Tuesday, April 12, 2011

11 Comeback Cities for 2011

Downtown Flint, Michigan.
Kiplinger -- "Hundreds of cities across the country were hammered by the recession, many experiencing double-digit declines in employment, throwing thousands of their residents out of work.

For some particularly hard-hit metro areas, 2011 will bring a dramatic turnaround -- new investment by businesses, growth in the number of jobs and a reblooming of hope.

Recovering all the ground they lost will take years and many of the cities are still suffering with unemployment that exceeds the national average. But these cities are enjoying a surprising and welcome upward bounce."

MP: The list includes Flint, Michigan, which is experiencing an impressive revitalization of the downtown area (see photo above), and is in the process of re-inventing itself with the slogan "From a Factory Town to a College Town" (Flint has about 30,000 college students at four different schools: University of Michigan-Flint, Kettering University, Baker College and Mott Community College). 

18 Comments:

At 4/13/2011 12:33 AM, Blogger PeakTrader said...

In response to "11 Comeback Cities for 2011," I've been focusing on some comeback stocks.

Portfolio management is very important, along with economics, fundamental analysis, and technical analysis, although almost every technical indicator fails at some point.

A portfolio stop loss, for example, will avoid large losses and preserve capital in "irrational" market periods, or taking advantage of volatility to lower average costs can minimize losses, along with managing the cash position.

So, for example, although a stock e.g. KBH fell from 16 to about 11 1/2 over the past three months (from the continued poor housing market), your average cost, e.g. from sound portfolio management, could be under 12.

Of course, managing (which includes some trading) a stock you know is a big advantage. I tend to focus on few stocks (in recent years: C KBH AMGN IMGN DNDN CTIC XOMA RMBS).

Also, some hedging can work out more often than not (e.g. if you wait for an excellent opportunity, it eventually shows up).

It's not that difficult to "hit it big," although it may happen a year or two later than you think. Nonetheless, the stock market is a "steep learning curve," and I wouldn't risk what you can afford to lose.

Of course, it may be easier to buy something like gold and hold it (with a stop loss) for a couple of years and make a 50% return. However, that may be too small of a return to some.

 
At 4/13/2011 8:31 AM, Blogger PeakTrader said...

To give a simple example of portfolio management or optimization, when KBH opened low recently at 11.30, I bought a heavy position and when it fell to 11.00, I used the remaining cash to buy more.

It was more complicated than that, since I sold all the AMGN, at a higher price, and later bought SPY Jun puts at about 134, for a potential market double top, because some indications suggested a market pullback, although the market often rises a little higher to fool people before topping.

Using portfolio management and economics (the housing market was still weak), I had a small to moderate position in KBH before it opened low that day, e.g. 30% of the portfolio at most.

I sold the two KBH positions I bought that day at 11.50 and 11.80, which lowered my average cost and built-up my cash position again.

If KBH continued the other way, e.g. between 10 and 11, I would've set a stop loss at 10, although KBH will likely double or triple within a year or two (and kept a 20% "core" position for a selling price target, e.g. 18).

 
At 4/13/2011 8:31 AM, Blogger hidisbeeric said...

Maybe we should wait a few years before we start declaring them "comeback cities"?

 
At 4/13/2011 9:33 AM, Blogger juandos said...

Hmmm, I would like to echo hidisbeeric's comment...

A little less than a year ago the Economist blog had this: Texas, here we come

'Migration statistics reveal that people are moving in droves to Texas. Why? Jobs and no state income taxes. High earning New Yorkers and Californians can take home between 9% and 11% more of their income by moving to Texas'...

I don't know about all the cities listed in the Kiplinger's bit but I do know that both Seattle and Portland (both places governed by liberal, tree hugging moonbats) are not slated for a come back of productive individuals due to excess taxes, fees, and regulations...

 
At 4/13/2011 10:29 AM, Blogger Buddy R Pacifico said...

Flint, Michigan revitalization:

Will Michael Moore film a movie based upon this positive premise?

Peak Trader links Comeback Cities to comeback equities:

Peak seems to take trading positions in impressive tech and stocks, but I wonder about KBH (KB Homes). KBH had a cancellation rate of 39% for the last quarter and is losing money . Further, Debt to Captilization is 77%, yet the CEO is taking in $ 3.5 million in salary and bonus. This would seem to be a tricky equity to manage successfully.

 
At 4/13/2011 10:38 AM, Blogger PeakTrader said...

Juandos, a lot of people moved to Colorado from California over 10 or 15 years mostly in the 1990s.

Colorado had a huge homebuilding boom that never crashed, and housing prices doubled and tripled.

Yet, although people in California are proud of their high incomes and government policies, they work much harder for a much lower standard of living than in Colorado.

Also, I may add, the restaurants in Denver are better than in San Francisco, and much cheaper. Steak at the supermarket is twice as much in California, etc.

 
At 4/13/2011 10:56 AM, Blogger PeakTrader said...

Buddy, yes, the housing market may be heading into a double-dip:

Case-Shiller Data Suggest Possible Housing Double-Dip
March 29, 2011

Housing data for January, released today (March 29) by Standard & Poor's/Case-Shiller, show home prices off to a dismal start in 2011.

"The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing."

Meanwhile, the Conference Board reported more discouraging news: consumer confidence in March fell more than anticipated to 63.4 from 72 in February..."The decline reverses five straight months of improvement."..."A reading of 90 indicates a healthy economy. The index hasn't approached that level since the recession began in December 2007."

