Sunday, October 05, 2008

Gave in to Temptation - Now Buyer's Remorse

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 believe 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.

Bottom Fishing Portfolio
Stock [purchase dateSharesPurchase Price

Price on 10/3/08

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]10



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 10/3/08

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



After the bailout bill passed, all these shares pulled back significantly and the portfolio is already down 7.5% for one day. So today, I regret buying these stocks. However, next week's market action will determine whether I should have waited before making a purchase.

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

For more on New Beginnings, check back every Sunday for a new segment.

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

Copyright © 2008 Achievement Catalyst, LLC

No comments: