Did I not just say the same thing a week ago specifically point 3 of my previous blog entry?
http://www.cnbc.com/id/26289118
I'm still sticking with my energy/gold/healthcare/tech plays for now. USAA has an interesting mutual fund ( USAAX ) with companies like Mastercard, XTO, IBM, Monsanto, Google, Oracle, Apple, RIG and Gilead. It's down 20% from its highs last October and with most of those stocks taking a beating over the last 3 - 6 months, I think it might be a good, diverse bet to wade through the upcoming volatile months ahead.
Tuesday, August 19, 2008
Monday, August 11, 2008
I love a good sale!
Holy cow! What a fast, swift ride down in energy and commodities over the last month! Of course, I bought a few stocks at the peak myself and have quickly lost......well.....a LOT in the last 4 weeks after seeing nice gains in others in the sector. I can't beat myself up too much as I did take profits along the way ( investing 101 ) and bought us a trip or 2 to Disneyland and a backyard patio. But still, that kind of decline that fast is hard to stomach.
Have you seen gold plunge 150 points in the last 2 weeks? Crazy!
Here's my theories:
1. Financials were shorted and beaten down so much and energy was the place to be. When we saw oil hit that 150 mark, it seemed to be the turning point where people ( investment hedge funds ) started profit taking and scrambling to cover their options by pulling money out of energy and putting it into financials. I can justify this reason as causing the initial 15 - 20% drop. The additional 15% drop that followed was pure emotion. Those who couldn't take the heat or see past six months from now, bailed.
2. Oil will be back. I've read many articles about China recently regarding their oil usage. Today, I read they had a 7% drop in demand this last month. To someone who might not know better, they might freak out and think that if China was slowing their demand, prices MUST be high. But what they might not realize is that for the last 6 weeks or more, the Chinese government mandated a cut back in driving as well as closed factories to try and "clear the air" before the Olympics. Plus, the price per gallon that they pay is subsidized by the government. They haven't seen the huge run ups in prices like we have seen here. At least not yet. I'm betting that a few weeks after the Olympics are over we'll start to see the "demand" pick up in that region again.
3. Then there's gold. Come on! Do people really think that we are out of this mortgage mess yet let alone curbing inflation any time soon? I don't. I'm still paying twice for my loaf of bread and 50% more for my juice. Do I really think I'll see the old prices ever again? I wish. Northwest Airlines just announced another $70 "fuel surcharge fee" they will begin charging soon. We all know where the "old" fuel surcharge fees from the early 2000's went. No where. We're just barely dealing with people who got 3 year ARMs. Next year will be those who got stuck in the 5 year ARMs and won't be able to refinance because their home is worth 30% less than what they paid. Not to mention that 40% of the homes on the market in my town are in foreclosure. Two homes on my street were abandoned over eight months ago and are just now being auctioned off. Retail companies are posting losses even after the "stimulus checks" yet we see their stocks jump on the news. How does any of this make sense? It doesn't. And I think the rally in the dollar is just an over reaction to Europe talking about a recession and choosing to not raise interest rates. Another reason I think gold will go back up is that the 800 level seems to be the point where mining companies won't be able to make a profit ( because of higher energy and inflation ) and will slow down mining which will bring up demand and prices.
Here's my game plan. I'm buying beaten down stocks. I know. It's HARD to buy low when you don't know how much lower they "could" go. It's scary. But it's SMART! I bought MCD at $50/share in January after they reported their 4th quarter '07 numbers which were good but not good enough and the stock took a 10% beating. Look at where it is now......$66! More recently, look at XTO Energy. I bought a few shares at its peak a month ago. It dropped 20% pretty quickly each day thinking it couldn't possibly go lower. Then it did. So when it finally hit 25% down and was ridiculously oversold, I bought some more. It's still hovering around that low but I have all the faith in the world that it will be back up soon.
The key is spotting a great deal and understanding the difference between a stock going down because it's a bad company or because it reported a less than stellar quarter.
I'm still buying into my USAGX fund as well. Gold isn't going away any time soon. I'm thinking at near its 1 year lows, it's a pretty good deal.
This is an interesting read:
http://www.financialsense.com/fsu/editorials/dancy/2008/0516b.html
Have you seen gold plunge 150 points in the last 2 weeks? Crazy!
