I Eat Bear

A key part of managing portfolio growth, is knowing what to buy and what to sell. Most of that will depend on you, and your risk tolerance. Some will depend on your expectations of what certain market sectors may do in the near, or long term, future. Whether you chose near vs long term, will undoubtedly affect your outcome some too.

The market as a whole is showing little tolerance right now, and there have been more and bigger down days than up ones. That could make for a great case for holding cash in high yeild mutual funds. It is guaranteed, slow, steady growth. There is something to be said for that in a market like this one. But, it is not much fun, and it may not make the best returns.

So, let's examine some other stategies. Well, there are some stocks that offer dividends near what many mutual funds pay. (DSX) Diana Shipping is one. This is a good company, but in a very volitile industry, in terms of stock price. It may not work for some of the less risk tolerant investors. If you want stable stock prices with medium stock price growth, and a tolerable yeild, maybe you should look to (T) At & T or (GE) General Electric. Larger, more stable companies, provide good long term capital that compounds nicely over time.

But, bigger is not always better. Nor, is it always worse either. Typically, it just means slower.
When the market is up, they grow slower, and when the market is down, they fall slower.

Then there are questions about what sectors will do best. That is a big part of how your portfolio should be allocated. Obviously, if one sector is in phoenomenal growth, you want a lot of it, and a sector under-performing you may want none of.

Bigger or smaller, oil or banking, dividend or growth, those are the kinds of decisions an investor has to make. Then there is buy, versus sell.

It does not take a rocket scientist to figure you want to sell high, and buy low. That is the way to make money, whether it is the stock market, or a household budget.

So, first, I suggest pick a direction. Determine your tolerance for risk, and pick sectors you expect to do well.

I am fairly risk tolerant, but not to the degree of concentrating on micro cap growth. You could make or lose a lot of money that way, and the scale tips a little more toward big losses than big wins. Nor, do I want to deal exclusively with large lumbering giants that provide reliable, but slow, long term growth, especially, in a short term game, like this lab is.

Now, I have limited myself on some sectors. I have avoided banking. It is not particularly my area of specialty, and the sector has being going down the crapper lately. I expect that to continue. I am heavy in oil, industrials, and materials. I expect at the very least, some stability in those sectors, if not a fair degree of growth over the next two years.

Quite simply I want market beating returns. A good way to determine that, is to look at chart patterns. So, I made some initial stock picks, and I think they were all good picks, although all are not beating the market right now. So, how do I improve on that?

There are some simply awe inspiring chart patterns out there for many companies. (ATW) Atwood Oceanics, (FSLR) First Solar, (POT) Potash, (MON) Monsanto, and TBSI, to name a few in this portfolio.

And there are some in this portfolio, that are not so awe inspiring too. Not that they are not good comapies, or don't have good potential, just that they are currently underperforming compared with other companies, and the DOW and S&P as a whole. I simply can not afford to keep stocks that are under-performing anything, in a short term game, such as this is.

So, I am about to make my first sells, and soon, some buys, on stocks that are at the bottom of chart patterns with good growth potential. The stocks I will sell, are all good companies, but I think I can beat the growth, by picking other good companies. Actually, I will not be adding companies, as much as increasing positions in ones I have.

My underperformers are not based so much on what has been made or lost, but that they simply do not have the more rapid growth I need. So, here is that list. (BA) Boeing, (OSK) Oskosh, (DD) E. I. Dupont, (GFI) Gold Fields International, (CCL) Carnival are all underperforming the DOW right now. Under other circumstances, that could make them a buy, if the rapid growth potential was there. I see growth for them, but not fast enough. I do like them all however, for a very long term investor. Then I have a few, bairly beating the DOW too, like GLW (Corning), (IRBT) I-Robot, and (HON) Honeywell, and (TEX) Terex, so at the very least, I will be reducing positions in them.

Why? Because there are som SCREAMING BUYS out there right now. Yes, the energy sector has most of them, but each sector in my portfolio has some. They are all near the bottom of chart patterns that show great growth.

You just can't go wrong with energy. (SLB) Schlumberger is cheap!, as is (SII) Smith International, (STO) Strat Oil, (MRO) Marathon, (NE) Noble, (CVX) Chevron, (NOV) National Oilwell Varco, and (DO) Diamond Offshore Drilling. I will be adding to ones I have smaller positions in, and (SLB) is a MUST!

In industrials, my buy list is actually some of the stocks in my portfolio which have been under-performers or marginal performers, but that list includes (CBI) Chicago Bridge and Iron, (FWLT) Foster-Wheeler, (STP) SunTech, (MTW) Manitowic, and (CMI) Cummins.

In health care, I do like (MRK) Merck, and I have it as a buy, but I may have to reduce position on it right now, simply because I see more growth elsewhere.

Then there are some stocks at the top of their chart patterns, and selling high, is always a good idea, but these are also some of the best to hold too. (TBSI), (JOYG) Joy Global, (RTN) Raytheon, (GG) GoldCorp, (KGC) Kinross Gold.

Buys I would love to make in other sectors, (BHP), (FCX), (RIO), (LVS), (GME), (CY), (TSL), (LDK), and (KO). Some of those will have to wait, either because I have a large enough position in them now, or I just plain ran out of funds.

I might add, a current down postion in a stock, is not always a reason not to buy it, and an up position, is not a reason to keep it. Nor, should we ignore those factors, when making decisions.

But, I like chart readings, and I think they can tell you a lot about when to buy. Buy on the uptick, after a big dip, with a lot of DOW beating growth. Use Bollinger bands, and look at trend growth. Charts can also be useful on when to sell, but avoid temptation to sell, just because a short term trend line points down. You may want that later, and the price to buy it back, may be higher than what you sold it for.

Comments: View Comments |  Friday February 15, 2008