Over the last two days, I added four new positions:
INTC 4.2% div
VALE 5.8% div
NUAN
PMT div 8+%
The last two are definitely in the speculative camp. I am not sure NUAN deserves to be in that camp, though as it trades at a low PE. It was smashed recently but I think unfairly. Same can be said for KO. This is one of my favorites. The dividend is over 3% and growing.
Having said all this, I am not necessarily adding much to my overall stock risk as my overall exposure is around 24%.
Stocks have had a great run. We are in a delicate position. Overall, I think we will go higher, but we can have pull backs. We are in an environment where having too high a cash position is very painful and most participants are looking for opportunities to buy. If that is correct, pull backs will be brief and shallow at the index level. Individual stocks will give opportunities to buy (like KO or NUAN, right now)
Tuesday, February 12, 2013
Friday, February 8, 2013
Thursday, February 7, 2013
Sometimes, no posts for a while and then, 2 in one day!
I came across this one,
http://seekingalpha.com/article/1160071-profiting-from-the-financial-crisis-is-it-all-about-the-money
Very intriguing. I agree that some may find the mortgage mess a moral quandary, but I feel that the working out of the problems does not have to be. If we look to Japan, a key, if not THE, reason it has been in such doldrums for such a long time is that the government never let the banks work out their bad loan problems by selling them. What our FED has done well, in my opinion, is pump in liquidity to let the banks work out their mess over time. They are only recently starting to sell their bad loans and the system is not smooth. I am on another side of this as well because I am buying properties from banks (talk about pulling teeth!). But the good news, is that it WILL be worked out over time. When a bank sells a loan, the new buyer is in a better position to work through it. Options include, lowering the principal, lowering payments and in general working with the homeowners. The companies that buy these loans want the homeowners to succeed as that will provide a better long term payout for the loan holders.
So, I find this PMT interesting and probably a good speculative bet ont he economy. If you think we are working our way to the upside, then this will provide a leveraged way to profit from the improvement. It is trading over book value, so be careful, but it is worth studying it and when you see a better price, jump in with a small spec bet.
Good luck
I came across this one,
http://seekingalpha.com/article/1160071-profiting-from-the-financial-crisis-is-it-all-about-the-money
Very intriguing. I agree that some may find the mortgage mess a moral quandary, but I feel that the working out of the problems does not have to be. If we look to Japan, a key, if not THE, reason it has been in such doldrums for such a long time is that the government never let the banks work out their bad loan problems by selling them. What our FED has done well, in my opinion, is pump in liquidity to let the banks work out their mess over time. They are only recently starting to sell their bad loans and the system is not smooth. I am on another side of this as well because I am buying properties from banks (talk about pulling teeth!). But the good news, is that it WILL be worked out over time. When a bank sells a loan, the new buyer is in a better position to work through it. Options include, lowering the principal, lowering payments and in general working with the homeowners. The companies that buy these loans want the homeowners to succeed as that will provide a better long term payout for the loan holders.
So, I find this PMT interesting and probably a good speculative bet ont he economy. If you think we are working our way to the upside, then this will provide a leveraged way to profit from the improvement. It is trading over book value, so be careful, but it is worth studying it and when you see a better price, jump in with a small spec bet.
Good luck
Good post on TIPS:
http://seekingalpha.com/article/1162381-the-message-of-tips-slower-growth-more-inflation?source=intbrokers_regular
I think he has this right, especially concluding that equity and real estate provide better inflation hedges right now. TIPs are a bit overpriced, but keep an eye on them because they offer a great unfiltered view of the economy. FOLLOW the money, not commentator's words.
I bought a bit more AAPL today. A bit more discussion about how AAPL is managing cash and I think this is a good thing. Perhaps they would consider an acquisition, but that has not been their way up until now.
Buy/watch COP and MRK. I think there is some value there as well as a good dividend yield.
Also on the energy front, KMI is a core holding. Very well managed, high dividend yield which will grow strongly over the next few years and a strategy to grow through acquisition. I like them a lot. I had sold a little bit around here (37.74) a short while ago ( to even up my stock holdings) and should have bought it back when it dropped below 37. I missed that opportunity. :(
S deal will probably close mid year. I still like this deal as I do not expect any regulatory delay.
