GDP fog

a post today shows how the fog of GDP forecasting is rolling in for this Friday’s expected report on Q1.  https://seekingalpha.com/article/4065188-u-s-q1-gdp-estimates-run-gamut-ahead-fridays-report

If there is clarity to either high or low side of the estimates, i can predict too much talking and a bit of emotional response (especially on the low side).  Regardless, the report will be worth paying attention to for support or challenge to one’s thesis wrt growth and reflation.

Sunday Reads April 23, 2017

  • Agree or disagree, this thesis is very similar to mine and why i have CSCO in mutliple accounts https://seekingalpha.com/article/4064344-3-reasons-bullish-cisco-systems 
  • More confusion in the CAH narrative, though this article reflects my thinking … i had a small position at $69, sold half of it at >$82, and now am leaning toward eliminating the remaining at a small gain rather than add more.  https://seekingalpha.com/article/4064312-dividend-aristocrat-cardinal-health-drops-12-percent-buying-opportunity-value-trap  It may not be a value trap, but i regret not selling my full position above $82.
  • Housing costs rising 2x income growth (without factoring inflation) https://seekingalpha.com/article/4064318-americas-real-estate-booming-bubble – one would think that an opportunity exists to provide more supply at lower prices if land and construction costs work out favorably.
  • From Jeff Miller’s weekly post
    • i think this ratio between earnings (GAPP i like better) and revenue is material in either a micro or macro analysis.  I could entertain a socratic discussion on if the delta between the two or their trends (and the corrleation between them) is the more important metric – i am not sure if i have an opinion yet.   <quote> “To date, 6% of the companies in the S&P 500 have reported actual results for Q1 2017. In terms of earnings, more companies (76%) are reporting actual EPS above estimates compared to the 5-year average. In aggregate, companies are reporting earnings that are 6.7% above the estimates, which is also above the 5-year average. In terms of sales, more companies (59%) are reporting actual sales above estimates compared to the 5-year average. In aggregate, companies are reporting sales that are 0.2% above estimates, which is also above the 5-year average.”
    • Jeff also pointed here, and i echo his comments – sad that this was not more widely discussed and we each should read –  http://www.imf.org/en/Publications/GFSR/Issues/2017/03/30/global-financial-stability-report-april-2017
  • Blackrock opines about favorable market segments for investors … i tend to agree with most of it but i am not a fan of Japan (i just cannot get my head around the growth potential and interest rate return for the risk)  https://www.blackrockblog.com/2017/04/20/investing-opportunities-2
  • Overweight into Tech and Financials http://fundamentalis.com/?p=6860 – i agree but add a  third:  healthcare
  • Not associated with a specific reading but plotting the plan over next 7 days.
    • Two reductions planned:
      •  INTC allocation is too high at 9.5% of taxable account – reviewed selling near term calls, but the prices do not justify holding the capital risk captive – i will sell 50% of the targeted reduction before earnings and accept the risk with the remainder
      • CAH as indicated earlier i think its time to exit 100% – just wish i had done it when i sold 50% above $82.
      • I can easily re-acquire the income (dividend) from both with adding to PFE or starting new position in BMY (or both)

Is there an issue with growing divergence between GAAP and pro-forma?

One of my more favored SA authors published a piece this week that had a very interesting graphic on the growing delta between aggregate GAAP and pro-forma corporate earnings.  This analysis aligns with my thesis that economic growth is not accelerating as people want to believe and the recent FED moves are more about putting bullets back into their weapon, than really slowing down inflation.  The negative element to this article and many of the comments is the political overtones that sound more like opinions and beliefs.   Just the facts and an analysis of the facts, please?

https://seekingalpha.com/article/4064161-brick-wall-front-trump-agenda-rally-2_0

Just a reminder

In a SA article this morning, https://seekingalpha.com/article/4063767-stock-bond-markets-alpha-coming-back, there is a very interesting reminder buried in the discsussion … traditional bond houses do not make money without volitility.  Their greatest profits come from other people’s mistakes.  While the new world of passive algorithmic trading is making some people very rich, many of the traditional vultures are hurting.  Makes it also very hard for small investors to find obscure values that the market will discover afterwards.

