Shares of American Express (NYSE: AXP) bottomed in early March at just over $10 per share.

Instead of covering, I hedged my bet by keeping the American Express short open. I suppose that is the entire point of absolute return investing, but boy, was I wrong in doing that.

AXP shot up like a rocket over the last three months and now trades above $23 per share. It has been a big gainer this year, returning 25% through the end of the second quarter.

Continue reading Stock to avoid #10 -- American Express (AXP)

Stock to avoid #10 -- American Express (AXP) originally appeared on BloggingStocks on Sun, 19 Jul 2009 14:00:00 EST. Please see our terms for use of feeds.

Investors continued to sell Eastman Kodak (NYSE: EK) during the second quarter, and shares bottomed at $2 per share.

Looking forward, I recently added Eastman Kodak to my Penny Stock Winners model portfolio as a buy recommendation.

In my opinion, the carnage at Eastman Kodak has been complete and the upside benefit of the digtal revolution is worth the speculation. The company may never fully recover from the last few years, but a small improvement in operations can result in big gains in the stock.

I would be a buyer of Eastman Kodak at these prices.

Next: Stock to Avoid #10

Stock to avoid #9 -- Eastman Kodak (EK) originally appeared on BloggingStocks on Sun, 19 Jul 2009 12:00:00 EST. Please see our terms for use of feeds.

Don't be deceived by the short-term performance of United Technologies (NYSE: UTX). The weakness of the dollar in the second quarter helped push shares of this multinational manufacturer higher. But these gains merely allowed the company to recover big losses sustained during the first quarter of the year.

The double whammy here for investors is exposure to the aerospace industry. As described previously, the weakness in the airline industry will negatively impact revenue for those companies providing equipment to the space. In addition, reductions in defense spending will also negatively impact UTX.

We are in the early stages of seeing change in how this company operates in the current environment. There is no catalyst for this stock to go higher, and shares are vulnerable to the extent the dollar strengthens. I would sell UTX.

Next: Stock to Avoid #9

Stock to avoid #8 -- United Technologies (UTX) originally appeared on BloggingStocks on Sun, 19 Jul 2009 11:00:00 EST. Please see our terms for use of feeds.

Similar to Dupont, I selected Eastman Chemical (NYSE: EMN) as a stock to avoid due to rising input prices and low margins. It is a simple formula that cannot be broken: If a company cannot pass along higher costs, it will make less.

The market has yet to grasp that concept with respect to EMN. The stock has more than doubled since bottoming in March and has skyrocketed during the second quarter. This is in stock contrast to the poor performance at Dupont.

Continue reading Stock to avoid #6 -- Eastman Chemical (EMN)

Stock to avoid #6 -- Eastman Chemical (EMN) originally appeared on BloggingStocks on Sun, 19 Jul 2009 09:00:00 EST. Please see our terms for use of feeds.

For the first two months of the second quarter Boeing (NYSE: BA) was on fire. BA gained significantly during that time, but then the company announced a delay in their much-awaited DreamShip -- a delay that opened the door for the airlines to cancel orders. Speculation based on that scenario slapped the stock back down to the flat line for the second quarter.

Unfortunately, the news does not get better for Boeing. There is too much capacity in the airline space, and new planes are not needed.

I would be a seller of Boeing today.

Next: Stock to Avoid #6

Stock to avoid #5 -- Boeing (BA) originally appeared on BloggingStocks on Sat, 18 Jul 2009 13:00:00 EST. Please see our terms for use of feeds.

Given the economic crisis and global recession, I hypothesized that multinationals may suffer as a result of a strong dollar. The idea being that investors would flock to the dollar in search of safety. Over the last quarter though, the reverse has been true.

The dollar weakened significantly as investors bet against the greenback due to inflationary spending in the U.S. As a result, the multinationals have been big winners in the last quarter.

3M (NYSE: MMM) though was only up slightly in the second quarter as the company's products failed to capture the imagination of buyers across the globe. When the dollar strengthens in the latter half of 2009, look for MMM to stumble.

Next: Stock to Avoid #4

Stock to avoid #3 -- 3M (MMM) originally appeared on BloggingStocks on Sat, 18 Jul 2009 11:00:00 EST. Please see our terms for use of feeds.

