Banon's Donkey Farm > General Discussion
Super Duper Stock Market Thread (Part Tres)
assassin:
If you were on JCE3000GT's and Dragonsbrethren's forums, you'll know I had two previous editions of this topic. To summarize, I started with $3500 in a Scottrade account on January 23, 2007, and set out to see what I could do with it. So far, it hasn't been pretty. :/ I've managed to turn that $3500 into $2778.73. I was in the $3100s as recently as last week, but a complete bloodletting in one of my stocks today brought me down hard (more on that later).
2007 was really a tale of two years. For the first 6 months, I made a couple hundred bucks, despite knowing squat about the stock market. I made all sorts of pathetic mistakes (some of which were catalogued in my previous topics), pissing away at least a few hundred dollars in the process, and still managed to make money. The beginning of 2007 through late July, barring a few days here and there, was a very friendly market. A retarded drunken chimpanzee could have made money in that market. Blindfolded. For the rest of 2007 (barring late August through October, which were peachy) and much of 2008, it's been brutal. I've learned a lot; I'm making sounder decisions; I actually have an understanding of how to value stocks; I 've done far less skittish sell-low-then-rebuy-higher. Yet I have jack shit to show for it, besides bruises and scars.
My previous messsageboard topics started reasonably, but turned into giant -- and more importantly, uninteresting -- walls of text, where I copied+pasted news about companies. That not only made my threads tedious to read, but probably hampered interactivity, because it was difficult to follow what in blazes I was talking about. Well, I won't do that nonsense anymore. :D I might still post buys, sells, and dividends, along with weekly portfolio closing values, but useless crap will be omitted.
Mainly, I'd like to focus on stockpicking, and I'd like to read your reactions to my stuff, as well as your own ideas. Here are a few to start off:
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1) SPY - This isn't an actual stock, but an ETF (Exchange Traded Fund) that trades at 1/10 the value of the S&P 500 index. Over any 20-year period, this index has *averaged* 10% yearly returns. So if you're patient, it'll make a great investment long-term. It may not match rocket stocks (or crude oil and natural gas), but it'll still whoop savings accounts, CDs, and most bonds.
I'm looking to buy 4 shares now (trading at $136 apiece) because the stock market has been beaten up recently due to skyrocketing oil prices and growing unemployment. You know the drill: buy low, sell high. I was just going to purchase an index fund through Vanguard, but am now opting for the ETF route. See, my plans are to put $3000-$4000 into this index, and Jim Cramer recommends buying down in scales (e.g. if you have 4 grand to spend, buy $1000 worth, wait for the stock to go down, buy $1000 more, repeat, etc). However, Vanguard has a $3000 starting minimum, which kind of craps on that approach. So I'll gladly pay Scottrade a $7 fee per transaction if it lets me scale into my position. I don't think the S&P (currently at 1358.44) is done falling yet. It fell to 1270 in late January, and to 1256 in mid March. I missed great buying opportunities then by procrastinating; if it gets that low again, I'll be armed and ready.
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2) GNK (Genco Shipping and Trading) - I don't know if I've ever mentioned this one on these boards. I bought some in December 2007 and some more in early 2008, then sold off in stages through mid-May, and have rebought some since. This is one of the few stocks that's performed for me lately. It's also one of the few stocks I genuinely feel is undervalued -- most stocks out there are hyped up bloated pigs. Several reasons it's great:
a. 5.70% dividend. On pace for at least $4 this year. Very nice. Many of these shipping companies are great at returning cash to shareholders, and Genco typifies their generosity.
b. Analysts are regularly raising their estimates for 2008 and 2009 earnings:
http://finance.yahoo.com/q/ae?s=GNK
c. 5-year earnings growth is predicted to be a stunning annual 62%. In other words, earnings 5 years from now will be 11.16x what they were last year. Now, the current year's growth is a staggering 132.3%. So if you factor that out, the company is predicted to average 48% annual growth for the 4 years after this one. 2009 growth will only be 21.9%, but that's still damned good.
