Current Update

I apologize for not having updated this blog for several weeks, I will not do a short update on my current holding and outlook.

In the last few weeks, I was lucky enough to make a short-term gain with SolarFun (NYSE: SOLF). Bought 110 at $17.98 when it was still climbing. Then sold a few days later when it topped around 27. I sold at $25.30, far from maximum profit, but any profit is a good profit.

Right now I have 310 shares of ESLR averaged at $10.33 per share. Today the stock ran up again due to an upgrade from an analyst at Lehman Brother's. The stock was trading at around $12.40 through out the whole day, however there was a strong sell-off at the last hour of the market and it closed at $12.07. Depending on the volume tomorrow, this open high then close low trend might continue for a few days. However, fundamental of this stock is still good, the CEO projects positive profit Q1 of 2009. Given the CEO's historically conservative estimation, that's a really good news.

Mining for the future.

Last week I spent most of the time discussing the health sector, with most of the news surrounding GlaxoSmithKline. This week I will begin my discussion about the mining sector, while primarily focusing on my mining pick, VALE (NYSE: RIO). Stay tuned, VALE is at a very attractive price right now, there is a high chance that I will be a proud owner of VALE by the end of this week.

(Remember, as Rule #1 investors, we don't buy shares of the stock, we own the company)

GlaxoSmithKline's 2007 Annual IMPACT Awards recipients each receives $40,000.

The winners for GlaxoSmithKline's 2007 Annual IMPACT Awards were announced. GlaxoSmithKline (NYSE: GSK) is one of the world's leader in pharmaceutical and health care research. The recipients will each receive $40,000 for their outstanding works in the community. "These organizations have committed themselves to promoting health and well-being." Said MaryLinda Andrews, GlaxoSmithKline Director for Community Partnership. The award ceremony will be held at GlaxoSmithKline's headquarter in Philadelphia on March 20th. The non-profit organizations that were recognized this year are: Domestic Violence Center of Chester County, The Free Clinic of Doylestown, Institute for Safe Families, The Letitia Fifer House d/b/a The Clinic, Pennsylvania Breast Cancer Coalition, Pennsylvania Health Law Project, Samaritan Counseling Center, and Water Street Rescue Missions Medical Clinic.

"The GSK IMPACT Awards are designed to recognize and promote the work of nonprofit organizations with a proven track record in the challenging and demanding area of community healthcare... Eight awards of $40,000 each have been made to small and medium sized nonprofit organizations in the Greater Philadelphia region, where GSK has its operational headquarters. Awards are given for existing work rather than new programs and an impressive number of strong applications were received." (GlaxoSmithKline)

If you wish to learn more about GlaxoSmithKline, you may go to their website at http://www.gsk-us.com/. From there, you may learn more about The GSK Impact Award by following these directions:

1. Click on Our work with communities on the top left.
2. Click on Health programs on the left side of FUNDING.
3. Click on Award, then look for the "GSK Tenth Annual IMPACT Award" PDF file.

Yesterday, after GlaxoSmithKline's disappointing performance, I said that GlaxoSmithKline is not going to be on my portfolio anymore, now I have decided to keep them. My judgment was clouded by recent news regarding GlaxoSmithKline announcement of discontinuing their products. Furthermore, Gilead Sciences, Inc. (NYSE: GILD), one of GlaxoSmithKline's major competitors have repeatedly received higher performance reviews for their drugs over competing GlaxoSmithKline brands. I have forgotten that one of the most important quality in a community is how much they give back to their communities, especially for a health research company like GlaxoSmithKline. I will hold on to them for now.

Verdict: The future is bright for GlaxoSmithKline, but the gain won't be in the near future.

GSK: SELL signs signaled on all three tools!!

What a dreadful day, it's only 9:30am and I'm already regretting not selling my GSK shares when I had a chance. As I said before, I bought GSK because of the market, I didn't buy GSK because of my rule #1 researches. This has been a week of bad news, I'll list a brief recap:

• GlaxoSmithKline discontinued the development of Dacart, their malaria drug. Full article. (source: CNNmoney)
• Researchers found out that Gilead's HIV drug outperforms GlaxoSmithKline's competing compound. Full Article. (source: The Motley Fool)
• Just happened today, no necessarily bad but it's nothing good. FDA requests from GlaxoSmithKline regarding the safety of their asthma drug. Full article. (source: Reuters)

As of 12:42 EST GSK has dropped to a new resistance level around 42.4. If you recall I bought the stock at 44.51, not good at all. When GSK breaks even (if it ever does), I will sell it no matter what. I didn't want to own the company to begin with, if the stock rise up after I sell then so be it. I've got my eye keenly set on RIO now, the momentum is going up and it doesn't seem like it's going down, so I have to be patient.

