Thursday, February 12, 2009

Buying Selectively

Over the past several weeks, I have been looking to take some positions.  While I don't think the market is going to turn around and take off anytime soon, I am trying to take a few positions right now.  I do not want to try and pick the bottom, so I've decided to just try and take a few positions here and there over the next several months.  I have a very large cash position and I want to be well position if this market ever turns around.

So I am deploying some of my cash right now and I'm trying to be smart about it.  Things I am buying right now are for the most part, long term holds which I do not plan on getting in and out of anytime soon.  I've taken three positions.  Some of them I think are relatively conservative in this market, one of them is going to sound crazy.

  • Health Care spider (XLV) - This is an ETF.  I actually picked this one slightly due to my fiance√© saying she thought I should get into some healthcare stocks.  I had a hard time picking a winner in this space.  I had considered Johnson and Johnson or a Pharma like Pfeizer, but decided to just buy the basket of stocks.  The reasoning is simple here.  Not only do I think this sector will continue to fare well in the down economy, but I actually think there is some huge growth opportunities in the next few years.  The U.S. is aging.  You cannot fight demographics.

  • Biotech ETF (IBB) - This is another ETF.  This ETF actually has  many of the same holdings as the other ETF (Gilead and Amgen for example) which means this is an undiversified pick.  This is OK if you know what you are doing and it does not represent an unusual amount of your portfolio, which these holdings do not.  Anyway, the same logic applies but with a twist.  This sector will continue to see consolidation over the next few years.  Many of the smaller players are going to get snapped up and the winners are going to become very big players.  On this one, I struggled between picking Gilead or Celgene as individual stocks rather than the ETF, but decided to just go the basket approach.

  • Morgan Stanley (MS)  - This one might seem like the oddest pick given how I feel about the economy, the housing sector, and the financial sector.  But like I said, I am not looking to bottom pick.  As I have said over and over in this blog, the government is making it EXTREMELY profitable to be a bank in the future.  While there is certainly cause for concern, the banks that come out of this mess are going to make lots of money.  Morgan Stanley is going to survive.  They have already taken the very painful step of writing down their assets and deleveraging.  So I want to start getting into banks.  Not just any banks, the right banks.  These stocks may easily triple over the next few years and the winners fall aside, and the winners start reaping the benefits.  Many of which are on all our backs.  I thought about going with Goldman on this one, but in the end decided Morgan was the better play right now.


I was actually looking to buy a few more things today, before the market turned around.  But the government announced a plan to help out borrowers, and the market reacted positively to the news erasing earlier losses.  I really really wish the government would just shut up and stop changing the rules.  These wild swings in the market are making it hard on me, and everyone else, to be able to make any rational choices.  They are distorting behavior at every turn causing people to rethink decisions or act in ways they might not normally act.  I was about to do the very thing they are trying to get people to do.  They want people to start taking some risk and get back confidence in the outlook.  But when prices move wildly like they have been, it makes it impossible for me to get any sort of comfort level.

4 comments:

  1. One thing to note, I actually took these positions over the last several weeks, not just the last few days. I'm actually up on everything but my MS trade, and even then I'm only slightly down.

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  2. I can understand Healthcare and Biotech, but I am still not confident nor comfortable investing in any financial services.

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  3. I too am leery of an financial institution. The other obvious landmine is anything relating to real estate. I still think alternative energy companies are the way to go.

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  4. Stands back from the keboryad in amazement! Thanks!

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