This year my new year resolutions included a more consistent approach for picking stocks. But how do you find good value stocks consistently? Looking through my trading experience over the past 20 years I noticed that I tend to do much better and have more consistent results on longer term holdings. This, of course, is also tax efficient. That means that I should focus my stock picking efforts on companies that are good long term investments and although historical performance is no guarantee of future results, the laws of momentum generally apply and "good" companies tend to stay good for a very long time. Next, I noticed that even the best companies' stocks move up and down with news announcements and analyst action (among other things), so there are good and bad times to buy even the best companies. So my second goal should be to buy stocks of companies that are down compared to their historical valuations, i.e., when they are better values than usual. Assuming that markets are efficient would make you believe that all available information (news stories, rumors, analyst action, climactic conditions, industry trends and etc.) is included in the current stock price and that is absolutely true longer term. Shorter term,  people can and do overreact in both positive and negative direction and prices rise and fall much more more than reasonable. Long term trend of the stock market is up, so being a very conservative investor, I don't want to ever short stocks and so ignore market players' positive overreactions. On the other hand short term negative spikes are a fair game. But how will I know that the price will not continue to erode? I must be careful to stay away from companies and industries that are in trouble and never buy stock in a company that is one of the many in an industry on it's way down (this year it is home builders and sub prime lenders), I must always review company fundamentals and seek out pertinent driving factors for the price drop and stay away from companies that have significant dependence on or are based in countries with unstable political climate (Venezuela anyone?) To take advantage of global opportunities, prefer country ETFs with low fess over individual stocks. If by the time I am done with all these screens, the price has not yet corrected up, I can confidently enter my order at a limit price near the market. After three months of using this new approach, I have the following results:

Purchase Date Symbol Purchase Price Closing Price (4/10/07)
Mar 26, 2007 JNJ $60.06 $61.67
Feb 27, 2007 BHI $64.44 $69.48
Feb 9, 2007 BRC $34.88 $31.11
Feb 7, 2007 LUV $15.05 $15.01
Feb 5, 2007 CHN $31.26 $34.31
Jan 9, 2007 KCP $22.79 $27.18

Obviously, I was too early calling the bottom on BRC (in fact it is looking more and more like it is forming a bottom only now - two months later). Also, LUV quickly went up over $1 right after I made the call, but is now back down hovering  around the level it was at the time I called it; the rest of this new portfolio is looking rather nice.

I agree that investing for the long-haul is the way to go. If a company has good fundamentals - it will prosper in the long-run - even if it takes temporary hits due to investor jitters, profit-taking or short-term economic downturns. However, in this age of instant gratification, buying and holding is easier said than done for many.

Dear Mr Berzon,

I am currently undertaking masters' studies in Banking and Finance and am doing a research paper on various strategies that could possibly thrive in this, and post-crisis period.

After reading your blogs I got intrigued and, due to your thorough experience, would appreciate very much if you could outline some of your recommendations - may be a fresh investment strategy to be precise (my focus of analysis are investments in stock markets, but as there are no limitations, I am interested in studying developing strategies regarding commodities as well). Thank you!

Best regards,

Bojan

Bojan, I articulated my strategy as clearly and precisely as I could in my original blog post on the subject. I realize that it left many questions unanswered, but that is by necessity, for stock picking is not pure science - it is also an art. If you have any specific questions about my strategy, I'll be happy to attempt to answer them.

This transaction on December 15, 2008 was motivated by tax considerations. I have held Greater China Fund) GCH since January 24, 2005. Since then it has appreciated more than 225% (including all distributions and commissions). However, it paid more than the amount it appreciated in capital gains and dividends (all of it this year). Furthermore, last year, I purchased and sold another lot of GCH shares. These shares were not specifically identified, so FIFO tax treatment was applied to that sale transaction. All this left me with a larger tax basis in the GCH shares remaining in my account. Selling the remaining GCH shares was the way to get my tax liability on GCH related transactions to correspond with my actual gains on this security.

I had a hard time parting with GCH at a time when Hang Seng index is hovering at less than half of it's peak October 2007 peak and lower than the peak it made more than 11 years in July 2007. So, to keep a reasonable amount of China exposure I used some of the proceeds from the sale of GCH to add to my China Fund Inc. (CHN) holding.

CHN and GCH are actually quite different in their strategies, country diversification, costs and holdings. For example, as of October 31st, 2008 (the latest available data for both ETFs) GCH has approximately 19.8% in mainland China red-chips and a relatively hefty 8.7% cash position, while CHN has 10.6% in these so called 'A' shares, but also holds 16.6% in direct investments and keeps very little in cash. Management fees are slightly higher for GCH. In terms of performance, one or the other fund has done better depending on the exact time period.

The bottom line is that both of these funds provide convenient exposure to China and given different tax circumstances, I would prefer to hold on to shares in both of these ETFs.

I sold my remaining CHN shares on Monday, May 19, 2009 at $19.99, realizing a net 15% loss on this position, accounting for all distributions, but ignoring commissions. (Small change relative to all my realized China related gains over the previous three years.) While I still have China related positions in a portfolio that was previously managed by a financial adviser, this CHN sale completes my exit out of China in this self-managed portfolio.

Being a socialist state, China can easily manipulate their economic barometer numbers and they have done so quite well to date. Fundamentally, however, China is stuck between a rock and hard place, having to stimulate not only their own economy, but also indirectly that of the US. I seriously doubt the possibility of the US coming out of this recession within a year. China will take even longer to recover. This line of thinking motivated my sale of remaining CHN shares.

The paper market is essentially dead, what with the fall of Wall Street and the economic crisis befalling numerous countries. These days, the best investment strategy is to have gold ownership.

Can you name the one company that steadily year over year, for the past five has increased its revenue, earnings per share, dividends and per share book value, yet it’s share price has gone literally nowhere? That company, of course is GE – the super mega conglomerate with a market cap of $335B! As if these reasons were not good enough to love GE, consider that GE’s current 3.7% dividend yield is roughly equal to the interest on the richest savings accounts. You’ll also be happy to know that in today’s volatile market GE is relatively safe, sporting a β of only .8, trading within about 10% of its 4 year low and at a P/E of about 15 - the very low end of it’s 10 year range. This stock is obviously a great value, but what makes me thing that now is the right time to buy it? Why didn’t I buy it a month ago, when it first made the bottom? How do I know that it will not dip any lower? Of course, nobody knows the answer to that last question - anything can happen, but facts are pointing towards a recovery in GE’s per share value. Here are some of the bullish signs in a bullet point form – details are left as an exercise for the curious:

  • GE stock is significantly oversold indicative of a bottom
  • GE insiders have started buying shares in an open market
  • GE can borrow at decreasing costs, while most competitors have to pay more.
  • Writer’s strike is finally over and NBC Universal can contribute an increasing share to GE’s profitability
  • Expect GE’s underappreciated Healthcare segment to improve performance – there is pent-up demand.
  • GE will grow foreign revenue, especially in emerging markets – China Olympic Games projects especially important
  • GE Energy has most technology and best products to fulfill the Oval Office dreams for an oil independent future.

