It's Been too Long

Well, it's been far too long since my last post. Unfortunately I've been extremely busy over the last five months and I just haven't had the time to sit down and write. The last five months have been very volatile in the market. In my last post, which was made in late July, I talked about the decision I had made to shift out of the stocks in the Cramer portfolio and move the money into the stocks in the Buffett portfolio. Thank goodness I made that decision when I did. As I have said many times in my investing career, the toughest thing an investor will ever learn is when to sell. Most of us are reluctant to sell a stock that we have a gain in because we're afraid it will go higher after we sell. For some strange reason we're also reluctant to sell a stock that we have a loss in because we're afraid it will go higher after we sell it. I also think it's harder to sell a loser because by closing out the position with a loss, we're, in a way, admitting defeat. That's the decision I was faced with in July. I had a lot of stocks in the Cramer portfolio that were down since I had bought them. I had the choice of selling them and locking in losses or hanging on and hoping that the stocks would rebound. I like to be very open about my trades and I often give the exact buy and sell points but I don't reveal the number of shares. Below is the list of stocks that I have sold since my last post along with the price I sold them at and their closing price as of Friday, December 12th. As you'll see, I made the right decision by selling these stocks.


Apple (AAPL) - Price I sold at: $166.03 - Current Price: $98.27
Burington Northern (BNI) - Price I sold at: $94.37 - Current Price: $71.38
Bucyrus International (BUCY) - Price I sold at: $58 - Current Price: $18.72
Chesapeake (CHK) - Price I sold at: $32.75 - Current Price: $16.64
Freeport McMoran Copper & Gold - Price I sold at: $64.75 - Current Price: $22.28
Google (GOOG) - Price I sold at: $411.69 - Current Price: $315.76
Goldman Sachs (GS) - Price I sold at: $99 - Current Price: $67.74
Raytheon (RTN) - Price I sold at: $56.09 - Current Price: $50.80
US Oil Fund (USO) - Price I sold at: $77.81 - Current Price: $38.10
US Steel (X) - Price I sold at: $141 - Current Price: $39.03

I also sold Eaton Vance Tax Advantaged Dividend Income Fund (EVT) at $18.37. It's closing price on the 14th was $10.72. This closed end fund was listed in the Buffett portfolio. I kept two stocks in the Cramer portfolio, Teva Pharmaceuticals (TEVA) and Wal Mart (WMT) because I felt these stocks were much safer than the other Cramer stocks, most of which were tied to commodities. That turned out to be a good move as these two stocks have held up well recently. Another fortunate move I made was to significantly increase my exposure to the Ultrashort DOW ETF (DXD) which seeks to perform at twice the rate of the DOW Jones Industrial average, just in the opposite direction. This is a holding that I've owned since late 2007. However, I never reported on it before because I always thought of it as an insurance policy rather than a holding in the portfolio. It certainly saved me from even greater losses when the mrket turned really nasty in September. Hopefully, I'll be back sonner rather than later to post some more.

Sunday, July 27th, 2008 Update

I haven't been able to post anything in over two weeks. I was on vacation for awhile and then I was really busy after getting back home. The last two weeks in the market have been really volatile. Unfortunately, my portfolio has not fared as well as I would like. I have always said that I don't mind for my portfolio to be up less than the overall market on the up days, as long as it's not down more than the overall market on the down days. Lately, that's exactly what I've seen all too often. It has pointed out to me that I've got too much risk in my portfolio and it's time to step back and not only look at the individual stocks that I own, but my overall investing philosophy. Fortunately, I've had a lot of time to think since my last post. I've come to the conclusion, that I need to do three things 1) reduce the number of stocks in the portfolio 2) make the Warren Buffet stocks a greater percentage of the portfolio 3) be more aggressive in writing covered calls and naked puts to generate current income. Right now, I own sixteen stocks with six of them in the Buffet portfolio and ten in the Cramer portfolio. I will start to liquidate most of the stocks in the Cramer portfolio as I feel the timing is right and use this money to invest in the Buffet stocks. New purchases of Buffet stocks will be done in combination with the sale of covered calls. Since these stocks are not nearly as volatile as the overall market, the idea is that I'll be able to bring in some cash by using the new shares as collateral. This upside is that I lower my cost basis on shares of stocks that I like and the downside is that I get called out and don't realize all of the gains that I could have. Since I will not sell covered calls against my entire position of any one stock, I will always have some shares available to participate in any rally. I will also use naked puts as a way to either generate income (put finishes out of the money) or allow myself to buy into a stock at a good price. I think this new strategy will help cut down on the volatility in the portfolio as well as help me achieve the goal of my investing philosophy: To build a portfolio that 1) generates long-term capital appreciation and current income 2) outperforms in a down market even though it may lag in an up market.

