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November 16, 2004
Sold Lucent
On November 15, all shares of Lucent Technologies purcahsed for Northlake clients on October 19, 2004 were sold at $4.05. The shares were purchased as a trading idea at $3.55. The idea behinds the trade was to.....
....take advantage of Wall Street's skeptical view of Lucent ahead of several potential catalysts. Specifically, Northlake expected another decent quarter to be reported, awarding of a large contract for wireless infrastructure by Cingular, and possibly news that would reduce fears surrounding Lucent's large pension and health care liability to its retirees.
Fortunately, each one of these catalysts occured and the shares reached our $4 target ahead of schedule. Trading ideas require discipline, so despite good momentum in the shares and a better tone on Wall Street about Lucent shares, the shares were sold.
Other holdings recently purchased in client accounts are intermediate to long-term investment ideas. Motorola is the closest to a trading idea and would be most likely to be sold if the shares either (1) achieve the low to mid $20s target or (2) the expected catalyst (strong 4Q handset shipments and earnings) fails to materialize.
Posted by Steve Birenberg at November 16, 2004 11:26 AM in LU
Congratulations - nice call on the on the LU. Given that we have had a nice run of late (elections, commodity prices coming in and corp bond enthusiam driving buyback announcements) what are your short term and medium term expectations for the market? Also, I have noticed energy prices beginning to rise again, what exposure to energy do you normally like to have and are there any names you normally look at.
Posted by: spencer at November 19, 2004 02:58 PMRight now, Northlake owns no special situation energy equities. However, via our Mid Cap and Value ETFs we have decent exposure levels. The S&P 400 Mid Cap ETF is 9% energy. The S&P 500 is 7% energy as a comparison. Northlake's current holding in the Russell 2000 Value ETF has energy exposure. Direct exposure is 5%. The value ETF also has 13% materials and 7% utilities. Both of those areas contain some enrgy stocks as well.
For the market, my current playbook is for possible weakness into early December followed by a rally to close the year at the annual highs. I always remain flexible but like to have a short-term playbook, especially as it relates cash reserves held in client accounts. The market seems unusually news sensitive and there is great performance pressure on managers, who I believe mostly missed the latest rally. I think that gives the market a good bid that will contain downside barring unusually bad news that I don't expect.
Posted by: Steve Birenberg at November 22, 2004 12:59 PM