Recommendation: JetBlue

Time to take stock of how our investments are doing since they were first recommended, and recommend a new stock that will hopefully take off. Our first recommendation, Nissan, is up almost 2 points, Encysive is up half a point, or over 10%, Yahoo is up 3 points, and Intel has gained 2 points. In hopes of maintaining our pristine track record of picks, JetBlue Airways (Nasdaq: JBLU) is the newest recommendation. I've had my eye on this for awhile, since I believe the entire airline industry has overreacted to rising fuel costs and security concerns. JetBlue features a business model as sleek as one of their new jets, while old standbys such as Northwest Airlines have been driven to bankruptcy when post 9/11 travel concerns exposed their already inefficient operation, something that also cracked the AA of American Airlines. JetBlue on the other hand, has flown clear of the turbulence and is now ready to soar, so it has been added to the All-In-vesting portfolio on September 6 at $9.93 per share.

Recommendation: Encysive: Slow playing a big hand?

I return with a recommendation after sitting idly for some time during the recent tough stretch the market has endured. Remember two things during these lulls, both in the market and at the poker table: have patience, and take advantage of discounts in value that present themselves during these down days. One opportunity that particularly catches my eye is small-cap drug maker Encysive Pharmaceuticals (Nasdaq: ENCY). They are sitting on a potentially market cornering pulmonary arterial hypertension (or high blood pressure) drug, however, it has yet to receive FDA approval to be sold in the US in its first two tries. This has caused the stock to drop over 50% despite being approved for sale overseas by the European Union. With that approval, Encysive has the bankroll to sit patiently until their drug is approved in the US, which now seems to be a matter of not if, but when. The FDA informed Encysive that their is one remaining issue that needs to be resolved before approval, and like a savvy poker player, Encysive won't divulge this information prematurely. They have been equally cagy about the EU approval, saying Thursday that they had received approval, leading to a rise in share prices, but then stating they had yet to receive the formal letter, leading to an inexplicable drop in price. I strongly suggest picking up the shares now that they're under $4, since they're sure to rise upon the now certain EU approval letter, and should double up when they catch the FDA approval on the river.

Bonus Recommendation: Yahoo

Recent breaking news has urged me to buy a stock I've wanted to own for a while. Yahoo (Nasdaq: YHOO) just fell in after hours trading by more than 4 points to $27.83 on news that their new search advertising platform would be delayed a quarter. I feel the market overreacted to this news, since Yahoo will still realize these earnings, just a little later than expected. Plus, Yahoo met this quarter's earning expectations plus has recently rolled out an upgrade to their already market leading finance site, so there's no real reason the stock should have dropped so drastically. Lucky for us, this makes now the perfect time to buy the stock at a discount, and use the upgraded site to find other bargains.

World Series of Poker

Taking a break from the investment newsletter, I'll regale you with tales of my pursuit of qualifying for this year's WSOP. Recently, I played in the world's largest satellite tournament on PokerStars.com, where 7377 people were gunning for 234 seats to the main event in a $370 buy in event that I qualified for via a $2 satellite. Unfortunetly, my pocket aces were cracked by pocket jacks and running spades before I could make it too far, but my chase of an elusive seat continues, as I will play in $2 satellites until they end. The moral of this story is that if life, cards, or the market deals you a bad beat, it shouldn't be discouraging, but rather motivating. As long as you stay within your means, you should have the bankroll to continue applying a little at a time, perhaps turning a small investment into a fortune.

Recommendation: Intel

Intel was added to the All-In-vesting portfolio on July 12, 2006 at a price of $17.88. The recent market downturn has made this stock more attractive than ever, with a P/E ratio of 13.97 and a PEG of about 0.5 that are very low compared to other stocks in the high tech sector. Plus a dividend yield of 2.24% makes it even more attractive compared to its dividend-less technology competitors such as AMD and Marvell, which also have much higher P/E ratios of 27.85 and 37.44, respectively. Therefore, Intel is a standout in its field and now is a great time to buy it at a discount.

Intel folds losing hand

Every player knows you have to fold once in a while to conserve chips that could be used in a better spot. This weeks recommendation, Intel (INTC), did the business equivalent last week, when they sold their communications and applications processor division to Marvell Technology (Nasdaq: MRVL). While this may seem like a strange move for a company that hopes to grow, it will pay off down the road, since it frees up $600 million in cash to invest in the wireless Internet services company Clearwire to try to drive a technology called WiMAX that they hope will sweep the globe like its predecessor Wi-Fi technology, which it hopes to make obsolete with a much larger range. Coupled with the unveiling of their new Core Microarchitecture chip and price cuts on their older model chips, this will give Intel an advantage that will allow it to gain market share from its nearest competitor, Advanced Mircro Devices (NYSE: AMD).

