29 July 2011 Down To The Wire

BAGAKOAA; 29 July 2011 Down To The Wire

Post 475

July/2011

(Ok I started this post on Tuesday, but it has been a heck of week as you will see. We will post what we had up till Thursday and finish the rest over the weekend. BTW thanks for the 7 people who called and wrote to ask if I was OK. According to the average numbers that Senators use, for every call and e-mail they weigh as 2,200 constituents. That means 15,400 of you were worried about me. Thanks.)

It is sad but I started this post on Tuesday and thought we were down to the wire on debt ceiling issue. Here it is Thursday (NOW FRIDAY) and the issue is still not resolved. It has been a couple of nights since we last spoke and I gotta tell ya it has been a long week. Man Child, Devin and I have been working to get summer school wrapped up, which this week had some interesting challenges. We just found out we all got through it somehow, BUT I will be drinking tonight! (AND I DID)

Yesterday, I had the bestest day with my buddies Ben and none other than Dave Hanna. We made our way up to Pacific Palisades and had a great day of golf at The Riviera Country Club.

The Riv

It took some potent juice from one of Dave's contacts to get us in the joint. Once in we were treated like royalty. This place has so much history.

The first shovel broke ground on the place back in 1922 as part of the famous LA Athletic Club. It is located in Santa Monica Canyon. The cost of the original design was $243,000 bucks, about 3 million today, which even by today's standard is not a lot for a golf course build out. In 1928 Douglas Fairbanks joined and wife Mary Pickford brought a slew of Hollywood's best. Anybody who was anybody want to be seen at the place. By then it had a polo field and tennis courts. The 4^th LA Open was played there in 1929. 1931 brought Bobby Jones to the course and he hit a two over 73. (Slightly better than I hit yesterday.) In 1934 a kikuyu grass was introduced to the course. Having now played it I believe kikuyu is Japanese for "I will tear the club out of your hands and grab your club head.", or "Don't even think about looking for your ball in this stuff." Nasty stuff. In 46 one of the greatest Byron Nelson plays one of his last rounds at The Riv.

hogan

The year later, 1947 Ben Hogan set some amazing record scores that are still talked about today. In 1948 the course held the first US Open West of the Rockies. 1950 saw an exciting play off between a recouperating Ben Hogan (He had a near fatal car crash the year earlier) and Sam Snead. Snead eventually took the 1950 LA Open that year. If you want to see The Riv in its glory Hollywood days rent the movies Follow The Sun, Pat and Mike and The Caddy all of which were filmed on the property. The 1980s had some great LA Open and US open action at the club with great like Hal Irwin, Tom Watson, Johnny Miller, and Freddy Couples. In 1992 a 16 year old amateur played the Riv for the first time. Mike Tyson, oops I mean Tiger Woods wood be that person. Ben and I got to see Phil Mickelson win the Trust Open in 2009. The Trust Open used to be the LA Open and at one time was known as the Glen Campbell LA Open.

Just to let you know there are still celebrities abounding at the club, as we were clearing the 17^th green headed for the 18^th tee, we ran into Paul Michael Glaser aka Starsky of Starsky and Hutch.

After the round of golf, I could not leave until I had a single malt scotch in the bar of the classic old building. It was a fabulous afternoon. But ad Robin Leach of Lifestyles of The Rich and Famous would say, "But That's Not All". We made our way about 10.1 miles away to a jumping little pizza bar called Mozzo and Dave Hanna bought us a quick late lunch early dinner. These Pizza's were made with a wicked dough almost like a Yorkshire Pudding consistency. Way cool.

We got back in the hood about 6:15 and I went home with great memories and helped Man Child wrap up his last night of homework. Thank God Devin had done all the heavy lifting as I only had to help him clean up some verbiage on an essay. But after walking 7100 yards plus and having a couple of drinks (its Ok we had a car) I could not type anther word so no blog last night.

Now it's Friday and Jack is done with summer school and will now be able to focus on a few days of fun.

Down To The Wire

Keep in mind this was written on Thursday. NOW FRIDAY

We nailed the market Tuesday but missed a metric. We called a disappointment in the consumer confidence number at 54 but it pleasantly surprised at 59. New home sales we soft as expected and Mr. Market danced to the tune we set out last night. The market was down about .8%.

We have been long AMZN and were rewarded today after hours as they had a good quarter. We did pick up some August 220 dollar calls but have not seen the pop we expected. There is time.

Now on the down side. OUCH! We pimped a call option on ITW, Illinois Tool Works expecting a meaningful beat. (This was a gamble and we did use the sticky wadded up poker money for this play.) My arrogance and confidence got ahead of me on this one as I gamble with OPM (Other People's Money) as well. Their earnings and forward looking comments were ugly. The calls are off about 95%. OUCH! We will be digging out of that hole for quite a few trades. We are looking at some put options to make it back, but have to judge of the 8% drop today was an over correction. More homework.

