfitters (URBN) - $15.58 (+4.01%)
Ecology & Environment (EEI) - $12.41 (+3.59%)
UFP Technologies (UFPT) - $5.30 (+0.19%)
Chase Corporation (CCF) - $10.91 (-3.37%)
Raven Industries (RAVN) - $21.81 (-9.50%)
Versar, Inc. (VSR) - $3.68 (-10.68%)
Yanzhou Coal (YZC) - $6.50 (-13.56%)
Hugoton Royalty Trust (HGT) - $13.06 (-18.63%)
Highveld Steel and Vanadium (HSVLY) - $5.112 (-33.44%)

A wide range of performance from my picks this month. Shares in Anadys Pharmaceuticals (ANDS) skyrocketed following the release of promising HCV data. Also strong movement in the natural gas sector helped lift picks Quicksilver Gas Services LP (KGS), Natural Resources Partners LP (NRP), and Dorchester Minerals LP (DMLP). The performance of Highveld Steel and Vanadium (HSVLY) prompted me to pick up a few shares at $5.48. I still believe that this company will be a major player in years to come, but right now it is holding up the bottom of the table.

My Short Picks for 2009, with 01/31/09 closing prices

Ann Taylor Stores (ANN) - $4.92 (-2.38%)
Mercantile Bancorp (MBR) - $9.85 (-6.64%)
Build-A-Bear Workshop (BBW) - $4.20 (-13.58%)
LaCrosse Footwear (BOOT) - $10.76 (-13.78%)
Converted Organics (COIN) - $2.80 (-20.90%)
Office Depot (ODP) - $2.16 (-27.52%)
Red Robin Gourmet Burgers (RRGB) - $12.18 (-27.63%)
Citigroup (C) - $3.55 (-47.09%)
Bank of America (BAC) - $6.58 (-53.27%)
La-Z-Boy (LZB) - $0.97 (-55.30%)
Smurfit Stone Container Corporation (SSCC) - $0.0331 (-87.27%) - Bankrupt
Circuit City (CCTYQ) - $0.006 (-95.38%) - Bankrupt

Well, my short picks fell across the board, although some more than others. Circuit City (CCTYQ) and Smurfit Stone Container Corporation (SSCC) both ended the month in the bankruptcy court, and both Bank of America (BAC) and La-Z-Boy (LZB) fell more than 50%. I fear that the economy may not recover in time for La-Z-Boy (LZB) who may also find themselves in the bankruptcy court before year end. After all, who is going to opt for a new recliner over a mortgage payment?

Well, I will review the list again at the end of February to see how my picks and pans are performing. Until then, happy investing!

Disclosure: At the time of writing the author held shares in Highveld Steel and Vanadium (HSVLY), Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), UFP Technologies (UFPT), and Versar, Inc. (VSR).

Raven Industries - RAVN

2009-01-27T21:49:00.004-06:00

Raven Industries (RAVN) is an industrial manufacturing company consisting of three Raven divisions and one subsidiary: Engineered Films, Flow Controls, Electronic Systems and Aerostar International.

The company has practically no debt and has consistently grown sales and earnings in recent years. Raven Industries (RAVN) boasts an excellent ROI of 26.2% over the past 5 years, compared to just 12.8% for the S&P 500. The company has a long track record of success and the stock price should soon recover from close to its 52 week low of $20.60.

Raven Industries(RAVN) currently trades at a trailing P/E of 12.87 and I anticipate a 12-month price target of $40 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Raven Industries (RAVN).

Stem Cell Research - The Bubble of 2009?

2009-01-26T21:34:00.003-06:00

It is anticipated by many that President Obama will lift the ban on federal funding for stem cell research, a historic move that is expected to boost the US health industry. Just last week, the Federal Drug Administration (FDA) revealed that Geron (GERN) will be allowed to initiate phase I clinical trials of its early-stage treatment for spinal cord injuries. Obviously, short-sighted investors welcomed the news.

Firstly, this is a phase I trial, it will be expensive to carry out and there is no guarantee of success. Geron (GERN) is burning through cash at a rapid pace (in excess of $30 million a year), which is obviously a very dangerous thing to do in a recession, especially for a company which has practically no sales! The company is trading at over 80 times annual revenue and at a yearly high. Clearly investors are riding the "Obama Wave" and this one has to come back down to Earth soon. This is clearly all hype and no hard evidence of profitability. Yes, Geron (GERN) may turn out to be the next "Microsoft of the biotech industry" and make some investors incredibly wealthy, but at this stage it's far too early to make that call.

Also in the news is the company StemCells (STEM) which holds a significant stake in ReNeuron - a company that is about to undertake clinical trials in the UK. StemCells (STEM) also hit new highs this week, despite having no evidence of profitability. Geron (GERN) and StemCells (STEM) do own close to 300 patents between them, however, the question remains whether their research can bring either company through to profitability.

