Learning point

Sometimes the external measure is more important than earnings (see CHK).

--Brad

KBH and CHK sold

I simply took some profits on the recent KB Homes run. I still have a position and I'll buy more as it dips.

I wish I had taken profits on Chesapeake Energy. With the company's last quarter this could feasibly be a $15 stock. Long term, I think the thesis of more drilling and Nat-Gas as an expanded alternative fuel source works. But I'm cutting my losses and I'll climb back in as Natural Gas stops its decline.

I'm still on the sidelines with Wachovia Bank (WB). I missed the bottom and a quick double, but I have no reason to believe it won't dip back towards $9.00/share and stay there. The balance sheet is simply too convoluted for me.

--Brad

KBH - Bought More

This is where KB Homes bottomed earlier (around $15/share), so I'm averaging down. My original thesis was that KBH would be a long term buying opportunity. So, with my paltry sums of cash I'm collecting shares.

According to the 2nd quarter conference call, they are still reducing inventories and stockpiling cash. I still believe this is the best strategy for the big home builders during this downturn.

lessons: I did get started too early.
I should have sold when I was up 5%, and bought back in now.

--Brad

CHESAPEAKE ENERGY (CHK) - Bought

Let the decline begin! I have brought my bad luck to the energy sector now, so everyone can blame me when it hits bottom. You're welcome.


Brad

Schering-Plough (SGP) - Bought

The news media is the main decline for this stock, which equals buy. The Vitorin press did not say the drug was bad, it said it may not do all the things advertised. So, listening to the conference calls, the execs are firm in their belief the drug will be redeemed. Until then, look at all the different businesses SGP is in: Claratin, Dr. Sholls,... More importantly than any of it, look at their pipeline of drugs submitted for approval. No other drug company is that loaded, and isn't that what Pharma company stocks trade on anyway? Like my buddies in REO Speedwagon, I'm "riding the storm out" and going long with Schering-Plough.

--Brad

Oh, they're pretty good on cash too. So they have that going for them.

WB - Sold

Dumped Wachovia today for a break-even. After cutting the dividend and releasing more shares, thus reducing EPS for my shares, I decided to keep the homebuilder and lose the bank. Time to find more buys.

--Brad

Energy

It's time to get an energy stock. Here's a problem I haven't encountered yet, too many good companies. So I'm going to start the energy play in Natural Gas. Why? Because I don't think these will get annihilated if the Democrats control both the Executive and Legislative branches of government this winter. I have no hard evidence that either will occur, I'm simply taking one of Descartes reasons to believe in God (If He does not exist, then death is like a long nights sleep, no big deal. If He does exist, then you don't want to be on the opposite side. But I digress.) So here goes...

Apache (APA): Stock Price = $139; P/E = 16.6; Dividend = $0.15/share; Sales Growth = 20%; Insider Activity = massive selling in the past 6 months.
Verdict: pass on it

Anadarko (APC): SP = $67; P/E = 8.4; Div = $0.09; SG = 55%; IA = very little activity in either direction. Random note: Saw an interview with the CEO and he seems like a straight shooter who gets things done.
Verdict: in the running

Atlas (ATN): SP = $41; P/E = 18; Div = $0.57; SG = 80%; IA = none
Verdict: pass on it. Is the dividend too good?

Chesapeake (CHK): SP = $50; P/E = 19; Div = $0.0675; SG = %6.5; IA = massive buying
Verdict: in the running

Marathon Oil (MRO): SP = $49; P/E = 8.6; Div = $0.24; SG = -0.4%; IA = lots of "awards" very little buy and sell
Verdict: pass on it

XTO Energy (XTO): SP = $67; P/E = 19; Div = $0.12; SG = 20%; IA = some selling, mostly exercise options.
Verdict: in the running

Finalists: APC, CHK, XTO

The winner(s) will be announced when (1) money is transfered (2) on a pull back.

--Brad