New Buys: DECK and JCOM

May 29th 2009

I would suggest to buy DECK again and also JCOM.

We sold DECK some time ago because it broke our stop loss at around $54.50. It is currently higher, but still with good fundamentals.
I would suggest an initial stop loss at $49.27

JCOM is new for us. It is a little expensive, with a PE ratio a little higher than its industry average. It also has an average growth rate, but has high ROI/ROE, high profit margins and a strong financial position.
I would suggest an initial stop loss at $19.96

New buy: GHM and CMTL

May 27th 2009

With the following initial stop loss:

CMTL: stop loss at $26.37

GHM: stop loss at $12.38

Unlucky with RECN

May 26th 2009

Today RECN opened very low, below our stop loss level and we sold it.
Sell price was the low of the day at $17.21 while it is now trading at $18.52.

Anyway, we bought RECN on March 11th at $14.04 and, although we could have done better, we cashed in a 22% in two months and a half.

Stop Loss

May 26th 2009

ADBE: $24.79
ADM: $24.27
APOL: $55.34
ENDP: $14.89
FLR: $39.48
FLS: $63.94
GIGM: $5.64
IPHS: $13.41
MVL: $29.80
NCTY: $8.10
NE: $27.52
NRG: $17.86
RECN: $17.54
TRLG: $18.51
TSYS: $6.18
VPHM: $5.24
WDC: $21.90

AFAM sold

May 21st 2009

Today AFAM broke its Stop Loss at $26.09 so we sold it.

Having bought it at $17.41 on March 25th 2009 it generated a return of around 49% for us.

New Buys: TSYS and APOL

May 19th 2009

Two new buys for me today: APOL (initial stop loss: $55.34) and TSYS (initial top loss: $6.18).

Updated Stop Loss Orders

ADBE: $23.88
ADM: $23.20
AFAM: $26.09
ENDP: $14.89
FLR: $38.09
FLS: $60.50
GIGM: $5.64
IPHS: $13.02
MVL: $28.27
NCTY: $8.10
NE: $26.48
NRG: $17.36
RECN: $17.17
TRLG: $17.66
VPHM: $4.96
WDC: $20.87

Calculate Stop Loss Prices

You can easily calculate stop losses on this page:

http://spiderman.servehttp.com/stop.jsp

NOTE: update your stop losses ONLY UPWARD.

DECK losing ground

May 13th 2009

It seems like selling DECK yesterday was not a bad idea.
It is currently trading under $52.

Updated Stop Loss

May 13th 2009

ADBE $23.40
ADM $23.20
AFAM $21.83
ENDP $14.89
FLR $36.61
FLS $59.92
GIGM $5.64
IPHS $12.60
MVL $27.79
NCTY $8.10
NE $26.37
NRG $17.28
RECN $16.69
TRLG $14.39
VPHM $4.86
WDC $20.67

DECK violated its stop loss

We should have sold DECK today, since it violated it stop loss at $54.23.
We bought it at $50.81, so we gained only a 6.7% with it.
What's next? Who knows... maybe DECK will skyrocket now or maybe it will move sideways for a while.
We will watch it and may buy it again, since its fundamentals are still good.

An update on Stop Loss orders

In this volatile market we should pay attention to protect our gains, specially for those positions on which we are gaining well.




Let's take our four best performers: TRLG (up 105%), AFAM (up 81%), IPHS (up 61%) and WDC (up 42%).



I would suggest to:

1. Almost Family, Inc. (AFAM) move the stop loss from $21.22 to $21.45
2. Innophos Holdings, Inc. (IPHS) move the stop loss from $12.21 to $12.60
3. True Religion Apparel, Inc. (TRLG) move the stop loss from $14.01 to $14.37
4. WESTERN DIGITAL CP (WDC) move the stop loss from $20.51 to $20.52

Happy trading

Correlation - Is our portfolio well diversified?

In probability theory and statistics, correlation (often measured as a correlation coefficient) indicates the strength and direction of a linear relationship between two random variables [1].