On the buy side, some stocks I am considering are VALE, SDRL and GOOG
I looked at PBI (Pitney Bowes). This one shows up on every dividend screen. It pays a huge dividend but after review, it does not offer good value for me. It is a dying business (sales have been steadily down for the last few years) and even with the heavy dividend, the loss on the business value (stock price) has overcome the yield. It's current payout is over 80% of it's earnings which is high and probably unsustainable. I would pass on that name.
http://seekingalpha.com/article/1162381-the-message-of-tips-slower-growth-more-inflation?source=intbrokers_regular
I think he has this right, especially concluding that equity and real estate provide better inflation hedges right now. TIPs are a bit overpriced, but keep an eye on them because they offer a great unfiltered view of the economy. FOLLOW the money, not commentator's words.
I bought a bit more AAPL today. A bit more discussion about how AAPL is managing cash and I think this is a good thing. Perhaps they would consider an acquisition, but that has not been their way up until now.
Buy/watch COP and MRK. I think there is some value there as well as a good dividend yield.
Also on the energy front, KMI is a core holding. Very well managed, high dividend yield which will grow strongly over the next few years and a strategy to grow through acquisition. I like them a lot. I had sold a little bit around here (37.74) a short while ago ( to even up my stock holdings) and should have bought it back when it dropped below 37. I missed that opportunity. :(
S deal will probably close mid year. I still like this deal as I do not expect any regulatory delay.
On the buy side, some stocks I am considering are VALE, SDRL and GOOG
I looked at PBI (Pitney Bowes). This one shows up on every dividend screen. It pays a huge dividend but after review, it does not offer good value for me. It is a dying business (sales have been steadily down for the last few years) and even with the heavy dividend, the loss on the business value (stock price) has overcome the yield. It's current payout is over 80% of it's earnings which is high and probably unsustainable. I would pass on that name.
Tuesday, February 5, 2013
Interesting article link:
http://seekingalpha.com/article/1156721-an-investing-strategy-that-is-half-warren-buffett-and-half-nassim-taleb?source=intbrokers_regular
He gets the tax treatment wrong, I believe, (options have a fixed tax treatment independent of holding period), but he illustrates combining a low risk option strategy to get leverage with a bond portfolio that will protect on big down moves.
The only downside is it can be time consuming to do all the research. This can be done at the index level as well with less time investment, but less targeting of stock picks, so you lose the "buffet-like" aspect.
I also like Bill Gross' commentary:
http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx
It may seem alarmist, but try to read through it to the key points. Be ready to accept lower returns and be mindful of inflation. Focusing on companies that produce and are well managed. Leverage can lead to spectacular returns - BOTH up and DOWN, so be wary of it both on a personal and at the company level.
It is not easy for me to read through a commentary like his without the obvious question - where is the place to hide. It is no surprise that the "prepper movement" is gaining followers. Many individuals are very concerned with the potential for a breakdown of order that may accompany financial chaos. I would counter that we have been through financial armageddon's before over the course of global and at a shorter scale, US history. I feel strongly that order will hold and that it makes no sense to invest for the end of the world. Going to all gold - aside from being a logistical nightmare (if you truly believed in chaos, you would have to keep the gold in your easy reach and it is HEAVY!), why would it really have any intrinsic value. I would argue that shelter water and farmland are more valuable.
Right now residential real estate is a good buy. Rental yields are better than they have been in a very long time and it is a natural hedge against inflation. Buying stocks that have strong, steady cash flows and pay their shareholders are good buys.
I agree that there are some countries that could offer some good diversification and protection. Canada and Australia come to mind.
I like TIPS despite being subject to the governments calculation of inflation, they offer some protection. I am waiting for a bit better buying oppportunity. The "breakeven yield" for the 30 year is currently about 2.7% (inflation would have to be higher than this to be better off in the TIPS). Ideally I would like to see 2.25% or so, but I may have to settle for something below 2.5%.
I would differ from Gross in the shortening duration argument. I just don't see any reason to hold the shorter maturities. I believe the "Great Rotation" that is being talked about in the media will be out of cash which is very painful to hold.
http://seekingalpha.com/article/1156721-an-investing-strategy-that-is-half-warren-buffett-and-half-nassim-taleb?source=intbrokers_regular
He gets the tax treatment wrong, I believe, (options have a fixed tax treatment independent of holding period), but he illustrates combining a low risk option strategy to get leverage with a bond portfolio that will protect on big down moves.
