It's an hour before market close, and it's been a wild Wednesday. The market peaked nearly 1.5-2% (depending on the index) half way through the day, and has plummeted down .5-1% (again, depending on the index). I've seen huge changes in my portfolio personally. The volatility can be nice, in that if you're active you can trade around it and turn a profit even if the market doesn't go much of anywhere. I've been caught more on the downside today, but I did do the prudent thing and trimmed 4-5 positions into this morning's strength and have added to 3-4 in the late afternoon weakness.
Let's see, I trimmed positions in ARG, DEO, JNJ, LOW, MA, and MRVL into the strength. I didn't close out any of the positions, but I had profits to protect and all of those were either getting somewhat close to my price targets or I felt the positions were too large now based on risk/reward. If they dip down lower I may look to add them back. As one user asked, this is the sort of action I consider 'trimming into strength'. When the market and/or individual stocks surge on no news or catalysts whatsoever, it's often prudent to trim and take some profits. Then, when the stocks pull back, you re-add your position if you care to and keep the profit. Worst case scenario the stock runs, you still have a position, but less of one. Best case scenario it pulls back, you get some profits from market overreaction, and you can buy it back if you choose.
Cramer says this a lot, and I really agree with it. It's arrogant to buy or sell all at once. No one can call exact tops or bottoms. If you think you're good enough to know the exact moment to buy or sell, more power to you. I don't. There are times opportunities present themselves where you must act quickly and decisively, but a vast majority of the time I choose to initiate a position, build it slowly over time with 3 or 4 separate buys, trade around it as it goes up and down adding and trimming to take advantage of volatility, then slowly selling off the position as it approaches my price target unless the thesis changes. I sell in the same 3-4 sells that I did buys, over time.
I also closed out some short term trades. I had a trade in WMT that spiked this morning so I closed it out for a nice quick 3.5% gain. I was also stopped out of 3 other trades, EGN where I protected a 2% gain, SNDK for roughly a 4% loss, and GG for break even.
I also put some money to work today adding to positions in both HAL and GW on this morning's energy downgrades. Energy has been hit really hard with the mild winter in the northeast. Both of these stocks I feel are severely undervalued and will gain long term, so I felt the weakness was a good spot to build my position a little more. First big snow storm in the NE will probably make these pop as well, at which point I might trim some into the strength. Later in the day on the massive decline I added to positions in HLF, PSPT, LWSN, NYX, and SHLD. In some of these cases, I was averaging down my cost basis (the stocks were cheaper than my average purchase price, so buying more brings my average cost down, which as long as I still believe in the stocks is a positive thing). In some of the others I felt they simply fell too much and will look to 'flip' them as they (hopefully) bounce. These are all investment positions, so flipping won't be selling off entirely, but simply trading around (unless I change my thesis on the stocks).
I also initiated trades in SNDK (which I later was stopped out of today for a loss) and PTIE. That's pretty much it. I may do some more today if I see opportunities. Overall it's looking like I'll post a loss today, but unless the indexes do something drastic in the last 40 minutes or so I will have lost significantly less than the indexes. I fell pretty good about my positions. I feel the spike today was out of line, but I feel the later selloff was a bit drastic and panicked. I'm still keeping a close eye on the action to start out the year.
-Rizen
Wednesday, January 3, 2007
Sunday, December 31, 2006
Comments
I didn't notice that I didn't have this blog set up to send me e-mail notification of comments, so I was just assuming there weren't any. Turns out I missed quite a few. I'll go back over the weekend and respond to some as well as fire some e-mails off to those of you that left addresses. Sorry if it seems like I've been ignoring them, I just didn't see them until now.
-Rizen
-Rizen
January 2007
I'll probably make several 'looking forward' posts before the market opens back up on Jan 3. I tend to try and think 3 different ways. What's going to happen in the next month, next quarter, and next year.
