Ak - Bond Funds become individual Munis

I am not an expert investor. This is my trading notebook for myself and close family, but you are welcome to any of my research. All I ask is that you do your own research and make your own decisions.

6/24/13 According to CNBC, there are now record outflows from bond funds to the tune of 40 billion.  If we use DODIX as a proxy:
7/23/13 the NAV was 13.57, on 4/10/13 it was 13.88
ACTION: set a calendar alert to reread this in six months, bond funds may become pretty cheap.

5/1/13 This Lipper report does not make sense to me. More money is flowing into bond funds than equities and exiting large caps? Thesis: the baby boomers are starting to retire and their Edward Jones (no insult intended, I have an EJ guy helping me with part of my portfolio) advisors are putting them into (expensive) fixed income bond funds. Let's just pick one of my former holdings to sample:
DODIX is up 2.12% for the year. Sounds good, but why? Some part of that has to be the inflows, according to Lipper, of 42.3 Billion in the month of March alone. Now here is the crazy thing. If we go to the fixed income section of our online trading site, we see -- utter crap --. If I can get 1.5% Yield to Maturity on a 3 year horizon the skies open up and the angels start singing. When DODIX ( or any other bond fund) bonds get called or mature, we can say bye bye to that sweet 5 -7% interest rate and have to lock in real money at rates that frankly will not keep up with inflation.

Repeat not an expert, but I have been an analyst of every sort for most of my working life. I suspect a bond fund bubble (bofunble). And if I am right, who gets hurt? Hard working folks that put in 65 years and listened to the advice of their financial analyst and are counting on that investment for monthly income.

4/20/13 Feeling pretty good about getting out of bond funds and into short time horizon Municipal bonds. There is more risk in some sense ( inflation, default etc), but also more return. If I had stayed in the bond funds, this is what it would look like in per cent gains and losses:
                  30       90        180 days
BKLN       (.16)    (.33)      .72
TIP           (.33)    (.09)      (.21)
DODIX     (.07)    (.22)      (.14)
FHIGX      .89      (.44)       .44
PRFSX      .18       .18         0
USSTX       0         0          (.09)

Update March 1, 2013
About halfway through taking the money from the bond funds and buying individual Municipal bonds in basket Ak. Looking for stable outlooks, A or better, short horizon max 2016. The crazy thing is that two of the bonds I tried to buy sold out from under me, so someone is also trying to buy bonds.

I read a Zacks article that recommends four international bond funds: FNMIX | PREMX | JEMDX | GAMDX | REBAX. Not personally ready to do that.

GTIP 53.89 (Watching this international inflation sensitive ETF closely)


Update February 24, 2013

Well, it is starting to happen. Still in the green for the entire basket, but in the past 30 days, things are headed South. Closed all positions except GTIP and probably want to set some sort of trailing stop for that.

Closed ETFs include: BKLN and TIP. Closed Mutual Funds include: DODIX, FHIGX, PRFSX, USSTX. Over the next few weeks will replace these investments with Municipal bonds.

February 4, 2013

I am continuing to watch the bond fund basket closely. I closed my position in HYLD in Ts today at 50.68 so all bond funds are now in Ak basket. The two best performers for 5, 30, and 90 days are GTIP and TIP which tells me someone believes we are going to face inflation. GTIP ( global, inflation protection ) is by far the best performer. But as I was doing my research I noticed something, GTIP does not move exactly with the market. For that reason I think I want to add a bit to the position.

Decision: purchase GTIP in two tranches. Half @market, half Limit@54.50, GTIP closed at 54.76 today.

GTIP (Blue) is not highly correlated with S&P or Dow Jones

The third best performer in the basket is FHIGX. This is a municipal long bond fund. Obviously this is tax advantaged. Two ETFs similar to this are TFI and MLN. MLN is fascinating to me, it is almost as if it was leveraged, it has much bigger swings than the other equities in this basket. But the whole point of Ak basket is to be calmer than the general market.
Decision: No more changes for tonight.

January 10, 2013

Closed position on PCY while I am still ahead.

