Weekly communication on core ideas - 1/14/07

The market remains extremely strong. I have anticipated the market correction after the earning season but the oil price drop and fall in the commodity price may delay this correction further. Fed is likely to continue to stay on the side with the rate policy. The economy is expected to moderate: but if the energy and commodity price stays low, the corporate America can continue to report robust earning growth as they can create goods at lower cost and thereby maintain higher profitability level. Next week is packed with important economic numbers that includes CPI and PPI. If the economic indicators continue to picture moderating economy with benign inflation, the market will go into the state of nirvana and we are likely to continue to set new highs in major indexes.

I want you to be invested in the market. However, I would set aside some cash to make sure you have money to put to work when we have a correction. I expect correction will be relatively short-lived but it will be painful if there is one. Most important thing the market needs to have to sustain this rally is the low energy and commodity price. So we need to pay very close attention to the movement of the energy and commodity price. But for now, I remain fairly optimistic about the short term market outlook. But expect choppy action. Any signs of higher inflation could trigger sell-off and we may just get that next week. Long term, I am very bullish about 2007. 2007 may turn out to be the best year since the internet bubble market correction in 2000.

Let us walk through individual names in the filthyrich stock list. Starting with the biotech names, AMGN is a strong buy at the current level. I expect the earning results in late January will be another outstanding performance. The stock should trend higher soon. CELG is consolidating and offers a great chance to add. CELG is a buy. GENZ is another outstanding buy at the current level. PDLI lacks near term catalysts to push share price higher and it is a good accumulate. Build position with PDLI. ISIS and ALNY are both speculative buys. They should not exceed 5% of your entire holding.

Financial names continue to remain strong. GS has hit another all time high level. The stock is still undervalued and is a strong buy. JPM is nearing its 52 week high level. It is reporting earning next week. I will preview the earning. If the earning comes out well, we may finally break above $50 level. It is heading into low expectation environment, and I want you to buy ahead of the earning. I will preview about JPM in coming article.

China names are incredibly strong. CTRP is nearing another 52 week high level. It had run up huge. Use the weakness to add. CTRP is the single best idea for 2007. FMCN is nearing my target price after being listed in 2007 idea just one month ago. Believe it or not, the stock may continue to trend higher. There is incredible excitement over Chinese display ad market and the PE multiple is still compressed compared to other Chinese internet names. FMCN should be bought only on pullbacks as it had a huge gain. Long term, I am very bullish about the company.

We had incredible strength in the transportation stocks. AMR is benefiting from falling oil price and has been setting 52 week high all throughout this week. AMR is reporting earning next week and we may see a little sell-off after the earning. I want you to accumulate shares if we see such pullback. In my opinion, energy price may continue to falter below $50 level; AMR may soon reach my target price soon. LUV is finally breaking out. I believe LUV can be bought right now. It is a great buy. LUV deserves higher multiple. It also reports earning this week and I will highlight it along with AMR.

Moving onto tech names, IBM is a great buy. It also reports earning next week. SAP and ORCL earning has been disappointing and many investors believe IBM will follow the suit. I think IBM has gained market share in the database market. In addition, its chip design business in GPU sector could bring in extremely strong earning as game console sales remained very hot this holidays. IBM is another stock that has hit 52 week high this week. Tivo is a solid buy. I believe that the tax loss season is now gone and the stock should trend higher based on Comcast deployment in March. I believe 2007 will be the year for Tivo although 2006 was disappointing for its shareholders. OPWV is a hold. I do not want you to add any additional shares. OPWV is fighting proxy battle as its management has poorly managed this company which has a good market potential. Let us wait until there is more visibility to the business. AVID is hold. As in OPWV, the revenue growth has been disappointing. Industry outlook is still good as HDTV rollout is accelerating but I would wait until the management provides clearer picture on the revenue growth outlook. RIMM is short and I want you to add to your short holding when stock is above $135.

Finally with the specialty retail idea, PEET is accumulate. Coffee business outlook is very good. However, the company is currently spending a lot of income to expand its store counts throughout CA. So the EPS growth may not be as strong as what the market likes. But you should be using this period of consolidation to build position.

Next week, I will publish articles on JPM, IBM, AMR, LUV and semi-equipment names ahead of earning to give you guys some trading ideas. I just hope that I have time to do this.


The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, 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.