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Stock Picks Bob's Advice
Saturday, 24 November 2007
A Reader Writes "Have you ever considered scaling into your positions...?"

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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

What a volatile week!  Thank goodness trading was closed on Thursday for Thanksgiving.  And I am already having buyer's remorse for buying the big chunk (for me) of Graham (GHM).  Not that I don't think it is a fabulous stock--it is just that I did break all of my rules, investing when my system was telling me to pull back into equities, and then buying a larger position than usual.  I guess I shall just employ my 8% limit and selling strategy on that position as well.

Anyhow, I had a nice letter from Gleb today who is a fellow covestor participant.  Gleb wondered about my buying strategy.  (After my impulse buy on Graham I wonder if I am qualified to give an opinion at all :().  Gleb wrote a nice letter:

Hi Bob,

I have been reading your blog for some time now and have a new question for you.  At times like these in the stock market, have you ever considered scaling into your positions instead of buying all of the shares at once (ie. buying 1/2 of your position and then adding the other half if the price of the stock drops 8%).  This way even if the stock falls 8%, you don't have a 8% loss on your whole position after averaging in the new purchase and then being able to give the stock some more leeway to turn around.

I utilized this technique on BTJ and it proved to be effective for me there.

Please let me know if you have any thoughts on this.

Best regards,

Gleb from Brooklyn, NY (pinkfl0ydg on Covestor)
First of all, thank you for writing.  As you know, I do have a rather unstaged purchase approach to investing and a staged selling.  You might be onto something about staging a buy.  Buy buying on weakness?
Let's think about that stock that is declining in price and you chose to buy some shares like Bolt (BTJ).  I do like the idea of buying a 1/2 position.  But then the stock plunges in price and you decide that you should add after it declines 8%.  Instead of turning around, the stock keeps dropping.  You would have to have another sale point....perhaps at a 16% loss.  In that case instead of losing 8% after a large initial purchase, you have lost approximately 12%....4% on the first purchase (1/2 of your total dropped 8%)  and then another 8% (the entire position drops 8%).  So this doesn't really solve the problem of volatility.
Let me try another approach.  Let's say since we are thinking of incremental purchases that we purchase 1/2 of our desired position.  For instance if we were thinking of a $6,000 purchase, we purchase $3,000 of the desired stock.  Now, instead of buying more on a decline, we simply give the stock greater room to play....after all it is only a 1/2 position.  So instead of selling at 8% loss, we give it all the way to a 16% decline before unloading our position.  Essentially, we would have the same 8% loss as before.
Now, instead of buying on weakness, we wait until the stock has appreciated 8% to buy the other half.  After we have purchased the second half, we still sell the stock if it declines to an 8% loss (instead of 16%), but insuring that the stock would need to demonstrate some strength until we commit our entire funds as planned to that position.  I like this approach better.
I don't like buying stocks on weakness.  I would rather buy a smaller position, give it more room to trade and then if it starts moving higher, we would employ a well known strategy of averaging up in investing.   
Gleb, thanks so much for being a loyal reader and writer.  Please feel free to comment in the comments section (you and all of my readers), or feel free to drop me another line at  If you get a chance, be sure and visit my Stock Picks Podcast Website, my Covestor Page where Covestor reviews my actual trading account and you can view other investor's actual portfolios and their performance, and my SocialPicks page where SocialPicks reviews my stock picking from the blog!
Have a great weekend!
P.S. If any of you are interested in participating in Covestor, please leave me a comment on the blog or email me and I can give you a formal invitation to participate.  I have four invitations remaining.  You might not need it, but if you do, please feel to let me know! 

Posted by bobsadviceforstocks at 4:05 PM CST | Post Comment | Permalink
Friday, 23 November 2007
Graham (GHM) "Trading Transparency"


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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

I just spent I don't know how much ink writing about trading discipline and there I go again.  Buying a stock without a "permission slip".  But I would like to start thinking about a 'hybrid' trading system.  That is, utilizing a basic portfolio management system and also investing occasionally in single issues with larger positions taken without regards to the 'rules'.  I am probably going to regret this diversion, but I am still learning, and I hope you are learning as well with me.

Last month I wrote about Graham Corporation (10/27/07), a stock that Doug S. brought to my attention, thinking correctly that it was 'my kind of stock'.  I will refer you back to last month's entry for details about the company.

In a nutshell,

The stock made the top % gainers list today, trading at  $61.60, up $2.85 or 4.85% on the day as I write. 

Latest quarterly report was very strong.

The company announced a 5:4 stock split and raised its dividend.

The "5-Yr Restated" financials looks solid.

And the 'point & figure' chart from appears to show continued positive momentum.

With all of that in mind, I broke my trading rules (once again) and purchased 400 shares at $62.4399.  Wish me luck.

I am concerned about the general direction of the market.  The sub-prime mess, the near-$100/barrel oil price, the weak dollar, and the imploding housing market.

