I believe that being successful in the stock market is much more than trying to predict the next trend.
I believe in finding a solid business with a core group of people running the company who have been there a while and have a vested interest in the future success of the business.
I believe that finding a company that pays a dividend to its shareholders and who has continued to pay that dividend for a long period of time is perfect for a buy and hold situation. Even better if they have continued to raise the dividend!
That being said, I'm going to make a bit of a prediction here.
I'm betting that Microsoft's share value will drop because of a botched search engine foray.
I'm also betting that once Time Warner spins off AOL, that company will flop as well.
Let's start with Microsoft.
It's no secret that Microsoft has been lagging behind Google and Yahoo for sometime in the search engine market.
They're also a distant third in online ad revenue behind Google and Yahoo.
Microsoft still has its nearly ubiquitous operating systems, although Vista was not nearly as well received as they would have liked.
But the future of computing is online, and Microsoft knows that. They've been trying to purchase Yahoo, or at least parts of Yahoo for a while now. A partnership between the two companies is probably the only way for Microsoft to have a chance at Google.
Online operating systems are already here, and cloud computing and software as a service (SaaS) are rapidly growing businesses. Microsoft wants to secure its place online, so what better way than to...do what they've already done.
Microsoft is gearing up for its big release of a new "decision engine" they're calling Bing. While it employs some new technology from Microsoft's purchase of Powerset, it mostly looks like a fancy Live Search.
They made the announcement and guess what happened next...
Google made an announcement of their own.
Google released information about Google Wave, an online tool for personal communication and collaboration on the web. It looks truly amazing, and I'm anxious for the opportunity to play around with it. It's a brand new HTML5 application, and it's open source! Google wants developers from around the world to pitch in and make this thing incredible. In fact, I'm so excited...
Oh wait, wasn't Microsoft saying something?
Google has gotten VERY good at playing their trump card at the perfect moment.
Sure, Microsoft has a new "decision engine" that will be available June 3, but look what GOOGLE is doing.
One of the most telling aspects of Microsoft's impending flop is the lukewarm response the Twitter community gave it.
Twitter has a list of trending topics that are hot throughout the community at any given moment. The day Microsoft made it's big announcement, "Bing" only reached #3 from what I saw, and by the end of the day, it was at the bottom of the list.
Microsoft is allegedly putting a lot of advertising money into promoting Bing. Something to the tune of $80 million, from what I've read.
That's a lot of money to throw at what looks to be a slightly jazzed up version of Live Search.
Microsoft isn't going to be competitive in the search engine and online advertising revenue market with Bing, and we're going to see that reflected in the share price of Microsoft(MSFT).
Now on to AOL.
Let's be clear here...AOL is not currently a stand-alone company nor can you purchase shares of just AOL.
Time Warner and AOL formed a partnership in 2001 and it has largely been regarded as one of the bigger corporate blunders in recent times.
Today it was announced that AOL will be spun off from Time Warner, and AOL will be left to pursue it's own business strategies.
That's like cutting off a diseased leg and throwing it to the wolves - telling your leg it can find its way to a new home.
AOL revenue has been lagging for years, and it will not survive for long by itself. Internet subscribers at one point provided $528 million per month in cash flow to AOL. That number is now 76 percent lower.
For the company to stand any real chance in the online ad revenue, or any other online business venture, AOL will need to be creative, and quickly.
Remember Bebo? It tugs a bit at my memory, but I'm sure AOL remembers it clearly.
That was AOL's attempted foray into the social media realm last year. It only cost them $850 million to find out that Bebo was NOT the next hot site.
They probably could have found that out by asking the collective teenage children of the company employees.
It's unclear right now how the corporate structure will be at AOL. I suspect it will be a public company, but the spin-off won't happen until the end of the year, Time Warner says.
If you do have the opportunity to buy AOL stock, don't. While Microsoft can recover from a blunder in the search engine business, AOL will not tread water for very long without thinking like MacGuyver.
Thursday, May 28, 2009
Thursday, May 21, 2009
The Stock Market and Your Money: Protecting Your Assets When Your Sanity is Lost
Okay, maybe the title of this post is a little dramatic, but I wanted to grab your attention.
Did I get it?
Wall Street has had an interesting week so far...we're just about par for the course with all 3 major indexes (as of Thursday night) just North of even.
