To Any Computer Programmer Readers -

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Zachstocks on Ctrip.com (CTRP)

Just noticed Zach over at Zachstocks.com has a nice write up on one of the fund holdings, Ctrip.com (CTRP). Ironically for the first time since October, I added to this name Friday. I have noted in October at the height of China mania (PetroChina hitting 1 Trillion Valuation), when every financial expert on TV was telling you to pile into China (doh! at the top no less) that things were getting out of control and instead I was running to India [Buying a Bucket of India] which was getting no attention by the 'savvy smart money experts'. That worked out well in retrospect as Chinese stocks have performed quite poorly the past few months. [China v India the Past 2 Months] However, I have noticed the past week or so some 'relative outperformance' (not performing as badly as US equities) in the Chinese stocks so we might be ready to get some rotation back to these names. Maybe. I own a few small and mid cap Chinese stocks (Ctrip.com being one) but had cut back exposure the past few months, while focusing on India. However, I am watching to see if this group is ready to make a move up - in fact if the portfolio were not already chock full of names (I am trying to keep to roughly 55 long positions) I'd be interested in potentially adding some of the larger cap Chinese stocks if they begin to break out - oil company CNOOC (CEO) is one I have had my eyes on for a long time. So if I do add one as a proxy for large cap China this would be the one.

Regarding, Ctrip.com this has long been a personal favorite and a part of my personal portfolio on and off for quite a few years... this was a Chinese stock to own before Chinese stocks became sexy. The long term story is quite easy to summarize - China, travel. And without the risk of high fuel prices that you would encounter by buying a Chinese airline or things of that nature. Ctrip.com has never been a cheap stock, but it has been one of those "growth stocks that has always been expensive". Yet it always seems to perform and it's management plays the Wall Street game to the hilt; under promise and over deliver. While there are always threats of increased competition to a service company such as this (so one must always be on the look out for slowdowns ingrowth), the growing pie of Chinese travel should provide secular growth for quite a while.

As a side note - as readers know from the name of my mutual fund, I am a big believer that being in the right sector is 2/3rd of the battle, but this sector is a case where you have to be in the right company. Many times over the years, as Ctrip.com has been very expensive I've been called by the siren song of "cheap" eLong (LONG) a competitor. But if you pull up a 3 year chart of eLong you can see what an unmitigated disaster it has been. Thankfully I never touched this name, but it was close a few times. So this is certainly a case of you need to pay up for high quality. Since I have a preference for "growth at a value" I tend to chase after the eLongs in sectors such as solar which truth be told has held me back (I've sat many months in 'value plays' while the most expensive stocks in the sector ramp up day after day)- closing your eyes to valuation and just buying a First Solar (FSLR) [which I found 'expensive' way back at $60] for example, was the better option. So I just want to point that out - because as they say it is sometimes better to pay up for best of breed, and online travel in China is case in point.

Anyhow back to Ctrip.com -in terms of technical stock performance, this has to be one of the most reliable stocks I have been associated with the past half decade. It generally will stair step up - make a move, consolidate (rest), than make another move up, and keeps repeating it. Short of an earnings warning in the future, this just seems to be the historical pattern. And we might be coming to the next move. As the chart below shows, the stock has been range bound for the better part of 2 months after a larger move. The range has become more and more narrow - during this time I winnowed my exposure to the name to use cash in other places with more appreciation. But generally as this range narrows, we begin to enter a stage where a large move can be made. Whether it is up or down is the open question. :)



Here are some points from Zach's article:

• The company operates much the same as the US equivalent Orbitz or Expedia except for the fact that CTRP enjoys what essentially amounts to monopoly status. Bear Stearns estimates that the company holds a 57% market share of the Chinese online travel market and that level has been growing quarter after quarter.
• Despite the high level of penetration, the company’s future growth prospects remain bright because the online travel market itself in China is expected to grow at a 37% rate through 2010. At the same time, Chinese culture is just beginning to embrace the idea of online travel booking whereas in the past, most have used more traditional travel agent services. Add to that, a broad population that has only recently been introduced to discretionary spending and leisure travel and you get the recipie for long-term secular growth.
• Bear Stearns estimates that the company only accounted for 2.7% of total hotel bookings in 2005, and 4% of total airline tickets in 2006. Both of these statistics are likely to increase to above 10% in 2010 and this in the context of a robustly growing overall industry. While eLong (LONG) is also a player in this market, the competition is tilted in CTRP’s favor as name recognition, service offering, and pricing power all appear to benefit the more well established player. Some of the major airlines have created their own online offering platforms, but at this point they have not been able to reach critical mass in order to effectively compete against CTRP.
• A look at industry trends shows that while hotel bookings are a strong cash flow driver for the company (and this business is expected to continue to grow), the primary growth engines will likely revolve around air ticketing and packaged tours. CTRP is set up nicely to benefit from trends in all three of these areas and while domestic travel and outbound travel from China makes up the bulk of its business, the company is beginning to receive more inbound business in relation to the upcoming Olympics as well as a general willingness of the global population to visit China.

