Sunday, March 08, 2009

3/8/09 Bottom Fishing Portfolio - Making Small Buys in Energy Conversion Devices 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 (AMZN), and purchased another 50 shares of Amazon. Last week, I decided to also include Energy Conversion Device, and purchased 100 shares.

The portfolio prior to the purchase of Energy Conversion Devices and Amazon was down 9.5%in the past week, versus a market fall of 6.1 % in the Dow. Financial stocks were punished last week due to poor results of AIG and the continuing lack of a Treasury plan to deal with the financial crisis.

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

Price on 3/6/09

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



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



Wells Fargo (WFC) [10/3/08]50



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



Amazon (AMZN) [3/6/09]100



Energy Conversion Devices (ENER) [3/6/09]100



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 3/6/09

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. I will look to close out the long positions in the financial stocks by end of March, 2009.

Disclosure: At time of publication, I own shares of Bank of America, J.P. Morgan, Wells Fargo , Monsanto, Amazon and Energy Conversion Devices. 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.

Copyright © 2009 Achievement Catalyst, LLC

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