Dr. Kris

10 Small Cap Stocks with Double-Digit Free-Cash-Flow Yields

Hi! I like what you're trying to do but looking at the charts of those you've recommended, I have reservations.

For one, the average daily volumes on all of your issues are under 200k shares, except for AWI which is around 350k. And five of your issues have average trading volumes under 75K shares (
AMPH, UFPT, PCCC, MGIC, WPCS, FRD).

The problem with small issues is that their stock prices can be easily manipulated.

Just my opinion.

Dr. Kris

23 High Quality, High Dividend Stocks

Thanks for noting my error on LFL. (I have no idea what company description I could have been looking at!) LFL is indeed an airline company (LAN airlines) and it's based in Chile, not Colombia. It does not own any airports but it does have interests in a couple of concessionaries. I also apologize for my misspelling. (The spell catcher doesn't know the difference between Colombia and Columbia.)

As for the "quality" rating of these dividend stocks: I don't have time to research every single stock that was output from the stock screener. These results are meant to be a springboard for your own research. It appears that most of the people here understand that, but I guess I should have stated it in the article. I shall do so in the future.

Thanks for everyone's comments and for keeping me honest!

April's Top 10 Social Networking Websites

I'm surprised Linked-In didn't make the list.

Don't Be Fooled by Inflation

I'm not sure if this country is on the verge of Armageddon, but if you were to pull up roots and relocate someplace else, where would it be?

Monaco's a bit too pricey...

Market Timing Buries 'Buy and Hold' in Asset Allocation

To CM in MA:

Thanks for your insightful comments. Here's a response to the points you brought up:

- Were transaction costs and taxes taken into account when calculating the returns?

No. These are, of course, different for everyone. Within a mutual fund family the occasional movement in and out of an asset class can be done without charge. As to taxes, if you are holding your investments in an IRA there are none. Outside of an IRA you will be paying taxes on realized gains at a rate that depends on many things but that is still preferable to loss of principal. Taxes must be paid sometime. It's one of the two things you can be certain about.

BTW, the SMC Analyzer does have the capability of adding these parameters along with others such as margin costs and account interest.

- What is meant by the "averaging period is re-optimized every month?"

This refers to the portfolio growth graph which is essentially a backtest of following the market timing versus the buy and hold strategies each month and then reaping the results of following the recommendations. Every month with the addition of new data the averaging period of the CCI for each asset class is re-optimized to maximize the effectiveness of its use in terms of portfolio growth.

- Does it worry you that two assets with the following monthly Hi-Low-Close data (55, 45, 50; 100, 20, 30) yield the same "typical price" input into the CCI calculation? If these assets then had following months of (50, 40, 45; 70, 25, 40), the "typical prices" would again be the same for that month. Carry this on long enough and the deviations from the moving averages also become the same. Likely, perhaps not. But it raises the possibility that a very volatile asset can masquerade as a far less volatile asset. Would this affect your strategy?

First of all, we are using asset classes here composed of many individual components hence the volatility intra-month should theoretically be dampened. Nevertheless, the analyzer uses only closing prices as a substitute for typical price. You do bring up an important point however. That sampling the performance of an asset class only at periodic intervals has a nonzero probability of misunderstanding its true characteristics. With 80+ years of monthly data available however there is a high confidence that the volatility of the asset classes used in the analysis is properly represented.

Short the Market with Options or ETFs?

Dumbo,

You're right on the price of SH on 1/6/09. No, my analyses did not include commissions or slippage but it was designed as purely instructional.

Per your other criterion:

"Had the opposite situation materialized (i.e. the markets had gone up instead of down) then the results would have been very different, especially for the options which would have yielded close to a 100% loss. The latter is very important for option trades as I see a lot of trader-wannabes on this forum who don't seem to ever analyze the what-if scenario from a contrary viewpoint."

Well said.

How Holland M. Ware Profited from His Forestar Group Takeover Bid

JE,

First of all, thanks to all who have left comments here. I truly appreciate feedback.

I did consider the fact that Forestar might be in bed with Ware, but there's no evidence (that I could find) of that. It took the Forestar board about a week and a half to nix the deal, which I think is a long time. You should know that Carl Icahn is a major stockholder.

It's sometimes tough to discern whether deals nowadays are real or not.

Dr. Kris

Beware Short and Ultrashort ETFs

Kunst:

I'm sorry that you felt that my reading comments here were under my radar. That's completely not true! I have several funds that I actively manage and writing an original blog every day takes up the majority of my time. Every author who posts here does it gratis.

I just want everyone to note that there's probably almost a thousand ETFs on the investing landscape. In the beginning it was the Diamonds (DIA) and the Spiders (SPY) that were the talk of the town..

As for the DTO, it's the double short oil that seeks to track the price and yield performance, before fees and expenses, 200% of the inverse daily performance of the Deutsche Bank Liquid Commodity index - Optimum Yield Oil Excess Return. The fund allows investors to take a short view on the performance of the index. The index is a rules-based index composed of futures contracts on light sweet crude oil (WTI) and is intended to reflect the performance of crude oil. [Description from their website.]

The DTO is the index I should have considered but honestly didn't know about it. I thought the double inverse tracking stock was the DUG. But the DTO is where it's at, baby, and you know it! Up 280% since October. It seems to inversely track the USO.

No options on it, though.

Thanks for everyone's comments.

Happy V-Day!