Tells

Good poker players know that others at the table give off tells, which can be used to acquire additional information on their strength. Companies are the same way, and there’s a wealth of information available that will tell you more about the company. One important metric that was used in the last newsletter is price to earnings (P/E) ratio, which is a pretty self-explanatory comparison of a stock’s current price to its earnings per share, either past or expected, giving trailing and forward P/E ratios, respectively. P/E ratios can be used to compare similar stocks, with low P/E ratios offering a better value. An extension of the P/E ratio that can give a better overall picture of a stock’s prospects is the price-to-earnings-to-growth (PEG) ratio, which is just the P/E ratio over the expected earnings growth rate percentage. This means a low PEG ratio is desirable, with less than 1 representing a growing company that is still a good value, but over 2 being an overpriced or slowly growing company. We’ll cover more tell-tale signs that can be used to glean information about companies in future newsletters, so stay tuned.

Introduction to Second Newletter

Welcome to the second newsletter of All-In-vesting. Hope you enjoyed the inaugural edition and can benefit from the information and advice it contained. Our initial investment recommendation, Nissan Motor Company (Nasdaq: NSANY), has held steady in an otherwise drastically down market. All poker players know the importance of breaking even when things aren’t going your way, and good discipline can allow you to tread water until the deck heats up. In the stock market and at the poker table during these lulls, it can be helpful to just sit and gather information on the other players, or in this case companies, that you think you may get involved with in the future.

Inaugural Newsletter

This concludes the posting of our inaugural newsletter in reverse chronological order. Feel free to read it back to front, front to back, or just individual sections, use the information wisely to start on the road to investing success, and leave comments so others can benefit from your experience. Stayed tuned for next month’s newsletter, which will apply the strategies outlined here to find more investment opportunities for you. We will do our best to make you a loyal subscriber to our newsletter and partner in investing success.
May all your investments make sense and money.
Sincerely,
Evan MacDonald
Founder of All-In-vesting

Nissan, the best of Japan's strong car companies

This makes any one of the Japanese automakers an attractive investment opportunity, but I believe Nissan offers the most value and potential right now. After struggling throughout the 90s, Nissan has completed a remarkable turnaround under the leadership of Carlos Ghosn, who was made president after the French manufacturer Renault bought a controlling share in the company, and continues to build momentum. One of the company’s major strengths is as one of the world’s leading manufacturer of automobile engines, appearing on "Ward’s 10 Best Engines" list for all 12 years since the award’s inception. Nissan models are also consistently ranked above average and recommend by Consumer Reports, one of the nation’s most trusted sources on automobiles. Nissan’s luxury line, sold under the Infiniti brand name, was especially impressive, earning top honors in the luxury sedan category with its M35 model. Nissan models offer all the reliability and efficiency that consumers have come to expect from Japanese automakers, with more distinctive style and performance than its cookie-cutter peers offer. In addition to its attractive product, its stock price offers more as well. It’s recent decrease in price has left it only a couple points off it’s 52 week low, presenting a great value buying opportunity. It’s price to earning (P/E) ratio of 9.87 beats Toyota and Honda, at 13.91 and 11.33, respectively. It also offers a greater dividend yield of 2.4%, verses only 1.17% and 1.02% for Toyota and Honda. While the American automakers of Ford and GM offer competitive dividends at 3.71% and 6.13%, their P/E ratios are nonexistent since their earnings per share (EPS) are negative. Common business sense tells us that paying out lots of cash per share while not taking in the earnings to cover it is a recipe for disaster. That being said, I believe Nissan will continue to outperform its American counterparts and is in position to overtake its Japanese competitors, leading to future company and stockholder success.

Recommendation: Nissan

This brings us to our first stock recommendation, Nissan Motor Company (Nasdaq: NSANY), 100 shares of which were bought for the All-In-vesting portfolio on 6/23/06 for 21.18. Nissan ranks as the third largest Japanese automaker behind Toyota and Honda, all of which have taken the lucrative American market by storm and show few signs of slowing. The major American competitors, Ford, GM, and Chrysler have put up a feeble effort in defending their territory from the Asian invasion. The so-called "Big Three" American manufacturers all appear headed towards possible bankruptcy, with the latter getting bailed out by its 1997 "merger" with the German company Daimler, which came to light in 2003 as actually being a messy hostile takeover that has left the company divided and weaker. These struggles have left the door open to foreign companies, which have certainly taken advantage, with the top three Japanese automakers having increased their share of the US domestic market by 8% between 1990 and 2004, while the share of the "Big Three" has declined 13%. However, the "Big Three" still account for over 50% of the US market share, leaving plenty of room for further Japanese expansion as the American automakers battle bankruptcy. Don’t forget about two other markets with possibly more untapped potential, China and India, whose burgeoning middle class promises to create even more demand for automobiles in the future.

