Funny Feeling...

Okay is anyone else getting a funny feeling about the markets right now. My investments have grown and now stablized for around a week now and it has interest me greatly. Mostly due to the fact that I am extremely sceptic about the market.

It is summer right now, and if consumers are going to buy anything, now is the time. Why do I say that? Traditionally most manufacturing occurs from the March to October time periods due to consumer spending increases. Stuff like lawn mowers, plant seed, bicycles, 2x4's, etc all start selling when the weather gets nice. So even in this bad economy, stuff will sell when the sun comes out. Money starts getting recorded and quarterly reports are reported, investors get jumpy and want back in. Which prices were so low, it wasn't a bad decision to make. A decision that I wish I had an option for.

Here is the thing. Manufacturing is still in the toilet. Every major production facility that I have contacts with are still running on fumes, bairly making anything. Which makes you wonder, why are stock prices going up? I understand a stabilizing in the market and am happy to see it, I just don't know if I believe that the market is truely stable.

My one buying idea is VIG, also known as Vanguard Dividend Acheiver's ETF. Essentially it is an ETF that covers constant dividend acheiving stocks. What is important to note is that it holds barely any banks and is mostly made of good companies that happen to pay a healthy dividend (don't believe me check for yourself here). It is also a Vanguard product so there is little in the way of fees and could potentially be a long term consistant dividend return product (currently ~3%) that could also grow in value over the long term. I am watching this ETF closely as I am looking to switch investing companies so that I can go with a service that does free automatic dividend reinvestment. I haven't decided a price point but will you all know when I do think it is a buy.

Investing (sounds like) Gambling

With all the down activity in the market the average investor and really all investor needs to realize that investing in the market is like gambling. Spreading out the portfolio in different markets, ETF's, stocks, and bonds is the best way to hedge those bets, but like sitting out a few good hands in blackjack, you will eventually lose some money. Especially if you are not watching your stocks or at least the market. So all that being said I am trying to form my own strategy to protect and grow my own portfolio.

Invest in the long term.

Wanting to not worry about the markets everyday, I am investing in what I see as the best of long term opportunities. In stocks this means perrinial favorites KR and WMT, international smoking company PM, and my only US manufacturer (that is slowly growing in the world market) BEZ. Some of these may be what people consider odd bets but I am looking to solidify things for long term and historically these are good companies and I through my own research I feel as I will be proven right in the long run.

More importantly is my chunk of investment in the Vanguard Total Market ETF (VTI). With it's fair dividend payout (currently 3.5%) and low expense costs, it has some serious potential to make money when the market turns around.

ETF's will be my anchor.

When this year's Roth investment ($5k for 2008) gets put in a majority will be in Vanguard ETF's with decent dividends and low expense fees. I want to get to a 70-30 rule with the 70 being in market ETF's. I will define the others later, but for now I am VTI all the way.

A stock strategy???

I sometimes have written about I have believe I have a knack for finding good stocks but as far as finding a good strategy for keeping, selling, and growing stocks, I lack a strategy. In the past I have hit 20%-30% growth on certain stocks and just let it ride. Let it ride all the way back down (okay not always). My goal is on speculative stocks, not the long term ones listed above, (assuming they go up) that somewhere above 15% growth I may sell off my original investment money wise. Meaning if stock X cost me $1k and is now at $1.5K, I will sell of that $1K of the stock and let the rest ride so to speak. For now that is what I am looking to do, we'll see if it works. I may iron out a few more details before the big Roth investment for 2008, we'll see though.

What else is out there?

I think the current downturn in the economy points to the importance of variety in your own personal portfolio, for me that means stocks, bonds, and interest may not be the only place to store cash. I am probably a year away from having the money for a side venture, but it is my goal to either own some rental property or *a laundromat*. The laundromat is my dream for some day. This year will be a year of ironing out some finances like paying off the car and attempting to get a better mortgage rate.

Should be an interesting year...hedge your bets.

My own private market update

Well after I lost roughly 46% of what I had put away in my Roth IRA I have been slowly climbing instead of digging with a portfolio shuffle that I think will work for both the short term and long term. I am now firmly only at a 26% lost. That means I have raised my funds roughly 20% from there worst point in the past 2.5 months. How did I do it, mostly buying two stocks that are a couple of the only companies that will do well in this economy Kroger (KR) and Walmart (WMT). Not to mention timely purchases of Baldor (BEZ), Philips Morris International (PM) and Vanguard Total Market Etf (VTI). I am buy no means a savvy investor again (was I ever) but I resolved late last year to make conservative long term purchases in the market. Also, I am going to go forward with an investing strategy which I will explain someday in a later post but the biggest impact is going to be anchoring ETF's like VTI and smaller investments for long term stocks using principals that I have laid out over the past year in this blog.

