I don't know the true answer to that question but I can tell you there are better places to park your money in times of distress. As you have learned from my last article, I recommend being very nimble in markets like this. I have not given up on the buy and hold strategy because I think the ultimate goal is to find deeply discounted value in your portfolio. But I also suggest that you pick and choose your battles wisely and not be afraid to walk away from poorly performing stocks. Now I know that sounds hypocritical when investments like Clayton Williams (CWEI), which was down roughly 30% in our first two years of ownership, rebounded and have returned us gains of over 150%. But notice CWEI had no fundamental changes in the company's operations and was in a perfect sector to outperform the market in the long run (CWEI was just waiting for its deeply valued stock to get mainstream attention). But I'm never too proud to part ways with a poorly performing stock like Zhone Technologies (ZHNE). ZHNE is a stock I love but the fundamentals changed and I was forced to sell the stock for a BIG LOSS. I was able to OFFSET this LOSS with a timely SHORT SALE (Betting the stock will go down) of ZHNE.
RECESSION PROOF
I have already mentioned buying infrastructure stocks of oil producers see the OIH recommendation. This is an excerpt from a recent article about the value in investing in Natural Gas Pipeline stocks. If this analyst is correct, my stock screen is identifying a timely move into energy infrastructure stocks.
This is a taken from Seeking Alpha's article: http://seekingalpha.com/article/83856-spectra-energy-gas-pipelines-make-great-recession-proof-stocks?source=side_bar_long_ideas
Seeking Alpha on why gas pipelines make great recession proof investments:
"It has been said before, but pipeline stocks are like railroads for natural gas. Simply put, the demand for natural gas is up and correlates somewhat with oil prices, but the upside with pipelines is that they do not have the competition from other forms of transportation. In order to move and significant volume of natural gas a pipeline must be used.
Pipelines are traditionally managed very conservatively, as is Spectra Energy, and make their money through cost-of-service contracts and other required services. This means that cash flow is relatively stable and predictable when compared to the market as a whole. This can be referenced by viewing the Beta coefficients of pipeline stocks which show significantly less volatility than the broader markets.
I have stated before, and I will state again that pipelines are great recession proof stocks.
On top of preserving and likely growing capital, investors can collect a healthy (and growing) dividend yield."
Sunday, July 06, 2008
Thursday, July 03, 2008
Investor Be Nimble, Investor Be Quick
If you are just starting out your investing career what better time to get started than in a turbulent market that we face right now. What we are witnessing will be written in economic and history books years from now. Oil just peaked again at $146, jobs are declining at a decent clip (6 straight months), the average consumer has huge amounts of debt, mortgages are foreclosing at alarming amounts, peoples income (real wages) are not increasing, consumer confidence is at a 28 year low and inflation is causing prices across the board to inch higher.
Things are so bad tough that politicians are even talking about a second economic stimulus package being give to consumers!!! Now I won't complain about getting another 600 dollars but lets try to chip at the issues that will reverse this downtrend. I won't get into policies that our government and Federal Reserve should take to turn us around but something will need to be done.
Until then I hope you are following our recommendations and putting yourself in a position to be nimble and quick to change your strategy. It's time to get tight like Phil Ivey, a good poker play would.
URB Recommendations:
~ Rebalance your 401K to a more defensive strategy. This would be ONLY where you have existing gains, and you should if you have been listening to my strategy of overweighting your 401K plan towards international and emerging market stocks in your 401K. Take those gains, ALL of it, and move into the safest but highest yielding plan. For me, I was able to move my old 401K plan into a Money Market account. And for my IRA plan, I was able to find a PERFECT fund called the Treasury Inflation Protection Fund (aka:TIPS) which take your basic money market rate and protects you as inflation creeps in by increasing the yield at the rate of inflation.
How to play the market during these times, turn defensive:
~ Big Pharmaceuticals
Some experts say big pharma like Forest Labs and Schering Plough are great defensive plays but I am not very good at evaluating big drug companies. The logic makes sense that you still have to buy drugs, but I not one that visits the pharmacy much so I don't know if the average person skips picking up their meds during tough times.
~ I recommend oil, natural gas, gold, steel, and select technology plays.
