A Chance to Get Back in the Market

I am hoping the market itself sort of calms down and stays in a relatively wide range (although Wednesday at 2 PM will provide the normal nonsense knee jerk reaction to Fed announcement) and we can perhaps get back to stock picking for the first time since summer 2008. That said, I've been saying that for the better part of a year... but it almost feels "normal" at this moment.

Fidelity National Financial (FNF) was down about 3% after hours on the first blush on earnings but obviously my blog entry turned the tide ;) [Fidelity National Financial Misses; Underlying Metrics the Real Story] It is now up 6%, I added a bit Tuesday morning and I think the earnings story here should be powerful as we move forward. When your top problem is a flood of business is coming your way, and you are having a hard time dealing with it... that's a good thing.


First American (FAF) reports on the 30th and usually I don't bulk up ahead of earnings but I am going to buy some portion back of what I sold ahead of the FNF earnings... essentially FAF is a smaller version of FNF and won't have the acquisition noise.

I am also adding to Allegiant Travel (ALGT) - I didn't add Monday on the big dip; some risk that the swine flu will accelerate and cause more damage but ALGT is not an international player so as long as the US situation does not get too whacky it should be ok. I bought some near $50 and continue to find this name dirt cheap at just over 10x earnings - there was what appeared to be a dilutive offering last week, but a reader commented these were not new shares but simply insider selling i.e. converting non float shares to future floated shares. In that case it is not dilution like I thought.

I have and continue to like Priceline.com (PCLN) - it was hit on the swine flu situation and I almost pulled the trigger but with earnings on May 11th I decided to wait. So far this earnings season being cautious on earnings has left some good profits on the table so this might be another one. [Feb 19, 2009: Priceline.com Impresses on Earnings] [Dec 19, 2008: Priceline - Back on my Radar]


There are some shorts I am eying but it is difficult to pull the trigger when every dip is so aggressively bought. They have to be done with such short durations that it is almost not worth it at this time; so I am mostly just watching. The Chinese large caps (US listed) continue to lag as has been the case (as we've noted multiple times) the past 2 weeks.

Looking through the list of names of interest we presented [Earnings of Note Monday-Tuesday]

1. We said Office Depot (ODP) was the flier of the week as a sub $3 stock, it is up well over 20% today as they stated nothing much more than we plan to stay in business. And of course they beat lowered expectations even as small businesses across America shut down.
2. Northwest Pipe (NWPX) is a small cap water infrastructure play - I didn't see a great report but great is not needed in this type of market - the stock is up nearly 15%.
3. Under Armour (UA) is up nearly 15% on a nice surge in sales (new footwear lines) but profit up only a tad. Good enough in this market.
4. Lazard (LAZ) - a peer to our Greenhill & Co (GHL) disappointed and is down 7%; I am not a big fan of Lazard but the market took up all these boutique firms on the same thesis. GHL is holding in there quite well considering the "student body left" environment at flat on the day - that is assuring. As I wrote when I started Greenhill [Apr 8: Bookkeeping: Starting Greenhill & Co] Lazard is the cheapest of the peer group I was looking at, but also had the worst chart. There is usually a reason for such things
5. Traders continue to pile into restaurants as if they are internet stocks circa 99... Buffalo Wild Wings (BWLD) surging ahead of earnings tonight. Again, we are almost at the point where we will soon see "sell the news" reaction as expectations are beginning to get out of hand in casual dining - not sure how many times the same old stocks can rally on the same "surprise". [Apr 23: America's Hottest Sector - Casual Dining]

Dendreon (DNDN) publishes a more detailed analysis of their data around 2 PM Tuesday - the stock continues to fly so I assume "those in the know" know it's going to be good. [How One Reader Found Dendreon] Outside of that I am seeing a lot of interesting activity in low priced tech/telecom stocks - the bar is so so so low - even Tellabs (TLAB) is a hot stock again. With the cash horde in the larger cap companies a lot of small / medium cap names are being tossed around by traders as "the next acquisition".Ciena (CIEN), a former holding, was the hot name of the day tossed around Monday due to call buying en masse

.

Disclosure: Author is long FNF, FAF, ALGT in fund; long ALGT, FNF in personal account

Comments

[novicemom:]

Can someone help me understand what happened with DNDN today with the plunge and info provided on the positive side???? Was it just massive profit taking from the initial rapid rise? I read alot and am learning from all of you but this has me completely befuddled!????

Apr 28 05:43 PM

[SCnewbie25:]

I'm fairly new at this too, but I've been reading a lot lately and my understanding is the drop was caused by a mix of short selling and market manipulation by hedge funds- i.e. bear market raid. Check out the stock's message board at finance.yahoo.com, you'll find a lot of commentary on it- albeit some more constructive than others.

Apr 28 08:35 PM

[bereal123:]

what is your background in finance? Are u a broker? Banker? have u ever worked on Wall St. how should this article have any value?

Apr 28 11:04 PM

[novicemom:]

Thanks! I didn't even know that existed, lol! It was very helpful!

