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Thursday, 27 January 2005
"Trading Transparency" COO

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any investment decisions based on information on this website.

As is my strategy, I reached a sell point on Cooper (COO) in my "Current Trading Portfolio". Only owning 60 shares of COO, I sold 15 shares a few moments ago at $76.88/share. I purchased these shares at a cost basis of $26.98/share on 2/20/03, and thus had a gain of $49.90/share or 185% on these shares.

This is my fifth sale of COO shares, and I was aiming for the 180% gain level. I sold 50 shares on 6/2/03 at $35.46, 50 shares on 9/4/03 at $41.90, 25 shares on 12/31/03 at $46.92, and 15 shares on 7/7/04 at $60.13.

My next targeted "gain" will be 60% higher (from cost) at a 240% gain....but am down to only 45 shares.

Since I have now sold a portion of a position at a gain....you know what THAT means :)....I am now able to add a new position back into the portfolio. I shall be on the lookout!

Thanks so much for stopping by! If you have any questions or comments, please feel free to email me at bobsadviceforstocks@lycos.com or leave your message right here.

Bob


Posted by bobsadviceforstocks at 11:28 AM CST | Post Comment | Permalink
Wednesday, 26 January 2005
A Reader Writes "Have you taken a look at CAT?"

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so always consult with your professional investment advisors prior to making any investment decisions based on information on this website!

One of my "Xanga" friends, 'rise' wrote a comment/question the other day and I would like to use this opportunity to answer his comments.

Rise wrote: "Bob, have you taken a look at CAT? They've had a great year and 2005 looks to be a good year for them too. Looks like a strong stock to me."

Well, first of all, I cannot predict the future! (Well that is sort of obvious) so I cannot tell you whether CAT will go up or down in price or be a good investment for you! That is up to your professional investment advisors. But let me see if it fits into the type of stock I like to review here on Stock Picks Bob's Advice.

First of all, Caterpillar, Inc. (CAT) closed at $91.12 today, up $.62 or 0.69% on the day. According to the Yahoo "Profile", CAT "...operates in three principal lines of business. The Machinery segment designs, manufactures and markets construction, mining, agricultural and forestry machinery. The Engines segment designs, manufactures and markets engines for Caterpillar machinery and electric power generation systems; on-highway vehicles and locomotives; marine, petroleum, construction, industrial, agricultural and other applications, and related parts. The Financial Products segment consists primarily of Caterpilllar Financial Services Corporation, which provides financing alternatives for Caterpillar machinery; and engines...."

How about the latest quarter? Well, they ARE going to be reporting TOMORROW, so I will go to the latest one before that, which was the 3rd quarter 2004 results which was posted in October, 2004.

For the quarter ended September 30, 2004, sales and revenues were $7.65 billion, up 38% from the $5.55 billion the prior year. "Profit" came in at $498 million or $1.41 per share, up 124% from the $222 million or $.62/share the prior year. This was a GREAT result!

How about "longer-term"? Looking at a Morningstar.com "5-Yr Restated" financials, we can see that revenue growth was fairly stagnant between 1999 and 2002, rising from $19.7 billion to $20.2 billion during that period. However, revenue growth did grow quickly since then with $28.1 billion reported in the trailing twelve months (TTM).

How about earnings? These also have been flat with $2.63 reported in 1999, increasing to $3.13 by 2003, and then growing quickly to $5.17/share in the trailing twelve months.

In addition, the company has been increasing its dividend every single year (!) from $1.25/share in 1999 to $1.52/share in the trailing twelve months.

Free cash flow, while erratic, has been positive, increasing from $19 million in 2001 to $593 million in 2002, but then decreasing slowly over the next two years to $216 million in the TTM.

The balance sheet is solid with $19.6 billion of cash and other current assets, balanced against $18.8 billion in current liabilities and $19.5 billion in long-term liabilities.

How about "valuation"? If we look at "Key Statistics" on CAT from Yahoo.com, we can see that this is a very LARGE cap stock with a market cap of $31.09 billion. The trailing p/e is reasonable at 17.05, and the forward p/e is also even nicer (fye 31-Dec-05) at 12.59. Thus, there is a PEG of 1.39 and a Price/Sales ratio of only 1.10. These parameters appear reasonable to me!

Yahoo reports 341.2 million shares outstanding with 341.2 milion of them that float. Of these 5.12 million shares are out short representing 1.50% of the float or 2.336 trading days of volume.

CAT does pay a dividend with a yield of 1.81%. The last stock split was a 2:1 split in July, 1997.

