Thursday, October 2, 2014

The Bullet Dodge

Yesterday Fannie Mae (FNMA) and Freddie Mac (FMCC) both got smacked down hard. As luck would have it, I got out last week after taking a minor loss. No clairvoyance on my part, but I did re-examine my reasons for getting into them, which was a perceived increase in new home construction. I didn't look at any government statistics, just seeing new homes starting to go up. This was back in May and the two stocks did double back them.  But 5 months out I was seeing no upside bump or jump at all, so I pulled the sell trigger. Good thing I did. I'm still following them. At the new price I consider them both buying opportunities, but not yet, I want to wait a few days to see if they continue to drop (down about 10% today). Sure, a lot of it is that the markets have been down for 3 days, but at a time when everyone else has been getting a slap on the wrist, someone opened a can of WA of epic proportions. This is the price range they were at before the big spike so I don't think they'll fall too much more. But you never know.  Sure they may spike up and I'll miss a great opportunity, but I can live with that.  I'm still seeing lots of new construction, maybe the market hasn't caught up yet.  Ten years ago these were both $60/share stocks.  I can dream, can't I?

Monday, May 12, 2014

How to keep investors stupid....

This article starts out with the following: "A measure of stock valuations called the Rule of 20 states that the stock market is fairly valued when the sum of the average price-earnings ratio and the rate of inflation is equal to 20. Above that level, stocks begin to get expensive; below it, they’re bargains." I call BS. Why? 

First, all the elements that make up this this "rule" are things that only change once a quarter. By that measure, once stocks are deemed "overvalued" they will remain so for the next 90 days at least. Taking that to the next logical, it would say that you should not invest in any stocks because they are overvalued.  See how little sense that makes? 

Second, during this 90 day period when you're waiting to see if the stock market will have bargains again, thousands of stocks are ignoring the Rule of 20, 30, 40, 50 and 60 if it exists. They are moving up, down and sideways every day, every minute. Stocks don't follow any rules, they move with changes in supply and demand.

I cannot confirm, but I would not be surprised if this, and most stock market formulas, are the result of someone reverse engineering the results of the market, making up a formula that made sense on the third Tuesday after the Sunday the Dallas Cowboys played a home game and lost by 21 points and because it sounds good, using it to sell their mutual fund clients into investing more, because they sound like they know what they're talking about. I'm not so sure.

My rules for investing:

Rule #1: It is my understanding that financial advisors and mutual fund managers don't make their money from returns on their investments, they make their money from fees you pay.

Rule #2: If financial advisors did make their money from their investments, I doubt they wouldn't be telling you what they're investing in.

Wednesday, April 2, 2014

Falling Into The Trap...

One of the hardest things to decide when investing is when a stock has run it's course. What I mean is, you maybe bought a stock a few years ago and it's up 60-80% over that time, but in the past 2-3 months it hasn't really moved. It's plateaued.  An example is Microsoft (which I don't own at the moment). Back in the 80s ands 90s this was a millionaire maker. But if you look at it over the past 10 years, it's pretty much stayed between $25-$35/share.  During that time, if your goal was growth you didn't get much. But if you were one of the lucky ones who bought when it was less than $10/share, you were sitting on a nice return. A very nice return.  But you were sitting. In hindsight, you could have put that money to better use somewhere else. But it's scary to sell and miss any potential upside that might come (as it has in the last few months, moving over $40 for the first time in years). But hindsight is 20/40.

Chart forMicrosoft Corporation (MSFT)
The challenge is to recognize an extended stagnation period in a stock and move your money to other stocks with potential grown. You don't have to move it all, especially if you think there's a chance of a spurt. But I suggest you at least take your initial investment and some gain off the table, that way your playing with "house money" meaning, if it goes south you took some gain off the table, as well as your initial investment, so you really haven't lost.

This is on my mind because I'm sitting on a few stocks with some ridiculous returns (in all fairness, I've had some since the 2007 crash). I've moved some, buying Fannie Mae (FNMA) and GT Advanced Technologies (GTAT) as I've mentioned in recent posts. Both are up as of today.  But I have to do more. I have several stocks with 3 figure returns that aren't moving like they once did. I'm not necessarily going to cash out totally, but I need to diversify.  I'm still seeing new housing going up on my way to work, and I still think there's about to be a housing boom (not bubble).  Interest rates are still low, and the economy is picking up steam, regardless of what some would like you to think. So, gotta get out of the trap.

