Monday, August 11, 2008

Portfolio Update: A +9.03% Return

It's been more than a week since I started unveiling my "Deep Discount" portfolio.
Let's take a look at how things are shaping up:

Merrill Lynch
Entry point: $26.85
Monday's close: $26.49
Gain/Loss: -1.34%

Former CEO Daniel Tully, who tripled Merrill's stock price in the 1990s, said current CEO John Thain was right to offload $31 billion of mortgage securities for a fifth of their face value, Bloomberg reported. Another former Merrill exec, Winthrop Smith Jr., the son of a Merrill CEO, made similar comments last month. Thain's got brass umlauts. I feel like buying more Merrill.

CIT Group
Entry point: $8.76
Monday close: $9.45
Gain/Loss: +7.88%

The business lender said it would sell its rail-car leasing business. In markets like these, traders like to see companies sell assets to raise cash because it decreases the likelihood that they will try to sell more shares, which dilutes all shares value a smidgen.

Entry point: $14.10
Monday close: 15.62
Gain/Loss: +10.76%

The car retailer said sames store sales fell 17%, and it's slowing its expansion plans. It's also scheduling fewer staff and trying to cut other expenses. That's all smart, and the Street knows it. That's why investors came in Monday morning and started buying -- shares had simply gotten too cheap. I may well have called this one at the bottom.

MGM Grand
Entry point: $29.78
Monday close: $36.52
Gain/Loss: +22.63%

You see a stock ink a gain like this and there's only one response: "Holy balls! Fire up a Monte Cristo!" What happened? Earnings came in, down 69%, but analysts see a rebound later this year. That being said, traders were cautious. Shares hit $38 today but gave much of it back. So if you're day trading my picks, you owe me for this one. Say a box of Monte Cristo No. 2's.

General Motors
Entry point: $10.23
Monday close: $10.76
Gain/Loss: +5.18%

GM said it's going to spend about a billion smackers to restructure, which is code for closing plants. Wall Street likes the closures, four of which are truck plants.

Overall, my portfolio has achieved a 9.03% advance in a week. That is, of course, dynamite. But it's also atypical and certainly not sustainable. In the name of full disclosure, if I could extract gains like that every week, I sure as hell wouldn't write about it.

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