UNLOCK

SOLD GMP @19.00
This is one of those very frustrating purchases, where it went down as soon as purchased, and I have to endure almost a year deep under the water. Now that I sold it, I am sure it will go right up from here. But that is not the reason. While the fundamentals remain reasonably good, it could be under pressure as I believe the upcoming quarter may be weak than expected. I see some analysts bringing down its numbers in front of its Q4/04 earning reports next week. Also, the company will unlock some shares in January, which also could bring some pressure to the price.

RED HOT COAL

ADD WTN.V @6.15
This probably is another one of those "late to the party" stocks, and I have to pay about $3 more for the rid. Last time this happened, I was doing alright and I hope this time it will do as well. Let’s look at the CONS side first, it is definitely still a speculative stocks as it does not have any production, revenues and cash flow. This, practically pre-determines that I can only have a very small position. I believe valuation is also fairly high. Based on my back-of-envelop calculation, the book value probably in the area of $4.15-$5.5 range (12% discount, US$55-75/tone coal price, 1.5 million tone production starting 2007). However, this book value is based upon the current count of outstanding shares (43 million), the company has a lot of options and warrants out there and I believe it probably will require additional financing in order to bring the production on line. On a fully-diluted basis, its book value probably in the range of $3-$4 range. Therefore, the stock is trading at approximately 1.5-2.0 times of its book value. Finally, the stock is a bit of too hot for me at this point and simply too many people are chasing it.

On the PROS side, (1) coal price remains very firm and the trend is likely to continue; (2) the company has significant reserve under the ground (60 million tones of my preliminary estimate, at least 20-years reserve life); (3) productions will be largely open-pit, and cash production costs will likely be reasonable; (4) late stages of obtaining necessary approvals; (5) Dillion will be on-line late this year and early next year, which will bring some cash flow to fund its operations; (6) debt or project financing is possible, reducing the dilution effect; (7) technically, strong uptrend with large volumes; (8) near term catalysts: approval for Perry Creek project; production and revenue from Dillion, debt or project financing.

CORRECTION TO BUSH-RALLY

WEEKLY SUMMARY
The week ended up with less optimistic note as the market dived due to broad based profit taking. As if the market read my posting last night (where I plan to trim my ATY position), it whacked ATY by more than 6%, giving up all the gains yesterday and some more. Well, it is a high beta stock. In addition to profit taking, the news of INTC and NVDA licensing agreement provided additional negative vibe. (My first instinct was to sell before the opening at $23.9, which would have been the correct move. Got to trust those instinct, and avoid procrastinating). It frustrated my effort to sell on the way up, and I am rather determined not sell on the way down. As I understand, this event while positive to NVDA, is neutral to ATY, and therefore, I do not see the 6% decline as justified. The correction is not unexpected, after the recent BUSH-RALLY. Other than ATY, the balance of my portfolio is holding rather well. Overall, despite the disappointing last day of the week, it has been terrific two weeks since election as my portfolio racked up more than 5% of net gain. More importantly, I have taken the opportunity to get rid of quite a few deadwoods, replacing them with much better quality stocks.

UNCOMMON COMMODITY

ADD NCX @53
Added a little NCX here. I probably a bid of late to the party, as a result, I have to pay $5.0 more for the rid. The earning momentum appears strong and we should see a few more very good quarters, which should carry this one to $60 level. I want to add more commodity plays other than energy, but I simply could not summon up enough courage to add any base metal names here, after missing the correction earlier this month. I think this might be a safer play.


DISCIPLINE
ATY could hit my initial target of $25 by tomorrow. Now the original plan is to increase beta by adding ATY in anticipating the "BUSH-Rally" which did materialize. It was planned to reduce exposure upon the $25 mark. Should I (1) sell half; (2) stop loss at $25; or (3) do nothing? While fundamentally, you should not sell stocks when fundamentals remain good, (or technically when trend is not broken), here is a perfect example of DISCIPLINE. I have to implement my original plan because (1) at this level, it will be over 10% of the total portfolio; (2) you can still take the ride with the remaining position; (3) a 20% gain in less than a month is nothing to laugh about; (4) the market has gone up by more than 10% after election, this might be qualified as "too much and too fast"; Time to trim before the correction; and (5) I always have difficulties to sell on the way up and I am determined to do so this time. Remember the cliche, IT NEVER WRONG TO TAKE SOME OFF THE TABLE. The amateur mentality: too greedy to sell on the way up and too scared to buy on the way down.

DON'T YOU HATE THOSE NON-VOTING SHARES

ADD ATD.SV.B @31
Add some ATD due to very strong seonc quarter result (Q2/05, $0.49 vs. $0.45), reasonable growth, improved margin, higher synergies realized, better outlook for the remaining two quarters, potential more acquisitions, and improved balance sheet. Numbers and target are revised upward as of today ($1.95 for F05 and $2.35 for F06). Valuation remains reasonable. The most important is the fact that the management has been able to deliver consistently quarter after quarter. It is not too bad time to add some consomer stables. The only drawback is the fact it is another one of those where owners control the company with voting shares. Well, this is Canada, and we are Canadians. Sometimes you have to do what you have to do.

SPECULATIVE & UNDISCIPLINED?