So once again, throwing caution to the wind, I jumped in on Graham (GHM).  It's a great stock.  But can it hold up in a correction?  Time will tell.

If you have any comments or questions, please feel free to leave them on the blog or email me at  If you get a chance, feel free to visit my podcast site where I discuss many of the same stocks I write about on the blog, my Covestor Page where Covestor tracks my actual trading account, and my SocialPicks page, where for the last year, SocialPicks has been tracking all of my stock picks.


Posted by bobsadviceforstocks at 11:23 AM CST | Post Comment | View Comments (2) | Permalink
Updated: Sunday, 25 November 2007 10:43 PM CST
Wednesday, 21 November 2007
A Reader Writes "What are the most important things you think a new trader should look at?"

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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

Happy Thanksgiving!

(Turkey from the MIT website)

I hope that you all have a chance to spend some time with family and friends, enjoy the Thanksgiving holiday, and share your expressions of appreciation with each other.

I am personally thankful of all of you who visit, write, and make blogging here on this website as enjoyable experience as it is for me!

Speaking of receiving email, I had a good email a short while back about investing that I kept meaning to respond to and tonight I guess is as good a time as any to comment.

Terry wrote me about investing in general and in particular, the SIRI and XMSR merger.

He wrote:

Hey Bob,
   I just Ran into your site searching and wanted to ask you a question. I am new to Trading and have been studying real hard and as of yet. Haven't bought a thing but hope to trade in the near future.
   I wanted to ask you. How do you do in trading ?
   What is the most important things you think a new trader should look at in a company before buying their stock.
One of my big problems as of now is I don't know how people figure out all of these percents of companies income's. Like this one about the 14%. I'm not a real smart guy but I do have common sense and can do this over time. How did this guy figure the 14%.
When the merger agreement was signed (Feb 23rd) SIRI traded at $3.74 and XM traded at $15.10. The agreement stated that each XM share will be exchanged for 4.6 SIRI shares.
At the time of the announcement that meant that SIRI would pay $17.204 per XM share (4.6 x 3.74) which is a premium of about 14% ( $2.1 premium per share).
   Hope you don't mind me asking and good luck to you in your Trading. Future Trader. Terry
Terry, first of all thanks so much for writing and visiting. I am sorry it took so long to get back to you.  I have been thinking about some of the questions you wrote and would like to respond to the best of my ability.  As I have written numerous times on my blog, I am also an amateur investor.  I have just been buying and selling and holding stock for a good bit longer than you.  You are welcome to my experience and perspective.
Let me try to get through your comments and questions in order.
You first write:
"How do you do in trading?"
I am doing just fine thank you :).  Seriously, you can follow my actual trades and my trading account by visiting my Covestor page. Covestor is a website that monitors my actual trades and my account without my active participation.  So they are about as unbiased a source as I could possibly imagine.  If you look through the Covestor page, you will see that there are many other investors that are doing better than I am doing, but I am still ahead of the market for the period which Covestor has been following me (since June 12, 2007).  
For 2007, my trading account which currently has a value of $54,535.50 as of today's close (including the sharp drop in stocks today).  I have a net unrealized gain in the account currently of $21,014.62.  (that means my stocks that I own but haven't sold are currently selling for $21,014.62 more than my purchase price overall.)  As of this morning, I had a net realized gain of $30,458.17.  However, I did take a small loss in BMC this morning that should drop that just under $30,000.  That means that if you add up all of the gains and all of the losses in my trading account, for 2007 I have realized, which means taken actual trading gains nearly $30,000.
So this year has been kind to me.  I am doing just fine thank you.
Your next question:
"What is the most important things you think a new trader should look at in a company before buying their stock."
This is what this blog is about.  I am continually examining the criteria that I believe to be critical in selecting a stock.  I can only share with you what I personally like to do at this time.  Not what is the right answer.  There are many different approaches to investing.  There is what I would call the "technicical" approach that involves looking at stock charts to determine appropriate investment timing, there is the "value" approach which I would include the 'Warren Buffett' investors who like to buy a stock as cheap as possible.  Then there are the "momentum" investors who look for stocks that are moving higher and trying to ride the trend.
For me, each of these approaches is attractive and reasonable.  I have chosen what I would describe as an 'eclectic' approach to investing.  I like to draw from each of these analyses to decide about which stock might be the right one for me.
I first look towards momentum, choosing to pick a stock that is moving higher on the day that I buy it.  I next start doing a fundamental analysis, identifying the results of the latest quarter and the "5-Yr Restated" financials on the stock.  Finally, I like to look at the 'point & figure' chart.  It is my way of looking to see that the stock price is basically appreciating.
There isn't anything magical about what I do.  Nor do I have any secret approaches that require you to send money to me to get the information.  I just like to write about stocks and share what I know for every investor, new and experienced, to consider.
