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Friday, May 21, 2010

LRCX: Lam Research Buy Alert

Lam Research Corp. (LRCX Charts) is one of the best run companies in the United States. In my newsletter, I refer to Lam as "Kirk's ATM Machine" due to how well I've done over the past  twelve years using its volatility to make a lot of money as described in this Los Altos Town Crier Newspaper Article about my success with LRCX.
Lam makes machines that etch patterns into semiconductor wafers. As semiconductor chips got more complex, more layers of metal are required for interconnecting the billions of transistors. Each layer requires two etch steps, one to etch the pattern of “wires” and another to etch holes to connect the just etched interconnect layer with the previous layer of circuitry. To me, it was clear when I first added LRCX to my newsletter portfolio back in 1998  (at $3.33 per split adjusted share) that one of the largest growth areas in semiconductor capital equipment tools would be tools to etch all these layers as chip complexity grew.
In April, Lam announced it earned $120.3M (94¢ per share) on revenue of $632.8M. 19¢ of every revenue dollar was profit!  Their shipments for the March 2010 quarter reached an all-time high reflecting market share gains in both their etch and clean businesses.
Fortunately, I took profits in my newsletter explore portfolio during that April; 100 shares at $38.31 and 200 more shares at $42.50 as LRCX surged into this great news. Lam had grown to over 10% of my explore portfolio so I sold 300 shares or (300/1,150x100%) 26% of my position.  I also sold some in my personal account. 
LRCX did not fall enough on the March 6 "panic day" to hit my hit my auto buy level target so I made note of its intraday low for future reference. Yesterday the market fell to test its March 6 low with the S&P500 dropping below its 200 day-moving-average or DMA. Lam also fell but did not go below its March 6 intraday low and found support just above its 200 DMA at $35.69. I saw this as a positive sign so I bought back 100 shares at $37.00 Thursday morning (May 20, 2010.)
Not only did LAM find support just above its 200-DMA but this price is also right at the dashed green support line I drew on the chart last month and show on a new and expanded chart below.
 click image for full size graph courtesy of stockcharts.com
It is IMPOSSIBLE to use fundamentals (shown below) to call tops and bottoms for LRCX or most other stocks in the semiconductor capital equipment sector such as AMAT, NVLS and UTEK.  These stocks usually peak when they look very undervalued with PEGs often well below 1.0 while they bottom when fundamentals look terrible and they are losing money.   With that said, if the economy continues to grow as ECRI predicts, then buying now should be rewarding in the future, especially if you sell the shares before the next market top.
Fundamentals with LRCX at $37.00 :
click table for full size
Debt/share
Net Cash / share
Dividend
$0.20
$5.16
$0.00
Cash/Share
Debt $M
M Shares
$5.36
25.83
126.53
The stock market came a long way very quickly but nowhere near as fast as we saw in 1999. I have learned over the years to take profits on the way up as you NEVER know when a final top will come and often if you take profits at the right time, as I get better and better at predicting, you make extra money buying back shares when they correct.
My guess is LRCX could see $60s to $90s if the bull market lasts another year and the small investors return to the market. The only complaint I have for Lam is they do not pay a dividend. The way to “extract value” over time with Lam is to trade the volatility to take cash out and pay our own dividends or buy when very cheap and ride out the volatility. I do a bit of both.
Disclosure: After gaining 84% for my portfolio in 2009, Lam is my top holding now at 8.7% of my newsletter explore portfolio after taking profits when it was over 10% and buying back shares today. As of 5/20/10 My newsletter "Explore" portfolio hold 950 shares "on house money" plus $124,678 in cash gains generated from buying and selling LRCX since buying my first 2,000 shares  shares at $10.00 (or 6,000 shares at a split adjusted $3.33) on 9/30/98 .  I have had similar results with my personal portfolio.

