TRADERS VERSUS INVESTORS, WHICH SHOULD YOU BE?

Just read an interesting article about traders beating out investors under current economic and market conditions.  While I agreed with some of their points, I think they ignored the fact that you don't necessarily have to be one or the other.  I firmly believe that there are merits to both and there are times when it's appropriate to trade stocks, as opposed to a simple buy and hold strategy.  So in my opinion, we should all be investors who also take advantage of a great trade when it comes along.  Although I consider myself a dividend investor, which entails buy and hold, I'm also quick to take advantage of decent capital gains.  Usually when I'm sitting on a large paper profit, I'll figure out how long it would take to earn the same amount through dividend payouts and then decide which I would rather do.  Sell the stock for immediate gains or hold and collect the dividends.  I've also cashed in on capital gains and turned around and repurchased shares of the same stock for the dividend payout when the share price has dropped back down. 

Not much news with my investment accounts this week.  Collected nice dividend payments from Merck (MRK:NYSE) and Ishares Preferred Index Fund (PFF:NASDAQ).  Took cash from Merck and reinvested dividend in PFF.  I'm working on building my position in PFF since they pay monthly dividends.  Want to keep my cash flow from dividends ever increasing and it doesn't hurt to have a few holdings who pay on a monthly basis. 

Recent Stock Trades

Decided to sell Copano Energy (CPNO) for a profit of 27%, with earnings down I am concerned about their ability to maintain their dividend payments. I will be reinvesting a portion of the proceeds from the sale of Copano in ConAgra Inc. (CAG). Their earnings per share of $2.15 per share is more than sufficient to maintain, and possibly increase, their dividend of 76 cents a share, which represents a 4% yield on the current price per share. While energy use may be declining in the current economy, people still have to eat, so upping my stake in ConAgra looks like the way to go.

For my IRA account, I'm adding more shares of AT&T (T). While their dividend payout of $1.64 represents 76% of earnings, I feel that their dividend is in little danger of being cut. AT&T is a long term holding in my personal portfolio as well.

My stake in Regency Energy Partners (RGNC) is doing well. It is up nearly 20% since my initial investment. Their dividend payout is around 62% of earnings, so I'll probably hang for the dividends unless the unless the price goes up over 20%. In that case, I would take the gain, since I initially bought the shares of the energy partnerships for short term gains. We'll see how that plays out.

Interesting Post On the Commodities Rally

If you're interested in commodities and the current rally in oil and gas prices, you might like to check out this post:

http://briskycapital.blogspot.com/2009/06/commodity-rallyis-it-for-real.html

I recently made some quick cash trading in my shares of British Petroleum. I had intended to hold it long term, but the price skyrocketed soon after I bought in and I decided to take the profit. May buy back in if prices decline latter this summer.

Lackluster Friday, But Not a Bad Week

Not much news as far as the stock market goes today. None that really caught my interest anyway. The new jobless claims were lower than expected, but I'd really like to see overall unemployment numbers improving. Would like to see the economy improving to the point that employers were hiring again. Overall though, it hasn't been a bad week for me as far as my investments go. I made some trades that were quite profitable (the last half of my UVE stock I'm selling with a 101% gain) and I've identified some shares I'm buying in to that I believe will do well. See: http://thebluecollarinvestor.blogspot.com/2009/06/trading-for-some-quick-cash.html So it really hasn't been a bad week for me.

Last spring I did an experiment in trading equities. Although I prefer long term investment, along the lines of Warren Buffet's long term, I did quite well with trading small cap stocks. As an investor, the more you learn, the more you earn. I feel comfortable with my knowledge of the stock market and my stock picks at this point and feel that I'm ready to make short term trades for quick cash. I am limiting the amount I allocate for short term trading and will report on how it goes in future posts. I think the market is in for a rough ride throughout the rest of this year, but I believe there are always opportunities to make money. You just have to look for them.

Trading for Some Quick Cash

Today was a day for selling on Wall Street and I decided to join in on some of the profit taking. I put in orders to sell half my position in Univeral Insurance (UVE), I'm keeping the rest for the dividend payout. I also sold British Petroleum (BP) and Veolia Environmental (VE) for quick cash profits.

I will be investing most of the money from the above sales in 3 energy limited partnerships:


EV Energy Partners LP (EVEP) Recent Price $21.91, Dividend/Yield $3.01/13.70%

Encore Energy Partners LP (ENP) Recent Price $15.93, Dividend/Yield $2.00/12.80%

Regency Energy Partners LP (RGNC) Recent Price $13.05, Dividend/Yield $1.78/13.70%


All three have fantastic dividend payouts, so I could be holding them long-term, depending on whether the payouts hold up. They were also attractive in the sense that I believe there is room for quick short term growth in stock price. So it's possible I could be trading them off for quick profits, depending on how the price moves. Whatever I decide, I'll be sure and post the results as they happen.

