Few investors want to come out of from under their bed after a day like today. Frankly I took a nap and felt better after getting back on line and taking a look. Yes the capital value of my fund is ugly, ok butt ugly. But after surveying the individual stocks I come away not totally pessimistic. Trust me being down six figures in your fund can get anyone to worry, but as last time we went through a period like this a few weeks ago I remain pleased with my stock picking. Fully 50% of all my losses are in four stocks of the 23 positions I have now. Two of those selections were fully expected to be sensitive to the economy. One of the others is getting hit due to exposure to the financial sector. One due to some bad management calls. The others have hung in there well since they were picked for a market like this one.
I am finishing up the trading for September right now and cash flow wise the fund continues to produce. I am glad I finished the selling by the end of trading yesterday or I might not have been able to say that. The question now is if today offered some final selling. We have tested the low earlier this year and it has held so far. Thursday brought some bad news, China economy slowing, Europe getting no better, and the US economy is finally being accepted to be in the dumps. The final point is important as accepting the fact that the US might be entering a double dip is actually helpful. I draws the attention of the political class headed towards an election and it washes out the amateurs in the stock market.
As I opined yesterday do not expect any improvement in the economy until we get past the 2012 election. Yes, that is now just under 14 months away, so built portfolios to handle than span of time. Frankly if we do not get a change in leadership in Washington DC in 2012 this will not get better. Build a portfolio to last until then so at tha point you make adjustments to election returns as well.
I continue to like dividend paying stocks in solid companies. As noted in the headline buy when others are fearful and right now others are fearful. I noted to a friend today now is the time to look for stocks that have been hit but have long term promise. Do not waste resources on those stocks that held up, just wish you had some as I do. Stocks that held up lately are LO, DUK, MO, NNN, SO, and T. If you looking for extremely safe depositories of cash these stock do offer safety and frankly are much better than US treasuries paying nothing. if you bought US bonds lately prepare to hold these low paying bonds for awhile because once the economy does turn up your selling value with get killed by up to 50% or more. You can also get out a stock screener online a point it towards the S&P 500 and see which stocks are down and pay good yields and do some research.
If you are looking some interesting opportunities, CTL, HCN, and PFF offer dividends and capital gain potential. If you are a real gambler I suggest looking at some of the banks that have been beaten down badly. Take BAC, it is not going out of business the government will not allow that as with the new banking laws banks are now a utility. Of course I am the person who bought GS several weeks ago at $125, take a look today and you will see what pain looks like. BAC could be bought here at near a 5 handle and a option sold for Dec.for $7 at 55 cents. A chance at a 26% return in three months. Might happen, might not, but you got a eventual winner with solid option opportunity.
The thing to remember here is unless the American people go totally nuts and continue stupid leadership the US economy will return to growth. Those who heeded that advise time and time again in the past made money. Keep the faith until proven otherwise and position yourself by taking advantage of opportunities. Trust me if I give up I will opine as such by signing off this blog and head to the beach for the rest of my life.
I own long or have options on all stocks in this posting except BAC.
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