" Some year-end wisdom and a little talk about Internet Security as a business in 2011"

Dow Jones Industrial Average  11,573    (Up) Week ending  12-24-2010

 As we approach the end of the year 2010, I think it is a good idea to remember Hal Holbrook and his words as Lou Mannheim the sage to the younger Bud Fox (Charlie Sheen) in the original Wall Street movie.

 "The main thing about money, Bud, is that it makes you do things you don't want to do." –Lou Mannheim (Hal Holbrook) .

Holbrook, who also doles out common sense advice when he portrays Mark Twain, reminds us that sometimes people end up in situations with money where they can find no way out and are forced into criminal behavior to keep the whole thing going. Bernie Madoff, I'm sure initially had good intentions to make all his customers money. Any company no matter how small or large can get in trouble with money.  Note General Motor's bankruptcy, Lehman Brothers, Bear Stearns, A&P Stores, currently Fannie Mae and Freddie Mac, and the old Pennsylvania Railroad company.  

So if you are a small business on the brink, because the conditions of your business have diminished, or are a homeowner facing foreclosure on your home and are in desperation, seek help - before you do anything crazy in regards to money.  With regards to stocks and investments, understand that there are different levels of risk with different types of investments. With the market going up in 2010 we all may have drifted into investments with higher levels of risk without even realizing it. You may be actually speculating when you think you are investing. Be careful! Invest like it is your first $100.  Enough said.

On to WikiLeaks! (and it's impact in 2011 on stocks in the Internet security business). Of course, the government is in full force with the WikiLeaks Task Force or WTF, which in SMS language is "What the  ___bleep?".   On the corporate front, there are companies of all sizes in the business of internet security. My chosen mission is to find you a few stocks that you can make money with. 

 The first obvious choice is Cisco Systems (Symbol CSCO, $19.84),
 It's all about the network and the "Cloud" and Cisco is totally involved along the whole path. The company does billions in sales and earns billions in revenue and has billions in cash on the balance sheet to buy up other high technology companies. It has sales growth of between 8-9 % a year and net profit margins of 18.90%. What's not to like? The internet security business should just add to these tremendous numbers.

If you want a little more high octane in your Christmas punch then Radware (Symbol RDWR, $38.84) should fit the bill for you. 2010 earnings per share of 66 cents and 2011 projected earnings of $1.00 per share. This company's stock is up 155% in the last 3 years. This small cap company should continue to grow nicely.


 Another small-cap name for you is SOURCEFIRE (Symbol FIRE, $24.74), with a 5 year sales growth of 33%. This company has a 3 year total return of 133%.  Just understand that these high growth stocks can hit speed bumps and you should be prepared for 25-30% downswings if they hit a slippery quarter. You need to buy into these types of stocks taking positions over time, maybe over 3 months to a year. As I mentioned in the beginning of the article, do not go in and bet the farm on one purchase or leverage and load up on one of these guys by buying on margin!  If you buy options, you often will lose all or some of your money.

If you are looking for a medium sized , well established company , you might want to look at Check Point Software Technologies Ltd. (symbol CHKP, $45.98).  Some nice internet security profits here with 40.4% net margins. This stock has a 108% total return over the last three years.

So watch what you say on Facebook and Twitter and always be cautious when exploring the web and even the email you receive.

Have a Happy, healthy and prosperous New Year, 2011.

Freewilly

"With an abundance of natural gas now in North America we need to liquefy it and export what we are not going to use here"

Dow Jones Industrial Average  11491.91  (Up)  Week ending  12-17-2010



Cheniere - Sabine Pass LNG

 If you live here in Pennsylvania, like I do, then you know that the northern tier counties in the state like Bradford, Sullivan and Susquehanna are experiencing a natural gas drilling boom. Marcellus Shale gas deposits all across the Appalachian Basin are producing large amounts of natural gas to be processed.
Chesapeake Energy Corp. (Symbol CHK, $23.30) seems to be doing a majority of this exploration. Not surprisingly, Carl Icahn has built a 5.8% ownership position in this company. 

