Update

And you thought this was one of those blogs that would disappear into anonymity after a couple of odd posts? Well gotcha!!

General Reflections

I am loving my picks and I don't think I could have been luckier in my stock pickings. Each one of my recommendations has done solidly well since the day they were bought. As of this writing I am sitting on a portfolio gain of a whopping 86 %! Of course I am tempered by the fact that these are not realized gains, a timely sense I developed after losing the last shred of clothing I owned in the 2000 bust.

And a pragmatic sense of well being now tells me to take some profits off the table. So as of market close on today I have done just that as illustrated in my portfolio list at the bottom of this post.

Market Commentary

The volatile moves are not too surprising given the macro economic events and more importantly, the temptation to take some profits off the table. Back in March I reasoned the Bull run is still strong and will continue on. It did. Now I am wary of the short term. July and August look slightly unpredictable. Volatility is jumping up again. The slight sneak into the current earnings is not boding well either. But bearish undertones aside, the uptrend channels have not yet been broken and that still makes case for a long term bullish progress. Intermediate term I will be playing safe though as you will witness from my picks below.

A Quick Commentary On Private Equity And The Yield Rates

Every person on the street and his step brothers now knows what a Private Equity is and how it just keeps swallowing companies left and right. And every person is also wary from the media's coverage of the so-called negative impact of the current rising yields on Private Equity and consequently, the equity markets. While I am not qualified to predict the ultimate impact of the current yield rate on the equity markets, I think a lot more is being made of the yield rates in terms of impact on the Private Equity. My opinion is even if the yield were to go as high as 6 %, money is still cheap for PEs. Often we think of PEs as the subservient recipients beneficiaries of investments by Mega Pension funds and such. However, the global appetite for investment is paralleling the billion dollar funds of institutions like CALPERS, etc. Also we simply cannot ignore the fact that sovereign funds established by oil rich countries and likes of China and Singapore are chomping at their bits. In one word or maybe a few - PE state is healthy. In addition to this the wrong assumptions about PE actually works in their favor. And by wrong assumptions I mean worn out rhetoric such as how PE is bad for the poor companies who get loaded with debt. If that were indeed true, PEs are operating with an extremely high risk-reward framework. And that is just not their style. PEs do leverage, no doubt. But they often find targets they know will prosper eventually by operational tweaks or could get acquired by bigger fishes that will bring operational and human efficienceis that the target company, in its inertia, would have never achieved. The only downfall that exists is that when yield keeps getting higher, money will become much more expensive and that could dampen a PE's enthusiasm. That ain't gonna happen anytime soon. My guess is at least a year and a half. In the meantime, the fact that PEs are pumping money into the market will make you money if you are invested into equity markets. The reasons are quite obvious as many of you may have guessed - (a) Stock supply dwindles and this creates more demand for the existing shares, (b) Shorting becomes a risky proposition because you never know when a company you shorted might be a target. This also helps in reducing long term volatility, (c) New IPOs of the trimmed companies will induce psychological boost and consequently, new money into the markets.

Status on Old picks

Now let us quickly see how the old picks are doing and the positions that are getting closed in this post

BZH short - Still going gaga over this call. Housing continues to slump and with the SEC investigations on the management handling of some of the company affairs, BZH keeps going down. We are right now sitting at a profit of 46 %. I expect this stock to go further down as a result of warnings from D Horton and Home Depot. I am planning to close this position anytime as soon as the stock hits a technical support. Stay tuned

CRDN long - This puppy served me well and it is time to bid adieu. There may still be long term upside but I think it is now well into the overbought territory for my appetite for risk. So I am closing this position and pocketing a gain of 40 %.

ISRG long - ISRG has proven to be one resilient stock in spite of everything that is going on. ISRG has its earnings announcement coming up shortly. I am expecting the stock to continue to run up till the earnings day. It is quite likely the traders may sell on the news. I am watching it closely and will most likely close out my position on the earnings day depending on how far above the earnings were in terms of expectations. Right now we are sitting at a corner-to-corner-grinning gain of 172%! Keep holding it. A side note on this industry - I have been investigating a similar company that could be what ISRG was couple of years ago. I will post more on that after completing my research but if you are interested, it is called Stereotaxis (STXS)

New Positions

GLD long - For those who don't know you can now trade physical gold in form of a share on NYSE. This stock symbol represents just that. GLD has been going down quite a bit in the last couple of months. It has hit an important technical support area. Right now it is at 65.61 and my target is $70 in 2-4 months. Depending on the momentum when it crosses 70, it has a further upside to $80 in the intermediate term. But that is a discussion for later.

TSO long - Tesoro is one of the hottest refining stocks and I am going to shamelessly jump on the bandwagon of some very famous traders in the market who have placed their faith in this stock. My primary reasons are technical and macro-fundamental followed by company fundamentals. Technically the stock is poised to go higher from its current price of 60.8 to 65 and then onto 70. It is possible it may languish a bit for the next month or so given the chart patterns. At a macro-fundamental level, refineries have gained quite a bit of indispensable value simply because there are simply not enough of them to convert the crude oil and address the demand. Macro-shacro aside, I am in this one to make a quick buck and a relatively high percentage gain. Hence I am going for call options on this one and will close out as soon as the gains are realized.

The Rathi Portfolio Holdings

Open List

• GLD - (Equity trade) buy long (Opened at 65.61 on 7/10/07)
• TSO - (Option trade) buy Jan 2008 Calls $50 strike (Bought at 14.40 on 7/10/07)
• BZH - (Equity trade) sell short (Opened at $41.54 on 2/14/07)
• ISRG - (Option trade) buy Jan 2008 Calls $130 strike (Bought at 9.60 on 3/8/07)

Closed List

• CRDN - closed at 79.37 - 40.63% Gain