China: A Growth Story

The Great Wall

After the Tiananmen Square protests of 1989, China, lead by President Jiang Zemin and Premier Zhu Rognji, took advantage of economic policies put in place in the 1979 post-Mao era of market and social reform. Subsequently, the PRC experienced an economic boon that pulled 150 million people out of poverty, and sustained an average annual GDP growth rate of 11.2% up through last year. This is the China we know today. The fast-growing behemoth that has dominated the last decade both financially and politically. But unfortunately China's final story may be a cautionary tale on the pitfalls of being  overdependent. Jump past the break for the scoop.

Me thinks this market be crazy

If you invest in momentum stocks like I do, you're not really sure what rally the lame-stream media is talking about today. Up 140? The Dow once again masks the ugly, underlying action that, at least for the time being, is the true tale of this market. I have about 100 companies I watch on a regular basis, and five had green arrows today. Five. This looks like a big move away from risk, or as the kids are saying "Risk Off." But, I did do some shopping today. I bought some Alexion Pharma (ALXN) as it was down 4%. I had been looking for this one to pullback for a while and today gave me the opportunity to add to my position. Also, I am now speculating on a Netflix (NFLX) takeover with the NOV 135 calls. I covered some of my shorts in Fossil (FOSL) only because by mid-day the stock was down almost 12%! It ended the day down 7% so I'm already happy with the move. I still think there is plenty of downside risk out there, so I'll be leaving the rest of my Fossil (FOSL) shorts on until I see some better data points out of Europe and China. China took center stage today as fears of a hard landing have accelerated. If it's not Europe, it's China. We can't get a break! Add to that the SEC is now probing Chinese companies to make sure their balance sheets aren't air, and that made for an all-out sell-off in the Chinese ADR's. Baidu (BIDU) and New Oriental Education and Tech (EDU) were down huge but parred their losses going into the close. At one point New Oriental Education and Tech (EDU) was down over 18%! I had to literally leave the office so I wouldn't buy these names, but it looks like I would have already made a handy profit had I just listened to my instincts. I wouldn't have held anything overnight, but it would have been one boss of a day trade. 

This is not a recommendation to buy or sell any securities. DAK was long ALXN and NFLX, and short FOSL at time of publication but positions can change at anytime.

Less than an hour to go....

I'm starting to get a bad feeling about the speech later. There is a lot of pressure on Bernanke to act as savior but the consensus seems to be that the only surprise today would be a surprise. I think there is too much upside risk to get short here but I have raised a bunch of cash and now sit about 25% liquid. I'll be ready to react to any big moves of the speech. The banks initially sold off hard but have stabilized after Moody's downgraded all their debt as the downgrade was no surprise to investors. New Oriental Education (EDU) is getting absolutely crushed today but seems to by finding support at its 50 day MA at $30.07. There is no specific news but lets stay away til we figure out what's going on. Arcos Dorados Holding (ARCO), my favorite play on Brazil is getting whacked today for over 6% for no apparent reason. If (ARCO) closes below $26.60 we have to stay away and revisit it when the chart stabilizes. The semi's, including my two faves Broadcom (BRCM) and ARM Holdings (ARMH) are flying today and I continue to be bullish on the whole sector. Baidu (BIDU) is coming back a bit off yesterdays strange action rising over 1.5%. Apple (AAPL) is back in the $420 area and the story today continues to be growth, but will the NASDAQ follow the rest of the market if we don't get something besides "Operation Twist"? Probably, so be ready. Gold is flat and oil is up.

This is not a recommendation to buy or sell any securities. DAK was long BIDU, ARCO, AAPL, EDU, BRCM, and ARMH at time of publication but positions can change at anytime.

Closing out strong....

