INTEL (INTC) - After the market close Thursday, the chip manufacturer announced better-than-expected fourth-quarter earnings and a strong outlook for the year ahead. Despite rising after hours yesterday, they finished 3.2% down at $20.80. With a forward p/e of 13 and with the company's 2.7% dividend yield supported by $12.9 billion in cash on its balance sheet, with just $2.4 billion in debt, INTC looks strong for 2010. After selling 50% of my stock prior to the results, bought back in yesterday. Looking for $22-23 in short term.
AMGEN (AMGN) - The stock traded in a narrow $55-57 range this week after guiding down estimates for 2010 earlier in the week. Holding on news of osteoporosis drug, Prolia in Europe.
MICRON (MU) - Have traded MU, selling several times above $10.8 and have bought back at $10.1. With memory chip prices improving, Micron is postioned well for the semiconductor recovery.
JP MORGAN (JPM) - Position sold Thursday prior to Friday results. JPM finished down 2.26% at $43.68 as Q4 results disapointed on the top line as bad debts continue to be a concern and there was surprise that despite the repayment of TARP (toxic asset relief programme) in 2009, the dividend was not increased. Under Jamie Dimon's leadership this is one of the stronger U.S. financial instritutions and will be looking to buy in on any continued weakness.
FALKLAND OIL AND GAS (FOGL) - The share continues to sharply move up , finishing the week at 168p, a climb of over 20% as Falkland Islands hysteria begins. Some profits taken but holding on deep water rig news or agreement to share Ocean Guardian Rig with Desire Petroleum.
BORDERS AND SOUTHERN PETROLEUM (BOR) - The company holds a 100% interest in five production licences in the South Falkland Basin. In November Borders & Southern raised £113m, enough to finance the drilling of three wells. Is is likely to share a rig with fellow south basin explorer, Falkland Oil & Gas. This is partly because Borders & Southern‘s licences are in the deep waters to the south, but also because Desire and Rockhopper have already secured their rig. Position initiated at 66p.
GW PHARMA (GWP) - Position increased. Price now 93p. Awating news on European approval of lead product, Sativex
ITV (ITV) - Position initiated at 55p with positive momentum in media stocks and turnaround story under Archie Norman.
NIGHTHAWK (HAWK) - Holding with drilling news from Jolly Ranch and Revere projects still expected shortly.
Saturday, January 16, 2010
Friday, January 15, 2010
ITV upgraded by UBS and Product Placement
ITV up 2% this morning as UBS adds ITV to European media most preferred list .
It has been said that goverment proposals to allow U.S. style product placement in programming is good news for ITV. However, whilst certain parts of the industry (particularly ITV) are continuing to lobby hard for it, there have been some strong counter arguments against from bodies as diverse as the BMA & ISBA. IWith the ongoing concerns over alcohol consumption, and with an election due this summer in the U.K., they are unlikely to allow something that with a couple of controversial incidents, could easily be very difficult politically. The recent history of this government & Ofcom, at least when it comes to advertising, has also shown that they usually come down on the side of regulation over liberalisation. Even if the government did decide to allow it in principle, the regulatory framework may be prescriptive, which would require a further, time consuming period of consultation.
It has been said that goverment proposals to allow U.S. style product placement in programming is good news for ITV. However, whilst certain parts of the industry (particularly ITV) are continuing to lobby hard for it, there have been some strong counter arguments against from bodies as diverse as the BMA & ISBA. IWith the ongoing concerns over alcohol consumption, and with an election due this summer in the U.K., they are unlikely to allow something that with a couple of controversial incidents, could easily be very difficult politically. The recent history of this government & Ofcom, at least when it comes to advertising, has also shown that they usually come down on the side of regulation over liberalisation. Even if the government did decide to allow it in principle, the regulatory framework may be prescriptive, which would require a further, time consuming period of consultation.
Portfolio adjustments January 15th
Yet another disappointing quarterly production update from gold miner Hambledon Mining (HMB) drove the stock down 16% yesterday. Given the huge increase in the Gold price over the last couple of years, the management have failed to keep ongoing maintenance and productivity issues in check, All patience lost with the company and position closed.
Position initiated in Borders and Southern Petroleum (BOR), another Falkland Islands Oil play given likely deep water Rig announcements from Falkland Oil and Gas (FOGL) in the short to medium term and looking cheap on relative valuation to FOGL and Desire Petroleum (DES). Position increased in FOGL following continued strength in the share price, now up over 20% since position started.
Position in JP Morgan (JPM) closed following strength pre earnings and increased in GW Pharma (GWP) on likely news flow relating to Sativex.
Position initiated in Borders and Southern Petroleum (BOR), another Falkland Islands Oil play given likely deep water Rig announcements from Falkland Oil and Gas (FOGL) in the short to medium term and looking cheap on relative valuation to FOGL and Desire Petroleum (DES). Position increased in FOGL following continued strength in the share price, now up over 20% since position started.
Position in JP Morgan (JPM) closed following strength pre earnings and increased in GW Pharma (GWP) on likely news flow relating to Sativex.
INTEL (INTC) produces a great earnings beat!
Intel (INTC) reported a fourth-quarter profit of $2.3 billion, or 40 cents a share, compared with a profit of $234 million, or 4 cents a share for the same period 2008. Revenue was $10.6 billion versus expectations of $10.2 billion, up from $8.2 billion for the same quarter a year before. Adjusted income was 55 cents a share, compared with analyst estimates of 30 cents a share
For the current quarter, Intel said it expected revenue of $9.7 billion, with an a potential upside or downside of $400 million, versus expectations of $9.3 billion, Chief Executive Paul Otellini said in a call with analysts that the outlook for semi conductors was improving and that Intel's major business units posted sequential gains in sales. Its PC client group, focused on chips and other products for desktops, notebooks, netbooks and wireless devices, reported a 10% increase. its data center group, focused on servers, work stations and storage systems, reported a 21% jump Its Netbook Atom products, rose 6%.
For the current quarter, Intel said it expected revenue of $9.7 billion, with an a potential upside or downside of $400 million, versus expectations of $9.3 billion, Chief Executive Paul Otellini said in a call with analysts that the outlook for semi conductors was improving and that Intel's major business units posted sequential gains in sales. Its PC client group, focused on chips and other products for desktops, notebooks, netbooks and wireless devices, reported a 10% increase. its data center group, focused on servers, work stations and storage systems, reported a 21% jump Its Netbook Atom products, rose 6%.