For January 07, it's one of the first times in a while that I'm really torn as to what I think will happen. The bull and the bear camps make pretty compelling cases. Bulls think that the end of the year stall is just a stepping stone on a way to new highs. They cite the general lack of inflation, the overall strength of the economy, and relatively modest valuations (in terms of P/E multiples) against the historic averages.
Bears think we'll see a big selloff to start the year as people look to lock in their 06 gains after they no longer have to pay taxes this year on them. They also point to the poor housing market (bulls see a bottom forming, bears think it's going to get much worse), and a theory of 'stagflation' in 2007 where we have stagnant growth and heavy inflation.
So what do I think? Well, overall I'm not very sure. I think we'll see some quick policy changes in Washington as the democratic congress officially takes over. The most notable one being a minimum wage increase, which I believe will put pressure on low-margin retailers such as Wal-Mart and Target. I also believe that when the numbers come in that the holiday season will show record sales but lower than expected profits. I personally saw a lot of sales, and big ticket items this year like big screen televisions were heavily discounted with low margins (anyone who doubts this go look at that Circuit City quarter). I think both discount retail and big box retail will be bad places to be, but there could be some profits to be made in niche and high end retail. Half a stock's movement has to do with its sector though, and it's tough to fight that trend. I definitely won't be looking to add to any retail positions in early 07. I liquidated pretty much all of them towards the end of 06, although I do still hold a position in Sears (SHLD) and Lowe's (LOW). Sears is a long term play for me though and Lowe's always seems tied more to housing than retail.
Speaking of housing, I'm more in the camp that housing is starting to form a bottom now and it won't get much worse before it gets better. I'm actually putting my money where my mouth is because I'm planning on building a house in early 07 since I believe prices won't go much lower. That being said, I don't plan on buying any housing stocks directly, although I may look at stocks tied to housing. Lowe's is a good example, as well as things like American Standard and Black & Decker (neither of which I'm recommending, they're just good examples).
I also believe that some of the large cap technology stocks will do well in early 07. On a yearly cycle, usually January is the time to leave tech, and normally I despise fighting cycles too much (saying 'this time is different' is often a recipe for disaster), we do have a major new product cycle in Microsoft Vista that could drive a push in some of the larger technology names, especially those tied to networking and PC Hardware. The at home PC business has become such low margin I wouldn't recommend making a play on that, but looking at what companies may benefit the most as businesses upgrade to Vista may be a great play for 2007.
I think the drugs/pharma sector will be an interesting one to watch. I think January will be a good tell on if these stocks will be good for 07. The main downward pressure on them right now is that no one knows what the new democratic congress will do. They've typically been anti-pharma (and anti-oil) and there have been some talks that they may try and leverage Medicare Part D into favorable pricing from the drug companies, something that the old congress didn't do and allowed the drug companies to make a killing. I personally think that aside from the minimum wage raise and some general stick waving, we won't see much action and that the drug/pharma stocks will enjoy a good 07, but I'm not confident enough in that to put any money there until after I see how January plays out. If it goes as I plan, I think some of the small/mid-cap drug stocks will be the place to be. Not necessarily the 'miracle cure for cancer' type stocks, but mainly the smaller drug companies with strong pipelines and drug patents on strong products that don't expire for a while.
My reasoning is this. Some of the bigger names right now (I'm talking about you Pfizer (PFE) and Bristol-Myers Squibb (BMY)) have patents that expire fairly soon on key drugs and virtually no replacements in the pipeline. They do have a ton of cash though so I think they'll look to build their pipeline by acquiring others. I personally don't like to try and game takeover bids, but I think by finding some high-quality small/mid-cap drug stocks with solid fundamentals, you could do well with or without a takeover this year.
Energy is a tough call for me. Oil is stabilizing some IMO, and I don't think it's a bad place to be, but as the 2008 election campaigns start in force I think we'll see a lot of talk about alternative energy. I personally don't like alternative energy (the stocks that is), so I won't put any money there except for quick trades. I think a key to the whole energy sector will be how the weather works out. We've had a relatively mild winter so far, which has really hurt a lot of the stocks tied to natural gas. I don't like to game the weather, so I'll probably stay away, although I may look to add a high dividend oil stock to my portfolio in early 07.
