Purchasing Intel Corporation

Today I purchased 1000 shares of INTC, Intel Corporation, at $21.35. Intel has dropped over a weak 4th quarter earnings report and increased competition from AMD, Advanced Micro Devices, Inc. I expect that things will remain bearish for Intel as the company struggles to introduce its next generation of Motherboard chipsets and CPU products. Intel introduced a weak line of multicore processors and the company itself admitted that it was a rush job. I see the recent drop in INTC share price as a purchasing opportunity. Microsoft is set to introduce Windows Vista sometime in 2006. With the introduction of Microsoft’s new OS, Intel and AMD should see an increase in demand for new CPU’s. Windows Vista posses the most stringent and difficult hardware requirements of any new OS upgrade that Microsoft has released. The trend is also moving toward dual core processing on the desktop, so while Intel faltered on its first generation of dual core processors, I don’t expect the company to make the same mistake again.

I would like to purchase a total of 3000 shares in Intel. If shares of INTC drop below $20 I will purchase another 1000 shares. If shares of INTC drop below $19 I will purchase another 1000 shares, bringing my total to 3000 shares. The battle between INTC and AMD reminds me of the GPU battle between NVDA, NVIDIA Corporation and ATYT, ATI Technologies, Inc. At some point the share price for both companies rose on demand for new GPU’s from a new cycle of game releases and graphics features found in new games. I expect the same thing to occur with INTC and AMD. I expect a new demand cycle to begin during the release of Microsoft’s Windows Vista. I see INTC reaching $24.00 in 3-6 months and $26.00 in 6-12 months.

Stock Blogs

I’ve learned a great deal from reading the various stock blogs linked on RawGreed.com. If you haven’t been there already, please check out Seeking Alpha for a comprehensive list of stock and financial blogs. Among my favorite blog reads are Controlled Greed, Technicator, The Bull Trader, and Trading Diary.

Raw Greed’s model

The Internet is a powerful thing. By using the web, I am able to aggregate the type of information that was once only available to sophisticated investors, researchers and financial firms. I’ve spent some time studying and putting together a financial model for selecting my stock picks. I intend to use this new model, dubbed Raw Greed’s Model, in my IRA trading account that currently has approximately $16,000 in it. I will increase my investment in the IRA by the maximum allowable contribution, $4,000 in 2006 and 2007, and then $5,000 for 2008-2011. During the next 6 years it will be interesting to compare the performance of the stock pick’s produced from the model versus the performance of my general individual stock picking. I intend to debut the model and stock picks in a separate portfolio in March, 2006. The groundwork for the Raw Greed model is based on Joel Greenblatt’s formula in The Little Book That Beats The Market, which is an excellent book I recently read. The Raw Greed Model uses my own screening criteria to select individual stocks from the list of top stocks that the formula produces. I have set a lofty goal of a 30% return per year using Raw Greed’s model. With compounding and factoring in the maximum allowable contribution to my IRA, that would turn the $16,000 in my IRA account into $134,440.06 by the end of 2011.

Watching Maidenform Brands, Inc.

I’ve added MFB, Maidenform Brands, Inc. to my watchlist. The company engages in the design, source, and marketing of a range of intimate apparel products in the United States and internationally. Maidenform was aquired by Ares Corporate Opportunities Fund, L.P. in May of 2004. The company had on its IPO on July 22nd, 2005 and opened at $20.50. Shares of MFB are listed on the NYSE. I can’t find any strong reason for the rapid decline in stock price for Maidenform. Shares of MFB are currently trading at $11.50. That is a drop of 43.9% compared to its July 22nd, 2005, opening price of $20.50.

The company announced that it narrowed its 2005 sales guidance to $385 to $390 million from $382 to $392 million. The company’s 3rd Quarter, 2005 results were slightly below analysts expectations. According to this press release, “Intimate apparel maker Maidenform Brands Inc. said Thursday its third-quarter profit fell 13 percent”. After looking at the full 3rd quarter, 2005, earnings annoucement you can see that net sales were actually up for the quarter and YTD comparisons.

Here are a pair of quotes taken from the earnings annoucement.

Net sales in the third quarter of 2005 were $100.1 million, up 11.2% from $90.0 million in the third quarter of 2004.

On a year-to-date basis, net sales increased 15.3% to $302.6 million in fiscal 2005, up from $262.5 million in fiscal 2004.

I believe there is not enough bad news to warrant a drop of 43.9% compared to the stocks IPO opening price on July 22nd, 2005. The market appears to have overreacted and investors are eager to sell at the moment. I like MFB at under $11 to low $11’s. I may purchase 1000 shares of MFB if the stock trades in that price range.

Bema Gold Corporation update

BGO, Bema Gold Corporation is currently trading at $3.93. I purchased 2000 shares of BGO at $2.80 on December 13th, 2005. Gold was trading at $522 on December 13th, 2005. BGO has passed my target sell price of $3.25-$3.50. I will likely sell my shares of BGO in the next month if the stock trades between $4.00-$4.25. I believe there is a strong chance that BGO will pass $4 in the next month. There is strong speculation behind gold at the moment. Gold is currently trading at $563.

