September 22, 2007
A year and a half has gone by. I now want to take this up a little more seriously. With it, I hope to start a financial conversation with family, friends and whoever else might want to join in. The conversation can span as far and wide as desired, even distancing itself from its original intent of being financial in nature.
The reason I undertook investing in the stock market last year, is that I wanted to try and guarantee some kind of pension to myself that did not depend on others. Since graduate school doesn't give benefits, and takes quite a long time to complete, it was my most obvious choice.
Now then... to business.
The first year of investing has gone well, I was up +19%, or some 6% better than the S&P500. The magic formula was right in most cases, I am happy to say, although in some cases I bailed out of some stocks for fear of the unknown, but in the end it turned out that it would have been better to keep them. However, to keep a realistic and credible measure of what's happening I'll use this blog, and I'll have to update it more frequently, so that readers can follow me and better understand what's going on.
Having almost erased all of last year's gains in the terrible month of August 2007, the day of the Fed rate cut (Sept 18th, close of business), I was back at and slightly above my all time high, and am now hovering around 13% for the year, or twice the current return of the S&P500.
Most of the recovery was thanks to a great and quick return on Inplay Technologies (NPLA), bought at $1.22 prior to their earnings report in mid-August, and sold at $2.25 32 days later. Incidentally, it's starting to become attractive once more. It is -you may have noticed- a highly volatile stock, so I'll issue a caveat emptor for it.
I'm currently still into EGY, which recently got a boost through management's decision of a share buyback program. Got recently into Forest Laboratories (FRX), which seems highly undervalued and trades close to its 52 week low. The recent resolution of patent rights briefly brought it up by over 10% (when I should have sold it) and then somehow retreated back to what it was at prior to the spike. I got into Northstar Financial (NRF) just before the housing market crash, unfortunately, but their hefty dividend (>10%) clearly helps make up for it, and am now back in positive territory. This is the first stock that I have purchased based on my own research and screening. I reckon it's still a good buy, but probably better when the next bad news on the housing market and/or subprime mortgages strikes. In the meantime, keep an eye on when the next dividend gets reported, since it'll be an excellent indicator of how things are going. A dividend of $0.35 or, obviously, higher should boost the stock considerably upward, showing that it hasn't really been affected much by the subprime crash. Finally, I'm also into ViroPharma (VPHM), got in at $8.7, a little late compared to when I wanted to, but still have considerable faith in it, since I similarly consider it undervalued. Am considering selling at around $12.
My strategy has changed somewhat in these 20 months. I believe I am really becoming proficient at spotting lows (although my friend Ani would tell you to wait 2 more days from my recommendation date), so now I'm focusing on trying to figure out when to sell. In buying, my technique now consists in finding companies in the magic formula which have been brought down significantly on a given day due to whatever reason, such as missed earnings by "inconsequential" (in my book) amounts. Early on that very day, the price of the stock will crash to some amount, and then start its walk back the same day or soon after towards a new value that will also take its growth prospects into account. Slower decreases in share prices of stocks suggested by the magic formula also provide excellent opportunities. The difference is that it's hard to predict when the upswing will happen, since it will depend on a piece of news, such as what happened with EGY (share buyback) or FRX (court victory).
I think my goal of reaching 41.41% or greater yearly gains can be achieved, I just had/have to figure things out lots of things for some time. However, the 0.5% rate cut by the fed also could trigger a powerful plunge in the value of the dollar, which is touching its lowest levels against many other world currencies. While this helps exports, it also dissuades toward investing in the U.S. market.
I'll try to update this blog once a week to keep track of what's happening. Since it's a period that involves lots of writing (my Ph.D. thesis, in particular) a little more will just go unnoticed.
Thoughts/concerns/comments?
The reason I undertook investing in the stock market last year, is that I wanted to try and guarantee some kind of pension to myself that did not depend on others. Since graduate school doesn't give benefits, and takes quite a long time to complete, it was my most obvious choice.
Now then... to business.
The first year of investing has gone well, I was up +19%, or some 6% better than the S&P500. The magic formula was right in most cases, I am happy to say, although in some cases I bailed out of some stocks for fear of the unknown, but in the end it turned out that it would have been better to keep them. However, to keep a realistic and credible measure of what's happening I'll use this blog, and I'll have to update it more frequently, so that readers can follow me and better understand what's going on.
Having almost erased all of last year's gains in the terrible month of August 2007, the day of the Fed rate cut (Sept 18th, close of business), I was back at and slightly above my all time high, and am now hovering around 13% for the year, or twice the current return of the S&P500.
Most of the recovery was thanks to a great and quick return on Inplay Technologies (NPLA), bought at $1.22 prior to their earnings report in mid-August, and sold at $2.25 32 days later. Incidentally, it's starting to become attractive once more. It is -you may have noticed- a highly volatile stock, so I'll issue a caveat emptor for it.
I'm currently still into EGY, which recently got a boost through management's decision of a share buyback program. Got recently into Forest Laboratories (FRX), which seems highly undervalued and trades close to its 52 week low. The recent resolution of patent rights briefly brought it up by over 10% (when I should have sold it) and then somehow retreated back to what it was at prior to the spike. I got into Northstar Financial (NRF) just before the housing market crash, unfortunately, but their hefty dividend (>10%) clearly helps make up for it, and am now back in positive territory. This is the first stock that I have purchased based on my own research and screening. I reckon it's still a good buy, but probably better when the next bad news on the housing market and/or subprime mortgages strikes. In the meantime, keep an eye on when the next dividend gets reported, since it'll be an excellent indicator of how things are going. A dividend of $0.35 or, obviously, higher should boost the stock considerably upward, showing that it hasn't really been affected much by the subprime crash. Finally, I'm also into ViroPharma (VPHM), got in at $8.7, a little late compared to when I wanted to, but still have considerable faith in it, since I similarly consider it undervalued. Am considering selling at around $12.
My strategy has changed somewhat in these 20 months. I believe I am really becoming proficient at spotting lows (although my friend Ani would tell you to wait 2 more days from my recommendation date), so now I'm focusing on trying to figure out when to sell. In buying, my technique now consists in finding companies in the magic formula which have been brought down significantly on a given day due to whatever reason, such as missed earnings by "inconsequential" (in my book) amounts. Early on that very day, the price of the stock will crash to some amount, and then start its walk back the same day or soon after towards a new value that will also take its growth prospects into account. Slower decreases in share prices of stocks suggested by the magic formula also provide excellent opportunities. The difference is that it's hard to predict when the upswing will happen, since it will depend on a piece of news, such as what happened with EGY (share buyback) or FRX (court victory).
I think my goal of reaching 41.41% or greater yearly gains can be achieved, I just had/have to figure things out lots of things for some time. However, the 0.5% rate cut by the fed also could trigger a powerful plunge in the value of the dollar, which is touching its lowest levels against many other world currencies. While this helps exports, it also dissuades toward investing in the U.S. market.
I'll try to update this blog once a week to keep track of what's happening. Since it's a period that involves lots of writing (my Ph.D. thesis, in particular) a little more will just go unnoticed.
Thoughts/concerns/comments?
posted by Fra... at 18:09
1 Comments:
I just read the book and I'm interested in analyzing case studies of people utilizing the principles.
While I haven't read your entire blog (only the first three entries...this one being the third), I'm very interested in you keeping it up-to-date. Perhaps I'll start one of my own.
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