Archive for March 14, 2012

HDY and ROYL — Oil Stock Speculations/Potential Shorts

March 14, 2012 Equities

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While I’m no fan of Hyperdynamics (HDY) fiscal statements, I do
recognize that HDY is a momentum stock that has some potential to reward
investors via their vast untapped oil reserves in Western Africa. I have often
written critical articles on HDY in the past and recommended investors short the
stock when the name was trading for $5 or $6 a share last year.

A year after my piece was published in which likened HDY to “Hydra Offshore”
from the movie Wall Street 2, the stock is now sitting at $1.36 and
actually looks tempting for a quick speculation using a tight stop loss order
at, say $1.23 or so. While I am certainly not endorsing the company as I am not
up to speed on their development, I do know a little about the business model,
strong upper management, and incredible reserve potential. That said, HDY
operates in Western Africa where the political environment is about as easy to
get your arms around as barrel of West Texas crude from an investment analysis
standpoint.

Hyperdynamics is compelling because of its off-balance sheet asset value,
potential, and reserve estimates. Additionally, the stock is trading some 85%
cheaper than it was just a year ago, which makes the name a potential rebound
candidate if their strategy pays off.

Read the rest of this post here: http://seekingalpha.com/article/430251-speculative-oil-stocks-hyperdynamics-and-royal

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5 Stocks to Short

March 14, 2012 Equities

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We think it’s time to book profits on the following five stocks owing to
valuation concerns. Each of these names trades at substantial premiums to book
values and cash flows, and now maybe the time to exit positions from the long
side and lock-in profits.

While it is always heartbreaking to sell a stock before a major run-up, it is
better to “sell too soon” than it is to wait until it is too late to catch a
decent bid for your portfolio dogs when valuation and growth rates make the name
a sell from a fundamental standpoint.

Qlik Technologies Inc. (QLIK): The company is a major
player in the technology world, but we think heady web valuations have spilled
over to the cloud-computing industry. We would look to sell or possibly short
QLIK provided that the overall stock market breaks lower. In the face of a
rising stock market, shorting seemingly overvalued stocks can lead to financial
misery, so make sure to set tight stop-loss orders.

Even with more losing trades than winning trades, investors who set hard
stop-loss orders profit because their winners, although few, make up for many
small losing trades. In the end, this type of trading strategy works pretty well
on the short side when married with strong technical analysis. While QLIK looks
okay from a technical perspective, the fundamentals are questionable when
compared to the company’s market valuation which makes this stock a potential
short.

Read the rest of this article here: http://seekingalpha.com/article/430961-5-expensive-stocks-worth-selling

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5 Foreign ETF’s to Consider

March 14, 2012 Equities

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While the US Stock market has risen in near vertical fashion since last
summer’s Greek fueled bear market bottom, many of the foreign and emerging stock
markets haven’t rebounded as quickly. Some of these ETFs look reasonable. My
research on the following 5 ETFs is not meant as a recommendation but instead is
meant to be an objective assessment of valuations and macro concerns as they
relate to the countries and companies listed. Keep in mind, the political and
macro risks should not be ignored by investors in the following index funds.

South Africa (EZA) — Trading at less than
twelve times trailing earnings, the South Africa iShares ETF looks to be a good
deal at current prices. EZA is fairly overweight basic materials (think gold
miners) and financials which together make up over 40% of the fund’s assets.
What is most attractive to me, is the fact that EZA is trading for a price to
cash flow multiple of only 5.8X and a price to book multiple of only 1.69X which
is quite a bit cheaper than most of the developed markets. With large positions
in gold miners like Gold Fields, AngloGold Ashanti, and Impala Platinum Holdings
investors can gain access to metals while remaining diversified — EZA has a
16.6% allocation to industrials, a 10% allocation towards energy stocks, and a
12% allocation towards communications services issues.

Brazil (EWZ) — The iShares Brazil Index
Fund looks even cheaper than the South African markets with a trailing PE ratio
of only 10X earnings. While US stocks are back to or higher than their August
2011 levels, the EWZ is still some 18% or so below last summer’s high at $81 and
change. The Brazilian stock market endured an incredible plunge in 2008 which
saw the fund fall from $100 to just $30 in the matter of 4 months! With large
holdings in Vale S.A. Preferred, Petrobras, Ambev, and Itauunibanco, EWZ is well
diversified but owns cheap assets that we think have the opportunity to
appreciate provided the global economy does not hit stall speed. With all of the
coordinated central bank easing around, I think the end is far from nigh but
caution is warranted from a valuation perspective in most of the developed
economies.

Read the rest of this article here: http://seekingalpha.com/article/433491-5-cheap-single-country-etfs-to-consider

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