Buying on the Dip

That time finally came!  I knew on Thursday morning that I might have a good opportunity to buy one of the stocks I had been eyeing by week's end.  The start of Thursday was looking like I might be able to jump in and play, but then the market acted like an elastic band and bounced back the other way, erasing the opportunity that looked on the horizon.  But that's how the market goes, no reason to get frustrated and do something I'm going to regret.

So even though Thursday turned out to be a bust on finding a sale item in the market, I still held out hope for Friday.  Sure enough, a few of my stocks were within striking distance of the prices I wanted to buy them at shortly after the open.  Cisco (CSCO) had dropped, but no where near the price it was just a couple weeks before.  McCormick (MKC) was about the same.  A new one on my radar, General Motors (GM), was down as well.  And then there was Facebook (FB).

My interest in buying Facebook is based off of one key component of their business model that I think is about to take off: mobile.  Mobile advertising to be exact.  They've had ads on their web-based site for some time, and have been improving it over the last few years.  Mobile is the next frontier I believe Zuckerberg and company will conquer, which is extremely crucial as more and more people rely solely on their iOS and Android devices to keep up on baby pictures, where their buddies are drinking at, and what people are eating.  And I believe they will be successful at achieving this.

I had set my buy point for FB at just below $25.  When I glanced at the stock, it was at $24.65, so I placed an order to buy 12 shares at $24.60.  The stock fell to this point within just a couple minutes, bounced back a few cents, then began to fall further.  It did bottom out late Friday afternoon at $24.08, before gaining about half of my money back to close at $24.31.

I could have gotten the stock for much cheaper yesterday, which brings about a series of questions I need to ask myself to make myself a better investor:  Should I have waited longer that day to see what the stock would do?  Would I have been better off setting a lower price to save some money and risk not getting the chance to buy the stock?  Was yesterday even a good time to buy more stock?

I'll answer the last question first.  Yes, I think yesterday was a terrific time to buy this stock, or many other stocks for that matter.  As I said in my last post, I was waiting for a down day to jump in and buy something else with the money I earned from my sale of SiriusXM.  So I got some Facebook on sale for $4.31 cheaper than it was at the beginning of the month.  The stock basically had a sign above saying "15% Off".  Who doesn't love seeing those signs above the stuff they want to buy?

As for those other questions, I'll answer both with a one word answer:  probably.  What I mean is that in the future, when I'm faced with a similar situation, I probably will let the market continue to do it's thing and try to save myself a few dollars.  Looking back on it, I'm guessing the bounce back of the day before was still in the back of my mind and led me to think I was buying the stock closer to the bottom for the day than I actually did.  But I don't need the money today or tomorrow, so I'm content to let it sit with the company and give it some time to grow.

I do believe the stock will be back up to $28 sooner rather than later, and will only grow as they extend support for their mobile platform.  I think it will be around $35 by year's end, but I honestly think I might move on before then.  My goal is to earn around 25% from this stock, meaning the stock needs to reach $30.75 for me to achieve this.  And if what I'm predicting happens, I could be there by summer's end.

So now what?  My aim is to stay diversified, meaning my next stock purchase should not be in the home finance or social media sectors.  In fact, I should probably steer clear of housing or technology all together if I want to continue down this road.  Here's some that I'm looking at:

• Verizon Communications (VZ) - This may sound like a technology stock, but I would argue that it is more of a telecom/communications company, which I believe gives it independence from Apple, IBM, and Google.  And the wireless network already has the largest LTE network, and is still extending it.  If this stock approaches $50 again, consider me a buyer.
• News Corp (NWS) - This is a media company that has such assets as The Wall Street Journal and the FOX networks.  The latter is what I'm most interested in, as FOX is relaunching some of its networks this fall as Fox Sports 1 and Fox Sports 2.  I know this may seem confusing or not that important, as CBS and NBC have created their own sports networks that have been far from blockbuster successes, but FOX has something the other two don't that will help it keep up with Disney's ESPN.  That's actual big league events.  At launch, FS1 & FS2 will carry live NASCAR races, big UFC events, college football games from top conferences, and next year MLB games, including certain postseason games, will be broadcast on the networks.  That gives FOX and edge right out of the gate.
• McCormick (MKC) - You've heard me rant and rave about this stock in previous posts, and this is likely to continue.  I've told people over and over if I were to buy this stock, I don't see myself ever selling it.  With constant growth likely to continue for years to come along with a dividend that could give a steady stream of income for the rest of my life, why would I?  If the spice giant were to dip back down to close to $70, I would be buying the first of what I would hope will be stocks I have in my portfolio when I retire.
• Delta Air Lines (DAL) - I'm much later to the party here than I would like to be, but I still think this stock will continue rolling on up.  The airlines are bringing in more money than they have in years since they can raise their rates and cut back on the number of flights they serve now that all the big players have merged, thus reducing their competition.  I figure we might as well make some of the money back we're spending on flights by paying ourselves from owning their stock.  Honestly, probably any of the airlines would earn you cash from their stock price going up, but I give Delta the green light since I believe it has more room to grow.

