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January, 2006: 5 19 24 31

Disclaimer - IMPORTANT - Read this first!

Investor's Journal is a diary focused strictly on investments and personal finance issues, primarily from a contrarian and retiree point of view. Follow along with an average guy's failures and successes as he learns, by trial and error, the fine art of value investing.

My top-ten equities for mention this week are AEM; BRK/A (or BRK/B); DODGX; DRAM; FRD; HD; IRF; NFB; NUE; and UNTD.

The focus for the current entry is on another Classic Value asset, United Online, Inc. (UNTD) (recent price $14.39). UNTD's P/E is 7.85. It has a market cap of $893.38 million. United Online has a large (4.20%) dividend (with a dividend payout ratio of 0.22). It's price to sales ratio is 1.75. UNTD has positive cash flow, a return on equity of 43.26%, debt to equity of only 0.19, a current ratio of 1.81, and a price to book value ratio of 2.84. Its shareholder equity to total assets ratio is 0.60. This stock meets Ben Graham value and safety criteria, based on low debt and P/E combined with a high yield.

Although I shall continue to hold tracked portfolio assets for one year and a day, I am also coming to believe that selling after an asset has risen 50% or more might be a better approach, everything else being equal. So, I'll keep track also of how a portfolio would have done if stocks that had risen 50% or more would have been sold right away, or at least after they no longer had significant momentum factors in their favor. I'll report on the results of this comparison here, and, if appropriate, may be altering guidance for future value asset hold periods.

1/19/06-Since the last entry, TWMC has been in the Leapin' Lizards (LL) portfolio for a-year-and-a-day and so will be sold at the market price a little later today and added to the LL record of closed positions. It is down so far 60.31% since purchase on 1/18/05. And INFO has been in the Classic Value (CV) portfolio for a year and so will be sold at the early market price tomorrow (for one-year-and-a-day long-term tax treatment) and added to the CV record of closed positions. INFO is down so far 74.75% (so far, indeed!) since purchase on 1/19/05.

My top-ten equities for mention this week are: BP; CC; CCJ; CELL;CTWA; CVX; IMCO; RTP; URGI; and VSEC.

The focus for the current entry is on another Leapin' Lizard asset, United Retail Group, Inc. (URGI) (recent price $14.54). URGI's P/E is 24.64. It has a market cap of $191.80 million. United Retail Group has no dividend. It's price to sales ratio is just 0.45. URGI has positive cash flow, a return on equity of 10.15%, debt to equity of only 0.06, a current ratio of 1.53, and a price to book value ratio of 2.38. Its shareholder equity to total assets ratio is 0.45. URGI is up this year to date 9.35%, up 166.02% in the last year relative to the S&P 500 Index, and up 173.90% over the last 52 weeks on its own.

As mentioned the last entry, in our actual portfolio we are selling some assets when they have gained 50% or more, though, for simplicity and to test which approach is more profitable, we are keeping all LL, CV, and YY assets in the tracking portfolios for at least a year and a day. Over the last couple days we sold shares of CELL, IPS, and PSS, with an average appreciation of 54% (not including dividends or sales commissions). The closed positions (including all commissions) are being recorded so eventual comparison can be made between the two approaches.

1/24/06-Since the last entry, CULS has been in the Leapin' Lizards (LL) portfolio for a year and so will be sold at the market price early tomorrow and added to the LL record of closed positions. As of the market close today, it is down 7.89% since purchase on 1/24/05.

My top-ten equities for mention this week are BCF; FRD; IAL; CERS; CONN; ZIGO; SCHW; CVX; MVSN; and UNTD.

The focus for the current entry is on another Yummy Yielder (YY), United Online, Inc. (UNTD) (recent price $14.48). UNTD's P/E is 7.93. It has a market cap of about $902 million. United Online has a large (4.10%) dividend (with a dividend payout ratio of 0.22). It's price to sales ratio is 1.75. UNTD has positive cash flow, a return on equity of 43.26%, debt to equity of only 0.19, a current ratio of 1.81, and a price to book value ratio of 2.85. Its shareholder equity to total assets ratio is 0.60. This asset was cited previously as a good Classic Value asset, but also qualifies under the YY criteria. Like several others cited here, UNTD meets Ben Graham value and safety criteria, in this case based on low debt and P/E combined with high yield.

As mentioned previously, in our actual portfolio we are selling some assets when they have gained 50% or more, though, for simplicity and to test which approach is more profitable, we are keeping all assets in the tracking portfolios for at least a year and a day. Several days ago, happily prior to the recent big downturn in the DOW and Nasdaq, we sold the Classic Value selection, PD, at a 52.28% profit (after commissions). PD had been purchased in the actual account on 7/14/05. This and other early sale closed positions are being recorded, so eventual comparison can be made between the two approaches.

1/31/06-Since the last entry, GFR has been in the Classic Value (CV) portfolio for a year and so will be sold at the market price early tomorrow and added to the CV record of closed positions. As of 10 AM (Central Time) this morning, it is up 45.10% since purchase on 1/31/05.

My top-ten equities for mention this week are BRK/A (or BRK/B); BZ; DRAM; LPX; SEB; DODGX; SKYF; HD; TDS; and RESC.

The focus for the current entry is on another Classic Value (CV) asset, Roanoke Electric Steel (RESC) (recent price $27.63). RESC's P/E is 7.62. It has a market cap of about $342 million. Roanoke Electric Steel has a 1.60% dividend (with a dividend payout ratio of 0.12). It has positive cash flow, a return on equity of 20.90%, debt to equity of only 0.18, a current ratio of 2.12, and a price to book value ratio of 1.74. Its shareholder equity to total assets ratio is 0.58. This stock meets Ben Graham value and safety criteria based on low debt and P/E. It also has a reasonably low P/S ratio of 0.56.

Since the last entry, we have sold a Classic Value security, IPSU, in our actual portfolio, with a total return of about 67%. As mentioned previously, in our nest egg portfolio we are selling some assets when they have gained 50% or more, though, for simplicity and to test which approach is more profitable, we are keeping all assets in the tracking portfolios for at least a year and a day. Our early sale of Imperial Sugar may not have been especially wise, for it has since risen from our $19.60 sale price to $23.15, a total return of about 94% if sold now. Of course, it may go up or down from here, before the end of the designated contest hold period of 366 days (367 for leap years).

This is our final entry here till mid-February. My wife and I are driving into the northern plains states and will be visiting with relatives who live on a large WI farm. They have had recent new snow and also own about a dozen horses. It should be a picturesque little adventure, far different from our winter experience in central TX.

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