The results support the thesis that demand in enterprise and consumer segments is improving as economic recovery gathers pace.
Will be looking to reduce position in INTC on opening strength.
Wednesday, January 13, 2010
Alcoa disapointment delivers weak start to U.S. earnings season
Dow Jones Industrial component, Alcoa (AA) delivered disappointing fourth quarter 2009 results after the close on Monday, causing an 11% drop in the price to $15.52 (-$1.93) and leading the Dow industrials down 36 to 10,627. The FTSE 100 dropped 39 to 5,499. After Monday's closing bell, Alcoa reported a quarterly net loss of $277 million, or 28 cents a share, compared to a year-earlier loss of $1.2 billion or $1.49 a share, when aluminium prices collapsed.
Analysts had expected the company to earn 5 cents a share on sales of $4.9 billion. Excluding charges, Alcoa said it earned 1 cent a share worrying the markets that economic recovery may be slower than anticipated. A short term buy trade in Alcoa prior to the earnings release therefore disappointed and the position was closed at the open yesterday.
After initially moving into positive territory, Amgen 's (AMGN) price was hit as it said 2009 earnings would come in close to the low end of its forecast, sending its shares down a most 2 percent at one point before closing the session down 1% at $56.03. Continued uncertainty about Amgen's potential block buster osteoporosis drug Prolia (denosumab) also weighed on the stock, as the company said it has not yet responded to a regulatory request for more information on the drug.
Speaking at the JP Morgan Healthcare conference on Tuesday, Chief Executive Officer Kevin Sharer said the company's full-year earnings would be close to the low end of its forecast of $4.90 to $5.05 per share. Analysts on average expected $5.04 per share. 2009 revenue would be at the midpoint of the company's projection of $14.4 billion to $14.8 billion. Analysts were looking for $14.7 billion. Sharer confirmed $4 billion in cash at the end of the 3rd quarter.
A drop in JP Morgan (JPM) to close to $43 at one point during the trading session gave a buying opportunity with results due Friday.
Analysts had expected the company to earn 5 cents a share on sales of $4.9 billion. Excluding charges, Alcoa said it earned 1 cent a share worrying the markets that economic recovery may be slower than anticipated. A short term buy trade in Alcoa prior to the earnings release therefore disappointed and the position was closed at the open yesterday.
Weakness in semiconductor stocks gave a good re-entry point for Micron (MU) and for an increase in the Intel (INTC) position with the results due Thursday.
After initially moving into positive territory, Amgen 's (AMGN) price was hit as it said 2009 earnings would come in close to the low end of its forecast, sending its shares down a most 2 percent at one point before closing the session down 1% at $56.03. Continued uncertainty about Amgen's potential block buster osteoporosis drug Prolia (denosumab) also weighed on the stock, as the company said it has not yet responded to a regulatory request for more information on the drug.
Speaking at the JP Morgan Healthcare conference on Tuesday, Chief Executive Officer Kevin Sharer said the company's full-year earnings would be close to the low end of its forecast of $4.90 to $5.05 per share. Analysts on average expected $5.04 per share. 2009 revenue would be at the midpoint of the company's projection of $14.4 billion to $14.8 billion. Analysts were looking for $14.7 billion. Sharer confirmed $4 billion in cash at the end of the 3rd quarter.
In the U.K., Falkland Islands oil play, Falklands Oil and Gas continued its upward move, rising 7.5 or 5% to 153p as Investec declared a 5% notifiable interest in the stock.
Sunday, January 10, 2010
Week ahead - earnings season starts with Alcoa
Earnings season in the U.S. kicks of with Alcoa(AA) on Monday, which given commodity rebound should be encouraging. On Wednesday, the Fed Beige book report will give further insights on the state of the U.S. economy. On Thursday after the close, Intel (INTC) reports and this will give a good idea of the outlook both for tech and semiconductors specifically.
In the U.K., further evidence on the health of retailers will be demonstrated by Tesco (TSCO) on Tuesday.
In the U.K., further evidence on the health of retailers will be demonstrated by Tesco (TSCO) on Tuesday.
Saturday, January 9, 2010
Portfolio Update Jan 9th
Coal of Africa (CZA)
Closed at 128p yesterday so showing close to a 30% profit. The Telegraph Newspaper cited takeover rumours as the driver of the increase, but the underlying fundamentals of coal demand are improving and this has increased sector prices across the board over the last 2 weeks. Demand from India and China remain particularly strong. Still awaiting news on Vele mine approval.
Have taken some profits, but still holding a substantial position.
Nighthawk Energy (HAWK)
Remains flat at 35.75p. News on drilling from Jolly Ranch and Revere expected during January. Holding.
ITV (ITV)
Position initiated in ITV at 58p. Evidence suggests significant pick up in TV revenues and positive outlook for 2010 driven by World Cup and global economic recovery which should bring back advertisers into the market.
GW Pharma (GWP)
Position moved into profit following buy at 84p. Now 90p to sell. News awaited on Sativex registration in UK and Spain. Holding.
Falkland Oil and Gas (FOGL)
Position increased with average buy price of 136p. One of Investor's Chronicle Tips of the Year for 2010 which was published yesterday which drove a significant increase in the SP to 143p. Holding.
Hambledon Mining (HMB)
Position initiated in gold miner at 7p.Q4 production and underground mine update due next week.
Amgen (AMGN)
Position increased following FDA review news on ESA's which sent share price to $55 at low. Average buy $56.7. Current price $56.8. Holding on earnings and product approval news.
Intel (INTC)
Position initiated at $20.8.
Johnson and Johnson (JNJ)
Position initiated at $63.9.
Positions closed
Desire Petroleum
Closed at 128p yesterday so showing close to a 30% profit. The Telegraph Newspaper cited takeover rumours as the driver of the increase, but the underlying fundamentals of coal demand are improving and this has increased sector prices across the board over the last 2 weeks. Demand from India and China remain particularly strong. Still awaiting news on Vele mine approval.
Have taken some profits, but still holding a substantial position.
Nighthawk Energy (HAWK)
Remains flat at 35.75p. News on drilling from Jolly Ranch and Revere expected during January. Holding.
ITV (ITV)
Position initiated in ITV at 58p. Evidence suggests significant pick up in TV revenues and positive outlook for 2010 driven by World Cup and global economic recovery which should bring back advertisers into the market.
GW Pharma (GWP)
Position moved into profit following buy at 84p. Now 90p to sell. News awaited on Sativex registration in UK and Spain. Holding.
