My Stock Winners

========= Undervalued Stock #1 ==========

—— American Financial Group, Inc. (NYSE: AFG) ——

Insider Name: Carl H Lindner
Insider Position: Chairman & CEO
Insider Action: 100,000 shrs on 8/20/2007
Insider Total Holding: 8,800,395 shrs

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Undervaluation Merits…

P/E Ratio = 8.8 (Industry Average 10.5)
P/S Ratio = 0.79 (Industry Average 1.40)
P/B Ratio = 1.19 (Industry Average 1.50)
P/CF Ratio = 5.60 (Industry Average 9.4)

Industry: Property & Casualty Insurance

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Other Merits…

Dividend Yield = 1.40%
Exceeded Analysts’ Earnings Estimates for Past 5
Quarters
Currently Under Share Repurchase Program

Dow, Nasdaq Finish Lower As Investors Grow More Uneasy About Economy. The stock market found little to assuage concerns in minutes from the Fed’s last meeting, released during afternoon trading. The major indexes’ losses steepened after investors parsed the minutes for signs of a possible cut in interest rates.

But don;t you worry. This only kills high flying stocks such as AMZN

Let’s say AMZN’s revenue grows 30% in ‘08, and 20% in ‘09, ‘10 and ‘11. I think that is extremely aggressive. Growing top line from such a large number.”

Let’s examine what this poster might mean by “such a large number”.

Isn’t the largeness of numbers pretty relative, and simply based on our own mostly brick and mortar experiences and perceptions about what is feasible or possible, i.e., enterprises like Target Stores circa 1991 tended to grow from a base (revenues of 16B) similar to Amazon by next years estimate at only about 10% per annum?

Target Stores
Revenue Growth
FY 92: 11.2%
FY 93: 7.3%
FY 94: 10.7%

But Target’s conditions for growth in a physical, landbased environment were different from the online marketplace in a number of ways. For example, you need more time and capital to build out a brick and mortar enterprise, that and the fact that the customer base, a subset of the population, is just not growing that fast anyway, even if you did not have those limitations.

The population Target was drawing from was probably not growing too much more than 1.1% per annum, but the population Amazon will be drawing from will be growing at a rate of 6x that much:

“JupiterResearch says the worldwide online population will increase at a compound annual growth rate of 6.6 percent during the next five years, far outpacing the 1.1 percent compound annual growth rate for the planet’s population as a whole.”

So if we couple this 6x factor with Target’s 1990’s growth rate of 10% we get a growth ceiling of about 60% per year for online retail between now and 2011.

Seen from that perspective perhaps the consensus 25% revenue, so far less than that 60% is a more conservative figure that some think. And one that already incorporates the slower economy and is based on Amazon’s most affluent customer segments. Meaning that when economies pick up 35-40% growth would not out of the question.

AMZN=30 in 1 monh

——— Chesapeake Energy Corp. (NYSE: CHK) ———

Insider Name: Aubrey K. McClendon
Insider Position: Chairman & CEO
Insider Action: 100,000 shrs on 8/10/2007
Insider Total Holding: 28,056,318 shrs

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Undervaluation Merits…

P/E Ratio = 9.1 (Industry Average 15.0)
P/S Ratio = 2.07 (Industry Average 3.20)
P/B Ratio = 1.59 (Industry Average 2.52)
P/CF Ratio = 4.6 (Industry Average 11.6)

Industry: Independent Oil & Gas

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Other Merits…

Dividend Yield = 0.70%
Exceeded Analysts’ Earnings Estimates for Past 5
Quarters

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Other Drawback…

Recent Analyst Downgrade

——— Chesapeake Energy Corp. (NYSE: CHK) ———

It wouldn’t be a big surprise if a big name decides to get in bed with Inhibitex because it’s happened before. There are a number of patient groups, including approximately 300,000 end stage renal disease patients in the United States, geriatric patients receiving chronic long term care, and patients undergoing certain elective surgeries, who are at risk of acquiring a staphylococcal infection. For these high risk groups, an active vaccine may be a less costly and preferred mode of therapy. Inhibitex entered into a license and collaboration agreement with Wyeth (WYE) to develop vaccines against staphylococcal organisms. The timing of today’s edition is no coincidence because:

If Wyeth does not enter into Phase clinical trials for drug by July 31, 2007 they will have to start paying annual research fees of $1 million vs. $500k.
Considering that Wyeth has a market cap of $65 billion dollars we doubt anyone will lose sleep over half a million dollars. However, if a Phase I trial is initiated this should prove that the technology behind Inhibitex should be worth more than negative.

