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.
Thursday, June 28, 2007
Tuesday, June 26, 2007
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.
"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.
Monday, June 25, 2007
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.
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.
Friday, June 22, 2007
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.
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.
Thursday, June 21, 2007
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.
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.
Tuesday, June 19, 2007
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.
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.
Monday, June 18, 2007
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.
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.
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