Watchlist

Better late than never.

Rock’s Watch List

Here are a few of my watchlist picks and why they are on the watchlist.
First, we are significantly affected by headlines, so temper your trades accordingly. Second, I’m sorry if any of them offend your political, moral, or religious bents. Third, I look at the indicators I see and they all point up, so these are on my watchlist as the market goes positive. Fourth, I will not trade the banks because of their lying balance sheets, and at any moment, they could become insolvent. If Congress gets any balls, which may be unlikely, but possible.

1. VMW. They have a great product and have expanded into the APPL zone. As we get more and more HTML3 and straming movies, there will be more server farms deployed and VMW is the choice for these installations. Their chart is on the bottom, stochs for the 3, 15, and 60 minute is <20. Their money flow is the same and is tipping up, so I’m thinking this is the time. On the financials, they have been profitable at around 18%, and their levered free cash flow (what they have left over to invest in their business) is a whopping 1/3 of their revenues (3.5B).
2. POT I like the smell. I grew up working summers on a farm, and it smells good. Food and water are going to be important going forward, unless the dictators in Africa are successful in killing off the locusts. It’s forming W’s with the right side higher. Their profit is around 40% (huge) but their free cash flow is is only around 12% of their revenue. Since their operating cash flow is about 40% of revenue, that says they’re reinvesting heavily in their company. Good long term strategy while the prices are low, as we get inflation, and companies that don’t invest now will not grow quickly as the economy cycle progresses. Their charts are a little high, but I like the W’s.
3. MCD. I don’t enjoy the product too much, when I go there I get a McDouble and side salad. However, their management team is the best. The chart action is not a formation I like to see, so the entry point may have to be risky or delayed. Profit is huge, 25% or so. Levered free cash flow is around 12% of the revenue which is great, and is about 50% of the operating cash flow, so they too are investing in their business. A lot.
4. AAPL. What can I say. I’ve made a lot of money on AAPL, and I believe sex sells, and if they get somebody sexy to replace Steve, this is a winner.
5. MON. Profit is good, around 12%. Cash flow is good as well. They’re reinvesting around 10% of revenues back into the business. On the chart, the weekly shows a W formation with the right side higher.
6. TIF (RL and COH too). Yep, as the economy turns, look for TIF to outperform. Profit is around 16%, but their levered free cash flow is negative. I can’t explain that other than they may need new management. Operating cash flow is around 10% of revenue, so they may be positioning to sell the company. “Will see”. I still like that play and look for it to hit 85 again.
7. I like several of the metals. I am playing XME because of the headline risk. I expect XME to hit the 76 and would gladly take the 50%. You can do some investigation on SLX AA ATI CCJ CENX CLF CMC CMP CRS CU FCX GGB IPI MT TML NUE POT PKX RS SCHN STLD TIE TX VALE WORX.
8. I don’t trade drugs because of the headline risk again, but some of the pharma ETF’s are on my list. I have not entered yet, but as my aches and pains get worse, I’m seriously considering it.
9. GLD The pullback in GLD is probably tradable since it’s so heavy on the psychologicals. I would keep my stops tight, because as the dollar strengthens, I expect GLD to decline. However, it looks like it’s downtrend M’s have been broken. One more day of follow-through with significant volume will probably kick me off to start a position.

I have established positions in AAPL, VMW, XME and POT. I have half-positions in MCD