Investment 101

I got the job! Start on Monday. This blog may need to change a bit due to my new role, will update things as I know more.

I had a problem with a previous post and it never made it to the board. This includes last year's successes and failures.

Ok, where was I. If the stock market were a car, then consumers would be the driver. What we want and what we need in turn becomes what we buy. We can steer the market in a direction toward what we are purchasing. The market moves up and down depending on how well we are doing, we have the accelerator and brake in the form of retirement programs and consumer spending. The government is the RMV(kind of funny how true this is). Listed companies in turn aren't even part of the car, they are more like billboards. They are all saying 'buy me." Like the McDonalds, Next Exit signs. How well they produce the good we want will determine if we steer toward them. This analogy isn't working out.

Here's how I determine what stocks I buy. First I sit back and look around me. What has changed, what's new. Look for companies that have been around forever that have a depressed stock price. The hot item Christmas '05, IPODs, so for a short time APPL went through the roof, then came crashing back to reality. It has since gone through the roof again with a great new computer launch.

Some of my success stories from last year and my thought process behind it. CWTR, SBUX, WFMI, DB, RAI, HES

Last year, Starbucks stores started popping up everywhere from the mall to Target. now I'm not a big fan of their coffee, but a lot of people are and they will pay big bucks for it. Also, I heard the CEO on Mad Money talking about their China expansion and that there are 250 million young, affluent Chinese people. SBUX is a growth company and should trade at a multiple of 50. With that in mind I picked it up when it was trading around a P/E of 35 and sold it when it got near 50.

Many of you probably haven't heard of Coldwater Creek. For many years it was a women's catalog clothing company. Solid, but boring. They have gone national with expanding there retail stores and their customer base is women 40+. Its my mother's favorite place to shop. So, I used to go in there when I needed to buy her gifts, they had a multitude of things to buy and the place was always crowded. I bought the stock solely based on my experience at the store.

Whole Foods, last year I bought and shorted this stock and was right in both directions. I was right, not because I'm good or lucky, but the market was wrong. Based off of WFMI growth rate they were similar to SBUX in growth rate and should have been trading in a similar mulitple range. For some reason this stock was a roller coaster even though the company was steady. So when it dropped too low, I bought and when it went nuts I shorted it. No great profits, but a 10-20% gain in both directions.

Deutche Bank, I wanted a bank stock to diversify my portfolio that would not be as effected by potentially rising interest rates. I got lucky and jumped on a steaming train. I expected steady and got an ass-kicker.

Reynolds American, I wanted a high dividend stock(they paid 5% at the time) that seemed underpriced. They fit the criteria. Comparing them to other tobacco stocks, their financials were very good, but the price was depressed. I jumped on at the right time and rode them for about a 30% bump. Hard not to ride a good company for that last year.

Hess, if there is an oil company out there that can be liked its Hess. They are the little guy of the business and they own the NY Jets. I bought them, because 3 of 5 guys in my department got a Hess Card this year. They give you 5% off your gas and they are putting up a lot of Hess Express stations. I looked them up and their price was down compared to other oil companies, so I bought some. HES has typically in the past traded closely with the price of oil. This past dip in oil prices was the first time they held their ground. I think the new stores and credit cards are partially responsible for that.

Next post will be....

My biggest mistake. CQB

Some I didn't jump on but weren't surprised by the way they moved. TM, MCD, ANN, CWTR

How I decide if a company is over/under or correctly priced.

AMGN - I sold about 2/3 of my stake before it tanked. I am looking at picking some back up possibly. $61/share is just way too cheap for this stock.

SBUX - I bought some at around 32. If it hits 28 without any bad news I will probably buy some more.

Got to love when you get something right, but don't act on it. I own a bit of FRO and it pays a great dividend. $30-$40 stock that paid a $2.50 dividend in December and just announced a $2.05 dividend payable this week. My point being.... The history on this stock is that it drops significantly after paying the dividend only to rebound before the next quarterly announcement. So the plan was to short the stock before today, the date of record for the dividend and then cover it after it drops. The theory here is that you essentially double your dividend if the stock does as you predict.

