Apple Computer Inc. set to launch something big

All eyes are on Apple as the company gets ready to make a big announcement this Wednesday. Speculation on the Net abounds with rumors of a Video iPod. Steve Jobs has debunked the idea of a Video iPod in the past, saying that such a device was impractical for the masses.

I continue to believe that Apple is more of a one hit wonder than anything else. None of the company’s other products have achieved the iconic status of the iPod. The odds are against Apple in reproducing or outperforming the success of the iPod line of portable audio players.

I wrote in this article that Apple’s stock should continue to appreciate as the company enjoys strong sales of its new iPod Nano. A confirmation of a new device, promising Apple a new entry into a new platform, should temporarily raise the price of the stock as greed takes its effect. Analysts will be riding the afterglow of the iPod’s success. I will be watching this Wednesday’s announcement to see how I should play out buying or shorting AAPL.

Skyworks Solutions Inc. and Motorola

I bought MOT, Motorola Inc. at $14.55 on April 18th, 2005 and sold the stock too soon on May 13th, 2005 at $16.08. Motorola has done a superb job at releasing new designs that are in high demand by consumers. Motorola’s stock has enjoyed a good rebound and I believe the stock will hover between $21-$25 for the next 6 months-1year. Instead of investing in Motorola, I would look at SWKS, Skyworks Solutions Inc. as an alternative. Skyworks Solutions, Inc. engages in the design, development, manufacture, and marketing of analog, mixed signal, and digital semiconductors for mobile communications applications.

Skyworks is a semiconductor company that produces a large part of the chips that power Motorola phones. The company has recently dropped its revenue guidance for its fiscal fourth quarter causing the stock to drop. I believe the sell off is overdone. I may look at purchasing SWKS in the $5-$5.50 range. I will continue to research the company a bit longer before posting my analysis and price targets.

Columbus Day Recap and Forecast

Well the market was down today following Delphi Corp.’s bankruptcy filing and concerns over weakness in the auto industry. I believe broad fears and sector uneasiness will drag down solid companies related to the auto industry. Is there anyone up for the challenge to look for a few gems?

Here’s how we did on Columbus Day:

DJ Indu 10,238.76 -53.55
Nasdaq Comp 2,078.92 -11.43
S&P 500 1,187.33 -8.57

Tomorrow’s forecast:

5 day forecast - What I’m watching out for:

I expect the market to end up this week following positive earning reports. I expect oil to gradually rise. This week my top picks are LU, Lucent Technologies Inc. and NT, Nortel Networks Corp. I am continuing to watch CAL, Continental Airlines Inc. for a buy opportunity, I like the stock at under $10.

Struggling with Sony

There’s been a lot of controversy over Sony’s notoriously tight knit corporate culture. In recent months Sony’s stock has been depressed over sluggish sales from its TV and portable electronic units. Concerns are also mounting over the uncertain future of Sony’s new high definition DVD standard named Blu-ray. The tight knit culture that Sony has fostered has been a double edged sword for the company. For example, Sony had the opportunity dominate the digital audio player market by leveraging its strong industrial design arm and the Walkman brand name. Instead the company came under pressure from its music and publishing unit over piracy. As a result, Sony opted to create its own proprietary format named Atrac3. Buyers of Sony’s digital audio players would have to re-encode digital audio files, a tiresome process, into the Atrac3 format to listen to them. Technologically Sony’s players had the capability to play file formats like MP3, AAC and WMV but the company opted not to include support for the files. It wasn’t until the third generation of Sony’s digital audio players that the company finally supported MP3 and other file formats. By then it was too late, companies such Apple established market leading products and a variety of Korean, Japanese and Chinese manufacturers began releasing digital audio players almost on a weekly basis. The digital audio player market rapidly saturated itself, margins eroded and Sony lost its window of opportunity.

