It's time to make some major changes, something I have said before. I am not the first to suggest this and I am quite sure I will not be the last. General Electric (NYSE: GE) needs to take some serious action to add shareholder value. Apparently, Jeffrey Immelt was very embarrassed after last quarter's earnings announcement, when the company reported disappointing earnings following Immelts' own earlier statement that they would hit their targets.
After GE sells its kitchen and laundry appliances, which is on the block now, it will still own business-producing aircraft engines, locomotives, electric distribution and control equipment, generators and turbines, and medical-imaging equipment. GE is also one of the preeminent financial services companies in the U.S. Commercial finance, consumer finance, and equipment financing and leasing together comprise the company's largest segment. Here is the formal list from the company web site:
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and Berkshire Hathaway (NYSE: BRK.B) too. It has been painful to have to report each month that I was being bested. However, since I have not seen anything contradicting my original rationale for my eight picks I stood my ground.
Moving into positive territory by pennies was Loews Corporation (NYSE: LTR). Among its holdings is a 51% stake in Diamond Offshore Drilling, Inc. (NYSE: DO) that has been doing well as the world remains desperate for more oil and natural gas.
Bunge Limited (NYSE: BG) was the other stock to cross the line into the black, while Valero Energy Corp. (NYSE: VLO), although improving, remains my worst performer. It is still down almost 28% after five months.
Today was a very gloomy day in the stock market with Oil reaching new highs and everything else losing -- almost. Among the few winners, and I mean very few, Apple Inc. (NASDAQ: AAPL), oil, and specialty steel were up. I went through my watch list and found this very short list of winners:
Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Reliance Steel is worth an evaluation.
First, don't think of Reliance Steel & Aluminum (NYSE: RS) as a steel company; think of it as a 'diversified' metal processing services company.
Reliance supplies metal process services and also manufactures metal products for the construction, transportation, aerospace, manufacturing, and semiconductor industries.
This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.
My riskiest stock pick Newcastle Investment Corp (NYSE: NCT) was down the most in March but recovered about 35% of the loss in April leaving Valero Energy Corp. (NYSE: VLO) the dubious honor of being my worst performer, down over 30% in the first four months of the year.
April showed improvement as many companies reported positive earnings reports or beat expectations.
Most of my picks improved. Higher food prices no doubt helped Bunge Limited (NYSE: BG) which recaptured losses moving up 23% from its recent bottom. My two winners Raytheon Co. (NYSE: RTN), the high tech defense contractor, and Reliance Steel & Aluminum (NYSE: RS) were joined by a third, Anglo American plc (ADR) (NASDAQ: AAUK) which had a 10% swing entering positive territory.
After hitting a one-year low of $39.91 in August, the stock hit a one-year high of $64.27 yesterday. This morning, RS opened at $61.90. So far today the stock has hit a low of $59.75 and a high of $63.95. As of 12:20, RS is trading at $62.11, down 2.16 (-3.4%). The chart for RS looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a May bear-call credit spread above the $70 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in one month as long as RS is below $70 at May expiration. Reliance would have to rise by more than 13% before we would start to lose money. Learn more about this type of trade here.
RS hasn't been above $65 at all in the past year and has shown resistance around $65 recently. This trade could be risky if today's earnings do not hold the stock down, but with a slumping economy, times do not look too good for steelmakers.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in RS.
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
My riskiest stock pick Newcastle Investment Corp (NYSE:NCT) is down almost 37% this year, and the energy stocks did almost as poorly even though fuel prices are near all-time highs. The downers were not offset by this months' repeat winners.
March was a seesaw battle, but in the end there was not much to show for it. However, unlike the last day of January (down 370 points in the Dow) and February's last trading day (down 315 points), March had a final day of plus 46.49, which is not very meaningful.
Most of my picks sagged a little more, while two remain in positive territory. Raytheon Co. (NYSE: RTN), the high tech defense contractor is up and Reliance Steel & Aluminum (NYSE: RS) is way up.