How about "technicals"? If we look at a Caterpillar "Point & Figure" Chart from Stockcharts.com:


We can see a very strong graph from late in 2002 when the stock was trading around $41/share, to now, with one small exception, the appreciation in stock price was steady and uninterrupted. The chart looks nice to me!

So what do I think? Well 'rise', I agree with you for the most part. The latest quarter was GREAT, the Morningstar.com, however, does not show that steady growth but rather more of a cyclical growth the last month! Valuation is reasonable, the stock pays an increasing dividend, free cash and balance sheet are solid.

This particular stock does look nice to me. However, I would rather see a bit more consistent growth, and I prefer a little smaller stock to invest in....maybe that is just me, but it always seems like a fast-growing small cap stock will appreciate for a much longer period of time, than will this cyclical, large cap stock CAT.

Thanks again for stopping by. If you have any questions or commeents, please feel free to email me at bobsadviceforstocks@lycos.com .

Bob


Posted by bobsadviceforstocks at 10:46 PM CST | Post Comment | Permalink
January 26, 2005 SS&C Technologies (SSNC)

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any decisions based on information on this website.

I took a look at the list of top % gainers on the NASDAQ today and came across SS&C Technologies (SSNC). I do not own any shares of this stock nor any option positions. SSNC had a nice day today, closing at $21.65, up $1.98 or 10.07% on the day.

According to the Yahoo "Profile", SSNC "...provides software, business process outsourcing services and application service provider solutions to the financial services industry primarily in the United States."

Taking a look at the latest quarter financial results, SSNC reported 4th quarter 2004 results yesterday, January 25, 2005, after the close, and thus, today's price rise! Revenues for the quarter ended December 31, 2004, came in at $27.1 million, up 51% over the $17.9 million the fourth quarter in 2003. Net income was $6.0 million, or $.25/diluted share, up 62% over the same quarter the prior year. These were really strong results!

At the same time, the company announced guidance for the next quarter for revenue of between $26 and $27.5 million, and earnings per share of $.21 to $.24. For the 2005 year, they estimated revenue of between $110 and $116 million. With the current quarter just completed, revenue for 2004 was $95.9 million. Clearly the "street" liked the announcement, and the stock moved higher in response.

How about longer-term results? Taking a look at the "5-Yr Restated" financials on Morningstar.com, we can actually see that revenue actually dipped from $65.7 million to a low of $56.4 million between 1999 and 2001. Since then, revenue has steadily climbed, with $95.9 million just reported for 2004.

Earnings have actually improved each and every year from 1999 when $(.54)/share loss was reported to the $.84 just reported for 2004. In addition, we can see from Morningstar, that SSNC initiated dividednds in 2003 and dividends ammounted to $.14/share in the trailing twelve months.

Looking at free cash flow, this is also encouraging, with not only positive free cash flow but increasing free cash flow from $6 million in 2001, increasing steadily to $26 million in the trailing twelve months.

How about the balance sheet as reported on Morningstar? This actually looks very nice with $121.3 million in cash, enough to pay off the $27.0 million in current liabilities more than four times over without even touching the $16.3 million in other current assets. NO long-term liabilities are reported on Morningstar.com.

How about valuation questions? For that I like to turn to "Key Statistics" on Yahoo on SSNC. Here we can see that this is a mid-cap stock with a market capitalization of $499.51 million. The trailing p/e is reasonable (imho) at 25.59, and the forward p/e (fye 31-Dec-05) is only 23.28. No PEG is reported and the Price/sales is a bit rich at 5.23.

Yahoo reports 23.07 million shares outstanding with only 14.60 million of these that float. Of the floating shares, 290,000 are out short as of 12/8/04 representing 1.99% of the float or 2.417 trading days of volume. This is down from 350,000 shares out short the prior month.

As noted, the annual dividend is $.16/share yielding 0.81%. In addition, the stock split 3:2 on March 8, 2004.

How about "technicals"? If we look at a Stockcharts.com Point & Figure Chart on SSNC, we can see a steady increase in price from $3.50 in late 2002, to a peak of $34.00/share in late February 2004. The stock subsequently sold off breaking through a support line to the $15.00 level. It currently is moving higher, after breaking through a resistance level of around $21/share. The stock chart actually looks nice to me, without being overvalued.

So what do I think? Well, I think the move today was impressive, the latest quarterly result was superb, the revenue growth has been a bit inconsistent some years back but has been steady for the last 3-4 years, earnings have been growing nicely and steadily, the company has just initiated a dividend, free cash flow is positive and growing, the balance sheet is spotless, valuation isn't bad, the graph is pretty good...well there isn't much I don't like about this stock quite frankly!