NASDAQ is set to launch what its executives are calling one of the most significant developments on Wall Street in decades: A private stock market for super-wealthy investors. Minimum requirement for traders: US$100 million in assets. Any private firm can list on Nasdaq’s new platform, which is called the Portal Market, and raise money by selling stock to an elite group of shareholders. Once a tiny influence on the markets, private money has gained unprecedented power on Wall Street. This year, the biggest deals have been swung not by public companies, but by private equity firms that are spending hundreds of billions of dollars to buy household names, such as Hilton Hotels, Sallie Mae and Chrysler, and turn them into private companies. These markets are creating an alternative and exclusive investment world buffeted from the turmoil that has roiled the major stock indicators in recent weeks. In the public markets, investors dumped stock during a credit crisis caused by the deteriorating mortgage industry. Private-market traders generally are sophisticated financial groups that take a long term view of their investments.

“One of the problems that business faces in America today is what I would call ’short-termism,’” said Howard S. Marks, chairman of Oaktree Capital. “There’s a lot of expense and complication associated with being a public company today… Now it is possible to gain most of the advantages of being public while sidestepping the disadvantages.” The rise of private money has created a new class of powerbrokers on Wall Street who have enriched themselves even as they provided billions of investment dollars to companies in all kinds of industries. But the trend is causing a backlash among working-class Americans who generally are shut out from investing directly in those circles.

The SmallCap MarketWatch believes that junior mining and exploration companies are going to offer investors the greatest upside opportunities when it comes to taking advantage of bull market in gold.. The challenge is to find ideas that are not just looking for home runs. As much as shareholders love million ounce discoveries the likelihood of success is very small and the risks are enormous. Mexoro Minerals (MXOM) has a major asset in its Cieneguita Property. Maybe it was great insight or perhaps dumb luck that Mexoro COO Mario Ayub was able to acquire Cieneguita after Glamis Gold gave up on the property.

The company believes there are 350,000 ounces of gold there. Initial estimates are that the property should produce approximately 1,500 ounces per month at a total expected mining cost of $230 per ounce. Such production would give net cash flow from operations of approximately $5,000,000 per year at current gold prices.

Today, the entire company is worth just a little bit over $22.5 million dollars. Publicly traded gold companies currently sport a valuation of 17.7 times earnings. If Mexoro were to see $5,000,000 per year in net cash flow from Cieneguita that would mean future exploration of other properties could be self supported. However, let’s say for the sake of argument not one dollar is reinvested and the net cash flow is just booked as profits. At 17.7 times earnings that market cap could be $88.5 million or over $4 dollars a share.

For junior gold exploration and mining companies growth is critical, and if Mexoro were to produce that kind of cash flow we expect almost all of it to be reinvested in other projects to build shareholder value. If everything goes as planned the Cieneguita mine will be constructed very soon with production to follow quickly after the mine is established. The current retracement in Mexoro shares represent a great opportunity for those that have been watching the stock waiting for the right time.

Base Metals/Copper (PCU)
Bullish
Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: NO
100-day Moving Average: NO

Sentiment: There is not yet an exchange-traded fund that allows investors to trade a basket of copper-related stocks, but one’s creation could be just around the corner. The Dow Jones AIG Commodity Index is partially comprised of copper and base-metal names, but also contains energy stocks. Right now, my favorite proxies for the group are individual equities Southern Copper (PCU) and BHP Billiton (BHP). Both stocks have seen their Schaeffer’s Volatility Index (SVI) readings spike in recent weeks to new annual highs, which can often be a bullish sign of future momentum. PCU boasts a short-interest ratio of 7.2, paving the way for a short-covering rally on any positive price action. And BHP has seen its Schaeffer’s put/call open interest ratio (SOIR) rise to 1.73, higher than 84% of the past year’s readings. Together, the 2 stocks have earned just 5 “buy” ratings along with 7 “holds” and a pair of “strong sells.”

Outlook: PCU has been in uptrending mode since mid-2003 and is fresh from a successful retest of its 10-month moving average. Technically speaking, BHP has performed in very similar fashion. The shares have increased nearly 6-fold since mid-2003 and recently pulled lower to test support from their 10-month trendline. The long-term uptrends combine with signs of skepticism to make these names intriguing contrarian opportunities. As for copper futures, the long-term contract is perched above significant support at the $3.00-per-pound level and is threatening to retake control of the $3.25 mark, which defines a 50% correction from the contract’s second-quarter 2006 peak to its first-quarter 2007 bottom.

