Fadi El-Eter

According to CNN, yesterday was the 7^th most horrible day in the stock market. The Dow index went down 635 points (or 5.55%), while the S&P went down 80 points (or 6.67%) The most affected sector was the financial sector, where stocks such as BAC and C went down over 20% and over 16% respectively. Here are some pictures, courtesy of Google Finance:

I think that this is a storm, like any other storm, made specifically so that the big guys can make some money by buying stocks at dirt cheap prices and then sell them a few weeks later for a 20% premium. Using money to make money, but again, this is the nature of this business!

For the first time in nearly 2 years, Citigroup’s (NYSE:C) market capitalization is now below $100 billion, thus reducing the number of US listed banks (note: US listed banks are not the same as US banks) that have a market cap over $100 billion to just 3: HSBC Holdings ($164.42 billion), JPMorgan Chase ($147.02 billion), and Wells Fargo & Company ($133.06 billion). Bank of America lost access to this exclusive club of wealth banks nearly 2 months ago.

In order to regain a market cap of $100 billion, C needs to be trading at $34.25, which may or may not happen this week. Personally, I think this week will be another horrible week for C (the stock is now down 3% in the pre-market). Bank of America, on the other hand, has to be trading at just over $9.87 to regain access to that club.

I remember when a friend of mine had nearly 10,000 C stocks (before the reverse split) and he sold half of his position when the stock reached $5, I advised him not to do so. In retrospect, he was right, I was wrong. I think 2011 is another bad, bad year for bank stocks. PIIGS, unrest in the Middle East, and a deteriorating US economy are making things worse than last year. I would stick to trading oil ETFs, at least they are predictable.

If you are long on Bank of America Corp (NYSE:BAC), then you’re probably in panic mode at the moment. The stock has shed almost 40% of its value since the beginning of the year (the stock has lost $2 of its value in since the beginning of July!). Take a look at the following graph (courtesy of Google finance):

Clearly, it doesn’t seem like the bad days are over for BAC, the stock is down 2% in the pre-market today, and if the trend continues, the stock may very well become a penny stock (by my definition) by the end of the year. Now seriously, how low can it go?

I think that nobody can predict the bottom of the stock at this very moment, the stock is reaching another yearly low nearly every day for the past couple of months. But one thing is for sure, this stock is now undervalued. I have already stated that BAC is a good buy when it was trading just below the $10 price, and I think it’s even a better buy right now (at $8.17), but I think one should time the entrance. Maybe buy a few hundred stocks once the stock starts showing some strong signals. However, it’s important to watch these stocks closely and take immediate action (in other words, jump ship!) once the stock goes bearish again if you can’t afford to lose any money on the short term.

I am confident that by the end of 2012, the stock will close at the $30 level, but now, only mega investors know where the bottom is. Unfortunately we (the small investors) are just pawns in this game.

I’ve only traded stocks in either the NYSE or the NASDAQ markets. I’ve never traded any stock in the AMEX stock exchange, partly because the stock prices are delayed even on my broker’s website (I’m not sure they still are). Another reason that I’ve never traded stocks listed in the AMEX (American Stock Exchange) is because that I feel that the stocks listed there are not solid at best, although AMEX is the third biggest market after the NYSE and the NASDAQ.

Now since I’m on a roll making these “lists”, I have decided to make a list of all the companies (and their stocks) listed on the AMEX stock exchange. Maybe there’s a diamond in the rough somewhere (but, as Captain Barbossa once said, “I rather doubt it”).

Here’s the list (note that I’ve ordered the companies by market capitalization and I’ve also added their contribution to the AMEX market):

Some observations:

• The total value of the AMEX market is $228,269,077,385 (just over $228 billion), which is just 2% of the size of the S&P market.
• The two companies with the largest market cap on the AMEX market constitute over 50% of the size of that market.
• The top company listed in the AMEX market is Britich American Tobaccco, which is a sin stock, but maybe not the ultimate sin stock.
• The bottom of the list consists of a fund (Cornerstone Total Return Fund Inc) with the smallest market cap I’ve known of ($9).

I was just checking C this morning in the wake of yesterday’s horrors. It is trading at a one year low (of course, after taking the reverse split back in May into consideration) of $34.81 (that’s only $3.48 before the reverse split). The stock right now is dirt cheap, here’s why:

– Citigroup is here to stay: This is a very, very strong back. Too big to fail? You bet!
– The stock is trading way below its book value: Citigroup’s book value is $58.46, which is a whopping 67% above its current price.
– The company is making money, the current EPS is $3.29, and it’s climbing.
– The P/E ratio of the stock is just over 10.

I think Citigroup is a very attractive buy at this point, and I’m sure that a $35,000 investment will definitely make you at least $3,000 within a week or so. Not too bad huh?

I have never, ever lost money on Citigroup. I just love this stock more than any other stock!

I’m sure you’ve already heard about the bloodbath yesterday on Wall Street. The Dow was down 4.31% and the S&P 500 was down 4.78%. The market is obviously in panic mode. I think at this point, it would be interesting to know how much money the stock market has lost.

Nearly a month ago, I have calculated the total value of the stock market, and back then it amounted to $23.34 trillion. Now it’s easy to assume that the total loss in the stock market (by looking at the Dow and the S&P movement) was around 4.5% on August 4^th. So, the total loss, in dollars, would be: $23.34 trillion x 4.5% = $1.04 trillion. Yes, the stock market lost more than $1 trillion in only one day. For those of you who hate stock traders and are gloating, don’t. Stock trading is a job like any other job, except that the person is working with money. It’s not nice to be happy when others are losing. Some investors lost quite a bit of money yesterday, and no, “it’s not easy comes, easy goes”. Try to live with the stress for a few days and you’ll see what I mean!

