RD's Picks

With Bank of America's announcement to expect some impairment from the credit crisis the day before the FOMC meeting, I decided to take advantage of the run up on the rate cut to cash out rather than wait to find out what's behind the warning. My plan is to ease those proceeds into my other bank holding, Wells Fargo (WFC). At the start of the contest, I was torn between these two so bought both. Wells has outperformed BAC over the duration of the contest so I'll just ride the stagecoach. Wells Fargo's price has been depressed somewhat due to concerns over their mortgage business. I think those fears have offered up an opportunity to build a position in a great bank at a good price. WFC consistently meets or beats earnings estimates and has clearly explained the steps they take to mitigate credit risks. In a presentation at a conference in San Francisco, the CEO stated "Given our responsible lending and risk management practices, we have not faced many of the issues others do in the industry." source At this point, I consider WFC a buy below 37. In the event it drops below 35, it'll be time to back up the truck. For SLO, I'd start selling off if it reaches the low-to-mid-40s. In my real portfolio, I'm copying Warren Buffet's approach and have a sell target of never.

Mattson Technology (MTSN) is about a half-billion dollar semi equipment manufacturer. Their balance sheet has no debt; they trade at a forward PE of 13 and PEG of 0.4. I had MTSN in the mix at the start of the contest, then traded out of it after a price run up. It dropped back below 10 about two weeks ago so I brought it back aboard. The stock price has a habit of clawing its way higher, then falling like a rock. I've had success playing that trade in stock picking games, but my one attempt in real life was a lot of effort to lose three bucks. For SLO, I'll buy small positions below 10 and trade out in the high 10's. I think this could be a $14 stock in a year of so if they continue to hit earnings estimates and deliver on higher margins. Margins and missing earnings have been problems for them in the past.

Comments: View Comments |  Thursday September 20, 2007