Friday, July 11, 2008

Qualcomm (QCOM) and Jacobs Engineering (JEC) Added to Goldman Sachs Conviction Buy List

Today I'm seeing interesting news that both Qualcomm (QCOM) and Jacobs Engineering (JEC) have been added to Goldman's Conviction Buy List. Now, typically I don't pay particularly close attention to analyst upgrades/downgrades and the like. I'll check out their price target and see if they're saying anything new or completey outlandish that separates them from the crowd. But, one list I do like to pay attention to is the Goldman Sachs Conviction Buy List. This list carries weight for me simply because Goldman are one of the few firms truly surviving in this credit crisis. And, they are doing so by doing extremely well in their trading group. So, checking out their "A-list" for buys is a smart move simply because they have been killing it in the equities markets.

Reason I point out these two specific names (JEC + QCOM) is because I'm actively interested in these names. Qualcomm being added is a positive sign for me as I've recently added to my position on the touch of the 50 day moving average. They are one of my biggest tech holdings and will continue to be in the future. They are a big player in the mobile buildout space and also have a large hedge fund presence.

Jacobs Engineering (JEC) operates in the world of global infrastructure and has interested me for a while. I've been in and out of Foster Wheeler (FWLT), Fluor (FLR), and McDermott (MDR) for my exposure to this sector. Currently, I only hold FLR and am cautiously stalking other names to add to my infrastructure basket. Most of these companies have true global exposure and massive contract backlogs, which is reassuring. I'm still in the midst of my infrastructure research, but I'm most likely going to be adding FWLT (again) in addition to my FLR position. However, JEC keeps popping up on my radar, so I'll definitely be researching it more.

Thursday, July 10, 2008

Infineon (IFX) to Benefit from 3G iPhone Sales

Let me preface this by saying I have absolutely no idea how much this will affect Infineon's (IFX) bottom line, but I would imagine it would have a solid impact. Everyone is expecting the 3G iPhone to be a big hit worldwide, which obviously benefits Apple (AAPL). But, there might be some other ways to play it if you're interested. With a little bit of digging today, I was able to find someone who had already disassembled the 3g iPhone (in New Zealand no less... since it's already out there). The people over at ifixit have literally taken apart the entire new iPhone to find all its components. Now, while there are still a few unidentified pieces in there, they have managed to identify the vast majority of components. And, I immediately noticed something: the 3g iPhone has numerous Infineon components. Again, let me reiterate that I am not sure exactly how much this will impact Infineon's bottom line, but it is obviously a positive for them.

The Infineon components can be found on the iPhone's logic board. As of right now, the team at ifixit have identified 3 chips as Infineon chips. And, there are rumors that 2 additional unidentified as of yet chips are from Infineon as well. They write that the identified Infineon chips include:

- "The largest chip in the top left corner is an Infineon 337S3394 WEDGE baseband."

- "Small chip to the right of the NOR: Infineon BGA736 (Tri-Band HSDPA LNA)"

- "The chip in the top middle is SMP 3i 6820, Infineon SM-Power3i. From Infineon: the part is 'optimized to support modem and data card applications based upon X-GOLD208 and X-GOLD 608, with features ranging from EDGE up to 3G and HSDPA.' "

Then, the 2 unidentified chips are believed to be the following Infineon components:

- "SP836175 G0822 337S3394 (rumored to be an Infineon baseband)"

- "338S03532Z 60814 (rumored to be an Infineon RF transceiver)"

(click to enlarge)

So, there are for sure 3 Infineon chips in the 3g iPhone, and possibly as many as 5. Obviously this should boost Infineon's revenue (and their stock as well). And, I noticed something interesting today. Infineon stock (IFX) saw very heavy buying on weakness today. I've talked about buying on weakness before and basically its a metric tracked by the Wall Street Journal which shows stocks that are down for the day but have seen the largest inflow of cash. IFX was #3 on that list today. Hmmmm, I wonder why? /End sarcasm. Not to mention, the stock is up around 2% after hours. I really don't think this news is mainstream yet. And, I really think that the buying today was by those people really paying close attention to the fact that the iPhone is technically released 'early' in the eastern half of the world and has already been disassembled. Seen below is a screenshot of the top half of today's buying on weakness list. You can check out the Wall Street Journal daily updated Buying on Weakness list here.

(click to enlarge)

The iPhone does not come out in the USA until tomorrow (the 11th), but the phone has already been released in the eastern half of the world. And, the guys down in New Zealand wasted no time disassembling the iPhone to find out what's inside. Clearly some people have noticed what I have: Infineon parts are all over the iPhone. You would think that IFX trades higher once this information hits the mainstream. Beforehand, the 3g iPhone components were a mystery. You could make logical guesses, but there was no way of knowing for sure. But, now that the information is public, there are a few stocks poised to benefit. And, Infineon (IFX) clearly leads the pack.

