10/24/2012
It wasn't as green of a Monday in thought it would be. In fact, it was quite red as was tuesday. Many more bad earnings numbers as well as bad news from Spain prompted heavy losses across the board yesterday. Today, the markets finished slightly down despite positive news regarding US home sales, which increased 5.7% to a yearly, seasonally adjusted total of 387,000, the highest in 2 years. In addition, the markit US manufacturing index rose to 51.3 from 51.1 in september which is better than Europe or China. Any growth is better than none or negative growth.
I believe the Fed policy meeting had little to no effect this afternoon. Bernanke said operation twist is in wait-and-see mode until December. I predict Bernanke will use the usual economic upturn over the holidays to ease the country slightly away from quantitative easing. The fact that earnings numbers have been so poor despite this new round of quantitative easing is extremely, extremely unsettling. I want to believe the economy has some life as is shown in the housing numbers, but the economy is just out of juice. It seems pointless to continue unleashing money unless the economy is showing some sign of life. The fact that Bernanke disclosed he will be ending his tenure in 2014 is possibly another sign of weakness if not entirely political.
I thought the economy would have a pullback either when QE3 wasn't released or after it was released, which is the reason I held so much cash. It seemed inevitable that the market would gap and then the gap would partially fill as traders realized neither of the first QEs were ever very effective which is the reason we have #3 in the first place. The last couple of days is exactly the kind of pullback I was originally predicting, and the fact I missed on much of the QE3 gains and now lost on all of this pullback is very upsetting. I no longer have an opinion on whether the market will correct from the past couple of days or if it will follow the world into a recession. And as a famous trader once noted, “if you don’t hold an opinion, don’t hold a position.
It is difficult not to get emotional in times like these. I am still well ahead of the S&P 500 for the year, but I’ve lost 3.36% during October compared to the index at 1.91% (largely attributed to my MSFT holding which is down 9.35% over the last month. My choice to go so long in MSFT is a large, unacceptable, and novice mistake. I subjected my portfolio to way too much firm specific risk, and I would be fired if I was doing this for a living, thank god I’m not. Looking forward, I am going to hold on to most of my positions, and I will sell at the first hint of negative Macroeconomic news. In the future, I will focus on finding sold dividend stocks which can contribute to my portfolio while the economy bounces around and goes nowhere.
Wednesday, October 24, 2012
Saturday, October 20, 2012
Green on Monday
10/20/2012
We’re in for a green Monday. My baseless optimism comes from what I perceive to be as an overreaction to the negative numbers on Friday and the inherent strength in my portfolio. Investors have been very worried over the last couple of years, and that was with good reason. The market has been unforgiving at times and the volatility can be hard to stomach. The weak fundamentals over the last couple of years have not slowed what has largely been a consistent rise in equity prices. This underlines the positive outlook beneath the skepticism of the average American.
When I look at the growth in the US economy over the past couple of years, I can accept the unacceptable comeback because I know it is not going to turn and continue heading downwards. The strength of American enterprise is not something to be overlooked, and I guarantee you will lose if you bet against it. Over the next one to three years, I envision a stock market that grows proportionately to the slow growth of the economy in addition to equal amounts of growth brought on by inflation.
In these aspects, I feel well positioned. I own multiple large, fundamentally strong companies which will remain largely sheltered from intraday hoobla. I expect to see modest gains as people continue to realize the figurative strength of our economy and regain confidence in the market. In addition, I will escape the inflation which Bernanke claimed is coming. It is possible he doesn't let it drift too much further above 2%, but I believe he thinks he will receive a better blurb in the history books if he allows for a decade of inflation instead of a Japanese decade.
Alright, lets get specific...
Emerson (EMR) is attractive to me because of its low risk and high dividend (3.32% paid 9/10/2012). The fact that Emerson stock is not going anywhere quickly is a reasonable attribute during times of volatility. It is psychologically stabilizing to have a stock that always seems to be slightly in the green. At the moment, Thomson Reuters has pooled analyst forecasts which predict a 12 month price target of a $48 Low, a $54.7 Mean, and a $60 high.
Microsoft (MSFT) was a stock that I originally bought on the fact that all the investment fund managers were screaming about it. It worked and I made a bunch of profit when I sold it. I reentered on recent, subsequent dips in the market, but the performance of the stock has me worried. The lack of PC sales is eating their revenue, and even if Windows 8 is as great as I think it will be, it may not matter. I am currently very long on the stock which may change if the recent gaps are not filled, which would put me in the green.
DSCVX is one of my largest holdings, and I could not be happier with it. It has risen a hair under 40% over the last year, and it has a five star rating from Morningstar. Its performance warrants little more critique.
I will give a rundown on my other holdings at a later date.
We’re in for a green Monday. My baseless optimism comes from what I perceive to be as an overreaction to the negative numbers on Friday and the inherent strength in my portfolio. Investors have been very worried over the last couple of years, and that was with good reason. The market has been unforgiving at times and the volatility can be hard to stomach. The weak fundamentals over the last couple of years have not slowed what has largely been a consistent rise in equity prices. This underlines the positive outlook beneath the skepticism of the average American.
When I look at the growth in the US economy over the past couple of years, I can accept the unacceptable comeback because I know it is not going to turn and continue heading downwards. The strength of American enterprise is not something to be overlooked, and I guarantee you will lose if you bet against it. Over the next one to three years, I envision a stock market that grows proportionately to the slow growth of the economy in addition to equal amounts of growth brought on by inflation.
