ORACLE

ORCL

I nibbled some ORCL on this good earning report. The upside earning surprise is encouraging, and outlook appears rather positive. ORCL has been stucked here as far as I can remember. Maybe this will its time. My initial target is $15 and one year target at 18.

BURTON MAGIC

CVO

I am low-balling some CVO this morning. As usual, I come to the party late due to my procrastination as I could have bought it at $6.0. On the other hand, Burton (BO) continues to buy this in the opening market at about $7.7 as recently as late May. I have a hard time to see where this is going other than a buyout, either by Burton, or by a third party as all signs seem to move towards this direction:

Large benificial ownership - checked
Insider buying - checked (double play)
Poison bill - checked
Seek alternative to maximize value - checked
Investment banker & legal counsel hire - checked
Acrimoniol relationship (Management & BO) - checked
Spilled out in public - checked
Breakout trading chart - checked
Special shareholders meeting called

The only issue is how much would it be sold. There is a lot of noises about $12 range, which will still make this a very profitable trade (order not filled).

PRECISION DEALING?

PD

I nibbled some PD ($50.74) for a trade here. This is such an obvious trade that it’s hard to believe that it would work. Everyone on the street knows that PD will be converted into a trust. The question is: will PD get the usual pop coming with the announcement? You would think that the trust conversion is fully discounted, but I am willing to bet my small position of PD that it will pop for a few points upon announcement. I am only looking at $55 in near term and then I would have to re-evaluate depending on the yield and payout ratio of the newly-minted trust.

Energy has another run and I pretty much miss the boat. The few energy positions I hold had not worked. I made a major mistake for holding internaltional plays, and not domestic majors and it has costed me. Even though I am having a “performance anxiety� here, I will not chase the majors here. I’ll rather wait it out the summer.

A FEW SMALL CAPS

CWH

The conference call was long but pretty good. If I were to grade this quarter, here would be the score: revenue growth (A), margin (A), EBITDA growth (A), EPS (C), cash flow from operations (A), B/S (A), cash balance (A), new customer acquisitions (A), product diversification (poker, bingo) (A), new platform development (kios, mobile) (A), and overall, a solid “A�. However, I am in the market enough to know that the market will likely focus on the short term sequential decline of revenues and disappointing earning numbers, and indeed it did. The stock was sold off, but not too much though. I was thing of $5-$7 level at the opening, it actually opened at $8.5 and stabilized at $8.0. So, the damange is insignificant. I think the fundamentals of the company remain solid. However, given its poor EPS number in Q2/05, I have brought down the number to 0.35 and 0.45 for 05 and 06 respectively. The stock appears expensive here. Better to wait and see if it can resume earning growth in the next few quarters.

LGI

LGI moved for about 15% today, after announcing stock offers at $10.50. I did not think the news, while positive, could move the stock this much. I intend to peel some tomorrow if I could sell it at $12.5 level.

ONE MORE STOP

STX

STX got stopped out this morning at $19.99. I am very frustrated as nothing I do appears working. The market behaves very badly. Good news are routinely sold. Valuation for STX (and SGTL, VTIV, DRTE) appears compelling, but they are sold nonetheless. I had a very flat week. I think I might be pushing too much. I will let it go for a couple of weeks.

MORE LOSS STOPPED

DRTE

DRTE got stopped out this morning at $15. Although I did not lose money on this one, nor did I make any meaningful return. I continue to believe this one is reasonably valued, but it appears lack of momentum. Same can be said of VTIV. Again, I found the market difficult and I do not have a clear direction. I guess I should not push it.

SELLING GOOD NEWS

CWH

I peeled some CWH off this morning. I do not know what is going on as it continues to fall with greater volume. Better to step aside and wait the shoe to drop. I consider this as the most difficult situation to handle: a free-fall of a quality stocks on a modest high volume, without any news. My experience in this kind of situations have almost always been bad. Better to step aside at the first signs of trouble, and not be stucked in a “disabled train� situation.


VTIV

I also find the market is troubling as it sell off on some pretty encouraging news from both Greenspan and TI in the last two sesseions. Better to tighen up stop-loss and hold up cash jar, and don’t rush anything. VTIV has been declining over the past few sessions and valuation is becoming compelling. Should I step in here? I think not. (1) Market does not behave like it wants to move up; (2) VTIV breaks all its support level and the trend is clearly down; (3) Small techs are particularly weak; (4) There will be plenty of time to pick it up even after Q2/05; (5) Foreign content rule remains in place.

GAMBLE?