As for my other stock, Radian Group, it took a hit this week, but as I said before, I'm not worried.  It didn't take quite the bite out of its stock price that it could have since a really solid housing number was released.  I don't remember the details, but it was above estimates.  And the company unveiled their dividend for this quarter.  I'm earning $.0025 per share.  Yes, that's a quarter of a penny.  So from my 30 shares, I'm receiving seven and a half cents total.  Don't worry, I'll try to not spend it all in one place!  But I'm obviously not in it for the dividend with this stock, so this is more about learning about how they're handled at this point.

After this crazy week for the market, here's where my portfolio stands:

• RDN - $13.13 - up $2.93 (28.7%)
• FB - $24.31 - down $0.29 (-1.2%)

My First Sale

What a run this market has been on!  It was exactly one month ago yesterday that I made my first purchase of SIRI, buying 100 shares at $3.01.  This stock started inching up to the selling point I had established.  I saw the stock stalling out at the $3.50 level, so I arranged a sale at $3.49.

The stock opened at $3.48 on Tuesday morning, so I had high hopes that the transaction would go through.  It took a good hour and a half after the market opened, but the stock reached that level and the stock was sold.  After fees, this stock earned me $38.08.  Not a staggering, retirement-earning amount by any means, but considering that I invested $301 for only a month and earned a return of 7.9%, I'd call that a victory.  After all, growth is what I'm after.

SIRI did surprise me when it continued its march higher throughout the day, reaching all the way up to $3.59.  That was an extra $10 I did miss out on, so perhaps that was a lesson to be learned that I should give a stock a chance to tick up a bit more, but I am quite content taking my profit and not risking losing the gains I made.  It did do what I thought it might and has since dropped back down to $3.45, justifying my thinking.

Now I have even more money to invest in a new company, so where am I going to throw it at?  Some I've been considering include CSCO, CAT, MKC, and DAL.  The only problem is that all of these have driven upward since I became interested and followed them, to levels that I feel are a bit pricey compared to where I think I might be able to get them if I'm patient.  I'm already a firm believer in that sometimes the best trade you can make is the one you don't take at all.  Just because I have the money in my account doesn't mean I want to buy something right away.  It just worked out last month that I bought both stocks almost right after I made my initial deposits.  A good analogy is let's say you find a shirt you like at a store in the mall.  You want to buy it until you look at the price tag and it makes you cringe.  Odds are it will be marked down or on sale at some point, so why not wait until then and get it for a fraction of the price.

As for my shares of RDN, they continued skyrocketing until they peaked just a couple days ago.  They reached $14.34 on Tuesday before settling, and eventually falling to $13.27 per share at close today.  I'm not worried, though, as this is a long term stock pick for me and I'm confident in it one day reaching $20 a share.

After one month, I am already up to over $775, and that's after RDN took its tumble these last few days, bringing my total gain so far to 20.3%.  I keep telling myself over and over again that I can't expect to achieve that every month, as the market won't continue to be as bullish as it has been.  But considering how long I have until that day comes that I might retire, maybe I can have a few more months like this between now and then, and have more money to play with!

Earnings Season!

Every three months, companies hold conference calls and send out press releases detailing how well (or poorly) they did in the previous quarters.  To most of us, a lot of this sounds like a barrage of numbers that don't seem to have much meaning, but shareholders, or prospective ones, should pay attention to a few specific details of each one.

I got to experience my first one on April 30 when SiriusXM released all of their nerdy details.  I really got a feel for how well the company was doing when I compared their numbers from 2012.  Although the numbers did fall just short of analysts expectations, everything appears up from last year.  SIRI earned $897 million compared the estimated $903 million, and 2 cents per share compared to the expect 3 cents in Q1 2013.  This increase in revenue from $805 million in the first quarter of 2012 is also reflected in the increase in net income, up to $124 million from $108 million last year.  Obviously the company is growing, both in number of subscribers and how much the company is earning per subscriber, and that is reflected in these numbers.

Another big deal is that free cash flow increased from $15 million to $142 million.  The reason this is a big deal for shareholders is that this allows the company to buyback more shares of stocks.  I mentioned in a previous post how this increases demand for shares, which in turn increases the price of the stock, thus rewarding us for owning shares of the company.  Many companies may choose to also release a dividend to shareholders, giving them an amount of cash directly per share.  Earning per share for SIRI are not great enough, so nobody expects to receive a dividend from them anytime soon.

That was on Tuesday morning, and after its release, the price of the stock pre-market had fallen.  I was expecting that, as I had noticed if a company only met expectations, a lot of people who had high hopes would sell off without giving the stock much chance.  But did SIRI every have a surprise in store for me!  All day Tuesday, the stock inched its way higher and higher, going from $3.07 (again, it was lower than that pre-market) to close all the way at $3.25.  And the stock wasn't done there!  The next day the stock peaked at $3.40 and closed at $3.35, greatly exceeding my own expectations of the stock for the week.  The stock did come back to earth today, as it closed at $3.30.  I can't be upset though, as the stock is now ahead of schedule in reach my goal of where I want to sell it.

RDN also released its earnings this week.  I won't go into as much detail, but the stock has had a roller coaster of a week thus far, but closed on Thursday at $11.89 per share.  I expect it to continue its march higher into the summer.

To date, SIRI is up 7.86% after fees, while RDN has earned me 14.71%.  This brings my total earnings to 11.31%.  I do realize I shouldn't expect to continue earning those kind of gains all the time, especially in less than 3 weeks.  But it does make me feel good and more confident with the decisions I make regarding my money and investments.