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OfflinegeokillsA
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Re: Stock Update for February 23, 2010 - Market Consolidates [Re: AroundtheSon]
    #12100600 - 02/26/10 08:43 AM (13 years, 10 months ago)

This is true, still holding TZA as a hedge since I haven't been around as much yesterday and won't be around at all today after 30 more minutes (the position is pretty much flat currently, call it insurance).

Managed to hit my bid at $4.20 on USU (uranium mining) yesterday morning.  A small starter position, up some 6% in 24 hours.  I will wait for more weakness to continue building this position as I believe it could become a core holding given the renewed enthusiasm towards nuclear energy coming out of Washington.  Market indicators are still showing short-term overbought readings, though most of them haven't rolled over so it's hard to game when a shift in sentiment may occur.  Was stopped out of POT, doing little else.

Today is my first day back in the ceramics studio in almost a year!!  Excited :cool:


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OfflinegeokillsA
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Stock Update for March 1, 2010 - USU, TZA [Re: geokills]
    #12119829 - 03/01/10 11:58 AM (13 years, 10 months ago)

I should have been a little more mindful that today had two things going for it before the bell even rang.  The phenomena known as "mutual fund monday" in conjunction with the beginning of a new month; two times that historically tend to invite an inflow of money to the market from large fund managers.  As such, my bearish hedge in TZA is biting my ass just a little bit.

If we breach the current highs of the day around 1115.5 on the S&P, I will be stopped out of TZA, but I still can't help but recognize that in aggregate the market is very overbought.  The S&P Oscillator has shown readings all higher than 7% last week, which is indicative of a short-term top in the market.  In fact, anything above (or below) the 5% mark on the oscillator is typically a strong signal that the trend is in danger of reversing or stalling out temporarily.

Thankfully, USU is more than making up for the pain induced by TZA, after having reported a good quarter with positive forward guidance, in conjunction with Obama's support in mid-February, breaking ground on three new nuclear power plants here in the US.  Usec is the only uranium enrichment company on American soil, supplying over half the US market and one quarter of the world market.  The stock trades at half of book value, and I am only sorry that I didn't buy more last Thursday at $4.20, with the stock currently trading to $5.20, showing me a nearly 25% gain in two and a half trading sessions!  I will look to continue building this position on weakness.


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OfflinegeokillsA
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Stock Update for March 4, 2010 - TWM, USU, SIRI [Re: geokills]
    #12141615 - 03/04/10 12:21 PM (13 years, 10 months ago)

I was stopped out of TZA that same day (to my benefit, as we gapped up the following morning!).  I have since sold half of my position in USU for a 24% gain in less than a week.  I will look to reload on any weakness, even if that weakness comes at a higher level.  Ideally, I would be adding to USU between $4.60 - $4.80, though I'm not sure we'll make it back to those levels soon so I may start nibblin' at around $4.90 - $4.95 with room to add more later.  Background: USU process uranium, and is expected to earn 40 cents a share in 2010 and 78 cents in 2011 (95% growth). Its trailing P/E is 15. The stock spiked higher following its most recent earnings report of 31 cents a share vs. estimates of 16 cents.

The market overall is stubbornly holding its ground just below 1125 on the S&P, even after a month of strong rallying.  Recall that I have been anticipating a trading range between 1150 and 1025 on the S&P for some time to come.  We are now nearing the top of that range, so I am not particularly eager to do any buying.  If I do, it will be very selective, small position sizing, and tight risk management.  There may be an opportunity for a quick trade to the upside if we close above 1125, but since I already have several positions showing gains from the past month, I'm not too excited about chasing more upside at this level.

Also to note, the Russell 2000 small cap index has been up 15 of the past 16 days.  That's pretty stretched!  However, even though several indexes and stocks are at or close to resistance and the market is definitely overbought, there is not a high level of bullishness among investors.  If there were, I would begin to be more aggressive on the short side, but when investors are not particularly bullish, it seems a reasonable probability that we will grind sideways to slightly down while working off our overbought condition, rather than plunging deep.

Nevertheless, I am bidding for a small chunk of TWM (the 2x short Russell 2000 ETF), in order to hedge some of my smaller cap positions in stocks such as USU and SIRI.  To note, SIRI was recently added to my portfolio at around $0.90 earlier this week.  I had also made purchases at $0.87, but got nervous and trimmed the position back rather quickly.  If my bid on TWM executes, my risk will be limited with a stop to 1.6% downside.  Meanwhile, I will be able to sleep peacefully knowing that I will be hedged in front of tomorrow's jobs number.


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OfflinegeokillsA
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Stock Update for March 29, 2010 - General Sentiment on the Market & the Financial Sector [Re: geokills]
    #12293086 - 03/29/10 01:49 PM (13 years, 9 months ago)

Well it's been nearly a month since I've posted an update, and despite my absence in this journal, I have been keeping active watch over the market and making several trades over the past few weeks.  For those of you who have been watching the market, you will no doubt have realized its uncanny strength and resiliency.  This type of action can be difficult, because if you are not involved, you may end up waiting for a pullback to enter a position, a pullback that may not have manifested even as the stocks you want keep going higher and higher without you!  This in turn can create a frustration that may result in you buying the top, just when you think the uptrend will never stop... and then, of course, it does.