Most of what I do in picking stocks is looking for stocks that have certain 'profiles'.  I know what the stock should look like.  And if the shoe fits....well then I write it up.  I really would suggest that you go through the blog, read as many of the entries as possible, and see if you can see and understand what I am doing.  You might not and probably should not agree with my approach, but you are welcome to utilize any of my thinking as you develop your own strategy for investing.
My 'profile' of a stock that is 'investable' includes a consistency in revenue growth, earnings growth, and free cash flow growth.  Outstanding shares should be stable and if possible they should be paying a dividend and increasing it as well.  The latest quarter should show positive revenue and earnings growth and hopefully they beat expectations and raised guidance.  You will hear these themes repeated over-and-over if you read my entries.  Finally, I would rather buy a stock with reasonable valuation, that is a p/e that isn't too high, a PEG between 1.0 and 1.5 or lower, a Price/Sales ratio that is less than the average in the industry and possible a significant number of shares out short that may end up being "squeezed".  The chart should show a stock that is steadily appreciating.
You will note that this discussion doesn't include the what of the company.  If there is a company that indeed I recognize their product (like Garmin (GRMN) that I recently wrote-up), then that is all the more powerful a story.  That is the 'Peter Lynch' portion of the investing story.
Beyond that, I find it critical to have a portfolio management system in place.  By that, I mean a system of knowing when and what to buy and when and what to sell and how much.  For me, I aggressively sell on declines and sell portions of my holdings on appreciation.  You can do whatever you like, but I find this helpful in managing my portfolio.  
We all need 'signals' to let us know when to be buying new positions and committing new funds to the market.  Some people just wait for the right stock and then buy when the 'price is right'.  For me, I have built in a system of shifting into and out of equities using my own portfolio as the indicator.  Simply put, when a stock of mine is sold on bad news (like my BMC I sold today), I use this as a signal that 'something is rotten' in the market (as indeed it is), and 'sit on my hands'.  That is I shift from equity exposure into cash for that position.  I do not reinvest my funds into a new position unless I have a signal to buy a new stock (which for me is a partial sale of one of my existing holdings at an appreciation target)---or if I am at my minimum of 5 positions and one of those is sold, then I am 'directed' to replace that position with an appropriate stock when that opportunity arises.
It is with this method that I try to respond to the market in as automatic a fashion as possible.  It is logical.  I just don't know if it really will work.
I am not sure about your question about the SIRI and XM merger.  It seems like your calculation answered your question.  If you wanted, you could buy XM stock and do what is called 'arbitrage' which is to speculate on the final closure of the stock at the arrangement described and collect the difference between the proposed merger deal and the current market price, which I guess as you write is 14%.  I haven't done the calculation.  And frankly, neither of these two stocks attracts me much because they just don't meet what I call my idiosyncratic method :).
Now you might ask why everyone in the whole world doesn't just jump in and buy XM if they are going to make an 'easy 14%'.  But it really isn't that simple, is it?  There is the risk that the deal goes bust.  There are real anti-trust concerns about the only two satellite providers merging.  After all, two companies were specifically created to allow for some competition.  We really are in a relatively lax regulatory environment, so the merger may well move ahead.  And you might just make some money if you play the merger.
But I am not into arbitrage situations.  I like to invest in the highest 'quality' companies available.  These are the ones that I write about.  I am not particularly clever or imaginative.  I am just trying to make a little money over the long haul.  And I am very happy to share with you and all of my readers my thoughts, whatever they may be worth.
I hope this answers you questions.  If not, please feel to write me again, comment on the blog, or drop me a line at  You all are welcome to visit my Covestor page, where my trading account is analyzed, my SocialPicks Page where my many picks are reviewed by SocialPicks another website, and my Podcast Page, if you would like to hear me talk about a few of the many stocks I blog about on the website.  
Meanwhile, I wish all of you a wonderful and Happy Thanksgiving holiday.  Tell the ones you love how much you love them.  Be thankful that you live in a world that allows you to celebrate freely and work hard to protect that freedom for you and your children.  

Posted by bobsadviceforstocks at 8:30 PM CST | Post Comment | View Comments (1) | Permalink
BMC Software (BMC) "Trading Transparency"

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 amagteur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

That bear market is gnawing at my portfolio!  (Or is it a bear yet?  Supposed to be a 10% correction---it ought to be close).  My recent purchase of BMC Software (BMC) was undone this morning as the stock hit an (8)% loss and I sold my 210 shares at $31.61.  These shares were just purchased on  11/7/07 at a cost basis per share of $34.43.  Thus, my loss was $(2.82)/share or (8.2)% since purchase.

Since I don't know of any fundamental difference between when I purchased the stock and now, except that the market is weak and most stocks are down, even though I have now sold my own shares,


Regarding what I do with the proceeds, since this is a sale on 'bad news', that is a decline in stock price, I 'sit on my hands' with the proceeds.  That is, I am shifting from equity towards cash as I would want my portfolio do do in a weak market.  But I don't really need to think about it.  I just need to pay attention and listen to what my own shares are telling me to do!

