Two quick thoughts: Electronic Arts and Oil

I'll post full writeups on both of these topics within the coming days, but I wanted to publicize some thoughts now.

First:

Electronic Arts is one of the best video game stocks to own this year going into the holidays.

• Madden and NCAA are still selling well
• SKATE displaced Tony Hawk as the best/most popular skateboarding video game
• "Orange Box" is being heavily advertised; apparently, it's one of the best games of the year
• Rock Band, a competitor to/improvement on Guitar Hero, goes on sale for christmas
• Halo 3 has put more consoles in homes, Wii still selling well, PS3 price going to be cut

Sure, based on P/E, ERTS is richly valued, and as a value investor, that's always something to be cautious about. I don't think this is a buy-and-hold-forever situation, but I think EA is going to perform well through the christmas season. Stop back for a full writeup within a few days.



Secondly, oil prices are unbelievable.

I originally wrote about oil needing to correct when it was at 82 (and it did - I held CVX and then COP puts, and ended up not selling soon enough and approximately breaking even).
Now, after little significant news, it's at 90. It touched 90 during aftermarket/electronic trading just a few hours ago. Unless this passing of this psychological barrier encourages buying (which, at this point, I would not be surprised at), I think oil simply has to fall. The price of oil, as well as the price of oil stocks, SHOULD fall soon. Here are a few reasons why:

• Chance of a production-disrupting hurricane now is slim to none
• Driving season ending
• Warm winter predicted
• Refining margins evaporating.
  

Since $80, most professionals have been saying there is really no significant supply issues or current events to support this price. Just tonight, this article posted at Bloomberg.com states that 20 out of 29 professional analysts polled believe that oil will fall within the next week. The article asserts that futures demand (aka, demand by traders who do not actually buy oil) is increasing, while actual worldwide demand for physical oil really isn't.

So rationally, I think, we should see sub-$80 (maybe sub $70) oil this winter. Does that mean it WILL happen? No. As I stated, paper demand, not physical demand, is responsible for these current inflated prices.

As long as the dollar doesn't collapse, or there is no World War III, there is no reason for oil to remain at these current levels.

Weekly Wrapup: September 10-14

It was a great week for the market; the major indexes all enjoyed gains of at least one percent. Here are weekly charts, courtesy of Marketwatch.com:

Dow Chart 9/10-9/14

NASDAQ Chart 9/10-9/14

S&P 500 9/14-9/14

As the charts show, each index posted gains for the week... and if measured from the bottom of the lows on Monday, the weekly increases are even more impressive.

Moving on:

A few interesting things happened with the stocks I own or watch this week. Syntax-Brillian (BRLC), which I had a small speculative position in, first delayed earnings, then disappointed the street by revising its future outlook downward. It fell from almost $7 on Monday to $4 this Friday.

Obviously, the company should be a little cheaper, because it did revise its future estimates. However, I do not believe that this stock deserved the downfall, or will trade at this price forever. Along with the quarterly results, BRLC reported yearlong earnings of $.48/share. At the current share price, BRLC is an 8 P/E stock, which is utterly unheard-of for such a small, high-growth company. Revenue and income continues to grow quickly (just not as quickly as expected), with demand out pacing the company's ability to supply.

I doubled my tiny position around $4 a share, and I believe that this stock will trade much higher than it does today. Unless there is some massive scandal or other major unforeseen problem, based on the current numbers and market conditions, I feel as though BRLC is beaten-up and undervalued in the long term. I don't know if it's going to "pop" anytime in the near-term, but in a year, I would not be surprised if it was at $8 or $10 per share.

Another interesting happening:
I purchased a tiny position (500 shares at $.56) of an even smaller TV maker, Soyo (SOYO.OB). Other than some news about a very small stock purchase by the CEO, information about sponsorship of a fighting candidate, and a reiteration of earnings guidence (of 7+ cents/share for the year), there wasn't much news; however, the stock shot up to $.92 on Friday, before closing in the 70-cent range.

