Wednesday, May 11, 2011

Thoughts as a Shareholder

As noted before in a post somewhere, I am a shareholder in a few companies at the moment. This started in the Spring of 2009, when the stock market crashed and I thought it was worth a shot in investing than earning 0.1% interest rates while holding it in the bank. This turned out to be a great call as my initial investment almost doubled by the year end -- mostly due to the strong bounce back by the market itself. Since then, there have not been much movement, but I thought I would take a few minutes to talk about my holdings and share my thoughts about them.

Until last year, I held shares in quite a number of different companies. The main purposes were twofold: speculation on any major movements, and diversification. I was fortunate to catch positive swings like AIG but the bulk of them have languished. To the best of my knowledge (I haven't checked my holdings in weeks), I currently hold shares in 3 companies.

[Ranked in order of # of shares, from most to the least.]

1. Advance Micro Devices (AMD) -- my holdings in AMD is essentially an extensive of the inner geek, always fascinated with computer gadgetry. Its stock prices hasn't moved in years, but I think it will be due for a breakthrough. As noted before, its main rival is Intel in the marketplace, a company that engages in monopolistic practices and has an R&D budget many times the size of AMD's. In other words, AMD is the David to the Intel's Goliath. I am inclined to keep holding AMD due to certain predictions:
  • AMD's rival in the discrete graphics market, NVidia, will be exiting this market entirely due to its focus on mobile ARM chips (e.g. Tegra). This remains a significant market but AMD's Radeon series has been dominating lately over NVidia's GeForce counterpart.
  • AMD's expanded clientele for its products. Since Intel's settlement with AMD, the latter has expanded the number of customers buying its computer chips and other goods. The most notable is Apple, who now only uses AMD graphics in their products. Others like Dell and Toshiba have expanded their offerings too. This is good as sales revenue increase = profit increase.
  • Fusion is the future of computing and Intel lags behind on this. AMD's Fusion products are system-on-a-chip (similar to ARM) that unifies the processor and video graphics onto a single die in production. This allows these chips to be made smaller, more video-capable, cooler, and probably cheaper. But these are different from NVidia's Tegra and other ARM (e.g. Qualcolmm's Snapdragon) in that they are designed for x86 systems (think Windows). Intel's counterpart is the Atom series which, to plainly put it, suck.
2. Ford Motor Company (F) -- I purchased Ford not knowing the brilliance of its CEO (Allan Mullaly) but because I thought the company was undervalued. At the time when I made my purchase, the other Detroit carmakers were begging the government for bailout while Ford had enough on its balance sheet to weather the storm. Today, people applaud it for not taking bailout money and it is riding on the woes of its other competitors (Toyota and Honda) through capturing market share across the board. I am very high on Ford and believe its stock has the potential to hit mid-$20 in a year. My speculations on Ford are:
  • Positive public image of the company's products will be a big plus for both the short-term and the long-term. If you want to own shares in an American carmaker, you pretty much can't go wrong with Ford. I recently met a guy who said he owns GM shares -- I found that hard to believe and had to force myself not to say anything combative.
  • Allan Mullaly is a genius. When you have a visionary CEO, how can you go wrong? Thanks to his leadership, Ford is posting record profits while carrying products that are very fuel-efficient. The latter is important as long as gas prices keep skyrocketing.
  • Growing market share gains in other parts of the world. The Ford Figo is doing great in India and there is discussion of migrating it to China too.
  • Unification of company's platforms across the world. I like how Ford brought over European models like the Ford Fiesta and Ford Transit Connect to the United States. Both cars have tremendous potential as the U.S. has seen nothing like them. As a personal quip, I would like to see Ford being over its Ford Ka line to the U.S. also. The Ka should be better priced, safer, and with better fuel efficiency than its competitors like the Mini Cooper. (I am going to try to pitch to Allan about this...haha).
3. General Electric (GE) -- I actually know very little about GE and its products/services, other than the fact that it is a global conglomerate with a failure chance of nil. I use them as the backbone of my investment portfolio (I pretty much invested all my savings into stocks at the time). I have no speculation/prediction about GE, other than the fact that it will be a stable, blue-chip stock.

Overall, I think it is a great idea to take a look at investing in the stock market right now. Interest rates still are terrible and picking up any blue-chip company (e.g. GE above) would lead to better returns. Of course, one has to do some research and determine how to best allocate the investment funds. The brokerage firm I use is entirely online -- "Tradeking", which allow for trades for only around $5 fee. If you don't want/need hand-holding in picking your investments, I would recommend them.

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