Saturday, July 31, 2010

Stocks Are Cheap!

This is a post on another blog that I follow.  This echoes what I have been saying for a while now.
http://gregmankiw.blogspot.com/2010/07/stocks-look-cheap.html

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Friday, July 30, 2010

What a Crazy Trading Day!

After opening the day down after a "weak" GDP report, the market clawed it's way back into positive territory for the day.  The Wilshire 5000 closed at 11,492.90, down .04% for the year, and .54% below the 200-day moving average.  My portfolio is now 4.62% in the black for the year, and beating the market by 4.66%.  I will publish an expanded post later this weekend.

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Wednesday, July 28, 2010

Market Closes Below 200-Day Moving Average

The Wilshire 5000 closed today at 11,529.18, .21% below the 200-day moving average of 11,553.34.  The market crossed above the 200-day moving average two days ago, and stayed there before closing below today.  The 200-day moving average is a significant technical mark, while the market is now below that technical level, the 200-day moving average is still in an uptrend, which is bullish.  Every market needs to take a day here and there to rest and consolidate, and today was one of those days.  While the market was down today, the overall fundamentals of the market are bullish.

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Monday, July 26, 2010

Names To Buy - 7/26/10

I wanted to post a quick message with some names I am rating as a buy right now:
1) Johnson & Johnson (JNJ) - $57.74 per share currently.  JNJ recently posted earnings of $1.21/share on the 21st of July, beating estimates.  JNJ is currently yielding 3.74% (the 10-year US Treasury is currently 3.03%), is trading at 2.54x price to sales and an 11.91 PE ratio.

2) Kimberly Clark (KMB) - $64.13 per share.  KMB just reported earnings of $1.20, beating by $.07.  KMB currently yields 4.12%, trades at 1.33x price to sales, 9.49x price to cash, and carries a 13.59 PE ratio.

Finally...
3) Marathon Oil (MRO) - $33.37 per share.  Marathon will report earnings on August 3rd.  MRO yields 3.00%, trades at .38x price to sales, 1.05x price to book, 5.26x price to cash flow, and carries a PE of 16.98. 

I think all three of these names are excessively cheap.  As I have detailed in other posts, I think the market is primed for a sustained up leg.  All of these names are yielding near or higher than the 10-year US Treasury, and have exception valuations, especially Marathon.

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Sunday, July 25, 2010

Portfolio Update - 7/25/10

Before reading, please see the disclaimer in the 'About Me' section.

It has been two weeks since my last post, and we are smack dab in the middle of earnings season.  So far, earnings have been strong, and I expect we will see much of the same this week as we have many large companies reporting this week.

The Wilshire 5000 closed at 11,507.70, up from 11,225.80, or 3.80%, since my post on 7/12/10.  The Wilshire 5000 is now .33% below it's 200-Day Moving Average.  Pretty soon I think we will see the index cross above it's 200-day MA, putting in support, and moving higher through the end of the year.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 35.6% BULLS, and 35.6% BEARS, for a spread of 0.0%. This is in comparison to a reading of 37.0% BULLS, and 34.8% BEARS, for a spread of 2.2% on July 12th. As I said in my last update, ideally we would see the BEAR percentage cross the BULL percentage, which is exactly what we saw in the reading on 7/13/10, one day after I wrote that.  This is a sign of capitulation in the market, which has been confirmed by some other data that I look at on a regular basis.  As you will notice, we have had a fairly steady rally after that reading.  On 7/13, the Wilshire 5000 closed at 11,411.90, almost 1% lower than where we are now.  The prior week on 7/6 the market closed at 10,683.50 with a BULL reading of 37.0%, and a BEAR reading of 34.8%.

The Volatility Index closed Friday at 23.47, down from 24.98 back on July 12th.

Now for the portfolio...(updated for dividends)
1) Verizon at $28.02, down 8.30% for the year, inclusive of dividends.  Verizon saw a nice pop this week on the back of strong earnings.  Many analysts have been saying on TV this week "would you rather own a Treasury sub-3.%, or Verizon yielding about 7%?  I'll take Verizon."  Welcome to the bandwagon folks. FTR, the recent spinoff, recently closed at $7.43/share, worth about $52.01 to this portfolio currently.

2) AT&T closed at $25.54, down 2.65% for the year, inclusive of dividends.

3) GE closed at $15.71, up by 4.41% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $36.42, down by 26.98% since my buy. 

5) FXP, the doubleshort China ETF, closed at $35.55, down by 18.23% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $17.29, up by 28.42% since my buy, including the reinvestment of dividends. 

7) NLY closed at $17.88, up by 3.80% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $259.94 up by 34.16% since my buy. 