While there are apparent disadvantages to Sony’s corporate culture, there are also distinct benefits. Sony is currently underway in the largest format battle since the company struggled with its Betamax technology vs. Matsushita’s VHS. Today Sony has pitted its Blu-ray technology against Toshiba’s HD-DVD technology. As with Betamax, Sony’s Blu-ray format is technologically superior to its competitor. Critics and analysts alike cite Sony’s falter with Betamax and digital audio players but have overlooked the importance of how Sony’s tightly knit culture can propel Blu-ray’s success. Unlike Betamax which was introduced as standalone technology, Sony can boost adoption of Blu-ray by using its computer entertainment and games unit. In the last decade Sony crafted one of the company’s biggest global successes to date, the Sony Playstation. Sony’s consumer electronics unit tapped its games unit and it was announced that Sony would be including a Blu-ray drive as part of every Playstation 3 sold. I looked up the adoption of DVD players in the first year they were released in 1997. According to this site DVD player sales totaled 320,000 units. In comparison, the Sony Playstation 2 sold 3 million units in North America just 2 months following its launch. That’s more than 10 times the number of DVD players sold in just the first 2 months of the Playstation 2’s release. To date the Playstation 2 has sold over 70 million unit’s world wide.

While I wrote in an earlier post about console game stocks that the impact of Microsoft’s XBOX 360 on the Playstation 3 is uncertain, it would be foolhardy to bet against the overall success of either new system. The large difference between the two is that Microsoft’s XBOX 360 will not include support for either HD-DVD or Blu-ray, opting to support the older DVD standard, while Sony’s Playstation 3 will support Blu-ray. Sony has taken a lesson out of Microsoft’s playbook. Microsoft enjoyed rapid adoption of it’s Internet Explorer software by bundling the browser with its Operating System platform. By bundling Sony’s Blu-ray with its game system platform Blu-ray’s adoption is almost assured.

Content providers will follow which ever format enjoys a larger installed user base. Analysts are ignoring the fact that the Playstation 3 will give Blu-ray a several million installed global user base in under the first year of sales of the system.

Sony future growth is highly dependant on Blu-ray’s success. Blu-ray gives Sony an avenue to charge for royalties from media manufacturers, content providers and hardware manufacturers. It will also herald adoption of new display technologies from its TV unit and allow its movie unit to leverage its library of titles in high definition.

Sony’s current stock price is $33.05. The stock is trading near its one year low. I expect that once the XBOX 360 launches in November and initial sales figures are released, Sony’s stock price will drop as analyst and investor attention turns to Microsoft’s game division. I am looking to purchase SNE at under $30 within 3-6 months.

I predict that if sales are strong for the Playstation 3 and Blu-ray discs are released in advance of HD-DVD, SNE will top $50 by middle of 2007.

SNE is part of a larger long term investment strategy that I will discuss in future posts.

My complete gold watchlist

Here’s the list of gold companies that I watch.

GG, Goldcorp Inc.
IAG, IAMGOLD Corp.
BGO, Bema Gold Corp.
NEM, Newmont Mining Corp.
ABX, Barrick Gold Corp.
PDG, Placer Dome Inc.
AUY, YAMANA GOLD INC

Gold is currently trading at $474.

Here are the stocks I am looking to short, including their target prices, if gold breaks 500 for a period of 3-6 months.

GG - Short at 25
IAG - Short at 11
BGO - Short at 6

I expect the ride to 500 not to be a completely smooth one. I believe there will be several fluctuations in the price of gold between 450-490 before it hits 500.

My anticipated timeframe for gold to break 500 is 6months-1year from now.

*Note: I’ve bought and sold shares of BGO twice. I like BGO at under $2.

Lunchtime request line is open

E-mail me your stock picks while you have lunch and I will report back with an analysis if I know anything about them. Thanks for all the e-mails. I’ll try to get to all the stocks I know about by this weekend.

Hard Disk Companies and Windows Vista

Hard Disk manufacturers have lost their luster over the last few years. This is largely due to the lack of software applications to take advantage of the increased size and speed of new hard disk drives. The most consumers centric, storage intensive application on the computer is recording digital video which consumers have failed to adopt. No near term catalyst, something like a video iPod, is available to drive the distribution of video files among the masses. Broadband speeds are also not quite ready to handle video distribution. While computer enthusiasts will continue to upgrade, I believe the majority of consumers simply do not require a drive larger than 200GB. With 200GB drives hitting retail channels at under $50, margins for manufacturers have been sharply reduced. The evident price drops lead to speculation that hard disks have lagged behind CPU, memory and video card upgrades in computers.