Here's my theories:
1. Financials were shorted and beaten down so much and energy was the place to be. When we saw oil hit that 150 mark, it seemed to be the turning point where people ( investment hedge funds ) started profit taking and scrambling to cover their options by pulling money out of energy and putting it into financials. I can justify this reason as causing the initial 15 - 20% drop. The additional 15% drop that followed was pure emotion. Those who couldn't take the heat or see past six months from now, bailed.
2. Oil will be back. I've read many articles about China recently regarding their oil usage. Today, I read they had a 7% drop in demand this last month. To someone who might not know better, they might freak out and think that if China was slowing their demand, prices MUST be high. But what they might not realize is that for the last 6 weeks or more, the Chinese government mandated a cut back in driving as well as closed factories to try and "clear the air" before the Olympics. Plus, the price per gallon that they pay is subsidized by the government. They haven't seen the huge run ups in prices like we have seen here. At least not yet. I'm betting that a few weeks after the Olympics are over we'll start to see the "demand" pick up in that region again.
3. Then there's gold. Come on! Do people really think that we are out of this mortgage mess yet let alone curbing inflation any time soon? I don't. I'm still paying twice for my loaf of bread and 50% more for my juice. Do I really think I'll see the old prices ever again? I wish. Northwest Airlines just announced another $70 "fuel surcharge fee" they will begin charging soon. We all know where the "old" fuel surcharge fees from the early 2000's went. No where. We're just barely dealing with people who got 3 year ARMs. Next year will be those who got stuck in the 5 year ARMs and won't be able to refinance because their home is worth 30% less than what they paid. Not to mention that 40% of the homes on the market in my town are in foreclosure. Two homes on my street were abandoned over eight months ago and are just now being auctioned off. Retail companies are posting losses even after the "stimulus checks" yet we see their stocks jump on the news. How does any of this make sense? It doesn't. And I think the rally in the dollar is just an over reaction to Europe talking about a recession and choosing to not raise interest rates. Another reason I think gold will go back up is that the 800 level seems to be the point where mining companies won't be able to make a profit ( because of higher energy and inflation ) and will slow down mining which will bring up demand and prices.
Here's my game plan. I'm buying beaten down stocks. I know. It's HARD to buy low when you don't know how much lower they "could" go. It's scary. But it's SMART! I bought MCD at $50/share in January after they reported their 4th quarter '07 numbers which were good but not good enough and the stock took a 10% beating. Look at where it is now......$66! More recently, look at XTO Energy. I bought a few shares at its peak a month ago. It dropped 20% pretty quickly each day thinking it couldn't possibly go lower. Then it did. So when it finally hit 25% down and was ridiculously oversold, I bought some more. It's still hovering around that low but I have all the faith in the world that it will be back up soon.
The key is spotting a great deal and understanding the difference between a stock going down because it's a bad company or because it reported a less than stellar quarter.
I'm still buying into my USAGX fund as well. Gold isn't going away any time soon. I'm thinking at near its 1 year lows, it's a pretty good deal.
This is an interesting read:
http://www.financialsense.com/fsu/editorials/dancy/2008/0516b.html
Tuesday, July 22, 2008
I can't believe I'm going to say this
I'm a big, huge skeptic. I especially have a hard time believing something to be true when all of the actions point to an opposite reality. I live by the mantra both in dealings with others as well as in the stock market, "Fool me once.....shame on you. Fool me twice.....shame on me". I tried bottom fishing with financials way back in the spring when Citigroup was trading around $24/share. Luckily I bailed on the idea around $21/share since it swiftly dropped to $15.
So it's hard for me to swallow what I'm about to say.
( choke ) It might be time to get in on some financial stocks ( gasp. choke. gag. )
I can't believe those words fell out of my mouth.
But, I did it. I sucked it up and did it. I bought some Bank of America shares today. They've been up 50% in just last week alone thanks to "better than expected losses and write-downs". But, I got in first thing in the morning as I followed the quarterly reports of Fifth Third and Wachovia. At the end of the day, I was up a quick 16% before selling 30% of my shares before the market closed to take profits. I bought BAC for a couple of reasons. 1. I knew a few big names were reporting today and took the gamble that they would do as well as the other companies that reported last week who saw 10/20/30% gains in a single day. 2. Congress is supposed to pass some kind of bill to help/bail out Fannie/Freddie and the housing market on Thursday.
