Get Red-Dogged Cost You A Bundle

Penalty for being wrong-footed on an entry point for a stock runs at least 20%. Occidental Petroleum, under accumulation by Warren Buffett, ticked in the sixties, now mid-forties. UnitedHealth hit a 12-month high, over $600, but got cut in half.  A three hundred dollar stock today. 

In a market correction which Tesla as yet hasn’t faced, it’s down from nearly $500 to three hundred. What can happen to Berkshire Hathaway selling at 170% of book value when Warren bows out of active portfolio management?

I own a dozen 10 dollar dogs that are starting to awaken. Macy’s, for example, and Cleveland Cliffs have come off the floor. Is American Airlines next? Just gimme a modest pickup in GDP. What about a rank oil play like Icahn Enterprises? Don’t overlook Ford either at eleven bucks and change. 

I don’t know the players  in Tesla. Are they using client capital or their own? Past year, TSLA was a bust up. You need an edge to trade ragamuffins. There’s little or no current research on them and you’ve got thin markets going in and coming out. 

My old, old buddy, Gerry Goodman,  wrote a classic column “The Day They Red-dogged Motorola.” It dealt with a bunch of dumb bunny analysts who missed their quarterly numbers on Motorola and now were scrambling to bailout. No cell phones as yet. So, you needed a telephone booth and AT&T connection.

Today, you can see comparable foul-ups in stocks like Tesla, Netflix and Salesforce. Even a bank, IBM or BABA can bounce around 4 or 5 points over a couple of hours trading. Consider a $700 stock, can play bouncy, bouncy ballie intra day. 

The size of your penalty for a dumb entry point on sale is normally a reflection of the market’s tone. If we’re in a bull movement, we are talking just a couple of points. But in a hyper sensitive setting 10% to 20% on your pick does evaporate overnight. 

Somewhat embarrassed, lemme air my stupidity on a current trade in Berkshire Hathaway which I’ve never owned no matter my respect for Warren Buffett. My thinking was BRK is a play on oil prices and Apple. Both can levitate in a rallying market. 

Year-to-date I’ve been running scared with an invested position of 35% long. But, macro numbers haven’t weakened enough which makes the case for recession less likely. Deep basic, I’m still concerned about the heady price-earnings ratio of the market, at least 20 times projected earnings. This is a no recession forecast, but I’m still skeptical. 

Anyways, I mused BRK was a great recovery piece of paper. Its huge position in energy stocks like Occidental could recover while Apple’s new product array looks promising. 

But, there’s little detail on BRK. Nobody wants to deal with its big premium over book value.  Berkshire sells at 1.7 times book, a heady ratio. I can buy oil stocks directly that sell at or below book value. Whadda I need Buffett for owning the oils, or even Apple directly? The financial history of personal holding companies is a disaster. I’m thinking of operators like Saul Steinberg, Ron Perelman et al. 

Meanwhile, I rest allergic to bank stocks so I don’t need Buffett for the financials. My pick here is Goldman Sachs which has risen to a heavy 10% position for me. Go Goldie! I’ll take the big swings in daily prices. 

The Street pretty much missed the strong report on quarterly job creation domestically. I’m less bearish, but still price sensitive.  The price-earnings ratio for the country historically peaks at 20 when the economy topped out. Pundity remains silent on this ratio’s importance currently. 

The jobs report makes me a little more comfortable on what I own like Apple, still a new product story. I love MLP’s yielding 6%, like Enterprise Product Partners. Disney and Amazon are my understandable growthies. Getting involved in growth-at-any-price stories like Tesla and its ilk runs too racy for me. 

Call me “Old Cobwebs.” I think back to the early fifties when I had no money or even  a good paying job and a place to live. The Abstract Expressionist art movement just hit New York. Paintings then sold for $1,500 by painters like Mark Rothko, Jackson Pollock, Franz Kline and Jasper Johns. Later on, I remember the gallarist, Mary Boone, offering me 3 pieces by Basquiat  for $4,500. 

Think of all this when you see Tesla trading 50 million shares by lunchtime at over $300 a share. Hey, guys.  You’re late. 

You shoulda bought Tesla at 50 bucks 5 years ago. But, you didn't., Now, you’re just another crazy player, probably in over your head. Where’s  the capacity to say to yourself "I'm late on this piece of paper and won’t play here?”