If you bought the dip with me this morning you made some money. After being down 250 points early in the day we came roaring back on a report that after the Greek Finance Ministry said the conference call today between Minister of Finance Evangelos Venizelos and the ECB was 'productive ans substantive'. In fact at one point the Nasdaq even went positive. We closed a bit off the highs of the session, but the story today was "high growth". Free Market Capitalist faves Chipotle Mexican Grill (CMG) and Lululemon Athletica (LULU) were up over 5%. Whole Foods Market (WFM), Wynn Resorts (WYNN) and Green Mountain Coffee Roasters (GMCR) were all up over 3%. Apple (AAPL) closed at an all-time high today of $411.63 and is red hot with a new product cycle ready to roll out in a matter of weeks. athenaHealth (ATHN) was up over 5% before fading but still closed .8% higher. I took some more of my position in athenaHealth (ATHN) off the table as it's up over 40% since I bought it. I've recouped my capital plus a little profit so I'm letting the rest ride. I bought some Broadcom (BRCM) as the semi's were getting hit hard this morning and you know I love semi's right now. With Broadcom (BRCM) you're also getting a sideways play on Apple (AAPL) since they make the chips that run iProducts. Arcos Dorados Holding (ARCO) bounced back above the $26.60 support level at the bottom of its $26-$29 trading range. I see this as bullish and think the stock should be bought right here. Gold fell hard down over 1.5%. My short-term view on gold hasn't changed and I expect it to test its 50 day MA of $1726.40 and then the head to the $1600 level. Oil was hit hard today and I'll be looking to add to my Oil Service Holders ETF (OIH) on anymore weakness.

This is not a recommendation to buy or sell any securities. DAK was long AAPL, OIH, ATHN, ARCO, WYNN, and BRCM at time of publication but positions can change at anytime.

Thinking about Indonesia....

I've been looking for a play on Indonesia for a while. After exhausting my research I thought I'd ask Jim Cramer on Twitter and he promptly replied. Check it out:

While I appreciate Jim's advice, I still think Indonesia will be huge in the coming decade so I will continue to look for an opportunity. Right now the best play I can find is the ETF I mentioned (IDX) but I hate buying ETF's as investments. I only like to use them for short term trades, because if you're going to invest, why buy a basket of stocks that has the bad ones and the good? I'm going to have to add an extra "I" to BRIC. Maybe I'll even drop Russia and just make it BIIC. I'll get back to you on that one. 

BRIC Building: Arcos Dorados Holding (ARCO)

Arcos Dorados Holding (ARCO) is pulling back more than 3% today and I'm looking to add to my position on this weakness.

BRIC Building: Arcos Dorados Holding (ARCO)

Arcos Dorados Holding (ARCO) is continuing its major breakout today in the face of this down market. After shifting between losses and gains, ARCO is now decidedly higher by almost 3%. Had you bought back when I recommended at $26 you'd be up a cool 16% right now! Keep your eye on this one because $30 a share is right around the corner.

Update: ARCO only ended the day up 1%, but given today's market decline you have to be impressed. (Especially when it's franchiser McDonald's was down almost 5%.)

This is not a recommendation to buy or sell any securities. DAK was long ARCO at time of publication but positions can change at anytime.

Mc'Donalds Disappoints....

Mc'Donalds Corp. (MCD), the largest restaurant chain in the world, reported same store sales growth at 3.5%, missing analysts estimates. While largely attributed to the problems in Europe and rising food prices, the most troubling part of the report came from Asia where strength from China and Australia was offset by weakness in Japan. Sales in Asia actually fell three tenths of a percent. This hasn't affected Free Market Capitalist Favorite Arcos Dorados Holding (ARCO),  the largest Mc'Donalds franchisee in the world with over 5,000 stores in Latin America and trhe Caribbean, as it's bucking the trend only down eight tenths of a percent right now. Mc'Donald's Corp. (MCD) was down 4.01% in early trade.

This is not a recommendation to buy or sell any securities. DAK was long ARCO at time of publication but positions can change at anytime.

I'm not buying it....

Today was a very strange day for me. The market was down on the Bernanke non-event, but every stock I own was up. Two of the companies I own had huge breakouts, athenaHealth (ATHN) and Arcos Dorados (ARCO) were up 7% and 4% respectively. Hansen Natural (HANS) was up big too at 2.5%. We could see Hansen Natural (HANS) testing the $90 level again very soon. But for some reason I just don't feel good about this market right now. I'm not so negative as to get short, though many of my fellow traders have done just that, but a few things here worry me. Europe is the obvious one as the world waits with bated breath for the proverbial "other shoe to drop". My other problem is the fact that this market is sure that QE3 is coming on September 21st and I'm not so convinced. While I don't believe QE3 is necessary for the companies I watch to thrive in the coming months, they will get taken down with the rest of the market if we correct. I have raised some cash by selling some Spyder Gold Trust ETF (GLD) puts and Oil Service Holders ETF (OIH) calls yesterday and today and will be ready to put that cash to work.

