BlastInvest
Blast Investor Real-time Plus           by Henry Lu

USG, Hedge Fund, and 2004 annual report

12/31/2004

Happy New Year!

BIRTP 2004 performance - nearly 60%

Blast Investor Model Portfolio hit new high today

The Blast Investor Model Portfolio hit new high today with total portfolio value of $141,981 equity. Since the model portfolio inception date of 12/31/2003 with value of $89,000, the BIRTP Model Portfolio gained 59.53% in 2004. In comparison, SP&500 index gained only 8.78% and NASDAQ index gained only 8.58%. The BIRTP performance beat index by more than 50% in 2004.  This performance is significantly above my past 5 year average return of 36% per year and I do not expect this kind of high return can continue in next few years.

USG - Big Guys Buying

Wall Street Journal recently reported that a big hedge fund purchased huge chunk of USG shares. WSJ implied that the recent run up of USG stock price was due to this large hedge fund buying. Any way, in order to make big money with value investing, a successful value investor must act quickly and invest before big guys.  Very fortunately, I myself and BIRTP members were able to outsmart this hedge fund and we invested ahead of those big guys. 

Value investing is very competitive field and one really has to find great pick ahead of big guys and move fast in order to make big money.  In this internet stage, big guys such as mutual funds or hedge funds really have no advantage over small guys or small firms such as BlastInvest.  At BlastInvest, we do stock data mining with our in-house software just as good as those big guys, if not better. Sarbane Oxley new law also helped individual investors and small firm like BlastInvest a lot because most of public companies now disclose information to public and to big institutions simutaneously through conference calls or press releases. Insiders now also have to report insider buying and selling within couple of days of transaction instead of several months before.  Whenever insiders buy or sell, BlastInvest will know that immediately within a few days. We want to buy when insiders buy and we want to sell when insiders are selling too.

Certainly big guys can still have advantages over individual investors in many area. Although I personally do not rate most of mutual fund managers very high (heard of mutual fund scandals? Have you looked at their fund performance?),  I have a lot more respect for hedge fund industries. Certainly the best investors in USA are among hedge fund managers. In fact, Warren Buffett was hedge fund manager for many years in 50's 60's and 70's before he started Berkshire Hathaway. Unfortunately, hedge funds are only available for rich people and average investors can not qualify for them. Fortunately,  although you may not have 1 million dollar to qualify for hedge fund, the door for BIRTP is always open for average investors. We beat them in USG and we can beat them more in the future.

BIRTP Success:  value stocks in real estate, oil, golf, and asbestos related industries

Looking back the past one year, BIRTP success was mainly from several big winners: Adams Golf (ADGO),  New England Realty Associate (NEN),  NRG Energy (NRG), USG Corp (USG), Whiting Petroleum (WLL), Chesapeake Energy (CHK). They are mostly value stocks, which either had very low earning multiples or had hidden asset values under the radar.  Some of them are still very cheap even after big run up.

I continue to be very bullish on oil or natural gas stocks WLL CHK and I look forward to 2005 as another great year for oil or energy stock investors. 

BIRTP misses, mediocre picks

Several picks did not perform very well.

SOHU is biggest under-performer in the Model Portfolio. Many Chinese media had lots of negative press on SOHU recently. You can find many articles on SOHU with title like this: "no future, no hope, lots of employee leaving, poor performance of management".  One Chinese famous author even wrote an article with title like this "Crisis of SOHU".  By the way, I do not believe that the negative press is correct on SOHU. SOHU CEO Charles Zhang certainly has his own problems in my eye. He is a little too non-traditional and liberal. But overall, SOHU management team is very good at business and trust-worthy. SOHU is the ONLY Chinese firm listed in USA that re-purchased its own shares. It is the ONLY Chinese company that insiders purchased its own shares.  Certainly Charles Zhang is correct in claiming that majority of US investors do not understand business and do not appreciate the strong business model of SOHU. Certainly stock market is crazy and insane place where most of its participants are speculators. As a value investor, I can appreciate potential of SOHU. Its cheap price is big reason for holding rather dumping. In fact, I continue to rate SOHU higher in my hot list risk/reward rating than  NTES, another Chinese stock that performed well in 2004.

Another BIRTP miss was Wellsford Real Properties (WRP), which I sold at $17 earlier this year. Now its price is at $14, even lower than my sale price. WRP was mis-managed company and it purchased lots of high priced commercial real-estate in bubble period and sold many real estate when the price collapsed.

HRB and HCA are both Warren Buffett stocks, which I invested for the model portfolio earlier. I sold them at small gain or at loss. Most of Warren Buffett picks are pretty good stocks to hold for long term. Over the past many years, I have invested into many Warren Buffett picks before, some were very profitable, some others were not. I admire Warren Buffett a lot and he is great investor. However, his fund size is so huge that he can not invest into many small cap stocks,  which I can for the Blast Investor Model Portfolio.  Currently, my fund size or together with all BIRTP subscribers' fund size is so small compared to Warren Buffett's fund size. We have much more freedom to invest into more attractive stocks, especially small cap value stocks.

