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Archive for the ‘Personal finance’ Category

Cool tool: Mutual Fund Facts About Individual Stocks

My first vice president in charge of finding cool links happened upon this one this morning:, which has a sortable database of how much every mutual fund had invested in every stock. Here’s the page for Caterpillar.

Scroll down and you’ll see a list of funds on the left-hand side, with columns of numbers revealing how many share they own, how many they sold, how many they bought, how much they won or lost, and so forth. Clicking on the gray column headers sorts the data, which yields cool data such as:

  • Who owns the most Cat shares: Capital World Investors, 42,236,500 shares (which also produces the highest value, $1,314,822,245, and the greatest loss: $-246,238,795)
  • Who sold the most: Wellington Capital Management, 7,249,924 shares (reported in November 2008).
  • Whose shares gained the most: Disciplined Growth Fund (American Century Quantitative Equity Funds Inc), 6202.03 %
  • Who bought the most lately: Eaton Vance Management, Feb. 11 2009 (report date, not the actual date of the transaction), 1,418,907 shares.

Disclosure: I sold most of my Wellington fund about the same time.

Click away and see what you think.

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Tom Mangan posted at 11:14 am February 13th, 2009 |

Nice overview of cyclical metals and mining stocks

Martin T. Sosnoff at profiles cyclical stocks that tend to pop early in an economic rebound.

I am periodically intrigued by some viciously cyclical properties like U.S. Steel, Freeport-McMoran and Rio. We’re talking about steel, copper and iron ore. Worldwide industrial production governs the price cycle of these commodities. Fertilizer producers like Mosaic and Potash are tied to agricultural cycles in corn, wheat and soybeans.

Freeport is almost a pure copper play with some byproduct gold. Less than a year ago, copper prices surged above $4 a pound. Today, copper trades around $1.50. Interestingly, Freeport earns a little money even at $1.50 a pound copper.

Sosnoff notes that Freeport topped $127 last year and now is in the $20s. U.S. Steel was at $196 last year and now is around $28. Could they rocket back up to those levels? Perhaps, but…

I had no idea that U.S. Steel peaked at $196 last summer when its earnings power was projected above $18 a share. No cyclical stock ever sells for long at 10 times projected peak earnings, but obviously, Wall Street didn’t see a deep recession about to unfold. It now trades around $28. If oil prices ever recover, its tubular steel division again will earn serious money, but worldwide steel production is likely to fall 10% this year and then recover slowly.

Overall a nice read, with cool anecdotes about his mom’s moldy General Motors certificates.

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Tom Mangan posted at 9:58 am February 5th, 2009 |

Divdends of Dow 30 stocks

Here’s a nice list of the dividends on Dow Industrials stocks as of Feb. 2. Caterpillar is No. 9; its yield as swelled to 5.45 from 3.85 just since the first of the year. Marc Cortenay, who compiled the list, expects the Dow to sink to 6,000 this year before “laying the foundation for the next major bull market.”

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Tom Mangan posted at 7:44 am February 4th, 2009 |

More dabbling in corporate bonds

Regular folks are being wooed by high yields on corporate bonds because enticing spreads between corporates and Treasuries. Typically institutional investors buy up nine-tenths of corporate bonds.

Brian Battle, vice president of trading at Performance Trust Capital Partners in Chicago, says investors who want to take the plunge on individual bonds should select companies that seem best-positioned for hard times.

He singled out Caterpillar Inc., among others, as a “pretty good credit” despite declining demand for its heavy equipment in a global recession. As of Tuesday, a 10-year Caterpillar corporate bond carried a 6 percent yield — more than double the 2.80 percent yield of a 10-year Treasury.

Things to keep in mind: High yield reflects low prices; low prices reflect low demand; low demand reflects perception of higher risk.

Here’s an e-how article on how to buy corporate bonds.

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Tom Mangan posted at 7:34 am February 4th, 2009 |

When will Caterpillar become a “buy” again?

Today we’ll consider ourselves lucky if support on Caterpillar holds at around $30 a share, and it could very well go lower if earnings keep pushing the broader indexes down. Cat’s in no position to fight the crowds these days and besides, unless you’re a member of the whips-and-chains crowd you probable don’t want to be betting up when the trend’s heading down.