Friday, July 11th, 2008 Update

I've been getting ready for vacation this week, so I haven't had a lot of time to post messages. The short update on my portfolio is that I lost ground to both the DOW and the S&P on Tuesday, then beat both of them on Wednesday and Thursday. Lately, I've been looking at the stocks I have sold this year to see where they traded after I sold them. Let's just say I'm very happy I sold most of them. One of the things I have said for a long time is that the toughest thing you'll ever learn related to investing is when to sell. Sometimes, this means taking a loss before it turns into a bigger loss. I'll talk about this more when I have time. I'll be on vacation the next week and will probably not be able to post much if at all.

Monday, July 7th, 2008 Recap

It was another down day for the major averages as the DOW dropped .5% and the S&P 500 dropped .9%. My portfolio managed to outperform both indexes with a .49% loss. Frankly, I'm getting tired of beating the averages in this manner. Unfortunately, I don't see an end to the poor market action just yet. The only real news of the day was the drop in oil prices and how the market failed to rally on that. Crude finished down about $4 per barrel on the day. Tomorrow Alcoa (AA) will kick off the earnings season with their second quarter earnings report. The company is sure to disappoint as they always do.

New Specific to my portfolio:
Altria (MO) was the biggest winner today trading up 2%. Since I can find no news to attribute the move to, I'm assuming this was probably just a bounce from last week's selloff which was puzzling. The biggest loser in the portfolio was Teva Pharmaceuticals which lost 8.5% on the back of a report that revealed a 40 mg dose of Copaxone, one of the few drugs the company has developed on its own, is no more effective against Multiple Sclerosis than the already approved 20 mg dose. I still like this stock, but in this environment, I will wait to see if the stock goes lower before adding to my position. I made two moves today. First, I sold some July 125 calls against my position in Freeport McMoran when the stock was trading around $109 per share this morning. The calls have only nine more trading days to rise about 14% or they will finish out of the money. Since my cost basis is well below $125 per share, I like the risk/reward here. My second move was to unload the shares of US Steel (X) that I bought last Wednesday when the stock dropped over $22 in one day. I decided to take the quick gain and lighten up on my position since the market is trading so poorly lately. I know the company will report great second quarter earnings in just a few weeks, but I am being very cautious at the moment and wanted to raise some cash in case buying opportunities present themselves in the meantime.

Sunday, July 6th, 2008 Weekly Roundup

It was another down week in the market and for my portfolio. The week finished a day earlier than usual as there was no trading on Friday, July 4th. Thursday was a slightly positive day for the market with the DOW and S&P ending the day both in positive territory. My portfolio was also slightly positive, but slightly less positive than the DOW and S&P. That makes my record against the DOW 6-3 and my record against the S&P 2-2. The big news of the week was the European Central Bank's move to raise short term interest rates by .25% and the seemingly never ending string of record-breaking oil prices. I began to raise more cash in my portfolio as it now appears we're headed for certain recession and I just can't see any improvement in the economic outlook or for consumers until we get lower prices at the pump. Hopefully, we will see lower gas prices this Fall. I've read reports of China building up their oil supply because they don't want there to be any shortages while their country is on display during the Olympics. The Olympics don't end until about August, 25th so I don't expect any relief until at least then. Meanwhile, fuel prices have risen so far so fast this year that it has really put a strain on businesses. Many companies have put fuel surcharges in place to offset the higher costs, but this has resulted in slower business. So, I want to sell the stocks in my Jim Cramer portfolio that I think will be hurt by this scenario and look for new stocks that are either unaffected or actually benefit from the current environment.

Warren Buffet Portfolio

Eaton Vance Tax Advantaged Dividend Income Fund (EVT) $23.01 - This closed end fund tends to track the market and it did so this week going lower. The two biggest sectors owned by the fund, energy and financials, are somewhat offsetting each other at the moment, but the remainder of the portfolio has been hurt by the downward direction of the market. The fund yields almost 8% so if it continues much lower, I will have to step in and add to my position.