But then again, I am waiting to sell a portion of one of my holdings at a gain before I have "permission" to add a new position. So I shall not be buying any SSNC right away.

Thanks again for stopping by! If you have any questions, comments, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com.

Bob


Posted by bobsadviceforstocks at 10:03 PM CST | Post Comment | Permalink
Monday, 24 January 2005
A Reader Writes "Do you know any stock I can buy...?"

Hello Friends! I hope you all had a great weekend. As always, please remember that I am an amateur investor, so please consult with your professional investment advisors prior to making any investment decisions based on information on my website, Stock Picks Bob's Advice.

Checking my mailbox, I was delighted to find a letter from a reader, LP who writes:

Hello Bob,

I have read and follow up on your blog for a few months now. I am very new
in the stock market and I am recently graduate from Michigan State
University. I have a job now. I would like to invest in some stock and
hopefully I can make some tuition payment.

I don't have much money to buy any stock that have more than $5.00 a share.
Do you know any stock that I can buy from sharebuilder.com give me a great
outcome within a year????

Thank you so much for you advice.

Regards,


LP


First of all, thank you for being a reader here. Without readers, there wouldn't be any point for me in writing, would there? And congratulations on your recent graduation from Michigan State. I am glad you are starting to think about your future and starting to invest.

As you know, I am not a certified advisor, so I cannot tell you specific stocks that would be appropriate for you.

We are back again to the question of stock price. I believe that the point of investing is not to accumulate a large number of shares of a relatively lower quality stock or a small number of shares of a higher quality issue. The point is to invest the same amount of $'s in stocks that are likely to appreciate in value. And be a relatively safe investment for you.

On my blog, I have been searching for what I believe to be "quality" issues. These are companies with good recent results, solid Morningstar evaluations, and relatively positive charts. I have a hard time finding these kind of stocks in the $5 or less group!

In addition, I have been selling stocks at 8% losses, and almost every time I buy a cheaply priced stock, I tend to hit that 8% stop right away!

As you can tell, I am not into the "get rich quick" type of schemes. With Sharebuilder, I believe you can buy any price stock with any amount of $'s. I don't use Sharebuilder so please correct me if I am wrong. As a relatively young investor, please start out buying stocks of the highest "quality" you can find. You can develop your own measure of quality, or adapt some of mine!

It is far more important to own stock in companies with solid futures than investing in speculative stocks with certain stock price features (like low cost/share). You are far more likely, imho, to accumulate wealth by a steady, reasoned approach, then to succumb to the temptress of the penny stocks and cheap stocks.

I hope that this answers your question! Good-luck and please write back and let me know how you are doing!

Bob

P.S. If you or any other readers have questions or comments, please feel free to email me at bobsadviceforstocks@lycos.com . While I cannot give individual advice, I am happy to discuss philosophy of investing here on the blog!


Posted by bobsadviceforstocks at 1:43 PM CST | Post Comment | Permalink
Sunday, 23 January 2005
"Looking Back One Year" A review of stock picks from the week of December 1, 2003





Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As you probably know, if you are a regular around here, I use the weekend to review picks from a year earlier. I use about a trailing 58 weeks or so....it grows when I miss a weekend review (!)...and see how things would have done if I had bought each stock I "picked" here and held on regardless of what the stock did. As you probably know, this "buy and hold" is NOT what I actually practice. I strongly believe that it is wiser to sell your losing stocks quickly and your gainers slowly.

Above all, please remember that I am an amateur investor so please consult with your professional investment advisors prior to making any decisions based on information on this website. If you have any questions or comments, please feel free to email me at bobsadviceforstocks@lycos.com.

I posted Thomas Nelson (TNM) on Stock Picks on December 2, 2003, at a price of $19.91. TNM closed on 1/21/05 at $22.20 for a gain of $2.29 or 11.5%.

On November 9, 2004, TNM announced 2nd quarter 2005 results. .
Net revenue was $61.9 million for the three months ended September 30, 2004, compared to $63.8 million the prior year a decline of 3%. Net income for the same quarter came in at $6.4 million, also a decline of 3% from $6.6 million last year. Diluted eps also showed a decline for the quarter to $.43 compared to $.45 last year.

On December 3, 2003, I posted Kensey Nash (KNSY) on Stock Picks at a price of $22.20. KNSY closed at $31.51 on 1/21/05, for a gain of $9.31 or 41.9%.

