Friday, March 20, 2009

SOLD NADX IN IRA/BOUGHT Kraft & NESTLE/ Bought Lottery Ticket in CBG at 2.39/ Drags: TALF, AXP and GE

I was wondering when AIG would start suing the originators of the mortgage pools that it insured with credit default insurance.  AIG just filed a suit against Countrywide, now a unit of Bank of America, claiming that Countrywide had misrepresented the mortgages that it bundled into a pool.

Goldman claims that it was not a party to any discussion involving the government's bail out of AIG Yahoo! Finance
 It further claims that it would not have been hurt in the event AIG failed since its agreements with AIG were either fully collateralized or hedged with other firms. 

Most of the large consumer staple stocks are trading at 10 to 12 times earnings and pay decent dividends.  I decided to go ahead and continue buying individual names to construct my own personalized version of KXI, an ETF with global consumer staple stocks.   So far this month, I have started my positions in Heinz, Campbell Soup, Proctor & Gamble, Sysco, Coca Cola, and Unilever which I have previously mentioned in prior posts.  Prior to this month, I had acquired 50 shares of Walgreens which is included in KXI.  Today, I started a position in Nestle (NSRGY) at 31.28 by just buying 30 shares, and I bought my entire position in Kraft.   I am going to fund the remaining purchases out of the recent short term bond sales rather than dipping into cash allocation which has been relatively stable at 30% since 2007.  I  hope to move about another fifteen grand into my personalized world consumer product ETF.  Except for Kraft and Coca Cola, where I now have full positions in place, the trades will be sliced into multiple orders per position to mitigate the damage in the event of a continued slide in prices. ( I sold another 3 International Lease bonds today at a small loss, and those proceeds were used to finance the common shares purchased today)  The remaining purchases will be financed from the proceeds already received from the recent 5 bond sales each in issues from HIG, GE and BAC.  This is a shift in my asset allocation from short term bonds to a common stock sector play, which is nonetheless another flagrant violation of my existing trading rules. The rationale for the violation is to take advantage of what I increasingly perceive as favorable entry points in consumer stable stocks for a long term hold based on valuations and dividend yields.  

I am not going to try to duplicate KXI with all of the securities contained it it and I will ignore its weightings, using my own.  I will focus more on those paying good dividends that I view as sustainable.  Some of the smaller foreign companies will just be ignored, and I do not intend to include Wal- Mart which has over a 7% weighting in that ETF and a larger one in XLP at around 13%.   Consumer Staples Select Sector SPDR FundI will  also not buy a tobacco stock.  Of the remaining stocks in KXI, I will consider adding some shares in Kimberly Clark, Pepsico,  Diageo, Constellation Brands, Heineken, General Mills & Kroger.  Nestle and Heineken do trade in the U.S. but only on the pink sheets.  

I previously sold 100 Kraft at 28.06 for a quick in an out, with the shares purchased at 26.52, but I did hold the shares long enough to collect a dividend.  SOLD KRAFT/GOP & GUNS IN BARS/ EBAY/ KEN LEWIS AND RICHARD PARSONS/DRYSHIPS
I mentioned in that post that I would look for an entry point back into the stock.  It goes ex dividend on Monday and the yield at the current price is over 5%.  Investors were disappointed by the last earnings report.  I went ahead and re-entered the position by buying 100 at 22.26.  I simply view that I am already ahead by having exited the 100 share position at 28.06 and then buying it back about $600 cheaper at 22 and change.

I decided not to be greedy with my recent purchase of 50 NADX at $1.27 on 3/10/09 in my Roth retirement account.  SOLD 1/2 JWF ON SPIKE/ Buy of 50 NADX at $1.27 I  sold it today at $4, hey every little bit helps.   I will keep the higher cost shares in my main account as a lottery ticket holding.  I replaced the NADX lottery ticket by buying another lottery ticket-50 shares of CB Richard Ellis (CBG) at $2.39 in the Roth account. This trading is a form of entertainment for me.   I have previously discussed CBG.  It was not that long ago that I was successfully trading it at much higher levels, as in the 30s, then in the 20s.   I view its business as sound but the current economic environment has put commercial real estate in the toilet.  We are unquestionably in a down cycle for CBG's business, as the price of the stock currently reflects.  Or does it reflect no upturn in the cycle for a very long time and the possibility that CBG might not make it?  I would say more of the later than the former.  I am already familiar with the company and routinely review its earning reports and reports from analysts.  S & P currently has it ranked as 3 stars. Barclays has an equal weight with a $10 target. The last earnings report was okay considering the current state of commercial real estate. CB Richard Ellis Group, Inc. Reports Full Year 2008 Revenue of $5.1 Billion and Earnings Per Share of $0.97: Financial News - Yahoo! Finance

Private investors applied only for 2.5% of the 200 billion the FED pledged to loan to support consumer and small business lending.  This is not a good start in my opinion

Friedman Billings lowered its target for American Express to $10 and argued AXP would post losses in both 2009 and 2010.  The broker further maintained that a dividend cut was prudent and imminent. -

Several firms cut their earnings estimates for GE. Bernstein expects GE Capital to post a 1 billion dollar loss.  It cut its 2009 estimate to $.81 from $1.18. GE Shares Fall as Analysts Cut Profit Views - Financials * US * News * Story -  Deutshe Bank cut its forecast to 97 cents from $1.20.  This has to do with GE Capital and the recent presentation made by GE.

The news on GE, AXP and TALF understandably placed a lot of pressure on financials today. 

I accounted for the entire volume on the stock exchange for GJO today.  Almost makes me feel like one of those Masters of the Universe.  I figured that holding that one to maturity in 2030 would add another 2% per year in annualized return.   It is a floater with no guarantee and a poor float provision to boot.  This purchase is more of an inflation hedge than anything else. 

  I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will.  In these posts, I am acting as an unpaid financial journalist and an occasional political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  By way of example, it is unlikely that I will ever need the funds contained in my retirement accounts. Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.  Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed.  These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities.   All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me. 

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