General Electric (GE) $26.91 - The company will announce second quarter earnings on Friday. I'm expecting a decent report, but nothing that will cause investors to come flooding back into the stock. Lately, the company has been focusing on cutting costs and selling off their slower growth businesses such as their appliances division. I wish the company would change their name from General Electric to "Green Energy" as they are making a real push into green technologies. They are also using their NBC affiliates to push the idea to the general public and it's now somewhat "hip" to be green. GE also announced today that it would byuy "The eather Channel" and the weather.com website. "The Weather Channel" has also started made a push towards green programming. so I can see where this is going. For now, I'm happy to be getting a chance to buy at historically low prices. I'm not sure how long the sale will last, but as the stock goes lower I will add to my position. I will add to my position if the stock trades down to $25.

Coca Cola (KO) $51.48 - Hopefully, the stock is finding a bottom here in the low 50's. It's been drifting lower for several weeks and has been hurt recently by announcements of slowing growth from international bottlers. I believe the weaker dollar will offset the slowing growth and the company will be able to make earnings projections for this quarter. KO has long been seen as a safe haven among stocks when the economy slowed so I think the stock will start to hold up better even if the market continues to weaken.

McDonald's (MCD) $57.19 - The company is benefiting from consumers trading down and the weaker dollar is also helping. They have announced good same store sales growth for each of the first two months in the second quarter, so I expect a good report when second quarter earnings are announced soon.

Altria (MO) $20.12 - The stock suffered this week after a report came out that the government may outlaw sales of menthol cigarettes. I've read that MO doesn't have any exposure in this area, but the stock got hit anyway. Whether the company sells menthol cigarettes or not, I don't think this will hurt earnings because I can't see people switching from menthols to nothing. I want to buy more shares if the stock drops to $19.75.

US Bancorp (USB) $27.67 - The stock has been hurt lately by other banks' woes. To me, this looks bullish for USB. I'm not sure why this best-of-breed regional bank has gotten sold off as much as it has, but it's giving me a chance to add to my position while the stock is yielding over 6%. If the stock falls to $27, I will add to my position.

I will be back later to finish the rest of my report.

Wednesday, July 2nd, 2008 Recap

It was an ugly day in the market with the DOW being down 1.46% to 11,215.51 and the S&P 500 trading down 1.82% to 1261.52. Several of the commodity related stocks were hurt today although the commodities themselves did well. Oil & copper were both up today but the stocks related to those commodities didn't fare as well. This is very confusing to me because commodity stocks should rally when the commodities they sell go higher. Also, the near term news is expected to be bullish for commodities as the ECB is expected to raise interest rates tomorrow. This should weaken the dollar further and provide more support to already strong commodity prices. I don't understand how this could be bearish for these stocks, but it definitely was today. Tomorrow was already setting up to be a bad day in the market, but now I really have to wonder how bad it will be if the stocks that should be rallying can't rally.

News specific to my portfolio:
My portfolio was down 1.8% today so it outperformed the S&P, but not the DOW. That brings my record against the S&P to 2-1 and against the DOW I'm now 6-2. I had two big losers in the portfolio today. US Steel (X) and Bucyrus International (BUCY). The news that I have been getting about the steel sector says that the steel companies have been raising prices like mad and they are still doing good business. The coal companies have been doing well because of short supplies and rising prices as well. I know both of these companies will announce great earnings for the second quarter, but since the stock market is more of a forward looking vehicle, the perception of what the company will do going forward is always more important than what the company has done in the past. A couple of days ago I was talking about X nearing $200. Today it closed just above $153 per share and is down over $43 in the last week. That seems very excessive to me, but the stock may go down more tomorrow. BUCY has not sold off quite as much as X, but it is still way off of its highs. I still believe in the story for both of these stocks, but I've learned over the years not to get in the way when the market tells you that you're wrong. Swift action may be required to avoid losing even more. Hopefully, the market will turn in our favor.

