"What to make of the Fed continuing to buy $85 Billion of treasury bills at every bond auction? I would say: don't go out on any limbs with your stock investments and sell one or two of your high PE stocks, just to prepare for a wicked financial hangover"

Dow Jones Industrial Average 15,451 (UP) Week ending 09-20-2013

Funny Money. "Billionaire investor Warren Buffett compared the U.S. Federal Reserve to a hedge fund, because of the central bank’s ability to profit from bond purchases while accumulating a balance sheet of more than 3 Trillion dollars." Here is a link about it. Buffett lectures at Georgetown University in Washington DC. -Bloomberg .

Chris Prybal, a Quantitative Analyst at SchaeffersResearch.com, says, "Based upon statistics from the New York Stock Exchange (NYSE), Margin Debt is approaching all-time high levels."  Here is the link to  Prybal's report on Margin debt on the NYSE

Funny Money. What does this all mean? It means people and the government are all leveraging to purchase investments.

How does this usually and always turn out? Bad, is the one word that comes to mind.

What should you do to respond?  If you own some high PE stocks, (25+ PE), that pay little or no dividend, you should review what you have and in the next month take one or two of them to the sidelines and lock in your profit.

On the flip side, I would, for the time being, only buy things that are pretty sure and steady stocks. One of those stocks is:

Express Scripts Holding Corp. (Symbol ESRX, $62.05)

is, according to CBS Marketwatch, "a holding company that operates through its two wholly owned subsidiaries, Express Scripts, Inc. and Medco Health Solutions, Inc.  The company provides pharmacy benefit management services and clinics healthcare account administration services in North America."  

One thing you can be sure of is that people are still going to take their medicine everyday, whether or not Ben Bernanke or Janet Yellen decide to "taper"  the amount of bonds the FED is going to be buying.

ESRX is projecting 2013 earnings of $4.31 per share, (PE of 14.59), and 2014 earnings of $4.94 (PE of 12.71) on the current price. Express Scripts has a PEG Ratio of 1.01 and a Return on Equity of 10.37.

Revenues for the company in 2012 was $93.86 Billion. The company has 5 year EPS growth of 24.95%.

Express Scripts has very strong Institutional support with companies like Vanguard, State Street, BlackRock, Janus and Fidelity being very large holders of the stock.

So the Freewilly final word is to be careful here in the next 3 months and just own mostly stocks that could weather a financial storm. Also, lower the average PE of your stock portfolio overall as a safety hedge.

Freewilly

"Let's talk about a company that has a monopoly on a whole market segment -robotics- in our country's fastest growing industry segment -medical devices. The business media hates this one, but I love the stock of Intuitive Surgical and their DaVinci Robotic System"

Dow Jones Industrial Average 15,376 (UP)  Week ending 09-13-2013

Sometimes when investing in stocks, you have to look at a company's strategic assets and its position in its market segment rather than what is happening quarter by quarter with sales and earnings. In the medical equipment segment, there are lots of companies from which you can purchase endoscopes, surgical microscopes and C-ARMS. But if you want to buy Robotic equipment with which to do minimally invasive surgery, there is only one company in the world that you can buy it from and that company is:

Intuitive Surgical Corp. (Symbol ISRG, $375.00)

 The two greatest inventions in Medicine in the last 50 years in my opinion are the mapping of human genes to develop medicines to fight diseases and the invention of the DaVinci robot for doing minimally invasive surgery both on site and remotely. The benefit of  minimally invasive surgery is that recovery times are dramatically reduced for the patient.

The price of the stock of Intuitive Surgical has been knocked down in the last 6 months because of a quarterly revenue and earnings miss, a problem with some of the instruments that hook to the robot, and an FDA investigation about robotic surgery: All short term events that can be resolved and the company will move forward from. ISRG stock is coming off a high of $585.67, so there is a lot of headroom here to run up.  At no time have annual earnings been down.

Here are some numbers for the company.
First, the Revenues TTM are $2.337 billion dollars annually. The market cap on the stock with this low price in place is only 14.89 Billion dollars.  So basically a company, for example GE , could come in and purchase the entire company and own this whole market segment for $20-$25 billion dollars.  As a comparison, Verizon just purchased from Vodaphone only a 45% stake in the part of the VZ Wireless company they did not own for a healthy $130 Billion dollars. So this would be a prime strategic asset with a #1 market position.

 There is one other surgical company in the robotics segment that focuses only on the orthopaedic surgery market, MAKO Surgical (Symbol MAKO, $16.22) , but they have not made any profit yet, and are no threat to Intuitive Surgical's devices. With the DaVinci Robotic unit, the physician can do the surgery in 3D. They can also do the surgery remotely from a separate working console.

 ISRG has a PEG ratio of 0.9858 and a Return on Equity of 20.12, so well within my investment parameters. The median PE is 21.83. The company produced Free cash flow of $164.10 million dollars. The company does not pay a quarter dividend.

The company operates at Gross Profit Margins of 70.04% and at Net Profit Margins of 27.5%. The earnings for 2013 are projected at $15.79 per share and for 2014 they are looking like $17.41 per share.



The company reports earnings on 10-15-2013. The quarter is not supposed to be stellar. So you might want to buy a small amount of shares here then some after the earnings report.  This is a stock you buy 5 or 10 shares at a time. CNBC said reporting on some stocks, that if you had bought ISRG the same day as Google came public you would now be up 1400 + %

Think Strategically for deploying your capital among stocks. This one will be a winner!

