iShares Exponential Technologies ETF XT

On Monday a new ETF began trading: XT.

The research firm Morningstar, ETF provider iShares and the media-savvy financial adviser, Ric Edelman teamed up to launch the iShares Exponential Technologies ETF, XT. The ETF represents a sample of what could be the most innovative and disruptive publicly traded technology companies -- from big data and analytics to nanotechnology and bioinformatics and robotics, 3-D printing, neuroscience, financial innovation and environmental systems.

Morningstar research analysts developed the index (comprised of about 200 holdings) that the fund tracks, which will be reassessed at least once annually.

The Top 10 holdings are: PHARMACYCLICS (PCYC), USD CASH (USD), SKYWORKS SOLUTIONS (SWKS), VALEANT PHARMACEUTICALS (VRX), FIRST SOLAR (FSLR), SUNPOWER CORP (SPWR), MALLINCKRODT PLC (MNK), STMICROELECTRONICS NV (STM), BIOMARIN PHARMACEUTICAL (BMRN), CHARLES RIVER LABORATORIES (CRL).

Two Investments Beyond the Stock Market

Stocks are going higher and higher. We do not know if it's for real. Financial analysts will continue to deliver their opinions why stock market should go higher, and will come back again to explain the reasons if it goes lower. They have ready reasons for all seasons.

However, there are other alternative opportunities that interested investors may have a look at. Here are two of those:

Distressed Debt:

Banks have plenty of distressed debt, consider a deal. Some Financial groups buy distressed debt bank portfolios that aren't generating cash for the bank and work with the families in the homes to refinance at affordable rates. If they can't work it out with the owner, the property gets a second chance, rather than sitting vacant, when they sell the loans as non-performing first or second lien bank notes.

But before deciding to invest in distressed debt, conduct a thorough title search of the property to reveal any liens. Check with the county to ascertain what, if any, outstanding property taxes are due. Contact a local real estate agent to get an estimation on the property and its as-is resale value.

Tax-advantaged Investments:

Tax-advantaged investments can include real estate partnerships, oil and gas partnerships and suitability, which refers to how appropriate an investment may or may not be to an investor. Two of the most common types of real estate partnerships, for example, are low-income housing and historic rehabilitation. The federal government grants tax credits to those who construct or rehabilitate low-income housing or who invest in the rehabilitation or preservation of historic structures. Recently Google invested millions of dollars in low-income housing to take advantage of its tax credit.

Investment In Water

According to an estimate from Goldman Sachs, the global business of water, encompassing the residential and industrial water and wastewater treatment and services, is growing by 4% to 6% a year in developed countries, and as much as 15% in developing countries. Currently, it is estimated to be of about $365 billion and holding a promising forward-looking future as all countries are planning to spend billions to repair and/or build infrastructure to funnel clean water to people and industry.

How to drink water and also make money out of it? We feel, PowerShares Water Resources Portfolio (PHO), an exchange-traded fund with a basket of global water stocks, is the best way to invest in this sector. It provides enough diversity and good exposure to the international market.

But if you like to take more risk and invest in some individual stocks, here are names of a few key players in this sector [A number of these are already in the portfolio of PHO]:
Aqua America (WTR): America's largest water utility company;
IDEXX Laboratories (IDXX): Products and services for veterinary, food and water applications;
Pentair (PNR): maker of related equipments;
Watts Water Technologies (WTS): maker of related equipments;
Suez (SZE): This Paris-based company provides water services in several European nations;
Veolia Environnement (VE): This Paris-based water utility company provides exposure to the global water market, including China and Latin America, where water shortages and the consequent huge spending on infrastructure are providing good investment opportunities;
Sabesp (SBS): Latin America's largest water utility;
Sinomem Technology (SINO Singapore): a small Singapore-based membrane-technology company with a dominant share of China's pharmaceuticals business.

General Electric (GE) and ITT (ITT) also have growing presence in the water sector, but water is a relatively small piece of their global operations.

Dow Reclaims 13000 but Exxon and Gold Disappoint

After about 4 months, Dow Jones Industrial Average reclaimed its territory above the 13000 level. In the mean time, it had fallen to as low as 11,508.74 on January 22nd.

Of the Dow's 30 components, 25 posted gains today, with financials and technology stocks leading the charge. The ability to borrow from the Fed is the catalyst which is allowing capital to flow back into financial stocks.

But investors in Energy sector were disappointed today with less-than-expected result from Exxon Mobil. While the results were 17% better than a year ago, Exxon failed to match its previous record, fell short of Wall Street's expectations, and was punished with a 4% drop in its stock.

