Van Meerten's picks

Xide pick it up before earnings release

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It came up on my stock screener as a possible. I then look for a reason to confirm my screener. I check the BarChart technical indicators and every single one of them says buy. Then I check the stats - 21 news highs in the last 65 trading sessions and it's only 1.38% off it's high. I look at the story and it's into batteries and other forms of electrical storage. Signed a contract with Toyota who might use them as a major supplier if they begin producing electric cars and car batteries if they don't. Lastly I look at some other sites to see what other non-pros like me think - surprise 101 say it will overperform and only 5 are negative against it. Check news and see very positive press.

When my screener says buy, it's got good current TA indicators, a good story, large positive following and recent positive press; this one would be hard not to jump on.

I really like this one. It's a buy at 17, and I'd bail at 14.50

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Everything you need to know in 100 words or less

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One of the requirements of these blogs is that we are supposed to share and teach others how to invest. I'll share the wisdom that was shared with me by one of the smartest business managers I've ever know: Wayne Flourey of Retail Credit Co. later called Equifax. One of Wayne's favorite saying was: It's better to be approximately right, than precisely inaccurate. The old KISS Keep It Simple Stupid method. So here goes my 100 word or less attempt to explain what is taught in an entire Modern Portfolio Management MBA program.

"In the real investing world only 4 things matter: Revenues, Margins, Net Earnings and Price. In the long run if Revenues, Margins and Earnings increase, the Price will follow. If Revenue, Margins and Earnings shrink, the price will go down. The rate of price change is tempered or amplified by the collective optimism or pessimissim that investors have about the overall health of the economy as a whole and in particular how it will effect the earning prospects of this stock."

Well there you have it, in 80 words; that's all you need to know. You really don't need to "trend" or analyis anything else. All the MBAs with all their Fundemental and Technical Analysis formulas, models and computers are just trying to see it the first 3 are trending up or down and using that information to predict what the price will do.

Fully understand those 80 words in the middle paragraph and you've unlocked the "secret" of stock market analysis.

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How To Use Barchart for Superior Returns

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Twice a year I mentor the Senior Economics Class at my daughter's school, Charlotte Latin in the Stock Market Game. It's a game where the students get a $100K portfolio to invest and they are pitted against several thousand other teams across the country. I teach them how to use BarChart because it's simple and free and let them know that with that tool plus the rest of the internet they really have more information at their disposal than Peter Lynch did in his heyday. Be careful not to get sensory overload! Every session several of the teams always rank in the top ten and almost all of the teams I mentor beat the market. The homework assignment is easy: Watch Mad Money and Fast Money on CNBC with your parents and decide if the shows are really investment knowledge you can use or just entertainment.

I instruct them that BarChart will tell them the 3 things needed for sucessful investing: 1 - Knowing what the Market is doing, 2 - Help you select stocks that are doing the best right now and 3 - how to decide when a stock needs to be eliminated from your portfolio. If you take a disciplined approach using these 3 knowledge sets it's hard not to make money and even harder to lose money.

WHAT IS THE MARKET DOING? - I look at 3 things - the S&P 500, the Value Line Index and BarChart's Market Momentum. I do a simple custom chart of the current price, 20 day Moving Average, 50 day MA and 100 day MA of the S&P 500 and the Value Line Index. The Market Momentum page tells me the number of shares traded up and down in various exchanges and the total number of stock trading above their 20, 50, 100, 150 and 200 day MA. It really gives me the pulse of the overall Market and even the number of stock reaching new highs and new lows.

WHAT STOCKS SHOULD I ADD TO MY PORTFOLIO - Simple - take the new high list go to the 65 day new high column and sort for frequency. If a stock has hit 25 new highs in the last 65 trading sessions I'd probably want to own it. Take the top 10 new highs and look at all the info on BarChart about it. Only own proven winners.

WHAT STOCKS SHOULD BE ELIMINATED FROM MY PORTFOLIO - I've tried all sorts of Technical Analysis indicators and find the 50 day moving average suits me best. When a stock is trading below it's 50 day moving average I seldom find a reason to continue to hold it.

