Hello to all Blue Collar Investors. On May 15, Jim Cramer welcomed Bucyrus International CEO Tim Sullivan to the show. Cramer has been bullish on (BUCY) for all you home gamers, for a while now. And he’s been right: The stock is up over 28% to $29.14 since his call on Dec. 9, 2008, and up over 84% since he reiterated the call on March 4 of this year! Cramer thinks this up-trend will continue. 

First, before we get into what the CEO thinks, let’s see if this Cramer stock pick is good for our Blue Collar System:  

Fundamentals: 

IBD SmartSelect Scan is all Green, and a go! 

Scouter rating of 8 

The E/R is due 7/23, all clear so far. 

Technical’s / Chart:

_______________ 

BUCY as of 6-05-09

                                                    “Food for Thought” 

What does Olive Garden, Red Lobster, and Long Horn steakhouse all have in common? They are all under the parent company, Darden Restaurants (DRI), one of Cramer’s 3 best restaurant picks for all you home gamers.

Besides the fact that Cramer wore a bib and waved a large lobster around the set to make his point, there are many reasons to own Darden. First, restaurants don’t have the luxury of federal aid, which means that the recession has thrown this industry into a Darwinian fight for survival and only the strong survive. Darden is keeping prices low to snatch up market share. Another positive is talent retention, usually a launching pad for key managers to further their careers, but in today’s environment they’ll stay put because recession’s mean fewer job opportunities.

Let’s run (DRI) through our Blue Collar system:

IBD diagnosis A+

Technical rating A-

Fundamental rating A-

Attractiveness rating A

Group’s technical B+

2nd out of 63 stocks in the Retail Restaurant Industry

E/R due on 3/19

Scouter rating of 6

So far so good!

Let’s take a look at the chart:

DRI 1-31-09

 - The 20-d ema is trading just above the 100-d ema.

- Price bars are above the 20-d ema.

- MACD is positive

- Stochastic Oscillator is uptrending except for the past 2 days.

- MACD Histogram is neutral.

I would consider this a mixed to slightly positive technical picture and therefore favor I-T-M strikes.

 

Let’s sell a covered call:

- Buy 100 x DRI @ $26.22

- Sell (1) $25 call (I-T-M) @ $2.20 for a 3.9% 3-week return (220 – 122/2500) and a 4.7% downside protection (122/2622). I love this country! Note that we favor an I-T-M strike due to the mixed technical picture and volitile market conditions.

 

More reasons to own DRI per Cramer:

Commodity prices are down. Beef and chicken are cheaper and this company will soon see those benefits when the higher priced contracts roll over. Another reason is that media costs are declining. Problems experienced by the larger advertisers such as the automakers have dramatically reduced costs, which is good news for restaurants which thrive on national ad campaigns. Lastly, these restaurants are affordable. Olive Gardens offers never ending pasta bowls, unlimited soup, salad, and breadsticks (don’t throw away that gym membership!). Even during a recession a family can eat out without breaking the bank.

 

Thanks to all BCIs,

Tony C.

 

Market Tone:

January has been a down month for the market and that is reflected in the charts of the S&P 500 and the VIX. Please note, however, that the S&P 500 is still up 10% from its November lows and the VIX is down 50% from its October highs. To me that means that the big picture is not that terrible and a base is forming. Here are the charts:

S&P 500 1-31-09

 

VIX 1-31-09

_________________________________________________________

Blue Collar Mission Statement

1- Become CEO of your own money

2- Become financially independent

___________________________________________________________

Never before have the convictions of the Blue Collar philosophy become more meaningful as they have this past week with the arrest of Bernie Madoff for what may become the biggest fraud in the history of Wall Street. Madoff, now being called “the Thief of Wall Street”, engineered a $50 billion ponzi scheme that has had a rivetting impact on families and charities from Palm Beach Florida to Europe and beyond. How could this have happened, how could it have been avoided, and what are the lessons learned?