At this point, though, how much worse could financial stocks get compared to the beating the energy stocks have taken this last month? Companies that I own like Freeport McMoRan and XTO Energy both reported today. Freeport reported a 14% loss partly related to the Phelps Dodge acquisition last year. They have plans to boost production in both their Morenci and Safford Copper mines this year plus increased their dividend to $2.00/share up from $1.75. This is a company that I've owned off and on over the last year or so. Without fail, the stock value will rise until it is time to report for the quarter and then for some reason, it gets slammed. It will trade up 25 points then pull back 20 which makes for an easy "buy low/sell high" stock to follow. I sold half of my position about a month ago in anticipation for today which did exactly what I suspected. Down 6%. Zero logic.
XTO has been a thorn in my side. They report a 33% increase in profit today after boosting their earnings estimates to 20% last month and the company's shares fell 9% which is better than down 11-12% like it was in early trading. It's nuts! This company just bought out a company called Headington Oil Company who has about 350,000 acres of leasehold in the Bakken Shale in Montana and North Dakota. Why is that important to me? Because I know for a fact that there is oil in that area because my parents receive a hefty check every month from the former Headington Oil Company for their mineral rights on that land. If there wasn't oil, they wouldn't be receiving a check which has gone up a LOT in the last year. So, if Headington found oil, XTO now owns it. So why on earth has XTO shares gone down almost 30% in the last month? Who knows. The large drop in natural gas probably. Reporting on a day when the price of oil per barrel dropped $4.00 was just dumb luck. I did buy back some more today since I thought the smack down they've received has been ridiculous. Their earnings growth and potential deserves better than that.
Natural gas plays are typcially cyclical and tend to trend down in July and August. Once hurricane season and winter gets closer, they hopefully should move up.
EDITED: So I bought some BAC last week. I made a nice 16% profit in one day before selling some of my shares. I put a stop limit to sell the rest at a 10% profit because I just don't have the stomach for it just yet. So, in 2 days, I did a pretty good, quick trade. I'm still going to be cautious and have a "wait and see" attitude........
So it's hard for me to swallow what I'm about to say.
( choke ) It might be time to get in on some financial stocks ( gasp. choke. gag. )
I can't believe those words fell out of my mouth.
But, I did it. I sucked it up and did it. I bought some Bank of America shares today. They've been up 50% in just last week alone thanks to "better than expected losses and write-downs". But, I got in first thing in the morning as I followed the quarterly reports of Fifth Third and Wachovia. At the end of the day, I was up a quick 16% before selling 30% of my shares before the market closed to take profits. I bought BAC for a couple of reasons. 1. I knew a few big names were reporting today and took the gamble that they would do as well as the other companies that reported last week who saw 10/20/30% gains in a single day. 2. Congress is supposed to pass some kind of bill to help/bail out Fannie/Freddie and the housing market on Thursday.
At this point, though, how much worse could financial stocks get compared to the beating the energy stocks have taken this last month? Companies that I own like Freeport McMoRan and XTO Energy both reported today. Freeport reported a 14% loss partly related to the Phelps Dodge acquisition last year. They have plans to boost production in both their Morenci and Safford Copper mines this year plus increased their dividend to $2.00/share up from $1.75. This is a company that I've owned off and on over the last year or so. Without fail, the stock value will rise until it is time to report for the quarter and then for some reason, it gets slammed. It will trade up 25 points then pull back 20 which makes for an easy "buy low/sell high" stock to follow. I sold half of my position about a month ago in anticipation for today which did exactly what I suspected. Down 6%. Zero logic.
XTO has been a thorn in my side. They report a 33% increase in profit today after boosting their earnings estimates to 20% last month and the company's shares fell 9% which is better than down 11-12% like it was in early trading. It's nuts! This company just bought out a company called Headington Oil Company who has about 350,000 acres of leasehold in the Bakken Shale in Montana and North Dakota. Why is that important to me? Because I know for a fact that there is oil in that area because my parents receive a hefty check every month from the former Headington Oil Company for their mineral rights on that land. If there wasn't oil, they wouldn't be receiving a check which has gone up a LOT in the last year. So, if Headington found oil, XTO now owns it. So why on earth has XTO shares gone down almost 30% in the last month? Who knows. The large drop in natural gas probably. Reporting on a day when the price of oil per barrel dropped $4.00 was just dumb luck. I did buy back some more today since I thought the smack down they've received has been ridiculous. Their earnings growth and potential deserves better than that.