Technicals
Oil Service (OIH)
Bearish
Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: NO
100-day Moving Average: NO

Sentiment: Sentiment has been moving into more bullish territory in recent weeks, even while the price of oil stagnates beneath former all-time highs. The oil-service group’s composite SOIR has dropped to 0.58, reaching an extreme as it hits its sixth annual percentile. In other words, 94% of all composite SOIR readings on the sector have been higher (or more bearishly aligned). Analysts also continue to support the shares. Of the 208 analysts’ ratings on various oil-service names, 68.3% are of the “buy” or better variety, while just 28.4% are “holds” and 3.4% are “sells.” This makes the oil-service group among the highest-rated market segments, and leaves the related components vulnerable to downgrades.

Outlook: Even while oil-service names earn the accolades of Wall Street and the speculative options crowd, the OIH has spiraled lower. The exchange-traded fund has dropped below its 10-week and 20-week moving averages, the former of which has rolled over into a descending pattern. A bearish crossover in this pair of trendlines could be a harbinger of future downside in the index. One concern from a bearish perspective is the OIH’s 160-day moving average, which contained the group’s pullback last week. Going forward, however, the lack of a concrete “wall of worry” could be harmful for the shares.

Courtesy of Schaeffer’s Monday Morning Outlook

When Businessweek came up with a list of the biggest brains in investing, they noticed how much each of them has influenced the way the world invests. They also noticed one other trait: Each saw opportunity well before the pack. John Templeton pushed international investing way before it was cool. Warren Buffett was buying up undervalued companies long before his brand of value investing became popular. Many of the world’s top investors got to the top by being first. They didn’t follow in the footsteps of others or copy wholesale the investing styles of others. They set themselves apart from the crowd. Standing out like that can require a lot of courage, especially on financial markets that, by their very nature, represent the epitome of the herd mentality.

Top investors “think for themselves”. They defy conventionalism. Perhaps this is why any list of the world’s top investors represents a vast array of political beliefs, personality quirks, and strange hobbies. While some keep a low profile, people like Buffett and bond king Bill Gross seem to love regaling others with their views. Another common trait: Most of the top investors, though not all, think long term. They have a confident belief in what their investments ought to be worth at some point in the future, and they stick with it. A long-term focus is crucial when you’re being judged on your record of not just a few months or years, but decades. The top investors usually stay active for several decades, at least. They have been survivors of every type of economy cycle. They’ve survived economic chaos, war, and volatility. True, not all the top investors make money by buying and holding investments. Some, like currency speculator George Soros, profit on the perfectly timed trade. But that requires being an independent thinker, too. Soros must understand conventional wisdom, but he is also willing to challenge it. He has bet billions by going against nations’ central banks.

How consistent are top investors throughout their careers? Do they pick one investment philosophy and stick with it? Walter Gerasimowicz, CEO of Meditron Asset Management, says they do:

“Everyone of these investment pioneers were successful because they operated with a coherent investment philosophy.” Most important, “they applied it consistently to all aspects of their portfolio,” he says. “They never wavered.”
One thing doesn’t change, however: It helps to be lucky. Even the best of the best can provide a long list of investing mistakes. Sometimes even the best investors wish they could turn back the clock and undo a big blunder. The brightest minds in investing are nothing if not adaptable, and can even use those missteps to fine-tune their future strategies. While ordinary investors may not be able to match their results, they could certainly profit by taking a page or two from the methods and approaches employed by our brain trust.

We brought up the name UpSNAP (UPSN) and for good reason. Things got off to a great start with the stock charging up from $2.43 per share to an interim high of $3.20 good for a gain of over 31% within a week. Since then the company has had to reinvent itself twice to survive.

What initially attracted us to UpSNAP was its interesting business model. No one likes to pay fees for making “411″ (directory calls) on their mobile phones because it is expensive. If users can text the name of the business or person they were looking for, UpSNAP would respond with the search query and relevant phone number. In the event the search result was a business as well as advertiser on UpSNAP, the user could reply via text messaging and UpSNAP would call the phone user via Voice Over IP (VOIP) with the business on the other line. Everything sounded revolutionary but there were a few problems.

First, lots of advertisers had to sign on and secondly the product had to work. After testing UpSNAP numerously we found the mobile search function to be “buggy” and just not very dependable. It would be no surprise if potential advertisers had the same experience and decided it was just not worth the trouble. It’s quite a shame because UpSNAP was in this space early and before companies like Google Mobile and 4INFO dominated the market. This just goes to show that ideas without proper execution equates to very little shareholder value.

