Sunday, January 04, 2009

1/4/09 Bottom Fishing Portfolio - Up due to last week's three day rally

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 50% from its high and its seed and agricultural businesses are still very strong.

As part of this portfolio, I have also been selling put contracts to open on specific stocks. I have been selling put contracts at one to two months from expiration on Monsanto and Energy Conversion Devices (ENER). Since the market rallied last week, I have selling these options on hold.

Three weeks ago, I decided to buy some Ford (F) call options, to capitalize on a possibility of a rebound if Congress supports an auto industry bailout. On December 2, 2008, I bought the December 5 call and on December 3, 2008, I bought the January 7.5 call. Since the automaker bailout did not cause a large bounce for Ford, the December calls have expired worthless.

In hindsight, I bought the financial stocks way too early. I've learned my lesson. I will not purchase any more financial company stocks, until there is a more clear turnaround in the financial crisis of 2008. Of the three financial stocks, Bank of America has been the worst pick. It also appears that I had been overly optimistic about the market impact of the automaker bailout.

The portfolio was up 7.6% in the past week, a little more than the 6%-7% advance in the market indices. The overall portfolio is still down 29.88%, after reaching a low of -45.30% three weeks ago.

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

Price on 1/2/09

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



Currently, I have profited from all four put contracts which have been closed or allowed to expired. Next week, I will consider selling some January put contracts short for both Monsanto and Energy Conversion Devices.

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

Closed Price

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

The last three trading days have been a mini year end rally. Perhaps, these stocks may participate in a January effect rally which some experts predict is very likely this year. If these stocks stocks should rally significantly, I will look to close out the positions in the financial stocks.

Disclosure: At time of publication, I own shares of Bank of America, J.P. Morgan, Wells Fargo and Monsanto shares and call options for Ford.

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

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