Actually, allow me to expand a bit on that last bullet point. Most people probably don’t know this, but GE Energy has the most advanced design for a safe nuclear power plant and it is the only US based company that can build a nuclear power plant. It has already built 4 of these and is in the process of building three more. None of these plants are in the US. In fact, there has not even been an application for a nuclear power plant submitted in almost 30 years. But since the end of Q3 2007 and trough the end of this year there will be close to 30 such applications filed. Under the Energy Policy Act of 2005, the industry is getting something like $12 billion in subsidies to do it. They will be getting more in federal-loan guarantees and risk insurance. That new nuclear power plants will be built in this country is a near certainty. That GE will be the one entrusted to build them appears inevitable. Now, did I mention that a reactor can easily cost $90 Billion to build and that the liability from accidents is limited by law?! Ok then, $90 Billion multiplied by 30 plants and we are talking real money.

Of course, I know that not all of these plants may get built and that GE will have to share these revenues with others and that the money will roll in very gradually and over an extended time period. But the sheer size of the GE growth potential here is absolutely mind-boggling. GE, as large of a company as it is, only has revenues of less than $50 Billion a quarter and this one single product is destined to boost their revenues by more than 10% and that’s a conservative estimate and that’s only one of GE’s leading edge energy products.

They also have leading edge geothermal – the way of the future for commercial heating in extreme climates, as well as leading edge wind turbines and there are solar products. Granted that the current production solar panels are rather inefficient, capturing only 12% of available energy, but I still remember the 80s, my college days and the federal tax credit inspired solar boom. Back then I was working at the nonprofit Boulder Energy Conservation Center, designing solar systems using similar looking panels, which were barely 1% efficient. If I was a gambling man, I would surely bet that within 10 years GE will produce panels that are so efficient that they can pay for themselves within 3 years for large commercial installations. Now I am dreaming…

So what’s the bottom line? It’s that I have a hard time imagining a scenario under which GE’s long term earnings growth will be limited to 2% a year – a common expectation among most analysts. What I see is a value priced stock poised for long term growth. I couldn’t resist to pick some up on Friday, February 22nd at $33.34

Today I took a 43.9% loss (including dividends and excluding commissions) on General Electric (GE) stock by selling it for $18.08 / share. While I still love the company and all they do, I now see GE Capital as a much bigger liability than I could imagine when I bought GE stock back in February. In addition, I now expect GE's NBC Universal subsidiary to loose a significant amount of ad revenue in Q1 2009. Infrastructure spending and investments in alternative energy, touted by President elect Obama as solutions to the country's current predicament, should help GE grow their revenues, but none of this is likely to help GE's books until Q3 of 2009. Furthermore, I don't expect the overall market (as measured by the S&P 500) to find its bear market bottom until at least the summer of 2009. And GE stock's β has recently increased to equal that of the market. All of this is making me think that I should be able to pick up GE stock at an even more attractive price level next year.

It looks like you know everything about GE I can't argue with you about that. GE is an important magnate on the world market. I also consider that it's success relies on the market trends in late years, people begin to realize that comfort is a part of the modern world and so they search for more comfort.

Cigna Corporation (CI) is one of the largest US health insurers. I have held stock in this company off and on since 2001. Prior to today, I have last gotten into this stock on May 3, 2006 at $94.20 ($31.40 split adjusted), a year before their 3-for-1 split. It has been trading in fair territory (between $52.5 and $57.50) for most of 2007. Over the past year revenues have grown at a very healthy 6.5% rate, while earnings have grown even faster. Cigna has very little long term debt (so little that it could just about be paid off with cash on hand). At its current price, Cigna is trading at a P/E of around 11, below its own long term historical average and at a steep discount to the industry average 14.7 over the past 12 months and almost 1/2 of the industry 5 year P/E average.

So why is Cigna selling at a 20% discount these days? Traditionally Health Care is a safe investment, when economy is in a recession, so many investors expecting trouble ahead rebalanced their portfolios at the end of the year to include a bigger exposure to Health Care related stocks. However, as S&P 500 underwent a major correction falling more than 8% YTD, investors in all sectors got nervous. Major Drugs companies lost more than 9% just over the past 4 weeks. Life Insurance companies lost almost 11%, Accident & Health Insurance companies did somewhat better on average, but were certainly not immune to the greater market forces. Investors found something to worry about in financial results recently announced by each of the major Health Insurers and others fell in sympathy. Than this morning all hell broke loose as New York Attorney General Andrew Cuomo announced that he would sue one of the health insurance companies for fraud and investigate others. Details were to be announced at noon. This uncertainty created a golden opportunity to dive in and double up on my position in Cigna (perhaps the most conservative of the Health Insurance majors) at $45.95 /share.

Once Cuomo at his noon conference announced that he plans to sue Ingenix, its parent, UnitedHealth Group Inc, and three additional subsidiaries, Cigna stock recovered to above its closing price the previous day, even though Cuomo has additionally announced that he has also issued 16 subpoenas to the nation's largest health insurance companies including Cigna. That's because nobody really expects anything to come from this subpoena. On the other hand, United Health and Humana, have not fared as well today, as investors worry that these companies' dealings with Medicare / Medicaid government programs may not have been all above board. They have good reasons to worry, as much of these companies' recent earnings growth has come from government programs.

It is the same great well run oil driller that it was last year, except that it is now even more profitable and selling at the same level, as when I bought it last February. Just released quarterly results, beat year ago quarter by 25%, but were a tad below those expected by analysts on average, some of whom also lowered their earnings expectations for 2008. In any case, BHI is still expected to earn well over $5 / share by every analyst - more than they ever made before, yet almost certain to happen. Furthermore, Baker Hughes is very likely to beat these expectations earning over $5.50.

However, given the current nervous market environment, BHI stock is now trading at more than 20% discount and is a good buy.

I sold Baker Hughes Incorporated today. It took the stock more than three years to get back to I was considering fair value when I bought it in 2008. Shares jumped just after the company reported much improved Q1 results. Still $0.87 in net quarterly earnings per share is a far cry from what I would want from an almost $80 stock. Growth prospects are limited and better opportunities exist elsewhere.

I made over 21% on this trade and am happy to get out. Additional shares of BHI, acquired at a higher price by an asset manager, remain in my retirement account.