This is not a recommendation to buy or sell any securities. DAK was long ATHN, ARCO and HANS, and short GLD at time of publication but positions can change at anytime.

Mr. Toad's Wild Ride!

If you bought down 300 today you're looking pretty slick right now. What a little rally into the close.! After looking like we'd be down 200+ on the DOW with 10 minutes left in trading, in came the buyers. I didn't do any buying today, though I was tempted, and it would have been way the right idea with almost every stock I'm invested in ending up on the day. The only stock I own that closed in the red was Arcos Dorados Holding (ARCO). I sold all my Spyder Gold Trust ETF (GLD) calls this morning into early strength, and have since taken the opposite trade and bought some (GLD) SEPT 179 puts. 

This is not a recommendation to buy or sell any securities. DAK was short GLD and long ARCO at time of publication but positions can change at anytime.

House of Pain

It's ugly and getting worse. We're flirting with down 300 and selling could accelerate as the day moves forward. I sold 2/3's of my Spyder Gold Trust ETF (GLD) SEPT calls when gold was about $1904 an ounce. I'm holding onto my Oil Service Holders ETF (OIH) even though I'm taking a big hit with them today. I don't feel like doing much shopping yet though I bought some Verizon for the Free Market Capitalist Portfolio. I may buy some more Arcos Dorados (ARCO) today as it's down over 4% but I feel like we could have a few bad days like this so it's probably better to just hold off. Hansen Natural (HANS) is holding up nicely in this decline bucking the trend by only falling .5%.

This is not a recommendation to buy or sell any securities. DAK was long HANS, ARCO, OIH and GLD at time of publication but positions can change at anytime.

BRIC Building: Brazil and Arcos Dorados

Today, in an unexpected and unprecedented move, the Brazilian Central Bank lowered the SELIC rate to 12% cutting it by 50bp's citing "substantial economic deterioration". Incredibly, none of the 62 analysts covering Brazil anticipated the move. This could be why Arcos Dorados Holdings (ARCO), my favorite play on Brazil, is selling off a bit today. I believe the global slowdown is overblown and we're already turning around which is why I'm using today's weakness to add to my positions.

This is not a recommendation to buy or sell any securities. DAK was long ARCO at time of publication but positions can change at anytime. 

BRIC Building: Arcos Dorados

Yesterday I talked about one of my favorites, Arcos Dorados Holding. I said to watch the $26 level because it's been a level of resistance. Today it has shot up well past $26 and if it closes above this level it's a screaming buy.

This is not a recommendation to buy or sell any securities. DAK was long ARCO at time of publication but positions can change at anytime. 

BRIC Building: Chinese Search Engines and Brazilian French Fries

In "BRIC Building" I will discuss my favorite stocks and strategies related to emerging markets. Every stock portfolio needs at least 20% BRIC(Brazil Russia India China) exposure so I'll be devoting a whole category to it. In this first post I'd like to talk about two of my favorites, Baidu (BIDU) and Arcos Dorados Holdng (ARCO).

Baidu.com Inc. (BIDU)

This company is the Chinese Google, simple as that. Plus, with Google out of the picture, they have a virtual monopoly. While the stock sells for 65X earnings, sales grew 87% and earnings grew 106% last quarter, easily justifying such a high multiple. Owning anything in China can be risky as the Sino-Forest collapse and Baidu has had some legal problems with the ChiCom recently. That said, Baidu gives you exposure to the hottest economy in the world and I think must own over the next 10 years. Baidu will probably see resistance at it's 50 day MA providing a good entry point.

Arcos Dorados Holding Inc (ARCO)

In Brazil, a Big Mac is $6.10. That's right, twice what is here in America. Arcos Dorados (ARCO) is the largest franchisee of McDonald's in the world and does business in one of the fastest growing places on earth. Doing most of their business in Brazil, Acros is enjoying 25% Revenue growth which should only rise as the world moves out of this most recent slow patch. Everyone needs exposure to Latin America and this is my favorite way to play it. Arcos has been seeing resistance at the $26 level. If it closes above $26 on high volume it should break out.

This is not a recommendation to buy or sell any securities. DAK had no position in the stocks mentioned but that can change at anytime.