Another sector, precious metals, lost its luster today with the return of strength in dollar. Gold futures fell more than 1% Thursday, as a rise in the U.S. dollar dampened investment demand for the precious metal. Gold for June delivery dropped $14.20, or 1.6%, to settle at $850.90 an ounce on the New York Mercantile Exchange. Gold may continue to remain at risk to further corrections in coming weeks.

Google: The God is Not Immune to Worldly Matters

Google's (GOOG: Quote & Chart) first-quarter earnings report is due out on this Thursday. And many would try to find the answer to the question: Is this high-flying company faltering in the face of a recession?

2007 had been a great year for Google. The year brought a lot of cheer to those analysts who followed the company and, after each crossing of a century mark, issued another price upgrade by another $100 and were proved to be correct! Their attitudes smacked somewhat of the 'irrational exuberance' prevalent in the year 1999-2000 when all technology analysts were taking great joyrides on the back of some immature (and may be innocent but greedy) investors.

To these analysts Google was such a formidable God that the act of worshipping this God made them forget about other dangers of the world that this God, if properly asked about, could only show as results of its search engine but couldn't really control and thus indeed was vulnerable!

For example, on January 9th, Hillary Kramer, the stock-picker guest of the Nightly Business Report picked Google to be her choice of investment at that day's closing price of $653 (down from its 52-week high of $747 reached on November 7th), adding that she was hopeful the stock would soon surpass $800! And last Friday's closing price was $457.45! In the meantime it also passed through the 52-week low of $412 on March 17th.

Google is a great company. As far as search engine is concerned, Google still rules the world and our mind. But, as an investor, we need to shake off our emotion and stand aside and have a closer look and ask some questions: How many new products that the company launched have gone on to generate significant revenue? How many companies that Google bought (with rather high price tags) are going to significantly contribute to its coffer in near future? Can the company make money from ads while consumers continue to suffer from high prices of food and fuel and thus hesitate to spend?

The answers to these questions (if you try to search using Google) do not look rosy, if not gloomy. While nobody can doubt the long term prospect of the company, it seems lot of dust needs to be settled before the company can boldly cross the $500 mark again and this state of uncertainly should continue for quite some time irrespective of the outcome of Thursday's earning report.

Coming Soon! V for Visa IPO

Visa, the San Francisco-based credit card company, filed with Security and Exchange Commission Monday to sell its initial public offering (IPO) of 406 million shares to the public at an expected price of $37 to $42 a share. The electronic transaction processor expects to trade under ticker symbol V on the New York Stock Exchange within the next several weeks. The company expects to raise between $15 billion and $17 billion, which would make Visa the biggest IPO ever in the United States.

It may be noted that Visa’s main rival, the Purchase, N.Y.-based card processor MasterCard (MA), has been one of the great success stories in the IPO market in recent years, posting a 421% gain since its May 2006 offering.

The Visa offering will give public shareholders a 52% stake in the company. Visa's earnings in the quarter ended Dec. 31 were $424 million on revenue of $1.49 billion, as transactions processed rose 13% from a year earlier. For 2007, Visa reported an adjusted loss of $861 million on operating revenue of $5.2 billion.

Bank of America and Chevron joining Dow industrials

Today morning, the Dow Jones Indexes announced it is adjusting the components of its benchmark Dow Jones Industrial Average. The index group said the following changes would be effective with the opening of trading on Feb. 19:

In :
Bank of America Corp. (BAC)
Chevron Corp. (CVX)

Out:
Altria Group, Inc. (MO)
Honeywell International, Inc. (HON)

Bank of America would be the third bank and fifth financial services firm in the index. It's worth noting the trust that the index is bestowing on the financial sector, despite the recent turmoil originating from subprime mortgage and credit crunch. There were other large cap stocks that have been ignored by the index, such as Cisco, PepsiCo, Apple or Google.

For average investors, a good way to play the index would be to invest in the exchange traded fund, Diamond Trust (DIA).

Nasdaq-100 Adds and Removes Stocks

The Nasdaq Stock Market said late Friday that, as a part of its annual re-ranking of its component stocks, the following 5 stocks are to be removed from the Nasdaq-100 Index effective Monday, Dec 24th. The Nasdaq-100 Index is composed of the 100 largest non-financial stocks on the Nasdaq Stock Market.

The removed stocks are (Friday's closing value in parenthesis):
LM Ericsson Telephone Company (ERIC, $24.31, -0.69, -2.8%) ,
XM Satellite Radio Holdings (XMSR, $13.55, -0.44, -3.1%),
Ross Stores Inc. (ROST, $25.01, -0.47, -1.8%) ,
Patterson-UTI Energy, Inc. (PTEN, $19.86, -0.35, -1.7%),
Sepracor Inc. (SEPR, $24.95, -0.20, -0.8%).

