Monday, August 20, 2012

Selling Seagate Technology STX

I am moving STX off my recommend list. This was on my "supplemental smartphone index" list I made up in response to Jim Cramer's Smartphone Index he introduced on Mad Money back on August 11, 2009. As my previous posts explain, I thought his original list of 21 names left out some good ones, so I picked a list of 9 supplemental choices. Originally, I had another 3 China domiciled names included, but I soon implemented a ban on all stocks reporting out of  The People's Republic - the "people" don't report there as much as the government. And I don't trust their reporting (Cramer has a similar ban, tolerating only BIDU). By the way, I made an error in my 2/18/12 post followup on the smartphone index. I had SYNA grouped with the 3 China stocks, CHU, CHA, NTE.

From the start of the index August, 2009, STX has returned +192% and still has a price/cash flow of only 4.7 and a PE of 4 ! I hate to sell something so cheap, it still looks good as this recent article over at Kiplinger attests. But it has evidence of a tiring climb, and a triple in 3 years probably already reflects a lot of good developments. If they move more forcefully into smartphone and cloud storage, there could still be a lot of climb left in this one.

I took ARMH out of the index on 3/7/12, so that leaves 7: LLTC, WRLS, SYNA, EA,OVTI, CREE, AKAM.

Wednesday, August 8, 2012

Selling JBSS

John B. Sanfilippo & Son (JBSS) is being rotated out of my recommend list here at around $19 today. It was put in at my Instablog at Seeking Alpha 11/20/09 at $13.90. This nets a +36% result. That's not too bad since the Dow is up just 27% since then ,+ 9% worth of alpha.

But there are some things going awry with the stock. The valuation numbers are no problem - price-to-sales 0.3, price-to-cash flow 9, forward PE 7. The earnings are on an upward trek with that nice 7 PE, but the cash flow from operations is flat over 5 years now and down over 3 years and has gotten erratic (counting TTM), and the 9 ratio is just market average. This is a basic food stock, which will probably be a good area for awhile, but I like to look mainly at cash flow and technicals. On both counts, this looks precarious. The nice climb the stock has been in is starting to gather a lot of volume and the action lately is starting to look like a churn top. It's fractal condition is toast. So I'm kicking it out to make room for some better stuff.