S&P 500 Support and Trend

Today's winner: Cash

I apologize for a long break between my Blogs.  The Stock market have been behaving pretty badly for past couple of months. Especially the U.S Government debt ceiling and Inflation in Emerging markets has finally spill over to the stocks. While the Governments are struggling to keep up with rising debt and inflation, the Companies are sitting on a historic amount earnings and cash. Companies are not able to decide on a stable market to Invest and grow their investments. But the inflation is creeping up across the world and companies cannot sit on  un-invested cash for too long. There is only so much of Gold and Silver to hedge on the inflation. Those two are in historic highs . Let us look at the S&P 500 behavior for the past couple of months. As i have noted in my April Blogs when the stock market headed up on very low volume with least amount of Institutional Investors participating in the rally.

You can see from the above chart that S&P was down 9 out of 10 sessions on high volume. But the small positive not is that the Volume was weaker than the May crash to 1249. We are 30 points away from the Lows established in May. The Overall trend is very negative. We are yet to test the 52 week lows , Most of the downtrend is caused by recent spike in Oil Prices and Spiraling Debt crisis in the Western block.

The Recent oil reserve Data and Saudi efforts to increase output will recent in Supply exceeding demand in the Oil markets. Once the Summer driving season is over, we would see a 15% drop in Oil prices and create a temporary Commodity crash, which bodes well for the financial Markets.

Based on my recent analysis, S&P 500 has short term support around 1250 (may 2011 low) and if we continue sliding , we are looking a 52 week low of 1160. I would advice to stay in commodities (Gold , Silver and Oil ) until the low is established and switch back to Equities around the time we start seeing signs of Summer Rally.

The S&P 500 will see a 1400 by the end of this year if the Middle East and European Debt crisis Subsides.

I am Staying on Corporate Bonds, Oil stocks and Municipal Bonds until things are clear ..

Good Luck with your Investments...and Please check out my Novel "Life to Life : Journey to the Other side" in Amazon 

Time To take profits - Global Unrest

This is the synopsis of all chain of events in Middle East.. A Great read if you are not tracking the Middle East turmoil day by day

http://edition.cnn.com/2011/WORLD/africa/03/04/middle.east.africa.unrest/

Market Momentum

I have been watching the Market in past 30 sessions since the beginning of the Middle East Crisis. This is what i see

1, The  Oil Price has been extremely Volatile

2,  Around 25% of Global oil Supply is at Stake during the Crisis.

3,  No visible Leadership from U.N or any of the Superpowers (Existing and Emerging)

4,  Market pricing in a $125/ barrel Crude oil price.

5,  Gold is Surging towards $1600 /ounce with Hedge Investor buying spree.

6,  U.S and EU on the sidelines due to the Economic and Fiscal Deficit dictating their Global and Economic policies.

Lets watch the Market momentum for past week.

Market Momentum		Advances	Unchs	Declines	20-Day MA	50-Day MA	100-Day MA	150-Day MA	200-Day MA
Today	-0.78%	920	108	3142	50.53%	59.59%	70.74%	79.73%	81.22%
Yesterday	+1.94%	3400	79	691	61.58%	65.01%	74.72%	81.31%	82.59%
Last Week	+1.83%	3537	73	559	58.07%	62.70%	73.92%	81.14%	81.96%
Last Month	+0.30%	2164	122	1883	57.81%	65.99%	77.40%	82.77%	81.12%

Lets see how many Distribution days we had in past 30 sessions

$INDU - Daily Candlesticks: "
via StockCharts.com
"

Seems like we had 4 sessions of Heavy selling and not even one Session of heavier buying..

This shows couple of Red flags

1, The Market is definitely in a negative Trend.

2,  Institutional Investors who create heavy volume is on the Sidelines.

3, End of Earnings season.

4, Arrival of Summer Driving season which naturally boosts Gasoline prices.

5,  High $3+ Gasoline prices for past 4 months cutting into Consumer spending.

Looking at all of the above and possibility of IRAN revolution happening anytime which happens to be the Top Oil producer in the region after Saudi . We have one Toxic Brew of bad news to kill the World Economic Growth .