9) January '12 Citigroup Calls closed at $.23, down by 47.73% since my buy.  Still long-term bullish on Citi.

10)  GS closed at $147.38, up by 8.29% since my buy thanks to an SEC settlement, and a strong quarterly report.

Overall, the portfolio is up by 4.31% (-.33% for the DOW Dogs), versus .09% for the Wilshire 5000. The current basket of ten stocks that I am currently invested in, including dividends, is down 1.79% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 4.22% outperform.






In a closing note, I would like to update how my trades in SPY and GOOG calls went.  As you know, I had a nice gain in both going into expiration.  Unfortunately, Google unexpectedly missed earnings, and that call spread expired worthless.  Live and learn.  I also ended up having to cover my SPY calls at a $.11 loss, after a couple tough trading days leading into expiration.  Next time, I will be sure to take profits. 

March options have recently become available for trading.  As such, I have recently purchased a block of C $7 calls for $.05.  I am long-term very bullish on Citi, and I am expecting these calls to net me a nice gain in the next 8 months or so.

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Tuesday, July 13, 2010

Intel, YUM! Beat on Top and Bottom Lines

I love earnings season.  For those of you paying attention, YUM! reported first and beat on both the top and bottom lines.  However, they took a bit of a hit, partly, because they stated the European market was soft, and will remain soft.  Get right out of town.

Intel, on the other hand, killed their quarter.  Their CEO said that was the best quarter they have had in their 40 years of existence, and they also raised guidance going forward.

Fundamentally, I still believe the market is undervalued, and I don't think the three DOW components that have reported will be the only three with this same theme.  I am on the side of the fence that believes the lows for the year are in, and there is money to be made.

If you have been following over the last few days, you would know that I have been playing the SPY $110 calls, as well as the Google $480/$510 call spread.  As of today's close, the SPY call was at $.75 (150% gain), and the Google call spread was at $13.10 (71.24% gain), not too shabby.  As of the close of after hours action in the SPY (following earnings after the bell), the SPY was $.66 above today's close.  This is an even stronger after hours move than last nights, and when I woke up this morning the SPY was trading +$1.00 in pre-market action.  I expect more of the same tomorrow out of the market, and a big gain in my SPY calls.  I am also expecting the Google call spread to move closer to capping itself out.

Tomorrow afternoon I will be raising cash to buy Citi January '11 $7.50 calls at $.04.  JPM will be the first financial to report before the bell Thursday, and we will also see BAC later on.  I expect all of the major financials to beat expectations and take the sector higher.  As such, I want to get into C ahead of the number Thursday pre-market.  Furthermore, I expect to see C beat the $.05 expectations in Friday's pre-market announcement.  C earned $.15 in Q1 2010, and I am looking for a number that is near or slightly higher that performance.  On a valuation side, I believe C is a $5 stock as of Friday's earnings.  Going forward, I see the passage of FinReg to be worth $.25-$.50 to the share price.  I also see the government's complete sale of their shares to be worth north of $1 per share in the stock.  All told, I think $.04 for these options is a huge upside bet.

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Monday, July 12, 2010

"All In." - 7/12/10

Both Alcoa and CSX posted Q2 earnings after the bell today, and both of these companies beat estimates on the bottom line AND the top line.  Furthermore, Alcoa boosted guidance on increased demand for aluminum going forward.  Both companies gave a positive outlook for their customers going forward as well.


On a day where the market was up modestly awaiting these announcements, I am left feeling even more bullish than yesterday.  I am expecting an up day tomorrow, followed by earnings beats for both YUM! and Intel.  We'll see.

Yesterday, I told you about a few trades I had made in my personal portfolio, and I think they are worth mentioning what I did.  Between 7/7 and 7/9 I averaged into upside SPY calls expiring this week at $110 (roughly) 1,100 on the S&P.  My average price is $.30, and currently the calls closed today at $.40.  Not a bad little gain.  As I expect the market to make a fairly decent move upward this week, I am going to hold onto my position and see what comes of it.  Currently, the SPY is trading up another $.38 in the after hours.

As I detailed yesterday, I was looking at buying an out of the money call spread on Google today at $470 and $500.  Google made a fairly decent move to the upside this morning, and the $470 calls, I feel, got a bit beyond my price range.  Instead, I purchased a $480-$510 calls spread in Google for this week for $7.65.  I expect Google to trend upwards with the market leading into earnings after the bell on Thursday.  As I detailed yesterday, I am expecting an estimates beating on Thursday, and I think this trade has the potential to be stopped out at $510 pending a solid number from Google.  Time will tell.

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Sunday, July 11, 2010

What A Rally! Earnings Season Here We Come! 7/12/10

Before reading, please see the disclaimer in the 'About Me' section.

