ARTi Invest

ARTi Invest is Moving

noreply@blogger.com (NLObserver Team) — Thu, 31 Dec 2009 23:11:00 +0000

To all my readers, I'd like to thank you for following my work. I hope that materials I provided on my site help guided you to better investing. Over the past two years, my mentor at Dividend Inc and I have been converging on strategies to better allocate assets. Beginning this new year (2010), we will be joining force in our new establishment, New Low Observer (www.newlowobserver.com). Please follow our work there where we will provide various investment strategies and market commentaries.

About New Low Observer

Watch List: 12/25/09

noreply@blogger.com (NLObserver Team) — Fri, 25 Dec 2009 21:07:00 +0000

At the end of the week, my watch list shrank to 17 companies compared to 20 companies from the previous week. Here are the companies on my watch list as of December 25, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
SVU	SUPERVALU INC	12.90	-0.92	6.35%	2.71%	-13.99	0.35	-3%
CWT	CALIFORNIA WATER SVC	37.07	18.54	10.69%	3.18%	2.00	1.18	59%
XOM	EXXON MOBIL CP	68.66	16.00	10.99%	2.45%	4.29	1.68	39%
BCR	BARD C R INC	79.08	15.85	14.71%	0.86%	4.99	0.68	14%
WTR	AQUA AMERICA INC	17.69	23.28	14.94%	3.28%	0.76	0.58	76%
UMBF	UMB Financial Corporation	38.68	18.42	14.95%	1.91%	2.10	0.74	35%
WEYS	Weyco Group, Inc.	23.13	23.13	15.02%	2.59%	1.00	0.60	60%
WMT	WAL MART STORES	53.60	15.54	15.89%	2.03%	3.45	1.09	32%
FDO	FAMILY DOLLAR STORES	28.02	13.54	16.75%	1.93%	2.07	0.54	26%
THFF	First Financial Corporation	30.99	16.93	16.81%	2.90%	1.83	0.90	49%
SRCE	1st Source Corporation	16.25	14.64	17.41%	3.94%	1.11	0.64	58%
UGI	U G I CP	25.05	10.61	18.50%	3.19%	2.36	0.80	34%
WGL	WGL HOLDINGS INC	34.20	14.31	19.62%	4.30%	2.39	1.47	62%
SYBT	S.Y. Bancorp, Inc.	21.89	16.21	19.68%	3.11%	1.35	0.68	50%
AWR	AMER ST WATER	35.71	22.04	19.99%	2.91%	1.62	1.04	64%
NTRS	Northern Trust Corporation	52.20	13.77	20.50%	2.15%	3.79	1.12	30%
HSY	THE HERSHEY COMPANY	36.48	21.33	20.52%	3.26%	1.71	1.19	70%
17 Companies

Merry Christmas!

Watch List: 12/18/09

noreply@blogger.com (NLObserver Team) — Fri, 18 Dec 2009 22:59:00 +0000

At the end of the week, my watch list expanded to 20 companies compared to 16 companies from the previous week. Here are the companies on my watch list as of December 18, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
SVU	SUPERVALU INC	12.48	-0.89	2.89%	5.61%	-13.99	0.70	-5%
CWT	CALIFORNIA WATER SVC	36.66	18.33	9.47%	3.22%	2.00	1.18	59%
XOM	EXXON MOBIL CP	68.21	15.89	10.27%	2.46%	4.29	1.68	39%
WTR	AQUA AMERICA INC	17.29	22.72	12.35%	3.35%	0.76	0.58	76%
UMBF	UMB Financial Corporation	37.94	18.07	12.75%	1.95%	2.10	0.74	35%
BCR	BARD C R INC	78.49	15.72	13.85%	0.87%	4.99	0.68	14%
WMT	WAL MART STORES	52.85	15.30	14.27%	2.06%	3.45	1.09	32%
SRCE	1st Source Corporation	15.83	14.26	14.38%	4.04%	1.11	0.64	58%
WEYS	Weyco Group, Inc.	23.09	23.09	14.82%	2.60%	1.00	0.60	60%
NTRS	Northern Trust Corporation	50.07	13.21	15.58%	2.24%	3.79	1.12	30%
UGI	U G I CP	24.50	10.36	15.89%	3.27%	2.36	0.80	34%
AWR	AMER ST WATER	34.51	21.30	15.96%	3.01%	1.62	1.04	64%
HSY	THE HERSHEY COMPANY	35.29	20.63	16.58%	3.37%	1.71	1.19	70%
SYBT	S.Y. Bancorp, Inc.	21.55	15.96	17.82%	3.16%	1.35	0.68	50%
WGL	WGL HOLDINGS INC	33.70	14.11	17.87%	4.36%	2.39	1.47	62%
NWN	NORTHWEST NAT GAS	44.80	15.51	18.80%	3.71%	2.89	1.66	57%
THFF	First Financial Corporation	31.52	17.22	18.81%	2.86%	1.83	0.90	49%
FDO	FAMILY DOLLAR STORES	28.29	13.65	18.82%	1.91%	2.07	0.54	26%
BRO	BROWN & BROWN INC	17.88	15.56	19.60%	1.73%	1.15	0.31	27%
SJW	S J W CP	21.93	24.42	20.36%	3.01%	0.90	0.66	73%
20 Companies

New to this list is Family Dollar (FDO) and 1st Source (SRCE).

