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.

A few moments ago I sold all of my shares of ResMed (RMD), which amounted to 150 shares, at $38.46.  These shares were purchased 2/4/05 at a cost basis of $29.87 giving me a long-term gain of $8.59 or  28.8% on these shares.  

This sale brings me down to my 'minimum' portfolio size of 5 positions.  I have set my maximum at 20 positions and my minimum at 5.  What this means is that with this sale, as before, since it is on 'bad news', which means selling on a defensive basis as part of a decline, I shall be 'sitting on my hands' with the proceeds.  That is, I shall not be replacing this position.

However, since I am now at 5 positions, if any of these are sold on 'bad news' I shall be looking for new stocks to replace them.  I hope you follow this 'strategy'.  

I would also like to explain the why of my sale.  

Basically after my initial purchase of ResMed (RMD), I had two partial sales at appreciation targets--at 30% and 60% appreciation levels.  My approach to stocks requires me to sell stocks if they decline to certain levels.  After an initial purchase, I sell a stock if it declines to an (8)% loss.  After a single sale at my first appreciation target (30%), I sell if a stock declines--slips back--to 'break-even'.  With additional sales, my sell-point is increased to 50% of the highest appreciation sale.  With ResMed having been sold partially at a 60% appreciation level, this means that when the stock dropped to under a 30% appreciation level I was given the 'signal' to sell the stock.  

Actually, the stock was 'flirting' with a sale yesterday as it bounced at that 30% appreciation level under and over.  I hoped it wouldn't break through but with today's market weakness, ResMed dipped and I sold shares.

Even though I still 'like' the stock from the good 3rd quarter report and the decent Morningstar.com '5-Yr Restated' financials, with my own sale, the best I can do: 

RESMED (RMD) IS RATED A HOLD

If we look at the ResMed "point & figure" chart from StockCharts.com, we can see the technical weakness with the stock, after peaking at $56 in February, 2007, has struggled to move higher, failing to make a new high in December, 2007, when it reached $54, and then breaking through support currently.

This isn't about 'liking' a stock.  I like ResMed a lot.  But my trading system required me to part company with the shares.  Successful trading is about some sort of discipline and I try hard to depend on my own trading rules to succeed.  I hope that I shall be a shareholder in this stock in the future, but for now.....

Thanks again for stopping by and visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  If you get a chance, visit my Covestor Page where my trading account is tracked, my SocialPicks page where all of my stock picks for the last year-and-a-half have been monitored, and my podcast page where you can download some mp3's and listen to me discuss a few of the many stocks I write about here on the website.

Yours in investing,

Bob 

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, while looking through the list of top % gainers on the NASDAQ, I came across a stock I would like to briefly share with you, Natus (BABY), which closed at $21.02, up $1.35 or 6.86% on the day.  I do not have any shares nor do I have any options on this stock.  In fact, as the trading day finished up, Natus was no longer on the top % gainers list, but did close with a nice gain, and I think deserves a spot on this blog.

I will try to briefly explain why,

NATUS (BABY) IS RATED A BUY

First of all, on what the company does.  According to the Yahoo "Profile" on Natus, the company

"...develops, manufactures, and markets neurondiagnostic and newborn care products to healthcare professionals worldwide. It provides healthcare products used for the screening, detection, treatment, monitoring, and tracking of common medical ailments, such as hearing impairment, neurological dysfunction, epilepsy, sleep disorders, and certain newborn conditions."

Insofar as the latest quarter, the company announced 1st quarter 2008 results on May 1, 2007.  Revenue climbed 36% to $36.9 million from $27.1 million.  Net income was up 73% to $2.6 million or $.11/share compared to net income of $1.5 million or $.07/share the prior year same period.  In addition to this great result, the company also raised guidance for the full year 2008 from $160 million in revenue to $161 to $162 million and earnings were also guided higher from $.68 to $.70 to the new guidance of $.70 to $.72/share. 

Longer-term, checking the Morningstar.com "5-Yr Restated" financials on BABY, we can see the steady rise in revenue from $31 million in 2003 to $118 million in 2007 and $128 million in the trailing twelve months (TTM).  Earnings have been a bit erratic, as is not uncommon in these small companies, but has improved from a loss of $(.05)/share in 2006 to a profit of $.43/share in 2007 and $.47/share in the TTM.

Outstanding shares have grown somewhat from 16 million in 2003 to 23 million in the TTM.  Free cash flow, which dipped from $7 million in 2005 to $1 million in 2006, has improved to $9 million in 2007 and $10 million in the TTM.

The balance sheet appears solid with $13.0 million in cash and $55 million in other current assets balanced against a current liabilities of $45.6 million.  This yields a current ratio of somewhere around 1.5.  the company has an additional $25.2 million in long-term liabilities on the book. 

Reviewing the Yahoo "Key Statistics" on Natus (BABY), the market cap is a small cap $481.72 million with a trailing p/e of 44.16.  The forward p/e (fye 31-Dec-09) is estimated at 24.44.  Thus, with the rapid growth in earnings the PEG works out (5 yr expected) to an acceptable 1.11 level.

There are 22.92 million shares outstanding and 22.5 million that float.  Currently as of 4/25/08, there are 2.3 million shares out short representing a short ratio of 16.7.  This is well ahead of my own cut-off of 3 days for short interest significance.  We may well have seen a bit of a squeeze of the shorts today in an otherwise negative market environment.  No dividend is paid and no stock splits are reported.

Let's take a brief look at the 'point & figure' chart on BABY from StockCharts.com:

Here we can see the relatively meteoric rise in the stock price from March, 2004, to March, 2006, from $3.75/share to $22/share.  Since that $22 peark, the stock has been consolidating and only in the last few days has it been moving to break through that level towards a higher price.  The chart looks strong to me in my humble opinion!

