I haven’t written much about my opinion on the stock market here lately, and, for the most part, that’s a good thing for Trading Common Sense readers. Why? Because if I wrote about my opinion on the market every day, this blog would be pretty damn boring.
I wrote about how overpriced the stock market is back in May of last year, and my opinion really hasn’t changed much since then. Stocks are not cheap, and I see very few obvious buying opportunities at the moment. That’s why my personal account is still about half cash at the moment.
There’s nothing wrong with holding cash in your account. Don’t go looking for things to buy just because you have the cash to buy. If there’s a good investment opportunity, great. If not, why would you overpay for expensive stocks?
So over the past three months, I have been mostly watching and waiting with half of my account in cash. But it’s not like I haven’t done anything during that time. Here’s a very brief rundown of the three trades I’ve made.
Bank of Ireland (NYSE: IRE)
I’ll get this one out the way first because it’s the most boring of the three. Bank of Ireland is de-listing its American Depository Receipt (ADR) from the NYSE next week. You can read the story behind the de-listing by clicking here. Investors have three choices: 1. Sell 2. Buy shares of BKIR on the London exchange or BIR on the Dublin exchange 3. Buy shares of IRLBF on the U.S. Pink Sheets.
Here’s an overview of my feelings about the Pink Sheets. So I’m opting out of that. And my online broker does not allow trading on either the London or Dublin exchanges, so that option is out too.
My position in Bank of Ireland was my smallest position. I sold the majority of my position about a year ago, and I explained some of the reasons why on Motley Fool.
I first bought Bank of Ireland at $6.98 in March 2012, sold in January of 2013 at $9.00, bought back in at $8.00 about a month later, then sold two thirds of my position at $18.75 about a year ago. The first trade I made in the last three months is selling the remainder of my Bank of Ireland position last Friday at $13.42.
All-in all I did really well with Bank of Ireland. It’s been my third most-profitable investment, not counting my still-open position in Melco Crown Entertainment Ltd. (NASDAQ: MPEL).
Melco Crown Entertainment
Speaking of Melco, the second trade I made came back in early December when I took a very small position in Melco July 2015 call options at a $19 strike price. So far, I’m slightly down on those calls, but I’m hopeful that by the time July rolls around I will be well into the green.
And, of course, I’m still holding every single share of Melco that I bought for $4.36 back in June of 2009. You can read my opinion of Melco by clicking here. You can read other articles I’ve written about Melco and Macau by clicking here, here, here and by searching Trading Common Sense.
United States Oil Fund ETF (NYSE: USO)
When I first bought shares of USO back in October at $30.93, I thought I was getting a great price! Shares were trading near multi-year lows and near a level that had consistently provided support going all the way back to 2009.
I knew there was an oil glut, but I didn’t fully appreciate just how bad things would get. I was early. It’s not the first time, and it certainly won’t be the last.
Back in February of 2009, I bought shares of Bank of America Corp (NYSE: BAC) at $4.96 only to watch the price subsequently drop nearly 50 percent to an all-time low of $2.53 later that month. I sold those same shares two months later for $10.99, a 120 percent gain.
I bought Apple Inc (NASDAQ: AAPL) for a split-adjusted $70 back in April 2013 only to watch the share price fall to $53 or so over the next couple of months, a nearly 25 percent drop. Again, I was early, but not wrong. I sold my shares of Apple at $104.65 back in October, a 54 percent overall gain (including dividends).
Right now I’m feeling the same way about oil that I felt about Apple and Bank of America. I was early, not wrong.
In a nutshell, there will always be a demand for oil. Yes, energy efficiency and alternative energy sources cuts into demand, but the global demand for oil is still staggering. Right now, a huge surge in oil production, particularly in North America, has produced a massive global oversupply of oil.
But oil price is nothing more than supply and demand. Oil production and price is cyclical, just like the stock market. When prices get high, production increases to meed demand. When production gets too high, prices fall and production drops. This process repeats itself over and over again.
I wrote recently about the first signs of falling production. Oil still has a long way to go before it recovers, but it will recover. Will it get to $130 per barrel? Maybe not. But it won’t stay at $50 per barrel forever.
The third trade I made in the last three months is increasing my position in USO by more than 70 percent at $20.00 per share back in late December.
Read some of the articles I’ve written recently about oil by clicking here, here and here.
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