There are several stocks that are pulling back. Bard CR (BCR) fell 6% today after two downgrades and Wal-Mart (WMT) which have been retracing back to the 50 day moving average line. We'll have to see how these name perform going forward.

Art

Stock Checkup: Automatic Data Processing, Inc. (ADP)

noreply@blogger.com (NLObserver Team) — Tue, 15 Dec 2009 23:47:00 +0000

I initiated a write up on Automatic Data Processing (ADP) on July 15th followed with a checkup on the 30th. My original thesis of ADP was that the stock discounted the unemployment rate. The chart below shows the previous peak in the unemployment in the 1980's. Shortly after, shares of ADP peaked in May 1983. The stock didn't trade higher than that level until May 1985, two years follow.

As a result, I believe it may be time for investor to begin unloading shares of ADP. At the current price of $41.90, it is trading 34% above yearly low and 3.6% away from the yearly high. I see this as a 34% risk and 3.6% reward profile, not very compelling argument to buy.

If one which to hold shares of ADP, one will be sitting on a yield of 3.8% (assuming a purchase price of $35). Surely that return is much greater than the average CD account and fractionally higher than treasury, but your principal has returned a whopping 23% (given you sell around $43). While the company can and has raised dividend at a double digit rate (15% CAGR since 1993), I assume that the company may not be able to continue such action unless growth return to the employment market.

I'm not suggesting that investor be short sighted and take any gain that come their way, but I suggest investors to look at the valuation and the technical aspect of the stock. Currently, ADP is trading near its 2007 peak ($46.25). How likely is it that they can better their all-time high? And if they break that level, how much further can it go? See chart below.

As mentioned before, I see ADP as a bargain below $41. At $42.90, it wise to take some if not all of the profit and search for a better opportunity in the new low list.

P.S. Exxon (XOM) and SUPERVALU (SVU) are currently dislike by the street for whatever reason. They may prove to be a better opportunity.

Market Commentary: 12/14/09

noreply@blogger.com (NLObserver Team) — Mon, 14 Dec 2009 22:15:00 +0000

The market continue to move higher. We got a continuous bull market confirmation today at the close. The Industrial closed at 10,501.05, above previous high of 10,471.58. The Transport also closed higher at 4,165.11. This is a classic Dow Theory upside confirmation.

Stocks In Focus

Exxon (XOM) announced that it will acquire XTO Energy (XTO) in $31 billion dollar stock deal. Shares of Exxon fell 4.3% today. It is trading 12% above the 52 weeks low and 16% below the 52 weeks high. Such dislocation may provide a good opportunity to buy Exxon.

Another name that popped up today was Citigroup (C). After announcing that they will pay back $20 billion of TARP by issuing shares, the stock fell 6.3% and is now trading below $4. I've written about the technical buy level for Citi and BofA in September. Citigroup may be a good trade if and only if it trade down to $2.60. Please note that this is purely speculation.

Art

Watch List: 12/11/09

noreply@blogger.com (NLObserver Team) — Fri, 11 Dec 2009 22:00:00 +0000

At the end of the week, my watch list contains 16 companies, same as the previous week. Here are the companies on my watch list as of December 11, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
WTR	AQUA AMERICA INC	17.02	22.37	10.59%	3.41%	0.76	0.58	76%
NTRS	Northern Trust Corp.	48.12	12.70	11.08%	2.33%	3.79	1.12	30%
SVU	SUPERVALU INC	13.39	-0.96	11.40%	5.23%	-13.99	0.70	-5%
CWT	CALIFORNIA WATER	37.60	18.80	12.27%	3.14%	2.00	1.18	59%
THFF	First Financial Corp.	30.13	16.46	13.57%	2.99%	1.83	0.90	49%
UMBF	UMB Financial Corp.	38.59	18.38	14.68%	1.92%	2.10	0.74	35%
UGI	U G I CP	24.33	10.31	15.09%	3.29%	2.36	0.80	34%
WGL	WGL HOLDINGS INC	33.27	13.92	16.37%	4.42%	2.39	1.47	62%
SYBT	S.Y. Bancorp, Inc.	21.40	15.85	17.00%	3.18%	1.35	0.68	50%
XOM	EXXON MOBIL CP	72.83	16.96	17.73%	2.31%	4.29	1.68	39%
WMT	WAL MART STORES	54.65	15.82	18.16%	1.99%	3.45	1.09	32%
WEYS	Weyco Group, Inc.	23.80	23.80	18.35%	2.52%	1.00	0.60	60%
NWN	NORTHWEST NAT GAS	44.84	15.52	18.91%	3.70%	2.89	1.66	57%
BRO	BROWN & BROWN INC	17.79	15.48	19.00%	1.74%	1.15	0.31	27%
HSY	THE HERSHEY CO.	36.02	21.06	19.00%	3.30%	1.71	1.19	70%
BCR	BARD C R INC	83.05	16.64	20.47%	0.82%	4.99	0.68	14%
16 Companies

The new addition to this week list is SUPERVALU (SVU) which got hammered after Kroger (KR) plunged on Tuesday after they reported earning. Removed from this list is Piedmont Natural Gas (PNY), one of my holdings.

Market Commentary

It's been a week since the non-confirmation in the Industrial. Today's closing was an exciting one with both indexes, Industrial and Transport, closing fractionally below its high. I said last week that I need to see the Industrial close above 10,471.58. The index fell short of that by 0.08 today!

It's foolish to call the market direction so we'll have to wait and see.

Some investment opportunities may be in the heavily sold names like SUPERVALU, Kroger, or Fred.

