"Let's take a look down at our feet and see if we can come up with any investment ideas"

Dorothy's Ruby Slippers

Dow Jones 10,860  (UP Strong)   Week ending 09/23/2010

 Why Shoes?  My daughter Molly told me I should buy stock in Chuck Taylor's Converse High top sneak company because they have been around for ever and are very popular.  Sometime in 1908, Marquis Mills Converse decided to start a rubber shoe company, bypassing a rubber trust that prevented most companies from doing business directly with their retailers. Early catalogs bragged about how many trucks left the Converse factory in Malden, Massachusetts, delivering product directly to stores in Boston. Mr. Converse’s idea worked. But more importantly, it survived. Chuck Taylor then joined the company in 1918. Unfortunately , as far as I can see, the company is privately held and not traded as a  common stock.


Converse High Top Sneaks 


 So what shoe companies should you buy stock in? My wife Deb tells me that Skechers USA Inc. (symbol SKX, $22.12)  sells sneaks that when you walk in them they are designed to make you lose weight? Novel idea. Skechers has a very reasonable PE (price earnings ratio) of 6 , with earnings for 2010 of $3.79 a share and for 2011 of $3.89 a share. That is not a big year over year increase, but still very good numbers for a stock trading at $22. Quarterly sales numbers rolling forward look very good, so I would call this one a very reasonable BUY. 

My hero Jim Cramer scooped me on Friday with

Nike Inc. (Symbol NKE, $79.57) because they had come in and reported good quarterly earnings on Friday. This blue chip stock is the 800 pound gorilla in this shoe space. It has a 3 year Total Return of 40.8%.  With long term earnings growth running 12% and the company trading at a PE of 18, there is no reason to rush into the stock here.  For a conservative investor that wants to grab this and stash it away in an IRA account for total return over 5-10 years, with it's dividend it is a very high quality Large Cap investment and would make a solid building block in your portfolio.  

If you are looking to add something with a little more juice for the short term, Deckers Outdoor Corp. (Symbol DECK, $47.61) is the shoe stock you are looking for. Long term earnings growth of 24.33% and earnings per share in 2010 of $3.53 per share and in 2011 projected at $3.94 per share make DECK an excellent stock for you to own in your portfolio. 5 year sales growth of 30.29% and with a one year total return of 68% , Deckers is the best pick in this shoe area of stocks with many years of growth ahead.

P.S. ****   I did not discuss Adidas, which also owns Reebok, because it trades on the German Deutsche Boerse in Frankfort as part of the DAX 30. They do trade an American Depository receipt (ADR symbol is ADDDF), but with very little data provided.

So lace up those sneaks and boots and get ready for some fall hiking. The leaves in the Northeast USA are beautiful this time of year.

  Happy Hiking and Running,      Freewilly.

  

"Sometimes things get silly and I just have to send out a friendly reminder"

Evening of September 23rd, a Harvest Moon outside.

This is not my normal blog just a warning to my friends that I will occasionally send out when I see things that are dangerous out there . 3 stocks that are, on a fundamental basis, well overdone and you quickly need to back away from. 

 First , Netflix, (symbol NFLX, $160.47). The stock is currently at a PE of 65. I had spoke about it earlier in the year at a much lower price. They have not reinvented the wheel here, and this media will soon be delivered directly via the Internet, fiber or cable. This will not end well.
SELL! SELL!SELL!  

     Also the two darlings of the "Cloud Computing Club".
Akamai Technologies Inc (Symbol AKAM, $50.59) with a PE of 62.46 and SalesForce.com (Symbol CRM, $117.49) with a PE of 179.83.  If you are buying or owning these stocks at these levels, the only thing in the clouds is your head!

Remember When:   The Optical stocks were growing at 40% a year and you were buying Sycamore Networks for $115.00 a share and it was supposed to go to $165.00. Or how about when Qualcomm was at $700.00 a share and Henry Blodgett boldly said it would probably go to a $1000.00 a share?

Does any of this sound familiar?    Haven't we been here before?

Hello, McFly, anybody home in there?

This is just to say, don't get Silly out there.  Stick with the fundamentals and avoid bubbles like these and stay out of trouble.

Good Evening,

Freewilly 
   

"If Johnny Cash was still around he might write a song about Coal & Steel and the miners that work down in the earth"



Johnny Cash & Bob Dylan

Dow Jones  10607.85   (UP)  Week ending Sept 17th

Johnny Cash always wrote songs about the folks that had the hardest path in life to survive, like convicts, outlaws, gun fighters, drifters, and people with family tragedies. Generally Johnny hated anything Elitest and always sided with the view of the common man, people like the coal miners. Johnny sang an old Billy Joe Shaver song called "Old Chunk of Coal" and it went something like "I'm just an old chunk of coal but I'll be a diamond some day, I'm goin to get rid of every flaw". Well I have a feelin that those Coal Miners are going to be working even harder next year because that "Old Chunk of Coal" and Coal stocks are going to turn into diamonds next year because of the tremendous demand by Asia-Pacific countries for metalurgical coal to manufacturer Steel.