It is this unbelievable strength that has resulted in a few things.  1) I've made some good money!  2) I've become much more focused on risk management, becoming more comfortable letting winning positions do their thing while maintaining and re-setting stop levels in order to protect the profits I've made in case the trend reverses.  3) Keeping my hand off the buy button, but maintaining a "shopping list" of stocks that I would like to own in the event the market does correct and I am offered better entry points.

Being involved in some capacity will help keep you in tune with the market's behavior and trend.  While I believe that we are due for some consolidation, I have also learned that it is sometimes appropriate to pay up for a small amount of stock just to get yourself involved in a strong uptrend. Keep position sizing in mind and only buy small at first, with the intention that you will be able to buy more when the market contracts.  In this way, you may participate in further upside while minimizing losses and having cash on hand to add to your position at a more favorable entry if the stock comes in. 

With respect to my portfolio makeup, I have been focusing intently on the financial sector, which appears to be poised to tack on some serious gains over the longer term.  I touched on this belief in another post regarding citigroup, which I will reiterate here.  If you look at the financial sector in general (such as the XLF), it appears to be breaking out of a volatility squeeze, which is typically a very strong indicator of a continuation of the trend.  That is to say, if the squeeze breaks to the upside on a weekly chart, there is likely to be long-term buying pressure that will push the stock even higher.

Quote:

A volatility squeeze is a prolonged period of low volatility characterized by a narrow trading range.  Because of the cyclical nature of volatility, a period of low volatility will inevitably lead to a volatility expansion, where the price becomes highly volatile.  A volatility expansion tends to be directional in nature - that is, the volatility will increase in an upward direction (breakout) or downward direction (breakdown).  Trading volatility squeezes can be exceedingly profitable because of the nature of the trade.  By delaying our trade until the squeeze breaks either upward or downward, we enter the trade right at the infancy of the volatility expansion.  As such, the trade begins working immediately and does not require much patience.  The volatility squeeze should be profitable almost immediately.  If it is not, then the trade is suspect and should be closed out.  One method of detecting a Volatility Squeeze setup is by studying Bollinger Bands.  An extremely narrow Bollinger BandWidth is only possible during conditions of low volatility.




This image depicts the XLF (a major Financial Sector ETF), which clearly indicates the direction of the
sector.  Bollinger bands are indicated as three light blue lines, with the 20 period moving average in
the middle, and the distance between the top and bottom lines expressing the current volatility in price
action.  Notice how over the past several months, the XLF has been trading in a tighter range than it
has in years.  This is indicative of a volatility squeeze.

             


Now study this image that I have annotated with the specific technical reasons that support a
continuation of the uptrend in the financial sector over the coming year(s).

             


To summarize, volatility is expanding to the upside of the squeeze, the long term 50 week moving average has turned positive and is now above the lower end of the recent trading range which will provide support to help prevent the current trend from breaking down in the event of a correction, and the sector just broke above resistance at the old October high.  The only thing of concern is that the current expansion is on fairly light volume.  We would ideally like to see a week of trading up on heavy volume to confirm the expansion for the longer term.  Fundamentally, the Federal Reserve's stated intention to maintain low rates allows banks to continue to benefit from the steep yield curve.

With this in mind, I am encouraged to continue building up positions in this sector.  I have held a large position in Bank of America (BAC) since it was trading around $11 and sold a little bit last month in order to "right-size" the position since it has grown so much, however it is still the second largest in my portfolio.  I also added a couple of new financial stocks to my portfolio, by way of Citigroup (C) and a smaller regional bank, Huntington Bancshares (HBAN).  Both of these "small" stocks have been showing signs of promise and should be great investments over the next 2 - 5 years.

My positions in C and HBAN are about 1/5 the size of a normal position for me, which leaves me lots of room to continue adding to them on any weakness.  I tentatively intend to add to my position in Citigroup (C) at $3.90, $3.75, & $3.50 - though these levels are of course subject to change dependent upon the near term price action.  I believe C is on its way higher and that it is therefore important to be involved in the stock at least with a small position.  However, I am mindful that the government's liquidation of their 30% stake in the company may keep a lid on the stock for the near term.  More importantly, Citigroup lacks what most other major banks such as Wells Fargo and Bank of America have, which is a major deposit base.  There just aren't that many actual Citigroup banks where people deposit their money, and therefore when C needs financing, it is likely to head to the capital markets which could result in the issuance of new stock.  This in turn can create pressure on the stock (buying opportunities) along the way, so while I would surely be involved with Citigroup, I would never advocate going all in all at once!

Generally speaking, my bias is bullish over the balance of 2010, though I expect we are due for some near-term consolidation.  I will briefly summarize my individual positions and if you have any questions, please post them and I will be more than happy to elucidate my thoughts and reasoning!



Bullish Positions:
  • Kinder Morgan Energy Partners (KMP) - Master Limited Partnership in the Natural Gas Pipeline industry. Great dividend.

  • Bank of America (BAC) - Major bank

  • BP plc (BP) - Major integrated oil company that recently purchased key natural gas properties from Devon Energy (DVN). Great dividend.

  • PepsiCo (PEP) - Snack food and beverage producer / bottler.  Decent dividend.

  • Apple (AAPL) - Consumer electronics.  iPad suppliers are reporting increased orders, initial sales went well.  iPhone, iPod, and Mac sales still strong.  What's not to like?