Natural gas plays are typcially cyclical and tend to trend down in July and August. Once hurricane season and winter gets closer, they hopefully should move up.
EDITED: So I bought some BAC last week. I made a nice 16% profit in one day before selling some of my shares. I put a stop limit to sell the rest at a 10% profit because I just don't have the stomach for it just yet. So, in 2 days, I did a pretty good, quick trade. I'm still going to be cautious and have a "wait and see" attitude........
Friday, July 11, 2008
Run to high yields!!!
With the Dow down 20% since its high last October, people are hard pressed to find some place to hide and ride out the brutal bear market. The usual places people go during a recession aren't working this time around. Places like healthcare and staples for example. Those who flocked to United Health saw a swift drop from a high of 85 down to 37 in six months. Coca Cola is usually recession proof if it weren't for its decline from 65 to 50 in the same six months time.
So what do you do? Find the high paying dividend stocks preferrably in the energy sector because energy and metals/mining are the only thing working. And there are several to choose from. I'm talking yields of 10% or more. High yields shield you from drops in stock price and gives you more cushion. If you have a stock that has dropped 5% in value from what you bought it for but pays a 12% dividend, you're still ahead 7% which is a lot better than being down 20% like the DOW average for the last nine months.
Here's my picks that pay a nice hefty dividend and that have done well the last few months:
1. Frontline
Frontline is an oil/ore/coal tanker company. I purchased my first set of shares when it was trading around $47. I've added to it over the last couple of months. Frontline pays an awesome dividend of 18%! Some of the shares I purchased are actually down 6% right now but with an 18% cushion, I'm still WAY ahead of the curve.
2. Hugoton Royalty Trust
I mentioned this one in a previous entry. HGT pays around a 12% dividend. The big plus with HGT is that it pays out monthly instead of quarterly. I actually purchased some more shares this week right before the ex-dividend date to get the payout. It basically averages to $15 for every 50 shares you own. It's had a big drop in value this last week when energy stocks got hammered but over all, it's a great yield which pays way better than any savings account! Who WOULDN'T want an extra $30 - $100 per month which is over and above any increase in stock price?
3. Linn Energy
Linn ( LINE ) pays a little over 11% a year for its dividend. It doesn't have huge swings in stock price and trades pretty flat but the guaranteed 11% makes it a pretty safe choice to stash some money and ride out the market.
4. Nordic American Tanker
Nordic is an oil tanker company that pays out almost 13% annually for its yield. Again, not a huge overall mover but a great place to stick some money and make a great dividend.
Over the last few months, I've been buying and selling mostly in these securities. If they hit a high, I sell off some. If they pull back, I use what I sold to buy them back. So far, it's worked well and why mess with a good thing?
This recession is different.
So what do you do? Find the high paying dividend stocks preferrably in the energy sector because energy and metals/mining are the only thing working. And there are several to choose from. I'm talking yields of 10% or more. High yields shield you from drops in stock price and gives you more cushion. If you have a stock that has dropped 5% in value from what you bought it for but pays a 12% dividend, you're still ahead 7% which is a lot better than being down 20% like the DOW average for the last nine months.
Here's my picks that pay a nice hefty dividend and that have done well the last few months:
1. Frontline
Frontline is an oil/ore/coal tanker company. I purchased my first set of shares when it was trading around $47. I've added to it over the last couple of months. Frontline pays an awesome dividend of 18%! Some of the shares I purchased are actually down 6% right now but with an 18% cushion, I'm still WAY ahead of the curve.
2. Hugoton Royalty Trust
I mentioned this one in a previous entry. HGT pays around a 12% dividend. The big plus with HGT is that it pays out monthly instead of quarterly. I actually purchased some more shares this week right before the ex-dividend date to get the payout. It basically averages to $15 for every 50 shares you own. It's had a big drop in value this last week when energy stocks got hammered but over all, it's a great yield which pays way better than any savings account! Who WOULDN'T want an extra $30 - $100 per month which is over and above any increase in stock price?
