tag:blogger.com,1999:blog-80585691886238806132024-03-13T18:19:39.120-07:00Marketing, Investing, RamblingI write about what I find interesting in my career and my life. This generally includes marketing, public relations, stock investment and travel.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.comBlogger31125tag:blogger.com,1999:blog-8058569188623880613.post-74113837002743591892011-04-14T13:33:00.000-07:002012-07-19T06:15:52.513-07:00Bored Marketing Idea #1 - Fast Food French Fries<script type="text/javascript">
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<p>McDonald's might be the most popular of the bunch, but fast food burger operators know that the quality (and uniqueness) of their french fries will be a motivating force for repeat business.</p>
<p>I've moved! To read the rest of the post, check out the article on my new site: zacksimpson.com.</p>
<p>Here's the specific <a href="http://www.zacksimpson.com/marketing-idea-mcdonalds-french-fries/">french fry marketing idea</a> post.</p>
<p>Thanks for reading!</p>Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-20442463781745591212011-03-24T16:13:00.000-07:002012-07-07T12:27:32.825-07:00Online Retail Marketing in a Post-Recession World<script type="text/javascript">
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In our post-recession economy, it's becoming increasingly important to seek efficient, profitable growth and adapt to changing consumer behaviors.<br />
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From a marketing standpoint, it's unlikely that past methods will yield efficient returns on spending. The downturn has fundamentally changed consumer expectations in a lasting way. Tricks and gimmicks are a thing of the past – replaced with an expectation of product quality and customer service.<br />
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These changes in consumer mindset will require online retailers to improve and adapt their efforts across each marketing channel, with a new focus on engagement with the consumer. Marketers must also increase the efficiency at which they spend their budgets and leverage key technologies to earn consumer loyalty.<br />
<p>The rest of the article can be found on my new site: <a href="http://www.zacksimpson.com/online-marketing-in-a-post-recession-world">www.zacksimpson.com/online-marketing-in-a-post-recession-world</a></p>
<p>I've moved just a few of the posts from this Blogger account over, and this is one of them. Thanks!</p>
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<p>Conclusions drawn from <a href="http://www.accenture.com/us-en/landing-pages/dynamic/Pages/fy11-gi.aspx?group=chameleon&c=ad_giussmFY11_10001026&n=sm_0111">Accenture</a> research report.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-21579243951953778692012-06-23T18:19:00.001-07:002012-06-23T18:19:19.560-07:00Blog is Moving<script type="text/javascript">
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<p>Well, I finally upgraded.</p>
<p>Don't get me wrong - Blogger is a great service and it was the perfect thing for me to begin writing about stocks and marketing.</p>
<p>But I finally took the plunge and bought my own site. Everything stock and marketing related will now be housed at <a href="http://www.zacksimpson.com">www.zacksimpson.com</a>.</p>
<p>I'm also mixing in some posts about life, but I intend to largely keep in stock market and marketing-related.</p>
<p>To whomever has read anything I've written here: I thank you.</p>Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-53231972512480426852012-02-25T00:48:00.003-08:002012-02-25T00:55:21.940-08:00Holdings Update 2012<script type="text/javascript">
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<p>I'm a terrible blogger. I come around here...what? Like once every 10 months? Terrible!</p><p>But I mean well. I'm genuinely passionate about the stock market, and I remain an avid reader of all things marketing news.</p><p>My <a href="http://caps.fool.com/player/starz188.aspx">Motley Fool CAPS score</a> has been wild over the past year. I briefly reached a 95 ranking, only to drop to 85 when I green-thumbed a number of silver stocks a bit early. I'm long on silver, so I'm not terribly concerned, and several of those green-thumbs are now earning me points and repairing my overall score to ~93.</p><p>These days I'm long on metals, energy, and Gorilla Glass.</p><p>If you're not familiar with Gorilla Glass, check out Corning, Inc (<a href="http://www.google.com/finance?q=GLW">GLW</a>). Their big revenue driver remains LCDs, but Gorilla Glass is the stuff Apple uses in their iPads, iPhones, as well as numerous other companies' products.</p><p>Basically the stuff is wonder-glass...it's break and scratch-resistant; perfect for touchscreen technology. It's also being used in TVs, kitchen appliances, and more.</p><p>Corning faces competition on a variety of their businesses, so do your due diligence, but I'm long on GLW and would recommend the stock. A healthy dividend yield will help while you wait for the stock price increase.</p><p>My other current holdings include: Melco Crown Entertainment (<a href="http://www.google.com/finance?q=MPEL">MPEL</a>), Enterprise Products Partners (<a href="http://www.google.com/finance?q=EPD">EPD</a>), Berkshire Hathaway (<a href="http://www.google.com/finance?q=BRK.B">BRK.B</a>), Activision Blizzard (<a href="http://www.google.com/finance?q=ATVI">ATVI</a>), General Steel Holdings (<a href="http://www.google.com/finance?q=GSI">GSI</a>), and Taseko Mines Limited (<a href="http://www.google.com/finance?q=TGB">TGB</a>).</p><p>Truthfully, I'm skeptical about GSI. I just doubled-down to lower my cost basis, but the company is woefully underperforming. Unless they turn things around next quarter, I'll look to liquid my shares and move to something better.</p><p>I will probably never sell EPD. Enterprise has consistently raised their dividend nearly every quarter, they are profitable and healthy, and the stock price has nearly doubled from my original purchase price. It's hard not to love that.</p><p>Other than Enterprise, I love Melco Crown (MPEL) and the success they've had in Macau. I still feel they are under-valued, and the last quarter's financials back me up on that. I'm in this one for the long haul until the fundamentals change. Las Vegas Sands (LVS) and Wynn (WYNN) may eventually force my hand...</p><p>My only other long-term play that I'll begin buying into with RM is silver. Across the board I'm looking at silver exposure for the next 20 year period. Silver has applications in technology that gold simply doesn't, and I'm concerned about domestic production reserves. Feel free to disagree, but I'm putting my opinion out there.</p><p>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! </p>Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-72469943981166354422011-04-13T09:52:00.000-07:002011-04-13T09:52:51.076-07:00Your Brilliant Marketing Means Nothing<script type="text/javascript">
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<p><u>Fun fact:</u> all the clever marketing in the world won't make up for a shitty product or poor customer service.</p><p>Despite the best efforts of marketing, branding and advertising, an organization simple cannot overcome ineffectiveness within it's core competencies.</p><p>Although this would seem to be a common sense business ideology, many businesses fail to invest in product refinement and customer service training. Why is that?</p><p>How many companies can you think of who have made their service the marketing message? Off the top of my head: Southwest, Zappos...and that's about it without spending much time considering it.Want to guess where these companies rank in their respective industries?</p><p><center><strong><font size=+1>Modern Consumers Demand Satisfaction</font></strong></center></p><p>Our world is globally connected. We carry the power of the internet in our pockets. It is simply too easy for consumers to find your competitors if you do not provide them the service they expect.</p><p>What's more, they're more likely than ever to take to a virtual soapbox and decry your company. Why give them any reason to?</p><p>Companies must make money to exist, and I'm not suggesting businesses bow to the threat of virtual strong-arm tactics. However, most customer requests or complaints are usually well within the margin a business operates.</p><p>I used the example two weeks ago about <a href="http://zacksimpson.blogspot.com/2011/04/necessity-of-understanding-customer.html">Hainan Airlines</a> and their shocking lack of customer service. I don't believe my requests were unreasonable (I was asking for their online quoted price over the phone, when their website went down), yet I didn't get my issue resolved, and I moved on to their direct competitor (Korean Airlines). It seems irrational that a business would operate in this way. What's more - I had heard nothing but POSITIVE things about Hainan Air. Perhaps it was an off-week for them.</p><p>To keep this short, businesses (particularly small to mid-sized businesses) need to invest more resources into their CRM, and in product/service refinement. If you sell ceiling tiles on the internet, invest in nothing but the highest quality tiles.</p><p>If you sell concert tickets online, then make sure customer relations management is a top priority. Positive customer experiences will lead to repeat customers, increasing their lifetime value. What's more, their virtual soapbox becomes their place to serve as a brand advocate. Which would you prefer?</p><p><i>The bottom line: Invest in strengthening your core competencies before opening up the marketing budget. If your customer experience is shoddy, you'll only do more harm than good by marketing to new consumers.</i></p>Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-54678834673962612872011-04-01T14:21:00.000-07:002011-04-13T09:09:25.883-07:00The Necessity of Understanding Customer Lifetime Value in Marketing<script type="text/javascript">
