If you have been following the stock market lately, you’ve probably noticed that it has been going down every day. Since my last post on February 11th, DOW has gone down 7.2% and S&P500 is down 7.6%. According to headlines today, the market now is at 1997 level. That means if you bought and held your stocks for the last 12 years, you would not have made any money! So much for the long-term investment, right? Well, look at it this way: you are not loosing more than 40% right now like lots of other people are!
To capitalize on last week’s downturn, we added more U.S steel at $28. We also thought Caterpillar Inc (NYSE: CAT) was a good buy at $29.25, and E.I. DuPont de Nemours & Co. (NYSE: DD) was pretty attractive with it’s 7.6% dividend at $21.50. So we started our position on both of them. We should have waited a little longer because the market kept going down through out the week, and today alone it was down close to 3.5%. U.S Steel was down another 13% today and was trading around $21.50. That’s a drop of almost 25% in a week. We had to buy more at that price! So we doubled our holding with purchase at $21.45. That dropped our average price of U.S Steel to $24.51.
Now we do not have any money left to invest. I hope this is the bottom!
Here is the updated list of our current holdings.
Current price as of 2/23/09
2 Comments until now.
Boy, do we all hope this is the bottom! I tell you, on my trading floor, there is not one trader who is not positioned for a rally. Every day this past week, we were met with what seemed like the beginning of a rally, only to be disappointed later as our watchful eyes painfully tracked the S&P line dip lower in each passing. It’s like the bears put a laddoo in your mouth and before you could taste its delicious goodness, they kick you in the groin and the laddoo pops out your mouth and into their hands as they say “so long, senor, see you tomorrow, same time, same place”. You can imagine the agony of having to endure this ordeal for 5 consecutive trading days. But even as reality points to a decline, our expectations are favoring the upside. Like I said, everyone I know on my floor is persistent in their belief that we are way too oversold in the short-term, that a rally is long overdue.
As one wise guy quipped on cnbc recently, “when people think all hope is lost, hope is usually right around the corner”. While only few on cnbc are ever right and taking their joker guests for their word is riskier than investing in junk bonds, this particular comment from this particular wise guy however does merit some credence because, as we all know, the best profits are extracted from extreme market sentiments. The markets may be very close to that short-term extreme right now as we sensed a very brief whiff of panic last friday. If we manage to stage one good rally day, ending the weakness in stocks seen every day this past week, at least technical analysis (because fundamental analysis is of little help in highly volatile, unpredictable market conditions; ask Buffett) tells us that we will have formed a short-term “bottom”– not necessarily one that will chart the course to 9000 on the Dow, but perhaps one that will stop the slow but ceaseless bleeding of stocks for a while and lead to some stability in prices in the short term. As for long-term, Paris Hilton’s guess is as good as Buffett’s. At least her voice is sexy. I’d prefer listening to her market calls.
Enough about bottom-calling. Good job on the portfolio! As most portfolios are taking a hit of more than 40-50%, your 19% down is still superior performance! I also like X. Have you looked into MSFT? I think current price levels on those stocks are great entry points to hold or to start building position on. But given today’s uncertainty in the market which significantly increases risk, I can’t imagine being involved without a stop-loss below 15 and 12 respectively. Be careful with X though. I am sure you are aware of the rumor on the street that X apparently may be lacking capital to meet a debt obligation that is soon due.
Best of luck!
- SK
Talk about “one good rally day”, SK – We’ve seen a few days of rally. Since March 8th, S&P 500 is up almost 16% (Google Finance Graph) As Paris Hilton might say, “thats hot!” or is that too old now?
And perhaps you managed to “taste [ladoo's] delicious goodness”?
What do you think? Have we hit a short term (or even say medium term) bottom?
Comment!