So I put in a limit order at $129.10 and left for work. Got to work and checked to see if it went through and noticed that the price had dropped to 127, doh! oh well!


To summarize my stock purchase. I bought 4 shares (yes, 4 it’s a pathetic number and the broker fees will eat a big chunk out of any profit I make. As a trade a day states, it’s a learning experience and let’s call it “tuition.” )

• 4 shares of AAPL at $129.10 = $516.40

As always I’ll be watching the technical indicators to see when to get back out. Let’s hope that those iPhone 8GB sell good in the next year.

“We’ve been saying for several quarters now that domestic business will be weak until at least late in 2008,” Nichols said. “From what we have seen in the retail environment as of late and order indications, that expectation needs to be extended until 2009.”

He goes on to state that the dramatic decrease in sales is directly related to domestic growth. And a small glimmer of hope can be seen in the international market which had an increase in sales.

“Worldwide revenue and backlog are down overall on continued weakness in the domestic market, while international revenue is up albeit at a slower pace in the fourth quarter than we experienced earlier in the year.”

Anyway, it looks like KSWS has had a tough year. I’m still going to keep my eye on this stock. I don’t expect to purchase anything till the market strengthens.

What is KSwiss?

Kswiss is a company that designs, develops and markets high performance footwear and apparel. As well, they market and design casual footwear. Which is how I know KSwiss. I know KSwiss from products like the shoe to the right.

Who are the consumers?

From the company description it looks like the consumers are sports fanatics and the modern teenager to young adult. As we know these people are large consumers.
Where can I buy KSwiss?

I like to do is determine where people can actually buy the product. I find that this is especially useful for retail stocks. If you can’t get a specific brand at certain stores / locations then this shows some sort of block in the moat or management. Looking online you can buy KSwiss from Foot Locker and Eastbay.com. On ebay there are over 300 items when searching for KSwiss

How’s the Management?

This is always the toughest question. However, if we look at the annual report from 2007 we can see that the CEO seems like a straight shooter.

The athletic footwear industry is highly competitive. There are several marketers of footwear larger than us, including Nike and adidas. Each of these companies has substantially greater financial, distribution and marketing resources as well as greater brand awareness than us.

We have increased our emphasis on product lines beyond our Classic model. In the past, we have introduced products in such highly competitive categories as court, boating, outdoor and children’s shoes. See “Products.” There can be no assurance that we will penetrate these or other new markets or increase the market share we have established to date.

The principal elements of competition in the athletic footwear market include brand awareness, product quality, design, pricing, fashion appeal, marketing, distribution, performance and brand positioning. Our products compete primarily on the basis of technological innovations, quality, style, and brand awareness among consumers. While we believe that our competitive strategy has resulted in increased brand awareness and market share, there can be no assurance that we will be able to retain or increase our market share or respond to changing consumer preferences.

 

Those are the sort of remarks that I can relate to meaning, “we can’t be assured that we’re doing these things, however, we believe this approach might work.”

What about the CEO, Steven Nichols?

Well, Mr. Nichols seems like our kind of player. He’s been on the board since 1987. He also holds a LARGE amount of stocks, over 70% of the voting power stocks. In addition, he only took 1 million as compensation for his work on the board.

Finally, KSwiss has a conference call on Tuesday to report the fourth quarter earnings of 2007. This should give us a great idea of the outlook for 2008. Furthermore, it’ll show us what kind of management we have. I’ll be sure to watch carefully on Tuesday.

First off, don’t get me wrong I’d love to own Lowes (LOW) forever. However, the big guys are weary about this industry right now. This is because of the weakness in the housing market in the US. Therefore, the money is coming out (or is out) so my money is out too. As I discussed in my last post selling Lowes. I figured that looking at a chart to see if I used the technical indicators correctly would be smart. I plotted a chart with the SMA, MACD and Slow Stochastic below. This chart is from February 7th, two days after I sold the stock.

As we can see from this graph all the indicators have actually trended downwards. The MACD is just starting to cross downwards, the slow stochastic has pass downwards and the SMA has crossed the stock price. This demonstrates that I got out at the correct time, therefore, minimizing any losses and thus maximizing my gain. It could be argued that maximizing my gain would be to get out at the top of the spike but I had no sign that the stock wouldn’t rebound.