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<p>I wrote recently about <a href="http://zacksimpson.blogspot.com/2011/03/online-retail-marketing-in-post.html">online retail marketing after the recession</a>, and since then, a thought has occurred to me: while the global consumer landscape is now different (expectations have shifted, etc), fundamental marketing research is still valid.</p><p>Today, I'm talking about the concept of <b>customer lifetime value</b> (CLV). In marketing, this means how much the average customer is worth to a business over the lifetime of the relationship between the business and the customer. </p><p>Of course, this is a highly variable thing, and not easy to calculate. It varies for each business type, industry and model. Contractual businesses (think real estate, subscription-based companies like insurance, cell phone service providers) rely on customers to renew a contract on a periodic basis. The reverse is called customer migration. Either a customer buys Product A from a business, or they do not.</p><p>If a customer doesn't renew a contract with a subscription-based company, they are considered lost. If a customer doesn't purchase Product A from Customer Migration Business A, they still might in the future. Determining the CLV metric for each business type is quite different.</p><p>In my opinion, drilling down CLV for customer migration businesses is much harder, as the marketer is not always certain when the relationship is over (from the customer perspective).</p><p>Once a business understands its CLV, it can use this metric to determine how much investment to make on customer acquisition, per customer. Example:</p><p>Ted's Toys Co. sells toys, and on average, customers spend $185 over the course of their relationship with the company. Marketer Jane from Ted's Toys knows that their products have an average 30% profit margin. This means, of the $185 spent per customer, $55.50 of it is profit for the company. Therefore, Marketer Jane must spend less than $55.50 to acquire each new customer, for the company to remain profitable. The lower she can get that number, the more profitable the company is.</p><p>Customer lifetime value is considered a long-term metric. It's not used for short-term goals, and generally emphasizes customer service and customer satisfaction as key barometers. Since we know that customer purchase behavior and expectations of value are now greater, CLV goes hand in hand with marketing to our post-recession world.</p><center><b><font size=+2>Teach CLV, Or Lose Business</font></b></center><br />
<p>This week I was shopping for a round-trip plane ticket to Beijing, from Las Vegas. This isn't the first time I've been to China, and it probably won't be my last. I had done some research since my last trip, and had discovered <a href="http://hainanair.us">Hainan Airlines</a>. From what I've read, Hainan Airlines is an exceptional company. They are rated 5-stars by some publications, and the customer reviews I've read are largely positive.</p><p>With credit card in hand, I visited their website to purchase my plane ticket. Except, their reservation system wasn't working online, and I only received error messages. No problem…I called their 1-800 number. However, when I tried to make the exact same reservation over the phone, I was quoted a price 40% higher. When I expressed shock and mentioned the price on the website, the agent advised me the higher price was the best she could offer.</p><p>I got off the phone and sent a friendly email the customer service department of Hainan Airlines, expressing my disappointment in my experience. I said I had heard good things about the airline, that I was a ready-to-buy customer, and could they honor their online price. I even included a screenshot of their online quoted price.</p><p>It took about 24 hours, but I received a response, inquiring about my contact number. I responded with my cell phone number, and promptly called the manager who had sent me the email. Voice mail; message left. No response. I sent a message to <a href="http://twitter.com/#!/HainanAirlines">their Twitter account</a>. Nothing. I waited two more days, and opted to make my purchase with a different airline. Three days later, I still have not heard back.</p><p>The cost difference on the plane ticket was about $500 – significant to me. I have no doubt that if I flew on HA, my experience with the company would have improved, and I would make them my first choice when I fly to Asia. Surely that $500 has some margin built in to it. Surely the airline president would want my business at the online quoted price, if it meant I was more likely to buy again in the future.</p><p>This brings up several organization and marketing points:</p><ul><li>Marketing and customer service need to work hand in hand to understand each other.</li>
<li type="circle">Marketers should be aware of common objections and front-line CS staff should understand CLV and be given leeway to assist customer acquisition.</li>
<li>Concepts like CLV need to be organization-wide knowledge. </li>
<li type="circle">Maybe it’s not necessary for shipping personnel to know what CLV is, but maybe Joe Boxmover has a brilliant idea for packaging coupons? Innovation can come from anyone, and SHOULD be encourage throughout the organization.</li>
</ul><p><i>Bottom line: Understanding key business metrics, like customer lifetime value, will help online retail marketers make better investment decisions in customer acquisition and retention.</i></p>Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-23308971855122628822011-03-25T15:37:00.000-07:002011-03-25T15:37:29.618-07:00Stock Follow-Up from May 2009<script type="text/javascript">
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<p>I was re-reading some of my old investment articles (it's still something I believe in very much), and I decided share what the results were from some of stocks I had picked.</p><p>First, let me say that I am not at all an expert at this stuff. I dabble for personal pleasure and my own financial gain, but I make ZERO promises anything I say about stocks will pan out. These are just musings.</p><p>With that said, let's turn to my post from May 1, 2009 titled "<a href="http://zacksimpson.blogspot.com/2009/05/downward-ho.html">Are the Stock Markets Downward Ho?</a>". This was May 2009 - of course they were!</p><p>At the end of my rambling, I highlighted a number of stocks I owned or was interested in. These included: <a href="http://www.google.com/finance?q=AUY">AUY</a>, <a href="http://www.google.com/finance?q=VGZ">VGZ</a>, <a href="http://www.google.com/finance?q=TGB">TGB</a>, <a href="http://www.google.com/finance?q=MPEL">MPEL</a>, <a href="http://www.google.com/finance?q=GSI">GSI</a>, <a href="http://www.google.com/finance?q=EPD">EPD</a>, <a href="http://www.google.com/finance?q=AOB">AOB</a> and <a href="http://www.google.com/finance?q=GLBL">GLBL</a>. I also mentioned ITLN and ACTU, but they are no longer traded.</p><p>My worst performer was easily AOB - American Oriental Bioengineering. It's a Chinese pharmaceutical company, and I (thankfully) sold the stock a while ago. Since May 13, 2009, the stock is down 52%. Ouch. I managed to sell long before that, but my predictions about a populous increasingly turning to medicines has so far been wrong.</p><p>Apart from AOB though, I've managed to do quite well. Taseko Mines (TGB) has managed to reward me beyond my dreams, and is up nearly 570% since my post! We had a bit of a snafu in October when the Canadian mining company lost on an environmental concession, but things are back on track now.</p><p>Similarly, my bet on gold has panned out nicely. I thought Vista Gold Corp (VGZ) and Yamana Gold (AUY) looked attractive, and they've grown 108% and 32% respectively.</p><p>I've been generally disappointed in General Steel - a Chinese steel company - but it's still up 22% overall. However it is down 62% from it's high over a year ago, and I feel like the market may be missing something here. Or maybe *I* am.</p><p>In 2009, I felt strongly that the oil and gas industry still had some real strength to it. I picked a couple two different players in the field: Enterprise Product Partners (EPD) and Global Industries (GLBL).</p><p>Global has exceeded my expectations, growing 228% since May '09. However my real love has been Enterprise Partners. It hasn't grown quite like Global, and the stock is up "only" 135% - but it's the dividend I love. Since May of 2009, EPD has paid out $4.51 per share in dividends to stock holders. The best part? The amount has steadily increased each quarter - from 54 cents/share to now 59 cents. It's really hard to be upset with that.</p><p>Lastly we come to Melco Crown Entertainment (EPD). This one is my baby. It's the second stock I ever purchased and it's one that I believe in for many decades to come. Melco operates a couple of high-end casinos on the Cotai strip in Macau. It's one of only six companies who has a license to do so, and their City of Dreams facility is arguably the most grand. </p><p>Despite some ups and downs, Melco is up 199% since May '09, and I will probably hold onto this one for a long time. Of course, I plan on holding on to most of the stocks I own, unless I'm ready to liquefy or the fundamentals of the company change.</p><p>So I suppose the moral is to pick companies you believe in, and hold on for the ride.</p>.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-15316323950684838752009-07-04T18:39:00.000-07:002009-07-05T00:15:33.024-07:00The Next Hot Stock is In Your HouseBeing a successful investor means picking the right companies. Who could have guessed how big Microsoft (<a href="http://www.google.com/finance?q=MSFT">MSFT</a>) would become in August 1987? Did you correctly predict Apple (<a href="http://www.google.com/finance?q=AAPL">AAPL</a>) would explode upon the scene in July of 1997? Or how about General Motors (no longer GM, now <a href="http://www.google.com/finance?q=GMGMQ">GMGMQ</a>)? Did you start buying put options four years ago because you saw the writing on the wall?<br /><br />If so – then you’re probably wealthy beyond belief, and there’s little reason for you to be reading this.<br /><br />But if you’re like the tens of thousands of people out there, from their early 20s to their late 70s, who would like to do something with their money, but haven’t a clue where to look, read on.<br /><br />When I first started investing, roughly a year ago now, I was simply sticking my paychecks and tips I was earning as a waiter into an account with <a href="http://www.sharebuilder.com">Sharebuilder </a>and trying to read up on the latest hot-stock trends.<br /><br />I didn’t know any better – most of us don’t! If we get a phone call from some brokerage firm telling us that stock XYZ will double in price in the next two months, but we’d better hurry, some of us might buy! (Note: I didn’t buy Helix Wind (<a href="http://www.google.com/finance?q=HLXW">HLXW</a>) when Bellwether Research called me, pitching that stock).<br /><br />After all, what’s the option? Learn about the stock markets and investments?! That sounds incredibly boring – right?<br /><br />Wrong.