Stock Banter

I am adding another 100 shares of ConED (NYSE:ED) to my retirement portfolio at $59 per share bringing my target allocation up to 75%. I’ve owned ED since 5/18/09 in my regular investment account. Since it pays such a high dividend yield, I am buying for my retirement account and selling out of my regular account.

This buy was timed in part to own prior to the Ex-dividend date of 5/14/12. ConEd’s dividend was increased by $0.02 per year raising the full-year run rate to $2.42 providing a current dividend yield of 4.1%.

During the past fiscal year, ED increased its bottom line by earning $3.57 versus $3.47 in the prior year. This year, the market expects an improvement in earnings ($3.75 versus $3.57). Consolidated Edison expects its EPS from ongoing operations for fiscal 2012 in the range of $3.65 to $3.85.

Electricity Consumption Expected to Grow 30%
US household electricity consumption has increased 21% since the 1970s and the Edison Electric Institute estimates another 30% increase by 2030. Natural gas consumption is expected to rise to as much as 24 trillion cubic feet by 2016 from about 23 trillion cubic feet today.

About ED
The company was founded in 1884 and is based in New York, New York. Consolidated Edison, Inc., through its subsidiaries, provides electric, gas, and steam utility services in the United States. It provides electric service to approximately 3.3 million customers and gas service to approximately 1.1 million customers in New York City and Westchester County, as well as provides steam service to office buildings and apartment houses in parts of Manhattan.
The company also provides electric service to approximately 0.3 million customers in southeastern New York and in adjacent areas of northern New Jersey, and northeastern Pennsylvania; and gas service to approximately 0.1 million customers in southeastern New York and adjacent areas of northeastern Pennsylvania. In addition, Consolidated Edison involves in the sale and related hedging of electricity to wholesale and retail customers; operation of generating plants; participation in other infrastructure projects; and provision of energy-efficiency services, including the design and installation of lighting retrofits, high-efficiency heating, ventilating and air conditioning equipment, and other energy saving technologies to government and commercial customers. It serves residential, industrial, and large commercial customers.

Today I added another 1/4 to my target position in BTU bringing my total investment to 175% of my target allocation. I have been buying BTU since 1/19/11 and in equal 1/4 increments through today 5/8/12.

This stock has been my single biggest loser. However I intend to Stay Long in the Land of OZ as Credit Suisse (12 month price target of $44) calls BTU.

“…We believe BTU remains the most attractive way to play the global coal recovery…” Credit Suisse Report

Another reason why I remain bullish on BTU is that coal production has been cut to epic lows. According to Mark Anthony, coal production cut to a 5 year low.

Mr. Anthony states

It’s more so as the ongoing production cut must lead to a coal price rebound and coal mining stock rally, but people do not know these numbers yet. Last week’s plummet in coal stocks thus provides another excellent buying chance.

Despite that Credit Suisse believes domestic consumption could decline in excess of 100m tons in 2012 in the United States, Australia is seeing strong demand due to rebounding steel AND due to weather, labor and mine closures supply has been reduced by as much as 15m tons.

BTU seems undervalued a PEG value of 0.5152, one of the lowest in the Coal industry
PE is 7.8273, is also lower than the industry median of 13.07.

Weaknesses
Disappointing stock price performance, modest growth in net income and high but manageable debt.

DEER is one of ‘those Chinese’ companies that many investors fear. You know that flat out fraudulent, illegitimate and highly profitable companies that Barrons warned against. If you believe Alfred Little, you would believe that DEER has no revenue growth and keeps a set of fake accounts receivables.

He said after an ‘extensive’ 10 City, 60 store ‘channel check’ that DEER sales are weak and that “Managers and store clerks have generally never heard of the DEER brand.” 60 story ‘channel check’, really? That’s not statistically valid.

Interesting that his article had to be edited and whole sections had to be deleted due to disputes. Its hard to believe someone when opinions are cited as fact and Anti-DEER articles are being disputed and removed.