  • Huntington Bancshares (HBAN) - Regional bank, discussed above.

  • Usec (USU) - Uranium enrichment company that will benefit from increased nuclear power production.  This one is really hot and I am just itching to add to my position preferably closer to $5.

  • Ace Ltd (ACE) - Major insurer that trades well below its book value.

  • Citigroup (C) - Major financial, discussed above.

  • Prospect Capital Corp (PSEC) - Private equity firm that pays a stupendous dividend.

  • Kodiak Oil & Gas (KOG) - A funky little oil & gas play that I'm holding only because it is nicely setup to continue a volatility expansion within a longer-term uptrend.


Bearish Positions:
  • ProShares UltraPro Short S&P 500 (SPXU) - This is a leveraged short ETF that returns 3 times the inverse of the S&P 500 index.  The S&P has been running into some resistance here and given the monumental run we've had over the past couple of months, I am going to scale into this one.  I'm at about 50% of the full position size and will add to this position on significant strength.  If on the other hand the market languishes around to work off its overbought condition or jumps significantly, I won't hesitate to drop this one as these leveraged shorts can really hurt when they go against you and as the old Wall Street adage goes, "Your first loss is your best loss!"

  • Short Energizer (ENR) - I was stupid to let this profitable position turn into a loser, but I maintain that energizer will face increased competition from rechargeable batteries and the loss of retail store shelf space.  However, if the stock breaches $64.91, the position will be dumped fast and hard.

    Note: My other long-time short in HSIC was stopped out for a loss.  I still think the company faces trouble as dental offices report fewer visits and significantly less elective procedures being purchased, which in turn has resulted in them spending less money on equipment.  Nevertheless, the position was just too much of a loser so as a sacrifice to the short gods, I had to cut it loose.  I feared seeing all that red on my screen was affecting my otherwise good judgment!



On my shopping list in the event of an aggregate market pullback/consolidation/correction are:
  • Teck Resources (TCK) - Metal Miner with a large stake owned by the Chinese gov't
  • Xyratex Ltd (XRTX) - Computer Storage Devices
  • Teva Pharmaceuticals (TEVA) - Generic Pharm Producer
  • Cree (CREE) - Semiconductor / LED lighting
  • Wells Fargo (WFC) - Bank
  • Visa (V) - Credit Processor
  • CF Industries (CF) - Agricultural Chemicals
  • Verizon (VZ) - Telecom
  • Humana (HUM) - Healthcare


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OfflinegeokillsA
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Stock Update for April 6th, 2010 [Re: geokills]
    #12343309 - 04/06/10 04:04 PM (13 years, 9 months ago)

The market has continued to rally persistently and several of the issues I picked up in February are up 10, 15, 25, one even 55%! :shocked:

While I wouldn't be adding to positions in USU, KOG, PSEC, ACE, C, HBAN, or BAC right here... I will be watching vigilantly for a meaningful pullback so that I can put more capital to work in these names.

Generally, I am expecting the market to at least pause by next Monday, and in fact I hope it will dip back to prior resistance around 1150 on the S&P (a 3 - 5% correction), then bounce in order to confirm that the 1150 level now stands as new support.  In this event, you can bet I will be adding to USU, KOG, C, and HBAN specifically.  And likely to open a new position in one of the following: TCK, CREE, and maybe CF which looks to be forming a solid base right now.

To note, I did recently add a small position in Verizon (VZ) at $31, with the intention to build at or below $30.  This telecom not only pays a delicious 6% annual dividend, but if Apple does come out with a CDMA iPhone and Verizon gets to carry it, that should be a major catalyst as many people are fed up with AT&T's unreliable coverage.

Current positioning (largest to smallest):
  • 50% Cash
  • Long KMP
  • Long BAC
  • Long BP
  • Short ENR
  • Long AAPL
  • Long SPXU (3x short S&P500)
  • Long PEP
  • Long VZ
  • Long USU
  • Long ACE
  • Long KOG
  • Long C
  • Long PSEC
  • Long HBAN



And since I'm pretty excited about being involved with AAPL again, allow me to cross-post my comments from an iPad discussion over on the Growery this afternoon:

Quote:

I think the iPhone was a revolutionary device, and extrapolating it to a larger screen format is the logical next step.  Ultimately, high powered processing incorporated into such thin/small devices with attractive and sensitive touch screens presents a practically limitless array of suitable applications.  It is exciting, and Apple being at the front of the curve gives them a major competitive advantage. 

I'd wager that the reason the iPad doesn't include some of the bells and whistles such as a camera, usb, internet tethering, etc; is because they wanted to keep the retail price of the product low enough that they would still retain hundreds of thousands of early adopters.  They sold some 300,000 their first day out, and I'd bet there's a lot more folk just waiting for the 3G version to come out, for which they will pay Apple even more money including a monthly connection charge.

As I'm a bit of a spend-thrift, I'm not one to jump on as an early adopter.  If history is any guide, it's obvious that a more refined product will soon be available for those willing to wait a year or two.  But that doesn't mean that I don't want one!  I think the iPad could be very useful not only for use on the pot, but in school, while traveling, for anytime entertainment, as well as in businesses such as healthcare, law firms, real estate firms, etc.