I haven't even begun adding to my 2008 Roth yet, so a big plop of money is going to get infused soon into my future funds and a close scrutiny of the market will litter my posts once again.

The best bet on the green movement: PBD ($30-$32 per share)

Let’s get this out of the way, I am a green-loving, bleeding-heart environmentalist, but I am also a logical, data-oriented, high-efficiency manufacturing engineer. Yes, you can be both. I guess what I am saying is that I am all for green initiatives but not at the cost of being stupid.

That being said I want to lie out what I think is currently the best play in the green stock world or rather the ETF world: PBD. PowerShares Global Clean Energy Portfolio (PBD) is made up of the best companies producing and utilizing clean technologies around the globe. This ETF when compared to the other ETF’s of it’s kind is supped up with the best green energy companies available, which not surprisingly are located outside of the US. Besides making you feel good about it containing a diversified group of clean companies, this is a good hedge against both surging oil and utilities prices, and since 70% of its holdings are based outside the US, this ETF is also a good hedge against the falling dollar.

The clean energy industry has seen some recent stock growth in the US from almost every manufacturer in the solar industry. FSLR, STP, SPWR, JASO, and more have all seen rapid growth as people trend towards more renewable energy sources. Alternatively, that is only one sector of green technologies, there are other great companies out there in hydro tech, geothermal energy, biomass, biofuels, rechargable batteries, wind energy, and more that will all start to experience a growth period. Expanding on that last technology, wind will have everybit as much market penitration as solar energy, as sunny areas of the world are not necessarily windy and vice versa. Currently the best wind power companies, other than GE*, are located outside of the US but are well represented in here (PBD). Wind power, not surprisingly, is catching on in windy states like California, Texas, and Iowa and are on the brink to really take off in Kansas and Minnesota. There is also some development in new production facilities of these foreign companies in the US, which is a sign for the expected orders to come. Here is a sample article that I have been finding on such occurances.


Let’s take a quick look at the top 10 stocks held in the ETF:

Weight
Name
More Information

3.41%
JA Solar Holdings Co. Ltd. (ADS)
China based Solar company recently rated as Buy by Piper Jaffrey and Zacks. Has long-term silicone supplier deal.

3.03%
Vestas Wind Systems A/S
Denmark based, premier wind turbine manufacturer recently reporting 500% profit increase year ($68.9 mil) over year ($13.5 mil) and 18% increase in sales.

3.01%
First Solar Inc.
US based solar company with Google like stock earnings due to its reliance on cadmium telluride instead of silicone for panels. Its most recent strategic move was to buy Turner Renewable Energy, a noted US based solar power installer. This allows for the company to sell whole packages to potential large-scale buyers.

2.71%
REpower Systems AG
German based wind turbine manufacturer that currently holds 10% of the German marketplace. Building a promising 5 megawatts wind turbine, one of the largest in the world.

2.69%
Suntech Power Holdings Co. Ltd. (ADS)
China based solar company that is extremely value conscious of their product. Has recently signed a long-term silicon contract with HOKU. This company is doing its best to keep prices down and deliver a high quality product (2nd most efficient PV panels).

2.66%
Acciona S.A.
A Spanish mega company specializing in everything alternative including wind, solar, hydro, biomass, and more. Recently began building a new wind turbine plant in Iowa to better serve new US business.

2.65%
Yingli Green Energy Holding Co. Ltd. (ADS)
China based solar manufacturer and installer. Another company capable of doing a complete solar install from production to installation. Has had a recent stock-funding event in order to raise $100 mil for further manufacturing and business initiatives.

2.58%
Gamesa Corporacion Tecnologica S.A.
Spain based wind and solar producer and integrator that has seen a 52.5% 1-yr sales growth

2.45%
Nordex AG
German based wind turbine manufacturer that has seen a net income increase of $5 bil to $18.5 bil year over year.

2.49%
Scottish & Southern Energy PLC
UK based major utility provider doing its part in construction and utilization of wind farms and solar facilities. Encourages its users to build renewable energy sources into their homes and businesses


To me the trend is in its growing stages and it seems that all renewables are experiencing considerable growth. This stock is picking the best of the best around the world and should be seen as the safest bet to ride this wave. Low management fees of 0.75% of total ETF price (high for ETF’s but still low compared to mutual funds, trades in multiple markets too) helps as well.

Lastly, some friends of mine have noted that nuclear is a possible alternative as a major energy supplier in the US instead of coal, solar, wind, and the rest. I have only one rebuttal is that nuclear is being discussed and solar and wind power are being approved. I think we are truly at the tip of the green revolution and there is definitely money to be made. Just hope the US tax incentives don’t stop anytime soon.



* GE is a great company figuring out many different alternative technologies, but because their brand covers such a diversified group of products, it currently is not a great alternative energy play.