NaabTrade

A monthly newsletter provided by Naab Investments & Trading

 

 

Bush Wins, Energy Wins!

November 2004 Issue

 

 

With the elections past us, the markets will begin to focus on the economy and earnings once again.  We feel that Bush’s next four years will be much better for the market than the previous four.  We look to move to nearly fully invested in the coming weeks in our managed accounts and the model Portfolios.  We will be focusing on the energy sector, with smaller forays into the financials and insurance stocks. 

 

A new issue this month we will be adding to the Long Term Growth Portfolio is Canadian Oil Sands Trust (COSWF).  The stock is very thinly traded on the Pink Sheets, so we advise you to place limit orders only.  COSWF is a trust that owns 37% of Syncrude, the only other major oil sands firm besides Suncor (SU).  Syncrude is also 25% owned by Exxon, 12% by Petro-Canada, and 9% by ConocoPhillips.  Plans are on the drawing board to increase production from today’s 1 million barrels per day to 3 million barrels per day in the next decade.  Currently, it cost Syncrude about $12.50 per barrel of operating costs, so oil above $30 is highly profitable.  That makes it viable for the oil majors to spend billions of dollars and several years developing oil sands projects.  Syncrude and Suncor will be at the forefront.  Remember it is estimated that oil sands in Canada contain nearly 500 billion barrels of oil.  Some highball estimates have the pegged the amount as high as 1 trillion barrels.  The U.S. Energy Information Agency estimates the official reserves at 175 billion barrels. 

 

In 2003 Canada passed Saudi Arabia and Mexico as the number one source for foreign oil.  It now exports 63% of its output to the United States.  In 2004, 35% of Canada’s total oil output will come from oil sands.  By 2015 it is estimated that virtually all onshore production will come from oil sands.  New technologies are on the way that could reduce the operating cost per barrel to as low as $7.50.  These new technologies will be needed to offset the cost of high natural gas currently used in the extraction process.  We advise that you take a look at Syncrude’s website http://www.syncrude.com/  for more information. 

 

COSWF is the only pure way to buy into Syncrude.  It currently trades around $48, near its high.  We are advising that limit buy orders be placed at $46 per share.  We will be initiating an 8% weighting in COSWF in the Long term Growth Portfolio at $46 once it reaches that price.  This will put us on margin slightly in that portfolio, but we are holding 15% MGM, which is being acquired shortly.  Once the MGM deal closes, we will be off of margin.     

 

Bigger pipelines will also be needed to get the increased oil production to the United States.  We think a HUGE beneficiary of the newly needed capacity will be TransCanada Corporation (TRP).  TRP is engaged in the transmission and distribution of natural gas and power in the United States and Canada.  TRP owns and/or operates or has under construction or development a number of power plants, and purchases power under a number of power purchase arrangements.  We are not going to go into detail this letter on TRP, but we will in the future.  Managed accounts may see TRP added to their portfolios in the coming weeks as well.   We are taking a 5% weighting in TRP at the current price of 22.70 in the LTGP.  This will put us further on margin, but the 15% we hold in MGM will be acquired for $12.00 soon. 

 

Pfizer is still under pressure due to fears over Celebrex and whether it is going to be the next Vioxx.  Our readings indicate that this drug presents none of the cardiac problems that Vioxx was having.  If Celebrex can stay on the market, it will, undoubtedly, get 90% of the Vioxx subscriptions.  This would equate to several billion dollars for Pfizer without having to do much.  Vioxx was approximately a $2.7B a year drug for struggling Merck.  At this point the risk/reward is in our favor for holding Pfizer.  If Celebrex is proven safe, it goes to $40-42 within a year.  Pfizer might then approach all time highs again after a major breakout above the $45 to $50 level.  If Celebrex is taken off the market, PFE probably falls $5 more at most.  In the October newsletter, we recommended purchasing new or additional shares of PFE on dips under $28.00.  On October 22nd PFE did dip below $28 and is still near that level.  We added 2% more in the LTGP on that dip to $28.00. 

AT&T Wireless (AWE) was finally bought out by Cingular.  The deal closed October 27th at $15.00 per share.  We will be putting the cash to work in several other stocks.  This was a great trade for us, and we are glad we held for the final deal closing while the market treaded water.  We picked up an extra 8% or so while the market went nowhere.  This freed up a lot of cash for us to do some shopping.

