Stock Tips

Some Investing Ideas for 2015


2014 has come and gone. The S&P 500 returned around 11.8% (not including dividends), which largely surprised most, especially after 2013 where the market returned >30%. My post in June of 2014 highlighted the possibility of a large pullback in Q3, followed by a strong rally into the end of the year in Q4. Well, I was generally correct, although providing specific index levels would prove how right I could have been. After my post, Q3 was largely flat (but finished up ~2.5%), and at the very end of Q3/beginning of Q4 we finally got the pullback (~7.5% top to bottom), but it wasn’t as pronounced as predicted (my prediction of ~15%).

If you look at the chart from that pullback, it is very “V-shaped”, meaning short-lived with a quick recovery in store. This “V-shaped” pullback has been a theme of this bull market, but particularly the last two years or so. Below is a weekly chart of 2014 highlighting all of the instances of these quick dips (click on it to view a cleaner picture). This is a weekly chart of the S&P500 in 2014. If you notice all but one of the five pullbacks have happened over a four-week period. The other one recovered its losses in 5 weeks.

It’s generally healthier to see a prolonged bottom (more people sell the due to fear, which historically sets up for a “healthier” continuation/upswing). With the lack of prolonged bottoms, this could mean more volatility and possibly larger pullbacks in 2015. Just a thought.

2015-01-04 12_07_07-7wy8uu7u (1504×722)

All of this said, what are some opportunities in and outside of the US (S&P 500) that I’m looking to capitalize on? Here is a link to a Google Spreadsheet where I conducted a study of different ETFs heading into year-end.

https://docs.google.com/spreadsheets/d/1GV_-ZA7MFuUVOJoZ2Z0-PnbsK9a-Nzy3dgeU3MyICX4/edit?usp=sharing

Given the study I’ve conducted, along with reading other trusted market pundits (NOT anyone who’s on CNBC), I think it’s safe to say that while 2015 presents its fair share of risk, there are plenty of opportunities to profit. Below are some of the ETF’s I’ll either be watching closely or have already invested in:

– EEM (Emerging Markets)

– TLT (20+ yr Treasury Bond)

– DES (US Small Cap)

– PSCF (US Small Cap Financials)

– PMR (Retail Powershares)

– CORN (Corn ETF, Commodity)

– JJG (Grains ETF, Commodity)

– EWGS (German Small Cap)

– RSX (Russia = high risk, high reward)

– BNO (Brent oil = high risk, high reward)

– GRK (Greece = high risk, high reward)

Other Buy Lists worth watching: 

– https://www.motifinvesting.com/motifs/crossing-wall-st—eddy-elfenbe-Zrsb0evv#/overview

– https://www.motifinvesting.com/motifs/william-blairs-picks-for-2015-w1Ktlu43#/overview (full list here http://www.streetinsider.com/Analyst+Comments/William+Blairs+Top+Stock+Recommendations+for+2015/10077925.html)

Go to the Google spreadsheet to view the nine ETFs/sectors I’m wary of in 2015.

As for a year end price target for the S&P 500. I honestly haven’t had time to finish my analysis, but the risk/reward for the US is definitely skewed towards the downside, which is why many of my buys are outside of the US. >90% of the time, the monthly return of January is indicative of the return for the year (positive January, positve year, and vice versa). Last year January was negative, but we saw a ~12% return. Generally speaking, I think this could be a great year for stock pickers, much like last year. Although this year I fear a larger, more prolonged pullback. Not because of a recession, but due to a highly valued US market and opportunities elsewhere.