Background:

Madoff was a self-made man. His roots began on Long Island, NY as a life guard and sprinkler system installer before entering the world of finance. His reputation grew as a competent, ethical, and philanthropic pillar of the Wall Street community. He was named Chairman of the Nasdaq as his reputation reached impeccable heights. Everyone trusted Bernie. His firm, Bernard L. Madoff Investments Securities LLC (“BMIS”) ,consisted of two main branches:

1- The broker-dealer section which traded stocks for their own accounts. This part of the business has not been implicated in any wrong-doing.

2- The money management section where he oversaw tens of billions of dollars of client assets and where he ran his ponzi scheme.

What is a Ponzi Scheme?:

Named after Charles Ponzi wherein money is taken from new investors to pay off longer term investors. Charles did his scam by touting a postage stamp that could be used anywhere in the world. He guaranteed investors to return double their money in 90 days. As new money poured in, the former group of investors were paid off and the scam snowballed. In much the same way, Madoff claimed consistent returns of 12% annually in any and all market conditions. He paid off investors with the tremendous flow of new money coming into his firm. This worked great for many years until the market hit its current downturn and people started pulling out of the market and no new money flowed in. The gig was up!

How did he claim to accomplish these returns?

He used what is called a split strike conversion strategy which is a fancy term for an option collar: He buys a stock from the S&P 100 (like Coke or AT&T), then sells a call option and buys a put option on that stock. This is vaguely similiar to what we do except he also buys a put (like getting insurance but lowering potential profit). This strategy works in an uptrending market but old Bernie claimed success in all market conditions. His trading was non-transparent and never checked by the regulators because everybody trusted Madoff.

Warning Signs and Regulators:

In 1999, Frank Casey, Fortune USA President, along with his fund managers ran a “dummy portfolio” using the split strike conversion strategy. He came to the conclusion that the claimed results were fraudulent and reported this to the SEC in 2000, 2002, 2005, and April of 2008! He backed these allegations with the fact that the volume of options traded could NOT possibly support the claims Madoff made of buying and selling options on tens of billions of dollars of S&P 100 stock. He also complained about the lack of transparency in Madoff’s portfolio. One of Casey’s associates wrote to the SEC: “The SEC should burn in hell for allowing this to blossom from a $10 billion ponzi scheme in 1999 to $50 billion one today”.

The SEC missed many red flags. First of all, Madoff had an impeccable reputation. Many former SEC officers become part of Wall Street. Arthur Levit, former SEC Chairman even asked Madoff to help develop policy for the SEC! How could anyone doubt this man? Furthermore, SEC resources are limited and cases need to be prioritized. They tend to focus on high risk investments like derrivative trading, not the more conservative system of Madoff (or so it seemed).

Christopher Cox (this man is toast!), the current SEC Chairman admits shock over the lack of follow-up with regards to the allegations made from 1999 to the present.

Who got hurt?:

This is the really sad part. So many hard working people trusted their life savings to this monster/sociopath. Members of the rich and famous set like Steven Spielberg, Frank Lautenberg, Mort Zuckerman, and many of their charities all got hooked in. In addition, many pension funds gave a bulk of their cash for Madoff to invest for them. Outside the USA, institutions such as the Royal bank of Scotland and the Korea Life Insurance Company were also severely impacted. First we learned that we could not trust AIG, then Lehman, now this. Who can we trust? How do our global financial partners feel about regulation in this country?

Many people have been effected and may not know it yet. Those who invested in Fund of Funds may have had money held by Madoff. These funds use as an investment strategy investing in other funds rather than investing directly themselves. Many of these Fund of Funds gave a bulk of their money to Madoff and their investors will feel the loss as well.

Lessons learned:

Everyone who knows Bernie Madoff is shocked. Wall Street, the SEC, stockbrokers, friends, relatives, you name it. Where does that leave us, the average Blue Collar Investor? How can we figure out who to trust if all these people can’t? We can’t either!

How can this happen?

This is probably a whole article unto itself. Suffice it to say that it probably is some combination of lack of education (I know nothing about the stock market), laziness (I just can’t take the time), and greed (It doesn’t sound reasonable but I’m in!). Most of all it takes a brilliant mind tarnished with sociopathic tendancies. Look at all the good people this man hurt.