 
At 4/13/2011 11:11 AM, Blogger Buddy R Pacifico said...

Peak, cities are making comebacks but housing inventory in those cities is probably adequate. It looks like some major housing companies are building to keep salaries in place for key people.

BTW, the pitch for new housing in the Phoenix area is: "you want to be in a new community, that is not full of old abandoned homes, so buy in our just completed project".

 
At 4/13/2011 11:20 AM, Blogger Kevin Peterman said...

Sim City predicted this years ago

 
At 4/13/2011 12:07 PM, Blogger w said...

Retail shopping downtown will not work and that includes Flint...

BTW, how much of the taxslaves money went into this so called restoration project?

 
At 4/13/2011 1:09 PM, Blogger VangelV said...

Of course, managing (which includes some trading) a stock you know is a big advantage. I tend to focus on few stocks (in recent years: C KBH AMGN IMGN DNDN CTIC XOMA RMBS).

I would say that you are playing with fire.

C would have been bankrupt without government intervention and is still in trouble. While the Fed has bought a lot of its toxic paper, it is hard to figure out the quality of C's portfolios, particularly given the risks going forward.

KBH is in an industry that has massive overcapacity and terrible demographic headwinds. Nobody in his right mind would pay almost twice book value for a similar company when there are other much better candidates.

The biotech stocks could do very well due to sentiment or actual drug approvals that pan out as expected. But for every person that I know who has made a lot of cash in the sector I know more than one who has lost a pile. Sadly, the sector has far more gamblers looking for quick gains than prudent analysts who are able to understand what is going on at the companies and figure out when or if the regulatory hurdles will be cleared.

The way I see it, there are much safer ways to make a decent return than to buy questionable companies without sustainable earnings at a time when the stock market could still go the wrong way.

 
At 4/13/2011 2:23 PM, Blogger PeakTrader said...

I try to take big risks for big returns in a safe portfolio.

Sometimes a gamble pays off big, e.g. the RMBS Mar 80 2000 calls I had before RMBS rose from 70 to 470 in three weeks (before the stock split), while the Mar 140 calls rose from $6 each (1/16th) to $33,000 each (if you sold at the top). Of course, there've been other big winners, almost of a similar scale.

Nonetheless, it's easy to lose more money than you make, over time, which I and people I know have proven often before.

 
At 4/13/2011 3:19 PM, Blogger Buddy R Pacifico said...

Peak Trader has linked Comeback Cities with comeback stocks. Two of the stocks, that Peak uses for his speculation strategies, are headquarted in a comeback city, Seattle. The two stocks are DNDN (Dandreon) and CTIC (Cell Therapeutics). Bio-Tech will help Seattle comeback.

Cell Therapeutics is the worst performing in the Bio category, with one opinion writer calling for the resignation of the CEO. Dandreon is probably the best Bio with a possible market for itsprostate cancer fighting drug Provenge of $10 billion. CTIC is wildly speculative and DNDN could be a handsome investment. Individual results may vary.

 
At 4/13/2011 3:36 PM, Blogger Benjamin said...

I thought Flint was going to hit the big time with lint rollers.

 
At 4/13/2011 7:40 PM, Blogger PeakTrader said...

Buddy, when I research small biotechs, I focus on their drug pipelines, or the potential quality of their drugs (also, it may be silly, but I also take into account if I like their names).

However, you may have to research about a hundred small biotechs to find one or two worth taking the risk.

I recall when I did an extensive search, I picked DNDN and CTIC at the same time, which was quite a while ago, and I was more confident with DNDN.

Also, before that, I recall picking two biotechs at the same time, SQNM (which I forgot to list) and XOMA. I was more confident with SQNM.

All four of those stocks went way up after I picked them, although some fell further before they went up or took longer than I expected to go up. Obviously, they're volatile too.

Yet, if I followed them more closely, I'm sure I would've made a big net gain, or hit it big on one of them.

Moreover, I may add, in the early 2000s, I picked two biotechs at the same time, i.e. IMCL and DNA. IMCL was a big winner for me, and DNA was a smaller winner. I missed the big move on DNA, because I was way too early (DNA became the largest biotech in the world and was eventually bought by a European firm).

 
At 4/13/2011 8:02 PM, Blogger PeakTrader said...

Anyway, in the early and mid 2000s, I was focusing mostly on mid and large cap cyclical stocks; the type of stocks VangelV implied, e.g. steel, paper, diversified machinery, etc..

 
At 4/14/2011 12:03 AM, Blogger Audacity17 said...

I was born in Flint and grew up there in the late 70s, early 80s when the big cracks began to show at the big 3. I left in 1989 and hadn't been back. Last year I located my best friend growing up and had a nice phone conversation. He told me about all the universities there and how it was a college town now. They've done it again. They've put all their eggs in one basket. A basket supported by the big government education complex. A basket that will implode when the money runs out. Stupid Flint.

 
At 4/18/2011 4:08 PM, Blogger VangelV said...

Anyway, in the early and mid 2000s, I was focusing mostly on mid and large cap cyclical stocks; the type of stocks VangelV implied, e.g. steel, paper, diversified machinery, etc..

The large cap cyclical stocks is not what I had in mind. I have been 95% in energy, gold, and oil since 2000.

 

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