Before you consider buying, be prepared for volatility.  As charts of LRCX here show,   LRCX was under $10 in 2002 and just over $60 in 2007.  There is great opportunity to make a lot of money with Lam, but you can lose a lot if you panic and sell at the wrong times too.
More Information:
Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP a tiny 8.6% vs. NASDAQ UP a tiny 3.5% (All through 12/31/09

In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%

Tuesday, May 18, 2010

Richard Russell Sell Signal


Richard Russell, octogenarian editor of the Dow Theory Letters, says "sell everything liquid."
May 18, 2010:  Do your friends a favor. Tell them to "batten down the hatches" because there's a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don't need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won't recognize the country. They'll retort, "How the dickens does Russell know -- who told him?" Tell them the stock market told him.
and
Just as for years I asked, cajoled, insisted, threatened, demanded, that my subscribers buy gold, I am now insisting, demanding, begging my subscribers to get OUT of stocks (including C and BYD, but not including golds) and get into cash or gold (bullion if possible). If the two Averages violate their May 7 lows, I see a major crash as the outcome. Pul - leeze, get out of stocks now, and I don't give a damn whether you have paper losses or paper profits!
Should we listen?  Here is what he wrote when the market bottomed and the new bull market began:
March 9, 2009: I don't see anything in my work that hints of an important bottom. .... I'm looking at the market now. The Dow is at 6512. At this price, the Dow has lost more than half of all its gains since its lowest point in the Great Depression, which was 41.22 recorded in July 1932.

The stock market doesn't live in a vacuum. This huge decline in less than two years is telling us (me) something. It's a warning. I think it's a warning of very hard times to come, maybe as difficult as those times we saw during the Great Depression.
and
I believe this bear market will go to the extremes. At the end, the market and the economy will be worse than even the bears envision.
To his credit, he said gold is "promising" a year ago at $933.29 but the market is up more than gold.
 
click image to see full size

The chart shows gold is up 30% while the DJIA is up 60% since Russell said March 2009.
 & 
Charts for

Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP a tiny 8.6% vs. NASDAQ UP a tiny 3.5% (All through 12/31/09
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%
As of  now, 5/14/10, the explore portfolio was up 4.5% YTD vs. DJIA up 1.8%
Subscribe NOW and get the May 2010 Issue for FREE! ! 

Tuesday, May 11, 2010

DOW Gold Ratio with Gold at All Time High

Despite gold at an all time high over $1,230 per ounce, the current Dow to Gold Ratio is closer to its resistance level than its support level shown on my graph below.
At 8.72, the Dow Jones Industrial Average measured in how many ounces of gold it takes to buy the 30 stock DOW is up 24% from its  March 6th low of 7.03. Despite that impressive gain, the DOW-Gold ratio is currently 80.5% below its 1999 peak of 44.77.
Here is a chart showing the current Dow to Gold Ratio, the ratio of the price of the Dow Jones Industrial Average to the price of gold. When measured in ounces of Gold, the DOW has been in a secular bear market since peaking in late 1999 at nearly 45.

chart courtesy of stockcharts.com (Click for full size image)

The markets, measured by the S&P500 (S&P500 Charts) and DIJA, may have recovered to new highs in 2007, but the DOW:Gold ratio told a different, truer story of just how unhealthy the US economy was.
  • Back in 1999, it took nearly 45 ounces of gold to buy the DJIA.
  • On Friday March 6 of 2009 the DOW-Gold ratio hit a low of 7.03
  • As of today (May 11, 2010) it only takes 8.72 ounces of gold to buy the DOW
  • Gold quote and charts
The scary part is the DJIA-to-Gold ratio got down near 1 in the early 1980s and was just under 0.2 in the early 1800s.

This 200 Year Dow/Gold Chart shows the DOW/Gold ratio from 1800 through August 2008.
chart courtesy of www.sharelynx.com (Click for full size image)
One way to get inflation protection without buying gold is with Series I-Bonds.   Currently new iBonds pay 1.74% which combines their 0.2% base rate plus 1.54% for annualized inflation.   For details, see:

CDs have been a "safe haven" for those wishing to preserve assets and get a small inflation adjusted return. See "Very Best CD Rates with FDIC" for a list of the best rates and terms.
    Disclosure: I own a very small amount of gold hidden in the house for bribes if we see Armageddon. For income plus inflation protection, I own and recommend in my newsletters TIPS, TIPS mutual funds and Series iBonds.

    For more information, see:
    Question: Which way do you think the DOW-Gold ratio is headed?

