Archives for July 2010

Best Blog Posts of The Week

Favorite Investing & Personal Finance Posts

Free From Broke explains how Dollar Cost Averaging Helps Eliminates Emotion.

Money Help For Christians discusses how investors will be affected by Mutual Fund and Capital Gains Tax Changes.

Invest it Wisely has an interesting article on A Millionaire Teacher.

Adam at Rabbit Funds has a different take on  The Number One Thing You Should Consider When Investing.

Barel Karsan has an investment opportunity for investors with Small Portfolios Out There.

Len Penzo lists 8 Reasons Why You’re Getting An F In Personal Finance.

Money Monk asks Have You Really Looked At How Much Money You Make?

KNS Financial elaborates on a Yahoo Finance article on 12 Tricks To Make Us Spend Big.

This is an older post by Joe Taxpayer about Warren Buffett: Hero Or Opportunist. I added it because it discusses Warren Buffett.

Moneyed Up

I have just started writing for Moneyed Up. Moneyed Up focuses on increasing your income, saving money wisely, and reducing expense. Check out the site. Thanks!

The Shrinking Middle Class

The American middle class is on the verge of extinction. The gap is widening between the have’s and the have not’s.  Look at the following disturbing statistics from the Business Insider.

– 83 percent of all U.S. stocks are in the hands of 1 percent of the people.
– 61 percent of Americans “always or usually” live paycheck to paycheck.
– 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
– For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
– In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
– The top 1 percent of U.S. households own nearly twice as much of America’s corporate wealth as they did just 15 years ago.

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Get Ready To See The Amoco Name Again

BP (NYSE: BP) may have survived the Gulf coast oil spill but the company is undergoing a major change. The company’s long time name is likely to change. The company is already cleaning out top level management with CEO Tony Hayward expected to lose his position. Top level management will be dismissed due to the poor handling of the oil crisis. The next thing to likely go away is the BP name. BP has to change the company name in order to move forward. The new name will be familiar to old customers, Amoco.

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Weekly Best Blog Posts

Investing Posts

Dividend Growth Investor looks at 5 Big Brands That Are Growing Their Dividends.

My post at MoneyUnder30 details 5 Growth Stocks For Young Investors.

Old School Value believes that BP Is A Buying Opportunity.

Dividend Tree states that Exxon Is Priced To Buy.

Personal Finance Posts

Wealth Pilgrim takes a look at exactly How Much Money Do You Need To Retire.

Financial Samurai discusses how to make money in the financial blogosphere with his post on Buying and Selling Blogs.

Free Money Finance believes that  Too Many People Are Relying On Social Security For Their Retirement.

Money Reasons asks If The Market Crash Is An Opportunity To Invest?

Bargaineering asks If Home Ownership Is Really The American Dream?

General Electric Stock Analysis

General Electric (NYSE: GE) has been dead money for some time now. The stock is down nearly $40 and down 72.5% over the last 10 years. The company finally reported positive quarterly earnings after two and a half years of declining earnings. The company earned $3.3 billion dollars (30 cents per share) as second quarter earnings increased 15%.

During the most recent conference call, CEO Jeff Immelt noted that “Equipment orders increased 17%, including 20% growth in the Energy Infrastructure segment and 14% at Technology Infrastructure. Oil & Gas and Healthcare orders were particular bright spots and helped hold total company orders backlog roughly flat, excluding the impact of foreign exchange.”

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How To Become A Millionaire

The goal for most people is to one day become a millionaire. Becoming a millionaire is not as difficult as you think. You just need to acquire a net worth of $1 million dollars. This means that the value of all of your assets together minus your liabilities should be equal to $1 million dollars.

Here are 5 steps that will put you on the road to becoming a millionaire.

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My Best Picks Over The Past Month

US Steel (X) has had a nice bounce since I recommended that investors pick up shares in the mid $30’s at the beginning of the month. Shares are up $7 giving investors an 18% gain.

Back on June 25th I recommended that investors get long Research In Motion (RIMM) when shares hit the $40’s. Shares appear to have bottomed out right at $47. The stock is up to $55 now. Investors should take profits now. I think that Research In Motion is headed lower.