d. A P/E ratio (share price / this past year's earnings) of 10.11, which is low. A Forward P/E ratio (share price / upcoming four quarters expected earnings) of 8.89, which is even lower. More importantly, a ridiculously low PEG Ratio of 0.14. The PEG ratio = Forward P/E ratio divided by the expected annual growth percentage. As a point of reference, Jim Cramer considers any PEG ratio under 1.0 to be rather cheap, and any over 2.0 to be rather expensive. So this stock could, in theory, multiply its price by 5 or 6, and still be considered fairly priced. I'm not expecting it'll go that high, though, because the shipping sector is notoriously volatile (due to shipping rates which can fluctuate a lot), and investors are afraid of it. Still, I see no reason it can't double, unless the world economy collapses.
e. Genco does its pricing based off of multi-month charter agreements with clients. This is in contrast with a company like DryShips (DRYS), which changes its rates daily based on the spot value of the BDI (Baltic Dry Index). So GNK will comparatively have a lot more price stability. It may not net daily rates as high as DRYS', but it'll also avoid the lower lows experienced by that company. The charters also let Genco management plan things in advance more, which I consider a good thing, because their management seems damn smart. :D
This pricing also allows for great buying opportunities in the stock. If the Baltic Dry Index drops a few days in a row, DRYS gets beaten down, and so does GNK. However, because GNK isn't changing its rates every day (remember, it functions off longer-term charters), these short-term ebbs and flows might have no effect on the company's earnings. So marketwide panic and/or a misunderstanding of the company allow you to pick up the stock at a bargain.
f. As I said before, it's one of the few stocks I've encountered that I consider undervalued (and by multiple metrics to boot). Usually, people value stocks based on their expected earnings. But a more conservative way to value them is based on their dividends, because that represents cash the shareholder will actually have in hand. Use this DCF calculator:
http://www.moneychimp.com/articles/valuation/dcf.htm
Plug in this upcoming year's expected total dividend (slightly over $4 most likely; I'll assume $4.25), plug in the 4-year expected growth rate of 48%, and assume a modest 1% yearly growth after that. Look at the calculated value. :omg: That's what the stock could be worth 12 months from now. Even if you slice the 48% predicted growth in half down to 24%, the stock should still make it over $89 by then.
And the beautiful thing about a high-dividend payer is: if the company continues to deliver on predicted earnings (and dividends), and the fearful market continues to under-value the stock, you just laugh at the stupid lemmings while you collect the dividend, and buy more of the stock when it dips.
g. The stock's been crushed recently, and unjustifiably so, imho. See, they raised some money via a secondary share offering (at $75.47/share), so they could buy more boats, charge wicked cash to haul people's goods, and return much of that cash to the shareholders. But some of the shareholders are retarded ingrates, so the price has fallen since then. It's currently at $59.92, which is down 20.6%. Apparently, they saw the company raising cash as a red flag, but they really shouldn't. See, if you have a money-losing company (e.g. some bank or mortgage lender disaster) that raises money, that could be a bad sign (at least in the short term) because it shows that they're desperate for money, and it'll take them awhile to rebuild and return to profitability. Now, if you have a thriving company raising money, that's usually a good sign, because they're in the driver's seat, they're not desperate, and they see the new money as something they can invest for profitable returns.
I believe the market is misunderstanding and botching GNK's secondary stock offering, just like they botched the steel company Nucor's (NUE) around the same time. Nucor has been kicking ass in recent months. Their stock was trading around $80. They offered new shares at $74, Jim Cramer and people from "Fast Money" recommended we buy them, then the stock proceeded to tank. It fell under $71.30. Jim Cramer ranted how the market was misunderstanding Nucor by treating a stock offering from a thriving company like it was somehow a floundering company, and reiterated that this drop presented an even better buying opportunity. He was right; within several days, NUE was above $81. It's pulled back to $76 now, but the company is still doing just fine. Several days after the nonsense, Cramer explained how the market had misinterpreted things, and why he made his recommendations. I had already been looking to buy more GNK shares, but his explanation for NUE seemed to have an obvious parallel for GNK (they're both prospering companies who raised money and watch their stock price fall), and solidified my resolve.
