How We Made 20.5% In 3 Months With Carl Icahn

Random Thoughts


It was yet another mixed day in market land.

The Ps sold off fairly hard, losing nearly ?%. This action keeps them in a shorter-term trading range. Again, they haven't changed much in around three weeks. Longer-term they still look okay. They remain in an uptrend and they only appear to be consolidating.

The Chart of the Day is Cepheid (CPHD). I found the stock by sorting today's New High List for frequency, eliminating the stocks that haven't had positive gains for both the last week and month. I used the Flipchart feature to review the charts. Since the Trend Spotter signaled a buy in 10/18 the stock gained 13.57%.

The Company develops, manufactures and markets microfluidic systems that integrate, automate and accelerate biological testing. Their systems are miniaturized instruments that analyze complex biological samples in a disposable cartridge by combining molecular biology with microfluidic technology that processes small quantities of liquid, typically using components fabricated with computer chip technology. These systems rapidly perform all of the steps required to analyze complex biological samples.

Markets were headed higher on Wednesday after the number of unemployed Americans reached a five-year low. The Labor Department reported that the unemployment rate fell to 7.0%. They also said there was an addition of 203,000 jobs in November. A level this low in unemployment has not be seen since November 2008. The data surpassed economists expectations of November jobs increasing only 180,000 and the unemployment rate to fall to 7.2%. September and October jobs were upwardly revised 8,000 new positions. During the month of October there were government employees who were counted as unemployed due to the partial government shutdown. With the increasing amount of positive economic data continuing to roll out, some speculate that the government may start finally pulling back on the Fed?s bond buying program. Eric Stein, co-director of the Global Income Group of Eaton Vance Investment Managers, said, ?The U.S. labor market is still far from healed, but it certainly is moving in the right direction. The number puts December on the table, but it isn?t a certainty,? when referring to the Fed?s possible bond tapering.

In a separate report released on Friday by the Commerce Department, it showed that consumer spending was up in October. Spending increased from a 0.2% rise in September to a 0.3% increase in October. This followed a slight 0.1% gain in wages and salaries. Personal savings was down to 4.8% from September?s 5.2%. The increase in spending was attributed partially to purchases of long-lasting items such as vehicles and non-durable goods, like clothing and utilities. Consumer spending accounts for nearly 70% of economic activity. Russell Price, a senior economists at Ameriprise Financial Inc. said, ?People are feeling better, that?s a positive for the holiday season. This year I don?t see the same strong fiscal headwinds ahead of us to impede our momentum.?

Shares of J were up on Friday morning after the company announced that they would be spinning off their Lands? End clothing portion of the business into a separate company. They will do so through a distribution of the stock to the company?s shareholders. This announcement was first made public in October when Sears said they were thinking about separating both Lands? End and the Sears Auto Center into separate companies. The auto portion was not mentioned in the announcement. Brian Sozzi, an analyst with Belus Capital Advisors, said, ?It makes you question the value of what Sears is sitting on. It may have to continue dismembering itself to stay alive today and shrink from the inside out.? He continued to say that the move shows that the Sears was not able to attract a buyer willing to pay the right price for Lands? End.

That?s all for the day.

All the best,
Jack Aubrey, Oakshire Financial

Every quarter, many of us in the investing world eagerly anticipate the SEC filings that the world's largest (and greatest) investment managers are required to file.

There is no single 13F that is more eagerly anticipated than that of Berkshire Hathaway's (NYSE: BRK-B) Warren Buffett.

The Oracle of Omaha isn't just one of the greatest stock pickers the world has ever seen. He is also one of the most selective. He seldom makes a significant new addition to his portfolio, usually instead preferring to add to existing positions or buy nothing at all.

So when he makes a big purchase of a new stock, it's kind of a big deal.

In the most recent quarter, Buffett revealed a rare new portfolio addition: Exxon Mobil (NYSE: XOM) -- for a cool $3.4 billion. Even for Buffett, that's a big purchase.

Investors have been scrambling to answer two questions: Why is Buffett was buying Exxon -- and why now? Buffett has been familiar with Exxon for decades, so what's changed about the company that merits a $3.4 billion investment from Berkshire?

It certainly isn't because Exxon's stock price has dropped:

With stocks at all times highs, we're starting to hear a lot of experts tout that equities are trading at "premium valuations" -- which is financial lingo meaning stocks are expensive relative to their underlying earnings.

While those pundits are partially correct, there's more to the story...

The recent rally has pushed the price-to-earnings ratio (P/E) ratio for the S&P 500 from 13 in 2011 to its current value of 16. While the move is dramatic, valuations are still nowhere near the soaring levels we normally see during most market bubbles. For example, before the 2001 "Dot Com" collapse, the S&P's P/E ratio reached 46.1 before crashing back down.

So while the recent rally is impressive, there's still little reason to believe we're nearing a "market crash" similar to that which we experienced in 2001 and 2008... Until that starts to change, we remain bullish on stocks.