Raw Greed poll

Please remember to vote on the Raw Greed poll. Once the poll reaches 200 votes I will change the poll question. So far “Scottrade” is the leading answer when readers are asked “Which Brokerage do you use?”

Watching Chartered Semiconductor Manufacturing, Ltd.

I have added CHRT, Chartered Semiconductor Manufacturing, Ltd. to my watchlist. The company is an independent semiconductor foundry, provides wafer fabrication services and technologies to semiconductor suppliers and systems companies primarily in North America, Europe, and Asia. The company recently reported a profitable 4th quarter, 2005.

Here is a quote taken from this AP press release:

Chartered Semiconductor Manufacturing Ltd. said on Thursday it swung to a fourth quarter profit, driven by record revenue, which increased 93 percent over last year.

The independent semiconductor foundry said income for the quarter was $26.5 million, or a penny per share, reversing a loss of $26.8 million, or a penny per share, last year. Revenue for the quarter was $367.2 million, up from $190.6 million last year.

Chartered Semiconductor is a Singapore based semiconductor fabricator. You can track the stock in Singapore by following CSMF.SI

Chartered Semiconductor’s 4th quarter results shows the growing global demand for semiconductor fabricators. It will be important for investors to watch 1st quarter, 2006, performance. Traditionally 1st quarter results for semiconductor fabricators has been slow. If TSM, UMC and CHRT all manage to post better than expected results, I expect all three stocks to move more than 30% upward from current prices during the remainder of 2006.

Chinese New Year

It is currently Chinese New Year and I am still traveling in Hong Kong. The Hong Kong and Taiwan market will re-open on February 1st, 2006. The Chinese New Year holiday lasts for a period of 10 days and many people have a complete leave of work during that time. During the holiday I expect the positive sentiment surrounding TSM, Taiwan Semiconductor Manufacturing Company Limited to continue uninterrupted so long as the US market continues to rally. There will be little reason for the stock, 2330.tw, to suddenly drop when the market re-opens in Taiwan. I expect UMC, United Microelectronics Corporation to also ride along with TSM and the positive outlook for semiconductor fabricators.

Watching Caterpillar, Inc.

I am currently watching CAT, Caterpillar, Inc., as an alternative investment to gold mining companies. With gold’s recent rise I am looking at ways to invest in the gold rush without having direct exposure to the metal. Caterpillar, Inc. manufactures construction and mining equipment; diesel and natural gas engines; and industrial gas turbines. It operates its business in Machinery, Engines, and Financial Products lines. As mining companies rush to expand operations they turn to companies like Caterpillar to purchase their equipment. I believe 2006 will be a great year for CAT, if gold mining companies continue to expand and a gold rally persists through the remainder of the year.

CAT reminds me of companies like CSCO, Cisco Systems, Inc. or NT, Nortel Networks Corporation that were the providers of infrastructure products during the .com bull run. Undoubtedly, if analysts speculate about the gold rush continuing, CAT valuations will also jump up with the expectation that companies will never end their increased spending on mining equipment. CAT is currently trading above $66, I see CAT potentially passing $90. I would consider investing in CAT at under $50. The last time CAT traded at under $50 was in late October, 2005. The risk for CAT comes from a steady drop in gold, energy or property prices, a drop in any of them would negatively impact sales for CAT.

Raw Greed morning update

Good morning, lets get started. The great thing about investing in Asian ADR’s like TSM, Taiwan Semiconductor Manufacturing Company Limited and UMC, United Microelectronics Corporation is that you can semi-predict how the stocks will perform the next day by tracking how the stocks perform in their own market. You can see TSM’s performance by tracking 2330.tw and UMC by tracking 2303.tw. TSM was up in pre-market trading and I expect the stock to continue posting strong gains. I believe investors are digesting the recent earnings report by TSM and only starting to jump on the bandwagon. If you believe in a Taiwan semiconductor rally, TSM and UMC are two of the best stocks to invest in. If you browse my archives, I’ve written extensively about the reasons behind a rally for TSM and UMC.

In early January, when the market started a strong rally, I wrote about my strategy of selling WHI, NT, and LU in order to purchase additional shares of UMC. If the market continues to rally I may still decide to sell NT and LU. Cash is not a bad place to be at the moment. Here is what I am predicting will happen in the next 1-3 months. I believe the price of crude oil will rise and consequently I am looking to short shares of AMR and CAL to low teens. I anticipate F, Ford Motor Company to trade below $8 again and I will consider purchasing shares of the company if it happens. I am also watching NAVR, Navarre Corporation, a company engaged in the publishing and distribution business for video game and television content. I’ve written briefly about NAVR in considering various investments in the video game industry. I prefer to invest in the distribution end of the video game spectrum instead of the development end. I would like to pick up shares of NAVR under $5 or at low $5’s. I see NAVR at $6-$6.50 a few months post launch of the Sony Playstation 3 console. Finally I am also considering investments in silver mining companies and I will post a few stocks that I am currently tracking.