JNJ – thought about it

My cost basis for JNJ is about $88.  Today’s drop got my interest as i could take on another slice of JNJ.  I looked quickly and even with my lower cost basis on 2/3 of a full position, i could not buy at $121.  I think somewhere closer to $118 gets interesting.  I would really like all purchases close to or below a 3.% dividend.

I also looked at the ETFs – FHLC and VHT given the impact of JNJ, CAH, MRK etc … not there yet.  The ETFs i think are still 8-10% too expensive.

Patience, patience, patience … the mantra

CAH guidance and follow up actions

CAH announced a purchase from Medtronic and some guidance this morning. https://seekingalpha.com/symbol/CAH

At first read, i thought that this would be a ‘buy the dip’ scenario and i would add to my very small current position.  Then i dug a bit deeper into the report.  Their earnings forecast just doomed the stock for the near term.  If i piece it together using basic rounding … 2017 = $5.35, 2018 = $5.00-5.25, and 2019 = $5.40-5.60 … analysts have not jumped in yet … but this changes my fondness for the dip … my relative risk algorithm tipped to the negative through same time period.  My earlier plan is reversed … i now need to sit and wait if i want more CAH … interesting level is in the $65-68 space given both its earnings growth view and dividend though i give the company credit for increasing its product portfolio.

Sunday Reads April 16

  • a good SA article  from Dr H on interest rates and USD … his view aligns with mine on the hard data not fully supporting increasing rates, as well as the unsupported view that FED has to increase rates somewhat else they have too few tools to battle any slowdown.  For me, it’s not perfect clear which way the balance is tipping and by how much, but i certainly cannot buy (and invest in) the thesis that rates are bound to climb steeply over near term.
  • State by state largest employer map … i saw a different version of this recently and it nearly took  my breath away – walmart.  i am not sure how this really influences local / state politics, but it has to somehow
  • The weekly S&P performance charts … struck by the greater than 1% decline on 20% less volume.  Seems the conceptual speculator could argue that the sell off was not enthusiastically executed and it will either continue down or bounce … i really dislike such speculation.
  • Great small comment in Jeff Miller’s Weighing the Week <copy> “Weekly jobless claims remained low at 234K. This half of the picture remains solid. We also need new hires.”  Not losing jobs = good/necessary, but creating jobs = sufficient.
  • Two interesting take-aways from this week’s blog from Brian Gilmartin http://fundamentalis.com/
    • Old technology is oversold going into earnings … this could be short term speculation opportunity
    • The comparison between S&P (and some specific companies) Q1 2017 and last year will be favorable due to lower 2016 performance (see the table)
  • A great batch of data from JP Morgan – i got lost here for about an hour and plan to revisthttps://am.jpmorgan.com/blob-gim/1383407651970/83456/MI-GTM_2Q17-Linked.pdf
    • the chart on slide 9 showing forward PE by sector is WAY cool – look at technology, health care and telecom
    • Slide 17 on correlations is also interesting
    • Slide 37 was a surprise showing US rates higher than all the others … how does that translate to destination in ‘flight to safety’?
  • Good perspective in this section Power of inflections that debunks a correlation between presidential hopefulness and market pricing … looking to fundamentals is way more important (another ‘hard’ and ‘soft’ data argument?)
  • <later add> a good perspective on interest rates with some good simple data – Blackrock

UMPQ

On Thursday, i increased my UMPQ  position by 50%.  My original position cost basis is just below $13.25, and the new position is at $16.70 … new cost basis = $14.26.  The dividend yield on the full lot is now 4.49%. UMPQ is just a good solid customer oriented bank and local within NW.  I also opened an account last year to make sure the customer experience was not other people’s opinion.

