SubscribeTDI Podcast 24: Trust and Transparency
August 25, 2007
Guests: John Dvorak, John Havens and Parker Conrad. Who can you trust when looking for investment and financial advice? We discuss Trust and Transparency in the modern age.
There is so much information out there and we take a deep look at the problems with mixing amateurs and pros in the analysis and recommendation of investments. The main question we all ask is how the end user can discern if the information they are reading or listening to has embed bias. There is a growing concern as Web 2.0 has made it relatively easy for anyone to broadcast their opinions and comments without any significant oversight.
Parker Conrad (wikinvest.com) argues that credentials are not very important while John Havens (BlogTalkRadio.com) wants references and track records. John C. Dvorak (dvorak.org/blog) thinks that nothing is different today and skepticism is prudent. Watch out for the fluff.
We also examine the idea of; who is to be believed in the blog/newsworld as well as TV, radio and podcasts? Also, what about Wikis?
About Wikinvest.com: “The audience target is anyone who is trying to learn about a company in more details, or is trying to understand how to invest in an issue or trend. I think there’s room to be appealing to both retail investors, who don’t have a lot of places to turn to for investment research, as well as institutional guys who need a brief primer or update on a company or topic they’re not as familiar with.”… Parker Conrad, Founder
John C. Havens - Vice President of Business Development for BlogTalkRadio (www.blogtalkradio.com), and Lead Organizer for PodCamp NYC . As the first About.com Guide to Podcasting, John published numerous articles and white papers and interviewed dozens of top media experts for his site and in his About.com Podcast. He has also written extensively on the topics of marketing in new media for ADOTAS and other publications.
John is a founding member of the Association for Downloadable Media and is currently working on a project focusing on Transparency with Shel Holtz.
John C. Dvorak - Current PC Magazine Columnist writing Inside Track, an essay and a weekly online column. These articles are licensed around the world. Also a weekly columnist for Dow-Jones Marketwatch, Info! (Brazil) and BUG Magazine (Croatia). Previously a columnist for Forbes, Forbes Digital, PC World, MacUser, PC/Computing, Barrons, Smart Business and other magazines and newspapers. Former editor and consulting editor for Infoworld. Has appeared in the New York Times, LA Times, SF Examiner, Vancouver Sun. Was on the start-up team for CNet TV as well as ZDTV. At ZDTV (and TechTV) was host of Silicon Spin for four years doing 1000 live and live-to-tape TV shows. Also was on public radio for 8 years. Written over 4000 articles and columns as well as authoring or co-authoring 14 books.
2004 Award winner of the American Business Editors Association’s national gold award for best online column of 2003. That was followed up by an unprecedented second national gold award from the ABEA in 2005, again for the best online column (for 2004).
Stocks Discussed: AAPL, GOOG
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Book PreOrders are being accepted at the website…Coming to bookstores September 2007. All pre-orders will be signed by ME.
Glancing Blow or Eye of the Storm?
August 23, 2007
If the markets were to be compared to a hurricane, we could say that the front wall has passed and we are now in the eye. This is one of nature’s wonders that is both beautiful and potentially deadly.
During the period that the eye passes over, skies are blue, the air is calm and there is even a feeling of excitement that the storms is finally over and the damage is limited. But that lasts for a short time. It is usually the back end of the storm that causes the most damage. In fact, that usually has 20% more strength and has the potential to create tornadoes and eventual mass destruction.
Often times, market corrections can act in a similar fashion. Usually as an investor our first inclination is to prepare and see if we can weather out the storm and then as the volatility slows look to move back into the markets. Hopefully waiting enough time for the worst to be over. Then, sometimes, seemingly out of nowhere, the violent storm starts again. We have seen this cycle occur many times in the past. First we see indications, we prepare and then, just as the markets seem to be headed back up, we see a second break down. This is usually due to additional information being exposed or the result of investors re-evaluating risk.
As the chart below shows (contrasting 1998 to today), a similar cycle was seen during the 1998 Long Term Capital Management fiasco. As the run-up in the market began to consolidate, the news of LTCM hit the financial markets. The initial downward move was fierce. Then, anxious investors, feeling more secure by the apparent containment of the event, looked to get in on a bounce opportunity and pushed the markets up for a few weeks.
