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April 22, 2008
FIRST QUARTER EARNINGS AREN'T WORTH LIGHTING A CANDLE OVER
What Is That Old Saying? The Proof Is In The Pudding!!!!
It will
be much harder for the "bought & paid" for analyst to keep touting the bull when, according to giant
companies such as GE and Wachovia, recent earnings announcements show the bear is in charge. Don't worry, these
bulls will find a way to tell you how great things are. Just don't listen to them. Avoiding CNBC is about the best
investment advice I can offer.
It
seems as though I hear (on CNBC) about twice a day some analyst, or economist, tells us the bottom has been found.
This is rubbish and proves that, just because some of them are educated, it doesn't mean they are smart.
A
great example would be the action of the markets on Wednesday, last week. Investors seem to have been relieved
after JPMorgan Chase & Co., Coca-Cola Co. and Intel Corp. all beat first-quarter projections, along with IBM
announcing Q1 earnings that jumped 26 pct, and the company increased its outlook. The good news sent the markets
to the moon, with the DOW 30 settling up 256.80 on the day, after backing off from a gain 263.31 for the daily
high.
It
sure seems odd that the markets hardly fall on a negative announcement, but a few positives and up they go.
Since I love examples, here are a few more.
On the same day the markets screamed, because of strong earnings on a few companies, we heard that
the cost of a barrel of oil exploded past the $115 mark for the first time ever.
On the same day the markets screamed, we heard that consumer inflation continued higher last month
as increases in energy, food and airline tickets overwhelmed the biggest drop in clothing prices in nearly a decade.
Core inflation, which excludes food and energy prices, posted a 0.2 percent rise. The Labor Department
reported consumer prices rose 0.3 percent in March after being unchanged in February.
On the same day the markets screamed, we heard that home construction plummeted during March to its
lowest level in 17 years, a sign that the housing sector will continue at a snails pace. Housing starts fell 11.9
percent to a seasonally adjusted 947,000 annual rate, after falling 0.7 percent in February to 1.075 million.
Here is another one we can put in our pipe and attempt to smoke. On Friday - Citigroup Inc. (C.N) posted its second straight quarterly loss, hurt by more than $16 billion of write-downs
and costs related to credit losses, and said it will cut another 9,000 jobs. The $5.11 billion first-quarter loss
was larger than expected.
Guess what? On the same day the markets
screamed, up about 250 points.
This means approximately 500 "up" points on the DOW 30 were due to earnings announcements
on about 5 companies, and some of those announcements were not so good. This is why we have to worry. The 500 +
points were with total disregard to the economic troubles. As far as I'm concerned, the rally will be over by the
time I get this out.
The
markets need to climb on real news and until we start seeing some, continue to avoid the big stocks.
INFLATION
Oil
prices still climbing and food prices are going through the roof. Crude-oil futures rose on Tuesday to a new high
of $119.90 a barrel, as lingering worries over oil-supply disruptions and the dollar's new low against the euro
provided support for higher prices.
Since the big fuss is over what a few corporations did in the last quarter, shouldn't we be
turning our interest to the current quarter? If inflation is climbing, what makes the bulls so sure it won't affect
corporate America?
Inflation is becoming a real problem. One of the main problems associated with inflation, is the
refusal of our government to accept the fact inflation is here, and rising. It seems the Feds are going out of
its way to convince us something, that is already here, is not going to get here. Figure that one out.
The
constant dropping of rates, to help the Feds banker buddies, is causing the dollar to plummet and unemployment
to rise. It is the wrong medicine and it will come back to bite our economy, but what's an American to do?
The government bail out plan for buying billions of dollars in mortgages is a disguise for helping our
banks and lending institutions unload bad debt at face value of the mortgages, not current market value. What it
is essentially doing, is making taxpayers pay the loss on the true value of the mortgage. The Feds will pay the
value of the original loan, when in fact the value of the home has fallen considerably. If the owner defaults,
the tax payer gets the bill, not the bank.
The
only thing we can do is remain cautious. Figure on the worst case scenario. This way if we are wrong, we will have
a better chance of coming out smelling like a rose. There is nothing wrong with being cautious, just don't be too
careful once a target investment is found, and we decide it is the place to go. Best to go there when the home
work is complete, since a true bargain will not stay on the bottom too long. Haste makes waste!