The price of stocks for hard disk manufacturers has reflected the lack of interest by consumers in upgrading. The traditional big three, STX, Seagate Technology , WDC, Western Digital Corp., and MXO, Maxtor Corp., have all fallen well below their one year highs. The drop seems to be spread among all the hard disk manufacturers rather than focused on a single company.

Without storage centric applications, I see one other reason for consumers to upgrade. If Microsoft releases a bloated operating system that causes computers to slow down, necessitating an upgrade for users to enjoy their experience, consumers will upgrade. This is exactly what Microsoft is doing. If you haven’t seen the absolute minimum specifications for the new Windows Vista operating system, here they are:

1.4 GHz processor
256 MB memory
64 MB videocard
7200 RPM HD 2 MB cache

As many of you know, the minimum requirements would equate to long loading times and sluggish performance. Microsoft has never written code to run faster on older hardware with each new operating system release. In the long history of the company its never happened. Microsoft is aiming at 5-10 second boot times and a customizable partially 3D environment for end users. Windows Vista is slated to be released by the middle of 2006.

Savvy investors should keep hard disk manufacturers on the radar as Windows Vista approaches. Hard Disk manufacturers are in the process of releasing products utilizing faster than 7200 RPM speeds and debuting new cache technologies. Vista is technologically and resource wise a bigger upgrade than Windows 2000 to Windows XP. My top pick among the storage companies is STX. STX has gained a solid reputation among enthusiasts for providing acoustically quiet drives coupled with reputable quality, as a result STX has enjoyed growing market share. STX will announce its earnings on October 18th. I will be watching the results to see if a buying opportunity exists.

Purchasing W Holding Co. Inc.

Today I purchased 1000 shares of WHI, W Holding Co. Inc. at $8.98. W Holding Company, Inc. operates as the holding company for Westernbank Puerto Rico (bank). The bank offers a range of business and consumer financial services, including banking, trust, and brokerage services.

I set a buy target some time ago to purchase WHI at under 9. It seems to me that the stocks of a large number of Puerto Rican banks have dropped in price as a result of alleged improper accounting by three of the countries top financial institutions. In reaction to the accounting scandals, unrelated stocks such as WHI have dropped as the shockwave of negative publicity reached the investment and banking community.

In a recent Forbes article, W Holding Co. Inc. is mentioned as part of a group of under $10 stocks that are comprised of profitable companies that have posted five-year sales growth of more than 5% a year.

Westernbank also shares some similarity to Commerce Bank another stock I purchased earlier today. Westernbank branches stay open till 7pm and keeps convenient hours on weekends.

This Motley Fool article mirrors my thoughts on W Holding Co. Inc.

I definitely look at the price drop of WHI as a speculative short term buy opportunity. This looks like another example of greed and speculation influencing a solid company.

Symbol: W Holding Co. Inc.

Intelligent Investor Strength: 7
Chart Strength: 7
Speculation and Greed Strength: 9

RawGreed Strength Rating: 8

Target Buy Price: under $9
Target Sell price: $11 within 1-3 months, $13-14 within 6 months-1 year.

Commerce Bancorp Inc. and McDonald’s, an unlikely combination that works

Unsurprising to many, the founder of Commerce Bancorp Inc. used to be a developer of McDonald’s restaurant sites and an owner of Burger King franchises. He adopted a franchise philosophy with Commerce Bancorp, stressing customer service and convenience as the retail banks top priorities. Commerce Bank is the nations fastest growing bank and for good reason. Walk into the bank and you are immediately greeted by a host with a bucket of candy ready to direct you to the department you need. The bank is decorated with Plasma TV’s, has no formal lines or tellers behind a plexiglass barrier. Commerce bank is open seven days a week and at late hours. The company has picked excellent high traffic locations. I believe that Commerce Bancorp will ultimately become the WalMart of retail banking chains. Commerce has enjoyed sustained growth in the last year and as long as they can continue to open new branches, in areas well served by their franchise philosophy, the stock should resume its upward momentum.

