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A discussion page dedicated to the managing of money through investment.

 

5/9/06 CONGRATULATIONS!

 

In reviewing your portfolio on the Maine stock market simulation web site, I saw that your portfolio is now in the TOP FIVE. Excellent work! I took a look at your stock holdings to see how they've done in the last week. It is worth noting that, while most of your stocks have outperformed the S & P 500 index, there were a few that did not. I hope that, by now, you have seen how the concept of diversification (which we discussed during my last visit) helps to keep your investments from imploding. No one likes to see a stock that either lags or just plummets. But by not putting all your eggs in one basket and investing across different companies, industries and sectors, you've increased your portfolio protection. I also noticed your recent purchase of the Dodge & Cox International Stock Fund. This investment adds another layer of diversification to your portfolio, by investing in foreign stocks to balance against your U. S. investments.

 

I am planning on paying a visit in a couple of weeks, and am looking forward to hearing your investment stories and answering any questions you may have. See you then!

 

Have a good week,

 

Mr. Nelson

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5/1/06 Investment Opportunities This Week

 

As I mentioned in my posting last week, I had noticed that you had not chosen any investments in the consumer staples and health care sectors. As we discussed in class, making sure you are well diversified is important to your investment success. One important aspect that these two sectors bring to a portfolio is that they are what we call "defensive" sectors. That means that they are less likely to get beat up (or won't get whacked as bad) as other parts of the stock market should we see a slowdown in the economy or if the market should suddenly sell off. Why is that? It's because of the fact that, no matter what the economy does, people like you and me still need the products that companies in these sectors make. Even if the economy is in the tank, we will still be buying food, beverages and household products (yes, like toilet paper), etc. We will also continue to take of ourselves medically, filling prescriptions and getting medical treatments. Illness knows no recession!

 

So what opportunities might there be right now in these sectors? In the consumer staples arena, it appears that names like Archer Daniels Midland (symbol ADM), Colgate-Palmolive (symbol CL) and Dean Foods (symbol DF) might be worthwhile. Among health-related stocks, some of the drug supply companies like Amerisourcebergen (symbol ABC) and Cardinal Health (symbol CAH) may be worth checking out.

 

You can pull up descriptions of what these companies do through the web sites that Mr. Tanguay and I have mentioned. If any of these companies look good after you've completed your research, adding them to your portfolio will add further diversification to your investments.

 

Good luck!

 

Mr. Nelson

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4/24/06 Reviewing Your Stock Portfolio

 

Welcome back from vacation! I hope you all had good time off. While you were away, I spent some time keeping an eye on your stock picks in your portfolio. Overall, it appears that your portfolio did well while you were away. Isn't it great when your money keeps working for you even when you're not around? In reviewing how your stocks did, I compared them to how the S & P 500 index performed. This is important to remember, since a stock can move higher but still underperform (or fall and still outperform). In my business, it's not just about how your stocks do, but how they do compared to the market as a whole.

 

Your consumer discretionary names had a good week in general. MSC Direct (MSM), Phillips Van Heusen (PVH) and Select Comfort (SCSS) outperformed. While Disney (DIS) lagged the market last week, no worries -- that is why diversification is important.

 

The positions in the industrial, materials and energy sectors also held up well overall. Your shares in Penn Virginia Resource Partners (PVR) rebounded as oil prices rose, which in turn increased the value of coal stocks. Despite some volatility, Freeport-McMoran Copper & Gold (FCX) also beat the market last week. The general industrial names in the portfolio were mixed, as Crane (CR) outperformed, while shares of Graco (GGG) started the week off well but lost momentum toward the end of the week. If we see a pullback in oil prices this week, it might present you with an opportunity to add to your energy names. One industry worth considering in that sector would be the oil refiners, such as Valero (VLO) and Sunoco (SUN).

 

In the financial sector, your shares of Apartment Investment & Management (AIV) outperformed the market while Allianz (AZ) managed to keep pace with the S & P 500.

 

The one disappointment last week came from Motorola (MOT), which fell last week following their earnings announcement. Slightly higher expenses during the quarter and less profit on certain products made by the company left investors disappointed with the company's results. It also created concerns that the company might have more difficulty increasing earnings growth during the next few quarters. While I was disappointed with the company's results, I do not believe you need to consider selling your shares. However, you may want to consider diversifying your technology position by adding other companies to the portfolio.

 

Speaking of diversification (again), you may also want to look at sectors in which you have no exposure yet, such as consumer staples, health care and utilities.

 

Remember, if you have any questions or would like more information on the markets, sectors, industries or companies, please let me know. I hope to stop by for a visit in the next few weeks, and look forward to discussing investments with you then as well.

 

Have a good week!

 

Mr. Nelson

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4/5/06 Mr. Nelson's Stock Update: Industrial Stocks

 

As I mentioned a few weeks ago, we are continuing to see some of the old-fashioned industrial names looking fairly attractive as investments. Why? It's all part of how the "business cycle" works. Generally, when an economy is beginning to come out of a slowdown (we call it a "recession"), those industries that are more consumer-oriented tend to outperform first. Then, as the economy starts to pick up steam, the industrial-related parts of the economy take over. This is what I believe we have been seeing for several months now.

 

How can you take advantage of this shift? Well, if you are diversifying your stock portfolios, you should already be considering industrial and industrial material names as possible additions to your holdings. That is why I have highlighted areas such as the equipment and steel industries in the past month or so. Right now, the machinery industry appears to offer some attractive investment opportunities. Among the companies that fall into this category are:

 

• Dover (symbol DOV)
• Graco (symbol GGG)
• Nordson (symbol NDSN)
• Parker-Hannifin (symbol PH)
• Roper Industries (symbol ROP)

 

If you're in need of an industrial name for your portfolio, you might want to start your research efforts with these names. As always, if you have any questions, let me know.

