Speculation: Chesapeake Energy – CHK

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What a wild ride this stock has taken this year.  It’s been split in half since the first of the year and has traded down to around $14.

Carl Ihcan recently purchased 50 million shares at about $15.50 in an effort to shake up the board of directors. He’s demanding 2 board seats for his guys and 2 more for the other large shareholders.

What do you think?  Time to back up the truck?  Right now I am looking at some January 2013 calls at a $20 strike price.  If Aubrey McClendon goes, or he agrees to the board shake up I believe this stock will rocket past $20.  Post your thoughts in the comments

2012 Investment Guide

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Wow, how about the “Sell in May and Go Away” strategy?

Would have worked well this year wouldn’t it?  After approaching 14,000 in April we’re now heading toward 12,000 with the Dow!

In my mind this is mostly fear based selling with the fundamentals staying the same.  In the the next few weeks I’ll be posting my 2012 picks and strategies.

Stay tuned.

Gold vs S&P 500

GLD – Time to buy Gold?

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I’ve been a gold bull since late 2005 when it was about $450 an ounce.  Now with gold pushing $2000, that proves to be a good investment considering the market turmoil since.  But what about now?  Is it the time for an entry position in gold??

 

As you can see, an investment in gold (or GLD, my preferred ETF) 5 years ago gives you a very nice return today.  The S&P 500 is still negative, however.

The chart below illustrates this

Gold vs S&P 500
After briefly touching $2,000 an ounce, gold has pulled back (a little) to around $1,750.   I like this price as a entry point for anyone thinking about starting a position.  Even a 5% portfolio allocation is a good start with GLD.  This can be used as a hedge against inflation or a spreading crisis in Europe.  If stocks do well in 2012, gold will probably lag a bit.  If that’s the case, buy more next year.  In any case, gold isn’t going back down to $1000 an ounce.

**Disclosure – I have no positions in physical gold or GLD at the time of this article.

Stock Market 2011

Summer 2011 Investment Ideas – How did we do?

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In May, we posted our summer 2011 investment ideas.  Now that fall has arrived let’s see how we did vs the market.

 

Here’s our original investments and allocations -

Stock Investments for 2011

Investments for 2011

 

Here’s how we did.

 

Stock Market 2011

 

 

More details and analysis to follow.  Although we lost money, we still beat the market.  Not bad in my mind!

Summer 2011 Investments – Part 5 – VWO

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An international presence is essential in any portfolio.  While the US economy could be stagnant other parts of the world could be booming.  Just look at 2008-2009.  While the financial crisis sent shockwaves through the world economies – international funds actually outperformed US equities. The ETF I’d like to feature today is VWO – or the Vanguard Emerging Markets ETF Fund.

Except a small window in late 2008, VWO outperformed the S&P 500 by almost double digit percentage gains.

International stocks and indexes are still very risky assets to own, however.  One year you’ll see a 70% gain, the next year you’ll see a 40% drop.  That’s the nature of the beast.  This is why you only want to allocate no more than 10% of your portfolio to an international fund or ETF.  Obviously, I am a bit convserative and you can adjust this up if you have a longer time-frame to retirement.  People in their 20′s could invest up to 15-20% internationally depending on their risk tolerance.

Here is VWO’s profile

The Fund seeks to match the performance of the MSCI Emerging Markets Index. The Fund employs a passive management or indexing investment approach by investing substantially all (normally about 95%) of its assets in the common stocks included in the Index.

 

You may notice I’ve been recommending a lot of Vanguard ETF’s.  They are by far any away the best in my opinion.  They have absolutely the lowest fees, period.  And fees can add up.

Let’s say you have $100,000 of VWO.  The yearly expense ratio of VWO is .22%.  That’s roughly $220 per year.  Now let’s look at a competitor.  iShares Emerging Market ETF – EEM charges .69% – or almost triple the fee for roughly the same exact fund.  Multiply that times 10 years of investing and that’s some serious cash you’re saving.

Some specifics on VWO:

VWO      S&P

1 Year 27.01 27.34
3 Years 11.97 7.72
5 Years 70.34 11.25

These are crazy returns – don’t expect this every year.  The 5 year obviously includes the 2008 financial disaster.

