Levott's Blog
October 29, 2009
GDP Sparks Rally
Well the 3rd quarter GDP was well above the consensus and the market was off to the races today. The cash for clunkers program and
government stimulus were a big help, but more importantly it wasn’t a bad miss. If the GDP number would have been awful, then the correction
surely would have continued. As it stands, the bulls have a little more secure footing than they did coming into this number. The market
has been on shaky legs this week to say the least until this morning.
I will be really interested to see what happens over the next week. I’d love to see this market hold its ground after the run up today
and start to move higher. The problem will be if we come right back down after this good news or slowly drift lower in the coming days.
The market over the last couple weeks has sold off into the close and that is generally not a good sign. Hopefully we can use this number
to start closing days off on a positive note. The corrections have been short over the last 6 months, so if you blink you could have missed
them. I hope this is another blink and you miss it correction.
October 27, 2009
How to Invest in BRIC and Others
There are several ways to invest in the so called BRIC (Brazil, Russia, India and China) countries. It certainly does not have to be
these countries but they are the ones talked about the most. I will go through three very easy ways to play it.
ETFs are probably the easiest and you get a basket of companies, so your risk is not tied up in one stock. iShares and PowerShares
are a couple of the more popular funds. One thing to look for is the holdings the ETF has because you might not be as diversified as
you think. For example, ticker symbol EWZ is a Brazilian ETF and if you look at the top 3 holdings they account for 31.4% of the assets.
That is not to say it is bad, but you know if one of these 3 stocks gets hurt the whole fund is going to take a good sized hit. Your broker
should have a breakdown of at least the top 10 holdings of any ETF you are interested in, if they don’t the ETF’s website should break it
down for you.
You could flat out buy foreign stocks via ADRs or ones listed here. This allows you to hold only the stocks of foreign companies that
you are interested in and not a whole basket of them like with an ETF. This allows you the flexibility of only being in industries you
like. The obvious downfall is if you pick the wrong stocks you could suffer losses even if the industry is doing well. You also never
know how some of these foreign governments are going to interfere with companies and a good example is China.
Perhaps a safer way to get involved with foreign countries is buying American companies that are expanding into the foreign country you
are interested in. This way you have a higher comfort level with the earnings that are being reported. For example, McDonald’s is now in
China but far from done expanding, so there are growth opportunities there and you have taken some of the worry out of owning a foreign stock.
If you think Brazil with its growing middle class and being awarded the Olympics is going to be expanding with infrastructure, then perhaps a
US steel or copper company with exposure to Brazil is the way to play it.
These are three easy ways to keep your portfolio global. Some of your investments may already be global plays and you just didn’t
even know it.
October 26, 2009
Risk Tolerance = Beta
Most people have a pretty good idea of their risk tolerance in stocks or investments, so setting up a portfolio with that in mind is critical.
It is one thing to know your risk tolerance, but quite another to find stocks that fit into your level of comfort. One way to help you figure
this out is looking at beta.
Beta measures a stock’s volatility in relation to what the market is doing. If your stock moves in perfect tandem with the market then its
beta would be 1.0. If a stock marches higher than the market over time then the beta would be higher than 1. A more conservative stock that
would move less than the market would have a beta below 1.0. Granted this is not a perfect science and there are pitfalls to using beta, but
it is a pretty good measure of a stock’s volatility. You can check out the definition, advantages and disadvantages by going to
Investopedia.com.
Here are some popular stocks and their beta so you can get an idea of what kind of numbers you are looking at. We went from low beta to
high: Wal-Mart 0.2, Procter & Gamble 0.55, Johnson and Johnson 0.6, Coke Cola 0.62, Microsoft 0.98, Disney 1.15, Amazon 1.2, Apple 1.49,
Goldman Sachs 1.49, General Electric 1.65, Bank of America 2.62 and AIG 4.35.
October 16, 2009
Go Ahead, I Dare You
Some of you might remember this old commercial when Robert Conrad used to put a battery on his shoulder and dare us to knock it off.
Well I’m not here to knock any batteries off shoulders but I will discuss a few lithium-ion battery companies that have some potential.
These stocks come with some higher risk so keep that in mind. This would be a play off an increased demand for electrical vehicles.
These are not recommended buys – you need to do your own research and evaluate risk tolerance - Levott does not give individualized
investment advice.
Advanced Battery (ABAT) – They design, manufacture and market rechargeable polymer lithium-ion batteries in China, the US and Europe.
This company is actually profitable, which is a good thing. The batteries they make are used in notebook computers, walkie-talkies,
mine-use lamps and other electronic devices, so this is not just an electric car battery play. They have a battery that allows a commuter
vehicle to get up to 120 mph and 240 miles without a charge. It takes about 3 to 4 hours to recharge. ABAT also has a deal within China
for their batteries in commuter buses.
