I’m going to use today’s bounce to sell Marvell Technology Group (MRVL). I don’t know how long this bounce will run—it could go to 1220 or so on the Standard & Poor’s 500 or be truncated by investors selling into strength—but I would like to lighten up on technology for the summer quarters. Marvell Technology is the most volatile of my tech holdings. That will be good news when the group rallies but right now it exposes me to more risk than I’d like. (For more on my short-term take on the market see my post https://jubakpicks.com/2010/05/26/and-the-best-lack-all-conviction-the-odds-are-against-u-s-stocks-holding-alone/ )
The company reported good earnings after the close on May 20 beating analyst estimates for 37 cents a share by a penny. Revenue too came in above the consensus of $845 million at $856 million. That was a 64% increase from the first quarter of 2009.
The company even upped its guidance for the second quarter. Earnings, the company projected, will be in a range from 38 cents to 43 cents per share (consensus before the revision was 36 cents) and revenue will be $900 million to $930 million (consensus was $865 million.)
That earnings news produced an 8% pop in the stock on the next trading day but since then it’s been pretty much What have you done for me lately?
 The stock has retreated toward its 200-day moving average with a close slightly above or below that support depending on the direction of the market as a whole. That’s not a good sign if you think that the overall market is trending lower.
As of May 26 I’m selling Marvell Technology Group out of Jubak’s Picks with a 5.3% loss since I added the stock to the portfolio on January 19, 2010.
Full disclosure: I will sell my personal position in Marvell Technology Group three days after this is posted.
CA GO? I won’t tough it with a 20 feet pole.
Thanks for the answers on the “cash” question. I just moved trom Treasuries to tax free CA GO bond ladders.
But I’m crazy.
A day or two late getting in, a day or two late getting out, and instead of a 5% loss, I’m breaking even and freeing up cash.
The decision to sell Marvell is an odd one though read against Jim’s “Time to Start Raising Cash” piece on May 18. Perhaps MRVL is a “growth story that hasn’t played out” (could it reasonably do so in less than one quarter?). (Personally, MRVL + ASML + INTC + CSCO = excessive tech exposure – which was even worse when TSM was part of the portfolio).
Little side show.
Few days ago, Hillary Clinton is reportedly praising China for being “wise” to buy US assets. I remember she was barking at how we could let so much treasury fell into the (unfriendly) Chinese hands during her presidential bid. What change. She is definitely “wise” to praise China.
What more fun is that this latest round of US-China high level talk. You know last year it was in US, so this year US delegation which included secretaries of treasury, sate and commerce went to China.
Originally this meeting suppose to be all about (pressing) Yuan from US prospect. The decsending US delegate reminded me of the “black boat” that opened Japan few hundred years ago. With China sitting so tight and quiet, by time these US high level officials got to Beijing, they seemed all collaped! The only thing came out there is Geithner saying “Yuan is China’s decision alone”! I couldn’t beleive it. It that all they can do?
My guess is that by time they got to Beijing, things got so bas and so quickly, US decided better not mass with China!
I still feel hard to believe the rise of China.
Ed:
Chinese government knows it. Remember, Chinese government is now full of people who went to schools in western countries.
I should say “screwing the one who pays your bill is screwing yourself”. Unfortunately that’s some people in this country want to do now, even though they may fall into even worse misery that.
yx,
Have you ever seen how politicians will sometimes let a rumor leak just to gauge public opinion? I sometimes wonder if the Chinese do the same thing.
That said, I do agree with you about the Chinese government. They are shrewd.
I know a lot of people in this country don’t like China for many reasons, but China’s handling of dollar, US treasury, Euro, Korea has been really prudent in my opinion.
Imaging what it would be if China did not come out and deny it today? China did same with US dollar. It only gradually shifted a little bit from dollar LATER, not right on the spot. China saved US and Europe a lot of troubles in a way. Of course China does it for its own good. That shows China understands now very well that screwing your customer is screwing yourself. Such simple matter can not be understood by many people here.
You all probably saw report yesterday “China Shields N. Korea”. I know many people including myself think the North deserves punishment. However, whatever punishment it may be, it will make things worse for the country that is dying. Because China refuses to jump on either side, the war won’t start! I guess South Korea has to bite the bullet this time.
Ed:
Your Acme analysis is just what I thought. Originally I thought US export to Europe is 5% of GDP. Later, I thought, my god, Europe is China’s largest export market! Then the chain reaction started…I felt it’s hard to gauge the impact right now, though I think the market may have a short term technical bounce.
