Three months back, I was ruminating about my increasing interest in Apple and wondering whether it was a good idea to own Apple as well as companies that compete with the tech giant.
Ultimately, I decided to put my money on Apple (AAPL) outperforming those companies. I sold off two-thirds of my Adobe (ADBE) shares. I liquidated my position in touchscreen maker Synaptics (SYNA.)
I felt pretty good about it then.
So, how did that play turn out a quarter later?
It was looking pretty smart until last week.
As part of the trade, I had sold my Adobe shares around $25, a hair above my average buy price.
It's since inched up to $28.20. That's about a 13% gain.
Not too shabby.
Synaptics is a much more interesting story.
I sold off Synaptics at $26, and the stock subsequently lagged for two months. It reached a low of $22, and it looked like investors were about to leave the company for dead.
Then, something turned.
First, the company's new CEO started talking about new growth opportunities.
The stock started to tick higher, up past my sell price.
Then, it reported earnings last week. And it blew up.
The stock is up some 25%.
Tale of the tape
Those are some nice gains, indeed. But, how did Apple do over that time?
Not bad. But not as well.
I picked up my Apple shares around $370. It closed Monday at $406. That's a hair under a 10% gain.
If I'd made the switches all on that same day, I'd have been up a bit on Apple over Adobe, but still trailing mightily on Synaptics.
The second guess
So, would I have been better off leaving my money where it was? Should I have hedged my tech bets instead of putting all those eggs in one basket with Apple?
I'm not quite ready to pass judgement on that yet.
Apple still looks underpriced to me, with fantastic growth and a price-to-earnings ratio under 15.
But it's an absolute behemoth, and moving that price won't happen as easy as it will for smaller firms like Adobe and Synaptics.
And this comparison has to take into account the first Apple quarter that failed to meet expectations in a long time. I think that will be an anomaly.
The hidden gem
Perhaps my biggest regret in selling off a company like Synaptics to later see a nice run up is that it's a small company I found through my own stock screens and research. It's hard to let those companies go in favor of a "safer bet" like Apple.
I'm going to check back on this trade in three months to see where things stand. But for now, it looks as though the three companies can exist in the same portfolio just fine.
I have not updated my portfolio in a while, but here's a look at my holdings as of September.
Tuesday, October 25, 2011
Wednesday, October 5, 2011
Are There Safer 'Safe Havens' Than Gold? Part II
Precious metals have gotten a lot of attention as a safe haven over the past few years, and with good reason: They've had a great run at a time when the stock market has just been crazy.
But while gold is mighty alluring, its sharp run upward in recent years leaves me worried about a potential bubble. That has me looking for alternatives.
Since the other precious metals don't appear to be any safer a haven than gold, it's time to shift focus away from all that glitters.
But there are other places to put money that offer some measure of safety in uncertain economic times while still giving you the opportunity to make your money grow.
One of those is foreign currency.
There are ETFs tracking the Euro (FXE), the British Pound (FXB) the Japanese Yen (FXY), even the Mexican Peso (FXM).
But the one that truly has had my interest as a good hedge against a bad market is the Swiss Franc.
Change in course
Nothing is ever a no-brainer, but the Swiss Franc ETF (FXF) seemed like a real low-brainer to me a month or so ago.
From July 2007 to July 2011, the Swiss Franc was up 52 percent.
It weathered the market crash of 2008 with just a 15 percent drop and a quick rebound.
What's more, the Franc had turned upward with growing economic turmoil.
It nearly matched gold from July 2010 to July 2011.
The FXF looked like the hedge I'd been seeking.
But then ...
In early September, the Swiss National Bank dropped a bombshell. The safe harbor currency was suddenly going to be tethered to the value of the Euro.
Here's a look at what happened to the Franc ETF since speculation about a Euro-based cap on the Franc's value surfaced.
Not very encouraging.
But with all the economic trouble in Europe, who can blame investors for turning away from the Franc?
Other currencies
Over the past few weeks, I've read numerous articles about other "safe haven" currencies that could replace the Swiss Franc. The British Pound, Japanese Yen, Australian Dollar (FXA), even the Norweigan Kroner have turned up as good alternatives.
