Wednesday, December 22, 2010

Extra Credit


Oil continued to defy gravity, but HERO started to show some weakness and I sold at $3.40 on a major retracement. I've had this happen a couple of times. If a really fast +20% move occurs within a week or two, it's much better to be snappy and happy with the profit taking. For now, I put in another buy at my original entry with HERO at just about $2.97 (but if you were Swiss in a previous lifetime too, my original entry was actually $2.9695).

After thinking about my timing some more, I decided I wanted to hold onto something to see what Santa could bring me tomorrow. So, I got into a new position with Genon Energy (GEN). Genon says that it is a wholesale electricity provider, but after looking through their Web site, I still have no idea what they do. What exactly is wholesale electricity anyway? Are they a de facto shovel seller in the sense that they provide the infrastructure/energy for electricity companies to then sell to consumers? It matters not. I looked at their balance sheet and I like what it does. Here's why:

1. P/S and P/B are both way below 1. Plus, it's actually trading at just about 12% of book value.
2. It experienced a pretty high double digit price decline over the past 52 weeks, which means that anyone who hasn't taken profit on their shorts yet will get their stops run. Bwahahaha...
3. Very strong revenue growth
4. Lots of cash compared to other utility companies. If I recall well, many utility companies are trapped in debt, but Genon is different. It just completed a merger and based on the cash on its balance sheet, it could be worth a lot more.
5. It hit its 52WH back in January 2010 and it's trading just a touch higher than its 52WL. This means that risk:reward wise, it could get pretty smokin'.

I'm looking for more undervalued + overlooked stuff to buy up and am cooking up another top secret trading idea. I won't spill the beans until I'm in the trade yet - don't want any Professors arbitraging me.

-0.67% on the SBA
-0.27% on the Roth IRA

P.S. I got into GEN at $3.8598...

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