January 9, 2013

Continuing to monitor these closely. I hold four mutual funds:
Ticker     Focus     Expense   30day   90day  
DODIX    Bond A+    .4           1
FHIGX    Bond A+     .46                     1
PRFSX   Muni Int      .5
USSTX   Muni Int      .33

All 4 have dropped over the past 30 days. In particular I am concerned about FHIGX, I added to this position April 9, 2012 and it is my largest mutual fund holding. I am up 9.81%, but that could erode quickly. If I do liquidate, two portfolio candidates when the time is right are FTABX and MLN. Here are similar mutual funds with a tax free municipal focus to FHIGX:

Ticker     Expense   30 90 180 365 5yr
FHIBX       .46          1                      3
FTABX      .25          2   1     1    1    2
VWLTX     .20                2    2     2
ACLVX      .48                      2          1

January 4, 2013

This is starting to look very hard to solve. At some point in the future interest rates will go up. When that happens bonds and bond funds will be under pressure. That point is not tomorrow, but apparently that fact is beginning to put pressure on bond funds. My thesis is this is not a really good place to be right now.

Worse, bond prices are sucky right now. So as bond funds add additional funds they tend to perform worse because their bonds perform worse. No action today, but need to review everywhere I hold bond funds. They are mostly in basket Ak, but there is another one, MWTRX, in the As basket. This is being used for sector and international ETFs, so I am going to sell it partly because I am afraid I will not watch it properly and partly because I would like to tidy up the basket.

Some trading ideas from my research, all 4 star Morningstar:

• BABS, based on build America funds so it is taxable, seems to have a few things going for it.
• MLN, long municipals
• SMB, short municipals

Decision: close position on MWTRX in basket As. Use that money to buy a short term municipal bond. Monitor basket Ak closely and look for opportunities to buy short term municipal bonds and begin to close most positions. Two to think about keeping are TIP and GTIP, if interest rates are going to go up, they may do well, though a Forbes blog suggests TIP is now in an oversold condition.

Now, how to get back into the game when the time is right. Probably the best idea is to look for a newly minted closed end fund. Ideally, I could be one of the preferreds ( when they create a closed end fund there is an IPO and it would be ideal to buy in at that point).

What about the limit on JNK in Ak? I think I will leave it and simply make it more aggressive 50 JNK Limit@40.00.

January 3, 2013


Decision close position on MBDFX, think about a replacement ETF. Candidates to replace include MBB, LAG, IEI, SHY, TLH, BSV. There is no clear winner here, but plenty of losers, it may be time to move to cash in this asset class for a while. Continuing to search, XMPT, IGU, HYMB, UJB. UJB is up over 20% for the year and IGU has not been doing so poorly either.
NOTE: I hold LAG

UJB is a leveraged ETF, those make it hard to sleep at night. It's gross expense ratio is 3.02%, net is .95% so it is rather expensive. It closed on 1/3/2013 at 51.47. If I do it I will buy on a dip and only hold a small position.

IGU is also leveraged with a similar expense ratio. It closed on 1/3/2013 at 55.45. Uggg.

So, we keep researching. This is real money at stake. What about lower rated, higher yield, higher risk based assets?

HYG            3
JNK     2     1     1     1
PHB                         2
HYS     1     2           3
BSJU

JNK has a .4% net expense, 12 billion in assets, it is sort of an index fund. 

Decision: close position on LAG, we have a microscopic loss. Open a limit order position on JNK, 50@40.50.

This will have the Ak basket with the following:
JNK ( if limit hits)
BKLN
PCY
GTIP
TIP

DODIX
FHIGX
PRFSX
USSTX

And entirely too much money sitting on the sidelines, but best I can do right now.

December 22, 2012
              30    90    180   365
AGG       5      5      5      5
BKLN     2      4      3      4
PCY        3      2      1      1
GTIP       1      1      2      2
TIP         4       3      4      3

• iShares Barclays Aggregate Bond Fund ETF (AGG) is negative for 30 day period and is now negative overall. It is the lowest performer of the ETFs in this basket.  Decision, sell and look for replacement. Candidates include: BND, LAG, BIV, VMBS, LAG seems to be the most consistent. Decision, open a small position, 50@market. Put on Google Calendar to review. 
• iShares Global Inflation-Linked Bond Fund (GTIP) is the best performer over 30 and 90 days, Decision, let's add to the position 25 shares@market.
• Update January 1, 2013 GTIP is still the best performer and with the House of Representatives not accepting the Fiscal Cliff deal, the odds are the market will go down, let's add 25 shares with a limit of 53.5
• Why market instead of limit; these are bond funds, they tend to be fairly steady state, at least that is what I am hoping.

