- Do not limit purchases/sales to the advice from Motley Fool Deep Value, but pay close attention to them. Ron Gross made Kathy and I some serious dinero with MDP and that opened right as the great recession hit.
- Seek out as much value advice as possible, run screens, take a peek at top holdings of value oriented ETFs and mutual funds.
- After initial build out of 10 equities no equity should comprise more than 10% of the basket,
- Avoid equities with dividend yield > 4%, that might not be sustainable
- Factor debt and P/E into decisions, but the most important factor is underpriced, or unfollowed stocks
- Use limit orders to buy and trailing stops to sell
- This is not a dividend reinvestment play, use the cash to buy more equities
- After initial buildout, up to 25% cash on the sidelines is fine, we are looking for buying opportunities.
- If there is enough cash on the sidelines, consider aggressive limits (10% lower than last close); bluebirds are rare, but they do happen.
1/30/15 First pick: Horsehead Resources:
ZINC 185 Limit 13.35 LC 13.44 NOTE: Beta is 2.19 consider a more aggressive limit, we might be in for some chop.
Round one of a watch list, I am using the top 5 holdings of SCHV (which I hold).
XOM EXXON MOBIL CORP 3.7%
MSFT MICROSOFT CORP 3.4%
JNJ JOHNSON & JOHNSON 2.8%
WFC WELLS FARGO & CO 2.5%
GE GENERAL ELECTRIC CO 2.4%
( potential bonus #6) PG PROCTER & GAMBLE CO 2.3%
Let's do the good ol red/green analysis, keeping in mind that past performance is not indicative of future results and this is only a relative measure constrained to this small, (diversified by sector), group of equities.
30 90 180 1 5 10
XOM 5 2
MSFT 3 4 4
JNJ 2 2 3
WFC 1 1 1
GE 1 3
WOW! I am truly amazed. The blanks are where the companies are negative for that time period, would not have expected this in a bull market that favors the big guys. I think the path of prudence is to proceed carefully. I have a position with each of the equities, but opened those positions years ago. Where to start looking for purchase #2 in a value basket?
Historically Wells Fargo has done well. Let's look at a few numbers starting with debt ratios:
D2Equity 134.20 Interesting, guessing this is leverage? Pot calling the kettle black?
D2Assets 14.67 (In terms of assets they are the 4th largest bank in the US)
Last close 51.92
They just had a banging quarter, so let's drill down on them solo as opposed to comparing them to other sectors. They are up 14% for the year, but down a bit recently. Let's try a limit order and see if that Beta and some market jitter will help us open up a reasonable position:
WFC 60 Limit 51.00 Last close 51.92
This is far from an aggressive bid, they dropped $0.81 on 1/30/15, now let's see if we can set something more aggressive up.
WFC 80 Limit 47.00 Last close 51.92