Tuesday, July 1st, 2008 Recap

I've been away for a few days. I was unable to do my usual weekly roundup and I was not able to make a post yesterday. On Friday, my portfolio outperformed the DOW as it was down only .5% compared to a 1% drop for the DOW. On Monday, my portfolio again outperformed the DOW with a .35% gain versus a fractional gain in the DOW. This ran my record against the DOW to 6-0. On Monday, I began tracking my portfolio against the S&P 500 index. I started with a win for a 1-0 record. Today was a different story as my portfolio was down about .1% against gains in both the DOW and the S&P. This makes my record against these indexes 6-1 and 1-1 respectively. There wasn't a lot of news on the day, but the DOW went for a wild ride. By late morning, the DOW had dropped more than 100 points below yesterday's close twice with a trip into positive territory sandwiched in between. At the closing bell, the DOW was up 32 points.

News specific to my portfolio:
Since I haven't made an entry since last Thursday, I wanted to mention that I sold out of Apple (AAPL) and Raytheon (RTN) on Friday. I like both stocks and I will probably regret selling them, but I just felt it was time to get rid of both given the near-term outlook. First, with AAPL I fear that they will not be able to sell as many new iphones as originally predicted. Gas and food prices have continued to rise and I think we will see more food inflation in the coming months as companies start to pass on price increases to the consumer. There are many factors that have been driving the oil market higher and it's uncertain whether this will continue or not. Either way, gas prices are elevated and iot appears they will stay that way even if prices drop. To me, this all says less spending by consumers on things like the iphone. In RTN's case I'm afraid the upside will be limited until after the Presidential election. The current polls are showing Obama leading McCain and this is perceived to be bad for defense spending in general. I continue to believe that RTN can increase earnings by selling to foreign countries, but the U.S. defense budget is by far the largest in the world and this is what is driving the stock price at the moment. Today, Teva Pharmaceuticals (TEVA) was my biggest gainer tacking on 2.6%. However, we'll have to keep an eye on this one tomorrow as after the bell the company announced they had lost a patent dispute against Astrazenica (AZN). Both Bucyrus International (BUCY) and Chesapeake Energy (CHK) were big winners today advancing more than 2%. Tomorrow will be an interesting day for CHK. After the market closed, they announced a joint venture with Plains Exploration. The deal seems pretty sweet for CHK as they sold 20% of the land they have in the Haynesville Shale to Plains for $1.65 billion and also agreed that Plains would pay money to drill wells for CHK. Apparently, other investors agreed with me as the stock traded up to $70.75 in after hours trading. This represented a $3.39 move beyond the closing price. US Steel (X) was the biggest loser on the day dropping over 5%. Apparently, investors were in the mood to sell steel stocks as the whole group suffered. I want to buy more of this stock if it drops below $170 per share. The steel companies have pricing power right now and I think this will be shown in the next quarter's earnings reports. One concern about the steel sector has been increasing input costs. This is where X has a bit of an advantage as they own most if not all of their supply chain. I look for this stock to go above $200 soon and still higher as we move toward the end of the year.

Thursday, June 26th, 2008 Recap

Today was a crummy day in the market. The DOW was down 358 points closing at 11,453. There was just a lot of bad news for traders to sell on. We had the RIMM and Oracle news from yesterday and then Oil was way up as well. It also didn't help that Goldman Sachs downgraded both Citigroup and General Motors to a sell rating. June has now officially become the worst month for the stock market since the great depression. My portfolio again outperformed the DOW as it was down just short of 2% and the DOW was down a little more than 3%. However, this is little consolation. I never like to lose money, but 2% of your portfolio in one day is especially tough to swallow. The two biggest losers in my portfolio were GE and Apple which were both down more than 5%. I had only two winners, Teva Pharmaceuticals and the US Oil Fund (USO).

Wednesday, June 25th, 2008 Recap

The market was plagued by another late day selloff which erased earlier gains. When the dust settled, the DOW was up only 4 points closing at 11,812. The decline started shortly after the Fed announced no change in the Fed Funds Rate. Early in the day oil, natural gas and all the energy names sold off while the financials rallied. After the Fed announcement, everything turned around as oil, natural gas and all the energy names rallied into the close while the financials sold off. Before the bell Monsanto (MON) announced earnings that exceeded expectations, but the stock was down on the day. Apparently, the guidance going forward was not enough to spark a further rally. This stock has been on fire for the last several months and I have wanted to add the name to my portfolio for some time, but there just hasn't been enough of a pullback yet for me to get in. If the stock were to drop to $125, I would pull the trigger. After the bell, Research in Motion (RIMM) and Oracle (ORCL) both announced earnings. RIMM's results were a little short of the market expectations, and the stock sold off about 10% in after-hours trading. Oracle, on the other hand, announced very good earnings, but the stock sold off after hours as the company was cautious on their outlook for the next quarter.