    Please post your answer here



    Saturday, May 08, 2010

    Equity, Bond & Money Market Fund Flows Report

    Weekly 05/05/2010
    Equity Fund Inflows $2.4 Bil
    Taxable Bond Fund Inflows $2 Bil
    xETFs - Equity Fund Inflows $385 Mil; Taxable Bond Fund Inflows $2 Bil

    ExETFs—For the week ended 5/5/2010 All Equity funds report net inflows totaling $0.385 billion as Domestic Equity funds report net inflows of $0.302 billion and Non-Domestic Equity funds report net inflows of $0.083 billion... The rate of inflows to Non-Domestic funds is $1.430 billion/week, as measured over four weeks... ExETFs—Emerging Markets Debt funds report net inflows of $0.078 billion… Net inflows are reported for All Taxable Bond funds ($1.977 billion), bringing the rate of inflows of the $2.319-trillion sector to $7.858 billion/week... Net inflows are reported to Corporate Investment Grade funds totaling $0.151 billion... Net inflows are reported to Flexible Funds totaling $1.092 billion... International & Global Debt funds have reported inflows (+$0.941 billion) for the fifty-ninth consecutive week... Money Market funds report net outflows totaling $15.999 billion... ExETFs—Municipal Bond funds report net inflows of $0.077 billion…

    Table 1 AMG Fund Flows for Full Year - $B
    --------------- Equity Tax Bond MM Fund
    Fund Flows for 2003 40.8 40.7 NC
    Fund Flows for 2004 95.0 11.3 (64.3)
    Fund Flows for 2005 71.9 9.3 89.0
    Fund Flows for 2006 52.5 29.9 308.3
    Fund Flows for 2007 111.3 68.8 569.5
    Fund Flows for 2008 3.5 (3.3) 608.0
    Fund Flows for 2009 6.0 172.0 (280.2)
    Fund Flows for 2010 1.9 68.6 (378.8)

    NC = Data Not Compiled

    Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP a tiny 8.6% vs. NASDAQ UP a tiny 3.5% (All through 12/31/09

    In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%
    Subscribe NOW and get the May 2010 Issue for FREE! !

    As of 5/7/10, the explore portfolio was up 1.0% YTD (DOW down 0.5% )



    May 8 2008 Started WeekEnded WeekChange% ChangeYTD %
    DJIA11008.6110380.43-628.18-5.7-0.5
    Nasdaq2461.192265.64-195.55-7.9-0.2
    S&P 5001186.691110.88-75.81-6.4-0.4





    More info:
    The Lipper FMI Fund Flows Database
    According to amgdata.com: The Lipper FMI Fund Flow Database is the most accurate, timely, and comprehensive proxy for investor sentiment. Weekly and monthly investor flows are aggregated in 19000 open-end mutual fund share classes with an $11 Trillion asset base that is sectored in datasets by investment objective as defined in the prospectus.
    Affiliated Managers Group Inc.
    (AMG) is an asset management company with equity investments in a diverse group of boutique investment management firms.
    Equity, Bond and Money Market Fund Flows as reported by AMG/Lipper Weekly Fund Flows Data at http://www.amgdata.com

    xx

    Friday, May 07, 2010

    May 6 Was Biggest DOW Decline in History

    For the first time ever the Dow Jones Industrial Average (DJIA charts) fell by over 1,000 points during the trading day. From its intraday peak of 10,879.76 to its intraday low of 9,869.62 the DOW moved 1,010.14 points or 9.28%!

    The biggest DOW percent decline in history occurred on Black Monday (October 19, 1987) with the DOW fell 508 points to 1738.74 for a decline of 22.61%!

     DOW YTD Chart
     click charts for full size images
     
    DJIA Intraday Chart

    Dow Jones Industrial Average
    May 6 Closing Value: 10,520.32
    Change: Down 347.80 points or 3.20%
    Previous Close: 10,868.12
    May 6 Opening Value: 10,862.22
    May 6 Range: 9,869.62 - 10,879.76 or  1,010.14 points
    52 week Range: 8,057.57 - 11,309.00

    There is a lot of finger pointing in the news about who to blame for this decline but a picture of the DOW year-to-date shows the market found a bid at its February closing low.  


    Biggest Dow Point Drops in History

    Below are the biggest closing point drops in the history of the Dow Jones Industrial Average.
    DateClosePoints /   %  
    9/29/200810365.45-777.68 / -6.98%
    10/15/20088577.91-733.08 / -7.87%
    9/17/20018920.70-684.81 / -7.13%
    12/1/20088149.09-679.95 / -7.70%
    10/9/20088579.19-678.91 / -7.33%

    Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP a tiny 8.6% vs. NASDAQ UP a tiny 3.5% (All through 12/31/09

    In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8% 
    Subscribe NOW and get the May 2010 Issue for FREE! !