Like a Rock

This slogan of two great American icons, Chevrolet and Bob Seger, teaches us a lesson in business and at the card table. These two solid performers have recently been upstaged by younger, flashier acts, a trend that has also been evident at the poker table as well, with younger, more aggressive players pushing the old guard around. Old players and companies are having trouble adjusting to the style of their ruthless and efficient competitors.

Mutual Fund Fees

Mutual funds are subject to similar fees. Fund managers don’t offer their services pro bono, but rather charge fees that can be effectively measured by the expense ratio, or the percent that the fund deducts per year to cover operating costs. Over time, a high percentage can eat away at the growth of the fund, and what’s more important, each dollar taken away in fees now doesn’t have a chance to grow exponentially over time. Low expense ratio funds will consistently outperform high fee funds since high expense ratio funds are at an immediate disadvantage and have to beat the market even more soundly just to recoup their high operational costs. We will try to find funds with low fees but solid management and companies.

The Rake

The rake at a poker table is the percent that the house takes, regardless of who wins the pot. The same is true of investing, with brokers and other agents that facilitate the buying and selling of stocks getting a cut of each trade. Like the rake, this cuts away at the player’s profits, but since, like bad beats at the poker table, it can’t be avoided, it must be limited as much as possible. Since brokers make the most if you’re constantly buying and selling, it’s hard for them to stay impartial regarding your trading decisions. They will be full of advice, trying to incite action and drive up their commission. Like playing a lot of hands will deplete your stack at the poker table, constantly splashing around in different stocks makes it tough to be consistently profitable. Rather, playing only solid performers is the way to go, holding on to them until they reach their full potential that we saw in them when we first bought them.

Mutual Funds

A variation of stocks are mutual funds, which pool the money of investors in order to buy a number of different stocks. They are to stocks what Omaha is to Texas Hold-em, except you get a lot more stocks instead of just two more cards, giving you more of a chance to hit the flop. By investing in a mutual fund, you own a small percentage of every company that is in the mutual fund. Obviously, mutual funds are good ways to instantly diversify your portfolio. However, there are a seemingly overwhelming number to choose from, so what should you look for in a mutual fund? First and foremost, you should be aware of the type of stock they invest in, as well as the specific stocks that make up the fund. The former will often be apparent from the name of the fund, such as Fidelity Blue Chip Growth or American Century Small Cap Value. The first fund invests primarily in "blue chips", established companies with a large market capitalization, or the total value of all outstanding shares of stock, still with potential for further growth. The second invests in stocks of small companies with low market capitalization, but perceived to be trading at a good value over their true worth. A little digging through what is called the fund’s prospectus, or official document disclosing its intentions and other information, will unearth a wealth of information including what individual stocks make it up. Checking this will assure the goal of the fund is in line with your investment strategy.

Types of Companies

Some high-growth-focused companies don’t offer dividends because all their profits are applied to help sustain higher-than-average growth. This introduces a distinction that is often used to define different types of investing strategies as either growth or value oriented. Growth investing focuses on buying stock in companies with anticipated upside and room to grow, offering the potential to increase the overall value of the company and your investment. Value investing is buying shares at a perceived discount over their intrinsic value, and expecting the stock price to eventually rise to reflect this. A third type could be considered, income investing, which concentrates on stocks with large dividends, which when reinvested allow the value of the investment to grow, with an added bonus if the stock price also happens to increase. Obviously, finding stocks with several, or all three of these characteristics, could be quite profitable, and will be our ultimate goal in stock investing.

Reinvesting Dividends

This brings us to one of the most important rules of winning investing: that you have to reinvest any dividends earned. Like winning a pot in poker increases your stack and allows you to put more pressure on your opponents, reinvesting allows you to grow exponentially when the stock is running good, and even to grow when the stock price is decreasing or staying the same. For example, chemical giant DuPont’s (NYSE: DD) shares rose just 0.5% during the past five years, but reinvesting dividends led to an 18.5% gain, and Microsoft’s (Nasdaq: MSFT) numbers were 0.8% and 15.2%.

The Tables

Like your typical cardroom, there are a plethora of games with different stakes available to investors nowadays. Stocks are the first thing that comes to mind when we think of investing, and they come in a variety of sizes and prices. Stocks allow us to buy shares of a company and benefit when they do well, with the risk of losing money if they do poorly. Companies sell stock to gain the capital needed to get their business off the ground and sustain its continued growth. When the company grows their stock price typically climbs as well. In order to further entice investors to buy, stocks often will issue a dividend, or the distribution of a portion of the company’s earnings, quoted in the amount each share receives.