In these difficult economic times I am not brave enough to roll the dice on GERN or STEM, and not lucky enough to know when to hold them and when to fold them. Stem cell research may prove to be the bubble of 2009 as weary investors try to recoup some of their heavy losses from 2008. At times such as these, I will be looking to invest in solid, proven market leaders with low debt and a high degree of free cash flow. A decent dividend would also be nice.

Disclosure: At the time of writing the author did not hold shares in Geron (GERN) or StemCells (STEM).

Ecology & Environment - EEI

2009-01-24T09:10:00.002-06:00

Ecology & Environment (EEI) is an environmental consulting and testing firm. The Company offers a range of environmental consulting services, including environmental audits, impact assessments, surveys, analysis, monitoring, air quality management, pollution control, and environmental infrastructure planning.

The company boasts low debt, high insider ownership and has been successfully growing both earnings and sales despite the difficult economic climate. The stock price has appreciated greatly in the past three months from a 52 week low of $7.30 to its current price of $12.69. With a current P/E of 19, I would expect the stock price to trade sideways in the $11-14 range for the next 6 months before rising to a 12-month price target of about $16.

Disclosure: At the time of writing the author did not hold shares in Ecology & Environmental (EEI).

Dorchester Minerals LP - DMLP

2009-01-23T21:41:00.002-06:00

Dorchester Minerals LP (DMLP) is the owner of natural gas and oil royalty properties. The company has practically no debt, high insider ownership, proven reserves and additional mineral interests.

The price of DMLP stock is mostly influenced by long-term oil and natural gas prices, and as such has suffered in recent months falling to a 52 week low of $14.80. DMLP currently trades at $17.74, well below the 52 week high of $36.49, which I believe presents real value as energy prices will resume their upward trend over the long term. While you are waiting for the stock price to recover, Dorchester Minerals LP (DMLP) boasts a generous 12.2% dividend yield.

While I fully expect renewable and green technologies to play an increasing role in energy production in the future, oil and natural gas will remain a major source of energy in the intermediate term. Dorchester Minerals LP (DMLP) currently trades at a trailing P/E of 7.4 and I anticipate a 12-month price target of $25 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Dorchester Minerals LP (DMLP). As a Limited Partnership, capital gains are factored differently, so please consult with a tax adviser prior to investing.

Inauguration Day Musings

2009-01-20T21:46:00.004-06:00

Well I don't know about you, but I wasn't really expecting an "Obama bounce" in the stock markets today. I know there are many people out there, from Wall St to blogspace that have been trying to feed the bull, but there really isn't a whole lot to get excited about. Sure, it is an historic day. Sure, Obama is a great orator. Sure, he gave a very inspiring speech, but at the end of the day the markets tanked! I think that any "Obama bounce" is already priced into the markets, perhaps we're not down quite as far as we would've been had he not won the election, but we're down none-the-less. Maybe we'll see a true bull run in a few years time? 2011-2012 anyone? Your guess is as good as mine!

I think I'm correct in saying that today marks the worst Inauguration Day in the history of the stock market! I think that says a great deal more about the country's outlook than Obama could express in his speech. We're not quite in as bad shape as countries like Iceland, Russia or the UK, but there is a lot that needs to be done in order to inspire confidence in the economy. The proposed stimulus packages may work, but what if they don't? Can the country handle that vast amount of debt? And cut taxes at the same time?? In my mind, for any plan to truly have the desired effect in righting the economy, it has to tackle the debt mountain that is piling up. Is the US Treasury too big to fall? I know it thinks that it is.... but what if overseas investors refuse to buy our paper anymore? What does that mean for the US dollar?

Maybe all the bulls were watching the ceremonies in Washington, leaving the bears to run the show for the day?! I for one will be keeping a close eye on how the markets open in the morning!

Yanzhou Coal Mining Co. - YZC

2009-01-18T21:32:00.001-06:00

Yanzhou Coal Mining Co. (YZC) is China's second largest coal mining company, with over 2 billion tonnes in reserves, and has recently expanded into Australia. The stock price of Yanzhou Coal Mining Co. (YZC) has been hit particularly hard over the past 6 months or so, and will in all likelihood continue to fall in the short term. However, I believe that the company has excellent longer term prospects.

China consumes more coal than the United States, Europe and Japan combined and continues to build new coal-fired power stations. While coal is considered to be the dirtiest of all energy sources, the environmental impact is less critical in the immediate future as greener technologies are just not economically viable in China at this time. Obviously this will change in the future, but for now China will continue to burn coal and lots of it.

The company has low debt, has shown excellent growth in recent years, and pays a 3.5% dividend.