Watch List: 12/04/09

noreply@blogger.com (NLObserver Team) — Fri, 04 Dec 2009 22:19:00 +0000

At the end of the week, my watch list contains 16 companies compared to 17 from the previous week. Here are the companies on my watch list as of December 4, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
WTR	AQUA AMERICA INC	16.81	22.12	9.23%	3.45%	0.76	0.58	76%
WGL	WGL HOLDINGS INC	31.86	13.33	11.44%	4.61%	2.39	1.47	62%
UGI	U G I CP	23.59	10.00	11.59%	3.39%	2.36	0.80	34%
NTRS	Northern Trust Corporation	48.69	12.85	12.42%	2.30%	3.79	1.12	30%
CWT	CALIFORNIA WATER SVC	37.67	18.84	12.48%	3.13%	2.00	1.18	59%
THFF	First Financial Corporation	30.03	16.41	13.19%	3.00%	1.83	0.90	49%
NWN	NORTHWEST NAT GAS	43.75	15.14	16.02%	3.79%	2.89	1.66	57%
WMT	WAL MART STORES	54.24	15.70	17.28%	2.01%	3.45	1.09	32%
PNY	PIEDMONT NAT GAS CO	24.46	15.78	18.28%	4.42%	1.55	1.08	70%
WEYS	Weyco Group, Inc.	23.84	23.84	18.55%	2.52%	1.00	0.60	60%
HSY	THE HERSHEY COMPANY	35.99	21.05	18.90%	3.31%	1.71	1.19	70%
SYBT	S.Y. Bancorp, Inc.	21.83	16.17	19.35%	3.11%	1.35	0.68	50%
UMBF	UMB Financial Corporation	40.31	19.20	19.79%	1.74%	2.10	0.70	33%
BRO	BROWN & BROWN INC	17.92	15.58	19.87%	1.73%	1.15	0.31	27%
XOM	EXXON MOBIL CP	74.25	17.31	20.03%	2.26%	4.29	1.68	39%
BCR	BARD C R INC	83.04	16.64	20.45%	0.82%	4.99	0.68	14%
16 Companies

It wasn't that long ago that biotech / pharma sector wasn't doing anything. The street hated them and I placed them on my watch list. On October 2, 2009, I highlighted 5 names in that sector, especially CAH. Let's take a look at where they are now.

Symbol	Name	2-Oct	4-Dec	%Gain
BCR	BARD C R INC	77.39	83.04	7.30%
ABT	ABBOTT LABORATORIES	49.84	53.78	7.91%
LLY	LILLY ELI CO	32.51	37.39	15.01%
BDX	BECTON DICKINSON CO	67.30	78.05	15.97%
CAH	CARDINAL HEALTH INC	26.25	32.14	22.44%

	Dow Jones Industrial Avg	9488	10389	9.50%
	S&P 500	1025	1106	7.88%

It sure is too late now but if you see sectors that are under perform it may be a good starting point. There are a lot of utilities companies on the list but they rely heavily on interest rate so I urge you to do extensive research on them prior to purchase.

Recent Articles

Market Commentary: 11/30/09

10-for-the-Money... Really?

Market Commentary

I have been waiting for some kind of major upside or downside break from the Transport for quite sometime. Recent read on the market tells me I needed to see the Transport break above the 4,072 level. The Transport closed at 4,101.76 today with strong volume. The Industrial, on the other hand, closed below its recent high. So we have what appear to be a non-confirmation according to the Dow Theory.

But wait, what if you take the November breakout of the Industrial as the first part of the confirmation then one month after, the Transport confirmed that November move? You see, chart reading isn't science but rather an art form. You see, I am confused and not afraid to admit it. It's part of the learning process.

My day-to-day read of the market can shed some light and guidance. The action in the Transport is encouraging for our economy (my commute time to work nearly doubled in the recent weeks). The Industrial appear to be weakening, apparent by late intraday sell-off yesterday. The financial, especially BAC and C. BAC can't move any higher even after the good news of paying back the TARP. To conclude, I see this is a non-confirmation from the Industrial. I will need to see the index close above the previous high of 1,0471.58.

What am I doing?

I currently hold WMT, PPDI, WEYS, and MO. Cash on hand is around 20% of the position so I have exposure to the market even when the read isn't clear. I can do so because I believe that my holding are deeply discounted. MO pays me 8% in annual dividend. WEYS has a pattern of accumulation. PPDI offers me growth opportunity in a hated sector, pharma. WMT was hated by the street when I bought it. I think it's still hated even after the recent run.

Remember, stocks fluctuate together, but prices are controlled by value in the long run.

10-for-the-Money... Really?

noreply@blogger.com (NLObserver Team) — Thu, 03 Dec 2009 22:53:00 +0000

Barron published a special report on retirement called "10-for-the-money" backed on November 23, 2009. The article has since made its way to the mass media such as Yahoo! Finance on December 2, 2009.

It was a well written article with great facts and figures. But I wonder, why did Barron published such article on a late note? The market has already risen 50% from the March low and now Barron comes out recommending big, giant company that doesn't move much after the move itself. Don't get me wrong, these great companies with strong balance sheet and moat to withstand any economic environment. What this article lag (or shall I say misled) is the fact that most of these companies are "fairly priced" or "over priced" if you look at it based on the current earning and NOT next year's estimate.

