Tuesday was good and bad for the Oxen Report. Our short sale of the day worked very well for us. I chose Ultrashort Proshares Oil and Gas for our short sale of the day due to my expectations that oil would drop in price as the market rallied and going into crude inventories. We opened our position at 14.65 and were looking for a sale price of 14.36 – 14.22. The stock just met 14.36 for a great 2% gain on the day! On the other hand, Best Buy was not as successful. We entered our position at 40.10 and were wanting to exit around 41.00 – 41.20. The stock, however, dropped 3% and hit my stop loss point before bouncing all the way back from the lows of the day to hit 41.14, right in our range. If you held, you made 2.5%, but if you stop lossed like I do, then you were 3% in the hole.
Result: 1/2, 2% gain on short sale and 3% loss (sort of) on buy pick.
The Buy Pick of the Day was the only the second miss the Oxen Report has had in the past two weeks! On to today…
Buy Pick of the Day: Electronic Arts Inc. (ERTS)
At 8:30 AM, Core CPI numbers came in right as expected, which is probably the best thing that can happen. The CPI is the Core Price Index, and it measures inflation. An increase in the CPI means higher prices and lower signals deflation. The CPI rose by 0.10%. There is a slight rise, but it was not signficant. Another piece of data was the Current Account, which measures the difference in worth between exported and 
imported goods, services, and interest payments (exports minus imports). This number was lower than expected, and it is a sign that American goods are worse off than expected. The news is not great for exporters, but it probably is not a market mover.
While Electronic Arts is one of those exporters, the stock is also my pick of the day. Over the past month, Electronic Arts has dropped just under 15% in market value. In the past week, it has dropped just over 5%. The reason is due to weak deman in video game sales that have been released in the past two months. Madden 2010, for example, which is the bread n butter of ERTS’ gaming life, took a 15% hit from the same period one year ago for Madden 2009. Ask the experts, and 2010 is a much better game as well. The demand for these leisure type goods just has fallen off in the recession.
"We’re disappointed that improved title quality (i.e. Madden) is not translating to better sales," wrote Justin Post of Bank of America Securities, who downgraded EA to a neutral rating after the NPD data came out last week.
Yesterday, the stock continued its fued as Best Buy Inc. reported weaker than expected earnings, further dropping the stock. By now, you are probably saying, thus, why in the heck would I want to buy this thing. Its called value investing. This stock is currently at such a bargain price. The stock is 60% of its 52-week high, while only $3 dollar above its 52-week low.
Further, this morning the catalyst was released. Take Two Interactive Inc. (TTWO) was upgraded by the brokerage firm Piper Jaffray this morning from Neutral to Overweight and given a price target of $15 per share, which is a premium of around 30% on its current stock price. Piper said that they see consumer environment returning in 2010, and that the company will be in the green for the next two years. It comes at a shocking time when ERTS was recently downgraded and sales are weak. Yet, Piper sees that the stock is at a place where it should improve.
The news sent TTWO up over 6% at one point in pre-market trading and other rival Activision Blizzard up over 4%. The laggard of the bunch, ERTS, was up only 1%. Yet, this is okay for a value investor. We want to buy this stock because we think it can move up 2-3% from a buy point. Being up only 1% makes you question why, but at the same time, a stock that has been this beaten down has a lot of short interest and a lot of investors who are not sure about reentering the stock. We want to beat the crowd. With the stock being technically lined up for a pop – oversold, undervalued, and near its lower bollinger band, getting ERTS on what is looking to be a positive day is a must.
Entry: We want to enter ERTS from 18.10 – 18.20 but not higher. The stock is at 18.31 in pre-market trading. I think we can get it at a bit of a lower price, but if it does not hit this range, it probably won’t get the movement we want. Check back at the Morning Levels alert for Oxen Group Alert Members any changes to Entry/Exit.
Exit: Defined 2-3% from entry, so around 18.45 – 18.75.
Stop Loss: Set at 17.55
No Short Sale of the Day due to a mistake I made on a stock I had been writing about for the past fifteen minutes that I just realized would not work.
Good Investing,
David Ristau