There are lots of sectors I'm sure I'm not talking about, but those are the ones I have major opinions on. I personally think we could go either way in January. I've repositioned my portfolio in such a way so that a lot of my core holdings are high-dividend stocks or stocks with a big buyback. That puts a nice floor in the downside for me. I'll miss some upside if 07 comes out on fire, but I like my position overall. I also have a higher than usual cash position so that once I get a better feel for how things may play out in the first quarter I can put some of that money to work.
Overall I'm cautiously optimistic, and am mostly positioned that way. I'll really be keeping my eye on how the drug/pharma sector is doing and how the new congress starts out the year. The other sector I'm keeping a close eye on that I haven't talked much about are the banks/financials/brokers. They started to run some at the end of this year and I think there could be some money to be made there. Again though, I don't feel confident enough to put any money to work until I see how things start 07.
-Rizen
For January 07, it's one of the first times in a while that I'm really torn as to what I think will happen. The bull and the bear camps make pretty compelling cases. Bulls think that the end of the year stall is just a stepping stone on a way to new highs. They cite the general lack of inflation, the overall strength of the economy, and relatively modest valuations (in terms of P/E multiples) against the historic averages.
Bears think we'll see a big selloff to start the year as people look to lock in their 06 gains after they no longer have to pay taxes this year on them. They also point to the poor housing market (bulls see a bottom forming, bears think it's going to get much worse), and a theory of 'stagflation' in 2007 where we have stagnant growth and heavy inflation.
So what do I think? Well, overall I'm not very sure. I think we'll see some quick policy changes in Washington as the democratic congress officially takes over. The most notable one being a minimum wage increase, which I believe will put pressure on low-margin retailers such as Wal-Mart and Target. I also believe that when the numbers come in that the holiday season will show record sales but lower than expected profits. I personally saw a lot of sales, and big ticket items this year like big screen televisions were heavily discounted with low margins (anyone who doubts this go look at that Circuit City quarter). I think both discount retail and big box retail will be bad places to be, but there could be some profits to be made in niche and high end retail. Half a stock's movement has to do with its sector though, and it's tough to fight that trend. I definitely won't be looking to add to any retail positions in early 07. I liquidated pretty much all of them towards the end of 06, although I do still hold a position in Sears (SHLD) and Lowe's (LOW). Sears is a long term play for me though and Lowe's always seems tied more to housing than retail.
Speaking of housing, I'm more in the camp that housing is starting to form a bottom now and it won't get much worse before it gets better. I'm actually putting my money where my mouth is because I'm planning on building a house in early 07 since I believe prices won't go much lower. That being said, I don't plan on buying any housing stocks directly, although I may look at stocks tied to housing. Lowe's is a good example, as well as things like American Standard and Black & Decker (neither of which I'm recommending, they're just good examples).
I also believe that some of the large cap technology stocks will do well in early 07. On a yearly cycle, usually January is the time to leave tech, and normally I despise fighting cycles too much (saying 'this time is different' is often a recipe for disaster), we do have a major new product cycle in Microsoft Vista that could drive a push in some of the larger technology names, especially those tied to networking and PC Hardware. The at home PC business has become such low margin I wouldn't recommend making a play on that, but looking at what companies may benefit the most as businesses upgrade to Vista may be a great play for 2007.
I think the drugs/pharma sector will be an interesting one to watch. I think January will be a good tell on if these stocks will be good for 07. The main downward pressure on them right now is that no one knows what the new democratic congress will do. They've typically been anti-pharma (and anti-oil) and there have been some talks that they may try and leverage Medicare Part D into favorable pricing from the drug companies, something that the old congress didn't do and allowed the drug companies to make a killing. I personally think that aside from the minimum wage raise and some general stick waving, we won't see much action and that the drug/pharma stocks will enjoy a good 07, but I'm not confident enough in that to put any money there until after I see how January plays out. If it goes as I plan, I think some of the small/mid-cap drug stocks will be the place to be. Not necessarily the 'miracle cure for cancer' type stocks, but mainly the smaller drug companies with strong pipelines and drug patents on strong products that don't expire for a while.