I also find it impressive that Apple had the foresight to acquire a mobile advertising firm.  If they can effectively integrate a proprietary advertising platform (think "iAd") into their mobile products, they could capture an exceptionally lucrative revenue stream that is currently dominated by Google, who stands to lose a considerable amount of market share to Apple if the plan works out.  In fact, with a successful enough ad platform, Apple can subsidize price and begin offering products such as the iPad for lower costs than any competitor with a comparable product.

I caught a double on Apple stock back during the iPhone release days.  I got back in at around $210 a couple months ago, and added to the position recently at $235.  I would like to add again on weakness!

Long AAPL




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OfflinegeokillsA
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Stock Update for April 14th, 2010 [Re: geokills]
    #12397136 - 04/15/10 09:11 AM (13 years, 9 months ago)

Another week, another week of continuation.  I was stopped out of all bearish positions last week for small losses (as well as my PSEC long for a moderate profit).  Longs continue to ride ever higher in a market that can't hardly take a breath.  In the back of my mind I continue to remind myself, it's not IF the market will correct, it's when!  So while I am mindful not to sell out of positions prematurely, I continue to re-evaluate and move higher my automated sell stop levels on individual stock positions at least weekly.  In this way, when the market corrects, I will automatically be exchanging some of my winning stock for cash, which will in turn prepare me to put that cash back to work at lower levels, at the first signs that the correction could be reversing higher.

There's really not much else to say.  Major indicies (S&P, DOW, Nasdaq) have all broken out, financials continue to perform well as does tech; and generally speaking, the trend is assumed to be a strong one whenever tech and financials are both leading the way.  The market is technically extended (overbought), but as evidenced over the past year, the market can stay overbought for a really long time!  It's therefore important to be patient, let your winners do the work for you, you'll be taken out of any losers through the disciplined use of sell stops, and be patient about the cash you hoard on the side... don't fret about putting it to work too quickly.  Just biding time, waiting for good entries on my favorite stocks.

Here's something a little different.  Not something I often advocate, this week I am taking a stab at a high flying speculative penny stock: Radiant Pharmaceuticals (RPC).  This company produces an non-invasive invitro cancer screening test that works by testing for breakdown products from solid tumor cancers.  It has proven effective and has already received FDA approval for colorectal cancer screening (the first such approval since 1982) here in the US, is approved for lung cancer screening and treatment monitoring in Canada, and is also in use in several other major markets.  Cancers are a major ailment and early detection with effective monitoring tactics have the potential to greatly improve survival rates.  The fact that the test is non-invasive makes it an easy first step for doctors and their patients to use in screening, and subsequently for monitoring the effectiveness of treatment.

Though RPC has already moved from about $0.25 a share to it's current position at $1.40, it looks to have found some support at around $1.20.  Make no mistake, this is a speculative play.  I would never bet the farm on a stock like this, but the story is good and I don't mind holding a lottery ticket every now and again for kicks.  If the Onko-Sure cancer screening test takes off, even the smallest position can return a good chunk of money.  Be warned, you will need a stomach for 10 to 20% swings -- so don't forget to manage your position size according to your risk appetite! 


Current positioning (largest to smallest):
  • 45% Cash
  • Long Bank of America (BAC)
  • Long Kinder Morgan Energy Partners (KMP)
  • Long BP plc (BP)
  • Long Apple (AAPL)
  • Long Verizon (VZ)
  • Long Pepsico (PEP)
  • Long Usec (USU)
  • Long Citigroup (C)
  • Long Kodiak Oil & Gas (KOG)
  • Long Ace Ltd (ACE)
  • Long Huntington Bancshares (HBAN)
  • Long Radiant Pharmaceuticals (RPC)


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OfflineHotnuts
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Re: Stock Update for April 14th, 2010 [Re: geokills]
    #12404550 - 04/16/10 03:19 PM (13 years, 9 months ago)

I've been watching the indicies (preparing for a monster sds) for the past 2-3 months and think a great opportunity is coming up for the bears. I can explain with charts if you want?


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OfflineYrat
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Re: Stock Update for April 14th, 2010 [Re: Hotnuts]
    #12405846 - 04/16/10 07:43 PM (13 years, 9 months ago)

yes plz


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"There are a thousand hacking at the branches of evil
to one who is striking at the root."
-Henry David Thoreau
Strike The Root


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OfflineMrBump
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Re: Stock Update for April 14th, 2010 [Re: Yrat]
    #12410309 - 04/17/10 05:24 PM (13 years, 9 months ago)

Quote:

Yrat said:
yes plz




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If it weren't for the bloody corpses, I wouldn't have any corpses at all.

There are two ways to get to the top of an oak tree: start climbing or sit on an acorn.

Are you a carrot, an egg, or a coffee bean?


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OfflineHotnuts
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Re: Stock Update for April 14th, 2010 [Re: MrBump]
    #12411146 - 04/17/10 08:44 PM (13 years, 9 months ago)

Ok. I'll do it in my own thread, in the morning. Not just charts, but fundamentals as well. Goldman excluded. :gethigh:


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Offlinepothead_bob
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Re: Stock Update for February 23, 2010 - Market Consolidates [Re: geokills]
    #12590608 - 05/19/10 07:08 AM (13 years, 8 months ago)

Just read the last page of this thread.  I looked up USU and noticed a huge drop about two weeks ago.  Do you still think it's a good investment? For the past 2 years, my energy stocks NLR, EXC and NRG have all been big time losers.  I'm thinking it's time to restructure my portfolio and get rid of the garbage so I can start looking for better places to put my money, but I'm afraid that as the economy returns, these stocks will start coming back to.  Those stocks are all heavy in nuclear power and I don't understand why they are still suffering considering the promising future of nuclear.