After my previous post on the stocks making up the Dow, I have decided to create another post which lists the stocks that make up the S&P 500. Obviously, as the name implies, there are 500 stocks that make up the S&P 500 (one of them is now inactive).

The list below is ordered based on the market capitalization of the listed companies:

As you can see from the above table, Exxon (NYSE:XOM), the #1 contributor to the Dow index, is also the number #1 contributor to the S&P 500. Any movement in this stock affects the two major American markets.

The total value of the S&P 500 (in other words, the total market capitalization of all companies making up the S&P 500) is just over $12 trillion. Not a lot!

For those of you who are interested, here’s a breakdown of S&P listed companies by industry:

• Finance: 82 listed companies
• Services: 81 listed companies
• Information: Technology: 72 listed companies
• Industrials: 62 listed companies
• Health: Care: 50 listed companies
• Consumer/Non-Cyclical: 41 listed companies
• Energy: 39 listed companies
• Utilities: 35 listed companies
• Basic: Materials: 30 listed companies
• Telecommunications: 8 listed companies

Notes:

– The above data (market cap and contribution to the S&P 500) is valid as of August 4^th, 2011.
– Marshall & Ilsley Corporation (MI) is inactive (hence the market cap of 0) yet it is still listed under the S&P 500.

This article (as well as all other articles on this website) is an intellectual property and copyright of Fadi El-Eter and can only appear on fadi.el-eter.com.

I know that this post has nothing to do with stocks, but I think that many MBA candidates will benefit from it, and that’s why I’m publishing it on my website.

When you want to apply for an MBA, you are asked for a statement of purpose, here’s what should be typically included:

– Explain why you want to pursue an MBA, while telling the reader a bit about yourself.
– Explain why you want to do an MBA at the specific university you are applying to.
– Conclude on how pursuing an MBA at the specific university you are applying to will help you fulfill your dreams.

Here’s my statement of purpose that I presented to JMSB (John Molson School of Business in Concordia) and got me accepted into the program:

I have made some drastic changes to my life since the beginning of the year: I have quit my job, I have started my own company, and I have freed myself from all the non-productive endeavors I was pursuing. Starting my own company was perhaps the most important change that I did, and what a change! It made me realize that when you’re the boss, you tend to work more because it’s your business, you tend to care more because it’s your business, and you want to learn more how to make your business better, because again, it’s your business. Since I was already working and caring more, I now wanted to learn more, and although I was an IT Manager in my last two jobs as an employee, I still lacked a lot when it comes to management, business, and people skills. I also knew that I was not following a standardized process when I’m running the business, my business; I’m merely applying what I’ve learned in my previous jobs, which may or may not be the right (or optimal) process. Learning more about all these things is no longer a want, it is now a need.

As I had already been accepted as an MBA student and had the chance to attend some sessions, I knew that an MBA is exactly what I want to become the man I want to be: It will give the discipline I so much need, it will give me the tools to run my business the right way, it will enhance my professional network (on the national and the international level), and, and last but not least, it will sharpen my management expertise.

But where I could do my MBA? I found that there is no better place than the John Molson School of Business at Concordia University (here in the very beautiful city of Montreal), not because I had already been accepted there in the past, but because of the school’s reputation and worldwide reach, the brilliant professors that teach in this school, the quality students that attend this school, and the advantage this school will give me over my business competitors.

I believe that an MBA at the JMSB is the right decision to advance myself and my business in this ever competitive world. It will open my eyes to opportunities I never knew existed before, it will complement my business, and it will make me a better man, a man who’s proud to look at the mirror and smile for the achievements he has made so far, and a man who can only see a bright, prosperous, and exciting future.

Feel free to adapt the above to your needs, and don’t forget to add your name (not mine) at the end of the document!

Good luck with your MBA!

I see him everyday, he looks sadder and sadder, yet still hopeful, he checks Google finance to see RIMM’s latest price, he then logs in to his investor’s account, maybe Google is wrong. To his horror, Google is right, RIMM has reached another new low.

I am talking about one of my work associates. The guy has a few thousand shares of RIMM which he bought at the ridiculous price of $80. His loss is now over $200,000 (yes, that’s two hundred thousand dollars). The guy never sold the stocks when he had the chance, instead, he kept them, thinking that the RIMM’s catastrophic fall is only a blip in its long term charts. Obviously he is wrong, he knows it, but he doesn’t want to admit it. He always asks this question loudly “Will RIMM ever recover?”.

I feel sorry for him, and I feel more sorry because I know that RIMM as a stock and RIM as a company are both finished. RIMM can never reach the $50 level again, never mind the $80. In fact, I think that RIMM will trade in the single digits by the end of the year (but I would not short it). Unless a miracle happens, like if RIM comes up with the next iPhone, then the company’s intrinsic value will worth nothing by the end of 2013. Too much competition, mediocre products, and wrong strategies are the main reasons for RIM’s imminent death.

RIM’s executives are apparently no longer oblivious to the fact that RIM is just two steps from its grave, and they’re trying all kinds of CPRs to revive it, but as the saying goes, “Stick a fork in it, it’s done”.

The Dow Jones Industrial Average, as most investors now, is an index that depends on the performance of 30 “Blue Chip” stocks. So what are these stocks? In order to answer this question, I have decided to compile a list of all the companies (or stocks) that make up the Dow. For your convenience, I have ordered these companies by market capitalization. I have also included, in the last column, their contribution to the Dow as a percentage.

As you can see from the above list, the Dow Jones consists of five computer related companies, three pharmaceuticals company, two banking companies, two oil companies, two telecommunication companies among others. 10% of the Dow is controlled by Exxon, the mega oil company.

Note: The above data (market cap and contribution to the Dow) is valid as of August 1^st, 2011.