Six Stocks to Buy, Five Stocks to Short

I think Yahoo Finance should have a disclaimer on its website that says "For weak hearts only", and before anyone attempts to buy a stock, the same message should be shown. The stock market has become too volatile to handle for many people, including me.

Here's how my portfolio performed this past week, just as an indication of how things were, and FYI, I am 30% short and 70% long.

• Up 1% on Monday Up 6% on Tuesday
• Up 1% on Wednesday, thanks to my Salesforce.com (CRM) and Staren Networks (STAR) short positions
• Down a whopping 22% on Thursday, thanks to heavy selling in Apple (AAPL), Priceline (PCLN)
• Down 10% on Friday, in spite of my First Solar (FSLR) short position negating losses from AAPL.

I devoted 30% of my portfolio to short stocks since I could not withstand the highly volatile movements in the market, and honestly that has not changed anything.

My opinion is that the markets are headed in no direction right now. Everyday, I dread to switch on CNBC at 8AM, because I'll have to hear of more credit-related writedowns, this time from a new bank. This is insane enough, and now Bernanke comes out with comments that the economy is slowing down. Sometimes I wonder, what does it take for these geniuses to just keep their opinions to themselves? The investors are spooked out enough and do not need another reason to be warned of the impending doom. Honestly it does not help in anyway to predict a recession. Why don't they do something about it instead of being soothsayers? The banks also are not doing us any favors. I am of the opinion that they should come clean with all the losses at once and take the hit instead of handling us a daily dose of gloom pills.

However, the last two trading days of the week were worse, in that tech stocks took the biggest blow, thanks to earnings from Cisco (CSCO) and Qualcomm (QCOM). These companies had great results and good forecasts, but were overly punished. We are talking about two tech behemoths who have enough resources and cash to withstand a recession, but even these were not spared.

Considering all the bad news, I am positioning myself to take advantage of the banks' misery. Here's some stock ideas going forward, both long and short:

Stocks to Buy

EMC (EMC) @ $18: VMW is still strong, storage requirements will only go up with tech spending.

VMWare (VMW) @ $75: If things get bad, this stock could get to $75, and that is when you jump in. There's no reason a company like VMW should take a 33% hit in stock price

Garmin (GRMN) @ $80: This company is down about 40 bucks from its high, and India and China are just warming up to GPS devices. This is an opportunity you should not miss out. Read the latest earnings report. This is a pullback which you must cash in on.

Suntech Power (STP) @ $55, watch out for earnings: I have always liked this stock, and recommended it way back here, on September 17, 2007. The stock has gone up almost 75% since then, and most of it is due to the runup in the solar sector as a whole. Now its pulling back, and earnings are on November 15th. If stock goes down to $55, buy before earnings, else buy after earnings. Check out JA Solar (JASO) today which Friday reported great numbers but sold on news due to recent runup on no news.

Akamai Technologies (AKAM) @ $34: Another stock which I like a lot. Solid fundamentals, is in a growing business, and the best of breed with the best companies as its customers. Had a good runup after earnings, but gave everything back this week. I would consider waiting till it hits 34, and buy for the long term, since this is a winner.

Uranium Resources (URRE) @ 12: I recommended this stock at $8 a share, and it has seen healthy growth even as Uranium spot prices showed moderate growth. U308 prices are expected to peak again in 2008, and this is the stock you should own to leverage that rise in price.

The company reported earnings Friday and went as high as $14, but the market brought the stock down to close up 4 cents. I expect the stock to approach its 52 week high at $15 next week on the back of very strong results and guidance.

Stocks to Short

First Solar (FSLR): Current Price $206: This stock has had an unbelievable runup in the past year, since it IPOed at $20, and hit $230 on Thursday, since when it has taken a 10% hit. The company reported earnings on Wednesday, which grew ten-fold, but the reason for that was adjustment of earnings due to stock offering. Company trades at a Forward PE of 125, and the PEG is 4.6, which is highly overvalued. For more, read here on FSLR.

JP Morgan Chase (JPM): Current Price $42: If the banks were the reason for all this turmoil, shouldn't they be the one that face all the fire? Every bank's stock price has seen a 30% drop atleast, except for JP Morgan and one of the reasons for this is that they still haven't fully disclosed their share of the credit-related losses. As they come out with their dark story, expect some selling here. I shorted at $43 and I will cover only when this whole murky picture gets cleared. Right now, everyone is afraid of banks, and those are the places to short.

Ctrip.com (CTRP): Current Price $59: Another good company but valuation is high at PE of 55. Till now it was China's Priceline and saw a nice growth as more and more Chinese took to traveling. Now, Priceline has purchased an Asian company Agoda, and could serve stiff competition to CTRP.

Limelight Networks (LLNW): IPOed amidst a lot of hype and has seen a nice rise since then. It was touted to be the answer to Akamai's monopoly, but earnings were less than impressive, with a loss in the third quarter. However, the PE is 60 and any growth is already priced in. Customers say that service is also not of the greatest quality and is not good enough to steal business from Akamai.