If Stock market is look ahead for 9 months of Economic conditions , the sell of will not stop until we see a 10% drop in coming  months.

I would suggest to Exit out of High Flying /High Beta stocks and head to Dividend paying and conservative Bonds...

As Always Cash is the King

Baidu -- Growth Stock of the tomorrow

Baidu, Inc. provides Chinese and Japanese language Internet search services. Its search services enable users to find relevant information online, including Web pages, news, images, multimedia files, and blogs through the links provided on its Websites. The company also offers online community-based products and entertainment platforms; an instant messaging service; and a consumer-oriented e-commerce platform. In addition, it designs and delivers online marketing services and auction-based P4P services that enable its customers to reach users who search for information related to their products or services. The company serves online marketing customers consisting of small and medium sized enterprises, large domestic corporations, and Chinese divisions or subsidiaries of multinational corporations primarily operating in the medical, machinery, education, franchising, electronic products, e-commerce, ticketing, tourism, information technology, consumer products, real estate, entertainment, and financial services industries. It sells its online marketing services directly, as well as through its distribution network. The company was formerly known as Baidu.com, Inc. and changed its name to Baidu, Inc. in December 2008. Baidu, Inc. was founded in 2000 and is headquartered in Beijing, the People’s Republic of China

Analysis

BIDU is single best stock for Investors to take part in the China's Super hot economy.   There are many stocks in this sector like SOHU, NTES, SINA which are all doing very well in recent few years.

BIDU is filling the need of 1/6 of the world population which is not served by Google. The middle class in China is twice bigger than the entire population of United States.

If Google lessons are true, more youngsters use the search engine on the typical day than any other age group.  With Google out of the way and Yahoo/MSFT being sidelined in mainland china. Bidu is poised for APPLE like growth.

Lets see the fundamentals of Baidu Company and valuation based on its recent earnings.

Valuation Measures

Market Cap (intraday) : 40.39B Enterprise Value (Feb 24, 2011): 42.96B Trailing P/E (ttm, intraday): 75.65 Forward P/E (fye Dec 31, 2012): 32.11 PEG Ratio (5 yr expected): 0.89 Price/Sales (ttm): 34.90 Price/Book (mrq): 32.86 Enterprise Value/Revenue (ttm): 35.77 Enterprise Value/EBITDA (ttm): 66.22

	2010-12*	2009-12	2008-12
Income Statement
Revenue	7,915	4,448	3,198
Operating Income	3,959	1,605	1,097
Net Income	3,525	1,485	1,048
Earnings Per Share	10.10	4.27	3.02
Shares Outstanding	349	348	347
Balance Sheet
Current Assets	8,782	4,843	2,852
Non Current Assets	2,266	1,314	1,086
Total Assets	11,048	6,157	3,938
Current Liabilities	2,552	1,400	849
Total Liabilities	2,643	1,404	849
Stockholders' Equity	8,406	4,753	3,089
Cash Flow
Cash From Operations	—	2,279	1,746
Capital Expenditures	—	-450	-477
Free Cash Flow	—	1,829	1,269

You can see that the EPS has tripled in last four years.. The stock price did Quadruple in past four years, with the rest of the Market...With a projected annual growth of 75% YOY (year over Year). This stock will be $400 in next 5 years. Recently the BIDU jumped almost 25% post earning seasons. But the stock got beaten up in last few sessions due to Middle east turmoil. But one that should be clear to investors is that Oil price increase will not affect the revenue of a search engine company like BIDU or GOOGLE. Any dip in this stock is a great buying oppurtunity.

Five Year Shows that the stock is well above its support lines

BIDU - Weekly Candlesticks: "

via StockCharts.com
"





With tremendous growth and doubling EPS every year with limited threat from Google/Yahoo/MSFT  BIDU is a real winner long term

My Target price for Baidu is $160 by end of the Year 2012.

The best entry points are below

First Buypoint if the Market shows signs of turnaround :                $109
Second Buypoint if S&P cracks the 50 day average :                    $101
Third buy Point if Market crashed another 1000 points:                  $97



Please comment ,it helps us to see different viewpoints.