Long Ctrip.com in fund; no personal position

Bookkeeping: 'Rising Tide' Performance Week 22

Week 22 performance of the mutual fund

Comments: Well I started last week's review with "A quiet week overall". Can't say the same this time around. It's been a long week - so long in fact it feels like it's been over a year long (oh cmon now, I've been waiting to use that line for months). No, on a serious note - this was a bad week. I was not keeping track of the fund/index performance week by week during the August swoon, but this week was worse than anything we had in very awful November on the S&P500. I don't track the NASDAQ weekly but Friday alone the NASDAQ lost nearly 4%... bringing back memories of summer and fall of 2001 or just about any week in 2002.

For the S&P500 in November the worst weeks were week 11 (of this fund) at -3.9%, and week 14 at -3.7%. Small potatoes as we start 2008 off with a bang with the S&P 500 down 4.5%, and the Russell 1000 down 4.6%. That is obviously some serious territory. Rising Tide Growth Fund fell this week too but a very manageable -1.00%. I'll take it! In fact, relative to the indexes this is *the* best week the fund has had period; with an out performance of >3.50%. To put that in perspective that annualizes to a yearly out performance vs the indexes of >180% (I wish)

This was actually quite the week. Monday was in line with the markets but during the heavy drop Wednesday, the 'pair trading' set up I have, long certain sectors combined with Ultrashorts against others worked great, so the fund was actually up during a 1.5% type of loss day, and Thursday with the market flat, this continued with sectors I am exposed to such as agriculture and infrastructure ramping very strong, while my top position at the time Ultrashort Real Estate (SRS) went on a 1 day 6%+ tear, as people start buying into the commercial real estate slowdown. (remember this is not a residential real estate short). And then it had another big day Friday. While I don't have an Ultrashort against the NASDAQ my Ultrashort against the Russell 2000 continues to outperform as it is chock full of companies dependent on the US economy - note the Russell 2000 was actually DOWN in 2007 whereas the S&P 500, Dow, and NASDAQ were up. This all plays into my thesis started in August that companies without benefit of exports will get hit the hardest.

Only on Friday did the longs in the portfolio suffer as the market started "baby with bathwater" type of selling, but the decent cash position and remaining Ultrashort exposure helped to buffer the fall to some degree.

From here, we appear to be approaching critical support on the indexes. If S&P 1400 does not hold, its a free fall situation. I would doubt this happens right away without a bounce first, but anything is possible. For the fund, I came into the week as heavily hedged as I go (19% type of Ultrashort position - I try to limit myself to around 20% since this is a long focused fund) and kept that level most of the week until late Thursday and Friday. Now with the market swooning so strongly, I am going back to a more long stance anticipating some bounce, and then once we hit 'resistance' again, will return to this negative stance as we enter earnings season. But the complexion of the portfolio changed quite a bit on Friday as I did the first round of heavy buying I have done in quite a while. Sentiment is starting to get quite poor so I would expect at least some attempt at rebounds next week. How successful it will be, I suppose depends on the market mood and if Fed cuts, government bailouts and the like convince people (for the fourth or fifth time) that those actions are enough to stop the business cycle.

As for the fund, it has been quite a hot streak of late. This sort of pace will not continue so I expect the market to take some gains back soon. She is a wild beast, and likes to humble us often so I expect to get some of that humble pie sooner rather than later. When things are working this well, it does not last. So I am expecting some weeks ahead where things don't go so splendid as they have of late. With 4 weeks left in my 2nd quarter of the fund life, I'm at pace to beat the indexes by over 60% this year (my annual goal is 15%), if the 3rd and 4th quarters match the 1st and 2nd. Even Ken Heebner would be proud? ;)

Price of Rising Tide Growth: $12.374
Lifetime Performance to date (vs Aug 3, 2007): +23.74%

Comparable S&P 500: 1,411.6 (-3.67%)
Comparable Russell 1000: 768.3 (-3.51%)

Fund return vs S&P 500: +27.40%
Fund return vs Russell 1000: +27.25%

Last week's results here.

