Random Walk and Un-Random Talk!!!

Before we get to the exciting part of portfolio holdings as of today, let’s talk about couple of not so mundane stuff.

People are bothered, puzzled, surprised and whatnot (is it even a real word?) about the market. Every now and then I am being asked – Why is the market going up? In fact the more ubiquitous question is – Why did the famous (or shall I say the infamous) sequestration  and the forth coming budget talks not stall the markets?


My dear fellow investors, I know there has been lot of noise about the unemployment and the sluggish growth  but everyone is forgetting that the housing industry, the pillar that has historically pulled US out of recession, has turned the corner. It has finally started contributing to the economy. There are cities in US like San Francisco, Phoenix and believe it or not – Austin – where the houses are selling faster than the pancakes at IHOP and they are getting pricier (FYI – I meant houses).

Moreover the stock market is a leading indicator of economy’s health in future (4 to 6 months down the line). I guess currently Mr. Market is discounting the shenanigans and gobbledygook of Mr. Washington.

Anyways, I enjoyed the ride and hopefully you did too. Apart from the employment data, there is no significant data coming up in next few weeks that will derail this rally.

Note of caution – Currently the PE(ttm) of $SPX stands at 17.5. Last year it was 15.5 and historical mean value has been 15.5. This doesnt really bar $SPX from reaching 20 but around this number, we have seen strong pullbacks in the past.


Switching topic.

Over the weekend I read that Mr. Buffett was unhappy with the Berkshire’s returns. Now talk about ‘Subpar’ performance. YTD out of outstanding 27000 mutual funds only 1000 mutual funds have been able the beat the Dow Jones. This would even surprise the Dad of the baby posted earlier.


But this was not the most interesting thing that I read in the Journal. What really caught my eyes was an article by Jason Zweig – Have Investors Finally Cracked the Stock Picking Code?

Come on Intelligent Investor!!! Is it as simple as Kramer cracking George Costanza’s secret code? (Damn! Posting youtube video used to be free.)

Don’t the numbers speak for itself – 979/26500. Do you really think that using GROSS MARGIN to evaluate a company in addition to the Net Income will make every trader a crystal ball reader like the pretty lady below? I will leave it up to you, the Intelligent Investors, to decide.


I will talk about my portfolio and it’s YTD performance tomorrow. Till then happy trading! Adios. And don’t forget to get my stock tweets @sumeetvats


STX breaks down, WDC trying to follow the suit.

Welcome to Quarter 2!

It seems last night “someone” got some news. So today morning “someone” decided to let go of boat load of STX.

In such cases where stock not only craters through a consolidated pattern but also breaches the 50 DMA on high volume, we need to do following –

  • Is the action happening on high volume?
  • Wait till next day’s action to see if buyers step in or is this a sign of bulls handing over the baton to bears.
  • Is this a high flier with multiples in higher end of industry spectrum or 5 year PE range of the stock? If yes then trim your position because in general this is precursor to more decline and change in the trend. In our case STX is trading at lower end of 5 year PE range. Also STX is still cheap in comparison to it’s peers.
  • Is there a catalyst – news – that changes the fundamental or long/short term outlook of the company? Such as company trimming it’s forecasted earnings or union strike at manufacturing facility or lowering of profit margin. See this. – THis is it. We are looking at decline of margins. This is somethings that I had mentioned towards the end of my article – Devil’s Advocate.
  • Is there a nearby support? Yes STX has support at $24.5.

Remember one last thing – Market runs by sentiments and you are merely trying to benefit out of this crowd mania. 

Finally, small loss today might trun into big loss tomorrow. So be alert.

 Below you see a 15 min chart of WDC where it does the same thing as STX.

Returns 2012,Q1

It’s time for numbers. We are going to look at 2012 Quarter 1 Performance. Following are the some standard model portfolios from here, that are generally used as benchmark.

I have three stock accounts, two of them are leveraged –

Interactive Brokers – In this account I own High growth stocks.

Stocks that I own here are – FFIV, AAPL, PCLN, SCSS, SXCI, CLR, RHT and URI.

TD AMeritrade – I own mid term to long term stocks such as STX, HLF, WDC, ALLT, WLL and GNC in this account. Intial idea was to have this as long term only account but cash crunch in the other account (IB) forced me to use this expensive account. I also own some funds such as YACKX, GHAAX, PRPFX and HSCSX. I think if the fees and interest of this account were same as IB (above), the performance would have been a tad better. This is also a leveraged account.

Lastly, let’s look at Fidelity – I own long term stocks here such as F, QCOM and APA. I own some funds as well such as FSCRX and FAGIX in this account. I might add some more APA once it crosses 105$. This will do better once Ford and APA start moving in right direction.

Overall all the above mentioned accounts have in combination generated returns of 27-30% in first quarter. It seems that I have done pretty well and I hope to continue such performance in future.

Top 10% stocks of 2012 Q1

The following stocks have been filtered on basis of following Criteria –

  1. Last three month returns in top 10%.
  2. Price Above 50 DMA.
  3. Prica Above 200 DMA
  4. 20 Day Average Volume > 150000
  5. Earnings Latest Quarter > 0
  6. Price > 10
  7. Price is within 20% of 52 Week High.
  8. Market Cap > 200 Million

The one’s flagged are currently part of my portfolio. Stocks that are highlighted in green were part of my portfolio in last three months. And the stocks highlighted in blue are the ones that I am eyeing. Most of these “featured” companies have outstanding earnings/revenue growth  such as LULU, TPX, INFA, EMC, AAPL, etc. Some of these companies might continue to rally for next 6-12 months depending on market.