This purchase is also a good example of how my portfolio strategy and radar method can be flexibile.  UMPQ originally (and still does) held only a #2 radar position – a long term holding that will be sold only if value exceeds rationality.  However, the new purchase is a #3 radar position as a special situation where the stock price did not reflect current value (in my opinion).  This recent +50% position may be sold at a 10-15% capital gain depending on a mix of company and market analysis.  The same company works in two different radar positions but each lot is managed differently with specific critieria (buy more / sell).  I limit my universe of analysis by using the same company for different objectives, taking advantage of what the market gives me … gaining some efficiency?

Sunday Reads, April 09, 2017

 

 

Fed’s correlation to S&P

Read a very well articulated article on the correleation between the Fed’s portfolio strategy and the rise of the S&P.  I am not supporting or rejecting the premise and conclusion of the article as i am just not that smart, but the correlation between the two entities is very striking and worth reading.    https://seekingalpha.com/article/4061144-fed-will-push-markets-lower

In another article (also a risk warning of impending market changes), it is not so much the article that i found fascinating, but a specific comment.  Article:  https://seekingalpha.com/article/4061158-i-can-cheezburger-visual-guide-4-market-risks

Comment <copied>

Calendar spreads, e.g. the 2-10 – that, or thereabouts, are the lifeblood of banking. Spreads need to steepen and there are powerful interests behind that – probably the most powerful. How? Timing? We got our hint of that, in an intentionally and characteristically coy fashion, from the release of the FED minutes – although most of us didn’t need that in order to know what the plan is. Like everything else of real importance, they tossed it to us over the transom as if it were a “ohh, by the way…we’re gonna unload some bonds…”

The long end yield has to come up and the FED has some long maturity paper on the books to manage that very nicely for the benefit of the banks, and the FED is ultimately all about the benefit of the banks.

So that’s the priority. The timing, they say, will be later this year and it may take 5 plus years of careful coordination to fluff up and sustain an increasingly erect yield curve. There’s plenty of motivation along those lines – and lots and lots of money to be made. My guess, given the team that will soon be in the FED driver’s seat, is that this process will be thoroughly corrupted and front run by friends and family – which means we’ll be whipsawed in and out of the trade by design.

TJX – I grabbed the falling knife

The other day, TJX fell in price <$78.  It was not exactly at my target price for entry, but i have anxiously waited for an entry point … i grabbed the knife on way down, missed this week’s bottom by about a $1.  My patience evaporated … poor discipline on my part, but i knowingly took the risk and have funds set aside for more TJX.  My longer term “gro analysis” suggests TJX could be a surprise core holding over 5-10 year timeframe.  Analysis will be published shortly as i share my “gro analysis” tool – will use TJX as the example.

Sunday Reads – April 2, 2017

I will get back to the portfolio radar this coming week to walk thru my analysis.  But here is a Sunday read worth sharing

  • https://www.kitces.com/blog/four-pillars-retirement-income-portfolios-interest-dividends-capital-gains-principal/ … this article surfaced in a couple of places, and relevant for folks in my age group (>50).  there were two elements that struck me.  One, the focus on ‘cash flow’ and not income; this is important and changes the way i might approach some investment stepping or structuring.  Two, the notion to break up portfolio return objectives in different segments based on your age and living style.  It’s totally rational and we investors probably do this intuitively, but it was great to see it simply described.

Portfolio Radar

The first version of the Portfolio Radar is ready.  Unfortunately this turned out to be much more manual effort than desired, but a start (that can be automated later).  Each layer 1-6 corresponds to different levels of investment.  I have left my draft components that is close to my portfolio as an example.

1 = Core Holdings that typically would not sell
2 = Holdings to sell only if price exceeds targets and value
3 = Special situations for capital gains
4 = To purchase once entry target reached
5 = Want to purchase but price much too high – waiting
6 = Observing as indicators and complimentary insights

This is the highest level view the radar screen … just by position.