ADD LYT.V @ 0.40
Let’s see, on the PRO side, (1) It essentially double its revenues each quarter, and it appears that the trend will continue; (2) Visibility appears to be good with $6.8 million back log. Its F05 revenues appear secured; (3) Management expects a strong finish of Q4/04 and profitable for F05; (4) Reasonably clean balance sheet with practically no debt; (5) Management appears to be strong, confident, and knows what they are doing. On the CON side, (1) It is not profitable, and cash flow negative; (2) There are quite a lot of shares outstanding for such a small company, and the mention of 60 million warrants ($0.30 strike price) outstanding adds more discomforting.

I believe I have enough speculative positions already in my portfolio and I should definitely refrain from adding more. On the other hand, this appears to have a good story, reasonable visibility, upward trend and fairly strong momentum for such a small cap. The key is the Q4 results and F05 outlook. It probably a risk worth taking, as long as the position is relatively small (0.85%).

AN EXCHANGE WITH A FRIEND

Haven't updated for a while as I have not done anything for a while. This is a part of e-mail exhange with a friend, and I thought it is worthwhile to put it on here.

PTA (NY) is an insurance company for long term care insurance; It had some troubleS over the past couple of years and is currently in the pace of recovery. (1) it will earn $0.20 this year, $0.30 next year, and it is traded at $1.85, 9X of this year's earning, 6X of next year's earning; (2) book value currently at $4.99, 0.37X of BV for an financial service company; (3) It just had a great quarter, earned $0.08 vs 0.05 (management guidance); (4) It just restalls its licenses in GA and CA. CA obvious is the most important due to its size; (5) the management is pretty impressive since restructure. It cuts costs, restructures balance sheet, develops new products, expands distributions network, and improves its underwriting process; (6) the balance sheet is pretty clean with about $80 million convertibles on book, which the company can force the conversion at $1.75+10% ($1.925) after OCT. 2005; The stock is currently traded at $1.85-1.90 and I believe the company will be able to force the conversion by OCT 2005 which basically will have a clean balance sheet with no debt; The interest savings will be about $5.0 million annually (0.06 add for 2006). So even the company does not grow at all for 2006, by converting the convertibles, it will be able to make $0.40 for 2006 which could take the stock to $4-5 range; (7) Finally, insiders are buying the stocks at $1.5-$2.0 range, which gives investors greater confidence.

Having said that, this is not a momentum stock and you got to be patient. There are practically no analyst or institutions coving this name. I expect it will achieve its earning target of 0.30 in F05 and stock will trade up to $3.0-$3.5 range, still a significant discount to its book value. The stock was traded at $20-$30 range until recently. $5.0 by 2006 is not unreasonable, as long as management delivers.

DII.SV

Bought DII.SV @40
Very strong Q3 results and outlook positive; Numbers are revised upward by all. Q4 looks very strong. Revenues growth strong; Margin expansion due to lower material costs; Balance sheet manageable. Strong management; Valuation reasonable presently; Defensive; On the negative side, organic growth modest, free cash flow remains negative; No debt reduction until 05-06;

BUSH-RALLY

SELL SWKS / KOMG
It is clear by now that these are mistakes. I correctly anticipated this Bush-rally, unfortunately for me, the trade is poorly selected and terribly executed. The market did rally rather strongly, but these two have no strengths whatsoever. Although I recognize the mistakes early on and had made decision to sell into strength, it still takes a lot of mine in order to pull the trigger. But I don’t see any other alternatives. If they are this weak in the strong market, how much weaker they could be if the market corrects, which could be around the corner.

DEPRESION

I am totally depressed (as usual). This market depresses me. This process depressed me. I have no confidence of my ability in managing the process. How can you achieve your target without any confidence? But how could I not be depressed when as soon as I sold, the stocks started to move up, dramatically (again!)? How could I not be depressed when the market is moving up (as anticipated), but my stuff actually is going down? Isn't it sufficient proof that I should give up the whole thing? What did I do wrong? Just as the portfoli starts to improve and my confidence starts to recover, a few mistakes crush me, and my confidence. I really hate this thing now and I wish it simiply go away.

SELLING NEWS

BUY SWKS AND KOMG
Today is a perfect illustration of the difference between the pros and amateurs. While amateurs are excited and jumping in, the pros are quietly selling the news. And I am the biggest amateur of all, buying in pre-market and paying the highest prices. I think I have been in the market long enough and experience sufficiently not fall into this kind of trap. Here are a few things to remember: (1) be aware of selling the news; (2) when excited, take a walk; (3) never bid in the pre-market, it almost always fail; (4) the first half hour is always tretrearous, better late than sorry; and (5) don’t buy cheap and weak stocks.

Having said that, what to do with the mistakes. Should I cut and run or should I hold the positions and hope the market will continue to move upward? My thesis was that the election will result in a 10% run for the overall market and technology will take a leadership role. This scenario does not appear to materialize, because the market does not look rigorous, and technology is certainly not leading. On the stocks, SKWS had a weak Q3 and not very aggressive Q4 outlook, and it lacks catalyst to move up in the near term; While KOMA had a very strong quarter and a healthy outlook, it has a pretty good run already. The potential gains for both before Q4 seem to be limited. This, plus that my original idea is for a trade, basically determines that I have to dispose them in the near term. Be opportunistic and look for selling into strengths.

I continue to find this is so difficult to execute and trading seem not fit my personal temperament. I am lack courage to BUY LOW and too greedy to SELL HIGH. I think that summarizes my shortcomings. Therefore, I should continue to try to avoid trading and focus on investing, and never lose sight of the objectives.