Update on the market; CRI crumbles and CAT attack!

Uncle Ben came to the rescue today. Last few days seemed like the short term bottom as the negatvity factor was high. It was in the last two days where the "noise" was heard and palpable. It is at those times, the market will usually change character and rise higher. Uncle Ben is "comfortable" with the inflation but would like to observe few more data points before hinting at a rate cut by 25 basis points. I believe that will come in April or May of this year. The cyclicals and transports lead the way.

Carter's crumbled on lowered guidance and continued weakness in their retail division. While the direct distribution business is humming along, they are still struggling with the Osh Kosh acquisition. I got out of my call contracts with significant losses. My calls were worth $14000 at its peak but I managed to escape today with $3200. I still think that Carters may be a good long term hold as I have faith that the management will be able to turn the retail segment around. I would advocate accumulating stocks and not playing options in this matter. I believe anything below $17 would be a good buy.

CAT is benefitting from the renewed market enthusiasm for a possible rate cut. Based on that, it rose $1.43 to $66.16. My 20 contracts in CAT are doing well with cost basis of $3.03. I may consider adding more call contracts to 100 contracts tomorrow. I am holding May $65 contracts for those who want to know.

Ruth is hanging in there and should provide an upside earnings report which I hope will propel this stock beyond $25 level by June. I am holding 90 contracts of May $22.50 contracts which closed at $1.00 today. I may add more but I am happy with this position right now.

EMC contracts were sold today to gain entry into BIDU prior to earnings. A big gamble of which I hope will pay off. I have 200 contracts of March 135 contracts with average cost of $1.21. Today, Bidu reported earnings of $.45 eps versus conensu of $.32 today. Revenues increased 136% to $34.8 million. Revenue guidance for Q1 was below analyst consensus of $36.6 to $39.4 million to $34 to $35 million. While on the surface this may seem troubling, the fact remains, the profits grew over 400%. That is some growth. I believe the short term guidance cut is temporary and reflects the company's ongoing interest into the Japanese search market as well as coincident overlap of Chinese New Years that has been factored in. I also believe that the management is always lowering expectation for the analyst. There is a lot of chatter at Yahoo message board that the shorts will take this stock down but I think the shorts will be surprised by the ferocity of this stock within the next couple of weeks. I will stick my neck out and say that this stock will take out the $135 mark within the next two weeks, market conditions permitting.

I have added two new entities to my portfolio today. I have added Valuclick and Denny's. I have 300 shares of Valuclick and 200 shares of Denny's. Valuclick is growing revenues and profits quarterly yoy at 69.3% and 52.60% respectively. Their business model relies on internet ads in a diversified fashion. It operates in three segments of business: Media, Affiiliate Marketing, and technology. They are well diversified in their business and they are providing strong growth. With the internet ad market expected to continue to grow, I believe Valuclick will do well for the future. I have average cost basis of $25.89. I will look to expanding my shares to 1000 total shares on any pull back. It is also #20 on IBD 100 list and the stock pattern is bullish with base on base pattern. It has formed a 7 week cup and handle base. Usually, this pattern portends strong upside price movement.

Denny's is a restructuring play and I believe that a turn around in this company is fully in place. They will report earnings tomorrow after market close with analyst consensus eps of $.01. I believe that this company will provide upside surprise with $.02 eps. They should also raise next quarter revenue guidance. This is a speculative play but with much upside. The forward PE is projected to be 34.38 but it is expected to continue to grow revenue and profits at 40%+ clips going forward. They currently manage over 500 stores and addition 1000+ stores to licenscees and frachises. When you visit Denny's they serve good food at reasonable prices and it is pretty much a vernacular among American culture. When was the last time you went to Denny's after a long night of clubbing? At current price levels, I believe that the prices can reach $10 by the end of the year.

I continue to remain bullish on EMC and CSCO and may be repositioning myself for the next leg up.