Trade: Bought Direxion Small Cap 3x Bear

Slow to report this but yesterday we bought the Direxion Small Cap 3x Bear (TZA) in the Growth, Hedged Growth and Opportunistic Portfolios. The purchase in the Hedged and Opportunistic Portfolios amounted to nearly 10% of the portfolios though the Opportunistic purchase was just to offset the margin currently in that count bringing the net bullish investment to just 100%.

TZA was purchased because it was and is extremely oversold having an RSI of 25 yesterday and a CCI below -100. Both signs that a reversal is likely. Small caps have just been too hot lately so we expect at least a minimal pullback.

For the Hedged Growth Portfolio this is on of the first hedges/shorts that we've used in the last year since the March 9th low.

Trade: Sold 50% of Liz Caliborne

Liz Claiborne (LIZ) has been a favorite stock of Stone Fox Capital for a while now. The stock was looking extended on the both the CCI and RSI measures. It was also approaching a double from October so we pruned 50% of our position in the Growth Portfolio at $7.26 leaving 2,000 shares. We'll be looking to buy that position back if the shares trade back to the 20EMA which is at 6.32 today.

It's also discouraging that the stock is down in an up day. Another sign that it might need to rest before trying to breakout of the double top.

Trade: Bought UltraShort Real Estate

Based on the weakness in the stock market from Obamamania and China banking restrictions, we bought some protection for the Growth and Hedged Growth portfolio today. The UltraShort Real Estate (SRS) was the selection for this hedge. Assuming the market craters thru strong resistance in the 1,085 level, SRS should see huge gains. In addition, the constant slamming of the banking system by Obama should help doom this industry as banks slow lending and commercial real estate companies lose the ability to roll over massive amounts of debt.

Now we're not completely set that the market is about to rollover, but SRS should provide us some protection in case it happens especially with the timing of the Obama State of the Union speech Wednesday night. This trade will likely only be kept for the week unless the situation changes.

Trade: Sold U.S. Steel

U.S. Steel (X) reported a dismal Q today. Revenue handily beat estimates ($3.4B vs $3.1B) yet earnings missed consensus numbers. All while competitors Nucor (NUE) and AK Steel (AKS) both easily beat number and reported profits. If that wasn't discouraging enough, X forecast that Q1 would be similar to Q4 while analysts (us too) expected a much improved number. Evidently input costs such as coking coal have increased much more then prices. This could be partially because of the demand in China. All in all, this tells us to stay with the Alpha Natural Resources (ANR) and the new pick in Puda Coal (PUDA). The coking coal companies seem able to benefit from the rising demand without the rising supply.

Key line from the report:
"We expect to report an overall first-quarter 2010 operating loss in line with the fourth-quarter 2009 as gradually improving business conditions are not yet fully reflected in our operating results," said Chairman and Chief Executive Officer John Surma.

Sold all shares in the Growth portfolio and personal accounts around $51 this morning.

Trade: Bought Puda Coal

Bought less then a 1% position in Puda Coal (PUDA) in the Growth Portfolio. PUDA is a Chinese company and a play on the ever expanding demand for coal in China. It's also a play on the coal consolidation project going on in China where they are in the process of taking over 8 mines and expanding the output. Will likely add more shares if the stock holds at support. A full write up on this investment to follow later this week.

Trade: Sold Portion of Baidu

A little late reporting this sale, but we sold another 25% of the Baidu (BIDU) shares we owned in Growth and Hedged Growth portfolios on the opening Monday. The reason was posted over on my covester.com page. That account sold all of its shares in the after hours on Friday. To some extent i got lucky from reading of the COO resignation after the close and thinking it happened after hours. Guess it is better to be lucky then good as BIDU is down $17 since those trades were made. Losing the COO is still negative regardless of the timing.

It's never a good sign when the COO resigns especially on a Friday after the market close. I'm surprised that BIDU didn't trade down, but it's likely that all of the influential traders were gone when the news hit. In addition, BIDU is technically on the verge of breaking down so it was only prudent to exit this position before the market clues in to the news.

Its very possible that the conversion to the new software hasn't gone very well. Why else would the COO leave BIDU for 'personal reasons' and not a big new job? If the stock does breakdown, we'll look to re-enter the position around the 200ema of $350.Stay tuned for more news!