On January 19, 2005, KNSY reported 2nd quarter 2005 results. Total revenues were $15.2 million for the second fiscal quarter compared with $13.7 million the prior year, an increase of 11%. Net income was $3.3 million, or $.27/share, an increase of 18% over the prior quarter's results of $2.8 million or $.23/share. However, as the Motley Fool reported, KNSY gave guidance that was a little less than what the street desired, and the stock responded weekly the prior day.

I posted Gevity HR on Stock Picks on December 4, 2003, at a price of $23.87. GVHR closed on 1/21/05 at $18.97, for a loss of $(4.90) or (20.5)%.

On October 21, 2004, GVHR announced 3rd quarter 2004 results. Revenues for the third quarter rose nearly 44% to $148.0 million as compared to $102.8 million in the third quarter of 2003. The company at the same time reported a 97.5% increase in net income from $4.1 million in the third quarter of 2003 to $8.1 milllion in the third quarter of 2004. EPS came in at $.29/diluted share in 2004, compared with $.16/diluted share for the same period in 2003.

On December 4, 2003, I posted Pogo Producing (PPP) on Stock Picks at a price of $46.66. PPP closed at $47.27 on 1/21/05, for a gain of $.61 or 1.3%.

As obtained from the Pogo Producing homepage, the company had a strong 3rd quarter 2004.Total revenue came in at $364.2 million in the quarter, up from $279.3 million in the quarter ending September 30, 2003. Net income for the 3rd quarter in 2004 was $86.6 million, compared with $67.6 million in 2003. On a diluted eps basis, this came in at $1.35 vs. $1.06 last year.

On December 5, 2003, I posted Medical Action Industries (MDCI) on Stock Picks at a price of $17.25. MDCI closed at $18.06 on 1/21/04 for a gain of $.81 or 4.7%.

On October 25, 2004, MDCI reported 3rd quarter 2004 results.Net sales for the third quarter ended September 30, 2004, came in at $35.1 million, a 9% increase from the $32.4 million reported the prior year. Net income for the period increased 12% to $2.7 million or $.26/diluted share, compared with $2.4 million or $.23/diluted share the prior year.

Finally, on December 5, 2003, I posted ResMed (RMD) on Stock Picks at a price of $41.76. RMD closed on 1/21/05 at $51.48 for a gain of $9.72 or 23.3%.

On November 8, 2004, RMD announced quarterly results.Revenue for the quarter ended September 30, 2004, came in at $87.7 million, a 20% increase over the same quarter the prior year. Net income increased to $22.9 million or $.43/diluted share, a 23% increase compared to the September, 2003 quarter. Unfortunately, there were a lot of "restructuring expenses" in the statement that muddled things up a bit for me!

So how did we do that week a little over a year ago? Actually not too bad. In fact, of the six stocks, five had gains, and only one (GVHR) had a loss during the period. Overall, the average performance was a gain of 10.4%. Again, this analysis assumes a buy and hold strategy. And always remember that past performance is no guide to future results.

If you have any comments, questions, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com . Bob


Posted by bobsadviceforstocks at 10:42 AM CST | Post Comment | Permalink
Updated: Sunday, 23 January 2005 12:43 PM CST
Friday, 21 January 2005
January 21, 2005 CheckFree (CKFR)

Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As always, please remember that I am an amateur investor, so consult with your professional advisors prior to making any investment decisions based on information on this website. If you have any comments, questions, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com .

Looking through the list of top % gainers on the NASDAQ, I came across CheckFree (CKFR) which as I write is trading at $38.82, up $2.51 or 6.91% on the day.

According to the Yahoo "Profile", CKFR "...is an electronic payment processing company. The Company provides financial electronic commerce products and services."

Yesterday, 1/20/05, after the close of trading, CKFR announced 2nd quarter 2005 results. Revenue came in at $185.8 million, up from $150 million in revenue last year. Earnings came in at $13 million, or $.14/share, up from a loss of $(1.9) million or $(.02)/share last year. In addition, CKFR raised guidance slightly for both revenue and earnings for the upcoming 3rd quarter. The "street" liked what it saw, and bid up the stock price today. I do not own any shares or options in this company.

How about "longer-term"? Taking a look at the "5-Yr Restated" financials on Morningstar.com, we can see a steady record of revenue growth from $310.2 million in 2000 to $643 million in the trailing twelve months (TTM).

Earnings dipped from a loss of $(.61)/share in 2000 to a low of $(5.04) in 2002, but have increased steadily since then to the latest $.25/share in the TTM.

Free cash flow has been strong and improving the last few years from $19 million in 2002 to $151 million in the TTM.

