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It took a while… AOL Pays Off

April 9th, 2012 29 comments

I’ve been wondering when I was going to feel justified for buying so much AOL stock.  Today is the day, with the stock price moving up 45%.

I’ll have to do a recap of my investments after I close it out, and walk through the trades that I made in order to get here.  The funny part is that I almost put in a sell order this morning to liquidate the holdings since we’re in the process of looking for a new house, and I’ll need the extra cash.

This is my biggest one day jump… though it took over a year to happen.

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Gulp… AOL Not Kidding Around

February 26th, 2011 19 comments

With my original purchase of AOL sitting at -17%, I can’t help but to be a little nervous about their recent purchase of The Huffington Post.  The $300 million purchase is essentially making an all-or-nothing bet that the CEO knows what he’s doing, and kills the possibility of many smaller acquisitions by the company.

So what am I doing?  I’m following the CEO’s move and buying more.  While he put around $10 million into his company, I think I’m going to go a little lighter than that.  I am however going to triple my current holdings at around $21 per share.  This will lower my average purchase price and also at the same time make it one of my biggest holdings.

In the future, I’m going to set a target at around $15 where I would consider buying more.  If it doesn’t get that low, then I will hang on to what I already own and see what happens.

In the meantime, I’m going to try and mentally prepare myself for another quarter or two of negative results.  The latest acquisition isn’t likely to show any serious impacts to the company’s revenue in the near term and this is mostly factored in at the current stock price.  On the other hand, if by some miracle, revenue and earnings show some serious improvements this stock could very well take off and I would have bought in at the bottom of the curve (this is a long shot though).

Only time will tell…

PS, I’ve fought the urge to leverage up and buy stock options for this one.

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Stock Pick for 2011

December 11th, 2010 1 comment

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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Why I don’t Need a Financial Planner

November 6th, 2010 4 comments

If you immediately thought to yourself… “because he doesn’t have any money” after reading the title, you are only partly correct.

I think that anyone who has even a little bit of financial sense should be able to manage their own money.  Assuming you’re not super rich, or have some weird circumstances, why should you pay someone else to manage your finances?  Warren Buffett has 2 simple rules to follow when it comes to managing money that anyone can understand:

  • Rule #1 – Don’t lose money.
  • Rule #2 – Don’t forget rule #1.

While this is somewhat of a humorous take on money, there is some truth to it.  While one of the richest men in the world can get away with joking like this, how could this be applicable to mere mortals like you and I?

Don’t lose money to the scammers. I have a rather broad definition of “scammer”.  A mutual fund loaded with hidden fees, a broker charging Grandma $150 to trade a stock, or a “Free Investing Seminar” hoping to lure you in and convince you to hand over money are all types of things that need to be avoided.

Don’t lose money by chasing the bull. Wayne Gretzky was awesome because he “went to where the puck was going, not where it already was”.  We should try to do the same thing.  A few weeks ago, I was talking with a Program Manager from Apple (he worked on iTunes), and he was literally in love with Apple stock.  While I can understand his reasoning, because he could very well be a millionaire from his stock options, he actually was recommending that I should buy in too.  No thanks!  He said “It just hit $300,  it’s great!”.  I replied that is exactly why it’s the wrong time to buy.

Apple could very well keep going up, but will it go up 1,000% from where it is today?  No way.  Back when Steve Jobs re-joined the company is when we should have bought that stock.  In 1997, the stock was trading for around $17.  If you bought $10,000 worth of Apple stock back then, it would be worth roughly $175,000 today.

Don’t lost money by taking unnecessary risk. I’m one of the worst offenders when it comes to this one right here.  I should have learned my lesson by now, but I keep making the same mistakes and taking the same risks.  While this type of problem could take many forms, my problems is trading stock options.

Stock options are supposed to be used to reduce risk, allowing you to shield your investment from big swings in the market.  Instead, it can also be used to legally gamble with your hard earned money.  This year I made a pretty big bet with Motorola.  In January of last year, I bought about $3,000 worth of Motorola $10 call options with a maturity date of January 2011.  My rationale was that the Android phones were going to rise and take over this year, pulling Motorola up with it.  Unfortunately, this doesn’t look like it’s going to happen and I just wiped out any other gains I would have made this year with other investments.  While if I had guessed right, and gambled on Apple, I probably would think I was sooo smart, at least I hope to learn to leave those options alone.

Maybe there’s other ways to lost money that I haven’t mentioned here, but these were just the few that came to mind as I was writing this.  No doubt, I’ll probably find a way to lose money in the future, and if I do, I’ll be sure to share.

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Spending Vs Savings

October 30th, 2010 2 comments

I’m at an interesting point right now in my personal philosophy towards spending and saving.  To give some background to my mental state, I guess I’d have to describe my personal finance upbringing.  Essentially, there was none.  I remember I was probably around 14 when my Dad sat down and discussed money and taxes with me.  Before that, I guess my family had the old school mentality of “it isn’t proper to discuss money”.

Fast forward to me graduating from college and getting my first job.  I was seriously in awe with how much I was getting paid to basically solve little problems on the computer, and I enjoyed what I was doing.  At the same time, my expenses were ridiculously low.  I think I was paying $500/month for rent, with utilities included.  Needless to say I saved some serious money.  I really didn’t spend money on anything either, besides buying a new truck (which I still have today… paid off).

Today, however, I’m add odds with how I feel about money.  On one hand, I think I should save any extra money I come across, but on the other hand, I have a nice little nest egg.  Should I spend money on material things that catch my eye and not feel guilty about it?

Tonight I’m probably going to go to the Apple store and drool over the new MacBook Air.  If I felt like it, I could throw down some plastic and not think twice.  I wouldn’t have to go into debt to get it, and I think it would be useful to have for blogging, working on websites, etc.  But something inside me feels like I shouldn’t buy it… like I would feel guilty for indulging and spending that much money on something that I don’t “need”.  Not to mention, I spent $550 there two weeks ago buying an iPad, which I still have mixed feeling about, but use pretty much every day.

I guess I have a little guy on one shoulder telling me life is too short to worry about things like this.  If there’s something shiny and new that I think would be cool to own, why not get it.  On the other shoulder is a little guy telling me that I don’t need those types of things and I would be wasting my hard earned money.

Sometimes I wish I was one of those care free types of people that don’t worry about money, except I wonder if they really do deep down.  Do they feel the same way, and maybe even more so, and put on a front of not caring to deal with it?  Not sure, but I’ll let you know what I think about the new shiny laptop that Apple has :)

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