11/14 Kelly Letter Topics
Weekly market review
The bottom holds
Big bounce volume
Recession projections
The magic midpoint
LevMark Timer holds
Crocs is dying
Hope for Goldman
Importance of retest
My expectations for an oversold bounce last week were satisfied about as much as a half-glass of O'Doul's satisfies an alcoholic. Most of our positions gained a smidge, but that's all.
The one-quarter of my original position left in Maxtor lost a little ground, but is still up some 62%. Pfizer gained ground and, oddly enough, disappointed me. Why? Because I'm looking to buy more at around $25. It's a classic Dow recovery situation and I continue to think that most of the bad news is out. Of course, I'm not the only one to realize that, hence the recent trend upward. I'm a patient man, though, and will wait for the $25 opportunity that may never come. I was pleased with Ultra Semicon's performance for the week, if not dazzled. With all the bad talk about semiconductor companies, seeing Ultra Semi down a mere 2.5% from our buy price is fairly encouraging. If and when this market finally perks up before crashing through summer, we should see some healthy gains.
The Dow is getting beat up again. Double The Dow is now down 6.3% so far this year. Not worried a bit. This is how it always goes with that investment approach and these downward fluctuations are what help you dollar-cost averagers get ahead in the long run. Remember, money you send now will fetch you more shares than money you sent back in December.
In my ongoing quest for good news to report, let's look at Sun. Regular readers here sold two weeks ago at $4.41 for a 5% profit. It's recorded here. Since then, the stock has dropped 8.6% to $4.03. Feels like getting under a thick tree just before the cloudburst, doesn't it?
"What's next," emailed several readers. Itchy fingers are everywhere...except here. I don't make many moves, but when I do something in the market, I generally do it big and it generally works. I'm not a fan of the frenetic ten-trades-a-month approach to the market. There are many, many sites that offer that and they usually post histories like this: +3%, -2%, -6%, +1%, -4%, +5%, and so on. In the end, after taxes, transaction costs, and stress, you'd have been better off sitting on the couch with that half-glass of O'Doul's I mentioned earlier. So, to the itchy finger crowd, I say to relax and be patient. We still have positions that will benefit should the bounce finally arrive, and we are sufficiently protected should the bottom fall out.
All in all, the market seems to be enjoying Easter season with a stroll through the Garden of Unchanged. The professional prognosticators have busied themselves lining up in equal numbers at decidedly different gardens. The Garden of Hell-Is-Upon-Us points out that a market that can't rally from these oversold levels is a weak market indeed. The Garden of Downside-Risk-Doesn't-Exist points out that oversold levels that wait a long time before bouncing upward tend to bounce a lot higher in the end. To me, both sides are reminiscent of somebody in a much more famous garden who had no idea how costly it could be to eat an apple. Which is a pretty roundabout way to say that, as usual, nobody knows what the heck's going to happen.
What to do? Same thing that always works. Pick what companies you want to own and at what price, then wait for that price to become available. As for me, $25 on Pfizer looks good. Sun at much lower levels looks good. After we get rid of that last chunk of Maxtor, buying again below $4 looks good.
Oh, and spending time with your family on Easter looks good. That's the surest bet I can offer. At least call your mother. From Sano, Japan, where the cherry blossoms are just days away from blooming into Spring, Happy Easter, everyone.