In closing, I want to believe the economy will improve as much as the next guy, or gal. It's just
that I can't seem to find anything on the "good news" front that seems lasting. Corporate earnings are
history; therefore recent announcements are already old news. The markets are supposed to move on events 6 to 8
months from now, not what happened in any given morning.
Wars and Hurricanes have the power to turn markets lower, on a dime, but I have never heard about a big rally
because of a War, or a Hurricane. We have to ask ourselves if there is strong enough news, in the near future,
to pull the markets back up. Certainly the banking troubles can't be over this quick and everyone knows the housing
markets still stinks.
The
"bottom line" is there is not any thing on the horizon that would cause the bull to charge and the bear
to sleep. The so-called War will not be over until GW is history and Americans are still losing their jobs faster
than they were.
Smaller stocks take fewer dollars to move and usually have far less exposure to world events and
changing currencies. This is where we want to be, but be careful. Most stocks need to be avoided right now. Only
the exceptions should get out attention.
As always, I wish you the very best in all
your investments!
Current Up-Date
Advanced Micro Devices (Computer
chips) (AMD)
(Recreational
& Environmental Products)
(news) $5.98.
Advanced Micro Devices (AMD) (52 week range 5.31 - 16.19), now at $5.98. AMD has become a leading factor in the primary PC chip war.
Here is a stock setting near the low with $1.89 billion in cash and a book value of $4.942.
Seldom do we have an opportunity to pick up stock in such a big company so close to book value.
AMD
is too strong of a company to have been beaten down this far. It can be played for a couple of dollars, and possibly
through the entire bear market or it can be picked up for the longer term. Either way, anytime under $6 is a great
bet. It only has to go back to $12 to make a great deal, while many chip stocks have not fallen far enough to go
back to anywhere, yet.
This stock is worth a "watch closer", but buy only when under $6. The last time at
these prices the stock moved to near $30, as the bull market aged. It can do it again when the time is right. Entry, if under $5.50, would be a thing to do.
A "Featured Spotlight" stock
Dynamic Response Group, Inc. (DRGP.OB)
(Recreational
& Environmental Products)
(news) $0.031
Dynamic Response Group, Inc. (DRGP.OB)
(52 week range 0.028 - 0.33), now at $0.031. DRGP is our newest addition to the "Stocks in the Spotlight".
DRGP is the first company we have added in over a year. Growing revenue and it would appear that the revenue will
continue to grow at a strong pace, is the main reason we need to look closer here. We should hear Q1 results any
day now and I would expect revenues will be strong again.
Nice industry for the current times. New products need to find a way to reach people and DRG
seems to know how to do just that. I have said we need to find a company with new products and growing revenue,
and trading near the low end of the trading range. DRG seems to be a prescription written for exactly those symptoms.
The
"Stocks in the Spotlight" has commenced a strong investor awareness program that will be active for the
next three months, which I believe, is all that is needed to accomplish a strong increase in volume and price.
Press Release
Dynamic
Response Group, Inc. Lands Exclusive Deal to Market The Official NASCAR Members Club
Tuesday April 22, 9:00 am ET
MIAMI, FL--(MARKET WIRE)--Apr 22, 2008 -- Dynamic
Response Group, Inc. (OTC BB:DRGP.OB - News),
a leading innovator of strategic marketing solutions, today announced it has signed an exclusive three-year deal
to market The Official NASCAR Members Club to the millions of NASCAR fans residing in the U.S. Effective immediately,
the deal comes on the heels of a successful marketing test, for which Dynamic Response Group created a scalable
model to market both "The Club" itself and a bundled merchandise package marketed as a VIP membership.
(more)
DRG's opportunity to increase the membership in NASCAR has just increased a few-fold. Working
with millions of fans, in one of the fastest growing sports, has got to be only good news for DRG. I look at as
another nail in the foundation.
I am recommending a "BUY" here!
Fonar Corp. (FONR) (Nasdaq NM)
(MRI Sales, Service & Mfg.) (news) $3.05
Fonar Corporation (FONR) (52 week range 2.38 - 10.00), now at $3.05. A company that has been working on its product for over 25 years, and
it has the best MRI scanners anywhere on the planet. FONR is a trading stock, once it finds a trading range. Due
to a big reverse, the total shares out there are far fewer; therefore, the habit of moving up and down is still
strong, even at the higher prices from the reverse.