Falkland Oil and Gas (FOGL)
Position increased with average buy price of 136p. One of Investor's Chronicle Tips of the Year for 2010 which was published yesterday which drove a significant increase in the SP to 143p. Holding.
Hambledon Mining (HMB)
Position initiated in gold miner at 7p.Q4 production and underground mine update due next week.
Amgen (AMGN)
Position increased following FDA review news on ESA's which sent share price to $55 at low. Average buy $56.7. Current price $56.8. Holding on earnings and product approval news.
Intel (INTC)
Position initiated at $20.8.
Johnson and Johnson (JNJ)
Position initiated at $63.9.
Positions closed
Desire Petroleum
Friday, January 8, 2010
FDA review triggers jittters in Amgen and J&J
Yesterday Amgen (AMGN) dropped by as much as 2%, to a low of $54.65 before rebounding and finishing the day at $56.27 (-0.92%) as the U.S. Food and Drug Administation (FDA) announced plans to consult outside experts to re-evaluate the use of Amgen’s Aranesp and Johnson u& Johnson ‘s Procrit anemia drugs when given to patients with chronic kidney disease
An article published in the New England Journal of Medicine on Wednesday, said the agency "anticipates convening a public advisory committee meeting in 2010 to re-evaluate the use of drugs known as erythropoiesis-stimulating agents (ESAs) in people with chronic kidney disease. Amgen's Aranesp and Epogen and J&J's (JNJ) Procrit are both ESA’s.
The drugs came under scrutiny two or three years ago after studies showed high doses could lead to heart complications or in very rare cases even death. An FDA spokeswoman said an "important question" for the advisory panel would be what level of haemoglobin doctors should try to achieve with the drugs . In the journal article, they said "optimal haemoglobin targets have never been established" for patients with chronic kidney disease and clinical trials had raised "major concerns regarding the use of ESAs to increase hemoglobin concentrations" in chronic kidney disease patients above levels needed to avert blood transfusions. But the studies "do not rule out the possibility, however, that modest increases in the hemoglobin level could be beneficial," they added.
Sales of ESA drugs are a significant contributor to earnings, particulary in the case of Amgen. Amgen reported third-quarter Aranesp sales of $675 million. Sales of J&J's Procrit and anemia drug Eprex were $542 million in the quarter.
Given that both Amgen and J&J have aggressively tightened the labelling of their ESA products to minimise risks which has hit earnings from their drugs signnicantly, it is likely that these products will contain to be mainstay of therapy in patients with Chronic Kidney disease given the lack of viable alternatives at the current time. Thought the FDA hearings will undoubtedly hit sentiment, especially for Amgen, it is considered unlikely that Aranesp, Epogen and Procrit will be withdrawn from the market. Additional monitoring may be requested which may further hinder sales, but forthcoming news on new products from both J&J and Amgen makes any downside likely to be covered by these new innovations.
Position increased in Amgen at $55 and position initiated in J&J at $63.
An article published in the New England Journal of Medicine on Wednesday, said the agency "anticipates convening a public advisory committee meeting in 2010 to re-evaluate the use of drugs known as erythropoiesis-stimulating agents (ESAs) in people with chronic kidney disease. Amgen's Aranesp and Epogen and J&J's (JNJ) Procrit are both ESA’s.
The drugs came under scrutiny two or three years ago after studies showed high doses could lead to heart complications or in very rare cases even death. An FDA spokeswoman said an "important question" for the advisory panel would be what level of haemoglobin doctors should try to achieve with the drugs . In the journal article, they said "optimal haemoglobin targets have never been established" for patients with chronic kidney disease and clinical trials had raised "major concerns regarding the use of ESAs to increase hemoglobin concentrations" in chronic kidney disease patients above levels needed to avert blood transfusions. But the studies "do not rule out the possibility, however, that modest increases in the hemoglobin level could be beneficial," they added.
Sales of ESA drugs are a significant contributor to earnings, particulary in the case of Amgen. Amgen reported third-quarter Aranesp sales of $675 million. Sales of J&J's Procrit and anemia drug Eprex were $542 million in the quarter.
Given that both Amgen and J&J have aggressively tightened the labelling of their ESA products to minimise risks which has hit earnings from their drugs signnicantly, it is likely that these products will contain to be mainstay of therapy in patients with Chronic Kidney disease given the lack of viable alternatives at the current time. Thought the FDA hearings will undoubtedly hit sentiment, especially for Amgen, it is considered unlikely that Aranesp, Epogen and Procrit will be withdrawn from the market. Additional monitoring may be requested which may further hinder sales, but forthcoming news on new products from both J&J and Amgen makes any downside likely to be covered by these new innovations.
Position increased in Amgen at $55 and position initiated in J&J at $63.
Thursday, January 7, 2010
Intel (INTC) a great entry point for a quality stock
It finally looks to be the right time to buy into the Intel (INTC) story. There are several compelling reasons to go long on this one.
1. Product launches
Intel is getting into high gear with their Core processor family early on the new year, as they are set to release 6 new desktop processors and 11 mobile processor in January. There will also be 3 new chipsets for desktop PCs and 4 oriented towards mobility.Of most relevance, all processors in the series feature a built-in GPU - for the first time ever it is possible to purchase a CPU that features a built-in GPU that is entirely separate from the chipset. This is known as a General-Purpose computation on Graphics Processing Units (GPGPU) and refers to the technique of using a GPU, which typically handles computation only for computer graphics, to perform computation in applications traditionally handled by the CPU. They also have improved efficiency, allowing them to use less power and generate less heat than existing processors, such as those based on other architectures. It is claimed that the chips provide close to double the processing and graphics performance than their comparable predecessors. The new chips are manufactured using the 32-nanometer process, which makes them smaller and more power-efficient than earlier chips. Based on the Westmere architecture, the transistors are a step away from chips manufactured using the 45-nanometer process.
Intel is getting into high gear with their Core processor family early on the new year, as they are set to release 6 new desktop processors and 11 mobile processor in January. There will also be 3 new chipsets for desktop PCs and 4 oriented towards mobility.Of most relevance, all processors in the series feature a built-in GPU - for the first time ever it is possible to purchase a CPU that features a built-in GPU that is entirely separate from the chipset. This is known as a General-Purpose computation on Graphics Processing Units (GPGPU) and refers to the technique of using a GPU, which typically handles computation only for computer graphics, to perform computation in applications traditionally handled by the CPU. They also have improved efficiency, allowing them to use less power and generate less heat than existing processors, such as those based on other architectures. It is claimed that the chips provide close to double the processing and graphics performance than their comparable predecessors. The new chips are manufactured using the 32-nanometer process, which makes them smaller and more power-efficient than earlier chips. Based on the Westmere architecture, the transistors are a step away from chips manufactured using the 45-nanometer process.
