Closing out position with NVLS, TRID, and SIRF.

I hope that everyone had a very happy New Year. The market is starting out the New Year in an exciting way. Yesterday, DOW moved with a range that exceeded 175 pts and today NASDAQ had a very strong rally. Everyone is starting to get excited about the market's sustained gain. The market had not had a correction within 7 months (with magnitude greater than 2%) and this has not occurred in the market's history.

Although I am bullish on 2007 market outlook, especially with emerging market (China), transportation (airline), biotechs (both large and small caps), financials (integrated banks and brokers) and last but not the least techs, I think the market is due for a correction. The market may remain fairly strong as we head into the heart of the earning season. In fact, I expect that the earning for January will be extremely strong. But I remain doubtful the guidance could be the same. As a result, after this earning season, we may run into a little corrective period. Because I am bullish on 2007 as a whole, correction would be a great buying opportunity and I really want you to have some cash to deploy when this happens. As such, I think profit taking on some of your winners could be shrewd.

The market has been strong in anticipation that the economy is achieving a soft landing. The market thinks the economy is slowing down but the earning will not be hurt. The market is anticipating at least 2 Fed rate cuts this year. Some are actually forecasting as many as 4 rate cuts. My take is in order for the market to see Fed rate cuts that is as aggressive as forecasted and expected, the economy has meaningfully slow down. Meaningfully slowing down economy means reduced earning for corporate America. As such, higher earning and slower economy that the market is expecting could be difficult to achieve simultaneously. My bet is that the economy is going to show signs of further slowdown ahead and will temporarily drag the earning performance in the late spring and early summer. I believe this is when Fed may start easing the rates. So until then, we may have some hiccups in the market here and there and as the market has been rallying for so long, any perturbations away from the soft landing scenario could trigger nasty correction (5 to 10% in magnitude). Lately oil price and metal commodities are showing signs of cracking down again. Oil broke below $56 level today, largely due to warm weather that we are seeing this winter. Copper are also at 8 months low. Although weather may play in a role with lower energy price, the truth is demand for oil and commodity is lower with slowdown in the manufacturing (auto and construction) sector.

I am closing out three names in tech area where I anticipate the most corrective action may happen given the relative strength of the sector. I am locking in gains with NVLS and TRID. I am taking a little loss with SIRF. NVLS is a semi equipment company that I initiated 7 months ago due to valuation. Since then it has racked up impressive 47% gain. The company lately announced that its president Sass Somek whom I think is the tech visionary is retiring from the company. I am not a fan of current CEO Rick Hill as he has screwed up the company big time with its overexpansion of the business (ego trip) and ruin the net profit margin of the company. The share price of NVLS has lately run up due to speculation that the company may be taken private at a higher premium. Because I am anticipating somewhat choppy environment in the semiconductor land especially in the consumer related devices, I don¡¯t see much fundamental catalysts with semi equipment names. I may revisit semi equipment names in the late spring, possibly with LRCX. But for now, I am taking the profit with NVLS.

TRID is a pure semi play with HDTV. The sales of the HDTV (LCD, plasma, and projection) have been brisk during this holiday season. However, I am getting concerned with the rapid pace of the unit price decline. The price of the LCD and projection TV has dropped so precipitously that I am beginning to worry about the margin pressure for TRID. In the summer of this year, we had much higher profit with TRID near 80% gain but the shares have never recovered strongly from the summer correction and today I am closing out position with 17% gain. With TRID, we held the stock for 13 months.

SIRF is a pure semi play with GPS device. SIRF started very strongly after we have initiated the name 13 months ago. We had gain as large as 50% at one point during the summer. But after the summer correction, like TRID, the stock remained anemic. The reason is the increasing competition. There are small players emerging in GPS chip market that is pressuring its margin. In Dec, the rumor of market share loss with Tom-Tom also dragged the share price lower. In addition, with the auto companies in doldrums, the GPS market associated with the auto manufacturers could be weak. Consumer GPS market has been very vibrant. But I also noticed that the pricing is getting brutal and as the GPS devices become commoditized, the margin is likely to suffer. Hence I am taking a slight loss of -5.2% and am removing the name from the core list.

In the following message (tomorrow), I will summarize all the current performance for the entire filthyrich list of stocks. Only members will be able to view this list. In addition, in order to update you more regularly on all names, I will try to do biweekly comments on all the names covered in the list. The comments will not be as extensive as the stock article I write on individual names. But this way all the stocks will get the coverage to a certain extent. This bi-weekly communication will only be available to the members.



The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Novellus, Sirf Technology, Avid Technology, Trident Systems, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)

Please check out the archives for past posting on individual stocks. Also analysis is available at www.investorhives.com under FilthyRich hive. Thank you for visiting my blog.