Topic is very informative. Thanks.

Jackson Hewitt Tax Service Inc (JTX) is a classic example of a good company in a solid business with great growth prospects currently trading at a discount.

Why is JTX trading at levels not seen since mid 2005, despite good year-over-year earnings growth? Three are four good reasons:
1. A Jackson Hewitt franchisee got into some hot water early last year for messing with the IRS by filing bogus tax returns. (However, the Justice Department law suit alleged misdoing by only 125 Jackson Hewitt franchised locations out of the almost 5,800 and it was settled with no payment from the company.)
2. IRS decided to take a stab at the rebate anticipation loan business that Jackson Hewitt participates in and derives revenue from by referring their tax preparation clients to financial institutions that do the actual lending. (However, the IRS did not actually do anything to ban the practice, they have only announced that they may want to regulate these types of loans starting in 2009.)
3. Tax preparation business is very seasonal, so Jackson Hewitt (along with just about any other tax preparer) has two quarters of losses every year and their Q2 (last completed quarter of operations August - October 2007) is always the worst.
4. Market players are very nervous these days and tend to overreact to any news that could be perceived as negative.

So why is JTX a good buy at the current price? Several reasons:
1. Death and taxes are two things that humans have tried to unsuccessfully avoid since time immemorial – and have always failed. US Congress has attempted to simplify tax code more than once, but have only made it more difficult every time. As a result most everyone in the US needs the help of tax software or tax people to get their taxes done.
2. The #1 tax preparer H&R Block is bidding for market share among do-it-yourselfers with a massive TV advertising campaign featuring their Tax Cut software “backed up by people”. While Jackson Hewitt targets lower middle class filers by placing most of their small footprint office locations inside Wal-Mart stores and in walk / drive up strip malls, strategically chosen to be in working class neighborhoods. JTX customers are more likely to have simple tax returns that they would rather shell out $50 - $150 for somebody else to do, than attempt to figure out how to do it themselves, software or not. H&R Block ads only serve to remind them of the nearing tax deadline and prod potential Jackson Hewitt customers to get their taxes done next time they go shopping at Wal-Mart or grab a ½ gallon of milk at their neighborhood convenience store.
3. Jackson Hewitt has a great business model! The company gets revenue from the franchisees no matter what happens. Yet it spends considerably less on corporate advertising than H&R Block, relying on location to generate plenty of foot traffic. And there is no software and no associated expense for maintaining, updating and supporting it. Remember that H&R Block has several versions of online and off-line Federal tax software to support as well all the state programs. They compete with the likes of Quicken on the consumer high end, as well as with Tax Act on the low end, which gives away their Federal tax software for free. Not to mention that there is FreeFile for the $94 million filers who earn $54,000 or less.
4. Jackson Hewitt sticks to what they know (and they know it well) – taxes, unlike H&R Block, which wasted more precious resources on an unsuccessful attempt to expand into subprime lending.
5. While Jackson Hewitt is the second largest tax preparer in the US, it only has 4% of the market and is positioned well for growing that market with new filers, as well as at the expense of the many mom & pop shops that often close down as their owners retire. (Of course this last statement doesn’t apply to my cousin and his wife in Albany, New York who will grow their tax preparation business to compete with Jackson Hewitt before they retire!)

Big thanks goes out to Vitaliy Katsenelson personally and ContrarianEdge.Com website for turning me on to Jackson Hewitt and doing much substantial research on the company.

Every year Brady Corp (BRC) stock price falls in the first quarter only to recover within the next six months. This is one of the best managed companies in the US. At the current price level it is an even better value than it was when I purchased stock in this company in the first quarter of last year. Over the past year the P/E contracted, as the company steadily grew revenue, profits and shareholder equity. Current drop in the stock price is temporary and a good opportunity to get in on BRC.

Pentair Inc (PNR) Pentair Inc is a diversified industrial manufacturing company with two operating segments: Water and Technical Products. As clean water is getting more scarce and is being recognized as an underappreciated commodity, stocks of companies involved in all aspects of clean water (treatment, storage, conservation, desalination and resource development) are getting more attention. One of the strongest and oldest companies represented in the Palisades Water Index and the PowerShares Water Resource (PHO) that tracks it is Pentair. The index has fallen 10% since the beginning of this year and PNR, which accounts for approximately 4% of it, is down 15%. This is a good opportunity to buy into a solid company in a great industry.

I still love Pentair, Inc. I especially like their business of water filtration and their company policy of raising dividends annually for over 20 years. I also like the technical strength the stock is currently showing and the over 26% profit I booked by selling the stock (including dividends and capital gains, but excluding commissions).

What I don't like and the only reason I sold PNR today is its current valuation. At a projected 2010 operating PE of 20 and a trailing PE of over 30, this stock is no longer undervalued. In the long term, PNR will still do well, but mid term, I expect its price to stagnate and that is even if the general stock market does not plunge from its current highs - a good possibility. Looking shorter term, I expect PNR to loose some of its recent technical strength after it goes ex-div next week.

All else being equal, I would be looking to get back into PNR at the $30 level.

This week Brady Corporation announced better than expected results and improved outlook. Its stock completed the first leg of its ascend to a previous high. I took this opportunity to lighten my exposure to the US stock markets and got out with a gain of 19.5% (including the April dividend payment and excluding commissions) in just 4 1/2 months.

Hi Jake,

Relatively new to investing and very new to your site/news letter. Wanted to understand your point of view in regards to BRC. As you mention that yahoo is a very good site and lot of analytical tools. one of the tools i am trying to use is evaluating by other competitors. When I did the same for BRC, MMM and AVery came up along with one more. To your point I could not see "any thing impressive" with BRC as compared to their industry competitors. I review you bio and lot of years experience and very impressed hence I am interested to find out you point of view when seening the comparison.

Thanks and best regards
Pradeep

Competitive analysis is difficult enough with single product line companies. Once you start analyzing diversified companies with multiple products, the job gets infinitely more difficult. That's why there are highly paid stock analysts with years of experience in the industry they specialize in.

Summary comparison of BRC against MMM and Avery perhaps has more merit than comparing apples and oranges, but is still bound to lead you down the wrong path. For example, while MMM and AVY may have some products that compete with BRC's, they also have an office supplies businesses that I do not find nearly as interesting. That being sad, I do find MMM rather attractive at current levels.

