Bottom Up and Top Down Stocks

I went through some scans I typically go through and thought I'd post some that caught my eye. The first one bottom up is Sucampo Pharmaceuticals SCMP.  The chart was cool because it just broke out of consolidation on very strong volume. It's also at a 5 year high. I looked at it some more and this is just under a $700 million dollar company with a diverse portfolio of pharmaceuticals it sells. The good thing I see here is the earnings revisions. Next quarters earnings estimate is $.11 up from $.05 90 days ago. The current years estimate is $.47 a share up from $.22 ninety days ago. Next years EPS is currently $.60 up from $.40 ninety days ago. It's always great when earnings are revised up. With the stock at $15.66 this gives us a forward P/E multiple of 26. With earnings growing about the same rate the stock is conservatively fairly valued. However, the next 5 years are expected to grow more giving the stock a mere .35 PEG multiple(price to earnings growth). Lots of bullish stuff going on here.


SCMR New high on volume

 

 I found this coffee company called Coffee Holding Company ticker JVA. It is a small company with a mere $34 million dollar market cap. Coffee companies are usually good businesses especially if you are selling beans wholesale, which they are. They are profitable and I see no reason the stock should trade around net tangible asset value. Roughly $20 million is net tangible asset value and the market cap is just above it at $34. It's around technical support and just had a wide ranging day up 7%.

that is technical and fundamental support

The top down one is oil. I think it is a good time to start scaling into crude oil long. Everybody knows the ETF USO. USO is a terrible way to invest in oil. It's because of the way it rolls the contracts. It has to turnover futures contracts thus resulting in a lot of decay. The futures themselves CL is ideally the best way to trade oil. There are better ETF's like 12 month Oil ETF USL . USL holds longer term contracts and thus more closely resembles the actual price of oil. I'm long some USL now. Full Disclosure: long USL

The Best Net Net Stocks?

I looked through a lot of net-net's lately and didn't find all that much. On Zacks.com I screened for ones with zero long term debt. That diminished the universe of them along with ignoring all Chinese ADR's. So far this company called The LGL Group ticker LGL founded in the year 1917 seemed the most intriguing. Mostly because the company and stock price has not always struggled. The stock preformed very well in 2010.The company has $9.9 million in net current asset value and a market cap of just $8 mil. $5.4 mil of the net current asset value is cash. The company is not profitable. The last year of profitability was 2011. I put it sort of in the category of Emerson Radio MSN a perennial net because they are both electronics companies. MSN by the way is now selling for less than half of its net current asset value and is profitable.

Net-Net PRLS Update and Metals Setup

I've been writing on Peerless PRLS here on the blog for years and in the last post on it I called it one of the most compelling net current asset stocks out there. They recently made an acquisition and now have a cash buyout offer for $7.00 a share. I talked on the phone with Peerless PRLS Chairman and CEO Timothy Brog five years ago. He's been very committed and patient in adding shareholder value with this company.

Metals are on trend support. I have a buy stop order in too long JNUG at 21.80.  Crude oil has a setup as well. There is a triangular consolidation on this flag/pennant over the last few days. If crude continues to crash I have a buy stop order at 74 in to short oil with the ultrashort ETF SCO.

 

Net Current Asset Stocks and Positon Updates

I plan on going through some net current asset stocks over the next few days as I will have some time off. I plan on using the trusty Graham Investor Site and a basic site like either MSN or Yahoo and just screening for great balance sheet strength with light total liabilities to find some stocks net cash and net current assets. I'll post up any interesting finds later this week. Off of the top of my head I had expected Delia's DLIA to be a successful net-net because of the strong brand and potential they had for a turnaround. I mean they are practically in every mall in America. I see this stock is now a sub penny stock trading below $.01 a share. Luckily I had forgotten about it for some time and never took a position.

The net-net Delcath Systems DCTH I posted on recently where I said I wanted to see it even cheaper to its net cash did indeed fall. When I say net cash that is essentially selling for less than the cash on its balance sheet minus all debt. The stock fell as low as $1.09 and has gone as high as $1.50s. I may have missed it as I didn't pull the trigger but this looks like a flag and it could very well drop even lower. I prefer to scale into positions so if I pick up shares around $1 they might just be half of the position.

My long term portfolio is mixed lately.  The Fidelity Emerging Asia Mutual Fund is underperforming the US Markets, however my dollar long position via the ETF UUP which I posted my buy of dollar ETF UUP on Twitter is finally coming around and breaking out again. My Pimco bond fund is  basically flat.

