One Step Forward, Two Steps Back

This past month has been a wild ride, not only for my stocks, but for the market as a whole.  If anyone out there has paid attention, and especially if you have money invested in stock, odds are you have gotten sick to your stomach and wanted to get off this roller coaster at some point.  It seems like there's no such thing these days as a slight gain or slight loss; it's all "Go big or go home!"

Both of my stocks are terrific showcases of this.  Radian (RDN) alone has had a couple sessions where it would change 5+%.  That's over 5% in one day!  Most of this volatility has been caused by the fed's lack of clarity of what it will be doing with it's bond buying program it has been doing since the financial crisis.  Obviously a policy like this was needed at some point, but just like when a patient in the ER gets better, there's no reason to keep them on life support when they're ready to be released.

Of course, other things have attributed to this:  good and bad news in the housing market, employment reports, and, most recently, the turmoil in Egypt.  But none of this is to say that it's a bad time to jump in on the market.  You just have to time those leaps.

Which brings me to my next issue:  my purchase of Facebook (FB) and what I do from here.  I know I said before my plan was to stick to the course, but I'm not sure that's where I want to be anymore.  I wish I could go back to that day in May and convince myself to wait for something better, even if that something better is FB for cheaper.  If you've been following along, I bought FB when it fell to $24.60, thinking that was the bottom for it.  Just over a week later, the same stock could be had for somewhere in the mid-$22 range.  Had I done that instead, I would have earned a solid $2 per share or about 9%.

So here's my plan:  I'm determined to not lose money on this no matter what I do, so I'm selling it at a price that's figuring the cost of both trades.  Basically, by selling it at $25.43 per share, I wipe out that $4.95 per trade fee that Tradeking charges, and I'm able to wipe my hands clean of FB.  They're expected to release earnings for the quarter on the 22nd of this month, so my hope is that the stock goes up on positive speculation (redundant, I know).  So as soon as the moment that the stock reaches this glorious price is finally here, I will be free from Zuck and his sideways trading stock.

Where I go from here is a bit uncertain:  I'm a bit late to the Cisco party.  CAT and MKC are close to levels where I could see myself being a buyer, as is VZ.  Maybe I could jump in on an airline like Delta before they take off.  I had considered going with a financial stock, but I feel like it would be too tied to the housing market, thus days when there's bad news on the housing front, both of my stocks take a hit.  Whatever I end up doing, I believe I've got time to think about it, and probably don't want to go after it right away again. Like last time...

Is This That First Lesson I've Heard About?

After the past few weeks of owning Facebook (FB), I can say one thing is absolute: I am sick and tired of owning it!  Maybe I was spoiled by my first two stock purchases, but this one has not panned out quite as well as I had hoped.  If you read my previous post, you know that I bought FB near what I assumed was the bottom of its fall.  Just a month before, I thought that $25 was the floor for this stock.  So when the day came that it traded for $24 and change, I jumped on the opportunity, foregoing other opportunities including McCormick (MKC), General Motors (GM), and Caterpillar (CAT).  MKC has now gained a couple bucks and GM rose 10% in one day after it was announced they had exceeded expectations of sales in Europe, while CAT has been stagnant.

Here, I guess, is what drives me mad about FB:  after I purchased it and it lost value, it has a couple times almost regained everything I lost, only to fall once again down into the $22-23 range.  Yes, this is about how the stock market happens for everyone at some point.  And yes, I realize I could be much worse off.  Should I regret this decision?  No, but I really want to.

I keep wanting the stock to get back up to just above where I bought it so I can wipe my hands clean of it.  But I'm constantly reminding myself that this isn't about what I have now or where things sit right at this moment, but instead this is all about long term.  As I've said before, I want to have a goal in mind when I buy each and every stock.  So I plan on sticking this out until I achieve my goal, or at least I hope to get closer than breaking even.  I don't need this money right now, and I don't plan on doing anything with it until I retire, or at least do something more long term than buy dinner at Buffalo Wild Wings.  I'll keep FB until it gets closer to $30 at least.

I always heard that you make a mistake in your first stock purchase.  I was determined to not let that happen, so if owning a stock (SIRI) for a month and making a quick $40 (after trading fees) is considered a mistake, I hope to be the worst trader ever!  The stock has slid further from where I sold it, to the point where I would have lost half of the gains I made if I still owned it.  And my second stock, RDN, has proven to be quite successful, and I only see it climbing higher as the year goes on.  It's off its highs, but I'm not the least bit concerned as the housing market continues to sound promising.  I'm still planning on selling half of my shares when the stock doubles.

So what's next?  Well I will admit that saving money hasn't been quite as easy as it was just a month ago.  The girlfriend and I moved into a new (and much nicer and larger) place at the beginning of the month, so we dealt with all of the expenses that come with moving.  Add to that the fact that I just used the money I had saved up to pay for tuition for the summer, my funds are mostly dried up.  So I'm getting back to it as quickly as I can, but for right now I'm putting my stock buying on hold.  I'll still be posting updates as time goes on, though, so be sure to check back in!