MUTUAL FUNDS:

              30    90    180   365

DODIX    3      5      1

FHIGX    5      1      2

MBDFX   1      2      1

PRFSX    4      4      5

USSTX    2      3      4

VIPSX     6      6      6

• Closing position on VIPSX
• Reducing postion on PRFSX, but want to keep some skin in the game to monitor
• Increasing position on MBDFX

Update: January 1, 2013, it may be time to reduce exposure to bond funds, they are only up because people have been looking for safety. I will think about this over dinner. In the past 30 days, MBDFX has dropped 2% which is a lot for a bond fund.

Ek CDs and some energy

I am not an expert investor. This blog is my trading notebook for myself and close family, though you are welcome to any of the information. Please do your own research and make your own decisions.

Thesis for basket Ek 4/20/13

There is an old rule of thumb that you take your age, subtract it from 100 and that is the percent of your invested portfolio (not including home) that should be in stocks. As people are living longer, that is being questioned and many experts are suggesting to have a higher percentage in stocks to prevent outliving your money.

The flaw with this of course is that it is possible to lose a lot of money in the stock market. As I am approaching retirement I am increasing the hedge ever so slightly.  To the best of my understanding CDs are pretty safe. Also, in a pinch, CDs purchased from a brokerage can be resold, but probably not at a profit under current interest rate conditions.

CUSIP Matures Interest
G99  10/11/13 0.55%
YW0   2/3/14  0.85%
5D0   3/23/15  0.95%

G73  10/13/15 1.15%

RE8   3/23/16  2.50%

5/19/15 Another CD has expired. Put an order in for 30 University Tex Univ Revs. Yield 1.141 Matures 08/15/2018. BTW, SYMX went up 8% today, who knows, that may get above water yet.

5/5/14 I took the cash from the CD that expired and moved it into small positions for municipals. This online broker had a good supply of munis that come due in 2015. The yield is dreck++, but it parks the money for a short time, earns a dollar or two in interest and is tax advantaged. Obviously I need to think about the longer term strategy for this basket.

3/11/14, I am not really happy with my strategy or execution, the biggest CD expired 45 days ago an reverted to cash, doing nothing. Need to rethink this some.

NOTE: from an earlier strategy there are two energy "orphans" in this basket:
VDE
4/20/13 106.84
SYMX
4/2013 1.04

Ts - Red Green 2013

Note: I am not an expert in investing, but if any of my work helps spark ideas, you are welcome to them. Strongly suggest you do your own research, this is real money we are talking about.

This is going to be the last post for basket Ts in 2013.  I tried to emulate an actively managed mutual fund. During 2014, my plan is to consolidate, reduce the number of positions, then when the inevitable  pull back happens have some cash ready to increase some of the strongest positions. Needless to say, past performance is not a guarantee of future performance, but it is certainly an indicator.

There is nothing magic about the red green process, but over time it has allowed me to spot and take advantage of trends. Be careful, this is only about trying to spot trends, I bought these equities at different times, so this is not an apples to apples comparison.

I have to do some analysis before the year ends to see if I should sell some losers. This blog post serves as my digital trading notebook. I will read it top to bottom today, do some additional research and make the best decisions I am capable of. I need to dump enough losers to offset the dividend payments the account has received.

12/12/13 Highest performing losers(reds) - high to low
                  30  90  180 1yr  5yr
MCD         -     -      -     3    4
GES          -    3      3     2    3
LECO      -     2      1     1    1
LF             -    -      -      5    2
TEVA      -     1     2     4    -

Decision: I think I have egg on my face with Leap Frog (LF), going to close the position to prevent further losses. Market sell, 90 shares, last close 8.10, my loss will be about $22.95 + two trade fees.
Opportunity: Lincoln Electric isn't likely to stay in the red, but it doesn't count as a value play either. Do some more research and set a trade alert in case it drops.

Next tranche of losers
                  30  90  180 1yr  5yr
ISRG          -    -      -     -      2
CTXS        1    -      2    -      3
RDWR      3    1      1   2      1
CORR       4    3      -    1      5
COH         2    2      -    -       4

Decision: hold on to, possibly increase the position in Radware (RDWR) especially if there is a pull back. So why is it down? Depending on when one bought it it might even be an up (green). I bought it 6/27/12 and it was at a bit of a high. This shows, I hope, why red greens are NOT decision makers, but sometimes help me spot trends.

