Stocks Of The Month: GS, MF

Yet another month of Fed lunacy, market volatility, and portfolio churn. Yay!

Gone is PetroChina (PTR), which had fallen from its high of $267 in October to my sale price of $176. I was still able to realize a 101% gain (46% annualized), and I can't really say that a $314 billion dollar company has much tremendous upside potential to be missed.

I picked up two new stocks: Goldman Sachs (GS) and MF Global (MF). Goldman Sachs is a very easy stock to own - even though its down nearly 9% from where I bought it earlier this month, I'm not worried one bit; because not only is Goldman the best investment bank in the world, their so-called peers are grossly incompetent in comparison. Yet somehow GS trades at a discount of 9x forward earnings, and a PEG of 0.65. Pretty ridiculous, I say. Long-term, at worst, GS is a reasonable bet to outperform the S&P 500.

MF is more of a flier pick. It's a worldwide clearing house of (count the buzzwords) futures, options, derivatives, "foreign exchange products", currencies, energy, metals, and agriculture. It had its IPO over the summer but hasn't done much since, nor has much analyst coverage - and with a market cap under $4 billion, has plenty of room to run.

Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.

Intuitive Surgical (ISRG) 8.59%
Southern Copper (PCU) 7.77%
Fording Canadian Coal (FDG) 7.28%
Baidu (BIDU) 6.51%
Dominion Resources Black Warrior Trust (DOM) 5.74%
Goldman Sachs (GS) 5.63%
Annaly Capital Management (NLY) 5.62%
MF Global (MF) 5.37%
Tidewater (TDW) 5.16%
Capstone Turbine (CPST) 4.94%
MEMC Electronic Materials (WFR) 4.83%
Google (GOOG) 4.70%
Apache (APA) 4.31%
Frontline (FRO) 4.16%
Apple (AAPL) 3.83%
NVIDIA (NVDA) 3.69%
Geron (GERN) 3.55%
Ace Limited (ACE) 2.97%
Alliance Resource Partners (ARLP) 2.68%
Nokia (NOK) 2.67%

I'm Not A Trader, But This Market Is Making Me Act Like One

Market volatility has killed my investing discipline. Or at least it feels like it.

Over the past two choppy down market weeks, I've sold five stocks - ACH, RMA, UA, LULU, and TNH - all due to their falling a third from their highs. Three of those stocks were owned for less than 2 months. All five of them had been owned for less than 8 months.

The last thing I want to be is a hyperactive trader who gives up on long-term stories due to short-term fluctuations. If that happens, then the damage done by implementing the supposed "lessons learned" from The Stock We Don't Speak Of will become catastrophic.

The above stocks have been replaced by Dominion Resources Black Warrior Trust (DOM), a 12% dividend yielder, and let's face it, just a cool name; Tidewater (TDW), a very cheap oil rig services play; and MEMC Electronic Materials (WFR), my late entry into the white-hot solar energy sector.

Truthfully, I have very little confidence in these stocks, or any other stocks in my portfolio. I have sell orders just waiting to be triggered if my stocks fall further. But I'm staying in the market because I could be wrong. It's the prudent thing to do...at least that's what I keep telling myself.

Stock Of The Month: NVDA

Back in July 2006, when AMD merged with ATI to get into the graphics chip market, Nvidia (NVDA) rallied from (a split-adjusted) $12 to $15 on speculation that it too would be taken over, most likely by AMD's much larger competitor. I immediately thought, "I've missed the move".

A year and a half later, NVDA sits at $36, still an independent company. By thinking I had missed the move, I ended up missing the real move.

Better late than never, I picked up some shares this week at $35. I believe NVDA is a great way to play the booming PC market; everybody mentions Intel, Microsoft, HP, and Dell, but seems to forget Nvidia - even though they dominate the graphics chip market - and that for today's PC users, graphical power is more important than computational power. These users demand Nvidia's superior products. Longer-term, Nvidia's technology promises to be critical to the gaming console and home theater entertaiment segments (their chip is already in use in the PS3, which, while lacking the software, is undeniably the most advanced gaming system platform out today).

While it is risky to buy a stock that has run like NDVA has, it still has reasonable valuations, a great balance sheet, and is just a $20 billion dollar company...perhaps Intel will buy it yet.

Stocks Of The Month: LULU, GERN

Time for the monthly (or so) stock housecleaning...

Bought lululemon athletica (LULU) at $46, watched it fall to $41, then pop 36% since to its current price of $55. Which is a nice case study in that its better to be early than late. I find LULU compelling in the same way as Under Armour (UA), in that it has built-in marginalization in its perceived markets. For Under Armour, it was "it's just a specialty football equipment maker" when it's really a broad-market athletic brand like Nike. For lululemon, it is "it's just a specialty yoga clothing maker" - when I think it could be the dominant brand of women's casual clothing for the next decade.

Also bought Geron (GERN) at $8, and it has since fallen to $7.33. This is a flier stock pick on two sure-fire growth segments in the 21st century: 1) stem cell therapy, and 2) intellectual property litigation. I hope that Geron doesn't evolve into just a patent-holding company, and can monetize its R&D findings on its own - but I recognize that in a business area so immature, finding the future game-winner is highly unlikely. Still, investing with the company with the most patents in its industry seems like a decent risk-reward proposition.

On the sell side, Rite Aid (RAD) was let go because it fell to near $4 from its high of $6.74 on June 5th (see, I told you I was going to start following my own rules). I think it still may be a long-term turnaround story, but short-term, there are better places to invest.

Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.

Southern Copper (PCU) 10.16%
Aluminum Corp. of China (ACH) 8.02%
Fording Canadian Coal (FDG) 7.85%
Intuitive Surgical (ISRG) 7.59%
PetroChina (PTR) 6.56%
Lululemon (LULU) 6.22%
Baidu (BIDU) 5.57%
Annaly Capital Management (NLY) 5.18%
RMK Advantage Income Fund (RMA) 4.68%
Google (GOOG) 4.54%
Geron (GERN) 4.23%
Apache (APA) 3.94%
Frontline (FRO) 3.90%
Apple (AAPL) 3.60%
Terra Nitrogen (TNH) 3.48%
Capstone Turbine (CPST) 3.38%
Ace Limited (ACE) 2.90%
Alliance Resource Partners (ARLP) 2.78%
Nokia (NOK) 2.72%
Under Armour (UA) 2.66%

Dear Delphi: It's Sooooooooo Over

I sold my Delphi stock this past Thursday.

All of it.

To which the proper response should be, "What-what-what?!???!?!", since I've been writing compulsively about how great the stock is for the past 3 months.

What was the turning point, you ask? What was the straw that broke the camel's back?

It was after purchasing more stock just two days earlier, and noticing that over the past year, I had bought the stock at the following prices: $1.73, $2.10, $1.88, $1.05, $0.92, $0.68, and $0.44.

And then I had to ask myself: "what the #&*% am I doing??" Even though I already knew.

I was catching the falling knife. Hoping instead of investing. Bottom-feeding. Trying to be a hero. Fighting the market. Pretending I knew something that the market didn't. Pretending that the market was dead wrong.

And I arrogantly kept betting on a losing stock, only to watch it lose further.

DCA'ing did help me to lose "only" 51%. However, I did watch the stock plummet 90% from its high earlier this year.

Absolutely inexcusable. And it had to come to an end, while I still had some of my money left to save.

It was a painful experience, but that makes it that much easier to remember, so that it won't be repeated. Ever. Again.

Lessons:

• Don't buy stocks that trade on the pink sheets.
• Don't buy stocks of companies that are exiting bankruptcy, by issuing new common stock (most likely resulting in the screwing of owners of the old common; in this particular case, that would entail having the old shares convert into warrants and option-like stock rights).
• Don't let stocks fall by more than a third from their highs.
  

As for Delphi the company, I look forward to it's successful exit from bankruptcy, and may choose to own the new common when it is issued. I still believe it is a company with valuable assets, superior technology, and improving prospects, and will execute its turnaround plan with great success.

As for DPHIQ.PK the stock, you're dead to me.

RMA, AAPL, TNH, INFY, NYX, FTEK, and of course, DPHIQ.PK

I've shaken up my portfolio considerably in the past three weeks. I've sold Infosys (INFY) at a 18% gain; NYSE Euronext (NYX) at a 22% loss (and right before the massive Borse Dubai/Nasdaq/OMX/LSE deal...oops), and Fuel-Tech (FTEK) at a 73% gain. FTEK was the toughest of the sells since its in a great business (making coal cleaner through emission controls), but it had fallen 40% from its high and I couldn't let it slip further.

On the buy side, say hello to RMK Advantage Income Fund (RMA) and its fat 16% dividend; Apple (AAPL), which has fantastic prospects for its PC business and international growth; and Terra Nitrogen (TNH), which is in the very bullish agriculture sector and pays a nice, albeit lumpy, dividend to boot. Consider all three "Stocks Of The Month" for September.

And then, there is Delphi (DPHIQ.PK). I recently reached the conclusion that since I had no problem catching this falling-knife of a stock - repeatedly - that I might want to figure out the actual value of the pre-bankruptcy exit stock. That number, according to my calculations, is $0.69. Therefore I'm going to try to DCA my way below that. If only I could have followed my own "sell after the stock falls a third from its high" advice, I would have been out at $2.61.