Another stock leveraged to the oil market is Dupont (NYSE: DD). Because many of the company's products are derived from crude oil, rising oil prices negatively impact profit margins. The only recourse, then, is to raise the price for consumers. But doing so in this environment is unlikely given the weakness in the economy.

As a result, the dynamics of the market are such that profits for DD will be lower in the near term.

That puts the company in a bit of a Catch-22.

Continue reading Stock to avoid #2 -- Dupont (DD)

Stock to avoid #2 -- Dupont (DD) originally appeared on BloggingStocks on Sat, 18 Jul 2009 10:00:00 EST. Please see our terms for use of feeds.

I take my absolute return approach to a deeper level by periodically buying and selling positions during the year. In late February, I suggested that investors cover the short position of Delta Airlines (NYSE: DAL) at $6.35 per share.

In my last update of the stocks on this list, I suggested that I would still be a seller of Delta. Shares of Delta did indeed lose value over the last three months. This move coincided with a blast in oil prices. Airlines are already struggling with a weak economy and excess capacity. Rising jet fuel prices make matters worse.

Continue reading Stock to avoid #1 -- Delta Airlines (DAL)

Stock to avoid #1 -- Delta Airlines (DAL) originally appeared on BloggingStocks on Sat, 18 Jul 2009 09:00:00 EST. Please see our terms for use of feeds.

With such uncertainty, following an absolute return strategy continues to offer investors the biggest bang for their buck. There is no sense in guessing where the market will be down the road.

Instead, buy cheap stocks and sell stocks that are expensive. Then blend the two approaches together in one portfolio and chances are you'll make money.

Even with a huge rally in stocks, the S&P 500 ended the second quarter with a year-to-date gain of 1.78%. That is a vast improvement compared to the 11% loss at the end of the first quarter, but it's a minimal return for taking risk in the stock market.

Investors need to do better -- and they can.

Continue reading Take a pass on these ten stocks

Take a pass on these ten stocks originally appeared on BloggingStocks on Sat, 18 Jul 2009 08:00:00 EST. Please see our terms for use of feeds.

Winnebago Industries (NYSE: WGO) traveled to Wall Street on Thursday to deliver its Q3 earnings numbers. The market thought that the results were worthy of a 10% increase in the stock price. Winnebago closed yesterday at $7.15 per share. The 52-week low on the stock is $3.14. Volume was active during the trading session. So, is Winnebago a buy?

Let's check out some of the stats. According to the press release (pdf file), net sales saw a very steep decline of more than 60%. Winnebago lost 29 cents per share in this year's third quarter versus a profit of 10 cents per share in last year's similar period. However, analysts expected a loss of 27 cents per share. Since Winnebago didn't beat the analyst community, you have to wonder why the market was so excited and in a frenzy to bid shares higher.

Continue reading Winnebago doesn't win the expectations game in Q3

Winnebago doesn't win the expectations game in Q3 originally appeared on BloggingStocks on Fri, 19 Jun 2009 09:00:00 EST. Please see our terms for use of feeds.

You may have heard the recent calls from China for a global reserve currency that is not the dollar.

Good luck with that one. The dollar is the global reserve currency. Do not underestimate the strength of this country as compared to the rest of the world. Predictions of our demise are premature.

Continue reading Reason No. 5 to avoid gold: The dollar is the global currency

Reason No. 5 to avoid gold: The dollar is the global currency originally appeared on BloggingStocks on Sun, 19 Apr 2009 15:30:00 EST. Please see our terms for use of feeds.

For more than 20 years, the price of gold did nothing. If you invested in gold, you wasted your time. That all changed with fears of inflation and hedge fund speculation several years ago.

Today, the church of gold is full of believers. What changed?

Continue reading Reason No. 4 to avoid gold: Gold was dead for 20 years

Reason No. 4 to avoid gold: Gold was dead for 20 years originally appeared on BloggingStocks on Sun, 19 Apr 2009 13:00:00 EST. Please see our terms for use of feeds.

Related to manipulation, the simple fact is that there is a limited supply of gold.

Those who want to return to the gold standard fail to appreciate that at some point a lack of supply could have disastrous consequences in a gold-based system.