Granted, my research is by no means professional. I'm a lay investor.
But I tend to agree with this article, penned a couple months before the Swiss Franc took a turn downward. Other countries' currencies could not stand up to the Franc simply because the countries were all carrying major debt, or had a history of monetary tinkering that the Swiss did not.
It was the only true safe haven currency then. And now that its value is leashed to the Euro, it's no longer the safe haven it once was.
So, my quest for a better safe haven than gold continues.
As always feel, free to offer suggestions.
See my portfolio here.
But while gold is mighty alluring, its sharp run upward in recent years leaves me worried about a potential bubble. That has me looking for alternatives.
Since the other precious metals don't appear to be any safer a haven than gold, it's time to shift focus away from all that glitters.
But there are other places to put money that offer some measure of safety in uncertain economic times while still giving you the opportunity to make your money grow.
One of those is foreign currency.
There are ETFs tracking the Euro (FXE), the British Pound (FXB) the Japanese Yen (FXY), even the Mexican Peso (FXM).
But the one that truly has had my interest as a good hedge against a bad market is the Swiss Franc.
Change in course
Nothing is ever a no-brainer, but the Swiss Franc ETF (FXF) seemed like a real low-brainer to me a month or so ago.
From July 2007 to July 2011, the Swiss Franc was up 52 percent.
It weathered the market crash of 2008 with just a 15 percent drop and a quick rebound.
What's more, the Franc had turned upward with growing economic turmoil.
It nearly matched gold from July 2010 to July 2011.
The FXF looked like the hedge I'd been seeking.
But then ...
In early September, the Swiss National Bank dropped a bombshell. The safe harbor currency was suddenly going to be tethered to the value of the Euro.
Here's a look at what happened to the Franc ETF since speculation about a Euro-based cap on the Franc's value surfaced.
Not very encouraging.
But with all the economic trouble in Europe, who can blame investors for turning away from the Franc?
Other currencies
Over the past few weeks, I've read numerous articles about other "safe haven" currencies that could replace the Swiss Franc. The British Pound, Japanese Yen, Australian Dollar (FXA), even the Norweigan Kroner have turned up as good alternatives.
Granted, my research is by no means professional. I'm a lay investor.
But I tend to agree with this article, penned a couple months before the Swiss Franc took a turn downward. Other countries' currencies could not stand up to the Franc simply because the countries were all carrying major debt, or had a history of monetary tinkering that the Swiss did not.
It was the only true safe haven currency then. And now that its value is leashed to the Euro, it's no longer the safe haven it once was.
So, my quest for a better safe haven than gold continues.
As always feel, free to offer suggestions.
See my portfolio here.
Thursday, September 29, 2011
Are There Safer 'Safe Havens' Than Gold?
Gold is a lot like politics.
Very knowledgeable people have very different views on how good an investment it is. And as the price has run up and the stakes have gotten higher, those views seem to be getting increasingly polarized.
Frankly, I'm skeptical of anyone who claims he knows with some amount of certainty whether it is or it's not.
Still, it remains an intriguing option to keep in my portfolio.
Gold, to me and many other investors, has allure as a hedge. Ideally, it's a place where our cash can continue to grow if the market sours.
But that's where my concern comes in.
As a safe haven, gold at these levels does not strike me as particularly safe.
That's why I'm looking elsewhere before I reconsider putting a dime into the GLD or a miner.
The obvious place to turn first is another precious metal, so that's what this piece's focus will be.
Poor man's gold
A year ago, silver looked mighty reasonable, trailing gold's march upward, despite having actual uses other than jewelry.
Silver has many industrial uses, although one of its largest -- photography -- has been shrinking rapidly with the rise of digital imaging.
Still, it seemed that a precious metal with industrial demand is better than a metal with none.
But silver caught fire last year. It gained 162 percent over just 10 months, trouncing gold.
No longer was it the poor man's gold. It was a bubble waiting to burst, and it did, taking two huge drops since May.
Some say it may have fallen too far. I'm more than willing to wait to find out.