Thus, I am now down to 13 positions (from a maximum of 20 and above the minimum of 5) and shall be waiting for some 'good news' to add a postion.

Thanks so much for stopping by and visiting.  Please feel free to leave any comments you might have, otherwise you can certainly email me at with your comments or questions.  I read all of my emails but don't have time to answer all of them.



Posted by bobsadviceforstocks at 10:29 AM CST | Post Comment | Permalink
Saturday, 17 November 2007
"Looking Back One Year" A review of stock picks from the week of May 15, 2006




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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

I missed the review last weekend.  That's how my 'looking back a year' looks more and more like a year-and-a-half!  In any case, I shall try to get this review posted this evening.  I just have two stocks to review so it shouldn't be too bad :).

These reviews that I do are my way of examining the stocks that I posted about a year previously in some sort of methodical fashion.  It helps me identify those things that are working in my process, and those that aren't.  It will also give you a chance to see how this blog is doing in picking stocks.  Credibility.  That's what I really seek here.  I hope that I shall be successful in my stock picking, but more important, is an honest appraisal of this entire process.

Anyhow, my reviews are based on a 'buy and hold' approach which isn't my own trading philosophy or the philosophy of this blog.  I assume this buy and hold at this time for the ease of the review.  In practice I employ and advocate a disciplined strategy of portfolio management that I have described multiple places on this blog.  I try to sell my declining stocks quickly and completely and sell my gaining stocks slowly and partially.  This difference in strategy would certainly affect the overall performance of any investment.  Please take this into consideration when reading these write-ups.

On May 16, 2006 I posted FactSet Research (FDS) on Stock Picks Bob's Advice when the stock was trading at $46.23.  FDS closed at $64.10 on November 16, 2007, for a gain of $17.87 or 38.7%.

On September 25, 2007, FDS reported 4th quarter 2007 results.  Revenues climbed 23.1% to $129.5 million from $105.2 million the prior year same period.  Net income rose 31% to $30.7 million from $23.4 million the prior year.  On a diluted earnings per share basis this worked out to $.60/share this year compared to $.46/share last year a 30.4% increase.

The company beat expectations which according to Thomson Financial were $.56/share on revenue of $128.7 million. 

Taking a look at the 'point & figure' chart on FDS from, we can see that the stock has appreciated nicely since it was picked on this blog and the upward move of this stock appears intact. 

Reviewing the "5-Yr Restated" financials page, we can see that the steady revenue growth, earnings growth, dividend growth, and stable outstanding shares is intact.  Free cash flow is growing nicely and the balance sheet appears solid.

With all of these findings,




On May 20, 2006 I posted Eagle Materials (EXP) on Stock Picks Bob's Advice when the stock was trading at $52.21.  EXP closed at $36.99 on November 16, 2007, for an effective loss of $(15.22) or (29.2)% since posting.

On October 22, 2007, Eagle Materials (EXP) reported 2nd quarter 2008 results.  Revenue for the quarter ended September 30, 2007, came in at $210.5 millon, down 18% from the same quarter last year.  Net earnings came in at $34.8 million, down 47% for the same period.  On a per share basis, this worked out to $.73/share this year, down 44% from the $1.32/share reported last year. 

The company beat expectations for earnings but missed expectations on revenue with Reuters Estimates being for $.72/share in earnings on $213.11 million in revenue. 

If we review the 'point and figure' chart on Eagle Materials from, we can see that the stock has continued to decline from the date of our stock pick and does not show any good evidence of technical strength, instead moving lower under the 'support line'.

Reviewing the "5-Yr Restated" financials on EXP, we can see that with the recent results, the trailing twelve months shows decreased in revenue, earnings, and free cash flow.  The company has maintained and raised its dividend expressing optimism over its own prospects, and the balance sheet while adequate shows a current ratio of just a bit over 1.2 with significant long-term liabilities present.

With the weak earnings report and the associated weak price chart,


So how did I do with these two stock picks from that week about a year and a half ago?   Well, I had one gainer and one loser.  The average of these two stocks works out to a gain of 4.75%.

Thanks again for dropping by and visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at  If you get a chance, be sure and visit my Stock Picks Podcast website, where many of my stock picks are discussed.  In addition, stop by my Covestor web page where my actual trading portfolio is reviewed, and my SocialPicks page where all of my stock picks from the past year have been reviewed.

Have a great Sunday everyone!  And wishing you a wonderful Thanksgiving week!


Posted by bobsadviceforstocks at 11:09 PM CST | Post Comment | Permalink
Garmin (GRMN) "Revisiting a Stock Pick"


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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

It is Saturday, and I wanted to see if I could get this one posted before the weekend is over!

The market rebounded yesterday and I saw an old favorite of mine, Garmin (GRMN) make the list of top % gainers on the NASDAQ.  I say 'old favorite' because I first posted about Garmin (GRMN) on May 3, 2006, when the stock was trading at $48.22, adjusted for a 2:1 stock split on August 16, 2006.  Garmin closed at $97.51, up $13.51 on November 16, 2007, for a gain of 16.08% on the day!  I do not own any shares nor do I have any options on this stock.  (At Friday's closing price, this represents an appreciation of $49.29 or 102.2% since my stock pick!)