Did you sell your shares of BP?  It's taking a hammering lately, but I've been watching it and thinking it may make a good investment at some point, but I'm not sure how much it has to fall yet.  I think they make enough money to take care of this spill, but I've been hearing about safety violations on other rigs and so I'm uncertain.


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No knowledge can be certain, if it is not based
upon mathematics or upon some other knowledge
which is itself based upon the mathematical
sciences.
  -Leonardo da Vinci (1425-1519)

Speak well of your enemies.  After all, you made them.


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OfflinegeokillsA
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Re: Stock Update for February 23, 2010 - Market Consolidates [Re: pothead_bob]
    #12596953 - 05/20/10 09:24 AM (13 years, 8 months ago)

I was scaling out of USU in small amounts as it was rising.  I was still holding a little bit when I got caught by their poorly received quarterly report, which I sold shortly after it hit the wire.  These low dollar stocks are generally not worth sticking around in if the trend appears in danger, they are just too volatile and unproven to easily resume an uptrend.  Do I think USU will be higher in 5 years?  Sure.  But it will take a while for USU to build a base and make the ascent, with lots of wiggling and jiggling in between, and I'd rather take the money I had in that stock and find a place for it in a stock that could work sooner.

As for BP, I sold 2/3 of my long term position, as the stock broke $50.  I did just buy back a little bit on today's weakness at $44.05.  The dividend was too juicy to ignore.  The stock has lost some $30 billion in market capitalization since the spill began, which is likely to exceed the monetary expense BP will incur as a result of the spill.  Once the leaking pipe is dealt with, I believe this one will work higher.  In the meanwhile, the dividend of some 7.5% should remain well covered as the company continues to fire on other cylinders.


Quote:

I'm thinking it's time to restructure my portfolio and get rid of the garbage so I can start looking for better places to put my money, but I'm afraid that as the economy returns, these stocks will start coming back to.




You should always be looking to rid yourself of the garbage in your portfolio.  Risk management is priority number one if you want to last in this game.  That means you will take losses, but generally speaking, your first loss is your best loss!  Holding onto a loser in hopes that it's going to "come back" is almost always a failing strategy, or in the least a big waste of time.  If you don't feel comfortable with your exposure, or with the way a certain stock is acting, throw it out, regroup, and work to patiently find your next opportunity.  When making your decisions to buy a stock, remember to put the greater emphasis on how low you believe that stock can potentially fall, rather than how high you believe it can rise.  In this way, you can define risk (ie. your maximum loss or Sell Stop level).

If you are involved in the market on the long side, days like today are really going to sting.  But if you properly identified your risk for each of your holdings, you should be comfortable to let yourself get stopped out of those that are violating your definition of risk, and let the others ride.  It is of great importance not to panic sell on a day like today, but instead maintain the strategy you outlined before emotions were running so high.

The majority of my positions are profitable, but for the two that aren't, the maximum loss does not exceed 5%.  I would suggest that it is always best to cut losers before they turn into double-digit percentage losses.  Remember that if you lose 50% on one investment, you will have return 100% profit (ie. DOUBLE) your next investment to make back the first loss.  You're going to be wrong often in this game, so do your best to identify when you are indeed wrong and take action accordingly.  When you are right, let the trend work in your favor and periodically re-define your risk (your stop levels) as your positions move over time.  Try not to buy or sell all at once and instead trade incrementally.

Good luck.  In this market, everyone could use a little!

Following is a list of stocks that I am currently involved with:
  • KMP
  • BAC
  • VZ
  • T
  • AAPL
  • BP
  • ASPS
  • PEP
  • TEVA
  • ACE
  • CPNO



Following is a list of stocks I am watching:
  • F
  • NVDA
  • MGM
  • RVBD
  • SWHC
  • RVBD
  • FFIV
  • RTN
  • HBAN
  • TCK
  • STEC
  • HOV


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Offlinepothead_bob
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Re: Stock Update for February 23, 2010 - Market Consolidates [Re: geokills]
    #12597672 - 05/20/10 11:53 AM (13 years, 8 months ago)

The problem right now is that all my stocks look like losers, just looking at the price and what I've lost, but I'm sure that for some of them, it's a case of the baby going down with the bath water.  I feel that some are good companies, but just got dragged down in this shitty economy.  Unfortunately, I didn't set stops when I started investing 2 years ago.  So now I want to figure out which stocks are good companies that are undervalues due to the shitty market and which stocks are just plain shitty and then get rid of the latter.  So I started doing a lot of research on how to analyze companies.