Two dollars and sixty one cents.

And then I could have taken that money and bought back Delphi at its much lower current price.

Lesson learned: the "third" rule exists for a purpose, and it probably shouldn't ever be broken.

Sold St. Jude...Bought More Delphi

I heart Delphi...as evidenced by all the times I've written about it.

I sold St. Jude Medical (STJ) to fund yet another purchase of DPHIQ.PK just this week. Again, the reason for selling St. Jude was that it was the most dispensable of my holdings. And really, are medical devices going to be that hot in the future? Aren't solutions derived from stem cell research and nanotechnology going to be the answer for cardiovascular health problems? I dunno. I was able to sell at an 18% gain - which, as my dad would say, is better than a kick to the head.

Here are my updated current holdings and their respective percentage of my portfolio. Needless to say, I believe in all of these stocks - until I sell them. Enjoy.

Southern Copper (PCU) 9.59%
Delphi (DPHIQ.PK) 8.28%
Fording Canadian Coal (FDG) 7.63%
Intuitive Surgical (ISRG) 7.19%
Aluminum Corp. of China (ACH) 6.66%
Fuel Tech (FTEK) 5.87%
Annaly Capital Management (NLY) 5.67%
PetroChina (PTR) 4.92%
Frontline (FRO) 4.83%
Google (GOOG) 4.38%
Rite Aid (RAD) 3.90%
Under Armour (UA) 3.90%
Apache (APA) 3.89%
Capstone Turbine (CPST) 3.77%
Ace Limited (ACE) 3.57%
Alliance Resource Partners (ARLP) 3.21%
NYSE Euronext (NYX) 2.86%
Infosys (INFY) 2.80%
Nokia (NOK) 2.77%

Ben Bernanke Will Have His Revenge On Wall Street

This is going to sound kind of bearish, but here goes nothing.

This is the list of things we learned after the Fed decided to cut the discount rate by 50 basis points on Friday:

• The Fed isn't oblivious to the crisis that began as "subprime", but now includes highly-rated debt, and is affecting businesses' ability to properly function.
  

That's it.

Here's the list of things we don't know:

• The scope of the crisis. So far, it has hit several companies in the banking, brokerage, homebuilder, and mortgage lender industries. What other companies within those sectors, or even worse, additional sectors, will be affected in the future?
• The duration of the crisis. Will it take weeks to play out? Months? Years?
• Collateral damage of the crisis. There could potentially be: millions of empty homes and their displaced former owners; many hundreds of thousands of jobs lost in the previously listed industries; and many millions of consumers, and thousands of companies, who will have exhausted their lines of credit. What further problems to the broader U.S. economy will manifest? Will the growth of the global economy be affected?

And most of all:

• The future actions of the Fed. The market is fairly certain that federal loan rate cuts (you know, the substantial kind) are imminent. When will they begin? How far will the Fed go?

That's a lot of unknowns. And the market hates uncertainty.

I'm not bearish though. I haven't sold anything, and history tells us that now are the times that we should be buying (and indeed, the "smart money" is starting to sift through the rubble). If you are thinking about bottom-fishing, just remember that every investment is just a foot in the door...and that the Fed owns the market, whether they want to or not.

The most frustrating part of this crisis is that it basically repeated the S&L bailout of the 1980's: greedy lenders making bad loans to undeserving or uninformed borrowers. It's amazing to me that history repeated itself so quickly. Both parties are to blame: the lenders shouldn't have taken on the risk, and the borrowers shouldn't have entered into a contract which they didn't understand or couldn't fulfill. I think a big part of resolving this current crisis will be finding an agreement satisfactory to both sides, ideally brokered by the government (Fannie Mae/Freddie Mac), allowing most homeowners to stay in their homes.

Welcome To The Market Capitulation

The market's getting clobbered today.

My portfolio is currently down seven and one-half percent for the session.

I'm happy.

We're finally making some progress here, by washing out all the trash speculation. Maybe Countrywide (CFC), Thornburg Mortgage (TMA), and the weakest of the brokers (Lehman (LEH)? Bear Stearns (BSC)? The supposedly bullet-proof Goldman Sachs (GS)?) all go under.

Yippee. Bernanke wins, we get a recession, and thank goodness, inflation is held in check.

Sometimes I wish the Fed Chairman would just come out and say what their policies really effect - "Sometimes our economy needs to be in recession, and unfortunately now is one of those times. We are keeping rates higher than they should be in order to ensure the economy's health in the long term." I mean, he isn't an elected official or anything. Just say it, Ben.

Anyway, I don't think "Dow 14,000" is going to be as infamous as "Nasdaq 5,000". I do think there will be more volatility in the near future. And, I'm going to hold on to my stocks - and eventually buy some more.

It does look like Deplhi's (DPHIQ.PK) stock-as-a-call-option scenario is coming true. Since I didn't do so before, I'll nominate it as August's stock of the month, since I did buy some in July as described here. It seems like as appropriate of a choice as any, with its 58% decline this month. Obviously, the risk side of that "high risk, high reward" investment is winning for now.

When Bernanke says enough is enough, things will be alright. Until then, welcome to the market capitulation. And do try your best to enjoy your stay.

Sold Qwest; Bought More Delphi

I exited out of Qwest (Q) and bought more Delphi (DPHIQ.PK) on Friday.

It's pretty much the same deal as the last time I bought Delphi, with Qwest taking the place of Sears as the most dispensable/smallest percentage holding in my portfolio. At least I was able to get a small gain (9%) for the year I held Q.

Right after that previous Delphi post, I was feeling kinda smart as the stock rallied to $2.20.

A little over a week later, it's at $1.20. Ouch...I've just caught a falling knife.

I'm still think the market's making a mistake by selling Delphi. I understand that its motivated by the subprime/private equity/corporate credit uncertainty, and the negative implications that has for the Appaloosa deal. But I still think the deal is safe. There's too many stakeholders - shareholders, Appaloosa, General Motors (GM), the UAW, and government - to not allow Delphi to emerge from bankruptcy 100% healthy.

That having been said, I'd feel much better if DPHIQ found a bottom on Friday.

Subprime, Housing, and Where The Market Is Headed

Mark down the date: Thursday, July 26th, 2007.

That's the day the market finally realized that the subprime loan crisis is real, and the housing market bubble has indeed burst.

Those conclusions could have reasonably been reached months ago; maybe even a year ago, or more.

Honestly, I'm relieved. The threat is over, because the reality has arrived. And now that's its here, we can all deal with it, and move on.

Is the market going bearish? Was "Dow 14,000" the top? Is a U.S. recession coming? Will the Fed finally cut rates? Is global growth finally going to slow down?

I don't know.

I'd guess we are due for a "correction", and that the market will continue to whipsaw from day to day. But really, I don't know, and anybody that claims to know is lying. Sure, they might end up being right, but they really didn't know. There can only be guessing, and some people's guesses are more educated than others.

I can tell you two things:

If experts say something is going to happen, don't dismiss it because it doesn't immediately manifest itself. Experts by definition are more observant than the rest of us, and therefore tend to be "early" - and complex problems usually take a while to unwind.

And, if days like today can scare you out of the market, look at this chart first before doing anything.

Unfortunately, those are both backward-looking statements, and the market only takes bets on the future.

But that's just an example of why the market is so great:

Nobody knows.

Give Up on Sears; Believe in Delphi

After giving Sears Holdings (SHLD) a thumbs-up just a couple of days ago because of Eddie Lampert's presence, I've given up on it.

Really, it's not that I don't like Sears, just that I determined it was the weakest investment in my portfolio, and due to it's lackluster performance, it was becoming a less and less significant part of the portfolio percentage-wise, and I didn't want to add to it...so I dumped it.

But really, what is Eddie Lampert doing at Sears that he can't be doing elsewhere (like ESL Investments)? How much of a difference can he make at Sears when he's tethered a struggling retail operation? Why isn't the turnaround plan being executed, quickly? Does Lampert have a voice in the boardroom, and is it being heard?

There's simply too much uncertainty that Sears Holdings really does equal Eddie Lampert. I realize I very well could be wrong, but Sears' actions don't seem like what Lampert's actions should and would be. I wouldn't be surprised if Lampert cashed out and walked away from Sears. In any case, it's become a "prove it" stock to me.

Meanwhile, Delphi (DPHIQ.PK) was pummeled today (down 17%) on news of its $2.55 billion investment plan with Appaloosa. That is down from a previous investment of $3.4 billion from Cerberus, who pulled out due to buying Chrysler from Daimler (DCX).

All I care about is that smart guys with money are still betting on the post-bankruptcy Delphi. The turnaround plan is intact: shed its old, low-margin, high-cost businesses (mostly auto parts); concentrate on its high-tech, high-margin businesses, like communications, safety, and thermal; and emerge as a smaller, more nimble, more competitive company. The long-term story didn't change one bit today - Delphi doesn't have to reinvent itself, but rather refocus itself. Yet the stock is much cheaper.

