The running of the bulls! (Stock market trading thread)

[zong]

The dividend is 8% annually. So, you've collected 70 cents per share dividend, while the stock price has dropped $3.00.
Still, I'm curious as to what promoted you to buy the stock in the first place? Did you think it had reached a bottom and was highly likely to rebound? Do you like the company's products? Did you feel that the valuation of the company was approaching cash reserves? I'm always curious exactly why somebody decides to buy into a company, then hold it. Most people (so far) have ignored that question, or else admit there was no logic involved.

[zong]

Here are 2 examples of what I think is rational trading. I'm posting them now. I expect both to be rocking tomorrow.
1 Option straddle at 65 on ASEI. Since the February options expire, the contracts will be at very close to actual cash value the rest of the week. So, at this moment, the bid for the 65 straddle(call and put) is 4.60. What that means is that you pay $4.60 for the position, and whether ASEI goes up or down, you make everything away from $65 at the moment you sell or exercise your option contract. SO, if ASEI is at 72, and you sell your call, you will get $7.00 as the return on your $4.60.
OK, so you may wonder, what if ASEI sits right there til the end of the day Friday? Weoo, you would be able to get whatever the bid is for the contracts, but certainly a loss. SO, suppose you look at the March contract? The ask for the March 65(both call and put) straddle is $5.65 You get an entire month extra time, in case tomorrow is a dud. So, even if there is less than $5.65 move in the stock, there will be the time premium.
As the evidence of the logicality of this trade I offer 2 observations. Over the past year, the next day earnings moves on ASEI has been $10, $15, $8, and a dud, for an average of $8 which would put you ahead at least $2.35 per share, or $235 per contract.
Over the 8 days following earnings, the maximum moves have been $10, $21, $8, and $6.
Every one would have paid off, an average of $11, a minimum of $6. vs the cost now of $5.65. That is in cash value, not counting the time value.

2. The same scenario for FOSL. The March 105 straddle costs $14.80. However the 100/110 position(called a strangle, rather than straddle) costs $10.20. The payoff will be the same minus 40 cents, or $40 per contract. In return for losing the $40, you are putting up $460 less outlay. Sounds like a good deal.
Over the past year, FOSL has had earnings moves of $20, $50, $23, and $12(which had stretched to $15 within 5 days) So, in each of those cases, a similar strangle would have paid $5, $35, $8, and even. Of course, that is cash value, and there is always some time premium.
So, theres my logical and sensible trade predictions. We'll be able to tell tomorrow if the payoff is immediate, or if not, we'll know within a few days.

[frogmammy]

Originally Posted by zong

The dividend is 8% annually. So, you've collected 70 cents per share dividend, while the stock price has dropped $3.00.
Still, I'm curious as to what promoted you to buy the stock in the first place? Did you think it had reached a bottom and was highly likely to rebound? Do you like the company's products? Did you feel that the valuation of the company was approaching cash reserves? I'm always curious exactly why somebody decides to buy into a company, then hold it. Most people (so far) have ignored that question, or else admit there was no logic involved.

Oh, Zong! This will SO go contrary to how you operate!

Obesity is "hot" right now, so I took a look at "fat" stocks...MED, WW, NTRI and Jenny Craig...Jenny was a no go right off the bat. There was also the exercise segment, but I had no interest at that time. Of all, NTRI looked the best to me, product availability was good, looked like it had "good bones", price was down with room for improvement. Tried the product and it was palatable, off the shelf (as opposed to MED).

And then NTRI goofed around and went down. Held on until "diet season" started and it hasn't moved much, but the season is young. Have enjoyed the 8% I receive every three months....as opposed to the 1% the bank would have paid...and I FULLY expect that the proposed changes in marketing will bring the price up again.

Mon

[clovis]

Originally Posted by zong

The dividend is 8% annually. So, you've collected 70 cents per share dividend, while the stock price has dropped $3.00.
Still, I'm curious as to what promoted you to buy the stock in the first place? Did you think it had reached a bottom and was highly likely to rebound? Do you like the company's products? Did you feel that the valuation of the company was approaching cash reserves? I'm always curious exactly why somebody decides to buy into a company, then hold it. Most people (so far) have ignored that question, or else admit there was no logic involved.

I take a long hard look and study any stock before I buy it. I answer all the questions you asked, and then some.

I look at:

Dividend payout history
Sustainability of the dividend
Payout ratio of the dividend
Dividend yeild
Debt the company has
What percentage of the stock is owned by investment funds?
What is the future for the industry as a whole?
How solid is the stock? Is it an old company, or an overnight sensation?
Charts: How has the stock preformed in the past 5, 10 and 20 years
How much has the stock fluctuated in the past?
Where is the stock in it's 52 week high and low? (I'm looking for bargains)
What is the press saying about this stock?

There are more questions that I ask before buying any stock, but these come to mind right now.

[clovis]

I missed a buying opportunity for COP before the dividend ex-date, and am not sure where to allocate the money I have:

Buy COP and wait until the next ex-date?
Buy KO, before the 2/28 exdate, even though it has a low yield of 2.7%?
Buy ATT, with it's 5% yield, even though I am going to have to wait until March to make the ex-date?