Thursday, March 20, 2014

Fanny and Freddie... The Return

On a day when the market was mixed to down, Fannie Mae (FNMA) and Freddie Mac (FMCC) were both up about 5%.  That got my attention, so I checked them out over the last 2-3 months. Seems like they've been trying to breakout, even hit $5.50/share this month.  So I  looked at the headlines over the last few weeks. At least all the writers think it's time to make a move.  Bottom line, they're both victims of the housing bubble collapse of 7 years ago. Before that, these were $60-80/share stocks. They may never get there, but looking at how they're moving, I think it's time to dip my toes in that water...

Tuesday, March 18, 2014

Sapphire Glass

A few months ago, I started hearing rumors about Apple looking to make their next iPhone with sapphire glass, replacing the gorilla glass they're using now. Assuming that, makers of sapphire glass are about to get bumrushed with orders from Apple.  Along the same lines as that rumor, GT Advanced Technologies (GTAT) appears to be Apple's choice to make the glass. On the strength of those 2 rumors I picked up some GTAT last week.  It's up 6% just today. No investment is a sure thing, but Apple has already put a ton (relative to what's in my pocket) of money into this company, and Apple doesn't throw cash around for fun. My expectation is that this stock will at least double by year end, if not sooner.

Happy Hunting....

Thursday, February 6, 2014

Twitter Catches a Beat Down

Twitter (TWTR), the internet darling a few months ago, went fishing and reeled in a keg of whup @$$ today.  On a earnings report that beat financial expectations, but showed that member growth was not as perky as expectations, Twitter is down 23% today as of this writing. One day, almost a quarter of the market value, and a quarter of investor's Twitter holdings, just evaporated. The markets are fickle like that. Revenue was up over 100%.  They made more money than expected, but didn't gain enough new bodies. Makes you wonder what investor priorities are.

I thought there were questions on why it was rising in the first place, so maybe people were waiting for a chance to dump the stock. In any event, the last 2 months of growth just disappeared. The question, do you think this is a short term situation or do you think the bottom still hasn't hit? The stock is selling around $50/share now. It was around $65/share yesterday. I'm going to keep my eye on it tomorrow, that should tell where it's going over the next few weeks/months.

In general, stocks took a beating this week. My beloved Apple went from about $560 to $498 in a few days, but has since bounced back a little.  In any event, I missed the general drop, but if there's no reason for a stock to drop other than the rest of the market, that's a great buying opportunity.

Friday, January 17, 2014

Helen of Troy

No, not the lady, the company.  Helen of Troy (HELE) is the company behind such brands as Honeywell, PUR, Braun, Vicks, Revlon, Brut & Dr. Scholl's, to name a few.  In May it was below $35/share, today it's playing with $58, including a 10% gain yesterday on the news that they announced a CEO succession plan. Wow.

Looking at the quarterly revenue, it tanked in May, but has been growing like crazy since them. This is one of those "power behind the throne" type companies, you don't know their name, but you know all their subsidiaries.   In researching them, I came across this article where a product from Vicks is being used to map America's driest cities. Not the most exciting thing to hear, but that's music to an investor's ears.

I don't expect them to double in the next 6 months, but that would be nice. Realistically, I'm thinking this is a long term buy & hold.

As a side note, be sure to tune into tomorrow's Bunny Slippers Are Evil Jobseeker's podcast at 10:00AM. This week's discussion of money is joint effort between this blog and that one.

Wednesday, January 8, 2014

Hard to love BlackBerry. Very hard.

I came across this article today while doing some research:
I'm thinking, I must be missing something. Big. Back in 2007 when they had 2 presidents and no clue, they refused to get rid of their physical keyboard and almost got wiped off the planet. Now that that ship has sailed, they're thinking that's what will get them back in the game. Really?  Again, maybe I'm missing something, but I know personally my use of my phone is too varied to have to have a keyboard all the time.  Too many games and apps don't require one and if it's there all the time, IN THE WAY, I don't see it setting the world on fire. The BB10 was a disaster. They need to back up, look at where the market is going, and then try to be there.

What is it with companies who think they can walk into the cell phone/tablet space and unseat the 2 titans overnight? I mean, is there something in cell phones or tablet that people are begging for but not getting? I don't think so. And if they were, I doubt it would be physical keyboards.