Month end review

I haven't posted in awhile due to lack of time. Things have been incredibly busy lately at work and I haven't had too much free time because of other activities. Since I've been too busy to look for new stocks, I've been sitting on a good amount of cash and that proved to be a good move for this month. Most of the indexes lost their gains or only up marginally. For the year I'm still up, but I need to calculate my performance. Once I get some free time I'm going to use a time-weighted return and I'll hopefully post about this soon.
I did manage to get a copy of the S&P 600 small cap directory, so I will look through that within the next week or so. I've already skimmed through some companies and I know I'm definitely not going to look further into some of the service companies. Some of these companies don't produce anything, they just find the best service for you (tech companies). I don't see the big deal about this, and it just seems like an industry that can change way too dramatically.
Anyway, back to the May month end review.

I ended this month with a bigger than normal gain because of a few things. I have been keeping my expenses in line and I think everyone can do this if they just stick to a plan. Check out NCN's blog as he went from a good amount of debt to savings with thousands of dollars. It didn't even take him that long to reverse things because he had a plan and stuck to it.
Since I didn't work the last few months while I graduated/looked for a job I ended up getting a big tax refund. This is definitely a one-time thing and I think next year my taxes are going to get a little more hectic.

My end net worth is: $48,637

This turns out to be 6.76% more than last month. The year started with a slower growth rate and now things have started to pick up a bit. This also means that next month I should hit a nice figure: $50,000
It's probably not a lot of money for some people, but to me that is a very nice number!

What is that?

I saw this incredibly odd color on my screen today....it was green.

The major indices had a relatively strong day (Naz and S&P) were up over 1%.
I remembered one thing I learned a few weeks ago and I wanted to share it.
Have you ever had some stocks that just open sharply down and wonder why? I see many people post messages saying it's the specialists ("they are crooks", etc.), but I wanted to explain one particular reason. The stock could go down in after-hours due to some bad news, but there's anothe reason that would be hard for the individual investor to spot.
Let's say there is no news, barely any after hours trading, and yet the stock still opens down 2.5%
What happened?
Here is one reason: suppose a major investor (or even the CEO) wants to sell a big chunk of their holdings. If they try to sell 1 million shares on a stock with an average volume of 300,000- well this is going to take days/weeks for them to get out of the position. Plus, all their selling can drive the price down which is something they do not want. One way to go around this is to call up some institutions. The CEO goes to Goldman Sachs (or whoever) and says "the price right now is $20, I need to sell my 1 million shares and I could go as low as $19.50"
Goldman then starts calling up other big places to drum up some buying interest. Their goal is to find people who are willing to buy the 1 million shares (either one party, or a group of parties) and for doing this they get the discount on the price. So these other big places will buy the shares for 19.50. Now here's the part the individual investor doesn't see: the movement of shares.
This transaction won't show up on the time and sales because of the way it went through. Then most of the time the price will open lower (around 19.50, not necessarily 19.50) for what seems like no apparent reason.

Another down day

Well the markets were choppy and ended the day in the red. I wanted to say a few comments about the market and the blow-ups happening in some of the emerging markets, but a piece in Barron's caught my eye.

I was scanning through the new issue and there's a table with the first quarter winners in terms of institutional and retail money managers. Some of these returns were fantastic. They had columns for quarterly returns, 1 year annualized, and 3 year annualized returns. I was more impressed with the 3 year column. Here are some of the big ones (3 year): Insight Small Cap Growth (45%), NorthPointe Small Cap Growth (41.47%), Globalvest Latin America (45.4%), Strategic Corp Long Only (60%), and Ironwood Small Value (50.6%).
Now, when I have time, I want to check into these funds to find any available information. Sometimes funds put the core part of their strategy on their website, and it will be interesting to see what these funds say.
Small cap is the major theme.

Expenses and a few blow-ups

I somehow have managed to spend over $600 this month on concert tickets. Now I did buy tickets for friends, so I haven't received that money yet, but my expenses for this month are going to be a little messed up. I might sell a few on eBay depending on my schedule, but as of right now I'm going to use them all. I have to watch my spending for the rest of the month in order to meet my savings goal. I did receive my federal tax refund, so this will help for this month.

