Tuesday, March 6, 2007

Help Wanted: Three Stocks Looking for Love

I'd like to propose three stocks. I have grown to prefer to be more of a trader than an investor. I am much too interested in the markets to just sit and watch day after day. However, every once in awhile I like to pick some stocks that I'd like to hold for the long-term. I have three stocks in particular that have really been slammed hard over the past few weeks.

Home Depot (HD)
First, we have Home Depot (HD). Falling behind Lowe's and having a handful of problems, HD's new CEO has plenty to improve upon. What began as the nation's top "Do-It-Yourself" store now has become a customer service nightmare. The darkening of the housing market has hit them too, but it's time to innovate or die.

Dell (DELL)
Next, Dell (DELL) is in a similar boat. With Michael Dell back at the helm, I believe he can bring his company back to glory. He (hopefully) knows that Dell's current business model isn't cutting it anymore. Lucky for investors, Michael started this thing from his garage and turned it into a leading desktop computer retailer. The question is can he put Dell back on top again?

Motorola (MOT)
Finally, we have Motorola. In mid-October the stock peaked at about $26 and now trades for $18.50. Margins have been squeezed and there have been some issues within top management. Considering every other person I see on the street is talking on a Razr, what happened here? They tried to swing for the fences again with a few successor models to the Razr, but none have gained the popularity they were hoping for. Like Superman without the tights, Icann has decided to start buying up shares. Men like Icann usually don't take large positions in companies if they don't plan to do something. So I guess we'll see if he can lean on upper management to improve margins and produce another winner like the Razr.

Buy Time
Considering how far these stocks have fallen in the past few weeks, months, etc., it would have been a good time to buy two weeks ago. Lucky for you we've had this "correction," "Shanghai Surprise," or whatever you want to call it. This has knocked another couple of percentage points of the price. These might not be an overnight sensation, but give it 6-months to a year. In order to quantify my recommendation, let's create a portfolio of these three stocks. Starting with $30k and an equal 1/3 investment in each let's see how these picks do week to week.

Stock Cost FMV(3/5/07) Gain/(Loss)
Home Depot (HD) $9,990 $9,990 -
Dell (DELL) $10,003 $10,003 -
Motorola (MOT) $9,990 $9,990 -

Details:
Purchases prices as of close on 3/06/2007:
257shs (HD) @ 38.87
444shs (DELL) @22.53
540shs (MOT) @ 18.5

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