If I buy this name at all it will simply be for a trade and nothing more. I don't consider this news to be mainstream yet, but you never know. This information could already by completely priced into the stock. Although their component presence in the iPhone is obviously bullish for the company, they still operate in the very competitive chip space, where I don't necessarily want to invest. So, the fact that they have numerous chips in the iPhone is alone not enough reason for me to invest in this name. For now, its simply a trading vehicle.

You can check out ifixit's entire iPhone disassembly here.

Hedge Fund Manager Interviews

Alpha is out with their Hedge Fund Hall of Fame. In it, they have listed the first 14 inductees who have had substantial impact on the creation and rise of the hedge fund industry. The inductees include pioneers from all backgrounds and investment styles. Taken from Alpha,

The first 14 inductees have all had an outsize impact on the hedge fund industry, enjoyed spectacular long-term success and displayed tremendous originality, starting with Alfred Winslow Jones, the inventor of the modern hedge fund. James Simons is on a 20-year roll of 40 percent returns. Bruce Kovner made commodities trading a hot pursuit. George Soros’ larger-than-life adventures put hedge funds on the map, and Kenneth Griffin intends to ensure they stay there. Michael Steinhardt and Steven Cohen brought credibility to short-term trading. Paul Tudor Jones II is the macro trader writ large, Seth Klarman is the premier value sleuth, Leon Levy and Jack Nash pioneered the modern multistrategy fund, and Louis Bacon is the risk manager’s risk manager. Where they blazed trails, others followed — not least the “cubs” sent skittering into the investment world by Tiger Management Corp.’s Julian Robertson Jr. Some of the most influential figures aren’t managers at all, like Yale University’s David Swensen, who made the road less traveled acceptable."

Here are the links to all the individual interviews (
Or, in the case of Levy and A.W. Jones, interviews with their families and former colleagues). I highly recommend reading all of them, as they all bring different perspectives to the table. If anything, I recommend at least reading them for the background they give on each legendary investor. These are names that I will frequently reference on the blog and this is a quick way to get to know legendary investors/fund managers whom you might have been unfamiliar with before.

In particular, I enjoyed reading Bruce Kovner's, Julian Robertson's, Louis Bacon's, and Paul Tudor Jones' simply because I have been following them for a long time and would like to believe that my hybrid investment style combines aspects from each of their individual styles. Here are some excerpts from their interviews.

Louis Bacon, Founder of $20 billion Moore Capital Management, talks about globalization:

What’s the most pressing issue facing the world?

"A Malthusian population explosion intersecting with globalization. We have encouraged all 7 billion of the world’s inhabitants to live like Westerners, and now that they have taken the bait, we are realizing it is impossible on this small Earth. The first big hit has been to the environment; the next, which we are witnessing, is to energy prices, and it is leading to food shortages and eventually more famines. Governments are only starting to address the problem, and the planet’s most inventive and powerful economy, America’s, is leading only from the rear, if at all, given our present administration."

Paul Tudor Jones, founder of Tudor Investment Corp, who has never suffered a losing year, talks about why you also have to focus on the tape/technicals:

What’s so special about macro hedge fund managers?

"I love trading macro. If trading is like chess, then macro is like three-dimensional chess. It is just hard to find a great macro trader. When trading macro, you never have a complete information set or information edge the way analysts can have when trading individual securities. It’s a hell of a lot easier to get an information edge on one stock than it is on the S&P 500. When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form. The inability to read a tape and spot trends is also why so many in the relative-value space who rely solely on fundamentals have been annihilated in the past decade. Markets have consistently experienced “100-year events” every five years. While I spend a significant amount of my time on analytics and collecting fundamental information, at the end of the day, I am a slave to the tape and proud of it."

Here are the links to all the interviews in their entirety; click on each name to see their interview.

Bruce Kovner, James Simons, Julian Robertson, George Soros, Michael Steinhardt, Kenneth Griffin, Seth Klarman, David Swensen, Steven Cohen, Leon Levy, Jack Nash, Louis Bacon, Alfred Winslow Jones, Paul Tudor Jones


Re: Natural Gas

Just browsing through some reading yesterday and I stumbled upon 2 articles in the Wall Street Journal that had some pretty powerful quotes about natural gas. I intend to do a larger post on natgas in the near future, so for now I'll leave you with some quotes.

Taken from the following article is this quote:

"But one thing seems certain at least—the U.S. is going to need more, not less, natural gas in coming decades, and the rest of the world is, too. That’s bound to make fresh U.S. gas finds all the more attractive."