Each position has other information associated with it that adds additional views.

Here is a view by major market segment

And finally, here is a view by investment type: stock, bond, ETF or REIT.

Now with these views, i can analyze if i am distributing my efforts according to my portfolio objectives, my key investment narratives, and my current investment macro bias.  All of those terms need a brief summary.

  • portfolio objectives:  this is the traditional risk tolerance balance against needed return on your investment in specific timeframes.
  • investment narratives:  a specific theme of investment based on your knowledge and analysis that you have high confidence of an investment foundation over a near-term horizon.  For example, my three key narratives are:
    • healthcare driven by the demographics of an aging population over the next 10-20 years
    • IOT driven by the increasing connected gadgets, devices and machines connected to IP networks and the internet
    • Cyber security driven by the ever increasing concerns of privacy, security and the expanding digitization of our lives
  • investment macro bias:  this is your crystal ball.  do you see interest rates increasing or decreasing, do you see GDP growing, declining, and other variables usually framed in a ‘macro view’

The next post will be the analysis of this within my personal framework.  If you are interested in these graphics and what the Google drive sheets behind them, send me an email.

The Old Journal Posts

March 30, 2017

Tools – i finished the first tool framework – The Portfolio Radar Screen.  I will implement on my portfolio and work to publish the output in a few days.

Another good thinking article in SA this morning https://seekingalpha.com/article/4058957-economic-issues-unfold-money-supply-high-tide-ebbs-becomes-low-tide – Atle Willems

<quote> from one of the comments

Procyon Mukherjee, Contributor

Gross Investment at fraction of depreciation is a trend not followed by only a very few; the exception is BNSF, which continues to invest more than depreciation, thanks to Buffet’s long standing belief that asset heavy businesses must continue to invest in assets no matter what the external conditions are. But fortunately for BNSF, it does not have to face quarterly roll-calls in investor appraisals, which the others in S&P 500 have to do. A lot could change if the investors asked the right questions. Market value of equity need not be only measured by the parameters that we are so used to

 

March 28, 2017

This is not about tools.  This is about 2 companies.

KR – this past weekend, i visited a Fred Meyer in PDX suburbs.  I try to make a habit of two things:  a) buy from companies i own, and b) visit retail establishments that i own.  Nothing like getting to know the company than walking thru the isles, etc.  Now, Freddies is not all of KR, but WOW … i was impressed (i had 10 year old memories of this store and they were not this).  Clean, bright, well organized and friendly and helpful staff.  I was especially impressed with the Organic / Natural section highlighting KR private brand.

INTC – i discovered that i had a McAfee subscription that i had forgotten (2 different emails, 2 subscriptions) … i canceled them both and had great customer service via chat session.  When asked why i was canceling, i noted the high cost of subscriptions compared to free open source offerings like Avast and Avira (especially for MAC).  The agent on the other end of chat immediately offered 50% off my subscription.  While an isolated incident and 1 person, if McAfee is willing to offer 50% off to keep a subscription, sure seems like something is going on.

March 26, 2017 – Weekly Update

Editorial:  i am going to start a sequence of ‘tools’ this coming week.  i am currently using 4 tools and am planning on adding a 5th in Q2.  These 4 tools will each receive an overview of how i use them as well as a pointer to a template for your use if you find useful.  All the standard caveats and warnings that tools and their use are never fool proof nor absolute … they each create relative views of data that we as investors can use to help make our decisions.  Nothing more, nothing less