Lowest winners better to lower
                  30  90  180 1yr  5yr
HURC       2    -     -      3     2
PANW       -    1    1      4    5
MELI         -    -     -       1    1
SSL           -    -     2       2    3
SLV          -    -     3       -    4

Analysis: Keep in mind this is relative, most of these are going to bounce around up and down, relative to each other. To have an absolute evaluation, one needs to focus only on that equity, but I find one of them a bit interesting and that is Pao Alto (PANW). I am familiar with the technology as well and they were early to the Next Generation firewall party. They have some patents, but I do not think they constitute a "moat" to keep others out of the field, in fact, I think Fortinet was earlier to market. PANW's track record isn't very long, I think their IPO was July 2012. Here is their chart, the $60,000 question is can they keep th current spike going.

12/4/13 Leap Frog (LF). This is a maker of educational tablets for children. I am always nervous about buying an equity I do not understand, but I have a relative with two small children and have seen them play with the gadget. Limit 90@8.30, last close was 8.44.

12/2/13 BSX, overall I like the company. The debt to assets is a bit higher than I like to see, I favor a ratio of less than 20, but inflation seems to be a distant concern, raising money should not be hard. I already have this position, but cautiously seek to add to it. Limit, 50@11.00 last close was 11.58. It is unlikely this will hit, this is the 3rd best performing equity in my mutual fund, but que sera sera.

The lowest performing greens in the fund in order of best to worst are SYZN, HURC, SSL, SLV. TILE AND MCD. Though I crave McDonald's cheese burgers w/o onions, love the way they are integrating into stores like Wal-Mart, see they are working hard on their menu, (if you have not tried the Bacon quarter pounder you owe it to yourself). I just cannot put another dollar in that equity; considering performance, I am overweight. Of the rest Sasol, SSL, seems to be the most interesting. They have had a great year. However, I have a lot of exposure to energy. Decided on a half hearted limit, 15@49.35 last close was 49.54.

11/30/13 Top performing reds in the fund. Best to least performing.
                  30  90  180 1yr  5yr
ISRG          -     -    -     -      4
TEVA        -    4    3     3      -
LECO        3    2    1     1      3
COH          1    3    -     -       2
RDWR       2    1    2    2      1

Think I need a calendar alert for ISRG in about two weeks this used to be a profitable stock for me, but it is clearly headed in the wrong direction. Or maybe just pull the plug. RDWR on the other hand seems like it will reach positive territory. Let's try a limit to add to our position, 30@16.

Coach (COH). There are a number of reasons why this might be a good buy, strong brand, doing well outside of the US, especially in China. However, there might be some good reasons NOT to buy as well, tepid US sales, a drift away from the original brand concept of really strong and durable purses, and a new art director, ( which could prove to be good or bad). And sales of luxury items are drifting down in China.
Decision: Deep limit, 30@54, last close was 57.90.

11/30/13 Did a lot of research into Extendicare (EXETF). Care of older folks in Canada and the US has to be a growing trend over the next 20 years though the margins may get interesting in the wrong way. Instead of a limit order, I set a calendar alert and will see how they are doing in 2014.

Also, decided to close my position on Riverbed (RVBD). We are going to get thumped this tax year and a few losses can help reduce the pain. 200@Market, 20% loss.

11/29/13 The market is only open till 1 PM today, so setting up some trades:
I have decided to harvest a loss with National Presto, NPK, they make bullets and mostly sell to DoD which is not a great place to be right now. 30@Market, but can use the loss to help offset the tax burden from the dividends.

Considering opening a position with Catamaran, CTRX. They may be positioned to compete with Express Scripts, which I hold and is doing well. The thesis is simple, some piece of Obamacare is bound to survive even if the next President is a Republican. They have gone far down the road and it will be difficult to unravel a lot of it. Catamaran's business model might let them take a bit of market share from Express in the health exchanges if things go their way. I went for a limit 30@45.00, last close was 45.55, it is not an aggressive limit, I just need some famous analyst to report that black Friday did not meet target or some such and the Wall Street computers will start to sell everything but the kitchen sink.

11/23/13 The mutual fund is doing well, but heck it is a bull market, right now is a bit like fishing in a stocked pond with wiggily worms. The scariest positive is MELI, I am up 12%, and I am confident of the long term, but have to wonder about profit taking, long past the one year capital gains hit. Added about $1500, (from dividend payouts, when possible you want to create a compounding machine), to positions in:
LECO 72.22
SZYM  8.20
Both were market purchases, I am a big fan of limit, but in a bull market you have to run with the bulls.