Happy Investing

NetGear - Gem in the Telecom Space - Earnings Tuesday

Today's winner : NetGear (NTGR)


About the Company :

NETGEAR, Inc. designs, develops, and markets networking products for home users and small businesses worldwide. The company’s products enable users to connect and communicate across local area networks and the World Wide Web; and share Internet access, peripherals, files, and digital multimedia content and applications among various networked devices and other Internet-enabled devices. Its product line consists of wired and wireless devices that enable Ethernet networking, broadband access, network connectivity, and network storage and security appliances.

Analysis

Netgear has been one of the best router companies in the computer Networking space.  This company is highly cyclical and sensitive to the economic conditions.

To See One of the clear examples of its cyclical  nature , we should go back as early as 2007-2008. During the beginning of recession when consumers and companies

cutback on investments, Netgear reversed to negative earnings growth in parallel with the Rest of the Economy. Now the economy has turned the corner and we see

increased consumer and corporate spending take over the arena. Its time to invest in companies of cyclical nature.

Here is the snapshot from recent Fourth quarter results announced on Nov 10.

You can see the primary business revenue exposure is in North America and rest in Asia.  Even though Asia is booming we have always been on the top of Technology spending.

                                                     October 3,       Percentage        September 27,
                                                         2010            Change              2009
                                                      (In thousands, except percentage data)
  North America                             $ 121,956        61.7 %           $  75,408
  Percentage of net revenue                  51.7 %        44.1 %
  Europe, Middle-East, and Africa   $  89,120         22.8 %          $  72,590
  Percentage of net revenue                 37.8 %         42.4 %
  Asia Pacific                                  $ 24,941          8.1 %             $  23,073
  Percentage of net revenue                 10.5 %         13.5 %

Lets see the valuation of the company versus future guidance..(as of 02/07/2011)

Market Cap (intraday):                            1.33B
Enterprise Value (Feb 8, 2011):                  990.02M
Trailing P/E (ttm, intraday):                   29.32
Forward P/E (fye Dec 31, 2011):          17.57
PEG Ratio (5 yr expected):                        1.14
Price/Sales (ttm):                                  1.51
Price/Book (mrq):                                 2.77
Enterprise Value/Revenue (ttm):         1.15
Enterprise Value/EBITDA (ttm):         10.15


Lets compare the valuation


Valuation versus the Index and Telecom/networking space.

Name	P/E (TTM)	P/E (Fwd 12 Mo.)	PEG	1 Year EPS Growth Rate	Next 3-5 yrs EPS Growth Rate
NTGR	21.4x	17.3x	1.08x	23.6%	-0.3%
Telecommunications Equipment Industry	24.4x	21.0x	-0.05x	14.1%	9.2%
Technology Sector	24.3x	19.9x	-0.06x	25.3%	21.1%

You can see that its way slightly undervalued compared to the telecommunications Equipments/network industry as a whole.

These are reasons that stock might outperform the rest of the industry .

1, Retailers  (traditional and Online) posting high revenues across computer related products
2, The stock is selling for 17.57, which is low compared to estimated 18 % Growth rate.
3,  High Demand for WIFI enabled devices boosting the need for Home/Office Networking bandwidth.
4,  Reported 3rd qtr 2010 earnings of $0.45 per share on 10/26/10. This beat the $0.38 consensus of the 8 analysts covering the company.


Lets look at the Weekly chart


NTGR - Weekly Candlesticks: "

via StockCharts.com
"



The stock is on the consolidation mode this year and settled well above the 50 day average with Reduced volatility. I would see this trading above $50 in 6 months  time frame..

My target price for NTGR is $45 in next few weeks if they beat the $0.47c  consensus. (which they will easily).

One of the areas of concern is the Speed at which the Company comes up with New products and speed of Expansion in Asia

Happy Investing.