Purchasing Commerce Bancorp Inc.

Today I purchased 1000 shares of CBH, Commerce Bancorp Inc. at $28.87. Commerce Bancorp, Inc. operates as a multibank holding company that provides retail and commercial banking services, as well as corporate trust services for consumers, and small and midsized companies in the United States.

I believe Commerce Bancorp, WM, Washington Mutual Inc. and WB, Wachovia form a group of banks that have revolutionized the retail banking experience. Commerce bank operates in the Northeast of the U.S. and is opening a large number of new branches. I believe greed and speculation has lead traders to short the stock over concerns of lower than expected 3rd quarter earnings and a downgrade made by Oppenheimer. The price of the stock has fallen quite dramtically and is trading close to its one year low. I have a bullish view on Commerce Bancorp and believe the current quarter earnings are not indicative of the long term profitability of the company.

Symbol: CBH, Commerce Bancorp Inc.
Intelligent Investor Strength: 7
Chart Strength: 8
Speculation and Greed Strength: 8

RawGreed Strength Rating: 7.75

Target Buy Price: under $29
Target Sell price: $32 within 3 - 6months, $35 within 6 months - 1 year.

Gold, here we go

Gold to 500?

Gold futures top $475, trade at 2-week high

Here’s a quote from the article: “Gold is still on track for $500 or higher, silver is looking like $8 is its next target, and copper remains the most beautiful market on earth where the road to $2 should be smooth and hazard-free,” said Dale Doelling, chief market technician at Trends In Commodities.

ATYT Runup

Look at ATYT jumping up today. The company released its 4th quarter earnings today. ATI’s revenue was down to $470M, $60M lower that its 3rd quarter revenue. Analysts had estimated the company would lose 30c a share for the current quarter. Instead the company lost 41c a share, from a profit of 24c a year earlier.

Retail products are still unavailable and the company posted disappointing 4th quarter results, yet the stock is jumping. Day traders have certainly caught onto this stock today. Looks like someone knows something none of us do.

A quick note to readers

I update my portfolio value only when I sell something.

Selling ATYT

I bought 1000 shares of ATYT at $13.11 on June 20th, 2005. I bought another 1000 shares of ATYT at $11.48 on June 23rd, 2005. My average purchase price for ATYT was $12.29. Today I sold 2000 shares of ATYT at $13.40.

My profit was $2208.88 or 8.98%.

The stock has dropped over fears of ATI launching unavailable products with its Crossfire line of motherboard chipsets and X1800 line of graphics cards. I believe short term fears over ATI’s products reaching retail channels are warranted. Online reviews of the company’s most important product line, the X1800 graphics cards, have been favorable. Performance of the X1800 has been comparable or has surpassed in many instances, ATI’s main competitor, Nvidia’s 7800 line of cards. I expect ATYT to drop to low 12’s before products reach retail channels.

A volatile day

Today we experienced some volatility in the markets. Speculative traders have come out in full force even with news of oil reaching a two month low. Tomorrow I expect the market to start off with a temporary rise as bargain hunters come out shopping before ultimately dropping again. I see no news or catalyst to cause the markets to rise. CAL has almost met my target buy price of under $10. The stock traded as low as $10.06 before ending the day at $10.50. I placed an order to purchase $1000 shares at $10. Tomorrow I will also place the same order to buy 1000 shares of CAL at $10.

Speculation is definitely up. I would advise investors to exit speculative short term positions if they have made a profit.

I won’t get in the habit of doing this on a daily basis, but for today I thought I would post up a market recap with a reminder of what I’m watching for the remainder of the week.

Today:

DJ Indu 10,317.36 -123.75
Nasdaq Comp 2,103.02 -36.34
S&P 500 1,196.39 -18.08

Tomorrow’s forecast:

5 day forecast - What I’m watching out for:

Unchanged. Oil to rise, airlines to go down. Buy CAL under $10. Buy JBLU at low $16. Buy ATYT at low $12.

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