Raw Greed morning update

Good morning, lets get started. Today I will look at increasing my position in UMC, United Microelectronics Corporation. I read an interesting article on MarketWatch discussing the possibility that foreign markets will continue to outperform the U.S. market.

Here is a quote from the article:

Taiwanese valuations are attractive, as the market trades at one of the lowest earnings multiples ever, and offers a 4% dividend yield. Taiwan’s valuations imply the market, as a whole, has gone ex-growth. Yet earnings growth will surprise on the upside this year. A recommended stock — and a play to the potential return of capital spending in the corporate sector — is United Microelectronics.

Overall I believe Taiwan’s market has been held back mostly due to the political instability of the country. Scandals over local elections and a tense situation with China have prevented Taiwan’s stock market from rallying with the rest of Asia. In particular I believe Taiwan should follow in the footsteps of Korea, a market that I believe is overheated. Taiwan shares many of the same technological strengths as Korea in semiconductor and display technologies, two key categories driving strong growth in the technology sector in Korea. In the case of UMC, it’s hard to argue against the near 100% utilization rate for the company. I expect to see UMC jump up in 2006, driven by strong utilization, growing revenues from a shift to 90nm and 80nm processes and strong growth from the broad market in Taiwan. I will try and purchase another 5000 shares of UMC at under $3.10 today.

Watching Yahoo! Inc.

I believe shares of YHOO, Yahoo! Inc. have fallen a little too agressively over fears of a possible weak 4th quarter, 2005, earnings report from GOOG, Google, Inc. YHOO has fallen almost $10, from a high of around $43, to its current price around $33. YHOO is a former stock pick in my predictions page. I believe the sell off in Yahoo was overdone. I plan to purchase 1000 shares of YHOO if the stock trades below $33.

A few shorts

I am in the process of looking at a few shorts. The first is TRLG True Religion Apparel, Inc., makers of upscale denim jeans. I don’t believe expensive denim jeans is a sustainable business. I do believe that consumer consumption habits have changed and people are more willing to pay for premium denim jeans. My worry is that jean companies go in and out of fashion rather quickly. Once a trend fades the only thing left remaining for a company to do in order to maintain sales is to reduce the price of the jeans until the brand losses its appeal and goes into obscurity. There is a chance that True Religion can diversify well enough to build a lasting brand like Levis, but the chances are against them. The niche that True Religion serves, the jetset wealthy crowd, is highly sensitive to trend changes. There are a large number of readers who, like myself, can name several upscale jean companies that were popular 5-10 years ago that no longer exist. Once True Religion jeans become too popular, the few people who can afford the price of the jeans will simply move onto another brand. I don’t expect that this will happen overnight, but I am guessing in about a 12-18 month timeframe.

The next two shorts I am looking at are CAL, Continental Airlines, Inc. and AMR, AMR Corporation. I believe the price of oil will continue to rise, causing pricing pressure on both airline carriers. CAL and AMR have risen quite aggressively over the past few months. I believe CAL and AMR are due for a 10-20% drop in price if crude oil can maintain or rise above its current price, around $68 a barrel.

Raw Greed update

I expect shares of TSM, Taiwan Semiconductor Manufacturing Company Limited to rebound following the company’s 4th quarter 2005 earnings report, set to be released on January 26th, 2006. I expect UMC, United Microelectronics Corporation to follow in suit with TSM. I believe the recent drop in share price for TSM and UMC, is a result of the disappointing earnings INTC, Intel Corporation, posted for its 4th quarter of 2005. Analysts have interpreted Intel’s disappointing results as an indication of weakness in the semiconductor industry. While Intel is the 900lb gorilla of the semiconductor industry, I believe the drop in revenue for Intel is more a result of AMD taking away market share from Intel than a sign of weakness in the semiconductor industry. There is no clearer indication of strong near term revenues for TSM and UMC than the utilization percentage for both companies fabrication plants. Both TSM and UMC are approaching 100% utilization rates.

In retrospect, I should have sold my position in NT, Nortel Networks Corporation and LU, Lucent Technologies, Inc. when I saw indications of an overheated market.

I believe BGO, Bema Gold Corporation should hit $4 if gold can break $570 by the end of the month. BGO reached as high as $3.85 on January 17th, 2006, when gold was trading around $560. Gold is currently trading at $553.60.

I am currently still in Asia and I expect to return in about 2 weeks. I will resume daily updates on Raw Greed at that time. I will continue to update Raw Greed remotely while I am travelling.

Taiwan Semiconductor Manufacturing Company Limited update

TSM, Taiwan Semiconductor Manufacturing Company Limited has met my target price of $11. Earnings are set to be announced on January 26th, 2006. The EPS estimate is 0.19. I expect earnings to surpass analysts expectations. We might see TSM break $12 by the end of January. UMC should gain on the heels of TSM.