THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
What a week! The Dow was up 268 pts., and I had a blockbuster ride. Timing and luck are hard to beat.
As stated last week, I re-entered gold which in GLD stayed flat, but I also bought Novagold (NG), a Cramer favorite. I bought NG on Monday and saw it rise 9% during the week on the news that Newmont Mining bought a similar, junior gold miner, Fronteer. Also, as predicted in this column last week, BP announced a $0.42 quarterly dividend, but did not get a pop from it. BP still faces lots of headwind including a fight with its partners over the direction of its Russian investments. But, at least now it is paying anyone who buys at its current price of $46 ( I re-entered lower than that) a 3.6% dividend while we wait for it to clean up its messes. Once it does, I see it trading above $60---sometime this year.
Having sold a disappointing McDonald's, I still wanted restaurant exposure and bought YUM (KFC, Taco Bell and Pizza Hut) as a Chinaplay. Read its recent reports. It opens a new restaurant in China every 18 hours! It is dumping A&W and Long John Silver's. Its 2% dividend is a bonus. I am buying it as a growth play. Gung hoy, fat choy!!
Having drunk from Jim Cramer's Mad Money cup, I now believe we are firmly in the middle of the recovery cycle. So, I bought Alcoa (AA) which Cramer picks as the biggest winner of 2011 and Nucor Steel (NUE), each the best of their breed. These are simple chart plays. Look at where these traded in 2006-2008. If we get back to that level or any where near it, these will appreciate nicely. Plus, they give me added diversity. Speaking of getting back to pre Recession levels, I bought Ford (F) following its disappointing report. When it found support under $16, I bought. I see this above $20 sometime this year.
Speaking of Cramer, I am also a believer in the smart phone tsunami. I love my HTC Incredible Android. Smartphones are still a small segment of the world market, but I see the developing world skipping the notebook/IPad phenomenon and migrating directly to the smartphone which is a great stand alone computer. I have owned Apple (AAPL) for sometime and see it going over $400. On the Jobs news and the F5 disappointing results, the entire sector dipped two weeks ago. The Skyworks Solutions (SWKS) I bought on January 21, 2011 is now up 19%! Did you see what happened to JDS Uniphase yesterday? This success embolden me to purchase Arm Holdings (ARMH), the intellectual property of which is found in virually every smartphone, every IPad, every Kindle, every portable GPs, every Nook, and now most every tablet. It was founded by Apple as a joint venture, but is now independent. It trades at a ridiculous price eanings ratio, and its purchase is a huge speculative move for me, but represents the level of my enthusiasm for this sector. If you want to learn more about other companies, Google "Cramer and the smartphone tsunami".
Bank of America (BAC), as reported in this morning's WSJ and last night on Cramer, is splitting into two units---a good bank and a bad bank, the latter holding all the bad loans and exposure associated with the financial meltdown. This is a similar move done last year by Citigroup. I see this as a sign that BAC sees a light at the end of the tunnel. I own a ton of BAC preferred that pay qualified dividends over 7% and trade below their redemption prices. I may buy some more before they trade above the redemption price.
My recent success with growth stocks is going to my head and causing a family rift. With my solemn promise to my bride to keep at least 25% of our holdings in cash and a substantial additional amount in gold, I am now close to being fully invested. Consistent with my original intent, the vast majority of these are in securities returning 7% or more in income (housed in Baskerville Funds I-IV, the Holmesian 7% "solution"). I am having success (and a lot more fun) ,however, investing in the Cloncs Fund (principal appreciation--named after my high school principal Eugene Cloncs), and I want to allocate more money into this fund. I have some really good plays I want to make with excellent prospects to make considerably more than 7%. Again, one is faced with age old question--what return is worth the risk (whence the name of the newsletter). Maybe what I really need is more money. So, I close this volume, dear Reader, and return to my law practice in order to generate more grist (money) for my invesment mill.
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