The only downside is it can be time consuming to do all the research. This can be done at the index level as well with less time investment, but less targeting of stock picks, so you lose the "buffet-like" aspect.
I also like Bill Gross' commentary:
http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx
It may seem alarmist, but try to read through it to the key points. Be ready to accept lower returns and be mindful of inflation. Focusing on companies that produce and are well managed. Leverage can lead to spectacular returns - BOTH up and DOWN, so be wary of it both on a personal and at the company level.
It is not easy for me to read through a commentary like his without the obvious question - where is the place to hide. It is no surprise that the "prepper movement" is gaining followers. Many individuals are very concerned with the potential for a breakdown of order that may accompany financial chaos. I would counter that we have been through financial armageddon's before over the course of global and at a shorter scale, US history. I feel strongly that order will hold and that it makes no sense to invest for the end of the world. Going to all gold - aside from being a logistical nightmare (if you truly believed in chaos, you would have to keep the gold in your easy reach and it is HEAVY!), why would it really have any intrinsic value. I would argue that shelter water and farmland are more valuable.
Right now residential real estate is a good buy. Rental yields are better than they have been in a very long time and it is a natural hedge against inflation. Buying stocks that have strong, steady cash flows and pay their shareholders are good buys.
I agree that there are some countries that could offer some good diversification and protection. Canada and Australia come to mind.
I like TIPS despite being subject to the governments calculation of inflation, they offer some protection. I am waiting for a bit better buying oppportunity. The "breakeven yield" for the 30 year is currently about 2.7% (inflation would have to be higher than this to be better off in the TIPS). Ideally I would like to see 2.25% or so, but I may have to settle for something below 2.5%.
I would differ from Gross in the shortening duration argument. I just don't see any reason to hold the shorter maturities. I believe the "Great Rotation" that is being talked about in the media will be out of cash which is very painful to hold.
Friday, February 1, 2013
An interesting month, no doubt. I updated my performance page. All in all, I can't complain having notched a 1.32% return. Of course this trails a stock only portfolio and even my 45% stocks/45% bonds/ 10% cash "benchmark portfolio". I need to study the benchmark issue again and see if another with a lower equity amount is more appropriate. But, my previous work supported that one and I am probably going to stick with it.
The real question is why I am keeping my equity exposure as low as it is given my view that stocks are cheap. I think I'll have to consult a psychologist for that one.
Currently I am at 25% exposure ( a far cry from the 45% benchmark). Given the big January run-up, I feel that it is prudent to be a bit conservative. I have done well in spite of my low allocation so I shouldn't beat myself up too much! In addition, the numbers were good in spite of a 0.50% hit from AAPL alone!
I have taken profit on CHK. Great run from that stock, but I think it is a bit expensive given all the restructuring it is undergoing. In addition, I have cut back on dividend payers that are not paying much more than the SPY - XOM, for example. Also, I have rebalanced the stocks I hold to roughly equal dollar amounts (except for AAPL and S).
Options continue to be cheap and I replaced the equity exposure that I sold in the stocks by buying March call options. I REALLY LOVE THIS TRADE. I just purchased March 155 Calls at just above 10.5% volatility which is very cheap. If you are underweight and looking for a way to get in to what could be a big rally, but with some protection, then this is the opportunity.
If you are adventurous, you can buy a bit more than you need and hedge the extra by selling SPY agains it. I would not recommend this unless you understand the basis of option pricing. But, as part of the rationale of this blog, I am revealing everything I am doing, so there you have it.
I have been WRONG about bonds on this recent move. Given that we continue to get poor economic growth numbers, I believe bonds are still good. Right now, they are going down because you have money coming out of them at the margin to go into stocks. I believe the right trade is to pull money out of CASH not bonds. But, that is not the way things are trading right now. I am sticking with it, though. And may buy some more. Currently I have about 9% in long term government bonds through TLT.
The real question is why I am keeping my equity exposure as low as it is given my view that stocks are cheap. I think I'll have to consult a psychologist for that one.
Currently I am at 25% exposure ( a far cry from the 45% benchmark). Given the big January run-up, I feel that it is prudent to be a bit conservative. I have done well in spite of my low allocation so I shouldn't beat myself up too much! In addition, the numbers were good in spite of a 0.50% hit from AAPL alone!