So I added to my position. The market will often gift-wrap good investments on bad days, and today that gift was in the form of DPHIQ.

Reflecting On 10,000

My one and only favorite baseball team, the Philadelphia Phillies, lost their 10,000th game on Sunday night.

They are the losingest franchise in the history of professional sports. And, they have been for quite a while.

Sure, there are some qualifiers behind that title. Any team that's been around for 125 years, in a sport with 154- or 162- game seasons, is going to lose a lot of games over that period of time. There are actually four baseball franchises that have worse all-time winning percentages - the Devil Rays, Padres, Rockies, and Rangers. Outside of baseball, there are several franchises that have worse winning percentages than the Phillies (.468) - in the NFL, the Panthers, Seahawks, Bills, Titans, Texans, Chargers, Bengals, Jets, Falcons, Lions, Saints, Buccaneers, and Cardinals; in the NBA, the Bobcats, Cavaliers, Warriors, Grizzlies, Timberwolves, Hornets, Raptors, Wizards, and of course, the Clippers.

But none of those teams are anywhere near 10,000 losses. Simply put, the Phillies have been a very bad team, for a very long time.

Looking back, I can't help but think of all the losing memories the Phillies have given me:

The close-but-no-cigar postseason chases of the past 6 years.
The Ed Wade era, featuring the lopsided Curt Schilling and Scott Rolen trades.
The hopelessness of the Terry Francona and Nick Leyva years.

And the 1993 World Series, featuring the unimaginable 15-14 loss of game 4, and the gut-wrenching Mitch Williams/Joe Carter series-ending home run of game 6 (I'd link you to YouTube, but I can't stand to watch it again).

I can say that I was alive during the one World Series-winning season of 1980 - but unfortunately, too young to remember. I also have no memories of "Black Friday" in 1977 vs. the Dodgers, the collapse of the Whiz Kids in 1964, or the 1 winning season out of 31 from 1918-1948 - but believe me, I can feel them.

Most of all, I think back to when I was a kid, flipping through my baseball card collection, seeing a slugging third baseman in a powder blue and maroon uniform, and deciding that Michael Jack Schmidt was my favorite player, and his team would be my favorite team, forever...and not knowing the consequences of such a decision.

Here's to another 10,000.

Stocks I Like Enough To Own

I promise that I'll never write about stocks I just like - I'll only write about stocks that I like enough to own.

With that in mind, here's my current portfolio. Needless to say, I think all of these stocks are worth buying/owning.

(Really I just needed to get this post out there, so I can authentically boast/lament later on when appropriate.)

Company Name (Symbol) Buy Date Buy Price Gain/Loss
One-sentence Investing Idea
----------------------------------------------------------
Ace Limited (ACE) 10-May-04 $48.35 28%
Reinsurance is a solid positive cash-flow business.

Nokia (NOK) 4-Jun-04 $13.89 115%
Premium cell-phone brand, and a nice dividend too.

Southern Copper (PCU) 2-Mar-05 $26.47 316%
Huge dividend; demand for copper a bonus.

Google (GOOG) 2-May-05 $256.80 115%
Destined to be the company to define the 21st century.

Apache (APA) 25-Aug-05 $67.53 28%
Cheap oil/natural gas producer.

Petrochina (PTR) 10-Jan-06 $87.50 81%
Hot commodity (oil) in hot economy (China).

Intuitive Surgical (ISRG) 2-Mar-06 $91.93 61%
Revolutionary surgery technology which should become standard procedure.

Fording Canadian Coal (FDG) 22-Mar-06 $28.99 20%
Nice dividend, and coal is a cheap necessity.

Infosys (INFY) 4-May-06 $39.77 30%
Fast grower in a fast growth economy (India).

Alliance Resource Partners (ARLP) 5-Jun-06 $36.64 16%
Another dividend-and-coal play.

Qwest (Q) 27-Jul-06 $7.95 21%
Turnaround/buyout story.

St. Jude Medical (STJ) 27-Jul-06 $36.30 16%
Bought for buyout potential, but is doing well on its own.

Frontline (FRO) 2-Aug-06 $41.91 23%
Huge dividend; demand for oil tankers a bonus.

Fuel-Tech (FTEK) 16-Aug-06 $13.27 143%
Coal is a cheap necessity, and Fuel-Tech makes it cleaner energy too.

Delphi (DPHIQ.PK) 5-Oct-06 $1.90 29%
Turnaround story which will emerge from bankruptcy leaner and meaner.

Rite Aid (RAD) 3-Nov-06 $4.64 34%
Another turnaround story - should hang around with CVS and Walgreen's.

Sears Holdings (SHLD) 5-Dec-06 $174.50 -10%
Eddie Lampert.

NYSE Euronext (NYX) 1-Feb-07 $92.33 -10%
Market leader in a consolidating group.

Capstone Turbine (CPST) 23-Feb-07 $0.96 40%
Pure-play on microturbine engines/green energy.

Under Armour (UA) 15-Mar-07 $46.52 17%
The next Nike.

Baidu.com (BIDU) 3-Apr-07 $96.50 121%
The next Google.

Annaly Capital Management (NLY) 17-Apr-07 $15.36 -8%
Nice dividend, and the Fed needs to cut rates at some point.

Aluminum Corp. of China (ACH) 18-May-07 $33.59 42%
Nice dividend, and aluminum demand should rise.

The Ten Year Rule

As I was feeling burned by another suspect CD purchase, I was reminded of a theory I had regarding the timespan of relevance of musical artists.

I think it's time to promote the theory to a rule:

Musical artists have a ten year (or less) window of relevancy, beginning from the year of their debut album.

This first occurred to me many years ago when thinking about two exceptional, decade-defining, never-released-a-bad-album bands: the Beatles and Led Zeppelin. The Beatles lasted only 8 years (1963-1970). Led Zeppelin lasted only 10 years (1969-1979).

Jimi Hendrix - 3 (1967-1970). Nike Drake - 5 (1969-1974). Nirvana - 5 (1989-1994). More recently, Elliott Smith - 9 (1994-2003). None of them ever released a bad album. (Untimely death certainly does not hurt the rule.)

So let's try to find some exceptions from acts that went beyond ten years:

Beach Boys (1962-1970) allows for all of their essential albums, ending with Sunflower. The Who (1965-1975) includes all of their classics and nothing more, give or take The Who By Numbers. Black Sabbath (1970-1978) covers all of the Ozzy years.

Elvis Costello (1977-1986) includes all of his Columbia releases. Van Halen (1978-1984) covers all of the Roth years. Prince (1978-1987) ends nicely with Sign 'O' The Times. Michael Jackson (1979-1987) includes Off The Wall, Thriller, and Bad, and conveniently leaves out his maddeningly uneven albums thereafter. The Cure (1979-1989) ends nicely with Disintegration. Metallica (1981-1991) ends nicely with The Black Album.

The breakups of Guns N' Roses (1987-1993), Jane's Addiction (1988-1990), Soundgarden (1988-1996), Alice In Chains (1990-1996), Pantera (1990-2000), Smashing Pumpkins (1991-1998), and Weezer (1994-1996) appear to support the rule. (In the latter two I'm counting the departure of D'Arcy and Matt Sharp as "breakups", but if you look at the "before" and "after" results, maybe bassists really are important.) It could be argued that Pearl Jam's (1991-2000) quality began to decline after Binaural. It could be more strongly argued that OutKast's (1994-2003) quality suffered after Speakerboxxx/The Love Below.

Some close calls:

Bob Dylan (1962), who released Blood On The Tracks in 1975; Pink Floyd (1967), who released The Wall in 1979; David Bowie (1967), who released Scary Monsters in 1980; Bruce Springsteen (1973), who released Born In The U.S.A. in 1984; and U2 (1980), who released Achtung Baby in 1991, as well as All That You Can't Leave Behind and How To Dismantle An Atomic Bomb in the 2000's.

All fine albums, but not their best. That's a pretty small list regardless.

The only rule-destroying exceptions - careers that had their defining works after year 10 - that I can find are Stevie Wonder, who had his glorious run from Where I'm Coming From to Songs In The Key Of Life from 9 to 15 years after his debut was released in 1962; and the Red Hot Chili Peppers, who, save for Blood Sugar Sex Magik in 1991, had all of their essential recordings far after their debut in 1984 (beginning with Californication in 1999 and continuing through Stadium Arcadium in 2006).

I wish there were more - rules are made to be broken, after all.

If you can find any, link back to this post, and hopefully I'll revisit the rule.

Stock Of The Month: NLY

Better late than never on this post, I suppose.

I started out this blog writing about all of my lessons learned from past investments, which is all well and good, but it's really more important to be focusing on present and future investments.

So I'll be sharing what I'm buying each month and why.

Then we can all see whether the trade belongs in this list, or this one.

The stock I purchased for July 2007 is Annaly Capital Management, Inc. (NLY).

Annaly is a real estate investment trust (REIT) that makes money from the spread between mortgages it sells and bank loans it buys. Therefore, with bank loan rates now near historical highs, and due to fall just as soon as the Fed decides to cut rates, I think now is a great entry point into NLY.