Is this the truth, or is this just more hyperbole from short sellers like Alfred Little. But there is Also Andrew Left who runs CitronResearch.com. He has been slamming DEER on Reuters and his website. He cites that he didn’t see any of DEER products on Tmall, a Chinese retail website. Andrew Left has a history of fraud claims made by the National Futures Association. “The panel found that Andrew Left made misleading statements to cheat, defarud or deceive…”

Oscar Romero makes a good case that DEER has been the victim of Naked Short Selling and that the stock will rebound to $11/share. Read his article here.

Deer is Fighting Back
From a DEER press release
“announced today that threats from a group of U.S. and China based short sellers led by a fictitious group known as ” Alfred Little “, have been carried out due to Deer’s refusal to withdraw a pending United States lawsuit pending in the Supreme Court of the State of New York .”

AF – Alfred Little = Andrew Left, I think it’s a joke, sir… like, uh, ‘Sillius Soddus’ or… ‘Biggus Dickus’, sir.
No, more like Naughtius Maximus.

More of my opinions on DEER

I picked up an additional 1/4 of my target goal in QCOM today at $62 per share on what I consider an overreaction to supply shortages.

On the company call Qualcomm said they “are seeing very strong demand for the new 28 nanometer chips” and warned it didn’t have enough capacity. The constraints on 28-nanometer supply are limiting our potential revenue upside this fiscal year.”

While that is a problem, too much demand a good problem to have.

Factors influencing my additional purchase of QCOM
-QCOM pays an annual dividend of $1.00 and, at its current price, yields 1.61%
-Revenues rose by 42.6% compared to last years same quarter
-Net income increased by 123.2% compared to last years same quarter

-Qualcomm has a strong balance sheet, with $14.64 of net cash and investments per share.
-Credit Suisse has a price target of $75 per share
-Relationship with ALL wireless carriers and all key smartphone platforms including Android, iOS, Windows Phone 7 and BlackBerry
-The Street gives QCOM its highest Rating A+ stating”

“The company’s strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and compelling growth in net income.”

About QCOM:
QUALCOMM Incorporated (Qualcomm) designs, manufactures and markets digital wireless telecommunications products and services based on its code division multiple access (CDMA) technology and other technologies. It has four segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); Qualcomm Wireless & Internet (QWI), and Qualcomm Strategic Initiatives (QSI). QCT is a developer and supplier of CDMA-based integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products. QTL grants licenses or otherwise provides rights to use portions of its intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. In May 2011, it acquired Atheros Communications, Inc. In November 2011, it acquired all of the technology and other assets of HaloIPT. In December 2011, it formed Qualcomm Life Inc.

I picked up shares of CAT today at $100. My top reasons are robust revenue growth, high rates of return on equity, and good growth in net income. CATs revenue growth rose by 34.6% since the same quarter one year ago. CAT seems valued at a discount with a PEG value of 0.5752, one of the lowest in the Constr. & Agric. Machinery industry.

CAT has shown a consistent pattern of positive earnings growth over the past two years. During the past fiscal year CAT has increased the bottom line from $4.14 to $7.39.

CAT is selling for less than other in its industry according to The Street. Credit Suisse has a $138 price target. From Credit Suisse’s most recent report:

For 2012, dealers forecast sales up 15-20%, consistent with last quarter, driven by replacement demand. Still, 60% of dealers implied CYQ1’12 was trending ahead of expectations. Also encouraging, housing is on the path to recovery coupled with some pockets of strength in comm’l construction and infrastructure (except military). Large engines remain on fire tied to strength in power gen and oil & gas.

Market share is up and S&P Capital IQ expectes revenues to rise 19% in 2012, following a 41% rise in 2011.

Background: Caterpillar’s trademark yellow machines are in nearly every country in the world, with 65% of product sales derived outside of North America in 2011 (64% in 2010). CAT previously operated in three lines of business: Machinery, Engines and Financial Products. However, in 2011, it shifted its segment breakup to Construction Industries (33% of revenues and 21% of operating profit in 2011), Resource Industries (26%; 34%), Power Systems (33%; 31%), Other (3%; 8%), and Financial Products (5%; 6%).