My reasoning is this. Some of the bigger names right now (I'm talking about you Pfizer (PFE) and Bristol-Myers Squibb (BMY)) have patents that expire fairly soon on key drugs and virtually no replacements in the pipeline. They do have a ton of cash though so I think they'll look to build their pipeline by acquiring others. I personally don't like to try and game takeover bids, but I think by finding some high-quality small/mid-cap drug stocks with solid fundamentals, you could do well with or without a takeover this year.
Energy is a tough call for me. Oil is stabilizing some IMO, and I don't think it's a bad place to be, but as the 2008 election campaigns start in force I think we'll see a lot of talk about alternative energy. I personally don't like alternative energy (the stocks that is), so I won't put any money there except for quick trades. I think a key to the whole energy sector will be how the weather works out. We've had a relatively mild winter so far, which has really hurt a lot of the stocks tied to natural gas. I don't like to game the weather, so I'll probably stay away, although I may look to add a high dividend oil stock to my portfolio in early 07.
There are lots of sectors I'm sure I'm not talking about, but those are the ones I have major opinions on. I personally think we could go either way in January. I've repositioned my portfolio in such a way so that a lot of my core holdings are high-dividend stocks or stocks with a big buyback. That puts a nice floor in the downside for me. I'll miss some upside if 07 comes out on fire, but I like my position overall. I also have a higher than usual cash position so that once I get a better feel for how things may play out in the first quarter I can put some of that money to work.
Overall I'm cautiously optimistic, and am mostly positioned that way. I'll really be keeping my eye on how the drug/pharma sector is doing and how the new congress starts out the year. The other sector I'm keeping a close eye on that I haven't talked much about are the banks/financials/brokers. They started to run some at the end of this year and I think there could be some money to be made there. Again though, I don't feel confident enough to put any money to work until I see how things start 07.
-Rizen
Friday, December 29, 2006
2006 in review
I won't make this super long, and I'll start posting more now that my daughter is born and I'm back in the swing of managing my funds regularly again.
With Q4 and 2006 now officially at a close I thought I'd recap a little bit. For December I had a return of .89% vs the S&Ps 1.72%, and for Q4 I had a return of 7.21% vs the S&Ps 4.85%. I attribute some of my December underperformance to the fact that I didn't get to watch things very closely missing a lot of trading days dealing with the birth of my daughter (which was obviously worth it).
A lot of my outperformance in Q4 came from pretty much perfectly timing the sector rotation out of defense stocks (not like military stocks, but your soups/soaps/cereals stocks like Proctor and Gamble and General Mills) and into technology and retail stocks ahead of the Christmas season. My timing was nearly perfect in getting out of the defense stocks right as they were topping and getting into the technology and defense stocks just 2-3 weeks after they'd started to run.
For the year, I returned 14.44% vs the S&Ps 14.14%. This is a bit misleading because I didn't start managing my own money until July of this year, so I only have 6 months of performance vs the S&Ps 12 months. That being said, I also dodged the horrible May of the year and the first half of 2006 was not near as good as the second half. I still fell I outperformed pretty handily though, and am looking forward to seeing how well I can do in 2007 now that I'm a more 'seasoned' investor.
I'll try and make another post with some thoughts to 2007 before the markets open again on Wednesday. Until then I hope all of you had a good year as well!
-Rizen
With Q4 and 2006 now officially at a close I thought I'd recap a little bit. For December I had a return of .89% vs the S&Ps 1.72%, and for Q4 I had a return of 7.21% vs the S&Ps 4.85%. I attribute some of my December underperformance to the fact that I didn't get to watch things very closely missing a lot of trading days dealing with the birth of my daughter (which was obviously worth it).
