First off, while I am by no means celebrating the fact that a former $21 billion company is now worth about $500 million (give or take), it is satisfying to see that when unnecessary, reckless, greedy risks are undertaken (in this case, deriving nearly all cash flows from mortgage-backed securities), and those risks are realized, there are consequences. Let there be no doubt that the market system is healthy and working in that regard.
I myself took on some unnecessary, reckless, greedy risk by investing in MF Global (MF) at $30, and again at the bad-news discount of $20. Seems I was half right: the arbitrage opportunity was that the stock traded above its fair value of $0, and should be sold (or shorted if you're into that).
So yesterday, I put in a trigger to sell all my shares at a limit of $16. That trade was unfortunately never executed today, and next thing I know, the stock is at $4. So using my best charting skills (desperate times call for desperate measures), I waited it out until finally selling at $8.25 - realizing a 69% loss over three lousy months, and earning a sure-fire induction into the next version of my worst stock buys ever list. I took the proceeds and bought some more Goldman Sachs (GS), the only financial stock I'd ever want to own at this point, at $145.
Lessons learned:
The one-third rule. No, really. Aside from high-dividend stocks, breaking this rule is asking to lose money.
Always use market orders, except for thinly-traded stocks. By scrimping on pennies per share, I lost dollars per share today. Not a good risk/reward proposition.
Diversification is a good thing. MF was just one of 18 stocks I owned going into today. If MF was somehow just one of 10 or 5 stocks I owned, like this guy recommends, I'd be feeling a lot worse.
Monday, March 17, 2008
Tuesday, March 11, 2008
Fed Appreciation Day
Saturday: Declared here that "I'll be waiting for capitulation (high-volume, high-volatility, large-percentage indices decline) to put the newly-freed cash to work."
Monday: Observed the CBOE Volatility Index (VIX) rocket up to just shy of 30, and thought to myself, "this seems pretty darn close to capitulation." Added to my existing positions in Terra Nitrogen (TNH) and Foster Wheeler (FWLT) in the late afternoon.
Tuesday: Fed Appreciation Day. Stocks...go...up.
It's worth noting that the stock I exited out of on Thursday, Annaly Capital Management (NLY), popped 17% on Tuesday and is up 7% from where I sold it. Also worth noting that four other stocks I've owned in the past, but don't own now - Countrywide (CFC), Americredit (ACF), First Marblehead (FMD), and lululemon athletica (LULU) - were up double-digit percentages as well.
But all in all, I'll take things as they are. It will be interesting to see where the market goes from here. Like everyone else, I'm hoping Monday was the bottom.
Monday: Observed the CBOE Volatility Index (VIX) rocket up to just shy of 30, and thought to myself, "this seems pretty darn close to capitulation." Added to my existing positions in Terra Nitrogen (TNH) and Foster Wheeler (FWLT) in the late afternoon.
Tuesday: Fed Appreciation Day. Stocks...go...up.
It's worth noting that the stock I exited out of on Thursday, Annaly Capital Management (NLY), popped 17% on Tuesday and is up 7% from where I sold it. Also worth noting that four other stocks I've owned in the past, but don't own now - Countrywide (CFC), Americredit (ACF), First Marblehead (FMD), and lululemon athletica (LULU) - were up double-digit percentages as well.
But all in all, I'll take things as they are. It will be interesting to see where the market goes from here. Like everyone else, I'm hoping Monday was the bottom.
Saturday, March 8, 2008
Exit oNLY
Got out of Annaly Capital Management (NLY) this Thursday, a day it was down 18% on fears it would be subject to margin calls it couldn't meet, sparked by The Carlyle Group and Thornburg Mortgage. Annaly is an extremely well-run company, the best mortgage REIT out there - but in the end, it's still just a mortgage REIT, and it was punished just like the rest. I shouldn't have been hanging on to NLY for this long, when it was a reasonable conclusion that it would be the next domino to fall in the subprime/credit/mortgage bubble/market deleveraging debacle. I'll take my 4% + dividends gain and run away.