Top 10 Holdings

Company Name % of Total
Portfolio
Dollar Value
(in thousands)
Gazprom OAO DR 1.88% $915,037.36
America Movil SAB De CV ORD 1.42% $691,145.24
Samsung Electronics Co Ltd DR 1.40% $681,410.80
China Mobile Ltd ORD 1.38% $671,676.36
Industrial And Commercial Bank of China Ltd ORD 1.25% $608,402.50
CNOOC Ltd ORD 1.12% $545,128.64
China Construction Bank Corp ORD 1.12% $545,128.64
Petroleo Brasileiro SA Petrobras DR 1.08% $525,659.76
Vale SA DR 1.00% $486,722.00
Itau Unibanco Holding SA DR 0.96% $467,253.12
Total: 12.61% $6,137,564.42

 

NLY Stock Chart

Summer 2011 Investments Part 4 – NLY

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Part 4 of our summer 2011 investments features a real estate investment trust or REIT.  Annaly Capital Management Inc, or NLY, is one of the best for a shorter term investment.  This stock is currently trading near its 52 week high at $18.50.  As you can see by the chart – the stock has been trading between 17 and 18.50 in the past 52 weeks.

NLY Stock ChartFrom NLY’s profile

Annaly Capital Management, Inc. is a Maryland corporation that commenced operations on February 18, 1997. It owns, manages, and finances a portfolio of real estate related investment securities, including mortgage pass-through certificates, collateralized mortgage obligations (or CMOs), agency callable debentures, and other securities representing interests in or obligations backed by pools of mortgage loans. The Company’s wholly-owned subsidiaries offer diversified real estate, asset management and other financial services. The Company’s main business objective is to generate income for distribution to its stockholders, mainly from the net cash flows on its investment securities. RCap is its wholly-owned broker dealer taxable REIT subsidiary which generates fee income. It is mainly engaged in the business of investing, on a leveraged basis, in mortgage pass-through certificates, collateralized mortgage obligations and other mortgage-backed securities representing interests in or obligations backed by pools of mortgage loans issued or guaranteed by Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae) and the Government National Mortgage Association (Ginnie Mae) (collectively, ‘Mortgage-Backed Securities’). It also invests in Federal Home Loan Bank (FHLB), Freddie Mac and Fannie Mae debentures. The Mortgage-Backed Securities and agency debentures are collectively referred to herein as Investment Securities.

There are some risks with NLY.  The fat 14% dividend is very appealing.  With the inevitable rise in interest rates the stock and dividend is surely to go down.  NLY basically makes it’s money by borrowing near zero percent and keeping the difference.  As rates rise the spread gets smaller.  This is still a stock I’d like to own for the rest of 2012.  I have been long NLY since around $17.90.

Summer 2011 Investments Part 3 – CVY

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CVY, or the Guggenheim Multi-Asset Income ETF, was a good find by a friend in 2010.  I’ve owned this since late 2010 with about an 11% gain (plus dividends).  This ETF is a well diversified basket of stocks, bonds, preferred stock, ADR’s, REIT’s, MLP’s, and royalty trusts.  Quite a basket of investments all into one ETF. The fund tracks the “Zacks Multi-Asset Income Index” for its investments.  CVY pays a nice dividend of around 4.7%.

The expense ratio of 0.60% is a bit higher but still in line with most ETF’s.  I’ll pay a little higher expense ration for higher returns any day.


Top Fund Holdings
SEADRILL LTD     1.48 %
CONOCOPHILLIPS .     1.38 %
CHEVRON CORP .     1.34 %
LINN ENERGY LLC .     1.29 %
WELLS FARGO & COMPANY     1.12 %
EATON VANCE LIMITED DURATION INCOME FUND     1.10 %
ALLIANCEBERNSTEIN GLOBAL HIGH INCOME FUND INC     1.07 %
PROVIDENT ENERGY LTD     1.06 %
ANNALY CAPITAL MANAGEMENT INC .     1.03 %
AMERICAN CAPITAL AGENCY CORP     1.03 %