Update March 29, 2013
1) Limit orders that perhaps should be market
Here are all the limit orders:
                  5    30  90  180 1yr  5yr
FTNT         -     -    2     -     -     1
CHEOY     -     -     -     3     1    4
QCOM      1     2    3    1      3    3
RDWR      -     1    1     2      2    2

CTXS       -     4     2    -       -     2
BRCM      3    5     4    -       -     3
NOV        2    3     5    -       -      5
INTU       1    2     3    2       2     1
TILE        -    1     1    1       1     4
Lets compare the strongest performers:

QCOM   1     3    4     3       4      3
RDWR   -     2    2     4       3      1
INTU     2    4    3     2        2      2
TILE      -    1    1     1        1      4

Decision: 35 TILE@Market to open position, look for a drop to add more, 15 RDWR@Market, Accumulate, 50 INTU@MARKET to open position, keep limit on CTXS@ to open position, cancel FTNT do not open position, watch CHEOY closely

2) Westport Innovations. Kathy is going to invest about $1k in CLNE in her MLk basket. I hold WPRT in Ts. So, she is investing in natural gas fill up stations coast to coast in the US and I am investing in the intellectual property holder of the ways to build the engines. Long shots, but added 25@Market to my position.

Update March 27, 2013
1) Red/Green lesson learned. Need to start using longer timelines. Starting now, I think I should start to factor in 5 years when possible.

Reds             5    30  90  180 1yr  5yr
TEVA   -     2    4     -     -      -     -
ERIE    -     3    3      1    1     -     2
IBKR   -      4    2     2    2      -     -
SSL     2      5    5     3    3      -     -
NPK    1      1    1     -    -       1    1

Decision: Stay the course

Update March 25, 2013
1) LQDT, Liquidity Services was a candidate for the ecommerce basket, but as I was doing my homework, it really had me scratching my head. Analysts tended to love it or hate it and a considerable number hate it. But it is interesting enough to me to open a small position in the mutual fund and watch it closely and keep learning more about the company. Decision: Limit 35 @28.75, it closed today at 29.35.

My thesis is this company has the potential to be the information broker for surplus goods. They have worked with eBAY and I have to guess one of the case studies is either Dell or HP.

Update March 22, 2013
1) CHEOY, my limit for 20 shares hit; therefore it took a dive. When I look for stock news, I am not seeing anything so far, when I look for news it is all positive including a heartwarming video of a mom hearing her son's voice for the first time. This is one of the great things about being an investor. Not sure what I am missing. Probably nothing, maybe just did not set a deep enough limit.
3/1/13 36.17
3/22/13 34.96

CHEOY is most definitely a green so lets check performance of the two above and below, best to least performing.
3/27/13                             5   30
              5       30      90
HURC                       1          3
WFC      2         2       2         1
CHEOY 3         3              2   4
FDX                          4
GSK     1          1       3     1   2

No immediate crisis on CHEOY.  Fed Ex is off a bit, but they are not going anywhere and like UPS FDX stands to continue to make money from a failing post office. However HURC is a bit troubling. CHEOY does not appear to be followed by analysts, so this may be a company to invest a bit more in.

3/27/13 I am still holding pat on Feb Ex, but very aware it has lost over 7% in 30 days.

2) HURC Let's take a closer look.
1/22/13 29.02
2/22/13 29.06
3/22/13 27.10
3/27/13 27.08

It does have a beta of 1.57 and it bounces around. They did have a lower first quarter compared to 2012, largely because a big part of their market is Europe. We are past the one year point for any purchase of this stock so we can profit take at any time. No action right now, but want to watch this one closely.

Update March 18, 2013
1) The market is insane, but not to complain, everyone likes a roller coaster. While I was teaching in Orlando, it set records for back to back highs. Today, is a little bit choppy. Forget firing bullets instead of cannonballs, today is a BB day. If I do anything at all, it will be surgical.

2) Open orders:

3) Best performing Greens in order (does not include penny stock TSRYY):
3/27/13                              5   30
               5       30      90
Z            1        1        1     1    1
PRAA     2        2        2     3   2
DIS         -        3        5          4
GS          -       -          4     -   -
FB          -       -          -     -   -
OII         3       4         3     2    3

Could it be time to head to the exits with Facebook?
3/27/13 Decision: profit take with GS and FB


4) Lowest performing Greens, high to low:
3/27/13                              5    30
               5       30      90
GSK        2        -        4    1     3
MCD       -        1        1    -     1
RGS        3        -        3    -     2
PANW    4        2        2   2     4
WFM      1        -         -   3     -

