Archive for November, 2006

Buy PowerShares Water Resources Portfolio (PHO)

November 30, 2006

I wrote about PowerShares Water Resources Portfolio (PHO) last month when I bought my initial position. Since then I have been seeing quite a few news reports which make me want to run out and buy more immediately. Here is a random sample:

Water shortage in Gambia results in lack of functioning toilets.

Low water supply in China portends a rise in global grain costs.

Water shortage worsens in the Phillipines.

Critical water shortage in Pakistan forces people to drink polluted water.

Australian companies cash in on water shortage.

Water shortage in Florida forces agricultural users to reduce consumption 15%.

Petroleum refinery in Kenya shut down due to water shortage.

Water shortage in Dominican Republic leads to violent protests.

In Colorado, where they actually have water courts to resolve disputes over limited supplies, construction of new homes and commerical buildings has been halted in some areas due to lack of water.

Water shortage in South Africa threatens economic growth.

Stock Trading Commissions May Be Negotiable

November 29, 2006

If you are dealing with one of the large online discount brokers, you may find that commissions have just become negotiable. Recent announcements by Bank of America and others that they will offer commission-free trading are apparently making some of the big online brokers scramble to hold on to their accounts.  I was able to negotiate a 30% discount to the advertised rate easily, just by calling up and pointing out the deal their competitors are offering.

Colonial Bancgroup Inc. (CNB)

November 28, 2006

CNB was favorably reviewed here on November 8 just after it made a new 52-week low. I believe the bottom is in, and I  bought the stock yesterday. CNB is a strong regional bank. The company is attractive as a core portfolio holding for conservative income investors. CMB is a growth stock selling at a value price and I think they could become a takeover target.

American Shared Hospital Services (AMS)

November 27, 2006

AMS is a tiny company with a market cap of only 31M. The stock is thinly traded and jumps around quite a bit for a security with a low beta of .46. It is too small for me, but someone may be interested.

AMS has performed poorly in relation to the S&P 500, but a turnaround may be in progress, judging by the last three months price action. Recent earnings have been good and the stock looks cheap. There is a 3.07% dividend yield and the company has definite growth potential. In addition, there has been insider buying activity in the last three months.

AMS and its subsidiaries provide Gamma Knife stereotactic radiosurgery services to medical centers in the United States. The Gamma Knife is a noninvasive treatment for brain tumors, vascular malformations, and trigeminal neuralgia. The company provides the Gamma Knife equipment, as well as planning, installation, reimbursement, and marketing support services to 21 medical centers in 18 states.

AMS also offers “The Operating Room for the 21st Century”, state-of-the-art surgical suites, at major medical centers on a fee-for-use or other shared basis. These operating rooms incorporate diagnostic imaging equipment to guide surgical procedures, with computer-controlled navigation systems an integral component. Robotic technology is included to provide assistance to the surgeon. The suite includes a computer-controlled, motorized combination operating room table and ICU bed with on-board sensors and dispensers for oxygen, anesthetic gases and intravenous fluids.

Health Care REIT Inc. (HCN)

November 25, 2006

Health Care REIT, Inc., a real estate investment trust, invests in healthcare and senior housing facilities throughout the U.S.A. These include assisted living facilities, nursing homes, independent living communities, and specialty care facilities. The need to care for our growing population of senior citizens is not going to disappear, just because the economy is weak, or because the Democrats have gained control of Congress. HCN is well positioned to meet the need. The company has 477 facilities in 37 states managed by 58 different operators.

HCN has a market cap of 2.5B and a current yield of 6.18%. This chart shows that HCN has had only half of the price appreciation of the S&P 500 since 1992; however, the compound return of its high dividend yield would have more than made up the difference. The quarterly dividend has risen from $.52 in 1996 to $.64 at present. HCN has a low correlation to the broader market and it demonstrated from 2000 to 2003 that it can go up while the S&P is going down. The stock’s beta is .90.

HCN has had quite a run this year while investors have been seeking out investments with higher yields among the REITs, and it has gained more than 30% since the May lows. The short-term trend turned down after the elections, but now HCN has started rallying again and appears poised to start making new highs next week.

This may be a good time for aggressive investors to buy HCN. There appears to be good support between 35 and 36. I would consider HCN attractively priced in that zone, and I’m not going to chase it into the 40s.

Alliance Resource Partners, L.P. (ARLP)

November 24, 2006

Yes, the Democrats will be bad for the coal business, the economy has been weak, and coal prices have been declining. But ARLP owns 549 million tons of coal reserves. Like it or not, this is an energy source that the United States will have to rely on in the future.

ARLP, formerly known as Mapco Coal, produces and sells coal to utilities and industrial users in the U.S. ARLP performed fantastically well relative to the S&P 500 until it peaked at 45.58 in August 2005. Since then the price has declined close to 25%, but recently ARLP has been bid back up every time it has dipped below 34, forming a large descending triangle with bullish implications. ARLP stock also looks cheap according to conventional valuation measures and the dividend yield is 5.78%. There is a good dividend history too. I think the risk-reward ratio is starting to look attractive.

