"Apprehension abounds as QE2 ending approaches. If you want to be in the market you better travel with the "Big dogs".

Dow Jones Industrial Average 11934.58  (Down) (7 out of 8 weeks)

I thought it appropriate to watch the TV show, Dual Survival, on the Discovery Channel, while I wrote this weeks blog. This week  Dave Canterbury & Cody Lundin are in South Africa trying to find their way out of a Wild game preserve that is full of Lions, Bull Elephants, and Warthogs and they are well down the food chain and looking like lunch there.  I thought Me and you are the dual ones that need to go back to our survival techniques to not get eaten up alive by this stock market and the lions out there in the bush.

So I have come up with a three part survival technique. One, pick out a sector that you want to diversify into, to balance your portfolio. I chose Pharmaceuticals because I had recently sold a position in that sector. Second, choose a company with a bulletproof balance sheet and low or no debt. Third , to travel with the "Big Dogs", pick a company that a hedge fund investor has taken at least a 5% position in. 

So here is what this discipline led me to:

Forest Laboratories Inc. (Symbol FRX, $39.33) .

This pharma company has a Current ratio of 5.6 to 1 and no long term debt. Who is the "Big Dog" on your team with you? That would be hedge fund manager Carl Icahn who has taken a 6.5% position in the company and has 4 nominees for the board of directors. Earlier in the year Icahn made investments in: Clorox, Amgen, and Southern Union. Mario Gabelli ,George Soros, Joel Greenblatt, and David Dreman were all on-board for the Southern Union trade and all made out nicely.


 Icahn must have been looking at Forest Labs 2011 earnings of $0.94 and 2012 earnings of $3.68 each per share. Or the 12 month Total Return of 43.4% or Net Profit margins of 23.80%. Put that all together with a forward PE of 10.69 and you have to wonder what Carl thinks there is to fix? The company also has $7.24 cents a share just sitting in cash. Maybe he wants to put that money to work?

Forest Laboratories, Inc. and its subsidiaries develop, manufacture and sell both branded and generic forms of ethical drug products which require a physician's prescription.


So if you are going to be out in the tall grass and can't see where you are going, you are best advised to hang with one of the "Big Dogs" , and hope for the best.  It should be a fun week. A regular Safari of adventures. Make sure you are not Lion food. Forest Labs seems a safe place to be.

Freewilly       

"Who can weather the storm in the tech sector and give you a good total return? I would look to Garmin LTD."

Dow Jones Industrial Average 12,004 (UP) Week ending June 17th  (NASDAQ continued down)


Tornado warnings in the Tech Sector

Well so far this weekend, I have heard about one person in the manufacturing sector who lost her job as buyer. She had been at the job for 40 years and her company is probably moving all the manufacturing outside the US, so that job is lost forever, not to be filled by a younger person in the US. Then I heard about someone who battled and battled to keep there house but finally threw in the towel, loosing all their equity in that house and walking away. This is a snapshot of USA , June 2011. How will we ever get unemployment down when we keep loosing more and more skilled and high paying jobs? We need to change our taxing policies and encourage businesses to stay in the US and new businesses to come to the US and build their factories right here.

The tech sector has been under siege for weeks
now, with Research in Motion, Juniper Networks, Micron, LG Display, Nokia, Seagate, Autodesk and others being vilified and their prices driven down. I guess everyone should just take their toys and go home and let Apple and Google own the whole tech world. I ..don't.. think... so!

One tech stock you can own is Garmin Ltd. (Symbol GRMN, $33.66).  First lets start with the 5.89% dividend  yield ($2.00 per share) that the stock pays.  Will they keep that dividend rate? You bettcha. They have a bulletproof balance sheet with Zero Long Term debt and have excellent controls on cost in place. The PE on the stock is 10.29. The product mix is being fine tuned and diversified so revenues and earnings have gone down a bit in the last four years, but the existing company is sound and moving forward into new businesses.


ForeRunner 610


You need to let go of the past. Garmin had most recent quarter EPS, GAAP earnings of .49 cents in the most recent quarter was over last years .19 GAAP earnings in the same quarter, and is up 157.89%. The 12 month total return on the stock is 18.1%. This is a dynamic company which will give you a nice total return and equity gains as new businesses develop.


 Talk about  efficiency. 52.90 % Gross profit margins and they turn their inventory 6.7 times a year.

Are there any road hazards around? Yes, keep an eye on the developments in the LightSquared 4G deployment and reported possible interference it causes to regular low power GPS systems. If there is one of those media hysterical behavior scares coming up,  there could be a big bargain day for GPS stocks. Keep on the lookout for it to buy in.

Also sift among the ruble in tech stocks and find some bargains like Skyworks Solutions (SWKS, $23.16) and Nokia Corp. ADR (NOK, $6.02).
                                               
         So find your way to Total Returns and even Go Fishing with Garmin ...... >>>>>>>
                      
           Freewilly

"The earnings keep rising at Quaker Chemical (KWR) of Conshohocken PA., year after year. I think it is time to take a position here in the stock."

Dow Jones Industrial Average 11,952 (Down)  - Is it 6 weeks now down?

