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Stock Pick for 2011

December 11th, 2010 Leave a comment Go to comments

The last few days I have been reflecting on my 2010 gamble with Motorola call options.  Well, that didn’t go so hot, and in January my options contract will expire and I’ll have lost a total of $3,100.  Barring a miracle next month this was indeed a bad run.

For 2011, I’m going to be swearing off options.  I may participate in some selling of covered calls, but I’m going to stay away from using them as a way to gamble on hunches I have about the future.  Instead, I’ll be sticking with regular, boring old stocks.

This year I have a hunch that AOL (yes that AOL… America On Line) is going to make a come back.  The future earnings projections are pretty abysmal, and I think people are being a little too negative about the company.

While AOL currently relies on old school dial up internet subscribers for a majority of their revenue (approx. $250 million in the last quarter), they are investing in a number of different areas to try and generate new streams of revenue.  At the same time, they are acquiring internet properties with high traffic volumes.  In fact, last quarter they bought TechCrunch.com.

Also, the numbers look especially bad right now compared to the recent history.  I believe most of this is from shutting down operations and  selling off some of their assets.  Hopefully, starting in 2011 things will stabilize and they can focus on expansion instead of controlling the losses.

So, how am I going to play this?  Well, I think the next quarterly statement might be pretty bad as well, so I don’t want to go all in at this point in time.  I’m going to buy 100 shares of stock this week and wait to see what happens.  If the stock tanks after the next quarter, I’ll double down and lower my cost basis.  Otherwise, I’ll stick with my 100 shares and see how the year goes.

PS.  If I had just bought stock for my hunch on Motorola instead of buying stock options, I’d only be down 3%.  That sounds a little more appealing than my current 92% loss.

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