I have taken profit on CHK. Great run from that stock, but I think it is a bit expensive given all the restructuring it is undergoing. In addition, I have cut back on dividend payers that are not paying much more than the SPY - XOM, for example. Also, I have rebalanced the stocks I hold to roughly equal dollar amounts (except for AAPL and S).
Options continue to be cheap and I replaced the equity exposure that I sold in the stocks by buying March call options. I REALLY LOVE THIS TRADE. I just purchased March 155 Calls at just above 10.5% volatility which is very cheap. If you are underweight and looking for a way to get in to what could be a big rally, but with some protection, then this is the opportunity.
If you are adventurous, you can buy a bit more than you need and hedge the extra by selling SPY agains it. I would not recommend this unless you understand the basis of option pricing. But, as part of the rationale of this blog, I am revealing everything I am doing, so there you have it.
I have been WRONG about bonds on this recent move. Given that we continue to get poor economic growth numbers, I believe bonds are still good. Right now, they are going down because you have money coming out of them at the margin to go into stocks. I believe the right trade is to pull money out of CASH not bonds. But, that is not the way things are trading right now. I am sticking with it, though. And may buy some more. Currently I have about 9% in long term government bonds through TLT.
Thursday, January 24, 2013
Hello sportsfans!
An awesome day for the underdogs and not so for the favorites. AAPL and Duke both suffered routs. Duke will get to take it out on it's next opponent. AAPL perhaps will take some time.
For me, this is the market at it's most puzzling. This company is the envy of any operating company in the world. I think the only thing that supercedes it is the hedge fund business. Margins are tremendous and, yes, they probably only can come down, but, truly that would only be coming down to merely great instead of insane for a company of this size. They have $137 billion dollars in cash which means you are paying about $330 billion for a company that will generate over $40 billion in EARNINGS this next year.
I actually read a comment from an analyst stating that "AAPL is a broken company". Wow. If they are broken, how is everyone else doing? I guess he is short everything (probably not putting his money where his mouth is).
About the only thing negative that I can gather is that revenues are not going to be growing at 18% a year ad infinitum. Ok, but not only would that be truly shocking if they could grow at that rate given their size, but the key point is that the company is not priced that way. A company that is expected to grow earnings at that rate would trade at, I don't know, say 158 PE like AMZN? I am not expecting AAPL to trade at a lofty PE but I don't think it should be a stretch for it to trade around the market multiple of 12-15.
We may be witnessing a different phenomena. AAPL is clearly owned by many and is perhaps in the unique position that there is no one "left to buy", or rather needs an impetus to get fresh buying interest. I have been thinking that an increase in the dividend to the 3-4% level would perhaps get the market to price the stock with a more reasonable multiple. The company clearly generates a lot of cash and does not necessarily look very acquisition hungry. Either way, the stock is cheap.
An awesome day for the underdogs and not so for the favorites. AAPL and Duke both suffered routs. Duke will get to take it out on it's next opponent. AAPL perhaps will take some time.
For me, this is the market at it's most puzzling. This company is the envy of any operating company in the world. I think the only thing that supercedes it is the hedge fund business. Margins are tremendous and, yes, they probably only can come down, but, truly that would only be coming down to merely great instead of insane for a company of this size. They have $137 billion dollars in cash which means you are paying about $330 billion for a company that will generate over $40 billion in EARNINGS this next year.
I actually read a comment from an analyst stating that "AAPL is a broken company". Wow. If they are broken, how is everyone else doing? I guess he is short everything (probably not putting his money where his mouth is).
About the only thing negative that I can gather is that revenues are not going to be growing at 18% a year ad infinitum. Ok, but not only would that be truly shocking if they could grow at that rate given their size, but the key point is that the company is not priced that way. A company that is expected to grow earnings at that rate would trade at, I don't know, say 158 PE like AMZN? I am not expecting AAPL to trade at a lofty PE but I don't think it should be a stretch for it to trade around the market multiple of 12-15.
We may be witnessing a different phenomena. AAPL is clearly owned by many and is perhaps in the unique position that there is no one "left to buy", or rather needs an impetus to get fresh buying interest. I have been thinking that an increase in the dividend to the 3-4% level would perhaps get the market to price the stock with a more reasonable multiple. The company clearly generates a lot of cash and does not necessarily look very acquisition hungry. Either way, the stock is cheap.
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