Insofar as other news or comment I have been able to find, you should know that Natus has filed for a public offering of 4 million sharees at $19.50 apiece.  The market has certainly taken that announcement in stride.

Natus is also a favorite over at TheStreet.com, where they recently commented:

"Natus has been rated a buy since June 2007. For the first quarter of fiscal 2008, Natus reported a 36% revenue increase year over year. The company also reported that its earnings per share improved from 7 cents a year ago to 11 cents in the most recent quarter. Over the same period, net income rose to $2.63 million from $1.52 million. First-quarter results were led by strong sales of newborn hearing-screening products. Additionally, the company completed its integration of Excel-Tech ahead of schedule, and recently announced an agreement to acquire Sonamed, a manufacturer of hearing-screening products.

Looking ahead, Natus increased its revenue and earnings guidance for fiscal 2008 and now anticipates revenue to range from $161 million to $162 million. Earnings per share are expected to be in the range of 70 cents to 72 cents for the full year, while guidance for the second quarter anticipates EPS in the range of 14 cents to 15 cents. This guidance does not include the potential impact of the Sonamed acquisition, which is expected to close by the end of May 2008. Bear in mind that the stock has surged 35% over the last year and is now trading at a price that is somewhat expensive when compared to the rest of the industry. We do, however, feel that the company does not currently have any significant weaknesses and that its strengths justify the higher stock price levels."

Also today, the Motley Fool commented on the Natus move as one of its "five-star stocks" doing well in the market.

And Thomas Sidwell wrote about Natus as one of the "6 Medical Device Makers Poised for Growth" over on Seeking Alpha.  Donald Johnson also had a piece on Seeking Alpha on May 12th about Natus.  He wrote:

"Like a lot of momentum stocks, BABY's already pretty expensive as these key statistics show. The forward PE is 24, the trailing 12 months PE is 44, the not too reliable PEG ratio is a cheap 1.12 and, the price sales ratio is 3.52, according to data on Yahoo.com. The price per share to cash flow is a very high 43.7, according to Morningstar.com, which doesn't rank the stock. IBD (investors.com) gives the stock a very high composite rating of 95, which is based on the company's earnings per share growth rate, profitability, sales growth and buying by institutions. BABY's point and figure chart shows a bullish price objective of $30.50. Thus, BABY is making the most of the baby boom, much as Pediatrix (PDX) is, even if that baby boom may be slowing."

I suppose I may be a little late to the party, but the water is fine and I shall jump right in :).  At least on the blog, as I do not own any shares!

Thanks again for visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  Have a great Memorial Day Weekend everyone!

Yours in investing,

Bob 

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.

One of my favorite activities as author of this blog is to receive, read, and respond to email and comments regarding investing.  I hope through these discussions that I have helped others understand investing concepts as much as I learn from these questions as well. 

Earlier today I received a nice letter from Randy S. who commented:

"hi,
what a great blog. I just found it last week. I'm trying to learning more about stock analysis and had a question about BLUD

"Going back to Yahoo for a few more numbers on this stock, we can see that there are 44.43 million shares outstanding with 43.88 million of them that float. Currently there are 1.72 million shares out short representing 5.7 trading days of volume. Using my own "3 day rule" on short interest, this looks significant and may well be adding to the buying pressure driving this stock higher. It does look like the short-sellers may be throwing in the towel on this company, for the prior month, the short interest was at 1.93 million shares."


I know I'm looking at today's yahoo statistics which have changed since your article but can you tell me where on the Stats page you found these numbers (44.43, 43.88, 1.72, 1.93), and how did you calc the 5.7 trading days volume?

And what is the signifance of the "short interest"?
i understand shorting but didn't understand the significance of the 5.7 days and how it effects buying pressure.

thanks very much!
randy"

First of all, I am glad that you 'found' my blog, found an entry that you found useful, and ended up asking some very good questions about what I wrote.

Let me try to go through to give you some answers in a bit more detail regarding your inquiry.  First of all, you commented on my entry on Immucor (BLUD) dated April 6, 2006.  On April 2, 2008, I 'revisited Immucor (BLUD) on this blog and updated some of the 'facts' behind my interest in this company.  I do not own any shares nor do I have any options on this stock. 

You asked about where I got the numbers on Immucor regarding outstanding shares, number that float, number of shares out short, and the number of shares out short the prior month.  Let me try to direct you directly to the source of that information.

I am not sure whether or not you are familiar with Yahoo "Finance" or not.  (I am assuming that you understand the use of hyperlinks. These are the 'links' on my blog and other websites that are often in another color--I use red--other links are in blue--and are underlined to indicate their status.  When you take your mouse and 'click' on these words, you will be directed to another website with the information I am choosing to present.  To get back to the original website, you just needed to click on the 'back' button or left-pointing arrow on the top of your browser.)

If we enter "BLUD" into the "GET QUOTES" box on Yahoo "Finance" we will arrive to this page.  This is the "Summary" page for BLUD, which we can see closed today (5/22/08) at $25.70, up $.32 or 1.26% on the day. 

For the numbers I refer to we need to examine the "Key Statistics" page which is found under the sub-section entitled "Company", just under the "Profile" for BLUD. 

This page gives us two columns of data on BLUD.  Under the "Share Statistics" section in the right hand column, you will see both the "Shares Outstanding" which currently is listed as 70.04 million shares and the "Float" which is currently at 68.97 million shares. 

Shares outstanding is defined as

"The shares of a corporation's stock that have been issued and are in the hands of the public. also called outstanding stock." 

