Wednesday, August 24, 2011
Although I have yet to finish going through everything I owned (at the point of starting this blog), I would be remiss if I did not comment on the ridiculousness of the last couple of weeks. After the dust cleared, I find myself down about 9%. Now, during the last "crisis", I accumulated as much as I could. After dropping over 1000 points in recent days due to, among other thing, the "Obama" downgrade (pissing 5 trillion dollars of borrowed money down the toilet while simultaneously killing any chance of growth is responsible more than anything for our country's first downgrade in its history). I know, part of that 5 trillion dollars of borrowed money was a down payment on our transformation to the "Green Economy" - and notice all the "Green Stocks" I own, making money hand over foot on wind farms - and the rest was spent on an ingenious plan to maintain the "Permament Democratic Majority", or, in other words, buy votes in swing districts. However, a lot of that loss is due to the very real sovereign debt problem of Europe, although, rest assured, a famous Nobel prize winning economist assures us the social democracy of Europe is running like a charm (they just give those things away to any brain dead moron, don't they).
Anyway, I digress ... with the very real sovereign debt problems in Europe slowing down any global economic expansion, Financials and Energy stocks took big big hits. Since one should "Buy low", looking for long positions in financials and energy may be advised. Now, in my opinion, you need to be real long in financials to make that a buy as its going to get a whole lot worse before it gets better, but energy stocks might be the way to go. My own holding of Walter took it hugely on the chin making me regret the stop order I canceled, but even Walter has gone back up over 7% since its precipitous drop 2 weeks ago. One thing I did NOT do was "sell to stop the bleeding". One thing to be noted though, is that our anemic 0.4% growth last quarter contributed to the big recent losses. Predicting these slow quartesr (or dare I say it, contractions) beforehand may be a signal to sell, then jump back in after the dust clears.
Now, back to our regularly scheduled program and the next stock I own in the wild and wooly world of ... Financials. I do own Wells Fargo and feel extremely fortunate that I dumped my Bank of America and Citibank months ago (BAC at $13 - it now trades near $6 and C at $40, it now trades near $25). I traded in those dogs for this one for one fairly simple reason ... piggyback investing! There is no shame in piggyback investing and in the last two years I have hitched my horse to the Oracle of Omaha himself, Warren Buffet with, excepting this one, very good success. In the last 2 years I've bought and sold with Mr. Buffet, CarMax, NRG, and Nalco. With NRG, I learned two valuable lessons. First, NRG skyrocketed when Exelon wanted to buy them out. NRG resisted believing they were worth even more than their offer. I trusted that assessment and watched the buyout fail and the stock plummet. Lesson learned, a buyout offer comes, sell when the stock price is inflated (see Continucare). Next lesson, Warren Buffet sold his NRG stock and again, looking at under 10 P/E ratios, I held. The stock fell. When WB dumped Nalco, I dumped it the next day, despite my fondness for it. These days, WB bought up tons of Wells Fargo, until it made up 20% of his portfolio. Wells Fargo is currently the only piggyback stock I own of Mr. Buffets as I believe he has recently lost it, becoming way to emotionally invested in his buddy Big O and clinging to the belief that he won't continue to be a failure. I also like John Paulsen for piggyback investing and recently started looking into the Auerx fund picks for future piggyback investing. For now, I'll stick long, really long with Wells Fargo.
Tuesday, August 2, 2011
Archer Daniels Midland (ADM) is one of the largest agricultural companies in the world. As a strong proponent of investing in company's that profit off things with intrinsic value, I believe ADM or other such agribusinesses should be a part of everyone's portfolio. At $30 a share and trading at multiples of under 10, I consider ADM a buy and accumulate. Having not missed paying a dividend in decades also works in ADMs favor. In fact, ADM is down recently, probably, I'm guessing, from the recent calls to end ethanol subsidies. I for one (in addition to being against the ethanol subsidies, despite my stake in it) believe this is a very short term issue and ADM, with their vast ability to diversify, will be back up soon enough. Of course, being located in the second worst state for doing business (Illinois) may not help either with short term outlooks, especially with class warfare rhetoric from their current Governor. Indeed, it looks as if tax increases were responsible for ADM missing their most recent quarterly profit expectations.
You may have heard of ADM thanks to the recent Matt Damon movie "The Informant" and their price fixing scandal in the early 90's. I'm fairly confidant that those price fixing days are behind them.
ADM is another stock I've nearly doubled my stake off of as one of the "blue chips" I purchased during the height of the Lehman Brother's, "The sky is falling, the sky is falling", stock market "crash". This one was chosen by my wife after reading "The Omnivores Dilemma". I don't know what you got out of that book, but my wife got "Buy Archer Daniels Midland!" out of it.
Archer Daniels Midland started in 1902 as Archer-Daniels, a linseed crushing company based out of Minnesota. With the acquisition of the Midland Linseed Product company, Archer Daniels Midland was first incorporated and, dare I say it, born. Systematically and deliberately growing and expanding into many agribusiness facets, ADM has systematically added such agriproducts as soybeans, corn, and cocoa to its agri-portfolio, and now is the premier company for linking the farmers raw products to the consumer. Along with RIG, ADM is another stock I may accumulate more of, especially at $30. However, I also like Mosaic (MOS) as an alternative to one's agribusiness portion of their portfolio.