The Blue Collar Philosophy:

By becoming CEO of your own money we would never entrust all our money to one person. We don’t care about reputation only what makes common sense. Even if we did give some of our hard-earned money to Madoff for his crime spree, it would have been a small portion because diversification is so important in our investment portfolio. We would never, ever give all our money to one guy! I believe in diversifying asset classes, stocks, and cash. If you get hurt in one area the others can pick you up. I’m all for mastering a particular strategy, after all that’s what I do when I sell covered call options. My son, Craig, gave me a great analogy in this regard: He calls it “learning the move”. When he was in high school, Sega Genesis was in vogue. He played an ice-hockey nintendo game where you would take the puck in on the backhand and then as you approached the goalie, switch to the forehand and you could score on anybody. He learned the move and was successful most of the time. Our move is selling covered calls or whatever move you choose. It is much more prudent to learn the move than to fall victim to the Bernie Madoffs of the world.

———————————————————————————–

Jim Cramer Makes Us Some Blue Collar Money; Vol. IX by Tony Covino

“Let’s Make Some Bread”

Hello all Blue Collar Investors!

On December 11^th Jim Cramer had the CEO of Panera Bread (PNRA), Ronald Shaich, on his show. He told Cramer that despite a tough 2008, Panera Bread is up 34 %. Comp sales have been in positive territory for the first three quarters and said this quarter will be the same. Earnings are expected to jump between 46 % and 54 %. “We’re not walking away from that guidance”, Shaich said.

Panera’s also sitting on $31 million in cash and should generate $ 70 million in free cash flow next year. That’s a great cushion to get through this recession, but Shaich is focused on growth. “A recession is probably the greatest opportunity you can have”, the CEO said, “to build a company and to build a fortune.” This sounds to me like this CEO has tremendous faith in his company!

Let’s run this company through our Blue Collar fundamental checks:

• Overall : A
• Technical: B+
• Fundamental: A –
• Attractiveness: A+
• Group Technical: C
• Overall rank: # 1 out of 63 stocks
• Earnings report due on  2/10/09(not confirmed)

Now let’s look at the chart:

PNRA Chart 12-19-08

The 20d EMA is just above the 100d in an uptrend rebound

• The OHLC bars are trending above the 20d EMA
• The MACD is above its trigger line and both are above the zero line
• The MACD Histogram is above the zero line (above trigger)
• STO is at 80 and slightly below its trigger line
• Heavy volume around December 3^rd pushed the stock price up

If we were to sell an option in a normal market we could sell the Jan $55 call @ $3.20 for a 1-month 5.9% return OR  (more conservatively) sell the Jan. $50 call @ $6.30 for a 3.3% 1-month return with a phenominal 8.5% downside protection!

In closing:

Panera Bread is seeing a benefit of lower commodity prices both for itself and its customers. The company’s food costs are down and that will increase company margins. We have lower gas prices and that means customers are more willing to spend a night out with that extra money in their pockets. Cramer calls Panera Bread, “a winning stock with winning management and that’s exactly what you are looking for in this difficult environment.”

Thanks and I hope to hear from you all,

Tony C.

——————————————————————————————————————Last Weeks Economic News:

On Tuesday, the Federal Reserve Board announced that it would lower the federal funds target rate from 1% to a range of 0% to 0.25%. It also indicated its willingness to purchase mortage-backed and Treasury securities. This sparked a market rally on tuesday wherein the S&P 500 rose 5.1%.

Other news wasn’t as positive. The Consumer Price Index (CPI) had its largest monthly drop ever, indicative of the depth of the recession we are experiencing. Steep declines in housing starts and industrial production also added to the negativity. For the week, the S&P 500 rose 0.9% for a year-to-date return of -38.15%.

I really hate ending my articles on bleak economic news sooooooo…..the Yankee signed Sabathia and Burnett so their pitching staff is looking really strong for 2009!

Use the “comments” link from this article to add your opinions and suggestions.

