Away for a few days

I off for a few days of vacation. I may still post a bit, but most likely it will be sporadic. Hope you all have a great 2011.

The Stock for January -- Corning Incorporated

My stock for January is Corning Incorporated (symbol GLW). The fortunes of Corning are now considered tied completely to the sales of TV's and Computers, a connection whose strength I dispute. Clearly, Corning is the biggest manufacturer of glass for flat screen televisions. Indeed, in the bigger screen sizes Corning has total control of the market. So the fortunes of TV sales has a strong effect on Corning's revenues and sales. But Corning is much more than just the maker of glass for large screen TV's. Corning's product "Gorilla Glass" is a high strength glass product that is being used on all manner of cell phones and tablet computers. Gorilla Glass is scratch resistant and nearly unbreakable. It gives cell phone manufacturers the durable screen that they need for touch screen product. Indeed, the estimate is that Corning will sell about a billion dollars of Gorilla Glass in 2011, or about 13% of total sales for the company. At the moment, the product does not produce as high a gross profit as the flat glass for LCD tv's, but the potential is extremely large. If TV manufacturers begin to use Gorilla Glass for their products (which would allow for thinner designs with a sleeker look), sales of Gorilla Glass could go through the roof.

Another product that Corning has in its repetoire is its bendable fiber optic cable. Corning produces fiber optic cable that can be bent at a 90 degree angle with no signal degredation. This product has not yet taken off, but in any future large scale fiber optic installations, Corning will be in total control.

There are other products that Corning has as well. Nevertheless, the market continues just to look at the flat screen TV's as controlling. Even here, however, Corning has done much better than expected. TV sales may not have been that spectacular this Christmas in the USA, but Corning sells world wide.

At its current price of 19.32, Corning is selling at only ten time expected earnings for the next twelve months. For a company with a product with the potential of Gorilla Glass (which has gone from sales of nothing to a billion dollars a year in two years), such a valuation is ridiculously low.

Investment in Corning is not for those with a very short term horizon, however. GLW should do well over the long term. It could easily go up by 50% over the next 18 months. For those who purchase the stock now at $19.32, I recommend also writing the February 20 calls at 50 cents or greater. This will reduce the cost, although you may lose the stock if the price is over 20 on the Febuary expiration date. Of course, if that option is exercised, you will earn a return in excess of 40% annualized for the seven weeks that you hold the position.

Corning is a stock that the market is overlooking.

Disclosure: I own Corning and have been invested in the company for much of the last year. I have no interest in the February calls mentioned above, although I periodically have both puts and calls written on Corning stock.


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Another Victory for Government Healthcare

Government Healthcare has won another great victory. This one has to do with the cost of prescriptions under the various savings plans that appeared in the last few years. About two years ago, Walmart announced that it would sell about 400 different prescription medicines for $4 for a month's supply or $10 for a three month supply. CVS followed suit a short time later. The CVS deal was for $9.99 for a three month supply so long as one joined the program for $10.00 per year. These programs allowed people with chronic conditions to get their medicines for a substantial savings over the cost under normal insurance. Further, for those with a maximum annual limitation on their prescription costs, the programs allowed the patient to save his allowable amount for higher cost pills when they were needed.

Now, in steps the government. This morning at CVS, I was informed by the pharmacist that the program had been changed so that the annual fee went up by 50% and the cost per prescription went up by 20%. The coverage also apparently has been reduced, although I have not seen the new list of covered medicines, so I am just repeating what I was told. When I asked why CVS was raising these prices by so much, I was told that the government had insisted on the higher prices. It seems that the CVS program was allowing individuals to buy medicines at too good a price when compared to what the government paid for the same medicines supplied to those on medicaid. The government insisted that it get the lowest price of all. As a result, the government also insisted that CVS raise the price for everyone else.

So for all those folks struggling to pay for their medicines, the government has stepped in to require that the cost of the medicine be increased. Only is the world of government bureaucracy could someone think that it serves the needs of the people to force a price rise on them for medicine. Only the government could believe that it was more important for medicaid to get a clearly lower price than everyone else than for everyone buying medicine to get that lower price.

According to Obama, half the cost of Obamacare is going to be paid for by getting rid of waste and fraud in medicare and medicaid. If this latest move is an indication of how well the government deals with waste, we are all in big trouble.

Stocks of 2010 -- an oversight

Somehow, I left out two stocks in my review of the 2010 results.