Let me try to briefly review this stock and point out why I believe this stock deserves a spot on my blog and why


What exactly does this company do?

According to the Yahoo "Profile" on Garmin, the company

"...and its subsidiaries engages in the design, manufacture, and marketing of navigation, communications, and information devices that are enabled by global positioning system (GPS) technology worldwide. It operates in four segments: Automotive/Mobile, Outdoor/Fitness, Marine, and Aviation."

Is there any news to explain the large move?

I haven't been following this stock closely, but two factors have been suppressing the stock price.  The company had been involved in an attempt to acquire TeleAtlas and also the company had been under pressure as much of its mapping information has been coming from Navteq (NVT), which since it is being acquired by Nokia (NOK), there had been concerns about the company's access to this critical information.  However, as reported:

"Navigation device maker Garmin is walking away from a costly bidding war with rival TomTom over Tele Atlas, a supplier of mapping data. Instead, Garmin (GRMN) worked out an agreement to get that valuable data from another source.

Garmin, based in the Kansas City suburb of Olathe, Kan., will extend through 2015 an existing contract to buy mapping from Navteq (NVT), the Chicago-based company that is being acquired by Finnish mobile-phone giant Nokia (NOK). Garmin also secured an option to renew the agreement for an additional four years. The companies also said they would explore "expanded points of cooperation" to improve mapping data quality. Financial terms of the deal were not disclosed.

The move brings an end to a dramatic takeover tussle that has shaken the navigation business to its core and fueled surges in the stock prices of takeover targets Navteq and Netherlands-based Tele Atlas. Though it has lost the bidding battle over Tele Atlas, Garmin sure looked like a winner to investors. It already buys about 98% of its mapping data from Navteq, so the extension of the current agreement lets it proceed without missing an operational beat. Garmin's plan for acquiring Tele Atlas included a transition period that would have lasted as long as two years."

How did they do in the latest quarter?

On October 31, 2007, Garmin reported 3rd quarter 2007 results.  Total revenue came in at $729 million, up 79% from $408 million in the third quarter of 2006.   Net income (GAAP) came in at $193.5 million, up sharply from $123.0 million in the same quarter last year.  Diluted earnings per share climbed 57% to $.88/share from $.56/share last year. 

The company beat estimates on earnings which had been expected to come in at $.82/share, and instead came in at $.88/share. The company also raised 2007 guidance to $3.40/share from prior forecast of $3.15/share.  Also it raised revenue guidance for 2007 to more than $2.9 billion from prior guidance of 'at least $2.8 billion'.

How about longer-term results?

Reviewing the "5-Yr Restated" financials on GRMN, we can see a phenomenal picture of rapid and steady revenue growth from $465 million in 2002 to $1.77 billion in 2006 and $2.25 billion in the trailing twelve months (TTM).  Earnings during this period have also grown rapidly from $.70/share in 2002 to $2.40/share in 2006 and $3.00 in the TTM.  The company initiated dividends at $.30/share in 2004, raised them to $.50/share in 2006 and up to $1.30/share in the TTM.  Meanwhile, shares outstanding have been very stable at 216 million in 2005, 217 million in 2006 and a drop to 216 million in the TTM.

Free cash flow has been positive and growing rapidly with $131 million in 2004 increasing to $269 million in 2006 and up to $473 million in the TTM.

The balance sheet is gorgeous with $668 million in cash which alone could pay off all of the current liabilities of $428.2 million and the smallish $91.5 million in long-term liabilities combined.  Calculating the current ratio, we have a total of $1,689 million in total current assets compared to current liabilities of $428.2 million, yielding a current ratio of 3.94.

What about some valuation numbers? 

Reviewing Yahoo "Key Statistics" on Garmin (GRMN), we can see that this is a large cap stock with a market capitalization of $21.15 billion. The trailing p/e is a moderate 29.37 with a forward p/e (fye 30-Dec-08) estimated at 22.57.  The PEG ratio is a very reasonable 1.15.

In terms of valuation, the company is richly priced, with a Price/Sales (TTM) ratio of 8.20 compared to an industry average of 1.62, according to the eresearch website.  However, the Fidelity website also reports that the company is extremely profitable relative to its peers with a Return on Equity (TTM) of 40.65% compared to the industry average of 12.27%.

Returning to Yahoo, we can see that there are 216.88 million shares outstanding with 102.91 million that float.  As of 10/26/07, there were 5.80 million shares out short, but owing to the large daily volume, this works out to only a 1.2 day 'short ratio'.

As noted above, the company is paying a dividend, which per Yahoo works out to $.75/share yielding .9%.  The last stock split was a 2:1 split, as I mentioned above, on August 16, 2006.

