Potential Breakout on TerreMark Worldwide

After consolidation in the $7 - $8.5 range since the beginning of the year, TerreMark Worldwide (TMRK) has finally broken above $8.8 a level they've struggle at a few times this year. Its now testing the 52 week high of $8.98 seen in late January. TMRK is a core holding of our Growth and Opportunistic Growth portfolios.

TMRK is our prime cloud computing investments and the move of the government to the internet. They provide managed information technology (IT) solutions with data centers in the United States, Europe, and Latin America. It delivers a suite of managed solutions, including colocation, managed hosting, managed network, disaster recovery, security, and cloud computing services.

China Watch: Markets Surge Higher

As we've been writing for the last month, the China economy and hence the local markets continue to rule the world. See China Market Rules the World on June 30th. Last night, the Shanghai market surged over 2% and made a very impressive jump off the 50EMA showing signs of more gains coming in August.

Copper has also been surging and met coal prices remain steady so the commodity stocks such as Massey Energy (MEE), Alpha Natural Resources (ANR) and Freeport-McMoran (FCX) continue to be our favorite domestic stocks to play this theme.

Additionally, we continue to follow China based commodity plays and mainly 3 companies that are dramatically expanding operations but remain at show me valuations. Puda Coal (PUDA) is acquiring and consolidating numerous coal mines and trades at a 4x '11 estimates. China Armco (CNAM) recently started up a steel recycling facility that should lead to $200M in revenue for a stock trading for $50M. Lihua International (LIWA) recently doubled its copper smelter capacity, but the stock trades at only 4.5x '11 estimates.

All 3 stocks have huge growth potential completely discredited by the markets. The tricky part of investing in these stocks is the reaction to earnings reports around the start up of these operations. Any slight pushes in production from Q2 to Q3 could cause an initial selloff though a likely huge buying opportunity.

See the Shanghai graph below. So far the domestic plays have seen some similar jumps, but the Chinese specific plays that should see a magnified move have lagged. They are risky plays but should be well worth the risk. Otherwise, dive into domestic copper and met coal plays that will benefit from a rebound of growth in China.





Disclosure: Long ANR, MEE, FCX, LIWA, PUDA

Trade: Bought Lihua International

Bought Lihua International (LIWA) at $8.76 for the Opportunistic Growth Portfolio. LIWA is a producer of refined copper products in China. Yesterday they announced the opening of a new copper smelter that will double capacity. Today the stock fell to below the opening price prior to the announcement so we used the weakness to buy right at the moving averages.

As I'm about to report on, the China markets have made a dramatic move off the bottom this month yet China stocks that trade in the US continue to lag. LIWA is a primary laggard and trades at roughly 4.5x the estimated 2011 earnings of $2. Considering LIWA makes around $1.2 on existing capacity I'd expect earnings for 2011 to double with capacity. Doesn't really matter with the stock price stuck below $9 whether they earn $2 or $2.5.

Growth Portfolio Beating 95.7% of Portfolios Over 2 Years

Over the last 2 years, the Growth Portfolio has beaten 95.7% of the portfolios tracked on Marketocracy.com. Still leaves some room for improvement but still a very solid performance. The last 3 months through June were very disappointing, but its still encouraging that the portfolio beat all but 4% of the portfolios over that time period. Q3 is starting off very solid with a 12.5% gain with 3 days left in July. Counting normalized fees, the portfolio is beating the SP500 by roughly 12% per year.


ALL RANKINGS FOR YOUR FUND

Date	1 Month	3 Months	6 Months	1 Year	2 Year	3 Year	4 Year
Sep 30, 2008	27.4%	40.1%
Dec 31, 2008	88.8%	30.2%	33.7%
Mar 31, 2009	87.7%	33.4%	23.9%
Jun 30, 2009	93.0%	99.1%	97.6%	89.9%
Sep 30, 2009	93.2%	94.5%	99.0%	98.5%
Dec 31, 2009	76.1%	39.5%	90.3%	97.9%
Mar 31, 2010	91.2%	96.6%	92.1%	99.3%
Jun 30, 2010	7.4%	7.2%	49.6%	85.4%	95.7%

Anybody interested in learning more about this portfolio, please see the info on the right side of the blog or contact me at stonefox27@ymail.com.

Sears Holdings Leases Prime Square Footage in Orange County

Today, Sears Holdings (SHLD) announced a deal to lease 43,000 sq/ft in their store at the South Coast Plaza in Costa Mesa, Calif to Forever 21. No terms were released on the deal, but anybody following SHLD knows that their biggest underutilized asset is their real estate. In so many cases, they'd be better off by leasing stores instead of operating them as a Sears or KMart.

Having a difficult time finding any solid details on the volume of leasing deals they've done. This appears significant in terms of finally moving forward on redeploying the valuable real estate in a more profitable manner though I haven't been able to locate any concrete data.

"This agreement is a great example of Sears Holdings selectively redeploying its asset base to improve the retail experience for consumers while working to create long-term shareholder value," said Jeff Stollenwerck, president, Real Estate for Sears Holdings.

Riverbed Technology Hits New 52 Week High on Not So Surprising Earnings

Ok, maybe the Q2 earnings report and movement was surprising to others, but it was clear from the F5 Networks (FFIV) report and 13% surge on Thursday plus other reports from the likes of VMWare (VMW) that Riverbed Tech (RVBD) would likely report a blowout quarter. Whats really surprising is the lackluster jump on Thursday and the monster 14% move on Friday.

After today, Riverbed Tech has become the largest position in both the Growth and Opportunistic Portfolios.

Details on the earnings report from Reuters:

*Q2 adj. EPS $0.25 vs est. $0.22

* Q2 rev $126.2 mln vs est. $119.4 mln

* Sees Q3 EPS $0.27 vs est. $0.24

Product sales rose more than 40 percent, marking its fourth consecutive quarter of product revenue increase, the company said in a statement.

After the results, S&P analyst Ari Bensinger upgraded the stock to "hold", saying that the networking equipment was experiencing a solid rebound in demand from the enterprise sector.

"While we still see a lagging recovery in Europe, we do not see weakness pronounced enough to impact strong operating trends in other geographies," he added.

Bensinger raised his price target on the stock by $10 to $33.

Always interesting to see what negative analysts do after a report that clearly surpassed their wildest thoughts. He upped his target by nearly 45% which is an incredible amount. This is so much more telling then a bullish analyst going from say $35 to $40.

Considering the size of the stock in our portfolios, we'll likely look for opportunities to prune the holding size. Otherwise, RVBD is in the sweet spot of the expansion of networks and the move to Cloud Computing. Considering its just the Q2 report and tech doesn't usually heat up until late Q3, this stock could have a big run ahead.

Downtrend Broken (For Now)

It appears that the downtrend started on April 26th has finally been broken. Our at least for the moment because lately the market could just as easily whipsaw back down this afternoon. Bullish earnings reports from CAT, T, UPS, and others helped pushed the focus back to earnings and away from the rehashed story that Bernanke told yesterday. The key that most people seem to be missing is that corporate profits are based on what's going on in China, Southeast Asia, and South America as much as the US. So the economy can remain weak, but that doesn't mean that profits will follow the US. Stocks remain extremely undervalued because of the focus on valuing the market based on US weakness.

As of 12:20cst, the market has actually broken above the 200ema which would be extremely bullish. Lately though it hasn't been able to hold these bullish levels so we'll need a good close and a positive follow through.

Looking at the chart a close above 1088 breaks the downtrend and of course most people see 1100 as the strong resistance. Naturally any break above that level would bring along a ton of technical traders.