There is a difference in the outstanding shares and the "float" because sometimes some shares are not available to the public.  These may be shares that are 'closely held' and not traded by the original owners of the company. 

As the definition of "float" explains:

"The number of shares of a security available for trading by the public. A company can have 20 million shares outstanding and only 7 million float. A stock with low-float means there is a limited supply of shares, which can often make a stock more volatile."

You also asked about the "Shares Short" which is also found under the right column on "Key Statistics" under the "Share Statistics" heading.  Today, BLUD has 6.02 million shares out short.  In the same section, there is a note that the "Shares Short (prior month)" amounted to 6.63 million shares out short.  Thus, we can deduce that some of the short-sellers (about 600,000 shares worth) have "covered" their shorts by buying the shares. 

Let's take a look at the definition of "short covering":

"The purchase of securities to close out a short stock position. To close a position, an option investor purchases the same number of shares that were sold short. If the price of the shares being purchased is below the price of the shares that were shorted, a profit could be realized (depending on trading fees)."

Of course, we need to understand the entire concept of 'short-selling'.  These are sales that go in the opposite order of the usual purchase of stock---what I generally do---which involves first buying shares of stock, hopefully seeing the stock rise in price, and then selling the shares later for a profit.

The short-seller, expecting the stock to decline, literally does this backwards!  He borrows shares of stock (promising to return the shares later) from another brokerage account (with the assistance of the broker), and then sells the shares.  If the stock shares actually do decline, as he/she suspects, then the short-seller can actually purchase the shares to 'return them' and if the stock has declined, can pocked the difference as a profit.  Going "short" is the opposite of going "long."

You asked about the "5.7 trading days of volume" as the amount of shares out short and where I got that figure.  This number is the same as the "Short Ratio", which now amounts to 12.9 trading days of volume.  This statistic is also found on the "Key Statistics" page under the "Share Statistics" section in the right column of each of these pages on Yahoo.

As explained about the Short Ratio, this is formally defined:

"Short interest divided by average daily volume over some period, usually 30 days. Some investors believe that a high ratio is a bullish indicator, and a low ratio is a bearish indicator."

The definition above suggests the effects of a large "short ratio".  I have personally chosen to suggest that greater than three days is significant.  That number is actually my own creation.  Other people might have other criteria to decide when a level is sufficiently high to be significant.

Let me try to explain why this might be an important statistic.  Assuming that there is a large "short ratio" on a stock--that is that a lot of shares have been sold "short" with speculators believing the stock is going to drop in price--and if in this situation something really good is announced.  For instance a contract is awarded, or an earnings report exceeds expectations and the company raises guidance or whatever.  Then the stock might start rising in price as other investors decide that the prospects for the company are terrific and they too want to own shares.

The short-sellers are thus under pressure in this situation.  For as a stock rises in price, instead of making money if like you or I if we are going "long" on a stock, they are instead watching their losses pile up.  You see everything is upside-down and sort of topsy-turvy in a short-sellers perspective. 

In fact, we could even see a bit of a 'panic' known as a short squeeze if this should happen as short-sellers scramble to buy back shares that they previously borrowed and sold to limit their losses.  Of course a rising stock price is a disaster for a seller who as already borrowed shares, sold them, and then was waiting for the shares to decline in price so that he/she could profit the difference!

Let me give you the formal definition of 'short squeeze':

"A situation in which the price of the stock rises and investors who sold short rush to buy it to cover their short position and cut their losses. As the price of the stock increases, more short sellers feel compelled to cover their positions. More common than the opposite, long squeeze."

So as part of my process of looking at some of the facts and figures behind a stock, I like to know what the short interest level is related to the average trading volume each day in the stock.

I hope that this discussion was helpful!  If you have other questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  If you get a chance, be sure and visit my Covestor Page where my actual trading account is reviewed, my SocialPicks page where my stock selections from my blog are monitored, and my Podcast Page where you can download some mp3's of me discussing some of the many stocks and topics I cover here on this website.

Wishing you all a good Memorial Day Weekend!

Yours in investing,

Bob   

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.

Is inflation rearing its ugly head?

As reported this morning:

The department's Producer Price Index, which measures inflation pressures before they reach the consumer, rose 0.2 pct in April following a 1.1 increase in March.

Core inflation rose 0.4 pct for the month, after rising 0.2 pct in March. That left core inflation up 3.0 pct in the past twelve months, the largest change since December 1991. Overall inflation has risen an unadjusted 6.5 pct for the year.

Economists polled by Thomson's IFR Markets had expected overall wholesale inflation to rise 0.4 pct, while core inflation was expected to increase 0.2 pct.

So what is an investor supposed to do?

IBonds deserve a place in an investor's portfolio.

These United States Government Savings Bonds are adjusted for inflation.

As explained:

I Bonds earn interest from the first day of their issue month.

• You can redeem them at any time after a twelve-month minimum holding period
• They are an accrual-type security
• They increase in value monthly and the interest is paid when you redeem the bond
• I Bonds are sold at face value; i.e., you pay $50 for a $50 I Bond
• I Bonds grow in value with inflation-indexed earnings for up to 30 years

If you redeem I Bonds before they’re five years old, you’ll forfeit the three most recent months’ interest; at or after 5-years old, you won’t be penalized.

Rates

The I Bond earnings rate is a combination of two separate rates; a fixed rate and an inflation rate:

Fixed Rate:

• Announced each May and November
• Applies to all bonds issued during the six months period beginning with the announcement date.
• Remains the same for the life of the bond

Inflation Rate:

• Announced each May and November
• Based on changes in the Consumer Price Index for all Urban Consumers (CPI-U)
• Is combined with the fixed rate to determine the earning rate of the bond every six months*

O.K., that's pretty conservative!  But I always feel like I have an ethical responsibility to share my best ideas with my readers.  And having an IBond in your portfolio of investments isn't really a bad idea!  I plan on picking up a bond later this year.  Investors are currently limited to $5,000/year in 'paper' bonds and $5,000/year in electronic bonds. 