CKFR has a solid balance sheet. As reported on Morningstar.com, they have $217.7 million in cash, enough to pay off both the $187.6 million in current liabilities AND the $30.4 million in long-term debt. In addition, CKFR is reported to have $249.0 million in other current assets.

What about "valuation"? Taking a look at "Key Statistics" on Yahoo, we can see that the market cap is a large cap $3.51 billion. The trailing p/e is high at 93.61, but going forward (fye 30-Jun-06), the p/e looks better at 26.79. The company has a PEG of 1.31 (5 yr-expected), and a Price/Sales ratio of 5.11.

Yahoo reports 90.46 million shares outstanding with 84.0 million that float. Of these, 11.91 million are out short as of 12/8/04, representing 14.17% of the float. IMHO this is significant, with a short raio of 11.91. I tend to use 3.0 days as a significant volume of shares to make a significant difference in case of a "short squeeze".

No cash and no stock dividends are reported.

What about "technicals"? The chart looks strong. CKFR was trading down lower in July, 2002, but in what appears to be in October 2002, the stock broke through a resistance level at around $12.50 and has traded higher since. This chart appears strong to me!



So what do I think? Well, I like this stock a lot. The latest quarter was solid, the earnings growth is very nice which has been growing alongside the revenue. Free cash flow is superb. The balance sheet is nice, and at least going forward the valuation is reasonable with moderate PEG, and forward p/e.

Now, if only I had some money to invest! LOL....thanks again for stopping by and visiting here on Stock Picks.

Bob


Posted by bobsadviceforstocks at 2:18 PM CST | Post Comment | Permalink
A Reader Writes "Should I buy SIRI"?
Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. As I always warn you, I am an amateur investor and cannot be responsible for your trades, so please consult with your professional investment advisors prior to making any decisions based on information on this website!

I was checking my mail the other day, and noticed I had a very nice email from Steve S. who wrote:

Hey Bob,

First off I want to say that I enjoy reading your blog everyday. You
definitely give some insightful advice for investors. You do a great
job with it and I just wish I had some capital to invest in the
market. I just graduated college in spring and recently got hired with
a full time career job at a bank. Unfortunately, I don't have too much
money saved up to start investing in the stock market right now. But I
really want to put some money into it and see how it turns out. My
main problem is that most of the stocks listed on your site are out of
my range to make a purchase. Do you think it is better to start with
out some smaller cap stocks and buy more shares or go with a larger
cap stock when I can buy fewer shares?

One stock that I have been watching recently which I really like is
SIRI. It has been on quite a rocky ride in the past few months but I
believe that XM and Sirius and satellite radio, in general, are going
to be the wave of the future. I mean, the price is right especially
when you look at XMSR at $35/share and SIRI hovering around $6/share.
Now that they also have some major contracts locked up the subscribers
should be jumping onto SIRI. Is it a good idea to buy on speculation
like this? I just don't know if I want to make my first stock market
purchase on a stock like this. But then again it could be a good stock
to hold onto for a year or two to see where it goes. Anyways, thanks
again for taking your time to do the blog. Please let me know if you
have any suggestions as to where I should invest.

Steve


Let me try to answer this email the best I can. First, thanks for the kind words on the blog. I hope that what I write in useful to all of you in thinking about stocks and what makes a good investment.

Your next question was about stock price and picking stocks. I want to clear up one thing first. I think you probably understand this but "small cap" and "large cap" have nothing directly to do with stock price. What you want to talk about is small stock price vs. large stock price.

Let me make sure that everyone else understands the difference. In a nutshell, the market capitalization of a given stock is what it would cost to buy every single share at its current trading price. That is, if we multiply the number of shares of a stock by its price, we get the "market cap".

There are a lot of different definitions of market capitalization. Looking through Google, I found a Market Cap Definition showing small-cap to be under $500 million of capitalization, Mid-cap to be between $500 million to $1 billion, and Large-cap to be above $1 billion. Lately, most definitions place this higher.

In fact, an "Investopedia" site defines Market Cap as follows:

Mega Cap - This group includes companies that have a market cap of $200 billion and greater. They are the largest publicly traded companies and include names such as Microsoft, Exxon, Wal-Mart, and General Electric. Not many companies will fit in this category, and those that do are typically the leaders of their industry.

Big/Large Cap - These companies have a market cap between $10-$200 billion. Many well-known companies fall into this category, which includes names like Yahoo, IBM and Citigroup. Typically, large-cap stocks are considered to be relatively stable and secure. Both mega and large cap stocks are often referred to as "blue chips."

