Sunday, March 10, 2013

Watch List (looking for a pull back to pick these up)

Stocks in rank order for my desire to add to portfolio and price points

(Last update March 10, 2013)
Summary: As the DOW is setting records, the doomsayers are predicting the end of the world as we know it. And they may even be right, but I want to think my priorities through carefully.

Increase small caps ETFs VBR and SCHA on a significant drop in basket Cs. This strategy is defined here.

Wal-Mart (WMT) currently 72.02, one of my regrets for the 2012 trading year was dumping my large WMT position in basket Es, but I had to because of the rules of the basket. I have a small position in basket Sk. The 20% drop would be 57.60. If it drops to 50, I think I would try to take it to core stock status.
12/17/12 69.20
3/1/13     71.74
4/2/13     76.02  Here is a pretty negative article though:

Amazon (AMZN) I think this is one of the best opportunity companies on planet earth for the next few years. It last traded for 252.05 and its 52 week low was 166.97. A 20% drop would be 201. Anything below 170 is interesting, anything below 150 would rock my world. I hold a significant position in basket Sk, but at the right price would like to add.
3/1/13 265.74
3/22/13 257.75

Intuit (INTU) last closed at 61.44 with a P/E of 25. Decision, extremely deep limit 50 shares@55, probably will not hit, but if it does, we have opened this position in basket Ts.
12/31/12 59.48
1/4/13 62.22, up 4% for the past 30 days.
3/1/13 65.04, going to take a miracle for this to dip to my buy around range

Whole Foods Market (WFM) added to watch list 3/1/13. This is one of my three favorite grocery stores,  (the privately held Wegmans and Trader Joes are the other two). I have just set a Google Alert and will begin to study it. Since it is trading closer to its 52 week low than high, I am thinking about opening a small position in Ts so I look at it a lot. Let's see what research we can find: has a 1 yr expectation of 103.15 and it is a Cramer pick
Ameritrade's analysts are neutral to poor
Schwab rates it a C, their analysts are neutral
Etrade analysts tend to be negative
Motley Fool CAPS is 4 out of 5 stars
Decision: I will do a better job tracking this stock if I own 10 shares of it in the mutual fund, limit@85.25
3/1/13 85.79
3/8/13 85.00

General Mills GIS) is in basket Ck (dividend). 3/30/13 they are increasing their dividend and will probably do better in a downturn than weaker stocks. P/E is fair 18.19, but debt is higher than I like to see. Expect this to be a fairly stable plodder. Buy around 38.00.
3/30/13 49.31

Disney (DIS) is up over 30% for the year. I hold this in my Ts mutual fund, it last closed at 49.66, to add to the position, I would want to see a price point of 70%, 34.66. And don't forget the Star Wars movie.
12/17/12 49.28
3/1/13     55.33

Biogen Idec (BIIB) has just had their Multiple Sclerosis oral pill approved. This will likely be the most prescribed treatment for MS. The stock is very pricey right now. Buy around 120.00.

Starbucks (SBUX), this only makes sens if there is a significant drop. Last closed at 51.84, 80% would be 41.47. Their loyalty program appears to be working, 86% growth in subscribers and they seem to be making progress at becoming a so called "third place" something other than home or office. They are also doing well internationally.

In January 2013 the news was abuzz about Starbucks legal tax minimization strategy in the UK.

The opportunity for them to really win is in the food. I read once that one third of purchases in the US at Starbucks include a food item. As we see MacDonalds continue to struggle at least for now it is far more likely for Starbucks to  intrude on MacDonalds food sales than MacDonalds McCafe to impact Starbucks coffee sales.

12/17/12 54.58
3/1/13    54.87
3/22/13  57.38

Panera (PNRA), is a stock I sold this year to lock in profits, it is currently richly valued. More analysis can be found here. Last trade 160.5, 80% 128.40.
12/17/12 160.52
3/1/12     160.50

Chipotle (CMG) is a stock I sold to lock in profits, it is currently richly valued, but slowly drifting down. It closed today at 263.75 and my fiscal cliff buy around is 210.80.
12/17/12 286.68
3/1/13     319.74

MSC Industrial Supply (MSM), they have the logistics figured out so their customers do not have to hold onto inventory. Wonderful company and a candidate for the Sk basket, bit overpriced need a dip.
1/22/13 87.79