The
stock recently made a strong bounce from the new 52 week low, under 2 1/2, up to over $4, but is heading back down
again. I wanted to get FONR in front of you on the way down. Anything under 2 1/2 would be a strong entry level.
A good fairly safe investment, in a not so fairly thought of market. Do a little research on the stock, because
short term moves are big enough to make it worth our time.
Wait for an entry level under $2.50!
A "Featured Spotlight" stock
Jet Gold Corp. (JAU.V) (Pink Sheets JAUGF)
(Mining, Oil, Metals, Coal & Gas) (news) $0.20
Jet Gold Corp. (JAU.V) (52 week range 0.13 - 0.69 (Canadian)(Pink
Sheets JAUGF),
now at ¢0.20 (Canadian) (U.S. = $0.22). Jet -- was incorporated
under the British Columbia Company Act on April 24, 1987. Jet Gold is an exploration and development company that
has been increasing shareholder value through acquisitions and exploration.
The
main two reasons I am recommending Jet Gold is, the qualified management and the addition of new holdings that
hold promise for millions of tons of coal.
The
company is coming into season. This is the time of the year where Jet Gold can move forward "full steam ahead".
The spring is when Northern exploration companies are able to get things rolling. This is why we have to look at
the stock now.
Development companies are not famous for frequent news, after all, they can't strike it rich everyday,
but when good news happens, in this industry, we have to be in the stock already. Our chance for good news is much
stronger in the next 6 months, than in the last 6 months.
Jet
Gold has a strong management team and loaded with loyal shareholders. A well managed company
that is always growing, by acquiring small percentages of producing companies, while at the same time exploring
for that possible big winner, and it may have it in Jet Gold's venture into the coal business.
The
stock is acting well and showing much strength, while others are not. All it needs is an increase in volume to
move the stock up and this is very possible over the next few months.
Treat Jet Gold as a long term stock with a
chance at a short term explosion. Buy here!
ZAP (Zero
Air Pollution®) (ZAAP)
(Recreational
& Environmental Products)
(news) $0.43.
ZAP
(ZAAP.OB) (52
week range 0.66 - 1.33), now at $0.699. ZAP
is in the business of making zero air pollution cars, scooters, bicycles and other electrically powered moving
vehicles, along with other energy saving methods of transportation.
This stock just can't seem to get going, but it is the ideal short term investment in this
current market climate. It has a following and a history of quick moves, only down faster than up. It has a great
story and a great product, but the company has been a total failure in getting the world of investors to even know
it even exists.
Recent financials show a big drop in revenues in the last quarter, falling from $2.019 mil down
to $1.151 mil. Probably the main reason the stock has fallen so far, but just maybe too far.
Enter anytime under 0.45, for the short term!
Visit
our "Stocks
To Watch" section for our brief opinion
on these and additional companies.
Make sure to visit the Week Ahead for information on
the
current market and comments on the coming week
The Week
Ahead
Remember, if in the right stock, at the right price,
the market direction will mean little!
I am J.R. Budke and this is my opinion!
J.R. Budke became a stock broker in 1981, an options
principle since 1982 and a branch office manager since 1987. He is currently inactive as a stockbroker as of 12/31/99.
J.R. writes the articles and opinions for the Stocks in the Spotlight. The stories and stocks found on this site, or any "Stocks in the Spotlight" written
material, are the opinions of J.R. Budke unless other wise stated, and should not be considered as advice. You should not purchase any stocks solely on the opinions found
on the "Stocks in the Spotlight's" web site or in any of its written material. You should also be aware
that options are not for everybody and carry a high degree of risk.
The "Stocks in the Spotlight" provides information only, this is not meant to be a recommendation to
buy or sell the profiled security, nor is this an offer to buy or sell the security. The publishers of "Stocks in the Spotlight" are not investment advisors and are
not acting in any way to influence the purchase or sale of the security. Before purchasing or selling any security profiled, it is encouraged and recommended that
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we select may involve a high degree of investment risk. Potential investors must understand that they may lose
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