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The Dumbest Stock Warren Buffett Ever Bought

Warren Buffett is widely regarded as the most successful investor of our times. On Monday Becky Quick of CNBC asked him today to reveal the dumbest investment he ever made. Turns out, Buffett says that his own company, Berkshire Hathaway (BRK.A), was the dumbest stock he has ever bought.

Why? Buffett explained on CNBC that early in 1962, he came across the textile company, which was constantly closing mills and reinvesting the proceeds in its stock. So Buffett figured he would also buy the stock, tender it to Berkshire's management and make a small profit.

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Short Crude Oil (USO)

After last week's huge run in the price of crude oil, it is time to think about taking a short position. This trade worked beautifully back at the beginning of August when crude was trading at similar levels. NYMEX front-month crude futures are now trading at $81.30.

Given the current economic backdrop, $80 seems to be the magic number over which oil has a difficult time sustaining itself. There are a number of important economic numbers out this week, any one of which could send the price of oil back below the $80 threshold. In the short term, a lot of things need to go right for crude to continue to march higher.

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Short City: Whole Foods

Natural/organic grocery store chain Whole Foods Market (WFMI) is now a short candidate, but for high-risk investors, only.

The calculation here is that Whole Food's fiscal 2011 revenue increase will lag the 10-12% consensus, as an increasing number of suddenly-just-modest-income Americans shun the chain.

Also, look for local/regional natural/organic stores to continue to nip-away at Whole Foods Market share. In addition, Whole Foods' stores are increasingly taking on the feel of -- you guessed it -- just another grocery store chain, only with organic and natural foods and prices that are too high.

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Stagnating Procter & Gamble Shares Short Strangled

Bright and early this morning, consumer goods titan Procter & Gamble (PG) was targeted by a short strangle speculator. The trader sold a block of 15,000 September 60 calls, and simultaneously sold a matching block of 15,000 September 57.50 puts. By implementing this directionally neutral strategy, the options player is wagering that PG will remain pinned between $60 and $57.50 through September expiration, which is just about one month away.

Continue reading Stagnating Procter & Gamble Shares Short Strangled

Playing the Volatile Gold Market

Back in February, gold took a big hit when the Federal Reserve announced it was lifting the discount rate. After pushing briefly above $1,200 an ounce at the beginning of December 2009, the safe-haven metal slumped over 12% in two months to a low of around $1,050.

Here we are about three months removed from that low, and we're right back where we started price-wise -- or at least, we were until gold spiraled downward over the last few days to mark a two-week low. So everyone is asking the question, "Is gold going lower, or is it going higher?"

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Deutsche Bank Gets Safety Net from German Government

Deutsche Bank BD logoDeutsche Bank (DB) has been suffering from many of the same ailments -- a falling housing market, tightening credit markets, countries threatening to default on their bonds -- that have been plaguing other too-big-to-fail banks around the globe. But now Deutsche Bank has one key advantage over all of these other banks: the German government.

The German government -- via the Federal Financial Supervisory Authority -- announced that it is placing a ban on naked short selling on key financial instruments until March 31, 2011. The ban covers naked short selling of debt securities issued by eurozone countries, credit default swaps (CDS) on bonds of eurozone countries -- unless the CDS is providing a legitimate hedge against default risk -- and a select group of individual securities.

Continue reading Deutsche Bank Gets Safety Net from German Government

Short City Update: Radio Shack, hold short

An update on a short position: Radio Shack Corp. (NYSE: RSH), first recommended on August 4, 2009 at a price of $16.13.

Too many retail (and wholesale) electronics stores in the U.S., too many Radio Shack stores, and a likely sales decline for Radio Shack in FY2009 and FY2010 do not bode well for RSH's shares.

Continue reading Short City Update: Radio Shack, hold short

Short City Update: GameStop: hold short; Telefonica: stopped out

An update on two short positions: GameStop Corp. (NYSE: GME), recommended on May 26, 2009 at a price of $26.00, and Telefonica S.A. (NYSE: TEF), recommended on the same day at a price of $61.11.

GameStop: Hold Short. It's still hard to make the case for growth in high-end / sophisticated games amid a slowdown in consumer spending. The era of the 'frugal consumer' is upon us: basic games are in, pricey games are out. Cover Short on a bounce off $20, $17, $15, or $10. Buy/Stop Loss if you sold shares in this company: $33.

Continue reading Short City Update: GameStop: hold short; Telefonica: stopped out

Short City Update: Panera Bread, Cal-Maine Foods - cover each short

An update: a decision to close two short positions - due to the probability of higher-than-expected U.S. GDP growth in Q3/Q4, and the impact that better economic recovery would have on consumer spending.