FWIW, I am trying to play catch up on my small retirement fund, and have limited cash to invest. I already own ATT, and like it very much.

Opinions, anyone?

[Michael W. Smith]

How did we miss out on HNZ - H J Heinz which is being bought up by Berkshire Hathoway for $72.50 / share?!?

I've looked at it for years - Pittsburgh is a 2 hour drive. What held me back was you couldn't buy the stock direct. If someone would have bought some shares back on December 17, 2009, it closed at $42.43. Holding it for 3 years and a few months, you would now have a stock worth $30.00 per share MORE than what you paid.

Of course, there seems to be suspicion now that there was illegal trading and some of the Wall Street bigwigs heard of the buyout a day or so before the announcement, so they could profit.

Zong, one of my criteria for buying a stock is to be able to bypass the stockbroker and buy it direct from the company - or a company that handles the buying and selling.

I also prefer to buy stocks that don't have an initial fee to buy in, or charges a fee for reinvesting the dividend. I also like to buy stocks that offer a Direct buy with a ROTH IRA.

All of my stocks are considered - long term. I'm buying them based on my opinion after checking information that they are a good stock to buy and to hold. A good solid stock that will throw out a dividend every quarter. A stock that produces or makes something that many people need or use.

Out of my picks, I've only had a few that didn't work out. Enron for one. Frontier for another. I owned Massey Coal - bought it, watched it skyrocket, and then watched it fall - then watched as it got bought out by Alpha Natural Resources, which has now plummetted.

Enron is of course dead. Frontier is still alive - pays a nice dividend now, but I don't ever see getting even let alone making a profit of it. (It will be a nice company to sell for a loss to help out with taxes some time.) Alpha is still alive - but coal stocks have been hit hard. Luckily I didn't have large amounts invested in any of them.

On the other hand, I've done well with some stocks. Some stocks have thrown off other companies and given me free stock - Marathon Oil through off Marathon Petroleum which has done great. There is at least one other company if not two that through off a company and gave me free stock.

I'm an investor that has evolved. My initial retirement was in a bank CD. Didn't take too long to figure out once interest rates dropped to nothing that the bank was ripping me off. Transferred from the bank and put into an IRA with my insurance company. (At least it is guaranteed to pay a MINIMUM of 3%.)

I then evolved into mutual funds, and joined The Vanguard family.

I've now evolved and have bought individual stocks.

I might just evolve at some other point and try some day trading or flipping. But currently I'm happy to buy and hold.

[clovis]

Originally Posted by tarbe

I have to admit to having a soft spot for COP. The petrochemical company I retired from this past year started its existence as Conoco Chemical Company.

I still consider them a sister company. I dealt with them quite a lot when I was working, and I think they are a pretty good outfit.

I am waiting for a dip to get back in (took some profits this fall). I hope I get a good chance to get back in at a discount!


Tim

I was napping this week when COP dipped below $57.

I've been working on another investment deal with real estate this week, but I hate it that I missed COP.

[clovis]

Originally Posted by Michael W. Smith

How did we miss out on HNZ - H J Heinz which is being bought up by Berkshire Hathoway for $72.50 / share?!?

I've looked at it for years - Pittsburgh is a 2 hour drive. What held me back was you couldn't buy the stock direct. If someone would have bought some shares back on December 17, 2009, it closed at $42.43. Holding it for 3 years and a few months, you would now have a stock worth $30.00 per share MORE than what you paid.

I was watching HNZ back when it was in the mid-$50's. Looks like I missed out in a big way!!!

[willow_girl]

How's everyone faring in the big market run-up this week?

My IRA has increased in value by $700 since the end of January.

Unloaded some LNDC this week for a profit of $89. I haven't had a lot of time to research trades this year, so I've mostly been keeping an eye on it and WOR, buying on dips and selling when the price goes back up.

[clovis]

Originally Posted by willow_girl

How's everyone faring in the big market run-up this week?

My IRA has increased in value by $700 since the end of January.

Unloaded some LNDC this week for a profit of $89. I haven't had a lot of time to research trades this year, so I've mostly been keeping an eye on it and WOR, buying on dips and selling when the price goes back up.

I've seen a huge bump to my account too...but it sure is getting hard to find bargains in the market.

[frogmammy]

Yeah, mine is looking nice so far this year! Not all the dividends have been paid yet (waiting with baited breath!) but I think most will be paid out this month. Check out the pay on CLCT, unbelievable!

Mon

[clovis]

I reinvested some of my recent dividends into KO today.

I certainly like the stock, especially because they've been a solid dividend payer since 1898, but I sure wish the yield was more than 3%.

I probably should have opted to buy a stock with a higher yield, but I like KO for the long term.

[frogmammy]

I'm kinda liking robotics, thinking it's the future. Got IRBT, AVAV and MAKO...although MAKO is a touch shaky right now and we need to see what this healthcare mess is going to do. I think if I were going to go for a long hold, I'd go with IRBT....I believe they are bound for a solid future as they have been around for a while, and are becoming very diverse.