Have a good night,          
Freewilly

"Don't try to reinvent the light bulb is an old mocking saying, but guess what? Cree (Symbol CREE) went ahead and did exactly that, with its super energy efficient LED lightbulbs."

Dow Jones Industrial Average 14,922.50 (Up) Week ending 09-06-2013

Cree Inc. (Symbol CREE, $55.58) provides another facet of the great American energy revolution. Its niche is on the conservation side, with LED energy saving light bulbs. Cree LED bulbs are sold in the USA exclusively by Home Depot (Symbol HD).

Cree is priced for growth with a PE of 75. The PEG ratio on the stock is a very reasonable 0.77 with a Return on Equity a little light at 3.27%.

1.38 Billion dollars in 2012 annual revenue. Revenue growth year over year of 27.25% is what makes this stock very exciting.

What I like best about the stock is its balance sheet. It has a sparkling Current Ratio of 10:1 which is as healthy as you can get.


CREE stock has had a steady rise up to a high of $76.00 then it got a major haircut when it reported a softer revenue growth quarter than Wall street expected, thus the more reasonable price of $55.58 to purchase it at.

2013 earnings are projected at $1.75 per share with 2014 earnings per share rising to $2.34 per share. What you would expect of a growth stock. (No dividend here).

J.P. Morgan has a "Buy" recommendation on the stock with a target price of $75.00.


CBS MarketWatch describes CREE's profile as:
"Cree, Inc. develops and manufactures semiconductor materials and devices based on silicon carbide, gallium nitride, silicon and related compounds. Its product line includes blue and green LED chips, LED Components, LED Modules, LED lighting, power switching devices and radio frequency devices. The company was founded by Calvin Carter Jr., John Palmour, Neal Hunter, Eric Hunter and John Edmond in 1987 and is headquartered in Durham, NC."

I would recommend CREE as a "BUY and hold" here for at least a two year period. It will be a good component for a Growth portfolio. Plenty of LEDs to be sold here in the next few years.

Pray for Peace in Syria. I know it seems like we are a long way away from that, but it is still possible.

Freewilly

"Strike a pose! Yahoo's CEO Marissa Mayer is equally as comfortable talking social media collaboration and the cloud as she is doing a fashion spread in Vogue magazine. Now this Yahoo stock is back in style and turning heads!

Dow Jones Industrial Average 14,810.31 (Down) Week ending 08-30-2013

Yahoo! CEO Marissa Mayer

This stock market has come down from Dow 15,800 high level to a 1000 points lower and I am starting to find and buy some good value stocks here, especially in the technology space.  One of those stocks last week was Cree (Symbol CREE, $55.14), but the second and more intriguing one to me is Yahoo! Inc. (Symbol YHOO, current price $27.12).

Yahoo's! CEO and company transforming visionary Marissa Mayer is molding this company to success through buying small bleeding edge social media companies for growth and at the same time collaborating with companies that in the past they treated as competitors such as Yahoo News with Disney and ABC's Good morning America.

(Photo from David Paul Morris - Bloomberg)

Yahoo! Inc.,which on its own, is one of the most recognized franchise names since the beginnings of the Internet, has really never parlayed this franchise value into the price of the stock.  With the exception of revenue growth, the company has some wonderful numbers. Return on Equity 29.44% and a PEG ratio of 1.27.  A Current ratio, (Assets to Liabilities ratio), of 4 to 1 and very little long term debt 1% (9 Mil.). EPS quarterly YOY growth of 70.44%

This Sunnyvale , Ca. company, YHOO gets most of their revenue from search and display advertising. They rocked Google's world this month when they showed up in the number one spot in unique user traffic veiws. Their website displays in 25 different languages.



Marissa in Vogue magazine interview.

Earnings per share for 2013 are projecting at $1.47 per share and for 2014 looking like $1.70 per share. The Investor's Business Daily IDB rating for earnings is 93. Forward PE of 17.7.

Here is Marissa's article in Vogue: Vogue magazine hail-to-the-chief yahoos-marissa-mayer/#1 

The 1 year TTM (Trailing Twelve Month) gain in the stock has been 84.87%. Annual free cash flow of 247.83 Million dollars.

Now back to that Revenue Growth: Revenues for 2012 were 4.83 Billion dollars. Investments in  Alibaba Group and the acquisition of Tumblr and other investments in growth should bring revenues along in my opinion. Here are some excerpts from a USA today article by Scott Martin on July 16th this year about Yahoo revenue:

"Yahoo is showing some signs of reversing course. Mayer has focused on revamping services, giving makeovers to the likes of Yahoo's Mail, News, Weather, Sports and Flickr photo-sharing, among others, in recent months."

Mayer touted the early signs of turnaround for interest in some of Yahoo's services on a conference call Tuesday with analysts, investors and members of the media.

"Renewed traffic growth in the face of multiple years of decline is, to my knowledge, unprecedented among industry players that operate with billions of page views," she said.

Yahoo has also gobbled up 17 companies in the past year in a bid to add popular services such as photo-blogging site Tumblr, which it acquired in a $1.1 billion deal in May. The move has given Yahoo, on a binge for talent, access to highly sought software engineers and designers to add to its ranks."

So I guess the only way to end this article is with the material girl herself, Madonna, and a Vogue - Strike a Pose image,  which idea is wholly owned hers, in concept and in spirit.

Wish me luck at the Fantasy football draft.  Hopefully, I can pick running backs as well as I can pick out stocks!

Freewilly