A lot of my outperformance in Q4 came from pretty much perfectly timing the sector rotation out of defense stocks (not like military stocks, but your soups/soaps/cereals stocks like Proctor and Gamble and General Mills) and into technology and retail stocks ahead of the Christmas season. My timing was nearly perfect in getting out of the defense stocks right as they were topping and getting into the technology and defense stocks just 2-3 weeks after they'd started to run.
For the year, I returned 14.44% vs the S&Ps 14.14%. This is a bit misleading because I didn't start managing my own money until July of this year, so I only have 6 months of performance vs the S&Ps 12 months. That being said, I also dodged the horrible May of the year and the first half of 2006 was not near as good as the second half. I still fell I outperformed pretty handily though, and am looking forward to seeing how well I can do in 2007 now that I'm a more 'seasoned' investor.
I'll try and make another post with some thoughts to 2007 before the markets open again on Wednesday. Until then I hope all of you had a good year as well!
-Rizen
Tuesday, December 12, 2006
Stock Spotlights
I'm currently in the process of re-evaluating both my watch list and my portfolio holdings. I'm constantly evaluating and re-evaluating positions, and as I feel things start to get out of hand I tend to do a 'clean up'. Right now is one of those times. Since that means I'm doing a lot of research on various stocks, I thought I might share some of my research here. Let me be up front, I use a 1-10 rating system, and I typically stay away from looking at bad stocks altogether, so you'll probably see me not have many ratings below 5 in here. In my system, if a stock receives a 5 rating, it means that I feel about equal to holding it as I would just staying in cash and putting my money in a money market account or short term CD/Bond. A 10 is a stock I will load up on, while a 1 is one I'll stay away from at all costs. I don't short sell, so I won't talk about that, although at some point I may add that to my toolbox, I don't feel comfortable shorting yet.
Also, this is a good chance to say STAY DIVERSIFIED! Even stocks I feel are a 10 will never take up more than 7-8% of my portfolio, and most stocks take up 4-5%. I tend to hold 20-25 stocks at a time for investment purposes, as I believe too many more than that and you just become a giant mutual fund and might as well buy S&P 500 index funds, and too few and you can't be diversified enough. Jim Cramer's books say you need at least 5 stocks to be diversified and he prefers 10, if anyone is curious on that.
Another reminder as well, that this blog is mainly for me to get my thoughts into writing, and is not meant as financial advice for anyone. Do your own homework please and don't blindly take my advice. I've only been at this since June, I do not consider myself a professional, and I'm certainly not qualified to give financial advice to others. This is for entertainment purposes only and as a means for me to discuss my opinions. If it gives people ideas, great, but if anyone goes out and immediately buys anything based on my recommendation or sells based on my thoughts without first doing their own homework, well to be blunt, they're probably stupid.
With all that out of the way, I'll probably be highlighting a few stocks per week as I update my watch list. I'll let you in to a lot of the things I do in my research, and perhaps give you ideas on what to look for in yours.
-Rizen
Also, this is a good chance to say STAY DIVERSIFIED! Even stocks I feel are a 10 will never take up more than 7-8% of my portfolio, and most stocks take up 4-5%. I tend to hold 20-25 stocks at a time for investment purposes, as I believe too many more than that and you just become a giant mutual fund and might as well buy S&P 500 index funds, and too few and you can't be diversified enough. Jim Cramer's books say you need at least 5 stocks to be diversified and he prefers 10, if anyone is curious on that.
Another reminder as well, that this blog is mainly for me to get my thoughts into writing, and is not meant as financial advice for anyone. Do your own homework please and don't blindly take my advice. I've only been at this since June, I do not consider myself a professional, and I'm certainly not qualified to give financial advice to others. This is for entertainment purposes only and as a means for me to discuss my opinions. If it gives people ideas, great, but if anyone goes out and immediately buys anything based on my recommendation or sells based on my thoughts without first doing their own homework, well to be blunt, they're probably stupid.
