Watch List: 11/13/09

The market closed above 10,000 for two consecutive weeks at 10,270.47, up 2.4% from prior week. At the end of the week, my watch list expanded to 19 companies compared to 17 from the previous week due in part because of an addition of regional banks. Here are the companies on my watch list as of November 13, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
THFF	First Financial Corporation Ind	27.23	14.80	1.91%	3.31%	1.84	0.90	49%
WTR	AQUA AMERICA INC	15.84	20.84	2.92%	3.66%	0.76	0.58	76%
SHEN	Shenandoah Telecom	16.88	27.23	4.84%	1.90%	0.62	0.32	52%
CWT	CALIFORNIA WATER SVC	35.28	17.82	5.34%	3.34%	1.98	1.18	60%
PNY	PIEDMONT NAT GAS CO	22.86	14.75	10.54%	4.72%	1.55	1.08	70%
WGL	WGL HOLDINGS INC	31.89	13.34	11.54%	4.61%	2.39	1.47	62%
WEYS	Weyco Group, Inc.	22.48	22.48	11.79%	2.67%	1.00	0.60	60%
UGI	U G I CP	23.64	9.81	11.83%	3.38%	2.41	0.80	33%
NWN	NORTHWEST NAT GAS	42.86	14.83	13.66%	3.87%	2.89	1.66	57%
UMBF	UMB Financial Corporation	38.28	18.23	13.76%	1.93%	2.10	0.74	35%
WMT	WAL MART STORES	53.20	15.60	15.03%	2.05%	3.41	1.09	32%
MON	MONSANTO COMPANY	73.58	19.36	15.93%	1.44%	3.80	1.06	28%
NJR	N J RESOURCES CP	34.99	13.30	16.83%	3.54%	2.63	1.24	47%
BCR	BARD C R INC	80.76	16.18	17.15%	0.84%	4.99	0.68	14%
XOM	EXXON MOBIL CP	72.47	16.89	17.15%	2.32%	4.29	1.68	39%
AWR	AMER ST WATER	32.33	23.95	17.31%	3.22%	1.35	1.04	77%
RLI	R L I CP	50.60	15.86	19.03%	2.13%	3.19	1.08	34%
HGIC	Harleysville Group Inc.	31.21	13.11	19.62%	4.17%	2.38	1.30	55%
SYBT	S.Y. Bancorp, Inc.	21.90	16.22	19.74%	3.11%	1.35	0.68	50%
19 Companies

*NOTE* I added selected regional banks to my watch list. If you are interested, I urge you to do an extensive research prior to your purchase. These regional banks have payout ratio less than or equal to 50%. Next year estimates are expected to rise as well.

Market Commentary: 11/12/09

It's hard for me to get excited about the market when I see headlines bombarded with layoff announcements. Yesterday Applied Materials (AMAT) beat the street by a wide margin. They reported an EPS of $0.10 per share compared with an estimate of $0.03. That is 233% upside surprise! Amazing how the consensus can be so wrong on the largest chip equipment suppliers. What's more important is that Applied plan to cut up to 1,500 jobs worldwide. Other tech companies are planning to reduce head counts as well. Here is the list of companies.

• Adobe - 680 jobs
• Electronic Arts - 1,500 jobs
• Sprint - up to 2,500 jobs
• Microsoft - 800 jobs
• RealNetworks - 70 jobs
• AOL - 100 jobs
• Sun Microsystems - 3,000 jobs
• Blue Coat - 150 jobs
• Lexmark - 825 jobs
• Nokia Siemens - potentially north of of 5,000 jobs
• Applied Materials - up to 1,500 jobs
  

I assume that these are considerably high paying positions. We'll have to see if the market can show any sign of weakness despite such bad news to the public.

That aside, the market continued to be strong BUT the upward trend is still in question. Dow stayed above the previous peak while the Transport have yet to confirm that move. I won't predict what the market will do and will wait and see. If the confirmation comes, I will buy quality company at or near its low.

Art

Market Commentary: 11/09/09

The Dow rallied past its previous high of 10,092.19 and closed at 10,226.94. This is the first piece to the upward movement confirmation. The second part lies in the Transport which has to close above 4,045.11 according to my reading. Right now, the Transport only need to move up 3.2% to reach that level. We'll have to wait and see if the two sign can converge. If and when they do, I'll be buying selected companies from my watch list.

The Dow P/E is 17.38 and yield 2.77%. I'm not sure if this is the right valuation for a long-term investor.

My Transaction

I closed my option position today with a big loss. Obviously I was wrong about the Dollar trade, what's more important was that I wager too much money into it. I wasn't discipline enough and as a result my most of my gains from this year nearly dissipated. Net loss of 23% was the result. I prepared myself mentally for the loss but the reality is still hard to swallow. You can learn a lot from someone else but this time I'll have to learn from my own.

Art

Watch List: 11/06/09

The market is still battling the 10,000 mark and ended the week at 10,023.42, up 3.2% this week. At the end of the week, my watch list shrank to 17 companies compared to 20 from the previous week. Here are the companies on my watch list as of November 6, 2009.

