Thursday, October 23, 2008


The stocks of American industrial companies are falling into the abyss. Many are reaching prices last seen in the mid-1990s.  It is common to see dividend yields of 4 to 6%.  I went back into my records to check how fast the fall has been just for the few that I have owned and sold earlier this year.  The sale price is approximate since I was looking at the price adjusted for brokerage commissions. 

Rockwell Automation (ROK) was sold at over 58 in May 2008 now down over 7% to 23 and change.

Dover (DOV) was sold at over 41 early in 2008 with a week holding period or so now at  26.7

Dow (Dow) was sold at over 39 in  April and now at 23.7

DuPont (DD) was sold during a rally day at over 45, now in just a month DuPont is at 31.3

GE was sold at over 38 in April and I started to buy back in the 20s.  I halted the purchases for the reasons discussed in prior posts.  GE is now struggling at 18 and change. (see post from 10 14: Time to Sober UP)  Yesterday's small purchase of Ingersoll Rand (IR) at less than one-half of my earlier sale this year is already under water. 

Caterpillar is one that I have not owned, and it continues a free fall similar to Deere which hit 94.89 within the past year and fetches 31 today.  I am not in the market for either Deere or Caterpillar stock this year.  If Deere falls to 15 to 20,  somewhere in its 1998 to 2000 range, I will take a serious look at it.  I am not interested in DOW now for the reasons stated in the earlier post today.

GE is another one that will have to fall further for me to add.  Its current price is back to where it was in the 1st quarter of 1997.  I am limiting myself now to reinvesting dividends to average down.  I will just add yet another link to a negative article.How GE Capital puts all of GE at risk - Oct. 10, 2008  

For today, near the close, I may do what I did yesterday and try to catch one of the industrials falling off a cliff.  I will limit myself today to catching a few shares in either DOV or ROK.  Any purchase now will have to be only a partial position, fully anticipating buying equally small positions later at lower prices.  Any holding period will probably have to be well into the long term capital gain holding period of more than 1 year to achieve an acceptable return given the current risk.  The higher dividend yields at the current low prices will help-as the price falls, the dividend yield goes up.

I have owned an ETF focusing on American industrial companies.  Vanguard is the sponsor and this ETF has to be bought in  100 share lots.  I sold it (VIS) in February 2007 at around 69.  After I sold it this ETF it rose to almost 78 by October 2007, when the bull market ended, and VIS has now fallen to 42.  It has a low expense ratio of around .22% with 306 holdings at last count.   SPDR has an industrial stock ETF that contains the ones included in the  S & P 500 (XLI)Industrial Select Sector SPDR (XLI), SPTRIDU Fund Detail | SSgA Funds - Fund This has an expense ratio of .23% and 59 holding with a large weight in GE as you would expect.  It has been some time since I owned it.  VIS is the kind of investment that I may make when the VIX settles down into a stable pattern, way way way below where it is now.

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