TheStreet.com's Jim Cramer says U.S. Steel is a puzzle, and he ponders how to play it here.
U.S. Steel (NYSE: X) (Cramer's Take) presents the ultimate conundrum. It is hitting on all cylinders, courtesy of the incredible demand for steel domestically because of pipelines. And it is finally not suffering from dumped imports, because the dumpers are from countries growing so much faster than we are that they need all the steel they can get - China, for example, is struggling to build its own share instead of dumping.
John Surma, the CEO, has taken this once-great company right back to greatness with a rise from $9 to $127 in five years. That defies gravity. He has done that by cutting labor costs and growing the business, he has done it by emphasizing areas he can dominate and cutting ones he can t. And he has done it by taking advantage of the 30 bankruptcies in this sector, leaving him one of the few publicly traded companies left, including Nucor (NYSE: NUE) (Cramer's Take), which is a great company, AK Steel (NYSE: AKS) (Cramer's Take), which levitates all of the time on takeover talk and then DOESN'T come in, and Reliance (NYSE: RS) (Cramer's Take), which is another fave of mine.
The currency of our realm, the US Dollar, has been losing value for many years, but lately the results of this sad state of affairs have become increasingly more evident. Concerns are mounting on a global basis not just in the United States. The euro, once pegged at a buck, is now trading at $1.55, while gold has passed $1,000 and oil has continued its charge, breaking through the $110 per barrel mark.
While a good deal of this problem is home grown, the pain is being felt all around the world. We have read many stories about how the American economy is a smaller part of the global economy and becoming somewhat detached. This is nonsense. What has happened is that the global economy has become infinitely more integrated and like any integrated structure (the architect speaking), what occurs in one place is felt everywhere.
The Federal Reserve Board, led by Chairman Ben Bernanke, has been watching the economy in an extremely measured fashion, bordering on casual. To those who see beyond Bernanke's calm demeanor, one should imagine a stock trader of old, holding the ticker tape up to his eyes and monitoring every change, every blip in the market as the ticker tape machine clicks away, spewing out the latest market activity.
Earlier in the week I posted about finding the market bottom using that age-old handheld calculator, a white paper napkin. So, unfortunately it looks like I may be right again. Not exactly something I was hoping for, but if it has to be, it has to be. I wonder if my old napkin can outperform Wall Street super computers?
Is this an auction to the bottom? Are investors bidding things down instead of up? Looks like it from all the negative sentiment. Consumer sentiment is down, and short sellers are all excited, increasing their negative positions to new highs every day.
And here is the all-telling sign of capitulation: the ever-lying overly optimistic government is starting to admit how bad things are and throwing hundreds of billions of dollars at the problem. When does the turnaround come?
It is alarming to me that the same people who screw up the economy (or stand by watching) are the ones that are now promoting the remedies. They have proven without a shadow of a doubt that this is not their strong suit. The proposed economic stimulus package has bi-partisan support and calls for an estimated $156 billion of tax rebates ranging from $500 to $1,000 (+ $300 for each child) that might show up in May.
If we are going to add on to our already humungous joke of national debt, than I want to invest this capital in something that will bring a higher return on invested capital (ROIC) than the paltry one time mad money. That expenditure should be for national infrastructure projects like roadways, bridges, tunnels, and waterways.
We have all heard about the poor condition of our national infrastructure and the hundreds of billions of dollars of repair work and replacement that is desperately needed.
This alternative would bring visible results that every single person in the country would benefit from and improved linkages always stimulate economic growth. Road improvements even reduce fuel consumption by shortening routes and reducing friction both strategically and physically.
