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.
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?
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.
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 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.
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?