Two questions!
I made several mistakes in the energy area portfolio with AIM. I started with too low of a cash level and bought too frequently on the way down. Guess that is less painful using real money. I ditched the AIM portfolio in the energy area Jan 1st because of time constraints and the distance to the next trade levels on most of the stocks. Some needed to rise 50% to get back to that first trade and that wasn't going to happen anytime soon. I haven't run a PCA example simply because I don't own Excel97. The lessons are even with the lowered cash reserves, I could have pulled the chestnuts out of the fire by simply buying slowly and putting those large drops to my favor.
Right now, the oil service sector is dead as a doornail. I sold most of my real holdings and let Uncle Sam pick up part of my losses last year. If you want to read a fairly nice article on the prospects for the sector, then read my partners latest missive at:
loosbrock.com
I'm thinking along his lines that the downturn in the industry will take a rise in the oil prices and a 6 month to 1 year lag before you will start to see oil company exploration spending increases. So now that I've taken my beating, I'm content to wait before buying into this quagmire again. Much simplier to just trade a basket of these stocks as you see the oil price change.
tfc-charts.w2d.com
Brazilian devaluation is going to keep oil prices low for another block of time. Go back to October and re-read my theme about using oil as hard currency. It's happening again. There are two possibilities. OPEC (read Saudia Arabia) decides to cut production so the price moves higher, or they keep the oil flowing and oil drops to $8/bbl. It is a crapshooot at this time. One of these days you are going to be able to make money in the oil patch again. I just don't see it happening right now unless you are willing to trade these aborted rallies.
Buy when prices turn up and sell when they turn down. No AIM'ing involved.
How do you feel about the ASND takeover by LU? I've troubled over it a bit and am thinking at this point that I'll let the shares roll to LU.
This one ticks me off. I think the exchange ratio should have been much closer to 1.00 vs. the 0.85 that has been agree to. LU is a huge company growing at 20% per year with a p/e of 50+. ASND was a smaller company growing 40%/year with a p/e of 50 at the time of the announcement. Seems like I'd be jumping from the fast horse that was about to get going, to a horse that might start slowing. LU is a fine company, but unless the eps estimates are all wet, it is too expensive.
If and when reality hits, CSCO and LU are going to get clocked. Look at the chart for CSCO in early 1997 when there was a general feeling that the data networkers weren't selling as much as expected. You got an almost immediate haircut in CSCO from $30 to the low $20's. That could easily happen with CSCO and LU from these lofty levels especially if hardware sales slow because of budgets being spent on y2k issues.
I bought FORE and XYLN as a consolidation play in the networking field. Friends bought NN, but I was again out of cash. Consequently I am looking for companies that will be acquired vs. companies that will be doing the buying. FORE and XYLN haven't moved much, but both should trade toward the high 20's low 30's before the news dies down again. Europe is slow in this area, but ALA, Ericcson and Nokia have yet to be heard from. NT is also a possible takeover target for someone wanting to make a big splash.
I'll probably let the LU/ASND shares ride until the media quits hyping the synergistic effects, then sell. There are more rapidly growing companies out there that can be bought.
I bought WSTL Friday on the Bell Atlantic/AOL pact to install ADSL service. There are lots of suppliers of ADSL equipment, but WSTL looked good for a trade to the low teens Looking at some of the others, but NetSpeed was swallowed up by CSCO last year and ATMX was swallowed by TXN. Overall there are very few "pure plays" in this area. WSTL is one but it is small. AWRE is another, but waaaaay ahead of itself (I guess).
One last thing. These are probably too boring for AIM'ers, but if you want a buy and hold stock, I'd highly recommend buying LaFarge (LAF) or Southdown (SDW) at these levels. LAF was a ConfirmatoryAnalysis.com selection in January at confirmatoryanalysis.com
In the cement and aggregates sector ML wrote:
With regard to the outlook for this sector, the keystone event of 1998 was the June passage of the Transportation Equity Act for the 21st Century, or TEA-21. That $215-billion legislation will boost Federal Transportation spending for the next six years to a level 42%
higher than under the previous six-year bill that it replaces, and should boost highway outlays in particular by about $8 billion per
year. About two-thirds of the annual increment will be expended in 1999, and by 2000 the program will be fully in place.
Just seems fair to buy the companies that will benefit from uncle sams appropriation of your tax money. ;-)
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Dave |