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.

Initial Stock Purchases

Like I said in the last post, I had followed the stock market since back in 2005, technology being what I followed the most.  Which stocks I followed varied depending on what was going on with them and what my interests were:  Dell was of interest back when I was shopping for their computers, Google has been a hot stock for years, Apple was one I tracked after the iPhone came out.  But one that I had of great interest since it debuted was SiriusXM (SIRI).

I got an XM Radio for my first vehicle back when I turned 16 and thought it was the coolest thing.  XM and Sirius both underwent several changes all the way up until the merger of the two, and the stock continued to suffer even after amid the financial crisis.  My interest in SIRI grew again recently when I learned that new car sales had increased as of late.  This means that with new cars that have satellite radio factory installed, car buyers get a free trial of the service to try it out.  From what I understand, this also includes some used cars that have it as well.  After that trial period is over, they can choose to continue the service and become paying subscribers.  Basically I'm banking on them getting hooked onto the commercial-free, coast-to-coast service so much that they're willing to pay for it.

I'll be honest, when I got serious about buying stocks last year, I didn't really think I would buy this stock.  I wasn't sure I'd find a good entry point to jump in.  By that, I mean where the stock became good value to purchase, but that's exactly what happened.

After I got my TradeKing account up and funded, I had been keeping track of prices of those stocks I was interested in buying.  For each one, I had an idea of at what point I wanted to buy them at, hoping that would be near the bottom.  For example, my price for FB (Facebook) was $25.00, CZR (Caesar's Palace) was $13.00, and DAL (Delta Airlines) was around $12.  And for SiriusXM, it was $3.00.

On my way to work on April 15, I noticed the price of SIRI had fallen to $3.03, so I got on my TradeKing app and set a limit order to buy 100 shares of the stock at $3.01.  I wasn't too sure if it would fall to that.  If it didn't, I wasn't going to be upset, but if it did, I felt I got a good amount of value in my purchase considering just a few days earlier, it had traded at $3.17.  Sure enough, within a few minutes, my portfolio updated to show that I owned 100 shares of SIRI and that the price had gone up to $3.03.  I had already made two dollars! (Minus the $4.95 cost of making a trade, of course.)

I arrived at buying $300 worth from the amount of money I had set aside for investing.  I presumed I could buy three different stocks for around $300 each, and that would be cost effective as the $4.95 per trade would equate to less than 2% of the total purchase.  Sure, when I sell the stock, I'll have to pay that again, but I plan on making far more than that amount first.

So before I confirmed to buy this stock, I had made a goal I wanted to achieve.  This is something I plan on doing for each and every stock purchase I make.  For SIRI in particular, my goal is to sell it at $3.50, netting myself somewhere around $40 after fees.  Then, I would use that money to move onto my next purchase.  I'm still holding onto that goal, as SIRI has been inching upward ever since a few days I bought it.  The stock did drop down below where I bought it, falling down to $2.97 at one point.  As much as I strive for perfection, I know not to expect that with any regularity.  Besides, buying any stock just four pennies from the bottom isn't doing too awfully bad.

Now that I had purchased my first stock, I obviously wasn't going to stop there, so I continued to research stocks I was interested in, along with new ones.  I keep a constant list on the Stocks app of my iPhone that I want to keep tabs on, and can tell you their average price at just about any given time.  I'll also use that, as well as the TradeKing app and my laptop, to follow trends of stock prices and trends, such as how high their peaks are and how low the drops go.  It's obviously not an exact science, but you can get a good idea of how a stock behaves and where good buy and sell points by looking at their one month, three month, and six month charts.

Two days later, I was keeping tabs on those stocks on my list, and noticed one that I was very serious about, RDN (Radian Group), had fallen throughout the morning.  It was one that, like I said, I was just waiting to find a good entry point.  When the stock was around $10.27, I set a limit to buy 30 shares at $10.20 each.  It didn't immediately fall to that point, but sometime after I set that, the purchase went through.

I was excited because this is one stock that I look to hold onto for quite sometime, at least a year if not three to five.  Radian Group is a mortgate insurance company that took a hit shortly after the financial meltdown.  Obviously when mortgages weren't being dealt like they had been, as well as so many falling victim to foreclosure, this was a dark time for anything related to housing.  But recently, the housing market has made a comeback and most things having to do with housing have seen quite the uptick in revenue, including homebuilders, suppliers, banks, and, in this case, mortgage insurance companies.  So just as SIRI was my play on the increase in auto sales, RDN works just the same with the boost in housing in this country.

The stock did fall further later that day, and even further the next morning, but after that it's been all uphill.  Again, I wasn't able to buy the stock at the very bottom, but I was within just over 3%, and now the stock is up over 15% from where I bought it, so I am already pleased with it, and plan on seeing this through for a while.