What about the chart?

Looking at the 'point & figure' chart on Garmin, we can see that the stock has moved sharply higher this past year with an increase from $44 in December, 2006, to a recent high of $124 in October, 2007.  With concerns about the Navteq purchase by Nokia, and the recent acquisition attempt by the company, the stock price dropped to as low as $81 in November, 2007.  With the removal of the acquisition attempt, and the contractual arrangements to obtain the Navteq data, the stock moved sharply higher yesterday, and is close to clearing the recent 'resistance line'.  I am comfortable with the chart in light of all of the news.

Summary:  What do I think about this stock?

I like this stock a lot!  I do not own any shares but if I had the opportunity, I would be buying shares.  To review, they recently dropped an acquisition attempt which generally helps an acquiring stock which otherwise might have its stock depressed in price.  In addition, concerns about one of their suppliers being acquired (Navteq) is now resolved for the immediate future.  They reported a terrific earnings report which beat estimates and they raised guidance.  Their long-term report is impeccable with steady revenue and earnings growth, an increasing dividend, and a stable outstanding shares count.

Free cash flow is solid and growing and the balance sheet is very solid.

Valuation-wise, the p/e isn't bad in light of the fast growth reported resulting in a PEG ratio just over 1.  Price/sales works out rich but the Return on Equity is impressive.  

I guess I just like this stock!

Anyhow, that's a wrap for this week!  Thanks so much for visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at  I cannot always answer all of the email I get, but I do read all of my mail and try to get around to commenting on all of the correspondence I receive!

If you get a chance, be sure and visit my podcast website.  I shall try to post a new podcast this weekend if I get a chance :).  Also, be sure and visit my Covestor page where my actual trading portfolio is analyzed and compared to other investors.  In addition, my SocialPicks page reviews all of my 'stock picks' and keeps track of their performance.  

Thanks again for visiting!  Be sure and have a wonderful weekend.


Posted by bobsadviceforstocks at 5:32 PM CST | Post Comment | Permalink
Updated: Sunday, 18 November 2007 9:58 PM CST
Tuesday, 13 November 2007
Fossil (FOSL) "Revisiting a Stock Pick"

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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

What a difference a day makes!  After four days of a steadily deteriorating Dow, it was nice to see the indices move higher today on what appeared to be a little better earnings than expected from Wal-Mart!  Not that I own any shares of Wal-Mart at this time, although my kids each own about 5 shares from their grandparents.   I also should have known that once I wrote about 'what to do in a declining market' it would be close to the end of at least that leg of the correction.  Let's see what tomorrow brings!

I had a little time this evening and wanted to see if I could find something to discuss on the blog.  Looking through the list of top % gainers on the NASDAQ today, I saw that Fossil (FOSL) had made the list.  I do not own any shares of FOSL nor do I have any options on this stock.  Fossil closed at $39.79, up $5.89 or 17.37% on the day.


I call this entry a 'revisit' because Fossil is what I like to call an 'old favorite' of mine on this blog.  I first wrote up Fossil on November 11, 2003, about six months after I started writing on this website when the stock was trading at $28.42. The stock split only once since that write-up, splitting 3:2 on April 12, 2004, giving me an effective 'pick price' of only $18.95.  With FOSL closing at $39.79, this means a stock price appreciation of $20.84 or 110% since posting.


What exactly does this company do?

According to the Yahoo "Profile" on Fossil (FOSL), the company

"...engages in the design, development, marketing, and distribution of fashion accessories, including apparel, belts, handbags, jewelry, small leather goods, sunglasses, and watches under proprietary and licensed brand names worldwide. The company offers a line of fashion watches under its proprietary brands, such as FOSSIL, MICHELE, RELIC, and ZODIAC; and pursuant to license agreements, under some prestigious brands, such as ADIDAS, BURBERRY, DIESEL, DKNY, EMPORIO ARMANI, MARC BY MARC JACOBS, and MICHAEL Michael Kors."

How did they do in the latest quarter?

As is often the case on this blog, it was the annoncement of earnings that drove the stock higher in trading today.  In fact, the company reported 3rd quarter 2007 results today.  Net sales for the quarter came in at $358.6 million, up 19.6% from $299.7 million in the same quarter last year.  Net income soared 41.4% to $30.5 million, compared to net income last year of $21.5 million.  Diluted eps grew 38.7% to $.43/share from $.31/share last year.

The company beat expectations for both earnings and revenue.  Earnings were expected according to analysts polled by Thomson Financial to come in at $.43/share on revenue of $343 million.  In addition the company raised guidance for 2007 to $1.67/share--analysts are currently expecting profit of $1.58/share.

How about longer-term results?

Reviewing the "5-Yr Restated" financials on Fossil, we can see the steady picture of revenue growth from $663 million in 2002 to $1.2 billion in 2006 and $1.3 billion in the TTM.  Earnings/share have also steadily improved from $.80/share in 2002 to $1.10/share in 2006 and $1.40/share in the trailing twelve months (TTM). Interestingly,  the outstanding shares which were 69 millon in 2002, are actually at 67 million in the latest twelve months.