Again, it has been almost a month since my last post.  I need to do a better job of keeping up with this blog.  Here is my current analysis of the market, as well as an update of my portfolio...

The Wilshire 5000 closed at 11,225.80, down from 11,668.80, or 3.80%, since my post on 6/20/10.  The Wilshire 5000 is now 2.57% below it's 200-Day Moving Average.  The Wilshire 500 closed as much as 7.53% below it's 200-Day Moving Average on 7/2/10.  Since then, we have gained almost 600 points on the Wilshire 500 since then.  Furthermore, the Wilshire 5000's 200-Day moving average has now entered into an uptrend.  This is bullish for the market if it holds, which I think it will.  Earnings start in earnest this week, and I am on the side that thinks we will see them come in better than expected, for the most part.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 37.0% BULLS, and 34.8% BEARS, for a spread of 2.2%. This is in comparison to a reading of 41.1% BULLS, and 33.8% BEARS, for a spread of 7.3% on June 29th. In an ideal world, we would see the BEAR and BULL percentages cross, and/or the BEAR reading come in at or above 35.00%.  34.80% for me is close enough for government work, especially with the earnings forthcoming this week.  I think the market has become, or did become, overly bearish in the past two months. 

The Volatility Index closed Friday at 24.98, up from 23.79 back on June 20th.

Now for the portfolio...(updated for dividends)
1) Verizon at $26.65, down 12.78% for the year, inclusive of dividends.  However, on July 1st we had a spinoff of FTR.  Verizon shareholders got 1 share of FTR for every 4.2 Verizon shares held.  Therefore, I have received (7) shares of FTR.  Inclusive of the spinoff, my combined Verizon and FTR shares are down 7.41%, inclusive of dividends since my Verizon purchase in the beginning of the year.

2) AT&T closed at $24.83, down 5.35% for the year, inclusive of dividends.

3) GE closed at $14.95, down by .61% for the year, inclusive of dividends. 

4) TBT, the doubleshort U.S. Treasury ETF closed at $36.99, down by 25.84% since my buy. 

5) FXP, the doubleshort China ETF, closed at $37.36, down by 14.07% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $16.98, up by 25.20% since my buy, including the reinvestment of a dividends. 

7) NLY closed at $18.15, up by 5.37% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $259.62 up by 34.00% since my buy. 

9) January '12 Citigroup Calls closed at $.25, down by 43.18% since my buy.  Still long-term bullish on Citi.

10)  GS closed at $138.06, up by 1.44% since my buy.

Overall, the portfolio is up by 3.22% (-4.42% for the DOW Dogs), versus -2.36% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is down 2.88% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 5.58% outperform.

As I have previously stated, I am near-term bullish on the stock market.  Given the Investor Intelligence sentiment which indicates oversold, the beginning of an uptrend in the 200-Day Moving Average,  and corporate earnings (which I believe will be strong), I believe we are about to see a new uptrend in the market.  Looking further out, I believe the elections in November will yield a more conservative government than most are counting on.  The last time we had a Democratic president, and a Republican Congress was in Clinton's term, and the market performed quite well.  Looking at it in the micro sense, I believe these events will be bullish for the market, and more importantly, my portfolio: 1) the government will be completely out of Citi by fall, good for a few points, in my opinion, 2) Goldman will settle with the government, 3) FinReg will finally be passed, removing a lot of uncertainty from financial stocks, 5) the government will finish up stimulus spending, and 6) financials will see strong earnings as interest rates continue to be held near 0.

In my personal portfolio this past week, I bought Jul '10 SPY $110 calls for an average of $.3088.  I also have an order in for a GOOG $670/$700 call spread for $8.25.  I am encouraged by a series of late day rallies in the S&P from this past week, as well as the prospect of strong earnings this week.  Specifically, I think Google is a good value at this level, and we will see an earnings surprise on the back of strong Android results.

Going forward, I am going to try to do a better job of explaining the trades I am making in my personal portfolio, as well as their results.  Happy trading!

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About Me

DISCLAIMER: I started this blog as a way for people to exchange ideas relating to investing and finance, primarily. I am in no way a professional in these areas, merely a student of the financial world. The thoughts expressed on these pages have no connection to my employer in any way. Anybody reading this blog should do so with caution, exercise their own judgment, and do their own due diligence on any financial undertaking. About Me: I reside in New Jersey with my wife and my two dogs. I have a B.S. degree in Accounting with a minor in Finance, as well as an MBA in Accounting. Currently, I am employed as a forensic accountant, and am pursuing my CPA designation. I love the stock market, and picking stocks. I spend a great deal of time analyzing market data, as well as individual names.

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