With all that out of the way, I'll probably be highlighting a few stocks per week as I update my watch list. I'll let you in to a lot of the things I do in my research, and perhaps give you ideas on what to look for in yours.
-Rizen
Tuesday Rundown
Overall it was a slightly down day for the market. FOMC meeting was the key item today, and there was a huge selloff prior to the meeting that caused a rather large dip in the indexes.
I had been talking the other day about how I had a fairly large position in cash now and wasn't sure if I wanted to put it to work or sit on it, well with the selloff today I felt it put a lot of my favorite positions 'on sale' so while I didn't buy at the exact bottom today, I loaded up on a lot of my favorite stocks at a discount on the huge dip today. I'm not going to give reasoning like I do a lot of other days because there were too many to count, but the positions I added to today were: AAPL, ARG, COF, GOOG, HAL, LOW, MA, MRVL, PSPT, and VDSI. Those (plus a couple of others that didn't dip today) are all stocks I have rated '1' in my portfolio. I use Jim Cramer's rating system where 1s are stocks I'd add on to at current prices, 2s are ones I would only add on to at a significant pullback, 3s are stocks I'm looking to trim into strength, and 4s are stocks I'm looking to sell at any cost. I re-rate them every week based on position size, current price, outlook, etc.
At any rate I also initiated two short term trades today in CAAS and SGP, and got stopped out of 3 short term trades in NTES, YRCW, and TEVA on the dip today at a 2-3% loss for each trade.
My portfolio suffered a little more than the indexes did today, primarily due to significant dips in Mastercard and Apple, two stocks I like a lot and have significant parts of my portfolio invested in.
I still have a little bit bigger than normal cash position that I may deploy on further dips, but I'm also comfortable just sitting on it in the current market environment.
-Rizen
I had been talking the other day about how I had a fairly large position in cash now and wasn't sure if I wanted to put it to work or sit on it, well with the selloff today I felt it put a lot of my favorite positions 'on sale' so while I didn't buy at the exact bottom today, I loaded up on a lot of my favorite stocks at a discount on the huge dip today. I'm not going to give reasoning like I do a lot of other days because there were too many to count, but the positions I added to today were: AAPL, ARG, COF, GOOG, HAL, LOW, MA, MRVL, PSPT, and VDSI. Those (plus a couple of others that didn't dip today) are all stocks I have rated '1' in my portfolio. I use Jim Cramer's rating system where 1s are stocks I'd add on to at current prices, 2s are ones I would only add on to at a significant pullback, 3s are stocks I'm looking to trim into strength, and 4s are stocks I'm looking to sell at any cost. I re-rate them every week based on position size, current price, outlook, etc.
At any rate I also initiated two short term trades today in CAAS and SGP, and got stopped out of 3 short term trades in NTES, YRCW, and TEVA on the dip today at a 2-3% loss for each trade.
My portfolio suffered a little more than the indexes did today, primarily due to significant dips in Mastercard and Apple, two stocks I like a lot and have significant parts of my portfolio invested in.
I still have a little bit bigger than normal cash position that I may deploy on further dips, but I'm also comfortable just sitting on it in the current market environment.
-Rizen
Monday, December 11, 2006
Monday Morning
As has been the trend lately, we're up early Monday morning. So far lately between mergers and 'Mutual Fund Monday' for the last 2 months or so just about every Monday I can remember has been a pretty big up day. I haven't done a whole lot today, and I don't anticipate doing a whole lot today except I may trim a few positions into strength.
I did just close out my position in ARDI after it got a takeover bid this weekend. The stock shot up 8% and it was more of a speculative name in my portfolio too. Overally I closed it out with around a 20% gain which I'm quite pleased with. I'm sitting with a larger than usual cash position in my portfolio of about 20%. Normally I'd be looking to put that to work, but I don't anticipate doing anything today. If I do anything it will be later this week on a pullback, and I'm going to try and get a shopping list prepared today of some stocks that should they pull back I'll be ready to pull the trigger on.