The major US indices look very healthy here and it looks like we are heading for new highs any day here. Even the Russell 2000 looks like it will break out here very soon. The Russell has been the laggard. It's often seen as a key index to the overall market. I may do a post soon on it as it looks like there is a failed signal on the chart forming. Failed signals can often be extremely important. Jack Schwager wrote about them in his books.

Deep Value Stock Blonder Tongue BDR

There is some activity in deep value asset land worth talking about. Blonder Tongue Laboratories (BDR) has always been a cheap value stock. It has never really delivered and seen the stock price follow through. Could this time be different? They just recently reported a strong quarter with actual sales growth and net income!! This has happened before as we can see from some of my old posts on BDR over the years. In 2010 the stock actually ran to almost $3.00 share. On this last quarter the buying volume in the stock is the highest I could find on any chart going back at least 10 years. The companies sales were up 23% and net income was $.06 per share vs. a ($.11) loss last year.  Margins improved too. Management said they expect the rest of the year to be improved as well.

Right now the stock is 29% below net tangible asset value of $1.74 per share. 

Since 2006 the stock has always found a floor around $1.00 a share. So it's pretty safe to say $1.00 is the current low side and about $3.00 the upside.  I made an 8% gain on my DGAZ trade shorting natural gas. I posted the setup on the blog and my entries and exits on my Twitter page.

Natural Gas Setup Emerging

One of the best patterns to trade is a breakout from a tight trading range. Such a fat pitch has been developing in natural gas lately. The channel lines are drawn out in these charts below. Whether it breaks out or breaks down there should be some significant follow through. Right now price is congesting at the bottom of the channel and looks poised to breakdown and plunge lower here. I have a buy stop set at 4.60 a share on DGAZ the 3X inverse natural gas ETF to short natural gas.  There may very well be whipsaw and this could be a fake out or failed signal but with energy getting hammered and a rush to liquidity in markets natural gas looks right to go much lower.

Two Net Current Asset Value Stocks

Lots of different things can become of net current asset value stocks. These are the truly deep value stocks that only a true value investor can love. Why? Because they aren't glamorous. They usually are not as sexy as say an Apple (AAPL) or GoPro (GPRO). Net Net's often don't even turn any profit. They are sometimes entering their journey into stock market obscurity.

However, sometimes they can be tremendous opportunities. Once in awhile a net net will be a former profitable growing company that just hit a rough patch. I find that many times these will have a "brand moat" like a major retailer. This can help the turnaround. Sometimes these good or great companies that turnaround and come out of net net territory can be big gainers and even multi-baggers. Yes, multi-baggers. Sometimes we value investors look for companies we that we know probably will never be good again. Companies that are just so cheap like trading below net cash that there might be a catalyst to bring out the value of the assets. Special situations and going private transactions can unlock that deep value. Or the company just recovers into profitability. One such company we will look at today that could possibly do so.

Delcath Systems (DCTH)
This troubled stock DCTH is seeing its stock price hammered lately. This is a struggling company. The reason I am interested in this one is the cash on the balance sheet. The cash has been stable. Let us crunch some numbers on this one. There is 25.1 million in net tangible assets or 2.64 per share, 22.7 million in net current asset value or 2.40 a share and 21 million in net cash which is 2.22 per share. The stock last traded at 1.77 a share. This is 20% below net cash. Technically this stock is taking out all kinds of support and I see it continuing to decline for awhile. Maybe we can see it around 40% below cash. That looks pretty good as cash stays stable.

SORL Auto Parts (SORL)
This is one of those that almost doesn't make any sense. This company has had sales and earnings growth and yet has been a net current asset stock. The last time I posted on SORL on the blog was last year. The stock ran up a lot and has started coming down again. Other than that not much has changed with this company. I can only guess the low price pegged on it is because it is a Chinese company. It's a small company too which is fine with me. The price to earnings growth rate (PEG) is nice here again at around 1.00. Last quarters earnings got shaved a little from forecasts. There is 129 million in net current asset value or 6.65 a share. The stock last traded at 3.48 per share or about half of its net current asset value. I think once SORL is below 3.00 a share it is in the buy zone. If you've read the blog over the past couple months or so you probably pinned me as just a technical analysis chart guy. Nope. I was a value investor before I learned how to read a chart. Why do I use both approaches? Simple. I like every edge I can get. I like to buy stocks that go up and short stocks that go down.

