A look back in time...

I've been following the ups and downs of the markets the last few months and what's interesting about my analysis is I don't really feel like much has changed. It has to be the most perplexing thing in the world for me now in my over 10 years of personal investing. It's perplexing because things are changing (slightly) and for the market we've seen its slow ascent higher. But I still think the market sucks. There is a lot of downside risk and I STILL like Commodities, Technology, Wireless.


I am clearing through my papers and I was looking of the habits of investing for success. The purpose of this blog was to capture the main theme of that write up and that was to keep a diary, a virtual diary in my example. The things to try and remember to do are:

~ Review your holdings (probably not daily)
~ Remember you portfolio includes all your accounts: Stocks, 401K, and IRA accounts do matter and they make up your complete portfolio
~ Pick how you want to measure your success: Success can vary from investor to investor so what defines whether you're up...a percentage, a target goal, etc
~ Start keeping track

I hope these tools go a long way into to helping you build your own portfolio. For me I do these things and really don't review my portfolio very frequently. I care about how they are trading but I don't get to concerned on their moves up or down. A great example was when we bought Burlington Northern Santa Fe. If you go back to when this stock was first recommended you will see why I thought it was important and at what prices I thought it was attractive. By taking notes, I still remember I liked this stock in the mid 70s because I believed that one of the positive things to take away from where the economy was at the time was the importance in commodities and the shift in emerging markets needing those commodities. I kept up with things but often didn't watch its swings. Its hard to wait but the odd thing was when Burlington finally got bought out at over $100 a share it was my friend that called me and alerted me of what had happened...I didn't know right away.


Here are a few examples of stocks that we've recommended over time and waited and watched them pay off as the fundamentals developed:


Supertel (SPPR) - I originally bought this in 2005 when it was known at Humphrey Hospitality. In researching my blog this was sold roughly 3 years later for around a 60% increase.

Cytyc (CYTC)- One of my all time favorite stocks, they were one of the first stocks I recommended and one of the first that I owned to get bought out. Bought at $17 and held until they got bought out in the $40s I believe.

Ambassadors International (AMIE) - This one was a stock that didn't move much for a long time I bought in 2004 for $13. I wrote an article 3 years later finally selling after I recall it hitting a peak of $32 and coming back down and settling in the mid 20s.

OIL - My call to buy oil stocks back in 2005 in my inaugural post was fitting. Who would have known the ride this commodity was going to be on going forward. Oil Post

Clayton Williams (CWEI) - Based on my call in oil, this was the a stock bought at $42 and this went all the up into the $100s. This took years to develop but what a ride.

Collectors Universe (CLCT) - Here is the final and prime reason to not let go of a good thing. CLCT is not the best stock I've owned over time, but it was the most stressful one to own. I have owned this stock since 2007. CLCT POST The story behind this stock and why I still own is because of fundamentals. This stock was paying a healthy dividend $.20c a quarter back then and helped me build up my war chest. When the decline of 2008 hit this stock plummeted to $4 when management cut the dividend. The only thing that stopped me from taking a huge loss was reading the financial report that was put out by the company. The newly appointed CEO (because the company booted the last one) outlined that the company could afford to still issue a dividend however it is prudent to hold the cash during tough times. So I waited and waited through the darkest period in the market and true to his word they brought the dividend back when the stock was around $6 a share. So I was essentially buying the stock each quarter with the dividends and lowering the cost of what I had bought the stock in. So today even with the stock standing at mid $13s a share we are seeing a 25% increase.


This is why its important to take notes.



Now it is even more important to remember your blunders and boy have I had a few in my past. The easiest one I can remember is:

Zhone Technologies - I rode this stock from $1.10 to the $1.40s. Then the fundamentals fell and I waited to long. This cost me a bunch as I never sold until this stock hit .70c! Ouch, they didn't get approval to sell in a region in Europe which they thought they had locked down. So this taught me be careful with penny stocks and they are volatile and their business can swing based on contracts.


Not Shorting Housing - This would have made me a legend if I knew about shorting back in the day. This post proves why you should write down your thoughts...my first call on housing and I didn't nothing about it: Housing


Rite Aid (RAD): Just a horrible pick and I'm glad to notice that I wrote about getting out of this position and putting my capital to better use. Ha to bad that cash went to Zhone Tech. LOL


NOT Buying Apple (AAPL) - I wrote a piece on this based on a reader question, and never followed my own advice.

BUYING ETFs - I will write here. Do not buy ETFs as an investment. I would only use these purely as hedges in your portfolio. They are difficult securities to own due to their calculations and just because oil is going up doesn't mean the ETF is going to do up also. Also, anything super levered (Banks x3) is just not smart!!! Repeat do not buy unless you are hedging your portfolio!!!