BUY Enterprise Product Partners (EPD) @29.05 or below...it even hit 28.76 today. I am also slightly bullish on pipeline companies. A few have surfaced on my screening and this sector may be signaling a timely opportunity to buy. I like Enterprise Product Partners (EPD) and Boardwalk Pipelines (BWP).
BUY or reBUY AK STEEL (AKS) @ 54 because steel is strong and their latest report on passing on big surcharges or fees to their customers is a good thing because it means that they are not footing the bill, although it could scale back demand.
Things are so bad tough that politicians are even talking about a second economic stimulus package being give to consumers!!! Now I won't complain about getting another 600 dollars but lets try to chip at the issues that will reverse this downtrend. I won't get into policies that our government and Federal Reserve should take to turn us around but something will need to be done.
Until then I hope you are following our recommendations and putting yourself in a position to be nimble and quick to change your strategy. It's time to get tight like Phil Ivey, a good poker play would.
URB Recommendations:
~ Rebalance your 401K to a more defensive strategy. This would be ONLY where you have existing gains, and you should if you have been listening to my strategy of overweighting your 401K plan towards international and emerging market stocks in your 401K. Take those gains, ALL of it, and move into the safest but highest yielding plan. For me, I was able to move my old 401K plan into a Money Market account. And for my IRA plan, I was able to find a PERFECT fund called the Treasury Inflation Protection Fund (aka:TIPS) which take your basic money market rate and protects you as inflation creeps in by increasing the yield at the rate of inflation.
How to play the market during these times, turn defensive:
~ Big Pharmaceuticals
Some experts say big pharma like Forest Labs and Schering Plough are great defensive plays but I am not very good at evaluating big drug companies. The logic makes sense that you still have to buy drugs, but I not one that visits the pharmacy much so I don't know if the average person skips picking up their meds during tough times.
~ I recommend oil, natural gas, gold, steel, and select technology plays.
BUY Enterprise Product Partners (EPD) @29.05 or below...it even hit 28.76 today. I am also slightly bullish on pipeline companies. A few have surfaced on my screening and this sector may be signaling a timely opportunity to buy. I like Enterprise Product Partners (EPD) and Boardwalk Pipelines (BWP).
BUY or reBUY AK STEEL (AKS) @ 54 because steel is strong and their latest report on passing on big surcharges or fees to their customers is a good thing because it means that they are not footing the bill, although it could scale back demand.
Wednesday, July 02, 2008
Get out of the Zhone...
Timing is always of the essence. So I am typing fast. Last night I read that Zhone Technologies will be guiding their forecasts lower for the next quarter...BAD NEWS. A deal gone bad is not good news in this environment for anyone let alone a stock trading around a dollar.
RECOMMENDATION: I am SELLING all my positions in Zhone @ the opening. You will see this reflected in the stock tracker.
RECOMMENDATION:Further, I am taking a risky position and shorting the stock ZHONE at the OPEN. That is opening a SHORT SALE (bet the stock will fall) and I will look for a quick 10% gain and they close this position.
Here is my comments from the stock tracker last night, when I stumbled upon this news:
This stock will be headed lower, after management announced a sale that didn't go through and will affect next quarter's result. They hope to get punished earlier by making the announcement almost a full month in advance.
RECOMMENDATION: I am SELLING all my positions in Zhone @ the opening. You will see this reflected in the stock tracker.
RECOMMENDATION:Further, I am taking a risky position and shorting the stock ZHONE at the OPEN. That is opening a SHORT SALE (bet the stock will fall) and I will look for a quick 10% gain and they close this position.
Here is my comments from the stock tracker last night, when I stumbled upon this news:
This stock will be headed lower, after management announced a sale that didn't go through and will affect next quarter's result. They hope to get punished earlier by making the announcement almost a full month in advance.
Tuesday, July 01, 2008
Mystery Market
Right now the market is like a victim on the tv special 48 Hours Mystery or Dateline. If you are are a bullish investor your portfolio gains are disappearing faster than Star Jones weight...I know amazing. That is why I have to say, without hesitation, that we are in the midst of an ugly recession that has many forces against it. Whether its a slumping housing market, skyrocketing oil, expensive food, vanishing jobs, or a weak dollar, we all seem to be affected in our wallets and now in our portfolio.