Stock Portfolio Update

With such a crazy market since the first of the year, it's easy to just sit on the sidelines and wait for more stability. Always the bull, when it comes to the stock market, I can't help but see opportunity everywhere! My IRA account, which I opened in December, is up 14.5% for the year. AFLAC (AFL) was my best purchase for this account, up an astonishing 67% since my original purchase. I think it will go even higher. Advance America Cash Advance (AEA) earned me a whopping 97% gain for my regular investment account.

So even though it's been a rough ride for the first five months of the year, as far as I'm concerned, it has presented us with a very rare opportunity to make some marvelous short term trades and fantastic long term investments.

I don't want anyone to get the idea that my life has been smooth sailing through this economy. My job shut down on January 10th and I'm still looking for work. I've had to cut back on the amount of money set aside for investing and I've practically stopped buying anything aside from the basic necessities. But I've been through much worse and this too will pass.

Don't Take My Word For It

O.K., so I've been writing since January about how this is the perfect time to get in to the stock market, albeit on a very selective basis. I always search for investments that provide current cash flow and the possibility of future capital gains. For anyone who thought that I couldn't possibly know what I was talking about, check out this article from the Rich Dad Blog by Robert Kyosaki:

When Pessimism Prevails, It's Time to Get Rich

If you go back and read some of my articles for this past year, you'll see that I've been saying basically the same thing Mr. Kyosaki is talking about in this article. I've read most of his books and he is by far my favorite author when it comes to investing, so I was pleased to see that his most recent post is validating a lot of the things I've been writing about. So, don't take my word for it, read what someone who's already made millions has to say.

Oil Prices and A Few More Stocks I Like

I've written about oil prices before, saying it was all about price and demand. Well now everyone seems to be in agreement. When the price reached the point where most Americans had to start cutting back, the price is beginning to falter. Seems everybody is backing away from their predictions of $200 dollars a barrel for oil and $5 dollar a gallon gasoline. I truthfully never expected it to get to that price. Most of the people I know and work with simply could not afford it. They are struggling now at $4 per gallon, so add another $1 and they simply would be out of commission. When the public can no longer afford something, no matter what it is, the drive behind increasing prices is gone. The new catch phrase, "demand destruction" is occurring on a huge scale, just as I predicted it would. Will China and India continue to drive demand? Only if they can sell their products and how is that going to happen if everybody is spending their money on gasoline? Demand destruction is occurring, not only from consumers switching to smaller cars and driving less, but also from the shift to alternate energy sources, such as bio-diesel, solar and wind energy, all lessening demand for petroleum products. I wouldn't predict oil at $40 per barrel like the guy they interviewed on CNBC earlier this week, but I do see the prices dropping dramatically.

So how is this affecting my investments? Fortunately, since I'm mostly buying, the price drop in equities has been good for me. I'm searching for stocks that I feel have room for growth, solid earnings and pay current high dividends. While the share prices of my portfolio holdings have dropped, along with everyone else, my earnings from dividends have been increasing month after month. I am currently re-investing all dividend income in bargain priced dividend stocks. When the market starts to recover, I will re-evaluate my investment plan and possibly shift dividend income to fixed income opportunities or real estate investments. But while the prices are down, I'm being greedy and adding to my holdings as much as possible. Whether we're at the bottom or not, STOCKS ARE CHEAP! Buy when they're on sale.

My latest additions to my portfolio include Biovail Corporation (BVF), a pharmaceutical company with a whopping 15.10% dividend yield and Windstream Corporation (WIN), a small rural telecom with solid earnings and an 8.4% dividend yield. Both should fit nicely with my overall plan of building a portfolio of high dividend stocks and increasing monthly income from dividends. Any price appreciation on top of that is just icing on the cake. Since I have no intention of selling any stocks within the next several years, I can wait on price appreciation.

I currently don't need any of the income from my stock portfolio, but the ever increasing flow of dividends into my money market account make it a lot easier to afford new investment opportunities as they present themselves. Robert Kyosaki, one of my favorite writers, says to "look at a deal a day." I've made that my goal. I can't always afford the deals, but it keeps my mind active and on the lookout for my next investment.

Don't Be Afraid of Listening to People Who Are Smarter Than You.

"Dependent people need others to get what they want. Independent people can get what they want through their own efforts. Interdependent people combine their own efforts with the efforts of others to achieve their greatest success." - Stephen Covey

Even though I haven't had the benefit of an extensive secular education, I still consider myself as pretty intelligent. However, one thing I have learned is, there is always someone smarter. When it comes to investing, no matter how much I learn, I know there are people who are more in the know than I am. A very important part of intelligent investing is to take advantage of advice from people who are smarter than you.

I recently came across this blog by Michael E. Brisky:


http://briskycapital.blogspot.com/


I didn't have to read too many postings before realizing this guy knows way more about investing than I do. So you better believe I'm going to be keeping up with his postings. While I might not take advantage of every piece of advice he gives, I think this guy definitely knows what he's talking about. Thanks Michael, keep up the good work!