Generally, I don't invest in "penny" stocks because it's unpredictable and more like gambling than investing. However, whenever I discovered Soyo, I researched it and really liked the company - it started as a company making specialty motherboards for gaming computers, and eventually got into the LCD TV market. Now, they produce a 24" TV that has 50% market share at that size, and signed a long-term contract to distribute products under the widely-respected Honeywell brand name, starting with portable USB drives this year and including big-screen HD LCD TVs next year. I like this little company in the long run; I could care less about the daily volatility and short term gains, becuase if this work out well, this company could be worth much more in the long run.

Along with the rest of the market, most of my other positions were up, including Marathon Oil (MRO), Electronic Arts (ERTS), and Sun Microsystems (JAVA).


For the upcoming week, markets will be focused on the Fed meeting on Tuesday. The decisions concerning interest rates will surely set the tone for the week. One of my positions, Hovnanian (HOV), will definitely be effected; I'm going to have a full-article writeup about it posted later tonight or tomorrow.



Keep reading; bookmark us; tell your friends!

August video game sales crush expectations - EA mini-analysis

Instead of summarizing, I'll just link you to the full article at Marketwatch.

I don't mean to toot my own horn, but I bought Electronic Arts (ERTS) on September 4th around $53.50/share in anticipation of news like this. For me, it's easy to do some analysis of EA in my everyday life; every single room that's on my floor (that has a video game console) has some EA football game. Both of its football franchises, Madden and NCAA, are wildly popular. EA's NCAA game is often regarded as the best one, and Madden is now the ONLY professional football game that is released (due to purchase of the exclusive rights to make it, by EA).

Well, Madden was the most popular game in August (by far), placing in the top ten twice because of sales on both Xbox 360 and PS3. I don't know how that will effect EA's earnings, but it's certainly a positive sign.

Even better, in my opinion, is what they have in their pipeline - a game called Rock Band, scheduled for release for this holiday season. It's made to compete with the ever-popular Guitar Hero franchise (which also held two spots in August's top 10). It's made by the same studio that made Guitar Hero 1 and 2, so it has the same popular, user-friendly, familiar interface. However, Rock Band has 3 input devices - a realistic guitar, drum pad, and microphone. Based on the limited information so far, it seems as though you can do all three yourself (at different times), play with other players on the same console, or even possibly be in an online band, connected to players through the magic of the internet.

I think Rock Band will be huge for EA - that's my main reason for being long in it right now. Only time will tell if it will be a success, and if it's a bust, it's not going to be good for EA's stock. For now, especially after this news release, I'm feeling good.

BRLC Followup and 9/11 trading review

Well, BRLC was a disappointing story today... by earnings bet apparently backfired. They delayed reporting results today, sending the stock down almost 10 percent. I'm still positive long-term, but this short-term problem is indeed unfortunate.

EDIT: In fact, a few analysts have speculated that the earnings delay may be due to overwhelming sales. I'm not going to buy any additional stake, but I hope they are correct.

However, the market (and the rest of my positions) had a great day. The major indexes were up 1-2%, with some large gains in individual stocks.

My best position today was Sun Microsystems (JAVA), up almost 6% today because of great information about its new server product, Solaris. This stock has been the gem of my portolio so far: I bought shares on August 24th for $5 each ($5.05 after commission); the stock has returned a very healthy 14% since then. The stock is now bordering on being overbought, so I wouldn't be surprised if it has a few flat, or down, sessions. However, I think Sun is a great company that has been overlooked for a long time, and its business and share price will continue to grow. I'll probably have a full writeup on Sun sometime soon.

Also, today, another recent purchase, Electronic Arts (ERTS) was up a few percent. I think that they are in a great position right now; they have a ridiculously-hot selling NCAA football game as well as the ONLY NFL football game, and are releasing a game to compete with the hugely-successful guitar hero franchise for this holiday season.

Western Digital, Take-Two Entertainment, and Ebay also led the NASDAQ higher today; I've been looking to get into eBay for a while, but it just keeps going up and up.


Overall, it was a great day! Hopefully it will spill over into tomorrow.