September 1, 2007: Aero defense notes and a etf purchase

Picture: When the military blimp built by Goodrich and Goodyear was King...in Akron, Ohio. Click to enlarge.


Today I purchased two ETFs, the Vanguard Whitehall High Dividend Yield Fund at $40.20 (VYM) and the Claymore Global Brokers and Asset Managers Fund at $24.99 (EXB). I believe these are good plays on several fronts: yield, pin action with lots of assets being bought and sold in world markets and the stocks included in the funds (see for yourself).

In Aero Defense and commercial aviation:

President Bush will seek another %50b in funds for Iraq next month.
Democrats, invested in defeat, will attempt to block the request by trying to negate General Petraeus' presentation to Congress on the war. Field Marshall Harry Reid and El Presidente of Botox Nancy Pelosi attempt a coup.

As predicted, Boeing won NASA's Ares I upper stage to the tune of $525m for starters.

India is seeking bids fir 126 jet fighters from several competitors. My view is that Russia will have the inside track with its MIG 35 coupled with giveaway pricing.

DRS won another Navy contract for $250m providing enhanced satellite-based communications.

The Army is reviewing 18,000 contracts worth $3b for Iraq.

Norwegian Air ordered 42 Boeing 737s, worth $3.1b

Xiamen Airlines ordered 25 Boeing 737s worth $1.9b.

Thomas Enders has assumed the unenviable position as the new CEO of Airbus. Reportedly, Enders took the job after Jay Leno and Toots the Clown turned the job down.

I like the aero defense sector as a whole, especially:

BE Aerospace (BEAV)
Boeing (BA)
CACI International (CAI)
Ceradyne (CRDN)
DRS Tech (DRS)
EDO Corp (EDO)
Enbraer (ERJ)
Esterline Tech (ESL)
Fluor (FLR)
General Dynamics (GD)
General Electric (GE) - for several reasons
Goodrich (GR) - still my favorite
KBR Inc. (KBR)
L-1 Identity Solutions (ID) -- great poential
Precision Castparts (PCP)
Spirit Aerosystems (SPR) - up and coming
Textron (TXT)

August 28, 2007: Financials and the shorts

Here is a brief summary of short positions in the financial sector. A more in depth look may be cause for selective investing as a contrarian or, on the other hand, following the institutional herd.

For the month ended August 15th, short interest was up 5% for the sector overall, compared with a 3% decrease for the companies in the S&P 500. Across the board, the largest changes were by the Brokers and Multinational Banks (up 49%) and the Reinsurers (down 17%).

Largest 1 month short interest % change:

LAZ 98%
STT 111%
NCC -33%
ETFC 60%
FNM 111%
NFS -52%
IVZ -50%
PGR 64%
ACGL -79%

Largest short interest as % of float:

BSC 10.4%
STT 3.5%
FITB 4.4%
OXPS 13.9%
FED 54.5%
GNW 6.1%
AMG 20.5%
RLI 9.9%
MRH 11.8%

Most days to cover:

COWN 4.3
STT 3.0
FITB 5.1
MXTX 13.9
DSL 7.9
PNX 12.1
AMG 7.4
MCY 12.2
MRH 9.4

Largest one month price % change:

COWN -36%
BK -14%
NCC -21%
ETFC -40%
TMA -61%
KMA -34%
FIG -28%
AFG -20%
AHL -19%

The above mentioned stocks were extracted from the following order in the financial sector:

Brokers and Multinational Banks
Securities Processors
Regional Banks
Online Brokers and Mkt Structure
Speciality and Mortgage Finance
Life Insurance
Asset Management
P&C Insurance
Reinsurance

August 24, 2007: High Yield picks to ponder

With interest rates ticking lower, picking up some valuable high yield stocks and LEAPS may be a nice addition to your portfolio. Here are some that passed through a recent search parameter I established:

AmeriGas Partners LP (APU) $35.00 7.10%
Broadridge Financial Solutions (BR) $25.00 13.50% dividend likely will be cut to 9%
A M Castle (CAS) $30.00 8.60%
Consolidated Communications Holdings (CNSL) $19.00 8%
Citizens Communications (CZN) $14.20 7.30%
Enbridge Energy Partners LP (EEP) $51.00 7.20%
Entercom Communications (ETM) $20.50 7.30%
First Industrial Realty Trust (FR) $40.00 7.10%
Health Care REIT (HCN) $37.00 7%
Hospitality Partners Trust (HPT) $39.00 7.90%
HRPT Properties Trust (HRP) $9.75 8.20%
Hersha Hospitality Trust (HT) $11.00 10.90%
Goodrich Petroleum Corp LEAP 2101 LP $31.25 8.30%
Liberty Property Trust (LRY) $38.25 6.50%
Lexington Realty Trust (LXP) $21.00 7.50%
Mindray Medical International (MR) $33.00 10.00%
Pittsburgh and West Virginia RR (PW) $9.00 8.90%
Regions Financial Corp (RF) $32.60 14.50%
Ship Finance International (SFL) $27.41 8.10%
Siemens AG (SI) $124.25 8.50%
TC PipeLines LP (TCLP) $36.25 7.60%
Expeditors International Washington LEAP 1009 (VF) $45.15 8.80%
Windstream Corp (WIN) $14.00 7.30%


