Saturday, January 30, 2010

A Place To Park Money During Turbulent Times

Looking for a place to park your cash during times like these? Looking for a way to water down some of the volatility? Have a look at some of these names and guess what they all have in common. BMY, BP, TEF, VZ, T, PBI, and FTR. Forgive me for not writing out the names, but I'm feeling lazy at the moment.

If you guessed yield, then you're right. All of these companies are yielding more than 5%. My two favorite on the list are Verizon (NYSE: VZ) and Bristol Myers (NYSE: BMY). Parking money in those two names is better than any bank account I can think of at the moment with 6+% being paid out.

For those who say the stocks could go down, they go up and down, but never down too far and never for too long. If you don't need the cash for 6 months or longer, then these names represent great alternatives to banks or CDs or money market funds. By the way, the 13+% yield on FTR is going away sometime soon.

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Friday, January 29, 2010

How Much More Proof Do You Need?!

People we are in a new trading paradigm. Throw out the short term strategies, as they're losers more than likely. Intel (NASDAQ: INTC), Microsoft (NASDAQ: MSFT), IBM (NYSE: IBM), AMAZON (NASDAQ: AMZN), General Electric (NYSE: GE), Hartford (NYSE: HIG) and the list goes on have all confirmed that the economy is heating up.

If that wasn't enough for you, then look at Q4 GDP - 5.7%! The market is dominated by traders and they're in a short mood right now. It's so easy to short these days because the feds haven't put the safety mechanism back in place yet.

We find it best to just use times like this to put on long term positions, but you have to wait for this downward spiral to play out. The first move down isn't the real move down. We've been burned in the past by buying into these pullbacks too soon, we now wait weeks before buying.

PG

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Friday, January 22, 2010

What a Week and What a Rout

Get used to the sideways action over the short and intermediate term. Traders rule the market now, so after a period of upward movement, expect moves down like this. Fundamentals don't seem to mean a great deal over extended periods and we've talked about that in the past.

The economy is coming along and most bellwether companies have had only good things to say, but the trade of the day seems to rule. We actually like the big banks here. BofA (NYSE: BAC) and Citi (NYSE: C). You could hold names like this and do quiet well over the next two years.

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Monday, January 18, 2010

The New Trade

Wondering how 'they' were able to turn the Intel news against us. You shouldn't be surprised by now, as we've been going on about this for a while. This has to do with options. To be more precise - the calls they sell to you and the puts they buy.

Once again, here's how and why it works.
1. They run stocks up until about a week before expiration.
2. They sell YOU a bunch of calls toward the end of the run up or on the initial pull back.
3. They buy puts during the same time on the cheap.
4. This works for 3 reasons, because retail leans long and because they are the same people responsible for the advertisement behind options and futures and because retail investors are emotional investors.

You see the same thing in the commodities markets. You're better off staying away from this until regulators get a handle, but if you can't resist, here's the new trade, as promised.

1. Never buy calls for a short term trade. Buy LEAPS or options with at least 6 months.
2. Buy calls no more than 50% out of the money, but 25% is more the target.
3. Only buy at least 2 weeks into the pull back and buy close to options expiration.
4. Sell after whatever big news breaks that you were waiting on.
5. Start betting on the downside buy buying puts as well (break those old habits).

Friday would have been perfect to buy options on those high beta names about 25% out of the money and at least 6 months from expiration.

This has become so predictable that we can build strategies around this. Funny that you hardly ever hear the 2 primary business news outlet talk bout what most people being interviewed must know.

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Thursday, January 14, 2010

So Predictable, Same Game Different Month

Look at most of those same high beta names like Potash (NYSE: POT), Mosaic (NYSE: MOS), Fuel Systems (NASDAQ: FSYS), Hartford (NYSE: HIG) and Trina Solar (NYSE: TSL) to name just a few. Inexplicably down in the days leading up to options expiration. This in the face of HIG saying their Q4 earnings would be at least twice the estimate. On the day they released that news, the stock was up big early and then just finished up.

Look for a post in the near future that tells you how to capitalize on this very predictable behavior the pros seem to run almost every month. By the way, you FSYS investors should be suffering from motion sickness.

PG

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Monday, January 11, 2010

Deciphering Alcoa

I like the numbers from Alcoa (NYSE:AA). The revenue number is solid and they actually predicted growth this year, versus a decline last year. The earnings number was light, but who really cares, as that's company specific. I'm more concerned with the overall market and I like what I heard/read.

The stock is down after hours because it was destined to fall after this huge run up. Note - when companies run up as much as AA did just before earnings, they almost always fall later. 'Buy the rumor, sell the news'.

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Friday, January 8, 2010

Where Are The Pre-Announcements?