Symbol	Name	Price	P/E	% Yr Low	Yield	EPS	Div/Shr	Payout Ratio
WTR	AQUA AMERICA INC	16.16	20.72	5.00%	3.59%	0.78	0.58	74%
CWT	CALIFORNIA WATER	36.32	18.34	8.45%	3.25%	1.98	1.18	60%
MON	MONSANTO COMPANY	69.14	18.19	8.93%	1.53%	3.80	1.06	28%
WMT	WAL MART STORES	51.25	15.03	10.81%	2.13%	3.41	1.09	32%
PNY	PIEDMONT NAT GAS	22.94	14.80	10.93%	4.71%	1.55	1.08	70%
WEYS	Weyco Group, Inc.	22.63	20.95	12.53%	2.65%	1.08	0.60	56%
BCR	BARD C R INC	78.39	15.71	13.71%	0.87%	4.99	0.68	14%
UGI	U G I CP	24.14	10.02	14.19%	3.31%	2.41	0.80	33%
NWN	NORTHWEST NAT GAS	43.09	15.61	14.27%	3.85%	2.76	1.66	60%
WGL	WGL HOLDINGS INC	33.23	13.90	16.23%	4.42%	2.39	1.47	62%
XOM	EXXON MOBIL CP	72.58	16.92	17.33%	2.31%	4.29	1.68	39%
CAH	CARDINAL HEALTH	29.50	9.25	18.62%	2.37%	3.19	0.70	22%
NJR	N J RESOURCES CP	35.59	13.53	18.83%	3.48%	2.63	1.24	47%
RLI	R L I CP	50.60	15.86	19.03%	2.13%	3.19	1.08	34%
FPL	F P L GROUP INC	49.76	12.05	19.96%	3.80%	4.13	1.89	46%
PGN	PROGRESS ENERGY	37.62	14.53	20.00%	6.59%	2.59	2.48	96%
T	AT&T INC.	25.93	12.87	20.94%	6.32%	2.02	1.64	81%
17 Companies

Something to note, I've taken Shenandoah Telecom (SHEN) out because of an annual dividend payment. I feel that it offer less cushion for myself. I replaced this company with Monsanto (MON) which appear to be on its way to becoming part of the Dividend Achiever. Take a look at this report for more on MON.

Recent Articles

Retrace the March Low

Lighten Up My Portfolio

Wrong Interpretation on Dow Theory

Market Commentary: 11/04/09

Market Commentary: 11/05/09

My position in UUP Call is under water (-15%) in just one day. That is how harsh the option market can be. You will know how well or bad I do on that position by next week.

Context from Bloomberg's article today.

"Buffett built Berkshire into a $150 billion company over four decades by buying out-of-favor stocks and family businesses."

Art

Market Commentary: 11/05/09

I went long the US dollar (UUP) today through a Call option ($22 strike expiring March 2010). This action was taken because of such bearish sentiment in the dollar along with the bearish sentiment in the market. My thesis is that as the market soften, investors and traders will turn to the safer asset which is the dollar. If I am right, I will be rewarded. If I am wrong, my leveraged trade should go heavily against me.

As for the market, Bob Prechter guessed in the video one (below) that the market should bottom somewhere around 2014 and 2016. This notion is similar to the one I have which I expressed in my article, Secular Bear: Understand the Market. I suggest you re-read this article.

1.) Bob Prechter: Bear Market Rally Is Over, Stocks Headed For New Lows

2.) Stocks, Commodities Topping; Dollar Set for Major Rally, Robert Prechter Says

3.) Jim Rogers with Lindsay Whipp of the Financial Times: Brief Dollar Rally

Art

Market Commentary: 11/04/09

A divergence today in the Industrial and the transport is very discouraging. The Transport was on a continuous decline thorough out the day and ended the day 56 points (1.5%) lower. This is after Buffett announced an all out bet on America by buying up Burlington Northern Santa Fe (BNI). The Industrial stocks opened strong and reached 9,900 then selling came in just one hour prior to the close bringing the index down more than 100 points from the peak.

This poor daily action confirmed my belief that the market is trying to tell us something. I remember seeing similar pattern during the 2008 and early 2009 sell-off. I am not suggest an all-out selling but simply be acknowledge this pattern. Below are today's movement for both averages.

 

Stay light on your feet. If Buffett net worth declined 75%, he's still a millionaire. If my net worth declined 75%, I'm toasted. I assumed most of you aren't in the Buffett camp and thus you should protect your investment now not try to grow it.

Art

Wrong Interpretation on Dow Theory

The media are constantly wrong on their interpretation of the Dow Theory. Take a look at this video from today Fast Money show.


One should pick up the following books for a full understanding of the Dow Theory.
The Dow Theory
Dow Theory Today

Lighten Up My Portfolio

As I spoke yesterday about the market, I took action today and sold three of my holdings. Those are Regional Banking ETF (KRE), Automatic Data Processing (ADP), and Paychex Inc. (PAYX). Let's go over why I sold KRE.

On 10/5/09 commentary, I bought KRE thinking that the worse would be over for the regional and assume that the key technical level would hold. That assumption didn't hold true. The commercial real estate which are the large part of regional banks' assets are under stress still. As Wilbur Ross sees 'Huge' Commercial Real Estate Crash ahead. The chart below shows the buy and sell pattern.

At the end of today, I'll be holding Piedmont Natural Gas (PNY), Wal-Mart (WMT), and Altria (MO)

Art