We can use correlation to evaluate how our stocks are prone to move together.

A well differentiated portfolio should have stocks that do not behave the same over time. Every day we should own stocks that win and stocks that lose (ideally more of the former and les of the latter) so that on average we gain more than the market in good times and lose less than the market in bad times.

Two stocks are perfectly correlated if there is a linear relation between them. Let's suppose to own stock A and stock B. If stock B gains X% everytime stock A gains X%, and stock B loses X% everytime stock A loses X%, then stock A and stock B have a correlation factor of 1. The same if stock B gains/loses 2, 3, 4 or n times X%. There is a linear dependency between the two stocks price.

Let's take as an example some of our stocks, starting from ADBE and FLS.

If we represent on a chart the prices of ADBE and FLS as points over one year (axys X is ADBE price and axys Y is FLS price) we see that these points lay on a sort of a line. Correlation for ADBE and FLS is 91%, meaning that they move in a very similar way. ADBE goes up, then FLS goes up too.

Let's look now at the correlation between AFAM and DECK.

In this case a linear pattern cannot be identifies. In fact the correlation factor in this case is around 7%.

As a further example let's have a look at the correlation between IPHS and some other of our stocks:

If we consider all the correlation factors in our portfolio we get an average correlation of 62%.

From sone research I did it seems like a good portfolio mix has a correlation between -80% and 80%. But, of course, I would like to read your comments on this.

[1] http://en.wikipedia.org/wiki/Correlation

Current Portfolio

May 10th 2009

Symbol	Last Trade	Price Paid	Gain/Loss %	Stop Loss
ADBE	$25.42	$18.70	35.93	$23.32
ADM	$26.97	$25.40	6.18	$23.20
AFAM	$31.55	$17.41	81.21	$21.22
DECK	$59.00	$50.81	16.11	$54.23
ENDP	$16.34	$17.38	-5.99	$14.89
FLR	$45.17	$37.99	18.89	$36.61
FLS	$74.38	$52.57	41.48	$59.19
GIGM	$6.43	$6.53	-1.53	$5.64
IPHS	$15.81	$9.47	66.94	$12.21
MVL	$33.24	$24.35	36.50	$27.35
NCTY	$9.24	$9.30	-0.65	$8.10
NE	$30.90	$24.39	26.69	$26.04
NRG	$21.19	$18.98	11.64	$16.35
RECN	$19.77	$14.04	40.81	$16.49
TRLG	$21.97	$10.53	108.64	$14.01
VPHM	$6.03	$4.71	28.02	$4.82
WDC	$23.71	$16.20	46.35	$20.51

GIGM to watch

May 7th 2009

GIGM looks interesting. I am currently watching it and may decide to buy it soon.

Happy trading from
Humble Trader


UPDATE

I am going to buy GIGM today with an initial stop loss at $5.64

Good news for our AFAM and TRLG

Both AFAM and TRLG posted good earning surprises.
We bought them cheap last month (AFAM at $17.41 - now around $30 - and TRLG at $10.53 - now around $20) and we are now in a very positive territory.

Updated Stop Loss

May 6th 2009

ADBE: stop loss $23.14
ADM: stop loss $23.20
AFAM: stop loss $20.83
DECK: stop loss $54.59
ENDP: stop loss $14.89
FLR: stop loss $36.61
FLS: stop loss $58.45
IPHS: stop loss $11.99
MVL: stop loss $26.77
NCTY: stop loss $8.10
NE: stop loss $25.42
NRG: stop loss $16.35
RECN: stop loss $16.02
TRLG: stop loss $12.97
VPHM: stop loss $4.71
WDC: stop loss $20.09

ADM missed the Street estimates

May 5th 2009

ADM missed the estimates. It will go down today. How much? Hard to tell.
It is a bad quarter, but the trailing twelve months performance is not bad at all.

I would suggest to keep the current stop loss at $23.20.

IPHS

On March 17th my system gave me the signal to buy IPHS.