Currently, I'm trying to figure out how to calculate the intrinsic value of a stock, but I can't seem to find an answer.  Maybe you know and could help?  So take HPQ, for example, which I'm thinking is a great, undervalued stock that I should hold on to.  It's FY 2009 free cash flow was 7.66 billion.  Projections say to expect 14% EPS growth rate for the next 5 years.  So I calculated the free cash flow for the next 5 years and I discounted every year to the present value assuming that the time value of money is 10% (a standard return for the S&P).  I get a 5 year total cash flow of 42.8 billion.  That would be FY 2010 through FY 2014.  So if I divide that by the shares outstanding, that would be $18.6 per share in cash flow.  The current EPS is $3.32.  This is a large discount, but did I do the calculation right?

Other positives:

What I also looked into is that the EPS for HPQ is low compared to the industry - 10.47 vs. 13.51.  The P/E-to-growth (PEG - expected 5 yr) ratio is less than 1 (0.75), indicating that the P/E may be too low if growth estimates are right.  The total asset to liability ratio is 1.55. 

Some negatives:

I've read that value stocks should have a price lower than tangible book value - HPQ has one signicantly higher (price-to-book ratio is 2.65).  The dividend yield is pretty shitty at 0.7%.


--------------------
No knowledge can be certain, if it is not based
upon mathematics or upon some other knowledge
which is itself based upon the mathematical
sciences.
  -Leonardo da Vinci (1425-1519)

Speak well of your enemies.  After all, you made them.


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OfflinegeokillsA
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Re: Stock Update for February 23, 2010 - Market Consolidates [Re: pothead_bob]
    #12597918 - 05/20/10 12:47 PM (13 years, 8 months ago)

Unfortunately, there is no universal formula for calculating the intrinsic value of any given stock because different stocks are judged upon different metrics.  The PE (Price to Earnings) and PEG (Price to Earnings Growth) multiples, cash flow, and debt are all important data points to know about any company you are researching; but are treated differently depending upon whether you are investing for value, growth, income (ie. dividends), or speculation (eg. takeover potential, immanent FDA drug approval, etc).  All the aforementioned data points, analyzed appropriately, will provide you with a fundamental understanding of the company that you wish to invest in.

In addition to fundamentals however, are the technical aspects of the stock's behavior, which are at times widely divergent from the fundamentals of the underlying company.  This disparity allows for great opportunity, but also tremendous confusion!  Ideally, you will want to find a stock with sound fundamentals, and then watch it for some time in order to execute your trade when the technical landscape is primed.  Technical analysis is part art and part science, and can therefore be very frustrating in and of itself... but with enough practice, you will ultimately begin to understand what tends to drive the general price action in most stocks.  These tendencies are not absolute by any means, but they are called tendencies for a reason, and being aware of them in conjunction with good fundamental analysis will give you a strong advantage.

I don't have the time nor inclination to go through your calculations re: HPQ.  Suffice it to say that the market's technical landscape has changed, and therefore even companies that report good earnings and a decent outlook are being punished.  HPQ sits along side Intel (INTC) and Cisco (CSCO) in reporting good numbers and bullish outlook, yet are still being hammered.  There are a number of reasons for this, mainly centered around the sector's ability to maintain a strong growth profile over the coming year.  Specific to HP, these include concerns over a rapidly weakening European market (which makes up as much as 25% of HP's business) in conjunction with concerns over the integration of recent acquisitions such as 3Com and especially Palm.

The bottom line is that the major debt issues and general uncertainty coming out of Europe is dominating sentiment and causing large fund managers to scale back.  When there is uncertainty, managers will raise cash by selling their most liquid names, particularly those in which they have already seen large profits over the recent past.  HPQ has done pretty well over the last year and with the future growth outlook uncertain for practically the entire economic landscape, the amount of money people are willing to pay for any stock (the average PE) is contracting. 

These are major headwinds to be sure, but if you are convinced that HPQ can continue to deliver, and you are not overweight on the stock (less than 10% of your entire portfolio), you probably don't want to bail out at this level, or could instead sell just enough to reduce your exposure to a level that you will feel comfortable should the company continue to fall to test the $40 level.



On another note, that I meant to include in response to your previous post:

There is no doubt that the stocks of good companies will get drawn down with the overall market.  Sometimes, retail investors (that's you and me) tend to get it in our heads that if one of our stocks has fallen so much more than the rest, it must inversely have so much more to rise once the market gets itself in gear again.  Unfortunately, while that thinking can be comforting, it is often untrue.  Stocks that underperform the market do so for a reason, and if the market is taking a hard fall and you just have to put your money to work in something, you should be looking for the stocks that aren't going down so much.  It may seem like they then won't be able to go up as much, but on the contrary, they have an underlying bid in conjunction with less overhead resistance which should act as a catalyst whenever the overall market recovers.

This is not an easy market, tons of uncertainty and whipsaw from day to day.  We are at a level now where it seems irresponsible to short or to bail out of all your positions.  However, if we see a relief rally, it would be wise to use that to lighten up on some long side positions and perhaps even initiate some shorts.  Whatever you do, you would be wise to keep position sizing small in order to reduce risk in a highly uncertain environment.


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Offlinepothead_bob
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Re: Stock Update for February 23, 2010 - Market Consolidates [Re: geokills]
    #12598168 - 05/20/10 01:27 PM (13 years, 8 months ago)

Scratch my last calculation, I think I figured it out.

For 14% growth rate over 5 years, the future cash flows are calculated as:

P=E*(1+G)^n/(1+R)^n

where P is the present value of future cash flow, E is current cash flow, G is the expected growth rate, R is the discount rate (expected lower risk return if you put your money elsewhere), and n is the time period.

