bottom or heading for new lows?

that's the big question now that the S&P 500 is near the march lows again. are we stopping here or are we heading much lower? My thought is I have no idea. What I do know is to focus on individual stocks that are attractive based on their secular growth prospects, competitive barriers to entry, good or improving profitability and reasonable valuation.

Heard about an interesting nat gas company to compliment Contango. Its symbol is PHX --Panhandle. They have 18 employees and they own the mineral rights in thousands of acres in Oklahoma, Texas and Arkansas. They are moving from just taking the mineral right royalty to having a working interest in the wells drilled on their property. Its more risk but if they choose wisely they can make a lot more . Just like Contango these guys outsource everything to actual operators.

There are a few issues to consider with PHX -- natgas prices are very cheap relative to oil (6 to 1 btu ratio between oil to gas). If nat gas prices reach $20, this stock is very cheap but so are most other nat gas companies. The next key is how much reserves they are going to add in the next couple of years. reserves have been growing at 20% or so a year -- there are billions of mcf in probable reserves plus plenty in possible reserves. Management talks about thousands of potential wells, which gives you some idea of future potential.

spent some time reading over the rails this weekend too. not sure I want to buy one but I am still learning the ins and outs of what drives the rail company earnings. I am intrigued by kansas city southern because of the mexican link especially to a seaport where they are the only rail connection. I also like the fact that they only have 10% of revenues from coal -- while Burlington Northern is convinced that coal will be powering utilities or years to come as the largest electricity fuel -- I'm not as convinced. many of the other rails get 20% of revenues from coal.

MCO -- planning on selling some put options -- betting that the trading range for MCO holds based on their business not really being able to get much worse and buffett owns 20% and presumably would buy more at the right price. if I sell a $30 put for August then I have the chance to make $2-3 per option assuming the stock stays above $30 for another 6 weeks. I am pretty confident that MCO will rally along with the rest of the market so unless the market just tanks, we should get a rally in MCO back towards $40. My plan is to sell puts at this price and calls if we get closer to $40. This way I can make money at both ends of the trading range.

I did sell a aug $95 call on ILMN last week -- the stock has done very well but the valuation is getting a little high.