TOP FUND SECTORS

SECTOR     WEIGHTING
Finance     20.50 %
Oils/Energy     18.12 %
Consumer Staples     13.06 %
Utilities     12.53 %
Closed End Funds     9.66 %
Computer & Technology     6.83 %
Medical     6.02 %
Aerospace     2.93 %
Basic Materials     2.56 %
Consumer Discretionary     2.31 %
Industrial Products     1.46 %
Construction     1.37 %
Retail/Wholesale     1.00 %
Transportation     0.85 %
Business Services     0.79 %

 

As you can see, the fund is leveraged heavily into energy and financial services.  Another economic downturn could hit this fund quite hard.  But with just a 10% portfolio allocation like I recommend, you aren’t betting the farm on this either.  I believe this ETF is also one to keep for a while.  Energy isn’t going anywhere and financial services will pick back up.  There may be some short term speed bumps though.

**disclosure – I am long CVY

Summer 2011 Investments Part 2- VIG

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This is one to buy and hold FOREVER!  VIG is quite possibly the best investment anyone can own.  Why is this?  Let’s take a look at VIG’s profile.

The Fund seeks to track the performance of the Dividend Achievers Select Index that measures the investment return of common stocks of companies that have a record of increasing dividends over time.

In other words, it only invests in the best high quality stocks that have consistently increased their dividends year over year.

http://www.mergent.com/news-2006-10.html

Dividend Appreciation Index Fund will track the performance of the Dividend Achievers Select Index™, an index created exclusively for Vanguard by Mergent. A unique dividend-growth investment tool, the index is a subset of Mergent’s Broad Dividend Achievers Index™ which follows U.S.-listed companies that have increased their annual regular dividends for at least the past 10 consecutive years and have met specific liquidity screening criteria. The Dividend Achievers Select Index uses additional proprietary methodology to focus on approximately 200 stocks, and offers investors access to companies with consistent earnings growth and bolstered diversification across securities, sectors and investment styles.

Again, this is one to own and hold forever.  Even though it only yields about 2% this is very misleading.  These are companies that are very strong financially.  These companies are almost zero risk for losing large amounts of money.

Top 10 Holdings as of 4/30/11… quite a list!  Buy this one and forget about it.  You’ll thank me in 20 years!

1 Chevron Corp
2 ConocoPhillips
3 Exxon Mobil Corp
4 United Technologies Corp
5 Coca-Cola Co/The
6 International Business Machines Corp
7 McDonald’s Corp
8 PepsiCo Inc/NC
9 Procter & Gamble Co/The
10 Caterpillar Inc
Ten largest holdings = 40.0% of total net assets

Summer 2011 Investments – CSJ

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The first investment I’ll cover is the largest piece of my portfolio.  Again, this is a very conservative portfolio and you could change the allocation any way you want.

CSJ is the iShares Barclays 1-3 Year Credit Bond ETF.  It currently yields around 2% and is a relatively safe investment.

From CSJ’s information page:

The Fund seeks investment results that correspond to the investment grade credit sector of the U.S. bond market as defined by the Barclays Capital 1-3 Year U.S. Credit Index. The Index includes investment grade U.S. credit securities that have a remaining maturity of 1 to 3 years.

The reason I like CSJ so much is that it invests in short term corporate bonds.  Almost all holdings mature in less than 3 years.  This keeps interest rate risk to a minimum (but it is still there).  As rates start to rise we will see a pullback on security price.  But on the long term this should still be a fairly safe income investment. This is especially useful for someone looking to diversify out of US Treasury bonds.

The expense ratio only knocks off 0.20% off your return.

Stock Investments for 2011

Summer 2011 – What will the stock market do?

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If anyone could answer this question – we’d all be rich!  Keep in mind… this is my own opinion,.  For every person that tells you the Dow is going to 15K I’ll find you someone it’s going to 5.

Here’s my opinion on what to own in summer 2011.  I am a more conservative investor during big run-ups like we’ve seen since 2008 (100% gain!!).

Here’s what I like.

Stock Investments for 2011

Investments for 2011

More details to come on each stock and why I like it…

CSJ – Online Investing Advisor Notes

VIG – Online Investing Advisor Notes

CVY – Online Investing Advisor Notes

VWO – Online Investing Advisor Notes

Quotes – CSJ , CVY , HYG, VIG, NLY

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