I haven't taken this stance in the few years that I have been investing but I am going to go on record and say "like a good poker player" you should tighten your game up right now. If you have big gains sitting out there keep a watchful eye out on those positions and look to sell to the upside. Capital on the sidelines can definitely be your friend when this all turns around. And for new stock positions or stocks that are currently trading at a loss you may want to set a floor, or stop loss, that limits your downside risk. It will all depend on how much you can stomach but I will remind you that it when you take a loss in a stock position, you actually have to gain "MORE" than your original loss to "JUST BREAK EVEN". Don't believe me run the number's...Let's say you buy a stock for $10 and it falls to $5, you just lost 50%. Now calculate how much you have to earn on $5 to get back to $10...try a 100% return!
My recommendations:
~ Take cover and move your 401K benefits to a safe investment like a money market fund or even better I found a inflation protected bond fund to hold me over until the market gains its footing
~ I believe that exposure to the commodities (oil, gas, steel) is a good hedge to the downward pressure. As you can see I have increased my tracking portfolio to see how GOLD and OIL perform during these turbulent times. I am also slightly bullish on pipeline companies. A few have surfaced on my screening and this sector may be signaling a timely opportunity to buy. I like Enterprise Product Partners (EPD) and Boardwalk Pipelines (BWP).
~ The international and emerging markets are no longer a complete safe haven. Many countries are feeling the effects of higher prices of food and oil and are also reeling from inflation. And as international countries raise their interest rates to combat inflation...earnings may be under attack. If you have moderate gains, take profits here for safer investments.
~ Set stop losses or floor limits for new stock positions and current positions that are at a loss. It is harder to break even from deep losses
I haven't taken this stance in the few years that I have been investing but I am going to go on record and say "like a good poker player" you should tighten your game up right now. If you have big gains sitting out there keep a watchful eye out on those positions and look to sell to the upside. Capital on the sidelines can definitely be your friend when this all turns around. And for new stock positions or stocks that are currently trading at a loss you may want to set a floor, or stop loss, that limits your downside risk. It will all depend on how much you can stomach but I will remind you that it when you take a loss in a stock position, you actually have to gain "MORE" than your original loss to "JUST BREAK EVEN". Don't believe me run the number's...Let's say you buy a stock for $10 and it falls to $5, you just lost 50%. Now calculate how much you have to earn on $5 to get back to $10...try a 100% return!
My recommendations:
~ Take cover and move your 401K benefits to a safe investment like a money market fund or even better I found a inflation protected bond fund to hold me over until the market gains its footing
~ I believe that exposure to the commodities (oil, gas, steel) is a good hedge to the downward pressure. As you can see I have increased my tracking portfolio to see how GOLD and OIL perform during these turbulent times. I am also slightly bullish on pipeline companies. A few have surfaced on my screening and this sector may be signaling a timely opportunity to buy. I like Enterprise Product Partners (EPD) and Boardwalk Pipelines (BWP).
~ The international and emerging markets are no longer a complete safe haven. Many countries are feeling the effects of higher prices of food and oil and are also reeling from inflation. And as international countries raise their interest rates to combat inflation...earnings may be under attack. If you have moderate gains, take profits here for safer investments.
~ Set stop losses or floor limits for new stock positions and current positions that are at a loss. It is harder to break even from deep losses
Monday, June 23, 2008
Making Everyone's Pain Your Gain
All I could do was smile as I filled up my SUV this weekend. Somehow when I was purchasing this truck late last year I was a part of the majority of you all out there that was saying that prices can't keep rising forever. I am not a nostalgic person but I was smiling because I will be able to tell my kids one day that I filled up one tank of gas for $70. But then I will tell my kids that dad ain't no dummy and I might as well "make my pain my gain".
That's means that you think about buying what has been hurting you the most:
Gas - Anyone that is a buyer of gas is feeling like they ate a whole bunch of tomatoes recently. But remember don't just buy it because it has 'energy' it its name. Look back at my posts and I told you not to buy the refiners because they are also 'buyers of gas' so this makes them a lousy play. But I love the Oil Services sector and added it to my Stock Tracker to the right of the page.