What's next for 2005?

Lots of positive things are happening that will benefit US economy in 2005. One recent development is in steel industry. China reported net exporter status in recent months and China is expected to export rather than import steel and irons. This development will not be good news for steel companies. But that is very good news for steel users, such as auto, building, and manufacture companies, which include Exx.a, or LIBHA in the model portfolio.  I expect the steel price to drop soon in 2005 and ahead.

I expect oil or energy price will continue to stay high. Oil stocks continue to offer best investment opportunities for value investors. Coupled with weak US dollar, I do not see any low oil price or energy price ahead anytime soon.

The big difference between energy vs mining industry (steel) is that steel products are mostly durable goods. Once the bridge or road is built, there is no need to use more steel. Steel industry tends to be extremely cyclical in this nature. In comparison,  oil or energy sources are consumed daily.  Our cars will continue to consume more gases daily even if  the big 3 car sale slows down. It is a lot safer to buy energy stocks than steel or mining stocks due to this business difference.

Blast Investor Model Portfolio Update

(as of 12/31/2004)

Model Portfolio - Performance


Portfolio inception date
 12/31/2003
Portfolio inception value
 $89,000
YTD Performance
 59.53%
S&P500 Index YTD Performance
 8.78%


Model Portfolio - Open Positions
Symbol Last Shrs Value Paid Gain
ADGO.OB 1.40 9,000 $12,600.00 0.78 $5,570.00 +79.23%
CHK 16.50 1,100 $18,150.00 13.90 $2,850.00 +18.63%
EXX-A 1.58 6,500 $10,270.00 1.638462 -$400.00 -3.75%
LIBHA.PK 4.80 1,200 $5,760.00 5.10 -$370.00 -6.04%
NRG 36.05 670 $24,153.50 23.05 $8,700.00 +56.30%
NTES 52.92 150 $7,938.00 36.60 $2,438.00 +44.33%
SOHU 17.71 700 $12,397.00 24.882857 -$5,041.00 -28.91%
USG 40.27 950 $38,256.50 18.425789 $20,732.00 +118.30%
WLL 30.25 600 $18,150.00 22.683333 $4,520.00 +33.16%
$$CASH -5,694 -$5,694.00 - - -
10 symbols Total(USD):
$141,981.00




Model Portfolio Transactions


Date  Type Symbol Shares Price Comm Amount Notes
Nov 24, 2004 Sell HRB 350 47.35 10.00 16,562.50 - 12.31%
Nov 4, 2004 Sell NTES 100 46.50 10.00 4,640.00 + 27.05%
Oct 19, 2004 Buy EXXa 1,500 1.60 10.00 2,410.00
-
Oct 6, 2004 Buy EXXa 5,000 1.65 10.00 8,260.00
-
Oct 6, 2004 Sell NEN 100 80.00 10.00 7,990.00 + 48.15%
Oct 5, 2004 Buy USG 250 18.75 10.00 4,697.50
-
Oct 5, 2004 Sell NTES 100 39.12 10.00 3,902.00 + 6.9%
Sep 30, 2004 Buy USG 700 18.31 10.00 12,827.00
-
Sep 29, 2004 Sell NEN 100 79.65 10.00 7,955.00 + 47.5%
Aug 5, 2004 Buy WLL 250 23.50 10.00 5,885.00
-
Aug 2, 2004 Sell NEN 100 69.95 10.00 6,985.00 + 29.5%
Jun 17, 2004 Sell HCA 250 40.30 10.00 10,065.00 - 4%
Jun 17, 2004 Buy NRG 670 23.05 10.00 15,453.50
-
May 24, 2004 Sell ADGO.OB 13,000 1.55 10.00 20,140.00 + 98.7%
May 10, 2004 Sell HCA 250 39.97 10.00 9,982.50 - 4.8%
May 10, 2004 Buy SOHU 200 15.59 10.00 3,128.00
-
Mar 5, 2004 Buy WLL 350 22.10 10.00 7,745.00
-
Jan 26, 2004 Sell WRP 700 17.40 10.00 12,170.00 - 5%
Dec 31, 2003 Buy CHK 1,100 13.90 10.00 15,300.00
-
Dec 31, 2003 Buy NEN 300 54.00 10.00 16,210.00
-

Date  Type Symbol Shares Price Comm Amount Notes
Dec 31, 2003 Buy HRB 350 54.00 10.00 18,910.00
-
Dec 31, 2003 Buy NTES 350 36.60 10.00 12,820.00
-
Dec 31, 2003 Buy SOHU 500 28.60 10.00 14,310.00
-
Dec 31, 2003 Buy LIBHA.PK 1,200 5.10 10.00 6,130.00
-
Dec 31, 2003 Buy ADGO.OB 22,000 0.78 10.00 17,170.00
-
Dec 31, 2003 Buy HCA 500 42.00 10.00 21,010.00
-
Dec 31, 2003 Buy WRP 700 18.30 10.00 12,820.00
-
Dec 31, 2003 Cash In -
-
-
-
 89,000.00 Inception