BYD (BYDDF) – This stock is traded over the counter and Warren Buffett has invested in this company. In fact, Berkshire Hathaway made
a billion dollars in profit off this stock last year. BYD not only makes batteries, they actually just decided to go ahead and make a car
for one of their batteries too. They are trying to get the F3DM model, which kind of resembles a Toyota Corolla, to the US and Europe by
2011 with a price tag around $20,000.
Ener1 (HEV) – This company’s products are for the most part in the automotive industry. Their lithium-ion battery is being considered
for the Karma electric sports car made by Fisker Automotive. This car is due out in 2010 and their plan is to produce 15,000 of these a year.
If Ener1 was able to land this contract it would be a huge revenue booster. That is a big “if” though, so play with caution.
Valence (VLNC) – This company’s batteries are used in electric vehicles, scooters, wheelchairs, remote power, for back-ups, robotics
and a few others. The product that interested me was the Brammo Enertia electric motorcycle. This motorcycle is 100 percent electric
with about a 45 mile range and tops out at about 55 mph. This motorcycle is actually sold at a few Best Buy locations around the country.
Obviously if the demand is high it could lead to great things for Valence, but again this is a very big “if”.
A123 (AONE) – This stock is a recent IPO so it comes with the usual IPO baggage and concerns. I will just mention this stock because
it has been hyped quite a bit. I'm going to wait for them to post a few quarters of earnings before I take a serious look.
NOTE: None of the stocks mentioned in this email are recommended buys or sells, you need to do your own research and evaluate risk
tolerance - Levott does not give individualized investment advice.
October 15, 2009
Dollar Doldrums
As the dollar continues to tank, we have oil working in the opposite direction. They are not always linked but that certainly seems
to be the case over the last couple years. You could also say as the dollar tanks, our stocks continue their rebound. Something has to
give here shortly and what happens after that is anyone’s guess.
Gas surely is approaching the levels at the pump when Americans start to really cut back and have to start budgeting for the extra
burden to their income. It also means any company using transportation to get their products in their user’s hands is taking a hit to the
expense sheet. I don’t know too many companies that don’t use some form of transportation get their final product out the door.
Once we start hurting the consumer at the pump and hurting the producer on its expense sheet, we have a big problem as far
as growth goes. With consumers having less money in their pockets, they can’t afford to pick up the tab the producers would probably try
to pass on to them for the extra fuel charges. So indeed, in this case, two negatives don’t make a positive.
Stocks have been inversely following the dollar for a while now, so if the dollar does correct you could assume stocks will
get a correction. This is just another ingredient in the main course of our economy and I’m hoping we get a great meal out if it eventually.
The point is if you have some huge gains you might want to start taking some off the table or at least setup some hedges. We can’t
continue this course because the camel's back doesn't want any more straw.
Here is another article
about the oil and dollar link.
And go Dodgers!!!!
October 14, 2009
A Utility with Some Green
FPL Group is not your typical boring utility company. They have some renewable energy sources that have and will be integrated into
their current energy generating sources. The 2008 energy source breakdown was 53% gas, 22% nuclear, 6% coal, 5% oil and 14% is purchased.
They have added wind and solar facilities this year, in fact they just announced they will be delivering solar energy via the largest solar
photovoltaic solar facility in North America by the end of October. This could really work in their favor with tax credits provided by the
federal stimulus package.
This is still a utility company so this baby isn’t going to skyrocket for you, but it certainly seems to have some of the tools to be
successful and pays a 3.5% dividend. Standard and Poor’s gives them a 5 star rating, which is its highest. The stock (as of October 13th
after the close) is below the 200, 50 and 21 day moving average, so it doesn’t look to be over priced. If you are looking for a utility
company or a stock with a lower beta (0.66) then you might want to give this one a look.
Note: Levott does currently own this stock in our Sample Portfolio. This is not a recommended buy – you need to do your own research
and evaluate risk tolerance - Levott does not give individualized investment advice.
October 13, 2009
Intel Brings It Home
Well Intel reported some great numbers after the bell today and it looks like technology stocks will get rewarded tomorrow. This is
an important quarter for all companies because the expenses have been cleaned up so they have to start beating on the revenue side. The
analysts should have these cleaned up expenses calculated into the current quarter’s earnings expectations, so it will be hard to impress
going forward without the revenue getting a pop. This earnings season certainly is an important one, at least until the next one, so make
sure your booking profits when you get a chance. We are off to a good start and remember to put those seatbelts on.