Steel, Copper, Gold - Now you may not know it but these metals ain't cheap and there are plenty of plays in this area to make money off of. I love the pick that I added to the Stock Tracker, AK Steel but it buddy US Steel just got a major upgrade and I still love this sector. Copper feels much the same so look out for names like Freeport McMoran and when talking about gold take the easy route for searching for a name and buy an Exchange Traded Fund (ETF) that specializes in a little bit of bling!
Speculation - The other thing that people have been talking about is market speculation, or people profiting by trying to drive certain markets higher. To benefit start looking at the alternative energy plays that are risky but could be worth the payoff. Solar energies like Evergreen Solar, First Solar, MEMC Electronics, Canadian Solar and the list goes on. And even our friend wind is starting to look good as plays like Broadwind Energy may continue to get pushed up by speculators.
Shorts - Try not to think to much and short the stupid plays. Shorting a stock is making a bet that a stocks price will go down. UPS and FEDEX are easy plays to see why they are getting smashed. They transport good and the price of fuel is skyrocketing...SELL. And when people can't buy the toys they want retailers like Circuit City and Pier 1 Imports, the automakers Ford and GM, and airplane companies like United and Delta will continue to fall like bodies in the movie Terminator. Also I am going out on a small limb and say short AT&T. With the exclusive rights to the I-Phone, I was watching on tv where an analyst felt like the amounts they are paying to subsidize the I-Phone will hurt the stock in the short term.
Go with the flow, the trend is your friend, and make everyone's pain your gain...buy energy, natural gas, steel and we'll tell our kids later about where we were when we made money off $5 gas prices.
That's means that you think about buying what has been hurting you the most:
Gas - Anyone that is a buyer of gas is feeling like they ate a whole bunch of tomatoes recently. But remember don't just buy it because it has 'energy' it its name. Look back at my posts and I told you not to buy the refiners because they are also 'buyers of gas' so this makes them a lousy play. But I love the Oil Services sector and added it to my Stock Tracker to the right of the page.
Steel, Copper, Gold - Now you may not know it but these metals ain't cheap and there are plenty of plays in this area to make money off of. I love the pick that I added to the Stock Tracker, AK Steel but it buddy US Steel just got a major upgrade and I still love this sector. Copper feels much the same so look out for names like Freeport McMoran and when talking about gold take the easy route for searching for a name and buy an Exchange Traded Fund (ETF) that specializes in a little bit of bling!
Speculation - The other thing that people have been talking about is market speculation, or people profiting by trying to drive certain markets higher. To benefit start looking at the alternative energy plays that are risky but could be worth the payoff. Solar energies like Evergreen Solar, First Solar, MEMC Electronics, Canadian Solar and the list goes on. And even our friend wind is starting to look good as plays like Broadwind Energy may continue to get pushed up by speculators.
Shorts - Try not to think to much and short the stupid plays. Shorting a stock is making a bet that a stocks price will go down. UPS and FEDEX are easy plays to see why they are getting smashed. They transport good and the price of fuel is skyrocketing...SELL. And when people can't buy the toys they want retailers like Circuit City and Pier 1 Imports, the automakers Ford and GM, and airplane companies like United and Delta will continue to fall like bodies in the movie Terminator. Also I am going out on a small limb and say short AT&T. With the exclusive rights to the I-Phone, I was watching on tv where an analyst felt like the amounts they are paying to subsidize the I-Phone will hurt the stock in the short term.
Go with the flow, the trend is your friend, and make everyone's pain your gain...buy energy, natural gas, steel and we'll tell our kids later about where we were when we made money off $5 gas prices.
Thursday, June 19, 2008
Cali Love ~ June URB Update
I took a few days off to head over to the West Coast last week. I was living it up in the state of sun, taking care of business for my boy TP who just got married...if you don't know then check out webeclubbin.com for more on the right way to live and enjoy life.