3/27/13 No action at this time

5) GS, as it says on the open orders, I put in a limit for 5 shares of GS@146.50

Update March 7, 2013
1) Open orders:

2) Reds looking for climbing activity:
3/27/13                      5   30
               5   30   90
RGS                     3   -     -
BCPC      1     1    1   1    1
RDWR    3     2    2   -     2
TDC                         -     -
SLAB                      -      -
TEVA    2    3
Decision: 25 BCPC @Market see screenshot above, 25 RDWR@Market.  Keep a close eye on TEVA.
Decision: sell 75 RGS, 90 TDC, 65 SLAB


Update March 1, 2013
1) Open orders:

2) What's up SUP?
Nope, not Stand Up Paddle Boards though we have those in two states, this is Superior Industries, the aluminum wheel maker. They just got creamed after earnings.
Decision: 25@Market last closed 19.54

3) Ireland Bank
I made a small bet on this equity, it has done well for me, but it keeps dropping this month and there is not chance I will ever really understand it. Closing position, 350 shares@7.62.

Update February 24, 2013
1) Open orders:
BRCM 20@31.39 last close 34.53
INTU 50@54.82 last close 62.78
RDWR 15@ 35.50 last close 36.90

2) Three tranches of negative equities in the basket. From least negative to most negative.
               5    30   90
MCD       3    2     3
SLAB      -    3     4
GTI         -    -      -
MELI      2   -      1
RDWR    1    1    2
Decision: close position on GTI to preserve capital, this will be a 2% loss. RDWR 15@35.50 GTC.
3/1/13 GTI is now down 28.9 percent for past 30 days.
4/27/13 GTI 7.06 down 30% over past 90, -5.4 past 30 days

3) The second tranche is even further down, so we need to be careful and really think this through.
              5      30     90    180   365
IBKR     -        1      -        2       -
ERIE     -        3      2        1       -
SSL       -        4      3        4       -
CHKP   1        2      1        3       -
HAIN    -        -       -        -       1
TEVA   -        5      -         -       -
Decision: close HAIN and TEVA. Purchase 10 CHKP Market@52.23.
3/1/13 CHKP 51.83 up 1.68% past 30 days, hard to say how this is doing.

3) The third tranche would be the lowest performing equities in the basket. I should tread very carefully here.
                     3/1/13    5  30
               5    30   90
GES        4     1    5
BCPC     3     3    3     2    1
RAVN    1     4    2           3
SQM      -      -    -
IRBT     5      -    4     1
WPRT   2      2    1           2
Decision: close SQM. Buy WPRT
3/1/13 WPRT 28.28 down 2% on the day, up 5% on the past 30, this stock has a beta of 1.91, so there will be some tummy churning moments. Let's set a Google Alert on IRBT, I so very much want this stock to succeed.

4) These are the lowest performing equities that are green ( positive ) in the basket.
               5    30   90
GSK        -     3     3
NTGR     -     -      -
BRCM    1     2     1
NOV       -     -      -
TDC       3     -      4
WFC      2      1     2
Decision: Close NTGR Market, it is falling fast. Last close was 33.70. Other than that, hold and wait on the rest.
4/27/13 NTGR 28.82 down 28% over last 90 days

5) Greens with the biggest dips on Friday
4/27/13                           30  90 1 yr%
               1   5    30   90
Z             3   1     1     1   2   1    58
ESRX      1   3     2     3   -    3    3.4
ALV        2   2     3     2   1   2    15
Decision: No action required


6) New candidates to be added to basket. All of these candidates appear to be well run companies with low debt. I have experience with Fortinet (FTNT), Pao Alto (PANW) and Whole Foods ( WFM). I can't say I play Leap Frog (LF), but have seen kids with them. CRUS is a major supplier for Apple (AAPL), to by this stock is to believe Apple will go back up.
              5      30     90    180   365
WFM     -        -       -       -        4
CRUS    -        -       -       -        2
PANW   1       2      3       -        3
FTNT     1       1     1     -1         -
LF          -       -      2       -         1

Not exactly awe inspiring. But I do want to keep an eye on these, especially Whole Foods, they are not carrying as much debt as most other grocers an in conjunction with Costco and Wal-Mart could be poised to take market share away from the competition.
Decision: PANW 15 Limit@55.00, FTNT 30 Limit@23.50.