Stock Market Update: Locating the Nearest Exit


I had a post two months back that highlighted how I was worried about the health of the market. Well, that view continues and my assumptions have been correct so far. The one addition I would add to that post, in which I discussed how few stocks are participating in these new highs, is that there are fewer stocks participating in the all-time highs. On top of that, most of the names that are holding up are large caps, whereas small/mid-caps were leading up until the end of 2013. This is usually a tall tale sign that the market has gotten too risky to be in “speculative” names and participants are “hiding” their money in “safe” large caps. To top this all off, volatility has been extremely low, and I’m sorry to say, but historically, these long/low volatility periods don’t last for long. Just like the small/mid-caps have gotten crushed in the past few months, I’m expecting large caps to do the same. To dig further into why this divergence in large caps and small/mid-caps is disheartening, read this brilliant post. To highlight, an old client and good friend of mine, Craig Johnson, does a great dissection of why what we’ve seen over the last few months, historically bodes to a large pullback, usually 15-20%. You’ve been warned!

My prediction was a choppy/poor performance through the end of September, then Q4 the market would finish with a rally. At this point, I still stand by that prediction. To position myself to take advantage of that prediction, I’ve increased my positions in TLT, XLU, XLP, GLD, UUP, and SH.

I haven’t left the building, but I’ve identified where the nearest exits are.

“The continued divergence between the Russell2000 index and the popular large-cap indices (DJIA and SPX) is a clear indication of weakening breadth and slowing momentum, and suggests investors are making an attempt to reduce portfolio risk by rotating assets toward the traditionally defensive area of the market.

To gauge the size of a possible decline we have identified years where the DJIA outperformed the RUT (a strong possibility for 2014), and measure the size of the market pullbacks that occurred in these years…..Thus, should the median pullback unfold this year, it would suggest a deeper correction in the broader market back towards 1,600-1,650 on the S&P500 Index.”

My Latest Stock Picks


Following up yesterday’s article on where I think the market is headed. Here are my current positions, followed by positions changed as of late.

Current Holdings:

– YHOO (@18.94/share on 11/28/2012) – Jumped on the Marissa Meyer bandwagon early – Price as of Friday 11/15 – $35.47

– HTGC (@10.58/share on 11/28/2012) – which has an +8% dividend yield – Price as of Friday 11/15 – $16.85

– TCPC (@14.95/share on 11/28/2012) – which has an +8% dividend yield – Price as of Friday 11/15 – $17.30

– DDD (@48.45/share on 8/23/2013) – Price as of Friday 11/15 – $80.17 – more on this one late

– JCI (@37.30/share on 5/17/2013) – Price as of Friday 11/15 – $49.45

– V (@182.00/share on 5/17/2013) – Price as of Friday 11/15 – $202.00

– GDXJ (@33.75/share on 6/27/2013) – Price as of Friday 11/15 – $35.98

– DTYS (@31.30/share on 5/17/2013) – Price as of Friday 11/15 – $29.41

Moves over the last few months

– Sold YUM on 10/10 for a 9% loss, and since then it is back up to my original purchase price of $74

– Sold LUV for a loss on 9/17, but up 28% since then (DOH!, but put that to work in DDD, which as been far more lucrative)

– Sold FB at $25 in June, now it’s at $50. Good news is I took the proceeds from that sale and put it in FB options, which I made 10x my money on. So this sounds like a poor sale, but if you’re bullish short-term, not long-term, buy options

– Sold ADT at $41.47, slight loss in June, and has hovered around $43 as of late

Biggest Industry I’m Bullish on 3D Printers. Here’s why:

Wall Street doesn’t fully understand this industry. And when they don’t understand and see the opportunity, that’s a huge opportunity for you as an investor. I think the message on Wall Street was “3D printers will never be able to replace manufacturers.” This is a true statement for the foreseeable future. But the opportunities that the industry is capitalizing on aren’t the mass production industries. They are things like organ regeneration using stem cells or easily replacing household items (focusing on having a 3D printer in every home, as evidenced by Windows 8.1 3D Builder). I think this is a long-term buy, with DDD, SSYS, and there are few health care focused companies as well. Health care is a focus of DDD, but not their only focus.