U.S. equities tried to rebound today, on the cusp of news that Goldman Sachs was injecting $2B of its own capital into one of its poor performing hedge funds (along with $1B in new investor money) with newly public Blackstone Group reporting that earnings jumped $500M in the latest quarter year over year. With less than an hour left in today’s session, the Dow 30 has slid from being up 80 to up 20 points, while the S+P500 was up about 17 is now up less than 4 points.

The NASDAQ was up early about 27 points and is now ahead less than 3, while the Russell 2000 opened and jumped ahead to 800.14, only to sell off, down about 8 points at press time. It looks like equities are staging a rally into the close from these levels. Here are the rest of the items that will drive trading on Wall Street this week.

On Tuesday, the trade deficit is expected to widen by $0.7B, to a negative $60.7B while producer prices are expected to drop by 0.1% due to the pull back in energy prices. Despite the news, crude oil was up $0.15 today to close at $71.62, despite being up as much as $1.42 to an intraday high of $72.19. Wal-Mart posts second quarter earnings, along with Home Depot, which is expected to focus attention on the renegotiated sale of their supply business to private equity buyers, as well as their announced $22.5B share buyback program.

Wednesday, look for consumer prices to rise just 0.11% in July due to the dip in energy prices according to Lehman Brothers. In June, prices rose 0.2% as gas prices fell slightly. Many market pros will likely use this as a “shot across the bow” towards Fed Chief Ben Bernanke as a catalyst for a cut in interest rates. We think Mr. Bernanke will likely utilize a new asset class similar to the one Mr. Greenspan frequently utilized. This time it will be known as the “Bernanke PUT.” In other words, don’t expect a rate cut.

Thursday brings the housing starts number, which is widely expected to fall 4% in July to an annualized rate of 1.41M units according to our good friends at Lehman Brothers. Any number north of that would likely diminish the “dead cat bounce” recently seen in that sector late last week. HP, Nordstrom, J.C. Penney, and Kohl’s all report earnings as well.

The week will end Friday with no big news or economic numbers slated for release. As we enter the “dog days” of summer, market participants will be hopeful that despite more hedge fund blowups, the bad news will be held to a minimum. While the OTCDigest.com would love to see the Fed cut interest rates, we can only imagine Mr. Bernanke will sit tight in his “long put position” in an effort to wring out the rest of the credit excesses in this debt driven market. Look for our Closing Market Commentary after the close on Friday!

It was a bumpy ride for U.S. equities this week and by today’s close most of the major indices closed slightly higher on the week. After last week’s rout, it was no surprise that the best performing index this week was the Russell 2000, which recouped 4.4% (+33.36) to close at 788.78. In all fairness, it was the most oversold of the four we report on last week.

The S+P500 tacked on 1.4% (+20.58) to close at 1453.64, while the NASDAQ Composite gained 1.3% (+33.64) to finish at 2,544.89. The Dow Jones 30 Industrials only managed to gain .04% (+57.63) and ended the week at 13,239.54. Stocks picked up after an early sell off today, as the European Central Bank and the U.S. Federal Reserve both injected money into a world banking system that is still coming to terms with what no one wants to call in the U.S. mortgage and hedge fund markets.

Last week it was Bear Stearns, this week’s bad news centered on two Goldman Sachs hedge funds getting whacked with word out today that Countrywide Financial may now be on the ropes. That news and more like it has recently has finally proven enough such that this country’s elite investors are finally beginning to unravel their hedge fund positions.

Market-neutral hedge funds utilize considerable leverage to generate a return, being 100% long and 100% short both at the same time. When investors suddenly request liquidation to pull in their capital, losses can often be exacerbated. It reminds us of the old adage, leverage up and leverage down. While this market rewarded leverage, it appears the tables are now turning.

Needless to say, when the President of the U.S. is quoted in the newspaper as saying there is enough liquidity to absorb a correction in the stock market and everything should work out okay, we don’t feel comforted. It’s also probably what pushed markets lower today before they lifted into the close. While we hate to say it, the trend is your friend and despite this week’s pause, let’s say, to reflect, the trend ain’t lookin’ real good lately. And yes, we’d love to be proved wrong on that.

In the past two months shares of Mexoro reached an interim high of $1.53 putting us up over 19.5%. Unfortunately, the recent broad market pull back has taken down just about every stock and Mexoro was not spared. In just the past thirteen trading sessions Mexoro has seen a retracement of over 31% on pretty decent volume. We think this presents a very good opportunity for those who have been sitting on the sidelines watching.

