Kennouth Investing: Positions

Kennouth Investments

29 July 2013

Positions:

BAC, F

The BAC Trade

I first bought this stock at $13.46, then added shares later at $12.58, and the stock has touched $15.00 in the past week.  There were multiple reasons for buying this stock, and there were many indicators that pointed me in the right direction.  The housing recovery, though not as strong as it we would all like it to be, is still strong.  Because of that, someone needs to be financing all of those mortgages, so the big banks and small banks will benefit from housing growth.  As the second largest bank in America, I thought it would be a safe bet.  Also, bond rates are starting to go back up, and banks know how and are the first to adjust their at-risk money.  There was also an article I read about an insider purchase of shares, and if I’m not mistaken, it was around $11.50.  Reports of insider purchases are always good headlines to watch for, and depending on the strength of the economy and their business, they can be seen as both good and bad omens.  Lastly, their quarterly earnings were fantastic, outperforming nearly every other large cap bank.  As of today, it has a p/e ratio of 33.6x, and pays a small dividend of four cents.  And there’s the chart:

While I do expect a correction in the near term future, I believe this stock should hit $15.50 before coming back down to find a good bouncing point on the regression channels.  Another good thing to remember is that if you bought this stock anytime in the past six weeks, you’ve made a good amount of money, even if you’re conservative and took in profits already.  But I’m still riding the bull on this one, hoping he’s still got steam to charge.

The Ford Trade

While its stock price plummeted during the financial crisis of 2008-09, Ford has stood out among the other automakers.  They never received a bailout, so the government doesn’t own any shares, unlike GM.  If you were smart enough to buy this at its low of a dollar in 2008, your money is now worth seventeen times as much.  But that’s not why I bought this stock.  Month after month this past quarter, Ford posted great sales numbers here in America, as well as China and India.  Their hybrid car sales were at an all-time high last month, and pick-up truck sales also soared.  They make as much as $10,000 from every F-150 sale, by the way.  Just this year the stock is up about 25%.  One of the latest announcements was the employment of 3,000 more workers by year end.  With all of these things going for Ford, why would you not want to own the stock?  That’s why I bought the stock before earnings.  It’s had a good run just this past six weeks, but since it crossed seventeen, it seems it’s building support there.  As of late, it’s gone through an upward trend, leading me to believe it should shoot up sometime soon, likely this week.  The chart also shows that while the price is at a high point in the regression channels, it still has favorable signs for new multiyear highs for the rest of the year. I strongly believe this stock has a good chance to hit $19.50 by year’s end.

Why the Bulls Will Win this Week

In a few days, multiple data reports will be released: non-farm payrolls, GDP report, and auto sales are three of them.  With more than 60% of companies beating their estimates, I’m expecting GDP to also beat estimates, and non-farm payrolls should at least meet estimates.  And from all of the encouraging data looming over the auto industry, those sales should also be a plus for the market.  Due to all of these factors, that’s why I purchased shares, just a few days ago.  It’s also another reason why I’m bullish on the market in general as well.



Charts courtesy of TDAmeritrade's thinkorswim software.

Disclaimer: Trading stocks has extremely high risks, and should not be taken to lightly without a thorough understanding. This is written from a commentary point of view and is not meant to suggest buying, selling, or holding a stock. All traders must do their own research prior to investing. We (Kennouth Investments, Learning and Research) are unaffiliated with all of the companies that are mentioned on this blog, and can't be held responsible for any losses that may occur. Invest at your own risk.