My thoughts on my largest holdings
I'll offer up some thoughts on my largest holdings. This is an excercise that I decided to do for myself to help make up my mind about whether to hold or sell out or trim these stocks after this massive rally. I don't doubt that we'll get a downturn or a flatline, and I wouldn't be surprised to see a significant downturn between now and the end of the year. And in big downturns, the only thing thats really comforting is believing in the stocks that you hold and their future value. That and having cash to put back into the market.
I have been as high as 40% cash after being nearly all in at the bottom, but the ever-rising value of my stocks has diluted my cash position to more like 30%. I am considering raising some more cash by liquidating a few things I think are no longer underpriced, or even overpriced. Or... by heding them (buy a put, sell a call) and raising cash if we get a dip via the increase in the value of the options.
These are some of my biggest holdings and my thoughts on their future and what action I want to take with them.
ASH. Ashland is a good company with a really impressive history of having good stock prices with no catastrophic crashes. Until this bear market. Ashland hadn't been under 10 before in its history, yet my median purchase price is in the 5's. Ashland had a good quarter, and isn't in any real risk of violating their loan covenants, and in the fullness of time the Hercules aquisition will add value to the company. Today after a massive run-up leaving me with nearly 300% gains, the stock is still comfortably below its trough level in the 2002 bear market, and still at a 20+ year low (excepting a brief dip in the early 90's). Ashland is a hold from here, or maybe even an accumulate on pullbacks. Target sell price is nowhere near $25 but closer to 40, 50 or even higher. Target sell time is the next time chemical companies are in favor / on cycle. That'll be a while.
XL. XL Capital, what a wild, wild ride this stock is. Wild. ITs beta must be as high as anything on the market. My cost average is $3 exceptfor some accumulation after earnings when it dipped recently. Like all the rest of these i don't want to sell now and pay income tax (OUCH!!!!), I would rather hold til capital gains. Especially if I think the stocks have any room to run. XL is still trading well below book value, still has some possibility of adding book value via mark-ups, and looks like its nearing a situation where it can start adding book value the old fashioned way. The dividend at 4% is nice, and they may well raise it if the share price stays up, the CEO has hinted as such. The disaster/bankruptcy scenario that got the stock into the 2's appears to be more or less off the table, XL appears to be a survivor, albeit in a reduced state. Since its long, long time stable highs of $60-80 its seen dilution of shares, and its also seen material losses in its investment portfolio. Its shed business units, and its probably not ever heading back to 80 bucks. But it has a legitimate chance to reach $20 or more over time and pay a pretty good yield in the meantime. Target sell price is whenever the stock reaches a typical insurance industry price/book value (or a little before, always leave some money for the next guy), and this is another one I'mcomfortable holding. Shares still at an all time low, but thats misleading due to dilutions, divestitures, etc.
DOW. Dow Chemical is and has been through this whole bear market one of my very favorite stocks. Unlike XL and ASH I haven't exactly nailed DOW. I bought in big for about 15 bucks in Janary, sold out at a big loss in February after netting a big short term gain on another stock, and had to wait 30 days. I handled it poorly, I've bought back in progressively over this rally, and have a cost average now of probably 12-13 bucks, I haven't looked. But nevermind my failures. DOW remains at a 15 year low. Its dividend remains pretty good, being almost 4% even after the recent cut. Its facing some dilution, but thats countered by the addition of Rohm and Haas, which is a good addition! In the fullness of time, DOW will raise its dividend again, in the fullness of time DOW will come to see another "on-cycle" time in the chemical industry, and this recession and the lessons forced will make it a better company the next time good times roll around. Target price is at least 30 and I believe the stock has a good chance of making a long, slow crawl to a new all time high at some future date some years hence. Target sell time is the next time the stock is in favor and the chemical industry is on-cycle.
TCK. Teck (formerly cominco, now something else, yawn). Mining company was a big BK risk with enormous refinancing needs this year. They overpaid for Fording coal a while back and this move won't help them in the short term. Today TCK has its financing situation worked out, albeit with highish itnerest rates, and isn't a BK risk. The time to sell TCK is at the top of the next commodity bubble, as this company has the potential to be a profit machine down the road. Target price is at least 20 bucks, which is book value, and I'll consider collaring or selling if it clears book value significantly.
etc., etc., etc. Other stocks that are among my largest holdings are riskier, and I'm not as comfortable holding them,a nd in sitting down tonight and going through all of the list one by one I came to realize that some companies I'd be happy to see dip down again so I could buy more, some companies i'm not so comfortable with.
And so, on Monday, I'll sell or collar some of the companies that I'm not so sure about and some of them I'm going to let ride, come another big dip or not.
This is a pretty good excercise and also alot of fun.