Compared to previous chips, the new processors speed up high-end tasks like graphics display. Related tasks would run close to two times faster than previous chips. Intel has also integrated graphics chips into the new processor package, which could make the chips capable of playing Blu-ray movies or high-definition games.
2. Good valuation
Although Intel is trading on a historical P/E of 49 which looks expensive, earnings are expected to recover signficantly in 2010. Analysts expect earnings to be in the $1.5 range, and this can be expected to increase as economic prospects around the semiconductor market improve. Therefore earnings of $1.5-1.7 in 2010 seem reasonable giving a forward p/e of 11.2-13.5. This compares favourably with others in the sector such as Advanced Micro Devices (AMD) (estimated loss in 2010) or National Semiconductor (NSM) (forward p/e of 21.4 based on $0.7 earnings).
3. Strong fundamentals for enterprise and Consumer chip segments in 2010
As discussed on a previous posting relating to Micron, the fundamentals for PC demand and semiconductors is signifcantly improving in 2010 driven by economic recovery, low inventories, rising prices and the launch of Windows 7.
At just over $20 (52 week range $12.05-21.27), Intel has some very positive attributes. Although the FTC (Federal Trade Commission) in the U.S. announced an investigation into the company's actions in early December and issues with the EU Trade Commission remain, this is expected to impact earnings only marginally if at all. Buy initiated at $20.8
ITV looks good play on advertising recovery
ITV revenues look to be strong in January (up 6.5% versus 3% for the total TV market) as revenues from advertisers floods in (source Aegis group),
With Archie Norman taking the helm at the company and a strong rebound in media expenditure looking likely, and Goldman Sachs adding ITV to its conviction buy list with a 70p target, now seems to be a good time to invest in ITV.
Position initiated at 58p.
With Archie Norman taking the helm at the company and a strong rebound in media expenditure looking likely, and Goldman Sachs adding ITV to its conviction buy list with a 70p target, now seems to be a good time to invest in ITV.
Position initiated at 58p.
Tuesday, January 5, 2010
Update on portfolio - January 5th 2010
Nighthawk Energy (HAWK)
Average buy price 35p. Currently 35.75p to sell. Hold with news from Revere and Jolly Ranch project imminent.
Coal of Africa (CZA)
Average buy price 99p. Currently 115p to sell. Rising South African Coal prices driven by strong Indian Subcontinent demand have moved the share price up from the £1 level. Further news on Vele project and move from AIM to main market are catalyts for further share price appreciation. Holding.
Desire Petroleum (DES)
Buy at 85p. Sold at 108p. Placing and open offer deadline extended to January 11th. Open offer at 70p means that shares may well be sold on receipt which may depress share price during mid January. Watching for possible re-entry.
Falkland Oil and Gas (FOGL)
Buy at 132p. Holding at 128p.
JP Morgan Emerging and Templeton Emerging.
Short positions closed at loss due to continued strength in Emerging markets stocks.
Micron Technology (MU)
Buy at $10.3 closed at $11. Share on watch for repurchase.
Amgen
Average buy at $57.5. Currently at $57.8. Holding due to imminent drug approval news.
GW Pharma (GWP)
Buy at 84.5. Currently 88p to sell. Holding with European Medicines Review agency due end January. Approval of Sativex lead drug likely Q1 2010.
Average buy price 35p. Currently 35.75p to sell. Hold with news from Revere and Jolly Ranch project imminent.
Coal of Africa (CZA)
Average buy price 99p. Currently 115p to sell. Rising South African Coal prices driven by strong Indian Subcontinent demand have moved the share price up from the £1 level. Further news on Vele project and move from AIM to main market are catalyts for further share price appreciation. Holding.
Desire Petroleum (DES)
Buy at 85p. Sold at 108p. Placing and open offer deadline extended to January 11th. Open offer at 70p means that shares may well be sold on receipt which may depress share price during mid January. Watching for possible re-entry.
Falkland Oil and Gas (FOGL)
Buy at 132p. Holding at 128p.
JP Morgan Emerging and Templeton Emerging.
Short positions closed at loss due to continued strength in Emerging markets stocks.
Micron Technology (MU)
Buy at $10.3 closed at $11. Share on watch for repurchase.
Amgen
Average buy at $57.5. Currently at $57.8. Holding due to imminent drug approval news.
GW Pharma (GWP)
Buy at 84.5. Currently 88p to sell. Holding with European Medicines Review agency due end January. Approval of Sativex lead drug likely Q1 2010.
EDUCATION SEGMENT: Contarian Investor's investing mistakes laid bare - one's you can avoid!
I would be the first to admit that I’ve had my share of expensive mistakes when it comes to investments. I first started investing in 1998, prior to the technology/internet bubble. In those days it was easy to make money! You bought an internet stock with no profits in sight or a hot Nasdaq stock like Amazon or Ebay and you just watched your profits grow by the week as the stampede to buy shares by the "man in the street" turned into a frenzy. There wasn’t a thought given to valuations - was a loss making company worth £1 billion, who cares? Solid companies like utilities or even Buffett's Berkshire Hathaway, which actually made profits, were sold on mass to fund purchases of hot tech. Technology funds sky rocketed and Initial Public Offerings (IPOs) for new companies on the market double, tripled or more in the first 24 hours. The news papers said it was the place to be, the start of the next revolution.
Of course in the end it all ended in tears for many amateur investors. Although I did well at the time the mistake I made was calling a bottom on the carnage and bought back too early. I made the fatal error of looking at relative prices. For example if something was £35 in 2000, well surely it must be worth £5. No way, it was worth 5p before I knew it. A lot of people lost an awful lot of their hard earned savings at this time and it was probably their first foray into the stock market. Many of them would never return again to the world of investing. Looking at a valuation of a company in relation to its expected profits is so important and also accepting that sometimes you make a mistake a cutting your losses are major lessons I learnt in the early part of the new millennium.
