Interesting comments, Blondie (re the last blog). I agree with you that dividends are very good and it’s great to get that cash in the bank. Next week I will talk about your comments.
Today I want to look at buying and selling strategies for Ford (F) and Advantage Oil and Gas (AAV), both of which I own in a tax deferred account. I bought F for $2.09 (October 2008) and sold the amount that equaled the cost of buying the stock and an annual return of 10% for 3 years (I am playing with ‘free’ money). F did a good job of reducing their debt and labor cost, but in the US they are competing against US Motors (GM) with no debt and lower labor cost and foreign automobile companies that have much lower labor cost. Which of the following would be the best strategy for the large number of the remaining F shares?
- Sell 50% with a stop loss order of 3% (price is around $10 today); wait until the price gets around $15 and then put in a second 3% stop loss order
-Sell 100% with a stop loss order of 3%
-Wait for the stock to go higher before putting in a stop loss order
Please comment on what you think is the best strategy.
The second stock I would like to talk about is AAV. AAV was a Canada trust (Advantage Energy Income Fund) that paid a high dividend (around 15%). With Canada changing its corporate trust law in 2011 AAV decided to become a corporation that dropped its dividend and reinvented itself as a growth-oriented natural gas and oil producer. Once it became a corporation, AAV became a trading stock for me. I have made several trades selling a subset of shares owned at around $7.50 and buying it around $5.50. I take 50% of the profit from the trade and increase my holding of AAV. The stock is closely correlated to natural gas and oil prices. When oil is around $70 the stock price for AAV will be around $5.50 and when oil is at $80 it will be around $7.50. I had a buy order for $5.50 at the beginning of December and just missed the buy (got to 5.52). Two events increased the stock price that day, record low inventory of natural gas and the Iranian army took over an Iraqi oil field (and left a couple days later). What do you think the high price for natural gas and oil will be next year? Should I continue to use AAV as a trading stock? Please add your comments on both questions.
2010 Oil and Natural Gas high price prediction:
Oil - 88.50
NG - 7.75
Paul
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AAV is a great stock to trade since it doesn't pay a distribution anymore. I would always keep a position in this stock in-case a world event would drive the price up
ReplyDeleteHow high will OIL go. It's trading at nearly $80 now but the fundamentals say it should be in the mid $60. They are forecasting global crude demand would rise by 1.47 million barrels per day. MY guess would be OIL will close above $105. Not due to the fundamentals but due to what, I would expect a weaker dollar and boil over in the middle east.
Natural gas UBS current price around $6. I would expect the price to fall because of a flood of supply coming into the system. I don't think it will go above $6.50 unless a cold snap happens in the next month. I expects prices to trend down to the low $5. If during 2010 prices fall to $4 NG would be a buy. I would also expect coal to be a buy if NG get down this low.
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