Worst Week Ever For Dow, How Did You Hold Up? I’ll Tell You How I Did
Slaughter, destruction, panic, pummeled… these are the words that describe this past week in the stock market. The Dow dropped below the 8,000 mark today but ended up from there and closing “only” down 128 points. A somewhat bright end to a disaster of a week.
How did you hold up in the recent annihilation of stocks? Did you get killed along with the majority of investors? Did you hold up ok due to a large cash position or some hedged positions? Did you make money because you were mostly short on the market? I’ll tell you how I ended up.
I Like Cigarettes and iPhones
I was pumped to see Apple (AAPL) fight against the market trend and end up nicely today even despite the severely lower stock price. I bought more a few days ago at $90.06 and I am confident it will end up a good buy. Apple will get hurt by a weak consumer. I believe most of that pain is already reflected in the share price. Apple has a boat load of cash (20+ billion) to finance their operations so a lack of credit is irrelevant to their operations. Superior products and innovation, the current valuation, the cash all add up to an attractive stock for me.
To hedge my Apple losses, I have been short Amazon and I actually covered over half of the position to just take the cash I’ve made from it. I am still short Amazon and very long Apple.
I am pissed that I didn’t have any cash to jump on some more shares of Philip Morris (PM) today at around $33 a share. The stock closed just under $40 today, I’m not sure we’ll ever see $33 again (or maybe we will). Either way these are shares that I will be holding for years as it is a very low risk investment with a nice dividend and some potential upside in share price.
My Chesapeake Energy (CHK) position is laughable when it comes to how much it has gotten pummeled. Energy prices continue to free fall and the stocks do as well. Thank God I took a substantial position in DUG to hedge against oil & gas losses. I sold half of my DUG position luckily near the high of today at $85 a share. The position at one point today was up 110% in just a matter of weeks! While this has helped cover the losses I’ve taken in my CHK position, the overall effect is still a net loss. I plan to hold my remaining DUG position to continue to hedge against further losses. I have to think we’re near a bottom in natural gas however.
Small Positions In China & Water
My China ETF (FXI) is down considerably along with the global markets trend and my water positions (VE, CGW) are also much lower than when I bought them. I’m not overly concerned since these are very long term plays anyways and a fairly small portion of my portfolio.
A small part of me believes we may have seen the bottom today just under 8000 in the Dow. Again, let me reiterate, a small part! It’s impossible to say where the bottom is, but I think we might be close.
Now, when we do hit a bottom, I in no way think we’re going to race back to 14,000. I have very serious doubts about our overall economy and about future growth. While I like the idea of buying certain individual stocks, I’m not sure the diversified portfolio will gain much in the next few years.