Then in my early investing years I took all those magazine and newspaper tips with a little too much enthusiasm. Share magazines and Newsletters can be helpful to give you the low down on what’s going on in the market but the weekly buy or sell tips are often fairly speculative and you can easily lose your shirt if you’re not careful. Many small cap shares in the U.K. are sold via market maker intermediaries. These guys set the price of shares and of course they read these tips and move the price up as soon as the tip is published. Readers buy immediately at this inflated price. I often find some good ideas in magazines and through internet sites but I often hold back, take a good look and then wait a week or so for the price to settle down a bit.
Internet bulletin boards can also be a curse on the small investor. During the tech boom in 2000 dubious posters so called “pumped and dumped” dodgy stocks on the basis of “hot inside information”. 95% of the time most of the information was wrong or even intentionally misleading with the intention to try and get uninformed investors to buy shares in the worst type of companies. The British site www.iii.co.uk has good discussion forums but everything that is said should be treated with extreme caution. Always do a check on information before you go ahead and trade. I well remember trawling these bulletin boards looking for my next investment and ending up with egg on my face most of the time.
Then there were the “punts” on high risk oil exploration or mining companies. There was a Caspian sea oil exploration company called Atlantic Caspian which was drilling for oil. Of course they didn’t find a thing and the company is no more. Fortunately I saw the writing on the wall before the end and sold out in the nick of time but I still lost money. Then there was the catastrophic investment in Asia Energy based on a “sure thing” tip, an AIM listed company trying to exploit a licence to cut coal in Phulbari province in Bangladesh. I remember the day well when I was driving home from work and listening to the BBC radio news when it announced a riot in Bangladesh with several people killed by riot police protesting against the potential open cast mines impact on their villages. Of course the price crashed. The company is now called GCM resources and is still trying to get the project off the ground 2 years on. Great lesson here, be very careful when investing in individual stocks in politically risky parts of the world. Collective investment vehicles like unit trusts/mutual funds are a far more sensible way to trade if you have a taste for the emerging markets. If I ever get a tip now where I’m told it’s a no brainer I always think to myself these days that “tips are strictly for waiters”!
I wish I could say that there was a magical formula for success as some books and newsletters claim but unfortunately there isn’t. Making money in shares is about research first and foremost. Adapting your strategy in light of current events is also very important. Who would have believed a few years ago when the banks were generating huge profits that in 2008 the Wall Street investment bank Lehman Brothers would fail and the U.K. government would nationalize Northern Rock as well as taking major stakes in many of the other British banks. In early 2008, the analysts were talking up commodities based on the “super cycle” theory which had the flawed hypothesis that prices would continue to climb into the stratosphere. Then there was the so called “decoupling” hypothesis with the forecast that the BRIC economies (Brazil, Russia, India, China) would be able to produce sustainable double digit growth even if the mature markets of Europe, Japan and the U.S. went into recession. Again, the crash in Emerging markets during the end of 2008, put pay to this assumption.
And it seems I am not alone in making mistakes. I was at a meeting with a private investor and he commented that he had bought shares in the U.K. retailer Marks and Spencer back in 2008. When I asked him why he had bought a retailer just at the time the U.K. was in recession and retailers were struggling (in fact many were going bust at this time in December 2008), he said “well they looks cheap compared to where they were before. I’m down 50% on my investment but I’m sure they’ll come good”. I respond ended well they just might get cheaper! Another short term investment turned into a long term investment!
Of course, mistakes are made, lessons are learnt and you move on. The famous Hedge Fund Manager, George Soros, who made his name by “breaking “ the Bank of England by betting against the pound and hoping it would leave the ERM (Exchange Rate Mechanism) .On Black Wednesday in 1992 the Chancellor of the Exquerer Norman Lamont admitted defeat and the pound was devalued netting Soros a reputed $1.1 billion., In a recent book called the The Crisis of Global Capitalism, he said “Most people are reluctant to admit they are wrong; it gave me positive pleasure to discover a mistake because I knew it could save me from financial grief”.
The most common mistakes I have made or seen are:
1. Not being diversified enough
Having too concentrated a portfolio in a certain sector or too much concentration of money in only a few shares can be the kiss of death if sentiment turns against it. If you put all your eggs into one basket your risk profile goes up significantly. Look at all those people who lost everything in the U.S. energy company Enron collapse in late 2001. In 2000, it claimed its revenues were over $100 billion and Fortune Magazine named it as America’s most innovative company for six consecutive years. Sure the profit manipulation by senior management including founder Ken Lay took many years to expose but thousands of investors poured their entire life savings into the company buying all the way down from a high of $90 (when insiders were selling huge blocks of stock) all the way down to virtually zero. The Enron sage is of course very sad for these people but they never should have put all their savings in one stock, especially not their pension funds, into this one company.
2. Not doing the right level of research
Most private investors are reluctant to delve into some of the fundamental measures such as debt, profitability and therefore fail to foretell potential issues down the line such as debt restructuring, dilutive share issues and the like which can hammer a share price. I have recently read a popular share dealing book written by a non professional investor and I was surprised that he felt that this sort of homework was unnecessary. I am not saying that you need to be accountant delving through the Profit and Loss Account and the Balance sheet but a lot of the web sites not can show the main measures without ploughing through pages of numbers. Take a 30 minute look at the financials and check out some other potential warning signs such as director share selling, big institutional sales, recent profit warnings.
Trading in U.S. shares has the advantage that all the quarterly earnings reports are accompanied by analyst conference calls which are available to download by private investors. Transcripts are also available on websites such as www.seekingalpha.com.
3. Being hit by despondency following some bad calls
How many potential investors buy a stock or two on a hot tip, lose a fortune and then never return to the stock market ever again as they lose half their money in 3 months. The answer is quite a few! Over the long term stocks have outperformed all other forms of investment. This is especially the case with companies that pay sustainable and growing dividends. In periods of poor stock market performance, the yield of the major indices such as the FTSE 100 can be substantial, this is the dividend payment as a proportion to the share price. You are effectively rewarded for holding a share and this payment can be higher than a savings account. Make your mistakes, learn from others mistakes and swallow your pride and move on. Persevere with the markets, it can be a lot of fun.
4. Buying shares on tips not on the basis of research
Newspapers and financial magazines can be a useful source of information about the markets in general or news on a particular stock. However, never buy or sell shares based on just what you read in these publications. Check facts, do your research and wait for the price to settle before you jump in. Remember that hot tips from the guy at the pub that says that company X is going to be taken over next week should be treated with extreme caution.
Brokerage reports are another area of caution. Many analysts are late cuttings their earning s estimates and their recommendations on a stock, How many “top analysts” were still recommending banks in 2008 when the financial crisis was beginning to play out?