From August 2008 to March 2009 IPHS decline from over $40 to less than $8.
During this dive it continued to make money and its PE ratio became more and more interesting.
In addition to that, from March 2nd 2009 my humble system started to tell me to watch IPHS for a possible trend inversion.

As I said, the signal arrived on March 17th and I was able to buy IPHS at $9.47. IPHS posted very good results yesterday, better than forecasts, and it gained 11%, closing over $17.

Analyzing IPHS fundamentals we see that it has an excellent value: very low PE and Price to Cash Flow, low Price Sales and average Price Book.
It still has good Current and Quick ratios, but it is using debt quite aggressively, compared to the industry average.
Finally it has first class profitability, growth and management effectiveness (best ROE in industry).

So the question is: should you buy IPHS? I would say "No". It may even go back to $40 and over, but IMHO buying IPHS now may be risky. Let's keep a stop loss on it at $11.93.

Current Portfolio

May 5th 2009

Symbol	Last Trade	Price Paid	Gain/Loss %	Stop Loss
ADBE	$26.69	$18.70	42.72	$23.08
ADM	$26.17	$25.40	3.03	$23.20
AFAM	$25.96	$17.41	49.10	$20.75
DECK	$59.10	$50.81	16.31	$54.23
ENDP	$16.56	$17.38	-4.72	$14.89
FLR	$40.77	$37.99	7.31	$35.68
FLS	$70.95	$52.57	34.96	$58.23
IPHS	$17.12	$9.47	80.78	$11.93
MVL	$31.10	$24.35	27.72	$26.83
NCTY	$9.66	$9.30	3.87	$8.10
NE	$30.21	$24.39	23.86	$25.21
NRG	$19.48	$18.98	2.63	$16.35
RECN	$20.01	$14.04	42.52	$15.78
TRLG	$17.53	$10.53	66.47	$12.79
VPHM	$5.42	$4.71	15.28	$4.71
WDC	$24.26	$16.20	49.75	$19.86

Time to buy ADM

May 4th 2009

It looks like it is time to buy ADM. It has good PE/Price Book/Price Sales/Price Cashflow.
Good financial situation. Average profitability, but good effectiveness and growth.

I would suggest to buy it and set an initial stop loss order at $23.20.

Current Portfolio

May 3rd 2009

Symbol	Last Trade	Price Paid	Gain/Loss %	Stop Loss
ADBE	$27.46	$18.70	46.79	$22.84
AFAM	$25.09	$17.41	44.11	$20.64
DECK	$56.11	$50.81	10.43	$54.23
ENDP	$16.51	$17.38	-5.00	$14.89
FLR	$37.73	$37.99	-0.68	$35.68
FLS	$69.81	$52.57	32.79	$57.82
IPHS	$15.33	$9.47	61.87	$11.80
MVL	$30.22	$24.35	24.10	$26.68
NCTY	$9.35	$9.30	0.53	$8.10
NE	$28.45	$24.39	16.64	$25.21
NRG	$18.98	$18.98	-	$16.35
RECN	$19.42	$14.04	38.31	$15.78
TRLG	$16.88	$10.53	60.30	$12.79
VPHM	$5.49	$4.71	16.56	$4.71
WDC	$23.39	$16.20	44.38	$19.86

Time to buy NRG

May 2nd 2009

I believe it is time to buy NRG. Here's why.

In its industry (Utilities : Electric Utilities) NRG is fundamentally well positioned. I like its value indicators:

• NRG is in the cheapest 20% of its industry if analyzed on PE, Price/Book and Price/Cash Flow, and it has an average Price/Sales
• It has good Current and Quick Ratios, although it has a little high Debt/Equity Ratio
• Profitability is in the best 20% of its industry, as its ROI and ROE
• Finally, EPS and Sales Growth are better than industry average

In addition to that, technical indicators show that NRG's down trend is likely to be finished.

I would suggest to buy NRG with an initial stop loss at $16.35.

Time to buy NCTY

May 1st 2009

Current price around $9.30
Initial Stop Loss: $8.10