On July 5th I suggested that investors get long Intel (INTC) at $19.48 and General Electric (GE) at $13.97. Shares of Intel have rallied 10.5% to over $21.50. GE has rallied 7.1%. I think that shares of GE have much more upside so I will continue to hold shares of General Electric.

My Current Picks

Bank of America (BAC) is a steal at $13 per share.

Exxon Mobil (XOM) is being given away at under $60.

Apple (AAPL) is worth buying at $245 a share. I would get long Apple shares.

I Am Still On The BofA Bandwagon

I added more shares of Bank of America (BAC) through my DRIP plan today. Shares of Bank of America trade at just $13.46. The stock has been punished due to its lackluster earnings report and the expected negative impact that financial reform may have on BofA’s earnings. Let’s take a look at the pros and cons of investing in Bank of America.

The negatives for Bank of America are as follows:

1) Credit losses continue to rise as delinquency rates are increasing. Bank of America has tremendous exposure to the real estate market and credit card market.

2) Financial reform is expected to put a cap on interchange rates. This would severely impact debit card fee income.

3) Trading revenues dropped substantially after bolstering the bank in Q1.

4) Much of last quarter’s profitability was due to one time gains such as the sales of bank assets.

So, why should you buy the shares?

Bank of America trades at a discount to book value. The bank’s earnings power is still incredibly strong. Fee income could easily offset any future losses. I expect Bank of America to find new ways of generating fee income by charging for services that used to be free. Increased checking account service charges and increased account activity fees.

The large deposit base gives Bank of America the cheapest form of capital. Bank of America has enough cash reserves to weather any economic downturn.

The downside is already baked into the stock’s price. Analysts have been rushing to downgrade shares of BofA. This is a bank that could easily earn $3 a share in in 5 years. Even if Bank of America only earns $2 per share 3 years from now, the stock still only trades at just 6.5 times earnings.

This is definitely not an overnight play. It may take years for things to shake out at Bank of America. However, I think that patient long term investors will be rewarded when the economy rebounds.

Disclosure: I do own shares of Bank of America.

Photo by: taberandrew

Is Now The Time To Invest In Apple?

Everyone in the world knows about Apple Inc. (NASDAQ: AAPL). If it’s in the technology arena, Apple does it. Apple makes money selling computer hardware and software applications. Apple generates sales from everything including it popular lines of iPods, iMac’s, iPhones, and iPads. Apple even derives revenue from music, books, laptop accessories, laptop cases, laptop sleeves, headphones, speakers, cables, and docks.

Shares of Apple Inc. dropped to $250 today. Apple’s stock has been in a steady freefall over the past 3 weeks. Shares have fallen from the $270’s and the stock has trimmed over $15 billion dollars off of its market cap. Why the steep drop? Some spectators believe that the price drop is due to a glitch with the phone’s antennae. Apparently the phone has a tendency to drop calls if it is held at the wrong angle. Apple is holding a press conference tomorrow to address the “death grip” issues.

I think that the drop in Apple’s shares is not totally due to the glitch. Apple’s shares have followed a similar pattern after the introduction of the iPad, and previous generation iPhones. Investors bid the stock up ahead of the introduction of a new product and then dump the shares after the product launch. This strategy is creating a buying opportunity for smart investors.

While Apple may have to modify existing phones or give free bumper cases to iPhone users, the fundamental growth story at Apple still remains unchanged. Consumer demand is still extremely high for the iPhone 4G and the iPad. Apple is still on place to earn over $16 per share next year. Apple is currently trading at a significantly discounted multiple to the company’s historical P/E of 32.

If the rumors are true about Verizon getting the iPhone, that would open up a whole new market for Apple. Analysts estimate that Apple could easily sell an additional 12 to 15 million iPhones in the first year alone. The iPad is still in its infancy and has continued room for sales growth with Apple just launching the product this year. Imagine what sales will be like when the iPad becomes available on Verizon’s network.

Apple may be a $230 billion dollar company but the growth is alive and well. The P/E ratio at 15 is actually lower than the company’s projected growth rate of 16.5%. Apple deserves to trade at a premium valuation not a discounted one. Even if you attached the industry average P/E and multiply it by the average earnings estimate, Apple is worth at least $350 per share.

At $250 or below, Apple is definitely a buy.

Disclosure: I do not own shares of Apple.