5. Not cutting losses when the share price drops sharply and waiting for the rebound – “don’t let a short term investment become a long termer”
It is hard to admit you’ve made a mistake and sell a losing investment. Human psychology plays a part. It is much more effective to deploy your cash working in a company which is solid with a growing share price rather than waiting potentially for years for a dog stock to recover and waiting for that nasty negative figure to turn to a blue positive. Sometimes the losses do recover, most of the time they don’t in a sharply declining stock. Another thing to watch for is the “dead cat bounce” This refers to a very sharp decline in the price of a stock which is immediately followed by a small and temporary rise before resuming its downward path. Often this rise is triggered by short sellers buying back shares to cover their positions or small investors trying to call a bottom which is ultimately reached much later. You should try and ignore the price you paid and think in terms of I am investing my money in the best company or could it grow faster elsewhere.
6. Looking at historical prices and using this as a benchmark
Investors often look at a share price chart and use this as a benchmark of where a price should be expected to return to in the case of shares which have had a heavy fall. A great example of this was the banking sector. UK banks Northern Rock and Bradford and Bingley fell from pounds to zero in less than a year. Just because a share was at a price historically high level never means it will return there. Also be aware of share splits, where shareholders shares are for example doubled up which has the effect of halving a price.
7. Not spreading risk by buying a position all at once
It’s almost impossible to time the purchase of an investment perfectly. If you are buying a large position consider buying in blocks to reduce the risk of a sharp fall in a short period around your purchase. Although this means your dealing costs are increased, by choosing a reasonably priced online broker these can be mitigated.
8. Not taking profits or letting some profit run
Timing is everything as they say. The share pundit Jim Cramer once said “Bulls make money, bears may money but pigs get slaughtered”. What Cramer meant is that you can make money on shares going up or down but don’t be greedy and take a little off the table and bank some profits. If your shares are up 20% on your buy price, perhaps sell 35-50%, leaving your other shares to run whilst you have some nice profit in the dealing account. Conversely many investors sell everything too early. I myself have been guilty of this as the excitement of a gain takes over. Over the next few weeks, the share price has subsequently doubled again making me curse myself for not having more patience. As stated above, taking some profit whilst letting some of your profits run is a good compromise. The advantage of CFDs and Spread Betting is that you can adjust your guaranteed stop loss upwards to guarantee your profit, but if the price drops sharply subsequently your stop loss is triggered and your profit is banked. Some firms even offer trailing stop losses which automatically trail the current share price.
9. Don’t Overtrade
Sometimes patience really can be a virtue when it comes to the stock market. Sometimes it pays to leave the portfolio alone. Research shows that the most successful traders have periods when they do little or no investing. Maybe there just aren’t any really good opportunities, the market is stuck in a range which makes it neither showing value nor over expensive so both long and short investors stay on the sidelines.
10. Don’t take internet bulletin boards too seriously
Watch the bulletin boards on iii.co.uk and advfn.co.uk with interest but don’t base your investment decisions on what’s said on them.
Of course in the end it all ended in tears for many amateur investors. Although I did well at the time the mistake I made was calling a bottom on the carnage and bought back too early. I made the fatal error of looking at relative prices. For example if something was £35 in 2000, well surely it must be worth £5. No way, it was worth 5p before I knew it. A lot of people lost an awful lot of their hard earned savings at this time and it was probably their first foray into the stock market. Many of them would never return again to the world of investing. Looking at a valuation of a company in relation to its expected profits is so important and also accepting that sometimes you make a mistake a cutting your losses are major lessons I learnt in the early part of the new millennium.
Then in my early investing years I took all those magazine and newspaper tips with a little too much enthusiasm. Share magazines and Newsletters can be helpful to give you the low down on what’s going on in the market but the weekly buy or sell tips are often fairly speculative and you can easily lose your shirt if you’re not careful. Many small cap shares in the U.K. are sold via market maker intermediaries. These guys set the price of shares and of course they read these tips and move the price up as soon as the tip is published. Readers buy immediately at this inflated price. I often find some good ideas in magazines and through internet sites but I often hold back, take a good look and then wait a week or so for the price to settle down a bit.
Internet bulletin boards can also be a curse on the small investor. During the tech boom in 2000 dubious posters so called “pumped and dumped” dodgy stocks on the basis of “hot inside information”. 95% of the time most of the information was wrong or even intentionally misleading with the intention to try and get uninformed investors to buy shares in the worst type of companies. The British site www.iii.co.uk has good discussion forums but everything that is said should be treated with extreme caution. Always do a check on information before you go ahead and trade. I well remember trawling these bulletin boards looking for my next investment and ending up with egg on my face most of the time.
Then there were the “punts” on high risk oil exploration or mining companies. There was a Caspian sea oil exploration company called Atlantic Caspian which was drilling for oil. Of course they didn’t find a thing and the company is no more. Fortunately I saw the writing on the wall before the end and sold out in the nick of time but I still lost money. Then there was the catastrophic investment in Asia Energy based on a “sure thing” tip, an AIM listed company trying to exploit a licence to cut coal in Phulbari province in Bangladesh. I remember the day well when I was driving home from work and listening to the BBC radio news when it announced a riot in Bangladesh with several people killed by riot police protesting against the potential open cast mines impact on their villages. Of course the price crashed. The company is now called GCM resources and is still trying to get the project off the ground 2 years on. Great lesson here, be very careful when investing in individual stocks in politically risky parts of the world. Collective investment vehicles like unit trusts/mutual funds are a far more sensible way to trade if you have a taste for the emerging markets. If I ever get a tip now where I’m told it’s a no brainer I always think to myself these days that “tips are strictly for waiters”!
I wish I could say that there was a magical formula for success as some books and newsletters claim but unfortunately there isn’t. Making money in shares is about research first and foremost. Adapting your strategy in light of current events is also very important. Who would have believed a few years ago when the banks were generating huge profits that in 2008 the Wall Street investment bank Lehman Brothers would fail and the U.K. government would nationalize Northern Rock as well as taking major stakes in many of the other British banks. In early 2008, the analysts were talking up commodities based on the “super cycle” theory which had the flawed hypothesis that prices would continue to climb into the stratosphere. Then there was the so called “decoupling” hypothesis with the forecast that the BRIC economies (Brazil, Russia, India, China) would be able to produce sustainable double digit growth even if the mature markets of Europe, Japan and the U.S. went into recession. Again, the crash in Emerging markets during the end of 2008, put pay to this assumption.