Williams and Sonoma WSM. Strong leadership, dividend payer and intentionally trying to move more into an online store ( though there is no substitute for walking through a cooking store). They also are Pottery Barn, I must confess I have never been in a Pottery Barn. Maybe next time I am in Richmond.
3/22/13 49.83

Movado, (MOV) I made some serious cash on this watchmaker and locked my profits into a CD. Last closed at 34.69 and 60% would be 20.81.
12/17/12 31.34
3/1/12     36.40

3D printing is an overpriced asset class. SSYS last 74.95 70% is 52.46, DDD 70% 31.30, but it has high debt to asset ratio so SSYS is probably wiser.
SSYS 3/22/13 74.80
DASTY, a Euro company is up 42% for the year, at 50% I would buy at 56.88. Proto Labs (PRLB) is smaller and they are up 24% for the year, they last closed at 36.00 and 80% is 28.8. And to drive these printers you would need Autocad, ADSK at 80% is 26.50. NOTE: I have lost money with ADSK in the past so this needs to really drop to encourage me to buy it.
ADSK 3/1/13 37.36
3/22/13 41.39

 IPG Photonics (IPGP) in the Es basket has been a good stock to own, but it is richly valued. It last closed at 59.10 so 70% of that would be 41.37.
12/1712 62.48
3/1/13    60.11 (better set a Google alert and keep a close eye)

Celgene (CELG) is the Ritalin company, they also have a number of cancer fighters. Adding to watch list 3/1/13 105.62
3/8/13 111.36
 HSBC has been on a tear all year despite everything we read about Europe. Last traded at 51.10, I would be scared even at 80%, but 70% puts me at 35.77 for this dividend payer.
12/1712 52.13
3/1/13    54.83

Wabtec (WAB) produces about half of all the rail brakes and safety products in the US. They are a bit overpriced, their debt is close to the upper limit I will tolerate in a stock and they are very volatile. This certainly would add diversity to the portfolio. But at the right price: the last close was 84.62 and 70% is 59.23.
3/1/13 97.72

 Polaris (PII) don't make a big bet, but an off road vehicle maker would add some diversity to the mutual fund. Last trade was 84.81, 20% drop would put me in the 67 range. They compete with Arctic Cat, (ACAT) up 90% for the year, anything below 15 would be a sensible buy.
3/1/13 86.77

 Philips 66 (PSX) is a refiner. It has been on a tear all year and this dividend payer is richly valued. Now that is a bit of a risky investment even though we all know people are going to need gas. The economic success depends on external factors. Last close was 52.37 and 70% is 36.66.
3/1/13 63.90

Interesting ETFs

MOO is the largest agriculture ETF and is up for the year despite the drought. Last trade was 52.17 and 80% yields 41.73.
12/17/12 53.12
3/1/13     54.13

PUW is a progressive energy ETF. They do renewables and making gas from natural gas and such. 19.68 would be the buy point. Keep this as a small buy, and long term hold, renewable energy has struggled, but should eventually work.
12/17/12 25.00
3/1/13     27.08

VIS, Vanguard Industrials is an industry sector ETF. Therefore it will be cyclical. The best way to make money is add to your position on the bigger dips and reduce it a bit as it starts to peak. It is up 12% for the year, but it is also fairly volatile, so if there is fiscal cliff churn an 80% might hit fairly early in the game. It last traded at 70.50 and 80% if you want to execute early in the churn is 56.40 and 70% is 49.35.
12/17/12 72.09
3/1/13     77.23

WOOD is a timber ETF, I think the expense ratio is about .48. It is up 15% for the year, but has paid a decent dividend, though their track record is not like clockwork. It last closed at 42.73, 80% yields 29.9.
12/17/12 43.61
3/1/13     48.38

December 1, 2012 Fiscal Cliff Thesis

Update 3/1/13 We are still in an overall bull market, we just fell off another fiscal cliff and nobody but President Obama and Ben Bernanke seemed to panic. I am very glad I did some profit taking and that money is locked into short term CDs. In the future I think I will lock in Municipals to try to reduce tax exposure.

Well it is looking more and more like we are going to fall off the fiscal cliff. My thesis is this will start to freak some investors out and we could see some price drops in the next few weeks. That is of course, the time to buy, but what are the best companies to buy? Probably companies that have gotten too pricey right now to add to the position.