Pier 1 (PIR), the stock of the month for December was recommended at $9.92. It closed a month later at $10.50. this is an annualized increase of 70%. Of course, since it is only a one month period, the annualized increase rate is not that meaningful. Suffice to say that the stock has been doing well. I would keep this one in the portfolio for now. Christmas sales should be out in the coming week. they may have been hurt due to the snow in much of their selling area, but if PIR dips, it is a buying opportunity. Over the next year, PIR will be moving into internet sales and the big increase that will bring.

MGM Resorts International (MGM) was recommended two weeks ago 12.72. It closed the year at 14.85, and increase of 17% in two weeks. I also recommended option trades with this one. The move here has been so large, that I would now recommend taking profits on half your position.

I also wrote about place for higher yields and about gold and silver trading, but those were in the last few days of the year, so there is no point in evaluating how well they have done.

Sorry for the omission.

UPDATE! -- I got an e-mail from a reader who asked why I am not discussing pSivida (symbol PSDV) in my results. The truth is that I should discuss it, but since it is still an open trade, I did not. On October 6, I recommended a trade of stock, calls and puts. As of now, it is still on track for the total return of the trade to be at the rate of 350%. The stock just needs to stay above $5.00 at the January option expiration for that to be the case. last week pSivida got slammed when their drup Illuvien was not approved by the FDA; instead, the FDA asked for more information. Even after the resulting decline, however, the trade i recommended is right on course to pay its full return. I just felt that until we get to january 22d, it is hard to know for sure just what the return will be.

Stock picks for 2010 - part two - what to do with them now

Yesterday, I wrote about how the stocks that I chose on the blog did up to the end of the year. Today, I want to write about what to do with those stocks if you still have them (or are thinking of purchasing them).

First the truly easy choices:

Shamir (SHAMIR) made an agreement to sell itself to another company. If you are not already out, there is no point to holding further.

Panera puts were recommended to be purchased before the end of last year. Most likely, it is too late to do that trade. If you bought them, you should look to sell during the first few trading days of 2011.

Lighting Science (LSCG) was recommended only a few weeks ago. Nothing has changed here.

Now for the less clear choices:

Caribou Coffee may have a bright future, but I no longer recommend it. I think that the big rise has already happened.

Jack in the Box (JACK) is the one stock I recommended last year that did not rise. Nevertheless, I think it remains a compelling buy. I owuld hold it.

American Capital (ACAS) is up over 50% from where it was when i recommended it. It is no longer likely to be a home run. Nevertheless, I think that there remains a nice up side to the stock. Still, one needs to be vigillant here. If the stock declines below $7.15, I would take the profits.

Armanino Foods (AMNF.PK) remains one of my favorites. While this stock also has risen over 50% since I first mentioned it, it also remains greatly undervalued. My one year target for the stock is $1.30. In the interim, it pays over a 5% dividend at the current price.

Brandywine Realty Trust (BDN) is another company which I would continue to hold. It pays a nice dividend, and over the next few years, some of its superior projects and holdings should begin generating much bigger profits. It is a long term play, but there should be a nice payoff.

Range Resources (RRC) is another I would continue to hold. The likely continued development of the Marcellus shale will bring big benefits to this company.

Gasfrac Energy Services (GFS:CA or GFS.TO) should come into its own this year. The results of the massive capital investment that has been underway for the last year should become apparent in 2011. Both revenues and profits should soar. Environmentalist pressure on hydraulic fracturing should also help GasFrac immensely.

Entropic Communications -- If you followed my initial advice, you no longer own this stock, having sold at 10 in mid December. Despite this, i still think that Entropic has a nice future, at least for the first half of 2011. This is one stock, however, where owning it should be coupled with the sale of covered calls in order to reduce the risk. it is not a stock for those without courage. Putting it another way, it is a speculative holding.

The last trade i recommended in 2011 was investment in municipal bond CEFs. Right now, it is possible to get over 8% return on your money, tax free. The two main risks of these funds are a rise in short term rates and defaults by municipalities or states. Given what the Fed has said, it is unlikely that we will see any short term interest rate rise in the next six months. Defaults or the threat of defaults are another matter. I do not expect a wholesale meltdown of the muni market which, by the way, would most likely kill every investment in securities. The fear of defaults will keep rising, however. This fear could bring down the value of the funds by forcing the rates on munibonds to rise. For the moment, I would keep the investments here, but watch them very closely.