On to the weekly review …

  • Here is a counter argument to the view that the S&P runup is based more on perception and an absence of better investments rather than real earnings growth – http://fundamentalis.com/?p=6780  (credit to SA author Jeff Miller for introducing me to Fundamentalis) – there is, at least, forecasted earnings growth.
  • Looking back to portfolio changes last week … i dumped TGT; i just got too exhausted trying to figure out if their retail model can thrive (not survive – who cares about that?).  my retail exposure will be doubled down into a) KR and b) TJX (one of the 4 tools up-coming ‘gro-view’ will show why TJX is new position target).
  • A great quote from Zacks:
    • “The market is currently pricing-in three interest rate hikes for 2017, with a March (already happened), June and December bump as the most likely. Savers and borrowers would be wise to keep an eye on these Fed meetings (or just keep reading my column for updates), and be sure to watch your personal finances to see if you are affected in any way or if you can do anything about it. For investors, the interest rates will have an impact but not as much as the financial media would like for us to believe. It’s better to focus on policy, fundamentals, and as ever, corporate profits.”
  • For value oriented folks like me, any time the general bias is enthusiasm for stocks turns more positive than cautious, it’s time for discipline.  Momentum will continue to push stock prices higher, and if earnings growth does not keep pace (see above from Fundamentalis), BAM!!!  Big risk surprise somewhere.  Here is a good picture of the transitioning enthusiasm from professionals.  – http://fat-pitch.blogspot.com/2017/03/fund-managers-current-asset-allocation.html
  • Some CEO comments this week that were worth internalizing –  (kindly linked from the work here http://avondaleam.com/company-notes-digest-3-24-17/
    • “we see a bit more modest inflation outlook versus what we saw a year ago in the fourth quarter” —General Mills CFO Don Mulligan (Packaged Foods)
    • “The retail landscape is particularly in the U.S. is not – is in a steady state…I think the important thing to point out is that these changes are really being driven by the consumer, and consumer demand at the same time remains quite strong. But we know that consumer expectations are quite high in terms of product, the type of product they want, the innovation, the style. They want the product fast, they want it easy, they want personal service.” —Nike CEO Mark Parker (Apparel)
    • Ask yourself, what business health prompts buying new office furniture?  “we experienced growth in six of the 10 vertical markets we track including five with double digit percentage growth rates. This growth was dampened by declines in the technical professional, education, healthcare and information technology sectors” —Steelcase CFO David Sylvester (Office Furniture)
  • Blackrock published a post on caution about accepting assumptions around the recent FED rate increase.  The second one i thought the better.
    • “Assumption #2: The Fed is now tightening and creating restrictive policy. — We believe nothing could be further from the truth. In our view, the elasticity of interest rate sensitivity is not linear and is in no way symmetric at different rate level thresholds. In other words, moving policy rates from 4% to 6% would essentially shift financial conditions from fairly restrictive to more restrictive, but moving rates at the lower end of the spectrum must be thought of differently. Indeed, we believe moving from negative real rates to modestly positive rates, as is happening today, is still extremely accommodative and supportive of the economy and markets. It also brings the financial system closer to an equilibrium.”  https://www.blackrockblog.com/2017/03/24/assumptions-march-fed-hike/

 

March 23, 2017

As you might have figured out, i have a couple of SA authors that i read consistently.  It’s not that i believe and agree with what they say, but that they make me think deeper, and the comments on the article (while half are garbage, there are others who prompt better thinking on my part).  a must read today – http://seekingalpha.com/article/4057175-actually-going-behind-scenes 

March 22, 2017

I am not going to comment on the last couple of days of market action other than comment that i am staying focused on fundamentals, and not political winds.  These winds are creating opportunities as well as anguish.  The paradox of the disciplined value investor:  YES!! the prices are nearing my value entry / repurchase targets.  NO!!! my unrealized capital gains are shrinking.  Hard to have one w/out the other … i will embrace the paradox with a good sized bucket of cash on hand.