Adding to this share reduction was the announcement today that the company planned to buy back up to 2 million additional shares. 

Free cash flow, which did dip from $53 million to a negative $(19) million between 2004 and 2005, improved to $98 million in 2006 and a stronger $138 million in the TTM.

The balance sheet appears solid with $170 million in cash and $467 million in other current assets.  This total of $637 million, when compared to the $204.6 million of current liabilities yields a current ratio of over 3.  In addition, the company has a very nominal level of long-term liabilities reported by Morningstar to be at $60.8 million.

What about some valuation numbers?

Reviewing Yahoo "Key Statistics" on Fossil, we find that the company is a mid-cap stock with a market capitalization of $2.71 billion.  The trailing p/e is a moderate 28.61 with a forward p/e of 19.99.  The PEG is a very reasonable (imho) level of 1.12.

Looking at the eresearch website, we find that the Price/Sales (TTM) for FOSL comes in at a nice 1.77, compared to the industry average of 2.64.  In terms of Return on Equity (TTM), the company doesn't come in quite as nice compared to other companies in the same industry with a figure of 15.78% vs. the industry average of 23.71%.

Finishing up with Yahoo, there are 68.14 million shares outstanding with 41.55 million that float.  Currently there are 4.16 million shares out short as of 10/10/07, giving a short ratio of 8.4 trading days of average volume.  Using my own idiosyncratic '3 day rule' this does appear to be a significant short interest and may well have contributed to the sharp run-up today in the face of good news that exceeded expectations.

No dividends are reported, and as I noted above, the stock last split 4/12/04 with a 3:2 stock split.

Summary:  What do I think?

Well, I liked this stock back in 2003, and I still like it in 2007!  I just haven't had the opportunity to buy shares :(.  I see so many stocks I like and there are only a few that I can buy.  

They reported great earnings, beat expectations, raised guidance, and announced a share buy-back!  In addition, they have been steadily growing their company over the past five years while actually decreasing the outstanding shares.  The stock chart looks strong, the balance sheet is pristine, and they even have a 'Peter Lynch' appeal, with a product that is well known and visible in malls across the country.

Thanks again for stopping by and visiting my blog!  If you have any comments or questions, please feel free to leave them on the blog or email me at  Be sure to try and visit my podcast site, my Covestor page and my SocialPicks page!  Each serve different purposes and you might enjoy listening to me discuss some of these same stocks, reading about how my actual trading account is doing (Covestor) and review an analysis of my stock picks this past year (SocialPicks).

Regards to all of my friends and readers!


Posted by bobsadviceforstocks at 6:26 PM CST | Post Comment | Permalink
Updated: Tuesday, 13 November 2007 9:46 PM CST
Monday, 12 November 2007
Some Thoughts about Difficult Markets---Revisiting Trading Philosophy

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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

I have missed another 'Weekend Review'.  We shall get to it next week.  But while looking through my past entries during the week of May 15, 2006, I came across an entry that I wrote back at that time which seemed to be a difficult trading environment.  What I wrote then still holds true.  Here is that entry

Wednesday, 17 May 2006
Maintaining Trading Discipline in a Declining Market

One of my greatest challenges as an investor is knowing how to deal with market declines and investment losses. One would like to have something automatic like this Rube Goldberg machine.

In other words, to have a trading system that will diminish your losses in a bear market and maximize your gains in a bull market.

Too often we find our emotions working against our own best interests. When investments decline we rationalize the losses and defer the realization implicit in a sale of holdings at a price below their cost. This exposes our investments to greater losses and delays the eventual 'day of reckoning'.

In the same fashion, as stocks move higher, our greed overcomes our rational thoughts and we delay realizing some of the gains by selling a portion of the holding, and instead allow our dreams of larger and greater profits override our need to 'lock-in' some gains with a sale.

Within every successful trading system there should be a method of avoiding the problem of compounding one's losses while at the same time encouraging the compounding of gains. In other words, when investments within a portfolio develop losses, they should be sold at a predetermined price point and the proceeds from such sales should not be re-invested; instead, the proceeds should be kept in cash to be re-invested when an appropriate buy signal occurs.

In the same fashion, when stocks are sold on 'good news' events, such as price appreciation, this should also be considered a bullish indicator and the proceeds from such good news sales should be re-invested in a new stock position.

I have expressed this strategy as being hardest on declining stocks that are sold completely and quickly on developing losses, and easiest on gaining stocks which are on the other hand sold slowly and partially as they appreciate in price. This bias will also select for the strongest stocks within your portfolio.

A strategy with pre-determined sale points both on the upside and downside reduces trading stress as one simply needs to review the stock price to determine one's action. It is the requirement for arbitrary decisions that may lead to over-trading as well as under-trading of one's holdings.

