August Activity

Due to the catalysts at work now and in the near future, I have decided to lighten up the portfolio and go to cash with some holdings. The most obvious candidates to me were the lower yielding blue chips where I was at or near cost basis or in the red. I sold ED, MCD, KO and PG. I am interested in picking up PG and possibly KO again after the correction which I believe is coming, but at a lower cost basis. We have lots of macro events in the hopper, any one of which can escalate and trigger a pullback. Take your pick-Russia/Ukraine, Iraq air strikes, Fed easing ending in October, Israel and Hamas, mid term elections, Europe entering recession again etc.

I am 1/3 in cash. This is a good time for covered calls.

July addendum

Here is a link to an informative blog which you might enjoy;



http://seekingalpha.com/instablog/5038891-interesting-times/3076305-interesting-times-for-all-commodities-and-investments-chapter-73

Earnings week this week-about 1/3 of the S+P reports earnings. Between that and the turmoil with a passenger plane being shot down and mid east problems we could be in for a rough ride this week.

July Activity - Good Deals Scarce

Even after the feds announced plans to end bond purchases in October, the market still went higher. Personally I was hoping for a pullback so at least I could sell some puts. I did sell one on DE strike $85 a few weeks ago. But it is difficult to spot a good deal now. VLO recently took a big hit but refineries are unpredictable and risky. I plan to hold cash this summer and save each month for the inevitable pullback. I'll be looking for deep value and put selling on businesses I have been watching-OHI, HCP, ED, possibly PFE, TGT or WMT although retailers face stiff online headwinds.

Here is a quote from Tim (see sidebar) that sums it all up in a way anyone, myself included, can understand;

On a relative basis, I'd think about it this way. There are plenty of companies that you can identify as growing north of 10% over the medium term. The trickier part, particularly here in 2014, is finding a company trading at a discount to fair value so you can benefit from P/E expansion as well. 

Thanks for stopping by..

June Activity - Morningstar rocks

Recently picked up some KMI at 33.25, sold and bought back a put on Con Ed with the intent to sell another put at 52.50, August expiration. AAPL is splitting 7 for 1 today and the share price has been shooting up in anticipation. I believe it will be at 92 and change pershare on Monday which should invite more retail investors to buy, putting even more upward pressure on the stock.

Morningstar.com offers the following valuable info for free:

After putting in a stock symbol go to the performance tab then click expanded view. Average the dividend yield for the past 10 years. If you are thinking of buying, try to get a yield higher than this 10 year average.

Click on Industry Peers after entering a stock symbol, then find Fair Value Estimate. This is Morningstar's fair value for that stock.

May Activity - goodbye ARNA

Well, I couldn't take the pain anymore of watching my portfolio get dragged down. After ARNA missed estimates by .02 the stock plummeted some 12%-this after a month of TV advertising and another accumulation on my part. This is the only stock I've owned that has consistently been a solid nonstop loser. My emotions got the better of me and I dumped the stock. It will be a long time before I do that again-invest my hard earned money in a speculation. It is a relief and almost worth the loss in dollars to be rid of it.At least I derived no income from it in the form of dividends-my dividend income stays the same.

Onto bigger and better things. I am about to have CSCO called away and that is ok with me. I am going to take the funds and look closely at a few on my watchlist-KMI, ED, OHI. I am looking forward this next few weeks and will post when changes are made.

April Reading and Research

I plan to read Morningstar, S&P outlook and Valueline regularly from now on for buy and sell ideas. A useful book that is now on my wish list is Paul Wagner's "The Duly Diligent Stock Investor"

http://www.amazon.com/dp/0615708714/ref=wl_it_dp_o_pC_nS_ttl?_encoding=UTF8&colid=3RZ0426V93W98&coliid=IK6JLANKC97AG


The classic investment texts are great (Jeremy Siegel, Ben Graham) but here is a concise book that just tells you how to methodically put together a watch list and then evaluate the list to narrow down the companies. I really want to read this book.

Thanks for stopping by... 

April Activity - trading advice

Picked up some AT+T at 32.50, sold a put for 32 which expired, collected premium. Here's some trading advice, your mileage may vary on this but for me it works....

•  Don't buy at the open, but it is ok to sell at the open. Price action is too weird with the opening frenzy.
• Use a limit order when purchasing stocks that trade with low volume, have big news that affects price, have a big spread between bid and ask price and that you definitely know you want to purchase at that specific price. If you use a market order you will get whatever price is in effect at the moment the transaction occurs-it could be not what you think given the conditions listed above.
• Sell a put option if there is a stock you'd like to own at a specific price but would be ok if you lost the opportunity because the price went up before it hit the strike price. You'd then collect a premium anyway.
• Sell a covered call if there is a stock you already own that you would be ok with selling if it hits a certain price but that you also would not mind continuing to own if it does not. Again, you collect a premium if it never hits the strike price. 
• Use a limit order when selling stocks that trade with low volume, have big news that affects price, have a big spread between bid and ask price and that you definitely know you want to sell at that specific price. If you use a market order you will get whatever price is in effect at the moment the transaction occurs-it could be not what you think.
• Use a market order on stocks with high trading volume, high liquidity, low bid/ask spread (these conditions are the opposite of those listed in the 2nd list entry above) and when you are absolutely positive you want the buy or sell transaction to occur at or within a few cents of the current price.
• Generally, find any excuse you can to not trade; a huge mistake especially for beginners is to overtrade, churn their portfolio and pay excessive transaction fees. Let time do the work-you are getting paid to wait if you are an investor collecting dividends on large cap stocks. I have gotten impatient, traded when I should not have and lost money as a result. If your companies are solid, the current price is irrelevant unless you are a swing trader.

February Activity

The dip we just experienced in the stock market may not be over. The 2008 pullback lasted over a year. I recently added to CVX, JNJ and COP-too soon (but still at fair value). Now I wait. If the pullback continues I will continue adding slowly; these additions just keep increasing my income! Is JNJ or CVX going to cut their dividend? No flipping way! That is why I own them. It doesn't matter how much the market pulls back. It would take an apocalypse to cause the likes of JNJ to cut their dividend.

Buy stocks that pay you for holding them. 

It doesn't take alot of skill to buy XOM at a good value and then do nothing.