2-5% Gains Coming Next Week

The Whale ran an extermly complex and sceintifc aramethic and discovered some hidden gems that are ready for a little pop. All of these stocks are expected to gain 2-5% in the following week.

Most of these stocks are trading near their resistance, so there is a good chance that we have identified a bottom.

 

BLV – Vanguard Long-Term Bond ETF

BJZ – Blackrock California Municipal 2018 Term

BTH – Blyth, Inc.

CTCT – Constant Contact, Inc.

ENX – Eaton Vance New York Municipal Bond Fund

HSN – HSN, Inc.

VTJ – Invesco Van Kampen Trust Inv Grade NJ

5 Stocks for 2012

Surly, everyone who is anyone will publish a list of his or her “Top Stocks of 2012.” This is a moot exercise. The future is unpredictable, thus making any of these calls is mere speculation, and anyone who says otherwise is not to be trusted. Making these calls at the beginning of the year is unwise, most moves will happen for a short time, holding a stock long will strip you of the meager gains.

Even more than fundamentals or technical indicators, the news cycles dictates the major market moves. No one knows what the market moving stories of 2012 will be – Will Iran attempt a blockade? Unlikely. Will the economy keep showing signs of improvements? Maybe. Will another earthshaking disaster take place à la Japan? Certainly.

Despite understanding the sheer impossibility of predicting good stock stories a whole year into the future, the Whale will make such an attempt.

Apple Inc.

Apple is the darling of the average investor and the darling of the average consumer. Apple was the Whale’s favorite pick of 2011, netting a cool profit and a bonus to boot. Not only is the Whale fond of the stock, the products that the company sells are of an extreme desirability for the Whale. My house is dotted with these bundles of joy; an iPhone for each member of the household, a MacBook Pro 15, a MacBook Pro 13, an iMac, 2 iPads, 2 iPod Touches, and an Apple TV, and several other itty bitty products that I can’t recall.

Fortunately, this is becoming the norm is most American households. Families are hoarding these consumer electronic products. The desirability factor of an Apple product is undeniable, the average consumer puts the product line only a different level. When purchasing a cell phone or laptop, there is the utility factor and fun factor, Apple is only a handful of companies that can lay claims to both of these factors.

Now that Apple has established itself as a dominant brand and established pricing power that parallels no other, the company is going to continue to grow. First, the Whale is hearing increasing rumors of an “Apple TV,” supposedly a dream project of Steve Jobs. The Apple fan blogs that write about these things tend to be more right than wrong, hopefully they get it right on this one, and so does Apple. Second, the Internet is again a buzz with rumors of a lower end iPhone, supposedly this product is going to help dominate the emerging market and compete with the $100 Android phones. Where there is smoke, there is bound to be fire – and the sources are rather reliable.

Even if none of these rumors pan out, Apple is still great story that is going to keep growing. The Whale predicted a $465 price target at the end of the year for the stock,however we fell below that range. Had the year not been so volatile, we would have easily hit our price target. The price target might have been rather bullish but $500 is attainable by the end of this year.

Ford Motor Company

Ford is down 35% year to date. Not a good sign. The Whale took some good hits from this one, losing more than 12% and finally ditching it for good.

Ford is a growth story, and one that the Whale believes in. The stock is backed mostly by intuitional owners, about 53%. These people are not worried about the little hiccups that happen along the road, they are in it for the long haul. The company keeps improving and working on their product line, it has been a long time coming but the company is finally posting profits and cutting out more fat.

The most significant improvement that Ford has been able to make is branding itself. For the first time in a long time, people are happy to own a Ford; in fact people want to own a Ford. This is a very hard feat to accomplish, as anyone in the auto industry knows; American vehicles were the least desirable. The pecking order was always; German, Japanese / Korean, and then American. The tide might be turning and the line is starting to blur between American and the Asian imports.

The most notable factor is that Ford is a cheap stock. Trading at 6.5 P/E compared to 40 of Toyota.

Better times are ahead from this company.

