Sunday, March 15, 2009

3/15/09 Bottom Fishing Portfolio - Financials Rocket and Profits Taken for New Purchases

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 made selective buys of stocks that I believe will emerge well from the recession, Monsanto, Amazon (AMZN), and Energy Conversion Device.

I am also taking the opportunity to sell when the market rallies. Last week, I sold 50 shares of Amazon and 100 shares of Energy Conversion Devices at a 5-15% profit after owning them a week or less. If Monsanto rises into the 90s, I may also sell the shares that were acquired in 2009. I am hoping, OK - wishing:-), that the financial stocks will rally significantly when the mark to market rules are relaxed. If they do, I plan to sell these toxic stocks.

The portfolio was up 15.66% in the past week, versus a Dow increase of 9.14%. Financial stocks were up significantly last week in anticipation of accounting rule changes that will reduce the issue of mark to market of mortgage securities.

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

Price on 3/13/09

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



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


sold on 3/11/09 at $68.87

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


sold on 3/13/09 at $18.46

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 3/13/09

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. Originally I was looking to close out the long positions in the financial stocks by end of March, 2009. However, with the potential changes in mark to market accounting, I may hold the financial stocks a little longer.

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