    Monday, May 03, 2010

    2010 I-Bond Rates: May 1 through Oct 31, 2010

    The Bureau of the Public Debt today announced an earnings rate of 1.74% for Series I Savings Bonds issued from May 3, 2010 through October 31, 2010.

    This new 1.74% earnings rate for I bonds will apply for their first six months after issue. The earnings rate combines a 0.20% fixed rate of return with the 1.54% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The CPI-U increased from 215.969 to 217.631 from September 2009 through March 2010, a six-month increase of 0.77%. When the inflation rate is less than zero, a bond's earnings rate is less than its fixed rate (but the earnings rate is never less than zero).
    The fixed rate applies for the 30-year life of I bonds purchased during this six-month period.
    Earnings rates for I bonds are set each May 1 and November 1. Interest accrues monthly and compounds semiannually. Bonds held less than five years are subject to a three-month interest penalty. I Bonds have an interest-bearing life of 30 years.

    I Bond Earnings Rate 1.76%, Fixed Rate 0.20%

    Minimum purchase:
    • $50 for a $50 I Bond when purchasing paper bond certificates
    • $25 for a $25 I bond when purchased electronically via TreasuryDirect
    Maximum purchase(per calendar year):
    • $5,000 in TreasuryDirect and $5,000 in paper bonds
    • $10,000 total per social security number
    Denominations:
    • Paper bonds: $50, $75, $100, $200, $500, $1,000, and $5,000
    • Electronic bonds via TreasuryDirect: purchase to the penny for $25 or more
    For more information, see:

    For older ibonds and what they will pay, see:


    Disclaimer: I own Series I Bonds in my personal account. Due to the small amount of i-bonds you can buy now, I own far more TIPS and TIPS funds in my personal and newsletter (FREE SAMPLE) portfolios.

    Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP a tiny 8.6% vs. NASDAQ UP a tiny 3.5% (All through 12/31/09

    In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%
    Subscribe NOW and get the May 2010 Issue for FREE! !

    As of 5/3/10, the explore portfolio was up 10.2% YTD (DOW up 6.9% )

    EE Bond Rates

    May 3, 2010 Series EE Bond Rate Announcement
    Today the Bureau of the Public Debt announced Series EE bonds issued from May 3, 2010 through October 2010 will earn 1.40%.
    Series EE bonds issued since May 2005 are earning interest at a fixed rate, depending on the rate set when the bond was issued.
    Series EE bonds issued from May 1997 through April 2005 earn market-based interest rates set at 90% of the average 5-year Treasury securities yields for the preceding six months. The new interest rate for these bonds, effective as the bonds enter semiannual interest periods from May 2010 through November 2010, is 2.16%. Market-based rates are announced effective each May 1 and November 1.
    Series EE bonds issued before May 1997 earn various rates for semiannual earnings periods, depending on dates of issue. See www.treasurydirect.gov for more information.
    For more Savings Bond information, see:

    Sunday, May 02, 2010

    Kitchen Sink Smoothie - Homemade Recipe

    What good is investing in financial assets for the future if you are not around to enjoy the fruits of your sacrifice?  Not only that, but you can save a fortune in health care costs with a healthy diet and exercise.   This recipe below for healthy, homemade "Kitchen Sink Green Smoothie" has a little bit of everything for a refreshing low calorie drink loaded with vitamins A&C, calcium  and iron plus fiber and protein. 

    In our facebook group "Investing for the Long Term" we have a discussion forum called "Healthy Living - Invest in Your Health Too" where we are very fortunate to have noted nutrition expert  Dr. James J. (Jay) Kenney, PhD, RD, FACN answer our questions about health and nutrition.Dr. Jay, an evangelist for personal responsibility for your health, has helped me greatly over the years stay fit and healthy based on good science and sage advice.

    Homemade Kitchen Sink Smoothie
    (a little bit of everything in this green smoothie)

    Yield: 3 1/2 cups (840 ml)
    Ingredients
    • 2 cups (310 g) fresh, ripe pineapple, with core (or a 2-inch-thick slice)
    • 1 stalk celery (7-inch stalk), halved
    • 1 cup (30 g) spinach leaves, gently packed
    • 4 ounces (113 g) low fat vanilla yogurt or vanilla soymilk
    • 2 cups (480 ml) ice cubes
    • sweetener to taste if pineapple is a bit tart (we like Splenda but any will do)
    Steps:
    1. Place all ingredients into the Vitamix container in the order listed and secure lid.
    2. Select Variable 1.
    3. Turn machine on and quickly increase speed to Variable 10, then to High.
    4. Blend for 60 seconds or until desired consistency is reached. Serve immediately.
    Health Classification: Diabetic Friendly, Low Fat, Low Sodium, Low Cholesterol, Heart Healthy, Vegetarian, Vegan

    We like the "Vita-mix Super 5200" blender for its heavy duty motor, solid construction, 7-year warranty and second container for grinding whole grains and beans. Consider getting an extra container to keep in the fridge or have a fresh container while the other is in the dishwasher.