These days, I'll take par for the course. If my holdings are staying put in value, I'm okay with that. But the trouble is I'm not making any money that way.
Or am I?
There are a number of ways to make money in a flat market or an up and down market. Many of them are far beyond my technical ability to understand or explain, and some simply aren't appropriate for the average investor. Options are a great way to make some money if you anticipate the stock price staying within a certain range, but not all investors have the kind of risk tolerance needed for options.
That leaves us with stocks that pay a dividend.
I know I write about dividend stocks a lot, but that's because they can be very nice to own. The company essentially pays you for each share of stock you own - sharing their profits with you!
When looking for a company that pays a dividend, also look to see how long they have paid it, and whether the amount has increased or decreased over time. Your best bet is to find a company with a long history of paying it's shareholders a dividend and a long history of steadily increasing the dividend.
Be careful though - too high of a yield percentage, and you may be looking at a company that can't sustain it's payments. When a company cuts it's dividend entirely or drops the yield, you'd better expect a drop in share price too.
My favorite dividend stock for a while has been Enterprise Products Partners (EPD). They are by no means the be-all and end-all for dividend stocks, but they have paid their dividend since inception and have been steadily increasing the yield.
Right now, for every share you own, you're paid $0.54 per fiscal quarter. Not too shabby. That means that for every 100 shares you own of EPD, you earn $54 a quarter.
Of course that's assuming we aren't going to reinvest our dividends - but we are. The trading company I trade with - ShareBuilder - lets me automate my dividend reinvestment. This means that every quarter, the dividend cash I'm given automatically buys more shares of the company.
Next time I may own 104 shares of the company, and next quarter I'll get an even larger dividend.
Reinvesting your dividends also helps you with dollar-cost averaging. This basically means you spread your investment in a particular stock over a period of time. That way, if the price dips you get in at a sale, and if it rises, you're adding to your position while it's strong.
Some people say this is simply a scheme by the brokerage firms to charge you a fee every time you invest - and there is some truth to that. But I'm not suggesting you do quite that. Reinvesting your dividends should be automatic, and free.
Let's take a look at another well known company with a solid dividend: Johnson & Johnson (JNJ). They have been paying their dividend every quarter since 1987. That seems pretty reliable to me. The current yield stands at over 3.5%, and they have posted very steady gains throughout the years.
While I wouldn't suggest you divert your entire portfolio to a company like Johnson & Johnson, they are a safe, dividend-paying company that isn't going to go out of business anytime soon.
I have three final thoughts regarding the not-so-distant market future.
1.) AT&T and Verizon's plan to get into netbooks is not going to end well. I'm young. I know what I like and what I don't. I feel as though I have a fairly good grasp on what people my age like and are willing to buy (or have their parents buy).
Netbooks are not one of those things.
Why? Because I would rather have a laptop. They aren't that much larger in size, and once you factor in the cost of the monthly payments on a netbook, the price is similar.
But netbooks are limited machines. They are essentially designed to use the internet - not to compute. We like our iTunes. We like our MSN Messenger.
Yes, I'm fully aware of SaaS...that's software as a service (Think: Akamai [AKAM]). We may reach the day when iTunes and our virtual music libraries are entirely online. We may reach the day when all of the programs that we run are simply run in cyberspace, without the need for mega-computing power. But when we reach that day, we'll be beyond netbooks.
2.) I still very much like gold plays. You can read about my ideas concerning inflation in my other blog post, and I still believe they are a solid play. The stock I'm watching - Yamaha Gold (AUY). Not only do they seem to be a very solid gold producer, but they also pay a dividend!
*gasp* My favorite!
The yield right now isn't extraordinary - .38% - but it's better than nothing while you watch the stock price increase while the market falls.
What's that? Oh yes - today as the market dropped 1.54%, 1.68% and 1.89% respectively, Yamaha added on nearly 5 percent. They have a beta of .75, meaning they will move in the opposite direction of the market. If you feel like we're heading downward, this might be a move to look into.
3.) I'm very short on OpenTable (OPEN). It's an IPO right now, and you probably can't get your hands on it yet, but I'd bet my bottom dollar we'll see that share price come back out of orbit.
Why?