Stock picks for the year --results were pretty good

With the end of 2010, I thought it was time to look back on the various stock picks that I made to see how I did. Here are the results:
Stock -- Caribou Coffee Company (CBOU), named stock of the month for April when it was at $8.04. It closed the year at $10.08, a gain of 38% on an annualized basis.

Stock – Shamir Optical Industry LTD (SHMR) chosen as the stock of the Month for May when it was $9.75; it closed the year at $13.40 after paying a dividend of 80 cents. Return for the period on an annualized basis is 68%.

Stock – Jack in The Box (JACK) chosen as the stock of the month for June. It was 22.17 when chosen and went down to $21.13 by the end of the year. It declined at 9% on an annualized basis.

Stock – American Capital LTD. Chosen as the stock of the month for July when it was 4.89. I closed the year at $7.56, a gain of 109% on an annualized basis. My recommendation, however, included writing the November 5 straddle. For those of you who followed that advice, you got a return of 110% on an annualized basis.

Stock – in April, I began writing about Armanino foods of Distinction (AMNF on the pink sheets). At the time, the stock was 48 cents. It ended the year at 74.8 cents and it paid a hefty dividend during that period. Even aside from the dividend, the gain was 84% on an annualized basis.

Stock – The stock of the month for September was Brandywine Realty trust (BDN). It was selling at 10.93 at the time and it closed the year at 11.65. This is a return of 20% on an annualized basis. However, I suggested that in buying the stock, you also sell the January 12.5 calls for 45 cents, a move that brought the total return to over 30% aside from the nearly 6% dividend.

Stock – The stock of the month for October was actually a class of securities: closed end funds holding municipal bonds. There is no easy way to figure out the total return from these stocks since the recommendation. Suffice to say that they paid about 7% or higher in tax free yields, the point of the recommendation.

Stock – the Stock of the month for November was Range Resources (RRC). It was $39.10 when I recommended it and it closed the year at $44.98, a gain of 90% on an annualized basis. Of course, now that we are down to just a two month holding period, the annualized returns start to get less meaningful.

Stock – In mid October, I also wrote about a Canadian stock GasFrac Energy Services (GFS:CA or GFS.TO). It was 7.07 when I recommended it. It closed trading for the year at 9.19, a gain of 30% or about 140% on an annualized basis.

Stock – in mid November I recommended Entropic Communications Inc. (ENTR). The stock was selling at $9.00 when recommended and closed the year at 12.08, a gain of 35% in a month and a half. My recommendation was to write December 10 calls and December 7.5 puts on the stock as well. For those who followed that advice, the return was over 120% on an annualized basis.

Stock – In mid December, I recommended Lighting Science Group (LSCG). It was selling at $3.25 when I recommended it a few weeks ago. It closed the year at the same price.

Stock – A few weeks ago, I also recommended purchasing puts on Panera Bread (PNRA). Since the point of the trade is the expectation that the stock will tank briefly (at least) right after the first of the year, there is no point to looking at the results.

On the whole, I am satisfied with these results. I had one stock that declined a bit, but everything else went up at a minimum rate of 30%, with some much better.

Global Warming in an historical context

New scientific evidence shows that the earth is cooler now than it has been for most of the last 10,000 years despite all the hype about supposed man-made global warming. At "Watts Up with That", Dr. Don Easterbrook posts the results of a study done on ice cores from Greenland from which certain isotope measures allow an accurste determination of temperatures over the last ten millenia. First, he points out that in the last 100 years there have been various periods of cooling and warming that have no relation to the quantity of Carbon Dioxide and other greenhouse gases in the atmosphere. Then he looks at the last 500 years and shows that the last few decades have been right in line with the many warmer periods during that time. In other words, for all of the purported affect of man caused greenhouse gases, the temperature has not been any different than what it was during the other warm periods of the last 500 years. Easterbrook then looks at the data for the last 5000 and 10,000 years. Here is where things get really interesting. Over the last 10,000 years, the earth has been warmer for at least 9,000 of those years than it is now. When the last 10,000 years are viewed in chart form, it is easy to see that the globe is just warming up after the little ice age of 1300 to 1800. Certainly, if 90% of the last 10,000 years were warmer than it is now, it is clear that there is no man made global warming.

The article in question can be reached by clicking on the title to this post. It is well worth reading. I cannot tell if the science used is valid or validly done. It certainly seems to be proper, but I am not qualified to make that determination (and certainly not on the data presented.) The government owes the American people a full study of this sort of data, however, before embarking on regulations that severely damage the economy in the name of potentially bogus environmentalism.