Sunday, June 3, 2012

"Every year the stock market in May is like the movie Groundhog Day. We repeat the same downside month, over and over again every year"

Dow Jones Industrial Average 12118.57  (Down and Ugly)  Week ending 06-01-2012

Phil Connors, the weatherman in the movie Groundhog Day has a message for you about the stock market during the month of  May, 

"It's going to be cold, It's going to be grey, and it is going to last for the rest of your life". 

 Every May, we repeat the same DOWN month over and over and over again. All we need now is the Sonny & Cher music.  Why didn't we listen to "Sell in May and go away", we knew it was going to happen, again?

Phil the GroundHog weather  prognosticator
Well , now what we need to know from Phil is if Spring is going to come back again in the next six weeks to this stock market, or will it be a "cold, grey, endless Winter of continuing stock losses? Will Phil, (the groundhog),  see his shadow and what should we take up as a strategy here? 

First, the good news is that in your 401K long term plans you are buying units at a steep discount right now and it will bring your average purchasing price down on shares. The bad news is that Greece could pull out of the Euro currency at any time and trigger meltdown in the banks in Spain, Italy, and Portugal. So to be judicious here, you need to be thinking long term and you should only take up smaller  positions in case things really go haywire.

So let's send Phil into the dust bin for a dumpster dive and see what he can pull out for us.  

Shuffle Master Inc. (Symbol SHFL, $14.81) has some good stuff going on in Australia and the On-Line gaming industry. If you had owned this stock you would still be up 38% for the year. In the first quarter their slot machine revenues were up 104% according to IDB.

Shuffle Master is projecting 2012 earnings of .77 cents per share and 2013 earnings of .90 cents per share. It operates at 14.35% Net profit margins and revenues are growing rapidly. SHFL has a 3 year total return of 222%.

What else has Phil found down in that dumpster? 

How about Noble Corp. (Symbol NE , $30.59). This one is more of a value play on all the negative press on the Oil patch. You will need some patience with this one. Here are some items that will make you happy to wait. The current book value on the company is $29.32 per share. The PE ration is only 10.93. The PEG ratio is only 0.70. Earnings for 2012 are projected at $2.78 per share but they move to a lofty $4.40 per share in 2013. In other words Long Term earnings growth is projected at 60%. 

Phil these are great ideas at reasonable prices. You got one more before Sono & Cher Bono sings "I got you Babe"?

Well unless Apple Inc. is going out of business or slowing down dramatically, the stock of
Cirrus Logic Inc. (Symbol CRUS, $25.93) should be a good and safe place to park some money. 

CRUS is projecting 2013 earnings of $1.67 and 2014 earnings of $2.21. The 5 year sales growth here has been running 26.94% with being an Apple supplier of chips. Net Profit margins are running at 20.61%.  The PEG ratio on the stock is a very reasonable 0.74. The company has Zero Long Term debt. (I wish I could say that!) 

One year Total Return on Cirrus Logic is 61.75% . For Three years the Total Return has been an astounding 537.10 percent. No Cold and Grey here. Nothing but endless Springtime. 

Thanks Phil  ,
the  great  ideas.

Adios Amigos,


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