And it seems I am not alone in making mistakes. I was at a meeting with a private investor and he commented that he had bought shares in the U.K. retailer Marks and Spencer back in 2008. When I asked him why he had bought a retailer just at the time the U.K. was in recession and retailers were struggling (in fact many were going bust at this time in December 2008), he said “well they looks cheap compared to where they were before. I’m down 50% on my investment but I’m sure they’ll come good”. I respond ended well they just might get cheaper! Another short term investment turned into a long term investment!
Of course, mistakes are made, lessons are learnt and you move on. The famous Hedge Fund Manager, George Soros, who made his name by “breaking “ the Bank of England by betting against the pound and hoping it would leave the ERM (Exchange Rate Mechanism) .On Black Wednesday in 1992 the Chancellor of the Exquerer Norman Lamont admitted defeat and the pound was devalued netting Soros a reputed $1.1 billion., In a recent book called the The Crisis of Global Capitalism, he said “Most people are reluctant to admit they are wrong; it gave me positive pleasure to discover a mistake because I knew it could save me from financial grief”.
The most common mistakes I have made or seen are:
1. Not being diversified enough
Having too concentrated a portfolio in a certain sector or too much concentration of money in only a few shares can be the kiss of death if sentiment turns against it. If you put all your eggs into one basket your risk profile goes up significantly. Look at all those people who lost everything in the U.S. energy company Enron collapse in late 2001. In 2000, it claimed its revenues were over $100 billion and Fortune Magazine named it as America’s most innovative company for six consecutive years. Sure the profit manipulation by senior management including founder Ken Lay took many years to expose but thousands of investors poured their entire life savings into the company buying all the way down from a high of $90 (when insiders were selling huge blocks of stock) all the way down to virtually zero. The Enron sage is of course very sad for these people but they never should have put all their savings in one stock, especially not their pension funds, into this one company.
2. Not doing the right level of research
Most private investors are reluctant to delve into some of the fundamental measures such as debt, profitability and therefore fail to foretell potential issues down the line such as debt restructuring, dilutive share issues and the like which can hammer a share price. I have recently read a popular share dealing book written by a non professional investor and I was surprised that he felt that this sort of homework was unnecessary. I am not saying that you need to be accountant delving through the Profit and Loss Account and the Balance sheet but a lot of the web sites not can show the main measures without ploughing through pages of numbers. Take a 30 minute look at the financials and check out some other potential warning signs such as director share selling, big institutional sales, recent profit warnings.
Trading in U.S. shares has the advantage that all the quarterly earnings reports are accompanied by analyst conference calls which are available to download by private investors. Transcripts are also available on websites such as www.seekingalpha.com.
3. Being hit by despondency following some bad calls
How many potential investors buy a stock or two on a hot tip, lose a fortune and then never return to the stock market ever again as they lose half their money in 3 months. The answer is quite a few! Over the long term stocks have outperformed all other forms of investment. This is especially the case with companies that pay sustainable and growing dividends. In periods of poor stock market performance, the yield of the major indices such as the FTSE 100 can be substantial, this is the dividend payment as a proportion to the share price. You are effectively rewarded for holding a share and this payment can be higher than a savings account. Make your mistakes, learn from others mistakes and swallow your pride and move on. Persevere with the markets, it can be a lot of fun.
4. Buying shares on tips not on the basis of research
Newspapers and financial magazines can be a useful source of information about the markets in general or news on a particular stock. However, never buy or sell shares based on just what you read in these publications. Check facts, do your research and wait for the price to settle before you jump in. Remember that hot tips from the guy at the pub that says that company X is going to be taken over next week should be treated with extreme caution.
Brokerage reports are another area of caution. Many analysts are late cuttings their earning s estimates and their recommendations on a stock, How many “top analysts” were still recommending banks in 2008 when the financial crisis was beginning to play out?
5. Not cutting losses when the share price drops sharply and waiting for the rebound – “don’t let a short term investment become a long termer”
It is hard to admit you’ve made a mistake and sell a losing investment. Human psychology plays a part. It is much more effective to deploy your cash working in a company which is solid with a growing share price rather than waiting potentially for years for a dog stock to recover and waiting for that nasty negative figure to turn to a blue positive. Sometimes the losses do recover, most of the time they don’t in a sharply declining stock. Another thing to watch for is the “dead cat bounce” This refers to a very sharp decline in the price of a stock which is immediately followed by a small and temporary rise before resuming its downward path. Often this rise is triggered by short sellers buying back shares to cover their positions or small investors trying to call a bottom which is ultimately reached much later. You should try and ignore the price you paid and think in terms of I am investing my money in the best company or could it grow faster elsewhere.
6. Looking at historical prices and using this as a benchmark
Investors often look at a share price chart and use this as a benchmark of where a price should be expected to return to in the case of shares which have had a heavy fall. A great example of this was the banking sector. UK banks Northern Rock and Bradford and Bingley fell from pounds to zero in less than a year. Just because a share was at a price historically high level never means it will return there. Also be aware of share splits, where shareholders shares are for example doubled up which has the effect of halving a price.
7. Not spreading risk by buying a position all at once
It’s almost impossible to time the purchase of an investment perfectly. If you are buying a large position consider buying in blocks to reduce the risk of a sharp fall in a short period around your purchase. Although this means your dealing costs are increased, by choosing a reasonably priced online broker these can be mitigated.
8. Not taking profits or letting some profit run
Timing is everything as they say. The share pundit Jim Cramer once said “Bulls make money, bears may money but pigs get slaughtered”. What Cramer meant is that you can make money on shares going up or down but don’t be greedy and take a little off the table and bank some profits. If your shares are up 20% on your buy price, perhaps sell 35-50%, leaving your other shares to run whilst you have some nice profit in the dealing account. Conversely many investors sell everything too early. I myself have been guilty of this as the excitement of a gain takes over. Over the next few weeks, the share price has subsequently doubled again making me curse myself for not having more patience. As stated above, taking some profit whilst letting some of your profits run is a good compromise. The advantage of CFDs and Spread Betting is that you can adjust your guaranteed stop loss upwards to guarantee your profit, but if the price drops sharply subsequently your stop loss is triggered and your profit is banked. Some firms even offer trailing stop losses which automatically trail the current share price.
9. Don’t Overtrade
Sometimes patience really can be a virtue when it comes to the stock market. Sometimes it pays to leave the portfolio alone. Research shows that the most successful traders have periods when they do little or no investing. Maybe there just aren’t any really good opportunities, the market is stuck in a range which makes it neither showing value nor over expensive so both long and short investors stay on the sidelines.