On Apr 28 08:35 PM SCnewbie25 wrote:

> I'm fairly new at this too, but I've been reading a lot lately and
> my understanding is the drop was caused by a mix of short selling
> and market manipulation by hedge funds- i.e. bear market raid. Check
> out the stock's message board at finance.yahoo.com, you'll find a
> lot of commentary on it- albeit some more constructive than others.

Apr 29 05:47 AM

[who noze:]

i believe thje sh. sellers manipulated the price w// false ruors etcprior to the news being released


On Apr 28 05:43 PM novicemom wrote:

> Can someone help me understand what happened with DNDN today with
> the plunge and info provided on the positive side???? Was it just
> massive profit taking from the initial rapid rise? I read alot and
> am learning from all of you but this has me completely befuddled!????

Apr 29 09:42 AM

[kelm:]

Regarding DNDN. The company said last night they had no idea why the stock dropped so hard (trading was suspended) the hour before the announcement. It will be interesting to see if the SEC goes after the funds that did it. Certainly doesn't look accidental.

Apr 29 10:15 AM

[Hot Richard:]

"up well over 20% today as they stated nothing much more than we plan to stay in business."

HA! Says a lot about the market we're in! This is why I follow Trader Mark. He writes with style. I don't hold it against him that he's way more optimistic than I am.

@bereal,
Stop looking at pedigrees, good man! It ain't a shortcut you can trust.

Apr 29 12:57 PM

[Michael Let...:]

First time reading your comments. Been building positions in an oil service stock (nov) for a while now. Their numbers are strong and the stock is selling at a discount to it's intrinsic value. I feel stong about a pick up in damand for oil when we get back to a normal economy. What's your take?

Apr 29 02:41 PM

[TraderMark:]

Thanks bud - I cannot believe you think I am optimistic :) everyone accuses me of being a perma bear. I guess its from where you sit where you think someone else is.

As for bereal I am glad he loves pedigree. Unless you lived under a rock you will notice bankers have been asking for public handouts and brokers have cost many of their clients 30,40,50% the past year.

Yes, I do not strike to be like either of them.


On Apr 29 12:57 PM Hot Richard wrote:

> "up well over 20% today as they stated nothing much more than we
> plan to stay in business."
>
> HA! Says a lot about the market we're in! This is why I follow
> Trader Mark. He writes with style. I don't hold it against him
> that he's way more optimistic than I am.
>
> @bereal,
> Stop looking at pedigrees, good man! It ain't a shortcut you can
> trust.

Apr 29 03:16 PM

[TraderMark:]

Mike OIH has been doing well of late (oil service ETF)

I think its a STRETCH that we have a real recovery soon but if the charts say so, you can play them for a while. I like the deep sea oil drillers - like a DO for example. They have fared best and have long term contracts. Compare DO versus say SII or NOV recent earnings report

The market treats them all the same but if I go into a sector I prefer the best fundamental story so if you go there, I think the select group of deep sea rigs have the best safety factor. But right now its a market where you throw a dart into a sector and monolithic moves take the whole thing up.

I will say this, if $50 oil is where we are at with THIS sort of global recession just imagine where we will be at when things recover. I love the space LONG run.... (commodities) - next 4-8 weeks I will have to watch the price action. Copper begun to roll over - so let's see how much is real and how much is just Chinese buying in commodities.


On Apr 29 02:41 PM Michael Letizia wrote:

> First time reading your comments. Been building positions in an oil
> service stock (nov) for a while now. Their numbers are strong and
> the stock is selling at a discount to it's intrinsic value. I feel
> stong about a pick up in damand for oil when we get back to a normal
> economy. What's your take?

Apr 29 03:19 PM

[mikebrah:]

TraderMark,

Check out ATW if you are into the drillers. Phenomenal balance sheet and an easy take-out target for any of the bigger guys whenever M&A becomes viable. They own newer rigs, too.

MM

Apr 29 03:34 PM

[mikebrah:]

Disclosure: long ATW since 10/08 as a long-term hold.

Apr 29 03:36 PM

[Sober Realist:]

Mark,
What are your thoughts on the dry bulk shipping companies?

Apr 29 03:50 PM

[TraderMark:]

Mike owned ATW for large parts of 2007 and 1st half 2008


On Apr 29 03:34 PM mikebrah wrote:

> TraderMark,
>
> Check out ATW if you are into the drillers. Phenomenal balance sheet
> and an easy take-out target for any of the bigger guys whenever M&A
> becomes viable. They own newer rigs, too.
>
> MM

Apr 29 07:17 PM

[TraderMark:]

I added back EXM this morn - again I think this rally is somewhat fooey but as long as we all believe global trade is roaring in 6 months, and happy times are here again one can continue to have exposure - it is stuck between $6 and $7.50 for now but I sold it out about 3 weeks ago and its about where I sold it so decided I'd get some back.

Something like GNK or Diana is more conservative, and DRYS of course for daytrader special.


On Apr 29 03:50 PM Sober Realist wrote:

> Mark,
> What are your thoughts on the dry bulk shipping companies?

Apr 29 07:19 PM

[Dr. O:]

I jumped into SGR, IBM, and IWM today. Of the three, I'm least confident about IWM, but the chart looks promising and that's where the hedgies go for beta.

Apr 29 07:28 PM