The following stocks will replace the above 5:
Hologic, Inc. (HOLX, $65.20, +0.66, +1.0%, No Dividend) is a developer, manufacturer and supplier of diagnostic and medical imaging systems primarily serving the healthcare needs of women.
Focus Media Holding Ltd (FMCN, $57.80, +1.30, +2.3%, No Dividend) operates an out-of-home advertising network in China using audiovisual television displays instead of traditional billboards to broadcast advertising.
Hansen Natural Corp. (HANS, $47.70, +0.31, +0.7%, No Dividend) develops, markets, sells and distributes 'alternative' beverage category natural sodas, fruit juices, energy drinks, sparkling lemonades and orangeades, non-carbonated ready-to-drink iced teas, lemonades, etc under the Hansen's and other brand names.
Steel Dynamics, Inc. (STLD, $54.64, -0.96, -1.7%; Dividend yield 1.10%) is a steel manufacturing company that owns and operates three steel producing mini-mills with an estimated combined annual production capacity of 4.2 million tons.
Stericycle, Inc. (SRCL, $59.26, +0.04, +0.1%, No Dividend) has a fully integrated, national medical waste management network including 45 treatment/collection centers and 105 additional transfer and collection sites.

As usual, you may find activities of selling in 'removed' stocks and 'buying' in 'added' ones on Monday.

VMWare: Tomorrow's IPO

VMware Inc. is a wholly-owned subsidiary of the tech giant EMC Corporation and is the leading provider of virtualization solutions. The company supplies proprietary virtualization software for x86-compatible computers, including VMware Workstation and the freeware VMware Server and VMware Player products and has a overall bright prospect of making its mark in Tech world.

Tomorrow the Initial Public Offering of VMware Inc. will start trading in the floor of NY stock exchange with ticker symbol VMW and the company is hoping to raise $924 million. The company kept the size of the deal at 33 million shares and raised its estimated price range from the earlier level of $23 to $26.

For the 3 months ended on June 30, VMware reported preliminary 2nd-quarter net income of $34.2 million on revenue of $297 million, compared with net income of $15.2 million on revenue of $156 million in the year-ago period. Income surged on sales of its software that helps businesses boost the computing power of Web servers.

With high profile investments from Intel (estimated 1.6% stake) and Cisco (estimated 2.5% stake) under its belt, VMWare may turn out to be the hottest IPO of the summer of 2007. But individual investors must not emerge themselves in emotion that prevails on first few days of a predictably hot IPO and throw too much money in it tomorrow. Just like we saw recently in the case of Blackstone (BX), the initial euphoria may die down quickly leaving the individual investors in limbo at least for some time adding to their worry from the recent pullback in global stock market. Blackstone traded at as high as $38 on its debut date June 22 this year and last Monday it had its lowest point at $22.76 (today's closing price $25.71).

While long term prospect for both BX and VMW would remain to be good, such a pullback right after investment always throws the confidence of investors into disarray and thus badly affects their trading strategy leading them to take bad decisions on other stocks as well.

Update: IndyMac (IMB)

Last Thursday we talked about IndyMac Bancorp (IMB) as a good opportunity play. The stock had a value of $31.44.

Today IndyMac Bancorp (IMB) closed at 35.09, up by $2.32 or 7.1% on news (that has no direct relation to the company) that iStar Financial Inc. said it would buy the commercial real-estate lending business of Fremont General Corp (FMT) for $1.9 billion in cash. The Fremont stock closed at $10.00, up by $2.89 or 40.65%.

Fremont shares had lost more than 60% of their value earlier this year. At the beginning of 2007, Fremont was one of the largest subprime mortgage lenders, offering home loans to poorer borrowers with bad credit records. But later the crisis in mortgage market hit hard the company hard. In April, it agreed to sell the subprime business to hedge fund Ellington Capital Management. Now Fremont is also selling its other main business - commercial real estate lending - leaving only its retail banking unit.

As we described in our last thursday's posting, the fear about IndyMac's mortgage business is already priced in the stock's value. This not-so-related news is good because it pushed IndyMac's stock value up but today's enthusiasm may fizzle out in next few days.

But we are not taking these short term fluctuations too seriously. We believe in holding it for a longer time for better gain, while enjoying its high dividend yield (currently, 5.70%). If you had bought IMB at last Thursday's closing price, the gain is already 11.60% -- that gives you a good profit in less than a week's time!