Funds on Clearance as Bill Gross Leaves PIMCO

Incase you don't know famous bond guru Bill Gross quit his position at PIMCO a major investment firm. This is the news story on his move. He left for Janus. As this news story was being digested lots of PIMCO funds began crashing as people sold. This really hit the closed-end funds the hardest. I was looking through the daily largest percentage losers on the NYSE. I found atleast 3 down almost double digits. Out of the ones I researched a couple stood out.

The first one is the PIMCO Corporate Income and Opportunity (PTY).  It traded down 6% Friday to 17.18. It isn't below net asset value (NAV) yet but still has a 7% yield now.

The second one is the PIMCO Income Strategy Fund (PFN). It lost 4% and is now at 10.31 which is a 5% discount to its NAV. It's sporting an 8% yield.

The other funds I looked at were heavy into mortgage related securities so I took a pass on those. I read that a lot of the PIMCO funds have traded at steep premiums to net asset value over the years so seeing some of these fall below NAV is a good opportunity.

What I've Been Doing And Looking At

Greetings from Bull Market USA. The bull market capital of the world. Where low interest rates reign forever! Wheeee! In all seriousness however, I don't think Japan's lost decade has much on our QE. We've done better in my opinion. A few years ago everyone was predicting something along the lines of a Japan post asset bubble collapse stagnation. That is what they had in the 90s. Our true collapse was really in the wake of the tech bubble bursting in the year 2000. Atleast when it comes to the economy and equites. Yes, that was the secular stock market bubble that had been going since the early 80s. So I don't think comparing Japan and the USA was really apples to apples anyway. The other expectation Austrian economists had was serious inflation following QE. There was definitely some inflation as evident commodity prices but the dollar inflation seems gone now. Just look at the gold price. Gold and the dollar are always completely inverse. Gold is still crashing. I'm not sure what is going to happen from here.

History would say that if rates stay low for a long period of time there will be significant inflation ala the 70s inflation. Only Paul Volcker could stop it when he effectively let the market set rates at 20%. Could you imagine that today? So far things are going pretty well with the macro here. Doesn't hurt to be hedged though.

To me a good hedge on low rates is to be long precious metals.  I actually bought some more silver bullion recently around $21 an ounce. I got some Engelhard Silver Rounds on Apmex.com. I've always been pleased with my orders with them and I recommend them. They are one of the top 2 respected online metals dealers. So far I have Silver Eagles and the Engelhards. I'd like to get some gold Krugerrands soon and some Palladium.

I longed some emerging Asian stocks via the Fidelity Emerging Asia (FSEAX) mutual fund in my Roth IRA. I like the Goldman Sachs Emerging Debt Fund (GSDAX) also and have it on my watchlist along with the I-Shares International Real Estate Fund (IFGL). All of these funds have low expense ratios and similar or better performance vs their benchmark index.

High Yield Stocks
I also have some high yield equites on my watchlist. Whether stuff keeps falling or not these look good to me too. The first is my favorite REIT. It's not one of those sketchy adjustable rate mortgage REIT's or anything like that. Those mortgage REITs are going to blow up when rates go up. There's probably a reason they are all yielding 9 to 11%. I like these simple ones.

One like Sun Communities (SUI) which is just mobile homes and RV's that have great cash flow. Sun has increased the dividend consistently and currently is yielding around 5%. Shareholder equity has been growing the past couple years along with revenue and earnings. The chart is a breakout too.

UMH Properties (UMH) is the second REIT. UMH is yielding 7% and has a consistently rising dividend history along with revenue and earnings. This one has a smaller market cap at just $215 million.

Another high yield stock I like is Energy Transfer Partners (ETP). This is a diversified natural gas pipeline company that also sells gasoline and runs retail convenience stores. ETP's current dividend yield is 6%. The PEG ratio (price to earnings growth) is a very nice .69.

Ebola Virus Stock Plays

With ebola in the news there has been considerable buzz about what is going on with the drug that the two Americans were given. Apparently there is more than one company that is working on a vaccine. The company that has gotten the most publicity the past couple days is Tekmira Pharmaceuticals (TKMR). TMKR's stock was up 45% today. Another company I found that is working on a vaccine is Newlink Genetics (NLNK) . The news headline is the company "secures a Letter Contract From the Defense Threat Reduction Agency for Testing and Evaluation of Ebola Virus Vaccine". Its stock was up 6% today. I found an interesting link in the comments on ZeroHedge.com from 2013. The military was supporting working on a vaccine back then. It proved effective on primates. Here is a summary from the military.