Our short position in US Canadian Minerals (USCA.OB) is going to be a winner for us.  On October 28th the SEC issued this:

The Securities and Exchange Commission announced the temporary suspension, pursuant to Section 12(k) of the Securities Exchange Act of 1934 ("Exchange Act"), of over-the-counter trading of the securities of U.S. Canadian Minerals Inc. (OTC Bulletin Board symbol “USCA”), of Las Vegas, Nevada. The suspension will commence at 9:30 a.m. EDT, October 28, 2004, through 11:59 p.m. EST, on November 10, 2004.  The Commission temporarily suspended trading in the securities of U.S. Canadian Minerals because of questions that have been raised about the accuracy of publicly disseminated information concerning, among other things, U.S. Canadian Minerals’ financing and mining activities and the value of U.S. Canadian Minerals’ purported assets.

USCA effected a 3 for 1 stock split the day before the trading suspension.  It was just another strange move by the company.  We have adjusted the prices and reflected the new trading symbol in the Model Portfolios.   We expect the stock to crater to under $1 once the suspension is lifted.  By early next year we look for USCA to be around 10¢-20¢.  For managed accounts, we will try to push the large capital gains out to 2005. 

 

Our short position in Travelzoo (TZOO) did not work out as well.  We were quickly stopped out at 77 on November 1st.  This stock is still being squeezed, and we have no idea when the bubble will burst.  For now we’ll leave this stock alone, but we will likely revisit a short position in the future. 

 

We will send a Flash Bulletin via email with any urgent updates or new stock trades.  Email any thoughts or comments to sales@naabtrade.com.

 

 

Portfolio Updates (Longs)

 

Altria Group (MO)

Gave an upbeat report to analysts yesterday.  They plan to split the company into three separate stocks.  Very bullish.  We may look to add to position in the high 40’s. 

 

Suncor Energy (SU)

This stock has rallied considerably since we added to the LTGP.  We are raising our buy price to $30.00 per share.  We may pull back to that level if oil continues to set back.

 

Texas Pacific Land Trust (TPL)

TPL has run away since we recommended it at $63 and is now near $100.  We would definitely hold off on any new purchases for now, but would not sell.

 

AT&T Wireless (AWE)

The merger closed on October 27th and all clients received $15.00 per share.

 

 

 

Portfolio Updates (Shorts)

 

US Medsys (UMSY)

Has dipped below support in the $2.80 to $3.00 area.  We’ll cover below $1.00.

 

US Canadian Minerals (USCA)

Has been suspended from trading until November 10th.  We’ll cover sometime in 2005.

 

Travelzoo (TZOO)

We were stopped out at $77 in all portfolios on 11/1/04.  We may try this short again in the future.

 

 

Portfolios  (Latest updates in blue text)

 

NaabTrade Short Term Growth Portfolio (STGP)

Date last updated:

11/5/04

 

 

*All returns calculated without dividends

 

Symbol

Action

Yield

Date Bought

Entry Price

Current Price

Return (w/o divs)

% of Portfolio

 Current Advice (Latest updates in blue)

MGM

Long

N/A

5/17/04

$12.00

$11.83

-1.42%

18.00%

 To be bought for $12.00.

EMC

Long

N/A

5/17/04

$10.25

$12.96

26.44%

15.00%

 Reported strong earnings on October 19th.

SIE

Long

N/A

4/21/04

$36.00

$51.24

42.33%

5.00%

 Likely takeover target in consolidating industry.

MGM

Long

N/A

5/17/04

$11.80

$11.83

0.25%

5.00%

 To be bought for $12.00.

RIGS

Long

0.97%

7/8/04

$20.75

$20.85

0.48%

5.00%

 PNC to buy for roughly $25 per share.

TVL

Long

N/A

7/8/04

$20.02

$18.40

-8.09%

5.00%

 Takeover target.  Look for $26-$27.

MGM

Long

N/A

8/25/04

$11.45

$11.83

3.32%

8.00%

 To be bought for $12.00.