 

 

 

Stocks and Blondes


large       Two of the greatest things known to man. Both can bring you pleasure as well as pain if you let your emotions get the best of you. I’ll be the first to tell you that I don’t know much about women, but I do know a thing or two about stocks. And one thing we can all relate on is saving for retirement.

Now, I have some good friends who are financial advisors. They can serve a pivotal role in helping you retire on a yacht instead of a box. But just like any business, they need to make money. Some people like the security that a financial advisor brings them, knowing that someone is carefully watching their money. And hence are willing to pay for that security blanket. But why did so many Americans’ nest eggs disappear during the last stock market crash if a “qualified professional” was watching their money? If I’m paying someone to manage my money, I better not see my wealth get cut in half, regardless of what the market did. Put me all in cash if you think the stock market is going to crash, or if growth prospects are weak. How many financial advisors did this? My guess would be just a few, and the ones who did were late to the game and then sacrificed considerable upside for their clients after the bottom in March 2009.

But let’s all take a step back and think about investing for a second, and not worry about our financial advisor. We’re all told to diversify across asset classes (stocks, bonds, alternatives, etc.), and then diversify within those asset classes. Then there’s a rule where you take 110 minus your age, and that should be your portfolio allocation to stocks (in my case 85% in “stocks”). Both are pretty simple rules that even your financial advisor follows (for the most part).

What am I getting at with this mini lecture? Do yourself a favor and don’t be afraid to start taking control of your own financial future. The tools are becoming more abundant and more user-friendly in order for you to do so without have a finance degree or knowing what a stock is. Two great websites that I personally use to track all of my investments are: http://www.sigfig.com and http://www.personalcapital.com . Think of each as a Mint.com for your investments. Below is a screenshot of the types of advice they give you. Turns out the mutual funds that my financial advisor put me in not only suck compared to other similar ones, but also cost me more in fees. I’ll either be putting my money in stocks (where he will only make a commission from my trade) or into low-cost ETF’s that do the same thing. More on mutual funds and ETF’s later. Click on the pictures to enlarge.

2013-06-03 21_24_47-My Portfolio - SigFig

2013-06-04 08_11_45-Personal Capital - 401k Fee Analyzer

So cruise to those sites and start getting some free help on your finances. Speaking of free help, below is a list of stocks that I currently own. Some I’ve held for less than a month, others I’ve held since 2006. As we all should know, individual stocks are much riskier than mutual funds/ETFs. And these are only my opinions.

The ones with the asterisks are the ones I hold in my Roth IRA and/or IRA accounts. This means I’m invested in these companies for the long haul. If you notice, not many of the stocks I own are in my IRA accounts (even though I just said roughly 85% of my portfolio should be stocks). We’ll talk about this in a later post and that’s where low-cost mutual funds and ETF’s come in. Also by having your account setup on either of these two sites just mention,  my next post make more sense.

– BRK.B – Berkshire Hathaway*

– YHOO – Yahoo!

– FDS – FactSet Inc.

– HTGC – Hercules Technology Growth Capital

– TCPC – TCP Capital

– JCI – Johnson Controls

– AAPL – Apple*

– V – Visa

– LUV – Southwest Airlines

– ADT – ADT Corp.

– YUM – Yum Brands

– DXM – Dex Media

– FB – Facebook (long story, don’t ask)

In a later post I’ll talk about the mutual funds/ETF’s and the differences in retirement accounts (Traditional/Roth 401k/IRA), but I’ll wait until you set up an account at one of those two sites.

If you’re truly interested in buying stocks, another cool tool that just came out is called TipRanks (www.tipranks.com). This tool brings you all of the analyst opinions on the stock you are interested in, if you care what the “experts” have to say. If you go to the site, you’ll be able to download a plug-in (I use a Chrome browser). Then go to a site like Google Finance, type in your ticker, and if you’ve installed it properly, a link should appear to these expert opinions.

2013-06-04 08_14_42-NASDAQ_FB_ 23.95 0.10 (0