Example

Intel P/E is around 47. The average P/E over the past 10 years is 20. The article claim that Intel is cheap because their forward P/E is 13, below historical average. Another word, they are cheap because their future profits are expected to be high relative to price. Earning is estimated to rise 100%. This kind of talk is similar to the housing boom when realtors would say "buy it now because you will profit next year".

At the low, Intel was trading less than 15 times actual earning (see chart below). On top of that, their dividend yield reached 4.5%!!! Although the payout ratio didn't really make sense and appeared to be unsustainable, it proved to be a good buy then. I didn't buy it then because of the payout ratio but any great value investor would be all over it.

I guess what I don't believe (may be I don't understand) is that this article didn't say anything about these stocks being "cheap". Surely using forward earning can make it look cheap but why not can go to 2011, 2012, 2013, or 2020 earning and call it cheap. After all stocks are seen as perpetual.

The recommendation, I believe, is based on the sector rotation analysis which is preached by Jim Cramer. I know this well because I read his book twice! At the end of the day, this is "market timing" with fundamental cover up. When you say things like "the rally's second phase, the high-quality stocks will be the drivers" you are assuming that the rally will continue. But wait! if it doesn't "And if the rally fades, they offer downside protection through their dividend income." If this analyst is right, second phase will end, what then will retirees do after buying these 10 or 20 stocks? Dividend? Come on.

Pardon my lingual, but it's a bunch of B.S. to me. The article claim that the retirees need to be in these names but I see the margin of safety is so small. What retirees need are first and foremost, margin of safety. There are three directions stocks can go: up, down, or sideways. If you stocks do not fall and chances of it going up is 50%. But after a 100% run up for some of these stocks, why would investor care for 4% yield. All they'll think about is protecting their 100% gain.

Sorry Barron, this could have been a great article if it was published at the right time. Now it appear to be irresponsible and I'll have to explain to my parents why they shouldn't buy any of these names.

Market Commentary: 11/30/09

noreply@blogger.com (NLObserver Team) — Tue, 01 Dec 2009 01:21:00 +0000

Announcement

*The blog is live at www.artiinvest.com*

Coppock Curve

It's the end of the month and the Coppock Curve isn't holding back. The index rose 65 points from October giving no sign of false buying indicator. At this point, I assumed that the uptrend should continue on. Once again, the Coppock Curve or indication doesn't tell us when to sell. It is a "buy only" indicator but I can extract some more useful information from this indicator. Since August 1932, the average duration between buying signal are 58 months. Secular bull market will have a duration longer than 100 months. Excluding the secular bull market, I have a figure of 46 months average. Adding 46 months to May 2009 and you end up with March 2013. This is purely statistic or a simple guess! May be March 2013 will be another time to buy.

Market

Despite some bad news about Dubai, the Dow continued to move higher. The ability for the market to disregard bad news is an encouraging sign but the high valuation got me wonder how far can this continue. With the major index paying dividend less than 10 years treasury (3%), one has to understand that the market has priced in tremendous amount of growth in the economy. The Industrial uptrend is clear but the Transport could be the joker. At this point, it's all about wait and see.

As for myself, I continue to search for value while acknowledging the market over bought condition. A new company on the radar is Hershey (HSY) the chocolate maker. No extensive analysis is done but I love chocolate so I have to look at it.

Wal-Mart (WMT) went up like a rocket over the past month so I expect some pull back. Look for $52 dollar range to be support. That price range will yield 2% in dividend.

If you want to buy something, make sure it is a good value to you. Analyst use discounted cash flow model to price equity. Small investor such as myself should utilize the same model but to price how much you are willing to pay for a stock. This analysis comes in the form of dividend. Right now I am long PNY, WMT, WEYS, and PPDI. Average yield of 2.80%.

Watch List: 11/27/09

noreply@blogger.com (NLObserver Team) — Sat, 28 Nov 2009 18:16:00 +0000

The Dow closed this week 10,309.92. At the end of the week, my watch list rose to 17 companies compared to 16 from the previous week. Here are the companies on my watch list as of November 27, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
AWR	AMER ST WATER	32.12	19.83	16.55%	3.24%	1.62	1.04	64%
BCR	BARD C R INC	81.86	16.40	18.74%	0.83%	4.99	0.68	14%
BRO	BROWN & BROWN INC	17.62	15.32	17.86%	1.76%	1.15	0.31	27%
CTBI	Community Trust Bancorp	23.00	14.20	2.00%	5.22%	1.62	1.20	74%
CWT	CALIFORNIA WATER	36.26	18.13	8.27%	3.25%	2.00	1.18	59%
HSY	THE HERSHEY CO.	35.60	20.82	17.61%	3.34%	1.71	1.19	70%
NJR	N J RESOURCES CP	35.31	13.43	17.90%	3.51%	2.63	1.24	47%
NWN	NORTHWEST NAT GAS	42.79	14.81	13.47%	3.88%	2.89	1.66	57%
PNY	PIEDMONT NAT GAS CO	23.62	15.24	14.22%	4.57%	1.55	1.08	70%
RLI	R L I CP	49.98	15.67	17.57%	2.16%	3.19	1.08	34%
THFF	First Financial Corp.	28.03	15.32	5.65%	3.21%	1.83	0.90	49%
UGI	U G I CP	23.53	9.97	11.31%	3.40%	2.36	0.80	34%
UMBF	UMB Financial Corp.	39.00	18.57	15.90%	1.79%	2.10	0.70	33%
WEYS	Weyco Group, Inc.	22.34	22.34	11.09%	2.69%	1.00	0.60	60%
WGL	WGL HOLDINGS INC	31.46	13.16	10.04%	4.67%	2.39	1.47	62%
WMT	WAL MART STORES	54.63	15.83	18.12%	2.00%	3.45	1.09	32%
WTR	AQUA AMERICA INC	16.09	21.17	4.55%	3.60%	0.76	0.58	76%
17 Companies

New addition to this week is Hershey (HSY).

