The market turned south on Thursday and continued down on Friday. IMO the housing bubble that has supported the economy for so long is coming to an end. The front page cover story in this weekend's Barron's will lead to more of the recent down turn the housing stocks are beginning to show. Article is titled.."POP" and points out that real-estate investment trusts dropped 5% this past week and suggest it might be the catalyst to burst the housing bubble that is beginning to fray. The CEO of Toll Brothers sold $22 million in his company's stock and most housing stocks took a hit this week. As a recent article in Barron's pointed out...40% of the growth in recent years has been related to the housing industry. Interest rates have reached a point that with the non-favorable tax breaks that REITs don't have, investments in them are reaching a point that they aren't such good investments and higher returns will come from other sources. IMO taking short positions in housing stocks will be a must in anyone's portfolio and I would suggest it via the buying of put options in the likes of Toll Brothers, KB Homes or any of your personal choice housing stocks. Interest rates ticking up next week will only add fuel to the fire.
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Due to the sudden down turn last Thursday I have closed out my position in the following stocks:
ARRS- Closed full position at $10.57 for a profit of 26.5%. I will look for a re-entry at a lower level.
BTUI- Stock bounced nicely during the week and I sold Friday at $7.10. Wish I had pulled the plug when it moved above $8.00. Still made a nice 18.5% profit in this trade.
WEDX- Sold Friday at $3.45 for a loss of 12.6%. This is a very interesting stock but currently isn't getting any interest and with concerns that I have for the market I will monitor and wait for a better time.
RADN- Sold at $11.35 for a week's gain of 14%. Will monitor for the future.
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RACK- Popped above $14.00 during the week and closed at $13.85 and is up 6.6% from purchase price. Still holding for near term gains, but will monitor closely the market.
HTGC- Had some good upside for the week and still closed at $13.75 for gain of 5.7%. I continue to hold!
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As for new a entry I will only add one stock this week. That stock is (MIND) @ $10.00 a share. Oil industry is currently hitting on all cylinders and companies like MIND will be providing a vital service to the major oil companies. This stock is under-followed by Wall Street as it is domiciled in Huntsville, Texas.
I was going to add (MSON) as it was on my watch-list and hit the parameters to be added, however, in the latest BusinessWeek magazine it was mentioned in a positive light and since this will become more widely known on Monday this will probably move the stock more. Since one of my rules is not to add a stock that has late breaking news from Friday closing prices, I will not add..but all should pay attention to the closing price of $7.20. I probably will buy a few shares on Monday if I can get a decent opening price.
Finally one stock to watch...Merck(MRK). I would suggest that one should take a short position either via options(PUTS) or the actual stock. Currently the first trial against Vioxx is underway in Brazoria County, Texas...a place that plaintiff lawyers greatly desire to have such cases heard. The trial will probably last a few more weeks, but when the deceased gentlemen's wife testified this week..several members of the jury were brought to tears....IMO this isn't going Merck's way and will open the gate for many future claims. However, with that said, IF the stock breaks down on a favorable jury award to the plaintiff, I would quickly look to reverse my position and go long the stock. It currently sports a dividend of about 5%..so anything above this level will provide a nice income stream. |