For example, P for year 5 would be:

P=7.673 B x (1+0.14)^5 / (1+0.1)^5 = $14.77 B

Adding the cash flow of the next five years, you get a cumulative cash flow of $50.4 B.  If you assume the company stops growing all-together in year six to infinity, the formula to figure out the present value simplifies to:

P=E/R

Using the cash flow of year five results in a year 5 value of $148 B of all the earnings that will ever be made by HPQ.  Discounting that back to year 0 leaves a present value of:

P=$148 B / (1+0.1)^5 = $91.7 B

Adding the 5 year cumulative earnings to the year 6 to infinity cumulative earnings leaves $142 B.  Dividing that by the shares outstanding leaves earning potential of $61.8 per share.

The current price of $46.50 is indeed a discount, if that calculation was done correctly.  Of course, the calculation heavily depends on if the growth rate estimate is accurate and if the less risky investment (S&P) does indeed grow at 10%. 

One other thing I forgot to mention in my previous post, which you just reminded me of, was that institutional ownership is at 77%, which seems quite high to me and would indicate that the experts are betting on this stock at a fairly high rate.

Certainly there is no universal formula, but as you mentioned, it is important to choose fundamentally strong stocks.  The problem with the .com boom was just that, the stocks weren't being bought on fundamentals.  I tend to lean towards investing for value and growth, which is why the low PEG looks attractive to me.  I've also been reading that HP is poised to be one of Apple's major competition alongside Google (?) in this new tablet market. 

I think based on my current analysis, I will hold my position in HPQ, with a stop at 8% below my average buy in to sell half of my positions.  If that gets hit, I'll look into what to do about the other half.  Now onto a review of EXC, which I have gotten absolutely fucked hard core on.  I'm assuming it has something to do with low power demand in the weak economy.


--------------------
No knowledge can be certain, if it is not based
upon mathematics or upon some other knowledge
which is itself based upon the mathematical
sciences.
  -Leonardo da Vinci (1425-1519)

Speak well of your enemies.  After all, you made them.


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Re: Stock Update for February 23, 2010 - Market Consolidates [Re: pothead_bob]
    #12602942 - 05/21/10 08:51 AM (13 years, 8 months ago)

Okay, I looked into Exelon further, and here's my take.  Being down some 55% from it's all time high, it's almost tough to imagine it going lower, but I feel that it certainly can.  The company is expected to grow at 1.52% over the next five years, which is significanly off the industry average of 4.43%.  Despite having a relatively low P/E of 9.49 vs. the industry average of 13.0, the low expected growth puts the PEG at 6.8 vs. the industry average of 2.73.  Using my above-posted intrinsic value algorithm, this company is worth $24.06 a share assuming no growth after 5 years.  With these considerations in mind, I won't be buying any more short of a significant price drop, or positive news of the company.  However, I also won't be selling my current position, which makes up about 3% of my portfolio.  Despite the negative looking numbers, I still think this is a good company.  For one, it is paying a great dividend which is over 5% and institutional ownership is decent at 67%.  And also, they produce an essential product that will always be needed - electricity.  Sales haven't been good over the past two years due to the economy, but they will pick up as we move out of this recession.  Furthermore, they are heavy in nuclear, which recently got a green light from the White House, and that is not an easy market for others to break into.

I figured I should also post my current holdings.

ED
EXC
FNM
FRE
GLD
HPQ
HTGC
NRG
SLV
SPH
T
UGA

I was also holding NLR, but that dog hit its stop-loss yesterday after draining my portfolio a good bit.  FNM and FRE are my gambling stocks.  I own them on no fundamentals whatsoever and I look at them like throwing a quarter into a slot machine and pulling the handle.


--------------------
No knowledge can be certain, if it is not based
upon mathematics or upon some other knowledge
which is itself based upon the mathematical
sciences.
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Speak well of your enemies.  After all, you made them.


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Stock Update for May 21, 2010 - SSO, MEE, TCK, BP, C, RVBD, BIDU [Re: pothead_bob]
    #12603005 - 05/21/10 09:08 AM (13 years, 8 months ago)

Just a quick note that I put on a tranche of SSO at the open in anticipation of a bounce after all of the heavy selling, so far so good.  I am keeping a tight stop so that I won't lose money on the trade, while allowing me to potentially capture an upside relief rally.  I have also added small positions in MEE, TCK, BP, and C.  I have bids in for RVBD and BIDU as well.  Note, I have placed new partial stops on almost all of my positions this morning, and full stops on my short-term trading positions such as SSO, MEE & TCK.

This market is way too uncertain to take too strong of a stance to the long side, and on any real weakness below this morning's opening print, you better believe a lot of my stock will be traded in for cash.  Bob, I would suggest that you make sure you are doing the same.  It looks like you have quite a few stocks there, and from the sound of your last few posts, it also seems like you may be underwater a bit.  Don't tolerate losses!  Set your levels ahead of time (when the market is closed), and adhere to that discipline.  If one of your positions violates your maximum loss level, do not hesitate to kick it to the curb right away.