Jim – interesting, but of all the indices, technology has historically and consistently been up over the summer months. IMO, this year, after we settle down (no, the world has not ended), high-beta stocks, esp tech, oil, and commodities, as well as beaten-down banks will run up quite nicely from the bottom (which is about 1040 unless violated – must be wary).
Also, a move up from 1085 to 1220 is, what, 12.4% – I’d take that return for the entire summer. (Never liked MRVL, though; I’ll be in a 3x tech ETF – why, after all, take on that company-specific risk.)
yx… I agree, I’m still skeptical and have resisted any further buying until the bottom seems to be more clear. I’m hoping for a bounce for a few stocks that I can sell off to generate cash.
Off topic… BP top kill effort successful (OK, I’m a little skeptical, but the source is the CG and not BP)
http://www.latimes.com/news/nationworld/nation/la-na-top-kill-works-20100528,0,4282960.story
Could this be a day that drillers get a bounce, along with BP?
Ed,
Picked up that story as well.
Definitely not a good sign. One of the key indicators. Your thesis is starting to look more and more true:). That’s what I get for going against you!
bobisgreen,
I noticed China denied the story. Even though that would have worked out well for my current holdings, I must admit that story worried me. If China tossed Europe under the bus, the dominoes would have started falling MUCH more quickly.
The U.S. money supply is actually dropping:
http://www.telegraph.co.uk/finance/economics/7769126/US-money-supply-plunges-at-1930s-pace-as-Obama-eyes-fresh-stimulus.html
Hello deflation! Commodity shorts are an excellent play right now.
EdMcGon,
Today’s news (5:30 AM): China denies the story!
I agree! Most brokers I know (my brother in law included [I don’t use him either]) are “in -house” taught to sell…have degrees in basket weaving and rely on someone else’s wisdom. Jim happens to be at the top of his class by virtue of performance, education and experience…not to mention a logical, well thought out approach (Jubak’s Picks). Along with the other books he suggests reading, I’d add his to the list [free promo!]…end of commercial!
Ed,
Looks like another big up day in the futures (markets are way too jittery).
I’m still shorting treasuries and waiting for some recovery in commodities. Treasuries can’t go too much lower from here and have a good upside in either growth of flight from the US dollar
yx,
It is difficult to put a number on EU economic problems.
Allow me a hypothetical:
Let us say Acme Products (Wile E. Coyote’s favorite business) is a strictly domestic American manufacturer of widgets used in airplane manufacturing. They sell only to American airplane manufacturers (not by choice, that is just how it works out).
Now let us say that Acme’s customers are getting their business from customers in the following areas: 30% China, 40% U.S., 10% Mideast, 10% Europe, and 10% other countries.
Naturally, you’d think an economic problem in the EU might only put about 10% of Acme’s business at risk. But let’s say half of the Chinese customers do business with Europe (15%). Maybe a quarter of the U.S. customers have exposure to Europe (10%). We’ll say the Mideast customers are unaffected for now, but the other countries have half of their customers impacted by troubles in Europe (5%). By the time you’re done, 40% of those airplane orders are cancelled or delayed, and orders for Acme widgets drop by that much.
That is just one example of how a company with no obvious exposure to Europe can end up in serious trouble from European economic problems.
And that is why I’m not touching any equities right now.
Ed, Run26.2
I somehow became very uncertain since late last week, not because Koreans but Europe. (Until then I was pretty opmistic about US recovery, though fragile.) I began to think the European mess may effect US corporate earnings and further the global economy more than we originally thought and I could not figure out a number for it. Euro zone is China’s largest export market. A shrinking Euro zone economy will effect China great deal (China’s GDP is still largely export driven) and that will further depress commodity and commodity producers. All bad for stocks. That’s why I just could not go out bargain shopping in the last few days. What’s your thoughts?
My guess for where Jim park his cash. Fidelity. Because few months ago he mentioned in one post that he has Fidelity credit card. To have that card, you need a Fidelity investment account. Cash in Fidelity can be swept into a FDIC bank account. I am not with Fedelity now, but am considering it.
Also few months ago, either Jim or someone at MSN.com wrote about where to make more on your cash. I rgot the title, but remember higher returns all have higher risks.
I may be wrong but I think money managers and wall street financial wizards have been buying up Treasuries with their cash. And I think that this implies that their sentiment is very bad.
—-“I’m sure Kim Jong-Il is quaking in fear of this pathetic administration.”
What’s with the gratuitous political commentary? Is this an investing blog or a political blog?
Jim, if you want to lighten up on tech for the summer quarter, what is your current take on Cisco?