Yingli Green Energy (YGE): Is this the Solar bubble this time, like the dotcom bubble in 2000? Any company that has solar in its name seems to have its stock up 100% recently. YGE for example, went up from 15 to 39 in a matter of 3 months, without any earnings release or major event. It got a few contracts, but nothing to warrant doubling of stock price. Stock fell sharply to 32, and I expect further decline, to $20s, as crude oil takes a breather.

Oversold Stocks

Meanwhile, check out the action on LDK Solar (LDK) Thursday and Crocs (CROX) Friday, as the whole market was tumbling. Both these stocks have been way oversold. Fundamentals remain very strong.

Disclosure: Author holds positions in the above-mentioned stocks

Comments

[Camden]

I appreciate your honesty in saying "The stock market has become too volatile to handle for many people, including me." I hope you will take the following as well-intended constructive criticism:

Anyone that loses over 20% of their portfolio's value in one day (especially a day with the indexes down less than 4%) should NOT be giving anyone financial advice. Heavy selling in two stocks gives you a 22% portfolio loss??? You shouldn't have a 22% loss even if Apple goes to zero. Clearly you are gambling, not investing properly.

Secondly, if you dread turning on CNBC because there is likely to be more bad news, you shouldn't be giving investment advice. It shows you are too emotionally immature to handle something as important as investment advice.
I hope you go on to get your finance degree and that it leads to a successful career. However at this time I sincerely suggest you do yourself and Seeking Alpha readers a favor by ceasing to write these "advice" articles. You are likely to make a make a fool of yourself and cost many impressionable young investors a great deal of money. All the best.

[Camden]

I appreciate your honesty in saying "The stock market has become too volatile to handle for many people, including me." I hope you will take the following as well-intended constructive criticism:

Anyone that loses over 20% of their portfolio's value in one day (especially a day with the indexes down less than 4%) should NOT be giving anyone financial advice. Heavy selling in two stocks gives you a 22% portfolio loss??? You shouldn't have a 22% loss even if Apple goes to zero. Clearly you are gambling, not investing properly.

Secondly, if you dread turning on CNBC because there is likely to be more bad news, you shouldn't be giving investment advice. It shows you are too emotionally immature to handle something as important as investment advice.
I hope you go on to get your finance degree and that it leads to a successful career. However at this time I sincerely suggest you do yourself and Seeking Alpha readers a favor by ceasing to write these "advice" articles. You are likely to make a make a fool of yourself and cost many impressionable young investors a great deal of money. All the best.

[Pokerface]

Gschwinn
I have bene trading for 15 years with double digit portfolio gains every year, and any trader worth his salt will agree with Prashanth. You probably have shares of WMT, PG and Altria rotting for the oast 5 years in your portfolio and they dont move an inch on either side.
Aggressive investing has risks, but is not gambling. I have been following this guy's posts and though he's not right all the time, his logic is pretty sound. If you dont like this posts, dont read.
Just dont preach here. I hate preachers like you.

[Camden]

InestLikeaPro
Congrats on your trading record! Fifteen straight years over 9% is amazing. I'd say that puts you in the top one-half of one percent of all investors. I can claim a very good 15 year record but had a loss in 2002.

1. I wasn't preaching, I was giving honest opinion based on 33 years on investment experience.
2. I happen to be a rather aggressive investor/trader. I rarely have less than 15 positions active and I'm currently up 42% YTD. Yes, the markets recent volatility hit my portfolio as well – I was up 50% a week ago.
3. I reiterate that someone that loses 22% of their portfolio on a day in which the indexes are down less than 4% IS gambling (or one of the world's worst traders).

Now I'll preach. Hate is a very destructive emotion. You'll likely live a better life if you can reduce it. Lighten up and learn to take others constructive criticism as a gift. There is often much to be learned from points of view that differ from your own.

[omooc]

I certainly share GSchwinn's views. Given the limited time one has, one really has no time to read someone's investment strategies that are ill-conceived. I cannot conceive a hedge fund (70/30 long/short) losing 20% in a day when the index is down but 3~4% -- unless the stocks in which one is long continue to go up, such as RTP going up 8% Friday. omooc

[Valueplay98]

I'm pretty sure you would have been blown out multiple times had you been investing in 2000. I hope you're young.

[calvino]

Schwinn, I appreciate the foresight in your advice, however consider that this columnist is typically representative of the trading ilk found in investment houses nowadays. Investment is not the stock in trade, rather it is musical chairs. When the Apples and First Solars were being run up a pole, someone had to be left holding the bag. Everyone knew it, ande everyone thought he was smart enough not to be the bag man. Welcome to modern day finance. Good money management is not easy to find anymore.

