Last week, I was looking at a research note from Tom Brown of Bankstocks.com defending First Marblehead, a student loan company that has had wild swings up and down the past few years. I knew that First Marblehead was one of his top holdings, but nonetheless I was impressed with the vigorous defense of the company. The fact that Tom Brown has forgotten more about financial stocks than I could ever hope to know was one factor in his favor. You see, Brown was the top Wall Street banking analyst for eight of nine years between 1989-1998, according to Institutional Investor.
I was actually thinking to myself, if Brown feels so strongly, maybe I should take a flyer on this one. Fortunately, I didn’t.
First Marblehead Shares Sink on Downgrade, Rising Concerns Over Ability to Securitize Loans
NEW YORK (AP) — Shares of First Marblehead Corp. sank Wednesday after an analyst downgraded the stock on rising concern over the student lender’s ability to securitize loans in December and beyond. Shares plunged $3.79, or 15.2 percent, to $21.19 in afternoon trading, after hitting a 52-week low of $20.88 earlier in the session. Shares have traded between $24.98 and $57.56 in the past 12 months.
This episode has just reinforced for me why I stopped trading eighteen months ago. It is simply too complicated, too risky and too time consuming for me to invest in stocks. Today, I only own two, and they are in retirement portfolios for the long term. They are EMC, the data storage company, and Chesapeake Energy, the natural gas company.
I have turned to exchange traded funds and to a lesser degree, mutual funds. Among my favorites are,
Oakmark Equity & Income
Oakmark Global
PowerShares Water Resources (PHO)
Rydex S&P Equal Weight (RSP)
iShares S&P Global 100 Index (IOO)
MidCap SPDRs (MDY)
I couldn’t be happier with my decision, I don’t need the stress that comes with owning stocks, and this week was a great reminder of that.