   This also bodes well for Johnny's other favorite subject "Railroad trains" headin west (and other bulk shippers). But for my conversation I will be speaking about the Coal stocks. These earnings projections for 2011 jumped off the page at me and my financial advisor Vince confirmed  my thoughts with some excellent Morgan Stanley Smith Barney research on the subject. So here goes with my picks.

Arch Coal ( Symbol ACI, $24.71) is one of the best pure Coal plays that you can invest in. earnings projections 2010 - $1.08 per share, 2011 - $2.66 per share, 2012 - $4.00 per share.  Coal companies do not normally operate at high profit margins so this is all going to be volume increases to boast up profits. Those poor coal miners are going to be working allot of overtime and longer hours to keep up. Sing it Johnny, "flesh and blood and toil in those dark & lonely mines". ( I hope the miners have some profit sharing plans!).

Peabody Energy Corp. ( Symbol BTU, $47.00) will also be humming a happy tune with earnings in 2010 of $3.03 per share, 2011 - $4.53 a share and 2012 of 6.26. Try to find another industry projecting this type of earnings growth.  Peabody's 3rd quarter profits were up 35% mostly due to metalurgical coal production and sales. They have a litle bit better return on equity that Arch Coal, (a little more profitable by controling cost, i.e these coalminers are workin hard and are good at their work).

 If you prefer something with a big dividend yield instead in the coal group,  PENN VIRGINIA Group Holdings (Symbol PVG, $22.07) might be your cup of tea.  Penn (PVG) will have the growth in earnings from Coal and will pay you a safe 7% dividend while you wait. Good for IRA accounts to give you some growth and income.

So look for the BLUE logos, make some money, and think
about and be kind to Coal miners like Johnny Cash would.

Freewilly

"Some stocks to hang your hat on that include bonus dividends in an increasingly volatile stock market "

Dow Jones 10447.93  (UP) Week Ending  09/03/2010

Has this stock market been tossing you around like a roller coaster ride at Dorney Park?  Well you are not alone. We have been in this 10,000 - 10,600 trading range all summer and people are having trouble getting their bearings. The high unemployment continues to raise questions of whether we might have a double dip recession.  Remember though, that the highest unemployment is seen at the end of a recession. The numbers I am seeing tell me it looks like the stock market put in a bottom in early June 2010. No matter what happens you can beat your cash/treasuries holdings with these four stocks that give you growth at a reasonable price and a nice dividend.

The first one is Coca-Cola Co. (Symbol KO, $57.56). Yeah Warren Buffet gets it right with this one. This soda fountain of cash generation pays a 3% dividend even before you start getting returns for it's growth . KO is projected to have earnings of $3.75 per share in 2011. The companies 1 Yr % Change (TTM) is 16.10%. You can do the math, this is a no brainer compared to the return on your money market fund.

 The next one is Honeywell International Inc. (Symbol HON, $42.82).  Collect your 2.83% dividend up front, this stock is up 18.5% over the last 12 months. Another stock you will not lose sleep over in this computer trading dominated market. We need you retail investors back! This company has a great return on equity and
it continues to gobble up small profitable security and monitoring companies. 2011 earnings are projected at $3.04 per share.

 E.I. DuPont de Nemours & Co (Symbol DD, $42.51) has had a nice run up since June and pays you a 3.86% dividend. This company does not have much sales growth but has a 40.90% Return on Equity and the stock has a 37.4% total return for the last 12 months. Is your stable asset fund giving you that??  Projected earnings for 2011 is $3.23 per share.  Remember , chemical stocks traditionally are the first to lead the way out of recession. Kick in lower oil prices which is a benefit to DuPont's bottom line and you have a pretty good idea here. With a PE of only 12, Dupont is a fairly safe bet.

Stock analyst generally hate Airline stocks because they are always
going bankrupt. But Ken Heebner in 2010 has made good money with them with US Airways and UAL, so I thought I would add my own pick. Southwest Airlines Co. (Symbol LUV, $11.57). Southwest is the sweetheart from the UAL/Continental merger deal and they pickup 36 slots at Newark Liberty International Airport in the lucrative New York City market. This could be a catalyst for growth in the stock. If you have ever been out to Chicago's Midway airport you know that Southwest fires off jets out of there like clockwork and their whole fleet is all exactly the same Boeing 737 jet to keep their cost down. No dividend here really (0.16%), but the companies 1 Yr % Change (TTM) is 37.57% which easily makes up for it. Earnings for 2011 projected at .95 cents per share according to Barron's and could pop over into triple digits, (over a $1.00) which would pop it up on analysts radar. I would not be surprised to see this stock get back to $15.00 per share.

So let the market go where it wants to and enjoy your fall with some stock buys that will
steer you through the turbulence.

Freewilly