SELL Carlisle Companies (CSL) at the Market

The time has finally come to issue a SELL recommendation for Carlisle Companies (CSL). The stock has performed moderately since the Research recommendation was issued on May 17, 2008. This company is poised to reach the $51 level. However, the returns that this stock has provided in the last four months say that it is worthwhile considering alternatives.

CSL was recommended when it was trading at $32.06. As of Monday September 15, 2008 CSL was quoted at $34.45. This equals a return of 7.45% in four months. Conservatively, on an annualized basis this would equal approximately 22.35% return. Selling this stock now also generates a return 3 times the amount of the dividend yield if the stock was held for a whole year. This stock will definitely be purchased again down the road.

It is always recommended that when selling a stock, one should not place an order after hours or when the market is closed. This leaves the seller in the position of being vulnerable to the whims of the market makers. Instead, place your sell orders only as a market order during market hours. Some would complain that a market order during market hours might leave some profits on the table. However, I would rather leave some money on the table rather than have it taken away from me by the trades that are placed by institutions and market makers.

    • at Monday, September 15, 2008

    What does Dow's Theory say about Bank of America?

    Today Bank of America (BAC) completed their announcement of the purchase of Merrill Lynch (MER). Although I have stayed out of the banking sector overall I was curious to see what Dow's Theory says about Bank of America. I will examine four cycles for BAC and see if there have been any predictive trends.

    Starting with the period from August of 1982 to the top at June 1986 we see that BAC went from $2.94 to $13.88. According to Dow's Theory the price of BAC was expected to fall from $13.88 to any of the following three support levels:
    • $10.23
    • $6.58
    • $2.93
    BAC actually bottomed at $3.88 in December of 1987.
    Next we have the period from December 1987 to the top at August of 1989. The price rose from the $3.88 level and peaked at $13.75. According to Dow's Theory the price of BAC was expected to fall to the following three levels:
    • $10.46
    • $7.17
    • $3.88
    BAC actually bottomed at $4.22 in October of 1990.
    Next we have the period from October 1990 to the top at July of 1998. The price rose from the $4.22 level and peaked at $44.22. According to Dow's Theory the price of BAC was expected to fall to the following three levels:
    • $30.89
    • $17.56
    • $4.22
    BAC actually bottomed at $18.16 in December 2000.
    Finally we have the period from December 2000 to the top at November 2006. The price rose from the $18.16 level and peaked at $55.08. According to Dow's Theory the price of BAC was expected to fall to the following three levels:
    • $42.78
    • $30.48
    • $18.16
    BAC actually bottomed at $18.44 on July 15, 2008.
    The next question becomes, are there any noticeable patterns that Dow's Theory provides us? Generally, each period from peak to trough (3 out of 4 times) BAC's price fell to the previous low level. What does this mean for Bank of America stock? It means that the $18.44, plus or minus 5%, is the lowest this stock will go.
    As hard as it is for me to believe that the bottom is in on this stock, I have to defer to Dow's Theory for some sort of guidance. Since Bank of America is now a bellwether stock for the banking industry, Dow's Theory is saying that either this banking crisis has hit bottom (for now) and might trade up from here (possibly in a range) or that anything below $18.44 is going to be chaotic.
    Let's watch and see how well BAC holds above the $18.44 level. I suspect that this price will be revisited in the near term. However, given all the wild moves in the market I can't be certain of what is to come after that. Did I mention that BAC has increased its dividend for over 30 years in a row? This should be interesting. Touc.

    • at Monday, September 15, 2008