The indices have gone through a rough couple of days. The S&P lost the majority of its gains (it's up about 1.08% YTD) while the Naz is down 1.13% for the year.
I've gone through a few blow-ups in my portfolio that has sent my portfolio down. What was on track to being a great year (in terms of my returns vs the S&P) is now just an okay year. I'm still beating the index, but I've lost a good amount of gains. I had two stocks decline over 10% in a day, and one down 4% or so. It hasn't been too fun and I might sell one due to a change in fundamentals. This means I'll take a loss and I haven't done that in a long time. This definitely doesn't change my outlook though. If I think the stock is bad, then I'll sell it and take the loss!

I'm going to take it easy the next week and then after that I will start looking for more investments. Some stocks should appear to look cheap because they have been dragged down by the markets. I'm going to actively look for more foreign stocks, no tech stocks, stocks with stable dividends, and small/mid-cap stocks. I will also look into the consumer sector.
Overall, I think a blend of these combinations will be best for me. I'll have some stability, generate some income, be hedged against the U.S., and hopefully find some alpha producing opportunities in lesser known names.

I also added the Investing Idea blog.

The Tech Sector

I read a few articles over the weekend and that got me thinking about the tech sector. What's going to fuel the growth in this sector (consumer tech)? This growth is fueled on innovation, but it seems that we're being saturdated by this innovation. The other factor is that one of the characteristics of this sector is that prices almost always go down. Other sectors can kind of go along with the economy, but with this sector the price today compared to the price 6 months from now will be different.

Over the past few decades we have come up with some nice products.
Computers: the market is getting saturated (look at Dell), you can buy a laptop for under $400, and while some people say that the growth will be through replacements I'm not too sure. I'm using a one year old laptop right now. The laptops out today will blow mine away, but do I need this? Only a small percentage of us use the maximum power of our laptops. We don't run heavily intensive programs! Yes, the new laptops can hold more (but I still have 13 gigs on my hard drive) and programs will load faster (a few seconds...).

LCDs: these are catching on huge and the prices are dropping. Many suppliers are going the route of selling as much as they can at lower profit margins. As the prices continue to drop, some of these producers will get squeezed.

Music playing devices: the iPod has to be one of the fastests products to penetrate mainstream America. It seems like every other person has an iPod (also, some articles note that they have an 80%+ market share). What will they come up with next?
Here's what I want to see: Sirius + iPod. Sirius is coming out (or already have) a portable radio. Wouldn't it be cool if they could shrink it down to almost the size of an iPod and have a built in flash drive to carry music? Then you could have commercial free radio + music.

One off the subject note, but still semi-related. I just read that the 2007 Infinity G35 will come with a 9.5 gig hard drive to rip music. I really like the G35 and catch myself looking up how much the potential monthly payment will be (around $500/month).

A Sea of Red

All the major indices were down over 1% or more for the day. It was just a wave of selling after selling. Some of the decline has to do with surging commodities as gold continued to soar (it's now $725 an ounce!) as well as copper. I read a joke somewhere (hey who knows, it might be true) that the pennies made before 1980 are now worth 2 cents!

Oil also reached $73 a barrel, but I've noticed a drop in gas prices around here. It will be interesting to see the sales figures for hybrid cars. I read that Lexus came out with a hybrid suv (I think) and it's only about $2000 more than the normal version. This seems like a good deal because you will save at least a few hundred dollars per year on gas and you might get some other breaks depending on where you live. Some of the perks I've seen before is that you can drive in car pool lanes even if it's one person (saves time, time = money) and some cities were offering free parking in certain lots. I'm still waiting for that Honda fuel-cel car. I think a few years ago they built the first one and gave it to a family to test, but that's the last I've heard of it.

My portfolio actually finished up today (and beat the S&P by 1.5%) all because of Jones Soda. It finished the day up 10.68% on really heavy volume- around four times the 3 month average. Generally when a stock shows that much gains on that heavy a volume, this is a great sign. If the volume doesn't pick up tomorrow, I would expect a drop though like CUP did today (down 6%).