Other pricey metals
Two other precious metal, platinum and palladium, also have industrial demand. Your car's catalytic converter (the device in your exhaust system that converts toxic gases into carbon dioxide and water) has at least one of them inside -- usually platinum.
Demand for these metals only increases as emission standards ramp higher.
Platinum is also used in fuel cells and in the refining of petroleum.
Palladium has even more industrial uses.
Both have ETFs which track their price.
But when you look at how the metals have traded historically, it gives pause.
They are far from stable.
Take a look at this chart for platinum that I pulled from kitco.com:
Notice that price drop from the 2007 peak near $2,200 an ounce to the floor, at $800 at the end of 2008.
By the time platinum (ETF: PPLT) was recovering to serve as a hedge to falling stocks, those stocks were nearing their lows and getting ready for their own march back up.
Here's a palladium price chart:
Notice the parabolic peaks, especially the one in 2000. How'd you like to have been a buyer of palladium (ETF: PALL) then, watching your hedge tank from nearly $1,100 to just over $300?
I don't think either of these metals is really a better option to gold right now.
The chart for gold is much different:
An impressive march upward, with only some moderate pullbacks, the most notable coming during the latter part of 2008.
But that may be what bothers me most about this chart. Each of the other precious metals has endured breathtaking drops after any fast runs upward the way gold has run up over the past couple years.
And it seems to me to be a buyer of gold right now, you have to believe it won't have a drop like that.
When I look at what's happened with silver, platinum and palladium, I just cannot convince myself of that.
That will leave me exploring other possibilities for my portfolio protection for now. If you have an idea, feel free to let me know. Otherwise, I'm still searching.
See my portfolio here.
Very knowledgeable people have very different views on how good an investment it is. And as the price has run up and the stakes have gotten higher, those views seem to be getting increasingly polarized.
Frankly, I'm skeptical of anyone who claims he knows with some amount of certainty whether it is or it's not.
Still, it remains an intriguing option to keep in my portfolio.
Gold, to me and many other investors, has allure as a hedge. Ideally, it's a place where our cash can continue to grow if the market sours.
But that's where my concern comes in.
As a safe haven, gold at these levels does not strike me as particularly safe.
That's why I'm looking elsewhere before I reconsider putting a dime into the GLD or a miner.
The obvious place to turn first is another precious metal, so that's what this piece's focus will be.
Poor man's gold
A year ago, silver looked mighty reasonable, trailing gold's march upward, despite having actual uses other than jewelry.
Silver has many industrial uses, although one of its largest -- photography -- has been shrinking rapidly with the rise of digital imaging.
Still, it seemed that a precious metal with industrial demand is better than a metal with none.
But silver caught fire last year. It gained 162 percent over just 10 months, trouncing gold.
No longer was it the poor man's gold. It was a bubble waiting to burst, and it did, taking two huge drops since May.
Some say it may have fallen too far. I'm more than willing to wait to find out.
Other pricey metals
Two other precious metal, platinum and palladium, also have industrial demand. Your car's catalytic converter (the device in your exhaust system that converts toxic gases into carbon dioxide and water) has at least one of them inside -- usually platinum.
Demand for these metals only increases as emission standards ramp higher.
Platinum is also used in fuel cells and in the refining of petroleum.
Palladium has even more industrial uses.
Both have ETFs which track their price.
But when you look at how the metals have traded historically, it gives pause.
They are far from stable.
Take a look at this chart for platinum that I pulled from kitco.com:
Notice that price drop from the 2007 peak near $2,200 an ounce to the floor, at $800 at the end of 2008.
By the time platinum (ETF: PPLT) was recovering to serve as a hedge to falling stocks, those stocks were nearing their lows and getting ready for their own march back up.
Here's a palladium price chart:
Notice the parabolic peaks, especially the one in 2000. How'd you like to have been a buyer of palladium (ETF: PALL) then, watching your hedge tank from nearly $1,100 to just over $300?
I don't think either of these metals is really a better option to gold right now.
The chart for gold is much different:
An impressive march upward, with only some moderate pullbacks, the most notable coming during the latter part of 2008.
But that may be what bothers me most about this chart. Each of the other precious metals has endured breathtaking drops after any fast runs upward the way gold has run up over the past couple years.