Trade: Sold US Steel

Just trimmed our position in US Steel (X) in the Growth Portfolio by 400 shares or about 40% of our position. Mainly just a trading move as X has become extended trading at roughly 20% over the 20EMA and the 14 day RSI is at 82. Numbers that usually alert to near term tops. We'll look to add back this position around the 20EMA currently at $49.50.

Trade: Sold Portion of Baidu

Sold about 25% of our Baidu (BIDU) position in the Growth and Hedged Growth portfolios this afternoon around $438. BIDU has been a huge winner in those portfolios including a 243% gainer in the Growth portfolio.

BIDU appears to be trying to set up a double top so its at risk of peaking. This is similar to a lot of other stocks as well, but we also feel that BIDU is closer to the proper valuation then most stocks. Trading at over 40x next years earnings leaves BIDU with very little multiple expansion unlike most stocks in the market. Granted, BIDU could still just grow at its growth rate of over 40% and we'd be happy investors. For now, we've just cut back on 25% of our holdings in both portfolios.

After selling, BIDU broke to a new 52 week high, but then quickly traded back down with the market. Seems to be a lot of resistance so we'll stick with locking in some gains for now.

Trade: Added KHD

Added more KHD Humboldt Wedag to our Growth Portfolio today when the stock plunged down to the 50ema. Can't find any news to explain the plunge so hopefully it's just a technical move and the stock will recover nicely.

Trade: Bought KHD Humboldt Wedag International

Just getting around to posting that Stone Fox bought KHD Humboldt Wedag (KHD) for the Growth Portfolio at $10.35 on 10/13. More to come on this play, but to summarize its a great value play in the Engineering & Construction segment with a huge focus on emerging markets like India.

Sold the Natural Gas ETF (UNG) to make room for this trade. Not much positive to say about this ETF. Just read any of the stories on popular financial websites to see why this ETF has turned out to be a huge bust.

Trade: Bought Synovus Financial

Bought an initial position in Synovus Financial (SNV) for the Growth Portfolio. SNV is a Georgia based banking institution hard hit by non performing loans. SNV recently did a $600M equity offering at $4 so the purchase around $3.8 is a 5% discount to that offering. As we've seen on most of these banking deals, the offering eliminates the 'going out of business' fear and allows for the stock to eventually trade more based on normalized earnings down the road in 2011. The extra cash also gives SNV the opportunity to snap up some of the banks that seem to fail every week in GA.

The other reasons to buy are based on the analysis by banking expert Tom Brown and the technicals suggesting prices above $3.8 are support. Do your own homework but don't take too long.

Trade: Added More X

US Steel (X) has one of the best symbols. Added more shares to the Growth Portfolio today. The dynamics in the steel industry appear to be improving. Talks by Ford (F) of ramping up auto production will be a big boost to steel production. Think I've seen figures around 18% of steel production goes towards autos. Not to mention that some of the stimulus infrastructure spending should begin starting in the US and other countries.

MarketWatch.com has an interesting article about the improving demand seen in the steel markets. Its encouraging that a market bottom has been reached and the all but certain increase in auto demand will help boost this weak sector. The ISM data from yesterday also very much supports this sector.

Though X has risen nicely this year, its still trading down roughly 80% off its high of $180. Also its worth noting that X made $18 in earnings in 2008 which is a remarkable amount for a stock now trading at $34.

Alpha Natural Resources (ANR) is another stock Stone Fox owns and should benefit from a rebound in steel demand. They provide a large amount of the metallurgical coal used in the making of steel.

Trade: Added Agrium

Bought Agrium (AGU) today for all 3 portfolios. AGU provides an investment for the portfolios that is tied into the agriculture market. A sector that has been greatly lagging and the prices are finally right. The Growth Portfolio is invested in FCStone (FCSX) that benefits greatly from the ag market, but AGU gives the portfolio its only real investment in the sector.

Agriculture is a great place to invest now since stock prices have fallen greatly but the end user demand has only fallen in the short term. Low inventory levels of corn compared to long term fast growing demand especially from China and India and even renewable fuels such as the ethanol mandates in the US should considerably increase the demand for the fertilizer products of AGU.

Agrium engages into retailing of agricultural products and services. It also produces and markets agricultural nutrients and supplies fertilizers in North America. Agrium operates through three segments: Retail, Wholesale and Advanced Technologies. The products that are produced and marketed by the company are nitrogen, phosphate, controlled-release fertilizers, micronutrients and potash. The materials produced by Agrium find applications in household products, mining explosives, pulp and paper, fiberboard, and aluminum. The markets served by the company’s products are specialty, international, industrial and agriculture.