I promised to keep you updated on my stock market transactions and I will continue to do so. However, I am short on time these days, so unfortunately going forward I will not always be able to review the detailed thought process used at arriving at the various buy and sell decisions, as I have done in the past. With that in mind, I would like to report the following purchases:

12/31/07 Noven Pharmaceuticals Inc (NOVN) @ $13.98. Trading within 10% of it’s 52 week low reached in October, this company is one of the best deals on the pharmacy block. It has the smallest patch on the market, great business deals with the big pharma boys, tentative FDA approval of Stavzor – drug for treatment of bipolar disorder and a nice and profitable business. The Stavzor approval just happened and the stock price didn’t budge. Last quarter’s numbers looked dismal at first glance, but it was due to non-recurring charges associated with an acquisition, while the core business grew. This time results will shine.

1/2/08: Good many stocks went on sale on this first trading day of the New Year and it was a great day to go shopping. I picked up China Fund Inc. (CHN) once again at $35.51. Now that it is trading at a 16%+ discount to its net asset value, I feel comfortable owning it once again. You may recall that I liquidated my position in this ETF less than a month ago at $51.35 prior to it going ex-div and distributing $12.12 / share in cash and common stock, so I am getting in about 10% lower now.

1/2/08: Purchased King Pharmaceuticals Inc (KG) at $10.12. That’s less than ½ the price it was trading last summer and less than 5% over its low for last year. This company is great at extending life of drugs that near their patent expirations and squeezing extra profit from them. They do very little R&D, instead preferring to buy rights & patents for established drugs, repackage them, market and sell, sell, sell! Current stock valuation assumes worst case scenario of the company loosing patent protection prematurely on all 3 of it’s current top profit contributing drugs and no replacement revenues. This is a highly improbable scenario and it is far more likely that KG will continue to turn in great results and be trading 40% higher within a year.

It's been one hell of a year and a half in the markets and under the circumstances NOVN - a pharmaceutical small cap held up remarkably well, so when this stock began its quick ascent in June, I decided - it could be a good opportunity to sell. I set my sell limit at $14.98 - 10% below what I thought NOVN would be worth, if all was good in this world. The markets flirted with high $14s briefly for the first few days of July, but my sell target was never hit until today. This morning, Hisamitsu Pharmaceutical announced that it entered an agreement to buy Noven Pharmaceuticals for $16.50 and my sell order executed at $16.47. A gain of 17.8% (excluding commissions) in about a year and a half is part luck, part genius, especially considering that the S&P 500 is down over 38% over the same time period.

Today, only six days after I originally purchased stock in King Pharmaceuticals Inc. (KG), the company announced that it has agreed to end its patent infringement lawsuit against CorePharma LLC relating to its important muscle relaxant drug Skelaxin. Under the agreement CorePharma will be allowed to make an authorized generic version of Metaxalone 800 mg, as well as CorePharma's generic 800 mg metaxalone product. The news immediately sent the stock up and I took this opportunistic exit with a 16.7% gain. The reason for exiting is that this type of an agreement is the only reasonable way this kind of dispute can be handled, so this should have been expected and does not materially change KG's position. In fact, the only thing that has changed is the short term perception of market participants, creating a short term supply/demand imbalance. I expect KG to continue going up, but now at a much slower pace and in spurts.

I sold my entire position in Cirrus Logic (CRUS) in the last trading hours of the last trading day of the year 2007.

Selling Cirrus Logic was a very difficult decision for me. I have held this stock through thick and thin for at least 15 years. I saw this stock soar from the $8 range up to $60 only to fall again to $10 and take another swing up to $40. In the old days I knew many of the people that worked at the company personally. These were the top engineering minds. The company was run by engineers, too. Their products were top notch designs easily manufacturable on current “state of the mass production” equipment at reasonable cost, giving CRUS a sizable advantage over even larger competitors like SSI. Back then CRUS was in the data storage business. I was in the data storage business. You might say I was married to this stock and we were in love, well at least I was!..

WhenHemant Thapar of IBM founded DataPath in 1994 (in July 2000 DataPath merged with LSI Logic Corporation) taking IBM’s best signal processing minds with him, I soon started working closely with Hemant, Jim Rae, Shih-Ming Shih and the others to develop a chip for NEC Electronics. I was thoroughly impressed by their innovative approach, but ignored the facts and held on to CRUS. When Marvell Semiconductor was formed in 1995 and soon came out with their low cost mass producible read channel design applicable to data storage and communications, I got concerned. Their first EPRML chip was a cheaper and simpler, yet elegant and powerful implementation of the next generation technology similar to Qualcom’s, DataPath’s and IBM’s. In the meantime CRUS was still the leader and their stock soared beyond reason, expectation and belief – I was ecstatic. Though I knew what was on the horizon from the competition, I trusted Cirrus to keep pace, and regardless of the fact that I saw nothing on their horizon I did not sell. Than there was a steep multiyear decent, followed by another peak and another decent…

In the meantime, CRUS got out of the data storage business, no longer able to compete. And they never got into communications in a big way, which was always my hope for them. CRUS also lost most of their very talented and very young engineering talent, margins shrank, profitability suffered. They got into trouble, like so many other technology companies backdating stock options.

Now, CRUS is an entirely different company, mostly in the dying audio chip business. Yes, they are priced accordingly and yes they still have the potential to transform into something bigger and better and yes, they do have George Soros as a major stockholder now and several analysts giving them thumbs up, but I, for one, am no longer married to this stock and am not willing to keep my eyes closed to the reality of their situation. There are many more challenges that they will face on their path to recovery. If they do make it back up the mountain, the road is certain to be much more difficult than it was 12 years ago.

On Dec 17, I sold all stock in Chromcraft Revington Inc (CRC) a domestic furniture manufacturer that is in the middle of its multi year process of shifting manufacturing overseas and only doing some final assembly in the US. An adviser I used in 2001 purchased this stock for my account and this was a small position that I have ignored for many years. It has declined even further in value over the past 6 years and I finally sold it for a tax loss.

Here are some bright points to keep in mind for CRC: The company is moving in the right direction and has made significant progress in aligning its operations with todays realities. The business furniture segment is especially promising and is growing and the company is currently trading at about 1/2 of its tangible book value.

But there are many more negatives: The company has been bleeding for quite a while. It is competing head on with a furniture company operated by Warren Buffet's Berkshire Hathaway (BRKA, BRKB) as well as with many no brand name Chinese importers. It is a tough environment for any furniture company to operate, with home sales in the rut and transportation costs rising significantly. This environment is especially bad for CRC, whose emphasis traditionally has been on larger bulkier quality brands of furniture. Customer facing presence for CRC is also in disarray with a diminishing number of retailers displaying Chromcraft (and similar) brands, their website is not properly maintained with links on the front page (click on "home" after navigating your browser to http://www.chromcraftfurniture.com/) pointing to defunct websites for sub brands. In addition, virtually no information is publicly available on CRC these days. Analysts don't bother with CRC, there are no quarterly meetings being broadcast and their CFO did not bother returning my call.