Top 10 Stocks Since Last Recession Now that it looks like we're headed into an economic downturn, we asked ourselves, "What types of companies do we want to own?" To help you answer that see what stocks have excelled since our last recession in 2001. They include Apple, Research in Motion, Ultra Petroleum, Guess? and Intutitive Surgical to name a few. The Top 10 Stocks Since the Last Recession - Fool.com
More People File Tax Returns Early, More E-File More than 38 million Americans filed electronic federal tax returns in the first two months of the year, a 5% increase from 2007, the IRS said Monday in the first statistics of this tax season. Filers who prepared their own taxes and transmitted them from home computers accounted for more than 12.3 million of the electronic returns, up nearly 14% from last year. More people file tax returns early, more e-file - USATODAY.com
Bankruptcies Make Gift Cards Worthless You know that Sharper Image gift card you got for Christmas? Right now, it's worthless. And other gift cards in your wallet could lose their value, too. Bankruptcy makes gift cards worthless - Marketwatch
Two months into the year and investors' true 'metal' was tested, and mine more than most. February showed signs of improvement over January, but the last week ended hopes of any rally. The last day of January saw a 370 point drop in the Dow and February's last trading day closed with similar results, down 315 points.
The soft stock market did display many points worth noting. The Dow Jones Industrial Average was about break even for the month, indicating investors were showing some signs of support for large cap stocks, prompted in part by news of increased profits at Wal-Mart (NYSE: WMT) and share buy-backs at IBM Corp (NYSE: IBM).
Some of my picks also sagged a little more, although not as much, while two turned into positive territory. In January, only Raytheon Co. (NYSE: RTN), the high tech, defense contractor, was up. In February, the weak dollar and inflation concerns boosted Anglo American plc (ADR) and Reliance Steel & Aluminum (NYSE: RS) -- two commodity plays.
January was a wild ride and February holds the promise of more of the same after yesterday's 370 point drop in the Dow. All the major indices were down in January and so were seven of my eight picks. Only Raytheon Co. (NYSE: RTN), the high tech defense contractor, was up. My two high flyers from last year, Huaneng Power International, Inc. (ADR) (NYSE: HNP) and Valero Energy Corp. (NYSE: VLO), were the biggest losers.
Among the indices, the DJIA lost the least and the NASDAQ lost the most. The average return for my eight picks was -7.82%. This underperformed the average of the indices that was -7.58% -- but my new stalking horse Berkshire Hathaway (NYSE: BRK.B) bested both, so Buffett is still the man.
Now including dividends for my picks which average 3.91% divided by 12 for the one month allows for an additional .326%, reducing the loss to -7.494%. Using 1.8% for the average dividend of the indices divided by 12 adds 0.15%, reducing the loss to -7.43%. The dividends tighted things up. BRK.B does not pay a dividend.
The following are my eight picks with the starting share price as of December 28, 2007:
It's time to make some major changes, something I have said before. I am not the first to suggest this and I am quite sure I will not be the last. General Electric (NYSE: GE) needs to take some serious action to add shareholder value. Apparently, Jeffrey Immelt was very embarrassed after last quarter's earnings announcement, when the company reported disappointing earnings following Immelts' own earlier statement that they would hit their targets.
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and 
Today was a very gloomy day in the stock market with Oil reaching new highs and everything else losing -- almost. Among the few winners, and I mean very few,
This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.
Here are some highlights from this past week's 
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
The currency of our realm, the US Dollar, has been losing value for many years, but lately the results of this sad state of affairs have become increasingly more evident. Concerns are mounting on a global basis not just in the United States. The euro, once pegged at a buck, is now trading at $1.55, while 
Earlier in the week I posted about 
It is alarming to me that the same people who screw up the economy (or stand by watching) are the ones that are now promoting the remedies. They have proven without a shadow of a doubt that this is not their strong suit. The proposed 
Dow. All the major indices were down in January and so were seven of my eight picks. Only 
Anheuser-Busch (BUD) sues InBev, what's next?
Wal-Mart might help your portfolio during the recession
IndyMac (IMB) turns to stone