Go to the links above for more information on details and tax consequences.

Currently, IBonds purchased between May, 2008, and October, 2008, are yielding 4.8%.  This may change.  Up or down.  But with money market rates in the low single digits, this might be something to consider.

I will write up some more stocks later :).  But I would encourage all of you to explore the possibilities of a IBonds in your portfolio as a small inflation hedge.

Yours in investing,

Bob

Besides blogging, I sometimes contribute to the local newspaper.  This year, I was chosen as a community columnist and had a chance to write about my father who recently died and who was instrumental in my own thoughts about investing and life values.  This is what I wrote:

A father’s lesson about life, business
By Robert Freedland | Community Columnist

.

Forty years ago, my father used to ask me to read the stock quotes to him of his holdings. Being only 12, I believed it was because his eyes were weak and I could help him read the prices. He probably had an ulterior motive, hoping that by reading the business pages, I would find myself attracted to the same hobby that he himself enjoyed — investing. My father’s ploy worked.

Dad was a career Army guy. After going to night law school because he couldn’t afford to go to medical school during the Depression, he was drafted and spent 23 years as an Army lawyer. Serving in England during World War II and handling claims after the Korean conflict, he was my mentor and my role model.
When I was 10, I used to play the 3-M Book Game called “Stocks and Bonds.” At that time, it was just about spinning a dial and marking up the new prices for all of the stocks my siblings and I would collect. By the time I was 13, I was starting to pick real stocks to buy; $300 was a lot of money for me, and I remember my first purchase of five shares of Global Marine. The next year it was five shares of Litton. I was hooked.

While some of my friends would be talking about the Dodgers, my best friend Alan Rich and I would talk about stocks in junior high. He was big on J.C. Penney; I was interested in Jones & Laughlin. We both worked hard to make good grades and get into a good college.

In high school, I was good in math and science and went on to college as a pre-med and then medical school. I never stopped following the market.

When I met my future wife, she would watch me read the Fortune 500 lists and be amazed that I could spend hours gazing at pages of numbers while she would be reading literature. Wanting to let me know that she could share my interests, she opened a brokerage account and bought a few shares.

I now write on the Internet and share my thoughts with fellow investors, often “newbies” as novices are called. I have learned that investing requires discipline, patience, self-confidence and concentration. I encourage people to learn to be good observers of the market, to listen to their own portfolios, to avoid chasing fads, to invest in quality companies and be humble when they are successful.

Lt. Colonel Sumner Freedland died this spring at 88. I still do not believe that any stock that starts with the word “General” is a good investment as he did. My favorite stock isn’t Merck. But each time I check the quotes, I think of him sitting in his Lazy-Boy recliner asking me to check another stock price. Somewhere my father is probably reading this column — and if he is, I would like him to know that his son works hard to be a good doctor, husband and father to his own children and that AT&T closed at $39.11 today.

Robert Freedland is one of 13 Tribune Community Columnists whose writing appears on the Sunday Opinion pages.

I write so many impersonal entries that I thought some of you might appreciate a little personal comment for a change.  If you have any thoughts or responses, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob 

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 hard to believe that I am now five years old here on this blog.  In fact, I wanted to share this button with you!

On May 12, 2003, I wrote this entry:

"May 12, 2003

St Jude Medical

Posted by bobsadviceforstocks at 6:01 PM CDT"

And the rest as they say is history.

By the way, St Jude closed 5/16/08 at $40.64.  Adjusted for a 2:1 stock split November 23, 2004, my pick price was $55.30/2 = $27.65, thus this stock pick had a gain of $12.99 or 47.0% since posting.

So how do I still think about this stock?  Well, let's check a few of the usual things I like to examine...but let's do this briefly :).

On April 18, 2008, STJ reported a solid 1st quarter 2008 report. They beat expectations and raised guidance.  Perfect!  Their 5-Yr Restated Financials on Morningstar are still gorgeous.

Finally, even the 'point & figure' chart from StockCharts.com looks solid when we take a long-term view that goes back to before 2003.

And NO, I don't own any shares or options on this stock.  But it is still a great holding for this blog don't you think?

Thus,

ST JUDE (STJ) IS RATED A BUY 

So now with 1,813 entries (!), and passing 200,000 visitors total, my blog is starting to show its age maybe just a little :).  This is still a 'one-man' amateur operation and I get only 157 visitors daily...but thanks to all of you who make the trek and visit.  You all are welcome to a piece of the birthday cake and maybe a party favor or two.

Here's to another five years of blogging!

Yours in investing,

Bob 

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.

Looking through the list of top % gainers on the AMEX this afternoon, I saw that Chase (CCF) had just made the list, closing at $19.00, up $.96 or 5.32% on the day.  I do not own any shares or options on this stock but my Stock Club does own some shares.

This entry is called a "revisit" because I have reviewed Chase previously.  On February 6, 2007, I examined this stock and found it worth of inclusion on this blog.  At that time the stock was trading at a split-adjusted price of $33.49/2 = $16.75.  With the $19 close, this represents a gain of $2.25 or 13.4% since posting.

I still like this stock and thus,

CHASE CORPORATION (CCF) IS RATED A BUY

I would like to briefly review some of the facts surrounding this company that have led me to this assessment and re-emphasize the philosophy behind my thinking.