In a recent Seeking Alpha publication one of my favorite authors posted an interesting article.  The main content of the article was what struck me, though worth the read, but there was a little nugget that i liked (and is part of my operating procedures as well, so it is always reinforcing to see a respected investor espouse similar).  <quote>

The fear of rising rates is now history and O is now on its way back to “normalized” trading. The chances for another pullback are now modest at best and I believe that my target of $55 could become a difficult goal. For new investors (in O) I recommend a dollar cost average strategy (25% at $58, 50% at $56 and 25% at $54).  – Brad Thomas Article

The specifics of the investment and prices are not relevant, but the strategy is golden in uncertain market times … and we certainly have that!  Systematical claim the position without missing a decent price.  One will never hit the bottom (or the top), but one can get close and carefully hedge the uncertainties.

March 21, 2017

A good portfolio strategy post by one of my favorite SA authors: http://seekingalpha.com/article/4056703-selling-trimming-reasons-within-86-stock-portfolio

Of the recent portfolio reductions made, the one that in short term seems to have been hasty is VOD.  Europe needs to be next domain of equity research.  I made an error i am afraid.

March 19, 2017

The theme for this Sunday’s readings has been surprisingly the same internal debate i have been having over the last couple of weeks -> is there really strength in the economy to support the narrative of 3 rate increases this year, or described as another dichotomy reinflation or deflation.  Couple this with the pushme / pullme of market valuations and holding cash, it is a hard time for investors like me.  Sitting in a large proportion of cash and equivalents, is the best thing for me now.

With this confusion of inputs, it does not mean, however, that i am sitting on my hands waiting for the sky to fall.  I am still confident in my main 3 narratives in equity – health, IOT and digital security.  But finding value in those vectors is complicated.  I have some favorites but am waiting on better entry points:  (IOT – SWKS, QTS,CONE; Health – CAH, PFE, JNJ; Security – the easy way CIBR, CSCO).    I recently reduced my CAH holdings as i think it got a bit ahead of itself, and will buy more on any pull back <$75.  QTS and CONE are interesting <$45, and even better <$42.  PFE entry is still <$32.  CSCO i own enough but may increase if prices decline materially – and am watching carefully how they respond to NFV threats in their main biz.

On the bond / income side of the discussion, PFF has surfaced as interesting, but this plays in to the interest rate conudrum that i started today’s post.  A bit more analysis is required before i take position, however.  I just cannot get over my aversion to big bank paper.

Fidelity (do not know if you need to be a customer to read this) posted a short interview with John Rodgers (Ariel Capital). https://www.fidelity.com/insights/investing-ideas/value-stocks-fund-manager.  I have been a fan of John for over 20 years.  My company approach is similar to his, though i often end up w/ large companies, where he stays mid-to-small.  I am learning the hard way that a small focused set of 30 companies is much easier to build confidence and knowledge, than a screener approach to the full universe of companies.  I am company picker, an active investor (owner of pieces of the company).

March 17, 2017

This is a bit pre-mature as i have not completed my ‘weekend reads’ but this article is worth reading.  http://seekingalpha.com/article/4055769-economy-well.  I follow the author as he usually has both sound analysis as well as a contrarian point of view.  The point that i found very interesting and meaningful was: <quote>

“In my view, the economy is not doing well. It is gradually weakening. The Fed is doing its best to normalize interest rates, so that it is better prepared to address any future shocks to the economy. It has no option other than to suggest that the economy is strong as it does so, for fear of roiling the stock market and undermining the wealth effect that it worked so hard to create. It is walking a fine line between building ammunition for the next economic downturn and tightening financial conditions in a weakening economy, which may instigate that downturn.”

From a company / stock perspective today, i am back watching the health care sector very carefully as the fallout of US administration may create some moves that are not warrented but create good entry points.  This will be the weekend sector to focus on for me.

March 16, 2017

I took some money off the table yesterday.  Selling a couple of lower dividend stocks that were either at or close to cost basis.  Now up to 15% cash in taxable account, and have not really changed the cash balance in non-taxable account which is still  higher than desired.  I just felt that the risk had exceed my tolerance, and i wanted a bankroll ready when values re-assert themselves.  Yellen’s tone was perfect and i came out on the wrong side of the trade (opportunity cost of risk aversion which i have stated consistently).