Dr. Kris

Holland Ware's Takeover Bid for Forestar Looks Questionable

Also from Business Wire:

Forestar Group Inc. FOR today announced the following strategic initiatives to enhance shareholder value:

Generate significant cash flow, principally from the sale of approximately 175,000 acres of HBU timberland Reduce debt by approximately $150 million, and Repurchase up to 20% of the company’s outstanding shares.

As a part of the plan, the Board of Directors authorized repurchase of up to 7 million shares of common stock, which represent approximately 20% of the company’s currently outstanding shares. Debt reduction and share repurchases will be funded by proceeds from the asset sales described above. Repurchases will be accomplished from time to time through open market or privately negotiated transactions, subject to market conditions and other factors.

“Forestar’s Board of Directors and management team are confident these initiatives will significantly enhance shareholder value,” stated Jim DeCosmo, president and chief executive officer of Forestar Group. “Despite difficult market conditions, we have confidence in our ability to execute these sales. We believe these strategic initiatives are consistent with our commitment to enhance shareholder value and position Forestar to take advantage of future growth opportunities.”

Holland Ware's Takeover Bid for Forestar Looks Questionable

Here's from today's AP news:

AUSTIN, Texas (AP) - Forestar Group Inc., which develops real estate, grows timber and produces petroleum, on Wednesday rejected a takeover bid as inadequate and announced plans to sell assets, cut debt and buy back shares.

The company said last month's $15 per share unsolicited takeover offer from major stockholder Holland Ware "significantly undervalues" Forestar. Based on the company's outstanding shares as of Oct. 31, 2008, the deal would be worth about $535.5 million.

Shares of Forestar, which has hired legal and financial advisers in the matter, fell 47 cents, or 5.1 percent, to $8.82 in morning trading.

At the same time, the company said it aims to generate significant cash flow by selling some 175,000 acres of timberland, cut debt by about $150 million and buy back up to 20 percent of its outstanding shares.

At the end of the third quarter, Forestar had about 35.8 million shares outstanding.

On Nov. 20, 2008, shares closed at $2.95, pennies above its 52-week low, before climbing in January to a range of $7.80 to $12.49.

Beware Short and Ultrashort ETFs

Thanks to everyone for your comments. I appreciate each and every one. I usually don't have time to read my comments here which I should because they're not only interesting and informative but also entertaining.

Luck o the Irish: Thank you so much for your in-depth and thoughtful comment. I'm not an ETF expert like you so I didn't know that the Dow Jones Oil & Gas Index was more than a pure commodity play. The Proshares website along with MSN Money did not list the top holdings for the DUG which they normally do when there are company holdings in an index. That lead me to think, erroneously, that the index was only tracking oil and gas futures. That was my bad.

And you're correct in that the IYE is the long equivalent. Looking at its chart, however, emphasizes my point even further. Since October 10, it's now down only 7% compared with 68% on the DUG. That's an even more impressive comparison than the USO. BTW, the UCO and SCO are true long and short funds that track the price of crude but they've only been in existence since the end of last November--not enough time for me to evaluate.

You're also right in saying that those with an understanding of how leveraged ETFs work would have probably stayed away from these instruments for more than a day or two during times of extreme market volatility. I don't agree with your “basic” qualifier because those who were supposed to be in the know on CNBC were touting going long the DUG as a play in the drop of oil. How wrong they were!

As for shorting oil, buying puts on the USO would be the way to go, as you suggested. They're liquid and looking at the charts of the February puts, I'd say most folks are confident that oil won't see northward of $29-$30 before next week's expiration.

JE: The OIH is an ETF of oil services companies such as Transocean (RIG), Schlumberger (SLB), and Halliburton (HAL).

Theobannion: If you look at the chart of the DIG since October 10, you'll see that it's essentially flat.

Frank Yans: Hi, Frank. I guess you're still holding a grudge. I told you repeatedly in college that I wouldn't go out with you. In your case, more testosterone (and brains) was definitely needed. It's really sad that you felt the need to find a public forum to get back at me. The saying that is engraved in McCormick hall (the women's dorm at MIT) is: "The odds are good, but the goods are odd." Need I say more?

Holland Ware's Takeover Bid for Forestar Looks Questionable

Thanks for your response, JE, and yes, the chart does look like an inverse head & shoulders pattern, but once a company is a take-over target, its chart ceases to have meaning.

What I was underhandedly fishing for was the reason why Holland Ware would make this supposedly low-ball unsolicited bid in the first place, and more importantly why the company is actually considering it. He's up against shareholders, the board and company officers, and most interestingly, Carl Icahn who have all bought the stock above his buy-out price of $15 (at least from the available data). Doesn't anyone besides me think there's something fishy going on?

Dr. Kris

Are Netbooks the Future of PCs?

Thanks for your article. I'm not familiar with netbooks but knew there had to be something out there that could give the Kindle a run for its money, (A friend of mine wanted to buy Amazon just because he liked the Kindle.)

Sounds like there's a bunch of technical problems to be worked out but in the end I do feel that netbooks will ultimately rule. How great would it be for students to carry only one ebook instead of a backpack full of heavy tomes? And how much better for the environment especially if they can be made out of eco-friendly materials?

I agree that this space shows a lot of promise.

Bare Escentuals: Expectations Ratcheted Down Too Much

I love their products but there are too many good imitators. The stock is down 90% from its mid-2007 peak. It needs to break the resistance gap at $6 on convincing volume before I'd be a buyer. Sorry, but unless they can come up with a great new product or marketing scheme, I don't think they'll be able to stand out from the rest.