HSBC Direct has yet another rate increase. It’s at 5.05% according to the e-mail I recieved. I still believe it’s fool’s money. The bank is never a great investment vehicle.
Taxes will take approximately 1.5% of that 5% and inflation eats up the rest. Your real gain is basically 0%. It’s great place to stash funds that’ll keep up with inflation, but don’t think it as a real investment vehicle.
Disclosures:
Here are my current holdings. It’s about time I discuss them.
Bank of America (BAC)
Price bought: $44.55
Current Price: $48.17
This was one of my “safe” picks that I believed would perform well with relatively low risk. The stock pays a healthy dividend which I believe they will maintain and maybe even increase in the foreseeable future. I bought this stock 7/26/05 so I’m very close to having owned this stock for a year. If I choose to sell at $48.55 that’ll be $4 or 9% in capital gains plus 4.5% yield in dividends in one year. Pretty decent for a “safe” pick I think.
I didnt make any purchases for awhile as I thought a lot of stocks I wanted were overpriced. With the recent downturn in the market. I picked up a number of stocks I believed were a bargain. The following are very recent purchases this month.
American Financial Realty (AFR)
Price bought: $10.29
Current Price: $9.68
Hmm, the stock actually dropped 3.2% today. A lot of people are nervous about this one because they don’t have enough cash from operations to fund their dividend. I believe their business model is working and their recent acquistions of properties shows that management believes the same too. I believe the dividend can be funded from sales of non-core properties. When the dividend needs to be funded with sales from core properties, that’s when I think we’ll be in real trouble. I got in earlier this month way before the ex-dividend date and I kind of want the price to dip a bit so since I am re-investing dividends.
Montpelier Re Holdings Ltd. (MRH)
Price bought: $16.78
Current Price: $17.29
MRH took a major hit after hurricane Katrina. This stock use to trade at $35. In essence I believe with stricter policy writing and assuming a less severe hurricane season should lead to increased profits and a great year for MRH. I am overweight in this stock and truly believe it to outperform. MRH also pays a slight dividend.
Coffee Holding Co.Inc. (JVA)
Price bought: $4.11
Current price: $4.59
The price was so attractive I had to buy it. The only disappointment was I probably should’ve gotten it closer to $4. I only bought this stock 4 days ago and it’s going on a mini rally. These small cap stocks are so volitile that I really think it’ll hit $4.11 again in the next couple weeks, maybe even next week. I’m really thinking about selling now to lock in the 11.6% gain and get back in when the price drops. JVA is probably my only non-dividend paying stock.
If you’ve noticed MRH and AFR are small cap stocks and JVA is a micro cap stock. At this point in my life i’m progressing towards a “high risk, high reward” strategy. Retirement isn’t in my near future. I can afford risk. These risks are without liabilities too as they are not bought on margin. This is not gambling either, not in that sense. It’s educated gambling. I truly believe these companies are damaged stocks, not damaged truly damaged companies. AFR will be risky if they can’t find a solution to eventually fund the dividend with funds from operations. MRH will suffer terribly if another devastating hurricane season comes along. JVA… I don’t even want to discuss the risks with this one o_O.
Bank of America looks like a complete opposite view to this high risk strategy. However you do need some sort of balance. Also, I believe Bank of America’s is done growing in the US, however international growth is an area Bank of America can grow in.
I don’t really think “fool’s money” is a good way of describing high yield savings accounts. At 5%, they outperform a lot of other traditional investment vehicles, like government bonds. They’re definitely inferior long-term investments, but they are still tremendously useful. Everyone should have one and use it to keep money needed in the short-term. I’m sure you understand that. I guess the “fool’s money” comment was simply from a long-term perspective.
I understand HJL perfectly. The major disbelief in most families is that the bank is where all money should be kept, regardless if it is excess money or not. My parents locked in CDs last year at insanely low rates of 2%-3%. Hence “fool’s money”.
You got a great entry price on MRH. I’ve been watching that stock since October and can’t believe it fell so low. I think you’ll be realizing a sizable gain on that stock over the next year.
BTW: Thanks for the comment and link.
A word of advice- I would sell your AFR today because its probably gonna lose the 10% that it gained if the fed raises interest rates. You can buy it back when its low and after the panic subsides, it will go back up.
I hope these aren’t the only stocks you own.
Do you still think its a good time to buy MRH? I don’t see why it wouldn’t be. The price is at 17.46.