More to come no this investment.

Trade: Swapped More CSX for UPS

For transporters, the cost of gas will be a 'driving' force in future profits and the ability to transport more commodities and less retail products will be beneficial. For that fact, Stone Fox has decided to swap shares in UPS for a bigger focus on CSX. Both were favorites of the NetPayout Yield Portfolio for decent dividends and a history of buybacks.

Unfortunately for UPS whether public perception or reality, the cost of fuel will likely continue to hinder the amount of products shipped going forward. Even if it doesn't, its likely to hold the price of the stock down and competition with FedEx and USPS is likely to hold down profit growth regardless. Not to mention that legal documents that used to be delivered via Express services will likely move to a sort of digital format reducing the need for UPS services because it can be done cheaper and is more economical and even greener.

Fortunately for CSX, the increasing cost of gas and likelihood that it will stay higher increases demand for the cheapest shipping method and most fuel efficient. Also, CSX greatly benefits from the demand for commodities such as coal, fertilizers, and ethanol. These goods can't exactly be shipped via a digital format. Railroads also face less competition and pricing power as new rails are almost impossible to get built.

In the end, its just a call that railroads have a better mix of products to ship and less costs from fuel. Either way, both CSX and UPS will move with the ultimate growth of the world markets, but we think CSX will move more.

Trade: Added Gafisa and Natural Gas

Quick update: Bought Gafisa (GFA) on the dip to $16.08 just around the 200EMA. See post on seekingalpha.com for more detials. Added to Growth Fund.

Bought United States Natural Gas (UNG) just above $14 on the 10% pullback today. The disconnect between oil and natural gas is very high. If the economy is in fact going to recover, then UNG is the better play at these levels. Huge cutback in drilling combined with more industrial use could squeeze the prices higher. Added to both ther Growth and Hedged Growth Funds.

Trade: Sold Coventry Health

Sold Coventry Health (CVH) shortly after the open and not long after the Aetna warning. Aetna is in the similar health insurance sector and warned of much weaker results. Based on this and the not so promising future for health insurance due to pressures from Obama Administration I'm not bullish on the sector. We originally bought CVH based on cheap PEs and the desire for exposure to the healthcare sector with the market still in crisis. Unfortunately, we should've pulled the trigger at $20 close to the 200EMA. Luckily though we got out with a nice gain around $18. This sector is still cheap so we'll look to re-enter if the market gets hit hard.

Edit 6/4: CVH initially rebounded yesterday making us wonder if the sell was prudent. Maybe Aetna wasn't that applicable to CVHs results. Maybe it'll hold the moving average after all. Well today, CVH sold off on a up 1% day and closed below the 20EMA at $18.10. This was a very bearish move and validates our sell. It's funny how the market will sometimes give you plenty of time to exit a bad position, but if you don't take advantage of it you will eventually regret it. Sometimes it just take the big Hedge and Mutual Funds days and weeks to exit positions. Now this might still turn around tomorrow and close back above the 20EMA leaving some hope. With Obama, the risk for now appears on the downside. This is an appealing name so we'll likely venture back as we already see the stock as cheap, but the market doesn't so we'll stay away for now.

Trade: Added Rigel Pharma

Rigel (RIGL) is an intriguing biotech stock. It has the potential for a blockbuster drug in RA and the biotech sector is compelling with the big pharma companies on the prowl. PFE would've been wiser to buy up somebody like Rigel (RIGL) or some other favorites like Onyxx Pharma (ONXX) or Savient (SVNT). If you want to develop a pipeline, then why not buy all 3 and get access to several potential blockbusters. Regardless, these companies are solid without them.

Not being a biotech expert, check out this story on Rigel from Hammer Stock.

• Rigel’s lead drug, R788, is currently being evaluated in two comparative trials in patients with rheumatoid arthritis (RA), a $14 billion indication. During most of 2008, R788 was considered to be one the most promising drugs in the biotech industry, but an update at last year’s ACR meeting raised doubts regarding the safety profile of R788, as reviewed in my recent article on Rigel. According to the company, the safety data from the ACR meeting did not affect its negotiation leverage, as the potential partners had access to the data before it was published, so nothing came as a surprise to them.

With a market cap of only $270M and the potential of a blockbuster drug, Rigel is very speculative with a lot of potential reward. Just what I'm for in a very depressed market.