I have been watching the market closely because it seems to be bouncing like a coaster at Six Flags Great America. The catch is the ride has been heading south more than it has been gliding up. I am here to report on what I've been paying attention to the most to keep you informed on new developments. I have to admit not much has surprised me, as most analysts are very negative on the US stock market. Some fools out there keep trying to catch the bottom of sectors such as the financial industry but who knows when they will learn. Let's see, Wachovia got smashed and cut their dividend, Bank of America is not doing much better, and regional banks like National City and others are feeling the pain and strain. I am watching oil closely as many people are taking a good game but little do they forget the fundamentals haven't changed and until someone (maybe Saudi Arabia) raises oil production little will be done in the short term!!!
June URB Updates
China Digital TV Holdings (NYSE: STV) is a BUY in my mind from a valuation standpoint. The background is set as China has opened it arms like the rest of the world to the digital revolution that is taking place. I am hoping the stock will be pushed by requirements from the Chinese government that major cities convert from analog to digital (sound familiar) by the end of this year!! Next think Olympics, my reasons may be simple but who in their right mind would want to watch the 2008 Olympics with just an analog signal...not me.
Zhone Technologies (NASDAQ: ZHNE) and heartburn might be one and the same. This stock I believe is dropping due to the fact that NASDAQ has notified the company that it will be delisted because of failing to meet listing requirements because the stock has been trading under $1 for over 30 days. Pay close attention to this stock as penny stocks can move very quickly to the downside. I would recommend cutting your losses as there are other battles to fight and even though this stock is in a great industry (technology) and growing sector (telecommunications) there will be other days.
Burlington Northern Sante Fe is a stock that has been mentioned plenty of times here and I would also recommend taking a little profit here because future earnings estimate forecasts are starting to come down and remember we were watching the executives of the companies sell massive amounts of stock. Interesting timing since the company just reported that floods and fuel costs are starting to hamper their business.
National City Corporation (NCC) will remain a volatile stock for the short term but it appears to be holding up well especially around the BUY levels we identified as close to book value. I still have some concern because banks are coming out every day and scaring us with more and more write downs. But they have beefed up their cash levels and have a host of analysts rating them as a buy.
Notes: I have purchased STV in my stock tracker and personal portfolio. I am closely monitoring ZHNE, BNI for sells, and NCC for purchase. Bulls and Bears make money...pigs and fools holding on to losses for pride get slaughtered!!
I have been watching the market closely because it seems to be bouncing like a coaster at Six Flags Great America. The catch is the ride has been heading south more than it has been gliding up. I am here to report on what I've been paying attention to the most to keep you informed on new developments. I have to admit not much has surprised me, as most analysts are very negative on the US stock market. Some fools out there keep trying to catch the bottom of sectors such as the financial industry but who knows when they will learn. Let's see, Wachovia got smashed and cut their dividend, Bank of America is not doing much better, and regional banks like National City and others are feeling the pain and strain. I am watching oil closely as many people are taking a good game but little do they forget the fundamentals haven't changed and until someone (maybe Saudi Arabia) raises oil production little will be done in the short term!!!
June URB Updates
China Digital TV Holdings (NYSE: STV) is a BUY in my mind from a valuation standpoint. The background is set as China has opened it arms like the rest of the world to the digital revolution that is taking place. I am hoping the stock will be pushed by requirements from the Chinese government that major cities convert from analog to digital (sound familiar) by the end of this year!! Next think Olympics, my reasons may be simple but who in their right mind would want to watch the 2008 Olympics with just an analog signal...not me.
Zhone Technologies (NASDAQ: ZHNE) and heartburn might be one and the same. This stock I believe is dropping due to the fact that NASDAQ has notified the company that it will be delisted because of failing to meet listing requirements because the stock has been trading under $1 for over 30 days. Pay close attention to this stock as penny stocks can move very quickly to the downside. I would recommend cutting your losses as there are other battles to fight and even though this stock is in a great industry (technology) and growing sector (telecommunications) there will be other days.
Burlington Northern Sante Fe is a stock that has been mentioned plenty of times here and I would also recommend taking a little profit here because future earnings estimate forecasts are starting to come down and remember we were watching the executives of the companies sell massive amounts of stock. Interesting timing since the company just reported that floods and fuel costs are starting to hamper their business.
National City Corporation (NCC) will remain a volatile stock for the short term but it appears to be holding up well especially around the BUY levels we identified as close to book value. I still have some concern because banks are coming out every day and scaring us with more and more write downs. But they have beefed up their cash levels and have a host of analysts rating them as a buy.
