After watching the stock market approach the November lows, I decided that now was the time to increase the BUY orders and to make a move which I've been hesitant to make until now- BUY financials.
When market initially crashed late last year, I stayed away from the financials and the auto stocks because there were too many safer bets out there that were sure to rebound with the market, whenever that time comes.
While the recession may be far from over and the President's plans to rescue the banks has not yet been unveiled, conditions have stabilized enough to delve into some financial stocks, in my opinion.
I have no qualms about taking risk in the market, because the best rewards come with the greatest risk, but I'm starting with this sector toes first and bought the Financial Select Sector SPDR ETF (XLF). This ETF encompasses most of the individual financial stocks that I was looking to buy, so the XLF purchase made my decision easier. Among the top holdings in XLF are JP Morgan Chase, Wells Fargo, Bank of America, US Bancorp and Citigroup.
Once the President unveils his plans for TARP II the sector could begin to see a rebound, if they like what they hear, and I wanted in before that happened.
In this market I've got a portfolio set for the long term (that's where XLF is going) and one for the short term. I believe that we've got the opportunity to buy the financials near the bottom right now and a few years down the road patient investors could be greatly rewarded.
Of course, there is still great risk in the sector because we do not know how the companies or the investors will respond to the Government conditions that will be placed on the industry after receiving so much Federal aid. In my opinion, it is a risk worth taking because if anything is certain in these economic hard times it's that the financials cannot fail. It may be a long time before they are as profitable as they have been for the past decade (or maybe not, Americans have a short memory), but they will recover.
To compliment XLF I also dropped a few shares of Citi (C) into the portfolio. It was a tossup between Citi and Bank of America (BAC) when I made my decision to buy Citi, but both are trading at levels that offer the potential for huge gains when this whole mess is sorted out. I did like the fact that Citi took the Government Credit Card contract away from Bank of America recently (because we know how our elected officials love to party on the Government cards) and I am one that believes that the Citi deal which pays the New York Mets $400 million dollars over 20 years is a good one. You can't get better advertising than that in the heart of New York.
A few other stocks that I am buying while the DOW drops below 8,000:
I took a flier on SIRI last week because I do not see bankruptcy coming. CEO Mel Karmazin is in a tight spot, but all the speculation that dropped the stock to a nickel was part of the game, in my opinion. It now looks like Liberty Media will step in and bail the company out.
Epicept (EPCT) is back down to my BUY levels in the sixty cent range. We should see nice gains with this one over the next year with Ceplene already approved in Europe.
Capstone Turbine (CPST) is also down into my screaming buy range. Capstone still has a great backlog of its microturbines and the company's low emission technology fits right in with this administration's plans of going green.
There's still more great deals out there in this down market and we should all be buying while we can. Contrary to the Political speak of late, this market will rebound and I'll be along for the ride when it does.
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