<br /><br />This isn’t just your money we’re talking about. The money only represents the hours you put in at the office, or the time at the construction site. The money represents the years you spent furthering your education, or the years you spent working to support a young family. Your money isn’t what defines your life…but it’s a representation of your efforts.<br /><br />You owe it to yourself, and your future financial stability to learn at least a little about personal investments. I’m not saying that everyone should manage their own money. Most people (including myself) don’t really have the time that it would take to nail down all there is to know. But before you blindly hand over your hard earned cash to a money manager (think <a href="http://en.wikipedia.org/wiki/Bernard_Madoff">Bernie Madoff</a>), take a little time to read up about the markets.<br /><br /><center><h2><span style="font-weight:bold;">Where to Start</span></h2></center><br /><br />I didn’t know jack about personal investments when I first started buying stocks. The first company I put money into was actually several years ago, and it was a real estate investment trust (<a href="http://www.wisegeek.com/what-is-a-reit.htm">REIT</a>). The company, whose original name no longer exists, is now called Bimini Capital Mangement (<a href="http://www.google.com/finance?q=BMNM">BMNM</a>) and I have lost about 96 percent of the original $85 I originally put in. Whoops!<br /><br />Fast forward to summer 2008, when I was earning “real” money and wanting to invest it for the future. I spent a bunch of time on the <a href="http://fool.com">Motley Fool website</a>, picking through the latest top picks that the Fool and its members were recommending. I settled on Melco Crown Entertainment (<a href="http://www.google.com/finance?q=MPEL">MPEL</a>), a Macau-based casino company as my first investment.<br /><br />And then all hell broke loose. That first investment was only about $600, but we all know what happened to the stock market in the latter half of 2008. Suffice to say I was a bit surprised, but still determined to make investing work for me.<br /><br />If you go back and read some of my older posts, you can follow along as I’m buying into other companies and adding to my positions, even throughout the worst of the recession.<br /><br />These days, those original investments are pretty much even. Some are down a few percentage points, some are up a few. But that wouldn’t be true if I hadn’t continued to add to my positions when the price dropped.<br /><br />I haven’t picked the next Microsoft or Apple, but along the way I learned something about investing.<br /><br /><center><h2><span style="font-weight:bold;">The Goose with the Golden Egg is on Your Nightstand</span></h2></center><br /><br />I read all about Best Buy (<a href="http://www.google.com/finance?q=BBY">BBY</a>) on the Fool website, but I hadn’t ever purchased the stock. Anyone who knows me very well knows Best Buy is essentially my biggest weakness. I can’t enter those stores unless I leave my wallet in the car! But even though I loved the stores themselves, I hadn’t translated that into owning stock – owning part of the company.<br /><br />In November of 2008, Best Buy hit a 52 week low of $16.42 a share. Today the company is trading at $32.08 – nearly a 100 percent return, despite the ongoing recession.<br /><br />I didn’t buy into the company then, and I still haven’t yet – buying my house is consuming most of my money these days. But I’m still keeping an eye on the company. The stock is still 34.5 percent below its 52 week high, and I still believe in their business model.<br /><br />Let’s look at another company I know and love - Hewlett-Packard (<a href="http://www.google.com/finance?q=HPQ">HPQ</a>). I have owned an HP computer exclusively for nearly a decade. I personally have never had any problems with their computers, be it a desktop or a laptop (I’m typing right now on an HP laptop). But even though I knew all about the company, and I used and loved their products, I have never bought any of their stock.<br /><br />In November of 2008, Hewlett-Packard was trading at $29.34 a share. Today the company is trading $37.85 a share – a nice 28 percent return. There have been two dividend payouts from the company, for 8 cents/share as well.<br /><br />I haven’t bought into HP yet, although I’m keeping an eye on them. I don’t believe in Dell, and no one I know that uses a Dell likes the computers. The mainstream isn’t going to buy an Apple, simply because most don’t know how to use a Mac – plus they’re significantly more expensive. Sure, there’s Lenovo, Sony, Acer, etc. for competition, but HP has a good share of the public mind. Plus the current share price is still 23 percent below its 52 week high.<br /><br />Okay, one more example, just to prove a point. <br /><br />How about the auto industry? We all know that the Big 3 American manufacturers have been sunk by the recession. Chrysler, GM and Ford have all been hammered, and even the foreign manufacturers have been hit as well. It’s a terrible time to own vehicle stock, right?<br /><br />Not so fast…<br /><br />I have never owned a Honda. My first car was an ’84 Mercury Grand Marquis, followed by an ’84 Oldsmobile and then a ’02 Nissan. But I have long been a fan of those cars and their reputation for being incredibly long lasting.<br /><br />Oh, and they get notoriously good gas mileage too – right? In fact, whether you’re a diehard Ford person or not, have you ever really heard anyone complain about their rice-burning Honda? I know I haven’t.<br /><br />But even though I liked the company – and I’m looking at a Honda for my next car purchase – I have never translated that into owning part of the company.<br /><br />In early December of 2008, Honda (<a href="http://www.google.com/finance?q=HMC">HMC</a>) hit a 52 week low share price of $17.35. Today it trades at $26.30 – almost a 40 percent gain! And dividends? You betcha! There have been two dividend payments from the company since then.<br /><br /><center><h2><span style="font-weight:bold;">So What’s the Point?</span></h2></center><br /><br />My point is that your best bet for finding quality, sound companies to invest in are to investigate the things you use and love in everyday life.<br /><br />Are you glued to your iPhone? Then maybe you should buy Apple stock. Or maybe you could do a little research and see that there’s a <a href="http://zacksimpson.blogspot.com/2009/06/why-small-cap-stocks.html">small cap stock</a> called Arm Holdings (<a href="http://www.google.com/finance?q=ARMH">ARMH</a>) that makes the microprocessor going into every single iPhone, along with a slew of other leading phones. You would also see that Arm Holdings is up almost 75 percent since January 2009.<br /><br />Are you, or is your girlfriend/mom/wife a huge fan of Coach (<a href="http://www.google.com/finance?q=COH">COH</a>) handbags? Do you hate shopping at the mall while dozens of girls pawn over the latest Coach this and that? Are you amazed that there is never an empty seat to rest because other guys are impatiently waiting on the women in their life? Then you may want to look into Coach as an investment. The stock is up over 91 percent since November 2008!<br /><br />Do you have wireless internet in your home or apartment? Chances are if you do, you have a NetGear (<a href="http://www.google.com/finance?q=NTGR">NTGR</a>) wireless router. NetGear is usually a bit more expensive than competitor Belkin, but the company is better known and generally more trusted (I own a NetGear router too).<br /><br />Guess what? Since October 2008, the stock is up almost 65 percent.<br /><br />I could go on and on with examples, but I have other things to do with my Fourth of July weekend. I hope this illustrates to you that searching for the next great investment, and next year’s hot stock, doesn’t have to mean combing through piles of financial reports.<br /><br />Take a look at your life. Who makes that toothpaste you love? Johnson & Johnson (<a href="http://www.google.com/finance?q=JNJ">JNJ</a>) - up 21 % plus dividend). Where do you pump your gas? Exxon Mobile (<a href="http://www.google.com/finance?q=XOM">XOM</a>) - up 21% plus dividend). How about your snazzy new LCD TV? Sony (<a href="http://www.google.com/finance?q=SNE">SNE</a>) - up 61% plus dividend.<br /><br />The next hot stock may already be in your closet/kitchen/bathroom, waiting for you to uncover its potential! Starting looking and start investing in your future!Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-81889583356380669382008-09-08T22:12:00.001-07:002009-07-01T22:04:25.399-07:00Turning Beer Money Into Early Retirement**Originally posted in September, 2008, this has been updated to reflect the deep impact the current economic recession has had on stock valuations. The examples using Honda Motor Company and Apple have been adjusted to reflect the current value of the stock.**<br /><br />So relatively recently - we'll say May of this year - I became interested in the stock markets and everything Wall Street. Perhaps it's because I'm starting to feel older. It could have to do with finally graduating college and facing the prospect of the real world. For whatever reason though, I've become a financial news junkie. Hour after hour of my free time has been spent pouring over articles on the Motley Fool, the Wall Street Journal, The Street, Google Finance and a number of other online sources. There is an incredible amount of information on the web regarding stock markets.<br /><br />Throughout all of the literature I've read, there has been one common message: START EARLY. The numbers don't lie - statistically the S&P 500 has returned roughly 10% annually since it's inception. That means a $10,000 investment in 2000 in a broad market fund would now theoretically be worth $19,487.17. The recession has had an enormous impact on the value of stocks over the past ten years, and we're essentially back to where we were in 2000. But for the sake of argument, let's use the historical number of a 10 percent return.<br /><br />Of course in 2000 not everyone had $10,000 to just set aside - I know I didn't. As a sophomore in high school working a PT job in a grocery store, I probably didn't have $1,000 to set aside! But, I remember cashing those $350 paychecks every two weeks and blowing it things I thought I needed: cds, gas, McDonald's and party supplies for the weekend warrior in me. I think back about all the money I've spent on "party supplies" over the past nine years and I wince when I consider how much it could be worth now.<br /><br />That being said, I wouldn't take back very many of the priceless moments spent with friends over the years that cost money. You should work to live, not live to work. What's the point in earning money if you never take the time to enjoy it? Of course if I had simply pared down my spending just a bit - say take a weekend off a month - I'd likely have a nice pile of change right now.