Short term Investor/Day Trader: LEND & FMT

If you read my post about LEND buying and the fundamentals. You must be waiting for this post. yeah last week LEND moved from 3.8 + (my buying price 4.04) to 11.93. I had a trailing stock as soon as the stock jumped to 10 and my trailing stocks were sold in two lots (9.43 and9.51) - a quick 120% return over 2 days.

	03/13/2007 14:41:51		Bought 100 SAY @ 21.44		-2,153.99		-$5,153.99
	03/13/2007 15:06:22		Bought 100 LEND @ 4.0475		-414.74		-$5,568.73
	03/14/2007 02:31:15		MONEY MARKET REDEMPTION		3,000.00		-$2,568.73
	03/14/2007 02:31:36		MONEY MARKET REDEMPTION (MMDA1)		0.00		-$2,568.73
	03/15/2007 15:14:55		Sold 50 LEND @ 9.5125		465.62		-$2,103.11
	03/15/2007 15:23:05		Sold 50 LEND @ 9.4306		461.52		-$1,641.59

Now I am kicking myself for not buying more ;) Greed never stops, But I am happy with my decision. If my story about the firms monetizing their loan portfolio doesn't hold, I wouldn't have been hold on to these very risky sub prime scrips for a long time in these murky stock climate.

I am also happy with this investment as it balances some of the losses ( 1500+) I have had due to my DOW calls. I have already lost money on March calls and I have to minimize losses on Apr calls. Will keep you guys updated.

My other investment SAY is going down, but that was a 12 month investment.

I also tried my hand at day trading in sub prime stocks on Friday. After 3 unsuccessful attempts, my fourth one was a break through. The current

	03/16/2007 14:38:52		Bought 1000 LEND @ 10.98		-10,989.99		-$10,062.85
	03/16/2007 14:43:07		Sold 1000 LEND @ 10.9832		10,972.87		$910.02
	03/16/2007 14:58:53		Bought 300 LEND @ 11.26		-3,387.99		-$2,477.97
	03/16/2007 14:58:53		Bought 200 LEND @ 11.28		-2,256.00		-$4,733.97
	03/16/2007 15:01:05		Sold 500 LEND @ 11.271		5,625.33		$891.36
	03/16/2007 15:26:27		Bought 1000 FMT @ 8.529		-8,538.99		-$7,647.63
	03/16/2007 15:38:28		Sold 500 FMT @ 8.55		4,264.87		-$3,382.76

The First two LEND trades were not going anywhere and there was some resistance, so I just cut my exposure. The last FMT trade seemed to have some momentum, but was hitting triple top resistance so I paired down my exposure from 1000 to 500. Finally, It was able to break through the triple resistance and is currently trading at bid ask 8.92-9.05. There is a support at 8.75 and minor resistance at 9.25 and finally Friday top of 9.50.

The only problem is that if I do more than 4 round trades in 5 days my account will be flagged as a day trader account. So, I will have to be careful :) So, I need to get up early and trade out of this. Normally, I would have closed this position, but day trader flag message from my broker along with my belief that this is the most well managed of the sub primes, made me decide that I can run this over the weekend.



Finally, I will leave with the thought.

"In the turbulent stormy sea, the boat with the most emotionally stable and experienced captain and the biggest size has the most probabilty to succeed."

Time to load up on discount: LEND SAY

Wall street had another bad Tuesday. I took measured dip. Where? In the middle of chaos of Sub-prime meltdown. I bought 100 shares of ACCREDITED HOME (LEND) as it was mouthwatering discount sale going on. I got a price of 4.04. A very small investment - balancing the small amount to the big risk that I am taking. I don't mind losing 200-300, but I hope to make some quick bucks in next week - as market stabilizes and investors try to go for asset sales. I discounted value of their portfolio is more than the market valuation. May be even double my investment.

While there, I also loaded up 100 Satyam (SAY) at 21.44. This is a longer term buy and I am looking to hold it for the next one year. I wanted to buy some Indian Outsourcing stock. I gave up on Accenture as it have less organizational leverage than pure Indian firms. SAY seemed the cheapest one of the top firms. Another reason was a recent upgrade and rise to 39. The position size gives me an opportunity to add more if there is another 10-15% drop in the price with no change to fundamentals.