 In September 2010, CHENIERE ENERGY PARTNERS (Symbol CQP, $19.55) received US approval to export liquefied natural gas. Up until that time, the facility's primary purpose was to import LNG to distribute in the US.  CHENIERE has a very nice 8.7% dividend payment and a low PE of 11.5. Cheniere Energy Partners reported a deal with Chinese energy firm ENN Energy for 1.5 million tonnes per annum of bi-directional LNG from the Sabine Pass LNG terminal in Louisiana. The MOU covers a 20-year agreement for the supply of
LNG to ENN, should regulatory approvals proceed as planned.

Boone Picken's Plan to use natural gas to power cars and most importantly 18 wheeler trucks, which use 33% of the barrels of oil that we bring in for diesel to move goods around the country, continues to gain traction. Natural gas is also used in many power plants in the country to produce electricity.

Apache Corp. (Symbol APA, $116.95)  owns 51% and  EOG Resources Inc. (Symbol EOG, $91.67) owns 49% of the planned liquefied natural gas (LNG) export terminal to be located at Bish Cove, near the Port of Kitimat, about 405 miles (652 kilometres) north of Vancouver, British Columbia. Planned capacity of the proposed Kitimat LNG terminal is about 700 million cubic feet of natural gas per day or 5 million metric tons of LNG per year. In November 2010, members of the Haisla Nation voted overwhelmingly in favour of approving a lease of reserve lands required for the construction and ongoing operation of the Terminal. Federal and provincial environmental authorizations for the initial design of the Terminal have also been obtained.

The plan is to export LNG to Pacific Rim countries from
Canada and plenty of it.

Out of these stocks I like Cheniere and Apache the best for shorter term one year trades and Chesapeake and EOG more as longer term 3 year investments.

I think that Liquified Natural Gas is a good energy product to balance our trade deficit and is an excellent clean fuel for use here and abroad. We need to add more storage capacity for LNG as a country as a matter of national energy security. It is definitely an integral energy source for this decade.

Enjoy your holiday gatherings with friends and family this week.

Freewilly

"Fundamental analysis depends on analysts' data, but what if estimates are too conservative and do not account for momentum?"

Dow Jones Industrial Average   11,410. (UP) Week ending 12-10-2010

Richard H. Driehaus


Greetings fellow shoppers. In his 1997 book "Investment Gurus" , Peter J. Tanous interviews legendary momentum trader Richard H. Driehaus, of Driehaus Capital Management, LLC. http://www.driehaus.com/index.cfm . Driehaus states when interviewed , "I've seen in the past that when companies report very positive surprises that analysts were almost all low. The analysts seem to prefer to be conservative rather than accurate. But when you are at a fulcrum or turning point, both analysts and companies can under-estimate growth."  Richard looks for earnings acceleration and positive earnings surprises.

        So we need to look at PE and make it "P" (price) divided by "E" (earnings) to the "X" power and put in an earnings acceleration factor in our fundamental analysis calculations. "X" could be the average earnings growth percentage gain in the last six quarters. This would give us a more accurate idea of the dynamic earnings growth and value of the company.

   So that is a lot of explaining to do, just to get to talk about Skyworks Solutions (Symbol SWKS, $28.04). SWKS has a one year Total return 95.4% and 3 year total return of 226.2%. "Skyworks Solutions, Inc. is an innovator of high reliability analog and mixed signal semiconductors. Leveraging core technologies, Skyworks offers diverse standard and custom linear products supporting automotive, broadband, cellular infrastructure, energy management, industrial, medical, military and mobile handset applications."  They have solutions for all air interface standards, including CDMA2000, GSM / GPRS / EDGE, LTE, WCDMA, WLAN and WiMAX. And here lies the fulcrum, the enormous exploding growth of the 4G and the above named interface markets.

Skyworks Solutions on November 15th, 2010  announced that "two of its power amplifier modules are enabling the first commercial long term evolution (LTE) handset in the United States. Samsung's newest 4G mobile phone, the Craft(TM), was launched in Las Vegas by MetroPCS and leverages the SKY77702 and the SKY77703. The carrier expects to cover 19 markets by 2011 and approximately 110 million LTE customers in major cities such as Dallas, Los Angeles and New York. Today's 4G systems offer a comprehensive solution where data and streamed multimedia are available to consumers anytime, anywhere at higher data rates than previous generation networks. In July 2010, Skyworks enabled the world's first commercial LTE device, Samsung's high speed 4G USB modem."