With 65% of its sales outside the US, CAT is a world recovery play. CAT’s dealer network, which employs more people and has more assets than CAT itself, as a significant competitive advantage. As of year-end 2010 (latest available), 73% of CAT’s independent dealers were located outside of the U.S.

10 years trend through 2011, CAT recorded compound annual growth rates (CAGRs) of 11.4% for revenues and 21.0% for earnings per share. The company also generated a 18.3% return on invested capital (ROIC) in 2011 (before one-time items), which exceeded its 9.5% weighted average cost of capital as of January 2012.

This is a long term buy and hold. I also own CAT in my retirement account. It currently yields 1.74%.

I’m buying more on the heels of yesterday’s annual report announcing record results!

2011 revenue of $226.7 million, an increase of 28.9% from 2010
2011 net income of $39.8 million, an increase of 31% from 2010
Fully diluted earnings per share of $1.18, an EPS increase of 31% from 2010
Anticipates favorable Chinese domestic consumer market environment for continued growth in 2012

2011 revenue was $226.7 million, an increase of $50.9 million, or 28.9%, from $175.8 million in 2010. Approximately 68% of DEER sales in 2011 were generated from the China domestic market while approximately 32% were from export markets. The increase in revenues was a result of sales expansion in the China domestic market of our Deer branded product lines. DEER was also able to raise the average selling prices of products and maintained healthy profit margins across our product lines.

2012 Forecast, Deer anticipates revenues from the high margin China domestic sales will continue to surpass export sales. Deer provides 2012 revenue guidance of between $270 and $290 million, net income guidance of between $45 million and $47 million, and targets EPS (Earnings per Share) between $1.37 and $1.42. 3-YEAR INSIDER SHARE LOCKUP, TOTAL MANAGEMENT COMMITMENT

Lockup Agreement
Deer’s entire management team has voluntarily entered into 3-year share lockup agreements, which prohibit them from selling any shares to the general public through at least 2013. The lockup agreements represent approximately 47% of Deer’s entire outstanding shares. Deer management’s vested interests are aligned with those of Deer’s public shareholders. Deer has been led by its original founders since the inception of its operating business 17 years ago.

About
Deer Consumer Products, Inc. is a NASDAQ Global Select Market listed U.S. company with its primary operations in China. Deer has a 17-year operating business as well as a strong balance sheet. Operated by Deer’s founders and supported by more than 100 patents, trademarks, copyrights and approximately 1,000 staff, Deer is a leading provider of “DEER” branded consumer products to Chinese consumers and a leading vertically integrated manufacturer of small home and kitchen appliances for global customers. DEER’s product lines include a series of small household and kitchen appliances as well as personal care products designed to make modern lifestyles easier and healthier.

Originally I owned Proctor and Gamble, PG:NYSE  in only my trading account since 2010.

Seeing that dividend tax rates are likely to go up, I decided to move my PG holding to my tax sheltered IRA account. Today’s selling of PG was the completion of PG stock from my trading account to my IRA.

With earlier purchases of PG on 10/25/12 at $65.09 and on 1/24/12 at $64.56 for my retirement account, I had equal amount of shares in my retirement account as I had in my trading account. Today’s selling action zeros out my trading PG stock by closing out PG shares at $66 and booking nearly an 11% long term taxable gain.

I’m still long on PG with 1/2 of my long term target position entirely in my Retirement account. And its nice to know I bought those retirement shares at a lower price than I’m selling my non-retirement shares.

Here are more thoughts on PG

Also on Feb 21, I added 1/4 more to my position in LLY. I hold LLY in my retirement account because it is a high dividend yielder (5%). I now own 1/2 of my target position in LLY.

In November of last year, I initiated a position at $38 per share. A few days ago I added to that postition at $39 per share.

LLY seems inexpensive with a PE value of 9.9453, below the Biotechnology & Drugs industry median PE of 17.95.
LLY is one of the more profitable companies in the Biotechnology & Drugs industry with a net margin of 17.90%.