Heckmann Corporation

No matter how much we hate to admit it, The world will always need oil. Any company who can get oil out of the ground will most likely be rewarded. Heckmann Corp is the next in a line of companies that make the earth go round and round. Although the company has been operating at a loss for a long period of time now, they finally started to post profits in 2011. With almost a 40% jump in operating margins, the company is poised to deliver some fine earning in the next couple of quarters.

Another reason to watch this stock is for a buy out play. This is a relatively small company that has established a name for itself in Shale oil, a lot of bigger players want to get in the business and might want to look at buying out Heckmann Corp, killing 2 birds with one stone – eliminating a rival and buying an already furnished infrastructure.

On an interesting note, the management of the company has previously declined buy out offers. This is usually a positive sign (not everyone can be as stupid as Yahoo’s management). The Whale trusts that the management knows the true value of the company is far from being reached, thus they want to play this out, drilling out some profits on the way.

Endeavour Silver Corp.

This is a gold play. The Whale is counting on the Euro Zone to have some turmoil times. Down goes the Euro, up go Gold and the Dollar. It is wrong to say gold is over valued; gold is rather at a fair value and plenty to room to grow. Silver on the other hand is under valued.

Further, there are too many fools in the Gold, and I fear that we are at the peak of some sort of bubble, thus I’m hedging my bets in Silver. It’s true that even with a Gold decline, silver will follow. But I fear that we will see more volatility in Gold thus sharp incline and decline, leaving no room to dump your assets before approaching the cliff. I rather have a soft ride up and a soft ride down.

Sprint Nextel Corporation

Sprint has been assaulted from all angels for a long time. Not only does Sprint play a second fiddle to the likes of Verizon and AT&T, the brand had no appeal to customers. AT&T was busy fashioning itself the most desirable product line, Verizon was busy fashioning itself as the most reliable, and T-Mobil the cheapest. Sprint was nowhere to be found, the only thing Sprint had going for it was a dedicated CEO who couldn’t do anything right.

However, things have changed. Steve Jobs was kind enough the leave Sprint a parting gift. The iPhone might help save this company from bankruptcy and maybe even let it compete with the AT&T. Currently, the only gimmick that Sprint has is the unlimited data plan, although this is not going to be enough to steal customers from the others, it will at least stop customers from fleeing to other carriers. Sprint might have an edge in attaining new customers; their price point is the lowest in the industry. Surly, people will take notice when their 2-year contract runs out.

The price point and unlimited data plan might be a double edge sword, where they might retrain and attract new customers; they will likely have paper thin margins.

The stock seems to be testing a double bottom at the current levels, this might be a good time to get in before 4the Q results are posted.

Current Portfolio

The Whale has a rather small portfolio at the current time, this is because a small number of stocks are easier to follow when you go dormant.

However, now that the Whale has awoken, a lot of these will need to go and more acquisition will be need to be made going into the year. Althought there is a lot or turmoil in the market, the bulls will run in 2012.

Stay tuned for all the action.

The Whale is Back

As our rabid fan base knows, the Whale has been out of commission for most of the year (we will share what we have been up to soon).

The Whale Fund held on to a modest portfolio, mostly composed of AAPL, staying out of the market for most of the volatile year. While most people were frantically trying to understand the market in 2011, the Whale sat back and watched. Even with the Whale’s lights trading year, the Whale still ended up dominating the market, being up almost 25%, mostly thanks to a 50% portfolio stake in AAPL.

However, thats in the past.

The Whale is back and is eager to cross the Alps just like Napoleon in order to dominate the market in 2012.

On to the Future!

The Stock Oil Rush

Enough said.

Not selling anything just yet. But as Plainview’s famous quote goes, “you have a great chance here, but bear in mind, you can lose it all if you’re not careful.”

Update: 10:59pm

Buy some Ford tomorrow, we think you will be a happy compare come Friday.

Into Lunch

The Whale woke up to some horriable news today, LCC took off and The Whale was no where on the plane. After adding the stock to my watch list last night and intending to make an allocation this week, it appears that it was all too little too late.