No system can respond quickly enough to avoid all losses and lock in all gains. However, having a system that can move one's holdings back and forth from equities to cash and back again, should be helpful in the long-run in building one's assets by maximizing gains and minimizing losses.

Wishing my readers the very best of luck in dealing with the difficult investing environment we are all facing!


I dont know how the market is going to trade tomorrow.  Certainly the Asian markets have been 'taking it on the chin' this evening.  But where will the Dow close tomorrow?  I simply don't know.

What I do know is that my stocks have predetermined sale points on the upside and the downside.  And that I shall stay as much 'put' as possible before implementing any trades.  I shall try to let my own portfolio dictate my trading and not my fears or hopes regarding stocks.

Wish me luck!  Thanks again for dropping by!  Good-luck trading tomorrow!


Posted by bobsadviceforstocks at 1:05 AM CST | Post Comment | View Comments (2) | Permalink
Friday, 9 November 2007
Yours Truly Gets Mentioned on 'Silicon Alley Insider'

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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

We have had a couple of really awful trading days in the market!  I am sure you noticed.  And I probably shouldn't have bought that BMC stock.  Not that BMC is a bad selection but I am going to give myself a new rule.  When I get a stock sale on bad news AND a sale on good news on the same day, the bad news wins if I am able to make that decision.  That is, I knew I had a sale on bad why should I go ahead and listen to that other signal.  TOO risky.  O.K. that's money under the bridge.  Or as we say in Wisconsin....that money is already out of the barn.


I got a nice mention on 'Silicon Alley Insider'.  This is what they wrote:

Covestor's Amateurs Get To Gas On Like Pros

| 7:09 PM

Covestor, the NYC/UK-based site that lets amateur stockpickers (like Fred Wilson) show off their real-life portfolios, (Fred is rallying after a slow start), is now letting them spout off at length: The company will highlight its top-performing members via an interview with Wall Street Transcript, a monthly publication that normally interviews pros. The company also plans to distribute the interviews via Investopedia, the stock education site purchased by Forbes Media earlier this year.

You can see the first example of the interviews, with Covestor star Robert Freedland, here (pdf). "BobsAdvice" is trouncing the S&P, so it might well be worth paying attention to him. But boy, is that dense slug of text! We'd like an annotated version, please.


Now that's a nice mention.
It's a busy day for me and I have to run.  But take a look at the article if you get a chance and visit Covestor.  Let me know if you need an invitation for a membership there as I have four more.  One of you got one of my invites.  I hope it is working out well for you.  I love the place!

Posted by bobsadviceforstocks at 6:40 AM CST | Post Comment | Permalink
Wednesday, 7 November 2007
BMC Software (BMC) "Trading Transparency"

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 remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

Earlier today I wrote about how I sold a portion of my Harris (HRS) at a gain giving me the "permission slip" to add a new position.  So I had a nickel in my pocket waiting to be spent!  Now I know you are going to point out how the Dow is plunging (as I write it is down 360.92 points or a (2.64)% drop), and how the NASDAQ is also dropping (as I write it is down 76.42 points for a (2.70)% decline).  But a nickel is a nickel.  And in almost every market there are stocks that are moving higher for a reason.

Anyhow, that's my excuse :).  Frankly, I just don't have any self-control!

BMC Software (BMC) was making the list of top % gainers on the NYSE. Of course, now it too is not as strong as earlier, and now, just before the close is trading at $34.12, up $.44 or 1.31% on the day.  I went ahead and purchased 210 shares of BMC for my Trading account at $34.38.

I probably should have sat on my hands :).


Very briefly, yesterday after the close of trading BMC announced 2nd quarter 2008 results.  Earnings for the quarter came in at $78 million or $.39/diluted share, ahead of last year's $58 million or $.28/share last year.  Non-GAAP earnings, taking out special one-time items, were even higher.  Revenue for the quarter came in at $421 million, up 9% over last year's results.  More importantly perhaps, the company beat expectations.  And they also raised guidance. These are all important factors and it is rather impressive that BMC was able to advance at all in such a broad correction as we experienced today.

Longer-term, the "5-Yr Restated" financials on BMC look strong with especially impressive revenue growth the past four years, increasing earnings, and actually decreasing outstanding shares.  Free cash flow is solidly positive and balance sheet appears strong.

Finally, the "point & figure" chart on BMC from appears reasonably strong without appearing over-extended.

So maybe I shouldn't have bought anything today.  But then again, just like when I sell a stock I don't really feel like selling when everything is moving higher, if I have a signal to buy, well, I guess I should be buying when I have a signal.  And BMC seemed to fit the bill.  Wish me luck!

Thanks again for dropping by!  If you have any comments or questions, please feel free to leave them on the blog or email me at  If you get a chance, be sure and drop by my Covestor Page or visit my SocialPicks Page where all of my picks are reviewed! 



Posted by bobsadviceforstocks at 3:36 PM CST | Post Comment | Permalink

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