News specific to my portfolio:
My portfolio was up .4% today which again outperformed the DOW. I think I'll start keeping score on a day-to-day basis. This week I'm 3-0, so that's where we'll start the record keeping. The biggest gainer in the portfolio today was Apple (AAPL) which was up more than 4%. There was no particular news on the company today. However, the stock did sell off some in after-hours trading most likely due to the RIMM news. I think you can buy this stock if it falls into the low 170's tomorrow. One other stock of note in the portfolio was US Steel (X). I have been talking a lot about the $185 level because this served as resistance for the stock for the last month or so. On Monday, the stock broke through that level and closed over $190. I think the $185 level now serves as support. Today we got good evidence of that as the stock sold off sharply early in the day, hitting an intraday low of $184.88. The stock bounced off this level hard and finished up 1.29% at $191.96. I still think this stock will see $200 by July, 4th. There was one stock in the portfolio that was a bad underperformer, The Chemical & Mining Company of Chile (SQM). I added the stock to my portfolio yesterday. In Tuesday's report, I mentioned that the stock had been on fire and I wanted to get in, even though I don't normally do that. This proved to be a bad decision and I quickly sold out of my position this morning when the stock dropped under $49. I decided there was a better way to play this than just taking the long side. After selling my shares, I bought one July 50 call and one July 45 put. Basically, I'm betting that the stock will continue to be volatile for the next few weeks. Hopefully, I will be able to sell one of these contracts for enough of a profit to cover the cost of both and still have some money left over. This is a risky strategy, but one I'm willing to try at this time given the volatility of the stock and what I perceive to be cheap premiums on the options. I made one other move today, selling some December 24 calls in Altria (MO). The stock had a nice pop at the open on an upgrade. When I sold the calls, the stock was trading around $21.75. By the end of the day, the stock had dropped closer to $21.25. It's a long time until December, but I feel like I know this stock pretty well and it usually doesn't move that quickly. In the past I have thought about selling calls when I felt the stock moved up too far too fast, but I always decided against it hoping the stock would continue upward. Today, I decided to sell the calls because I felt it would probably go back down in the near term. Only time will tell if I'm right.

Tuesday, June 24th, 2008 Recap

Today was pretty quiet as the DOW was down 35 points to finish at 11,807. The Fed started a two day meeting today and we will get the all-important "statement" along with the announcement on interest rates. Most traders are not expecting a rate change from the Fed, but they are expecting tougher language on inflation in the statement. I agree that the Fed will leave rates unchanged, but I'm not sure what that will mean for the market. Obviously, we're in a tough environment for stocks right now. Inflation is running high and the economy is getting weaker. Hopefully, at some point we'll get some relief on energy prices which is a must if we're going to see things get going again.

News specific to my portfolio:
I was lucky again today as my portfolio was up a little while the DOW was down a little. Yesterday's two biggest winners, Chesapeake Energy (CHK) & Bucyrus International (BUCY), were today's two biggest losers. CHK lost about 3.5% to finish at $65.45 and BUCY was down 2.2% finishing at $75.99. The two biggest winners were US Bancorp (USB), which was up more than 3.5% to finish at $29.93, and Raytheon (RTN) which was up 3.28% to finish at $59.25. I suspect that Nat Gas being down a little gave folks a reason to take some profits in CHK. BUCY has been on a tear, so I suspect a little profit taking on it as well. Both RTN & USB have been down for several consecutive days, so maybe the stocks finally got cheap enough for investors to step in. I can't find any news that would account for the rise in those shares. Today was a fairly active trading day as I made three trades. I was able to buy more Wal Mart (WMT) at $56.50. I feel good about being able to add these shares because I had been waiting for them to come own to my price. In my second trade, I added a new name to the portfolio, Chemical & Mining Company of Chile (SQM). I'l have more about what they do in the weekly roundup. This stock has been moving higher lately and trading volumes have been increasing. This is a big momentum name, which I don't usually like to trade, but I decided to take a chance on this one. The last trade I made was to sell some Big Lots (BIG) short. This is purely on the recommendation of Fast Money's Karen Finerman. She has been right on with her short calls and I feel like she is right on this one as well. I also don't do much shorting, so this will be a little different for me as well.