Regardless, we are having some good moves today. Our AAPL, F, options are doing great. Up 60%+ together.

We also started a position in DIG, USO, and EXK today morning. We noted all of these stocks last night and they are already rallying.

Whale Watch!

The Whale is bullish going into the week after listening to a comforting speech from the leader of the free world. We are especially looking at a couple of sectors, hoping to bank on rare earth metals on oil.

As it is pointed out everywhere, again and again, there is a massive amount of money is being printed in this great country and abroad. The Chinese  are keeping their currency undervalued or at least that is what we are told.  The Euro is crap. Economies are collapsing (see Tunisia).

All while the experts keep telling us that when there is massive new currency in circulation, the value goes down due to the decline in rarity.  The only product that can not be created on demand is/are- rare metals, especially gold and silver.

Another sector on the Whale Radar is oil. There have been reports from various C.E.Os (B.P, Shell) and big shots going on about how oil will eventually reach 400 bucks. Might even be this year they say. The Whale thinks that is a little whack, oil is not going to jump 300%+ this year. But if their thought process is any indication, it can be concluded that oil will eventually trend higher. This is especially true when you consider the various growth potential over seas, especially the demand coming from India.

Names we like:

Gold / Silver : SGOL, IAU, EXK
We think the best play with this is with an ETF, trying to pick a single company might be like throwing a drat.

Gas / Oil : BP, USO, UCO,DIG

BP is the only oil company that we feel is undervalued, we are looking towards a good earnings quarter this week and a rally going into next week. Other than that, we are also looking to play it safe with some ETFs, holding some shares until summerish.

Does the Market Really React to State of the Union?

That is the question that all the talking heads have been answering all day on CNBC, Bloomberg, and Fox Business. The Whale thinks these people are all full of crap.

Most of them just predict what the President is going to say, and usually it is the same thing over and over again. This should not be a surprise to anyone because they all get their information from the same place, the fucking press releases.

All they should be doing is trying to do is make sense of the following chart:

It annoys me to no end that they keep bringing around all these “experts” who have just read the same press release maybe 10 minutes before going on air. Regardless, the question remains, does the State of the union really move markets? Or do traders know that actions speak louder than words?

The Whale has been busy since lunch time trying to figure out Microsoft Excel (The Whale only uses Apple products typically), so I can present the public with some Whale facts.

The Whale loves numbers so let us look at some data, shall we?

While figurine out which data is relevant, The Whale determined that the data that is “current” should be given weight. For this reason, we complied a list of historic changes to the Dow Jones on the days following the President’s speech. We only included data from the past 14 cycles, going back further than that would not really be helpful because the stock market reacted differently to news before the advent of “rapid trading.” Further more, we did not feel it necessary to look at the whole year, month, or even week because so many different variables effect stocks in that long of a time period. The day following the speech is the only single day that traders actually react to the SOU, and as each day progress, it becomes less and less relevant.

Dow Trades Higher / Dow Trades Lower / Dow is Flat

The Down Jones closed higher on 8 days following the speech, one of the days was pretty flat. Down Jones closed lower on 7 days following the speech.

Not to be politically (The Whale does not vote), but, the markets seem to react much better during a Republican administration. This is not just from the data we looked at. Going back 35 years, the Down Jones has traded up about 80% of the time when a republican gives a speech, in our data, markets traded up 87% of the time when Bush gave a speech, the highest was 1.6% in 2002.

Over a long period of time, the Democrats have not done bad, the Dow closed higher about 68% of the time. But this is a stark difference compared to the 16% that we see in our data set.

But, does this really matter? Is the color of a person’s tie the cause of this? The Whale thinks not!

“D” denoted Domestic Policy
“F” denoted Foreign Policy
“DF” denoted Domestic Policy & Foreign Policy

The Whale believes that the content of a man’s speech is more relevant than the color of his tie. So Let us look at the content of of our data set.

The Whale thinks that they only correlation is that when the speech focuses on Foreign Policy, the market tends to trade higher. This is rather baffling because the typical wisdom would dictate that focus on the domestic economy would lead to a more bullish view. Even looking at data from the previous 35 years, the Whale found a similar trend, the market trades higher when the focus is shifted from the domestic to foreign.

