Investment 101

Stick it out or dump it is the question......

I've been holding this stock for about a year now and I'm dead even. At this point it is the largest holding in my portfolio and I need to decide whether to hold on and hope for good things or dump it like the dog its acted like.

Here's the stats.

Last 5 years the company has grown at a 19.2% yoy rate.
Last year they earned 3.90/share, but diluted EPS ended up at 2.48 somehow. Looks like they took a big charge in the 2nd quarter, that's when the P/E jumped up on my Ameritrade chart.
Profit margin is 20.7% and operating margin is 35.8%, both strong.
They are projecting a growth rate of 13% this year or a full year EPS of $4.41.

A stock with a growth rate of 13% that has not missed an earnings estimate in a long time, their guidance is always conservative, in an industry that is growing should trade at a multiple above 20, more like 25-30. Going by their diluted EPS of $2.48 they are at an P/E of 28 right now, going by their actual earnings they are at a P/E of 18. Assuming they hit their earnings target of 4.41 at year's end then the stock should trade somewhere between a multiple of 18 and 28 or $80 and $125. If interest rates go up then multiples come down and I think you'll see interest rates go up again in late September. A realistic price for Dec. '07 is $85.

Other evidence.... http://www.thestreet.com/_yahoo/funds/madmoneywrap/10335542.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
(Page 2)

Should I hold or try and use my money elsewhere?

Apache Oil, my favorite bounce play and stock that I've been pumping for a year, "buy when it goes below 63, sell above 68." Otherwise known as APA, also the stock that last week I told one of my friends to buy if he wanted to make money in oil right now, is up 10% in the past 10 days. They purchased 28 oil fields in Texas for 1 billion and this should push their stock up to around 80, its at 70 right now. I should sell something in order to pick it up.

If only I followed my own advice.....

Well my retail picks hit the crapper, but I'm not sure there were too many retail stocks that ended up on the plus side. I have had a good run recently with PFE, COF and AMGN pulling me along. Even though my buddy Cramer took a dump all over COF I still believe its undervalued and should be in the mid 80s at least. One of last year's favorite swing plays looks like it may start a good 10% push. APA which is now at 68 should finally break the 80 mark that I thought they would hit last year. They just purchased a 28% share in someone's(can't remember the company) Texas oil field stake. Growth through acquisition can be just as good as internal growth.

I think the best way to beat the market this year will be through a mix of high dividend payers and small caps. Last year was the year of the big boys, this year the small guy will strike back.

Peace out for now.

A little while back one of my friends was asking about dividend stocks. So I went and dug up 20 stocks paying over 5% dividend. I've narrowed the list down to 8 that you could buy right now. In alphabetical ticker order, ALD, CZN, FRO, MWE, MMLP, MPW, PGH and PVX.

ALD - Great Buy right now.
CZN - pay $1 share, communications company, currently about 7%
FRO - last twelve months paid 22%. Dividend is variable.
MWE - good financials, dividend had doubled in last 5 yrs as well as stock price.
MCGC - pay 0.42/qtr, price varies from 15-20/share.
MPW - Little over 1yr old, div. has increased from 0.17-0.27. Medical industry.
PGH - pays monthly
PVX - pays monthly

Well, I'm watching everyone and the market zoom right by me. All my shit is in stall mode right now. I expect FRO and CZN to trade pretty flat since they are high dividend stocks. FRO is low right now and may be good to buy more. DB is flat, but just went through a huge run, I expect them to announce a hike in their dividend in the next couple of months which will boost their price short term again.

As for trading, AMGN is flatlined. I just bought some AA, they are projecting a good year and have room for their stock to move at least 20% this year. I also recently purchased some PFE, looking for a 10% flip within 8 weeks. I'm out by the end of February if it doesn't move. I also just shorted some SNE, Playstation 3, not so hot and their TV reviews aren't so good. I like SONY products, but stock is overpriced right now.

I need to do more homework, right now I don't see any good prospects. Still think HD is a good prospect, even with crappy real estate economy.

Communications is the way to go this year. I've been up in the air as to buy T or VZ, think I just have to buck up and pick one.

I have a feeling this is going to be an interesting year in the stock market. Since we currently have an inverted yield curve, which means that short term interest rates are higher then long-term, the experts expect us to have a recession soon. The short term rates are higher because people feel that rates over a 10-yr period will average less then they are right now. Anyways, historically this has been a precursor to a recession, plus they call them economic cycles for a reason and we are overdue for a recession.

Another thing pointing to a recession is the high level of mergers and acquisitions. Combine two companies and you need less staff such as accounting, HR and other support areas. You also have the opportunity to clear out undesireable salaries, such as long-term middle management.

Where was I going with this.... oh yeah! Inverted yield curve should lead to a more cautious investment strategy from the big players. This usually leads to a slight downturn in the market overall. What this means to the little guy. Look for under-valued dividend paying or consistent growth stocks this year. Avoid companies that will be relying on future defense contracts due to the shift in congress. International growth is still very good, SBUX. Companies with what was the latest and greatest thing will struggle as their growth slows and their P/E shrinks, WFMI and SNDK. Companies like PG and T should be steady and even though not blockbuster returns will make you 10-15% on the year.