    Nutrition Information:

    Risk Free Trial!
    With the FREE standard shipping and risk FREE Trial explained here, there is no excuse to not start investing in your good health today!

    Saturday, May 01, 2010

    Equity, Bond & Money Market Fund Flows Report

    The weekly mutual fund flows data shows more money is still going into bond funds than equity funds.  Also, GDP growth is clearly aided by people pulling money out of their money market savings accounts.
    Annual data shown in table 1 below.
    Weekly 04/28/2010
    • Equity Fund Inflows $3.8 Bil;
    • Taxable Bond Fund Inflows $4.3 Bil
    • xETFs - Equity Fund Inflows $1.7 Bil; Taxable Bond Fund Inflows $3.2 Bil
    ExETFs—For the week ended 4/28/2010 All Equity funds report net inflows totaling $1.725 billion as Domestic Equity funds report net inflows of $1.398 billion and Non-Domestic Equity funds report net inflows of $0.326 billion...  The rate of inflows to Non-Domestic funds is $1.243 billion/week, as measured over four weeks...  ExETFs—Emerging Markets Debt funds report net inflows of $0.220 billion…  Net inflows are reported for All Taxable Bond funds ($4.336 billion), bringing the rate of inflows of the $2.292-trillion sector to $5.924 billion/week...  Net inflows are reported to Corporate Investment Grade funds totaling $1.159 billion...  Net inflows are reported to Flexible Funds totaling $1.656 billion... International & Global Debt funds have reported inflows (+$1.213 billion) for the fifty-eighth consecutive week...  Money Market funds report net outflows totaling $7.726 billion...  ExETFs—Municipal Bond funds report net inflows of $0.085 billion…            



    Table 1 AMG Fund Flows for Full Year - $B
    --------------- Equity Tax Bond MM Fund
    Fund Flows for 2003 40.8 40.7 NC
    Fund Flows for 2004 95.0 11.3 (64.3)
    Fund Flows for 2005 71.9 9.3 89.0
    Fund Flows for 2006 52.5 29.9 308.3
    Fund Flows for 2007 111.3 68.8 569.5
    Fund Flows for 2008 3.5 (3.3) 608.0
    Fund Flows for 2009 6.0 172.0 (280.2)
    Fund Flows for 2010 (0.5) 66.6 (362.8)

    NC = Data Not Compiled

    Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 159% (a double plus another 59%!!) vs. the S&P500 UP a tiny 8.6% vs. NASDAQ UP a tiny 3.5% (All through 12/31/09

    In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%
    Subscribe NOW and get the May 2010 Issue for FREE! !

    As of 5/1/10, the explore portfolio was up 8.5% YTD (DOW up 5.6% )

    More info:
    The Lipper FMI Fund Flows Database
    According to amgdata.com: The Lipper FMI Fund Flow Database is the most accurate, timely, and comprehensive proxy for investor sentiment. Weekly and monthly investor flows are aggregated in 19000 open-end mutual fund share classes with an $11 Trillion asset base that is sectored in datasets by investment objective as defined in the prospectus.
    Affiliated Managers Group Inc.
    (AMG) is an asset management company with equity investments in a diverse group of boutique investment management firms.
    Equity, Bond and Money Market Fund Flows as reported by AMG/Lipper Weekly Fund Flows Data at http://www.amgdata.com

    IMPRESSIVE Long Term Results


    Since 9/30/98 inception, "Kirk's Newsletter Explore Portfolio" is UP 390%
    vs. the S&P500 UP only 51% vs. NASDAQ UP only 57% (All through 12/31/11)
    (More Info, Testimonials & Portfolio Returns)
    Q1 2012 Update: Up 11.3% YTD as of 3/31/12
    (remember this 2012 performance is with 1/3 in fixed income!)



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