Yanzhou Coal Mining Co. (YZC) currently trades at a trailing P/E of 4.2, below book value, and a price of $7.05. I anticipate a 12-month price target of $13 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Yanzhou Coal Mining Co. (YZC).

Buy the Rumor, Sell the Fact - Michael Maiello

2009-01-17T17:16:00.014-06:00

Buy the Rumor, Sell the Fact by Michael Maiello takes a look at many of today's trading myths, maxims and slogans to see if there is indeed any truth behind them.

Buy the Rumor, Sell the Fact is not a book in the traditional sense, more of a collection of thoughts each taking just one to three pages. The author uses simple language to examine some of the market jargon that is often thrown about without any real thought to its validity. Some of his arguments are a little too simplistic, but I believe that was the intended point to the book.

The book is a fast read and makes a number of interesting points regarding trading myths that are widely accepted as truths. A recommended read for anybody who is new to the world of Wall Street.

Circuit City - CCTYQ

2009-01-16T21:54:00.003-06:00

Circuit City (CCTYQ) is a specialty retailer of consumer electronics, or should I say "was"! Circuit City (CCTYQ) today announced after failing to secure financing from creditors that it would liquidate its remaining stores. The bankrupt retailer had a poor business model, despite over $10 billion in sales this past year, failing to effectively compete with Wal-Mart (WMT) and Best Buy (BBY), both of whom will benefit greatly from the demise of Circuit City (CCTYQ).

Circuit City (CCTYQ) is the first of my short picks of the year to declare bankruptcy.... who will be next?

Versar, Inc - VSR

2009-01-15T20:22:00.001-06:00

Versar, Inc. (VSR) is a professional services company which specializes in project management and infrastructure services for government and private sector clients. A number of analysts see this company as being like a mini Halliburton, and with its wealth of government and military contracts I tend to agree. Versar, Inc. (VSR) has high insider ownership, good growth and practically no debt.

The one unresolved question is how will the company's fortunes change following the Presidential switch in the next week? If the Obama adminstration is favorable towards Versar (VSR) then this will prove to be a very profitable investment. Some may say that the stock price has increased substantially since the Election, suggesting the change at the White House is already priced in, but I believe this one has a long further to run. The one thing missing is a nice dividend payment!

Versar, Inc. (VSR) currently trades at a trailing P/E of 12.3 and a price of $3.85. I anticipate a 12-month price target of $9.

Disclosure: At the time of writing the author held shares in Versar, Inc. (VSR).

Chase Corporation - CCF

2009-01-12T21:41:00.002-06:00

Chase Corporation (CCF) is a manufacturer of specialty tapes, laminates, sealants and coatings for a number of industrial applications particularly in the automotive and electronics industries. The company recently reported disappointing first quarter results with a significant decline in revenues and EPS. However this is entirely expected in the current economic climate.

Chase Corporation (CCF) has strong conservative management and there is significant insider ownership. The company is well positioned to bounce back once the economy improves. The company has a healthy balance sheet with cash/equivalents of $4.3 million and no outstanding debt. The company will likely benefit strongly from any infrastructure programs put in place by the incoming Obama administration.

Chase Corporation (CCF) currently trades at a trailing P/E of 8.81 and a price of $11.25. I anticipate a 12-month price target of $18 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Chase Corporation (CCF).

United Foam Plastics Technologies - UFPT

2009-01-11T11:33:00.001-06:00

United Foam Plastics Technologies (UFPT) offers a range of engineered packaging solutions and specialty products for a number of industrial applications. UFP Technologies (UFPT) trades at close to book value and has significantly increased both sales and revenue over the past few years.

The price of UFPT stock has suffered in recent months falling from it's 52 week high of $14.63 amid significant insider selling in the range of $12-$14 to a 52 week low of $3.92. UFP Technologies (UFPT) currently trades at $5.40 which I believe presents good value as insiders have been making modest purchases in the $4 range.

UFP Technologies (UFPT) currently trades at a trailing P/E of 5.79, with very little debt, and has recently broken through it's 50 day moving average. I anticipate a 12-month price target of $11 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author held shares in United Foam Plastics Technologies (UFPT).

Highveld Steel and Vanadium - HSVLY

2009-01-10T08:11:00.002-06:00

Highveld Steel and Vanadium (HSVLY) provides good exposure to the commodities sector, while at the same time giving the investor significant dividend income. While I don't expect the huge dividend to be maintained at this level indefinitely, it is unlikely to ever be cut completely.

The price of HSVLY stock has suffered in recent months falling to a 52 week low of $4.75. HSVLY currently trades at $7.20, well below the 52 week high of $24.94, which I believe presents real value as the stock has been heavily oversold. Highveld Steel and Vanadium (HSVLY) is among the most solvent and profitable mining companies, and will benefit strongly from any infrastructure programs put in place by the incoming Obama administration.