I'll be waiting for capitulation (high-volume, high-volatility, large-percentage indices decline) to put the newly-freed cash to work.
I'll be waiting for capitulation (high-volume, high-volatility, large-percentage indices decline) to put the newly-freed cash to work.
Tuesday, March 4, 2008
Stocks Of The Month: AAPL, MF
Several of my portfolio holdings have taken double-digit-percentage beatings of late. Foster Wheeler had a bad earnings miss. NVIDIA disappointed on forecasted operating expenses. Goldman Sachs is down nearly 40% from its high on Halloween. Once-mighty Google is currently trading at its 52-week low. Everything is on sale!
I've decided to reinforce my current positions in Apple and MF Global, which were previous picks from September and December 2007, respectively.
Apple, along with Google, finds itself in the unusual position of being a value stock, with a forward P/E of just 20, and $18 billion of cash and no debt on the balance sheet. I believe there is still plenty of iPhone and Mac growth ahead.
MF Global has been punished for a "rogue wheat trader" who cost the company $141.5 million. Consequently, the stock has lost $1.2 billion in market value, as investors are concerned about the perceived lack of risk management. Seems excessive for a likely one-time event that doesn't affect the fundamental story of the company, and a quasi-arbitrage opportunity as the stock should return to its previous levels.
Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.
Southern Copper (PCU) 12.63%
Dominion Resources Black Warrior Trust (DOM) 12.25%
Fording Canadian Coal (FDG) 9.66%
Google (GOOG) 5.99%
Annaly Capital Management (NLY) 5.98%
American Capital Strategies (ACAS) 5.30%
Tidewater (TDW) 5.27%
MF Global (MF) 4.90%
Apache (APA) 4.64%
Apple (AAPL) 4.62%
Goldman Sachs (GS) 4.41%
MEMC Electronic Materials (WFR) 4.22%
Frontline (FRO) 3.78%
NVIDIA (NVDA) 3.67%
Alliance Resource Partners (ARLP) 2.76%
Terra Nitrogen (TNH) 2.72%
Ace Limited (ACE) 2.56%
Nokia (NOK) 2.44%
Foster Wheeler (FWLT) 2.18%
I've decided to reinforce my current positions in Apple and MF Global, which were previous picks from September and December 2007, respectively.
Apple, along with Google, finds itself in the unusual position of being a value stock, with a forward P/E of just 20, and $18 billion of cash and no debt on the balance sheet. I believe there is still plenty of iPhone and Mac growth ahead.
MF Global has been punished for a "rogue wheat trader" who cost the company $141.5 million. Consequently, the stock has lost $1.2 billion in market value, as investors are concerned about the perceived lack of risk management. Seems excessive for a likely one-time event that doesn't affect the fundamental story of the company, and a quasi-arbitrage opportunity as the stock should return to its previous levels.
Here's my current portfolio. As always, I believe in all of these stocks - until I sell them.
Southern Copper (PCU) 12.63%
Dominion Resources Black Warrior Trust (DOM) 12.25%
Fording Canadian Coal (FDG) 9.66%
Google (GOOG) 5.99%
Annaly Capital Management (NLY) 5.98%
American Capital Strategies (ACAS) 5.30%
Tidewater (TDW) 5.27%
MF Global (MF) 4.90%
Apache (APA) 4.64%
Apple (AAPL) 4.62%
Goldman Sachs (GS) 4.41%
MEMC Electronic Materials (WFR) 4.22%
Frontline (FRO) 3.78%
NVIDIA (NVDA) 3.67%
Alliance Resource Partners (ARLP) 2.76%
Terra Nitrogen (TNH) 2.72%
Ace Limited (ACE) 2.56%
Nokia (NOK) 2.44%
Foster Wheeler (FWLT) 2.18%
Subscribe to:
Posts (Atom)