I Passed CFA Level I Exam !!!

I passed CFA Level I exam !!! The overall passing rate is only 39% though. It is really a good start in the coming year of Rat :)

I have to admit that taking the 6-hour exam is not a good experience at all. But the knowledge gained is priceless. I did well in the following topics, with my performance in the ">70% " segment.

- Economics
- Equity Analysis
- Ethical & Professional Standards
- Financial Statement Analysis
- General Portfolio Management
- Quantitative Analysis

Hope that I have good luck too in the coming Level II exam.

Options Investment Winning Trade on Jan 15, 2008 (FCStone Group)

BUY TO OPEN: at $2.25 on Jan 11, 2008
SELL TO CLOSE: at $4.00 on Dec 14, 2008
TICKER: FCStone Group (FCSX)
EXPIRY DATE: Feb 2008
STRIKE PRICE: $50
OPTION TYPE: Call
RETURN: 78%

Stock to Watch and Investment Analysis (New Oriental Education and Technology)

EDU

Sector: services;

Industry: Education & Training Services

Business Model
EDU provides private educational services in China. Its business has 6 segments: language training; test preparation; primary and secondary school; educational content, software, and other technology development and distribution; online education; and other services and products. Test preparation generates 38% of the company's revenue.

Industry Analysis
The industry where EDU operates has huge potential. There are currently 600 million Chinese between 5 and 29 and it's the company's target market. The company's primary market is people between 10 and 19 and who live in cities, the population of which is estimated to be 140 million. A large portion of the market has been tapped yet.

Competitor Analysis
In mainland China, EDU has no real competitors. Its main competition includes regional niche companies that lack the reputation, capital and nationwide brand presence.

The company has a very strong brand that allows it to charge a hefty premium over smaller competitors.

Margin Growth
From 2004 to 2007, margin improves steadily with the exception of 2006. In 2004, its gross margin and net margin is 57% and 12% respectively. And in 2007, the margins increased to 60% and 22%.

However, margin varies a lot on a quarterly basis. Based on 2008 Q1 report, the margin in 2008 Q1 improves compared with the same quarter in 2007.

Top Line and Bottom Line
Over the last 4 years, revenue and net income are increasing steadily (again with the exception of 2006). Revenue and net income fluctuates significantly from quarter to quarter. Revenue will be higher normally in school holiday season (Q1).

Technical Analysis
The stock chart shows a clear upward trend. During the past 4 quarters, EDU exceeded expectation 3 out of 4 times. Most recently in the quarter of Aug 2007, the company beat analysts' earnings consensus and the stock price gapped up by $4.69.

Key Developments
November 26, 2007: EDU and Educational Testing Service (ETS) have reached an agreement making New Oriental the only language schools in China authorized by ETS to sell the TOEFL Practice Online (TPO) in their training classes. As part of the agreement, New Oriental has an exclusive right to provide TPO as a component of its language training or test preparation courses and may also sell the TPO to the general public through its bookstores. ETS will continue to sell the TPO on its website or through its subsidiaries or other third party resellers.

October 15, 2007: EDU Issued Q2 2008 Revenue Guidance In Line With Analysts' Estimates

Nov 27, 2007: New Oriental and Heinle ELT Partner to Develop Custom English-Language Learning Materials

Risk
When the company misses analysts' estimate consensus, the stock price will gapped significantly. This is what happed in July. The stock price tumbled $4.21.

Conclusion
EDU's fundamentals look strong and its earnings will continue to grow in 2008 as the company rapidly expands itself.

Options Investment: First Winning Trade in 2008

No other things will make you happier than watching your stock rocketed to sky high while Dow Jones Industrials Index tumbled 1.9%, NASDAQ lose 2%, and S&P500 was off 1.4%. This was exactly what happed to MOS on last Friday.

On Jan 8, I argued that the stock price of MOS will goes up even higher. On Jan 11, Mosaic shares hit a new high of $99.96, which shows that my analysis is quite accurate.

The stock price did go to as low as $83 on Jan 9 because of investors' over-reaction to the CFO's concern on the price of sulfur. As the fundamentals of MOS are very strong, I firmly believe that it will bounce back sooner or later. I waited for the moment to come. My patience finally pays off.

My trading on MOS is my first trade in 2008 and it is also my first winning in 2008, which is definitely a good start. I'll have more winning soon :)

Options Investment Winning Trade on Jan 11, 2008 (Mosaic)

BUY TO OPEN: at $6.90 on Jan 8, 2008
SELL TO CLOSE: at $9.90 on Jan 11, 2008
TICKER: MOS (Mosaic)
EXPIRY DATE: Feb 2008
STRIKE PRICE: $95
OPTION TYPE: Call
RETURN: 43%!