Because it shot up some 60 percent right out of the gate. And because the market share in the U.S. is limited in their industry - in fact you could say the recession is causing restaurant closures and cutting into potential market opportunities.
And I'm short on it because they had some trouble establishing themselves in Europe. I believe they opened in France, Spain in 2006-7 ish, and they closed their business their the next year. That's not what I want to see from a company I'm thinking about putting money into.
And lastly, I'm short on OpenTable because of the current economic environment. We're in a recession. People aren't eating out as much. Restaurants are dying off, with just the strong ones and the value-oriented ones surviving. Business isn't exactly booming at the places still standing - although I wouldn't be surprised if companies like Shari's and Denny's are doing well.
It's not that I don't like OpenTable itself. I just don't like it's share price at $31.89.
As always, any suggestions made regarding the stock market and individual stocks are my own ideas and personal opinion. Always do your own due diligence before investing any amount of money. And good luck out there!
Did I get it?
Wall Street has had an interesting week so far...we're just about par for the course with all 3 major indexes (as of Thursday night) just North of even.
These days, I'll take par for the course. If my holdings are staying put in value, I'm okay with that. But the trouble is I'm not making any money that way.
Or am I?
There are a number of ways to make money in a flat market or an up and down market. Many of them are far beyond my technical ability to understand or explain, and some simply aren't appropriate for the average investor. Options are a great way to make some money if you anticipate the stock price staying within a certain range, but not all investors have the kind of risk tolerance needed for options.
That leaves us with stocks that pay a dividend.
I know I write about dividend stocks a lot, but that's because they can be very nice to own. The company essentially pays you for each share of stock you own - sharing their profits with you!
When looking for a company that pays a dividend, also look to see how long they have paid it, and whether the amount has increased or decreased over time. Your best bet is to find a company with a long history of paying it's shareholders a dividend and a long history of steadily increasing the dividend.
Be careful though - too high of a yield percentage, and you may be looking at a company that can't sustain it's payments. When a company cuts it's dividend entirely or drops the yield, you'd better expect a drop in share price too.
My favorite dividend stock for a while has been Enterprise Products Partners (EPD). They are by no means the be-all and end-all for dividend stocks, but they have paid their dividend since inception and have been steadily increasing the yield.
Right now, for every share you own, you're paid $0.54 per fiscal quarter. Not too shabby. That means that for every 100 shares you own of EPD, you earn $54 a quarter.
Of course that's assuming we aren't going to reinvest our dividends - but we are. The trading company I trade with - ShareBuilder - lets me automate my dividend reinvestment. This means that every quarter, the dividend cash I'm given automatically buys more shares of the company.
Next time I may own 104 shares of the company, and next quarter I'll get an even larger dividend.
Reinvesting your dividends also helps you with dollar-cost averaging. This basically means you spread your investment in a particular stock over a period of time. That way, if the price dips you get in at a sale, and if it rises, you're adding to your position while it's strong.
Some people say this is simply a scheme by the brokerage firms to charge you a fee every time you invest - and there is some truth to that. But I'm not suggesting you do quite that. Reinvesting your dividends should be automatic, and free.
Let's take a look at another well known company with a solid dividend: Johnson & Johnson (JNJ). They have been paying their dividend every quarter since 1987. That seems pretty reliable to me. The current yield stands at over 3.5%, and they have posted very steady gains throughout the years.
While I wouldn't suggest you divert your entire portfolio to a company like Johnson & Johnson, they are a safe, dividend-paying company that isn't going to go out of business anytime soon.
I have three final thoughts regarding the not-so-distant market future.
1.) AT&T and Verizon's plan to get into netbooks is not going to end well. I'm young. I know what I like and what I don't. I feel as though I have a fairly good grasp on what people my age like and are willing to buy (or have their parents buy).
Netbooks are not one of those things.
Why? Because I would rather have a laptop. They aren't that much larger in size, and once you factor in the cost of the monthly payments on a netbook, the price is similar.
But netbooks are limited machines. They are essentially designed to use the internet - not to compute. We like our iTunes. We like our MSN Messenger.
Yes, I'm fully aware of SaaS...that's software as a service (Think: Akamai [AKAM]). We may reach the day when iTunes and our virtual music libraries are entirely online. We may reach the day when all of the programs that we run are simply run in cyberspace, without the need for mega-computing power. But when we reach that day, we'll be beyond netbooks.