Shares of Mexoro closed Wednesday at $1.05 per share which is roughly 18% less than where it was when we first profiled the company. With 21 million shares outstanding, the market cap is $22.5 million. Mexoro raised $3 million dollars in a private placement last year to explore its properties in the Sierra Madre gold belt in the Chihuahua region. Originally we believed that this financing was creating an overhang on the stock but so far this has not been the case.

From April 19 till July 24th, there HAS NOT been a day where Mexoro closed under $1.00. It has broken below this level during the trading day only to see investors come in and support the stock. For a microcap stock, its been quite a feat that over 12 million shares have traded during the past 68 trading days. The 6 million shares at $0.50 from the $3 million financing have probably been sold or investors are holding for the long term. The strength in Mexoro’s stock is testament to investors’ belief in the company. This current retracement is either the start of a new leg down or just a great buying opportunity. Based on the chart and how the fundamentals are shaping up we believe the latter to be the case.

situation right now. Current Liabilities are 1,936 million
cash+equilants are 1,004 million, marketable securities=661 million=total 1,665 million. They are short by 271 million.
But account receivable= 384 million. If they receive the account receivable on time they are ok. But if there is any problem there AMZN is in trouble meeting obligations. In that case they may have to start liquidating inventory of 735 million. Some of that inventory may not be good may have to sell cheaply or written off. This is the cash crunch problem of AMZN. In a lousy economy; they definitly have trouble. The real problem is market cap of 34.5 BILLION for assets of less than 300 million. Stock could tumble if there is liquidity CRISIS or SALES going down. AMZN is showing profits by one time items such as Lower tax, forex conversions and juggling Depreciation, FCF, stock based compensation expenses, cap exp.

A reversal of Friday’s misfortune, as U.S. stocks enjoyed a bounce back today. The Dow 30 added 286.87 points (+2.18%) to close at 13,468.78. The S+P500 gained 34.61 (+2.42%) to 1,467.67, the NASDAQ added 36.08 (+1.44%) to 2,547.33, and the Russell 2000 gained 10.97 (+1.45%) to 766.39. Volume was slightly ahead of Friday’s sell off.

Tomorrow, the Federal Reserve’s policy committee meets and is expected to hold the Fed-funds target at 5.25%. Obviously, market pros will be looking to see if there is any mention of the sub-prime market mess anywhere in the statement. We don’t expect the Fed to ride to the rescue any time soon. Non-farm payrolls are expected to advance to about a 2% annual growth rate in the second quarter after a 1% first quarter gain. Consumer credit is expected to increase $6B in June after a $12.9B jump in May, as higher energy prices increase revolving credit.

Wednesday is relatively quiet, with wholesale inventories seen rising 0.4% in June. Thursday is the day all large publicly traded companies are due to file their quarterly 10-Qs with the SEC. Wall Street will be scouring the wires looking for any additional financial related casualties that might create further panic. Retailers report their July chain store sales numbers as well.

Friday, the July federal budget deficit is expected to hit $33.2B, and import prices are expected to rise 1.0% in July, but remain flat when gas prices are removed from the equation. We will look forward to show you our Weekly Market Commentary after the close on Friday.

Weekly Closing Market Commentary 8-03-2007

The path of least resistance the last several weeks has been down, as a mixed labor report did nothing to abate the additional bad news concerning another Bear Stearns private mortgage fund belly flop. Who could expect anything less during these dog days of summer?

It’s interesting to note that all four indices we follow were down more in just one day, today, than they were on the week. A brief rally did take hold late Wednesday and into Thursday and ahead of today’s dismal headlines, but there just wasn’t enough steam to maintain the follow through.

The Dow 30 lost 84 points (-0.06%) to close at 13,181.91 despite being down 284 points (-2.09%) today. Likewise, the S&P 500 gave up 25.89 points (-1.07%) for the week even though it lost 2.66% and was down 39 points in the week’s last trading frame. The tech heavy NASDAQ gave up 2.51% today (-64.73 points) but finished the week off 1.99% (-50.00) to close at 2511.25.

The Russell 2000 again took it a little harder than the rest. For the week, the small cap OTC index gave up 2.88% (-22.41 points) to close at 755.42. In Friday trade, the Russell gave up 3.64% and was down six points more than on the week. With an absence of any bright spots, the mixed labor numbers today would cause us to expect to hear more “street chatter” regarding hopes that the Federal Reserve may ride to the rescue with a rate cut. More benign inflation news could be just the trick to halt this bull market correction.