Going, Going, Gone...

Here are my picks for July. In this segment I pick 2 stocks that I am high on and 1 that I am not so high on.

Going (Long Buy): Petroleo Brasileiro SA PBR
This stock could be one of those stocks that make you say "why didn't I buy that stock when it was down in the gutter and everyone knew it would recover". PBR is the biggest oil company in Brazil (a growing market, which happens to be hosting the world cup in 2 years) and a history of success. Some recent legislation and a spill have put some negative light on the company, but with a P/E of 6, a solid dividend and a Q1 net profit margin that was up over 2011, it appears to be a decent value. At 19.50, it is down after being in the 30's in March. I bought in at 25 and although results haven't been great so far, I bought thinking long term and now its even a potential better value than before.

Another reason I am so high on Petroleo Brasileiro is that they have the rights to most of the deepwater wells off the coast of brazil, which are some of the biggest deep water reserves in the world. The economist did a write up about these reserves last year and if Petroleo Brasileiro can harness those reserves (as well as get through the legislation), their pool of oil could grow immensely. Oil companies have a history of hitting bumps and I think PBR could be on the upswing.

Going (1 Year - Long Buy): Skullcandy Inc SKUL
I personally think they offer the best value in the headphones category, which is saying something since they are supposed to be the "stylish" line. Their image keeps them relevant and will allow them to harness the youth market for a long time, with their endorsement program (that includes Kevin Durant and James Harden) and personalized products. They offer both entry and mid level products, which prevents them from being dependent on one market.

Another reason I am high in Skullcandy is the amount of shorts that are out on the stock. Apparently a lot of investors thought Skullcandy would be a bust after its IPO and looked to short. However, after 3 straight strong financial announcements, its looking like few of these people will be picking up their shorts and this will likely lead to an increased evaluation as the percentage of stock that is shorted is reduced.

Skullcandy products sync are compatible with iOS products and will likely see a huge boon in sales after the release of the new iPhone at some point in the new quarter. 9 analysts are calling for a $22 valuation, which means if you buy now at 14.50, there is some nice room for growth.

Gone (Stay Away): Microsoft MSFT
I actually liked Microsofts recovery prior to hearing the news that they were releasing not 1, but 2 tablets into the consumer market. While I agree the new surface tablet will sell, there are a lot of investors looking at Microsoft as capable of outselling the iPad. A lot of people will argue that the iPhone market share seemed insurmountable before the Android products came out, but I think phones are selected much differently than a tablet device. A tablet is not a necessity that every person feels they need, but rather a device for pleasure. Android phones are offered at a number of different prices, sizes and carriers, which allow people who wouldn't pay over 100 bucks for a phone to have a "android" phone. Microsoft isn't going to be able to just have their product offered in more places, it is going to have to out-cool the iPad and Microsoft has never been at the forefront of "cool".

Also, anyone who uses a tablet knows the key to the experience is the elegance of the apps, which Microsoft will be years behind iOS and even Android. I find it very hard to believe that Microsoft can create the level of development and applications that we see on iOS anytime soon, or for a profit for that matter. All the bells and whistles that were shown off were quite minimal in my opinion (who really cares about using it as a secondary controller for Xbox?) and as we all know, its all about the software. Mixed reviews on Windows 8 and their track record with making their own hardware scares me on this one. Lets not forget, their one success was the xbox 360 which came out BEFORE the PS3, not 2 years after like in the tablet market.