October 8, 2009
History is Made
I declare today the greatest sports Thursday in the history of mankind. We have a triple play of MLB playoffs starting with Philadelphia
and Colorado. This is a nice game but my interest is not of the highest degree in this game. We are then presented with the Dodgers (greatest
baseball team in North America……no make that the world) verses the St. Louis little birds. I figured the Dodgers had no chance in this series,
since they have played like dogs since early July. They perhaps have awoken from their long slumber. The Huskers are next on the slate in taking
on the Missouri Tigers. I expect a declawing and taming of these Tigers in Columbia. Not a good day in Missouri for their teams. The last event will be
the Angels throwing the Red Sox into the hamper until next spring. As you can see, today is clearly the greatest sports Thursday in the history
of mankind.
October 5, 2009
Trust Thyself
Well we have all learned a lot of lessons over the last couple of years about money. It could have been lessons about how to protect
your portfolio, about who manages your money, what financial institutions do I trust with my money, if I lose my job do I have enough in
savings to get by and plenty of others. I know I heard the words ‘ponzi scheme’ more than I care too. The descendants of Charles Ponzi,
who the schemes have been named after, probably are the happiest of anyone because it is just a matter of time before it’s called a ‘Madoff
scheme’. Regardless of what lessons you’ve learned hopefully one is to manage your money better or at least monitor who is managing your
money with greater scrutiny.
Nobody and I mean nobody cares about your money more than you so you should take the bull by the horns. Everyone’s financial situation
is different with risk tolerance, age, retirement lifestyle and a host of others, but one thing remains constant it’s your money so you
should be actively involved. You should always trust yourself when doing research and when selecting where to put your money. If you listen
to the so called experts you hear on TV or read in the newspaper you are doing yourself a disservice by blindly following. The words, ‘this
guy must know what he’s talking about’ and following that advise without doing your own research is silly.
There are plenty of people out there trying to give sound advice on where the economy is head, which stocks will be hot in 6 months and
what’s happing with inflation over the next couple years. It could make total sense to you, but nobody really knows what is going to happen
in the future so hedging is important. You may not make the most money you can by hedging but you can at least sleep at night. There are
plenty of ways to hedge your investments too which I won’t get into. You just need to make sure you trust thyself when making investment
decision and that’s all I got to say about that.
October 2, 2009
Support Levels
We have a long way to go before the close today, but if we break the 50 Day SMA of 1021.74 on the SP500 (see chart) the next next support level should be
around the 1007 area. The closes in recent days have shown weakness and it will be interesting to see if we follow suit today. We
started the day off pretty bad, but had some successful bounces off the 1021 area. Right now (1:32 EST) we are looking great for the day,
we are up 2 points. If we hold around the even level today, you have to figure that it is a success for the bulls considering the
horrible jobs data we got this morning.
If the market does take a turn for the worst, I have protection in place with some puts so the painful days aren’t quite so painful.
Every investor should have some protection for these market dips. I like to follow the trends and stay away from listening to the so
called experts telling us if the market is over sold or over bought.
And now to completely change gears on you, I’m going to the NFL. I like the Steelers to take care of the Chargers this weekend, but
6 points sure seems like a lot for a team that can’t seem to find their running game or put teams away when they have a chance. The
Steelers are my favorite team so I sure hope they roll, but I’ll take a win. I like the Saints to pound the New York Jets. The Jets
are a good team but I can’t see them keeping up with the Saints offense. The last pick of the big games this week is Baltimore and 2
points. The Ravens look for real and are actually scoring points in bunches this year, but let’s face it they weren’t up against the best
defenses on this planet. I hate picking the Ravens but I have too.
Have a great weekend!
October 1, 2009
Wal-Mart Why Not
In my humble opinion, Wal-Mart (WMT) isn’t sitting in to bad of a spot now to pick up for the long haul. If you look at the stock
over the last ten years it has traditionally been a great time to buy Wal-Mart around $45 and start thinking about unloading it at $60.
The stock will start off October at $49.09, which is closer to 45 than 60 for you mathematically challenged. In just looking at the 52
week high ($60.30) and low ($46.25), they are sitting close to the bottom of that range.
A couple of Levott stats for Wal-Mart are above average with the Levott Buying Index (LBI) standing at 2.25 with 1 being the best
and 5 the worst, the return on investment (ROI) sits at 13.28%. The stock pays close to a 2.25% dividend, which is nothing to shake
a stick at. I should also mention that Standard and Poor’s has Wal-Mart listed as a Strong Buy (5 stars). However, I rarely if ever
look at what analyst or companies rate a stock. You should do your own homework and trust it.
If the economy does take a little double dip in the near future, you would expect Wal-Mart to drop less than the major averages with
a beta of 0.21. The great thing about this stock is if tougher times are still in front of us, people will always be shopping at
Wal-Mart. You can’t say the same thing about higher end retailers. Wal-Mart will continue to pull customers in good and bad times.