Cash

N/A

N/A

N/A

N/A

N/A

N/A

24.00%

 Waiting for opportunities

 

 

 

 

 

 

 

 

 

UMSY

Short

N/A

6/28/04

$5.30

$2.35

55.66%

10.00%

 Company a delisting in the making.  Target is below $1.00

USCA

Short

N/A

10/19/04

$5.00

$5.65

-13.00%

5.00%

 Trading suspended by SEC until November 10th.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recently closed out positions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Symbol

Action

Date Bought

Date Sold

Entry Price

Exit Price

Return (w/o divs)

% of Portfolio

 Current Advice (Latest updates in blue)

AWE

Long

4/20/04

10/27/04

$10.50

$15.00

42.86%

12.00%

 Acquired for $15.00 per share 10/27/04.

TZOO

Short

10/19/04

11/1/04

$55.00

$77.00

-40.00%

5.00%

 Continues to feel the short squeeze.

GREY

Long

7/8/04

10/4/04

$950.00

$1000

5.26%

5.00%

 Achieved our $1000 target on October 4th.

WHIS

Short

4/15/04

7/13/04

$5.90

$2.75

53.39%

5.00%

 Dipped below $2.75 on July 13th.

AMTY

Short

4/23/04

7/9/04

$12.00

$7.99

33.42%

5.00%

 Dipped below $8.00 on July 9th.

ABIX

Short

4/22/04

5/20/04

$9.83

$3.75

61.85%

5.00%

 Had to take quick gain handed to us by daytraders.

IMM

Short

4/12/04

5/13/04

$22.50

$14.10

37.33%

10.00%

 Will look to short around $20.00 again.

VAPH

Short

3/17/04

5/13/04

$8.22

$0.65

92.09%

8.00%

 Company has little chance of survival.

EDS

Long

3/4/04

4/20/04

$20.25

$20.01

-1.19%

10.00%

 A small winner after selling calls in consecutive months.

 

 

 

 

NaabTrade Long Term Growth Portfolio (LTGP)

 

 

 

Date last updated:

11/5/04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Symbol

Action

Yield

Date Bought

Entry Price

Current Price

Return (w/o divs)

% of Portfolio

 Current Advice (Latest updates in blue)

MGM

Long

1.90%

5/17/04

$12.00

$11.83

-1.42%

15.00%

 To be bought for $12.00.

PFE

Long

1.90%

5/13/04

$35.25

$28.84

-18.18%

8.00%

 Core LT healthcare holding.  Added 2% more on 10/22/04.

EMC

Long

N/A

5/17/04

$10.25

$13.02

27.02%

8.00%

 Core LT technology holding.  Buy below $11.00.

COSWF

Long

4.00%

N/A

N/A

$48.43

N/A

8.00%

 Core LT energy holding.  Buy below $47.00.

TRP

Long

4.20%

11/5/04

$22.70

$22.70

0.00%

5.00%

 Core LT energy holding.  Buy below $23.00.

SGP

Long

1.32%

5/12/04

$16.30

$18.58

13.99%

5.00%

 Turnaround/Takeover candidate.  Buy below $17.00.

NXTL

Long

N/A

5/12/04

$23.70

$27.66

16.71%

5.00%

 Takeover candidate and growth story.  Buy below $24.00.

SU

Long

0.72%

4/29/04

$22.94

$33.72

46.99%

5.00%

 Core LT energy holding.  Buy below $30.00.

WMB

Long

0.38%

4/25/04

$9.20

$13.33

44.89%

5.00%

 Turnaround story in energy industry.  Buy below $10.00.

MRO

Long

2.95%

1/1/04

$29.78

$38.50

29.28%

5.00%

 Core LT energy holding.  Buy below $30.00.

MO

Long

5.46%

11/6/00

$34.00

$54.02

58.88%

5.00%

 We may look to add to position in the high 40's.

RAI

Long

6.54%

8/24/00

$36.25

$70.51

94.51%

5.00%

 Hold.

TPL

Long

0.79%

6/2/04

$63.20

$94.40

49.37%

5.00%

 Hold.  Stock ran away from us.

CP

Long

2.00%

6/2/04

$22.40

$28.89

28.97%

5.00%

 Buy at $23.00 or less for LT appreciation.

PFE

Long

1.90%

10/22/04

$28.00

$28.84

3.00%

2.00%

 Core LT healthcare holding.  Added 2% 10/22/04.

Cash

N/A

N/A

N/A

N/A

N/A

N/A

-6.00%

 We are now on 6% margin after TRP buy.  Await COSWF.

