| Buy the stock or a lottery ticket? | |||
|---|---|---|---|
| Company | 52 week range | Price on 4/3/09 | My Decision |
| AIG (AIG) | 0.33 - 49.50 | $1.14 | Lottery ticket |
| Citigroup (C) | $0.97 - 27.35 | $2.85 | Lottery ticket |
| Fannie Mae (FNM) | $0.30 - 31.67 | $0.70 | Lottery ticket |
| DryShips (DRYS) | $2.72 - 116.43 | $5.25 | Flip a coin |
| Bank of America (BAC) | $2.53 - $4.65 | $7.60 | Flip a coin |
| General Electric (GE) | $5.87 - 37.90 | $10.94 | Flip a coin |
| Ford (F) | $1.01 - 8.79 | $3.25 | Stock |
| Alcoa (AA) | $4.97 - 44.77 | $8.17 | Stock |
| Dow Chemical (DOW) | $5.89 - 43.43 | $11.00 | Stock |
For reference, in the lottery game Mega Millions, the chances of doubling, tripling or winning 10 times a bet are 1 in 75, 1 in 141, and 1 in 844, respectively. In addition, there is a 1 in 175, 711,536 chance of winning a several million dollar jackpot.
In summary, I have very low confidence that AIG, Citigroup and Fannie Mae will recover sufficiently to significantly increase the value of their stock. Thus, buying a lotto ticket offers more return, less stress and more fun :-) For DryShips, Bank of America, and General Electric, I think there is a slightly better chance for recovery than failure. Finally, for Ford, Alcoa and Dow Chemical, I believe there a reasonable chance these stocks will recover when the economy recovers. If the current rally reverts into a market decline again, I will consider buying small positions in these stocks.
Disclosure: At time of publication, I own shares of General Electric and two lottery tickets.
For more on Reflections and Musings, check back every Saturday for a new segment.
This is not financial or investment advice. Please consult a professional advisor.
Copyright © 2009 Achievement Catalyst, LLC
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