Know when to hold them, know when to fold them

This market requires traders to get in a rhythm and longer term investors to buy and hold on the dips like yesterday and today.  The most important thing is do your home work,  look at earnings going forward and looking back, revenue growth and book value.  There are aways screaming buys in the equities market, you just have to get in the flow.  Buy on dips.  

ibm

It has broken below 130 and is very close to a support trend line this morning.  It may be a good time to stick your toe in the water/

IBM

IBM is down almost 2% in after hours trading.  I would not jump at it tomorrow.  Give it some time to digest and see what they have that is new that can take the stock higher.  If you traded out today, you are in the money

IBM

Looks like IBM has been driven up quite a bit in the last week and is at resistance. I traded out of some 125 July Calls this afternoon as I think we will see an INTEL style pull back on the great earnings that everyone is expecting on IBM/   I still think she has a way to go in the next quarter or so, but I think you may get a great buying or buy back opportunity in the next day or so.  

  

Alcoa Looking Good

Alcoa was the first to report earnings and they surely looked good to me.  The market will be coming to this stock in the next few months.  The market was expecting earnings of .06 per share on earnings of 4.82 bil revenue. What they got was rev of 5.4Bil but the per share was only .01

I expect earnings to continue to improve as auto building, aeroplane construction and infrastructure demand increase worldwide.

Remember Alcoa dropped like a rock last year and it is now a very tight rubber band.  Look for some great price appreciation as the year progresses.

My Alcoa position is up 33 % over the last 8 months or so.   I am adding to my position at the lower price on Tuesday. 

Hey, their revenue was almost $500 mil over estimates.  They expensed items this quarter and that hit the per share earning.  This is a screaming buy.  Get my drift.

Stocks should show some solid top line earnings

It is the beginning of the earnings reports for the fourth quarter and I am expecting some pretty good reports.  These positives should propel the market even higher, but selective buying at these levels is a must.  Know what you are investing in and be convinced by your research that the momentum is going to be there to carry your portfolio to new heights.  GE, Alcoa, IBM are my favs for this week.  

If you are getting nervous and want to move some money to bonds, please don't.  It is okay to sell and take some money off the table, but stick with the low yielding money markets as a place to reinvest.  I am very leery of bond funds or individual long term (over five year) bonds right now because as interest rates start their march higher in the next few months, the value of your principal will will decline at a rate greater than your interest return   Be careful.

Airlines fly high, IBM looking good

As I pointed out a few days ago, you buy airlines on bad news.  Sell when they start to discount. I hope some of you bought some last week when they were weak due to the security scare.  Well guess what they raised fares and the stock prices rose by 10% Plus today on the ones I recommended.  You may have missed a great opportunity, but all is not lost.  Buy on dips going forward and reap some good returns.  

IBM pulled back today, but they are scheduled to report fourth quarter earnings on the 19th of Jan.  They beat third quarter by a penny or so and I expect even with the huge earnings number estimated for the fourth quarter they will beat that as well.  I am looking for a price target of at least 135 by mid March.  Tomorrow may be a great buying opportunity for this bluest of blue chips.

First time Home buyer

Q:  I currently rent in southern california, I have received a settlement that will give me some money for a down payment is this a good time to buy?

A:  The question really is can you afford the monthly mortgage payment.  Currently bungalow style houses in your area are priced at around $275,000 for an 800-1000 square foot home.  That is down from over $400 K just a couple of years ago.  Your settlement and the current $8,000 first time tax credit means you will finance around $250,000.  At todays rate of 5.34% your monthly payment will be about $1350/mo not including tax or insurance escrow.  Tax and Insurance cost are readily available from your lender.  (you can pull up a loan calculator off the web)

In summary, You have four things solidly going for you, You have a down payment that is close to 20%, you have a job, it is a buyers market and interest rates are historically very low.  If you can realistically afford the monthly mortgage (which is probably not much more then your current rent)  Buy Buy Buy and  thank you for the question.

Index Funds Vs individual stocks or managed funds

Q:  I have had some Vanguard Index funds for several years diversified by large Cap, Small Cap and International.  I recently did a review and found that even with dollar cost averaging I have only earned about 3% per year.  What do you think?  Capt. John, Nashville

A:  Well Capt. John the good news is that you are ahead for the period, while the S and P is virtually flat for the last ten years. (Gold is flat for thirty years)  But I digress.  Up until just a few years ago, very few fund managers could routinely beat the S & P Averages year after year. The S & P represents 500 stocks of companies with Capitalization from large to small, but no international (about 65% of the income does come from multinational companies).  Anyway what I want to say is:

I love individual stocks and have time to watch the news on them, research competition, and use my gut to tell me when enough is enough. Managed funds like American Funds, Fidelity in various size and sectors will probably out perform the index funds during certain short periods, but they are hampered by the shire number of shares that they have to move in and out of to make a difference in there performance.  Effectively you have hired a manager to move you in and out of individual stocks for you. Your hope is that he (she) is in the right ones at the right time.  The index fund stays in the same stocks except for when a company has been added to or taken out (or reduced ) within  the underlying index.  This means a investment company like Vanguard does not care what the news is in the short term.  These are long term investments.  I believe that continuing with investments in the index funds on the same dollar cost averaging strategy that you have been employing will, by the time you retire (in almost 19 years), give you a very nice nest egg.  

To summarize:

For the investor that is looking for long term positive performance within equity investments, the index fund will continue to shine into the future.  More good news, from what I could ascertain, the majority of non-hedged non-shorting managed mutual funds, fell a greater amount in the June 2008 to March 2009 then did the indexed funds. 

I don't have any money to invest!

You would not believe how many times I have heard that over the years from rich people and poor people.  Some are just telling a big tail, but most are being honest.  The problem is:  whose fault is it you do not have any money to invest?  Look in the mirror.  Just think of all the money you wasted last year or for the last ten years or more on stuff that just did not make a difference in your life.  I am not saying "don't go out and have a good time", because this is not a dress rehearsal.  When you are dead you are dead.  It does not matter how much you have when you die, it matters that you do have money to get there.  What I am saying is: if you do not put some money away every time you get paid, you will never be able to do the things you need to do when you need to do them.  Car repair, home emergency, health emergency, a friend in need, vacation etc.  Let's get on the bandwagon for 2010.  Start saving even a little bit and understand what ever you do save is more than you had before you started.  

With interest rates where they are right now (near zero on most savings accounts) you can put the money in a coffee can and not be losing anything.  After you build some savings then go to a credit union and join up.  

Make it your vow, "I am going to be worth more next year then I am right now."

Now what are you waiting for, go empty the couch, the car, your drawers of all the coins that have taken rest there and take them to the bank and get some folding money for your coffee can.  See you feel better already.

Happy New Year