Sunday, March 01, 2009

3/1/09 Bottom Fishing Portfolio - Making Small Buys in Monsanto and Amazon

Since October 3, 2008, my attempts to buy stocks near a bottom have failed miserably. My first attempt was to buy financial stocks, which have since fallen 50 to 90%, and an agricultural stock, which has fallen 14%. I have also experimented with buying calls on auto stocks and financial stocks, also without success. I've had the most success selling put contracts to open on Monsanto (MON) and Energy Conversion Devices (ENER), which earned a few hundred dollars to slightly offset the losses.

At this point, I am no longer buying any financial company stocks, which I consider to be toxic. In the near term, the only investment I will make in a financial rebound is buying calls, which limits the downside. I had already used the call buying strategy with Ford, with no success, prior to the auto bailout. I briefly considered buying stocks with 6-7% dividends, but then several of the potential candidates cut their payout significantly. The only strategy that has been profitable is selling puts short on Monsanto and Energy Conversion devices.

Because the strategy is working, I will continue to sell put contracts to open. In addition, since I think a bottom is near, I have decided to make selective buys of stocks that I believe will emerge well from the recession, Monsanto and Amazon. This week I bought 50 shares of Amazon and 100 shares of Monsanto.

The portfolio prior the the purchase of Monsanto and Amazon was up 3.2% in the past week, versus a market fall of 4.06% in the Dow. Financial stocks rallied last week on unfounded expectations of a Treasury plan. The overall portfolio before this week's purchases was still down 50.0%

Bottom Fishing Portfolio
Stock or Option [purchase date]SharesPurchase Price

Price on 2/27/09

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



Ford Dec 5 call (FLA) [12/2/08]1000


expired 12/20/08 at $0

Ford Jan 7.5 call (FAU) [12/3/08]1000


expired 1/16/09 at $0

PNC May 45 call (PNCEI) [1/20/09]100



PNC Jan 55 call (WYLAK) [1/20/09]100



Monsanto (MON) [2/23/09]50



Amazon (AMZN) [2/26/09]50



Monsanto (MON) [2/26/09]50



Currently, I have profited from all five put contracts which have been closed or allowed to expired. I will continue to sell put contracts on Energy Conversion Devices and Monsanto.

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

Price on 2/27/09

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


closed on 10/29/08 for $0.91

Energy Conversion Nov 20 put (EQIWD) [11/12/08]100


expired 11/21/08 at $0

Monsanto Dec 40 put (MONXI) [11/20/08]100


expired 12/20/08 at $0

Energy Conversion Dec 17.5 put (EQIXW) [11/25/08]100


expired 12/20/08 at $0

Energy Conversion Feb 15 put (EQINC) [1/14/09]100


expired 2/19/08 at $0

Monsanto Mar 65 put (MONOM) [2/23/09]100



Energy Conversion Mar 20 put (EQIOD) [2/26/09]100



It's clear to me that the financial stocks will not likely recover in the near future. If these stocks should rally significantly, I will look to close out the long positions in the financial stocks.

Disclosure: At time of publication, I own shares of Bank of America, J.P. Morgan, Wells Fargo , Monsanto and Amazon shares. I am long PNC call contracts and short Monsanto and Energy Conversion Device put contracts.

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

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