These are ideas, not recommendations.

August 21, 2007: Ideas: Large caps with a nice Return On Equity

Time for another stock screen. Here are several large cap stocks with very attractive REOs, selling quite cheap. I am looking at several for investment, and own a couple. Insurance, drillers, banks and ADRs lead the way on this screen for ideas.

CRH PLC ADR (CRH) 18.25%
ASML Holding NV ADR (ASML) 34.70%
Telefonica SA ADR (TEF) 38.46%
Aetna (AET) 18.29%
BG Group plc ADR (BRG) 25.50%
Transocean Inc (RIG) 26.42%
Cummins Inc (CMI) 25.33%
Diamond Offshore Drilling Inc (DO) 36.92%
PT Telecommunications Indonesia (TLK) 44.15%
Humana Inc (HUM) 19.96%
DIRECTV Group Inc (DTV) 23.27%
America Movil SA de CV ADR (AMX) 43.04%
ABB Ltd. ADR (ABB) 31.82%
Freeport-McMoran Copper and Gold (FCX) 33.12%
Chesapeake Energy Corp (CHK) 20.18%
CNOOC Limited ADR (CEO) 34.30%
Aluminum Corporation of China ADR (ACH) 30.51%
Sasol Limited ADR (SSL) 27.63%
Global SantaFe Corp (GSF) 25.91%
Huaneng Power International ADR (HNP) 17.21%
Portugal Telecom SGPS ADR (PT) 45.68%
BASF AG ADR (BF) 18.46%
PACCAR Inc (PCAR) 30.44%
Noble Corp (NE) 28.39%
Petroleo Brasileiro SA ADR (PBR) 27.26%
Valero Energy (VLO) 33.69%
XL Capital (XL) 19.74%
Deutsche Bank AG (DB) 21.27%
Morgan Stanley (MS) 25.87%
Unilever plc adr (UL) 36.94%
ACE Limited (ACE) 18.43%
Merrill Lynch (MER) 26.67%
Allied Irish Banks ADR (AIB) 24.46%
The Chubb Corp (CB) 20.24%
The Travelers Company (TRV) 18.98%
Goldman Sachs (GS) 31.27%
SK Telecom, Ltd. ADR (SKM) 19.98%
Credit Suisse Group ADR (CS) 24.14%

August 20, 2007: Smart spending...best stuff at a good price

Every so often, MONEY magazine publishes a fun issue. The most recent, set to be on newsstands shortly, is almost solely devoted to highlighting the "best stuff at the right price". We all know that being a good investor means saving money as well as investing appropriately with the correct attitude.

Here are some of MONEY's recommendations, including the "best advice':

"When you do not know a thing, to allow that you do not know it - this is knowledge."-Confucius

"He that is overcautious will accomplish little." - Friedrich von Schiller

"For age and want, save while you may; no morning sun lasts the whole day." -Benjamin Franklin

"It is the part of a wise man to keep himself today for tomorrow and not venture all his eggs in one basket." - Miguel de Cervantes

"Asset allocation...is the overwhelmingly dominant contributor to total return." - Gary Brinson, Brian Singer and Gilbert Beebower

"The nest way to own common stock is through an index fund." - Warren Buffett

"The real key to making money in stocks is not to get scared out of them." - Peter Lynch

"Performance comes and goes, but costs roll on forever." - John Bogle

"If a business is worth a dollar and I can buy it for forty cents, something good may happen to me." - Warren Buffett

"There is nothing new in the world except the history you do not know." - Harry Truman

"It takes as much energy to wish as it does to plan." - Eleanor Roosevelt

"The time is always right to do the right thing." - Martin Luther King, Jr.