Now let’s look at my other stock trade which I discussed in analyzing coldwater creek. In this article I discussed purchasing the stock because of the low price and that the stock was under the margin of safety. Furthermore, the chairman is buying back stocks, which is usually a positive sign. So, I purchased 25 stocks at $6.20.

Upon discussing this at a forum, roicommunity.com, a poster pointed out that I might have entered too soon. Meaning that the stock might be trending sideways for a while. Therefore, I won’t see any increase in the price of the stock (possibly for a while) and therefore my money would be tied up and I won’t be able to use it at other places. By the chart posted below I can see that this poster might have been correct. The technical indicators are tough to judge at the moment as the price seems to have crossed back over the average but the MACD and the slow stochastic is under. I’m guessing this is a sign of a sideways sliding stock.

That being said, I still believe that this company has a large potential of increase and I won’t be surprised to see a $12 (or higher) price sometime this year. That would be a great return on investment. Therefore, I’m leaving my money in the stock and trying a buy and hold strategy with this stock. In fact, if it decreases below $5, I’ll consider increasing my position.

Well, it’s a good learning process so far. Now I just need to find the next undervalued company. In the meantime I’m growing my cash in order to take full advantage when I do find the undervalued stock.

• 10 day simple moving average
• Slow Stochastics
• MACD (with 8, 17 & 9 as my settings)

Looking at the chart below we can see that all three symbols are trending downward today.

So, I followed the Book Rule #1 advice and sold. I’m now waiting and watching the symbols for them to tell me when the big guys are getting back in.

• Sold – 25 shares @ $24.60 = 615 – 9.95 (trade fees) = $605.50
• Total Profit = $605.50 – $567.45 = $38.05
  

Coldwater Creek is a specialty retailer of Women’s clothes and apparel. With two main segments retail and direct. Let’s take a look at the growth rates numbers. The ROIC is 7% last year, which violates the 10% rule from Rule #1, however, the 5 year growth rate is 14%. The other growth rate numbers are all very high, over 20%. The equity (BVPS) has been over 20% for the past 9 years and was 26% last year (2006).

What about the four M’s?

Meaning – Women’s clothing… Not really my bag. However, it is retail.

Management – The management just recently announced (Oct 2007) they’re buying back shares. Today alone, the chairman bought 925,000 shares. This can be seen as either the board of directors trying to regain confidence in the stock. Or the management is trying to get shares back while at a cheap price.  I worry a bit about the management after reading articles like this.  However, I see the buyback as a positive boost to the stock and company.

Moat – This is the only one that really worries me. Others competitors such as Ann Taylor or Chico’s are also making a serious threat in this market. So do they have a Moat? Yes.  But it’s being / is breached.

Finally the Margin of Safety (MOS)

• Growth Rate = 20%
• EPS = 0.32
• PE = 28 (average 10 year)

This puts a Margin of Safety at $7.01.

The only other thing that worries me is that there has been lots of bad news as of late. The company announced a fourth quarter loss of $0.16 to $0.20 per share is expected. This is what has actually brought the share price down as of late. However, the company has had very steady high growth rates for the past 9 years. Can they continue these high numbers?

Would I be happy to own this business for the next 10 years? Yes!  Women love to shop and as long as they can keep a good product line then they’ll continue with good growth.  However, that being said I think watching this company and the management will definitely be necessary.

The current price is $6.42, January 31st, 2008.  If you notice on the chart below we get three green signals on January 18th.

• I purchased 25 stocks at $6.15 on January 31st, 2008.

• Equity = 14% (near typical growth rate)
• EPS = $1.98
• Future PE = 22 (historical)

This provides a sticker price of $39.92. However, the Price per Earnings ratio has been decreasing for the past 5 years. The last two years the PE has been 18 and 16 respectively. This makes me wonder if a PE ratio of 22 is too high.

Therefore, reanalyzing the PE somewhere between the current value and past values. If I take the average between 13 (current value) and 23 (average past value).

This provides a sticker price of $32 and a Margin of Service of $16.