According to the Yahoo "Profile" on Chase (CCF), the company

"...engages in the manufacture of specialty tapes, laminates, sealants, and coatings, as well as in the provision of electronic manufacturing services worldwide. It operates through two segments, Specialized Manufacturing and Electronic Manufacturing Services."

Chase, on April 8, 2008, announced 2nd quarter 2008 results.  For the quarter ended February 29, 2008, revenues came in at $28.2 million a 3% increase from the $27.5 million reported in the year earlier same period.  Net income worked out to $1.87 million, up 36% from the $1.37 million reported last year or $.22/share, up from $.16/share the prior year. 

While I might prefer to see a stronger revenue increase, for me I am satisfied that revenue did grow and that earnings were able to increase even more.  One of the cornerstones of my investment 'picks' and my general philosophy is that the consistent results of a growing company producing ever-improved financial results will result in a stock that also consistently appreciates in price over time. 

But one quarter of good results is not enough to sell me on a stock.  It is the consistent reporting of results--which for me I can identify utilizing Morningstar.com.  Indeed, if we check the Morningstar.com "5-Yr Restated" financials, we can see several things that I like about the company.  First of all the steady increase in revenue (although the company is certainly quite small), from $74.6 million in 2003 to $127.5 million in 2007 and $132 million in the trailing twelve months (TTM).

Earnings, after a dip from $.63/share in 2003 to $.58/share in 2004, have steadily increased to $1.22 million in 2007 and $1.37/share in the TTM.

Another interesting observation is that this small company even pays a dividend---and not only that has been fairly regularly increasing that pay-out from $.14/share in 2003 to $.20/share in 2007 and $.25/share in the TTM.  I do not require dividends to 'endorse' a stock--but it certainly is an added 'plus' for me!  To also have a company that regularly increases its dividend is a corporate action that suggests a certain confidence in the company's prospects and financial strength.  

If we examine the outstanding shares, we can also see that Chase (CCF) has been quite conservative with issuing shares.  In fact, 8 million shares are reported in 2003 and four years later, the company still reports only 8 million shares.  In contrast, you can view the Morningstar.com "5-Yr Financials" on Sirius, not a favorite of mine, that has increased its shares from 827 million in 2003 to 1.47 billion in the trailing twelve months.  I do not know if CCF will be a better investment that SIRI tomorrow, next week, or next year.  I am just using this example to explain my attempt to identify what I call a 'quality' investment, that for me includes a certain reluctance on the part of management to issue an excessive amount of new shares.

Insofar as 'free cash flow' is concerned, I want to see creation of 'free cash' instead of a cash burn rate that was so common during the dot com bubble.  For Chase, they  generated $3 million in cash flow in 2005, increased it to $9 million in 2006, $11 million in 2007 and $12 million in the TTM.  Perfect.

And the balance sheet.  Again, I am not a genius, but at least on these tables I want to see more assets than liabilities.  Sort of like having more cash in the bank than bills to pay :).  Don't we all want that sort of balance sheet?

In Chase's case,  they are reported by Morningstar to have $1 million in cash and $37 million in other current assets.  This total of $38 million in current assets (things that can be easily converted into cash within the next 12 months), easily covers both the $16.1 million in current liabilities (with a current ratio of 2.375---a healthy ratio from my perspective) and the $10.9 million in long-term liabilities combined.

In terms of valuation, I am also always looking for a 'good deal'!  That doesn't mean I am a value investor, but that value plays an important part in any investment decision. In fact, I would describe my own philosophy as eclectic, that is utilizing all of the information I can find to make that decision.

An easy place to find valuation numbers on stocks is right at Yahoo Finance.  If we review the "Key Statistics" on Chase (CCF) from Yahoo, we can see that first of all this is a very small capitalization stock with a market cap of $157.95 million.  The most common ratio used by value investors is traditionally the p/e ratio.  In this particular case, Chase is what I would call 'dirt cheap' with a p/e of 13.92.  The forward p/e (based on estimated earnings for the fye 31-Aug-09) is even better at 11.88.  Since there aren't any analysts willing to estimate 5-yr results, we don't have a PEG with is the ratio comparing the p/e to the 5-yr growth rate anticipated.   

I have been looking at a few other 'value' numbers, including the Price/Sales ratio.  Back in 2005 Paul Sturm, from Smart Money wrote a great article on the utility of the Price/Sales ratio in comparing one company to another.  A great article, I refer to it often on this blog.

Like so many other numbers, this one is relatively useless in isolation.  That is, the value of this ratio is in its relation to other companies in the same industry.  That is the relative valuation of a stock can be evaluated by comparing 'apples to apples'.  Thus, checking the Fidelity.com eresearch website, we can see that Chase (CCF) has a Price/Sales ratio (TTM) of 1.13, compared  to the industry average value of 7.49.

In terms of profitability, examining the Return on Equity (TTM), we find that Chase comes up a bit 'light' with a ROE (TTM) of 20.84% compared to the industry average of 31.29%.  So in this particular number, we find a little less of an impressive result.

Returning to Yahoo, there are 8.31 million shares outstanding (a small company!) with 5.96 million that float.  That being said, there is a significant number of shares out short, which for me means a current ratio greater than 3 days.   Yahoo reports 75,080 shares out short as of 4/25/08, representing 4.5 trading days of volume. 

Regarding the dividend, the company pays a forward annual dividend of $.25/share yielding 1.3%.  The last stock split was a 2:1 split back on June 28, 2007. 

Insofar as a chart, I am not much of a technical analyst. I don't talk much about moving averages.  But with point and figure charting, I do take a look at 'support' and 'resistance' lines. 

