Back to Stocks

Since the previous post on stocks, the market went down, went back up and is holding on to some of the recovery. It was the credit crisis driving down the stocks in the beginning of the year and after the fed bailout of Bear Sterns and interest rate cuts, the market started going back up. These days it seems to be the record oil prices that is driving the stocks down or keeping it form going up.

Had I posted this update few months back, the return from the 3 stock picks would have been pretty bad. Since the market has had some good days in the last couple of months, the returns look fairly decent:

1. MRVL 16.75 (down 8.7% from 18.76)
2. AAPL 176.84 (up 108% form 84.76)
3. SAY 26.95 (up 27.7% from 21.09)

The average return form these 3 stock picks is 26% (including a 22% loss from AMGN that was dropped sometime back). Not a bad return, considering the market has been pretty much flat in this time period. S&P500 is 1360 and it was 1361 when I first recommended these 3 stocks.

It looks like I did manage to pick well managed companies that can withstand occasional market shakeups. That said, I also realized that I should come up with a better way to pick stocks. Being lucky is something that I can't always count on. With that motivation I picked up book on value investing. The ideas in that book are nothing new and is available in so may articles written everyday on Yahoo finance or other websites. But the difference was it did not mean much to me when I started out trading stocks. My reaction was - who has the time to do all that work, I will just pick some stocks and see how it does. But this random Brownian motion leaves me exactly where I started after many hits and misses. Hopefully I can put some procedure in place for all this stock picking. Here is one lesson I piked up recently:

- Don't try to make sense of every price change in every stock that you are interested in. Instead follow the companies that make sense to you. In other words, buy what you know.

The above statement is true but it is also good to join the crowd at times. Check out some of the fertilizer stocks - POT, MON to name a couple. These things have at least doubled in the last one year. Based on recent news it looks like their run is not going stop anytime soon. It will be interesting to watch these in the next 6-9 months. More later...