When the Markets are Closed, Trade Word Futures

November 23, 2006

Trendio.com is a free online trading game I came across last week.

When you register at Trendio, you receive $10,000 in play money and use it to bet on words that appear in the news. If a word appears more frequently, you will make money. They provide the words to choose from – you can’t make up your own. The words are priced hourly according to the number of times they appear in 3000 English-speaking web sites. Nifty little charts are provided so you can check the hourly and daily trends before placing a bet. One good strategy is to look at the breaking news headlines, then place bets on key words that you think will go up. You can double your money overnight if you get in on a good story early. I made a bundle on “Lebanon” yesterday, and now I am long “pope” in anticipation of the pontiff’s visit to Turkey next week. The game is fun, and who knows? It might help to sharpen your trading skills.

If you decide to register, please use this link and my account will be credited with $1000 of play money for the referral.

Windstream Corporation (WIN)

November 22, 2006

Windstream is a relatively new company with a 6.4B market cap which was formed through the spinoff of Alltel’s landline business and merger with VALOR Telecom. It offers telephone, broadband and digital television services for approximately 3.4 million access lines in 16 states: Alabama, Arkansas, Florida, Georgia, Kentucky, Mississippi, Missouri, Nebraska, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina and Texas. WIN is headquartered in Little Rock, Arkansas.

The shares pay a $.25 quarterly dividend, resulting in an amazing yield of 7.17% at the current price. This stock has not been a shining star during our phenomenal telecom rally, but after formation of a double bottom in January and July, it appears a new uptrend could be getting under way. WIN recently reported a nice earnings increase and a sharp rise in broadband subscribers. Their earnings may be sufficient to continue paying the dividend but that is an open question.

NYSE does not give a beta for the stock (I believe they use three years of data). Google Finance says the beta is 1.00 and Yahoo Finance says the beta is 1.27. WIN is definitely more volatile than T or VZ.

The prospect for continued growth of WIN’s earnings is murky at best. The recent rally hasn’t shown convincing volume, and it may be losing momentum. A pullback wouldn’t be surprising. However, that might be a good opportunity to buy WIN as a speculation. There has been some recent insider buying.

Using Short-Term Market Cycles to Your Advantage

November 21, 2006

Much has been written about long-term market cycles. They have become well known, and this year’s price action makes it look as if they have been anticipated and discounted by the market. For example, the market was not weak in September and October like it was supposed to be. Instead it has been going straight up since August. Likewise, this year the 4-Year Cycle and the Presidential Election Cycle have not been behaving the way they are supposed to.

There is a shorter-term market cycle which is quite persistent. For the sake of discussion, let’s call it the 4-Week Cycle. The market and most individual stocks tend to bounce along on their charts, making short-term lows that are about 20 to 25 trading days apart. The highs also tend to be about 20 to 25 days apart. Sometimes the cycle compresses to three weeks. It may stretch out to six or seven weeks. Sometimes it will exhibit remarkable regularity for a few months and then disappear altogether. But it always comes back. I think the 4-Week Cycle is just the effect of short-term traders constantly at work within longer-term trends – buying dips and selling rallies.

The 4-Week Cycle would be very easy to trade if it were regular and if the market did not trend! You could buy whenever the price was below the range of the preceding 10 days, then sell and go short when the price was above the range of the preceding 10 days, and cover your short and go long once again when the price fell below the range of the preceding 10 days. It wouldn’t take long to make a fortune, and I suppose that is why this cycle keeps disappearing after it has worked well for a few months.

The cycle is not regular enough to trade, but it can be useful to long-term investors for timing their purchases.

Whenever current price is below the 10-day range, the stock or index is oversold and at least a bounce is likely within the next few days. Everything else being equal, this is probably a good time to buy. Also, when the price is above the 10-day range, the stock or index is overbought on a short-term basis and this is probably a better time to sell than to buy. A decline or several days of sideways price action can be expected, so purchases should be deferred. I use closing prices to calculate the 10-day range.

NASDAQ 100 Trust Shares (QQQQ)

November 20, 2006

Here is a great deal for anyone who wants to accumulate shares of the exchange traded fund QQQQ by dollar cost averaging. QQQQ can be bought without transaction fees of any kind through http://www.qqqdirect.com/.

The NASDAQ is sponsoring and subsidizing this arrangement. After opening an online account and choosing a payment option, QQQQ can be purchased automatically in amounts of as little as $25 per month.

QQQQ tracks the NASDAQ-100 Index, which is composed of 100 of NASDAQ’s largest non-financial companies based on their market capitalization. It is always among the top ten most actively traded stocks. With an expense ratio of only .20, QQQQ is also one of the cheapest funds to own.

Personally, I am in no hurry to buy QQQQ as long as it continues to lag the S&P 500. This ETF has a dividend yield of only 0.20%. But QQQQ is quite volatile, with a beta of 1.34, and the shares look a little pricey at 44.30. I will wait until they are on sale again.