It just occurred to me that I haven't heard one significant, negative pre-announcement for the 4th quarter. I think we're in for a good 4th quarter and good guidance. Think about the last few quarters. By now, there would have negative pre-announcements from at least half a dozen name brand firms across industries this time last year or 2 quarters ago.

Buckle up, I think we're going much higher. Look at names like Alcoa (NYSE: AA), US Steel (NYSE: X), Cliffs Natural (NYSE: CLF), and Dow Chemical (NYSE: DOW). These companies foretell where we're headed.

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The Banks Appear To Be In Favor Again

Everyone is talking up the banks now, BofA (NYSE: BAC), Wells (NYSE: WFC), and even Citi (NYSE: C). What changed besides the year? We noted BAC and C looked like good buys at least a couple of months ago. They're paying or have paid back the TARP money and BAC is even paying their bankers like it's 2007 again!

Given where the market has gone and the fact that BAC and C have lagged in our view, we think the analyst are behind the curve yet again.

By the way, what's the deal with the coverage on General Electric (NYSE: GE)? It was bashed last quarter. All the while analyst raised their estimates for this latest quarter and now everyone is buying. With the recovery well underway GE stands to benefit handsomely.

Note: We sold Sierra Wireless from the 2011 Model Portfolio. The latest big move up was too hard to ignore. $12.30 was a good price considering we paid somewhere around 3 or 4 bucks in March.

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Wednesday, January 6, 2010

Smells Like A Lot Of Short Covering

I believe what we're seeing are shorts taking their profits and professional longs who booked profits in November/December, taking up those long positions. I say that because even with the market flat to slightly down the past couple of days, the high beta stocks (many that we've talked about here-see history) that were beaten up in November/December are taking off.

I like it, but I'd wait and see what happens next week when options expire before celebrating just yet. This is a quick expiration, just about 2 weeks in to the month and the last 2 expirations haven't been kind to longs.

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Tuesday, January 5, 2010

Give Us A Break Meredith

Hasn't she had her 15 minutes? Her minutes have run in to someone other person's 15 minutes. She brought down Goldman Sachs' (NYSE: GS) estimates from 6 bucks to $5.50 and that apparently took the wind out of our sails. I long for the day when one voice doesn't move the market.

As I type this, I hear reporters saying 'economists' are calling for a double dip. They waste no time and pile right on.

The fact is, things look good going forward. We should remember that Meredith was also preaching doom and gloom while the banks were taking off and reporters just like mayhem.

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Monday, January 4, 2010

What A Day And What A Way To Start The Year

I don't know whether to cheer or be wary. I see many of the usual suspects taking off, Fuel Systems (NASDAQ: FSYS), Potash (NYSE: POT), Genworth (NYSE: GNW), etc.. These are among the most manipulated stocks out there and the people pulling the strings tend to run them up, then take the air out of our sails, then rock the boat until we capsize.

I'm not complaining, as I like up days, but I wouldn't chase the really big movers if this continues for a week or two. If you're in, then great, if not, I'd wait for the next pull back to get in, but then, what do I know.

Disclosure: long GNW from a buck

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Citigroup In The Spotlight And Ready To Move

I expect big things from Citi (NYSE: C) in 2010. If for no other reason than the fact that it lagged the market in 2009. Let's consider the facts. They're paying back the feds, they're making money, banks are among the most profitable companies on the planet, they - like the other banks are charging consumers an arm and a leg for everything, IPOs are coming back, people have short memories, and again, it was one of the worst perfomers in 2009.

Don't underestimate that last point. Typically stocks that lag that badly, perform quite well the following year. That's our stock to watch for the year.

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Sunday, January 3, 2010

2011 Model Porfolio Update


Here's the December update for our model portfolio. Remember, we plan on holding this until Jan 2011 or in that neighborhood. Also, recall that although we continue to list NYSE (NYSE: NYX), we did sell that one a month or two in and replaced it with GE(NYSE: GE). Also, Mosaic(NYSE: MOS) wasn't purchased on 26 Mar, but shortly after.

So the results speak for themselves, 97% return - 63% better than the 34% return of the S&P 500. The 4th quarter was a wash, but we expect the portfolio to do quite well this year.

My further 2 cents: best picks Dow Chemical (NYSE: DOW), Aflac (NYSE: AFL) and Sierra Wireless (NASDAQ: SWIR). Those 3 picks were way too easy. DOW and AFL were yielding about 7% when we bought them and SWIR was trading at cash. We also expect DOW to increase the dividend this year.

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The Vix

About This Blog

Where we rant and rave about the market and of course give our opinions on stocks we love or hate. We're not advisors and urge you to conduct your own due diligence.

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