Archive for October, 2007

Investing - Thou shall nots!

Friday, October 26th, 2007

I have made many mistakes in investing and I want to record my mistakes so that I will have to ensure I do not repeat mistakes twice.

Therefore, though shall not,

  • Invest in a stock on the basis of stock price movement (MXP: I did this with this oil company - Max Petroleum - and although it is probably quite good, I should have noticed so many sellers from the RNS’s. The company was suspended soon after. Also, PDX, its one of those stock with great prospects but no revenue - cannot beleive I invested in that - I exited soon after, but lost money.)
  • Ensure I have produced an analysis and financial estimate on the stock. I recently invested in quite a few without doing this as I got carried away. I must always do this as it points out growth prospects and communicates if something is already a fair price. Cause I want unfair prices on the low side!)
  • Do not buy when stocks are expensive - I bought some of the miners eg BHP and Vedanta, but they were pretty expensive and everybody likes them - I exited with a small loss soon after.

I will be keeping this list up to date and I will commit to refering and following it everytime I buy a stock!

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Buy the Banks - Merrill Lynch a classic Warren Buffet moment.

Wednesday, October 24th, 2007

This post is the most important post on my blog ever, ever, ever. I am going to BUY Merrill Lynch! Send me to the Sanitorium!

Why Bank on the Banks you may ask? You may inform me that I am mad as Merrill Lynch have announced 7.9 Billion of writedowns today! I ask you to ignore this. Warren’s number one rule is don’t lose money and I think there is a good margin of safety in this stock. Including the write offs, Merrill will earn est 3.87 if Q4 is ok. That makes Merrill on a PE of 16.98 - not a bargain you may think. However, the write offs look to be a one off event and its Mark to Marking assets, they haven’t actually made a loss on them unless they are realised and sell them. So if the price goes up they make money - they will probably also collect coupon payments on them as well, so that revenue will come in.

So, I think this is a one off hit to profits and it could earn 9 dollars the year after - a PE of 7.3. That’s why I am going to buy selected worldwide banks who have had a price reduction, caused but not affected by subprime CDO’s. I also think today is a great time to buy as Merrill may trade down on the news this morning. Merrill is around $65. (update— $62 today)

Buffet has recently bought Bank of America. I did too - at a lower price than Buffet as well. I have also bought Citibank.

However, Merrill really interests me as I will get it cheap today and also, they have had more time to work out subprime impact and include the write offs into the 3Q figures.

Warren - if you read this - can you put in a good word for a job please. I have always day dreamed that I might, just might, one day, be in the position to say to you - Sir -do you want to supersize that happy meal.PS. After I wrote this article, Merrill dropped today and I got a bit more at around $62.

PS. After I wrote this article, Merrill dropped today and I got a bit more at around $62. 

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