Just 3 simple steps: 1 - Know where the Matket is going now, 2 - Screen for the best stock to add to your portfolio and 3 Weed out the ones you've bought that aren't performing.

Lastly, I tell them the Kenny Roger's Rule of Investing: Know when to hold 'em, know when to fold 'em, know when to walk away, know when to run.

If you evaluate the overall market, select only the best proven stocks to buy and weed out those that have run their course, then it's hard to go wrong. As my German teacher in college summed it up: " If you want to do well in my class and in life as well you must exercise 3 values - DISCIPLINE, DISCIPLINE, DISCIPLINE!" Thank you Professor Schmidt.

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Positive returns are not luck, they come from discipline

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I've received a lot of nice comments but I'd like to share some misconceptions of my posts. The best advice I can give anyone is to find a good stock screener and/or information service and REALLY learn how to use it. I like BarChart because it's simple, easy to use and gives me more information than I actually need. It took me a few months to learn how to use the information but it's always right on and easy to use.

1 - Why do I want to know what the Market is doing? Sometimes the Market has no direction. I look for trends. I choose the stocks that that are presently having gains WITH the trend. If I don't see a trend, I sit on the sideline. If the Market has either a positive or negative trend then I go looking for stocks. By the way, if it means I'm out of Compliance because I'm not 65% invested I don't care, I'll sit out and preserve capital rather than lose money just to be compliant. Value Line may always be invested and Warren Buffet might wait through a couple of losing years for a stock he likes to bloom, but not me.

2 - It seems you pick stocks the same way not matter which way the Market is trending. That's exactly right. I want to look for stocks having new highs in whatever Market there is at the present time. My time frame is NOW. Not 6 months or a year from now. I invest as long as the Market isn't choppy.

3 - You are heavily weighted in energy. You got lucky by guessing the right industry at the right time but you won't keep doing that. WRONG! I didn't pick energy and decide to get over-weighted in it. I looked only for stocks that were hitting new highs. My portfolio is not 50% into energy because that's where I wanted to be. It just happens that 50% of the stocks making new highs are energy stocks. 3 weeks from now new highs might come from ag or steel stocks. I don't look for good industries, I only look for good individual stocks. I don't know and I don't care what the rest of that industry is doing.

4 - Your portfolio can go down as fast as it went up. WRONG! I jump right off any stock that drops 10% or trades below its 50 day moving average. I don't care what they do, who else owns them, what they produce, what Jim Cramer says, what they earn or who the manager is. If the price drops I'm out immediately, no questions asked. I'll look for reason it dropped later, but I'm out at the first cross of the 50 day moving average. The old "Let your profits run and cut your losses" adage.

The bottom line is just plain DISPLINE. I buy what is going up and sell what isn't. If nothing is going up, I sit it out and preserve my capital.

The way to make money in any market is to say on top of your portfolio. Each day you cull out what isn't giving you the return you want. Only buy when you find someting that is going up NOW.

I hope these comments help and I'd be glad to answer any questions. I've learned from making lots of mistakes but I try not to make the same mistake twice.

Capre Diem!

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Thanks for the comments but I need votes

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I'd like to thank all the people who have sent me great comments on my blog postings but noticed you didn't vote for me. Ken Kam won't hire me if I don't get some votes.

This reminds be of an old Georgia politician who had great bar-b-que fund raising rallies. Very well attended but what a suprise when he lost the election.

When the press asked why he thought he lost he said: "I don't know why they didn't vote for me but they sure did like my bar-b-que!"

I'm makin' bacon in the market but not gettn' votes where it counts. Thanks in advance for your votes.

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How to become and STAY the Millionaire Next Door

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The book that should be required reading for every high school senior should be The Millionaire Next Door by Drs Stanley and Danko of Georgia State University. They did extensive research on the traits of America's millionaires and came up with some interesting results. The average millionaire really never made a big salary but rather was a small business owner or corporate employee who lived very much within their means and continued to year after year reinvest in his business or portfolio. Small steady gains accumulating over the years; never worrying about what his money might buy.