Then, the second leg of the correction ensued, dropping out another 5% or so. While the past is no indication of the future, we should look and learn from some of the similarities and differences. The current environment is one that has fear, apprehension and uncertainty tied up a liquidity crunch. All of which wreak havoc on investments.
Be careful not to get your leg caught in a non-confirming bounce. Sometimes, a patient investor is a profitable investor. The fact is that we will not know whether we are in the EYE or if we just received a glancing blow. Prudence prevails.
Update - Zumiez Hits HOT 100
August 20, 2007
On July 24th, we initially reviewed Zumiez (ZUMZ) with a post entitled Zoom Zoom Zumiez. Concurrently we started to add a first round of investments for our client portfolios. The price at the time was approaching $38.50.
Recently, CNN.com reported that Bon-Ton is tops in growth in the Stores Magazine’s list of ‘Hot 100′ firms. This list ranks stores with fastest-growing annual sales. Also included towards the top ranking is GameStop (GME), Zumiez (ZUMZ) and CitiTrends. Meanwhile, Wal-Mart (WMT) is down at number 78.
According to the article, within the top 10 also includes Zumiez (Charts) at number 4! This is a huge move over the past 12 months. Zumiez is an online and mall-based seller of clothing and accessories for active sports like snowboarding, skateboarding and surfing. All the HOT products…..
Since then, there have been several interesting announcements from the company and the sector. First, Zumiez announced same store sales that beat expectation by 40%. Coming in at a hot 9% growth rate as compared to last report was enough to push the stock higher, for a few days. Then, the retail sector reported that sales had slowed in many sectors. This had a cooling effect on many retail stocks.
The noted strength in this name during the recent market downturn has to convey increasing support and awareness for the underlying brand that Zumiez sells. The sector has a broad range of companies, some of which will do well in this current market and economic environment and others that will not. Furthermore, there are a select few that will be more protected from market risk (although not removed from it). These are the companies that sell to the younger group that will continue to buy up the “hot” items. This is where we want to invest.
Coming in a few days, (August 22) Zumiez is planning to release quarterly earnings. The latest run up and then almost immediate pullbacks indicates that we are seeing short-covering (as of July 17 - 15.7 million shares held short which is 27% of float) into this announcement. The company only has 17.47 million shares in float and a daily volume that is approaching 1,248,190. This is a sharp increase from the 3-month average of 660,000 shares.With 88% institutional ownership and Profit Margin (ttm) of 6.69%, along with operating Margin (ttm) of 11.33%, the earnings will certainly show us if this is a short term aberration or if this company and their management actualy understands their market segment. Up until now, they have done a stellar job honing in on the trends and creating the environment within their stores that helps to move products.
The continuing concern is the Forward P/E nearing 32.6. This is high as compared to the market and the retail sector. As we wrote in the initial review and buy recommendations, the P/E along with a hot PEG ratio has us wondering if this is a growth company ion the verge of a major breakthrough or a company that is overvalued.
This next earnings announcement will show us a much better view. With that said, during the recent market meltdown, we have been recommending and buying this name aggressively.
Analysts are looking for quarterly earnings with a range of $.08-.09 and annual of $.95-1.01. Management has surprised in the past, though the surprises are not consistent. All of this is the obvious reason that investors have not committed to shares. Until we see otherwise, we are finding good reason to build positions, especially when shares are below $40. This may be the last time investors have this option as a good earnings report will solidify the range and should push the shares above $46.
Disclosure: Clients of Horowitz & Company hold LONG positions of ZUMZ as of this post.
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TDI Podcast 23: Investment BootCamp
August 19, 2007
Portfolio Strategy and Specifics during market assault. Make sure that your portfolio is set for any downturn and also the eventual upturn. We look at Preferred stocks yielding over 7 percent. Many of these have an after tax equivalent yield of 8.5 percent.
A new segment: Mutual Fund Grab-and-Stab. Andrew discusses what is working now and what is not. Specific funds and sectors are reviewed. Watch out for hidden traps with some funds. Focus on the Market Neutral Fund Sector.