Stock Checkup: HJ Heinz (HNZ)

noreply@blogger.com (NLObserver Team) — Sat, 21 Nov 2009 01:42:00 +0000

I have one word to describe HJ Heinz's (HNZ) performance in the past few months, WOW!

Since I wrote about it on April 21, 2009, Heinz has done nothing but moved up. You asked "but so have the market". A rising tide raises all boats and although Heinz under performed the Dow by 7%, one should never complain about making less money. Let's review the data.

Fundamentals

My calculation shows Heinz to be a great value around 5% dividend yield. This placed Heinz at $35 at the time of my article. Fair value estimate is at 3.9% yield or $42. Excluding dividend, that's a 20% upside. Not too bad considering seven months time frame. Fundamentally, the stock has reached its fair value so I would urge you to unload the stock. I sold my holding back in August 5 around $38. If you believe that shares can continue to rise, keep on reading the technical section.

Technicals

This is a text book technical trading stock. After reaching a bottom in March, share rose above 50 day moving average and never turn back. The moving average provided 5 buying opportunities. How long this will last? No one know. The 150 day moving average is still going strong with no sign of turning, another bullish signal. You can assume that if the trend continue, it will go to infinity but that's not going to happen. That is why I recommend selling it and forget about picking the top. If you really want to push it, sell after it fall below 150 day moving average.

P.S.

Cramer recommended it in his next week game plan.

Watch List: 11/20/09

noreply@blogger.com (NLObserver Team) — Fri, 20 Nov 2009 21:46:00 +0000

The market closed at 10,318.16 this week, virtually flat from prior week. At the end of the week, there are 16 companies compared to 18 from the previous week. Again, I added the regional banks to this list last week. Here are the companies on my watch list as of November 20, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
WTR	AQUA AMERICA INC	15.88	20.87	3.18%	3.65%	0.76	0.58	76%
THFF	First Financial Corporation	27.96	15.28	5.39%	3.22%	1.83	0.90	49%
CWT	CALIFORNIA WATER SVC	35.78	17.93	6.84%	3.30%	2.00	1.18	59%
WGL	WGL HOLDINGS INC	31.33	13.11	9.58%	4.69%	2.39	1.47	62%
UGI	U G I CP	23.36	9.88	10.50%	3.42%	2.36	0.80	34%
PNY	PIEDMONT NAT GAS CO	23.01	14.85	11.27%	4.69%	1.55	1.08	70%
NWN	NORTHWEST NAT GAS	42.82	14.82	13.55%	3.88%	2.89	1.66	57%
WEYS	Weyco Group, Inc.	23.17	23.17	15.22%	2.59%	1.00	0.60	60%
AWR	AMER ST WATER	31.94	19.72	15.89%	3.26%	1.62	1.04	64%
BCR	BARD C R INC	80.72	16.17	17.09%	0.84%	4.99	0.68	14%
UMBF	UMB Financial Corporation	39.48	18.80	17.33%	1.77%	2.10	0.70	33%
WMT	WAL MART STORES	54.28	15.73	17.36%	2.01%	3.45	1.09	32%
NJR	N J RESOURCES CP	35.40	13.46	18.20%	3.50%	2.63	1.24	47%
BRO	BROWN & BROWN INC	17.83	15.50	19.26%	1.74%	1.15	0.31	27%
RLI	R L I CP	50.84	15.94	19.60%	2.12%	3.19	1.08	34%
XOM	EXXON MOBIL CP	74.38	17.33	20.24%	2.26%	4.29	1.68	39%
16 Companies

*NOTE* I added selected regional banks to my watch list. If you are interested, I urge you to do an extensive research prior to your purchase. These regional banks have payout ratio less than or equal to 50%. Next year estimates are expected to rise as well.

Market Commentary

My friend at Dividend Inc. expressed his concern over the triple-top formation in the Transport and I couldn't agree more. I'd like to show you what I see. The charts below, you see the Industrial continue on an uptrend. The Transport seems to be stuck in this trading range indicated by the red line. Such indecision from the Transport sends a very negative message to me. For me to be more bullish now, I will need to see the Transport close above 4,072 as mentioned by Dividend Inc.

Video

Warren Buffett and Bill Gates: Keeping America Great (1:04:51)

Recent Articles

Market Commentary: 11/16/09

Today's Transaction

Housing Update

Stock Watch

FHA, The Next Bail Out?

noreply@blogger.com (NLObserver Team) — Thu, 19 Nov 2009 18:25:00 +0000

Yesterday remarks from Robert Tolls, CEO of Tolls Brother, about FHA reaffirmed my view that FHA is a government backed sub-prime lender and is due to fail. Providing a 3.5% down payment and promoting 27.5x leverage ratio is not a rational way to promote home ownership. I mentioned that in early July. Robert worried that “Yesterday’s subprime is today’s FHA” and so should you and I, the tax payer.