  • Update December 17, 2012, so far we have enjoyed an overall up market since I first wrote this and that is a beautiful thing. I have zero sellers remorse over the five incredibly well performing equities I sold in Step 1, I refuse to attempt to time the market, just give me my 20% increase or better and I am a happy chappy.
  • Update December 22. 2012, on Monday I will be closing my positions in the Ts basket (mutual fund) in: KAI, AMZN ( still have a position in Sk), CMC, BMC, DLB and PCAR. This is pure profit taking with an intent to purchase CDs.

Step 1, I want to profit take on some of the best performing equities in the Ts mutual fund. On December 3, the following market orders should execute.

RAX Last@ 69.12 12/22/12 72.86
ISRG 529.00 12/22/12 496.76
MA 488.68 12/22/12 493.57
ROIC 12.69
WSM 45.26 12/22/12 43.45

UPDATE: December 3, 2012, The orders did execute and I am cash heavy in Ts, but I am comfortable. I like the idea of keeping some powder dry before we find out about the fiscal cliff. I am VERY glad to have unloaded ROIC at a profit. I did my homework before picking it up, but I missed the whole thing about 41 million in warrants (essentially long term options designed to expire October 23, 2014). This equity is too marvelous to me and I doubt I will pick it back up.

Step 2, Keeping in mind the WASH rule, I should not add any of the above list back until January 4, 2013. That said, they are all great companies and I believe in their business models, so at the appropriate time and at the appropriate price I would be tempted to add them back.

Step 3, For the next few weeks, I need to start working on a list of other stocks/ETFs/mutual funds where I would like to go shopping. I think one good place to add new money is in basket Sk. Online retail is only going in one direction, up, up and away. However, any and every stock/ETF/Mutual Fund that you have designated as core to your portfolio ( you are heavy in this position) deserves a chance to have the position increased at the right price. Finally any equity that I closed in the Ts basket to profit take may be a good choice for reopening the position. They are companies I know and have researched so adding them back could make sense.

Monday, March 4, 2013

Investing in an up market

This has been modified from an earlier financial blog. I am no expert. Conditions change, we each have to do all your own thinking, but in October 2012, the market was up and bonds were fairly down. According to the universal wisdom, Bonds and CDs tend to be safer than equities, but they often do not reward as much in the good times.

I like CDs when I am getting subpar interest because there are two safety nets; first the bank has to fail and, second, FDIC would have to fail (and if that happens, I have bigger problems than my lost investment.) However, because it is such a safe investment, a CD tends to have a low interest rate most of the time. My thesis is that if I invest a thousand dollars in equities and earn 20 percent on that investment in an "up" market and then move it to a CD at two percent, I can think of my interest as an average of 20% and 2% and I have a much better and safer deal. Pssst: be sure and hold that equity for at least a year to avoid a potential 35% capital gains tax. Speaking of tax, if you invest with discipline, you will start to earn money. And the various governments will want to tax you on that money. You will have to do your homework, but in many states they do not tax money earned on municipal bonds from that state. Not being taxed can make a 4% return sound a lot better.

6/18/12, this strategy has really been working out for me. Since I have started doing this, there have still been no decent returns anywhere outside the stock market.
  • We "average" into the market, making some investment at least once a month with money budgeted for that purpose that we can tie up for at least five years. We are patient, except for times the market is screaming upwards, we we try to buy with limit orders
  • We begin with broad ETFs, because they should not go bankrupt; we favor ETFs that pay dividends
  • When we buy individual equities, we realize we are investing in a company, we have a thesis and we have a way to know things about that company
  • The majority of our investments are for the long haul, statistics clearly show the more we buy and sell, the less likely we will grow our portfolio
  • Not every equity will be a 30% return in the short term, but from time to time we look at an equity that we bought and did well, sell it as profit taking, and invest the principal and the profit in a safer alternative like a Municipal Bond or a CD. We do this because we know we should have a diversified portfolio and no same person would buy a multi-year CD at 1% interest at a time when there are potential inflationary pressures two or three years in the future. However, if we made 30% profit and use that money to buy the safer investment, we are protected from inflation. 

  • 10/3/12 The strategy is still working out for me. A couple of speed bumps I have run into. Since I am buying into the market using "averaging", I didn't buy all of any position at one time. So, now at profit taking I have a longer delay. There are a couple positions I would like to close, but while I opened the position much longer than a year ago, I have been adding to it and have to choose between not taking my profit now or paying some capital gains.

    5/1/13 Wow! Talk about an up market! At this point I am slowing way down on putting new money into the stock market, though I still open positions with worthy companies and will look closely at a bit more profit taking and putting that money into a wimpy yielding Municipals that are short term focused.