2.) I still very much like gold plays. You can read about my ideas concerning inflation in my other blog post, and I still believe they are a solid play. The stock I'm watching - Yamaha Gold (AUY). Not only do they seem to be a very solid gold producer, but they also pay a dividend!
*gasp* My favorite!
The yield right now isn't extraordinary - .38% - but it's better than nothing while you watch the stock price increase while the market falls.
What's that? Oh yes - today as the market dropped 1.54%, 1.68% and 1.89% respectively, Yamaha added on nearly 5 percent. They have a beta of .75, meaning they will move in the opposite direction of the market. If you feel like we're heading downward, this might be a move to look into.
3.) I'm very short on OpenTable (OPEN). It's an IPO right now, and you probably can't get your hands on it yet, but I'd bet my bottom dollar we'll see that share price come back out of orbit.
Why?
Because it shot up some 60 percent right out of the gate. And because the market share in the U.S. is limited in their industry - in fact you could say the recession is causing restaurant closures and cutting into potential market opportunities.
And I'm short on it because they had some trouble establishing themselves in Europe. I believe they opened in France, Spain in 2006-7 ish, and they closed their business their the next year. That's not what I want to see from a company I'm thinking about putting money into.
And lastly, I'm short on OpenTable because of the current economic environment. We're in a recession. People aren't eating out as much. Restaurants are dying off, with just the strong ones and the value-oriented ones surviving. Business isn't exactly booming at the places still standing - although I wouldn't be surprised if companies like Shari's and Denny's are doing well.
It's not that I don't like OpenTable itself. I just don't like it's share price at $31.89.
As always, any suggestions made regarding the stock market and individual stocks are my own ideas and personal opinion. Always do your own due diligence before investing any amount of money. And good luck out there!
Sunday, May 17, 2009
Wall Street's Near Future: What to do About Personal Finance
When it comes to managing my own stock portfolio, I'll admit to some serious head scratching.
Trying to predict the stock market with any real accuracy is an exercise in futility.
It's kind of like predicting the weather where I'm from in North Idaho. You can scan the horizon, take measure of the clouds, see what others are saying and kick the dirt around a little bit. Your timing may not be perfect, but hopefully you can stay dry on your next outing.
The markets are a similar beast. You can scan the quarterly earnings, take measure of the 30 day trends, see what Warren Buffet is buying, and kick around the statements from the C-levels in the companies. Your timing may not be perfect, but hopefully you can pick out a safe investment or two that will bring you healthy returns.
Right now I think we're going to see some further rain clouds.
I've been saying it for a while now. The 30% gains we saw from the "bottom" in March were based on almost nothing. The economic news isn't good - it's simply not quite as bad as it's been. I think investors are looking for something a little more solid, and so am I.
So where does that leave my portfolio?
Well I actually maintain two separate accounts. One has my buy & hold money, and the other has my active-trading money. The buy and hold account is staying where it is. After watching the market drop off last week, I regret a little bit not locking in the gains (or at least the creep back towards even!), but it's my buy & hold account for a reason.
Some of the stocks in that account have an amazing dividend that I will happily sit back and collect every quarter (Enterprise Products Partners [EPD]). Others I simply like what I see in the future (Melco Crown [MPEL]).
My other account is what I'm interested in these days. I mentioned before that I'm looking into gold stocks (AUY). I also like Taseko Mines (TGB) as a copper play, but I'm not sure if I'm ready to buy that yet. In the near term, I'm short on financial stocks. (Short meaning I see the stock price dropping or staying at the current level)
I still like Wells Fargo (WFC), but I'm going to wait a little bit before getting back in. I see Citi (C) and Bank of America (BAC) staying low for a while.
I also am short on home builders. The housing market is starting to adjust and we're seeing the pace of purchases pick back up - but that's because prices are incredibly low. I don't think many builders will be back to major work anytime soon.
For now, I would suggest stocks with a beta around 1 or lower (meaning the stock will follow the market, or if <1, it will head the opposite direction).
I also am looking for companies that offer products that people will always buy. Johnson & Johnson (JNJ) is a very solid company with products that are always in demand. They also have a wonderful dividend yield of 3.54%!