FHA-Backed Lending Is a ‘Train Wreck,’ Toll Says

With F.H.A. Help, Easy Loans in Expensive Areas

Stock Watch

noreply@blogger.com (NLObserver Team) — Thu, 19 Nov 2009 17:26:00 +0000

I came across two stocks that I'd like to you keep an eye on for possible future acquisition. These companies are Nacco Industries (NC) and Cephalon (CEPH).

Nacco Industries (NC)

Although Nacco is not trading near its low, it is worth tracking because of the fundamental. There's a head-and-shoulder pattern that occurred this past year. Nacco then broke above $40 in late July and never look back. Look for shares to retrace to $50 and may be $40. I will do more through analysis on this and update you. For now, just keep an eye on it.

Cephalon (CEPH)

A double-bottom at $53.25 area. A double-top is around $60 so any close above $60 will be very bullish. Other technical bullish pattern is the cross over the 150 day moving average. Keep an eye on this name as it could be a possible acquisition.

Market Note

Kulicke & Soffa (KLIC), a dominant semiconductor equipment company reported an impressive earning today but instead of shares soaring, it fell more than 10%. Revenue rose 80%, doubled from previous year, and 112% sequentially. Future expectation were not far from guidance either with company expecting $115 million to $120 million in revenue when the street is expecting $116.5 million. I wonder if the shares are simply overvalue trading at 26x forward earning. That seems like a heavy premium to pay for profit that hasn't been recognized.

Housing Update

noreply@blogger.com (NLObserver Team) — Wed, 18 Nov 2009 17:23:00 +0000

I've written many posts about the housing market and where we are based on my fundamental analysis. Many people have great interest because they've seen friends or family made fortunes during the boom time and hope that there are some treasures to be had once the market hit bottom. The biggest question is, has it?

I believe the most essential thing for investors to consider is value. Think about the property you are interested in and how much do you think price can fall... not rise. If the downside risk is less that upside risk, you buy. But how to determine the downside? I've compiled two data point that might shine some lights.

Coppock Indicator

Case-Shiller release housing data monthly. I have placed the data into a what's known as a Coppock Curve. This indicator allows us to extract the soul-called "risk" out and place a long-term buying indicator in. I first used the Coppock Curve in May 2009 to indicate a possible turn in the market. Looking back this has to be one of the greatest turn in history. The chart below shows a buy indicator came in May 2009 for San Francisco region

As a low-risk, long-term buying indicator, the Coppock Curve serve not to pick the bottom but indicate when it may be safe to buy. This is the first sign that home price may have reached a bottom.

Long-Term Cycle

Every market has a cycle and real estate is no exception. I came across Roy Wenzlick, a great real estate analyst. He developed a theory that real estate has a 18.3-year cycle. The most prominent thing about long-term cycle is that people tend to forget the past but focused on the future. Many of us have seen great wealth built on "new hopes" of housing for everyone with notions that housing will keep going up forever. Never have we stopped to think, if all of us own a house, who then will bid up the house we own and inflate the price further. You see, price is a function of supply and demand. When everyone own, there are no more demand. Thus the cycle of boom and bust is created. The chart below shows that the relative low was in 1973. If you add 18.3 years to 1973, you end up with 1991.3. Add another 18.3 years to that and you reach 2009.6 (July 2009). Precisely where housing market appear to have reached bottom.

This is no magic. Wenzlick lived from 1894-1989 and yet his cycle analysis was able to provide us with some timelines.

Conclusion

I come back to the same thesis that housing isn't an investment or saving. You can't buy a house and get rich because it doesn't provide cash flow (unless it is an investment property). I also don't believe that housing will make a "V" bottom. The statistics and analysis provided above is an added evidence from an unconventional view that housing has bottomed. Whether it has or has not depend on the region and city but in aggregate, the high risk appears to be out of the picture. I too purchased a brand new home two months ago, not based on this analysis or data but purely on affordability. The government provided a $8,000 down-side risk while low interest rate provided a hedge against inflation. All the more reasons for you to consider owning a home.

Today's Transaction

noreply@blogger.com (NLObserver Team) — Tue, 17 Nov 2009 21:41:00 +0000

After the market turned bullish yesterday, I decided to dip my toe in the market. I purchased Pharma. Products Dev. (PPDI) and Weyco Group (WEYS). My cash position is down from 50% to 20% of total portfolio.

Market Commentary: 11/16/09

noreply@blogger.com (NLObserver Team) — Mon, 16 Nov 2009 22:32:00 +0000

Despite a bearish call from one of the most prominent analyst, Meredith Whitney, the market continued higher. The Dow pushed higher and closed at 10,406,96. The Transport didn't lag this time and closed its yearly high of 4,046.50. This beat the last 4,045.11 that I've been watching. This mean the upward trend should continue. Although I see the upward momentum to continue, I can't ignore another Dow Theory view from a friend at Dividend Inc. He is watching the 4,072 level to be the bullish mark.

Because of the bullish trend confirmation, I suggest readers to revert to my watch list for potential buy. My personal favorites on that list are Weyco (WEYS), Wal-Mart (WMT), Monsanto (MON), Bard CR (BCR), and Exxon (XOM). For those with higher risk profile, I suggest you look at the Nasdaq 100 watch list.

Buffett Added More Wal-Mart

Some of you may know that I bought Wal-Mart in September. Today news from CNBC was most welcomed as Warren Buffett announced he nearly doubled his share counts in Wal-Mart during the summer. Share count rose from 19.9 million shares to 37.84 million shares (90% increase). In addition to Wal-Mart, he also bought more Exxon.