How do you put that to work for you? Very easy. I know this works because I've done it. Every year max out your 401K or whatever company pension plan you have and always max out your traditional or Roth IRA. Invest it aggressively until you hit the number you need to comfortably retire, stop and live off your assets. If you are under 59 1/2 ask your financial advisor to show you what a 72t is to avoid IRS penalties.

That's where to put your money but now the how to invest it. If you've read my other posts then you know how to have a defensive portfolio and still take advantage of opportunities in the market. That's not how you get rich, it's how you stay rich. I'm a Boomer about to retire so I'm well into my accumulation phase. Now I'm entering the phase of living off my accumulations.

In the accumulation phase there are two main methods of investing: Growth and Value investing. I suggest a combination of both and use them agressively to hit for a home run.

In the LOOONG run all stocks become truely valued and its true value is the present value of its net earnings stream. They are valued like bonds. Their value is the coupon interest rate and a stock's value is it's net earning stream.

Growth Investing like Peter Lynch means finding companies who year after year have an increase in their net earnings, are in a product that will have continued appeal and have good management.

Value Investing like Graham & Dodd or Warren Buffet means finding good stable companies making a profit that you feel will be around for the next 20 to 30 years and buying them as cheap as you can and definetley cheaper than it's competitors.

These two methods are great in the long run but the Market as a whole has it's own mind and sometimes these methods sell at a great discount to their present value. Over time they will return to the proper value and it's great in the accumulation phase if you are dollar cost averaging into your portfolio but when you reach retirement age a few bad years can really hurt you. Some market cycles have lasted 7 - 15 years and a retiree might not be able to ride that out.

Boomers are buying BILLIONs of dollars of annuities each year for several reasons: professional management of both the portfolio and income stream and guarantees from income, value and death benefit riders. These requirements don't come free and might cut deeply into your investment returns but if you aren't a pro that might be your only alternative.

But I'm writing to the people that want to take their destiny into their own hands. Experienced investors who know that they can beat the Market and most of the pros. (Let's face it, twenty-eight of us are beating all the pros including the best they've got - Ken Kam and he's using the best stock picks of the best 100 players in his 81,000 player data base),

My STAY the Millionaire Next Door stategy is simple: use stop losses (mental or actual) to limit down side losses - just like annuity owners buy protection riders and find CURRENT indefinite term opportunities. You might notice I didn't say short term. I have no idea how long I'll hold a stock. It might be 48 hours it might be 3 years. As long as it increases in price I hold it; start losing and I dump it - no qestions asked. If there are no current opportunities I'll collect my money market rate but eventually I'll find stocks that are increasing in price.

I've always found that in both up and down markets there are stocks that increase in price, and usually not the same stocks n each cycle, That's why I evaluate every stock I presently own each day to see if I should continue to hold it and I run my screening every day to see what I'd buy to replace it or if I just want to sit it out.

I might not beat the value or growth investors when they are at their best, but I'll be willing to sit back and accrue interest while they are investing in that stock that might bloom 2 years from now. I'll lose far less on the downside.

Well that how to make money in the accumulation phase and keep money in the payout phase of your investment life. I welcome your comments.

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Casey (CASY) caught in a squeeze

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I'm not as high on Casey (CASY) as the rest of the market is right now. Casey has experienced some positive price movement mainly on the theory that if gas prices are going up the retailers must be making a killing. Let's look at Casey's own press release on their annual results.

Although sales dollars were up the actual gallons of gas sold was only up 1.8% - not an impressive growth rate. Credit card companies are increasing their fees so the margins will be squeezed. As the gas prices go up this will increase operating expenses. There is a shift to charging gas - increasing credit card fees - instead of paying cash further squeezing gas margins.

While we're mentioning operating expenses, Casey's operating expenses rose 15.6 percent - much higher than the inflation rate.

Casey failed to execute their published expansion plans. They projected to acquire 50 new stores but only bought 12. They wanted to build 10 but built none.