And it seems to me to be a buyer of gold right now, you have to believe it won't have a drop like that.
When I look at what's happened with silver, platinum and palladium, I just cannot convince myself of that.
That will leave me exploring other possibilities for my portfolio protection for now. If you have an idea, feel free to let me know. Otherwise, I'm still searching.
See my portfolio here.
Wednesday, September 21, 2011
A Fool To Buy Gold, Or A Fool Not To?
A more experienced investor had a gander at my portfolio and was struck by one thing.
"I notice you have no exposure to the precious metals," he said.
I don't.
In fact, the only time I've even thought about touching a precious metal investment was a short-lived plan to bet against silver after a crazy run this spring. It was short-lived only because silver promptly started to plummet before I funded my brokerage account.
There's a good reason why I have yet to touch silver and gold.
I have no idea how to evaluate how much I should be paying for gold or silver or any other precious metal -- not a clue about how one would go about determining the value of the gold ETFs (GLD, IAU).
Gold doesn't have earnings. It makes no sales. It has no margins.
What's more, gold has no industrial uses like copper, iron, or even silver and platinum, have.
Its price seems primarily driven by fear. There's been no shortage of that over the past few years as the price ran up.
Frankly, that makes me fearful of buying gold.
Not at the party
But still, as an investor, I can't help but feel like I'm missing out on an important opportunity to diversify and protect myself from more economic turmoil by having a little precious metals exposure.
Under most circumstances, I turn to more knowledgeable folks for advice. But on this subject, it seems like there are just as many smart money people calling gold a bubble as there are saying it's still under-priced.
Maybe a miner?
That more informed investor also suggested I look at gold-mining stocks.
This was something a little more up my alley: Companies whose fundamentals I could take a closer look at.
Admittedly, miners like Barrick Gold (ABX), and Yamana Gold (AUY) looked quite reasonably priced based on earnings. And that's after most enjoyed a nice appreciation in price over the past six months or so.
But those earnings are based on the rising prices of gold. If gold were to be a bubble, the miners' profits would burst right along with it.
So, the idea of owning a gold miner offered little consolation.
I also considered a more diversified miner, Freeport-McMoran (FCX), figuring that would be a better hedge. But FCX mines copper as well, and many feel that copper's prices are due a fall.
Only time will tell who's the fool
That's all left me just as skeptical about gold as I was when I started taking a closer look at it. Which makes me think I should avoid it altogether.
If the price continues to rise, I'll miss out, and maybe I'll feel stupid for not taking the risk.
But as I once read, the price of gold is determined only by what the next fool is willing to pay for it.
And I just don't want to be that fool who buys just before a bubble bursts.
What do you think? Am I making a mistake?
See my portfolio here.
"I notice you have no exposure to the precious metals," he said.
I don't.
In fact, the only time I've even thought about touching a precious metal investment was a short-lived plan to bet against silver after a crazy run this spring. It was short-lived only because silver promptly started to plummet before I funded my brokerage account.
There's a good reason why I have yet to touch silver and gold.
I have no idea how to evaluate how much I should be paying for gold or silver or any other precious metal -- not a clue about how one would go about determining the value of the gold ETFs (GLD, IAU).
Gold doesn't have earnings. It makes no sales. It has no margins.
What's more, gold has no industrial uses like copper, iron, or even silver and platinum, have.
Its price seems primarily driven by fear. There's been no shortage of that over the past few years as the price ran up.
Frankly, that makes me fearful of buying gold.
Not at the party
But still, as an investor, I can't help but feel like I'm missing out on an important opportunity to diversify and protect myself from more economic turmoil by having a little precious metals exposure.
Under most circumstances, I turn to more knowledgeable folks for advice. But on this subject, it seems like there are just as many smart money people calling gold a bubble as there are saying it's still under-priced.
Maybe a miner?
That more informed investor also suggested I look at gold-mining stocks.
This was something a little more up my alley: Companies whose fundamentals I could take a closer look at.