I had sold the last of my GNK shares at $79.60 several days before the offering was announced. The stock went on to reach a record high of $84.51. Then after the offering announcement, it fell, and I bought 3 shares at $72.94. I bought 5 more shares today at $59.75, as it continued to tank. I consider this price a steal, and think GNK will behave like NUE. Genco management isn't stupid; they wouldn't create shares at $75.47 if they didn't have conviction that the stock would return to that value.
h. The shipping sector is smack in the middle of several bull markets. Genco ships coal, iron ore and steel, and grains. All 3 of those industries are experiencing surging prices, brought on in part by increasing demand. When there's more demand for these goods, there's an increased need to ship them, which plays right into the shipping companies' hands (or their hulls, if you will :P). Also, because these boats can go nearly anywhere around the globe, they're not specifically bound to the slowing U.S. economy. It's a global growth story that lets them prosper.
i. Shippers aren't particularly hurt by skyrocketing fuel prices. They can pass these prices along. Truckers are losing market shares to railroads, as the latter's fuel efficiency becomes more and more important. Well, you can't run rails across the oceans, so the shippers needn't fear CSX or Burlington Northern and their mighty trains. Now, the airlines are getting killed by fuel prices, but they had trouble making profits even before oil started running; they're clearly dysfunctional, and the shippers shouldn't be compared to them.
Okay, nine reasons is enough. Did I mention I really, really like Genco Shipping, and am (relatively speaking) damn confident about their stock? :)
The major risk the company faces is that their profits are very much tethered to the shipping rates based on the Baltic Dry Index. If this index goes down and stays down, GNK's profits will plummet. This can happen if demand for the products they ship falls. Analysts don't see this happening any time soon. The index can also go down if there's a greater supply of shippers competing with one another. The credit crunch has impeded some upstart companies from getting into the business (or from getting funding to buy boats, which are expensive), which bodes well for more established shippers like Genco. That could change, though. Still, I trust it isn't happening yet, as I'm not reading news about it on Yahoo, nor do I see analysts lowering their earnings expectations for companies like Genco (rather, they've consistently raised them in recent months).
This stock was over $84 less than one month ago, and I don't see why it can't crack $80 again within a few months. $60==>$80 would be a nice 33% return.
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3) Universal Energy Corporation (UVSE). This is the aforementioned bloodletting. The company's stock fell from 32 cents to 12 cents (!!!) today after they announced they were going to raise a couple million dollars via debt (and possibly additional stock shares). I can see why people would be concerned. The company's still in its infancy, it's only had one profitable quarter so far, and it's taking on an increasing amount of debt. Still, I think they're overreacting with the plummet to 12 cents (!!!). The company did have its first ever profitable quarter in 1Q 2008, and they're predicting rapidly-growing revenues for 2Q and 3Q. Yet even before today, the stock was FAR below what it was last summer, back when the company had yet to earn a red cent.
Also, the company has a 4 out of 6 success rate on its sites, which I'm told is notably above average. They just started drilling another site in Texas on June 5. Two of their sites in Louisiana will start delivering natural gas to the market in July; they've already been successfully drilled and tested.
Furthermore, UVSE is in a perfect industry for the times: oil and natural gas. They're especially focused on the latter, which has seen a ludicrous 66% price increase from the start of this year (to bring it closer to its historical ratio with oil's price). If they continue to execute, and most of the sites are successful, the company should have a lot of revenue streams.
I'm going to buy more shares in 2-3 days, after transferred funds become available. Hopefully, the stock price stays low until then.