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Blackstone Group - Seriously Undervalued

Today's winner : BlackStone Group LP (BX)

About the Company :

The Blackstone Group, L.P., together with its subsidiaries, provides alternative asset management and financial advisory services worldwide. The company operates in four segments: Private Equity, Real Estate, Credit and Marketable Alternatives, and Financial Advisory. The Private Equity segment involves in private equity investing through five general private equity funds and one specialized fund focusing on communications-related investments. This segment engages in various transactions comprising leveraged buyout acquisitions of companies, transactions involving start-up businesses in established industries, minority investments, corporate partnerships, distressed debt, structured securities, and industry consolidations. The Real Estate segment manages opportunistic real estate funds, internationally focused real estate funds, European focused real estate fund, and real estate debt investment funds. This segment invests in lodging, urban office buildings, and various real estate operating companies. The Credit and Marketable Alternatives segment engages in the management of funds of hedge funds, credit-oriented funds, CLO vehicles, and publicly-traded closed-end mutual funds. The Financial Advisory segment offers corporate, and mergers and acquisitions advisory services; restructuring and reorganization advisory services; and fund placement services for alternative investment funds. Blackstone Group Management L.L.C. operates as the general partner of the company. The Blackstone Group, L.P. was founded in 1985 and is headquartered in New York, New York.


Analysis


Blackstone has been one of the flagship companies in the Investment management space.  In fact its one of the few companies which survived the financial crisis by being conservative on the derivatives and CDE based investments.


Here is the snapshot from recent Fourth quarter results



Economic Net Income (“ENI”) increased to $1.4 billion for the full year 2010, up 102% from 
$703 million for the full year 2009. ENI increased to $513 million for the fourth quarter of 2010, 
up 56% from $329 million for the fourth quarter of 2009. 
Distributable Earnings were $702 million for  the full year 2010, up 47% from $479 million in 
2009; Distributable Earnings increased to $239 million for the fourth quarter of 2010, up 12% 
from $213 million in the fourth quarter of 2009. 
GAAP Results Attributable to The Blackstone Group L.P. improved in 2010 with a net loss of 
$370 million, compared to a net loss of $715 million in 2009, in each case including net IPO and 
acquisition-related charges. GAAP Net Loss Attributable to The Blackstone Group L.P. was 
$11 million in the fourth quarter of 2010, compared to a net loss of $143 million in the fourth 
quarter of 2009. 
Fee-Earning Assets Under Management increased 14% to $109.5 billion at December 31, 2010, 
from $96.1 billion at December 31, 2009 while Total Assets Under Management increased 30% 
to $128 billion at December 31, 2010. 
Blackstone declares a quarterly distribution of $0.32 per common unit which brings full year 
distributions to $0.62 per common unit.


Lets see the valuation of the company versus future guidance..(as of 02/03/2011)

Market Cap (intraday)	6.38B
Enterprise Value (Feb 3, 2011)3:	11.76B
Trailing P/E (ttm, intraday):	N/A
Forward P/E (fye Dec 31, 2011)1:	11.73
PEG Ratio (5 yr expected)1:	0.81
Price/Sales (ttm):	2.25
Price/Book (mrq):	1.49
Enterprise Value/Revenue (ttm)3:	4.32

lets compare the valuation 




Valuation versus the Index and Financial Group

Name	P/E (TTM)	P/E (Fwd 12 Mo.)	PEG	1 Year EPS Growth Rate	Next 3-5 yrs EPS Growth Rate
BX	15.3x	11.9x	0.47x	28.4%	--
Specialty Finance Industry	16.6x	16.2x	-1.13x	8.1%	-12.4%
Financials Sector	17.8x	23.4x	-0.4x	31.0%	-2.9%
S&P 500	19.3x	17.2x	-0.19x	22.6%	10.3%

You can see that its way undervalued compared to the financial industry as a whole.


These are recent events of significance that will boost the stock price increase


1, Possible New real estate fund.
2, Acquisition of Polymer Group.
3, M&A activities involving Sara Lee.
4,  Last quarter earnings up by 180 % .(BX reported 4th qtr 2010 earnings of $0.46 per share on 2/3/11.)





Lets look at the Weekly chart


BX - Weekly Candlesticks: "

via StockCharts.com
"


The stock is on the upswing with high volume in last few trading sessions. I would see this trading above $20 in short time frame..


My target price for BX is $25 in next 3 months


Happy Investing.


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