Mid Cap - Ranging from $2 billion to $10 billion, this group of companies is considered to be more volatile than the large and mega-cap companies. Growth stocks represent a significant portion of the mid caps. Some of the companies might not be industry leaders, but they are well on their way to becoming one.

Small Cap - Typically new or relatively young companies, small caps have a market cap between $300 million to $2 billion. Although their track records won't be as lengthy as that of the mid to mega caps, small caps do present the possibility of greater capital appreciation--but at the cost of greater risk.

Micro Cap - Mainly consisting of penny stocks, this category denotes market capitalizations between $50 million to $300 million fall into this category. The upward potential of these companies is similar to the downside potential, so they do not offer the safest investment, and a great deal of research should be done before entering into such a position.

Nano Cap - Companies having market caps below $50 million are nano caps. These companies are the most risky, and the potential for gain is often relatively small. These stocks typically trade on the pink sheets or OTCBB.


So clearly there are a lot of definitions of market cap.

Now to get back to your question (!), is it better to buy a lot of shares of a lower priced stock or a few shares of a higher priced stock when investing? In my opinion, higher quality stocks are often higher priced! Thus, I would first try to determine whether the stock was the kind of quality I was looking for (using my parameters) and then buy my previously determined dollar amount, and then adjust the number of shares.

I do not think that your goal of looking for a particular price point for your stocks is a good idea...not from my perspective. As a small investor, you might want to check out the "Sharebuilder" website. I have no affiliation with them, I have never used their services, but I believe that you are able to make relatively small dollar purchases of stocks and purchase fractional shares. I started out investing years ago with Merrill Lynch, even though I am currently utilizing mostly Fidelity and Schwab. At that time, I could buy even $100 of a stock and purchase fractional shares. I would rather see a beginning investor buy fractional shares of a quality company than buy lots of cheaply priced penny stocks.

Finally, back to your question on SIRI. I am a big satellite radio fan, owning an XM radio in my old Jeep. My kids fight over which channel they want to listen to, while me getting to the age where news and commentary are what I enjoy, prefer to flip over to CNBC or CNN...or even Air America. But as an investment, that is, as they say, a "horse of a different color." I am not a big believe, a la Peter Lynch, just because a product is out there, and there is a lot of "hype" about a stock, that you should "chase" it. SIRI might turn out to be a great investment, and I could be totally wrong about that particular stock, so you should make up your own mind, but it just doesn't fit into my style of stock picks!

What do I mean? Let's briefly go over the usual steps I use when looking at a stock: first, latest quarter. On October 27, 2004 SIRI posted 3rd quarter results. The company widened it's loss at $(169.4) million or $(.14)/share from $(106.7) million or $(.11)/share the prior year. Now total revenue DID jump from $4.3 million to $19.1 million. But note, the company lost almost $175 million in order to have $19.1 million in revenue. This isn't my kind of company!

Looking at a "5-Yr Restated" financials on Morningstar.com, we can see the explosive revenue growth from $1 million in 2002 to $47 million in the trailing twelve months (TTM).

However, I am looking personally for stocks of companies that are profitable. And I would suggest that a novice start with those companies. SIRI has been EXPANDING its losses from $(97) million in 1999, to $(598) million in the trailing twelve months. On a per share basis, this doesn't look as bad because of the DILUTION of shares. DILUTION is a bad sign. That means the company is pouring out (issuing) new shares that dilute ownership.

In fact, SIRI had 24 million shares in 1999, increased in to 76 million in 2002, 827 million in 2003, and 1.2 BILLION shares in the trailing twelve months. Not a good sign imho.

The company continues to spend away cash with $(413) million in free cash flow in 2001, and $(337) million in the TTM. Not very promising!

Balance Sheet? Well, per Morningstar, they have $523 million in cahs and $47.1 million in other current assets, which should be plenty. But they have $165 million in current liabilities that need to be paid, and with their free cash flow of $(337) million, that means they have about another 12 months of operating cash until such time that they will need to borrow money or float some additional dilutive shares.

The whole picture is simply unattractive to me, no matter how much I like the concept of SIRI, no matter how much I think Howard Stern might bring in subscribers, it just is far too speculative for me, and probably isn't the place for a novice to start.

If you do buy some shares, good-luck! It might be a GREAT investment. Just not my style in any case. And I do NOT own any shares, nor do I have any short positions or puts or calls or anything like that. I am just giving you my take on this.

Thanks so much for stopping by! Please feel free to email me back at bobsadviceforstocks@lycos.com if you have any comments or questions...and let me know what you decided to do!