 

 

 

 

 

 

 

 

 

USCA

Short

N/A

10/19/04

$5.00

$5.65

-13.00%

5.00%

 Trading suspended by SEC until November 10th.

AMR

Short

N/A

9/20/01

$19.00

$9.04

52.42%

5.00%

 Stay short as fuel costs skyrocket.

UMSY

Short

N/A

6/28/04

$5.30

$2.35

55.66%

5.00%

 Company a delisting in the making. Target is below $1.00.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recently closed out positions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Symbol

Action

Date Bought

Date Sold

Entry Price

Exit Price

Return (w/o divs)

% of Portfolio

 Current Advice (Latest updates in blue)

AWE

Long

4/20/04

10/27/04

$9.90

$15.00

49.49%

5.00%

 Acquired for $15.00 per share 10/27/04.

TZOO

Short

10/19/04

11/1/04

$55.00

$77.00

-40.00%

5.00%

 Continues to feel the short squeeze.

UAIRQ

Short

9/20/01

9/13/04

$5.30

$0.71

86.60%

5.00%

 Probably as low as it will trade for awhile.

IMM

Short

4/12/04

8/4/04

$22.50

$9.15

59.33%

5.00%

 Continues lower now at $8.80.

VAPH

Short

3/17/04

5/13/04

$8.22

$0.65

92.09%

8.00%

 Company has little chance of survival.

UALAQ

Short

9/20/01

5/26/04

$18.00

$1.00

94.44%

5.00%

 Finally traded at our buy-in price.

 

 

 

 

NaabTrade Focused Aggressive Growth Portfolio (FAGP)

 

 

Date last updated:

11/5/04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Symbol

Action

Yield

Date Bought

Entry Price

Current Price

Return (w/o divs)

% of Portfolio

 Current Advice (Latest updates in blue)

MGM

Long

N/A

5/17/04

$12.00

$11.83

-1.42%

20.00%

 To be bought for $12.00.

MGM

Long

N/A

6/10/04

$12.30

$11.83

-3.82%

15.00%

 To be bought for $12.00.

EMC

Long

N/A

5/17/04

$10.25

$13.03

27.12%

15.00%

 Reported strong earnings on October 19th.

MGM

Long

N/A

6/2/04

$11.80

$11.83

0.25%

10.00%

 To be bought for $12.00.

RIGS

Long

0.97%

7/8/04

$20.75

$20.86

0.53%

5.00%

 PNC to buy for roughly $25 per share.

TVL

Long

N/A

7/8/04

$20.02

$18.38

-8.19%

5.00%

 Takeover target.  Look for $26-$27.

Cash

N/A

N/A

N/A

N/A

N/A

N/A

10.00%

 Waiting for opportunities.

 

 

 

 

 

 

 

 

 

USCA

Short

N/A

10/20/04

$4.71

$5.65

-19.96%

10.00%

 Trading suspended by SEC until November 10th.

UMSY

Short

N/A

6/28/04

$5.30

$2.35

55.66%

10.00%

 Company a delisting in the making.  Target is $1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recently closed out positions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Symbol

Action

Date Bought

Date Sold

Entry Price

Exit Price

Return (w/o divs)

% of Portfolio

 Current Advice (Latest updates in blue)

AWE

Long

4/20/04

10/27/04

$9.90

$15.00

51.52%

20.00%

 Acquired for $15.00 per share 10/27/04.

TZOO

Short

10/19/04

11/1/04

$60.00

$77.00

-28.33%

10.00%

 Continues to feel the short squeeze.

AWE

Short

1/14/04

10/20/04

$9.90

$14.84

49.90%

20.00%

 We chose to sell early to raise cash for short sales.

GREY

Long

7/8/04

10/4/04

$950.00

$1000

5.26%

5.00%

 Achieved our $1000 target on October 4th.

ABIX

Short

4/22/04

5/20/04

$9.83

$3.75

61.85%

15.00%

 Had to take quick gain handed to us by daytraders.

IMM

Short

4/12/04

5/13/04

$22.50

$14.10

37.33%

20.00%

 Will look to short around $20.00 again.

VAPH

Short

3/17/04

5/13/04

$8.22

$0.65

92.09%

15.00%

 Company has little chance of survival.