I’ve been on a sabbatical from writing because of personal and business reasons but look forward to renewing my dedication to the Contrahour blog.
For visitors that have been here before, you’ll notice that the site has gotten a fresh coat of paint and a couple new bells and whistles. The most useful addition is probably a link to my online charts at stockcharts.com. If you find yourself a bit confused by the short term movements in the markets, please click over to this link to get a quick overview of some price, breadth and sentiment indicators. While these indicators have been whipped around like a 30 year old mule in the past couple of months, they have done well to put me on the right side of the market over long periods of time. Take a look by clicking on the link to the right.
Also, if you want to check to see if I’ve posted anything new, without coming to the site, please sign up for the Bloglines or MyYahoo aggregators. Or subscribe to my posts via email (neither I, nor Feedblitz, will send advertising or other spam).
In freshening up the site, I also reviewed my posts over the past year. I want to be sure that what I’m saying makes sense and adds some value. So here’s a quick review of my hits, strike outs and the foul balls –
The hits…
My best posts have been on industries to avoid. I thought homebuilders in 2005 looked like tech stocks in 2000, post-secondary education stocks were past their growth phase and newspaper stocks were still too expensive to be considered values.
In June and July, I posted a list of stocks from the IBD Top 100 that were either "boxed" or looked interesting. While I routinely look at the list for stock ideas, the stocks I listed turned out to be much bigger winners than even I thought possible. Of the ten stocks I mentioned, only one was a loser (AMMD), two were up in line with the markets (CVH – up 15% and CTSH – up 35%) and the rest were up between 50% and 100% (AVL, CHRW, LKQX, BOOM, CBG, CDIS – now HELX, and CIB). Given this success rate, I’ll be sure to keep you posted on the stocks I find attractive out of the IBD Top 100 list. I had no idea that this method could be so successful over a year-long period.
If you want to know what the heck is going on with commodities, world trade, and the economy please go back and read my first post about the Kondratieff wave. It’s arcane and controversial but it has been dead on right. I fought against this long-wave trend in my numerous battles with the energy sector and it should be a lesson to all investors – don’t fight secular trends.
My research showed that an inverted yield curve in itself didn’t mean the stock market would automatically turn down.
At the time my analysis seemed clear as mud but, in hindsight, I thought I did a good job spotting the October low. If you’re looking for how bottoms form, the October lows are one of those times when the fundamentals, techncials and sentiment all lined up to give a green light.
Luminex (LMNX) has been a great company and stock so far. While the valuation is far from cheap, the business model is so compelling that I’m not sure that price is a limitation, yet.
Despite getting off the oil bandwagon too soon in 2005, I was lucky enough to realize my mistake and be able to get back on.
OVER is one of those frustrating stocks that will die a long, painful death. The frustrating part is that everyone knows it’s going to $0 – so it’s way over-shorted. That makes for very sharp counter-trend rallies on its way to zero. Nevertheless, the technicals pointed the right way in this case.
My research that natural disasters have little effect on the stock markets proved right.
The Echo of The Echo of Baby Boom post came up with some good stocks like Carter’s (CRI), Children’s Place (PLCE), Gymboree (GYMB) and Blackboard (BBBB).
I was hating on GM, before hating on GM was cool. At this point, though, it’s actually a better long bet than a short bet. If GM can offload it’s pension and healthcare problems on the US government like every airline has done, the company will be freed from a huge anchor dragging it down.
I thought the dollar could stage a remarkable recovery, given the negative sentiment.
You can’t raise the price of a semiconductor chip but people will pay you anything for a bag of rocks. The rock companies, MLM, VLC and FRK, turned out to be even stronger momentum stocks than I thought they would be.
The strike outs…
One of the more frustrating aspects of investing and trading is identifying a trend but not profiting from it. Thanks to the Kondrateiff wave, I was on the oil bandwagon in 2002, 2003 and 2004 but thought the trend had reached a zenith in 2005. I sold most of my oil positions in the beginning of the year only to watch the stocks continue to move higher. My mistakes are cataloged here, here, here, here, here, here, here and here. Luckily, I was able to realize my mistake but it was painful at the time.
While my analysis of Chipotle’s seemed intellectually rigorous, it didn’t help me make money. I thought the stock was overvalued from the first day of trading but it’s done nothing but go up.
My negative call on Chinese stocks didn’t pan out too well. The country and the stocks are still taking the world by storm.
I said short steel stocks in June of last year. That was about 100% below current levels. Ouch!
Also, if you had shorted these building material companies, you would have been in pain. Even after a recent correction, they’re all pretty much higher than in April of 2005.
I, along with every other market analyst, thought large cap stocks would start to outperform. That everyone else was calling for a similar trend should have been enough make me realize I would be wrong.
Calls that were neither here nor there…
My analysis of copper stocks was spot on in determining cheap valuation and upside potential. However, I advised to wait for a pull back before buying. That was obviously wrong since PCU promptly increased about 30% without a downtick.
RENT has done well so far, but it’s too early to make a call one way or the other.
I wasn’t as enthused about Sears Holdings (SHLD) as Jim Cramer. While the stock has gone higher, it hasn’t really outperformed the market. However, after the last quarter, which was much stronger than I expected, I am much more positive on the stock. Cramer has been right on this stock and I’m warming up to it – it could be the next JC Penny’s (JCP).
The Outback Steakhouse (OSI) had been one of my favorite restaurants and stocks. If you bought at the time of my post in October you would be making money, but the company has disappointed me so far. Instead of fixing the core operations and continuing to build the other growth concepts in their portfolio, it seems as if management continues to drop the ball on the Outback business. And now it seems they are beholden to a bunch of New York hedge funds who are pressing them to spin out their growth concepts before their ready to stand on their own. It’s a difficult situation and I’m no longer an owner of the stock. While the idea worked, I’ve moved on.
Research In Motion (RIM) has been great trading stock since it seems to move 10 points a week in one direction or another. Before Treo began taking market share and the company had to pay out $600 million to settle patent infringements, I wondered whether the Blackberry was doomed to be the Billy Big Mouth Bass of 2005. It wasn’t – but the stock hasn’t done much but go sideways since then.
I thought the transportation average was looking toppy in December. Six month later it’s still en fuego so that’s a very poor prediction on my part. However, the games not over yet. If the trannies truly are similar to the Dow in 1987, I might not be so wrong.
I thought the municipal bond insurer stocks would take a serious hit after Katrina destroyed much of the Gulf coast. But many smart value investors came in to support stocks such as MBIA (MBI) after the stocks tanked initially. I still don’t understand how an insurance company that doesn’t ever expect to pay a claim can stay in business over the long term but I’ve been wrong so far.
I thought Dicks Sporting Goods (DKS) would become a broken growth stock and be a great short candidate. It was a good short for about a month and has since struggled back to where it fell out of bed the first time. I don’t have an opinion about it now.
Citigroup (C) has struggled sideways since I’ve been long it and since I wrote this post about it last year. I still think it’s boring but interesting.
My short call of Gentex (GNTX) didn’t do much until the past month.
Some other decent posts…
Always "see" the other side of the trade.
The real meaning of the consumer confidence number.
The Fed has been giving with one hand and taking away with the other.
Two opposing views on Greenspan’s legacy (the good and the bad).
Using the ISM as a predictor of the market.
Oil is probably cheap now vs gold – just the reverse of last year.
The bullish shareholder rights trend.
Haven’t we seen this real estate bubble before?
Changing a company’s capital structure doesn’t add any value.