<br /><br />Example:<br />Let's say I spent roughly $20/weekend on partying. Over the course of the past 9 years, that's probably a fair average. If I had stayed in one weekend a month, I'd have saved $2,160 over the past 9 years [($20 *12)*9]. That's a decent amount of money by itself. But let's say I put that money into a decent company whose name I knew - we'll do Honda. Since Dec. 31, 1999, Honda (HMC) is up over 38%. It has also paid out dividends (those wonderful moments when a company gives its shareholders some of it's income), but I'm gonna reinvest those. The market value would now be worth $3,208.10 today. That's a difference of over $1,048 if I had simply saved that $20/month!! I don't know about you, but a $1,048 vacation sounds really nice right now.<br /><br />We'll do one more. Let's say for some reason I was clever enough to invest that $20/month in Apple. You know, the company that makes your iPods, iPhones and MacBook Airs. That investment of $1,920 over the course of these past 9 years would today be worth $17,885.80! That's a gigantic difference! With that money today I could effectively pay off my student loans from college. Hot damn!<br /><br />My point isn't that it's super important to pick the next Apple or Wal-Mart or Google. Not every company is going to experience that kind of growth. But what is important is that you start now. The sooner you begin setting some money aside the sooner it can start bringing you some returns on it.<br /><br />If you're reading this, that's a great first step. But I don't claim to know everything about investing. To be honest, I don't know much beyond what I've read from people far wiser than I. But if you're interested in reading more I'm going to try and post a blog on investing on a recurring basis. Also, I encourage you to visit some of the websites that I've found to be a treasure hoard of information. I go to <a href="http://www.fool.com"> The Motley Fool</a>, <a href="http://finance.google.com">Google Finance</a>, <a href="http://money.msn.com">MSN Money</a> and <a href="http://www.thestreet.com">The Street</a> for a few.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-63711508269438277552009-05-21T20:07:00.000-07:002009-06-22T23:17:17.233-07:00The Stock Market and Your Money: Protecting Your Assets When Your Sanity is LostOkay, maybe the title of this post is a little dramatic, but I wanted to grab your attention.<br /><br />Did I get it?<br /><br />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.<br /><br />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.<br /><br />Or am I?<br /><br />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.<br /><br />That leaves us with stocks that pay a dividend.<br /><br />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! <br /><br />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.<br /><br />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.<br /><br />My favorite dividend stock for a while has been Enterprise Products Partners (<a href="http://www.google.com/finance?q=EPD">EPD</a>). 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. <br /><br />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.<br /><br />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.<br /><br />Next time I may own 104 shares of the company, and next quarter I'll get an even larger dividend.<br /><br />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. <br /><br />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.<br /><br />Let's take a look at another well known company with a solid dividend: Johnson & Johnson (<a href="http://www.google.com/finance?q=JNJ">JNJ</a>). 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.<br /><br />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.<br /><br />I have three final thoughts regarding the not-so-distant market future.<br /><br />1.) AT&T and Verizon's plan to get into <a href="http://www.businessweek.com/magazine/content/09_22/b4133000229480.htm">netbooks </a>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). <br /><br />Netbooks are not one of those things. <br /><br />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.<br /><br />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. <br /><br />Yes, I'm fully aware of SaaS...that's software as a service (Think: Akamai [<a href="http://www.google.com/finance?q=AKAM">AKAM</a>]). 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.<br /><br />2.) I still very much like gold plays. You can read about my <a href="http://zacksimpson.blogspot.com/2009/05/downward-ho.html">ideas concerning inflation</a> in my other blog post, and I still believe they are a solid play. The stock I'm watching - Yamaha Gold (<a href="http://www.google.com/finance?q=AUY">AUY</a>). Not only do they seem to be a very solid gold producer, but they also pay a dividend! <br /><br />*gasp* My favorite!<br /><br />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.<br /><br />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.<br /><br />3.) I'm very short on <a href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/21/MNN117MLMD.DTL">OpenTable</a> (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. <br /><br />Why?<br /><br />Because it <a href="http://www.ft.com/cms/s/0/ecbb5a66-465c-11de-803f-00144feabdc0.html">shot up some 60 percent</a> 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.<br /><br />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.<br /><br />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.<br /><br />It's not that I don't like OpenTable itself. I just don't like it's share price at $31.89. <br /><br /><br />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!Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com2tag:blogger.com,1999:blog-8058569188623880613.post-592835012147438632009-06-21T14:30:00.000-07:002009-06-22T23:13:25.168-07:00Why Small Cap Stocks?In investing, you'll run across companies that are considered "blue chip", "large cap", "small cap" etc etc. In basic terms, this has to do with the financial size of the company.<br /><br />Cap is short for capitalization which is a measurement of economic size and is equal to the number of shares outstanding times the share price. For example: at closing time on July 19, Verizon (<a href="http://www.google.com/finance?q=VZ">VZ</a>) had a share price of $29.66 and 2.84 billion shares outstanding giving it a market cap of $84.25 billion. This is a large cap company.<br /><br />So why do I try to look at small(er) capitalization companies? <br /><br />Potential.<br /><br />Much like the 10 year old with a 38 inch vertical has a lot of potential in high school basketball, a good small cap company has a lot of potential going forward as well.<br /><br />Plus, basically every large cap company today once started out as a small cap. Let's look at Ford Motor Company (<a href="http://www.google.com/finance?q=F">F</a>).<br /><br />While the American auto-makers, including Ford, have certainly seen their market cap fall in the past year, Ford's market cap as of market closing on July 19 was $18.15 billion. Compare that to 1982 when Ford was merely a $815 million company. As you can tell, that's quite a difference - a nearly 700 percent difference!<br /><br />That's not to mention Ford's peak in 1999 at $73.02 billion. Every $100 invested from January 1 1982 when Ford was a small company would have returned you over $5000 if you sold in early May, 1999. That's the kind of potential a small cap has!<br /><br />So do you think you'll ever see 5000 percent gains from buying Microsoft (<a href="http://www.google.com/finance?q=MSFT">MSFT</a>) and Apple (<a href="http://www.google.com/finance?q=AAPL">AAPL</a>) stock these days? Dream on. While both companies have earned great returns for their investors over the years, you won't see enormous wealth growth from owning Microsoft stock.<br /><br />To really pursue growth, you have to uncover the small stocks with great potential. <br /><br />Let's start with a basic definition. Small cap is roughly between $250 million to $1 billion. The edges on that definition can be blurred a bit, but that will give you range to start with.<br /><br />Let's look at Research in Motion (<a href="http://www.google.com/finance?q=RIMM">RIMM</a>), the maker of the BlackBerry devices. In early 1999, Research in Motion was a small cap company with a market capitalization of $490 million. Today RIMM has a market cap of $44.22 billion, representing a return of over 3800 percent. Yes - for every $100 invested in early 1999, you'd now be sitting on $3800+.<br /><br />Of course investing in small cap companies will open you up to more risk than investing in the sturdy stalwarts like Microsoft, Johnson & Johnson (<a href="http://www.google.com/finance?q=JNJ">JNJ</a>) and General Electric (<a href="http://www.google.com/finance?q=GE">GE</a>). But you won't see the potential for big returns with said companies.<br /><br />Not to mention, guess where Microsoft started out in 1986? Yep - a small cap! It's simply risk versus reward.<br /><br />Investing in small caps works best if you have a longer investment horizon - hence why I suggest getting started young. Being younger, I have (hopefully) many more years of earning and investing in front of me and I can rebound if an investment takes a dive.<br /><br />But to truly ride an investment out of the park, you'll have to dig around a bit. Simply throwing money at a company because their current market cap is $300 million won't do you a lick of good.<br /><br />Find a small cap company with good fundamentals like a dedicated and invested management/ownership team, a strong balance sheet and good forward earning potential. Only then can you hope to turn $100 into $23,000+ like the early investors in Microsoft have.<br /><br />These days I'm investing in a number of small and large caps. It's always wise to keep some money in a safer, more stable company like Microsoft, Johnson & Johnson and General Electric (I don't own shares in any, but not because I wouldn't like to). But you should keep some money ready to pounce when you find a small cap company that you like and which has potential.<br /><br />So why small caps? Because I don't want to work all my life, and with that kind of potential, I may not have to!<br /><br />*Note* All historical market cap information came from using the <a href="http://wolframalpha.com">WolframAlpha </a>engine. I had a heck of a time trying to dig it up otherwise.