STOP WELLCARE

WCG

WCG got stopped this morning. Good idea, poor execution (as usual). In hindsight, I should have sold it yesterday when it hit 40, for a rather fat profit. I remain positive on WCG on a long run, but this stop is not necessarily bad, given my exposure to healthcare has risen to more than 20% (with WCG). This would bring it down to 15% range, which fits me just fine. Also, it appears the market is exhausted by and the sell off might continue. Having a bit of cash is not a bad thing.

MORE PANIC SELLING

WCG

Major sell off of healthcare service stocks this morning, and I sensed keen jerking panic. WCG sold off by more than 15%. I missed last opportunity when it was at $36, and I will not missed this time. Picked some up at $37.25 (could got it a bit of lower if the broker could act promptly). It quickly recovered to $39. This is a pure Medicaid play with high growth potential, good earning growth, strong cash flow. I missed it and felt it is traded with too much premium for me. Now I picked it up with a discount. I love this kind of keen jerking panic actions, although I had panicked a few times myself, last one happened yesterday.

DISPOINTING QUARTER

STX

Sold my entire position of STX ($18) this morning. I should have known better. To add position at this point is rather risky when market has run so much so fast, particularly with a less quality name such as STX. On the other hand, I could have picked YHOO or INTC, both quality names, but I would have suffered more. Looking at the portfolio, I believe it is reasonably defensive. A few tech names have good fundamentals to withstand this sell-off.

GOING FOR THE RIDE

REI / MXT / WJX.UN / STX

Sold my REI position this morning, partially to raise some cash, partially due to some concerns of REI’s outlook for the coming quarter. Fundamentally, apparel retail is a tough business with fierce competition, tight margin and inconsistent performance. I also sold MXT as I suspect it might have some earning risk on Thursday. I replaced it with BSX($28.07), which announced a decent result, and raised guidance. The stock is very reasonable valued due to numerous litigation concerns. I think it has some decent momentum and news from here are likely positive in nature (settlement of major litigation), which will provide some catalysts for multiple expansion. My target is $40 within a year.

I also picked some WJX.UN (C$20.65), which currently carries a 10.5% yield. This, I got lucky as it went up pretty hard this morning. I would be happy with the 10.5%. Any extra would be gravy.

Picked some STX ($19.57). I am not too sure about this call. I believe it will meet or beat consensus, but outlook is uncertain. There are some risks on this call. On the other hand, it would had worked thus far in this quarter. I feel a bit of lucky and I guess I don’t mind to speculate a little at this juncture. Keep my figures crossed.

Things don’t look good after market. While earnings meet or exceed the expectations, the market sold off, including STX and MOT, which beat rather handily. Oh well, it could be worse. I could have picked YHOO, or INTC.

MORE ANXIETY

UNH

I continue to experience performance anxiety, particularly in the area of tech. I really should not be because a rather significant portion of my portfolio are in tech (MOT, ORCL, NESS, AUO, WEBM), and all of them are performing rather nicely. I could feel my inside would like to add more tech positions. But this is exactly not the point to do so. If anything, I would peel some positions.

One area I should add on is health care, which continues to take a leadership position in this rally. Long term outlook is also strong. I am under-weight presently, particularly in the large cap area. I am considering to open a small position on UNH, which released its result this morning. This thing has been going up for a long time. Well, I have missed most of the raid, but better late than ever. Another name is ABT, which released rather decent results, but was sold off severely, most due to concerns of gross profit margin. I thought this might be an opportunity to pick it up with a reasonable entry price.

The PD idea turns out to be a absolute disaster. As its loss mounts, I am having a tough time to cut loss and run here. My energy stocks have not been performing well. It tends to move slowly when the sector moves and drop like rocks when the sector falls.

OVER-REACTION?

MXT

I nibbled a bit of MXT ($14) this morning. I thought the market is over-reacting to a piece of old (bad) news, when it sold off for more than 5%. Moreover, fundamentals are strong, valuation reasonable, balance sheet improving, and it’s an take-over target. I am looking for $16 exit price for a 14% gain.