One of the positions i exited was DSW.  Bought before earnings and sold after earnings w/ the dividend.  I will continue watching the company’s efforts to reverse same-store sales numbers.  If they management can pull that rabbit out of hat consistently over next quarter, i will be back even at slightly higher entry price.

March 12, 2017

March 8, 2017

Yesterday’s two analysis outputs.

  1. NYLD & NYLD.A … this company hit my radar about 3 months ago as it surfaced within the renewable energy sector.  I have been watching it since, and this week it neared the buying zone.  I dug deeper.  It’s an asset and debt tool for NRG (an electric utility).  It has two natural gas generation facilities which are by orders of magnitude the largest energy sources in the NYLD portfolio.  It also carries all the debt with a very confusing capital structure so that NRG never loses control of the voting majority.  Just feels like a NRG dumping ground for all the risk and a very handsome dividend (>50% of total) going back to the mother company (NRG).   Decision:  pass
  2. I also stumbled upon DSW … you know, shoes.  My wife and daughter shop there occasionaly and i have been drug into the store several times (sigh).  The price is rational, the dividend is good though with limited growth potential.  Revenue growth and the AMZN threat is holding things down and back.  I will most likely start a position at current prices and look to double if narrative stays the same (and prices do not exceed rational buying zone).

March 7, 2017

This is a long article, and regardless if you agree or not, it is worth the read  http://seekingalpha.com/article/4052270-broadly-overvalued-moment-market-history … note to self:  “do NOT chase the weasel!”

Ironically after reading that article, i took a couple of small positions yesterday.  CIBR ETF for my daughter’s account.  This segment is my favorite narrative, but i have no flipping clue who will surface as winner and who will do an Icarus … so an ETF.  I also added small lot of O to IRA at $59; i expect this will go lower, but across my accounts today my cost basis is <$50 (a dollar-cost averaging approach every time O drops to $59 or less.)

March 3-#2, 2017

when it rains, it pours.  had time to review CAH decision – hold or sell

decision:  the rational lower down-side is -15%; current gain is >20%
decision: hold, if declines 15% decision needed: BUY MORE?

March 3, 2017

after a brief interruption of other attentions …

while i was away – shorted DE, closed the position with small profit.  turned around and bought longer puts on same DE.  decided to not sell off some INTC even though position is larger than comfortable, but sold April calls against the excess.  key here is to keep generating some income boost without selling off positions.  why?  i do not have better place for the money and risk capital seems to have a floor due to overall market momentum.  if that momentum shifts, the floor will disappear, however.

new targets include COST (~160), PFE (~32), and TJX (~75, which btw i also bought / sold calls and turned small profit).  all of the interest rate targets, ETF and REIT will be targeted for after March FED to see if interest rate goes up and prices go down for some vulture harvesting.

next week, i should be back to consistent updates.

February 16, 2017

I do not like the current prices.  They are just too high.  Rather than sit on my hands and walk away, i started nibbling the other way.  small short positions opened / closed in same week, and selling near-term calls on positions that need to be reduced.  Making ~2% per trade but learning a tremendous amount.  Lost money on earlier Put on DE, and then made money back selling it short this week.  Practicing with real money.

