Sunday, March 29, 2009

Pontifications From Savannah

Since I last wrote a bulletin published at, the stock market has risen almost 20%. On a short-term basis, this is good news. On a longer-term basis, time and decisions in Washington will collectively decide whether this recent rally is a bear market correction, or the beginning of a new bull market.

I believe that there is a 70% chance that the triple bottom (new low) of this bear market was reached two weeks ago. I made a similar prediction near the end of 2008-and was proven wrong!

I continue to rigorously research the investment markets each day, looking for investments that I believe have fallen too far, based upon their current and projected financial condition. The number one category of purchases in the past two weeks has been in the “oil patch”. I believe that a barrel of oil will be closer to $80 than $30 within two years. With a barrel selling for $35 a few weeks back, we began loading up on stocks that can benefit from the future up turn in crude.

These include:

1. United States Oil fund (USO)
2. Chevron (CVX), 4.3% yield
3. Marathon Oil (MRO), 3.8% yield
4. Conoco Phillips (COP), 5.4% yield
5. Valero (VLO), 3.2% yield
6. British Petroleum (BP), yield 8.5%

We added to our existing position in an ETF (KOL) that owns and tracks America’s version of a Middle East monopoly-Coal. At the same time, we initiated a new position in the United Natural Gas ETF (UNG), which was selling at a new 52 week low. Natural Gas is America’s second version of a Middle East power play, but right in the good ‘ole U.S.A.

We also added Dr. Pepper/Snapple (DPS), 0% yield and Pike Electric (PKE), 0% yield. DPS stands to benefit from running their company separate from the Cokes and Pepsi’s, with significant long-term growth potential. PKE stands to benefit big time from the need in the U.S.A. to upgrade our electrical grid.

In addition, we have added the NASDAQ index ETF (QQQQ) to several of our portfolios. We bought Genuine Parts (GPC), 5.7% yield, based upon the fact that Americans are delaying buying new cars and fixing the ones they have. GPX owns the NAPA auto parts stores across America and yields a whopping 5.7%.

In the investment business, patience is a virtue and a very strong stomach is necessary to buy great stocks when they are selling at, near, or below their historic low valuations and the media news is bad every day.

It is in these times that great fortunes are made and lost.

Fortunes are made by the buyers of great companies, who are more than willing to buy the shares from the sellers of these great companies, who simply “can’t take it another day”.

As the saying goes, “the time to buy straw hats is in the winter!”

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