Bottom line: I sold!

China Fund Inc. (CHN) earlier today declared capital gain and net investment income distributions in the estimated aggregate amount of $12.12 per share payable on January 25, 2008 to shareholders of record on December 21, 2007.

In response to this announcement CHN's share price shot up 4%. This despite an almost 2.5% drop in the Hang Seng Index overnight. This combination of NAV reduction and market value appreciation will have the likely combined effect of reducing the discount on this fund to around 7% (about half of its YTD average and significantly below current peer fund discounts). At $51.35 the fund has appreciated 64% since it was added to the portfolio only 10 months ago and is trading only 3% below its all time record peak reached at the end of October (at the same time when Hang Seng Index was 10% higher).

In the meantime, the now popular China story is loosing some of its original appeal. Profits of most China based companies have not been able to keep up with the explosive growth of their stock market valuations. Costs have also been on the rise and demand growth has slowed, as the following factors are playing their parts:
1) Appreciation of Chinese Yuans in $US terms by almost 5%.
2) Increased input costs vis-a-vis energy, labor and raw materials.
3) Higher taxes on certain exports. (More are sure to come.)
4) Additional quality control requirements.

On the other hand, exports are but a small part of the overall Chinese economy, which is continuing to grow faster than ours and Yuan has much more appreciation to do in the coming years. All in all China is still the long term story other countries can only envy. For this reason I am holding my investment in China through The Greater China Fund, Inc (GCH) in tact for now, but to reduce portfolio volatility over the next several months, I am taking today's opportunistic exit with CHN.

You sold BHI in April for $78.40 but missed the run to $100, its now back to $78.33
You bought Citi @ $50.43, its now $32.00
you bought HELE @ 19.03, its now #18.01
you bought PDS @ $17.91, its now $16.12
you bought JNJ @ $60.06, its now $67.59 good call
You bought TRID @ $7.01, its now $6.51 and has failed to meet NADSQ's listing requirements according to Yahoo.

I want to but EWJ that you recommend but am concerned about some of your selections. I do see Barrons recommending this ETF

While it is impossible to pick the exact market and stock bottoms, you can pick out stocks that appear undervalued and sell them when they reach my target prices. This is what I attempt to do and do it with some success, though I tend to be a bit early getting in and early getting out. I measure success relative to the S&P 500, which I am beating by a very large margin YTD.

Of course, all of this means that some of my picks may be underwater at times. Also, in the words of John Cramer, "I am not perfect," which means that I can make mistakes. I consider Citigroup purchased at $50 a huge mistake. I had no idea that their balance sheet did not properly reflect their exposure to the mortgage business. When I looked at their financials, it looked like only 5% of their profits came from mortgages. Had I known that this was not the case, I would have never touched this stock with a 10 foot pole at $50! Looks like all of the professional investors where blindsided by this as well. Of course at $32 C looks a lot more attractive, even with all the mortgage problems that we have all heard about and may still hear more about. The question to ask at this price level is "what about credit cards?" I do not have an answer to this question and therefore have neither dumped C, nor added to this position.

My other stock picks should recover and reward rather nicely with the market over the next 6 months - 1 year.

EWJ is an exchange traded index fund of large Japanese stocks. Japanese stocks have been range bound over the past two years and Yen / $ exchange rates have moved in a rather narrow range, as well. EWJ shares denominated in $US reflect these facts. Of course, there are good reasons why Yen has steadily depreciated along with the $US over the past two years. Near 0% interest rates, slow moving economy and negative population growth are certainly among factors that have limited demand for Yen. And with stock markets elsewhere in the world going gangbusters it is no wonder that Japanese have not been too eager to invest at home. Investors from other parts of the world contribute to this trend by originating Yen denominated low interest loans, converting proceeds to other currencies and investing them elsewhere for higher yields.

With all this on the proverbial Japanese plate, why bother investing there? There are actually a few good reasons. In the past quarter, Japanese currency began decoupling from the $, appreciating 8% since June. Luckily, during the same time the NIKKEI average lost 10%. This makes for a great opportunity for US based investors to get in on the $ denominated EWJ at a price level below June's, purchasing a basket of sale priced Japanese stocks. In addition, while the Japanese economy is not the hottest one in the world at the moment, it is in far better shape than the US. (For example, Japan does not have outrageous trade and budget deficits.) And going into the Japanese stock market is certainly a safer way to diversify away from the $US than by buying into the volatile and overinflated BRIC stocks.

Yes, perhaps there are still good stocks to be had in Germany, Italy or Switzerland now, but there is also much more currency and market correction risk. As Euro and Swiss Frank have appreciated 15% - 20% over the past two years, Yen did not! As European stock market indices appreciated more than 50% over the past two years, Japanese did not! So, what do you think will happen when the overheated markets in Europe and US correct? That's right, a whole hell of a lot of folks will try to cut their losses and either pay off those low interest loans in Japan or, who knows, perhaps, even drop a few billion Yen into the Japanese stock market. In any case, Japan currently offers the biggest bang for the buck and the best hedging opportunity in case hot markets elsewhere loose steam. And who knows, we may be in the middle of a correction already...

It took IAMGOLD Corp. (IAG) exactly 6 months to reach my target price of $9.50 and I liquidated my positions in this up and coming gold miner, locking in gains of 21%. I believe this stock will continue to go up with the price of gold significantly over time. However, as gold hits record levels, risks of holding IAG short term now outweigh potential rewards. I will be looking to reenter this position once the gold rally takes a breather.

As much as I love NCR and their ATM business (I was their shareholder for 6 years), this is a business that directly depends on the health of the Financial sector, which appears to be deteriorating on a daily basis. Also, now that the Fed started to admit inflation, markets are skiddish overall, so any negative news story or careless comment by an analyst could easily move NCR down from its peak. This peak was reached following the tax free spin off of Teradata (which I have not sold) a month ago and better than expected earnings report this week.

Please note that a story on TheStreet.Com yesterday mentioned that Jim Cramer “likes NCR to buy into the coming spinoff of its holdings in Teradata (TDC).” If that is what he wanted to do he should have bought in September and it would have been a good strategy yielding north of 12% in just a month.

Precision Drilling Trst (PDS) is an income Trust that primarily provides oil and gas drilling services in (yikes!) Alberta, Canada.

So, with all the new taxes and royalties Alberta decided to impose on oil and gas producers, rig day rates on decline, low utilization rates, poor grade oil under their feet and extreme difficulty in getting it out, why would anybody in their right mind want to own this security?