Best wishes,

Alan (alan@thebluecollarinvestor.com)

]]> http://www.thebluecollarinvestor.com/blog/%e2%80%a2the-bernie-madoff-ponzi-scheme-a-validation-of-our-blue-collar-philosophy-plus-tony-c-checks-in-on-cramer/feed/ 5 http://www.thebluecollarinvestor.com/blog/jim-cramer-makes-us-some-blue-collar-money-vol-4-plus-high-volume-stocks-unveil-gems-by-tony-covino-and-alan-ellman/ http://www.thebluecollarinvestor.com/blog/jim-cramer-makes-us-some-blue-collar-money-vol-4-plus-high-volume-stocks-unveil-gems-by-tony-covino-and-alan-ellman/#comments Sun, 03 Aug 2008 11:16:08 +0000 admin http://www.thebluecollarinvestor.com/blog/jim-cramer-makes-us-some-blue-collar-money-vol-4-plus-high-volume-stocks-unveil-gems-by-tony-covino-and-alan-ellman/ M’M, M’M Good

Campbell Soup Company (CPB)

Hello fellow Blue Collar Investors! In Alan’s last article “Earnings Reports Are Telling Us To Buy Stocks!” he mentioned that many companies are reporting better than expected earnings reports or positive surprises. Campbell Soup Company (CPB)  fits this trend. As noted by J. Cramer (CPB) “is down more than 35% over the past 10 years and has missed four straight quarters before finally pre-announcing that 2008’s earnings should come out on the high side of previous estimates.” Also, as Cramer always tells us, “institutional money drives the stock market and as the flight to safety continues, there’s a good chance that the Big Boys will move into this stock and drive it upwards. Our Blue Collar Investor Checklist:

Overall:                        A

Technical:                   A-

Fundamental:            B

Attractiveness:           A

Group Technical:       B

Industry:                     Food Prep.

Scouter rating:          9

Also, if you look at the technicals as of July 7th, this equity has been in an uptrend with positive technical indicators. Check early July in the chart below and note that there was a positive MA Crossover with the OHLC bars remaining above the 20-d ema. This was confirmed by a bullish MACD crossover and stochastic crossover, all on high volume. CPB has been on the rise ever since.

This is an example of a stock that is considered quite safe in this volatile market. Since it lacks extreme volatility the option returns will be lower than other equities on our watchlist. Given the current market environment, see if you feel that this security may be right for you. Here is an example of a trade you could have made on July 31st:

Buy 100 x CPB @ $36.38 = $3638 investment.

Sell 1 x 9/$37.50 @ $80

This is a 2.2%, 6-week return or 19% annualized.

If CPB appreciates to the strike price by 9/08, we earn an additional $112 or $192 total for the 6 weeks. This represents a 5.3%, 6-week profit or 45% annualized. Not bad for such a great performer.

Here are some additional key points for your consideration:

 1- It is a recession proof stock (turnaround play with minimal downside as per Cramer).

 2- Grain costs are down and increasing sales prices are boosting revenues.

 3- Expansion overseas to China and Russia.

4- Management is consistently buying back shares indicating its faith and confidence in the company’s future.

5-Could be bought by a large firm that deals in Euros (due to the weak dollar, the company is considered cheap).

6- Ranked #7 out of 46 stocks in the industry (THS is rated #1 and passes all our system criteria but was NOT mentioned by Cramer).

7- The earnings-per-share rank (a company’s earnings performance of a period of years is combined into a single indicator so it can be used to rank earnings momentum against all other companies) is in the 86th percentile.

Remember that Cramer advises: “Buy and Homework”, not  “Buy and Hold”. Surely this is a philosophy we Blue Collar Investors subscribe to.

Hope to hear back from you all!

Tony C.

High Volume Stocks Unveil Gems:

Every day on the IBD’s Website homepage is a list entitled “Stocks on the Move”. This list displays equities that have gone up in price that day on high volume. As you know, this buying pressure means that the institutional investors are taking a position in these equities. Since it is difficult for the big boys to take their full positions at one time (for fear of driving the price up too rapidly) we can take advantage of this knowledge and take our full positions.I screen out stocks that have reported earnings that day because that could represent a one-time volume spike resulting from the ER. All others can be run through our system. I checked this list on Wednesday and Thursday and came up with the following equities:
ANSS

TMO

ACN

WBSN

Check them out and see if they make your watchlist.

