Peter Kurata September Monthly Investment Report (CRM, FFIV, AKAM, VMW, NFLX, GLD, SLV, LGF, VIA))

Author: Peter Kurata

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Disclaimer: Peter owns GLD and SLV in his Covestor CANSLIM model.

September 9, 2010:  Another month, another failed rally. On the S&P 500, it is the fifth time since May this index has bounced off of the psychological “tax” or 1040 support line. A break below this may find the index down to 1000. Leadership did show up as cloud computing stocks, Salesforce.com (CRM),  F5 Networks (FFIV), Akamai Technologies (AKAM), and VMware Inc. (VMW), and online video renter Netflix (NFLX)  rose nicely. Monitoring these through this correction will provide valuable clues to their strength on the next market rally. I look for signs of low volume selling and high volume buying, or for the weekly price action to be flat. Buying leading stocks in this wild market has been difficult as many breakouts have lead to break downs. Thus, the longer term approach for this portfolio has been GLD (SPDR gold trust ETF), whichI continue to hold. An position in Silver Trust ETF (SLV) was also initiated on August 18, 2010.
Despite government efforts to stimulate the economy, unemployment remains high. GDP growth also is disappointing. The Fed admitted that “the pace of recovery in output and employment has slowed in recent months” (http://www.federalreserve.gov/newsevents/press/monetary/20100810a.htm, August 10, 2010). The country is getting fed up with current monetary policy of printing money, and the markets also showed disapproval on reaction to Bernanke’s Q2 announcement, which will dig the nation deeper into debt.

Q2 is a plan to prime the economy’s pump, by reinvesting principal payments from agency debt and agency mortgage- backed securities (from the stimulus and bailouts) into longer term Treasury securities. This money, which was created out of thin air, will earn 25-50 cents on the dollar, will then be used to help fund the nation’s budget deficits, now about $1 trillion a year.  Add this to the $2 trillion pumped of stimulus, which only provided a temporary economic boost, and it appears the risk of a double-dip recession, or even the “d” word is growing.

Netflix (NFLX)  is a good example of the “N” in CANSLIM. A new product or service to fuel company growth. Put another way, a better mouse trap. It recently announced deals to make downloads available on TV’s, DVD players, Playstation 3, XBOX 360, Wii, iphone, and just recently the ipad. Since then, the stock has risen from approximately $43 on September 10, 2009 to approximately $146 on September 9, 2010. The movie studios are also jumping on the Netflix wagon as they see demise of video rental stores. The deal with Epix will allow timely showing movies from Lions Gate (LGF), Viacom’s (VIA) Paramount, and MGM. That means Netflix could potentially stream some of the big summer hits, such as “Iron Man 2″ and “Dinner for Schmucks,” at the same time DVD retailers and premium cable channels show it. This agreement will fuel already stellar growth.

Stocks to watch Salesforce.com (CRM),  F5 Networks (FFIV), Akamai Technologies (AKAM), VMware Inc. (VMW), Netflix (NFLX), GLD (SPDR gold trust ETF), Silver Trust ETF (SLV).

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