Stock Banter

At 8:43 I entered a Sell to Open GE May 21 2011 22. Call at 27 cents. I believe there is more punishment for GE due to the reactors they built or partnered to build in Japan. I may not get this trade, it moved to 20 cents right at market open.

What I sold last year:

I sold EMC at $19.25 for a 18% long term gain – still holding significant number of shares. Sold too soon.

I sold all my SLV at 27.65, 43% short term gain, but did I sell too soon? Very scary at these levels. Looking for a major pullback before considering any purchase.

I sold all my UUP in March at 27.65, good move because I got out with a 2.5% gain and now the fund is down to 22.71. I’m staying away.

I sold 200 shares of PG at $63 early on February 18th, I had a 31% short term gain on half the shares. I bought 100 shares on May 5 at $60. Gives me 200 shares total. Considering additional shares.

I sold 150 shares of RIMM on February 18th and then my remaining shares on April 26 all at an average selling price of $70.92. Good move because RIMM is trading at $58.13 right now. Looks like the stock peaked at the end of March. I have zero shares of RIMM at this time. Looks like I sold just in time.

I sold RFMD after holding the stock for just one month. If you have a 21% gain in a month, I think that might be a good time to book profits. I sold RFMD on October 28 at $7.33. Today the stock is trading for $7.35. Waiting for a pull back on this before considering.

I sold TBT at $50 on January 13, 2010 booking an 11% profit in less than 3 months. Looks like I sold just in time.

First and Last Call of 2010 was January 6

After ending last year by selling some GE for a loss (read: tax purpose)  and then buying 71 GE Calls on December 30, March 20 2010 Call 13 @ 2.94, I then sold those calls on January 6 @2.70, netting me $3072 in one week. But that scared the crap out of me. The call-put prices are so volatile, it seems like a crap shoot. That was the last call I bought in 2010, and I didn’t buy or sell any puts either.

Uncle Gary Asks, “If dividends are the way to accumulate wealth, does it pay to own stocks that don’t pay a dividend?”

The idea that triggers this thought is an article I read a few weeks ago:

http://seekingalpha.com/article/215869-a-10-step-process-of-improving-portfolio-returns-part-i?source=email_most_popular
Adopt a long-term investment approach (future dividend flows), rather than momentum (short-term price change).

Step one is all about a simple choice you have. You can decide to invest in a business as an owner, allowing the business to generate long-term wealth for you. Or you can decide to buy a piece of paper in hopes that someone will buy your paper at a higher price than what you paid for it.

As the owner of a business you are entitled to receive all the earnings that your company can generate through its day to day operations. These earnings can be paid to you in either a check, or as a reinvestment towards the future growth of you business.

For the past 100 years or so, businesses in the U.S. have generated about a 5% annual growth in capital through reinvested earnings, and in addition have paid about 4.5% a year in income to their owners. The funny thing is, the U.S. Stock Market has averaged an almost identical return with a 4.5% dividend yield and a 5% earnings growth.

The problem for many shareholders in adopting this long term approach is that many of you measure the value of your business by the daily market price of your company’s shares. Thinking only about the short-term price swings, instead of business operation performance, will place you into the momentum camp. Resist it and you will be rewarded.

I  like stocks that yield rather than bonds. Bonds are overbought in my opinion and many others .

Even with dividend taxes going up January 1, 2010 (if the Bush tax cuts are allowed to expire), I believe in dividend paying stocks. They are all near their lows for the year since investors have been anticipating the tax cut repeal.

But what if the tax cuts are extended for some or all including those making over $250K/yr? This could be extra bullish for high dividend yielding stocks.

That’s why I have been buying high dividend stock such as MO (my favorite at 6.74%), ED at 5.04%, INTC at 3.4%, GE at 3.3%, PG at 3.2%, TAP at 2.5%, WMT at 2.37%, MSFT at 2.18, CSX at 1.98% and KR at 1.87%.

Today GE Struggles to say above my $14 Strike Price

It’s official, I added another 1/8 of my holding in GE at $14 per share. The transaction occurred at 10:54 AM est. With a 2.77% yield, GE looks like a good long term buy and hold.

I believe GE is being knocked down by the more conservative approach to budgets that Europe is heading. Will this new, fiscally responsible attitude hurt GE? Probably in the short run, but in the long run, it will be very bullish for many large American companies operating in Europe.

Ford Equity Research has this to say about GE:

We project that GE will strongly outperform the market over the next 6 to 12 months. This projection is based on our analysis of three key factors that influence common stock performance: earnings strength, relative valuation, and recent price movement. We project that GE will strongly outperform the market over the next 6 to 12 months. Thisprojection is based on our analysis of three key factors that influence common stock performance:earnings strength, relative valuation, and recent price movement.

And here is a very bullish statement from Credit Suisse

The GE CEO gave an upbeat outlook at the EPG Conference, and appears confident the company is set to start growing earnings substantially. Fears over the demand outlook have clearly risen in recent weeks as regards Europe (GE’s exposure to European sovereign debt is low, and its EUR costs and sales are fairly matched) and China (GE highlighted that its exposure to ‘bubble’ areas in China such as real estate and thermal power generation equipment is small), but we believe that if we see industrial EPS momentum slowing somewhat in the next few months, GE should outperform its EE/MI peer group off the back of potential earnings surprise in GE Capital, where we think consensus estimates are still very low. The CEO stated that Capital is in the ‘midst of a strong earnings snapback’.