"The avoidance of taxes is the only intellectual pursuit that carries any reward." - John Maynard Keynes

Best television: Panasonic TH-50PX600U 50-inch 720P Plasma est. $1500.00

Best theater system: JVC DVD Digital Theater System TH-D50 est. $400.00

Mattress and box spring: Sealy Silver Coast Ultra Plush Euro Pillowtop (no est. cost)

Everyday suit: Jos. A. Bank Business Express Suit est. $550.00

Quality men's suit: Hickey-Freeman Barrett est. $1350.00

Desk chair: Herman Miller Aeron est. $949.00

Printer-Copier-Fax-Scanner: Epson Stylus CX9400F est. $150.00

Golf driver: Callaway FT-3 est. $299.00

Grill: Weber Genesis E-310 est. $550.00

Stationary bike: Spinner Sport est. $499.00

Mobile personal finance software: Pocket Quicken est. $40.00 Ultrasoft Money est. $40.00

Credit card for college-bound students: Citi's mtvU (rewards timely payments and good grades)

Enjoy your Monday morning.

August 13, 2007: Aero Defense and Commercial Aviation

Pictures: US Army unmanned weapons systems



Defense stocks look solid in a sea of turmoil. Aero Defense stocks are especially attractive and I have been proud to bring to your attention some nice winners in this sector to you over the past months:

General Dynamics (GD) received a $339m order for 600 Cat II MRAP vehicles, a total of 4400m for M12 SEP tanks and a $120m Stryker order.

Lockheed Martin (LMT) will repay the government $265m for JSF billing errors.

Raytheon (RTN) received a $116m LRASS order.

CRDN received am $800m plus total order for ESAPs.

Northrup Grumman (NOC) and Lockheed Martin (LMT) received a $340m contract for the 3rd NSC (Coast Guard) AND $255m to cover coast overruns on the first two NSCs.

The Boeing 787 maiden flight will be pushed back to October. Most feel that this will have a nil impact on the plane or sales.

Boeing (BA) announced that Spirit AeroSystems has joined the P-8A Poseidon team.

Aviation Daily has reported a large shift in market share from major carriers to low cost airlines.

Stock recommendations:

I like the entire aero defense sector at this time. This is the first time I have recommended the entire sector.

Individual stocks:

BE Aerospace (BEAV)
Goodrich (GR)-- highly recommended
Precision Castparts (PCP)
Spirit AeroSystems ( SPR) --highly recommended
Boeing (BA)
Esterline Technologies (ESL)
DRS Technologies (DRS)
EDO Corporation (EDO)
General Dynamics (GD) -- highly recommended
L-3 Communications (LLL)
Lockheed Martin (LMT)
Northrup Grumman ( NOC)
Raytheon (RTN)


Look for more Homeland Security contracts to the Coast Guard for Deepwater program.
Look for more USAF/Navy and Army unmanned weapons systems to be mass produced by major defense contractors.
Look for bi-partisan support for equipment and supply of the military in the coming months.

August 10, 2007: The Ideal Portfolio, thoughts of Harry Browne

Yesterday was a smack down day. For some reason, my extraordinary gains from Wednesday did not completely evaporate, just about 60% of them. So much for the "attaboy" as we ride a rollercoaster.

There are times when referring back to an old chestnut book of investment advice is useful, and interesting. I did that today (instead of selling).

Harry Browne was a very interesting and insightful person who managed to articulate his views quite clearly on everything from Swiss Banks,Portfolio Theory, Gold and the Libertarian Party which nominated him for President twice. He died almost two years ago. But not forgotten.

I have written about Mr. Browne before, and several years ago had an interesting e-mail exchange with him on a variety of topics. We disagreed quite often on policy issues, but he was always the consummate gentleman who never talked down to anyone. We did agree on some classical music selections(he was an opera buff). The following is a direct excerpt from his 1981 book, INFLATION-PROOFING YOUR INVESTMENTS:


THE IDEAL PORTFOLIO (from Chapter 27)

"For the next ten years, one investment will do better than all the others; no mix or combination of investments will be abler to beat it. If you think you've identified that investment, you may be tempted to put all of your money into it.

Unfortunately, none of us knows for sure what the big winner will be. Each of us may make a guess - and, because there are so many of us, some of the guesses will turn out to be right. But that won't mean that anyone really knew the future - only that a few people estimated shrewdly or guessed well.

Uncertainty is a fact of life. The world is too complicated for anyone to be able to project all the details of the present into the future and predict where the world will be ten years from now.

But that shouldn't make you feel helpless - only humble.

Financial diversification can protect you from what can't be foreseen. A diversified portfolio should reflect your expectations by emphasizing the investments you believe will do best. But it should also include what appear to be second and third best investments, as well as small amounts of hedges that probably will lose money if your favorites pay off. It isn't easy to put money into hedges you don't expect to do well, but there are two reasons that you should.