Furthermore, Cat had record sales and earnings for the first three quarters of 2008, which means all the year-over-over year profit/revenue/cash flow comparisons will be terrible in 2009. Cat’s dividend yield will go up as the price goes down, so there may be something to be said for picking up the shares on the cheap, keeping in mind they could get still cheaper.

The short-term story for Cat is all suffering, but if like Cubs fans everywhere you can wait till next year, things might just turn around. says construction spending outside the United States is about to explode because of infrastructure spending totaling $355 billion.

Chris Sleight, editor of International Construciton magazine says, “The potential boost to the global construction industry from fiscal stimulus packages over the next two years could be enormous. US$ 355 billion is greater than the GDP of many medium-sized countries, and in terms of construction it is greater than the size of the German market – the fourth biggest market in the world.”

He continued, “The key now is for the spending pledges to translate into real on-the-ground activity. Governments need to make sure their planning and tendering processes are as stream-lined as possible and that there are no bureaucratic obstacles in the way of these plans being effective.”

The total additional spending to shore-up economic growth in 20 major economies is set to exceed US$ 1.9 trillion, of which US$ 795 billion has been ear-marked for construction. Most of this will be spent in 2009 and 2010, however schemes such as Brazil’s housing-focused package will be longer term.

Folks living in places like the United States and Western Europe that have all the highways they need can easily forget that places like China, Africa and South America need massive improvements in their transportation grids. The opportunities to build new roads, airports, dams and other projects in the developing world are tremendous.

Demand for machinery will boost demand for commodities needed to build them, plus commodities needed for actual construction. Right now the mining business is in the tank, but all the money being thrown at infrastructure should juice demand for metals, oil and other commodities whose extraction requires equipment Caterpillar builds (along with all its competitors, of course).

The people who were saying Cat looked great at $45 look like idiots now that it’s at $30. Cat’s business tanked in December and doesn’t look to be getting any better in January and probably won’t for the rest of the year. But the prospects for next year — when earnings reports have a chance to show gains again — seem much better.

Disclosure: I own no shares of Cat.

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Tom Mangan posted at 9:55 am January 30th, 2009 |

Lessons in leverage, an update

My fake portfolio with 100 shares of Caterpillar stock bought for $1,000 down and the rest on margin is now worth less than zero. Nice thing about fake portfolios: no real margin calls!

For new readers: I posted an item in late December explaining how I accidentally created a leveraged stock portfolio by buying 100 shares of Cat at $42.33 but funding it with only $1,000. With $1k of my own (pretend) cash and $3,233 in (pretend) borrowed money, I created a three-to-one leverage ratio, which was tripling my gains in the Santa Claus rally at the end of the year and is now tripling my losses with Cat revisiting its 52-week low.

In real life my broker — from whom I borrowed $3,233 — would’ve had me on the phone hollering “where the hell’s my money?” long before my cash balance ran to zero. But I’m sticking with my charade trade to see how it plays out over the long haul and to remind myself (and the rest of you following along) of the risks of trading on margin.

All professional traders use margin — which is why the prospect of falling interest rates makes the market rally (and why prospects for a rally now are so grim, with interest rates bumping against the zero limit) — but they also hedge their risks with futures, options, credit default swaps and such. They kinda/sorta know what they’re doing (except when they don’t).

My three-to-one margin bet on the stock market looks borderline foolish in the context of this experiment, but if you put 10 percent down on a $100,000 mortgage, you’re using 10-to-1 leverage. If you sell that house two years later for $120,000 you’ve doubled your cash investment. (The difference being that your home’s value will not fluctuate like a stock’s value because a house has inherent value as shelter while a stock is a piece of paper).

Disclosure: I own no real shares of Cat.

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Tom Mangan posted at 11:34 am January 29th, 2009 |

More stocks that pay fat dividends

Caterpillar is included in a bunch of stocks whose dividend yields are higher than usual in this Wall Street Journal item:

CNBC host James Cramer uses the term “accidental high-yielders” to describe companies like Caterpillar. He means it’s a strong company that’s meant to have a skimpy dividend yield but now has a fat one thanks to the stock market’s recent plunge. Hence, its shares are worth buying.

