Catching falling knives and other painful lessons

This last couple of weeks taught me a couple of lessons that left a scars to remember – though small.  Three retail stocks that i have watched and wanted to purchase, IF the prices dropped considerably to my targets.  TJX, DSW  and TSCO.

My initial target for TJX was $72.50 (it is currently $75.53 and my cost basis is $75.33), but i relaxed my target within 5% as i worried that the stock would not fall to my target.  However, it did fall to just below $74.  Key learning to watch the knife fall and hit ground before picking it up.  My position is 5% within my target, but i could have had a better entry point.  Position created in 2 purchases, and a third purchase is possible but ONLY at the target.

For TSCO, the target initially was $63, and the current price is $54.88 and my cost basis is $57, much below current price.  TSCO was bouncing in large percentages during the time period, and my position covered 3 purchases.  Again, the knife did not hit the ground, but hit my target price … after 30 day wash rule expiration, i may sell the most expensive position for loss and reposition.  Same lesson as TJX to wait for the knife in ground.

DSW was purchased in two different accounts (one much longer term that will be ignored here).  DSW dropped like a rock on a host of potential rationalizations, but i purchased a block at $16.20 thinking i would ride a bounce.  It bounced to $16.40 immediately and i put in a stop at $16.10 thinking that the bounce would continue up.  It sank again and my stop was executed.  It did not go too much below $16.05 and now it is at $16.73.  The value and yield is interesting and below $16.50 i will pick it up after 30 day wash rule.  Lesson learned … stop loss orders are a bane, but would i go without them for dead cat bounces?   … probably not.

Sunday Reads May 28, 2017

  • a sizable group of indicators, and a short summary:  “The nowcast for the economy remains positive, as does the near term view, with both stocks and jobless claims leading the way.  The longer term forecast remains neutral to positive, shading a little closer to neutral based on the tightening yield curve, less robust growth in real money supply, and the miss in corporate profits.”  Source
  • Two things here (Factset):  a) Europe growing and b) positive forecasts coming out of S&P Q1 earnings.  One can rationalize pollitically and economically why growth is moving away from US.  Aggregate indicators like this can be misinterpreted and misused … i see these like tail / head winds that need to be considered when looking at specific companies.  The industry data sets are important, however.   Source
  • Jeff Miller’s posted weekly snapshot 
  • A great overview of BMO, my fourth largest stock holding with cost basis of $53.19 / 5.19% yield – 
  • Not sure i agree w/ this perspective on Convertibles, but was worth the internal dialogue.  Source – i looked at ETF, ICVT, for a quick reference:  low yield, low analyst ratings, and a steep positive price slope (where’s the value?).
  • A good fist-full of data –

Will come back w/ a post on last week’s catching falling knives.

Language choices matter

The language news sources choice matters … significantly in my opinion.  Here are the framing assumptions:

  • Many people (investors too) read headlines and snippets and few take the time (or have the time) to read the full text and try to comprehend the nuance
  • All stories, investment stories too, have nuance
  • The language used in headlines creates and demonstrates the bias of the writer and perhaps “the street” for investments

Here is a good example from … “…worse than expected earnings and a 3.0% decrease in comparable store sales” … this just feeds the negative bias for retailers.  When actually, the earnings were $0.01 from consensus, and revenue (which i find most important) was about 1.0% ($6.2m) above estimates.  But that was not mentioned.  So income missed, revenue exceeded, but the headlines completely avoided the positive (revenue).

For the headline readers, continue selling the retailer.  For those of us who actually read the details and try to understand the nuance, we will do our best to take advantage of your headline only ignorance / actions.

Thank you!

Sunday reads & weekly commentary May 7, 2017

Triple Net REIT Noise – Increased my O

Yesterday was one of those days for Triple Net REITs due to one specific REIT disasterous earnings.  Like the lemings that investors typically are, every like REIT suffered max exodus – the fear quotient.  I got out my check book and increased my position in O.  I basically doubled my overall position across both taxable and non-taxed accounts.  I grabbed the knife on the way down and did not get the absolute bottom – two positions, 1@55.5 and 1@55.8 … i’ll take the cuts on my fingers for this one.  Brad Thomas (Mr. SA REIT) wrote similiarly yesterday and promised to write more about O.

PFE and a good Wednesday read

Yesterday, i doubled my PFE holdings with a purchase <$33.  While something less than $31 would have been ideal, i compromised my target buy to increase position before X-div date upcoming.  Sometimes buy / sell targets are ‘guidelines’ like the pirates code.

A really good quick read on how people can hold too tightly to historical versions of the world … always learning, always mashing up past with future seems good advice –

TSCO – just cannot pull the trigger

I have been watching TSCO for quite a few months now and remember the stores from my growing up in the mid-west.   the price passed thru my ‘buy target’, so i took another look through my ‘relative growth’ model tool that looks at future capital and dividends with a blend of historical and forecasted numbers.  two reasons i just cannot pull trigger … first, the dividend yield 3 years out remains below 3.5% which is my favorable 3 year floor.  second, even though the capital appreciation on the low side should be somewhere close to 9% annual appreciation, i fail to see how rural america and small town america which is the heart of TSCO customer base will stay even with where it is now … a cyclical decline based on a) international competition for commodities, b) demographics behind the aging populations, and c) the further exodus to urban centers for jobs, education and promise

i took the target down $2 from today’s close to $59, and i am still frozen on same two rationale.  there has to be some new sign of growth in the customer base and the business before i can pull the trigger … more waiting, though TSCO now moves from a radar slot #4 to a #6 (just watching).

If you want a blank Google Sheet w/ the relative growth model, email me @

Small adjustment – RY to T

based on two factors:  a) canada real estate bubble anxiety and b) T yielding 5%.  I own two of the 5 Big Canada Banks (BMO and RY), but today i reduced my RY by 30%.  Took those funds and a bit more and purchased more T for the 5% dividend, and lower capital risk.  I may also add to VZ position above 5%.  Everybody seems to hate VZ and T these days, and that usually means the floor is close – and i have a hard time seeing their businesses going away or even declining materially any time soon.  Of course, they (VZ / T) need to figure out a higher ARPU and avoid being commodity digital conduits.

Sunday Reads & Weekly Commentary – 4-30-17

Commentary -> I did follow thru and removed a bit of INTC from taxable account and sold the remaning CAH.  I also took profits on the UMPQ trade position that i took – gross return was ~7% for a <30 day hold; this could be a repeating pattern between $16 and 18.  As much as i wanted to take a couple of new positions (expanding current ones too); the prices just did not hit my trigger target so i held off … of interest right now:  T, VZ, VNQ, O, FPI, and TSCO (on the latter, i have yet to convine myself that a) rural US will avoid further declines and b) TSCO can hold sales against the others, e.g., WMT, AMZN, HD …  i am also watching ETFs carrying China, India and other emerging markets.  I have yet to find the best way to invest there.

Watching ahead next week … mostly irrational moves and reactions to macro and political perceptions.  One observation is that since the US election, the market has reacted to perceived / anticipated events more than to fundamental facts.  I will stay focused on the facts, and react when others ignore them and create opportunities.