The market was all over the place this week. We got a few more details on the banks stress test and a little more info on what the FED was going to do with the banks; which looks like they are not going to nationalize but just dilute the common share holders. With time still really uncertain, we did finally get some good news from GE. GE cut their dividend to ten cents a quarter to help ensure their AAA credit rating and save them 9 billion dollars a year. This will help them add to their 48 billion in cash reserves so they will stay well capitalized. The company also reiterated that they are expecting to make 5 billion in profit this year. I believe that this is a good time to start looking at GE. With its dividend cut to $0.10 it still pays 4.44% yield at a $9.00 share price. I believe that we will see GE stock price fall for a little while longer. But after it breaks down to $7.50 range I would be looking at it. Now this trade is not for the short term. I am recommending GE around $7.50 as a long term play; I am talking like 4-8 years. By that time things in the market will have gotten better and with the size and money that GE has it should take market share though all of this turmoil. I would not be surprised to see GE in the realm of $15.00 to $20.00 in 4-6 years. At those prices that is a 100-150% increase. I would not go out and spend all my money on GE when it hits $7.50 that is just the time I would start buying. When buying a stock like this you don’t want to buy all at you want to dollar cost average. It is almost impossible to pick a bottom of a stock, but if you’re dollar cost averaging you will be in around the base once you average all of your purchases.
The other stock I believe that will be a good stock over the next 2-5 years is MO (Altria). This tobacco company has virtually no debt and is currently handing out a dividend that is yielding 8.5%. With no problems with bad loans or capitalization, there is no current reason why this stock should not continue producing, and maybe even raise their dividend over the next 5 years. Also this company is projecting growth of 3-6 % this year. In a horrible market like this, if any company is projecting a growth, it is something to take notice of. I am looking for this stock to reach into the $25.00 to $30.00 dollar range over the next 5 years, and the whole time returning a great dividend. This stock is a buy any time it is under $15.75. I currently own both GE and MO and plan on buying more shares in the near future. These companies have been through recessions before and came out strong and will again.
One final thing, now that gold has come down below $950.00 like I said it was going to, when it hits $925.00 I would start picking up small amounts because of the protection it offers. I believe that when we do start coming out of this recession all the money the FED has been handing out is going to cause hyperinflation. Once again gold will be a safe haven.
Friday, February 27, 2009
Monday, February 23, 2009
Feb 23, 2009
Well, today was a horrible day in the market. But there are trends that are building. I have noticed that gold goes to about 1040 an ounce then it falls back. If you are into risky plays I think this is something that I would short or buy a put on. Now a lot of people do not understand “shorting” a stock, and know even less about “puts”. Shorting a stock is selling a stock that you do not own with the promise to buy it back at a later date. So if stock ABC is selling for ten dollars and you think it is going lower than you “short” it, which means you put out a number of stocks that someone else can purchase in hopes that the stock goes down in price. If stock ABC goes to eight dollars and you are happy with the profit you have made and you want to get out of the trade you would need to purchase the same amount of shares that you shorted which is called covering your position. Once you have purchased the same amount you shorted you have none of the stock and whatever money you have left over from the purchase. That is how shorting works and how money is made doing it. Puts are a form of options and options are a lot more complicated. I will not explain puts in detail in this post because it will be a whole post all to itself in the future.
Another thought I had today is a lot of people can’t decide what kind of investor they are. When purchasing stocks it is imperative to know a timeframe on your trade. You need to know if you are buying a stock for a long term investment, or if it is for a quick profit. Most of my trades I give 18 months to work there course. When I make a recommendation on my blog I will give a timeframe for the trade and where I expect it to go. With that said, I always put in a 20% stop loss on all my stock trades.
I hope this information has helped you. The trade comment I made for gold is a brief one, but I would short gold at 1040 and would be out after a bear market rally which should bring gold down to 925-950.
Another thought I had today is a lot of people can’t decide what kind of investor they are. When purchasing stocks it is imperative to know a timeframe on your trade. You need to know if you are buying a stock for a long term investment, or if it is for a quick profit. Most of my trades I give 18 months to work there course. When I make a recommendation on my blog I will give a timeframe for the trade and where I expect it to go. With that said, I always put in a 20% stop loss on all my stock trades.
I hope this information has helped you. The trade comment I made for gold is a brief one, but I would short gold at 1040 and would be out after a bear market rally which should bring gold down to 925-950.
Sunday, February 22, 2009
Introduction
My intention with this blog is to help people understand the stock market and also open a debate about stocks and for everyone to learn from each other. I always tell people that if you can do basic math you can understand the stock market. So at any time if you have questions about a single stock or how something works please ask. I will do my best to answer your question or find a site that can answer it better.
My first entry for my blog about stock is going to basically be a little background on my trading. I have been trading for about 10 years now, my best year was in 2000 when I made about 23% and my worst year was 2008 when I was down 1%. Now with that said those numbers are based upon my account balance from the beginning of the year. A lot of mutual funds will post their returns based on how they did verses the S&P 500 Index. For example, if they were down 5% this year than they were proclaiming that they beat the market by 41%. Now for any good trader you always want to beat the S&P 500 Index, because if you can’t than why spend all the time and effort, when you could just invest in the S&P 500 index fund. Which has the ticker symbol (SPY).
My first thought for today is a lot of friends of mine have asked me if they should stop investing money right now due to the huge retreat in the markets and the uncertainty that is still ahead. My comment to them is that they should continue investing, but they should also look at their portfolio to make sure they are diversified and that the companies that they invest in are going to be around for years to come. As soon as I tell them that they fire back with the next question. How do I know the company I invest in will be around with all the companies going bankrupt lately? I tell them to look at the balance sheet of the company. If accounting is not your thing, this is one form you will need to learn how to read. It tells you how much the company is making and also how much debt the company has. Most companies I invest in have a good cash flow, with very little debt. A company that can show good cash flow and a reduction in debt, or no debt at all, will be around for the long term.
My first entry for my blog about stock is going to basically be a little background on my trading. I have been trading for about 10 years now, my best year was in 2000 when I made about 23% and my worst year was 2008 when I was down 1%. Now with that said those numbers are based upon my account balance from the beginning of the year. A lot of mutual funds will post their returns based on how they did verses the S&P 500 Index. For example, if they were down 5% this year than they were proclaiming that they beat the market by 41%. Now for any good trader you always want to beat the S&P 500 Index, because if you can’t than why spend all the time and effort, when you could just invest in the S&P 500 index fund. Which has the ticker symbol (SPY).
My first thought for today is a lot of friends of mine have asked me if they should stop investing money right now due to the huge retreat in the markets and the uncertainty that is still ahead. My comment to them is that they should continue investing, but they should also look at their portfolio to make sure they are diversified and that the companies that they invest in are going to be around for years to come. As soon as I tell them that they fire back with the next question. How do I know the company I invest in will be around with all the companies going bankrupt lately? I tell them to look at the balance sheet of the company. If accounting is not your thing, this is one form you will need to learn how to read. It tells you how much the company is making and also how much debt the company has. Most companies I invest in have a good cash flow, with very little debt. A company that can show good cash flow and a reduction in debt, or no debt at all, will be around for the long term.
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