First, the future may not match your expectations. If it doesn't, the hedges will save you from a disastrous loss.

Second, over ten years, the road from here to there will not be a straight line. Your favorite investment will have ups and downs along the way - and each time its down, you may wonder if it will ever get up again. The hedge investments provide comfort and security during those times by partially offsetting the temporary losses on your favorites.

The surprise factory in Washington will continue to be the main source of investment uncertainty - as the government looks for a new way to paper over old problems. You can't anticipate what the government will do next year or even next month. And even if you knew what the government would do, you still couldn't be certain of the investment effects or of their timing.

If you have opinions about the future, you should act on them. But it's a mistake to confuse opinions with knowledge."


Down home basics written in 1981 still have merit today.

August 9, 2007: Attaboy! and a better ETF for commodities

Once in a blue moon, everything goes better than planned. Wednesday was my second best overall performance of portfolios to date this year. When a bit of a laggard, VHI, goes up 28%, you are indeed lucky, not brilliant. I am not going into details, because this portfolio will not hit another inside the park home run for awhile, if ever. As usual, I'll release my portfolio in portions over the next few months.My portfolios are not biased in one or two sectors, they are balanced to suit me. Thus, a killer day is a welcome event.


NEW COMMODITY FUND MAY BE A WINNER: GBC

Goldman Sachs has launched a new ETF, the GS Connect S&P GSCI Enhanced Commodity Total Return Strategy Index ETN (GBC). This fund may also win first place in length of name.

The security tracks the S&P. This ETN also takes into account several new indexes that try to avoid contango. Contango happens when the cost of the next month future's contract is more expensive than the current month contract. This has investors loosing an edge.

Here iare the marked enhancements for this commodity fund:

In oil markets, the WTI crude, if contangoed more than .50%, dictates that the fund will roll the index from the first month to the sixth month, rather than the first to the second. And, for Brent crude, if the contango between the second and third month is more the .50%, the index rolls from the second to the seventh month.

The index also factors other commodities in a unique paring:

The Heating Oil contract is rolled only to the December contract (annually).
The Natural Gas contract is rolled only to the January contract (annually).
The Chicago Wheat contract is rolled only to the September or December contract biannually.
The Corn contract is rolled only to the July contract (annually in May).
The Lean Hogs contract is rolled only to the April or August contract biannually.
The Live Cattle contract is rolled over only to the April or October contract biannually.

More twists and turns are included...go see for yourself.

Is this worth a 1.25% annual fee plus the usual expenses? Maybe.

It is worth looking at if commodities are in your investment world.

August 8, 2007: Credit? Where do other facets stand and some recommendations

With all of the sub-prime panic rants amongst the media and others, I thought it would be interesting to look at where a few other finance-oriented groups stand. Here are my findings:

Credit Cards: Credit card profits decreased in June and July as a result of lower yields and higher losses. Second quarter returns were a bit lower than expected by analysts, but bankruptcies and other losses began to normalize.Third quarter trends are expected to decline modestly as credit losses continue to trend higher.

Credit Quality: Bankruptcy filings for the week ended July 27th were up 31% from a year ago. The four week moving average is up 35% from last year and year to date filings are up 51%. 2008 looks better, according to company reports. Many analysts have revised their bankruptcy numbers downward for the year.

Auto Finance: Sub-prime losses decreased while mid prime losses increased. Used car prices are up slightly. Profitability remains suspect due to higher costs and increased stips to meet loan requirements. Many view this as a good thing longer term.


Stocks to consider for purchase:

Capital One Finance (COF)
CapitalSource Inc. (CSE)
Citigroup (C)
CompuCredit Corp. (CCRT)
JPMorgan (JPM)
Morgan Stanley (MS)
Neinet Inc. (NNI)

I know that several of the above stocks have been rocked by the sub-prime rants. This may be a great time to snap a few up for your portfolio.

August 6, 2007: What to do? Stocks, wild markets, real estate

PICTURE: DO NOT BECOME ONE!

Being an investor for over thirty-five years - and still loving it - I think the first thing to do is something NOT to do. Don't panic.

If you are top heavy in banks,home builders,mortgage companies or investment houses that are top heavy with junk debt. Or, if you are in a hedge fund that gives you insomnia, do the following: cut back 50% on your positions. You have taken a shot to the groin but don't throw in the towel. Most of these securities and funds will bounce back longer term, especially if government gets into the home business to help those that can't afford a home of their own (and who started the sub-prime mess to begin with).

I would place cash into a simple fund: GE InterestPlus which yields 5.43% on a layered interest scheme. www.geinterestplus.com

I would also use the security lists I have generated on the past several posts to find individual stocks that will fit well into your diversified portfolio.

