2009-05-25 21:20:11
Reviewing Some of Our Recent Long-Term Buys
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Time for a bit of a change of pace.
In late 2008, I wrote an article in which I detailed three stocks (well, two stocks and one ETF) that I would be adding to my portfolio.
You can read the original article, which was published on December 20th, 2008, here.
The two stocks that I said that I would be buying were:
GOOG
AAPL
The ETF that I announced that I would be purchasing was XLF.
First, let's look at how GOOG, AAPL and XLF have done since then.
At the time of the article:
GOOG was trading at $310.17
AAPL was trading at $90.00
XLF was trading at $12.23
At the close of trading today:
GOOG was trading at $393.50
AAPL was trading at $122.50
XLF was trading at $11.66
GOOG and AAPL are both up substantially, while XLF is down about 5%. XLF is an ETF that contains many well-known financial companies, so it shouldn't surprise you to learn that XLF has recovered substantially over the past couple of months (it has more or less doubled during that time). XLF is basically a basket of stocks that includes the likes of Bank of America, Goldman Sachs and JP Morgan, amongst others.
I bought GOOG because they are a market leader with an absolute stranglehold on the online search market. They are sitting on a pile of cash and continue to innovate. At the time of the article, I felt that advertisers would be moving more of their dollars from print and TV to online spending, and I still believe that this will continue to be the trend, and that Google will be the direct beneficiary of this. Google doesn't have anyone that I would call serious competition, and their business is a money-printing machine. I still feel the same about Google as I did back in December, and I will still continue to hold. Nothing has changed for me here.
At the time that I bought Apple, they were being absolutely taken apart. Their stock was down to $90 from a 52 week high of over $200. There were many concerns about the health of Steve Jobs, as well as the impact of a plummeting economy on their business. The main reasons that I bought Apple were: innovative and exciting product line, billions of cash in the bank, billions in free cash flow and a rabid fan base. I talk to many people that have made the switch from a PC to a Mac - I have never talked to anyone who has made the switch the other way. This bodes well for the future of Apple. I will continue to hold Apple as well.
XLF - I'm getting rid of it.
The financial sector has recovered tremendously over the past couple of months, as mentioned, however I don't believe that this rally (in the financials) will have any sort of sustained lasting power.
Many of the companies included in XLF benefitted from stronger than expected earnings. However, these "strong" earnings weren't the result of any uptick in their business or fundamental underlying strength. Rather, it was a one-time boost that will not be seen in coming quarters. When investors start to figure this out, I believe that the financials will be sold off yet again. I just don't see any sort of a catalyst for these companies over the next couple of years.
Looking back on it, I shouldn't have bought XLF in the first place, and I'm glad to be able to exit at this price.
When it comes to AAPL and GOOG, they have moved higher, but so have the markets in general. We are definitely not going to congratulate ourselves for these picks, even though they are both considerably higher than they were in December.
instead, we simply re-evaluate our positions and decide whether or not we will continue to hold them. I've elected to hold both for the foreseeable future.
Other additions to the portfolio? I must say that I like gold here - this is probably where I will be looking for any possible additions. If I decide to buy something then I will be sure to post an article here first.
I'm being very choosy, as I don't like much of anything right now.
Filed under: General Knowledge
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COMMENTS
Comment by Jay (market folly) on June 04, 2009 @ 3:26 am
Apple is an interesting play and should do well over the long term. Numerous prominent hedge funds own a position in it, as we've noted on our blog. (We track hedge fund portfolios). A lot of funds own GOOG as well now that I think about it... but more own AAPL these days it seems.
Wondered if you'd considered any other names outside tech? Might be worth it to diversify into other sectors a little bit, and maybe into other asset classes, including commodities.
Jay
marketfolly
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