February 14, 2017

A recent article in SA mirrors my perspective as to the current market influence (the gory details of EU politics are interesting, but for me it’s the take-away of what is currently driving big money).  It makes it a bit hard for value oriented fundamental investors like myself on one hand, but on the other hand, it makes for some interesting vulture scenarios as long as there is cash in the account, or one is willing to margin to pick up good companies that the macro winds executed for no sound financial reason.  http://seekingalpha.com/article/4045315-politics-portfolio-seeing-red

 

February 12, 2017

Portfolio Strategy … we call can have one, and i find that i intuitively have settled on a strategy that i have yet to articulate (even to myself).  while that may seem incredibly haphazard, especially for one who can be such a data devil, it has served me well so far.  Today, i ran across an article that closely resembles my approach at the portfolio level.  http://alephblog.com/2016/11/26/the-band-travels-up/ .  This was referenced in my favorite Sunday read http://seekingalpha.com/article/4045113-weighing-week-ahead-trump-vs-yellen-round-one (Jeff Miller at Seeking Alpha).  It can take me a couple of hours to wade thru his weekly update (and the requisite pointers).

February 10, 2017

After a bit of hiatus … two things

  1. I sometimes struggled with one of my favorite mutual fund advisors (Ariel Capital) when they would have many of the same companies in their different portfolios.  I finally figured it out and feel quite stupid.  I am actively watching around 50 companies.  It takes time to really understand them as i want to before investing and even after investing.  I am finding that i now put same stock in different accounts as well.  I just cannot by myself manage a much broader set of companies, and when their price hits a ‘purchase point’ i put in best account based on tax implication.  I now understand why companies end up in different portfolios.  The analyst KNOWS that company and understands its value, and obtaining that knowledge is expensive and can only be spread so thin.  Should have figured that out years ago.
  2. PFE … you can see my last post about it.  But what if i turn the objective a bit sideways.  I do not want to reference expected capital and dividend growth over 5 years.  I only want to park some capital there to generage 4% dividends with low down-side risk to capital.  PFE merits a re-look w/ different objective.  This was prompted by a very good SA author, Chuck Carnevale. PFE Article

January 31, 2017

I ran thru the health narrative and PFE surfaced as something interesting.  First i had to remove my bias against “big drug evil”, then i ran it thru my relative growth comparison forumla … PFE is a dud.  While the dividend grows nicely over the time period to something above 5%, capital does not grow even to that level of annual basis.  For a deep dive, i have to see at least 5-10% annual growth.  PFE downside risk ranges from 30-20% over the next 24 months or so.  PFE = Pass and watch, but not the price, more the growth potential (quarterly check points).

January 30, 2017

A new filter process implemented.  There is a bit of hocus-pocus in the beginning; the best way to explain -> follow up on one of the three narratives:  iot, heath, cyber.  pick the half dozen or so companies i know and understand their business.  Put them side-by-side with a set of Yahoo.com data sucked into Google Sheets.  Conditionally color key ratios or data comparisons and see which one floats out.

I ran thru the iot narrative -> SWKS

Then i put into the relative growth comparison forumla … SWKS pans out as interesting.  Next step -> deep dive.

January 29, 2017

I put SBUX thru my standard relative risk / reward analysis.  This is typically the first fundamental analysis screen before really digging thru analyst reports and annual reports.  SBUX just did not make the cut.  The downside risk to valuation is too high, even with a substantially lower entry point.  For example, at $52/share entry, the lowend of expected annual price growth would be 6.46% with a downside risk of ~35% in 2017; on the high side, one might see growth rate >20%.  At 4 years, the dividend rate would be 3.67% based on historical and projected dividend growth rates.  The bar i commonly use is the lowend expected return should be annualized @10%.  I will continue watching, but my deep dive will move.

Given that SBUX is outside my 3 vector growth strategy, i.e., cyber, health and IOT, the special situation value needs to be compelling.  SBUX is just not compelling, and possibly not until low $40s.

January 27, 2017

SBUX and CLX were the dichotomy of the day.  SBUX fell ~4% today on earnings report.  Its trading at $56 something.  My original target is $53.  Getting close so do i pull trigger?  What is a similar investment that is position-priced (a price where i may either initiate or increase a position … CLX.

Looking at the two and in reference to the portfolio, SBUX is the choice (and a breakfast test w/ my wife confirmed).  Now i do deep dive on SBUX financials.