I encourage comments and suggestions on the comments link of this article or contact me directly @ :

alan@thebluecollarinvestor.com

*****SPECIAL NOTICE*****

I am forming a VIP List for EARLY NOTIFICATION of my next seminar Series in New York this fall. This will occur when I return from a series of presentations that I will be doing for Norwegian Cruise Lines in September. Since there is limited seating and all previous seminars have been sold out, those on the VIP list will have an opportunity to register prior to the information being posted on this website. Simply send  your email address and other contact information to:

alan@thebluecollarinvestor.com

My best to all,

Alan

Our country has no energy plan. In the past and currently we have been buying foreign oil and as our needs increased so too have our imports. 700 billion dollars flow out of this country every year to pay for these foreign imports. Much of this money is going to our enemies who are funding wars against us and buying up assets within the United States. To throw salt in the wound, oil prices have now increased to the point where it is crippling our economy. I cringe every time I hear one of our politicians pleading with foreign countries to increase their production of oil. When will they learn their lesson. It’s like the parent who is screaming at his children to behave as their conduct gets worse and worse. It’s time for another approach.

I recently became aware of an energy plan that makes a world of sense to me and I’d like to share it with you. I’ve done quite a bit of research on this plan because I think it is that important. The creator of the plan is T. Boone Pickens, the legendary oil investor, who I have alluded to in previous articles. He is the CEO of BP Capital.

The goal of his plan is not to increase foreign oil production but to become independent of these foreign countries. Here are the facts on oil importation to the US:

- 1970: we imported 24% of our energy needs.

- 1991: we imported 42% of our energy needs.

- Today: we are importing 70% of our energy needs.

Where are our leaders? As Dr. Phil says: “This story needs a hero”.

Boone Pickens to the rescue. His plan to knock down that 700 billion dollar figure and keep those American dollars right here in the USA starts with wind energy. The building of new wind generation facilities can produce 22% of our nations electricity. He claims that the United States is the Saudi Arabia of wind power. There is a corridor from West Texas to the Canadian border that has fabulous wind conditions. The Department of Energy estimates that it can produce 20% of our energy needs; Boone thinks that figure can be much higher.

Sweetwater, Texas is a model of what can happen in that corridor south to north. This town is now booming because of wind energy demonstrating the effect this plan can have on jobs in this country. 250 miles north of Sweetwater is Pampa, Texas where Pickens is creating the world’s largest wind farm. Billions of dollars will be spent in this corridor creating an untold number of jobs. “Oil fields are eventually depleted, wind never stops” says Pickens.

The Problem by the Numbers: ( there are 700 billion problems-where is our

  leadership?).

1- The US consumes 21 million barrels of oil per day.

2- We only produce 7 million barrels (5 million of oil and 2 million of natural gas 

     liquid). Therefore, we import 14 million barrels of oil each day. 

3- Total worldwide production of oil is 85 million barrels per day.

4- Therefore, we import 25% of the world’s oil production, but only have 4% of the world’s population.

5- We are importing close to 70 % of what we use.

These numbers paint a rather bleak economic picture. Put that together with the fact that oil is a declining commodity (it is still unclear whether we will be drilling in the outer continental shelf).

The Solution:

1- Of our energy-related natural resources (coal, biofuels, wind, solar, hydrocarbons and nuclear), only natural gas can impact and reduce the 700 billion dollar figure. This is because it is the only form of energy that we can put into our cars and trucks.

Before I go on, here are some interesting facts I learned about natural gas :

-There are 8 million cars toaday that run on natural gas. Only 142,000 of them are here in the US.

     – General Motors makes 19 natural gas cars, all foreign.

     – The technology is in place right now to use natural gas vehicles.

     – Natural gas is cheap, clean, domestic, and abundant.

2- Natural Gas currently produces 22% of our power generation. This can be replaced by wind energy, thereby freeing up the natural gas for transportation use.