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-82752074053341157992009-05-28T21:29:00.000-07:002009-05-28T22:16:46.885-07:00Why AOL & Microsoft Stocks Will SinkI believe that being successful in the stock market is much more than trying to predict the next trend.<br /><br />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.<br /><br />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!<br /><br />That being said, I'm going to make a bit of a prediction here.<br /><br />I'm betting that Microsoft's share value will drop because of a botched search engine foray.<br /><br />I'm also betting that once Time Warner spins off AOL, that company will flop as well. <br /><br />Let's start with Microsoft.<br /><br />It's no secret that Microsoft has been lagging behind Google and Yahoo for sometime in the search engine market. <br /><br />They're also a distant third in online ad revenue behind Google and Yahoo.<br /><br />Microsoft still has its nearly ubiquitous operating systems, although Vista was not nearly as well received as they would have liked.<br /><br />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.<br /><br />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.<br /><br />Microsoft is gearing up for its big release of a new "decision engine" they're calling <a href="http://www.microsoft.com/presspass/press/2009/may09/05-28NewSearchPR.mspx">Bing</a>. While it employs some new technology from <a href="http://blogs.msdn.com/livesearch/archive/2008/07/01/powerset-joins-live-search.aspx">Microsoft's purchase of Powerset</a>, it mostly looks like a fancy Live Search.<br /><br />They made the announcement and guess what happened next...<br /><br />Google made an announcement of their own.<br /><br />Google released information about <a href="http://wave.google.com/">Google Wave</a>, 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...<br /><br />Oh wait, wasn't Microsoft saying something?<br /><br />Google has gotten VERY good at playing their trump card at the perfect moment. <br /><br />Sure, Microsoft has a new "decision engine" that will be available June 3, but look what GOOGLE is doing.<br /><br />One of the most telling aspects of Microsoft's impending flop is the lukewarm response the Twitter community gave it. <br /><br />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.<br /><br />Microsoft is allegedly putting a lot of advertising money into promoting Bing. Something to the tune of $80 million, from what I've read. <br /><br />That's a lot of money to throw at what looks to be a slightly <a href="http://searchengineland.com/microsofts-bing-vs-google-head-to-head-search-results-20006">jazzed up version of Live Search</a>. <br /><br />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(<a href="http://www.google.com/finance?q=MSFT">MSFT</a>).<br /><br />Now on to AOL. <br /><br />Let's be clear here...AOL is not currently a stand-alone company nor can you purchase shares of just AOL.<br /><br />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. <br /><br />Today it was announced that <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/05/28/AR2009052800895.html">AOL will be spun off from Time Warner</a>, and AOL will be left to pursue it's own business strategies.<br /><br />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.<br /><br />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. <br /><br />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.<br /><br />Remember Bebo? It tugs a bit at my memory, but I'm sure AOL remembers it clearly. <br /><br />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. <br /><br />They probably could have found that out by asking the collective teenage children of the company employees.<br /><br />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.<br /><br />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 <a href="http://en.wikipedia.org/wiki/MacGyver">MacGuyver</a>.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-20346765123476772752009-05-17T20:56:00.000-07:002009-05-17T22:11:17.223-07:00Wall Street's Near Future: What to do About Personal FinanceWhen it comes to managing my own stock portfolio, I'll admit to some serious head scratching.<br /><br />Trying to predict the stock market with any real accuracy is an exercise in futility. <br /><br />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.<br /><br />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.<br /><br />Right now I think we're going to see some further rain clouds. <br /><br />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.<br /><br />So where does that leave my portfolio? <br /><br />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.<br /><br />Some of the stocks in that account have an amazing dividend that I will happily sit back and collect every quarter (Enterprise Products Partners [<a href="http://www.google.com/finance?q=NYSE:EPD">EPD</a>]). Others I simply like what I see in the future (Melco Crown [<a href="http://www.google.com/finance?q=MPEL">MPEL</a>]).<br /><br />My other account is what I'm interested in these days. I mentioned before that I'm looking into gold stocks (<a href="http://www.google.com/finance?q=AUY">AUY</a>). I also like Taseko Mines (<a href="http://www.google.com/finance?q=TGB">TGB</a>) 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)<br /><br />I still like Wells Fargo (<a href="http://www.google.com/finance?q=WFC">WFC</a>), but I'm going to wait a little bit before getting back in. I see Citi (<a href="http://www.google.com/finance?q=C">C</a>) and Bank of America (<a href="http://www.google.com/finance?q=MPEL">BAC</a>) staying low for a while. <br /><br />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.<br /><br />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). <br /><br />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%!<br /><br />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.<br /><br />Don't have a checking account with a nice yield? Try <a href="http://home.ingdirect.com/index.html">ING Direct</a>. 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%. <br /><br />That APY might help keep you dry while you eye the sky for the next clear and sunny day.<br /><br />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.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com2tag:blogger.com,1999:blog-8058569188623880613.post-29011067355495165622009-05-03T15:49:00.000-07:002009-05-13T22:34:05.651-07:00Updates UpdatesIt's now been about seven months since I made the transition from N Idaho to Las Vegas. I'm still alive...<br /><br />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.<br /><br />I added Wells Fargo (WFC) as a new holding and re-introduced myself to NovaMed (NOVA). <br /><br />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. <br /><br />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.<br /><br />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.<br /><br />Where can we go from here?<br /><br />I'm afraid down is the answer. The latest job loss report is expected this week, with another <a href="http://www.marketwatch.com/news/story/Another-steep-drop-payrolls-expected/story.aspx?guid={FC83EB15-5F51-4AE4-85A2-3496FDC76473}">580,000 jobs gone in April</a>. 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.<br /><br />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. <br /><br />There was a very interesting commentary on MarketWatch last week that I would encourage anyone to read. The title is <a href="http://www.marketwatch.com/news/story/Sell-May-go-away/story.aspx?guid={1C251E45-B620-4B9A-A07E-7CC5CD62CEC4}">Sell in May and Go Away</a>. 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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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!Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-42057390473621686422009-05-13T21:35:00.000-07:002009-05-13T22:31:50.139-07:00Are 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. <br /><br />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. <br /><br />Well, they've been noticed.<br /><br />I can look at <a href="http://www.google.com/finance?q=MGM">MGM </a>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. <br /><br />There was bound to be a bounce. <br /><br />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?<br /><br />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.<br /><br />I turn also to my most recent purchase: Wells Fargo (<a href="http://www.google.com/finance?q=WFC">WFC</a>). 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.<br /><br />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.<br /><br />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!?<br /><br />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.<br /><br />Now comes reality.<br /><br />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.<br /><br />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?<br /><br />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. <br /><br />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 (<a href="http://www.google.com/finance?q=AOB">AOB</a>), the gaming industry (<a href="http://www.google.com/finance?q=MPEL">MPEL</a>), the steel industry (<a href="http://www.google.com/finance?q=GSI">GSI</a>), the oil industry (<a href="http://www.google.com/finance?q=GLBL">GLBL</a>, <a href="http://www.google.com/finance?q=EPD">EPD</a>) and the technology industry (<a href="http://www.google.com/finance?q=ACTU">ACTU</a>, <a href="http://www.google.com/finance?q=ITLN">ITLN</a>). But I think I may just diversify some more and make my next purchase a golden one. <br /><br />I've been looking at Yamaha Gold (<a href="http://www.google.com/finance?q=AUY">AUY</a>), but there are some other interesting companies out there worth taking a look at. Vista Gold (<a href="http://www.google.com/finance?q=VGZ">VGZ</a>) and Western Goldfields (<a href="http://www.google.com/finance?q=WGW">WGW</a>) could hold some promise. I also like Taseko Mines (<a href="http://www.google.com/finance?q=TGB">TGB</a>) 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.<br /><br />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!Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com1tag:blogger.com,1999:blog-8058569188623880613.post-48289446517447503002008-09-25T18:29:00.000-07:002009-05-13T22:27:52.190-07:00A Time To PanicWell it has been yet another exciting and interesting week in the world of finance. Unless you're completely holed up in a cave, you've likely heard something about $700 billion being ask for by President Bush to try and boost the U.S. financial system. <br /><br />Make no doubt about it, that is a ton of money. The cost of the Iraq war is nearing this amount ($582.45 billion at the time of writing this), or we could send some 23 million American students to public college for <a href="http://www.buzzmachine.com/2008/09/21/what-700-billion-could-buy/">free</a>. Wouldn't that be great?!