That quote then linked me to this next article where I found comments regarding world demand for natural gas:

"Prices in the U.S. have risen 93% since late August as power-hungry nations like South Korea and Japan compete in a global natural-gas market that scarcely existed a half-decade ago. Still, U.S. prices are as low as half the level of some overseas markets, suggesting they have much further to rise."

Powerful stuff to say the least. And, it continues to play right into my theses all along: 1. demand for electricity is rising and will continue to rise, and 2. natgas will become a larger component of the energy supply picture.

Tuesday, July 8, 2008

Wind Update

Today I'm seeing a lot of interesting bits about wind power. The main bit I'm seeing is Boone Pickens' alternative energy plan found on the new website: Longer term readers will know I keep tabs on Pickens simply because he's an energy maverick, has made a lot of money in the industry, and now runs BP Capital, an energy centric hedge fund. I've posted his thoughts numerous times. (I tracked his hedge fund portfolio holdings here, and I linked his thoughts on energy here). Now, although he's made the bulk of his money from oil, he's turning his focus to wind and natural gas; and rightly so. I've been bullish on alternative energy for some time now, saying that you need to play energy for the future. I've been assembling baskets of names in the wind, natural gas, solar, and nuclear spaces. But, that's not to say that Boone isn't still going to be invested in oil and other current energy plays. Besides playing energy for the future, you've got to play it for the intermediate term as I posted about here. Oil, coal, and natgas aren't going anywhere anytime soon, so you've got invest in those as well. And, if you think about it, natgas is the only type of energy overlapping in both the current energy picture and numerous people's plans for the future. So, I like to take a basket approach and pick a few names in each class and then have a dedicated percentage weighting to each type of energy.

But, back to wind. The main problem with investing in wind power is the lack of tangible options for the retail investor. There are a few companies who trade on the main exchanges, but wind is only a small sliver of their business. GE is the perfect example of this. They have wind exposure which is great, but a lot of people don't want the other stuff that comes with that company; they only want the wind exposure. The majority of wind-centric companies trade on the OTC and pink sheets (such as, BWEN.ob,, etc). And, the majority of investors either aren't comfortable investing over the counter, or simply don't know how to. So, its good to see wind getting more media exposure and 'hype' if you will. And, as investors, we've got to be playing it. I've said all along to spread your bets across all alternative energy classes, to cover your bases. Because in the end, there's no real way to know which ones will be prominent 20 to 30 years from now. If you're looking for a route 1 way to play wind, you could simply go through the new etf FAN. And, for your convenience, Jeffrey McLarty has sorted through the ETF holdings here. And, TraderMark highlights a new Wind IPO (Noble Environmental Power) here.

Lastly, I'm starting to see some wind names really breakout with heavy buying. Stewie highlighted Aerovironment (AVAV) over on his blog as a great technical setup. Some of you might remember me writing up a piece on AVAV here, after I learned they were the makers of architectural wind products (basically wind turbines on tall buildings). But, disappointingly, they are primarily a defense company and the wind segment of their business is tiny (although growing). If you want a trading vehicle, AVAV looks to be breaking out right now as Stewie pointed out. The overhead resistance in the high 26's has been taken out and should now act as support, and I'd be a buyer on the re-test of that support if you want to trade it. But, that's the main emphasis here, its a trading vehicle, not an investment (yet). I've got to monitor their wind segment growth over the next few quarters to really see if its a viable wind investment. Because, like many other 'wind' investments, the company is primarily NOT a wind company. They just have a wind segment of their business. At any rate, AVAV is breaking out and you can trade it if you like.

Whether it be through natgas, wind, nuclear, solar, you-name-it, you've got to be thinking ahead and playing energy for the future. Boone Pickens is a great person to follow in this regard as he is taking proactive steps to make Wind power a viable alternative through his wind farms in Texas. But, wind isn't the only option and he discusses that in the following video. Enjoy.

Monday, July 7, 2008

Energy Transitions

I'm going to be in and out today so instead of writing something up I thought I'd direct readers to a must-read piece over on TheOilDrum. This piece deals with energy transitions and I thought everyone even remotely interested in energy should take a gander. Check it out here.

(By the way, TheOilDrum is easily becoming one of my favorite energy resources on the web, so make sure to poke around the site for other great reads)

Quote of the Week 7/7/08

Hope everyone had a good extended weekend! Now it's time to get back down to business. This Quote of the Week is one of my personal favorites, and I think it is very applicable here in this current market. Over the coming days, weeks, maybe even months, there will be bountiful opportunities presented before us. But, many times, these opportunities slip past us, leaving us looking at them in the rear-view mirror. Without further ado...

"The opportunities that are clear in retrospect are rarely visible in prospect."

Be patient, yet keep your eyes peeled for some great buying opportunities. And, if you don't have a shopping list, you better get busy.