Notes: I have purchased STV in my stock tracker and personal portfolio. I am closely monitoring ZHNE, BNI for sells, and NCC for purchase. Bulls and Bears make money...pigs and fools holding on to losses for pride get slaughtered!!
Monday, June 09, 2008
Kenya IPO / National City / The New Gold??
Kenya IPO - Safaricom
Back in March, I wrote about Safaricom the telecom giant of Kenya. This recommendation highlights a great way where communicating with your friends leads to great stock recommendations. After understanding the risks involved, I noted that this would be a great play in the international markets especially because the local US environment isn't exactly overflowing with gigantic returns. I was pleased to read today the Safaricom's Initial Public Offering rose roughly 50% today. The one difficulty the average investor may have run into is that because it was an international IPO there weren't as many ways to participate in this offering outside of having some type of link to Morgan Stanley an advisor to Safaricom. Check out our earlier discussion here: http://urbanomics.blogspot.com/2008/03/march-edition-urb-in-60-seconds.html
NATIONAL CITY - IS IT TIME TO BUY???
National City (NYSE: NCC) dropped over 83 percent in the previous 12 months. Time after time we have continued to comment about the weakness in the financial sector. Need more proof, check out Lehman Brothers, Washington Mutual and National City as examples of banks under fire and almost under water. I got a call the other day from a friend who said is it time to buy, so I began my research of this company and turned up some positive information. I was surprised and comforted by the recent upgrades by Deutsche Bank AG and KBW. However, I also stumbled along an article about the fact that NCC is under a Memorandum of Understanding or MOU with a regulatory banking agency. From my experience of auditing banks, an MOU is not a good look. As a matter of fact is down right ugly and means that the regulators are not very happy with your financial standing as a bank that is federally insured by the government. I also read that NCC book value price, if all the assets were sold, would roughly place the share price at $4.70. However my only problem is that some analysts may be placing value on some assets that no longer have value. So I am recommending at this point that if you truly want to own this stock, take the book value and discount this price to the point that you can sleep easy at night. I am not in a hurry to catch a bottom for financial stocks, so stay tuned to see if I change my mind.
THE NEW GOLD
The new gold will be solar or wind energy. I've got some views on both of these areas so check back with me soon.
Back in March, I wrote about Safaricom the telecom giant of Kenya. This recommendation highlights a great way where communicating with your friends leads to great stock recommendations. After understanding the risks involved, I noted that this would be a great play in the international markets especially because the local US environment isn't exactly overflowing with gigantic returns. I was pleased to read today the Safaricom's Initial Public Offering rose roughly 50% today. The one difficulty the average investor may have run into is that because it was an international IPO there weren't as many ways to participate in this offering outside of having some type of link to Morgan Stanley an advisor to Safaricom. Check out our earlier discussion here: http://urbanomics.blogspot.com/2008/03/march-edition-urb-in-60-seconds.html
NATIONAL CITY - IS IT TIME TO BUY???
National City (NYSE: NCC) dropped over 83 percent in the previous 12 months. Time after time we have continued to comment about the weakness in the financial sector. Need more proof, check out Lehman Brothers, Washington Mutual and National City as examples of banks under fire and almost under water. I got a call the other day from a friend who said is it time to buy, so I began my research of this company and turned up some positive information. I was surprised and comforted by the recent upgrades by Deutsche Bank AG and KBW. However, I also stumbled along an article about the fact that NCC is under a Memorandum of Understanding or MOU with a regulatory banking agency. From my experience of auditing banks, an MOU is not a good look. As a matter of fact is down right ugly and means that the regulators are not very happy with your financial standing as a bank that is federally insured by the government. I also read that NCC book value price, if all the assets were sold, would roughly place the share price at $4.70. However my only problem is that some analysts may be placing value on some assets that no longer have value. So I am recommending at this point that if you truly want to own this stock, take the book value and discount this price to the point that you can sleep easy at night. I am not in a hurry to catch a bottom for financial stocks, so stay tuned to see if I change my mind.
THE NEW GOLD
The new gold will be solar or wind energy. I've got some views on both of these areas so check back with me soon.
Subscribe to:
Posts (Atom)