The Stock Playbook : Shorts

Issue: 4/25/2008

Dave Dispennette — Fri, 25 Apr 2008 03:54:00 GMT

Foreign Stocks

HMIN @ $21.99 (Home Inns & Hotels) operates 134 hotels with 16,162 rooms and 48 hotels under development covering 50 cities throughout China. Revenues have increased 71%, 75%, 74% and 96% during the last four quarters. earnings are expected to grow 269% this year and another 58% in 2009 to 0.93 cents a share. We originally recommended this stock on 10/29/06 at $25 and watched it double in a few months to $50. We are revisiting it here and will add to position on any weakness that brings us down to $19. We will set our stop loss at $17.75.

JRJC @ $18.45 (China Finance Online) is a Chinese provider of subscription-based online financial data of China's listed companies through www.chinafinanceonline.com. Revenues have increased 184%, 289%, 322% and 252% during the last four quarters. Earnings have accelerated 100%, 267%, 275% and 999% during the same time frame and are expected to grow 47% this year and another 78% in 2009 to $1.39 a share. We originally recommended this stock on 7/13/06 at $5.62 and watched it run as high as $47 in a little more than a year. Since then it has fallen as low as $10 and appears to be trying to recapture its 200 day moving average. We will establish half a position here and enter the remaining half on a pull back to $16 with a stop loss set at $15.

Shorts

IT looks like the rotation out of these Chemical and Fertilizer plays might finally be here. We are short POT and CF, but feel MOS and AGU have the same downside. If you took our advice two nights ago and shorted them, you should tighten up your stops now that they have all fallen $15 to $20.

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Issue: 3/18/2008

Dave Dispennette — Tue, 18 Mar 2008 20:03:00 GMT

The Playbook 100

BRKR @ $15.42 (Bruker Corp) develops life science tools based on mass Spectrometry and materials research tools based on X-Ray technology. Revenues have accelerated 16%, 21%, 26% and 35% over the last four quarters. Earnings are expected to grow 74% this year and another 31% in 2009. We are establishing half a position here and will add the remaining half on a pull back to $13.50. Our stop loss will be set at $12.

IPO's and New Issues

V @ $44 (Visa) priced above its range of $37-$42 tonight and will raise $17.9 billion, easily eclipsing the previous U.S. record IPO of $10.6 billion set by AT&T Wireless eight years ago. We were a little surprised by the pricing in this market. Many people feel this will be the next Mastercard (MA) but it won't, and I'll tell you why. After the offering, Visa will have a market value of $36 billion, or $8 billion more than Mastercard's current $28 billion value. When Mastercard came out, they priced their deal and only had less than a $6 billion market cap. In other words, Visa is being priced off of Mastercard's current value. Unlike Mastercard, you will not see Visa climb 500% over the next two years. However, we feel you could see a 100% increase over the next two years. We are going to establish half a position under $45. Otherwise, we will exercise patience and wait for it to come in for us. The remaining half will be added on any weakness that brings the stock toward the $40 level, which could easily happen in the current environment. This stock will be added to the Playbook 100.

Shorts

SLB @ $84.37 (Schlumberger) provides technology services, project management and information solutions to the international oil and gas industry. We are bullish on this stock long term but feel a short here with a tight stop at $90 could be rewarded nicely if oil pulls back to $100 a barrel. For the options players, we would play the April $95 Puts (SLB PS) at $11.60 with a stop set at $8. A move to $72 on the downside could net us in excess of 100% return and that is a good risk to reward ratio.

Issue: 3/12/2008

Dave Dispennette — Wed, 12 Mar 2008 20:12:00 GMT

Growth Stocks

SWSI @ $20 (Superior Well Services) provides technical pumping and down hole surveying services for oil and gas fields through 19 service centers. Revenues have increased between 26% and 61% during the last four quarters. Earnings are expected to grow 34% this year and another 31% in 2009 to $2.86 a share. We are establishing half a position here and will enter the remaining half on a pull back to $18. Our stop loss will be set at $17.

Shorts

HANS @ $41.62 (Hansen Natural) manufactures alternative beverages including Monster energy drinks, fruit juices, soy smoothies and natural sodas. For those long time subscribers, this name brings back fond memories (check Flashback selection below). If you look at the weekly chart, it appears to be setting up a head and shoulders pattern. A move below $36.82 and we could be on our way to testing the $25 level. We are shorting half a position here and will add the remaining half on strength that brings the stock to the $45 level. Our stop will be set at $46.50.

Watch List

STV @ $21.26 (China Digital TV) looks impressive. We will nibble here and add to position on a pull back to $18. We're also still looking to get long Apple (AAPL) which may have its sights set on a move to $140 over the next week, hopefully on some weakness.

Current Portfolio

What are the chances of Mastercard closing at $200 next Friday, allowing us to book the entire profit on our MA $200 Straddle that we established on 2/25/08. We like our chances.

Flashback

On 3/23/04 we wrote that our favorite pick was:

HANS @ $11.25 (Hansen Natural) markets and sells alternative beverages including natural sodas, fruit juices, smoothies and "functional drinks". Management owns 43% of the stock and they are stating to take shelf space away from the big boys like Pepsi and Coke. the stock started rallying in the middle of January and reached an all time high of $15 last week. It traded above $14 yesterday and then sold off with the market closing at $11.25. With Americans becoming more health conscious, this is a nice addition to our Top Ten List.