CWH

My average-down of CWH did not appear to work out as CWH continues to fall, breaking all supports. While I could not detect any fundamental changes, I should have paid more attention to the technical, which is clearly broken. I hate the situation like this. Should I cut loss and run or should I hang around? One theory is that if the fundamentals are not changing, why sell? In this case, I can’t see any fundamental changes, earnings are good, balance sheet clean, growth is strong, and the sector is in favor. The other theory is to sell on a pre-determined stop loss, in this case, is breached. One fundamental, one discipline. They appears to be contradictory all the time. Which rule should follow? One rule I believe has been clearly established: if earnings have deteriorated, SELL!

Does this free fall indicate a poor second quarter (April/05) coming, or is it just orderly profit taking? I believe the company will likely deliver solid earnings as most of its revenues are recurring. If it does, the stock should move up again. I will wait until the earning report, which should not be too far away.

STX

I re-established a small position of STX ($21.40) today. There are a couple of factors playing in its favor. One KOMO increased its Q2/05 guidance this morning, which leads me to believe that STX will have a good chance to beat its Q2/05 guidance. There are also a couple of upgrade this morning, and 05 ESP is upped slightly ($1.35). The stock consolidated a bit in the past few sessions and is ready to move up. Initial target $25, stop at $19.90.

CONTRAST

PTI

PTI announced its Q2/06 results and it was a mixed bag. Revenues, EBITDA, and net income showed some modest growth, but EPS declined. EBITDA margin fell by approximately 1.0% sequentially. The market is not pleased and the stock was rather severely punished (down 8%). Being a shareholder, I can’t say I am happy, but nonetheless, I think the market appears to over-react a bit.

This illustrates the hazard of investing in turn-around situation. In most of cases, it would not work simply due to weak management. And this management team has not shown that they have the vision and management skills to turn around this company. The first full quarter since acquisition of Mova has been disappointing and on the call, the management appears to whine a lot and I don’t sense a lot of confidence in their tone! The share is not really cheap either. Even after today’s decline, it is trade at 20XEPS05, and the EPS number will be brought down by Monday morning, and we don’t see any sign that earnings will grow in near term. I do not see any catalyst until next quarter. Cut loss ($10.04). I was wrong on this one, and better to cut and run instead of procrastination.

CWH

Contrary to PIT, CWH has been a very consistent performer and it has been growing rapidly. The stock has come off quite a bit on a very low volume. I nibbled some this morning at $9.0. I believe it could made 0.45-0.55 this year and 0.60-0.65 next year. It is trading at 15X of next years EPS. Initial target at $12, stop loss at $8.5.

PTA

I attended two conference calls this morning and what a difference. PTA’s management said what they would do, and on this call, checked. And they outlined what they would do next quarter and I have no doubt that they will be checked as well. The company is extremely under-valued (6XEPS05, half of its book value). There are a number of catalysts in the work, new reinsurance agreement, potentially upgrade, conversion of its convertibles (reduce its debt to zero), additional states to open for business, reverse split and additional coverage, not to mention better earnings. Management is confident and appears to know that they are talking about. I believe this will be a $5.0 stock by this time next year.

I had a decent month of May where I am up by 4.6%, most resulting from techs I added in late April. June has an ominous start as one of my holdings missed its earnings and fell of the cliff. It is also rather difficult to pick as stocks are not cheap here. Good thing is I have quite a bit of cash, and I would not mind if the market pause and consolidate here.

TOUCH-DOWN?

TD

Add some TD (52.85) this morning. I have way too much cash and I would like to park them somewhere for the summer, and banks appear to be the appropriate place for their stable earnings, and dividend yield. TD is also a obvious trade here as this rumor of merger with AMTD swirling around. Depending on terms of the deal, it could move TD to $55 range, which is all I am looking for. On the negative side, banks are not cheap, and TD is trading at a premium to other banks. Concerns of interest rate are still hanging around. While earnings are stable, they are really not very impressive. Last but not the least, I own way too much financials. Unfortunately this is a reality in Canada. Excluding financials and materials, there is not much left.

Averaging some COM. I do not really know if this is a good move as it continues to be a rather speculative stock, and I have never made any money investing in biotech. On the other hand, biotech is so widely hated that it probably wouldn’t hurt to nibble a bit here. Initial target $9.0 and stop loss at $6.5.

GLW

GLW got stopped out at $15.99, really against my will. I still like the company, the sector and overall trend. But I am also concerned that this rally might run off its course and a correction could potentially in place. That’s why I have tighten up the stop. GLW could be also under some pressure as a result of recently announced new issues (20 million shares). I will like to take it back if it falls below $15.

TIGHTENING STOPS

GTK

I am tightening my stops on this run-up (GLW, MOT, EPIC), and GTK actually was stopped out this morning at 27.99 (19%). While the market may continue to move up from here, caution is in order.