Playoffs...

"Playoffs...Don't talk to me about playoffs" is the infamous line in the Coor's commercial by coach Jim Mora. And even though its early in the year you have to treat your portfolio like its the playoffs. Its game time this weekend for the National Football League (NFL) and only the best of the best are around to fight for the title. And this is the approach that must be taken with your portfolio...only the best of the best will be accepted. The current market conditions: the value of the dollar, the credit crunch, the housing bubble, higher unemployment, deteriorating earnings, high gas, and the threat of inflation are just a few of the strengths working against you...kinda like the opponents defense in a playoff game. So the past week has seen me actively paying attention to the market. I gave you Bear Stearns (NYSE: BSC) just a few days ago as a momentum play as James Cayne stepped away from the company. That was a tough day for stocks you could have gotten in BSC anywhere from $71-$77 dollars. At all of these levels you would still be showing a profit at this point. I am not a huge fan of owning any financial companies at these levels.

My formal recommendation is to SELL Bear Stearns. However, informally if you got into Bear Stears near the 52 week low, I would licking my lips and thinking about keeping holding at those levels.

The next thing I recommend at this point is to closely watch analyst revisions and warnings of certain industries and companies. For instance, if you don't understand that the credit crunch is the real deal at this point and that ALL retailers are being affects EXCEPT for your discount and low cost retailers than you are napping on the market and deserve to be invested in index and mutual funds.

My next move this past week was to part with any RETAILERS that I own with a gain. The only retailer that I owned was BEST BUY (NYSE: BBY). BBY was sold for a small profit but this is an retail darling that I would keep a close eye on. As this stock continues to reach low levels and nears its 52 week low I would take our old price point and build in a 5-10% margin of safety. Our old price was 43.95 (need to verify that) and then I would think about buying in. I personally will lean towards a 5% margin because I think people with still shop at BBY for CDs, electronics, video games, and all discount priced electronics.

My formal recommendation, SELL BEST BUY (NYSE: BBY); look for points of reentry later

Lastly SELL gains with limited upside or in industries that will continue to lag the market. The following stocks are formal SELL recommendations:

Maximus (NYSE: MMS) - limited upside here after large institutional investors sold their stakes in the company...I walk when the big money walks!!!

Online Resources (NASDAQ: ORCC) - Sold after it soared to $12 and showed resistance at those levels (this was a nice gain in two months of over 20%)

Supertel (NYSE: SPPR) - I have owned this for at least a couple of years now. It was originally Humprhey Hospitality. Limited upside at this point (nice gain of over 60% in over 2 years)

Remember only go into the playoffs with the best players for your team. Now some of the best players can be guys that have performed in the clutch for you in the past. I say this because I am a believer of this philosopy. Need proof, check out Buffett's additional purchases of Burlington Northern Santa Fe's stocks at levels where he originally purchased the stock. My only wish is that I would have sold this stock (which we bought around $77) when it hit $86 and now we would be in position to buy again. So sell non-performers and hold cash for the Michael Jordan's, Magic Johnson's, and Larry Bird versions of stocks. My FORMAL BUY RECOMMENDATIONS will be a good number of stocks because the market is getting crushed here and I think plenty of stocks will surface with attractive values:

Burlington Northern Santa Fe (BNI) - Buffett's back and so am I love at our old levels of $77

Best Buy (BBY) - This sector (retailers) is getting crushed so wait for proof that the bad times are over and catch this stock, further build in a margin of safety so you can sleep easy at night; consider buy with a safety @ 40, give a hard look @ 42

Maximus (MMS) - This is an attractive stock with mostly buy and strong buy ratings by analysts. The biggest long shot of my buy group; buy at my old post rec price of $29 & 30 dollars.

Online Resources (ORCC) - We loved this stock when the CEO promised he would put up his own money to buy shares of this stock. And we bought around $8.9 dollars a share. Anything under screams BUY

Radisys (RSYS) - Guess who's back! This stock was a 50% gainer for us last year, when we dollar cost averaged our purchase prices on this stock at levels between $10.60-13. We sold when it hit @17 and smiled all the way to the bank. Well it hit my STOCK SCREEN AGAIN, and I will be adding Radisys back to my portfolio. The recent 10 - 15 low is $12.25 and that is where I will set my buy target. This stock closed at 12.19, and with this stock back to my old buy recommendation levels, I am RE-Recommending this stock. I truly don't believe it will test its 52 week low of $10.50 and we have the help of an earnings release in early February that could propel this stock forward.

Zhone Technologies (ZHNE) - I am going to recommend Zhone Technologies and believe that dollar cost buying down at these levels will have positive upside. This has buy a roller coaster ride and hopefully after the short sellers have to recover there will be huge swings to the upside for this stock.