 

Happy investing,

 

Mr. Nelson

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3/20/06 Mr. Nelson's Stock Update: Consumer Stock Ideas

 

I was taking a look at the consumer discretionary sector earlier today and wanted to share some possible industry ideas that might be attractive investment opportunities and examples of companies in those industries.

 

Retail/Wholesale Building Products

 

• Fastenal (symbol FAST)
• Home Depot (symbol HD)
• Lowe's (symbol LOW)
• MSC Direct (symbol MSM)

 

Retail Clothing/Shoe

 

• American Eagle Outfitters (symbol AEOS)
• Aeropostale (symbol ARO)
• Claire's Stores (symbol CLE)
• TJX Companies (symbol TJX)

 

Retail Consumer Electronics

 

• Best Buy (symbol BBY)

 

Retail Restaurants

 

• CBRL Group (symbol CBRL)
• Darden Restaurants (symbol DRI)

 

If you have any questions on these industries or companies, or on any of your stocks, let me know.

 

Talk again soon,

 

Mr. Nelson

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3/16/06 Mr. Nelson's Market Update: Time to Invest in Drug Stocks???

 

In the past week or so, I have noticed that many of the pharmaceutical companies have started to appear more attractive. If you are looking for additional stocks for your portfolios, particularly in the health care sector, this might be a good opportunity.

 

Among the names to consider (and research): Barr Pharmaceuticals (symbol BRL), Mylan Labs (symbol MYL), Pfizer (symbol PFE), and Wyeth (symbol WYE). I suggested Merck (symbol MRK) a few weeks ago, but given the company's current legal situation (they're being sued by boatloads of people), there are probably better investments in the names above.

 

Another way to invest in this industry is to consider those corporations that help the large drug companies with their testing of new drugs. Two names that are interesting are Covance (symbol CVD) and Pharmaceutical Product Development (symbol PPDI).

 

As always, my usual reminder about doing your homework and researching any stock before buying still applies. Just because I like them is no guarantee that they'll make you money!

 

If you have any questions, please let me know. Happy investing!

 

Mr. Nelson

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3/2/06 Mr. Nelson's Market Update: Retailers Get Discounted!

 

On Thursday, all of the major stores and retail chains reported their results for the previous month, with some releasing quarterly results. For some, those results were weaker than anticipated and the stocks of those retailers were lower Thursday, sometimes much lower, as a result.

 

Among the bigger losers were shares of Chico’s (symbol CHS), a women’s clothing store, which fell $6.41 (or 13.42%) to $41.35 per share. While the company reported that their earnings/profits had improved, their results were still below expectations of investors that had anticipated them doing better. Remember when I mentioned during my last visit about how a company's stock can get beat up badly if they miss expectations? This was a good, but painful, example of what can happen.

 

There weren’t a lot of winners in this industry today, which can be frustrating if you hold them as an investor. So now what do you do? Well, if you hold a retail stock that got beat up, take a quick look at why it happened. You can use the Yahoo! site to get a quick look at news headlines for your stock. If you're still not sure, or have other questions, please let me know and I'll try to help out.

 

What about buying a retailer now? Depending on the stock, now might be a good time to buy, as many of these stocks are lower even though their results might not have been too bad (it’s kind of like buying a store's stock “on sale”). What might be some good names? Some of the stocks that appear to offer potential include auto parts retailers Autozone (symbol AZO) and O’Reilly Automotive (symbol ORLY), and retail chains J. C. Penney (symbol JCP), Limited (symbol LTD), and TJX (symbol TJX, they own T. J. Maxx and Marshalls).

 

Before I forget, I have one rule that you need to follow as you pick your stocks: PLEASE DO YOUR OWN HOMEWORK ON ANY STOCK BEFORE YOU DECIDE TO BUY!!! Just because I recommend something is no guarantee that it’s a winner. I’ve picked my share of stinkers over the years, too. Use the MSN and Yahoo! websites to check these names out if you are thinking about making an investment in any names mentioned here.

 

If you have any questions on retailers, or anything else stock-related, please pass them along and perhaps I can answer them here.

 

Have a good weekend,

 

Mr. Nelson

 

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3/1/06 Mr. Nelson writes:

 

Consumer Discretionary -- The sector has been struggling of late, as the economy is shifting more toward industrial production. I would be somewhat particular in choosing names here. Right now, the Retailer (Clothing & Shoes) industry seems to be holding up pretty well, with names like Limited (LTD) and TJX (TJX) looking attractive.

 

Consumer Staples -- Another tough sector for the same reasons as above. Archer Daniels Midland (ADM) is still a name that I would recommend.

 

Energy -- I can't get real excited about the sector, given the volatility and pullbacks (and that most of the names are overpriced relative to their future prospects due to speculation). The Oil & Gas - Field Services industry is one of the stronger areas of the sector, and I would suggest Tidewater (TDW) as an example.

 

Financial -- I still like the investment banking industry and the list of names from my previous e-mail.

 

Health Care -- Not too many industries to get excited about. Among the drug names, both Merck (MRK) and Cephalon (CEPH) might be worthwhile.

 

Industrial -- The focus is on industrial production and transportation, here. In addition to Caterpillar (CAT), which I mentioned previously, other industries would include heavy construction (Granite Construction (GVA)), transportation services (C. H. Robinson Worldwide (CHRW)), and general industrial names like Dover (DOV) and Parker Hannifin (PH).

 

Materials -- In addition to the steel industry names I mentioned previously, other attractive industries include cement & aggregates (Martin Marietta Materials (MLM)) and specialty chemicals (Airgas (ARG)).

 

Technology -- I would still recommend the industries and companies from my previous e-mail.