Todd Durrant’s Random Thoughts
Follow the efforts of a creative, crazed entrepreneur.

Six Months in the Market

I may have mentioned before that I started dabbling on a very small scale in the stock market last October when things were looking really bad for stocks in general.  I had never tried anything like that before, figuring that my low income didn’t allow for any kind of real retirement savings or investments.  But I decided that since I was going to be turning 40 soon, I better just get going in SOME way, and seeing the stock market go down meant that stocks were basically “going on sale”.

I find it interesting that when the stock market goes on sale in a decline, that is when many “shoppers” go running in the opposite direction.  Really, aren’t sales when you are supposed to run into the store and buy like a crazed person?   My purchases are always small.  We’re talking about $10 here and $20 there, but I’ve been consistent and have continued to build a portfolio.   Since I entered, the market dropped even lower, but has since started to rebound a bit.  I don’t think it’s already on the way to a full recovery– the current trend is simply a display of optimism, and will probably bob around, head down again, etc. before it truly gains any lasting strength.

With that being said, I thought that I’d take a look at where I stand after 6 months playing the game.  So far my stategy seems to have paid off.   I’m at 13% gain on my investments at 6 months, which certainly beats a savings account.  Of course, it could go down just as quickly.  I haven’t made many moves to sell so far.   A couple of times I sold just to bail out of something, and only once have I sold to cash in.  Here’s a run-down of those moves.  I originally had some stock in GM because it was pretty cheap.  Then GM took a government bailout and I knew they were in trouble.  After the bailout, their stock went up because I suppose some investors thought, “good, they’ll make it now, thanks to the tax money of the US people…”  So, I sold quickly.  I didn’t make anything after the trade fee ($9.95) but at least got my money back, which in the current state of GM still looks like it was a good idea.   On the other hand, I saw that Ford turned down the government bailout, so I put $30 into their cheap stock, which amounted to 15 shares at the time.   They took a steady rise in value once it looked like they truly could pull through without a hand-out.  Last week they peaked at $6 per share (my $30 had a $90 value), so I sold 10 shares.  After the trade fee, I’d made just over $50, and I still have my original $30 in Ford (which now is only 5 shares).   My other no-profit sell was bailing out of what little I had in Apple.   They were on a steady climb for a while, and I saw that I could sell and make about $10 profit after the fee, so I did it.  I just don’t see Apple coming up with anything new and exciting for a while, and I wanted to move to Google instead, since they are going to take over the world eventually (haha).   By that I mean they have a new operating system, new browser software, etc. that are forever in “beta test” mode, but every indication is that they will challenge Microsoft to some degree in the future, and people love Google (while there is a sort of bad public sentiment about Microsoft).

At the point, my top holdings are in the following, though we’re still talking very small amounts:

VTI (Vanguard Total Stock Market ETF) –>  A safe ETF bet if you want to just invest in the general market without picking “winners” and “losers” individually.   Market goes up, so does the value.

SPY (S&P 500 Index Spreader ETF) –>  Another pretty safe bet for ETF’s spreading your shares through the S&P 500.

QQQQ (Powershares Nasdaq 100) –>  Another good ETF that spreads through the NASDAQ if you want to bet on Technology.

IYG (IShares Financial Services Index) –>  An ETF that focuses entirely on the financials (banks, insurance companies, etc.) which is probably my more risky bet considering that financials are the primary cause of the stock market’s current crash, but they were so darn low that I wanted to put something there to cash in on a future rebound.   Having dropped the most, they have the potential for also rebounding the most.

EWZ (IShares Brazil Index Fund) –>  Another ETF that invests your stock purchase into the Brazilian stock market.   They went down with everybody else in the world, but their economy in general is not so bad right now.  So far, they have indeed gone up faster than the US stock market.

DIG (Proshares Ultra Oil and Gas) –>  Yet another ETF, and this one focuses on Oil and Gas companies.  They went down a lot after gas prices dropped and are still down, but I believe it is strategic.  They have to wait a while for the public to forget how angry they were about the huge profits these guys made when gas prices were high.  Then supply will be lessened and prices will go up again.  We’re still dependent on gas.

TTM (Tata Motors) –>  And this is the first in my top 8 holdings that is actually a single stock.  Next month this Indian auto maker will launch the cheapest car in the world, the Tata Nano (which I lovingly called the iCar– a $2500 dock for your iPod).   The first 200,000 are already sold to people who basically won the opportunity because demand in India is so  high.  The company can’t even export these cool 4-person cars because they can’t fill demand in India!  Face it, one of the largest populations in the world, with millions upon millions of lower-income citizens that can now afford a car…it will be years before they run out of a local market for this thing, or expand manufacturing capabilities enough to start selling outside of India.  I think Tata’s future is secure.    So far, the stock price has gone up 81% since I purchased my shares, and I don’t think it will slow for a while.

AGG (Lehman Bond Fun) –>  Another ETF for bonds, instead of stocks, just to balance things out.

OK, so 7 of my top 8 holdings are in ETF’s (exchange traded funds) instead of individual stocks, simply because I believe they are a safer way to bet on a particular market or interest, rather than trying to pick a single winner.   For example, if I buy stock in an ETF for the financial market, then even if some banks go out of business, it won’t completely kill the stock value because it is spread to other banks that may do well.

Of the individual stock holdings I have, these are the biggest winners so far.  The percentage shows the gain since I purchased:

Ford (F) = 214 %

Uranium Resources Inc (URRE) = 87%

Energy Solution (ES) = 83%

Tata Motors (TTM) = 81%

Rio Tinto (RTP) = 52%

Advanced Micro Devices (AMD) = 37%

And these are the biggest losers so far, the percentage showing the negative drop:

PNC Financial Services (PNC) = – 62%  (note: originally purchased as National City Corp, but was bought out by PNC)

Southwest Airlines (LUV) = -27%

Campbell Soup (CPB) = -23%

Basically, airlines are still hurting and haven’t climbed much.  I was thinking a budget airlines like Southwest might even do well in a recession, but alas, it’s hard to get people to travel.  Throw in the words “swine flu” and people may even cancel some trips.  Bummer there, but it will go up.   Also, I was betting on soup being popular during a recession, but that hasn’t actually happened.  People feeling “poor” were actually less likely to buy a can of soup than to get a Big Mac.   Oh well, Campbell is still a strong company, so I think in the long run it will hold steady.   If not, there goes my $50.

Well, there’s the run-down.   I’m guessing this isn’t nearly as interesting as my commentary on the music market, but hey, these are my RANDOM thoughts, so I have to vary a little bit from time to time.  Now, go out and buy some stock, and let me know how it goes!

-Todd

PS.  Please don’t consider this blog as a “hot tip” on investment advice.  As mentioned above, I’ve been at it for six months, which hardly merits any serious wisdom on the subject.    I haven’t actually withdrawn any profits made so far, and have kept everything in investments since this is supposed to become some kind of retirement…you know…when I’m 90 and finally decide to retire.

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One Response to “Six Months in the Market”

  1. My only investment in the past few years is up 31% from when I bought it on 3/31/09 (Vanguard Small Cap Value – VBR). Of course, looking at our entire portfolio over a longer time scale isn’t so pretty.


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