<br /><br />But let's consider what could happen if our government doesn't act...<br /><br />If we let capitalism run its course and kill off the companies that made the poor decisions regarding mortgage-backed securities and sub-prime loans, we would say adios to some enormous financial institutions. Forget for a second that we have already seen Bear Stearns, IndyMac and Lehman Brothers fail. Let's look at Fannie Mae, Freddie Mac, AIG, Goldman Sachs and Merrill Lynch. <br /><br />Freddie and Fannie have both been responsible for a combined $5 trillion in mortgages. That's enough money to pay off over half of our <a href="http://www.brillig.com/debt_clock/">national debt</a>. And yet this year these two companies were essentially taken over by the government because they had made too many bad bets.<br /><br />AIG recently was granted an $85 billion bailout loan from Uncle Sam to keep it afloat. The company is in the insurance industry...perhaps you've heard of them.<br /><br />Goldman Sachs is thanking its newest investor (read: savior) Warren Buffet. He invested $5 billion into the company; allowing it a breath of fresh air and a real chance to survive. But let's not forget that Goldman no longer exists as an independent investment firm. The government changed that up, making Goldman a traditional bank now...not really different than Wells Fargo.<br /><br />Merrill Lynch had to be bought out by Bank of America for it to survive.<br />If none of that had happened, it's not a far stretch of the imagination to think that we'd be in a second Great Depression.<br /><br />So back to that $700 billion. What Bush is proposing is that he uses that money to buy the bad assets from these financial institutions. This way, their books are in better shape and in return these institutions will begin lending money out again.<br />Our nation and our economy rely on these giant financial institutions moving money around and lending it out - allowing for capitalism to function. When banks aren't lending money, people can't buy things like homes and, as we've seen, the whole system goes to hell.<br /><br />Do I believe that a $700 billion band-aid is going to fix what ails the economy? No. The whole problem stems from lenders granting loans to John and Jane Doe who simply over-extended themselves and were allowed to keep spending. But something needs to be done and perhaps helping out some of these institutions can be a start.<br /><br />Now would seem like a terrible time to begin investing in the stock market. As I've just said, banks and investment firms have been in a death struggle trying to keep their heads (and financial books) above water. As with many scary times, perhaps it's best to keep your money tucked away under the mattress until the skies clear and things are a bit more certain, right?<br /><br />I disagree. And the world's greatest investor of all time disagrees. Buffet has said that "it is best to be greedy when others are fearful, and to be fearful when others are greedy." Can you smell the fear in the air?<br /><br />I've written about the wild ups and downs in the stock markets recently. It can be a stomach-curling experience to watch your hard-earned dollars losing value. But on the other hand, there are a great number of strong, long-lasting companies who have had their value decrease through no fault of their own. <br /><br />Does anyone really believe that Pfizer (PFE) or Coca-Cola (KO) have anything to do with sub-prime mortgages? And yet Pfizer is down 18.64% on the year and Coke is down almost 18%. Both companies pay a healthy dividend and have for years. Does anyone really think that Pfizer or Coke is going to go out of business anytime soon?<br /><br />Now this isn't necessarily a recommendation for either company. I personally don't own shares of Pfizer or Coke, but I wish I did. Dividend paying companies are a sure way to keep your portfolio healthy when the sky appears to be falling.<br /><br />So my final thought.... is this a time for panic? I say emphatically no! Instead, I see a lot of opportunity and value in the market these days. But don't just take my word for it. I suggest heading over to a website like <a href="http://www.fool.com"> the Motley Fool </a> and read some of their free articles. An hour or two spent on that website always reminds me that a long-term approach to investing is the best and most successful way to go!Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com1tag:blogger.com,1999:blog-8058569188623880613.post-16909043805515957472008-09-19T10:58:00.000-07:002009-05-13T22:25:13.942-07:00Wild Week!Yowza has it been a wild week on Wall Street! This past week has seen the largest single-day drop since the 9/11 (Monday) and also the largest single-day gain in 6 years (yesterday). The last two days (Thursday and today) have seen the market rebound strongly and I'm thankful that I kept my money in the stocks that I own. General Steel Holdings (GSI) is up 9.35% today as I'm writing this.<br /><br />In fact, I recently read an interesting study from the University of Michigan that supports keeping your money in the stock market for the long-haul. The <a href="http://www.towneley.com/pdf/MT%20Study%2004.pdf">Towneley Market Timing Study</a> was originally done in the early 1990s, and found that 95% of market gains occurred on only 1.2% of the trading days from 1963-1993.<br /><br />I'll say that again. <B>95% of the market gain happened on 1.2% of the days.</B> That's incredible!<br /><br />Of course the idea is to own the stocks during that 1.2% of the days, and have your money is something safe like short-term Treasury bills for the other 98.8% of the time. This is called timing the market and is virtually impossible. A perfect market timer would have turned a single $1 investment in 1926 into $690 MILLION by the end of 1993. You can imagine how often that happens. As stated by the Towneley study:<br /><br />"The financial results of perfect timing are indeed attractive. Yet they are virtually unreachable. In terms of the monthly data, for example, if a market timer is right 50% of the time, the probability of executing a perfectly timed investment strategy is 0.5 raised to the 816th power -- or nearly zero."<br /><br />So what is an investor to do? Well, obviously you want your money in play for that important 1.2% of days. Ultimately the safest choice is to buy and hold for a long time period. I'm looking to hold onto my stocks for a 3-5 year range. That's not set in stone though. Generally, there's no real reason to sell a stake in a solid company so long as the fundamentals of the business don't change.<br /><br />Am I glad that I had my money in the market for yesterday and today? Heck yes. Was it a painful Monday and Wednesday (drops of 504 points and 449 respectively) on the Dow? Heck yes. But I'm not attempting to time the market. I'm attempting to build wealth over the long run and after rallies like Thursday (9/18) and today (9/19) I remain confident that I'll be successful.<br /><br />By the way, as I'm finishing up writing this, GSI is now up 10.58% on the day. :-)Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-41443640798329018052008-09-17T10:41:00.000-07:002009-05-13T22:22:31.675-07:00Another Gloomy Day on the StreetAs expected, in reaction to the news that the Fed is bailing out AIG with a $85 billion loan. It seems like every day when I head to CNN.com that I read about investors sweating another financial crisis. Thankfully I have a longer-term mindset. I know that day to day gyrations in the marketplace are common. Instead I direct my attention to what the market does over a longer period of time, say 3-5 years.<br /><br />In fact, today I purchased more shares of American Oriental Bioengineering (AOB). Why? Well because it's still an great company and it's even cheaper than when I originally bought into it! I take solace in the fact that since 2004 AOB has had net incomes of $7, $13, $29, $43 and an estimated $62 million this year. That's impressive year over year growth! I feel even better when I read about <a href="http://www.stockpickr.com/problog/976/"> others </a> who feel the same way about this company. <br /><br />But don't take my word for it. Or stockpickr's either. I advise doing a little research of your own. Try "googling" a company that interests you and see what you can find about their business success. Or better still, head over to <a href="http://www.fool.com"> The Motley Fool </a> and give their CAPS service a try....it's free!<br /><br />Most importantly of all, start early and keep saving and keep investing! No one wants to work their whole life and investing in solid, value companies is a great way to ensure you enjoy the years to come.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-40870931498301434292008-09-15T11:01:00.000-07:002009-05-13T22:21:44.575-07:00A Dark Day on Wall StreetWell today Lehman Brothers (LEH) filed for bankrupcy. This is the company that helped finance the construction of the railroads in the 19th century. These guys have been around for almost 160 years! And yet despite decades of prudent investing and a solid business, Lehman couldn't pull itself out of the mortgage mess.<br />It's been an UGLY year on Wall Street. <br /><br />Take a look at <a href="http://finance.yahoo.com/echarts?s=%5eGSPC#chart10:symbol=^gspc;range=ytd;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined"> this chart </a> and you can see just how bad this year has been.<br /><br />I took a look at the chart too and I don't fret. Why? Sure, in the YTD the market has been in a gut-wrenching spiral downward. I've watched my portfolio sink deeper into the red. But here's the catch. I'm not a short term sort of guy. I'm much more interested in what happens when I buy and hold. <br /><br />So I dragged the time-frame indicator on the bottom of that chart back over to 1990. And you know what - the chart looks a lot different! THOSE are the kinds of results that matter to me, the long term kind. That's why I'm eying this painful market downturn with an eager eye. With so many great companies on sale, how much money I can make in the next 18 years is essentially limited by how much I can plunk into those solid companies right now!Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-11355057067650863432008-10-28T12:36:00.000-07:002008-10-28T12:48:49.132-07:00A New TownI apologize to the few of you that come and read these blogs - I haven't written in a while. That's largely due to the lack of an internet connection, but also because I've moved. I gave up waiting for the phone to ring while I was in Idaho and headed down to Las Vegas about a week ago. I felt living where I wanted to work would give me a better chance at starting a career.