What Credit Crisis?

Banc of America just settled with MBI for a song, sending MBI up 40%. As such, BAC is ripping too. Hell, the whole entire god damned banking sector can’t find enough buyers. Warren Buffet said he’s been buying WFC every month this year. The regionals are all up big and anything related to housing is up 50%+.

Even Fannie and Freddie are back from the dead, sporting 5 symbol stock symbols up 100’s of percentile a lot in recent months.

All of the government rules and regulations to curb risk taking hasn’t got in the way of some good old fashioned stock market speculation. The speculation is: the banks are bullet proof. Their balance sheets are strong and housing is driving fees again.

They may not be sporting 3x p/s ratios any longer–but the industry is clearly in bull mode.

I don’t own any banks, regrettably. Like others, I was brainwashed to believe “the banks are too hard, might as well look elsewhere.” Sometimes the blackest of rocks yields the brightest diamond.

The good news, as a whole, is that the economy should benefit from this banking renaissance. Auto and homes loans should be abundant and American consumerism will rake the path to prosperity, one Michael Kors bag at a time.

All things considered, what’s good for BAC is good for us all.

I added to my MU position.

RBCN earnings are tomorrow. Last quarter the company missed bad, citing purposeful withdrawal from customers due to cheap sapphire pricing. Wall Street thought they lost customers, sending the stock diving. We shall see tomorrow. It is not for the faint of heart, trust in that.

My AMBA is ripping higher. It just fits the criteria of every high tech winner these days: small float, high growth, teenage stock price: BOOM.

I am up another 1% or so today, but need MU and RBCN to keep going higher to fuel my gains–which stand at around 17%.

For now, to make things clear and concise for me, I am focused solely on technology stocks, mainly due to valuation. The way I see it, stocks have run very high, very fast. If I am to be caught with my pants around my ankles again, I’d rather it happen in an industry that doesn’t get annihilated when deflation talk hits the tape. Technology, in a way, is resilient to macro events and can trade on a company by company basis.

Aside from the stocks I own, I also like WFR, AMKR, GTAT and PAMT.

How about that WETF?

Bottom line: we’re all waiting for the market to pullback. While we wait, why not make a little money?

APO posted gangbuster results today, solidifying private equity as a force to be reckoned with on Wall Street, as far as smashing EPS estimates is concerned. Pair that with the buyout of BMC this morning, and there is reason to pay attention and look for names that might be next on the takeover list.

Here is my criteria.

Market Cap under $50 bill

Minimum daily volume of 500k

Debt/equity under 2

Forward PE under 15

PEG ratio under 2

Price to free cash flow under 15

Price to sales under 5

Exclude all China related stocks

Sector: only technology

When looking for private equity buyout candidates, growth isn’t a major factor, believe it or not. Sometimes growth is paired with volatility, which is avoided by PE. What they’re looking for is free cash flow, clean balance sheets or able to lever up, inexpensive valuation in a cheap sector. In this case, tech is the cheapest sector out there.

According to an S&P report published this morning, information technology is trading at a significant discount to historical valuations, more so than any other sector.

I don’t have a favorite name just yet. But some of those chip companies look good and the industry is ripe for consolidation.

Back in the good old days of 1999, my young broker friends and I would laugh at the old men in wheeled chairs, bringing tickets for Tootsie Roll and Eastman Kodak to the trading desk. The Bethlehem Steel crowd could not grasp the dot com “revolution”, due to minor impediments–such as free cash flow and legitimate business models.

At the time of the crash, one of my childhood friends worked for me. His father was an executive at a big bank, experienced on Wall Street for more than 30 years. He had a small account with us, no more than $150k. He was down a swift 20k on the initial downtick and asked me to sell out his account and send back the money. Naturally, I tried to convince him otherwise, since the “new economy”, as we liked to call it back them, would replace all of the old idiot stores with the online variety.

He replied, in a distinct eastern european accent, “you’re f#cked for at least 10-15 years.” My broker friends and I had a good laugh about that statement, over drinks at Bryant Park that night, belittling the old man for being “close to the wheeled chair.”

Lo and behold, he was right. The markets are at new highs–but the NASDAQ isn’t even close to new highs, which is the index that all “new economy” protagonists claimed to be superior to the Dow and SPY. Back then there were people who believed the NASDAQ would surpass the Dow in price. Clearly, we were lunatics–high off the money and speed of the markets. We were also drunk a lot.

The good news is: the market has worked through that technology bubble and subsequent meltdown for over 13 years. We are overdue another great big, stupid, bubble. The only question is “where?”

All signs are pointing towards the solar/LED markets. But there are quite a few movers this year. I’ve compiled two lists of stocks, one being the actual biggest winners in the tech space, the other is a list of small cap names that might go “HAM” to the upside soon.

All based upon the laws of mathematics and other celestial things of course, yada, yada, yada.

PPT members may access actual screen here.

http://www.youtube.com/watch?v=whRRR08A3Ac

“The Fly” does not preach on such a glorious day. He celebrates.

Enjoy the weekend. We have moar for them on Monday.

We’re at Dow 15,000. It feels like just yesterday when Green Writer was predicting the Dow would bottom out at 38, but the real number was around 6,000. The rally is hated because the market is supposed to follow the economy. When the economy is at all time highs, so should the markets. But the markets have deviated, greatly, from the general economy, as of late. There’s no use in fighting it any longer. The middled class no longer dominates and the shadow economy, filled with illegal migrants, is more than likely filling in the void.