Watch List: 11/13/09

noreply@blogger.com (NLObserver Team) — Fri, 13 Nov 2009 21:57:00 +0000

The market closed above 10,000 for two consecutive weeks at 10,270.47, up 2.4% from prior week. At the end of the week, my watch list expanded to 18 companies compared to 17 from the previous week due in part because of an addition of regional banks. Here are the companies on my watch list as of November 13, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
THFF	First Financial Corporation Ind	27.23	14.80	1.91%	3.31%	1.84	0.90	49%
WTR	AQUA AMERICA INC	15.84	20.84	2.92%	3.66%	0.76	0.58	76%
CWT	CALIFORNIA WATER SVC	35.28	17.82	5.34%	3.34%	1.98	1.18	60%
PNY	PIEDMONT NAT GAS CO	22.86	14.75	10.54%	4.72%	1.55	1.08	70%
WGL	WGL HOLDINGS INC	31.89	13.34	11.54%	4.61%	2.39	1.47	62%
WEYS	Weyco Group, Inc.	22.48	22.48	11.79%	2.67%	1.00	0.60	60%
UGI	U G I CP	23.64	9.81	11.83%	3.38%	2.41	0.80	33%
NWN	NORTHWEST NAT GAS	42.86	14.83	13.66%	3.87%	2.89	1.66	57%
UMBF	UMB Financial Corporation	38.28	18.23	13.76%	1.93%	2.10	0.74	35%
WMT	WAL MART STORES	53.20	15.60	15.03%	2.05%	3.41	1.09	32%
MON	MONSANTO COMPANY	73.58	19.36	15.93%	1.44%	3.80	1.06	28%
NJR	N J RESOURCES CP	34.99	13.30	16.83%	3.54%	2.63	1.24	47%
BCR	BARD C R INC	80.76	16.18	17.15%	0.84%	4.99	0.68	14%
XOM	EXXON MOBIL CP	72.47	16.89	17.15%	2.32%	4.29	1.68	39%
AWR	AMER ST WATER	32.33	23.95	17.31%	3.22%	1.35	1.04	77%
RLI	R L I CP	50.60	15.86	19.03%	2.13%	3.19	1.08	34%
HGIC	Harleysville Group Inc.	31.21	13.11	19.62%	4.17%	2.38	1.30	55%
SYBT	S.Y. Bancorp, Inc.	21.90	16.22	19.74%	3.11%	1.35	0.68	50%
18 Companies

Market Commentary: 11/12/09

noreply@blogger.com (NLObserver Team) — Thu, 12 Nov 2009 21:45:00 +0000

It's hard for me to get excited about the market when I see headlines bombarded with layoff announcements. Yesterday Applied Materials (AMAT) beat the street by a wide margin. They reported an EPS of $0.10 per share compared with an estimate of $0.03. That is 233% upside surprise! Amazing how the consensus can be so wrong on the largest chip equipment suppliers. What's more important is that Applied plan to cut up to 1,500 jobs worldwide. Other tech companies are planning to reduce head counts as well. Here is the list of companies.

Adobe - 680 jobs
Electronic Arts - 1,500 jobs
Sprint - up to 2,500 jobs
Microsoft - 800 jobs
RealNetworks - 70 jobs
AOL - 100 jobs
Sun Microsystems - 3,000 jobs
Blue Coat - 150 jobs
Lexmark - 825 jobs
Nokia Siemens - potentially north of of 5,000 jobs
Applied Materials - up to 1,500 jobs

I assume that these are considerably high paying positions. We'll have to see if the market can show any sign of weakness despite such bad news to the public.

That aside, the market continued to be strong BUT the upward trend is still in question. Dow stayed above the previous peak while the Transport have yet to confirm that move. I won't predict what the market will do and will wait and see. If the confirmation comes, I will buy quality company at or near its low.

Art

Market Commentary: 11/09/09

noreply@blogger.com (NLObserver Team) — Mon, 09 Nov 2009 21:19:00 +0000

The Dow rallied past its previous high of 10,092.19 and closed at 10,226.94. This is the first piece to the upward movement confirmation. The second part lies in the Transport which has to close above 4,045.11 according to my reading. Right now, the Transport only need to move up 3.2% to reach that level. We'll have to wait and see if the two sign can converge. If and when they do, I'll be buying selected companies from my watch list.

The Dow P/E is 17.38 and yield 2.77%. I'm not sure if this is the right valuation for a long-term investor.

My Transaction

I closed my option position today with a big loss. Obviously I was wrong about the Dollar trade, what's more important was that I wager too much money into it. I wasn't discipline enough and as a result my most of my gains from this year nearly dissipated. Net loss of 23% was the result. I prepared myself mentally for the loss but the reality is still hard to swallow. You can learn a lot from someone else but this time I'll have to learn from my own.