  Skyworks manufactures Gallium Arsenide (GaAs) power amplifiers.
 GaAs has some electronic properties which are superior to those of Silicon. It has a higher saturated electron velocity and higher electron mobility, allowing transistors made from it to function at frequencies in excess of 250 GHz. Unlike silicon junctions, GaAs devices are relatively insensitive to heat. Also, GaAs devices generate less noise than silicon devices when operated at high frequencies. They can also be operated at higher power levels than the equivalent silicon device because they have higher breakdown voltages. The chart below shows Skyworks Solutions market share.
 

The company will earn $1.46 per share in 2011 and $1.79 in 2012.
 
 With the discussion above, I feel these analysts earnings estimates may be too low. Sometimes you just need to acknowledge success
and  put the thing in your portfolio and "let it ride", (to quote Bachman Turner Overdrive.)
 
So add some Skyworks Solutions into your Christmas stocking
or give it as some Hanukkah Gelt, but get it tucked in for 2011. 
 
Happy Holiday Shopping,    Freewilly  
 
 

"3 Industrial companies, 2 Commercial banks, and a partridge in a pear tree"

Dow Jones Industrial Average 11,382.09 (UP) week ending December 3rd, 2010

Caterpillar

When you load stuff up to your blog you need to remember that
it may be up in cyberspace for a long, long time and that any one of your blogs could be read out of context at a future time. So I, like
Jack Finney in his time traveler short stories "About Time" , must
leave notes for future readers that will stand the test of time, to be read and relevant in the future.  Last week I put up mostly momentum stocks. This week we are back to fundamentals and good earnings growth.

Caterpillar Inc. (Symbol CAT, $90.35) is a rock solid company whose machinery sales were up 48% over the 3 months ending in October. Annual earnings for 2010 of $4.02 and projected 2011 earnings of $5.70 per share. Cat is also buying Bucyrus International to fuel their revenue growth. They also are doing a one billion Yuan bond issued for two years that is well received. 12 month Total return of 59.5% for CAT. This one will stand the test of time.

Carpenter Technology Corp. (Symbol CRS, $ 38.68) the manufacturer and fabricator  of specialty metal alloys has taken a sudden and rapid earnings turn to the positive and I think it is because of  demand for Titanium products. Earnings for 2010 are going to $1.40 and 2011 are projected at $2.79 per share.  Carpenter Technology announced "Expansion of Titanium Facility to Support Growing Aerospace Fastener Wire Demand". Titanium is an amazingly strong and light metal. A piece of it has held my hip and femur bone together for the last ten years after a car accident, so I can personally vouch for it.  

The third industrial stock is Joy Global Inc. (Symbol JOYG, $79.14). This company has a return on equity of 45.90%. 5 year earnings growth of 26.92%. The company has been building cash reserves for the last 5 quarters. This producer of machinery for mining Copper, Coal, and Iron ore should keep going strong with the world growth in China, India and Brazil.

My two banks are Bank of America (Symbol BAC, $ 11.57) and HDFC Bank ADR (Symbol HDB, $179.10).

 These two banks have the size and earnings power to be competitive in the global banking arena. 

Bank of America with it's Merrill Lynch operations in Asia have made great strides to grow and HDFC based in India has been on a 5 year, 41.5% revenue growth  expansion that shows no signs of letting up. Both companies will have rapid earnings growth in 2011. Bank of America reported today that they are bringing back a more substantial dividend.  Both 10 years from now will be around if you are reading this in 2021, unless they merge or are bought out.

I also promised you a partridge in a pear tree from the The Twelve Days of Christmas (song). The song which could be of English or French origin will also certainly be around in the future and has many more stanzas, but I could not come up with that many stocks!  So here is your partridge. Why he ends up in the tree, I am not sure? 

Make sure to sing a happy tune and enjoy the capital gains tax staying at 15%!     Freewilly