The market will be open again next week, next month, next year.  Do not feel like you need to have all your money at work all the time - it would be a fatal error!  In truth, I am the most long I have been in years (since prior the crash) as of this morning's open, because the whoosh down after all the previous weeks selling pressure screams potential for an oversold/relief/snap-back rally.  However, with the nasty jobless numbers that came out yesterday, China tightening its growth and tremendous uncertainty in Europe, I do not think we are going to new highs on the major indexes anytime soon.  In fact, if I'm not stopped out beforehand, I will be raising some cash around 1125 on the S&P, and will even be looking for an opportunity to go short at around 1140 on the S&P.

This is a tough market, and unless you are very short-term oriented, you should be playing small and conservatively.  For a longer term portfolio, I would look towards high yielding names such as KMP, CPNO, T, VZ, PEP, and even BP if you have the steel for it!


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Offlinepothead_bob
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Re: Stock Update for May 21, 2010 - SSO, MEE, TCK, BP, C, RVBD, BIDU [Re: geokills]
    #12603067 - 05/21/10 09:25 AM (13 years, 8 months ago)

I'm up very nicely on UGA and GLD, so I have recently set trailing limits at 10%.  When (if) those limits trip, I'll happily log in the gains into my investment spreadsheet.  I'm up huge on HTGC, it was my best performer.  I got in right before the crash, lost a bundle, doubled down several times and now I'm up, but not just because of appreciation.  Also due to a very impressive divi that was paid out and has recently been significantly reduced.  I have a limit set to sell half my positions at $8.50, but I don't want to totally abandon it because  I think the divi may be raised next quarter.  SPH I'm up slightly with a stop set.  It also pays a nice dividend.  I'm down a tad on T, but it also pays a nice dividend.  I'm down big time on EXC and less so on NRG.  NLR was also a big loser, but that hit its stop yesterday.  Those are the stocks I'm unsure of what to do with.  I think I'll hold EXC because it pays a good divi and the fundamentals are there, but not enough to buy more.  I can't find the words to describe FNM and FRE.

I'm currently watching BP.  Planning to get into it at some point, but I'd like more positive news from the Gulf first.  I haven't put any more money into my taxable account in 2 years now and I won't for the forseeable future.  I put my savings into Vanguard funds in an IRA every month and let the experts take care of the investing.  I play with the taxable account and try to learn with hopes of some day putting more into it and actually making some money.


--------------------
No knowledge can be certain, if it is not based
upon mathematics or upon some other knowledge
which is itself based upon the mathematical
sciences.
  -Leonardo da Vinci (1425-1519)

Speak well of your enemies.  After all, you made them.


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Re: Stock Update for May 21, 2010 - SSO, MEE, TCK, BP, C, RVBD, BIDU [Re: pothead_bob]
    #12603798 - 05/21/10 12:24 PM (13 years, 8 months ago)

Don't any of you guys feel a tiny bit uneasy about the world situation? Europe is teetering and may fall. Or slip in greece as i like to say. :wink: The usa is in not so great shape either and a falling europe is likely to bring down the rest of the world. We might be able to grow our way out of the depression we are in but that assumes no bad news from abroad. The recent swoon of the stock market may not be a temporary correction or aberration but a sign of things to come. I got rid of the last of my stock last week and i'm glad i did.

The media keeps printing happy news but it's kind of forced. The housing crisis shows no sign of letup although not a month goes by without some happy talk in the papers about how things are picking up. The number of mortgage holders who have missed at least 1 payment went over 10% of all mortgages just recently. That is ominous. Sure, the last few months of the quarter saw a surge in sales from the stimulus money. So what? There are more and more houses going into foreclosure and things do not look so bright. I'm doing some bottom fishing and making lowball offers. Hey, someone has to make a profit, though it will be a while before i do, if i do.

Then we have the steadily climbing national debt and interest payments. That along with the rising debt of the states mirrors the rising debt and default rates among the public. Does none of that concern you stock market types? It should, the market does not exist in a vacuum. I'm sure the 360 odd point drop yesterday was noticed by someone. Gold went down some too after peaking but i don't plan to sell any time soon. It's still almost at 1200.

Instead of concentrating on voodoo charts and assuming things will go back to where they were and even higher, you might want to consider the possibility that things might keep going down. Anyone examine the stock market in the 30's after the '29 crash? It did not go down all at once, it gradually fizzled out. I'm sure the chart people were doing the same things you guys were. I think shorting is a great long term strategy. Yes, we will have the odd bounce here and there but look at the underlying economic situation. That is more important than charts, imo.

I say this is the middle of the second great depression.


--------------------
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.” (attributed to Alexis de Tocqueville political philosopher Circa 1835)

Trade list http://www.shroomery.org/forums/showflat.php/Number/18047755


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Re: Stock Update for May 21, 2010 - SSO, MEE, TCK, BP, C, RVBD, BIDU [Re: geokills]
    #12604954 - 05/21/10 03:43 PM (13 years, 8 months ago)

Hey geo, since you seem pretty knowledgeable, I meant to ask you about doing options trading.  Selling calls and puts seems much too risky for me, but have you ever bought puts to hedge against losses?  I've just been reading about options trading today, so I'm not sure how effective it could be for me.


--------------------
No knowledge can be certain, if it is not based
upon mathematics or upon some other knowledge
which is itself based upon the mathematical
sciences.
  -Leonardo da Vinci (1425-1519)

Speak well of your enemies.  After all, you made them.


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