February 4, 2013
Sold 100 LRN - Thesis, it is still in the green, but suspect the pressure on proprietary institutions will make it a bit choppy. Closed today at 18.53
2/24/13 21.81
3/1/13  20.83 Phoenix University Accreditor reccomends probation, this will probably impact most proprietary institutions.
4/27/13 25.21 When am I going to learn to slow the heck down?

Sold 95 HYLD - Thesis, time to reduce exposure to bond funds, better to actually own the bonds. Closed today at 50.68
2/24/13 50.87
3/1/13  50.92 Making progress at buying bonds in basket Ak, keeping them short, looking for better opportunities in 2015 and 2016.

Open limits from previous analysis:
Ticker      Limit     Last Close    Action, if any
INTU      54.83       62.09      
JCI          30.0         30.83
BSX        5.00           7.45         Change from limit to market
FDX       89.00         103.39      Cancel, this bus has left the station
BRCM    31.5          32.45
ALV       59.00        65.01         Strongly considering a modest market buy


Five lowest % that are positive in the account, lowest to highest 2/4/2013
2/24/13   5   30
BRCM   1    2
SLAB    -    3
IDX       2   1
OTEX   -    -
GTI      -     -

IDX has performed the best in the past 30 days, but I am overweight both on this ETF and Indonesia in general so passed on adding.  SLAB has performed second best for 30 days and 90 days. Decision: Buy 15 SLAB Limit@43.23.
2/24/13 42.27
3/1/13   31.09 Ouch!
4/27/13 39.32

Five highest % that are negative in the account, highest to lowest
Ticker      5    30   90   180
RGS        1                   2
MELI             2      2
MCD       2     1            2 (tie)
HAIN
JCI                       1       1 (25% increase in past 6 months)

How about these tea leaves, how do you choose? I will certainly watch these closely.
JCI profit is down, and their debt is close to my 20% limit. Decision: close the position and lock in a small loss before it becomes a big loss. Last close was 30.83.
Decision: take no more action tonight, set a Google calendar event to revisit the remaining 4 equities in ten days.

The US Patent 100

In the course I author and sometimes teach, SANS MGT 512 Security Leadership Essentials, we have an intellectual property section. I tell people that one of my investing strategies is to bet on companies that engage in R&D and that a good proxy for that is the number of patent applications filed per year.

To be honest I have felt a little like a lone wolf in the wilderness. But tonight I learned about the US Patent 100 from a newsletter called Wall Street Daily. It appears to be the work of one guy, (Louis Basenese) and I am sure he is off sometimes, everyone is, but I find his writing style enjoyable ( stocks, after all, are rather boring, so it is nice to see someone spice it up). And I have only read one issue of his newsletter, but I have to say I agree with the majority of what he wrote.

Back to the US Patent 100, I Googled it.  This is a joint venture of MDB Capital Group ( the investment bank that tracks IP ) and IAM, the intellectual property magazine. Here are the top five ( no surprise):

• Samsung
• IBM
• Canon
• Panasonic
• Sony

I hold IBM and Canon and have an ETF that has Samsung as its largest holding ( I do not really want to trade on the London Stock Exchange just to hold Samsung). I guess I need to look into Panasonic and Sony.

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:
http://www.bloomberg.com/news/2013-03-26/customers-flee-wal-mart-empty-shelves-for-target-costco.html

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:
Finance.yahoo.com 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.

12/1/12
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.

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. 

Small Caps and Liquidity in Basket Cs

NOTE: This entire blog series is my trading notebook. I am NOT an expert investor, so be very careful trying to learn from me, I am just taking steps to make my notes and research available to myself and close family. You are very welcome to read and comment and even tutor me should you feel gracious :)

Small caps in Basket Cs
VBR Vanguard small cap
2/4/13 close at 77.18
2/8/13 I hold VBR and it went down today. Last close 75.02. Buy, 15, limit@72.00.
3/8/13 80.90 Waiting for a correction HOLD

SCHA Schwab small cap
2/4/13 40.51
2/8/13 41.26 Smaller bet, buy 10, limit@ 37.5 ( Good luck with that, man has to have dreams)
3/8/13 42.48

3/8/13 Notes:
NOTE(1): As it says in the research section small cap ETFs tend to be highly correlated. Adding another ETF will probably not increase diversity, just be one more account to manage at tax time. Instead, concentrate on building the SCHA position on dips. ACTION: set an email alert.

NOTE(2): We barely have enough small caps to disturb the liquidity of the basket, much less the portfolio. Setting a very patent target allocation of 10% of the basket over time, by making small commission free trades in basket Cs. As of today, both ETFs together are 3.85% of Cs. A 10% small cap allocation will be part of the strategy that drives Cs.