Since the market cap of the median stock in the Rising Tide Growth fund (median $9.8 Billion as of November 07) is significantly below the SP500 index (median $13.1 Billion as of September 07) but higher than the median market cap in the Russell 1000 (median market cap $5.8 Billion as of September 07), I am measuring the fund against both indexes. Click here to see all fund's holdings as of mid November 2007.

Basis for indexes is 5 day weighted average of closing prices Aug 3-9
SP500 : 1,465.2
Russell 1000 : 796.2

To see why I use the 5 day weighted average of the first 5 trading days to smooth out the volatility of the indexes as the fund launched, see here.

Please click here: fund performance for previous updates

This Week's Performance

Normally at this time I will post the weekly performance of the fund. However, the Marketocracy.com data is not working right now (it is showing most stocks returning 0% return today) so I am unclear on the exact returns the fund posted this week. If it gets fixed in the next 30 minutes I will post the weekly summary. Otherwise I will get it up Saturday.

It was a very good week up to today, but not sure how things went today- I am very curious.

Bookkeeping: More Apple (AAPL)

As discussed this morning I was hoping to add (more) Apple (AAPL) at the 50 day moving average ($184) - I am getting my wish so I am taking this stalwart up to a >3% position, with a larger buy than I did this morning.

Post earnings when it trades at $215, people will look at the chart and ask "why did I not buy", forgetting the emotion of the moment. Charts are so easy to read 2 weeks after the fact. ;) If my personal account was not chock full of other stuff this is where I'd be adding some as well. While we won't get a 40% increase in Apple, like some more speculative names could provide , it should have relatively limited downside as people flock to 'safety' (relatively). And if they wish to take it down to $160 or so I'd be happy with that too.

Remember the pattern discussed earlier this week - first teflon tech stocks fall (check), next solar (starting), next infrastructure (starting today after a blowoff type of top yesterday) and agriculture (sell off? never!). Amazing repeat of November happening before our eyes.

I am exhausted at this point.... been sitting on the sidelines mostly the past few weeks, waiting for this part of the cycle... I am out of practice hitting "buy buy buy". My only worry is we might not bottom until the agriculture stocks are taken out and shot. Maybe Monday.

p.s. Holy Crocs (CROX)! I am adding more down 15%? Wow. I'll start printing up the T-shirts "I went long the stock market and all I got was Crox'd!" Should be a good seller and bring in some revenue ;)

Long Apple, Crocs in fund; wish to be long Apple in personal account

Bookkeeping: Letting more Ultrashorts Go

Well it's been a breathtaking week eh? Happy New Year and all. I have no idea what Bush did or did not say - if anyone had the TV on, please let me know what the 'working group' told him to say.

I am seeing some major negativity in the stocks, but still no drop in the damn fertilizer names :) I assume these will only fall when we get the "crazy throw everything to the curb I don't want to be long anything" sort of selling we got in August and November. But I've decided to chop another layer of my Ultrashorts off. The S&P 500 quickly approaches the August/November lows of 1400-1405, just like that (a week ago we were at 1495? amazing). While it is possible we just continue straight down, the more probable path is some bounce in first half of next week. In a general sense nothing goes straight down, or up. If we get that bounce, I will use that opportunity to reload on my insurance (Ultrashorts). They are helping to mitigate losses to some degree today. If I am wrong and we just continue to go straight down - well I will be giving back some of these large gains in the fund performance but that's why you need to make hay when you can. :)

I also don't want to be in the path of a surprise intervention which the Bernanke Fed seems to love to do at the most inopportune times for shorts. But I do think we have first sniffs of fear in the air - first since November. Reality is finally starting to hit some people over the head - those that have denied reality since that fateful day in July when Bear Stearns hedge funds started to implode. Not a great start to the year for the bulls.

One area that seems to be doing quite well today are the Chinese large cap and mid cap ADRs... so that got my attention. I added to my New Oriental Education (EDU) this morning and just added some to my Ctrip.com (CTRP) here on this relative strength. The Chinese large caps have stunk the past few months, but could be putting in some near term bottom here so I have really lightened up on my Ultrashort Xinghau China 25 (FXP)

Long all names mentioned above in fund; no personal positions

Bookkeeping: Closing NII Holdings

I've added a few new positions today, and since I want to limit my long positions to around 55, I am looking at names to close out of the portfolio. I've decided to send South American business cell phone company NII Holdings (NIHD) packing. This is another name I've held since August 6th, 2007 (I believe the 3rd I've sold this week), so a stock I've had for quite a while. I am perplexed at how the market has treated this name, as it has solid growth, a good valuation yet is trading as if the South America market is saturated. Whatever the reason I am going to cut my losses here, watch it from afar and see if it can regain its footing in the future.