Adjusting for a 2 for 1 split on 8/9/05 and another 4 for 1 split on 7/10/06, our cost average on our original purchase was $1.40 a share. We sold stock all the way up, but on 6/22/06 we cashed out of final position at $175 a share and then went SHORT, just before their 4 for 1 split for a 3,025% return. One ecstatic client sent us his confirms and made $338,000.00, a nice chunk of change, but even more impressive was that he bought the stock for less than $12,000. Obviously he made more money than us because he held the whole way up. Anyway before we get sidetracked, on 7/6/06 we wrote:

HANS @ $205.35 (Hansen Natural) is our only short in the portfolio right now and we will add to our short position on this recent strength, because we feel HANS is getting a little long in the tooth and priced for perfection. We think a 50% retracement is in order and will use the recent strength to add to our short position.

Over the next week to three months, we covered our HANS short for another 50% return. You can visit www.TheStockPlaybook.com and search our archive section for HANS and see all these trades. Our point isn't to gloat, although it can't hurt in this market, but to stress everyone has a stock that they are just in tune with and HANS is that stock for me. We are SHORTING it now, as listed above.

Issue: 3/10/2008

Dave Dispennette — Mon, 10 Mar 2008 20:19:00 GMT

Growth Stocks

JOYG @ $63.83 (Joy Global) manufactures continuous miners, longwall shears, electric shovels and blast hole drills for coal and mineral extraction. Earnings are expected to grow 27% this year and another 23% in 2009 to $4.19 a share. For those looking for an investment, we are establishing half a position here and will enter the remaining half on a pull back to $57. Our stop loss will be set at $55. The traders could establish a full position here and set a tight $1 stop loss.

Shorts

Our Shorts in CF, MOS, TRA, SYT and MON all seem to be going in the right direction. For those that shorted any of these stocks today, remember to adjust your stops and trail them lower as the stock works it's way lower.

Current Portfolio

For those that are wondering, Citigroup (C) bottomed out at $13.30 in 1998 during the Asian financial crisis and is the next major level of support. We started nibbling in C last week at $22 and added another 1/4 to our position today at $20. With a cost average of $21 on half a position, we will not add to position until we get a climactic sell off, which may allow us to enter the remaining half between $15 and $16 hopefully. We still like the Citigroup January 2010 Call Leaps at $11. Another very attractive play for those that have experience in options is to sell (or write) the January 2010 $15 Puts for $3.20. It would give you a cost average of $11.80 on your position in Citigroup as a worst case scenario, which is pretty attractive, unless you think Citigroup is going out of business.

Vs. Cramer

BBI @ $2.87 (Blockbuster) operates 6,551 and franchises 1,809 movie and video rental stores in the U.S. and 22 countries worldwide. We made money on this pig a couple years ago and believe Cramer might be onto something with the attractive risk to reward ratio this is offering us. We will establish a position on a pull back to the $2.75 and set our stop loss at $2.60. If we're wrong, we lose 0.15 cents. If we're right, $4 gives us almost a 50% return. This is a great place to hide in this weak market, with all the damage already being done in this company.

Issue: 1/08/2008

Dave Dispennette — Wed, 09 Jan 2008 21:05:00 GMT

Market Summary:

The market skidded lower in another fitful session today, with investors worried that the tumbling economy may not only cripple mortgage lenders like Countrywide Financial Corp. but also create problems for other companies like AT&T. Investors tried to take the market higher at many points during the day, but eventually succumbed to another stream of bad news. The Dow and the S&P 500 are down more than 5 percent so far this year and the Nasdaq is down nearly 8 percent, having been pummeled since Jan. 1 due to worse-than-anticipated readings on the economy. Today's events raised fears that fourth-quarter earnings reports, which start pouring in later this week, may not meet already lowered expectations. The Dow fell 238.42, or 1.86 percent, to 12,589.07, after ratcheting up and down through the day. The S&P 500 dropped 25.99, or 1.84 percent, to 1,390.19, and the Nasdaq, reflecting uneasiness about tech stocks after AT&T's news, declined 58.95, or 2.36 percent, to 2,440.51.

Shorts:

The recent correction has been hard and swift. We are more inclined to buy stocks at these levels, rather than shorting them. Shorting the market would have been a great idea a week ago. However, for those that have been emailing us the last few days, looking for shorts, I would suggest exercising caution. We would rather use this as an opportunity to add to some of our favorite positions on this weakness. As we usually do during market corrections, we've brought back our popular Watch List section, which will highlight a few stocks that we want to accumulate during this weakness.

Watch List:

It is tough to recommend buying stocks in a market like this. There are, however, some stocks that we will slowly accumulate during these tough times. These stocks are investments. You still need to set some downside protection on them. These are stocks that we wouldn't mind owning in three years from now and will add to positions on weakness. We, personally, like using long term equity options (LEAPS) instead of equities in many of these cases, but that is for you individually to decide. Call us at (386)756-9728, if you need help figuring out the best plan of attack for you.

We will start nibbling on: GS @ $175-$178, NYX @ $68-$70, RIMM @ $87-$92, AAPL @ $145-$150, and MSFT @ $31.