And for all of the rest of you, have a great weekend and feel free also to email me with any thoughts, questions, or comments; I hope that my thinking is helpful in getting you all to think as well! Some of you may even help ME understand stuff :).

Bob


Posted by bobsadviceforstocks at 12:29 PM CST | Post Comment | View Comments (2) | Permalink
Updated: Friday, 21 January 2005 12:32 PM CST
"Trading Transparency" ASKJ

Hello Friends! Thanks so much for stopping by. I haven't been posting much here for a few days, have been busy and haven't been finding that much to like in the midst of this bearish market!

As always, please remember that I am an amateur investor, so PLEASE consult with your professional investment advisors prior to taking any action based on information on this website.

I am going to have to think that latest "rule change" of mine. I sold my EXPO on some bad news, but decided since it wasn't at a loss, I could just replace the stock...Bad idea. I think that we will have to go back to the more conservative idea of only buying a new position on clear selling on good news. The rest just doesn't count.

Anyhow, I was checking my portfolio last night and realized that my ASKJ had passed my (8)% loss level. So I pulled the plug this morning. At the open, I sold my 240 shares of ASKJ at $27.55/share. I had just purchased these shares at $30.10 on 1/14/05, so I had a loss of $(2.55) or (8.5)%. Hmmm.....I will have to learn to SIT on my hands a little better.

Thanks so much for stopping by. I will try to get an answer to a letter up a little later today...and maybe go looking for a stock to discuss!

Bob


Posted by bobsadviceforstocks at 11:14 AM CST | Post Comment | Permalink
Saturday, 15 January 2005
"Looking Back One Year" A review of stock picks from the week of November 24, 2003





Hello Friends! Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice. This is the entry that I like to do to review in a methodical fashion all of the stock picks I have posted on this Weblog. Please remember, like always, that I am an amateur investor. So consult with your professional investment advisor before making any investment decisions based on information on this website! If you have any questions, comments, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com .

The first stock I posted on Stock Picks that particular week was Odyssey Healthcare (ODSY). I posted Odyssey (ODSY) on November 24, 2003, at a price of $35.94. ODSY closed at $12.11 on 1/14/05, for a loss of $(23.83) or (66.3)%.

On November 1, 2004 ODSY reported 3rd quarter 2004 results. Net patient revenue for the third quarter of 2004 ended September 30, 2004, actually jumped 23.1% to $87.5 million, compared to $71.0 million the prior year. Net income for the quarter was $9.0 million, a 14.7% increase over the $7.8 million the prior year. On a per diluted share basis, this came in at $.24, a 14.3% increase over the $.21 in the same quarter in 2003. Overall, not too bad results.

However, if we look at the ODSY Point & Figure chart from Stockcharts.com, the graph still looks awful.


The stock broke down in February, 2004, when it broke through a support level at around $23 and has traded lower since. It actually is significantly off its lows of $7.50 which it reached in October, 2004. I would like to see the stock above $19.50 to feel it might be reversing its downward trend.

On November 26, 2003, I made the second post of the week and posted H&R Block (HRB) on Stock Picks at a price of $53.41. HRB closed at $47.34 for a loss of $(6.07) or (11.4)%.

On November 23, 2004, HRB reported 2nd quarter results. Revenues for the quarter ended October 31, 2004, came in at $539.3 million a 5.2% drop from the second quarter of 2003. In addition they reported they lost $(52.2) million or $(.32)/share compared to a loss of $(10.4) million or $(.06)/share last year. To top off this dismal report, HRB lowered its expectations for earnings for the year to $3.50 to $4.00/share from $4.00 to $4.25/share previously provided as guidance.

You can imagine how the stock responded! Looking at a Point & Figure on HRB from Stockcharts.com, we can see how the stock seemed to be moving higher from its lows in December, 2002, at around $29.00 to a high of $60 in February, 2004. However it broke through support in October 2004, and has been under the support line since.


Overall, a fair chart, but not very encouraging to me!

So how did we do? In a word, lousy. The week of November 24, 2003, I picked two stocks on this blog: ODSY which is now down (66.3)% and HRB which is down (11.4)% for an average loss of (38.85)%. So what does this prove? First of all, that this "system" of picking stocks is no less fallible than the next one and that is why you should consult with your advisors! Next, it shows the importance, imho, of NOT letting your losses run, and instead, cutting them short. I use an 8% stop in my trading and I would suggest that every investor have some sort of loss limit when they make a decision to buy a stock.

We have had many outstanding weeks on Stock Picks, but this one I would rather forget!