Morningstar Market Neutral Fund Ranking
TFS Market Neutral is a concern and on our “watch list”, while Gateway Fund continues to perform.
We start with a look back at how the specific recommendation of host Andrew Horowitz did throughout this market slide and then give SPECIFIC advice on how to manage the risk of the market. This is about the credit and financial markets, not the markets in general.
Markets are expelling a poison right now. What we should do now. We also question the idea of who is to be believed in the blog/newsworld and not to mention TV, radio and podcasts.
JAM PACKED with advice, help and even a slew of terms are explained.
Stocks Discussed : AAPL, CROX, NOK, ZUMZ, BSC, TOL, KBH, SCHW, LEH, AMTD, SNDK, ZEUS, STLD, SFLY.
Preferred Stocks Discussed: RBS-H, IND, BAC-D.
Have a question? Write to askandrew@thedisciplinedinvestor.com of you can ask questions on our Voicemail system.
Kindly subscribe and go to iTunes or your favorite podcast directory and post a review of the show - This is much appreciated!
Book PreOrders are being accepted at the website…Coming to bookstores September 2007. All pre-orders will be signed by ME and get more goodies.
Can financial bloggers collect unemployment benefits?
August 15, 2007
“I rant and therefore I am”… Andrew Horowitz
Of Mice and Anal-ists
It is awfully irritating to read and listen to the post game shows. FELLAS: we already know that the market tanked! What we need is prediction and pre-market assessments! Unfortunately, it seems that the art of forward thinking is all but dead. This struck me hard as I listened to one of my favorite podcasts yesterday and heard strategist David Goertz from HighMark Capital give his best advice for this market. He went on to give two examples of stocks to own now; Intel and EMC.
Does he think we are idiots? EMC, the stock that spun off one of the hottest IPOs that day. EMC, who would benefit from the 90% ownership of VMWare that opened at $50 from an IPO pricing of $29? Fortunately, he did go on to predict that it would be light during the day and dark at night…
Just a few weeks ago, anal-ists and rye-ters were all singing the praises of this market. They were chirping a lovely tune about the immense amount of liquidity and opportunities ahead of us. Little was said about the growing chinks in the armor that seemed as apparent as the “pink-on-cramer.”
Now, the “experts” on sites like bloggingstocks.com are busy telling us how the market may move lower and it seems that bullish commentary is hush. Thanks! These are the same amateurs that make the same mistakes time and time again only to find themselves out in the cold with no jackets during the winter months.
To be honest, I really wonder if many of the folks discussing the markets are simply out-of-work real estate moguls, now turned investment advisors. Whatever they are, I think that if THE Donald were here, he would surely say…YOUR FIRED!
The Numbers Don’t Lie…
This time around (which by the way is no different than any other time, even though they always say: “it is different this time…”) we are seeing a spike in the number of financially oriented websites along with a slew of bloggers who are benefiting no one. Their hyperbole and hysteria surrounding names like Baidu (BIDU), Apple (AAPL) and Croc’s (CROX) is enough to make anyone feel sorry for their misguided optimism. These are not bad companies; we are simply seeing bad analysis of these companies.
I recall a time that we saw an amazing increase in the number of Series 7 registrations in 1987, Real Estate Agents in 2005 and the record breaking number of CFP applications in 1994. What these have in common is the simple fact that people want in on the action. Greed and Fear, the two most talked about words these days are always at work in the financial arena.
ARMs For The Poor
Now, the record number of financial blogs, podcasts, wiki’s and television shows along with the countless number of money related sites should have been an enormous warning flag. When we allow ourselves to believe the talk of the time and buy into what we know to be counter-intuitive (right, so you believed that 100% financing and interest-only ARM loans posed no long-term problem) a light bulb should go off (actually, 50,000 volts should pass though our body) to remind us that something is not quite kosher.
In the end, these types of market corrections help to wash out the excess. That excess pertains to stock prices as well as the hot-air blogging fad. Watch and wait… I hope at least, for their sake, they will be able to collect unemployment benefits.
* Note: Discussion is somewhat limited to those “part-time” bloggers who write for THEIR own benefit. You know who you are….
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