A sense of patience is probably prudent these days. I think the market is probably going to head lower for a month or two. With earnings reports behind, there isn't much economic news to focus on, other than the weekly/monthly jobs reports. It might not hurt to simply leave your cash in a high-yield savings or checking account.
Don't have a checking account with a nice yield? Try ING Direct. I use them to stash my stock market cash before deciding to invest it. They offer checking accounts with an APY of up to 1.65%.
That APY might help keep you dry while you eye the sky for the next clear and sunny day.
As always, any individual stock mentions are purely suggestions and personal opinion. Doing your own due diligence is a must for any sort of financial investment.
Trying to predict the stock market with any real accuracy is an exercise in futility.
It's kind of like predicting the weather where I'm from in North Idaho. You can scan the horizon, take measure of the clouds, see what others are saying and kick the dirt around a little bit. Your timing may not be perfect, but hopefully you can stay dry on your next outing.
The markets are a similar beast. You can scan the quarterly earnings, take measure of the 30 day trends, see what Warren Buffet is buying, and kick around the statements from the C-levels in the companies. Your timing may not be perfect, but hopefully you can pick out a safe investment or two that will bring you healthy returns.
Right now I think we're going to see some further rain clouds.
I've been saying it for a while now. The 30% gains we saw from the "bottom" in March were based on almost nothing. The economic news isn't good - it's simply not quite as bad as it's been. I think investors are looking for something a little more solid, and so am I.
So where does that leave my portfolio?
Well I actually maintain two separate accounts. One has my buy & hold money, and the other has my active-trading money. The buy and hold account is staying where it is. After watching the market drop off last week, I regret a little bit not locking in the gains (or at least the creep back towards even!), but it's my buy & hold account for a reason.
Some of the stocks in that account have an amazing dividend that I will happily sit back and collect every quarter (Enterprise Products Partners [EPD]). Others I simply like what I see in the future (Melco Crown [MPEL]).
My other account is what I'm interested in these days. I mentioned before that I'm looking into gold stocks (AUY). I also like Taseko Mines (TGB) as a copper play, but I'm not sure if I'm ready to buy that yet. In the near term, I'm short on financial stocks. (Short meaning I see the stock price dropping or staying at the current level)
I still like Wells Fargo (WFC), but I'm going to wait a little bit before getting back in. I see Citi (C) and Bank of America (BAC) staying low for a while.
I also am short on home builders. The housing market is starting to adjust and we're seeing the pace of purchases pick back up - but that's because prices are incredibly low. I don't think many builders will be back to major work anytime soon.
For now, I would suggest stocks with a beta around 1 or lower (meaning the stock will follow the market, or if <1, it will head the opposite direction).
I also am looking for companies that offer products that people will always buy. Johnson & Johnson (JNJ) is a very solid company with products that are always in demand. They also have a wonderful dividend yield of 3.54%!
A sense of patience is probably prudent these days. I think the market is probably going to head lower for a month or two. With earnings reports behind, there isn't much economic news to focus on, other than the weekly/monthly jobs reports. It might not hurt to simply leave your cash in a high-yield savings or checking account.
Don't have a checking account with a nice yield? Try ING Direct. I use them to stash my stock market cash before deciding to invest it. They offer checking accounts with an APY of up to 1.65%.
That APY might help keep you dry while you eye the sky for the next clear and sunny day.
As always, any individual stock mentions are purely suggestions and personal opinion. Doing your own due diligence is a must for any sort of financial investment.
Wednesday, May 13, 2009
Are the Stock Markets Downward Ho?
Well I think my gut was right...we're starting to see the downward trend again across the markets. Why? Because the upward trend was based on nothing but cheerleading and hope.
Hope that the half million jobs lost last month wouldn't have as much of an impact as the 600,000 lost the month before. Hope that the government could continue to print money and bail out companies like AIG, GM and Freddie/Fannie. Hope that the losses posted by company after company the first quarter somehow could slide by unnoticed.
Well, they've been noticed.
I can look at MGM as an example. Here is a company that saw it's stock price skyrocket over 700 percent from March 2009 to early May. How many 7 baggers did you have in your portfolio during that period? The funny thing is that I knew the stock was oversold. This was a multi-billion dollar company that was trading as low as $1.81/share.
There was bound to be a bounce.