10. Don’t take internet bulletin boards too seriously
Watch the bulletin boards on iii.co.uk and advfn.co.uk with interest but don’t base your investment decisions on what’s said on them.
Monday, January 4, 2010
Coal prices drive Coal of Africa(CZA) higher
Coal of Africa (CZA) rose 8.5 % today to close at 112p, as South African coal prices continued to climb steeply on Indian demand. Though the CZA positons show a good profit (buy at 95p), continued upward pressure on Coal prices and news flow means that it continues to be a hold (Vele update, move from AIM to FTSE main market).
Reuters article:
LONDON, Jan 4 (Reuters) - Physical coal prices rose sharply by around $5.00 a tonne for cargoes delivered into Europe on strong buying after the New Year holidays.
South African FOB prices rose less steeply, by around $2.00 a tonne, on renewed Indian buying interest but are expected to move rapidly higher during the next few weeks because demand exceeds available supply, traders and utilities said.
Strong rises in oil and gas prices helped spur coal prices higher, traders said.
"It was the first day back after the holidays and everybody seems to have decided they ought to go out and buy now before prices rise any further," one European trader said.
Widespread, acute shortages of coal at Indian power plants are forcing state and privately-owned generators to cut power production.
Many generators have two days of coal stockpiles or less and port congestion is preventing the import of coal bought in Q4.
Indian traders who have contracted to supply coal to generators have not yet bought all the coal they need because they were waiting for prices to fall.
Several traders are rushing now to find February and March loading South African cargoes and are finding that the few available are rising in price every day.
"There was a February trade today at 88 U.S. cents over the API4 Index for a South African cargo but now you'd struggle to find anything for less than $1.00 over Index," another trader said.
Coal prices have risen sharply over the past two weeks and are set to strengthen further on tight supply and strong demand outside of Europe, traders and producers said.
TRADES
March delivery cargo of multi-origin coal traded via brokers at $88.25 a tonne DES ARA, up $3.00 from the last trade on Dec. 31. 50,000 tonne February loading cargo of South African coal traded on Monday at 88 cents over the API4 Index.
PRICES
March delivery coal cargo was bid at $88.50 and offered at $90.00 a tonne DES ARA on globalCOAL, up $5.00 from last Thursday.February loading South African coal cargo was bid at $82.00 and offered at $86.00 a tonne DES ARA, up $2.00 from last Thursday. A March loading cargo was bid at $83.75 and offered at $86.00, also up around $2.00.
Reuters article:
LONDON, Jan 4 (Reuters) - Physical coal prices rose sharply by around $5.00 a tonne for cargoes delivered into Europe on strong buying after the New Year holidays.
South African FOB prices rose less steeply, by around $2.00 a tonne, on renewed Indian buying interest but are expected to move rapidly higher during the next few weeks because demand exceeds available supply, traders and utilities said.
Strong rises in oil and gas prices helped spur coal prices higher, traders said.
"It was the first day back after the holidays and everybody seems to have decided they ought to go out and buy now before prices rise any further," one European trader said.
Widespread, acute shortages of coal at Indian power plants are forcing state and privately-owned generators to cut power production.
Many generators have two days of coal stockpiles or less and port congestion is preventing the import of coal bought in Q4.
Indian traders who have contracted to supply coal to generators have not yet bought all the coal they need because they were waiting for prices to fall.
Several traders are rushing now to find February and March loading South African cargoes and are finding that the few available are rising in price every day.
"There was a February trade today at 88 U.S. cents over the API4 Index for a South African cargo but now you'd struggle to find anything for less than $1.00 over Index," another trader said.
Coal prices have risen sharply over the past two weeks and are set to strengthen further on tight supply and strong demand outside of Europe, traders and producers said.
TRADES
March delivery cargo of multi-origin coal traded via brokers at $88.25 a tonne DES ARA, up $3.00 from the last trade on Dec. 31. 50,000 tonne February loading cargo of South African coal traded on Monday at 88 cents over the API4 Index.
PRICES
March delivery coal cargo was bid at $88.50 and offered at $90.00 a tonne DES ARA on globalCOAL, up $5.00 from last Thursday.February loading South African coal cargo was bid at $82.00 and offered at $86.00 a tonne DES ARA, up $2.00 from last Thursday. A March loading cargo was bid at $83.75 and offered at $86.00, also up around $2.00.
Share tips - CAVEAT EMPTOR! (Buyers beware!)
When the Investors Chronicle Magazine arrived a few days ago it was interesting to read the analysis of their Tips of the Year 2009. In a year which saw the FTSE All share grow by over 21%, the Investors Chronicle performed well below any fund which just involved putting your money in a straight tracker fund. Their top 20 Buy tips grew on average by 217% (including the assumption that Aero Inventory will no longer exist as a going concern) and their top 20 Sell tips declined by 56% on average. Therefore, you would have been broadly flat in you had invested in these 40 stocks tipped by the IC. The lesson is that magazines are a useful source of ideas and I get many this way, but investment decisions should be carefully researched before committing any funds. Remember, "tips are for waiters!"
Friday, January 1, 2010
Improving outlook for Chip prices and short term trade in Micron Technology
Just before Christmas, chip maker, Micron Technology (MU) reported a fiscal first-quarter profit of $204 million, or 23 cents a share, compared with a loss of $718 million, or 93 cents a share, for the year-earlier period. Revenue was $1.7 billion (compared with analyst expectations of $1.6 billion), up from $1.4 billion for the same quarter the previous year.Micron said revenue from its DRAM products rose 50% from the previous quarter, while sales of NAND Flash products rose 21%, due to higher sales volumes and improving prices.
DRAM (Dynamic random access memory (DRAM)) chips are found in personal computers, while NAND (a type of Flash memory) processors are used in such devices as digital cameras and mp3 music players.
In 2008 and 2009, Memory Chip prices fell through the floor as consumption dropped and inventory levels soared. However, the outlook for 2010 is far more optimistic as corporate IT budgets may finally start to be unfrozen and consumers buy into new PC kit driven by the launch of Windows 7. A reduction in inventory levels gives the potential for substantial chip price upside if consumption growth comes to fruition as the global economic recovery gathers pace in 2010.
A position in Micron was closed yesterday at $10.8 following an entry at $10. Further opportunities to trade long will be exploited on any market weakness, especially if the stock trades below $10.
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