As outlined in mid December, this has been one of my top 3 losers in the fund [Top 10 Winners and Losers Thus Far]. Since that time it's 'improved' from a $8.6K loss to $8.0 loss as the stock has bounced from $42 to $48 the past month. I only hold 150 shares and a smallish 0.6% type of position, so I am letting these last shares go. Technically, this is a chart only a mother could love, and the stock is somewhat comatose. One good earnings report could change this situation but at this point I am going to have to see some performance before returning this name to the fund. I am not really worried about a lot more losses in the name, but it's simply dead money at this time and I don't have a large enough position (or confidence in the company) to make the position larger, as I have been doing with some of my other "losers".

No position

Bookkeeping: Two New Positions

I am adding two positions here, one an old holding I am adding back to the portfolio and another a brand new name.

1. After being bullish all fall on the deep sea oil drillers, and promptly seeing them do nothing I exited my positions about 8 weeks ago. Of course, not more than a few weeks later did this group finally begin to put a move on (Darwin and all). I did mention in mid December how great the charts were looking of the 3 names in this sector [Three Deep Sea Drillers - 3 Great Charts]. I did add a smaller position back in Atwood Oceanics (ATW) shortly after [Restarted Atwood Oceanics], when it pulled back, but certainly not enough considering how huge of a move it made right after that buy. I am maybe making the same error today by being greedy and holding out for a lower price, but I am going to restart a position in Diamond Offshore Drilling (DO) on today's pullback. After peaking around $149 last week, the stock has pulled back to its 20 day moving average today - $134. (10% correction) So I am adding here in the $136s, with hopes to see mid $120s to add more. This would be near the 50 day moving average. As we enter a world of stagflation (I was a kid last time around so should be 'exciting' to see it in this time around), I expect oil to continue to confound 'experts' who don't realize this brand of inflation has nothing to do with the US economy but a continued world of shortages as too many people try to enter the middle class at once across the globe. Much like the oil service names I have been hoping to hop in, deep sea oil service is going to be needed if crude is $60, $80, $100, or $120. Why these stocks are not getting better valuations is beyond me - I think people still think this is a cyclical story, and not secular. I started DO as a 1.5% position. Atwood Oceanics has not budged - I was hoping to add to that name as well. Most traders would actually add ATW since it has the better relative strength vs DO, but I like to buy things near support levels. Just a style difference - I could certainly have the wrong horse, but I now own both once again.
2. For the first time I am adding a steel name to the fund. I am very conflicted over the steel story. On one hand the world growth must slow as Western economies enter slowdown (cough cough recession). On the other hand China seems determined to build build build no matter what.... and India is still building... as is the Middle East. More importantly China increased tariffs on steel exports, so this might be a short term benefit as they slow down their flooding of world markets with steel. While I am not a secular bull on steel, I keep a small part of the portfolio for cyclical companies (short term moves) like the refiners, or just some shorter term trades, so I am going to try one here with US Steel (X). I debated this name versus Arcelor Mittal (MT) which is turning into the worldwide powerhouse in steel, and Cleveland Cliffs (CLF) which is a US based iron ore pellet company (iron going into steel). I like all 3, but chose US Steel for technical reasons. I actually have debated adding Cleveland Cliffs for months as a long term holding since I think it could be bought out at some point and I have very little iron exposure... still debating. Back to US Steel (X) - easy story from a technical perspective... before the Chinese tariff news steel stocks seemed to be weakening on fears of slowdown in world economies, after this news is released stock rallies from low $100s to $122. Now we are back to where we were before the tariff news came out. 50 day moving average is $106 so this is where I enter. Now, since this is more of a trade instead of a long term position I am taking a different tact than normal. Usually I build up a position over time but I am doing a quick 2.6% exposure (300 shares) - if X strengthens I will add to this position and then if I can get a 10% or so move I will flip out. If this 50 day moving average fails, then I will set a stop loss somewhere near $100, take the loss and move on. Let me stress again, this is not a typical position but I try to keep a small portion of the fund for opportunities like this. I have avoided this whole area (metals, mining, steel, dry bulk) the past few months due to the inevitable time when people realize emerging markets can't decouple from their export markets, and it has worked out well thus far. I plan to continue to play the growth in those markets with agriculture and infrastructure (especially energy build out)... I think the other areas are more prone to investor sentiment swinging to fears of commodity slowdown when world economies slow, so those areas are best left to nimble trading in and out - whereas we will have a lot more stability in the ag and infrastructure names in my opinion.