The rich have been in a super bull market since 2009. Their lives depend on the stock exchanges, as it is a main source of income and wealth for them. Inside of this world, inflation is running upwards of 10%, with an insatiable demand present for all things luxury and collectibles.

I am allocating some serious money into MU today, not only because of the better than expected jobs numbers, but because they are benefitting from a runaway bull market in their commodity: DRAM.

Observe.

Talking to industry insiders, I got the feeling MU/INTC and Samsung were partaking in a little price fixing. Apparently, Samsung isn’t flooding the market in order to take share any longer. As a result, profits at MU should be fantastic.

I also added to my USG position, off of those incredible BZH numbers. There will be pricing power in wall board. Wait for it.

Benjamin Bernanke has it all under control. Asset prices are rising, ever so swiftly, all the while commodity prices press against the earth. This is a best case scenario for the US consumer. Apparently, someone intends to price that in today.

I started a gigantic new position in MU and added to USG.

The jobs numbers exceeded expectations. Gravity has been nullified. There is nothing to stop us now.

This post is going to serve a dual purpose.

1. To remind myself of my best ideas.

2. To remind you of my best ideas.

We’re gonna do this by listing 3 stocks per sector, so here goes.

Financials

BX: The largest owner of residential homes in America, boss of all bosses in private equity space. They are to finance today what Goldman was to finance 10 years ago.

WETF: They are the best closed end fund operator in the country, manager of the Wisdom Tree funds, innovative and savvy. Their Japanese ETF, DXJ, has attracted billions in new money–making WETF a prime takeover target for other ETF players, BLK and IVZ.

APO: Here is another extremely savvy LBO shop, second fiddle to BX–but smartly run by industry legends.

Basic Materials

PBR: I like this name short. It is run by clowns who know as much about oil as virgins know about fornicating.

WNR: I’m not a big fan of the materials at all here. However, the refiners should weather the storm and continue to thrive due to lack of pipeline infrastructure.

KWK: This is a high leverage play on the resurgence of natural gas and their ability to divest from some very valuable properties at premium prices.

Consumer Goods

KORS: In my opinion, they are the best retailer in fashion right now, punching the bozos from COH in their flaring nostrils every single day of the week. Ultimately, the stock will trade over $100.

GNRC: I am a big fan of their products and know that many will be buying their generators, for years to come, as hurricanes ravage America’s aging electrical grid.

TM: I should’ve bought this stock at $90 when I published my Japanese thesis trade idea. Even though it’s up, the stock is in the sweet spot of a 2nd half automobile boom, coupled with insane Abenomics.

Healthcare

PCYC: Crazy people for the win, on the dip!

ATHN: I like this stock as a short. Their CEO is a loose cannon, someone I could see featured on American Greed one day.

LLY: The stock is barely up 10% this year, while all of their nerdier peers are up 20%. That’s a stupid reason to own a stock. Then again, some people buy stocks simply because they’re down. LLY is a quality company that will not castrate me me if they post an earnings shortfall.

Industrial Goods

BZH: This is the riskiest play in residential construction. Although they’re currently focusing on firming up the balance sheet instead of growth, I believe they will turn up the volume, going into 2014, making BZH a must own stock into a housing boom.

USG: People have this stock all wrong, punishing the shares to a 8 percent deficit for the year. Shame on the sellers. This is your #1 wallboard play heading into a hurricane season/housing boom. When earnings power comes back, this will double.

LNN: I’ve been trading this stock, in an out, since the $20’s. Like a moron, I always end up selling it. This is a long term play on water irrigation. This and VMI are going significantly higher over the long term. Now if I can just remind myself that the next time I buy it.

Services

OSTK: I’ve been talking to myself and to people inside of The PPT about this company since $5, yet have not purchased a single share. I find the website to be much better than AMZN for a variety of items. The next time it pulls back, I am getting in. I actually chose this stock over WFM, my #4 stock in the services sector.

FBHS: One of the best ways to play the housing boom in a number of ways. It is the one stop shop for home remodeling/renovation.

ULTA: My wife is always in this stupid store. There is no way this stock doesn’t trade way up, over the next few years.

Technology

YELP: Words cannot express the emotions I felt when I saw this stock gap up today. It’s everything I knew would happen, once the company found its legs and ran. Well, they are running and someone is going to want to buy them out.

ANGI: I am hearing too many positive anecdotal reviews from contractors to ignore it any longer. This is yet another name that I’ve talked about in great lengths, but failed to pull the trigger. I believe their model works and will only get better as the housing boom solidifies itself.

CREE: LED lighting is a juggernaut and CREE is the godfather of it. There are many ways to play it, from AIXG to VECO down to RBCN. However, CREE is the direct beneficiary of the move away from antiquated incandescent lighting. I swapped out all of my incandescent high hats, in exchange for LEDs. Eventually, people will catch on and CREE will become a beast.

Notable mentions:

TRIP, RBCN, FRO, SBH, WDAY, AAPL, FSLR, MU, WFR, EXP, KKR, HMC, AMKR, RAS, NMR, WFM, VMI, MIDD, Z, TRLA, BREW, HIG, AMBA, GTAT, PIR, NXPI, FCS and NSM.