Thesis:

Of course you can read anything on the Internet, but I just read an interesting article on the liquidity of small cap stocks and their performance. From the article: "On the other hand investors who take the opposite tack and favour small value stocks that don’t trade frequently tend to do quite well. But they swap comfort for profits as they scour the back alleys of the market where many fear to tread."

Liquidity and Small Caps

Liquidity is how easy it is to buy/sell an equity. Houses are not very liquid and Apple stock ( AAPL) is very liquid. I never really understood exactly what this meant in conjunction with small caps, until I read Peter Lynch's take on this: "Another way that a lot of fund managers hemmed themselves in was worrying about ‘liquidity’. They avoided all the wonderful small companies – a good collection of these could do wonders even for a big portfolio – because the stocks were ‘thinly traded’."

What does thinly traded mean to me? I do a lot of my trading from Hawaii and the market is usually closed by the time I get my SANS work done and start thinking about investing for retirement. I see some small cap stock that looks good, and it last closed at 35.11, so I make a market order and find that the next day I bought it at 40.2397, what the heck? If there are only a few shares outstanding then I might get this unpleasant surprise, I am bidding on the stock, so are others and it pops up/jumps up as buyers are matched to sellers and guess what, retail investors do not have the fastest trade network, the big boys do. They got it cheaper, I pay too much. I know many people have different opinions about the Motley Fool investment advice, but one of the most repeated statements they make is: "Use a limit order". I have the rest of my life to balance my portfolio, I need to quit using market orders, it hits, or it does not hit. So be it.

Small Caps and Volatility

One of the things that I am thinking about is trying to smooth out my portfolio. At a time (March 2013) when the general advice is avoid Municipal bonds, I am increasing the % allocation to bonds. They are short, no more than 3 years, A or better, 1.2% or better, it takes some digging to find them, but I am patient. I am also experimenting with Floating Rate Funds for the same reason.

Small caps, either growth or value tend to be very volatile, so am I contradicting myself? Nope, it is a portfolio. It is made up of a number of baskets and each basket has a strategy and rules or procedures to enforce the strategy. So I have make a small cap play somewhere in the portfolio. Now in general, if I do not know the company well, I might be better off with an ETF, but I should not ignore the small caps asset class because they are volatile, after all, volatile can mean great gains ( or losses ) in a short period of time.

Of course it can be hard to do your research on what the small value stocks are and whether they are a good investment because not many analysts are following them. If you know the company well, it could make a lot of sense.

SourceFire illustrates the volatility of a small cap investment

In February 2013, SourceFire, (FIRE) the IPS and other network security device company was down 6% over the past 30 days. They are a great company and have great products. However, they are competing against Cisco's marketing engine and according to this article, they are in a slowing market. Also, with a P/E of 210.5 one could strongly argue this is not a value play, though it has clearly been a growth play in the past five years. However, despite the brief down, if you had bought in at the IPO, you would be very happy with the overall performance. Here is a chart from March 8, 2013, up 4% in two days, sooner or later that could add up.

Small Cap ETF Research

I do not know that many small cap individual equities that well. Therefore, it might make sense to have a position in an ETF that focuses on small caps instead of individual equities. Let's screen the performance of five examples on 30, 90, 180, 365 days
March 8, 2013             30  90 180 365
January 7, 2013.
            30  90 180 365
VB                        1
VBR                      2   1          1    2
SLYV  2          2         2     2    2  
IJS      1    2     1         3     3    3    3
JKL          1                       1          1

The thing that just jumps out at you when you do your research is strongly they correlate. So, it might be the better long term play is to choose the one with a lower expense ration which is usually Vanguard. UPDATE: March 8, 2013 Warning, this chart could be misleading. It is amazing how tightly correlated these portfolios are. The difference between one and another is tiny, usually less than a percentage point. I think choosing a Vanguard product because of the expense ratio makes all the sense in the world.

Timing, of course I cannot time the market, but this is an aging bull. Small caps did very well in 2012, but people will start to turn to large caps and mega caps when they think the end is coming; a so called flight to safety, so choosing when to buy is also worth giving some thought. And buying on a dip may make all the sense in the world as well. Let's channel Peter Lynch again:"Bargains are the holy grail of the true stock picker. We see the latest correction not as a disaster, but as an opportunity to acquire more shares at low prices. This is how great fortunes are made over time. "