Everybody is worrying about Quantitative Easing 2 ending. Who will buy our debt issued when it goes to auction if the government is not buying it. If no one wants it, will they need to raise the interest rates to get it moving? If interest rates rise, what will happen to the housing market and the recovery. Will the dollar rise in value? What ever will happen? Buddy can you spare a dime? Hope it doesn't go that badly.

Maybe Alfred E. Neuman from MAD magazine had it right in 1959 when he said " What me Worry?"

Alfred E Neuman

Neuman once answered a letter from a suicidal reader by giving him "expert advice" on the best technique for tying a hangman's knot. Such was the bantering of the irreverent Mad magazine and of course our childhood education on these matters.

But alas, around the world we will still need steel and steel tubing and the specialty chemicals that keep those grinding machines cool and running.



Quaker Chemcial , (Symbol KRW, $39.56)  is a company that focuses on just such an area of business. Quaker is a $544.1 million dollar company headquartered in Conshohocken, Pennsylvania, USA, with regional headquarter locations in Uithoorn, The Netherlands, Rio de Janeiro, Brazil and Shanghai, China. The company is publicly traded on the New York Stock Exchange, and has a long track record of financial consistency and strength. The principal industries they serve throughout the world are automotive, steel finishing, heavy equipment, aerospace, tube and pipe, and bearing manufacturing. They also serve other industries involved in making products from metal which require machining and grinding, rolling and forming, and associated cleaning and corrosion prevention processes.

I have been joking around with my company's distribution manager, who lives in Conshohocken, about buying this stock all the way back to when it was trading at $14.00 per share. Always wary of the "tip from a friend" purchase, I finally made a further analysis on this stock and bought it. Quaker trades currently at a PE ratio of 13.84 .  2011 earnings are projected at $3.30 per share and a forward PE of 12 and 2012 earnings are looking like $3.67 per share with a projected  PE of 10.78.  Add in a current dividend yield of 2.43% and you have a nice package poised for a reasonable return. Financials also look good with a Current ratio currently of 2.25.  There are only 11.5 Million shares outstanding so a small float, good for earnings building. 

The stock YTD is down 5%, but over one year it is up 47.39% , 3 year 34.28% and 5 year 119.66%. I can live with those kind of returns. This is a good way to play the high demand for steel products. 


So keep an eye on the VIX  (VOLATILITY S&P 500 index) to see when this downside volatility starts to subside and start buying in incrementally into stocks with good fundamentals and earnings like this one.

Keep your eye on the ball  ............                                    

                          .......and stay in the game.

Freewilly

"Dryships (DRYS) looks to steam ahead with the boost of Oil drilling revenues and a slight uptick in the Baltic Dry Index"

Dow Jones Industrial Average 12151.26 (Down, longest stretch since 2004) 

Dryships Inc. (Symbol DRYS, $4.15) is looking good after a week where stocks just got drubbed over and over again. The stock is sitting here with a PE of 4.   Dryships is a drybulk shipping and contract drilling company.

DryShips stock shot up Friday after it got the notice of some of the Goldman Sachs folks to give it a nod as an upgrade to "Buy"

The Goldman guys (gals) are looking at DryShips as a Oil drilling leasing company with both large oil drilling platforms for lease and also oil drilling ships. I started looking at the stock because of a mild uptick in the Baltic Dry Index in the last month. This could be a real bonus.

Urs Dur of Lazard Capital Markets, in a note back in Dec. 2010 described developments as a “bevy of positive news” from DryShips and agrees with other analysts who told TradeWinds on Friday that Dryships private placement was the first stage of an IPO for Ocean Rig (their drilling operations).
He said: “Given that much of the unresolved financing pressure has been alleviated on Ocean Rig (including the recent announcement of a $325m bridge loan and the recent completion of DryShips’ $350m ATM transaction), and that DryShips has significant built-in growth in a deepwater drilling sector that is firming, we feel that a public spin-off of Ocean Rig from DryShips in the new year is much more likely today.”

Dryships is projecting 2012 earnings of $0.97 cents per share.  The company has a 5 year growth rate of 26+ % and Net profit margins of 35%.  DryShips Inc , a Greek dry cargo transporter and oil driller, said its drilling unit won additional contract days for one of its rigs from Borders and Southern Petroleum, taking the total contract value to $126 million. Earlier this month, the company secured a 90-day contract for Leiv Eiriksson rig from British explorer and producer Borders and Southern Plc for drilling offshore the Falkland Islands. DryShips said Borders & Southern have declared two optional wells under the existing drilling contract for the harsh environment drilling rig Leiv Eiriksson, owned by its unit Ocean Rig UDW.

Ocean Rig, which has secured contracts for all of its initial newbuilding drillships, is expected to list its shares in the United States and in Oslo, DryShips is looking at a valuation for the majority-owned subsidiary at $25-$26 a share.

I would buy this stock for a trade here and take your profits when you have them. I would expect a 33% return on the trade.

So going forward I will be looking for quality stocks that have been beaten down over the last few weeks, that may be good additions to your portfolio. Onward and upward.

That's me at the Wyndmoor Memorial Day parade this year. I am standing next to a 1967 GTO that was the same year and gold color as my old car. There is nothing like cruising in a muscle car on a nice breezy day.
 Have a good week and enjoy the summer

 Freewilly