<br /><br />So far it's been a stressful job hunt. I've only been in town for about a week, but I spend many hours in the library researching and applying for jobs. I haven't limited myself to professional positions either - although I would love a PR job. The trouble is there are many qualified people out of work these days and jobs everywhere are scarce.<br /><br />I've had several interviews for a variety of job types: restaurant server, office assistant, marketing rep...some of these I'm still waiting to hear back on. Today I got a legitimate callback on a marketing position with MasterCraft and have an interview on Friday! Think happy thoughts!<br /><br />All in all I am in good spirits. I'm happy that I'm giving this life a real shot instead of being passive about my future. It was hard to leave my girlfriend Alicia in Moscow, but I needed to begin my life/career.<br /><br />I have not given up in investing and I remain almost entirely invested still. Today we saw a huge rebound after yesterday's awful market showing. Economic pundits have begun to predit a bottom to the market, but I remain cautious. <br /><br />I'm holding on to the couple of put options I own (through November anyway) because I think things may still go lower. But the moment I get a job and a paycheck, you'd better believe I'll be snatching up as many depressed shares of good companies as I can!Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com1tag:blogger.com,1999:blog-8058569188623880613.post-50402202766536653802008-10-16T16:06:00.000-07:002008-10-16T16:43:12.485-07:00Brace Yourself For The AftershockBefore I get into this post, let me apologize if I come across as overly negative. I genuinely believe in capitalism and a long-term positive outlook to the stock markets. That's why I continue to add to my stock positions, even as the markets crumble and businesses fail. <br /><br />But there's no point in trying to convince yourself it's not raining when you're getting drenched. Beating your head against the wall will not change the fact that our nation is in a recession and things are going to need some time to get better.<br /><br />Our current mess is due in a large part to sub-prime lending and the subsequent repackaging and reselling of those securities. But I believe the sub-prime mortgage mess is only phase one. Phase two is option-ARM (adjustable rate mortgage), and I think we'll be feeling this aftershock in the not so distant future. I wrote last month about the option-ARM mess <a href="http://zacksimpson.blogspot.com/2008/09/howd-we-get-here.html">here</a>, but an article on <a href="http://www.fool.com">the Motley Fool</a> caught my attention. Kristin Graham wrote an article titled <a href="http://www.fool.com/investing/general/2008/10/15/the-next-housing-catastrophe-waiting-to-strike.aspx">"The Next Housing Catastrophe Waiting to Strike"</a> and it includes some interesting research about the looming option-ARM crisis.<br /><br />I strongly recommend you read the article, but since I'm sure some of you won't, I'll paraphrase. <br /><br />First, take a look at <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbhLk1Ce_keA2rNr4_KHjdUIeXBDED80uZjUugHcxH5w9cdvb0t26YAqBW9C8Dv1QQnCjWR3fLaG2ZGK5XF7UhL9SzdaJEdXyxCJahJ2GzGHY3pxZbw-aBhyphenhyphenE9PiIVWZihQRtm7Pm_Yoo/s1600-h/IMFresets.jpg">this graph</a>. <br /><br />As you can see, in 2007, many sub-prime mortgages rates began resetting. This means the low introductory rate that many homeowners were enjoying reset to a higher default rate. Consequently, the monthly mortgage payments went sky-rocketing, and now we are where we are.<br /><br />But look at the graph again and you may notice in mid-2009 many option-ARM mortgage rates begin resetting. According to Graham's research, some $500 billion in option-ARM mortgages are going to have their rates reset between 2009 and 2012.<br /><br />That's a lot of resets, but that's not even the scary part.<br /><br />According to Graham, the average Californian homeowner with an option-ARM currently owes 109% of the value of their home. Roughly 60% of option-ARM mortgages are in California, Graham says. When the monthly payment jumps, how many people do you think are going to stick around when they owe more than their house is worth.<br /><br />It's their own fault. By not making the full monthly mortgage payment (as option-ARM's allow you to do), they set themselves up for disaster.<br /><br />However, as we have already found out, one person's mess can really stink up the backyards of all of their neighbors.<br /><br />So while I continue to advocate seeking out good companies with solid fundamentals like a high return of investments (ROI), I am afraid things will only get worse for the short term.<br /><br />You are left with several options, and these can vary in terms of return and risk. For a low risk and low return for the short term, you can seek out bonds and CD's. In fact, some places are paying in the 4% range for a 1 year CD so shop around.<br /><br />Those with a slightly higher risk tolerance can look into put options like I do. With put options, you are betting that the share price of a company will decrease over a certain period of time. These days, that's not too hard of a guess. But options include risks that many people aren't comfortable with. I would encourage anyone considering options to read about <a href="http://www.theocc.com/publications/risks/riskchap1.jsp">the characteristics and risks of options</a>.<br /><br />The old money in your mattress can work too, although it's hard to get much growth that way. I would encourage anyone to at the very least seek out a high-yield savings account or money market account. For example, <a href="http://www.ingdirect.com">INGDirect</a> offers a 2.75% savings account, or a 4.00% 12 month CD. That 4% over the next couple of years might let you sleep better at night than risking the wild waters of the stock markets. Either way, starting to save today will allow the miracle of compounding interest to pad your nest egg.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-74221302717513637562008-10-15T18:52:00.000-07:002008-10-15T19:21:40.338-07:00Holdings Update Take 2Well after yet another monumental day of losses on Wall Street, I thought I'd keep up my promise to inform you faithful few what your's truly owns....<br /><br />As of closing time October 15, 2008 I own shares of:<br />- Actuate Corp <a href="http://finance.google.com/finance?q=ACTU">(ACTU)</a><br />- American Oriental Bioengineering <a href="http://finance.google.com/finance?q=AOB">(AOB)</a><br />- Enterprise Products Partners <a href="http://finance.google.com/finance?q=EPD">(EPD)</a><br />- Global Industries LTD <a href="http://finance.google.com/finance?q=GLBL">(GLBL)</a><br />- General Steel Holdings <a href="http://finance.google.com/finance?q=GSI">(GSI)</a><br />- Intellon Corp <a href="http://finance.google.com/finance?q=ITLN">(ITLN)</a><br />- Melco Crown Entertainment LTD <a href="http://finance.google.com/finance?q=MPEL">(MPEL)</a><br />- NovaMed Inc <a href="http://finance.google.com/finance?q=NOVA">(NOVA)</a><br /><br />I also own <em>put options</em> for GSI, <a href="http://finance.google.com/finance?q=AA">Alcoa</a> and <a href="http://finance.google.com/finance?q=GAP">The Great Atlantic & Pacific Tea Company</a>.<br /><br />For a rough introduction to put options, you can refer to my previous post <a href="http://zacksimpson.blogspot.com/2008/10/limbo-time-how-low-can-you-go.html">here</a>.<br /><br />On Monday, feelings were good and optimism was high on Wall Street as the markets flourished, with the Dow, Nasdaq and S&P 500 all climbing over 11%. Well today it rained on our parade, with the markets giving up those gains begining yesterday.<br /><br />Such is the state of the market these days. Brief moments of upward movement, followed by punishing days of freefall. If you look at my holdings(the non-option ones), you can quickly see that my portfolio has taken a large hit too. <br /><br />But I haven't stopped investing. <br /><br />There's a technique that's called dollar-cost averaging. Basically, you plan to buy shares of a company in stages. For month one, you buy $200 worth of shares and continue to do so for a certain amount of time. Many investors buy in thirds - or for 3 months. That way, if in the short term the share price falls, you can scoop up more shares for the same amount of money ($200). The flip side is if the share price rises, you're getting fewer shares for your money. The idea is that you protect yourself against short term price drops and can average out your <em>cost basis</em> (cost you've paid per share).<br /><br />It's fortunate that I've continued to pick up shares along the way, because almost all of my initial purchases are now deeply in the red. The theory goes, if you liked the company at $15/share, you must love it at $5/share. Of course, if the value is dropping for a valid reason (i.e. the company is going bankrupt) then you should likely sell. But with the current market conditions, many good companies are being thrown out with the bathwater. It's up to us to go find those opportunities.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-26565964804871402112008-10-12T17:26:00.000-07:002008-10-12T18:22:32.374-07:00A Safe for Safety?In my previous post I wrote about put options as a way to hedge risk in times of uncertain markets. It's a bit tricky and options trading isn't for everyone, but you CAN make money in times like these.<br /><br />As you may be hoping, there are other options when it comes to investing in wild times like these. For example, sales of <a href="http://www.reuters.com/article/marketsNews/idUSN1140073420080911">Campbell's soup</a> <a href="http://finance.google.com/finance?q=NYSE:CPB">(CPB)</a> have profit up 46% on the year. With inflation driving prices of many consumer goods up, middle-America appears to be loading up with some old-fashioned staples.<br /><br />Another example of the times is sales of safes. Companies like <a href="http://www.sentrysafe.com/">Sentry Safe</a> and <a href="http://www.gardall.com/">Gardall</a> are reporting <a href="http://www.cnn.com/video/#/video/us/2008/10/11/meserve.safe.keeping.cnn">sales increasing</a> 50% over the previous year. Unfortunately for us, Sentry Safe and Gardall are privately held companies, but they serve as examples for what we should be looking for.