I’ve already purchased the LOW stock at $22.30 which be at a 30% discount and not the 50% discount that we’re looking for. So, now I’m faithfully watching LOW and using my Technical indicators to see when to get out.

Acceleware is a hardware acceleration company specializing in the acceleration of computing processes. The company was founded from a group of graduate students and professors at the University Of Calgary, Calgary, AB. The original goal of the hardware accelerator cards was to determine a hardware method to speed up Finite Difference Time Domain (FDTD) simulations. For those that aren’t “in the know” hardware cards (your video card) is much MUCH faster then anything that your processor can compute.

Last November, Acceleware signed a $3 million dollar partnership with NVIDIA one of the major players in video cards. This move along with many other partnerships (SPEAG, Agilent Technologies, etc..) is a major move towards solidifying Acceleware’s future. Furthermore, this past quarter Acceleware surpassed the one million dollar mark of sales in a quarter. Finally, Acceleware is expanding their operations to Seismic and Biomedical applications which should widen their scope of clients.

I’m buying this stock as a speculative stock or penny stock. It’s currently at a year low and I think once more companies are aware of this technology the stock will start to rise. In my line of work (Electrical Engineering) I use this product everyday at work. I’ve seen the increase in computational speed with these Hardware cards. If they can adequately market themselves I see Acceleware increasing to the $3 – $5 mark. I’ve purchase 300 stocks.

• 300 Shares at $0.74 = $222 (January 21st, 2008)

I’m very curious to see the 2007 annual report for Acceleware and will be sure to give it a good read through. I’ll let you know if I have any insights from the report.

Looking at the chart below I’ve plotted the stock, simple moving averages, MACD and Slow Stochastic. We can see that around January 14th the Slow Stochastic was trending up. Then January 16th, the 10-day moving average and the MACD crossed up. This shows that people were starting to move more money into the stock. That’s three indicators trending upwards. I waited for an extra day and on January 17th you can see the 30 day moving average crossed through the price. I purchased the stock January 18th at $22.30.

Now I’m watching the three tools to see when they tell me to sell. It really is as easy as Phil Town says after finishing the initial analysis. Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! It’s true I just check the stock and read any information that is currently available.

Does the company have meaning to you?

Yes. I often shop at RONA (Canadian equivalent as there isn’t a LOWES in my city yet) . As well, I am interested in starting home renovations in the near future.

Does the company have a moat?

Yes. There are only really two major Home Improvement retailers in the US: Lowes and HomeDepot. This could be compared to a similar Pepsi / Coke comparison as the two major soda makers. Currently Lowes is expanding into the Canadian market. A move that is possibly a little late as HomeDepot and RONA have already established themselves in these markets. So it’ll be interesting the effect that the movement has on companies like Canadiantire.ca, RONA and HomeDepot.

What is the Management like?

Management is always the toughest to analyze. Looking at the financial’s of how much they’re compensated shows that the executives make quite a bit of money a year (over $4 million). This is a quite a large amount of money.

However, are they treating this company like it’s their only asset for the rest of their family? Maybe and maybe Not! The President and CEO have recently just sold approx 270,000 and 107,000 shares each respectively. That’s a lot of shares. The shares were worth $33 and $30 in June and August. Did they know the stock was going to go down to as low as $20 at the start of January?

So we have a high paying CEO and president who’s recently cashed out quite a significant chuck of shares. Should I be worried? Well, they still have over four hundred thousand shares each. As well, this was back in the summer of 07. Maybe they were just taking shares out to start a different business venture or something of that nature. Either way this management kinda scares me as it seems they’re being compensated quite significantly and have sold some shares recently. I’ll be sure to watch and read the annual report quite carefully.

What is the Margin of Safety?

Well, the margin of safety that Phil Town calculated for LOW is $24. I calculate a MOS to be $20. I get these numbers using

• Equity = 14% (near typical growth rate)
• EPS = $1.98
• Future PE = 22 (historical)

That puts the Sticker price between $34.87 – $39.92 per share. I’ll be keeping my eyes on the three tools for Lowes to see when to get out.

If you have any comments or suggestions on my initial analysis of Lowes please leave a comment. I’d be glad to hear your opinion and respond to your thoughts.