I agree with the conclusion, especially on Caterpillar, but not with the term. The accident, as near as I can tell, is that stocks since 1802 have yielded an average of 4.9%, but a bubbling up of prices stripped yields to an average of 2.2% over the past two decades. The market’s price drop last year lifted yields from 1.9% at the end of 2007 to 3.3% today. That seems less an accident than a return to normalcy.

Even if you hate the harrowing plunges Cat’s been taking of late, you can console yourself in the knowledge that the lower prices are driving up the dividend yield (because you can buy many more shares at lower prices and dividends are divvied out on a per-share basis … the more shares you own, the more dividends you earn. Opposite is also true: in a raging bull market it’s impossible to make much on dividends).

My favorite on the list linked above: Harley Davidson, the Hog-maker whose stock’s gotten slaughtered and now is yielding north of 9 percent.

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Tom Mangan posted at 12:03 am January 15th, 2009 |

Lenny Dykstra’s favorite fundamentals

Dykstra typically starts his columns with lame references to recent headlines from the world of sports, but if you hang with him, he gets around to sharing lots of sane investment advice, especially for rookie stock-pickers. His latest from notes some of his top fundamental indicators.

The fundamentals that I want to see are price-to-earnings and price-to-book ratios, return on equity, operating and free cash flow generation, and cash on hand to pay liabilities.

Online stock screeners like can clue you in on all these indicators. Lenny likes Caterpillar’s return on investors’ equity.

An important criteria for me is return on equity, which tells us how profitable the company is relative to shareholder equity. I’ll use blue-chip stock IBM as a benchmark. Big Blue has some of the best returns going: Its ROE is 49.4% for the last 12 months.

One of my recent picks — and a previous winner for me — is Caterpillar, which has a solid ROE of 42.4% for the past 12 months.

I’m always dubious of advice from famous people, particularly star athletes, but all I’ve seen from Dykstra to date has had at least a whiff of authority about it.

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Tom Mangan posted at 9:21 am January 13th, 2009 |

Advantages of Individual Retirement Accounts

Motley Fool describes a bunch of reasons to have an IRA, chief among them that you can dump stocks at a tidy profit without fretting over the capital gains tax bite. I never knew about this one, though:

2. Creditor protection
When the economy was booming, few people thought about the protection that IRAs provide against creditors. But now, anything that can protect against debt collectors has gotten new attention.

Employer-sponsored retirement plans like 401(k)s have traditionally had strong protection from creditors, but many states didn’t offer the same protection on IRAs. That changed in 2005, when federal law added IRAs to the list of protected assets in bankruptcy, up to $1 million.

Although the bankruptcy laws don’t apply to all debts, they provide a useful weapon against creditors — as well as a further incentive to contribute to IRAs, and keep the money there even during hard times.

The article also notes that IRAs often aren’t counted against families by colleges when calculating financial aid.

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Tom Mangan posted at 11:19 pm January 12th, 2009 |

Indicators I like to follow

Most market pros look for hints on where the Dow, Nasdaq and S&P are going from signals within individual sectors. These are some I follow (with links to their charts at

  • Dow Jones Transportation Index: Often a leading indicator because companies that ship products and people feel the effects of economic shifts first.
  • Philadelphia Semiconductor Index: Pretty much everything in the Nasdaq starts with the fundamental building blocks: microprocessors. I don’t trust any rally if the SOX isn’t playing along (and preferably leading the way). Tech stocks generally lead the markets, and the SOX generally leads tech stocks.
  • CBOT VIX: The celebrated “fear index” can be useful in the context of a sustained bull market: big breaks to the upside on the VIX almost always correlate to recoveries in the broader markets. However: VIX followers who bought stocks at historic highs back in October — when it hit 50 for the first time in several years — got blasted when it rose to 80 amid the credit market meltdown.
  • U.S. Dollar index: Especially important for Caterpillar watchers because a cheap dollar makes expensive Caterpillar tractors built in the U.S. cheaper overseas.

One of the trustiest adages I’ve heard over the years is “let the trend be your friend.” These indicators help confirm or refute which way the prevailing winds are blowing. There are, of course, thousands more. The only indicators that really matter are how much you paid for your stock and how much you can sell it for; the rest are all hints.

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Tom Mangan posted at 9:57 am January 9th, 2009 |