If we review the 'point & figure' chart on Chase (CCF) from StockCharts.com, we can see that the stock has indeed shown some weakness dipping from $29 in January, 2008, to a low of $16.50 in March, 2008.  Since that time it has been 'fighting-back' so-to-speak, but frankly, I would like to see this stock get above $24 before starting to call the 'all clear'.  

In summary, I still like Chase (CCF).  I am not prepared to buy any shares but shall keep it on my own 'watch list' which isn't really a list at all, but the accumulated names of stocks I write about here on this blog :).

I hope that my rambling once again helped explain what I believe makes a good stock good and what might be helpful to look for.  Of course, this is only my 'amateur' perspective, but I think it all makes sense.  At least to me!

If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  If you get a chance, be sure and visit my Covestor Page, where my actual trading portfolio is monitored.  Also stop by and check out my SocialPicks Page where all of my stock picks are followed.  And if you still have some time :), be sure and visit my Podcast Page where you can download some mp3's for your enjoyment on some of the many stocks I write about here on the web.

Have a great Thursday everyone!

Yours in investing,

Bob 

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 wanted to share with all of you this beautiful photograph from In The Headlights called "Water Colors".  As Riannan writes, the photo "..put me in a calm state immediately.  There is a Zen beauty and serenity to them that I find very pleasing."

But what does this have to do with my portfolio?---I can almost hear all of you asking that question.  My point is that my activity since my last Portfolio Update on April 6, 2008 has been nil.  It is not that there haven't been opportunities for selling or trading.  It is just like the comments about patience from Nonin Chowaney at the Nebraska Zen Center, who quotes from Lao Tzu:

"Do you have the patience to wait
till your mud settles and the water is clear?

Can you remain unmoving
till the right action arises by itself?

The Master doesn't seek fulfillment,
but not seeking, not expecting,
is present, and can welcome all things."

I am far from any kind of expert at things Zen, but the idea of waiting patiently for the right time to act seems apropos to me.  

In other words, my actions in the market are directed by my own holdings.  My sales generally have been made when prices dictate a sale, and my purchases are directed by other portfolio-initiated 'signals'.  And sitting calmly, avoiding the temptation of 'trades' and activity, my portfolio is working well to direct me to action or not.

Since I have been associated with the Covestor website, you can now visit my Covestor page and monitor my performance at least since I joined Covestor (June 12, 2007).  However, this website, while now including my blog entries on my Covestor Blog, does not monitor the performance of many of my purchases preceding my participation in Covestor.  Thus the utility of these reviews.

As a change on this review, I would like to post some charts of each of my six holdings and show the points at which I plan on selling shares, which for me includes plans for both sales on the upside as well as downside sales.

The holdings are listed in alphabetic order of their symbols, followed by the number of shares, date of purchase, price of purchase (cost basis), latest price (5/9/08), and percentage unrealized gain or (unrealized loss).

Copart (CPRT), 210 shares, 9/27/07, $33.73, $41.50, 23.04%

I have not had any sales of Copart on the upside or downside, and thus, my downside sale would be an (8)% loss or .92 x $33.73 = $31.03, or on the upside, I plan on selling 1/7th of my holding (30 shares) should the stock reach a 30% appreciation point (my first target for a sale).  This would work out to 1.3 x $33.73 =  $43.85.

Thus, the 'point & figure' chart on Copart from StockCharts.com:

Covance (CVD, 102 shares, 4/9/07, $62.61, $83.08, 32.69%.

I have sold shares of Covance once on 10/25/07, thus, on the downside my sale point is moved up to 'break-even' or $62.61.  On the upside, my next partial sale would be at a 60% appreciation target, which works out to 1.6 x $62.61 = $100.18.  At that point, I would plan on selling 1/7th of my remaining shares or 102/7= 14 shares.  Of course, on the downside, my plan is to sell all shares should the stock decline to that level. 

Let's take a look at the 'point & figure' chart on Covance from StockCharts.com (recall I am just posting the purchase point, the upside sale and the downside sale points on these charts.)

IHS (IHS), 140 shares, 10/1/07, $58.53, $67.23, 14.87%.

I have not sold any shares of IHS so my loss limit would be at 92% of the purchase price or .92 x $58.53 = $53.85.  On the upside, my first sale of 1/7th of my holding or 20 shares would be at the 30% appreciation level which works out to 1.3 x $58.53 = $76.09.  Thus, the 'point & figure' chart on IHS from StockCharts.com showing these points on the graph:

Morningstar (MORN), 103 shares, 11/22/05, $32.57, $73.90, 126.86%

Since purchasing Morningstar shares in 2005, I have sold portions of this holding four times: at 30%, 60%, 90%, and 120% levels.  On the upside, my next sale of 1/7th of my holding or 103/7= 14 shares, would be at a 180% appreciation level or 2.80 x $32.57 = $91.20.  On the downside, at 1/2 of the highest appreciation sale point or at 120%/2 = 60% appreciation level, all of my shares would be sold.  This works out to 1.6 x $32.57 = $52.11.  If we look at the 'point & figure' chart on Morningstar from StockCharts.com, we can see these points graphed:

ResMed (RMD) 150 shares, 2/4/05, $29.87, $40.28, 34.86%.

I have sold portions of ResMed twice, at 30% and 60% appreciation levels.  Thus, on the downside all shares of ResMed should be sold at 1/2 of 60% or back to the 30% appreciation level.  This works out to a sale at 1.3 x $29.87 = $38.83.  On the upside, the next sale would be 1/7th of my holding or 150/7 = 21 shares at 1.9 x $29.87 = $56.75.  Reviewing the 'point & figure' chart on ResMed from StockCharts.com we can identify these points:

Meridian Bioscience (VIVO), 171 shares, 4/21/05, $7.42, $28.08, 278.49%.

