With that said, here's my initial purchases for the Zack's $100000 Challenge and my reasoning behind them (as well as any stop limits or notes about those purchases and strategies).
1. HAL - Initial Purchase: Since April of '06 this stock has slowly been driven down. Though that was the peak of oil and energy prices, many large oil producers made a nice end of the year rally. However, Haliburton is just plain hated by the public and after a brief rally, headed down to end the year @ $31.05. HAL has one of the lowest P/E ratios of the oil service providers, has the greatest Net Annual Income, almost no debt, PEG ratio of less than .72 and a promising outlook for future government contracts. Money speaks louder than politics and eventually HAL will win out because of this. I'm going to start a position of 130 shares as low as I can tomorrow. Technically, the stock is sitting in the oversold territory. Slow Stochastic readings have been sitting below 20 for more than a week. The stock has fallen below 50 and 200 day moving averages and is clinging to the lower bollinger bands. My only worry is the RSI is sitting around 40 and has slowly been trending lower since October 23rd. We either have a relative bottom and the new year excitment will start to bring the stock higher or HAL will bottom when the RSI sits below 20 and the Slow Stochastic does a fake above 20, back below 20 and then starts it's way back up as it did the end of September and beginning of October. In the next few weeks I'll build up a nice position and watch the technical indicators. I'll look to get out when it's P/E ratio starts to approach that of Slumberger (SLB), the poster boy of the large service providers.
2. MO - Initial Purchase: Altria is a solid grower that has great profitability early this year with a combination of a weak dollar and their large foreign income and a recent price increase in their cigarettes of $.10 per pack. There has been no earnings restatement, no analysts have changed their outlooks on the stock. It's a simple matter of under promise, over deliver. No one is rocking the boat or changing the status quo and this will to continual, steady movement up on any upside. The courts have removed any "light cigarette" liability and the Kraft divestiture will be completed in Q1 2007. On the technical side, MO has broken out of a resistance at ~$85 and should start to create some higher highs and higher lows. RSI has slowly been building to a peak mid-November and at the end of December. If this persists, I'll slowly build and ride the tobacco train until KFT is gone and post earnings and revisit the stock to see if it still has the gusto to move. And if nothing else, MO has been known for a solid dividend earner. I'll start off with 50 shares and build from there.
3. VDE - Initial Purchase: Since 2002, the average Q1 gain of the OIH has been 9.4% with a peak of 17% in 2005. Oil is notoriously strong in Q1 and with the brunt of winter coming in January and February, the demand for oil will drive the prices up. OPEC production cuts "should" take place in February which could contribute to an increase in oil price as well. Lastly, and sadly, until the US actually decides to act on a move away from oil, our dependency will drive the prices up at times of great need (Enter Invisible Hand). the VDE places money in both oil companies like XOM and COP as well as oil service providers like HAL and SLB. This ETF will cross into my HAL play. I believe energy will do well, but that HAL will do especially well. Consider VDE as a hedge in case HAL continues to flounder.
I'm working on some other stocks for tomorrow like United Health and some other heath care stocks as well as some drug stocks and entertainment. I'll try to update mid-day with anything noteworthy or any other purchases.
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