The stock was punished in 2005 due to rising interest rates and a cut in its dividend, but it has been slowly recovering and has been raising its dividend for the 6th consecutive quarter.

So in the long term, the stock price should appreciate; but in the meantime, there is a 6.5% yield to reward investors while they wait for the Fed to make its move.

Another thing to like about NLY is the CEO, Mike Farrell. He saw the sub-prime mortgage crisis coming and avoided it, and unlike most, he has insisted that we are in the early innings of the crisis (which is my gut feeling as well).

This demonstrates his ability to manage the company's assets, and that he has the best interests of the company and its shareholders in mind.

The 420 Greatest Albums Of All Time (a.k.a. My CD Collection)

This is a list of every album I own, ranked best to worst; the non-ranked albums at the bottom are compilations, greatest hits, box sets, singles, classical, or albums I haven't gotten around to listening to yet.

Enjoy.

1 Nirvana In Utero 1993
2 Smashing Pumpkins Mellon Collie And The Infinite Sadness 1995
3 Pantera Far Beyond Driven 1994
4 Beach Boys Pet Sounds 1966
5 Dylan, Bob Blonde On Blonde 1966
6 Led Zeppelin IV 1971
7 Beatles Revolver 1966
8 Beatles Rubber Soul 1965
9 Pearl Jam Vitalogy 1994
10 Hendrix, Jimi Electric Ladyland 1968
11 Dylan, Bob Highway 61 Revisited 1965
12 Nine Inch Nails The Downward Spiral 1994
13 Soundgarden Superunknown 1994
14 Radiohead The Bends 1995
15 Outkast Speakerboxxx / The Love Below 2003
16 Rolling Stones Exile On Main St. 1972
17 Jackson, Michael Off The Wall 1979
18 Smashing Pumpkins Siamese Dream 1993
19 Nirvana Nevermind 1991
20 R.E.M. Automatic For The People 1992
21 Love Forever Changes 1967
22 U2 Achtung Baby 1991
23 Jackson, Michael Thriller 1982
24 Led Zeppelin Houses Of The Holy 1973
25 Deftones White Pony 2000
26 Led Zeppelin III 1970
27 Beatles The White Album 1968
28 Public Enemy It Takes A Nation Of Millions To Hold Us Back 1988
29 Buckley, Jeff Grace 1994
30 Gabriel, Peter So 1986
31 Who The Who Sell Out 1967
32 Bowie, David The Rise And Fall Of Ziggy Stardust And The Spiders From Mars 1972
33 Springsteen, Bruce The River 1980
34 Radiohead OK Computer 1997
35 Metallica ...And Justice For All 1988
36 Hole Live Through This 1994
37 Hendrix, Jimi Axis: Bold As Love 1967
38 Led Zeppelin Physical Graffiti 1975
39 Weezer Pinkerton 1996
40 Smith, Elliott XO 1998
41 Sonic Youth Dirty 1992
42 White Stripes Elephant 2003
43 Sex Pistols Nevermind The Bollocks, Here's The Sex Pistols 1977
44 Faith No More Angel Dust 1992
45 De La Soul De La Soul Is Dead 1991
46 Outkast Stankonia 2000
47 Wilson, Brian Smile 2004
48 Rolling Stones Let It Bleed 1969
49 System Of A Down Toxicity 2001
50 Hendrix, Jimi Are You Experienced? 1967
51 White Stripes De Stijl 2000
52 Pavement Slanted And Enchanted 1992
53 Pearl Jam No Code 1996
54 Guns N' Roses Use Your Illusion I/II 1991
55 Eels Electro-Shock Blues 1998
56 Springsteen, Bruce Darkness On The Edge Of Town 1978
57 Phair, Liz Exile In Guyville 1993
58 Nirvana Bleach 1989
59 R.E.M. New Adventures In Hi-Fi 1996
60 Beach Boys Today! / Summer Days (And Summer Nights!!) 1965
61 Depeche Mode Violator 1990
62 Portishead Dummy 1994
63 Costello, Elvis This Years Model 1978
64 Dr. Dre The Chronic 1992
65 Pink Floyd The Dark Side Of The Moon 1973
66 Rage Against The Machine Evil Empire 1996
67 Swervedriver Mezcal Head 1993
68 Smashing Pumpkins Adore 1998
69 U2 The Joshua Tree 1987
70 Jay-Z The Blueprint 2001
71 West, Kanye The College Dropout 2004
72 De La Soul 3 Feet High And Rising 1989
73 Beatles Sgt. Pepper's Lonely Hearts Club Band 1967
74 Metallica Master Of Puppets 1986
75 Radiohead Kid A 2000
76 Guns N' Roses Appetite For Destruction 1987
77 Eminem The Marshall Mathers LP 2000
78 N.W.A. Straight Outta Compton 1988
79 Beck Odelay 1996
80 Smith, Elliott Either/Or 1997
81 Stone Temple Pilots Tiny Music...Songs From The Vatican Gift Shop 1996
82 Rolling Stones Sticky Fingers 1971
83 Alice In Chains Dirt 1992
84 Who Who's Next 1971
85 Korn Korn 1994
86 Weezer Weezer 1994
87 Foo Fighters Foo Fighters 1995
88 Springsteen, Bruce Born To Run 1975
89 Sonic Youth Daydream Nation 1988
90 Rolling Stones Aftermath (UK) 1966
91 Team Sleep Team Sleep 2005
92 Sonic Youth A Thousand Leaves 1998
93 Pantera Vulgar Display Of Power 1992
94 Flaming Lips The Soft Bulletin 1999
95 Clash London Calling 1979
96 Mann, Aimee Bachelor No. 2 1999
97 Dylan, Bob Blood On The Tracks 1974
98 Velvet Underground The Velvet Underground & Nico 1967
99 Rolling Stones Some Girls 1978
100 Cure Disintegration 1989
101 Hum Downward Is Heavenward 1998
102 Rage Against The Machine The Battle Of Los Angeles 1999
103 Megadeth Rust In Peace 1990
104 Sonic Youth Washing Machine 1995
105 Led Zeppelin Presence 1976
106 Oasis (What's The Story) Morning Glory? 1995
107 Beastie Boys Paul's Boutique 1989
108 Stone Temple Pilots Purple 1994
109 Pink Floyd Wish You Were Here 1975
110 Led Zeppelin II 1969
111 My Bloody Valentine Loveless 1991
112 White Stripes Get Behind Me Satan 2005
113 Flaming Lips Yoshimi Battles The Pink Robots 2002
114 Wonder, Stevie Talking Book 1972
115 Led Zeppelin I 1969
116 Nirvana MTV Unplugged In New York 1994
117 Smith, Elliott Figure 8 2000
118 Springsteen, Bruce Born In The U.S.A. 1984
119 Apple, Fiona Extraordinary Machine 2005
120 Catherine Wheel Chrome 1993
121 Cure Pornography 1982
122 Metallica Kill 'Em All 1983
123 Jay-Z Vol. 3…Life And Times Of S. Carter 1999
124 Simon, Paul There Goes Rhymin' Simon 1973
125 Wonder, Stevie Innervisions 1973
126 Springsteen, Bruce Nebraska 1982
127 Buckley, Jeff Sketches For My Sweetheart The Drunk 1998
128 Jane's Addiction Nothing's Shocking 1988
129 West, Kanye Late Registration 2005
130 Jane's Addiction Ritual De Lo Hibitual 1990
131 Oasis Definitely Maybe 1994
132 White Stripes The White Stripes 1999
133 Beck Mellow Gold 1994
134 Limp Bizkit Significant Other 1999
135 Tool Lateralus 2001
136 Limp Bizkit Three Dollar Bill, Y'all 1997
137 Smashing Pumpkins Pisces Iscariot 1994
138 Beck Sea Change 2002
139 My Bloody Valentine Isn't Anything 1988
140 Beach Boys Sunflower / Surf's Up 1971
141 Beastie Boys Ill Communication 1994
142 Hole Celebrity Skin 1998
143 Beatles Magical Mystery Tour 1967
145 Pearl Jam Binaural 2000
146 Drake, Nick Pink Moon 1972
147 Morissette, Alanis Jagged Little Pill 1995
148 Smashing Pumpkins Gish 1991
149 Afghan Whigs Gentlemen 1993
150 Black Sabbath Paranoid 1970
151 Nine Inch Nails The Fragile 1999
152 Pavement Crooked Rain, Crooked Rain 1994
153 Drake, Nick Five Leaves Left 1969
154 Gabriel, Peter Passion 1989
155 Mann, Aimee The Forgotten Arm 2005
156 Sonic Youth Sonic Nurse 2004
157 Dylan, Bob Love And Theft 2001
158 Jay-Z The Black Album 2003
159 Anthrax Sound Of White Noise 1993
160 Local H As Good As Dead 1996
161 Garbage Garbage 1995
162 Deftones Around The Fur 1997
163 Harvey, PJ To Bring You My Love 1995
164 Beatles A Hard Day's Night 1964
165 Cars The Cars 1978
166 Tool Undertow 1992
167 Cars Candy-O 1979
168 Hum You'd Prefer An Astronaut 1995
169 Keys, Alicia The Diary Of Alicia Keys 2003
170 No Doubt Return Of Saturn 2000
171 A Perfect Circle Thirteenth Step 2003
172 Pink Floyd The Wall 1979
173 Hum Electra 2000 1993
174 Beck Mutations 1998
175 Cornell, Chris Euphoria Morning 1999
176 Grateful Dead American Beauty 1970
177 Red Hot Chili Peppers By The Way 2002
178 Beatles Abbey Road 1969
179 Lynn, Loretta Van Lear Rose 2004
180 Outkast Atliens 1996
181 Pearl Jam Ten 1991
182 Pink Try This 2003
183 Queens Of The Stone Age Lullabies To Paralyze 2005
184 Pearl Jam Vs. 1993
185 Outkast Aquemini 1998
186 Beastie Boys Licensed To Ill 1986
187 Eels Blinking Lights And Other Revelations 2005
188 Green Day American Idiot 2004
189 Limp Bizkit The Unquestionable Truth (Part 1) 2005
190 Metallica Ride The Lightning 1984
191 Pantera The Great Southern Trendkill 1996
192 Soundgarden Down On The Upside 1996
193 System Of A Down System Of A Down 1998
194 Tool Aenima 1996
195 Local H Pack Up The Cats 1998
196 Blink-182 Enema Of The State 1999
197 Bjork Debut 1993
198 Deftones Adrenaline 1995
199 Zwan Mary Star Of The Sea 2003
200 Catherine Wheel Adam And Eve 1997
201 Beck One Foot In The Grave 1994
202 Keys, Alicia Songs In A Minor 2001
203 Rancid …And Out Come The Wolves 1995
204 Red Hot Chili Peppers Stadium Arcadium 2006
205 Bush Sixteen Stone 1994
206 Aaliyah Aaliyah 2001
207 Strokes Is This It 2001
208 Wolfmother Wolfmother 2006
209 Beck Midnite Vultures 1999
210 Faith No More The Real Thing 1989
211 Offspring Smash 1994
212 Alice In Chains Sap 1992
213 Beatles Please Please Me 1963
214 Beatles With The Beatles 1963
215 Blur The Great Escape 1995
216 Flaming Lips Transmissions From The Satellite Heart 1993
217 Hole Pretty On The Inside 1991
218 Rancid Let's Go 1994
219 Stone Temple Pilots No. 4 1999
220 Def Leppard Hysteria 1987
221 Pearl Jam Yield 1998
222 Queens Of The Stone Age Songs For The Deaf 2002
223 Deftones B-Sides & Rarities 2005
224 Soundgarden Badmotorfinger 1991
225 Swervedriver Raise 1991
226 Foo Fighters There Is Nothing Left To Lose 1999
227 Harvey, PJ Rid Of Me 1993
228 Ocasek, Ric Troublizing 1997
229 Pearl Jam Riot Act 2002
230 Harper, Ben Fight For Your Mind 1995
231 Rentals Seven More Minutes 1999
232 Nirvana Incesticide 1992
233 Led Zeppelin Coda 1982
234 Darkness Permission To Land 2003
235 Guided By Voices Bee Thousand 1994