I know I’m putting WMT on my watch list and would certainly nibble a little if it hits around $46.
This is NOT a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized
investment advice.
September 28, 2009
Disney In Middle Ground
Disney (DIS) is a stock that is not going to skyrocket over the next couple years, but it is a solid company with the potential to get
a 25% return over the next 18 months. I can’t predict the stock market so who knows where the market or this stock is going, but I
like the stock in these uncertain times. It isn’t easy for parents/grandparents to cut back on Disney products for their little ones.
I speak first hand because I have two little ones myself. I’d put off a purchase or two to get that Disney product to see the smile
on their faces when they get it.
Over the last 15 years it has generally been a good time to buy Disney around the $15 to $20 level and get out around the $35 to
$40 level. The stock is sitting a little above $28, as I’m typing this, and that would be located in just about the middle of these
high and low ranges. The stock is also just off its 52 week high, so this isn’t a bargain bottom price, but not far off a level that
interests me.
The stock struggled to break above the $27 level in July and August of this year, but on September 10th DIS broke above that
resistance. This could be a new level of support for the stock. It also has had some pretty good support around $25 level. It is
kind of a tough time in the market to be jumping in with both feet, so would nibble at this one around those support levels.
The purchase of Marvel will increase the Disney teenage boys demographic and does give them a lot of new characters to pick from
for movies. The superhero movies have enjoyed some recent success, so the opportunities are there. Disney does pay a 1.27% dividend,
which is not the greatest but better than a sharp stick in the eye. Disney could be a nice partner in a portfolio, but if you are
looking for a stock to go up, up and away, then you should look elsewhere.
This is NOT a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized
investment advice.
September 25, 2009
Pirate’s Life for Me
I have never understood the argument that you can’t do anything with gold so why own it. You can’t build bridges with it, consume it,
be entertained by it or Twitter with it. Yes, it is true you can’t do any of these things with it, but it is actually purchased to wear
around our wrists, necks and fingers. It still remains a hedge against inflation and inflation is something that will come into play within
the next five years.
There is a growing middle class in the BRIC (Brazil, Russia, India and China) countries and with that growing middle class you have to
imagine that more gold will be purchased to wear. The US is not the only country that will face inflationary pressure over the next five
years so it will be used as a hedge there too.
I’m not suggesting that you need to rush out and buy the GLD or gold coins to stash away in your safety deposit box, but it should probably
be a part of everyone’s portfolio even if it is only 1 or 2 percent of it. Gold has enjoyed a great run recently so the near term move could
very well be down, but for the long run you have to think inflation will rear its ugly head.
I do own the GLD that accounts for a little less than 2.5 percent of my portfolio and also own a few gold coins that are tucked away in our
safety deposit box. The reason for the gold coins is because I’m a pirate at heart and must own some coins, plus passing them down to my kids
seems like a pretty cool thing.
There are other ways to fight inflation or hedge portfolios, but I just don’t understand the argument that you can’t do anything with it.
Heck, what good is a stock certificate of any company that we own. We don’t even get the satisfaction of holding the paper anymore. I choose
to hold gold in my treasure chest – Yo ho yo ho a pirate’s life for me.
This is NOT a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized
investment advice.
September 24, 2009 (First Entry)
Walt Mossberg?
The picture is my son’s impersonation of Walt Mossberg and it doesn’t seem right bringing up Walt without talking about Apple. There
are very few companies or products that really have an attachment to people. They personally feel slighted when bad things are spoken
of it and Apple, both the company and just about every product they create sure draws that kind of feeling from its users. I own several
Apple products myself and kind of feel the same way. They really do give the users a great experience.
The iPhone is a great product and I think will continue to increase market share in the smart phone industry. I see more and more of
my friends buying the iPhone and both of my parents own one. My mother has even gone to free iPhone classes that are offered at Apple
stores. She loved it and I myself could learn a thing or two by attending one. I know of very few companies these days that open up
their doors to customers to bring in their products and they will willingly help you with whatever your question or issue is. This brings
up another great thing about Apple and that is the customer service and experience you get at the stores.
The iPhone will lead me to get a Mac at some point in the near future, if my work didn’t depend on some Microsoft software I would already
be a Mac user. This is really the only problem Apple has and I’m guessing will continue to bridge the gap with the corporate world. The Mac
will continue to grow in market share and is great for their margins. Apple's pockets are already stuffed with cash and the Mac will only
create a need for deeper pockets.
The stock is near a 52 week high and has enjoyed a great run since the March lows so it is not exactly cheap, but I still see plenty
of long term upside potential in this stock. The mobile internet experience just continues to grow and Apple will be a big part of it.
This is NOT a recommended buy – you need to do your own research and evaluate risk tolerance - Levott does not give individualized
investment advice.