Sunday, October 19, 2008

10/19/08 Bottom Fishing Portfolio Update - Still No Clear Bottom

On Friday, October 3, 2008, I couldn't resist the temptation of buying some stocks before the bailout vote. I bought shares of Bank of America (BAC), J.P. Morgan (JPM), Wells Fargo (WFC) and Monsanto (MON). I believed that these three banks will not only survive this financial crisis, but will be one the four major banking powers in the next year. Monsanto was down over 40% from its high and its seed and agricultural businesses are still very strong.

Unfortunately, it isn't clear that a bottom has occurred. The portfolio is down 20.18%, with all of the losses coming in the first week I owned it, when it was down 23.36%. Bank of America has been the worst with a -38.84% return.

Bottom Fishing Portfolio
Stock [purchase dateSharesPurchase Price

Price on 10/17/08

Bank of America(BAC) [10/3/08]100



J.P. Morgan (JPM) [10/3/08]100



Wells Fargo (WFC) [10/3/08]**100



Monsanto (MON) [10/3/08]50



I also sold one Nov 60 put contract on Monsanto. The contract is an obligation to buy 100 shares of Monsanto at $60. Since Monsanto is currently in the 80s, I expect this contract to expire worthless and I will keep the $239 premium. However, if Monsanto should fall below $60, I would be fine with buying 100 more shares at 60.

Put Contracts Sold Short to Open
Stock [short date]SharesShort Price

Price on 10/17/08

Monsanto Nov 60 put (MONWL) [10/3/08]100



So far the market action showed I should have waited before making a purchase. As a result, I don't plan to make any more purchases a more clear turnaround in the market trends.

Disclosure: At time of publication, I own Bank of America, J.P. Morgan, Wells Fargo and Monsanto. I am also short a put contract for Monsanto.

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This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

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