<br /><br />Some people may be concern that as the nation's economic situation deteriorates and jobless rates rise, crime will rise too. This is a pessimistic view, but it may pay to be prudent. <br /><br />Self-defense and law-enforcement tool maker Taser <a href="http://finance.google.com/finance?q=TASR">(TASR)</a> is currently suffering from a lawsuit stemming from an incident in 2006, but can we imagine Taser's sales increasing? The share price is down nearly 67% on the year, but that could represent a good entrance point.<br /><br />Now I'm not necessarily recommending you run out and buy shares of Campbell or Taser, but perhaps it wouldn't hurt to take another look. After all, Campbell is only down 2.46% on the year, compared to 36% for the Dow. Campbell has also paid out its quarterly dividend this year - a friendly 2.93% and recently announced it was <a href="http://www.reuters.com/finance/stocks/keyDevelopments?symbol=CPB.N×tamp=20080925160900&rpc=66">raising it's dividend</a> 14%.<br /><br />With the market as crazy as it is these days, consider what sort of companies can profit in downturns and sell goods or services that people won't cut out of their budget. Dollar stores are reporting booming business these days. Dollar Tree <a href="http://finance.google.com/finance?q=NASDAQ:DLTR">(DLTR)</a> is up 35% on the year. <br /><br />It's currently hunting season here, so best of luck bagging a solid company!Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-46459261316880679362008-10-07T14:23:00.000-07:002008-10-07T15:23:56.014-07:00Limbo Time! How Low Can You Go?Perhaps it's time to dust off your <a href="http://www.youtube.com/watch?v=mIh1p6VkeF8">Chubby Checker Limbo Rock album</a> and find a broom stick... It may be time to get low!<br /><br />After an abysmal market performance on Monday (10/6), Mr. Market followed it up by falling another 5%. In fact, all three indices (Dow, NASDAQ, S&P) suffered 5-6% losses.<br /><br />Needless to say, these brutal days on the street can be rough on us average investors. It's not fun to watch your stake in a company fall lower in value, day after day. That's why I invest with a long-term mindset, and I understand that short-term falls are not unexpected.<br /><br />That being said, wouldn't it be great if there were a way to protect yourself from the short term losses. There is. They're called <a href="http://www.optiontradingpedia.com/free_buy_put_options.htm">put options</a>.<br /><br />In markets as volatile as these, it sometimes pays to employ other trading techniques other than the simply buy and hold. That's not to say buying and holding won't work out in the long run. After all, that's what we're after. But why not protect your investment a bit and earn some money while you're waiting for the long run?<br /><br />Simply stated, put options represent the "option" to sell a stock at a certain price at a later date. You don't need to own the stock itself, but you're agreeing that on XX/XX/XXXX, you'll sell shares of the stock at a set price.<br /><br />An example: Let's say Google (GOOG) is trading at $345/share right now. You think that in the long run the share price will go up, but think in the short term the price may fall. In markets like todays, that's not a bad bet. So you can buy a <em>put option contract</em> which generally represents 100 shares at a certain price. For the March 2009 expiration date, you can buy a put contract at $39.50/share, with a strike price of $320.<br /><br />This means that for $39.50/share, you're buying the right to sell 100 shares of (GOOG) at a price of $320/share, on March 20, 2009. It will cost you $3,950 to buy that contract (100x39.50). It's important to remember that options are just that, options. You have the option to sell those 100 shares, but are not required to. <br /><br />In fact, the real value with options comes from its leverage. Let's say prior to March 20, 2009, Google's share price has dropped below $320/share. Your put option is now <em>in-the-money</em> and has gained in value. Now if you'd like, you can close your position, thereby forfeiting your right to sell those shares later down the road, but pocketing the profit. <br /><br />I'll give you a real example from my own portfolio to explain better. I own shares of General Steel Holdings <a href="http://finance.google.com/finance?q=GSI">(GSI)</a>. Due to the growing global financial crisis, building slow-downs and a variety of other factors, the stock price is quite depressed lately. But I also own put options of GSI. I own put contracts for the November 2008 expiration date, with a strike price of $7.50. This means in November, I can sell my 100 shares for $7.50/share. It cost me $2.05/share to buy this, so roughly $215 per contract after commission. <br /><br />Since I bought the contracts, GSI's share price has fallen quite a lot. However, this means my contracts have increased in value since my strike price is above the share price. While each contract cost me $205, minus commission, it is now worth $320/contract. If the share price stays low and the date for my sell option gets closer, the value will continue to increase. <br /><br />Of course, there is the chance that GSI's share price could increase, and my option will lose value, but what do you think is most likely in the next two months? It's a rough sea out there, but there are still ways to make money. Think of put options as a way to protect your investment in a company. <br /><br />As always, this isn't a recommendation for GSI or for its put option. This is also a very very brief introduction into one of the many ways to use options to invest. Options can involve greater risk and are not for all investors. I implore you to do your own research and talk to a financial advisor if you'd like. There are many financial professionals out there who know gobs more than I do. But I want to make sure you aren't running from the market with your tail tucked. More than 80% of the companies publically traded U.S. stocks are down this year. This includes solid companies like <a href="http://finance.google.com/finance?q=aapl">Apple</a> and <a href="http://finance.google.com/finance?q=ge">General Electric</a>. <br /><br />These current lows represent a great time to get invested into a solid company. Ask <a href="http://www.marketwatch.com/news/story/ge-sell-12-billion-stock/story.aspx?guid=%7B82385698-8517-4ADA-8436-83DB02638BD7%7D&dist=msr_10">Warren Buffet</a>. But also consider protecting your investment for these short-term downturns.<br /><br /><br />***Remember, you can subscribe to this blog and you'll be notified via email whenever I publish a new post!***Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com0tag:blogger.com,1999:blog-8058569188623880613.post-58567027950844313162008-10-06T13:41:00.001-07:002008-10-06T14:22:32.761-07:00A Sub-10k DayI woke up this morning and turned on my laptop, ready to face the day and catch up on the news from the East coast. MSN Messenger started up and on the news of the day pop-up thing that comes with it, I was stunned to see a headline about the Dow falling below 10,000 points.<br /><br />Immediately I headed to <a href="http://finance.google.com">Google Finance</a> to check out what the heck was going on. By mid-day the Dow, NASDAQ and the S&P 500 were all past the negative 8% mark. <br /><br />But since Congress passed the bailout bill, we should be rebounding in the markets, right? Not exactly. The bailout was designed to prop up banks and support the broader economy. It was created to avoid depositors running on the banks in a mass account withdrawal. It was not intended to boost the individual prices of individual stocks. <a href="http://finance.google.com/finance?q=NASDAQ:EBAY">Ebay's</a> income statements and business fundamentals haven't changed because of the bailout.<br /><br />The 10,000 point mark is "psychologically important", according to many economists and financial experts. The last time the Dow was at 10,000 was in March, 1999, when it was on its way up. 10,000 points itself doesn't mean much. But since it's been 9 years since we've been at this level, it does show that our progress since '99 wasn't sustainable at that rate.<br /><br />Remember, this mess was created because of a bubble in the housing and mortgage industry. Eventually bubbles pop. Markets correct themselves.<br /><br />It was a painful day in terms of my own holdings. Fortunately I own not just basic shares, but other somewhat tricky market things like options - more importantly, put options. In a very brief explanation, that means I can still make money even if the share price drops.<br /><br />What does today mean for the average investor? Well, the broader markets rebounded in late afternoon trading today, making their way back towards a less frightful -3.5 to -4.3% range. Individual stocks rallied, with some ending up in positive territory on the day. <br /><br />This simply goes to show that the market can be a wild beast. Trying to time the market bottom is virtually impossible, as I wrote about in <a href="http://zacksimpson.blogspot.com/2008/09/wild-week.html">this</a> previous blog. An investor's best bet is to take some time finding companies with a sound business plan. Look for companies who have produced solid earnings growth, year after year. <br /><br />In times like these, take a look at dividend paying companies like Johnson & Johnson <a href="http://finance.google.com/finance?q=JNJ">(JNJ)</a>, Coca-Cola <a href="http://finance.google.com/finance?q=KO">(KO)</a> or Enterprise Products Partners <a href="http://finance.google.com/finance?q=EPD">(EPD)</a>. All three of these companies have at least a 2% dividend, paid each quarter. While all three are not immune to a broad market downturn, dividends can be a nice way to offset the selloff, especially if you re-invest them. As always, this isn't necessarily a recommendation to run out and buy these three companies, but perhaps taking a look at their cash flow and income statements wouldn't hurt.<br /><br />Regardless of the broader market and the current recession, there are a great many companies in the world who operate solid businesses and manage to make money year after year. When companies like these get swept up in the turmoil of the greater market, it creates opportunities for investors like us who understand it won't always be like this. <br /><br />Take a breath. Realize it's not the end of the world. McDonald's <a href="http://finance.google.com/finance?q=McDonalds">(MCD)</a> won't go bankrupt anytime soon. Look for the value in good businesses and invest with confidence for a brighter day.Zack S.http://www.blogger.com/profile/04243511618698704067noreply@blogger.com1