Another Increase

Today the Fed raised interest rates for the 16th straight time to 5%. The markets acted with some volatility, but did not drop too much. The Nasdaq did drop 0.75%, which is a big amount, but the S&P and Dow held steady.
I think I might have found a few stocks worth looking into, which is a good thing so I can put some cash to work. Lately I've been seeing some of my other picks go up and I'm kicking myself for not investing. I highlighted a risky company awhile back, CUP, when it was around $3. It went down and I almost talked myself into 1000 shares at around $2.20. I didn't end up buying, and in a relatively short amount of time it has gone up over 100%. Today it finished up 17% and it's up another 3% in after-hours. It's getting somewhat close to their project's NPV (which doesn't kick in till 2009-2010), so there's definitely some downside risk.

In other news, I made a relatively small eBay sale but profit is profit. I have roughly three more items (possibly a fourth) so this will bring in some extra cash.
As of right now things are going along fairly slowly. I'm saving a good amount, my portfolio is up a decent amount, and I've had some other smaller sources of income. It's been a long stretch to reach $50,000 (a nice milestone), but I think I will get there within a few months (although I might have been there if I bought some CUP!)

Jones Soda transcript

I got a chance to read over the transcript for JSDA's last conference call and it was good. Of course it highlighted the areas in the press release (27% increase in Q1 revenue, 310 basis points improvement in gross margin), and included a q&a section.
The overall theme though was to only put out limited information. They kept their answers short and would not expand in certain topics. For instance they used to break down their sales figures into a little more detail, but not going any further. I'm assuming the reason for this might be because of their Target relationship. They are in discussions regarding the extension of their agreement and it appears that the lack of sales data might have something to do with the discussions.

The highlight was Jones Organics (still makes up a small percentage) and well as the Valentines Day success. They also really improved their balance sheet. The cash position is healthy now (last quarter was a little low). I think they also mentioned a southwest production plant. This will increase costs in the short run, but decrease costs (like transportation) in the long run.

There wasn't really anything exciting about the q&a session. Capex was $21,000 while cash flow from operations was $1,069,000. This will get you a free cash flow of $1,048,000.
The one semi-surprising note was that Jeff Canter (who follows the company) actually had only positive things to say. He seems to rely heavily on cash flow (free cash flow, cash flow from ops), so he really liked this quarter. Here's a quote from him: "I think your free cash flow generated in the quarter was greater than your cumulative free cash flow from 2001 through 2005, and hopefully that's a trend that will continue." He seemed impressed with the results.
Overall it was a good conference call.

Jones Soda earnings

I'm actually drinking a Jones while typing this (watermelon flavor). Today was incredibly busy at work so I was unable to listen to the conference call. If I get a chance tomorrow I'll print out the transcript and read through it (so more comments may come in next weeks post).

It's funny how three different headlines can be talking about the same thing. If you look up on JSDA on Yahoo Finance the first three reports are titled: Jones Soda Announces Record 2006 1Q Financial Results, Jones Soda Profit Falls, and Jones Soda Breaks Even in Q1.

I didn't get a chance to read through anything, so these are just some preliminary thoughts. While I was hoping they would be a bit more profitable, I was happy with their 28% increase in revenue. The other positive figure was their increase in gross margins, which improved year over year from 32.5% to 35.6%.
Some of the headlines mentioned that the Valentines Day package was a success. I actually hope they put out that soda more often because it was really good.
On a side note: I wish I was able to find more flavors in my area. The Targets around me generally only carry around 3 different flavors.
I definitely want to read the conference call, so that will have to wait until tomorrow.

April month end review

April was a pretty decent month for me. I didn't have any unexpected large expenses and I had gains in my brokerage account. I managed to save a good amount of my paycheck and I see the same thing happening for May.
My expenses were in line with my expectations. I didn't want to get into a pattern of wildly fluctuating expenses and I've managed to keep expenses within a decent range. My savings rate hit my goal and I expect the same thing for May. I also expect somewhere between $200-400 dollars in extra income from a few sales I've made.

April Net Worth: $45,554

This amounts to a 4.7% growth rate from the previous month.