What about the convenience store portion of the business? We all know that convenience store prices are higher than the supermarkets. They count on impulse sales. As the public tries to cut back on driving there will be fewer trips to the gas pumps and fewer visits will be made to the inside of Casey.

Long range - Number of gallons sold will probably decrease causing fewer customer visits. Higher operating cost, failed expansion plans, and more customers using credit cards instead of paying cash will squeeze gross margins. They failed to achieve their own grow in the number of locations - no projected increase in market share. What's to like about next 6 months?

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Banking: The Perfect Storm

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For some time I've been back testing my "Sharks and Minnows " theory. In many instances, companies that are acquired (the Minnows) usually get acquired at a price that is a premium. When the merger is announced, the acquiring companies (the Shark) usually takes a hit in the market. I know the exchanges are supposed to be policing insider trading, but there still seem to be leaks.

Look at almost any Mergers and Acquisitions in the past few years and you will see unusual price and volume movement in the two weeks prior to the M&A announcement.

What do we see today? Fact #1 - Many banks and financial services companies are selling at 50% of their last year's high. Fact #2 - The Euro is now at least at 50% higher than the dollar. Fact #3 - Both Warren Buffet and many of the Sovereign funds are visiting Europe, awash with cash, and both like bargains.

Does that make for the "Perfect Storm"? US banks for sale at 50 cents on the dollar. Euros make the dollar worth only 60 cents. Warren Buffet and the Sovereign funds are awash in cash and looking for bargainsin Europe. Why not go to Europe and fund the take over of US banks on sale?

Who would be a likely target? Forget Citigroup, Bank of America and Wachovia. It's not that they are too large. It's that the people who could acquire them already have a banking presence in the US and the 10% rule comes into play if you add any of those bank deposits to the big three. Where does that leave us?

For that I go back to BarChart and get a list of the Money Center banks and look at the prices and volumes. When I look at the historical volumes, most banks are trading at 30- 50 % but I notice that Key Group (KEY) is trading at 108% of its historical volume. Key Bank's price has traded lower almost every week for the last 6 months, but something strange happened on June 13th. The price stopped declining and stays at a steady support level of $12 per share.

Lastly, check the news. There was insider buying activity below $12. Seems insiders don't want the stock any lower.

If a non-US bank wanted in the US market, Warren Buffet or the Sovereign funds could fund the acquisition for a piece of the action. My money is on Key Bank to be acquired in a "hostile" takeover at a great premium.

The perfect storm is just over the horizon!

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Bulls, Bears and Beers

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They announced that there is just 2 weeks left and we only have till July 11 to make our mark. It looks like either of three can take the lead: The Bull (Me) - VanMeerten, The Bear - Aardvark and the Beer - DuffBeer. I needed a plan to beat my two closest opponents.

I almost had my strategy. When my portfolio crossed 60% I was tempted to dump everything and go into cash equivalents and hope that no one could top my 60%. But I didn't let Satan tempt me so my sense of fair play kicked in and I thought I'd to the right thing. (That shows what an idiot I am - I put fair play ahead of winning).

The market hit a bump and now Aardvark is barking - or what ever noise an aardvark makes - at my heels so I have cause to worry. I was even tempted to dump everything and invest in exactly what he has. If my return for the rest of the session was equal to his and I'm now ahead he couldn't catch me but that too wouldn't be fair. But I did decide to peek at what they were doing and that gave me the idea for the title of this blog.

My portfolio is a pure stock portfolio. I fully invest in the stocks that are presently doing well in what ever type of market we presently have. Every stock stands and is added or fails and is eliminated from my portfolio on it's own merit (or lack thereof). The old theory of you can't make money if you aren't in the game. My portfolio is pure bull - my stocks are going up and I think I'll just stick it out.