[jonreagan]

The broader point here is that retail investors need to be aware of the institutional forces at work, and realize that they are a pimple relative to what is really driving the market. No coincidence that there's a hedge fund redemption coming up this Friday; we saw the same kind of rampant dumping of great stocks like AAPL and RIMM by major funds before a similar date last August; they all recovered nicely afterwards. These stocks have great fundamentals, and most importantly, have product lines that people want; "the Google", as W would say, has a +55% market share. Unfortunately, the fundamentals aren't enough to predict market behavior, which has become totally irrational. CMI dropped 22 points after announcing solid 3rd qtr. earnings, which didn't meet consensus estimates. GRMN got hammered after the Nokia/Navteq deal was announced last month. A few days later prior to the market opening on Oct.31st, they announced a strategic move to buy Tele-Atlas....they get hammered again. After the market closed the same day, they announced a great quarter with record earnings....you can guess the rest;down goes the stock again in after hours trading.
I've come to the conclusion that the key word--whether trading or investing-- is momentum. Find out the "hot stocks" that the big boys like, and know the calendar so that you can hop off before you get burned. Otherwise, as a previous writer suggested, you'll end up with S&P five-star stocks like PG and GE that spend their lives going sideways.

[PrashanthCherukuri]

Gschwinn
I dont want to respond to every point in your comment. Instead of saying things about me, look at my track record since the beginning of the year and my stock recommendations and when i have made them.
When you do the math, you'll see the 42% seems pretty amateur in comparison.
good luck

[raylo]

As a third party bystander, I see that GSchwinn's original comments are quite rude. In this past week, lots of people lost big money and to add insult to injury is really negative and pathetic behaviour at best. Wait til your portfolio got hammered big time next and you'll feel it. Schwinn you smug

[jcrash]

20% in a day is just stupid.

You are way out on margin and need to be a lot more decisive.

When you see Goog and Apple drop more than 5%...GET SHORT.

[beech_35]

I appreciate the author's candor but would restate - NO market is for the faint-hearted. The market will reward investor research and patience, and will mercilessly punish those running with the herd. Having said that, I'd ask Mr. Cherukuri if his decision to sell AAPL wasn't at least a little bit emotionally induced. There was nothing substantive about Apple that would warrant such a selloff, and in hindsight today's closing price will look like a buying opportunity. There are few companies like Apple, and I've long on AAPL since Steve Jobs returned some ten years ago.

Garmin is one of those few companies. It also fell victim to the tech selloff with NO substantive news to warrant it, and is now a screaming good deal at $80. Like Apple, Garmin makes innovative, superior products, with brilliant leadership. I've been waiting for just this opportunity to buy.

Don't like the CNBC news? All the tickers are red? Those who have done their research will find screaming good deals when all the news is bad! Absolutely no one is recommending financial stocks now. What does that tell you?

Mr. Cherukuri, your head is in the right place. Follow it, not your gut. Look for AAPL to exceed its previous highs in January. GRMN will probably exceed them sooner than that.

[PrashanthCherukuri]

hi beech
I dont think I mentoined anywhere I sold Apple. I'd be really out of my mind to take a $30 hit in stock price and then sell.
I have all my positions. I have some nice shorts in FSLR and CRM as well so I'm all set.
thanks

[zerro]

This is the first time I've read your predictiions. On your Nov. 12 posting, you predicted that URRE would reach $15. "next week." Today, Nov. 19, it closed at $11.07; a far cry from $15. Maybe you, like CNBC (which I am not inclined to listen to, either) are "just one of those genius who should just keep your opinions to yourself." No, I did not buy more URRE. I bought URRE way back when it was just under $4.00 in '06, along with a lot of uranium stocks that trade on the Canadian exchange. Will it get to $15.? Sure it will eventually; but not last week or this week. It is extremely dangerous, irresponsible and risky to predict for others what will happen "next week."

[zerro]

This is the first time I've read your predictiions. On your Nov. 12 posting, you predicted that URRE would reach $15. "next week." Today, Nov. 19, it closed at $11.07; a far cry from $15. Maybe you, like CNBC (which I am not inclined to listen to, either) are "just one of those genius who should just keep your opinions to yourself." No, I did not buy more URRE. I bought URRE way back when it was just under $4.00 in '06, along with a lot of uranium stocks that trade on the Canadian exchange. Will it get to $15.? Sure it will eventually; but not last week or this week. It is extremely dangerous, irresponsible and risky to predict for others what will happen "next week."

[sunrises]

It's interesting how many readers followed your article from pros to new comers. Isn't that considered something to be noted :). Keep going and take in the lessons learned along the way. Good luck.

[sunrises]

It's interesting how many readers followed your article from pros to new comers. Isn't that considered something to be noted :). Keep going and take in the lessons learned along the way. Thanks and good luck.

[EricSaeger]

Great article. I got killed - and still am - in a short position with JA Solar, so it's now become my long position (!hat is WRONG with you people, listening to whatserface from Goldman Sachs and no one else?! The 3rd quarter was crazy good!).

Only problem: storage tech stocks peaked with 9/11, and disk space can be had free of charge all over the place. Very unsexy stuff.

Again, thanks for a super article.

[User 128054]

I completely disagree on Ctrip. Ctrip is a great company and deserves a premium valuation. It has a monopoly on the China travel market - its only competitor, eLong, cannot compete. Priceline's acquisition of Agoda is a joke - Agoda has a very little footprint in China. Its hotel network is tiny compared to that of Ctrip, and it does not have air ticketing capability as well as any of the other travel services that Ctrip provides. Ctrip is a great long-term investment.