Admittedly, miners like Barrick Gold (ABX), and Yamana Gold (AUY) looked quite reasonably priced based on earnings. And that's after most enjoyed a nice appreciation in price over the past six months or so.
But those earnings are based on the rising prices of gold. If gold were to be a bubble, the miners' profits would burst right along with it.
So, the idea of owning a gold miner offered little consolation.
I also considered a more diversified miner, Freeport-McMoran (FCX), figuring that would be a better hedge. But FCX mines copper as well, and many feel that copper's prices are due a fall.
Only time will tell who's the fool
That's all left me just as skeptical about gold as I was when I started taking a closer look at it. Which makes me think I should avoid it altogether.
If the price continues to rise, I'll miss out, and maybe I'll feel stupid for not taking the risk.
But as I once read, the price of gold is determined only by what the next fool is willing to pay for it.
And I just don't want to be that fool who buys just before a bubble bursts.
What do you think? Am I making a mistake?
See my portfolio here.
Monday, September 12, 2011
Think You're a Risk Taker? Take a Test First
A longtime friend who admittedly knows very little about investing approached me the other day about the possibility of putting some money to work.
As we talked, it was becoming apparent that anything less safe than a guaranteed CD was going to be an unnerving proposition.
That can be a recipe for disaster if an investor is not careful.
One of the biggest mistakes investors make is miscalculating how much risk we're really willing to take on.
These are trying times in the market right now. The wild swings present great opportunities, but they are not for the faint of heart.
When people first ask me about dipping into stocks, especially those that carry higher risk-reward, I ask this question: "If you had an investment that dropped 20 percent in one day, or even one week, how badly would you freak out?"
If you envision a manic episode, you're probably not ready to wade too far out into the market, and certainly not on your own.
You can still make money in stocks, but you're probably best off sticking with mutual funds, exchange-traded funds and truly stalwart stocks like Proctor & Gamble and Altria. (So long as you're not averse to investing in cigarettes.)
But even if you think you're a risk-taker, you might not be. Imaginary losses are a whole lot easier to stomach than real ones. And most of us learn out risk tolerance the hard way.
But do we have to lose a good chunk of money to find out? Maybe so, at least definitively.
But fortunately, there are some resources out there to help us form a solid foundation for our decisions and avoiding pitfalls.
Here are three I found useful:
http://www.kiplinger.com/
http://www.bankrate.com/brm/
http://njaes.rutgers.edu/
Try them out. See where you stand.
I scored a 34 on the Rutgers quiz. Kiplinger's says I should put every penny into stocks.
But Bankrate indicates I have only a "moderate" risk tolerance.
Go figure.
My portfolio down 7.3% on year. See it here.
As we talked, it was becoming apparent that anything less safe than a guaranteed CD was going to be an unnerving proposition.
That can be a recipe for disaster if an investor is not careful.
One of the biggest mistakes investors make is miscalculating how much risk we're really willing to take on.
These are trying times in the market right now. The wild swings present great opportunities, but they are not for the faint of heart.
When people first ask me about dipping into stocks, especially those that carry higher risk-reward, I ask this question: "If you had an investment that dropped 20 percent in one day, or even one week, how badly would you freak out?"
If you envision a manic episode, you're probably not ready to wade too far out into the market, and certainly not on your own.
You can still make money in stocks, but you're probably best off sticking with mutual funds, exchange-traded funds and truly stalwart stocks like Proctor & Gamble and Altria. (So long as you're not averse to investing in cigarettes.)
But even if you think you're a risk-taker, you might not be. Imaginary losses are a whole lot easier to stomach than real ones. And most of us learn out risk tolerance the hard way.
But do we have to lose a good chunk of money to find out? Maybe so, at least definitively.
But fortunately, there are some resources out there to help us form a solid foundation for our decisions and avoiding pitfalls.
Here are three I found useful:
http://www.kiplinger.com/
http://www.bankrate.com/brm/
http://njaes.rutgers.edu/
Try them out. See where you stand.
I scored a 34 on the Rutgers quiz. Kiplinger's says I should put every penny into stocks.
But Bankrate indicates I have only a "moderate" risk tolerance.
Go figure.
My portfolio down 7.3% on year. See it here.
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