236 Mellencamp, John The Lonesome Jubilee 1987
237 Red Hot Chili Peppers Blood Sugar Sex Magik 1991
238 Stone Temple Pilots Core 1992
239 Beatles Beatles For Sale 1964
240 Def Leppard Pyromania 1983
241 System Of A Down Mezmerize 2005
242 Young, Neil Mirror Ball 1995
243 Hill, Lauryn Mtv Unplugged 2.0 2002
244 Placebo Black Market Music 2001
245 Oasis The Masterplan 1998
246 Red Hot Chili Peppers Californication 1999
247 System Of A Down Hypnotize 2005
248 Pearl Jam Lost Dogs 2003
249 White Stripes White Blood Cells 2001
250 Pink M!Ssundaztood 2001
251 Catherine Wheel Like Cats And Dogs 1996
252 Deftones Deftones 2003
253 N.E.R.D In Search Of… 2002
254 Public Enemy Fear Of A Black Planet 1990
255 Amos, Tori Boys For Pele 1996
256 Jackson, Michael Bad 1987
257 Tool 10,000 Days 2006
258 Ac/Dc Highway To Hell 1979
259 Hendrix, Jimi First Rays Of The New Rising Sun 1997
260 Megadeth Peace Sells...But Who's Buying? 1986
261 Placebo Sleeping With Ghosts 2003
262 Ben Folds Five Whatever And Ever Amen 1997
263 Flaming Lips At War With The Mystics 2006
264 Rage Against The Machine Rage Against The Machine 1992
265 Helmet Meantime 1992
266 Aguilera, Christina Back To Basics 2006
267 Black Sabbath Master Of Reality 1971
268 Blink-182 Blink-182 2003
269 Gorillaz Demon Days 2005
270 Limp Bizkit Chocolate Starfish And The Hot Dog Flavored Water 2000
271 Rentals Return Of The Rentals 1995
272 Soundgarden Louder Than Love 1989
273 Alice In Chains Alice In Chains 1995
274 Gnarls Barkley St. Elsewhere 2006
275 Catherine Wheel Ferment 1992
276 Apple, Fiona Tidal 1996
277 Everclear World Of Noise 1993
278 Nine Black Alps Everything Is 2006
279 Placebo Meds 2006
280 Bjork Post 1995
281 R.E.M. Out Of Time 1991
282 Nine Inch Nails Pretty Hate Machine 1989
283 System Of A Down Steal This Album! 2002
284 Local H Whatever Happened To P.J. Soles? 2004
285 Guided By Voices Alien Lanes 1995
286 Pixies Doolittle 1989
287 Anthrax Stomp 442 1995
288 Afghan Whigs Black Love 1996
289 Oasis Be Here Now 1997
290 Foo Fighters The Colour And The Shape 1997
291 Guided By Voices Isolation Drills 2001
292 Pink I'm Not Dead 2006
293 Soundgarden Ultramega Ok 1988
294 Nine Inch Nails With Teeth 2005
295 Interpol Turn On The Bright Lights 2002
296 Smith, Elliott From A Basement On The Hill 2004
297 Everclear Sparkle And Fade 1995
298 Radiohead My Iron Lung 1994
299 Audioslave Out Of Exile 2005
300 Blur Blur 1997
301 Anthrax The Greater Of Two Evils 2004
302 Black Crowes Amorica 1994
303 Placebo Placebo 1996
304 Hill, Lauryn The Miseducation Of Lauryn Hill 1998
305 Sonic Youth Murray Street 2002
306 Chevelle Point #1 1999
307 A Perfect Circle Mer De Noms 2000
308 Deftones Saturday Night Wrist 2006
309 Elastica Elastica 1995
310 Korn Life Is Peachy 1996
311 Pixies Surfer Rosa 1988
312 Police Synchronicity 1983
313 Bush Razorblade Suitcase 1996
314 Audioslave Audioslave 2002
315 Alice In Chains Jar Of Flies 1994
316 Weiland, Scott 12 Bar Blues 1998
317 Days Of The New Days Of The New 1997
318 Smashing Pumpkins Machina II / Friends And Enemies Of Modern Music 2000
319 Pantera Cowboys From Hell 1990
320 Bush Golden State 2001
321 Radiohead Hail To The Thief 2003
322 Snoop Doggy Dogg Doggystyle 1993
323 Garbage Bleed Like Me 2005
324 Metallica Metallica 1991
325 Amos, Tori Under The Pink 1994
326 Screaming Trees Dust 1996
327 Petty, Tom Wildflowers 1994
328 DJ Jazzy Jeff & The Fresh Prince He's The Dj, I'm The Rapper 1988
329 Ben Folds Five The Unauthorized Biography Of Reinhold Messner 1999
330 DJ Jazzy Jeff & The Fresh Prince Rock The House 1988
331 Garbage Version 2.0 1998
332 Black Crowes The Southern Harmony And Musical Companion 1992
333 Blur Parklife 1994
334 R.E.M. Green 1988
335 Anthrax We've Come For You All 2003
336 Sonic Youth Goo 1990
337 Kasabian Kasabian 2004
338 Pantera Reinventing The Steel 2000
339 Megadeth Countdown To Extinction 1992
340 L.L. Cool J Mama Said Knock You Out 1990
341 Nine Inch Nails Broken 1992
342 Breeders Last Splash 1993
343 Urge Overkill Saturation 1993
344 Radiohead Airbag / How Am I Driving? 1998
345 Gorillaz Gorillaz 2001
346 Led Zeppelin In Through The Out Door 1979
347 Beck The Information 2006
348 Coldplay A Rush Of Blood To The Head 2002
349 Metallica St. Anger 2003
350 My Chemical Romance Three Cheers For Sweet Revenge 2004
351 RZA RZA As Bobby Digital In Stereo 1998
352 Smashing Pumpkins Machina / The Machines Of God 2000
353 Van Halen Van Halen 1978
354 King, Carole Tapestry 1971
355 Sepultura Roots 1996
356 Darkness One Way Ticket To Hell…And Back 2005
357 Hole My Body, The Hand Grenade 1997
358 Korn Follow The Leader 1998
359 Linkin Park Hybrid Theory 2000
360 Live Throwing Copper 1994
361 No Doubt Tragic Kingdom 1995
362 Velvet Revolver Contraband 2004
363 Sponge Wax Ecstatic 1996
364 Megadeth So Far, So Good...So What! 1988
365 White Zombie Astro-Creep: 2000 1995
366 Veruca Salt American Thighs 1994
367 Jackson, Michael Dangerous 1991
368 Live Secret Samadhi 1997
369 Sharp, Matt Matt Sharp 2004
370 Radiohead Amnesiac 2001
371 Beastie Boys Check Your Head 1992
372 Nada Surf High/Low 1996
373 Radiohead Pablo Honey 1993
374 Abdul, Paula Greatest Hits 2000
375 Kid Rock Devil Without A Cause 1998
376 Beck Guero 2005
377 Anthrax Volume 8: The Threat Is Real 1998
378 Branch, Michelle The Spirit Room 2001
379 White Zombie La Sexorcisto: Devil Music Vol. 1 1992
380 Ludacris Word Of Mouf 2001
381 Down Down II - A Bustle In Your Hedgerow… 2002
382 Sepultura Chaos A.D. 1993
383 Linkin Park Meteora 2003
384 Black Flag Damaged 1981
385 Outkast Idlewild 2006
386 Alice In Chains Facelift 1990
387 Branch, Michelle Hotel Paper 2003
388 Corgan, Billy The Future Embrace 2005
389 Fountains Of Wayne Fountains Of Wayne 1996
390 Megadeth Youthanasia 1994
391 D Generation No Lunch 1996
392 Silverchair Freak Show 1997
393 Springsteen, Bruce The Rising 2002
394 That Dog Retreat From The Sun 1997
395 Helmet Betty 1994
396 Lil Jon & The East Side Boyz Kings Of Crunk 2002
397 Madonna Bedtime Stories 1994
398 Love, Courtney America's Sweetheart 2004
399 Bubba Sparxxx Deliverance 2003
400 Presidents Of The United States Of America The Presidents Of The United States Of America 1995
401 Rollins Band Weight 1994
402 Fireball Ministry Their Rock Is Not Our Rock 2005
403 Johnson, Jack On And On 2003
404 Stabbing Westward Darkest Days 1998
405 Stone Temple Pilots Shangri-La Dee Da 2001
406 7 Year Bitch Gato Negro 1996
407 Foo Fighters One By One 2002
408 Prince Batman Soundtrack 1989
409 Fountains Of Wayne Welcome Interstate Managers 2003
410 Jackson, Michael Invincible 2001
411 Beastie Boys Hello Nasty 1998
412 Bush The Science Of Things 1999
413 Soul Asylum Let Your Dim Light Shine 1995
414 Nappy Roots Watermelon, Chicken, And Gritz 2002
415 Metallica Load 1996
416 Dr. Dre 2001 1999
417 Metallica Reload 1997
418 Jackson, Michael History 1995
419 Soulfly Soulfly 1998
420 R.E.M. Monster 1994
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311 Greatest Hits '93-'03 2004
7 Year Bitch Viva Zapata! 1993
Beach Boys Endless Summer 1974
Beatles Help! 1965
Beatles Let It Be 1970
Beatles 1962-1966 1973
Beethoven, Ludwig Van Symphony No. 9; "Fidelio" Overture 1991
Berlioz, Hector Symphonie Fantastique; La Damnation De Faust 1972
Blondie The Best Of Blondie 1981
Breeders Pod 1990
Captain Beefheart & His Magic Band Trout Mask Replica 1970
Carpenters The Singles 1969-1973 1973
Cars Anthology: Just What I Needed 1995
Cash, Johnny The Sun Years 1990
Clap Your Hands Say Yeah Clap Your Hands Say Yeah 2005
Costello, Elvis Armed Forces 1979
Cream The Very Best Of Cream 1995
Creedence Clearwater Revival Chronicle: 20 Greatest Hits 1991
Cure Staring At The Sea: The Singles 1986
De La Soul Buhloone Mindstate 1993
Duran Duran Decade 1989
Eminem Curtain Call - The Hits 2005
Flaming Lips Clouds Taste Metallic 1995
Foo Fighters This Is A Call 1995
Foo Fighters Big Me 1996
Fountains Of Wayne Utopia Parkway 1999
Green Day International Superhits! 2001
Hendrix, Jimi South Saturn Delta 1997
Jackson, Janet Design Of A Decade 1986/1996 1995
Jett, Joan Fit To Be Tied: Great Hits 1997
Lennon, John Plastic Ono Band 1970
Lennon, John Imagine 1971
Lennon, John Lennon Legend 1997
Love And Rockets Earth, Sun, Moon 1987
Madonna The Immaculate Collection 1990
Madonna Something To Remember 1995
Mann, Aimee Lost In Space 2002
Nirvana Oh, The Guilt 1993
Nirvana Singles Box 1995
Nirvana Nirvana 2002
Nirvana With The Lights Out 2004
Notorious B.I.G. Ready To Die 1994
Pearl Jam Merkinball 1995
Petty, Tom Greatest Hits 1993
Police Every Breath You Take: The Classics 1995
Prince The Hits 1/2 1993
Queen Classic Queen 1992
Queen Greatest Hits 1992
Queens Of The Stone Age Queens Of The Stone Age 1998
Queens Of The Stone Age Rated R 2000
Replacements Let It Be 1984
Silversun Pickups Carnavas 2006
Simon, Paul Negotiations And Love Songs 1971-1986 1988
Smashing Pumpkins Lull 1991
Smashing Pumpkins The Aeroplane Flies High 1996
Smashing Pumpkins Ava Adore 1998
Smashing Pumpkins Greatest Hits 2001
Steve Miller Band Greatest Hits 1974-78 1990
TLC Now & Forever - The Hits 2003
U2 The Best Of 1980-1990 1998
Urge Overkill Exit The Dragon 1995
Various Artists Sub Pop 200 1988
Various Artists Singles Soundtrack 1992
Various Artists Last Action Hero Soundtrack 1993
Various Artists No Alternative 1993
Various Artists The Beavis And Butt-Head Experience 1993
Various Artists Batman & Robin Soundtrack 1997
Various Artists O Brother, Where Art Thou? 2000