3. Linn Energy
Linn ( LINE ) pays a little over 11% a year for its dividend. It doesn't have huge swings in stock price and trades pretty flat but the guaranteed 11% makes it a pretty safe choice to stash some money and ride out the market.
4. Nordic American Tanker
Nordic is an oil tanker company that pays out almost 13% annually for its yield. Again, not a huge overall mover but a great place to stick some money and make a great dividend.
Over the last few months, I've been buying and selling mostly in these securities. If they hit a high, I sell off some. If they pull back, I use what I sold to buy them back. So far, it's worked well and why mess with a good thing?
Monday, July 7, 2008
Retirement. Where should I put my money?
If your company offers a 401k, it's a great place to put your pretax money with each paycheck. One reason is because the money is deducted pretax and is out of sight out of mind which is great for people who have trouble saving money. Unfortunately, what you also don't see are the management fees associated with your 401k plan. I looked at my husband's account the other day and noticed that in the last six months, they deducted at least $60 in maintenance fees from one of his funds. Also, the fund options I have to choose from are extremely diversified and has us investing in sectors like financials which I don't want to be in a 3000 mile radius of right now. The maintenance fees we've been charged for the privilege of losing 10% on our account in the last six months is equivalent to eight or nine trades using my own online account which I can have more control over. Needless to say, I've transferred a bulk of the 401k into bonds and a small amount into a heavier weighted energy fund and a tech fund.
So, what I have learned..........
ONLY invest up to the amount that the company will match. For my husband's company that means if we invest at least 6%, his company will match another 3%. I don't care if I can put up to $15,500 this year into the account because all I'd be doing is flushing money down a toilet each month.
What to do with the rest of the money? Sink it into a ROTH IRA. If both you and your spouse have your own accounts you can each invest up to $5000 per year at the current contribution for 2008. That way, you have control over what you want to invest in. You want to invest in McDonalds? Go for it! You want to own a few shares of Research in Motion because you think their new Blackberry is super cool? Do it! If you want to be a little more conservative, you could invest in a mutual fund that is sector specific. You aren't tied down to what funds the company offers. Plus, you get to keep all of the dividends and you only pay a fee if you make a trade! And the best part is that all of the money the ROTH makes is completely tax free when you start to withdraw on it later.
If you're lucky, your company might offer the ROTH 401k plan. This just started a couple of years ago. If you aren't sure, contact your Human Resources department and ask. It's the same principle as a traditional 401k but it is invested after taxes. You can invest in either one or put some in each up the $15,500 limit. Depending on how many deductions you have, you might actually be better off with the ROTH 401k. For us right now, because we have two mortgages and one rental property, we are able to claim a lot in deductions so the amount we'd save by investing in the pretax 401k isn't worth it to us. In 2010 ( assuming Obama doesn't become president and repeals the tax cuts like he claims he will do as soon as he gets into office ), you will be able to transfer a traditional 401k/IRA to a ROTH with no income limits. Currently if you make over 100k you aren't allowed to make the transfer. Also keep in mind you'll have to pay taxes on the money but if you make the transfer in the year 2010, then the IRS will allow you to spread the taxes over two years. ( Editorial comment: So help me.......... Obama better not become president! )
So, what I have learned..........
ONLY invest up to the amount that the company will match. For my husband's company that means if we invest at least 6%, his company will match another 3%. I don't care if I can put up to $15,500 this year into the account because all I'd be doing is flushing money down a toilet each month.
What to do with the rest of the money? Sink it into a ROTH IRA. If both you and your spouse have your own accounts you can each invest up to $5000 per year at the current contribution for 2008. That way, you have control over what you want to invest in. You want to invest in McDonalds? Go for it! You want to own a few shares of Research in Motion because you think their new Blackberry is super cool? Do it! If you want to be a little more conservative, you could invest in a mutual fund that is sector specific. You aren't tied down to what funds the company offers. Plus, you get to keep all of the dividends and you only pay a fee if you make a trade! And the best part is that all of the money the ROTH makes is completely tax free when you start to withdraw on it later.