And, I would look long and hard at purchasing existing homes as an investment. New spec homes that are sitting vacant also represent great long term value. I have never seen a better buyer's market for residential and multi-family housing in many areas of the country than now. Make low ball offers through a Realtor who has helped pre-screen properties that fit your criteria. For most novice investors, properties should be less than thirty miles from your home.

When buying (unless I really see a property I want that is dirt cheap), I generally make offers on fifteen homes and have the sellers eliminate themselves by their actions. Generally, one or two have to sell. Or, pass and try again later on the same or different homes. The principle is simple, buy at the lowest price from an individual that has to sell.And you will know which ones have to sell be seeing how low they go.Some owners become hostile - they are toxic and cannot take emotion out of their business procedure of selling the property. I find the latter amusing.

Recently I bought single family homes in Southport, NC. On day one, I made offers on twelve homes at 8 a.m. through a Realtor (I am licensed in other states and found a Realtor with excellent sources of information about growth plans for the area - a great help).By noon we were down to five. At 4:45 p.m. we were down to two. I selected one for purchase (the other thought for sure I was going to meet his terms and would not budge). At 5:15 the one owner I had not selected called and asked when we could close on the home. I said sorry,but I'll see you in two months when your home will still likely be on the market.Compressed negotiations are a great idea once you acquire real estate experience and the ability to look at each purchase as a business, not emotional decision. The same business mindset should be in place for securities.

Do not fall prey to media swirl, ego-satiated blog professionals or be paralyzed. Have confidence in your ability to stick with almost all of your core holdings and begin to add a few defensive stocks and wisely purchased real estate to your portfolio. Over the long term, you will do just fine.

PS -- I really enjoyed endorsing all the rent checks this week. This repetitive name signing beats just about all double shorts and day traders out there!

August 2, 2007: CSFB recommendations, part two

J-the end, as per the August 1 post: Self defense stock list


Jabil Circuit (JBL)
JetBlue Airways (JBLU)
Johnson Controls (JCI)
Kellogg (K)
Kenneth Cole Productions (KCP)
Kinder Morgan Energy Partners (KMP)
Liz Claiborne (LIZ)
Lyondell Chemical (LYO)
MetLife (MET)
Microsoft (MSFT)
National CineMedia (NCMI)
Nike (NKE)
NRG Energy (NRG)
Nucor (NUE)
Occidental Petroleum (OXY)
Office Depot (ODP)
Peabody Energy (BTU)
PG&E Corp (PCG)
Phillips-Van Heusen (PVH)
Polo Ralph Lauren (RL)
Progressive Corp (PGR)
Qualcomm (QCOM)
Regal Entertainment (RGC)
Republic Services (RSG)
Ross Stores (ROST)
Schering-Plough (SGP)
Southwest Airlines (LUV)
Staples (SPLS)
Texas Instruments ( TXN)
TJX Companies (TJX)
Under Armor (UA)
United Technologies (UTX)
Verizon (VZ)
Wal-Mart (WMT)
Waste Management (WMI)

August 1, 2007: Best defensive plays according to CSFB:Part 1

picture: self defense

It is no secret that I admire much of CSFB's analysis. In certain sectors they are truly outstanding.

Today, they released a comprehensive seventy-plus page report on the best defensive plays for the market as it now stands. All of these have been selected as Outperform and Strong Buys to the exclusion of other companies in their sectors. Without further comment, here they are:

3Com Corporation (COMS)
Accenture Ltd. (ACN)
Air Products and Chemicals (APD)
Alergan (AGN)
Allied Waste Industries (AW)
American International Group (AIG)
Applied Materials (AMAT)
Arch Capital Group (ACGL)
AT&T (T)
Boardwalk Pipeline Partners (bwp)
Boeing (BA)
Check Point Software (CHKP)
Cinemark Holdings (CNK)
Cisco Systems (CSCO)
Citigroup (C)
CME Group (CME)
Comcast (CMCSA)
CVS Caremark (CVS)
Danaher (DHR)
Danaos (DAC)
EBay (EBAY)
Ecolab (ECL)
El Paso Corp (EP)
Enbridge Energy Partners (EEP)
Enterprise Products Partners ( EPD)
EV Energy Partners (EVEP)
Fidelity National Information Systems (FIS)
Flextronics (FLEX)
General Electric (GE)
Goodrich (GR)
HJ Heinz (HNZ)
Halliburton (HAL)
Hanesbrands (HBI)
Hewlett-Packard (HPQ)
Huntsman Corp (HUN)
Intercontinental Exchange (ICE)

j-z will be published tomorrow.