Open Letter to Steve Ballmer

Dear Mr. Ballmer,

As I was subjected to an advertisement for the Zune for the 23948239842348532904932745th time, the thought occurred to me that you may not be fully aware of the state of your company.

You are beating a dead horse (maybe more like a stillborn colt) with the Zune, and you are beating dead horses in every business you compete in.

You are fighting fierce battles, on several fronts, against savvy opponents. Apple in consumer devices. Oracle and SAP in business software. The open source movement in development software. Google and the freeware movement in desktop software. Google, TimeWarner, eBay, Yahoo, and News Corp. in internet properties. Sony and Nintendo in gaming platforms.

You are either losing, or your lead is precarious, in all of these battles. More importantly, you have already lost the battle in the hearts and minds of your potential customers, who see you as either pure evil, or even worse, just plain uncool.

As I see it, your company has two choices.

You can admit that your company is in a long, slow, irreversible decline, and that your stock is in reality a bank treasury, and you can use your cash war chest of $25 billion to fund a buyback and a significant dividend, in order to reward your shareholders.

Or, somehow, someway, for the first time in your company's history, Microsoft could start innovating.

And cease the beating of dead horses.

Lessons Learned from the Sell Side

I'm going to be completely lazy and start off this post by quoting myself.

"Is there anything harder in stock investing than deciding when to sell? Either you have a winner, and would like to be 'prudent' and take some profits, even though you risk giving up on even greater profits. Or you're stuck with a loser, and 'prudence' calls for cutting your losses, though that entails buying high and selling low, a surefire way not to make money.

And, sure, they are just pieces of paper, but you love these stocks. You don't want to abandon them when they've been so good to you, or are going through some hard times."

Sounds like there's some lessons to be learned...

I've already written about the good and bad of the stocks I've sold, which has led to these proposed principles for selling a stock:

1) Know your decision points, and stick to them. Note that the decision can be hold or buy more, and not just sell.

The decision point I use is when the stock falls one-third from its high, during the time I owned it. I decided on one-third because I don't want to fret over my stocks if they have a few bad days - I want to give them ample room to operate in what is now, and will be for the foreseeable future, a volatile market.

Furthermore, I decided on letting all my stocks fall one-third before I decide what to do with them, because just like the bottoms, I can't call the tops either. I'd rather let the market carve out a top for me, and risk losing some money, than attempt to call out a top, be wrong, and miss out on even greater gains.

Both of these strategies have the added advantage of reducing the burning of cash on commissions, which although they have dropped greatly over the years, are still significant at the levels I trade at. If you are trading larger dollar amounts, you can probably tighten up the percentage, and/or make incremental trades.

One important exception to these rules: a stock that goes sideways for an extended period of time. There's nothing more irritating about investing than when a stock is bought, and it just does nothing. I say the decision point is one year of sideways trading, then revisit it.

