ANF and TGT

I recommended ANF and TGT on 7/18, and said the following:

ANF and TGT are both top players in their sectors, with proven track record, and steady growth rate. Better yet, both are undervalued, in my opinion, at least 20%. Plus, I expect them to release strong numbers for the 3rd quarter, in other words, both stocks will have a positive outlook in 3 months.

Let us check it out. On July18, ANF was closed at $51, and TGT was closed at $45.5. ANF and TGT are closed at $68.95 and $54.39 today. 35% and 19.5% up respectively, in 2 months. Oh, forget to mention, they both are mid-to-large-cap companies (>5B), and you don't see large size company moves up 20% in such short time period that often. Wow, what a nice call.

Well, on the other hand, I recommended NTE at around $20. And it is around $12.50 now. Fear not, if you haven't bought it, buy it at this price, before it moves up.

P.S. I bought COP last week at $59.28, it was between $57 - $59 range since then. Buy it in the coming 2 weeks at ~$57, as a long term investment, the price will look so cheap in 6 months.

Bought COP - Conoco Phillips

In my last post, I said oil industry stocks are on our watch list, and I bought 100 shares COP at $59.28 today. Here are the reasons.

1. Industry - Though oil price is influenced by many factors in short term, its long term price trend is primarily determined by supply and demand - if you ask me, supply can hardly catch demand in long term.

2. Company - Third largest integrated oil company in the world. Diversified geographically (an aggressive international player, have 18% - 20% holdings in Lukoil, and other projects in Libya, Venezuela, Saudi Arabia, etc), and strong business lines in both oil production and refining.

3. Peer Comparsion - Among COP, CVX and XOM (top 3 in oil industry), COP has the lowest P/E (5.8 v.s. 8.6 for CVX, and 10.2 for XOM), lowest P/B (1.2 v.s. 2.0 for CVX and 3.3 for XOM), and highest projected earning growth (25% v.s. 19% for CVX, and 18% for XOM).

4. Charts - The stock has very strong support at $60 level. It touched $60 at least 4 times in the last 52 weeks, and everytime rebounded above $60 within less than 3 weeks.

5. Others - The stock is oversold this year. They purchased Burlington Resources and was widely regarded as overpaid. While it is difficult to judge the value of the merged assets, COP's does have proven and successful M&A history.

Strategy: An ideal long term investment candidate, but I will take short-term profit, if it go up 10% in 1-2 months. If the oil / stock continue to go down in the coming days, the next entry point is $56. Will keep every one updated.

What do you smell?

Do you recall that many stocks plunged 5%, 10%, and even 20%+ in one day in the last 3 months - many of them are great companies at a fair price before the sudden drop. It happened more often than usual that the price drop was based on insignificant news, and overreacted. Just name a few, NTE, OVTI, ASEI, AET. And it happend again yesterday on KOMG, and today on MATK.

All the names above are leaders in their market, with proven track record with at least 10%-15% organic annual growth, and to say the least, very reasonably priced even before the sharp price drop.

What does that suggest? To me, the market is irrational right now, and it makes every excuse to go down. Usually when the market is irrational, guess what's going to happen next? it goes even more irrational... So hold cash tight and be selective, don't buy just because it is fairly cheap, buy when it is dirty cheap, I am sure you will see plenty of them in the coming weeks.

I am not positive on the market outlook in the short term. But there are execptions:

energy stock - in short, I believe that energy price will go only higher in long term, and the recent price drop is a good chance. OIH (an energy ETF) around $130 is a good entry point in short term. For individual stocks, APA($65) and COP($62) are fairly priced now, some good entry points are around in the next 2 days if it goes down another 2-3%.

NTE

NTE's News release on Friday is brutal. In short, quarterly revenue stays flat, while its profit margin deteriorates sharply. As a result, 3rd EPS is estimated 20% - 25% lower than the same time period last year. In the meantime, it slashes annual sales growth projection by half from 25% to 12% in year 2007/8.

Shares sank 23% on Friday, closed around $11.5. This stock is too cheap for me to give up (low P/E, high cash position, leader in a competitive market, proven track record, etc) - but it may take a while for the stock/company to recover. For those who are interested in, but not yet taking position, be a little bit patient, I would wait until the stock price stablizes. Also keep an eye on the company shares buyback program.