Thanks so much for stopping by! Please leave your comments right here on the blog or drop me a line at bobsadviceforstocks@lycos.com if you have any questions or comments.

Bob


Posted by bobsadviceforstocks at 10:20 AM CST | Post Comment | Permalink
Updated: Saturday, 15 January 2005 10:23 AM CST
Friday, 14 January 2005
"Revisiting a Stock Pick" Scientific Games (SGMS)

Hello Friends! It is the end of the week and we got a bit of a rally today. The market was getting terribly oversold after multiple down days this year, and it was time to see a few "bargain hunters" jumping in to bid up prices. I will wait and see if there is any follow-through next week; I just don't see the catalyst for a new bull run...but then again, I do not claim to be any kind of expert on predicting the market! In fact, I would like to thank you for visiting my blog, Stock Picks Bob's Advice. As I like to point out multiple times around here, I am an amateur investor, so please consult with your professional investment advisors prior to making any investment decisions based on information on this website.

After blogging over a year-and-a-half, and making literally hundreds of stock picks, I think I owe it to myself and to my readers to revisit stocks if they are still worthy of being discussed. Recently I started the process of re-posting a stock, if it has been over a year since I originally discussed it, and if it again makes the list of top % gainers, and deserves to be noted! Scientific Games (SGMS) is such a stock!

I first posted Scientific Games (SGMS) on Stock Picks on September 12, 2003, when it was trading at $11.55/share. To give you some perspective, SGMS closed today at $25.87, up $2.57/share or 11.03% on the day! And to think that even I did NOT ever buy any shares :(.

According to the Yahoo "Profile" on SGMS, SGMS "...is a provider of services, systems and products to both the instant ticket lottery industry and the pari-mutuel wagering industry based on revenues." What drove the stock higher today was a report that SGMS and International Game Technology (IGT) have formed a "worldwide, long-term strategic alliance to jointly provide products for the converging gaming market." Clearly, the "street" liked the idea of the alliance of these two gaming 'titans'.

If we look at the latest quarterly result for SGMS, on November 1, 2004, Scientific Games reported 3rd quarter 2004 results. For the quarter ended September 30, 2004, revenues increased 36% to $179.3 million from $132.1 million reported in the same quarter of 2003. On a diluted basis, net income increased 60% to $.24/share from $.15/share in 2003. These were great results!

How about longer-term? Taking a look at the "5-Yr Restated" financials on Morningstar, we can see that revenue has grown nicely from $211.1 million in 1999 to $719.7 million in the trailing twelve months (TTM).

Earnings dipped from $.01/share in 1999 to a loss of $(.84)/share in 2000. Since that year, earnings have improved each year to the current $.84/share in the TTM.

Free cash flow, according to Morningstar, has also improved from $55 million in 2001 to $108 millin in the trailing twelve months.

The balance sheet appears adequate, if a bit heavy on long-term debt, with $96.6 million in cash and $164.1 million in other current assets. That is plenty to cover the current liabilities of $129.5 million and to make a bit of a dent in the long-term debt of $566.3 million.

What about "valuation"? To assess this, I like to review the "Key Statistics" from Yahoo. Here we can see that SGMS is still defined (under $3 billion) as a mid cap stock with a market capitalization of $2.28 Billion. The trailing p/e is moderate at 30.87 with a forward p/e (fye 31-Dec-05) of 23.31. The "5-Yr" PEG is nice at 1.16, and the Price/Sales ratio isn't bad at 2.85 (but not exactly cheap.)

Yahoo reports 88.08 million shares outstanding with 61.80 million of them that float. Of these there are 3.31 million shares out short as of 12/8/04, representing 5.36% of the float, or 3.456 trading days of volume.

Yahoo does not report any cash dividends. The stock last split 2:1 in October, 1993.

What about "technicals"? If we take a look at a Point & Figure chart from stockcharts.com, we can see an extremely strong stock that has not faltered in any significant fashion since late 2000. In August, 2004, the stock broke through a support level down to $16/share, but has been climbing steadily since. This chart looks nice to me!



So what do I think? Well, I wish I HAD bought some shares back in 2003. Quite frankly, the stock almost looks stronger than ASKJ which I DID buy some shares...hmmm. Anyhow, the move today is nice, the latest quarter was impressive, the alliance with IGT is convincing, the free cash flow is great, the balance sheet is solid, and the chart looks super. What else can I say. Now if I hadn't bought that ASKJ so quickly....lol. You all have a great weekend!

Thanks again for stopping by! If you have any questions, comments, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com .

Bob


Posted by bobsadviceforstocks at 4:08 PM CST | Post Comment | Permalink

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