Long US Steel, Diamond Offshore, Atwood Oceanics in fund; no personal positions

Bookkeeping: Morning Purchases

As mentioned earlier today, I cut back my 'insurance' versus my long exposure - the Ultrashorts by about 15-20% each - locking in some very nice profits over the last week, and expecting perhaps a potential positive reaction to King George when he speaks this afternoon after meeting with the invisible hand.

Of course the market can continue to tank but we have tons of support at S&P 1400-1405 and I don't expect that to break without a bounce first (as I type we are at S&P 1422), so we have somewhat limited downside (for now)

I am making some purchases this morning - below is the list and why

1. Research in Motion (RIMM) - series of buys between $109s and $106s. This company is already done with earnings, we have seen it and don't have any earnings risk going forward. After beating estimates a few weeks ago [Research in Motion - Nice Results] the stock gapped up from low $100s to low $120s, where I dumped some shares. I am now buying those back plus more. Along with Apple (AAPL) this is going to be one of the few secure areas of growth, and again RIMM has yet to begin its assault on emerging and foreign markets. The stock did break its 50 day moving average, around $108, but I am confidant enough in the business to ignore that at this time. Downside should be to $100 where I will add more. I took this up to a 2.6% position (from 1.0%)
2. I added some Apple (AAPL) in the $189s - it was sitting at $200 a few days ago, and I am hoping for a pullback to $184 (50 day moving average) to add more ahead of what I think will be a monster quarter (earnings).
3. I started a new position in Brazilian oil giant Petrobras (PBR). I have been chasing this stock for weeks on end, and it just continues to go up. After peaking near $119 yesterday I started my position in the $109s. I am hoping for a further pullback to $102 where I will add more - this is just a small starter position of 80 shares or 0.7%, and I also own it through my smaller stake in iShares Brazil (EWZ) in which it is a huge component. With the recent discoveries, this is one of the few companies that will be able to increase production in a world of continued energy shortages. Earlier posts on Petrobras here.
4. Coal stock Consol Energy (CNX) - I've been waiting for some pullback in this name after cutting the name down (locking in profits), so I am beginning rebuilding here as the stock fell to its 20 day moving average. I added here in the $65s and hope to see a pullback to the $62 area which is near its 50 day moving average, where I will add in larger scale.
5. New Oriential Education (EDU) - I added in the low $81s. Strange move today, up in a bad market. With earnings coming on the 15th of January this might be signaling to us to expect some good things. Either way I don't have enough exposure to the name (I was down to 1.2% of the fund) so I added more today - this is one of my favorite Chinese stocks but gosh darn expensive.
6. Infrastructure stock McDermott (MDR) - this was once my largest holding (way back in the day - August). After an earnings report which people found issue with, the stock tanked and I have been slowly building up this position - it performed very well yesterday as the infrastructure stocks ramped and with todays nearly 7% decline I decided to add more to this already sizeable position ($58s). The stock is still above its 50 day moving average ($57) - if the market continues to tank I don't expect that level to hold, but it's been acting quite healthy and this is one of my favorite groups.
7. Crocs (CROX) is acting like it's going out of business. In fact all retail stocks are. I have been hesitant to add much more but with the stock now approaching 07 lows post earnings implosion (mid $30s), you'd expect some support. I am adding in 2 layers here in the $34s with expectation to sell these lots in the upper $30s. I still really like the story here, and I think people are missing the international expansion opportunities but you have to respec the price action which has been miserable of late. Again, this is not the type of chart I usually buy because stocks below their moving averages can stink for months/quarters on end, but valuation is downright cheap and if I can flip out part of this position near $40 that would be a nice 10%+ gain.
8. Continuing to build up the Illumina (ILMN) position discussed yesterday - now we are at the 50 day moving average ($57), as I wrote yesterday - and this is the type of set up in a chart I like. A growth story, pulling back to key support. The risk is the stock breaks through this support level, but that is part and parcel with a strategy of buying stocks pulling back to key support levels - which is different from today's in vogue style of buying stocks at 52 week highs. Added in the $57s.

On my wish list?

1. Fertilizer - hasn't pulled back enough, but might never do so with Mosaic (MOS) set to report next week
2. Solar - not even close to a pullback
   
3. Oil service names I outlined earlier this week - both Cameron International (CAM) and Smith International (SII) are close to areas I'd start new positions. I am monitoring these two closely as they pull back ... I'd like to see some more weakness though.

Whew... this is the most buying I've done in a while...

Long all names above in fund except Cameron International and Smith International; long Research in Motion and Illumina in personal account