Wednesday, October 28, 2009

Closing Panera Bread

Closed my (small) position in Panera Bread (PNRA) today.

This is an interesting story. Company is growing fast, has no debt (amazing for a restaurant chain) and has a great management. Company had a great quarter, raising some prices when people moved from full service restaurants to discounters.

Why am I selling it then? The answer is simple: I'm selling stock, not a company. This stock can move 20% up or down on no news at all. There are some reasons for that: sometimes institutional investors buy or sell big positions. Big short interest (currently about 13%) adds to volatility.

In short, this stock is better as a trade than as investment. I might enter position again at lower level.

Full disclosure: at the time of publication author did not have any positions in PNRA. Positions can change any time.

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Wednesday, October 21, 2009

Google: No Pin Action

Google (GOOG) reported good quarter last week. Main number: year-to-year revenue and earnings growth. Reaction of financial press: advertising is coming back, it's the end of recession.

Not so fast, guys. First of all, Google is the only advertising company so far showing improvement. Yahoo! (YHOO) reported revenue drop. I'm not sure traditional media is going to report any improvement either.

I think the main driver for Google is the shift of advertising from traditional media to the Internet. Yahoo! missed this move, company is too busy with reorganizations. We'll see traditional media reports soon, but I don't see any pin action. Google is swallowing advertising market, that's the real picture.

Full disclosure: at the time of publication author had a long position in GOOG and no positions in YHOO. Positions can change any time.

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Sunday, October 18, 2009

Things are Looking Toppish

I'm afraid to blow it again. Couple of times I called the end of this rally or at least a pullback and was dead wrong both times. But.

We see different reaction to the news now. Last quarter earnings were met with "buy, buy, buy" reaction, whether earnings were good or, more often, not so good. Now, earnings are coming better, I can actually see real growth in some reports, but every company gets killed. With exception of Google (GOOG), which reported outstanding quarter. I'm going to write more about Google later. But the fact that very good earnings from Intel (INTC), IBM (IBM) and Goldman Sachs (GS) were met with sell-off is telling.

Another point: sentiment is becoming more bullish now. If I understood Todd Harrison's last missive right, he's not bearish anymore. That's telling. Would be even better to see Doug Kass bullish, but I don't think so.

I thought that rally in July-September was a buying panic. Still think so. Looks like panic is over, window dressing finished in September. We are up for a pullback. How big is it going to be? Nobody knows.

Short term, I'm tempted to play earnings. I know it's a sucker's game, but temptation is too big. Medium term, I'm waiting for a 10% pullback. Because I'm bullish long term (defined as 18 months in my case), I'm buying such pullback and buying even more if pullback goes deeper. And of course, I want to take some profits.

Right now, I want to buy Intel. Jim Cramer is absolutely right: any company running 63% margin is a buy. Apple (AAPL) is tempting for a trade.

Full disclosure: at the time of publication author had a long position in GOOG and no positions in other stocks mentioned. Positions can change any time.

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Monday, October 12, 2009

Natural Gas from Shale

Suddenly a burst of articles about old news. Yes, companies developed technology of horizontal drilling which allows to extract gas (and some oil) from shale. Those who follows oil and natgas industries know about it since last year.

Is it game changing? Somewhat. This technology probably doubled world natural gas reserves in less than a year. It added a little to the oil reserves. As a new technology, it has a lot of room for improvement, so I expect gas and oil reserves to increase even more.

Is there a trade or investment here? Not much. Obviously, natural gas prices in US aren't going to grow much anymore, supply is way too big. Additional supply of oil is too small to make a change. Situation in Europe is different. As far as I know, Poland and Estonia have huge shale fields. In Estonia it was even feasible to use shale rock as a fuel. With Europe looking to diversify gas sources from Russia, it might be a very bad news for Gazprom. Don't even think about investing in it.

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Monday, October 5, 2009

Back From Vacation

I've spent last two weeks recuperating on Antilles. Now I'm back in full force. Can anything kill this buying panic? There is support for it from sentiment reading: people are still mostly bearish. Technicals are telling me nothing, with a small exception: we are about to see downtrend line running from November 2007 cross uptrend line started in March. Fundamentals are bad and not getting better.

Earning season is upon us, as well. Let's see. As Todd Harrison says, reaction to the news is more important than news itself.

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