2) Re-examine the buy-side story all over again. Once a decision point is reached, use a fresh buy-side analysis to determine whether to sell, hold, or buy more. Are the fundamentals still intact? Has the bear or bull case strengthened or weakened? Has management changed its outlook? Have existing competitors stepped up their efforts, or new competitors broken down the barriers of entry?

I like to frame the decision like this: if I didn't own the stock already, would I want to start buying it at current levels? If the answer is "yes", then that's good reason to at least hold, or consider buying some more. If the answer is "not sure" or "no", that's good reason to sell.

3) Try not to panic. Many of my bad sells occurred when the stock had fallen near its decision point, some bad news had pushed the stock down below the decision point, and I shot first and asked questions later. When it turns out the bad news was short-term or inconsequential, the market was actually doing me a favor and giving me a great buying opportunity - yet I did the exact opposite and sold.

Given that panicking is sort of an involuntary response, this is a tough rule to stick by, but I still think its a worthy aspiration.

4) Don't fire and forget. I keep an eye on all of the stocks I sell (obviously), trying to evaluate whether the decisions I made were right or not, and hopefully apply those lessons to the next decision point. Also, it's fun, in a strange sort of way, to watch a stock I sold plummet. Petty fun, but fun nonetheless.

I think the bottom line here is that success in investing is all about planning and execution. And, hopefully, the past can influence the future for the better.

Lessons Learned from the Buy Side

Last week I looked back at both the good and bad of my stock buys. Now it's time to try to formulate some simple rules to be applied from my past experiences.

These rules, like any of sort of rules, are made to be broken. They will always be a work-in-progress.

I guess what I'm saying is, these aren't really rules at all. Maybe just guidelines, or philosophies, or hypotheses.

Whatever. Let's get started.

1) Fundamentals matter. Everything starts with the fundamentals (duh). These are easy enough to find on the web using Yahoo Finance's "Key Statistics" pages. The ones I really pay attention to (followed by what I'm looking for) are:
Market Cap (min)
Forward P/E (min)
PEG Ratio (min)
Profit Margin (max)
Operating Margin (max)
Return On Assets (max)
Return On Equity (max, and greater than Return On Assets)
Total Cash (max)
Total Debt (min)
Levered Free Cash Flow (max)
% Held By Insiders (max)
% Short of Float (max)
Forward Annual Dividend Yield (max)

These values should be compared vs. competitors and vs. the market in general.

Now, you can't find a stock that has all of these things, but you can find stocks that have most of these things, in your favor. Sometimes it's good to own stocks that are average across the board, but exceptional in one category (such as a large dividend yield). In any case, you'll certainly want to think twice about buying stocks that are unfavorable in any more than a few of these categories.

2) Don't fight the market. Or, "Don't try to call the bottom." If you have your eye on a stock that is well off of its high, be aware that it could very well be further off from its high in the future - especially if its fundamentals aren't the best.

Please note I am not saying "don't buy distressed stocks". Fallen stocks often represent the best opportunities the market has to offer. I can see two ways around this: either let the market carve out the bottom for you before you decide to buy (i.e. the chart has a nice "bounce" established already); or just buy the stock, and be prepared to DCA your position, or bail out altogether, if the stock falls further.

3) Understand, and disprove, the bear case. Bears aren't stupid; they can't be because, by definition, they make up roughly half the market at any given time. But just because they aren't stupid doesn't mean that they aren't wrong at any given time. When you find that the reasons keeping a stock down in the short-term aren't likely to hold up in the long-term, you have a catalyst for that stock to outperform the market.

4) Find a compelling bull case. Beyond the fundamentals, I want my stocks to tell a great story, such as "Google is going to be the first trillion dollar market cap company", or "Baidu is the next Google", or "Under Armour is the next Nike". It's up to you to find the evidence for which such bold proclamations are going to become true, and when you do find that evidence, it becomes a lot easier to own the stock through thick and thin. (For the record, I do own GOOG, BIDU, and UA.)

Tomorrow I'll look at the sell side.

My Best Stock Sells Ever

In the final of my series of historical stock trades, it's time to look back at my best sells ever. I can't say I'm particularly proud of these sells; if anything, it's more of a feeling of relief.

As in "man, I'm glad I ditched that stock."

Disclaimer - these are determined from sell point to current. Some of these stocks have recovered in between those two points, in which case I missed an opportunity to dollar-cost-average (DCA) a way into a positive return.

Here they are, my best stock sells ever:

Stock: AES Corp. (AES)
Sale Date/Price: May 2001 @ $43.75
Current Price: $22
% Loss (Annualized % Loss): -51% (-11%)
Divesting Idea: I actually liked the stock, but I needed some cash.
What Happened: Proving once again that it's better to be lucky than good, AES fell below $2 in a little more than a year. It has since bounced back strongly (though nowhere near the level I sold), making for an excellent DCA opportunity missed.

Stock: Pfizer (PFE)
Sale Date/Price: May 2001 @ $43.87
Current Price: $26
% Loss (Annualized % Loss): -42% (-8%)
Divesting Idea: Finally reached the conclusion that Pfizer was a dinosaur/old-news/played-out big pharma company. Also, I needed some cash.
What Happened: Pfizer's pipeline has dried up, and along with the rest of big pharma, has become nearly irrelevant as compared to biotech.

Stock: Standard Pacific (SPF)
Sale Date/Price: March 2006 @ $32.84
Current Price: $19
% Loss (Annualized % Loss): -43% (-35%)
Divesting Idea: Was spooked by talk of the "housing bubble", and after a decline of 34% from it's high, I decided to take profits.
What Happened: The housing bubble definitely burst, and homebuilder stocks fell further.

Stock: Headwaters (HW)
Sale Date/Price: November 2006 @ $24.30
Current Price: $17
% Loss (Annualized % Loss): -28% (-41%)
Divesting Idea: After initially buying at $35 and DCA-ing down to $30, the stock just continued to slide...and slide....and slide some more. Sometimes, you just have to admit you don't know what's going on with a stock, other than "the market hates it". I sold.
What Happened: The market continued to hate this building material/coal/alternative energy company. Hmm, maybe that mish-mash of businesses is a clue why.

Stock: Interstate Bakeries (IBCIQ.PK)
Sale Date/Price: November 2005 @ $8.55
Current Price: $2.50
% Loss (Annualized % Loss): -71% (-53%)
Divesting Idea: After buying, it quickly fell nearly 20% in two months. I like Twinkies and Ding-Dongs just as much as the next guy, but that doesn't mean I was going to own the stock.
What Happened: The turnaround that didn't happen before, hasn't happened since.

And, finally, my best stock sell ever - a little bit of redemption from a really bad buy:

Stock: ATA Holdings (ATAH)
Sale Date/Price: May 2005 @ $0.91
Current Price: n/a
% Loss: -100%
Divesting Idea: This airline's prospects were as ill-destined as Oceanic Flight 815.
What Happened: The company went bankrupt, and the common became worthless. Yea!!

I'll write about some philosophies/lessons learned from all my trades, next week.

My Worst Stock Sells Ever

Back to the humiliation.

Is there anything harder in stock investing than deciding when to sell? Either you have a winner, and would like to be "prudent" and take some profits, even though you risk giving up on even greater profits. Or you're stuck with a loser, and "prudence" calls for cutting your losses, though that entails buying high and selling low, a surefire way not to make money.

And, sure, they are just pieces of paper, but you love these stocks. You don't want to abandon them when they've been so good to you, or are going through some hard times.

Or maybe that's just me.

Disclaimer - these are determined from sell point to current or buyout. Some of these stocks have dipped in between those two points, in which case I missed an opportunity to dollar-cost-average (DCA) a way into even bigger gains.

Here are my worst stock sells ever:

Stock: Kos Pharmaceuticals (KOSP)
Sale Date/Price: January 2006 @ $49.56
Buyout Date/Price: November 2006 @ $78.00
% Gain (Annualized % Gain): 57% (35%)
Divesting Idea: I had watched KOSP fall nearly 37% from its high, and panicked, selling at a slight profit. After all, Kos was just a one-trick pony (cholesterol drugs).
What Happened Instead: That one-trick pony was coveted by Abbott Labs, which bought them out less than a year after I sold.

Stock: Sanderson Farms (SAFM)
Sale Date/Price: January 2006 @ $26.90
Current Price: $44
% Gain (Annualized % Gain): 64% (41%)
Divesting Idea: Another unbearable price fall (45% from its high), and right around the time of the bird-flu epidemic. I decided that my position was too small and didn't want to add to it, so I exited completely.
What Happened Instead: The bird-flu scare passed, chicken prices went up again, and the stock rebounded nicely. Too bad I was chicken s#!t when it came to buying low on this stock.

Stock: Corning (GLW)
Sale Date/Price: June 2006 @ $19.30
Current Price: $26
% Gain (Annualized % Gain): 32% (36%)
Divesting Idea: I had a great run, but the stock had fallen 35% from its high, and there were reports of falling demand and increasing supply of flat-panel glass. I wanted to lock in my profits.
What Happened Instead: Prudence didn't pay off here, as demand for glass snapped back, and the stock recovered.