And then it kept bouncing, and bouncing and bouncing, breaking $13/share on May 11. Meanwhile, I live in Vegas and all I'm reading in the newspapers is how perilously close MGM is to declaring bankruptcy. They battled in court with their financial partner in the CityCenter project just to keep construction going! They were forced to cut one of their condominium towers in half due to some faulty construction! Was nobody else getting this news?
Today I watched as reality sunk in to the stock price. It fell nearly 30 percent today during normal trading hours, and another almost 11 percent after hours. As of 8 pm EST, it was at $7.75. Had you bought at $1.81, you would still have a nice return, but this is a much more realistic valuation of the company at the current moment. I like MGM as a company, and I wish I had bought their stock when I first considered it. But right now I think it's a bit volatile for my taste.
I turn also to my most recent purchase: Wells Fargo (WFC). I mentioned in my previous post that I felt Wells Fargo and I were going to be a long term thing. My gut ended up telling me otherwise. I bought around $19 a share, sold it at $25.75 a share and then watched it RISE to over $28/share on May 8 AFTER the stress tests revealed the bank would need to raise billions in capital to cover itself.
Talk about crazy. How on Earth did Wells Fargo's stock rise when the Fed announced the bank was essentially too weak? I don't pretend to be any sort of market expert, but that just seemed counter intuitive.
Well lo and behold, reality sunk in this week. The stock has sunk over 14 percent across the past three days, and in after hours trading, ended up at $24.06. I'm glad I got out at $25.75! What will tomorrow bring? At this point, who the heck knows!?
I'm not a negative person, and I don't like to watch my portfolio value sink lower either, but it's nice to see the prices come back down from orbit. MGM Mirage and Wells Fargo are but two examples of stock rebounds that were based on hopes and dreams.
Now comes reality.
With the incredible amount of money being printed in the U.S. (and in many other countries across the globe), we are going to run into severe inflation at some point. Oil prices just broke $60/barrel, and in case you haven't been watching you're local Shell station, prices at the pump are starting to rise too. The gas station by my place has gone from $2.06/gal to $2.24 in the past couple of weeks.
Inflation will also devalue the dollar, and will make it harder for those of us who still have jobs to be spending on the economy and helping it recover. We already aren't buying new cars (sorry Chrysler, GM) or new plasma screen TVs (sorry Sony, Panasonic, utilities companies)...think we'll splurge on $5 loaves of bread?
I'm not writing this to be a harbinger of doom. I don't believe in that junk. I'm not stocking up on bullets and bottled water. Yet. But I am turning my attention to some stocks that may help me ride out inflation.
Traditionally precious metals like gold have been favorite refugees for investors, and I don't think this go-round is any different. I'm keeping my positions in the medical/health industry (AOB), the gaming industry (MPEL), the steel industry (GSI), the oil industry (GLBL, EPD) and the technology industry (ACTU, ITLN). But I think I may just diversify some more and make my next purchase a golden one.
I've been looking at Yamaha Gold (AUY), but there are some other interesting companies out there worth taking a look at. Vista Gold (VGZ) and Western Goldfields (WGW) could hold some promise. I also like Taseko Mines (TGB) as a copper play. I've been watching them for a long time - I wish I would have gotten in at $0.75, but even at $1.35 it still looks attractive.
As always, these are only suggestions. Doing your own due diligence is a must. I think there is some real potential out there in the stock markets, but I think it'll take a combination of patience and rational thinking!
Hope that the half million jobs lost last month wouldn't have as much of an impact as the 600,000 lost the month before. Hope that the government could continue to print money and bail out companies like AIG, GM and Freddie/Fannie. Hope that the losses posted by company after company the first quarter somehow could slide by unnoticed.
Well, they've been noticed.
I can look at MGM as an example. Here is a company that saw it's stock price skyrocket over 700 percent from March 2009 to early May. How many 7 baggers did you have in your portfolio during that period? The funny thing is that I knew the stock was oversold. This was a multi-billion dollar company that was trading as low as $1.81/share.
There was bound to be a bounce.
And then it kept bouncing, and bouncing and bouncing, breaking $13/share on May 11. Meanwhile, I live in Vegas and all I'm reading in the newspapers is how perilously close MGM is to declaring bankruptcy. They battled in court with their financial partner in the CityCenter project just to keep construction going! They were forced to cut one of their condominium towers in half due to some faulty construction! Was nobody else getting this news?
