Stocks for the Long Term

[riverbabe]

Remember how many times here I have described Black Monday, 1987? I rushed to my husband and said, Honey, the Dow just dropped 500 points. He said, Don't worry, it will come back. It always does. My head is currently buried firmly in the sand.

[Louetta]

Good write-up. Today another method was suggested to me: the Buffett method. You buy good stocks and hold on through thick and thin. I was, of course, much too well brought up to mention Buffett owns large positions in four airlines and a variety of banks. I did buy some more STOR which is a holding of one of Buffett's lieutenants.

Well. I did buy STOR (in previous days). Their thing is buying strip mall properties which can't be internetized. Barbershops, laudromats, pool halls. Today it's down 20%.

If you think about it these are a good sampling of what you don't want to buy because they all involve people walking in the door and people aren't walking thru any doors these days.

[BlueWolf]

Sorry...that's KMI (we always call it KMP in our industry emails for Kinder Morgan Partners).

The valuations on both are excellent right now, and I agree that they could be great investments, especially as a hedge as the economy starts to show the effects of the CoronaVirus. Just be careful about opening any positions just yet. I don’t think the panic is over, and I haven’t seen any signs that we have bottomed. I’ve been watching closely for the last several days and I keep seeing the same pattern. Buyers come in and attempt to start a rally, and the sellers then overwhelm them, driving the market down even further. Funds and institutional holders must be selling into every rally trying to squeeze every dollar they can out of their positions. I’d wait until we see a sustainable rally before opening any new positions. I’ve been trying to day trade the rallies myself, and the trades keep failing because the market rolls over. This is some nasty business.

[mrmarket]

take a look at MIC and KMP. They got beaten down because of the overall market and compounded by the energy pummeling. However they are not oil companies..they store oil for oil companies. Right now since oil is cheap and the market has reverted to "contango" they are going to see excellent YOY earnings. They also pay great dividends while you wait.

Sorry...that's KMI (we always call it KMP in our industry emails for Kinder Morgan Partners).

[mrmarket]

take a look at MIC and KMP. They got beaten down because of the overall market and compounded by the energy pummeling. However they are not oil companies..they store oil for oil companies. Right now since oil is cheap and the market has reverted to "contango" they are going to see excellent YOY earnings. They also pay great dividends while you wait.

[BlueWolf]

Officially adding two more options to my list of ideas for combatting a market downturn:

Eight)* The Buffet Way
Basically, he buys stocks for the long term and holds through market turmoil. Of course, you have to be astute at picking stocks that can weather a storm and bounce back. With this method, you should expect to hold a stock for at least 5-10 years or longer, but time has shown that if you invest in good companies you will prosper with this method.

9) Trade index futures
I don’t know how I left this out. I haven’t traded futures in a while, but this is certainly a viable way of being able to short the market, much like trading index ETF puts. One key difference with futures is that they represent an obligation to buy or sell whereas an option is, as it’s name suggests, is a contract to optionally buy or sell the underlying asset. Another key difference is that with futures, unlike options. there is no underlying asset to deliver. For this reason futures contracts always settle in cash when they expire. With options, they either expire worthless, because they’re optional contracts, or you end up settling at expiration by delivery of the underlying asset, i.e. the underlying commodity, stock, ETF, etc. You’ll need a separate (from the account you use to trade equities) account to trade futures.

* - for some strange and unknown reason, the editor would not allow me to enter the number eight.

[enhancebeginner]

Good write-up. Today another method was suggested to me: the Buffett method. You buy good stocks and hold on through thick and thin. I was, of course, much too well brought up to mention Buffett owns large positions in four airlines and a variety of banks. I did buy some more STOR which is a holding of one of Buffett's lieutenants.

Totally agree with this, Buffett was one of the good people who helped and made us learn the nook and cranny of this kind of business.

[Louetta]

Overall, I do believe the Buffett method is truly the best method.

I agree completely. STOR has done well till just recently.

Also, bought some MPC. Sneaking up on a seven year low. They are refining, retail, and midstream operations. 6.5% dividend, earnings to cover said dividend (2.32 vs. 3.97), PE of 9. Bought about 1/3 of a position. Expect crude will go lower. Putin's not going to throw in the towel very soon methinks. Down a robust 44% since 2/20/2020.

[BlueWolf]

Good write-up. Today another method was suggested to me: the Buffett method. You buy good stocks and hold on through thick and thin. I was, of course, much too well brought up to mention Buffett owns large positions in four airlines and a variety of banks. I did buy some more STOR which is a holding of one of Buffett's lieutenants.

Overall, I do believe the Buffett method is truly the best method.

[Louetta]

Good write-up. Today another method was suggested to me: the Buffett method. You buy good stocks and hold on through thick and thin. I was, of course, much too well brought up to mention Buffett owns large positions in four airlines and a variety of banks. I did buy some more STOR which is a holding of one of Buffett's lieutenants.