But in speaking of this stock, I must note that it's extremely RISKY. It's SPECULATIVE. The company is moving in the right direction, but they could very well go out of business, or take on gobs more debt (which hurts the stock price) to avoid doing so. If they go out of business, the stock will be worth ZERO. If they survive but take on debt, the stock price will possibly FALL until they can pile up growing profits for several quarters in a row.
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I'd tired of typing, but I'll post at least one other stock I own later.
To summarize my monetary situation: in 16.5 months, I took a $3500 initial deposit down to $2778.73. That's a 20.61% loss, so keep that in mind if you dare to take any stock advice from me. :/ Today, I added $1010.00 from my bank account, in order to buy the 5 GNK shares, SPY shares imminently, and some UVSE shares whenever I get clearance to do so. So going forward, you can say my total deposit money is $4510, which has become $3782.58.
Most of my portfolio's losses have come from UVSE, and I've largely reacted by doubling down in it (like any ailing gamber would!). At current prices, I only stand to lose an additional $165.14 from it (that is, until I buy more). I suspect I have much more than that to gain, if the company continues on the right track. It could take a couple years or more, but I'm holding on for now. It'll make for entertaining reading, at the least.
Yes, this turned into even more of a wall of text as my older posts. :D But it's more readable and personal, as opposed to the copy+paste bullshit I had flooded other servers with.
Now lay some stock ideas on me! If a few of us conspire, we should be able to come up with a righteous portfolio.
Lenophis:
Unfortunately, since I'm about as smart as a retarded drunken monkey on the subject, I cannot offer any advise. Although...
--- Quote from: assassin on June 10, 2008, 09:43:05 PM ---The beginning of 2007 through late July, barring a few days here and there, was a very friendly market. A retarded drunken chimpanzee could have made money in that market. Blindfolded.
--- End quote ---
That makes me wish I had something invested during that timeframe, as my $0.13 would've grown to about $1.50. :happy: The stock martket isn't my cup of tea, to be honest. What little I do know came from the economics class I took my junior year of high school. We did a mock-stock market type of game then, and we started about a week after the Juno/Netzero merger. We would've made a killing had we been able to get in on that. That said, the only thing I can say is to watch the ticker, and see what the companies are doing. [/non-response]
Dragonsbrethren:
I was wondering when/if you were going to restart this thread, I know it's probably pretty annoying to have it disappear on you. Twice. :blush:
--- Quote from: Lenophis on June 10, 2008, 09:56:40 PM ---The stock martket isn't my cup of tea, to be honest. What little I do know came from the economics class I took my junior year of high school. We did a mock-stock market type of game then, and we started about a week after the Juno/Netzero merger. We would've made a killing had we been able to get in on that.
--- End quote ---
We did the same type of game in 7th grade civics, but in quite possibly the most retarded way ever. The first day of class we were given a newspaper, had to partner up with another person and were told to pick five stocks, with absolutely no education on the subject and no idea how any of these stocks had preformed in the past. Sometime towards the end of the year we got to see how we did, my friend and I ended up being the absolute worst in the class, although I don't remember exactly how bad we did, but every stock we picked dropped by a lot. So yeah, never ask me for any advise.
assassin:
hah, we had something like that in 8th grade Economics. back then, our only resource was the stock listings in the newspaper. being a kid, i picked Toys 'R Us. (apparently, the company was public back then.) i think it was trading in the high $30s, and i remember it did squat. at the end of the few-month project, it was up like 3/8 of a dollar or some measly change (or maybe it went down 3/8).
it was eons ago, but i should've taken it as an omen to avoid the stock market. ;) no, i didn't have the knack, not like Pit Boss Billy....
assassin:
--- Quote ---I was wondering when/if you were going to restart this thread, I know it's probably pretty annoying to have it disappear on you. Twice.
--- End quote ---
speaking of which, was there a link to a backup of the Dragonsbrethren Industries forums when these forums went up, or am i misremembering?
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