My short list of playable junk paper covers several old industrials. You gotta be diversified. Don’t go down in a single ship. I cover steel, with Cleveland Cliffs, utilities with Hawaiian Electric, retailing with Macy’s. Rivian handles electric cars and Ford autos. Energy is tapped with Icahn’s IEP. You’ve got coverage in airlines with American Airlines. Macy’s is the highest priced stock at $13.
Think of all the stocks trading in their twenties that are playable, too. I held Halliburton in the past cycle for so-called junk. Now trades in the mid-twenties, Intel was a $70 stock a few years ago, looks viable. My list gives me broad sector recovery coverage.
I remember Intel when it was a player at the start of the semiconductor industry, early sixties, along with Fairchild Camera and Texas Instruments, later Motorola.
Like the ethical drug industry. When you fail to innovate, like Pfizer, you end up valued like a wobbly producer of pretzels at 10 times earnings even if you paid a fat dividend. Pfizer ticks at $25 a share and yields 4%. Eli Lilly sells over $800, a market powerhouse.
Anyone in the business should feel able to analyze the pivotal variables in any major industry such as banking, retailing, oil output and steel production. Aluminum, too. My biggest win was Nextel which zoomed from 3 bucks to over $30 and then sold out.
Analysts missed the cellular technology play because the consensus held the industry was near saturation. Actually, it was in its takeoff stage. Decades later, Apple remains the largest position for Berkshire Hathaway, worth hundreds of billions. No saturation.
Take Haliburton, a conservatively managed oil services operator. It was crunched down from the thirties to five bucks a few years ago when everyone was worried about over drilling.
Intel, a $60 stock a few years ago, recently broke down to $20. Its product line wasn’t filled with new toys to play with, Icahn’s baby, IEP, makes the list as a snapback in oil futures. “So will everything else” you say. Maybe so, but my goal is more leveraged to economic recovery. I’m talking 50% or more. What was Halliburton doing at 5 bucks? I understand American Airlines’ fall. It could end up in receivership on more slippage in seat miles logged.
Nobody promised you a rose garden.
Halliburton now trades in low twenties. Hawaiian Electric was once termed a growth utility. I can’t remember when Ford last traded in single digits. Macy’s fell from the growth retailer column. Revian sold as a strong second to Tesla who’s recent down day logged 20%. Lehman, which was considered a prime financial house, succumbed to massive holdings of iffy commercial real estate. I got caught. Merrill Lynch floundered by writing home mortgages on properties with mythical interest coverage.
Lehman’s bankruptcy, for me, was an eye-opener. Just remember that Bank of America’s preferred stock based near $5. Buffett bailed ‘em out, taking back a convertible preferred issue and common stock. Made billions.
That Buffett could balance his Apple growth play on one hand and the BAC bailout in the other palm showed me how courage flows when the numbers make sense.
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