I'm going to be very picky about what I go into right now though (not that I'm not always picky). I really think that we're going to see mostly churn for the rest of 2006 with overall very little up or down until then, although I think the ride will be very choppy up until then, so I may make some short term trades to take advantage of volatility.
I've been continuing to trim a lot of my video game, technology, and some retail exposure. I feel like video games and technology as sectors are starting to get a bit played out and have had huge gains worth protecting. We're at a point in the business cycle where the playbook says to buy retailers, but I have some big concerns over the retail sector due to the minimum wage increase I think we're very likely to see in early January. I also think the business cycle and the calendar cycle caused people to get into retail earlier than normal in anticipation of the holiday shopping season, as retailers had a pretty big run in the last few months, and I don't think the downside for the minimum wage increase is priced in at all yet.
I've considered looking at some higher end retail plays since I don't think minimum wage increases will impact them much, but 50% of a stock's move is usually tied to what sector it's in, and trying to pick good stocks in a bad sector is typically counter-productive. The playbook also says to get some financials, and I may very well look to do that after the FOMC meeting this week so we can get a handle on if and when we may see a rate cut, as the rate cut is really the upcoming catalyst for that sector. In addition I've been wanting to get some metals and oil stock exposure in my portfolio, as I'm pretty limited in those two areas. I've got a few names I'm keeping my eye on and I may pull the trigger on one or more of those later this week. Overall though I'd be perfectly fine sitting on my cash position through the end of the year and just getting the 5% return from my money market account if I don't see anything I really like. As always, I will also look to add to my some of my current positions if I can improve my cost basis or get a nice pullback in one of my favorite names.
-Rizen
I did just close out my position in ARDI after it got a takeover bid this weekend. The stock shot up 8% and it was more of a speculative name in my portfolio too. Overally I closed it out with around a 20% gain which I'm quite pleased with. I'm sitting with a larger than usual cash position in my portfolio of about 20%. Normally I'd be looking to put that to work, but I don't anticipate doing anything today. If I do anything it will be later this week on a pullback, and I'm going to try and get a shopping list prepared today of some stocks that should they pull back I'll be ready to pull the trigger on.
I'm going to be very picky about what I go into right now though (not that I'm not always picky). I really think that we're going to see mostly churn for the rest of 2006 with overall very little up or down until then, although I think the ride will be very choppy up until then, so I may make some short term trades to take advantage of volatility.
I've been continuing to trim a lot of my video game, technology, and some retail exposure. I feel like video games and technology as sectors are starting to get a bit played out and have had huge gains worth protecting. We're at a point in the business cycle where the playbook says to buy retailers, but I have some big concerns over the retail sector due to the minimum wage increase I think we're very likely to see in early January. I also think the business cycle and the calendar cycle caused people to get into retail earlier than normal in anticipation of the holiday shopping season, as retailers had a pretty big run in the last few months, and I don't think the downside for the minimum wage increase is priced in at all yet.
I've considered looking at some higher end retail plays since I don't think minimum wage increases will impact them much, but 50% of a stock's move is usually tied to what sector it's in, and trying to pick good stocks in a bad sector is typically counter-productive. The playbook also says to get some financials, and I may very well look to do that after the FOMC meeting this week so we can get a handle on if and when we may see a rate cut, as the rate cut is really the upcoming catalyst for that sector. In addition I've been wanting to get some metals and oil stock exposure in my portfolio, as I'm pretty limited in those two areas. I've got a few names I'm keeping my eye on and I may pull the trigger on one or more of those later this week. Overall though I'd be perfectly fine sitting on my cash position through the end of the year and just getting the 5% return from my money market account if I don't see anything I really like. As always, I will also look to add to my some of my current positions if I can improve my cost basis or get a nice pullback in one of my favorite names.
-Rizen
Subscribe to:
Posts (Atom)