Highveld Steel and Vanadium (HSVLY) currently trades at a trailing P/E of 3.50, with very little debt, and I anticipate a 12-month price target of $16 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author did not hold shares in Highveld Steel and Vanadium (HSVLY).

Hugoton Royalty Trust - HGT

2009-01-09T19:36:00.003-06:00

With an 80% net profit interest in XTO Energy (XTO) projects that span three states, including the prolific Anadarko basin, Hugoton Royalty Trust (HGT) provides good exposure to the natural gas sector, while at the same time giving the investor significant royalty income.

The price of HGT stock is mostly influenced by the long-term natural gas price, and as such has suffered in recent months falling to a 52 week low of $14. HGT currently trades at $16.98, a far cry from the 52 week high of $37.86, which I believe presents real value once natural gas prices resume an upward trend.

While I fully expect renewable and green technologies to play an increasing role in energy production in the future, natural gas will remain a major source of energy in the intermediate term. Hugoton Royalty Trust (HGT) currently trades at a trailing P/E of 5.98 and I anticipate a 12-month price target of $20 as the economic outlook improves in the second half of the year.

Disclosure: At the time of writing the author held shares in Hugoton Royalty Trust (HGT).

The Richest Man in Babylon - George S. Clason

2009-01-07T17:08:00.006-06:00

The Richest Man in Babylon by George S. Clason is one of those classic texts that has really stood the test of time. The book dispenses financial advice through a series of simple, easy-to-understand parables set in ancient Babylon. Through a collection of everyday experiences the characters in the book learn key tenets of financial wisdom, which are still relevant and practical today.

The principles are not new and can be found in other texts, however, the simplicity of this book is its appeal. It is an inspirational text which should be required reading for everyone. I am amazed at how much is packed into such a short book. You could read The Richest Man In Babylon cover-to-cover in an afternoon, but it could take you a lifetime to fully appreciate the wisdom on the pages.

You will learn how to pay down debts and acquire wealth. You will learn to pay yourself first and to control expenditures. You will learn how to ensure future prosperity and guard your wealth from losses. If you have an income you can build wealth using these timeless principles. This book is a multi-million copy bestselling classic and you will see why when you read it. I highly recommend this book.

2009 - Ideas For The Year

2009-01-01T13:03:00.015-06:00

Welcome to 2009!
The past year has been a rough ride, and I imagine that many of you (like me!) are considerably worse off than you were a year ago. The events of 2008 exposed many weakness in both the national and global economies leaving bankruptcies, falling sales, job losses, lower real estate prices, foreclosures.... the list goes on.... and it ain't pretty!

There are many challenges that lie ahead in 2009, but with them come many opportunities for those looking in the right places. There is money to be made in 2009, but it may not come as easily as in years past.

The purpose of this post is to make a few picks for the year which I will review at the end of each month. In the coming few weeks I will post further thoughts about each of the picks. The purpose of this exercise is to provide ideas for your own research, some potential opportunities for 2009, as well as some companies I feel are best avoided. I will focus on specific companies in this instance, although later in the year I may look in more depth at specific sectors, or the economy as a whole.

My Long Picks for 2009, with 12/31/08 closing prices

Highveld Steel and Vanadium (HSVLY) - $7.68
Chase Corporation (CCF) - $11.29
Versar, Inc. (VSR) - $4.12
Natural Resources Partners LP (NRP) - $17.45
Hugoton Royalty Trust (HGT) - $16.05
UFP Technologies (UFPT) - $5.29
Anadys Pharmaceuticals (ANDS) - $1.57
Yanzhou Coal (YZC) - $7.52
Ecology & Environment (EEI) - $11.98
Quicksilver Gas Services LP (KGS) - $9.48
Urban Outfitters (URBN) - $14.98
Dorchester Minerals LP (DMLP) - $15.87
Himax Technologies (HIMX) - $1.61
Raven Industries (RAVN) - $24.10

My Short Picks for 2009, with 12/31/08 closing prices

Citigroup (C) - $6.71
Bank of America (BAC) - $14.08
LaCrosse Footwear (BOOT) - $12.48
Red Robin Gourmet Burgers (RRGB) - $16.83
Office Depot (ODP) - $2.98
Ann Taylor Stores (ANN) - $5.04
Mercantile Bancorp (MBR) - $10.55
Circuit City (CCTYQ) - $0.13
La-Z-Boy (LZB) - $2.17
Build-A-Bear Workshop (BBW) - $4.86
Smurfit Stone Container Corporation (SSCC) - $0.26
Converted Organics (COIN) - $3.54

Well, I will review the list at the end of January to see how my picks and pans are performing. Until then, happy investing!

Disclosure: At the time of writing the author held shares in Himax Technologies (HIMX), Hugoton Royalty Trust (HGT), UFP Technologies (UFPT), and Versar, Inc. (VSR).