If you're lucky, your company might offer the ROTH 401k plan. This just started a couple of years ago. If you aren't sure, contact your Human Resources department and ask. It's the same principle as a traditional 401k but it is invested after taxes. You can invest in either one or put some in each up the $15,500 limit. Depending on how many deductions you have, you might actually be better off with the ROTH 401k. For us right now, because we have two mortgages and one rental property, we are able to claim a lot in deductions so the amount we'd save by investing in the pretax 401k isn't worth it to us. In 2010 ( assuming Obama doesn't become president and repeals the tax cuts like he claims he will do as soon as he gets into office ), you will be able to transfer a traditional 401k/IRA to a ROTH with no income limits. Currently if you make over 100k you aren't allowed to make the transfer. Also keep in mind you'll have to pay taxes on the money but if you make the transfer in the year 2010, then the IRS will allow you to spread the taxes over two years. ( Editorial comment: So help me.......... Obama better not become president! )
Wednesday, July 2, 2008
Energy! Energy! Energy!
Energy is the place to be right now.With the price of oil up over $140 per barrel, there is more pressure to drill and explore areas where we might find oil. One of the most popular areas right now is the Haynesville Shale ( natural gas ) in northern Louisiana. Chesapeake Energy( CHK ) along with Petrohawk ( HK ) hold the most acres. Luckily, I own Chesapeake for myself. I've owned it off and on over the last couple of years. I recently bought back into it on May 30th so in the last month, it has jumped over 30%. Unfortunatly, I DIDN'T buy Petrohawk when I was looking into it a week ago. If I had, I would be up over 25% in just a little over a week. I think I'll wait for a pull back before I get in. That's a huge run in a short period of time.
The other energy play that is hot right now is the Bakken Shale in the Dakotas/Wyoming/Montana area. There are several smallish companies drilling in the area right now. One of those is Continental Resourses ( CLR ). I bought them at the end of April and in one short month, it almost doubled in value. I saw it starting to decline so I sold off all of my shares. I might get back in again but for the last month it has been flat. Another small player is Brigham Exploration ( BEXP ). This is my speculative play. It hasn't done much since I bought it a month ago. I'm hoping they will ride with big news from other companies. Proabaly the biggest player in the Bakken right now is EOG. I contemplated buying them, but they've been trading flat so I decided against it.
Another way to play the energy sector right now is with Hugoton Trust ( HGT ). They are a trust account for XTO. Not only do they pay an awesome 12% annual dividend but they pay out a percentage of the dividend each month around the 15th. So the dividend compounds monthly as opposed to quarterly. Plus, since I bought my initial shares at the end of April, it has seen an increase of 21% which makes the monthly dividend gravy. I bought 220 more shares last week, just in time to get the next dividend payout and it is already up another 3%.
Today, there was a HUGE sell off in all things energy, oil, coal and gas related. Even though the price per barrel was up again almost $3.00, I think people were just looking to keep SOME profits wherever they could find them. These stocks typically have huge swings plus or minus 5% on any given day but today, they were slammed big. But, in a couple of days, there will probably be a great buying opportunity since I don't see these commodities coming down anytime soon.
The other energy play that is hot right now is the Bakken Shale in the Dakotas/Wyoming/Montana area. There are several smallish companies drilling in the area right now. One of those is Continental Resourses ( CLR ). I bought them at the end of April and in one short month, it almost doubled in value. I saw it starting to decline so I sold off all of my shares. I might get back in again but for the last month it has been flat. Another small player is Brigham Exploration ( BEXP ). This is my speculative play. It hasn't done much since I bought it a month ago. I'm hoping they will ride with big news from other companies. Proabaly the biggest player in the Bakken right now is EOG. I contemplated buying them, but they've been trading flat so I decided against it.
Another way to play the energy sector right now is with Hugoton Trust ( HGT ). They are a trust account for XTO. Not only do they pay an awesome 12% annual dividend but they pay out a percentage of the dividend each month around the 15th. So the dividend compounds monthly as opposed to quarterly. Plus, since I bought my initial shares at the end of April, it has seen an increase of 21% which makes the monthly dividend gravy. I bought 220 more shares last week, just in time to get the next dividend payout and it is already up another 3%.
Today, there was a HUGE sell off in all things energy, oil, coal and gas related. Even though the price per barrel was up again almost $3.00, I think people were just looking to keep SOME profits wherever they could find them. These stocks typically have huge swings plus or minus 5% on any given day but today, they were slammed big. But, in a couple of days, there will probably be a great buying opportunity since I don't see these commodities coming down anytime soon.
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