Art

Watch List: 11/06/09

noreply@blogger.com (NLObserver Team) — Fri, 06 Nov 2009 21:59:00 +0000

The market is still battling the 10,000 mark and ended the week at 10,023.42, up 3.2% this week. At the end of the week, my watch list shrank to 17 companies compared to 20 from the previous week. Here are the companies on my watch list as of November 6, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
WTR	AQUA AMERICA INC	16.16	20.72	5.00%	3.59%	0.78	0.58	74%
CWT	CALIFORNIA WATER	36.32	18.34	8.45%	3.25%	1.98	1.18	60%
MON	MONSANTO COMPANY	69.14	18.19	8.93%	1.53%	3.80	1.06	28%
WMT	WAL MART STORES	51.25	15.03	10.81%	2.13%	3.41	1.09	32%
PNY	PIEDMONT NAT GAS	22.94	14.80	10.93%	4.71%	1.55	1.08	70%
WEYS	Weyco Group, Inc.	22.63	20.95	12.53%	2.65%	1.08	0.60	56%
BCR	BARD C R INC	78.39	15.71	13.71%	0.87%	4.99	0.68	14%
UGI	U G I CP	24.14	10.02	14.19%	3.31%	2.41	0.80	33%
NWN	NORTHWEST NAT GAS	43.09	15.61	14.27%	3.85%	2.76	1.66	60%
WGL	WGL HOLDINGS INC	33.23	13.90	16.23%	4.42%	2.39	1.47	62%
XOM	EXXON MOBIL CP	72.58	16.92	17.33%	2.31%	4.29	1.68	39%
CAH	CARDINAL HEALTH	29.50	9.25	18.62%	2.37%	3.19	0.70	22%
NJR	N J RESOURCES CP	35.59	13.53	18.83%	3.48%	2.63	1.24	47%
RLI	R L I CP	50.60	15.86	19.03%	2.13%	3.19	1.08	34%
FPL	F P L GROUP INC	49.76	12.05	19.96%	3.80%	4.13	1.89	46%
PGN	PROGRESS ENERGY	37.62	14.53	20.00%	6.59%	2.59	2.48	96%
T	AT&T INC.	25.93	12.87	20.94%	6.32%	2.02	1.64	81%
17 Companies

Something to note, I've taken Shenandoah Telecom (SHEN) out because of an annual dividend payment. I feel that it offer less cushion for myself. I replaced this company with Monsanto (MON) which appear to be on its way to becoming part of the Dividend Achiever. Take a look at this report for more on MON.

Recent Articles

Retrace the March Low

Lighten Up My Portfolio

Wrong Interpretation on Dow Theory

Market Commentary: 11/04/09

Market Commentary: 11/05/09

My position in UUP Call is under water (-15%) in just one day. That is how harsh the option market can be. You will know how well or bad I do on that position by next week.

Context from Bloomberg's article today.

"Buffett built Berkshire into a $150 billion company over four decades by buying out-of-favor stocks and family businesses."

Market Commentary: 11/05/09

noreply@blogger.com (NLObserver Team) — Thu, 05 Nov 2009 22:25:00 +0000

I went long the US dollar (UUP) today through a Call option ($22 strike expiring March 2010). This action was taken because of such bearish sentiment in the dollar along with the bearish sentiment in the market. My thesis is that as the market soften, investors and traders will turn to the safer asset which is the dollar. If I am right, I will be rewarded. If I am wrong, my leveraged trade should go heavily against me.

As for the market, Bob Prechter guessed in the video one (below) that the market should bottom somewhere around 2014 and 2016. This notion is similar to the one I have which I expressed in my article, Secular Bear: Understand the Market. I suggest you re-read this article.

1.) Bob Prechter: Bear Market Rally Is Over, Stocks Headed For New Lows

2.) Stocks, Commodities Topping; Dollar Set for Major Rally, Robert Prechter Says

3.) Jim Rogers with Lindsay Whipp of the Financial Times: Brief Dollar Rally

Art

Market Commentary: 11/04/09

noreply@blogger.com (NLObserver Team) — Wed, 04 Nov 2009 21:48:00 +0000

A divergence today in the Industrial and the transport is very discouraging. The Transport was on a continuous decline thorough out the day and ended the day 56 points (1.5%) lower. This is after Buffett announced an all out bet on America by buying up Burlington Northern Santa Fe (BNI). The Industrial stocks opened strong and reached 9,900 then selling came in just one hour prior to the close bringing the index down more than 100 points from the peak.

This poor daily action confirmed my belief that the market is trying to tell us something. I remember seeing similar pattern during the 2008 and early 2009 sell-off. I am not suggest an all-out selling but simply be acknowledge this pattern. Below are today's movement for both averages.

Stay light on your feet. If Buffett net worth declined 75%, he's still a millionaire. If my net worth declined 75%, I'm toasted. I assumed most of you aren't in the Buffett camp and thus you should protect your investment now not try to grow it.

Art

Wrong Interpretation on Dow Theory

noreply@blogger.com (NLObserver Team) — Tue, 03 Nov 2009 23:25:00 +0000

The media are constantly wrong on their interpretation of the Dow Theory. Take a look at this video from today Fast Money show.

One should pick up the following books for a full understanding of the Dow Theory.
The Dow Theory
Dow Theory Today

Lighten Up My Portfolio

noreply@blogger.com (NLObserver Team) — Tue, 03 Nov 2009 17:40:00 +0000

As I spoke yesterday about the market, I took action today and sold three of my holdings. Those are Regional Banking ETF (KRE), Automatic Data Processing (ADP), and Paychex Inc. (PAYX). Let's go over why I sold KRE.

On 10/5/09 commentary, I bought KRE thinking that the worse would be over for the regional and assume that the key technical level would hold. That assumption didn't hold true. The commercial real estate which are the large part of regional banks' assets are under stress still. As Wilbur Ross sees 'Huge' Commercial Real Estate Crash ahead. The chart below shows the buy and sell pattern.

At the end of today, I'll be holding Piedmont Natural Gas (PNY), Wal-Mart (WMT), and Altria (MO)

Art