I decided to look at Aardvark's portfolio and was surprised to see there weren't any stocks. Most of his portfolio was in ProShares Ultra Short ETFs. My own personal portfolio contains a lot of these but I thought Marketocracy had a percentage rule about how much of your portfolio could contain funds so my Strategy Lab Open portfolio doesn't contain any. I guess I was wrong because his fund is marked PASS with Compliance. Well it did give me the idea to call him the Bear because he is long the short sided funds. If the market tanks he will be a sure winner.

I see no way to beat him. Both of us have placed our bets and they are exactly opposite. I'm the BEAR and I am fully invested in stocks and if they do well I will win. He is the BEAR and is fully invested in the ProShare Ultra Shorts - he not only found a way to short the market but he managed to leverage it too. (nice gamesmanship of the rules) If the market tanks; the contest is his.

But what about BeerDuff. While I was out at lunch eating a couple of Chicago Dogs - run through the garden at Matt's Chicago Dog here in Charlotte (Yes DuffBeer we do have the real thing down here in Charlotte. Matt has the Vienna Beef dog shipped in with the right green relish, sports peppers, pickles on a poppy seed bun topped with celery salt all shipped in here from Chicago) Hard to tell the difference from the ones at Junior's in Cicero. It was while I was sliding down my second one that I remembered DuffBeer's last blog entitled: "Did anyone notice?" It told of how he looked at his portfolio, went into a beer induced coma and when he awoke this portfolio had sky dived. The idea hit me. DuffBeer - go look out on your porch and you'll find 10 cases of Leinenkugel Honey Wheat beer - the best domestic beer I could find. A case for each of the next ten trading days. I hope you'll stay in the beer induced stupor until July 12 after the contest is over.

There you have it, stay fully invested, pray the market doesn't tank and keep DuffBeer polluted.

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Important - The last reality check I do before I hit the buy/sell button

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As I've said in previous posts I use BarChart because its easy to use and has more features than I could ever use. I've found one feature I always use before I buy or sell anything. And I mean anything. It's the custom chart feature and it has helped me from making a lot of mistakes when my screeners didn't tell me the whole story.

Right before I press the submit button on any buy and sell I run a short term custom chart. I use a 5 minute frequency chart which tells me how the stock tracked for the last day and a half. I set the parameters for 1 - BarChart OHLC, 2 - Moving Average 20,50,100 period, 3 - Up/Down Day Chart and 4 -Trend Spotter (tm).

Please just try it on any stock you are thinking of adding or deleting and tell me what you think. I think you'll be surprised how many times you change your mind, Let me know if you find the toll valuable.

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Buy Elan before you forget but with a trailing stop loss

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Buy Elan before you forget! I've been following Elan Pharmaceuticals for some time but not for their drugs. I used to live in Gwinnett County Georgia and back then Donald Panoz President and Chairman of Elan was buying up land in Gwinnett to build a winery. I visited it from the beginning and really liked the wine.

Recently, Elan began coming up on my screeners with a 96% buy on BarCharts. The stock began trading above it's 20, 50 & 100 day moving averages which are part of my required litmus test. When Ken Kam started mentioning the stock I knew I had to look deeper into it. Every place I look there are positive stories, when that happens I start to worry.

As boomers approach their 70's they start to worry about quality of life. They see drugs are controlling a lot of the causes for premature death: Weight, Diabetes, High Blood Pressure and Cholesterol. Many of their older relatives and parents are living longer but sliding into a dark hole of forgetfulness and death called Alzheimer's. They are really afraid of this disease more than any other.

Elan's trial of Bapineuzumab - nicknamed Bappy may offer protection and cure. Good trial results are all over the news. You may find boomers taking it just because.

Here's my caution: I'd buy the stock on it's technicals alone but it really has a story being covered by the news and a product that may have one of the largest markets in history. Why the caution?

I've seen press releases before about new wonder drugs. Sometimes later phase trials don't pan out or someone else comes along with an cheaper, more effective drug just when you're about to come to market. I worry that Elan may not be able to dominate market share when this drug goes into production.

Buy the stock and ride it on up but PLEASE, PLEASE protect yourself with a trailing stop loss in case the drug gets blind sided by later trial results or competition.

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