Mon

[Belfrybat]

I don't buy individual stocks, but instead use mutual funds. My IRA is with Pax World balanced funds and is doing great. I also have Vanguard Windsor II and Intermediate Corp. bonds (usually in a 50/50 mix -- but since stocks have been skyrocketing it is now 53/47). I don't need to take money out right now but will by mid-summer when some high ticket items come due. So question -- since what goes up usually comes down, would it be a wise idea for me to take $2500.00 out of the Windsor account tomorrow which would balance the mix back to 50/50, or should I gamble and stay put hoping it will go up even more? I'd appreciate any words of wisdom here.
BTW, I'm 64 which is why my Vanguard mix is a bit more conservative than the traditional 60/40 split.

[willow_girl]

Today was a red-letter day for me, as I came home from work to find two of my stocks had sold ... the LNDC I bought on a dip about 3 weeks ago, and the WOR I bought (also on a dip) yesterday. Netted a total of $211 -- w00t!

[clovis]

Originally Posted by willow_girl

Today was a red-letter day for me, as I came home from work to find two of my stocks had sold ... the LNDC I bought on a dip about 3 weeks ago, and the WOR I bought (also on a dip) yesterday. Netted a total of $211 -- w00t!

Nice!!!!!!

[willow_girl]

Umm, not really, as that LNDC I unloaded went up more than 8 percent today ($1.02). If I were still holding it, I'd be up $548.

[willow_girl]

And I'd be up $358 if I'd held on to WOR ...

Excuse me, I have to go kill myself now.

[clovis]

Originally Posted by willow_girl

And I'd be up $358 if I'd held on to WOR ...

Excuse me, I have to go kill myself now.

You know the old sayings:

"The bears get a little, and the bulls get a little, but hogs get slaughtered."

"You can never argue about profit."

[clovis]

BTW, I cannot believe this market.

Who would have thunk that the Dow would be at 14,500+?

Maybe Zong?

[clovis]

This market is on a crazy bull run.

My account hit another small milestone today, due to the run up in share prices.

I'm a happy camper, at least until the Dow takes a plunge, LOL.

[Halfway]

Great time to add small amounts for long, value positions.

Today: T WMT EPD COP

[Michael W. Smith]

Great time to sell losers with the run-up in the market.

Back in July of 2010, when I was (and still am) invested with Verizon, they spun off shares of Frontier.

Great deal, right? You keep all the shares of Verizon, and they give you FREE shares of a new company. At that time, my investment was small so I didn't get too many shares.

I got the free shares and saw how great the dividend was - and I thought, let's add to it! So I did. In 2011, I sent in $3000.00 and got 352 shares of Frontier for $8.44 per share.

Then I watched as the stock dropped, and dropped and dropped. But I thought with the wonderful dividend, it will be fine.

Today, with dividend reinvestments and the free shares, I own over 431 shares. Today, those shares are worth $4.08 / share, meaning I have $1758.00 for my $3000.00 investment.

I'm bailing out. Selling all of the shares and getting out. I figure with the great run up in the stock market, it's time to sell a loser and I'll get a loss for tax purposes for the year.

If I wouldn't have sent in money, I'd still have the free shares, and I could hold onto them to see if they recover.

I probably should have sold before this, but I kept thinking the stock would come back.

That's one I was wrong on!

Oh well, I guess 1 loser out of 13 or so stock picks isn't too bad.

[clovis]

MWS-

Sorry about the loss. BTDT.

If your luck is anything like mine, Frontier will gain another 2 points after you sell it.

[Michael W. Smith]

Mmmmm, I doubt it. I would say it will still be around the current price a year from now - currently $4.14.

After a year, if the stock is still around the current price, I may buy it again - it does have a nice dividend. But I highly doubt they can keep the high dividend for another year without slashing the dividend.

No worries, Clovis, the amount I invested was piddly compared to what I've made on other stocks. It will be nice to get a tax break next year.

[clovis]

MWS-

What are you going to invest in next?

[Michael W. Smith]

Not sure. I'm waiting on the check to come in and get it cashed before I think of the next investment. It might be to put invest it in something I already own and just add to it. (It's fun to get bigger and bigger dividends -which are just reinvested - I never actually get the money, but it sure is fun to see your dividend get bigger and bigger each quarter!)

The one stock I have in mind pays a 4.5% dividend.

[clovis]

Originally Posted by Michael W. Smith

t's fun to get bigger and bigger dividends -which are just reinvested -

The one stock I have in mind pays a 4.5% dividend.

I love seeing those dividends grow too.

Which stock is that?

COP?

[Michael W. Smith]

Hawaii Electric. I'm thinking sometime the wife and I need to go to one of their shareholder meetings.

I wonder how much expense you can list on your taxes for going to a shareholder meeting? Airfare, hotel, etc. I'm quite certain it would be a chore to attend their meeting.

[clovis]

MWS,

Since you are a fellow dividend investor, what other stocks are you looking at?

I am still studying KRFT, COP, BP, AEP, DUK, NLY, VZ. I'll need to see some pullbacks on some of these before jumping in.

I'd like to strengthen my current positions in T, KO and possibly BPT.