According to Cramer..... from his book Smart Money, when the stock market dropping reaches the front page of national news outlets, we have reached a bottom. Yesterday morning both the USA Today and Fox News had a story about the most recent dip and the fact that it could keep going due to the Asian markets. If Cramer is right, then we are done. Don't know about y'all, but I got hammered pretty well during this correction. I had a good portion of my account in cash, but Starbucks and my cell tower stocks got whomped.
When Toyota dropped I bought more, my Deutsche Bank sale and Toyota purchase have been a wash so far. Look for DB to drop more throughout the 2nd quarter like it has done in the past, its worth buying now, but seems to go down this time of year.

I've been bad about keeping to a topic on this blog and promise to get better. Which means I will continue my chart buying segment which I began about a month ago. Wish me luck, interview #3 today. Hopefully I'll be starting this new career soon.

Look at MWE today, if it goes up I'm happy if it goes down I'm not. Took a flier and bought it on margin last week, they reported last night. I haven't listened to the conference call yet.

People are starting to panic. There is NO need to panic. Unless most of your 401k is in that international fund that you know nothing about. The market could correct as much as 5% more, its down a total of about 4% as I'm writing this. Its been over inflated for a while. I was lucky to have my cash account not in anything at the time of the drop. I also had about 20% of my 401k in cash also. I got hit pretty hard, but only about average. I think I am still up for the year, even if its only a little. I picked up some more TM today, my 3rd purchase now. I also got lucky and pulled the trigger on DB two days before things fell. Granted I spent that cash on cell towers which have tumbled.

That's all for now. Again, don't panic. May be time to bu a couple of dividend stocks, see a few posts below for some that I like.

Trying to get my financial career started. I'm waiting to hear on a job that I interviewed for twice and the waiting game sucks. Not knowing whether they are just taking longer then expected or if they've decided to toss you to the curb, just plain sucks.

Stock news to follow later today...

When the stock market is doing well, everything seems fine and dandy. I picked up some Alcoa, not enough bought less then I normally would for a trade, because it was all the available cash I had at the time. If you believed their statement about growth this year due to strong aluminum demands then they were underpriced. Before I bought them they went up almost 10% which made me question the purchase, but even at that price they were cheap. I picked some up at 30.34 and it has been moving up steadily, until today when out of nowhere it popped 8% at the open is is retracing somewhat now. I will soon be getting out. Made my cash, now time to move on to another value pick.

I will be looking deeper into SBUX in the next couple of days. They are dropping like a rock and I don't see a prevailing reason why, except that they are volatile and the market is moving down. Could be a good opportunity to pick them up.

Before lunch

AA - 11.71%
AMGN - 33.28%
CZN - 6.92%
DB - 12.17%
FRO - 11.10%
T - 17.53%
Cash - 7.4%

If DB sells at asking price.

AA - 11.71%
AMGN - 20.67%
CZN - 6.92%
DB - 8.11%
FRO - 11.10%
Cash - 37.84%

I'm reevaluating my positions.

Well, I was bitching and moaning to myself this morning about how my portfolio has recently backtracked. then I looked up the three major indexes and realized that they have collectively risen 1.39% for the year and have given back ground in the past week. I feel better now, being up 3.74% YTD. I will continue my chart buying topic this week, as early as today. I need to change my holdings and move into things that can grow throughout this year. I'm just not feeling confident in some of my current stuff. I'll list my holdings and the percent of my portfolio later.

Cramer - If you haven't read any of his books or watched much of his TV show, but you are interested. Read his books in reverse order of their publication. I haven't read his first book yet, but his second book was very good. His third book which I'm reading now, Mad Money, so far is a pre-cursor to book #2, Real Money. Its quick and I'm sure there are a few things I'll pick up.