Thursday, August 28, 2008

Are The Bulls Really Back?

I don't know that I really believe in this rally, but I have found a stock that I really like. I saw SWS Group break out today, so I took a deeper look. I like this stock from both the technical and fundamental perspectives. These guys have been in the most downtrodden industry and have had the guts to take advantage of the downturn and make quality acquisitions. They earned 31 cents per share in the quarter, as compared to 25 cents in the year ago quarter. To post that growth in this environment is a real accomplishment. They sold off some of their non-core lines earlier in the year and are adding to their core business. This transition by all accounts appears to be going very well. As the financial sector recovers (I am not by any means trying to call a bottom in the sector) and it will recover a some point---this one should outperform. Now as for the overall rally, I am not bought in and think we will head downward again. My plan is to buy half of my position in SWS now and more as it pulls back. I like the chart and the management.

Natural Gas literally got hammered today and I must admit that I was wrong. I did not see any way that nat gas would go down with the hurricane threat in the Gulf. I am not sure what happens tomorrow, but I will be looking at XTO if it pulls back more. For those of you that asked me during the day if there was a bottom to nat gas---remember this---As natural gas declines, it becomes even more practical for Boone Pickens plan to fuel our automobiles. With alternative energy at the forefront of the political scene during this election year, I think we could see some real government money to flow into creating the infrastructure necessary to fuel our autos with nat gas. So as for nat gas, I don't know where the exact bottom is, but there can and most likely will be more uses for it---so that will provide growth in demand.

One stock that has not participated in the recent rally is Potash (POT). You will need guts and excess capital to short this one, but it could be rewarding. I have thought for quite some time that the fundamental story in the fertilizers is still intact, but you can't fight the market. While this stock has been a "darling" for the past couple of years---the market seem to have moved it to the doghouse for now. I don't have a position in this one, but if I do short it, I will use my stops and let the market take me out if I am wrong.

Dell got slammed after hours. Most of you know that I have been a fan of tech lately. The Dell report did not bother me as much as it bothered the traders in the after hours. I don't intend to buy Dell here, but I think Seagate STX has been unfairly punished as of late. In full disclosure, I own shares of STX and may look to buy more at these levels. I think they are finally going to see some benefit for the Maxtor acquistion. When the deal was first announced, it seemed as though the Street loved the deal. As of late, the Street has punished this stock for its results. I think this one could double over the next year. I am not backing away from my belief that tech will outperform in the coming months. IBM is another stock that could really take off. I would not be surprised to see IBM hit $145 by the end of the year.

I have said that I HOPE we will go up after Labor Day, but I DOUBT it. I think we need to see how this election is shaping up before we can move substantially higher. WE NEED TO LOWER CORPORATE TAXES TO FUEL GROWTH!!!!