Stock: Constellation Brands (STZ)
Sale Date/Price: March 2007 @ $19.16
Current Price: $24
% Gain (Annualized % Gain): 25% (112%)
Divesting Idea: There was a supposed grape glut, and Constellation was aggressively buying up vineyards and racking up debt. The stock fell 38% from its high, and I decided to lock in a decent 33% gain.
What Happened Instead: It's an unfolding story, but it seems the glut was false, wine consumption is up, and/or Constellation is integrating its acquisitions quite well.

Stock: AmeriCredit (ACF)
Sale Date/Price: March 2007 @ $20.89
Current Price: $27
% Gain (Annualized % Gain): 28% (143%)
Divesting Idea: I had held this sub-prime auto lender for nearly four years and was up 117% (23% annualized), but seeing what was happening to sub-prime home lenders (e.g. New Century) at the time, I panicked and sold.
What Happened Instead: The sub-prime crisis was limited to housing (at least so far), and the stock bounced back to near its previous high.

And, the "winner" for my worst stock sell ever:

Stock: Mossimo (MOSS)
Sale Date/Price: May 2005 @ $4.25
Buyout Date/Price: April 2006 @ $8.50
% Gain (Annualized % Gain): 100% (41%)
Divesting Idea: I decided that MOSS was too small and illiquid and was being ignored by the market, and gave up on it.
What Happened Instead: Evidently, the founder of the company agreed with my assessment and announced he was buying the company and taking it private. Shortly thereafter, Cherokee offered a sweetened takeover bid, which was accepted.

Tomorrow, I'll look at my best stock sells ever.

My Best Stock Buys Ever

After beating myself up yesterday, I'm going to pat myself on the back today for some trades well done.

Or maybe I was just lucky. Maybe stock picking is all a big crapshoot, and analysis of the past in the hopes of improving future performance is futile.

For the sake of this post, and my ego, I'm going to pretend that, indeed, perhaps there was some intelligence involved with these purchases...or at the very least, less stupidity than in my other trades.

Disclaimer - these are determined from buy point to sell point. Some of these stocks have since tanked while others have soared - leaving me feeling smart and kicking myself, respectively.

So, here they are, my best stock picks ever:

Stock: PeopleSoft (PSFT)
Purchase Date/Price: August 2004 @ $16.95
Sale Date/Price: November 2004 @ $22.75
% Gain (Annualized % Gain): 34% (229%)
Investing Idea: PeopleSoft was in the middle of fighting off a hostile takeover bid from Oracle, involving "poison pills", trashing Oracle's customer service, and the defensive takeover of another software company (J.D. Edwards). Buying PSFT seemed like a reasonable, though certainly not risk-free, arbitrage situation.
What Happened: PeopleSoft finally capitulated after several sweetened bids, ending one of the most ridiculously over-dramatic takeovers of recent memory.

Stock: USG Corp. (USG)
Purchase Date/Price: September 2004 @ $28.93
Sale Date/Price: June 2006 @ $58.10
% Gain (Annualized % Gain): 101% (49%)
Investing Idea: USG, like many other building materials companies, was in bankruptcy due to asbestos-related litigation. However, they had two strong catalysts: the U.S. housing boom (USG is the leading manufacturer of wallboard), and the willingness of Washington to create an asbestos settlement fund.
What Happened: USG emerged from bankruptcy with a clean balance sheet and more certainty in its asbestos-related claims - and its stock price shot up to $122 before settling down in the $50's, helped by a Warren Buffett-backed stock offering at $40 (which is figured in the purchase and sale prices above).

Stock: Maverick Tube (MVK)
Purchase Date/Price: December 2004 @ $29.71
Sale Date/Price: August 2006 @ $64.26
% Gain (Annualized % Gain): 116% (57%)
Investing Idea: Small, undervalued oil services/infrastructure company, with a great balance sheet and low P/E and PEG metrics.
What Happened: Bought out by Luxembourg-based steel pipe manufacturer Tenaris S.A.

Stock: Southern Copper Corp. (PCU)
Purchase Date/Price: March 2005 @ $26.47 (DCA'd and split-adjusted)
Sale Date/Price: (still own)
% Gain (Annualized % Gain): 257% (74%)
Investing Idea: Attractive because of a large dividend (around 10%) but also a play on copper, which at the time was still a relatively cheap commodity.
What Happened: Copper prices have rocketed, at first due to housing, more recently due to the insatiable appetite of China...and still pays that large dividend to boot.

And my best (and, not surprisingly, favorite) trade ever:

Stock: Corning (GLW)
Purchase Date/Price: June 2001 @ $4.82 (DCA'd twice)
Sale Date/Price: July 2006 @ $19.30
% Gain (Annualized % Gain): 301% (31%)
Investing Idea: At first, was purchased as part of my ill-advised "wow, telecom equipment stocks have fallen a lot...they must be cheap" basket of stocks, along with Ciena and Nortel. Corning was being punished for its fiber-optic cable glut, but the market was completely ignoring its market-leading flat-panel glass segment.
What Happened: LCD monitors and hi-def TV's replaced old CRT's, and the stock rebounded from a low near $1 (and near bankruptcy) to a high of almost $30, and now trades in the mid-$20's.

Corning is my favorite stock story because it really tested my convictions of owning a stock - I just knew the market was wrong, and felt strongly enough to not just keep owning the stock on the way down, but to buy more at a bargain price. It's one of a far-too-few personal experiences of diligence in investing.

I'll continue later in the week with my worst and best stock sells ever.

My Worst Stock Buys Ever

I'm going to write about stocks/investing on here from time to time. But first, like any good investor, I must subject myself to a (virtual) flagellation over trades gone bad.

I not so proudly present to you, my worst stock buys, ever.

Disclaimer - these are determined from buy point to sell point. Some of these stocks have since recovered, in which case I missed an opportunity to dollar-cost-average (DCA) a way out of my self-created mess.

Stock: Altigen Communications (ATGN)
Purchase Date/Price: June 2000 @ $6.25
Sale Date/Price: June 2001 @ $1.15
% Loss (Annualized % Loss): -82% (-81%)
Investing Idea: Pure play on VoIP telephony equipment.
What Happened Instead: VoIP didn't take off (yet), and even so, a tiny company like Altigen wasn't going to the beneficiary, but instead large equipment providers like Cisco.

Stock: MedImmune (MEDI)
Purchase Date/Price: January 2001 @ $49.31
Sale Date/Price: April 2001 @ $34.84
% Loss (Annualized % Loss): -29% (-100%)
Investing Idea: Everybody has to own a biotech, right?? Plus, it had fallen from its high of above $80.
What Happened Instead: Caught a falling knife in a market of falling knives. I could have DCA'd my way into a gain though; it fell as far as the low $20's but now trades at around $58.

Stock: Ciena (CIEN)
Purchase Date/Price: June 2001 @ $36.98; DCA'd to $11.48
Sale Date/Price: June 2003 @ $5.44
% Loss (Annualized % Loss): -53% (-32%)
Investing Idea: Wow, telecom equipment stocks have fallen a lot...they must be cheap.
What Happened Instead: They were cheap for a reason - this was during the height of the "bandwidth glut" (which has subsequently become the "bandwidth shortage"). Meanwhile Ciena was gobbling up companies and burying itself in debt. I was able to reduce the damage through DCA-ing, but not enough to avoid this list.

Stock: Montana Mills (MMX)/Krispy Kreme Doughnuts (KKD)
Purchase Date/Price: June 2002 @ $6.00 MMX (equivalent $40.29 KKD)
Sale Date/Price: November 2003 @ $10.01
% Loss (Annualized % Loss): -75% (-44%)
Investing Idea: A family member wanted to own Montana Mills but didn't have a brokerage account, so they gave me some money and asked me to purchase it for them, which I did.
What Happened: Montana Mills was bought out by Krispy Kreme. I should have sold at that very moment, but held on only to watch Krispy Kreme crash due to rapid over-expansion and dubious income from franchise rights. This was easily my most painful trade of all time - as much as it hurts to lose money, it hurts 100 times more to lose money for your family.

Stock: ATA Holdings (ATAH)
Purchase Date/Price: September 2004 @ $2.36
Sale Date/Price: May 2005 @ $0.91
% Loss (Annualized % Loss): -61% (-100%)
Investing Idea: I could pretend to have a valid justification for buying not just an airline stock, but a bankrupt airline stock, but I won't.
What Happened Instead: The company continued its downward spiral, with a brief blip provided by a deal with Southwest, which, of course, I missed.


And, last and certainly least, my worst trade ever...which happened to be my first trade ever.

Stock: Covad Communications (DVW, used to be COVD)
Purchase Date/Price: August 2000 @ $15.94
Sale Date/Price: June 2001 @ $0.67
% Loss (Annualized % Loss): -96% (-100%)
Investing Idea: Pure play on the impending DSL rollout.
What Happened Instead: Two huge problems here - 1) DSL is an inferior product, and 2) even so, a tiny company like Covad wasn't going to the beneficiary, but instead the Baby Bells.

Yes, letting that run as far down as it did was pure idiocy. Thankfully, not a lot of money was involved.


I'll continue tomorrow with a slightly cheerier subject, my best stock buys ever.