Schwab Equity Rating on LLY is ‘A”. In their report, Schwab says, LLY will “Strongly Outperform” the broad market. With positive valuations on Cash Flow Strength, Capital Intensity, Income Statement Valuation, Track Record of Positive EPS Surprises and Business Geographic Diversification, Schwab rates LLY in the top 3 percentile rating.

The Street Rates LLY ‘A-’ Buy.

The company’s strengths can be seen in multiple areas, such as its solid stock price performance and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

Eli Lilly and Company discovers, develops, manufactures and sells products in one business segment, pharmaceutical products. It also has an animal health business segment. The Company manufactures and distributes its products through facilities in the United States, Puerto Rico, and 17 other countries. Its products are sold in approximately 125 countries.

Products include neuroscience products, endocrinology products, oncology products, cardiovascular products, animal health products and other pharmaceuticals.

In the United States, Eli Lilly and Company distributes pharmaceutical products principally through independent wholesale distributors, with some sales directly to pharmacies.

Recent Aquisitions:
During the year ended December 31, 2010, it acquired Alnara Pharmaceuticals, Inc. and Avid Radiopharmaceuticals, Inc. On May 28, 2010, it acquired the European marketing rights to several animal health product lines divested by Pfizer Inc., as part of its acquisition of Wyeth, Inc.

This isn’t John Deere (DE:NYSE) the tractor company, this is DEER:Nasdaq, a small cap appliance and tool maker based in China.

I picked up this stock on Feb 21 for my IRA retirement account specifically because it is a high dividend yielder at 4.5%. I started with a small position, 1/4 of my target allocation in the stock. I will be reviewing this stock for additional entry points.

What’s to like about Deer? First of all it is important to understand what the company does.  Here is some background information:

Deer Consumer Products, Inc. (Deer), is a Chinese designer, manufacturer and seller of small home and kitchen electric appliances. Deer develops, promotes, manufactures and sells a range of products, including blenders, juicers and soy milk makers. Its products are sold both in the China domestic market and to export markets. In the China domestic market, its products target China’s growing middle-class and are sold primarily under the Deer brand name, as well as under one store brand for a retailer’s private label programs. In the export market, it manufactures its products for overseas consumer products companies who sell them under brand names, including Black & Decker and Betty Crocker Kitchens, as well as store brands for retailer’s private label programs. The Company operates 13 tooling houses, 291 injection-molding machines, 27 production lines and possess an annual production capacity of 14 million units.

DEER has a PE ratio of 3.978, one of the lowest in the Appliance and Tool industry.
DEER has a Net Profit Margin of 17.405, making it one of the most profitable in its industry.
DEER zero long term debt according to its most recent (9/30/11) Balance Sheet Statement. The company has reported zero or near zero long term debt since 2007.

The Street Rates DEER a B- Buy.

The company’s strengths can be seen in multiple areas, such as its

robust revenue growth, largely solid financial position with reasonable debt levels by most measures,

impressive record of earnings per share growth, compelling growth in net income and attractive valuation

levels.  We feel these strengths outweigh the fact that the company has had lackluster performance in the

stock itself.

The company’s strengths can be seen in multiple areas, such as itsrobust revenue growth, largely solid financial position with reasonable debt levels by most measures,impressive record of earnings per share growth, compelling growth in net income and attractive valuationlevels.  We feel these strengths outweigh the fact that the company has had lackluster performance in thestock itself.

The fact that the stock hasn’t performed while the company is growing financially is a market disconnect. I’m starting with a small position, but I will be watching this stock very close. During the past fiscal year, DEER CONSUMER PRODUCTS INC increased its bottom line by earning $0.91 versus $0.51 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus $0.91).

With a market cap of $155 Million, DEER is just 2.8% the size of Whirlpool Corp (WHR).
And the stockholders’ equity (“net worth”) in DEER has greatly increased by 31.04% from the same quarter last year.
DEER’s liquidity has increased from the same period last year. Overall, the key liquidity measurements indicate that the company is very unlikely to face financial difficulties in the near future.

This is my first pure play China stock.