The short answer is that things can't get much worse for PDS at this point and the only way to go is up! However, the longer answer is far more interesting. We have already listed the macro conditions weighing down drillers in Western Canada. What makes this company interesting is, of course, its rather unique set of strengths and the much ignored set of positive market forces. Let's go over my list of top 10 of these briefly:

1) High percentage of variable expenses allows to closely align expenses with revenues and make money even if utilization is very low.

2) Emphasis on high performance teams and equipment, deeper drill depths, extreme operating conditions and safety record ensures best customers and day rates.

3) Recent successful entry into the US market diversifies income base. Look for the company to further geographic diversification in as little as 10 months.

4) The recently acquired portable waste water treatment business, does not currently contribute significantly to earnings, but has much opportunity for growth.

5) Historically, the two "winter" quarters (Q4 and Q1) are higher revenue and more profitable for PDS than the "summer" quarters, due in part to traditional ancillary charges for winter equipment.

6) Customers are currently reserving rigs for winter at a rate very similar to last year. These reservations have no contractual commitment, but imply market conditions above expectations.

7) Most income sources are currently Canada based, which means higher income in $US, as our currency sinks further.

8) Increasing oil prices and natural gas prices (which are expected to increase as cold weather kicks in and demand picks up) should drive up drilling activity in Canada.

9) Alberta scaled down original taxation and royalty plans. New law will not impact drilling in the area as much as was originally feared and will hurt larger companies involved in exploration (PDS's customers) the least. Yet PDS shares are still trading at the level they were before the uncertainty was cleared.

10) Analysts are finally starting to see the light, with Andrew Bradford (a highly accurate EPS forecaster for the industry) earlier in the day coming in with an estimate of .63 cents for Q4, $2.67 for 2008 and upgrading Precision Drilling to a buy.

So, do you know any other companies with long term growth potential, which also pay a 9% dividend while trading at both TTM and believable forward PE of less than 7?! After keeping a close watch on this security for over a month, I finally felt that the opportunity was ripe for taking the plunge.

Now that analysts are starting to recognize the great value that Precision Drilling Trust (PDS) was, are upgrading it and the stock is back up to its year ago levels, I decided to get out of this position. Accounting for dividends (but not commissions and taxes), this holding generated a 35.8% return for me, since the original purchase less than 5 months ago - not too shabby under current market conditions. I actually expect PDS to return another 10% before the end of the year. However, it is likely to correct from current levels before doing so, as virtually all equities have recently done, after having a nice run up. I prefer to play it safe and lock in some gains at this point, as I am sure that there will be more than enough losses to offset these gains come year end, courtesy of my ex-financial adviser and their foray on my behalf into the "great Financials" like GS, LEH, MS, UBS and others. Wish they would have listened to what now appears to have been prophetic advice I penned in April of 2007, months in advance of subprime disaster grabbing first headlines.

Yesterday, Trident Microsystems Inc. (TRID), maker of graphics chips that drive most of the high end LCD based TVs and many of the low end ones reported results for the quarter ending on September 30, 2007. These results, while not spectacular, were quite an improvement over a year ago and within analyst expectations. What shocked the analysts (and lead to a slew of downgrades) was the company's forecast for lower sales in the current quarter - an indication that competitors have made significant inroads into the low end sets.

This is certainly bad news, but it was no secret that Trident chips were being designed out of consumer LCDs 3 months ago. The latest company guidance should not have been a great shock to anyone, yet it created a panic sell off, which took the stock down to under $7 / share several times during the day. Prior to the announcement Trident was trading at a premium to the many other fabless semiconductor companies. However, after a drop of $9.72/share (58%) over the past three weeks (most of it today) the generous premium quickly turned into a rather hefty discount. Last time Trident could be had for $7 was three years ago, when it was one fifth of its current size by revenue and was barely breaking even. The latest sell off appears to have been overdone - a gross overreaction.

Oh, and one other thing, this stock only has 58 million shares outstanding and 34 million of them changed hands today (another 5 million traded yesterday), so everyone who wanted to get out of this stock - likely already did so. Watch for analysts to upgrade it purely based on valuation in the coming weeks and for the stock to drift back up to its most conservatively estimated fair value of $9 - $10/share rather quickly.

Yes, Trident was overvalued. No, it is certainly not a $30/share stock that it was early in 2006, but at $7.01/share I paid for it today, it is a great bargain!

Varian Medical Systems (VAR) reported better then expected quarterly results after the market close last night, sending the stock price up 8%. There is certainly room for VAR to appreciate further, however it is up more than 12% in less than 6 months since I purchased it and with market volatility on the rise and reporting season in full swing there are bound to be some really great deals coming right up.

Headwaters Inc. (HW) is an interesting company for those of us who hate waste. You see, HW is in alternative energy and construction materials businesses and whatever would go to waste in their alternative energy business gets used in their construction materials business! You know what else is great about HW? It is that they almost always beat analyst estimates and right now analysts are not predicting such a bright future for HW (current quarter results are not expected for another 2 weeks). So the stock is trading at a P/E of 6, within 3% of its 4 year low, price to sales ratio of 0.6 and at a 30% discount to its book value. Needless to say, construction materials business is out of favor these days, so it is not surprising that HW stock is in the rut. Another issue is negative sentiment in the US towards coal as an energy source. And perhaps most importantly, keeping the price of HW down is the fact that HW sells a reagent that is used to liquefy coal, which qualifies certain alternative energy producers for section 29(a) (re designated to IRS Section 45J and IRS Section 45K). Well, this tax credit has a time limit and evaporates as the price of oil increases, so the demand for HW's reagent wanes as many of its customers are motivated mostly by this credit itself. On the other hand with light sweet crude trading at over $80 / barrel, liquefied coal becomes an increasingly competitive source of energy. Granted that coal-to-fuel plants will take a couple of years to materialize, but once they do, demand for the reagent will skyrocket and so will HW's profit. In the meantime, analysts are forecasting a lackluster 2008 for HW, with profits falling. Yet, even under the very worst assumptions, HW's profit will get chopped in half and at its current price HW is a real bargain!

Helen of Troy LTD. (HELE) is a great company with easily recognizable brand names for consumables in several categories, and small kitchen appliances/utensils. HELE products are available at just about any grocery store and at many department stores. Most of HELE manufacturing is done in China. This company is heavily owned by institutions and there is a general expectation of a margin squeeze due to lack of pricing power. Fear has driven the price of this gem down to the point of ridiculous. It is now trading at a P/E of 12 based on the trailing 12 months and 10 times expected earnings for the current fiscal year. Share price is only about 10% above book value and price to sales is less than 1. The company has less long term debt and more cash than competition. Moreover, HELE can implement and is implementing small price increases, which is all that is required to keep this company very profitable. Quarterly results announcement is scheduled for tomorrow, so we don't have to wait very long to find out if I am right.