The two closed positions: Panera Bread (NASDAQ: PNRA), recommended on May 29, 2009 at a price of $52.65, and Cal-Maine Foods (NYSE: CALM), recommended on the same day at a price of $23.21.

Continue reading Short City Update: Panera Bread, Cal-Maine Foods - cover each short

Short City Update: McGraw-Hill, hold short; Paychex, cover short

Just call it 'one win, one loss' with these two shorts, first recommended on May 13, 2009.

McGraw-Hill Companies
(NYSE: MHP). Hold Short, first recommended on May 13, 2009 at a price of $29.89. After flirting with the Buy/Stop Loss at $36, MHP has resumed the predicted path: down. Belt-tightening by states, school districts, and by other education institutions does not bode well for MHP's education publishing wing. Cover Short on a bounce off $20 or $15. Buy/Stop Loss if you were to sell shares in this company: $36.

Continue reading Short City Update: McGraw-Hill, hold short; Paychex, cover short

Short interest back on the rise

For the first time in two months, short interest increased on the major exchanges from the May 15 - May 29 period. On the NYSE, the overall number of shorted shares rose 1% to 15.29 billion; Nasdaq short interest rose 3.6% to 6.6 billion shares.

The NYSE short-interest ratio reached 2.7, while the Nasdaq's ratio hit 3.1. The short-interest ratio can be loosely defined as the number of days, at the average daily trading volume, it would take to buy back all shares currently sold short.

This potentially indicates a turning tide toward bearishness after a March-May period that was painful for the short sellers and others maintaining a bearish disposition. With the S&P 500 Index moving back to challenge the 950 area, the bears may becoming a bit more brave. Are we range-bound, do we have further to run, or are we setting up for another correction phase? Share your thoughts in the comments field.

Beth works for The Options News Network (www.ONN.tv), which provides daily stock and options commentary. The above comments are not intended as trading advice.

Short City: Panera Bread, Cal-Maine Foods

Investor and trader Mishko Janusevich had a mantra that he used to repeat while outlining the top, new stock shorts that appeared that day, as determined by technical indicators.

He would stand next to the overhead projected stock chart at the front of the trading room, point to the stock chart and recite, "You see this stock? You see that it's dropped $8 in past two days? You think it can't drop any more? SELL THAT STOCK it's dropping more!!"

Short these shares if you can tolerate high-risk and are an experienced investor that does not remove Buy/Stop Losses.

Continue reading Short City: Panera Bread, Cal-Maine Foods

Short City: GameStop, Telefonica

Some contend that shorting stocks is un-American. Hardly. Selling short provides liquidity to the markets, aids in price discovery, and provides an extra check -- some argue the only check -- against ill-conceived business ideas and incompetent executives.

New York Stock Trader Dave Fischer is a short king, and has made most of his money over the past 15 years shorting stocks. His favorite phrase is, "With those fundamentals, that stock can't hang on for long."

Short these shares if you can tolerate high-risk and are an experienced investor that does not remove Buy/Stop Losses.

Continue reading Short City: GameStop, Telefonica

Short City: Aeropostale, Burger King

Every market is a two-sided market, and while the typical investor makes money during bullish phases, experienced investors know how to make money during bearish phases, as well. In fact, many experienced and institutional traders make more money shorting stocks than by going long.

Short these shares if you can tolerate high-risk and are an experienced investor that does not remove Buy / Stop Losses.

Continue reading Short City: Aeropostale, Burger King

Cramer on BloggingStocks: Buy banks despite the shorts

The stress tests seem to show that most financials are actually quite healthy.

The market's bullishness gets harder and harder to fight. Now we learn that banks that people were telling me should be shorted aggressively on every lift are actually able to handle things quite fine, thank you very much.

I was concerned about the late moves BB&T (NYSE: BBT) (Cramer's Take) made in real estate at the top, but either the examiners aren't concerned or things have gotten better. I have always been a fan of Capital One (NYSE: COF) (Cramer's Take) and used to own it for Action Alerts PLUS until I got worried about the economy, but it looks like its credit losses are actually holding up rather well and it needs no new capital.

Continue reading Cramer on BloggingStocks: Buy banks despite the shorts

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Symbol Lookup
IndexesChangePrice
DJIA-89.2312,801.23
NASDAQ-23.352,903.88
S&P 500-9.311,342.64

Last updated: February 12, 2012: 11:00 AM

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