Today I watched as reality sunk in to the stock price. It fell nearly 30 percent today during normal trading hours, and another almost 11 percent after hours. As of 8 pm EST, it was at $7.75. Had you bought at $1.81, you would still have a nice return, but this is a much more realistic valuation of the company at the current moment. I like MGM as a company, and I wish I had bought their stock when I first considered it. But right now I think it's a bit volatile for my taste.
I turn also to my most recent purchase: Wells Fargo (WFC). I mentioned in my previous post that I felt Wells Fargo and I were going to be a long term thing. My gut ended up telling me otherwise. I bought around $19 a share, sold it at $25.75 a share and then watched it RISE to over $28/share on May 8 AFTER the stress tests revealed the bank would need to raise billions in capital to cover itself.
Talk about crazy. How on Earth did Wells Fargo's stock rise when the Fed announced the bank was essentially too weak? I don't pretend to be any sort of market expert, but that just seemed counter intuitive.
Well lo and behold, reality sunk in this week. The stock has sunk over 14 percent across the past three days, and in after hours trading, ended up at $24.06. I'm glad I got out at $25.75! What will tomorrow bring? At this point, who the heck knows!?
I'm not a negative person, and I don't like to watch my portfolio value sink lower either, but it's nice to see the prices come back down from orbit. MGM Mirage and Wells Fargo are but two examples of stock rebounds that were based on hopes and dreams.
Now comes reality.
With the incredible amount of money being printed in the U.S. (and in many other countries across the globe), we are going to run into severe inflation at some point. Oil prices just broke $60/barrel, and in case you haven't been watching you're local Shell station, prices at the pump are starting to rise too. The gas station by my place has gone from $2.06/gal to $2.24 in the past couple of weeks.
Inflation will also devalue the dollar, and will make it harder for those of us who still have jobs to be spending on the economy and helping it recover. We already aren't buying new cars (sorry Chrysler, GM) or new plasma screen TVs (sorry Sony, Panasonic, utilities companies)...think we'll splurge on $5 loaves of bread?
I'm not writing this to be a harbinger of doom. I don't believe in that junk. I'm not stocking up on bullets and bottled water. Yet. But I am turning my attention to some stocks that may help me ride out inflation.
Traditionally precious metals like gold have been favorite refugees for investors, and I don't think this go-round is any different. I'm keeping my positions in the medical/health industry (AOB), the gaming industry (MPEL), the steel industry (GSI), the oil industry (GLBL, EPD) and the technology industry (ACTU, ITLN). But I think I may just diversify some more and make my next purchase a golden one.
I've been looking at Yamaha Gold (AUY), but there are some other interesting companies out there worth taking a look at. Vista Gold (VGZ) and Western Goldfields (WGW) could hold some promise. I also like Taseko Mines (TGB) as a copper play. I've been watching them for a long time - I wish I would have gotten in at $0.75, but even at $1.35 it still looks attractive.
As always, these are only suggestions. Doing your own due diligence is a must. I think there is some real potential out there in the stock markets, but I think it'll take a combination of patience and rational thinking!
Sunday, May 3, 2009
Updates Updates
It's now been about seven months since I made the transition from N Idaho to Las Vegas. I'm still alive...
Much as I have seen some wild, crazy things here in Las Vegas, we have also seen some wild, crazy things happen in the stock markets. I've held onto my shares of GSI, MPEL, AOB, GLBL, ITLN through it all. I've added to my holdings, sold off shares of other companies, and picked up some new ones.
I added Wells Fargo (WFC) as a new holding and re-introduced myself to NovaMed (NOVA).
It's been a frantic six months, and I've watch my portfolio sink deeper and deeper into the red. But you know what happened? Things started to turn around. Despite the economic conditions, the US stock markets have risen substantially over the past 6-7 weeks.
Shares of companies that I've owned for a while are returning to normal, and I just sold NOVA again for a clean 35% gain. Wells Fargo and I are going to be in this for the long haul, however. They have a very nice dividend (which I'm reinvesting of course) and I think it will pay off nicely.
Looking forward though, I'm not sure the current bullish trend will sustain. There's a remarkable amount of negative economic news out there, and yet the markets have continued to rise. Chrysler went bankrupt, and the GDP fell by 6.1% - more than expected. Yet the market rose.