3- The use of wind energy to free up natural gas will reduce the 700 billion dollar figure by 38% (300 billion). This can be accomplished within 10 years.

4- This reduction in oil imports will also reduce the price of oil as supply and demand economics kick in.

5- The use of natural gas will give us a 20-30 year bridge to the next alternative (domestic) fuel.

To me, this is a plan that makes sense. The status quo is NOT an option. Boone Pickens has already purchased the turbines for his wind farm. Pampa, Texas will become the Wind Capital of the world. It will generate 4000 megawatts, Sweetwater is generating 2000 megawatts and Shell Oil is building a wind farm west of Pampa that will generate 3000 megawatts. This pattern can continue north to canada and represent huge recovery for rural America. Our capacity for generating wind energy will double by the year 2010 and we’ll be on our way to energy independence.

Back to Dr. Phil…we need a hero:

That hero could be Boone Pickens. He does need the support of the government. Our political leadership will need to clear land access east and west of the aforementioned corridor to carry the electricity generated to the rest of the country…they will need to set up transmission lines. We are in a crisis so this is something that need be accomplished without the normal governmental red tape. It should be a nonpartisan decision to save our country and economy. You politicians waited way too long. The time to act is today…now!

I believe that there is an excellent chance that this plan will be accomplished. Boone Pickens is extremely well-respected in the energy community, well-connected politically, determined, and filthy rich. Need I say more? 

The most significant theme to this article is our economy and freedom from foreign and especially unfriendly nations. But why not make some Blue Collar money while we are supporting an energy plan?

Here are some stocks that have a presence in the natural gas arena:

CHK
SD
XCO
CLR

Here are two stocks that have a connection with wind energy:

WGOV
AMN

BONUS – Tony Covino checks out a Cramer/Blue Collar Stock

(FTI)    FMC Technologies

It has been a tough task over the past few weeks to find a Cramer stock pick that passes our system checks and that doesn’t have a chart that’s falling off the edge of a cliff.  Some of the reasons are because of current market conditions and that some of Mr. Cramer’s picks are not “optionable”.  Also, some stocks are “speculative” and are not ready for our system requirements. 

As Blue Collar investors, it is our job to keep doing our homework, looking for sectors that are still in demand.  As we know, the entire oil and gas patch are still working fine.  So our next pick is FMC Technologies or (FTI) for all of us home gamers, as recommended by Mr. Cramer on June 28^th.  This company is the leader in subsea trees.  These trees’s control the flow of oil and gas, as well as other fluids used to regulate pressure in oil wells.  This prevents spillage inducing blowouts (less of a chance of spillage) a very hot topic lately.

Some other key points:

• Subsea business has grown 29% since 2002, and FMC expects to grow 62% in the next five years
• Then there’s a 5 billion dollar backlog
• Potential stock buyback worth 10% of shares outstanding
• Best of all, it passes all of Alan’s system checks as follows Overall A+, Technical Rating A, Fundamentals A+, Attractiveness B+, Group Technical A.
• It’s # 1 out of 28 stocks…best in group!
• Scouter Rating of 8
• And a chart that is not that bad

Since the Earnings Report is due out on July 24th (approximate date), we would not sell options on this company until after the ER or wait for the September contract. However, if there was no ER, here is how the option sales would play out if we bought the stock today @ $73.62 per share: - 100 shares = $7362 Sell 1 x 8/70 in-the-money call for $6.40 – $3.62 = $278.-  This gives us a 5-week return of (278/7000) = 4% or 40% annualized. - Downside protection (362/7362) = 4.9% - Had we been brave and sold the out-of-the money 8/75 call for $3.90 our return for 5-weeks would be (390/7362) = 5.3% or 53% annualized. - Upside potential would be (138/7362) = 1.9% .Because of the negativity in today’s market and the extreme volatility, selling in-the-money calls gives us greater protection and makes us less susceptible to risk.

Thanks to Tony for his enlightening article. I look forward to hearing from you on energy plans, stocks, or any other subject that we Blue collar Investors may benefit from.                                         Best regards,  Alan      alan@thebluecollarinvestor.com