Helen of Troy is a great company with good brands in the right business and doing a great job running their business frugally. However, in uncertain economic times, investors tend to stay away from consumer goods importers, like HELE. Such companies tend to be more susceptible to having their margins fall, as the consumer gets squeezed by a persistent economic winter. (I expect it to be a long one.) By the time economic activity picks up, some of HELE competitors may even be forced out of business (although I expect HELE to persevere).

Fear is exactly why shares of HELE were discounted to such ridiculously and unexpectedly low levels over most of the past 9 months. Better than expected quarterly results announced 10 days ago, coupled with a fall back in oil prices from their recent highs and an associated market relief rally, especially in the consumer sector this week have propelled HELE shares back to reasonable risk-reward levels. I might also add that HELE did exceptionally well and demand for the company's products kept up, even as prices were raised.

On the other hand, with further deteriorating economic and market conditions a distinct possibility, a major risk for HELE is a significant drop in demand in their traditional licensed brand personal care business. If this happens, while the market is generally downbeat, HELE share price will be decimated once again.

At this point in the economic cycle, I saw it prudent to continue increasing my cash position. Selling Helen of Troy LTD. on July 17, 2008 at $19.91, after holding it for a little over 9 months, at only 3% above purchase price (not accounting for commissions) was the right way to do it. While this was still better than holding the money in the bank, I would consider having purchased HELE in October a mistake.

I just added to my position in Live World Productions (LVWD). I have been following this company since its glory "Internet Bubble" days under the guise of "Talk City", when it traded at a high of $29 / share. Lots have changed since then... After the Internet bubble burst, the stock hit an all time low of $0.01 / share and seemed destined for bankruptcy. Yet, the company under the leadership of its CEO Peter Friedman, was able to divest of its Talk City brand and business, conserve resource, develop new services, retain several big name clients and survive. I was so impressed with this miraculous feat that I bought back into the company about five years ago at $0.03 / share. In February of last year I added to my position at $0.45 / share. Since then the company has made amazing progress, expanded its customer base, increased revenue, improved reporting and announced plans to return to NASDAQ. If all continues to go as well for Live World as it has for the past 5 years, I expect LVWD to become consistently and ever more profitable within a year and be trading around $3 / share in 2 years.

Wal Mart (WMT) is the world's largest corporation, yet it is still growing at a rather healthy pace, expanding internationally, consistently making more money from quarter to quarter, paying a healthy dividend, yet trading at a PE of only 14 and within about 5% of its 8 year low! Wow - what a great value for a top defensive play in these uncertain times - the company that my hero Warren Buffet calls "the retailing machine of all time." Hey, what can I say, if it's good enough for the Oracle of Omaha at $48, it's certainly great for the Oracle of Denver at a 10% discount!

On Wednesday, December 31, 2008 I sold my entire WMT position at $55.27/share. I believe that Walmart's wining position in a recessionary market has now been fully priced and that Walmart's stock price will not go anywhere over the next several quarters. I have also recently added SuperValu to my portfolio. I consider my position in SVU entered into at $12.46/share last week to be a much better value and it was intended as a replacement to WMT position in my portfolio. Today's sale of my WMT position completes this portfolio replacement. Accounting for dividends and ignoring commissions, my gain on WMT shares, since I purchased them on August 23, 2007 was 29%.

Historically, stock market corrections like the one we are experiencing now have two legs, the first leg down usually lasts half as long as the second and is half the magnitude. There is normally a short reprieve on the positive side between these two legs. This pattern is starting to be distinctly visible in the current correction now. Looking at the various support levels, I expect the major market indices to return to their low February 2007 levels by the Labor Day week, before the market starts to march back up. Long term investors should not panic and sell. Instead, stay the course, as the market should stabilize and go back up in Q4.

I originally purchased Brady Corp. (BRC) on February 9th of this year at $34.88. The stock made considerable gains since beginning of this week and I closed the position with over 21.5% gain (including dividends) in just under 6 months. Although, I still like Brady Corp., its business strategy and direction, it was time to take the profit. This stock is mostly owned by institutional investors, with a relatively small number (135) of holders now owning over 96% of all shares outstanding. Institutions have been net buyers of this stock for over a year now, increasing ownership from under 75% over that time. In fact, 23 institutions took out new positions in this stock! News on BRC is rather hard to come by, yet institutions are rather well informed and certainly plugged into the rumor mill. Therefore, the slightest perceived problem on BRC's horizon can turn disastrous for share price very quickly. I took the safe exit out of fear of such outcome.

I originally purchased AMAT (APPLIED MATERIALS INC) at $15.37 on July 20th, last year. Now that the stock was up over 48.5% (including dividends) and considering how much chip equipment makers are in vogue these days (even among value funds), it was time to reconsider my position in the stock. Certainly, AMAT is still a great company and a leader in its industry. However, with the stock market in the "correction mode" (which I expect to last for another two to four weeks) and AMAT's third quarter results due out on August 14th, now is a good opportunity to exit this position and take long term capital gains.

Here is how my this year's stock picks performed so far. Data is as of today (July 23rd) market close and ignores effects of dividends, commissions and taxes. Average annualized % gain is currently over 65%.

Symbol Purchase Date Purchase Price Closing Price (7/23/07) Sold Date Sold Price Annualized Return
%
C Jul 20, 2007 $50.43 $50.86     103.74%
GCH May 24, 2007 $24.48 $32.25     193.09%

IAG
May 18, 2007 $7.84 $8.77     65.60%

VAR
Apr 27, 2007 $41.38 $43.71     23.62%
JNJ Mar 26, 2007 $60.06 $62.00     9.91%
BHI Feb 27, 2007 $64.44   Apr 25, 2007 $78.40 138.72%
BRC Feb 9, 2007 $34.88 $36.99     13.46%
LUV Feb 7, 2007 $15.05 $16.42     20.02%
CHN Feb 5, 2007 $31.26 $43.15     82.64%
KCP Jan 9, 2007 $22.79 $23.77     8.05%

Today’s trade is not for the faint of heart. It is quite speculative and definitely a step away from my strategy of buying quality large cap stocks on weakness that I have outlined in a previous blog entry. Today I bought IAMGOLD Corp. (IAG), the world’s 10th largest gold mining company, at $7.84. I have bet on gold outperforming before when I bought Streettracks Gold Trust (GLD) on 12/30/2004 at $43.80. Now, almost 2.5 years later when gold has already risen well over 50% in dollar terms, it is difficult to count on it going up as quickly. IAG presents a unique opportunity among gold mining stocks to leverage further gains in gold prices. Here is more on the subject.