[BlueWolf]

Well, crap. What else is there to say about this insane market. I got out at just the right time, but got back in way too early. The good news is that I am still sitting in a far amount of cash, and I intend to keep that powder dry until I see some concrete signs that this thing has bottomed. For now, I am going to hold my long term positions, while I actively trade to cover my drawdown. I wanted to write this post to share my thoughts on strategies you can use when you get caught in a major correction like this. Let me preface these remarks by saying that I am basing my chosen strategy(ies) on the belief that because this correction is not based on economic factors (yet), there will be some significant bounces. I will be shorting, as I did today, but it is in those bounces that I intend to also book a lot of cash. Here are some of the strategies I considered, and my thoughts on them:

1) Using covered calls.
Not viable, because I don’t hold 100 share increments in all my positions.

2) Buying protective puts.
Viable, since I don’t have to own stock in 100 shares increments, but difficult to use when you want to spread the risk across your stocks according to the since of your position. You could instead buy some protective puts on some of your holdings, trading or rolling them if the stock prices continues to drop. The downside is that you may be stuck letting them expire worthless, and therefore lose your premium, if you mistime time and the prices of the stocks you are protecting go up. Not for me.

3) Buying puts against the indices.
There are a number of ways to do this including puts against index ETFs, e.g. QQQ, SPY, and DIA. This isn’t an unreasonable hedge, but again, if the indices head up after you’ve bought your puts, the premiums you paid will eat into your stock profits. Again, not for me.

4) Hedging with positions in closely related stocks.
This strategy, which is sometimes used by hedge funds in various forms, involves buying or short selling stocks that are different from the stocks you own, but basically in the same segment of the market. A long side hedge is usually used when you have expectations for growth in a market segment, but you are unsure who the ultimate winner is going to be. You therefore go long in multiple competitors to hedge against the chance you picked the wrong company. In the case of a dramatic market downturn like the current one, you short sell competitors in the same segments as the positions you hold to allow the generation of profits while the markets heads south. I actually use the long side of this strategy, but I am not a fan of the short side as I feel strategies 5, 6, and 7 are more fruitful.

5) Shorting the stocks you own.
This is called “shorting against the box.” Since most brokers (all that I personally know of) won’t let you short a stock you currently hold long, however, this usually requires opening a separate account from which to short. Like most of the other strategies, this only works if the market continues to head down. If the market heads back up after you have shorted, your short positions will eat into your profits until you close them. This actually works nicely, however, if you are convinced the market is headed much lower. In that case, you let the short positions build up profits until you feel the market has bottomed, and then you close your short positions, and ride the long positions back up. Of course this mean you need to be pretty accurate in calling a bottom, which can be very tough to do. I have not ruled out using this strategy because I am not convinced there won’t be yet more spikes down, but, at the most, I will probably only use this strategy on a selective basis, i.e. for some but not all of my long positions.

6) Shorting stocks you don’t own.
With this strategy, you are basically just shorting the market. Just like any day and swing trading, you scan for short setups and then short those stocks when they trigger. I definitely plan to use this strategy as I did today.

7) Playing the long bounces.
If you are caught in a really rapid, deep correction, as we have been, you can bet there will be some significant bounces. These bounces will provide really great opportunities to generate some profits. The thing to consider here is whether or not you are willing to swing trade long, or just day trade. Since swing trading implies holding your positions overnight, it opens you up to “gap disease,” i.e. gaps up or down in share price at the next day’s open that are caused by overnight news. Personally, there is no way I am going to do anything except day trade, i.e. round trip with a single day, in the current climate. Other than that restriction, I will definitely utilize this strategy.

I hope this helps someone.

[mimo_100]

from Marketwatch

Opinion: Pick up these ‘next generation’ technology stocks while they’re on sale

shares of companies like Roku, Twillio, Cree and Chegg have more potential because they are more “next generation” tech names,

Published: March 7, 2020 at 11:18 a.m. ET By Michael Brush
Companies such as Twilio, Chegg and Enphase Energy are the FAANGs of the future, says Kevin Landis of the Firsthand Technology Opportunities Fund

[BlueWolf]

If a person believes the market is dead and will never recover then he should get out. If one believes this is a glitch and recovery will eventually turn things around why not hold or buy quality high dividend stocks and harvest the reinvested shares? Assuming there won't be wholesale dividend cuts the return should be the same monthly, quarterly, yearly whether the portfolio is worth 200K or 150K. If you don't have to use the proceeds you'll be rewarded with many more shares when the market recovers be it one, two, or three years.

--------------------billy

That is indeed one defense strategy, BillyJoe, but it typically doesn’t generate much income unless your sitting on an extremely large portfolio. It is also a strategy that many retirees use when they want to go into a more cautious mode with the ability to extract income. Personally, I’m not that keen on buying stocks just for their dividends. I do, however, always direct my broker to reinvest the dividend I do get back into the stock because I don’t need the income right now.

[billyjoe]

If a person believes the market is dead and will never recover then he should get out. If one believes this is a glitch and recovery will eventually turn things around why not hold or buy quality high dividend stocks and harvest the reinvested shares? Assuming there won't be wholesale dividend cuts the return should be the same monthly, quarterly, yearly whether the portfolio is worth 200K or 150K. If you don't have to use the proceeds you'll be rewarded with many more shares when the market recovers be it one, two, or three years.

--------------------billy

[jiesen]

Well, as luck would have it the main product of my POTY pick (and one I own), CERS, deactivates coronavirus(es) in donated blood.... so hooray for me? (CERS is up another 3% today, too)