The Old Journal Posts

By | April 1, 2017

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.

Leave a Reply

Your email address will not be published. Required fields are marked *