VIVO is my most profitable stock having sold portions 8 times already, at 30, 60, 90, 120, 180, 240, 300, and 360% appreciation levels.  Thus, on the upside, my next partial sale would be at a 450% appreciation level (!) which works out to 5.5 x $7.42 = $40.81, at which time I would plan on selling 1/7th of my shares or 171/7 = 24 shares.  On the downside, at 1/2 of the highest appreciation sale recorded, this would work out to a 360%/2 or 180% appreciation level.  Calculating this, we have 2.80 x $7.42 = $20.78.

Here is the 'point & figure' chart on Meridian (VIVO) from StockCharts.com showing these points:

Thus, I am still at 6 positions.  As I have previously noted, my minimum for my portfolio is 5 positions with a maximum of 20.

The current market value of my securities (May 11, 2008) is $45,056.74, with $234.87 in the money market portion of the account.

As of 5/10/08, I had $(4,534.09) in realized net short-term losses, and $3,283.50 in realized net long-term gains, for a net of $(1,250.29) in realized losses in 2008.  In 2008 I have paid a total of $(221.13) in margin interest and have total income of $53.82.

My account, as of 5/9/08, has $14,289.41 in unrealized gains.

Thanks again for stopping by!  I hope the more detailed view of my positions and my current 'inactivity' is explained.  Of course, I shall step up my trading activity as my own portfolio dictates.  Meanwhile, I shall be trying to exercise the 'Zen' of trading patience!

If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob 

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 the weekend and I really would like to get this review done.  Last weekend one thing led to another and I never got one out for the blog.  And now I am another week behind....so not really a look a 'year ago'...more like a year-and-a-half!  In any case, let's get down to business and review the picks from the week of October 16, 2006.  Two weeks ago, I reviewed the stock picks from the week of October 9, 2006, so let's see how the two selections from the following week turned out! 

These reviews assume a buy and hold strategy for investing with equal dollar amounts assumed invested.  In reality, I advocate and practice a disciplined portfolio strategy--selling declining stocks quickly and completely and selling appreciating stocks slowly and partially.  This difference would of course affect performance and should be taken into consideration when considering these performance evaluations. 

On October 16, 2006, I posted Angeion (ANGN) on Stock Picks Bob's Advice when the stock was trading at $10.75/share.  ANGN closed at $6.26 on May 9, 2008, for a loss of $(4.49) or (41.8)% since posting.  I do not own any shares or options in Angeion.

On March 17, 2008, Angeion (ANGN) reported 1st quarter 2008 results.  For the quarter ended January 31, 2008, the company reported revenue of $7.5 million and a net loss of $(675,000) or $(.17)/diluted share, compared to revenue of $10.6 million and income of $489,000 or $.12/diluted share last year.

With this poor quarterly pereformance,

ANGEION (ANGN) IS RATED A SELL

Looking at the Morningstar.com "5-Yr Restated" financials on Angeion, we can see that revenue growth peaked at $39 million in 2007 and has come in at $35 million in the trailing twelve months (TTM).  Earnings peaked at $.38/share in 2006, dipped to $.24/share in 2007 and is at a loss of $(.05)/share in the TTM.

Free cash flow remains positive at $1 million.  And the balance sheet remains solid.

Reviewing the 'point & figure' chart on Angeion from StockCharts.com, we can see that the stock peaked in January, 2007, at $18.50/share only to decline with an acceleration in the drop in April, 2007, when the stock broke through support at the $14.50 level.  The stock is currently struggling to find a new level of support at the $6 level and has some 'work' to do to get above resistance and into new positive territory. 

On October 19, 2006, I posted Alliance Data Systems (ADS) on Stock Picks Bob's Advice when the stock was trading at $60.43.  ADS closed at $59.11 on May 9, 2008, for a loss of $(1.32) or (2.2)% since posting.  I do not own any shares nor do I own any options in Alliance Data Systems.

On April 23, 2008, Alliance Data Systems (ADS) reported 1st quarter 2008 results.  For the quarter ended March 31, 2008, revenue increased 7% to $499.3 million vs. $466.3 million for the same quarter in 2007.  Income dipped 3% to $62.7 million in the quarter vs. $64.7 million or $.78/share down from $.80/diluted share in the prior year.  (These results were adversely affected by the one-time costs associated with the cancelled sale of the company to the Blackstone Group.) 

Reviewing the Morningstar.com "5-Yr Restated" financials on ADS, we can see that revenue growth is intact, earnings have dipped in the trailing twelve months and 2007, shares are stable, free cash flow is solid, and the balance sheet appears adequate.

With most of the financial data intact,

ALLIANCE DATA SYSTEMS (ADS) IS RATED A HOLD

Let's take a look at the chart.

Reviewing the "point & figure" chart on Alliance from StockCharts.com, we can see the recent sharp decline in price performance from a peak at $80 in October, 2007, to a low of $40 in January, 2008.  The stock is fighting back and recently broke through a resistance level but has a lot of 'work to do' to get back into a positive technical pattern (imho). 

So how did I do with these two stock picks from the week of October 16, 2006?  In a word, mediocre!  Both declined in price from the selection price and had an average decline of (22)% since posting!

I do believe that these types of stock performance support my own belief in the need for disciplined management of holdings and that the 'buy and hold' proposition is far too risky for me!

Thank you again for dropping by!  I hope you all have a great weekend.  If you get a chance be sure and drop by my Covestor Page where you can monitor my own trading portfolio (which has been very stable for the past month or so), my SocialPicks Page where you can view my past stock picks and how they have been doing at least from early 2007, and my Podcast Page where you can listen and download mp3's that I have put together on some of the many stock picks on this blog!