I think 60-70% of the selling is already done. We may still go below 11900, but if you are looking long term this is a good position to start buying.

GS: I said "What about Sub-Prime crisis"

I wrote this blog about GS and it got lost somewhere after being there for at least a week. I will update this later.

Time to take a small dip: GOOG

After the last weeks sell off, I believe there are some great opportunities. I snagged Google (GOOG) and Goldman Sachs (GS) last week as they have fallen hard and oversold. Before you read forward please note the following two points.

First, I took a dip as I was going to be busy next couple of weeks and would miss the opportunity. These are investor darlings and will not stay at bottom for very long and I am not an expert to time a perfect bottom. "If this is not the bottom, it is very close and I am willing to hold these for about a year and reap profits :)" Second, I mentioned dip I bought 8 GOOG and 10 GS shares. It is not a dive, just a small dip ;) Let us move to my rational behind these buys.

GOOG: I said "I would not touch google above 420"

Google is currently selling at 438.68. Analyst expect google to produce 2007 EPS of 13.56 - 15.49 with a median of 14.25. That gives Google a forward P/E of about 30 (Compared to Yahoo 54). I have told many people to wait for GOOG to reach 420 before you get in, but I did dive in with 8 shares as I might be busy next week to get in at the right price. Also, being GOOG, one of the most followed stock, people with get in there as soon as it touches the P/E of 30. So, it is not going to stay there for long.

Compared to their 2008 EPS, GOOG is almost 23 times earnings. With a growth of 40% in 2007, this is one of the very few times that you will have PEG of 0.95 (less than 1:). Yahoo has a PEG ratio of 2.19. So, let me back up a little - Leadership position in searches, great core product , gaining market share means stock should be cheaper. Isn't that what market is saying?

Lets look at the earnings growth opportunity. First their core busienss, search advertising. Google is still gaining market share. On top of that they have the best monetization rate of the searches based on a better algorithm. That is a double whammy.

On the content side, Google adsense still doesn't have any competition. The beauty of adwords is in the problem that it solves. There are tens of billions of website on wide variety of topics. If you are a big firm and you have your own advertising group that monetizes the spaces on your website. What about a small guy, who just has a small blog about dogs or guitar or investing:) How do you monetize the ad space on your website with out spending disproportionate amount of time on trying to target advertisers? Answers is simple - Google adsense. It generate s advertisements dynamically based in content of the site.

Finally, in next 18-24 months, some of the initiatives in the pipeline will start to trickle down to the pipeline. Google have been secretly working on a number of initiatives that can be categorized into

1> Small Business services - Google docs & spreadsheets,
2> Consumer services - maps, book scaning et all
3> Mobile inititaives - They have acquired a number of mobile software firms

These initiatives are equivalent to the drug pipelines of pharmaceutical firms and will keep the earning growth going.

So it's a great company with lots of growth, but can I make money on the stock? Let's assume that google is able to maintain it's EPS in 2007 and at the current PE of 40 for a growth company gives us a valuation of 570 in 2007. Also, if the company doesn't reduce it's earnings forecast. Based on a forward PE of 30 we get a valuation of 555.

Now Google has always blown the estimates except one quarter last year. And if they are able to deliver beyond the target.

As with any stock there are risks to this rosy picture. But, the risks are few and limited.

1> Google may not achieve these growth rates. In fact, with Panama success for Yahoo we may see yahoo capturing more of the incremental ad revenue that their current share. I believe, Panama, if successful, will not be monetized before 2008 and 2009. The current advertisers will stick to tried and tested google adwords and wait for at least a year to confirm the success of Panama.

2> The whole internet advertising may slow down. This is very likely if we get a hard landing and companies reduce advertising expenses. I believe that even in this case, GOOG is the stock least likely affected and money will move out of other search competitors first. Also, I don't believe in Hard landing just a slowing with may be one quarter of GDP contraction.

Loading Dock: anything below 420-440
12 months Target: 540
Return expected 25%

Tomorrow I will write a post about GS, but here are the price

Loading Dock at anything below 200
12 months target: around 260
Return expectation: 30%