Two Public Figures, Lots of Homework, a Little Stock Talk

I apologize for the absence of new posts this week; I've had two exams (well, Macro Econ is tomorrow morning at 10:10) and lots of other work.

Plus, on Wednesday, Jim Cramer came to do his show here. Tonight (Thursday), Bill Clinton came to speak on behalf of his wife.

I semi-reluctantly went to see Cramer put on his show, and I'm glad that I did. I hate the caricature-Cramer of the show, with yelling, screaming, hyperbole, and sound effects - but in real life, I was able to see a different side of him.

And, interestingly, his on-show appearance is turned on and off like a light switch. As the cameras rolled, he was in his TV persona, but as soon as they cut to commercial (when filming here, the "commercial" breaks were about ten minutes long), he began to speak candidly. He fielded long questions and lightning-round quickpicks from investment club and secular audience members; instead of screaming about them, he responded logically and thoroughly. He talked a little about himself and his life, in a very personal and honest way.

So I definitely have a new respect for Jim Cramer. I'm still not a fan of the show, but I like the real Cramer (or at least as much of the real Cramer as I got to know in that hour). He seems like a great guy to have dinner, a beer (if you're of age), or a round of golf with him. One last, possibly jaded comment; if he doesn't like his TV semi-insane alter ego, I feel bad that he has to turn it on for hours every day. However, if it's fun for him... then good for him. He's making money doing it.


Concerning Mr. President William Clinton's appearance tonight...

It was worthwhile to see him, but instead of talking about himself (which I would have cared more about), it was all about his wife and her policies.

I actually registered as a democrat (though I consider myself to be more republican) so I could have a meaningful vote this April in the Pennsylvania primary. Though I'm not a fan of Barack's 20-30% capital gains tax (and main campaign platform of "hope"), I think I'll probably vote for him over Hillary next month. I firmly disagree with many of her policies (as outlined by Bill), except for one - she supports a troop withdrawal, beginning within 60 days of taking office. Iraq is a waste of time, lives, and most importantly, money - money that is spent now, will continue to cost more money later (as veterans require medical care, future aid because of mental illness, etc), and money in the future (in the form of repayment of national debt). It really doesn't matter to me if we're "winning" or if the surge is "working" - great! our generals learned how to fight this war. Just because we're doing better doesn't mean that we should continue to be there. I have friends from high school that went to the Naval Academy, and I hope they'll be deployed in a time of peace.


A couple quick stock thoughts:

I put in a super-lowball bid on a lottery-ticket option for Penn National Gaming (PENN). They are (supposed to be) bought by Fortress (FIG) by the summer, at $67/share. I put in a low bid and got April $55 contracts for $.15 - I'll actually probably sell now that it's a quick double in value. However, if the deal somehow closed between now and then, it would be jackpot for me.

I also tried to short my long-loathed CMG over the past few days, as it's bounced up about $20 for no reason at all... but Ameritrade doesn't have any share available for me to short. Options aren't worth it (premiums are too high), but I'm staying on the lookout for an opportunity to get short.

Financials are coming back down, which I dislike (because I own CFC and ETFC) but also like (because I'd like to buy some LEAP calls of other ones). I think FIG and BX are good buys at these levels; both are about as low as they have ever been, and I think they're likely to snatch up a few good bargains as things have cheapened, which they'll be able to sell for much more when conditions improve. If they fall a little farther, I'm still not against buying FRE or FNM, because I think the quasi-government connection provides safety. Brokers are still dangerous, I think - I'd rather go with a BAC or C, but in a few months after they write down some more of their balance sheet.


Lastly... I'm still in TMA. They'll probably be stagnated between $1-$2 for a while, but it seems like the danger of bankruptcy has passed. If one can endure the 10% daily moves, I think there's an outside chance that its a $5-10 stock in a few years.



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Is Crocs biting back?

I loathed Crocs (CROX) during this summer and fall, as trendy investors engaged in a feedeing frenzy, inflating the price of the quirky shoemaker. I did not take joy in the stock's plunge, but I felt as if it was justified.

However, CROX is now an attractive prospect. After a massive, painful decline from $75 to $35, CROX had returned to earth from it's lofty orbit. At that point, it was trading at a forward P/E of about 15 - cheap for such a high-growth stock.

Investing in high-growth niche stocks like CROX can be tricky, or even disastrous. (I briefly owned Heely's, a similar, trendy shoemaker, selling eventually for a small loss.) Once a former high-flyer like CROX falls, it's often hard to establish a floor.

But, I decided to take a risk. I liked CROX at $35; I thought it was significantly oversold.






So when it was in the high $30's, I bought December 42.5 calls. I just closed the position today.

11/30/07

Bought

CQJ LV Call Crocs Inc $42.50 Exp 12/22/07

$1.10

12/07/07

Sold

CQJ LV Call Crocs Inc $42.50 Exp 12/22/07

$4.20

The stock certainly recovered nicely, bouncing up about $4, or 10% in one week.

After selling my $42.5 calls, I deciced to reinitiate an options position, and purchased December $47.5 calls for $1.40/contract.

This investment, in my opinion, is attractive for two reasons; fundimentals, and momentum.

As I previously discussed, CROX was ridiculously overvalued at $75. When they announced earnings, which weren't even bad, the expectations of speculators were crushed, and as Jim Cramer shouted "SELL" on Mad Money, investors dumped the stock. (That wasn't a direct shot at Jim - though he had been pumping up the stock on its way up, a panicked investor that sold on his advice would have not endured the full losses). CROX fell over $25 the first day after earnings, and continued its downward slide for another two weeks before stabalizing.

Now, CROX has an attractive long-term vaulation. The shoes are still selling well, as consumers snatch up the trendy, colorful, albeit unusual clogs. During the last conference call, the company still called for strong growth, just not strong enough to justify a 40 forward P/E. CROX is also releasing clothing to compliment their product line, using lightweight material; if the clothing is as revolutionary (or intreuging) as the shoes, sales could become supercharged.

I usually wouldn't touch a stock if I didn't believe its long term prospects were respectable, so CROX passes that test. However, the real reason why I'm playing with some options is because CROX is (or was) a hot momentum stock. Now that CROX is well off its low (and up in 4 out of the last 5 sessions), individual investors who had sworn off CROX might be attempted to jump back in.

I don't think a valuation of $75/share is reasonable, but CROX still definitely has room to run. The average prediction of next year's earnings is $2.69/share. The current forward P/E is just 17, which I'd consider pretty low for a company expected to grow 40% next year and at 26% over the next 5 years.

I'd start to find CROX a little overpriced with a forward P/E in the mid-20's. However, the stock still has lots of ground to cover before then. With a forward P/E of 20, CROX would trade around $54/share. Assuming a forward multiple of 22.5, that would make CROX a $60 stock.

My December options will expire too soon to enjoy all of CROX's potential price increase. But, even as a value-oriented longer-term investor, I think CROX is an attractive buy-and-hold at this current valuation. CROX may be cold-blooded now, but I think it's going to bask in the sun.