If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

Bob 

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 was looking through the list of top % gainers this afternoon and came across an 'old favorite' of mine, Charles River Laboratories (CRL) which closed strongly higher at $64.00/share, up $6.08 or 10.5% on the day. 

I use the term 'old favorite' because this was a prior stock pick of mine going all of the way back to July 30, 2003, when I 'picked' Charles River Laboratories for Stock Picks Bob's Advice when the stock was trading at $35.60.  With the stock closing at $64.00, this represents a gain of $28.40 or 79.8% since posting this stock almost five years ago!   I do not own any shares nor do I have any options on this stock.

Let's take a closer look at this company and I will explain why

CHARLES RIVER LABORATORIES (CRL) IS RATED A BUY

First of all,

What does this company do?

According to the Yahoo "Profile" on Charles River Laboratories, the company

"...together with its subsidiaries, provides solutions that advance the drug discovery and development process, including research models and associated services, and outsourced preclinical services worldwide. The company operates in two segments, Research Models and Services (RMS) and Preclinical Services (PCS). The RMS segment involves in the commercial production and sale of research models, principally purpose-bred rats, mice, and other rodents for use by researchers. It also offers new and proprietary, disease-specific rat models used to find new treatments for diseases, such as diabetes, obesity, cardiovascular, and kidney disease. In addition, this segment provides research models services comprising transgenic services, research animal diagnostics, consulting and staffing services, and discovery services. Further, it provides vaccine support and in vitro technology products for the testing of medical devices and injectable drugs for endotoxin contamination. The PCS segment engages in the discovery and development of new drugs, devices, and therapies. It offers toxicology studies; pathology services; bioanalysis, pharmacokinetics, and drug metabolism services; discovery support; biopharmaceuticals services; and clinical services, including Phase I trials in healthy normal and special populations."

How about the latest quarterly result?

As is often the case, it was the announcement of 1st quarter 2008 results after the close of trading yesterday that drove the stock higher today, in spite of the overall week market tone.  For the quarter, net sales increased 16% to $337.7 million from $291.2 million in the same quarter in 2007.  Net income for the quarter came in at $45.2 million or $.64/diluted share, up from $36.8 million or $.54/diluted share during the same period in 2007.  Non-GAAP results (what analysts estimate), amounted to a profit of $50.8 million or $.72/share, up from $43.2 million or $.64/share last year.

These results exceeded expectations of analysts polled by Thomson Financial, which were for a profit of $.69/share on $325.2 million in revenue.  The company reaffirmed guidance in line with analysts' expectations for the balance of 2008.

How about longer-term results?

Reviewing the Morningstar.com "5-Yr Restated" financials on CRL, we can see the steady record of revenue growth from $599 million in 2003 to $1.23 billion in 2007.  Earnings during this period have grown, albeit somewhat erratically, from $1.64/share in 2003 to $2.25/share in 2007 (after posting a loss of $(.80)/share in 2006).

The company does not pay any dividends and has maintained outstanding shares fairly stable with 54 million in 2003, and 67 million in 2007.  Free cash flow has also been a bit irregular dropping from $122 million in 2005 to a negative $(6) million in 2006 before rebounding to $61 million in 2007.

The balance sheet appears strong with $225 million in cash and $382 million in other current assets reported on Morningstar.com, compared to $302.5 million in current liabilities and $642.5 million in long-term liabilities.  This works out to a current ratio of 2.01. 

What about some valuation numbers?

Looking at Yahoo "Key Statistics" on CRL, we can see that the company is a mid cap stock with a market capitalization of $4.36 billion.  The trailing p/e is a moderate 28.5 with a forward p/e (fye 29-Dec-09) estimated at 18.93.  The PEG ratio comes in at an acceptable 1.43.

Utilizing the Fidelity.com eresearch website, CRL has a Price/Sales (TTM) of 3.09, vs. an industry average of 6.69.  In terms of profitability, CRL has a Return on Equity (TTM) of 9.06% compared to an industry average of 10.60%.

Finishing up with Yahoo, there are 68.18 million shares outstanding with 65.51 million that float.  As of 4/10/08, there were 4.5 million shares out short representing 9.5 trading days of volume (well above my '3 day rule' for short interest significance.) No dividends and no stock splits are reported on Yahoo.

What does the chart look like?

Examining the 'point & figure' chart on CRL from StockCharts.com, we can see the fairly steady price appreciation, with the dip in 2006 correlated with the short-term drop in the company's prospects.  The price has moved from $25/share in March, 2003, to a recent high of $69 in January, 2008.  The stock has been trading above the support levels for the past two years but does not appear over-extended to me. 

Summary:  What do I think about this stock?

Avoiding the issues of 'animal rights', I like the stock and its performance.  They reported a great quarter, beat expectations on both earnings and revenue and confirmed guidance.  Valuation is reasonable with a PEG under 1.5 and a Price/Sales below the industry average.  Return on Equity did come in a slight bit light.

After a dip in 2006, the company has rebounded in an impressive pattern of growth.  I do believe the opportunities for theis company are great with the continued demand for new drugs and therapeutic interventions to improve all of our quality of life.  Finally the chart looks strong as well.

Now, if I just had a signal to be buying some shares.  Meanwhile, I shall continue to 'sit on my hands' in the face of this tumultuous market.

Thanks again for visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  If you get a chance, be sure and visit my Covestor Page where you can monitor my actual trading account, my SocialPicks Page where you can view my latest stock picks and the results of past stock market investment ideas.  Also, visit my Stock Picks Podcast Page where you can download some mp3's on some of the many stocks I write about here on the blog.

Have a great 'rest-of-the-week' in traidng and investing!

Yours in investing,

Bob