The Street is less Bullish on GE, here is their statement on GE:

The company’s strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally poor debt management and disappointing return on equity.

S&P rates GE [Four Stars out of Five Stars]

Our risk assessment reflects our view of GE’s long-term record of earnings, cash flow and dividends, which we attribute to good management of a diversified portfolio of profitable businesses, offset by recent financial market turmoil, which has caused GE to access the capital markets.

I am looking to add to my shares of GE if the stock ever drops to $14. The original buy was at $14.40, I lowered the buy price due to the severe drop in the general market.

All assumptions on GE are still in play.

I was disappointed this morning when the market was up 133 points on the Dow. Relax in this market, my bottom fishing trade opportunities are still alive and possible. Here is the latest recap on my bottom fishing buys.

GS ‘Goldman Sachs’ Limit 135

AAPL ‘Apple Inc Com Limit 200

GE ‘General Electric Co Com Limit 15

HPQ ‘Hewlett Packard Co Com Limit 40

MO ‘Altria Group Inc Com Limit 20

C ‘Citigroup Inc Com Limit 3.5

GOOG ‘Google Inc Cl A Limit 400

INTC ‘Intel Corp Com Limit 20

I still like Tech, Finance, and high dividend yielders.

Other quick notes: GS has a P/E of 5.95x and MO is paying 6.86%.

One disappointing note, MSFT was down over 4% today.

Another down day, another chance to buy really on the cheap.  Here is my current ‘bottom fishing list’.

AAPL ‘Apple Inc Com Limit 200

GE ‘General Electric Co Com Limit 15

HPQ ‘Hewlett Packard Co Com Limit 40

MO ‘Altria Group Inc Com Limit 20

C ‘Citigroup Inc Com Limit 3.5

GOOG ‘Google Inc Cl A Limit 400

INTC ‘Intel Corp Com Limit 20

Looking for great deals on Tech, Finance, and high dividend yielders.

I don’t want to see these stock fall to these levels. But if they do, I’m a buyer.

GE U.S. operations lost $408 million
GE international gained a $10.8 billion profit

“Our business model is performing,” Immelt said. “We are expanding Industrial margins and realizing benefits from over two years of restructuring, while increasing investment in R&D to drive profitable organic growth.” Jeff Immelt

GE is making fantastic strides in making money, just not in the US. GE actually has a negative tax rate in the US. -10.5% according to CNN Money.

GE said there were positive indications in commercial aviation, freight rail and advertising.
“We saw encouraging economic signs,” said chief executive Jeffrey Immelt.

GE Capital profits fell 41 percent much of that was due to downsizing and a substantially lower tax credit. The loss in commercial real estate more than doubled to $403 million. Still, GE said losses were moderating at GE Capital. CEO Jeff Immelt predicts that GE Capital has “turned the corner.” Source: Stephen Manning, AP

GE posted a $607 million profit even with the lower tax credits — $357 million compared to $1.15 billion a year ago. GE also saw stabilization as losses and delinquencies declined in the first quarter. Industrial cash flow from operations on track at $2.6 billion; $70 billion consolidated cash and equivalents.

S&P REITERATES BUY OPINION ON SHARES OF GENERAL ELECTRIC
(Standard & Poor’s)
Q1 EPS of $0.21, vs. $0.26, is $0.01 above our estimate but $0.05 above consensus. Revenue was in line with our forecast, but slightly below consensus. We note $600M operating profit in finance segment, significantly ahead of our estimate, and see global credit markets improving, except commercial real estate. We also see industrial order trends improving, with equipment orders down 10% vs. -14% Q4 and -32% in Q3. On signs of continued economic and credit recoveries we raise our ’10 EPS estimate by $0.03 to $1.05 and ’11′s by $0.10 to $1.20. We up our target price by $4 to $23.

Interesting Famous Frideman Quotes

I am continuing to hold my position in GE on the hopes that more people will see value in GE. I would add to my position if I weren’t over invested at 150% of my planned budget allocation. I’ll admit, I went a little overboard on GE after Warren Buffet bought some of its preferred.

General Electric shares rose more than 4.7% Tuesday after the industrial giant told investors it aims to resume increasing the dividends its pays to shareholders some time next year.

“We’re going to plan to resume growing the dividend again in 2011 at the GE parent level,” GE Chief Financial officer Keith Sherin told investors attending a Goldman Sachs investor conference in Boston. “We’re not putting a number on it, but we do expect to grow the dividend in 2011.”

Last February, GE cut its dividend in half, something it hadn’t done since the 1930s. The stock got hammered as you can tell from this chart:

Still GE Capital is still on the minds of many investors. GE CFO Keith Sherin told investors that ‘at some this loss cycle rolls over.” GE Shares are up 85% since last February.

The first significant upgrade in GE for over a year. Brokerage firm Oppenheimer on Friday upgraded its rating for General Electric Co. to outperform from perform as the conglomerate’s financial portfolio stabilizes. “We note that consumer finance’s delinquencies and non-earnings have recently shown meaningful signs of stabilization and flattening out,” the firm said in a note to investors.

GE’s financial arm is still at risk, but GE’s industrial business is holding up well.

TheOppenheimer raised its 12-month price target to $18 from $17. Shares of GE are up 79 cents or 5.47% to $15.22 at the time of this writing. I have 125% of my target investment in GE.