In these aspects, I feel well positioned. I own multiple large, fundamentally strong companies which will remain largely sheltered from intraday hoobla. I expect to see modest gains as people continue to realize the figurative strength of our economy and regain confidence in the market. In addition, I will escape the inflation which Bernanke claimed is coming. It is possible he doesn't let it drift too much further above 2%, but I believe he thinks he will receive a better blurb in the history books if he allows for a decade of inflation instead of a Japanese decade.
Alright, lets get specific...
Emerson (EMR) is attractive to me because of its low risk and high dividend (3.32% paid 9/10/2012). The fact that Emerson stock is not going anywhere quickly is a reasonable attribute during times of volatility. It is psychologically stabilizing to have a stock that always seems to be slightly in the green. At the moment, Thomson Reuters has pooled analyst forecasts which predict a 12 month price target of a $48 Low, a $54.7 Mean, and a $60 high.
Microsoft (MSFT) was a stock that I originally bought on the fact that all the investment fund managers were screaming about it. It worked and I made a bunch of profit when I sold it. I reentered on recent, subsequent dips in the market, but the performance of the stock has me worried. The lack of PC sales is eating their revenue, and even if Windows 8 is as great as I think it will be, it may not matter. I am currently very long on the stock which may change if the recent gaps are not filled, which would put me in the green.
DSCVX is one of my largest holdings, and I could not be happier with it. It has risen a hair under 40% over the last year, and it has a five star rating from Morningstar. Its performance warrants little more critique.
I will give a rundown on my other holdings at a later date.
Friday, October 19, 2012
10/19/2012 - I Like Starbucks
10/19/2012
Most of my stocks were in the red today because of a dip in home sales, bad news from Spain, and a host of negative earnings across the board. Microsoft(MSFT), one of my largest holdings got absolutely hammered losing over 2%, and Starbucks(SBUX) is currently down 3% on the day. At 3% in the red, Starbucks (SBUX) looks oversold, so I sold my seven day-old, 71 share position in Sysco(SYY) holding at $31.73 for a gain of $33. I used the money to immediately buy 49 more shares of Starbucks(SBUX). Despite the drop in prices, there seems to be a great deal of positive sentiment towards Starbucks(SBUX), and the opening their flagship store in Mumbai is very exciting. The growth opportunities outside the US are limitless, and few companies are going to knock Starbucks down domestically.
I see little reason to exit from any of my other holdings at the moment. The pull back is largely superficial, and uncertainty alone is not enough to prompt me to sell. If larger, macroeconomic problems start to arise in the next couple of weeks, I shall quickly recede into cash because the equity market feels overbought. That said, the different attitude Ben Bernanke showed toward inflation when he released QE3 is a large reason I am still in stocks. There is no such thing as an overbought stock market during times of inflation.
Most of my stocks were in the red today because of a dip in home sales, bad news from Spain, and a host of negative earnings across the board. Microsoft(MSFT), one of my largest holdings got absolutely hammered losing over 2%, and Starbucks(SBUX) is currently down 3% on the day. At 3% in the red, Starbucks (SBUX) looks oversold, so I sold my seven day-old, 71 share position in Sysco(SYY) holding at $31.73 for a gain of $33. I used the money to immediately buy 49 more shares of Starbucks(SBUX). Despite the drop in prices, there seems to be a great deal of positive sentiment towards Starbucks(SBUX), and the opening their flagship store in Mumbai is very exciting. The growth opportunities outside the US are limitless, and few companies are going to knock Starbucks down domestically.
I see little reason to exit from any of my other holdings at the moment. The pull back is largely superficial, and uncertainty alone is not enough to prompt me to sell. If larger, macroeconomic problems start to arise in the next couple of weeks, I shall quickly recede into cash because the equity market feels overbought. That said, the different attitude Ben Bernanke showed toward inflation when he released QE3 is a large reason I am still in stocks. There is no such thing as an overbought stock market during times of inflation.
Thursday, October 18, 2012
Starbucks
10/18/2012
http://usa.chinadaily.com.cn/life/2012-10/18/content_15828480.htm
I saw an opportunity in a long term Starbucks(SBUX) position this morning. Yesterday, an article in China Daily Newspaper stated that coffee drinking is a growing part of Chinese culture. In Japan, coffee exploded in popularity, over tea, going from an average of 3 cups consumed by the average person to 300 cups, well above the 240 world average. The same thing seems to be happening in China, and the trend has just begun! Starbucks is the #1 coffee company with 100 stores, which they hope to increase to 1000 within 8 years.
The consistent performance of Starbucks stock during the recession is an indication of the company's fundamental strength. The stock is down on performance in the last few months, and the stock lost about 1% in early trading hours this morning. I bought 79 shares with a limit price of $47.86 which I partially funded with a sale of 35 shares of Emerson(EMR) stock at 49.28 for a $161 gain. The purchase of (SBUX) was the only driving influence behind my sale of (EMR). With the dividend (EMR) was paying, it was a tough decision to let it go. I was driven to make the sale/purchase today because of the drop in (SBUX) price due to some news which was likely a short term driver.
It is now close to the end of the trading day. I have positive emotion while reflecting on the trade. (EMR) rose 1%ish after I sold it, but it is currently below the day’s opening price. (SBUX) dropped around 9/10 of a percent from where I bought it, but considering my underlining purpose of buying the stock was my multiple year vision, I am not bent out of shape. http://usa.chinadaily.com.cn/life/2012-10/18/content_15828480.htm
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