Stock to Watch and Investment Analysis (Mosaic Co)

MOS

Sector: Basic Materials;

Industry: Agriculture Chemical

Business Model

It is the world's leading producer of potash and phosphate crop nutrients, key ingredients used in making fertilizer. It has four segments Phosphates, Potash, Nitrogen, and Offshore. The contribution to net sales by these four segments is 52%, 24%, 2%, 22% respectively.

Industry Analysis

With significant barriers to entry, the industry of potash has only a few players. Although suppliers of raw materials may increase the price of sulfur, its customers’ bargaining power is weak and fertilizer producers will be able to pass along any additional costs to the consumer.

Competitor Analysis

There are four major competitors in the industry, The Mosaic Company (MOS), Potash Corporation of Saskatchewan (POT), Agrium (AGU) and Terra Industries (TRA). MOS’s gross margin is the lowest compared with AGU and POT. Its operating margin and net margin is also significantly lower than POT.

Margin Growth

However, MOS' gross margin and net margin are improving over the years. From 2003 to 2007, the gross margin increases from 10% to 16%. At the same time, net margin increases from 3% to 7%. On a quarterly basis, both gross margin and net margin increased significantly in 2007 Q4 and 2008 Q1.

Top Line and Bottom Line

Over the last 5 years, revenue and net income are increasing steadily (the unusual expense in 2006 affected that year’s net income negatively). On a quarterly basis, revenue and net income increased significantly in 2007 Q4 and 2008 Q1.

In past several months, particularly in Jun, Sep, and Oct, analysts upgraded their recommendation on MOS. EPS for 08 and 09 were revised upward in the last 30 days. But the earnings for the current quarterly revised down by 1 cent recently.

Technical Analysis

The stock chart shows a clear upward trend. In the quarter of Aug 2007, the company beat analysts' earnings consensus and the stock price gapped up by $4.23.

Key Developments

Most recently, Mosaic Announces Prepayment of $150 Million of Long-Term Debt in Dec and reaches $1 Billion Prepayment Milestone.

Base on Google Finance, Goldman Sachs raised the price target of MOS to $120 from $65 on Dec 27, 2007.

Risk

A huge new phosphate-processing factory may open in Saudi in the next few years based on an article from Forbes on Dec 20, 2007 (Mosaic: Fertile Ground).

The price of sulfur almost doubled recently but the company should be able to pass the cost to customer.

Conclusion

MOS’s earnings will continue to increase and the stock price may go up ever higher

Investment Analysis Tool Updated

Several days ago, I came up a tool that list the companies that are going to report earnings after market close today or before market open the next trading day. I just revised the scripts so that I no need to update the list every day. Now it will update automatically.

Because these companies will report earnings soon, the stock price seems to be more volatile. If their earnings beat expectation and they have a promising earnings power, their stock price may gap up. Otherwise, the company will gap down. So the strategy that we can use is to buy the options or shares before a company report earnings. If you plan to buy call options, you need to identify, from the list, those companies that have done well and will continue to do well. It is really a treasure hunting game!

However, you have to do your home work before you put your money in the market. And Yahoo finance, Google finance, and MSN money are websites that provide a lot of information/materials that you must read before you make the decision. That's why I created the links to these websites. When you click on these links, you will be directed to the relevant page of these websites. For example, if you see Microsoft is in the list (MSFT) and when you click on the Google link beside MSFT, a new window will open and you will be directed to Microsoft at Google Finance. This will save your time to go to each individual website and key in the ticker separately. My experience shows that if you are to analyze quite some companies, the time saved would be quite significant.
I hope you like the tool. Happy making money !

This Tool will Save Your Time in Company Research

Finally, I have finally completed this tool after so many hours dealing with JavaScript (amazing that I worked so hard on the very first day of 2008). It is quite challenging because I want the tool to work for both Internet Explorer and Firefox. Some scripts work for IE perfectly but not Firefox. Lucky that I solve all the problems before mid-night.

I hope you still remember the 4 steps to earn 100% return on your option investment and the 3 steps to identify winning trades. One key step is to conduct company research. And this small tool is right here to help you identify those winning trades.

Here we list those companies that will report earnings soon (either today or next trading day). You need to conduct detailed on each company to hunt the treasure. While I will update this page daily, companies will change their plan at any time. I suggest you visit briefing.com to check the latest earnings calendar at your spare time. Alternatively, if you have spotted any company that will report earnings after market close today or before market open tomorrow but is not shown here, please drop me an email to the author or leave a message.

Furthermore, I have created the links to Google Finance, Yahoo! Finance, and MSN Money. You no need to go these websites and enter the ticker individually. The links will be opened in a new window. This will save you a lot time.

Moreover, if you want to study some other companies and to create links to relevant Google Finance, Yahoo! Finance, and MSN Money pages, you can enter your symbol in the input box provided and then click on the "Add Your Symbol!" button. You can add any many symbols as you want.

Hi, dear friends, hope you have a wonderful 2008 :)