Sure, many stocks have become expensive, but a few remain absolute bargains. For example, certain small-cap stocks still have plenty of upside potential when compared to the broader market.

No, I'm not talking about fly-by-night penny stocks -- I'm talking about companies that are on the ground floor of a promising new trend or technology. These companies are poised for explosive growth and can deliver impressive profits to investors in years to come. In today's issue, I'd like to introduce you to one such company, which is trading at bargain prices after a recent selloff.

Is It Time To Buy This $1 Billion Game Changer?
SodaStream International (Nasdaq: SODA), the manufacturer of homemade soft drink machines and one of Andy Obermueller's favorite game-changing stocks is down 26% since June... is now the time to buy?

Andy originally recommended SodaStream in September of 2012, back when the stock was trading around $35 a share. At the time, Andy thought the company's contemporary soda maker could compete head to head against major soft drink companies like Coca-Cola (NYSE: KO) and Pepsi (NYSE: PEP). As he said of SodaStream back then:

Unsurprisingly, the machines and the flavorings are flying off the shelf. I like the device because it has a variety of sugar-free options. And the stuff is actually cost-effective versus name brands like Coca-Cola and Pepsi (NYSE: PEP), after the cost of the machine has been recouped. For families that drink a lot of soda, these savings can be appreciable -- or at least perceived as appreciable -- which might push a consumer into the roughly $100 purchase.

Turns out he was right. Just 11 months after his recommendation, the stock had already soared over 80% in value...



But after the meteoric rally and ensuing correction, the question becomes... does Andy still like the stock?

The short answer to that question: yes. In his most recent report -- "The Top 5 Game-Changers of Tomorrow" -- Andy details his bullish case for SODA:

SodaStream is going places. It's going into homes, and heaven only knows where else it could end up. My guess is that restaurant chains will figure out a way to make exclusive signature sodas that include alcohol, which would elicit thousands of machine sales and a significant quantity of lucrative customized product.

What's next?

I predict that sooner or later SodaStream is going to be acquired.

It's just too little money for too rich of an opportunity. At today's share price, SODA is worth $1.2 billion. In an acquisition, let's put the sticker price at an even $3 billion. Coke has nearly $10 billion in cash and nearly that again in short-term investments! Pepsi has almost $8 billion in cash on the books, plus enough inventory on hand to come up with another $4 billion.

?Tis the season: Amazon Smile is giving $20 to your favorite charity when you buy a Kindle Fire HDX during the next week.

Quote of the day

Brad Feld, ?Sometimes you have to stop doing things to make more progress.? (FeldThoughts)

Chart of the day



S&P 500 breadth continues to deteriorate. (The Short Side of Long)

Markets

Market bellwethers are rolling over. (Charts etc.)

The case for REITs. (SurlyTrader)

Affluent investors are holding onto cash like a security blanket. (FT)

Options skew is elevated. (The Short Side of Long)

Hedge funds

Hedge funds are getting crushed in 2013 by the runaway S&P 500. (Bloomberg)

Seth Klarman and David Tepper are returning cash to investors. (II Alpha, ibid)

Investors are pulling money from Eddie Lampert?s hedge fund. (Dealbook, WSJ)

Sears Holdings ($SHLD) is spinning off Land?s End. (Reuters)

Strategy

Why we should expose ourselves to opposing viewpoints. (Above the Market)

Options selling has not been a rough road the past few years. (research puzzle pix)

Why current retirement withdrawal strategies need a rethink. (Rekenthaler Report, InvestmentNews)

Technology

Palantir is now valued in excess of $9 billion. (Businessweek, Bits)

AngelList is the Nasdaq of our generation. (Andreas Klinger via @mattermark)

There are too many damn messaging apps. (TechCrunch)

ETFs

How big a problem is index-frontrunning. (IndexUniverse)

A closer look at the Cambria Foreign Shareholder Yield ETF ($FYLD). (TheStreet)

Where investors put their money in 2013. (Focus on Funds)

Global

Spanish stocks are overvalued. (FT Alphaville)

South Africa is getting crushed by the reversal of the commodity cycle. (Sober Look)

The case for greater public investment. (Economist)

Economy

The November non-farms payroll report surprises to the upside. (Calculated Risk, Capital Spectator, Daniel Gross, smithy Salmon, Bonddad Blog)

How the Fed will read the NFP report. (Real Time Economics, MoneyBeat)

Rail traffic is chugging along. (Pragmatic Capitalism)

Corporate profits just keep on increasing. (Calafia Beach Pundit)

The evolving nature of men in the US workforce. (Political Calculations)

Earlier on Abnormal Returns

Simplify your investing to avoid ?opportunities for failure?. (Abnormal Returns)

What you may have missed in our Thursday linkfest. (Abnormal Returns)

Mixed media

Bitcoin fraud is a thing. (Dealbook)

American teens are still watching television. (The Atlantic)

What the Lightning adapter says about Apple ($AAPL). (Daring Fireball)

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