Manutius (24.69)

Journal 14 Oct 09

October 15, 2009 – Comments (0) | RELATED TICKERS: STD , ENR , CNI

Busy, busy, busy as the S&P500 rallies sharply to 1090's.

1. Running out of cash so I took some profits.  Cashed in much of my SPY holding near the top, sold a slice of STD, sold a slice of ENR (which I've never added to my CAP because I'm in the process of liquidating it).

2. Used some of the cash to buy an initial position in CNI.  I am in the "accumulation" phase for this cyclic so I expect it to underperform for a while but perk up as GDP rises.  The rest I'll hold for additional purchases on the next downturn.  (There's always a next downturn.)

3. Also changed my opinion on TKLC from hold to buy.

4. Whoever recommended not holding ADR's that throw dividends in an IRA, because the dividends will get double-taxed was mistaken in his opinion.  The Bank administering the ADR offers options for how you take the dividend: 1. Straight up in cash (and it gets double taxed). 2. Auctioned in the foreign country for dollar equivalent (and it doesn't get double taxed, but you get price uncertainty), 3. Reinvested on your behalf in the underlying equity (and it doesn't get double taxed, but "value" depends on whether stock is up or down that day). 

In short, with options 2 or 3 you don't get double-taxed; if you are bullish on the equity, pick 3; if you need the income pick 2, and if you are bearish, why are you long the stock??

The actual process was fairly easy (and I didn't have to figure the newspaper article out).  Shortly after I had sold a slice of STD an e-mail from by broker hit my desktop, alerting me to a "corporate action" I had to make a choice on, with a deadline of COB tomorrow.  I followed it up and got to an explanation of the action as described above. The page of the website where I might be able to make the choice on-line was "under construction" so I was given a number to call, which ended up getting me to a trading advisor.  My question actually stumped him (score one for the Fools) but he got in touch with an in-house ADR specialist, sorted out the options available for the STD dividend, and gave me good advice on which one to pick.

It was just an unlucky chance that I sold some STD before the action alert came, and I wish I had it back. I'm still bullish about the equity and now that I know I can pick up the full ROI I am back to a BUY on it.