LUCKY BREAK

NSTC

I add some NSTC @ 10.33 (market cap $355 mil) this morning. The company is traded at a very low multiple compared to its peers (14X05, 10.7X06) and growing at about 20% annually. Strong growth through acquisitions and partnerships, blue-chip customer base, niche player, clean balance sheet, very limited analyst coverage, valuation compelling. There are a lot of integration risks for this company and it has to deliver consistently. But I am having a hard time to found any compelling valuations here, particularly in the tech area. I also continue to concern a bit about the yield curve. Cyclicals, including techs, have not performed well in periods of flat or inverted yield curves. I am also not very confident about the coming earnings reports. While Q2 results will likely be decent, it is the outlook causing concerns. Better to wait, pick those that have pre-announced (to avoid earning surprises), or pick those with relatively low multiples.

DII

DII warned this morning and I sold as soon as market opens. Lucky for me as it fell by more than 10%. Lessens leant.

PERFORMANCE ANXIETY

Performance Anxiety

I am having an anxiety attach this morning as the market continues to move up. I should not. First of all the market is up, not down and I am participating. Secondly, when I acted upon an anxiety attached, I had been wrong most of the time. Third, there are a lot of opportunities down the road.

I also shorted a bit of energy, and it turns out to be wrong again. I have a very tight stop loss here and if I am stopped out, so be it. At the end of day, it evens out with my energy positions. (Stopped out).

PARE SOME FINANCIALS

ING / TD
I am considering sell ING here for a number of reasons. (1) It has done nothing for me; (2) I think it will have a weak quarter. Although charges are not reoccurring, but I still think investors will react negatively; (3) Financials are over-weighting; (4) Declining earning trend; (5) Too many analysts coverage.

Sold the entire position of TD on this ramp up. I doubt that if it will go up much from here for a while. I also want to raise some cash in front of this second quarter report season.

PANIC FROM LONDON

PANIC

The second quarter reporting season started with a blast in London, and market is going to over-react. It appears that crude is under pressure, which is somewhat counter-intuitive. Usually, crude price tends to move upward in the event of political instability (along with gold). On the other hand, it does make some sense because (1) demand for fuel could fall due to security concerns; and (2) investors’ first instinct will be protecting any gains, which have only come from energy sector.

Therefore, I would like to sell some energy stocks (PZK comes into mind) at the opening and cover it when selling becomes intensified. I may also raise some cash from my large financial holdings. On the other side of the equation, I would look for tech names to nibble, particularly small names which will undoubtedly suffer the most from this panic selling.

This is rather amazing. There are so many contrarians out there that the consensus this morning probably is buying at panic, instead of selling. So a real contrarian would have to sell in order to against consensus. Moreover, market did not panic sufficiently to present buying opportunities. It was essentially a wash! Resilient.

CHEAP OR UNDERVALUED?

NSTC

This might be one of my key weaknesses: I tend to be attracted to those broads that are fundamentally cheap, and technically unsound. NSTC is definitely one of them. It is dirt cheap for no obvious reasons. The company is traded at 14X of E05 and less than 10X of E06, while growing at well over 20%, both top and bottom lines. It has a clean balance sheet with more than $3.0/sh in cash. The earnings appear to be safe as the company reaffirm its earnings outlook as recently as Q1/05. It is unlikely by now that it would miss its Q2 guidance as it would have warned by now. What are the risks? I know, I know, it is an Israel based company, a bit of unstable, you might say; The sector is not exactly on fire, but which one is (other than fuel). Competition is fierce, so are most of other sectors. Moreover, doesn’t that it is growing at a fast clip in a fierce competitive environment says a lot of its competence? There are a lot of doubts about its ability to manage its acquisitions, but what are the bases of those doubts? Has the company failed to deliver? I can’t see the downside risk below $9.0, while upside could be as high as $15.