Good Buys: Ford?

A little over a week ago I bought more Wells Fargo stock. With yesterday's close of WFC at $21.19, the buy at $15.90 feels pretty good. This week's bargain shopping stock was a purchase of F for $1.82 on Monday.

Wonder what today will bring. Here is one guess.

The Google Gold Mine

Most people on the web know the value of Google as a search engine. Long time holders of the stock know the value of Google as a cash cow. But Google also has a wealth of information people are just learning about.

How often people do a search on the Flu can predict when and where flu outbreaks will occur. This can be extended to track and predict bird flu outbreaks. (For more on that see this TED presentation.)

Even a lone psychiatrist can find things with Google that are virtually unknown in professional literature. "The research literature is virtually silent on sex-induced depression, but a Google search revealed several Web sites and chat rooms for something called postcoital blues. Who knew? There, I read many accounts nearly identical to those of my patients, with reports of various remedies for the malady."

The PageRank algorithm that Google uses to rank web pages in relevance to a search topic has recently shown an ability to predict Noble Prize winners.

There is so much value in the meta-data held by Google that I believe we are all just beginning to scratch the surface.

NBR Interviews Warren Buffet

Last week Nightly Business Report (NBR) interviewed Warren Buffet as part of the show's 30th anniversary celebration. There is a transcripts of the interview and video.

Buffet discusses Obama, the deficit, Bernie Madoff, and how he learned to invest. It is definitely worth reading, watching, or listening to if you invest in equities.

Buying Wells Fargo

I took advantage of the recent collapse in banking stocks to pick up more shares in Wells Fargo at $15.90 a share. This stock has generally been a favorite of Warren Buffet, whose Berkshire Hathaway owns approximately $10 Billion worth of the stock. At this price the current estimated yield is around 7% making it a rather attractive bank stock as it has so far not fallen victim to the issues plaguing other banks.

High Yeilds and Divideneds

Back in 2007 I wrote a post on the tax rates for dividends. Reading through an old 2008 copy of Money magazine I came across and article on high dividend and high yield ETFs and mutual funds. Funds in their list:

• Vanguard High Dividend Yield (VYM) - Currently, this fund holds no bonds and all equity, with a yield between 4 and 5%.
  
• iShares Dow Jones Select Dividend Index (DVY) - This fund has an even higher yield, possibly due to being 45% percent invested in Financial Services. Current yield is over 5.5%.
  
• SPDR S&P Dividend (SDY) - Again all stocks and about 40% invested in Financial Services, this fund currently yields over 5%.
  
• Vanguard Total Bond Market ETF (BND) - Virtually all bonds with 0.02% of fund invested in stocks. Check the NAV verses the trading price (everyone should do this with all ETFs)!
  
• Vanguard High-Yield Corporate Bond (VWEHX) - This is not an ETF, but a regular mutual fund with a minimum $3000 initial investment. It currently has a yield over 10%!
  
• Vanguard REIT Index (VGSIX) - This REIT fund's value fell off a cliff like most REITs in 2008 & 2007. It is basically 98% stock and 2% cash, with a current yield over 8%. This also is not an ETF, but a regular mutual fund with a minimum $3000 initial investment.

It is important to notice the difference between dividend yield and income yield for tax purposes. The first three funds about appear to be all dividends. My personal favorites are VYM and VWEHX.

Chips Down

Contract Chip manufactures are seeing a dramatic drop in orders. This Reuter's Story tells the details.

December sales at Taiwan's UMC, the world's No.2 contract chip maker, fell 45.5 percent, its biggest drop in near seven years due to weaker tech demand, and the pain could continue into early 2009.

I took advantage of the drop to buy some TSM stock. If the drop of over 40% in orders is a long term trend then this is probably a bad move. On the other hand, if the economy stabilizes in 2009 then I think these stocks are a good buy.
Added Feb. 13 09: TSM purchased at $7.55 second week of January.

Risky Stocks

In the past 2 months I have bought a number of stocks some pretty risky and others less risky. Naturally, I weight towards the less risky options, and treat the others like a trip to Vegas.

On the less risky side I have bought oil stocks BP and COP, both at $50 a share. Add to that a recent purchase of Texas Instruments (TXN), at $14.20 a share.

Of moderately risky stocks are two purchases to add to existing positions in LGF, at $5.70, and ETFC at $0.80 and $1.10. Over all I'm still losing money on those two stocks, but the recent purchases are positive as I write this, and lower my average cost per share. LGF is Lions Gate Films, which has some interesting movie properties and cable shows like Weeds. ETFC is E-Trade online brokerage, which has been hurt badly by the meltdown in the finance sector.

Then there are the seriously risky penny stocks: Midway Games (MWY) at $0.18 and R.H. Donnelly (RHDC.PK) at the regrettable price of $0.35 (now $0.20). These are true gambles, if they survive the down turn they will do well (at these prices) and if they don't survive then they are a total loss.

In the coming weeks and months I plan to focus on companies with high dividends that are defensible, and on companies with little or no debt. Hopefully I can find companies that have no debt and high dividends.