The only reason this makes sense is that in the recent years, when discussing the economy, the President does not have great news.

In conclusion : Number don’t lie, but to say that the market will move because the President speech is a stretch.

Into the Bell

We are looking to trade off of heavy options activity. When there is money to be made, someone who knows usually sings via calls or puts.

Today we are looking at BP and PCX both names are reporting earnings in the coming days and both are showing heavy increases in call volume activity. Stay tuned!

What is Apple Inc. Really Worth?

The short answer to that question is $337, and the long answer is $465.

The Whale wants to dig deeper and find out if there is really value in Apple and what the stock will be worth a year from now.

As everyone knows by now, Apple killed the earnings report. They took that sucker out to the woodshed and emptied out the double barrel, and then some. This is a little ridiculous, especially when considering that they have been doing this for the past several years.

Why have analyst not caught up? Why do they not call Apple out on their conservative forecasts and throw them a bigger number?

All these questions are good, but these question don’t really need to be answered. In all seriousness, are probably some institutional investors (75% of ownership inst.) playing this sucker by having their people low ball and over shoot? Probably! It does not matter, as long as we are all on the same side.

Now let us look at the numbers. Apple posted a record $26 billion (ridiculous money) revenue stream for the 4th quarter of 2010. Apple returned $6.43 profit per share. Raking in $6 billion dollars in profits. This is a remarkable growth considering that the company’s revenue grew from 15 billion last year, that is a total of 57% growth in one year.

Revenue is good, but what really matters is profits. Last year the margin was 40%, this year, margins were cut down to size, 37%. This is partly due to the cost in the rise of commodities.

Now that the dust is finally starting to settle regarding the Steve Jobs news, it is a good time to look at where the company is headed in the future.

Apple has been beating the street’s expectation every quarter for the past 40+ reporting cycles. This is perhaps the best record in the tech sector.

Despite having a great quarter, Apple is forecasting $5.11 for the next quarter, less than their earnings this quarter. That is a rather modest number once again, especially looking at the past quarter(s). Despite the forecast, there is expectation of 66%+ growth this year, compared to 52% that Apple has in 2010. Despite this impressive production, revenue, and growth, Apple trades at only 19 P/E and a mere 13 forward P/E. This is a mind numbing number when you consider that the tech sector giants such as VMware (48 forward P/E) and others trade a much higher premium.

It is very difficult to judge where Apple will be trading in the near future, but if metrics and numbers matter, we can draw a mathematical conclusion as to the ball park figure of the share price a year from now.

In the past 5 years, Apple had 57% ESP growth each year. Is it a coincident that the stock price has grown about 57% in the past year? (Apple 1 year chart Jan2010 – Jan 2011) In the past 5 year, ESP has grown roughly a total of 250% . Is it just an irony or coincident that the stock price has been inline with this growth as well?Probably, but if this pattern holds, as it has in the past, the growth rate of 66% this year would produce an additional value of $222 to the stock price. Using this unscientific method, the stock would be worth $560.

If we consider the forecast growth of 66% ESP growth this year, and if history tells us anything, we can expect a 66% growth in the price? This might not be the best metric to predict the price, but the P/E is a better indicator. Considering the growth that Apple has had, it is a shame that it trades at such a low P/E. Forward P/E is 13, we think this will level off in the coming months and start to catch up with the current P/E, 18. We expect ($25*18) the stock price to be roughly $450.

So, after looking at all this “research” the Whale predicts a stock price in between our two number. We expect the price of Apple shares to trade between $450 – $560. The mean of our forecast is $505, but let us be modest about that. We like the $465.

In a remarkable coincident, we would like to note the forecast of some of the industry’s finest.

The mean of these estimated is roughly 462, which is only 3 points off of The Whale estimates.

Wedbush and Oppenhieimer actually noted our percentage method in their report. They both appear to be believers of the “The Whale Percentile Methodology.”