I don't have an exact price with this particular buy, as that was not my intention with it.  I would like to hold onto it for over a year, see where housing is at at that point, and try to figure how high it will go and when.  I keep reading and hearing that RDN could reach $20 within just a couple of years.  Obviously that depends mostly on if housing can keep its momentum going over the course of that time, thus why I'm leaving my options open.  I will say this though:  if it were to reach $20, or if I think it will get there, what I'd like to do is sell half of my shares and keep the other half.  The thinking here is that since the price will have doubled, selling half will earn me my original investment back, meanwhile I still own those 15 shares-worth of the company.  Nobody ever got hurt taking a profit, right?

So those are the two stock I've purchased up to this point.  As of this writing, SIRI as inched its way up to $3.12 from the $3.01 where I made my purchase, an increase of over 3.5%.  Meanwhile, RDN has managed to reach $11.78, $1.58 more per share than where I bought it.  Again, obviously those $4.95 per trade fees do dig into my profits, but as I increase my net worth and start buying larger portions at one time, the percentage of what I spend on said fees will go down.

First Investments Made

Before I got started picking my own stocks, a friend turned me onto another investment web site known as Betterment.  Betterment, to sum it up, is made for those who don't want to have to think or worry about what they're investing in.  It uses index funds, along with bonds, to spread your money out among several companies, allowing you to choose the proportion of stocks and bonds you're investing in.

I wasn't planning on signing up for this, but as with almost anything financial-related these days, it was taking me a while to get my brokerage account up and running.  And my lack of patience was getting the best of me (obviously not the greatest trait for any investor).  I guess I just wanted to get my money working for me as quick as possible.  So I added my money to the account (the $250 minimum) and started out all in stocks.  I quickly tried timing the market, moving to all bonds when I felt the market was at the peak of its up, and switching to 100% stocks when I felt the it had hit the bottom.  The only caveat to this is that day trading rules allow you to only change your allocation once per day.  And even though I had that figured out, sometimes Betterment would not act as quickly as I would hope, even waiting until the next day in a couple instances.  I found this to be annoying because both of those times, I lost everything I had gained the previous few days because the market had fallen.

I cancelled this account just before my first month ended and Betterment would have charged me their fee.  I'm absolutely not telling you to avoid this service, because this may be a terrific option for many of you who don't want to be as involved in where exactly your money is going as I am.  It does a terrific job of putting your money to work for you.  If nothing else, do like I did and make use of their one month free trial.

During this same month, I researched several brokers, and each one had its own pros and cons.  The one I decided on was TradeKing, as it had one of the lowest costs per trade and it is supposed to do a great job of giving you what you need to make the tax side of all of this easier (obviously more on this coming next year).  As time goes on, hopefully I'll be able to give more feedback on who to recommend and who to avoid.

I had followed the stock market off and on ever since 2005.  Being a computer science major, tech stocks in particular interested me.  I would try to follow the news and take notice of what it did to the stock price.  What I noticed is that paying attention to each company, including the news surrounding it, sales at any given point, and new products in pipeline, allows you to generally predict where a stock is heading.  And then there's those companies who will have a curveball thrown at them (or in some cases, they'll be doing the throwing).  That's where you risk losing money, but you never know where to expect it 100% of the time.  And that's where that "diversification" term comes from.

Remember when you first heard "Don't put all of your eggs in one basket."?  I can't think of any finer example of this than in the stock market.  Diversifying means not only investing in several different companies, but also in different sectors of the market. So investing in all kinds of technology stocks would do me no good when all of that sector takes a hit.  Buying MSFT (Microsoft) and AAPL (Apple) would put me at risk when all of technology falls, but buying MSFT and MKC (McCormick, the spice company), would give me a little bit of a cushion.  Is it possible that both could fall?  Absolutely!  But putting part of my money into some salt & pepper would keep it safe from poor sales in the PC market.

Speaking of McCormick, it is part of a sector that many refer to as "consumer staples".  This includes companies that produce products that nearly everyone uses in one way or another, such as Clorox, Proctor & Gamble, and Phillip Morris.  These are thought to be safe stocks, since these products are probably in your house right now.  They offer fairly consistent prices, as well as dividends.

Dividends are payments that companies pay to shareholders as a reward for owning their stock, a way of sharing the profits the company made.  The price is paid per share, and generally is handed out every three months.  Not every company does dividends though.  If a company is new and isn't yet profitable, there's no profits to hand out.  Some companies prefer stock buybacks, essentially where the company will use profits to purchase their own stock.  This increases demand, which in turn should boost the price of the stock, bringing increased value to those owning it.  Many people prefer to use dividends to purchase additional shares of the stock, also increasing shareholder growth.

OK, enough lecturing like a college professor.  Time to move on to the fun part!