Disclosure: We own IndyMac in our personal portfolio. You should do your own research before making any decisions. This blog, or its authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.
Caution: Always purchase stock depending on the risk level you can take. Keep your portfolio diversified and never ever put all or most of your money in one basket. Spread your risk in various kinds of investments: real estate, fixed income, bond, stocks in various sectors. If you feel individual stocks are too risky for you, consider ETFs or mutual funds.

Opportunity in Beaten Down Stock: OVTI

Omnivision Technologies (OVTI) : OmniVision designs, develops and markets high-performance, highly integrated and cost-efficient semiconductor image sensor devices. The Company's main products, image-sensing devices referred to as CameraChip image sensors, capture images electronically and are used in a number of consumer and commercial mass-market products -- most notable among them being camera phone.

Throughout 2003 the company had a nice run mainly because it was riding on the increasing popularity of camera phones at that time. The stock enjoyed a second phase of great run from November, 2005 to May, 2006 with introduction of some security technology products and high performance sensors. After that a series of earning disappoints made the stock to talk with the floor for about a year now. On March 1, the company said its third-quarter profit plummeted 86% due to stock-based compensation expenses. Quarterly revenue fell to $134.4 million from $137.7 million. But, along with those bleak news, the company also sent some positive signal by announcing that its board approved a stock buyback plan of up to $100 million in common shares.

Today the stock closed at $14.49, up 9c. The current P/E ratio is at a reasonable level of 17.25. We feel the stock may start another good run soon. The company recently introduced TrueFocus 3 Megapixel sensors (always on focus -- no autofocus lag) and also autofocus 5 Megapixel sensors for camera phones and other low cost digital wireless security solutions. These products are already in high demand and has good future. That should reflect in the earning reports of the company in next few quarters.

The company is also a possible take-over target. Any new rumor may push the stock up. If you buy this stock, keep a watch on the morning news everyday for any take over rumor so that you do not miss the opportunity of making a good profit. In case no rumor comes up, we believe holding the stock for a time-horizon of about a year would bring nice gain. Omnivision's basket of good technology products that are useful for average consumers as well as big industry houses certainly do not deserve to be overlooked for a long time.

Disclosure: We own Omnivision Technologies (OVTI) in our personal portfolio. You should do your own research before making any decisions. This blog, or its authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.
Caution: Always purchase stock depending on the risk level you can take. Keep your portfolio diversified and never ever put all or most of your money in one basket. Spread your risk in various kinds of investments: real estate, fixed income, bond, stocks in various sectors. If you feel individual stocks are too risky for you, consider ETFs or mutual funds.

Opportunity in Beaten Down Stock: IMB

IndyMac Bankcorp (IMB) : On April 26th, the California mortgage lender IndyMac Bancorp said its first quarter profit fell 34% as mortgage profits took a hit from a shakeout in the subprime lending. IndyMac President Richard Wohl said he expects mortgage-banking revenue to drop at the firm's reverse mortgage unit, Financial Freedom, in the 2nd quarter, after performing well in the first quarter. "We expect net income for Financial Freedom to decline from $28 million in the first quarter of 2007 to roughly $12 million in the second quarter and then likely grow from there."

Still we like this stock for various reasons. The stock is down 34.6% from its all-time high of $48.21 set in May 2006 and has a single-digit PE ratio of only 7.27. We believe the situation regarding subprime or Alt-A lending is not of critical concern and most of the risk is already priced in the stock. The bank has a growing presence in Southern California and over the last few years could establish itself as a readily recognized name -- one reason being relatively high yield of its CD rates. Sooner or later it could also be a take-over target of big banks.

One can get into this stock at this level and hold on to it for big gains to come, while enjoying its high level of dividend (currently 6.34%). It's an intermediate to long term play. We expect it to go the level of $40 within a year's time -- may be sooner. But if we do not start taking a position now, we may miss the bus completely.

The stock closed today's session $31.44 -- up by 0.38 or 1.22% -- possibly aided by the Fed chairman Bernanke's positive comments about the effect of sub-prime lending on US economy. "We do not expect significant spillovers from the subprime market to the rest of the economy or financial system,'' Bernanke said at a conference in Chicago today.

Disclosure: We own IndyMac in our personal portfolio. You should do your own research before making any decisions. This blog or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.
Caution: Always purchase stock depending on the risk level you can take. Keep your portfolio diversified and never ever put all or most of your money in one basket. Spread your risk in various kinds of investments: real estate, fixed income, bond, stocks in various sectors. If you feel individual stocks are too risky for you, consider ETFs or mutual funds.