Continue reading Reason No. 3 to avoid gold: Gold is in limited supply

Reason No. 3 to avoid gold: Gold is in limited supply originally appeared on BloggingStocks on Sun, 19 Apr 2009 09:00:00 EST. Please see our terms for use of feeds.

One thing I am very afraid of with gold is manipulation.

Unlike paper currency that is impossible to manipulate in any way, gold can be accumulated by a group of connected buyers for the sole purpose of eliminating supply from the market. A successful cornering of the market can result in volatile swings in price. Unsuspecting buyers acquire bullion at higher prices only to see a flood of supply hit the market resulting in damaging price collapse.

Continue reading Reason No. 2 to avoid gold: Gold prices are easily manipulated

Reason No. 2 to avoid gold: Gold prices are easily manipulated originally appeared on BloggingStocks on Sat, 18 Apr 2009 15:30:00 EST. Please see our terms for use of feeds.

Whether it's collapsing home prices, discounts on automobiles or reductions in stock prices, asset values across the board are declining, not increasing.

The gold bulls state that enemy number-one of the dollar-denominated currency is inflation. I agree wholeheartedly, and so does the Federal Reserve.

Continue reading Reason No. 1 to avoid gold: There is no inflation

Reason No. 1 to avoid gold: There is no inflation originally appeared on BloggingStocks on Sat, 18 Apr 2009 11:00:00 EST. Please see our terms for use of feeds.

I will be very blunt: I despise gold and everything it stands for.

It's an abhorrent example of materialism and serves no real purpose. Lust for gold is over the top excess, and despite the protestations of the goldbugs, there is no real basis for the metal serving the currency needs of the world.

Continue reading Five reasons why gold is a BAD idea

Five reasons why gold is a BAD idea originally appeared on BloggingStocks on Sat, 18 Apr 2009 09:00:00 EST. Please see our terms for use of feeds.

As one would naturally expect, revenues and profits were down. Sales from continuing operations declined 9%, and net income decreased 40% to $0.26 per share. You have to play the analyst game to really see how GE might be doing. In this regard, the conglomerate won. According to this source, Wall Street was calling for something closer to $0.21 per share.

Continue reading General Electric beats in Q1 -- how does the stock look now?

General Electric beats in Q1 -- how does the stock look now? originally appeared on BloggingStocks on Fri, 17 Apr 2009 15:00:00 EST. Please see our terms for use of feeds.

Some believe health care is the Holy Grail for investors in this horrible market, but I'm not so convinced.

When everyone jumps on a bandwagon, I usually like to jump off. It seems like everyone is preaching the merits of owning health care stocks. And when I say everyone, I mean everyone. Even the barber is touting this sector as a place to be during this recession and beyond. We shall see about that.

Instead of focusing on the space, how about looking at a specific name?

Continue reading Recession-proof stock #5: Johnson & Johnson (JNJ)

Recession-proof stock #5: Johnson & Johnson (JNJ) originally appeared on BloggingStocks on Sun, 29 Mar 2009 12:00:00 EST. Please see our terms for use of feeds.

In a recession, most professionals suggest that investors take a defensive posture.

That theory states that buying stocks with great balance sheets and stable cash flow is a way to withstand the downdraft of a bear market. If you own stocks of companies with products that consumers have to buy, you can expect to beat the market performance-wise.

Again, this bear market has been different in many ways. Even the most defensive stocks are losing value in a big way. None of it makes sense.

Continue reading Recession-proof stock #4: Potash (POT)

Recession-proof stock #4: Potash (POT) originally appeared on BloggingStocks on Sun, 29 Mar 2009 09:00:00 EST. Please see our terms for use of feeds.

Apple (NASDAQ: AAPL) is an absolute must-own stock, recession or not. The company is growing its business at a time when others are retrenching. It's the best of the best, and there is more growth to come.

Apple continues to see penetration in the personal computer market as its products are more desirable to former PC users. Its innovations with iTunes and the iPhone have changed markets entirely.

Continue reading Recession-proof stock #3: Apple (AAPL)

Recession-proof stock #3: Apple (AAPL) originally appeared on BloggingStocks on Sat, 28 Mar 2009 15:00:00 EST. Please see our terms for use of feeds.