Citigroup Inc. just reported quarterly results that beat both a year ago quarter's and analyst estimates. Yet the stock, a part of the widely watched DJ Industrials index after an initial euphoric rise fell in sync with the index which was down more than 180 points (1.3%) by midday from its all time record close above 14,000 yesterday. C's announcement of new M&A related bridge loans was definitely playing into the downward movement on Citicorp's stock, while the index was falling in response to missed expectations from Google and Caterpillar, as well as general across the board profit taking.

The negative pressure from the falling index along with investor sentiment to stay away from any company with exposure to sub prime mortgages created a great buying opportunity for Citicorp's stock. Indeed Citicorp's subsidiary CitiFinancial operating throughout the US and Canada is in the subprime lending business. And it is not a small company by any measure, yet it is only a tiny fraction of Citicorp's entire business. In fact, US consumer lending contributed only 6% to Citigroup's total revenue in Q2.

Citigroup has operations in more than a 100 countries. Among its many subsidiaries is the powerhouse Smith Barney brokerage and Citigroup is not wasting any time refocusing its efforts on Japan - a very smart move. Opening of additional branches in Japan will give Citigroup direct access to additional low cost funds, as more Japanese consumers open deposit accounts in this saver country. Listing on the Tokyo exchange will help gain their trust, as well aas create more demand for Citigroup's stock throughout Asia.

Citigroup also pays a rather safe (and historically increasing) quarterly dividend that (at the purchase price) currently yields 4.28% annualized and the stock is trading at PE of 11.6 based on the earnings from the last 4 quarters. (Next regular quarterly dividend of $0.54/share will be paid on 8/24, with ex-date of 8/2.) Amazingly for such a huge entity, Citigroup is still growing at a rather healthy pace. All this makes Citigroup one of the top bargains in the DJ industrials index at its current price.

Today, I made a very painful decision to sell Citigroup Inc. (C) at a loss of 35.5% (accounting for dividends). Certainly at this price level Citigroup Inc. looks like a bargain basement, high dividend paying value stock that I should be buying. However, as the year end approaches, a door is closing on the opportunity to offset some of the capital gains I have generated this year.

Yes, I am an ardent believer in maximizing income by minimizing taxes, but why am I selling C specifically and not some of my other holdings that are currently in the red? Well, the answer is rather simple; however it involves a combination of factors:

1. Information that came out over the past several months exposes weaknesses in Citigroup's corporate, risk and financial controls and materially affects my fundamental view of the company. My analysis of C in July, assumed a worst case maximum 6% exposure of Citigroup to consumer mortgages and I discounted this revenue stream entirely when valuing the company. What I, like all the others, missed at the time, is that Citigroup had much more exposure to these mortgages through SIVs. No digging through the financial statements could have possibly revealed this – they were all of balance sheet. How could have the higher echelons within Citigroup allowed for such vulnerability and risk taking? If a man on the street (yours truly) has for years recognized risks associated with real estate market declines coupled with a surge in popularity of newfangled mortgages, surely so did the professional risk managers at Citigroup! Which points to an obvious and quite troublesome conclusion that C has bigger corporate problems with internal communication and controls.

2. Many other financial stocks have lost just as much of their value since the summer and Citigroup can be easily traded in for one of the other down beaten financials to preserve my portfolio’s industry balance. One idea that came from Vitaliy Katsenelson, a Certified Financial Analyst whom I interview for the upcoming January issue of Odesskiy Listok, is to buy stock in a regional bank, instead. One of the ones I looked at, Keycorp (Key) pays a rich dividend, trades at a very low valuation and holds very little consumer debt. In the current market environment, I judge that to mean less downside risk and quicker price recovery.

3. A catalyst for a significant rise in Citigroup’s stock price is unlikely to appear within a month, so I should be able to take a tax loss now and buy back C at the same depressed price level next year. C is a very large US corporation and it is highly unlikely to go out of business, even if it takes more direct help from US government to keep it alive. However, because C is so large, it will take time to determine what is broken and how to fix all the problems. For this reason, it is likely to follow and not lead other financials in stock price recovery action.

4. I can get a much larger tax reduction this year by selling Citigroup than other stock in my portfolio. My losses on C are greater, so by selling this single position I can get a greater tax reduction than by selling 4 other short term losing positions. Thus, this strategy is at least more efficient.

What are some other “F” stocks in my portfolio waiting to be sold before the year end? Deceivingly (and funny enough), they too begin with a “C” and soon enough you will find out why I plan to liquidate CRC and CRUS at such ridiculously low clearance prices!

SK Telecom is Korea's largest mobile operator. I purchsed it originally in October of 2005 at $20.30 - a bargain. It has also paid about $1.70 per share in dividends since the purchase. Sold at $28.18 today for a profit of almost 48%.

8% of the price gain have actually occured since Wednesday, when rumors intensified that SKM may be bidding for the roughly 39% stake in Hanarotelecom, Korea's second-largest broadband service provider. SK Telecom has said it's not in talks to buy a stake in Hanarotelecom. In fact, shares of two telecom units of South Korea's LG Group (the more likely bidders) finished by their daily limit-high Friday (15% up) on market talk they're jointly bidding with Australia's Macquarie Bank Ltd. (MBL.AU) for a controlling stake in Hanarotelecom Inc. LG officials declined to comment. Last month, American International Group Inc. and private-equity firm Newbridge Capital named Goldman Sachs Group Inc. as an adviser to review strategies for a possible sale of this stake in Hanarotelecom.

I believe, SKM stock to be fully priced at current levels and now see more downward share price risk than opportunity for appreciation.

GCH is finally trading below its historic discount level and is now a better deal than CHN (my other Chinese ETF play). The bottom line for adding to my GCH position now, after Greenspan told a Madrid, Spain, conference via satellite that in China "there is going to be a dramatic contraction at some point" and that China's stock boom "is clearly unsustainable," is frankly that I don't believe him! His hidden agenda is to keep US investors from bailing out and heading to China in even higher numbers. Keep in mind that he has been very wrong with timing before, that US vs. China trade deficit has only grown larger, that the US dollar has dropped about 7.5% vs. the Yuan, since China's first move in July 2005 to allow limited floating of its currency and last but not least that the current round of US - China trade talks are on rough ground - we simply have no leverage!

You have heard about selling down to your sleep level, well with The Greater China Fund, Inc (GCH) up over 34.5% in just over 3 months since I have added to this position, the fund failing to report its weekly NAV last week, obscene volatility of both the Hang Seng Index and the GCH plus the ultimate media PR campaign against all that is Chinese from chopsticks and toothpaste to children's toys and dog food, my sleep level required this reduction in my GCH closed ended fund position. This, despite my strong believe that there are more good times ahead for China and Hong Kong.

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