I didn't do any homework on where the prices of the AMZN, BBY and DELL stood before companies report on Christmas season sales. Basically, DELL and BBY look ok, but holy crikey is AMZN already overpriced. So even though I think they will have a good Christamas it is almost impossible for good news to start a run.

Tip #48

Rip a stock on your blog as being a dog and it will jump in price the very next day. Predict a downfall based on bad news and at worst you are looking at a flat day.

Brilliant!!

I am in the process of realigning my retirement account for this year. I currently hold 3 longterm high yield dividend paying stocks which are the conservative portion of my portfolio. The rest of my money I use to hold 2-3 stocks which I actively trade. By actively trade I mean, goal is a 10% bump in 8 weeks. Eight weeks is an average length I hold them, the longest to date is almost a year. This would be a dog of a stock named Amgen.

Anyways....

A wise man once told me(Kramer), even if you are buying as little as 50 shares of a company to do it in steps. Yesterday I bought some Pfizer, one of my 5 star picks for the year. I also had a buy in at a lower price looking to pick some more up in the next few days if it dipped. Today I'm sitting at a stop light on my way to work reading the headlines in the WSJ. Two drugs used to trat Parkinson's disease shown to cause heart valve damage. Of course one them is Pfizer's. Well, I should be able to pick it up cheap today and so should you. Expect a 3-7% drop in the price, since the drug is fairly old.

Still mulling my upcoming communication acquisition. SKM, VZ, CCI, AMT and SBAC are in the running.

Oh yeah, incase you were wondering. My three high dividend holdings are FRO, CZN and DB. DB used to pay a higher % dividend, but the price went up 39% since I first bought it last year. YAY! me. CZN pays out $1/share on what is now a $14.xx stock and FRO's dividend changes with their earnings every quarter. They target paying a minimum of 6.75% a year, last year they paid 22%.


Peace Out for today.

Time to guess which retailer will beat the street for Christmas. Since more and more people are shopping online these days and/or giving gift cards.

My picks are
AMZN, DELL and BBY.

AMZN was just cut by a major analyst today and is looking pretty good.
DELL was the #2 online retailer in $ right behind AMZN.
BBY is now under $50/share and it was very busy, Black Friday, Christmas Eve and two days after Christmas.

There were two reasons I used to avoid BBY at holiday time, parking and cashier lines. Their new line system has eliminated the cashier line problem. Unfortunately, eliminating the cashier problem only adds to the parking problem. Their customer service was also very helpful. They may not have the best prices in the world, but people are willing to not shop for the best price if you make the shopping experience pleasant. Best Buy has been accomplishing this recently.

Tip #127 -

When tracking and buying stock always remember to be careful with your letters. For more then a year now I have been tracking a few cell tower stocks(AMT, CCL and GSL), AMT I owned for a while. Today I'm going back through the watch list and realize that CCL is actually Carnival Cruise Lines. CCI is the stock I had been wanting to track. Whoops.

GSL is in the process of being sold to CCI for $55.95 or 1.61 shares of CCI. So they should trade together until the sale goes through. A cash option is available for GSL, if you know how to do this, which I don't then there's a couple of $s a share to be made right now.

Continuing on my communication stock theme

Main players in the cell tower stock industry are:
AMT, GSL/CCI and SBAC - This is not just alphabetical, but also their size by # of towers operated.

Foreign Communication stocks on the rise - SKM and VIP
SKM is South Korean, solid unless NK goes nuke happy again.
VIP is Russian, personally I'm not buying any Russian stock, but this one is on fire.

CCI will stall for the 1st quarter until the acquisition is complete. AMT and SBAC could be good acquisitions. Analysts are down on them and I'm not sure why, still investigating.

Here's my picks from just the DJIA for 2007.

***** - VZ, PFE

**** - T, C, HD, AIG, UTX, HPQ

AIG, HPQ and C would be leading the way except their prices have all been driven too high since the early November run.

Looking into 2007, the market went nuts last year. Big company growth is predicted to slow and companies have an influx of cash right now. Look for a frenzy of mergers and acquisitions to continue throughout this year. M&A will slow down in the 1st quarter but pick back up through the 2nd and 3rd quarters.

Rough numbers, DJIA +16%, S&P +12% and Nasdaq +8%
My retirement, that I control, +25% I had a good year. My goal is to double the 3-market average each year. Later I will give a rundown of what I bought/sold throughout last year and how I did. No short sells, no margin trading.

As for this year....

My preditions are for growth stocks to tumble. Some housing stocks will rebound, most likely building materials, not home builders. Communications will flourish as will lower growth, more stable revenue generators.

More later including my '07 picks.

Post here a lot more often.

First, since I never really mentioned this due to lack of response (25%). I never really mentioned the survey I took last January. In that survey, strongest backed companies were Apple and Starbucks.

Based off of your responses, my recommendations included Toyota, Whole Foods, Verizon and get out of anything to do with housing.
Whole Foods was a good play if you knew when to get out, which is pretty easy to determine with them. Toyota is a giant. Verizon is solid.

Made money twice on starbucks this year. Apple was dangerous. Huge christmas for the ipod last year drove it through the roof, then they came back to reality.


Basically if you couldn't beat the market by just playing the big baord this year, let someone else take care of your money. That being said, everyone makes bad trades. For instance, my shitbum picks of the year.... AMGN and the 800-lb gorilla known as CQB.