Small Cap Trading Alerts: American Vanguard (AVD), Liberty Media (LCAPA)

In This Edition...

New Trading Ideas: One Bearish, One Bullish
Time to Pull The Plug: Make Exits on These Five Trades
From the Blog: SpongeTech and Applied DNA Make a Guest Appearance

New Trading Ideas

Though the market turned in decent results on Thursday, we expected something of a bounce following Wednesday's hard landing. Stocks are still well in the hole for the week, and it's going to take a lot more than one nice gain to undo the technical damage inflicted during the first three days of this week.

Since we still contend the tide is leaning on the bearish side of the fence, we really want to tack on a few more short/bearish trades than usual... to go with the flow. If the market somehow manages to rebound, as long as we've picked 'em well those charts will continue to fall anyway. Thus, we can win with upside and downside trades simultaneously (the very best trends generally trade independently of the market).

So with that, we've got one bearish and one bullish trade for today.

American Vanguard Corp. (AVD)

I can't even begin to tell you how many times I went round and round with this one. There were about 10 agricultural chemical (fertilizer) stocks I could have put into this space, and I think any of them would have been fine.

See, this is a fertilizer industry play as much as it is an individual stock play.

I don't know if you've noticed or not, but fertilizer stocks are this week's second-best performers with a 4.5% gain so far (the market is down 3.9%, for perspective). That's not a huge disparity, but it's not been a huge amount of time either. If the divergence continues, fertilizer stocks could be one of the only places to hide.

Mosaic Co. (MOS) and Agrium Inc. (AGU) both looked like they had some value left to tap, and Converted Organics Inc. (COIN) looked attractive with its $2.19 price tag. However, Mosaic isn't exactly a small cap, nor were either Mosaic's or Agrium's shares priced anywhere close to the sub-$10 mark... where I really like 'em. Converted Organics isn't profitable yet. (Although companies don't have to be in the black to be trade-worthy, when every stock in the group is profitable, it's tough to justify owning the oddball.)

American Vanguard had it all though. It's a small cap, it's an S&P 600 constituent, it's profitable, it boasts a forward-looking P/E of 10.5, and shares are priced around $10.00.

What I liked best about it, however, was how it looked like the chart was just coming up off the low end of a trading range.... the other stocks in the group have all been on big runs, and could be getting tired. American Vanguard seems like it could have fresh legs. Needless to say, AVD's the one I picked.

Liberty Media Holdings (LCAPA)

If the name rings a bell, it's because this is the organization that became a majority shareholder of Sirius XM Radio Inc. (SIRI) a couple months ago by way of supplying up to $530 million in funding for the struggling satellite radio outfit.

The market was in love with the idea for most of that time, judging from the way LCAPA shares ran from $5.00 to as high as $14.00 on the heels of the news. A few days ago though, it looks like the honeymoon finally ended - the stock fell to the low $12's yesterday after a brief attempt to resuscitate the uptrend.

Don't get the wrong impression. I'm not shorting LCAPA just because I think Sirius is ultimately a money-sucking black hole that Liberty inexplicably jumped into. No, I'm shorting Liberty because the stock is overbought, and starting to crumble.

The company is an ok company, but it's not a $14.00 stock right now. I don't even think it's a $12.00 stock right now. I just think overzealous traders ran this one up, and once reality hit (Q1's numbers included a few red flags) the exodus began.

I don't know how far LCAPA might fall. Maybe none, or maybe a lot; I don't think a retest of the $7.00 area is out of the question though. I just know I want to add a short trade or two right now with the market looking troubled, and this looks like one of the better pullback opportunities out there.

Time to Pull the Plug

We blogged these instructions after the market closed last night, but given their importance, we felt we needed to specifically mention it here. So.....

If you were in one of our recommended trades for CopyTele Inc. (COPY.OB), Procera Networks, Inc. (PKT), Empresas ICA, S.A.B. de C.V. (ICA), GTC Biotherapeutics, Inc. (GTCB), or Solar Enertech Corp. (SOEN.OB), we think it's time to pull the plug and make an exit.

Like we said then, it's not that any of these picks is under a huge amount of fire relative to their potential upside, but none of them are nearly as compelling as some of our current or future trades. There's just no need to leave something hanging in the wind for no reason - we'll look ahead to better opportunities (and spend our time taking care of our more productive trades).

If you want to see their charts and get a little more rationale, here's the blog entry.

From the Blog

In our effort to streamline the newsletter as much as possible, we're going to try and rehash as little blog commentary as we can. Instead, we'll just post links to the blog entries we've added since the last update. If you're interested in reading more, just click on the link.

We've got two new blog entries for you this time around (from a couple of old friends):



		Property Management in Small Cap Stocks Having been a landlord at one time myself; I learned it is work and it became work that I didn't like. I liked the tax break at the time, but not the monthly collection or maintenance requirements like the emergency of a busting water heater or paving a driveway. From large apartment complexes and commercial buildings to small storefronts and individual rentals, the management of properties has become a big business and I think I've found a couple of pure plays that might warrant diligence and investment. And the two are wildly different in location and scope. There are seemingly countless Big Cap realtors that mix both selling properties with the accounting and upkeep of them. One small cap I found does exactly: sells and maintains. CB Richard Ellis Group on the NYSE (CBG) trading in the $7 is a hybrid of sales and operations and produces revenue streams from both its units. I wanted to find however companies that focused solely on collection and maintenance (and to some degree collateral financial service like documentation) and I found two that I like very much... Read the rest of the story at the new Small Cap Network community pages.



		Good Things Come in Small-Cap Gold Stocks Gold has been stuck in a rather tight trading range over the past several weeks, but the latest rash of lousy economic reports are the kind that drive up the price of gold. First, retail sales dropped for the eight time in the past 10 months. Sales were 9.4% lower than in April 2008, down 10% compared with the same period a year ago. Then, the U.S. trade gap increased in March for the first time in eight months as exports declined faster than imports. The trade deficit - the difference between exports and imports - increased by 5.5% to $27.6 billion in March from $26.1 billion in February. Plus, that four-letter word the government hates to talk about, D-E-B-T has been rearing its ugly head in the media lately. Government public debt totals $11 trillion and counting (there's actually A National Debt Clock in Manhattan that keeps a running tab). Debt climbs at a rate of almost $4 billion per day. If you consider the government's future obligations such as social security, health care and other contractual items, the total skyrockets to $71 trillion. To pay back this debt at $1,000,000 per day would take 191,780 years! The government just prints more money, making dollars worth less and less. That's when gold becomes alluring, valuable and very popular... Read the rest of the story at the new Small Cap Network community page.

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