Where can we go from here?
I'm afraid down is the answer. The latest job loss report is expected this week, with another 580,000 jobs gone in April. While this would be the fewest since October, more than a half million tax-paying, grocery-buying, vehicle-driving Americans will have lost their jobs. The continued unemployment IS having an impact on our country - it just seems the markets haven't recognized it yet.
We also have the results of the bank stress tests coming out this week - assuming the Fed doesn't delay again. Goldman Sachs should be fine. Wells Fargo is also a likely safe one. B of A has already been warned by the Fed about their status. It will be interesting to see how much information they make public, and just what that info is. My guess is we'll hear mostly "good news" because it's in the government's best financial interest to keep the bull market going.
There was a very interesting commentary on MarketWatch last week that I would encourage anyone to read. The title is Sell in May and Go Away. The basic premise is that the bull trend isn't sustainable and we'll see another large drop in the near future. That is also my gut feeling.
I hope I'm wrong. I would love to watch my holdings to pare their losses and continue to see my portfolio value rise. I'm just not sure we're there yet.
That being said, if/when stock prices sink again, I've got my eye on some stocks I'd love to hold! If I can get them on sale - even better.
Last thought....click through the comments on the MarketWatch article. On page 7 (roughly), there is a decent technical comment from john qp that may give you a more technical insight. Don't worry if you don't understand Elliot Waves... you don't need to to get the general gist.
By the way, I was recently approved for a mortgage loan, so I've been house hunting lately! The Las Vegas real estate market has been positively hammered, so I may soon be a home owner!
Much as I have seen some wild, crazy things here in Las Vegas, we have also seen some wild, crazy things happen in the stock markets. I've held onto my shares of GSI, MPEL, AOB, GLBL, ITLN through it all. I've added to my holdings, sold off shares of other companies, and picked up some new ones.
I added Wells Fargo (WFC) as a new holding and re-introduced myself to NovaMed (NOVA).
It's been a frantic six months, and I've watch my portfolio sink deeper and deeper into the red. But you know what happened? Things started to turn around. Despite the economic conditions, the US stock markets have risen substantially over the past 6-7 weeks.
Shares of companies that I've owned for a while are returning to normal, and I just sold NOVA again for a clean 35% gain. Wells Fargo and I are going to be in this for the long haul, however. They have a very nice dividend (which I'm reinvesting of course) and I think it will pay off nicely.
Looking forward though, I'm not sure the current bullish trend will sustain. There's a remarkable amount of negative economic news out there, and yet the markets have continued to rise. Chrysler went bankrupt, and the GDP fell by 6.1% - more than expected. Yet the market rose.
Where can we go from here?
I'm afraid down is the answer. The latest job loss report is expected this week, with another 580,000 jobs gone in April. While this would be the fewest since October, more than a half million tax-paying, grocery-buying, vehicle-driving Americans will have lost their jobs. The continued unemployment IS having an impact on our country - it just seems the markets haven't recognized it yet.
We also have the results of the bank stress tests coming out this week - assuming the Fed doesn't delay again. Goldman Sachs should be fine. Wells Fargo is also a likely safe one. B of A has already been warned by the Fed about their status. It will be interesting to see how much information they make public, and just what that info is. My guess is we'll hear mostly "good news" because it's in the government's best financial interest to keep the bull market going.
There was a very interesting commentary on MarketWatch last week that I would encourage anyone to read. The title is Sell in May and Go Away. The basic premise is that the bull trend isn't sustainable and we'll see another large drop in the near future. That is also my gut feeling.
I hope I'm wrong. I would love to watch my holdings to pare their losses and continue to see my portfolio value rise. I'm just not sure we're there yet.
That being said, if/when stock prices sink again, I've got my eye on some stocks I'd love to hold! If I can get them on sale - even better.
Last thought....click through the comments on the MarketWatch article. On page 7 (roughly), there is a decent technical comment from john qp that may give you a more technical insight. Don't worry if you don't understand Elliot Waves... you don't need to to get the general gist.
By the way, I was recently approved for a mortgage loan, so I've been house hunting lately! The Las Vegas real estate market has been positively hammered, so I may soon be a home owner!
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