Speaking of homework. I got all goosebumpily when none other than my Patrone of Patrone asked about a stock. OPEN OpenTable, Inc. provides restaurant reservation solutions in the United States, Canada, Mexico, Europe, and Asia. It offers solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. The company offers electronic reservation book (ERB), an integrated software and hardware solution that computerizes restaurant host-stand operations. The ERB streamlines and enhances various functions and processes for restaurants, including reservation management, table management, guest recognition, and email marketing. The company also operates opentable.com, a restaurant reservation Website that enables diners to find, choose, and book tables at restaurants on the OpenTable network in real time. In addition, it offers OpenTable Connect, which allows restaurants to take online reservations through the OpenTable Website; POP program, which lets restaurants offer diners bonus Dining Reward Points for reservations at select times; and telephone reservation management services for restaurants. Further, the company operates toptable.com, a restaurant reservation site; and designs, builds, and operates the OTRestaurant Website, which serves as an information and services portal for its restaurant customers. OpenTable, Inc. was founded in 1998 and is headquartered in San Francisco, California.

Back in November 3 2010, we did mention the stock:

"Table for Two

I was going to write a nice little piece here about a cool stock that IBD, Investors Business Daily helped me find today. You see it is Wednesday and I jokingly call it date night as I regularly have dinner with one of my best buddies (and reader). We usually go to one of the best places to dine and relax near our homes. It is the famous Hanna's, best beef, best wine (though I occasionally bring my own) and best hugs in OC. But I digress. As I read this article early this morning about OPEN OpenTable, Inc., together with its subsidiaries, provides restaurant reservation solutions in the United States, Canada, Mexico, Europe, and Asia. It offers solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. I thought I would check it out to find a decent place to try for a change. The first thing I did was to make sure Hanna's was in their database. Not only was it in their database, they have 52 reviews, all but one exceptional. The one that was not exceptional was not all that bad but they said it was too narrow a place. This must have been a review from a portly person as even chubby I do not have a problem navigating my way through the place. After reading the article, tonight I thought I would check out the stock since it was my turn to buy and I had run into OpenTable in quite few places I had researched for another dinner I had scheduled. The website is cool, informative, interactive and has me thinking about placed I did not know about. The viral social network aspect of this has a lot of legs. So let's look at the fundamentals. Wow should have done this last night. The stock closed up today by 12%. But let's ignore that point and still look at the numbers. Forward looking P/E is huge at 62, but that is because the company has shown phenom growth. The 5 year average earnings per share growth

http://www.investopedia.com/terms/e/eps.asp

is a whopping (financial term for very impressive) is 36%. That is a 5 year average. Now there is no way to say that growth will continue, but from their sec filings they claim 14,000 restaurants and 160 million diners. By the way these are global stats so they have just begun to scratch the surface of this market segment. I would guess market penetration in the US at less than 2%. The social network acceptance of this is building a fairly wide competitive moat. As the economy improves and more people discover the usability of the site, I think it could be huge. With that said and the huge bump it had today. We are going to play this with a call option. We are going to look at some January $70 call for $6.00. I have a feeling that train may have already left the station, but we'll give it tram. For every contract we buy we will control $6,800 of OPEN stock for $600. The option is selling for about 7.75 at the moment so we need a little downward adjustment to catch this option and hope we are not catching a falling knife. This is very speculative, but I like the product and except for the very expensive price, I like the stock."

So now let's take a look now. The stock was at 62 back then and is now at 75. We did not catch the call mentioned in the November post, but did go long in April of 2011 only to be stopped out in May with an 8% loss in the 100 dollar range. My timing sucked because Jeff Jordan of Paypal and eBay fame stepped down in May. I got out at 90 is and missed the fall to the 70s. Jordan left to cash out after seeing a 400% gain in two years and to form a venture capital firm. He is still Chair of OPEN. In a recent interview with Business Insider Jordan explained how "sticky" the site is. Mr. Hanna was telling me how painful it would be to contemplate switching a service even if he wanted to.

Dave is doing the right thing as he is looking at a stock he knows. He is familiar with the product or service. By kicking the tires and doing a little homework he knows it is not a "cheap" stock so if he buys he will be paying a premium for future growth and profit.

We will wrap up the miserable week when we go through this week's Barron's tomorrow. Needless to say, eve though we got a few of the economic data points right, concern over the debt ceiling dragged the entire market down.

One of readers Doyle W. was asking about Boeing. I have to do some homework, but the deal with AMR this week does not look accretive and could saddle the company with some huge long term debt if oil spikes above 150 a barrel likes is expected. CAUTION. I will run some numbers and report back.

Sorry not much art tonight.

Salve Lucrum

BAGAKOAA;

I am not a professional investment advisor. Anybody reading my blog and investing accordingly must be out of their minds. I have made more money than I have lost. There are many more qualified people than I to actually tell you how to invest your money.

BAGAKOAA=Boys And Girls And Kids Of All Ages

Salve Lucrum=Latin for Hurrah for Profit.

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