Building a Valuable Wish List: NYSE Euronext and Devon Energy

I truly prefer short articles and "cut to the chase" analysis. But the real reason I enjoy reading Richard Wendling's blog is because he was one of the few analysts who called this stock market crash many months before it happened.

Richard likes to follow the buying and selling habits of the stock exchange "specialists", who are the masters of "buying low and selling high". Some think that the specialists are the true "market makers" in the literal sense of the word.

Richard and I stay in touch, but I confess I didn't listen to Richard like I should have. It cost me dearly but I have learned my lesson.

Why should any of us "fight the tape" or forget that "the trend is our friend"? It is nothing short of foolish, and we have paid a large "tuition" to learn our lessons well.

Why not buy what the "big players" are buying and why not do it when they are doing it? Why not be a seller when the "smart money" is selling? it is less risky, more boring, and in the long-run probably much more profitable.

So I'm starting to create a "wish list" of great stocks of financially sound franchises that are the kind of companies that the specialists would be buying and selling.

Take NYSE Euronext (NYX). With an almost $7 billion market cap, this great "franchise"offers various financial products and services. It provides securities listing, trading, and market data products and services.

The company engages in trading cash equities, exchange traded funds and other structured products, and equity and interest rate derivatives, as well as the creation and distribution of market information related to trading in these products. It operates two securities exchanges, the New York Stock Exchange LLC (NYSE) and NYSE Arca, Inc.

In case you didn't know, the NYSE is an equities exchange and provides an orderly, liquid marketplace where investors buy and sell listed companies' common stock and other securities. NYSE Arca, an all-electronic stock exchange in the United States, engages in trading exchange-traded funds and exchange-listed securities, as well as equity options.

It also operates a distributed connectivity network, and provides commercial trading and information technology solutions for customers and other exchanges. In addition, the company provides international services for regulated cash markets and derivative markets in Belgium, France, the United Kingdom, the Netherlands, and Portugal. As of December 31, 2007, it operated six cash equities and six derivatives exchanges.

Its balance sheet shows that it is sitting on over $1M in cash. At around $26 a share it is selling below its book value. That being said, I want to buy it at $20 or less per share. Will I get the chance? I believe I will.

Or take Devon Energy (DVN). I added that to my wish list today. Many know that DVN is in the oil and gas exploration, development, and production business. It is also in the transportation of oil, gas, and natural gas liquids; and the processing of natural gas.

But did you know that its earnings have been booming and that its operating cash flow is approaching $10 billion? At $77 a share it is selling at 9 times forward earnings and its operating margins are a mouth-watering 46%.

Yet I'm going to wait till its share price falls below $54 before I "back up the truck". This way when it spikes back to around $77 I can bag a 40% plus short-term profit, and I have enough carry-forward losses to make it a tax-free profit.

In this economic environment there are many, many wish list candidates from the following sectors: Energy, Healthcare, Gold & Precious Metals, Retail, Industrials & Materials, Internet and Software just to name a few.

While I'm building my wish list and waiting for prices to come to my buying level, I can also sell puts at the strike prices that match those buying levels. I warn you, make sure you know what you're doing if you try this yourself.

In the weeks ahead I'll be sharing some other candidates and prices that are worthy of our consideration. Do your own due diligence and keep an eye on Richard Wendling's blog to see what stocks he's following.

We are getting closer and closer to "the buying opportunity of the century" and it behooves us all to be ready to participate as much as possible. Let your loses and the "tuition" you've paid inspire you to be a more patient and saavy investor.

Stock position: Short NYX.