On another news, one more stock came up on my radar. Activision Blizzard (NYSE: ATVI), used to know as just Activision under they merged with Vivendi Games last year (Full Article. source: BBC News). As an avid gamer I'm embarassed to have only found out about it today. If you look at the historical growth rate, Activision does not qualify as a Rule #1 stock. However, as a gamer I know the importance of this merger, it means that the only large consolidate left in the video industry will be EA and the new Activision Blizzard. 10 years ago when I first played Warcraft II, a game made by Blizzard, I told my self that if Blizzard ever issue common stocks I will be the first to buy it. Throughout the years they have proven themselves time and time again with each blockbuster games. Right now the price is strapped around $27, the agreed premium, when the merger is complete I predict that there will be a dip and that will be the time to go in.

Buying Activision Blizzard is not the same thing as owning Blizzard.

But...

It's as close as it gets.

Verdict: Sad about GSK, excited about the future.

Further "RIO" discussion

First, let's look at the numbers and find RIO's intrinsic value using Rule #1 formula. We know that in order to find out Margin of Safety (MOS) price we need to know three values: Current EPS, Estimated EPS, and Estimated PE in ten years. I've made predictions, one conservative and one aggressive.

Aggressive Prediction:

• Current EPS: 2.33
• Estimated Future EPS: 33 (As seen from historical Equity Growth)
• Future P/E: 13 (As seen from average of historical P/E)

Using these numbers, we conclude that the MOS price (50% off sticker price) is $64.83. When I saw this number I almost jumped out of my chair, it's almost too good to be true. The price is so good that I almost think that my prediction is off. That's why I also came up with numbers for the conservative prediction:

Conservative Predicton:

• Current EPS: 2.33
• Estimated Future EPS: 25.4 (Future earning growth estimate of RIO from money.msn.com on 03/03/08. Personally I don't like this number too much because it's an estimate growth or earning, not equity)
• Future P/E: 12.26
  

The MOS price calculated from these numbers is $33.94. Now I'm interested, look at how close this is from today's price of $35.29 High, $33.93 Low, and $34.84 Closing. If I was to invest in this company on numbers alone, these numbers were enough to persuade me. To be further convinced, let's look at a recent critical fundamental development for VALE.

Following Japan's Nippon Steel and South Korea's Posco (NYSE: PKX), China's top steel producer Baosteel Group has agreed to a 65% increase in iron ore price in 2008 with Vale. Read more here at CNNmoney. From these deals we can expect an increase in earning from the following quarters to come. We must take note that the entire mining sector has been down for the last couple of days, so we probably won't see the 65% reflected until a few quarters later.

Now let's take a look at some charts:

• The market price and simple moving average line are almost about to cross, a sign to get out of the market.
• MACD also shows a bearish sign, even though the indicator is still above the 0 critical level.
• Stochastic brings more attention to a possible bearish market, %K line has crossed under the %D line. Furthermore, it has recently crossed over the 80% point, indicating that the stock is steering away from its overbought status

Verdict: I'm waiting for the buy signals to pop up on all three tools, judging from historical charts, we can roughly expect RIO to dip under to $32.00 or even $31.00.

Good news all around

Good news came from all three companies on my watch list.

GSK:

• Came up to $44.50 after last friday's low $43.91 closing price.
• FDA grants priority review for GlaxoSmithKline's bleeding disorder drug, you can find the news link at here. (provided by www.reuters.com)

BVN:

• Operations resumes at four sites after last week's strike breakout. You can find out more at PR Newswire and Reuters.com.
  

RIO:

• Brazil based mining company Vale announced their quarterly earning on Feb 29th, its revenue rose 12.2% and its net earning was increased by 59%. (www.fools.com)

Further Analysis

I was searching for financial analysis online and bumped into this nifty website, www.getrichwithwealth.com. The website offers free service to break down and rank different stocks for a wide range of categories. I looked up on the three stocks that I talked about,

(http://getrichwithwealth.com)

As you can see, the two mining companies BVN and RIO both received the overall A grade. The company that I bought reluctantly (remember how I mentioned that GSK was on the bottom of my top 3 list), only has an overall D grade. Now look at the equity growth rate, one of the most important category for Rule number 1 investors. RIO has an A, BVN received a B, GSK is stamped with a C. Once again, GSK has the lowest grade. It isn't looking good for GSK, I'm thinking about putting a stop loss at $43.51.

What do you think?