1/1/11-For those into numbers, today's date is kind of cool.
Here is the Low Price to Book, Low Price to Earnings, Five-Star Stocks, Double Winners, and S&P 500 Index performance summary, through the final quarter of 2010:
(The statistics combine portfolio open and closed position results and are effective as of the close of trading 12/31/10. Dividend income has not been included in the table's performance figures. Commissions, though, have been subtracted from each of the portfolio asset results, but not from the SPX performance.)
Observations about the portfolios:
For those interested in how the Jim's and Phil's (my) "Ten Stocks for a Decade" portfolios have performed since inception on 5/14/10, on average they are now up 12.40% in their thus far 0.63 year holding period. This works out to an annualized return, excluding dividends but net of commissions, of 20.39%. In the same period, the S&P 500 Index is up 10.74%, for an annualized return of 17.58%. And if commissions had been subtracted, the S&P 500 record would of course be worse.
And here is our 2010 year-end summary for my wife's and my nest egg:
May we all have a happy and prosperous 2011.
1/9/11-Since the last entry, there have been no new portfolio sales or stocks ready for sale among assets followed here. So, no redemptions are indicated at this time.
My top-five current low price to earnings stocks are: BKI; KTCC; LACO; SKX; and WRLS.
My favorite among them is Telular Corp. (WRLS) (recent price $6.77). It meets Benjamin Graham's bargain stock safety and value criteria.
Telular Corp. will be added to our nest egg at its market price early tomorrow morning, 1/10/11.
1/16/11-Per the rules indicated in December, 2010, for our then new Double Winners portfolio (inception 11/29/10), it was time to sell LACO on Friday, 1/14/11. Although I have been enjoying LACO's gains, those portfolio rules simply call for a mechanical trade out of equities that no longer meet Double Winners' buy criteria, replacing them with ones that do. In this case, LACO exceeded the low price to book value criterion of 0.66 during the day on 1/14. Meanwhile, the portfolio as a whole was up at least 5% and there were other qualifying Double Winner asset candidates available for purchase to replace LACO in the portfolio. All of the sell criteria being met, LACO was accordingly, early that afternoon, sold for $3.51 a share and its open position removed from the portfolio.
Its purchase and sale records were then added to the spreadsheet for previous Double Winner portfolio closed positions. LACO had gained 43% in the short time it had been held.
All of the open and closed Double Winner portfolio asset results have now been recalculated as of the close of trading on Friday, 1/14/11. To date, the overall (still open plus closed positions) Double Winner average results net of commissions (but not counting any dividends) show a gain of 12.04%, which, given the short average hold period, translates to annualized gains of 315.46%.
Considering only the four closed positions, the average gains were 18.64%, with an average hold of just 27 days, for an annualized rate of growth of 929.85%. I mention this only for interest, of course. In reality, sustaining such an annualized rate would be virtually impossible, and we can assume that in relatively short order the gains will be coming back to Earth.
The Double Winners portfolio had a cost basis at inception of $24,654 and just prior to the sale of LACO the open positions' total market value stood at $28,590. Since I replace sold assets with the average value of the portfolio assets before each sale, I shall early on Monday, 1/17/11, be replacing LACO with about $5700 worth of shares in a new Double Winner asset, WRLS. WRLS has a low P/E, a hefty regular dividend, and a low dividend payout ratio.
My new Double Winners portfolio, rebalanced with info evaluated today, will be as follows: AOB; ELNK; HQS; SUTR; and WRLS.
The Double Winners portfolio remains experimental. I am simply following the rules set up for it initially in selling out LACO at this point, though it remains undervalued (just less so than at purchase) by more than one standard. The rules simply call for the removal from the portfolio of any asset that no longer qualifies on the initial buy criteria. However, those criteria are rather stringent, and it is quite possible assets that no longer qualify as buys will continue to see substantial price increases subsequent to their removal from the portfolio.
Thus, for anyone trying to follow the buy and sell transactions noted here who does not need the funds from the sale of one asset to buy another, I would personally advise continuing to hold shares in LACO, and any other still undervalued Ben Graham type securities, so long as the market value remains below their fundamentals' value on such standards as low price to book, low price to earnings, and high dividend to price.
1/17/11-The day and date from the following in yesterday's entry should have read "Tuesday, 1/18/11." I had forgotten about the holiday today affecting the U. S markets. "...I shall early on Monday, 1/17/11, be replacing LACO with about $5700 worth of shares in a new Double Winner asset, WRLS. WRLS has a low P/E, a hefty regular dividend, and a low dividend payout ratio."
1/24/11-I am beginning two new actual account experimental portfolios, similar in format to the Double Winners started on 11/29/10 (and explained in my entry dated 12/12/10).
The first of these is called "Earnings Estimates Increase - 5% Plus." It will consist of a portfolio of five assets chosen from among stocks for which recent reporting of earnings estimates has shown at least a 5% increase from the just prior earnings estimates. Through 12/10/10, a portfolio of such assets followed by the American Association of Individual Investors (AAII) Journal has shown an 18.9% risk-adjusted return (not counting dividends) since inception (1/1/98). With dividends, the average annualized risk-adjusted total return may well be 20% or better.
From among assets meeting this initial earnings estimate increase, I am choosing only from those assets which also meet the following standards: 1. Debt to equity must be 0.99 or below; 2. Current ratio must be 1.5 or above; 3. Return on equity must be positive; 4. Balance sheet info must be within the past 6 months; 5. Shareholder equity to total equity must be 0.5 or above; 6. If there is a dividend, the dividend payout ratio must be 0.50 or less; and 7. The asset must be one of the top 5 remaining assets based on the result of a formula: return on equity divided by a figure derived from the product of the trailing P/E and the P/Bk, and that product reduced by the asset's dividend percent, if any.
As with the Double Winners Portfolio, such assets will be held until the portfolio as a whole is up at least 5%, one or more of the assets no longer meets all of the portfolio's buy criteria, and there is a replacement asset available (for each security being sold) which does meet said requirements, at which point the portfolio will be rebalanced to again include only qualifying stocks.
My first five Earnings Estimates Increase - 5% Plus assets were purchased over the period 1/20/11 through 1/24/11, and the resulting portfolio consists of: DSW; IRBT; IRF; STEC; and WLK. Through the close of trading today, the portfolio as a whole is up almost 3%.
The second experimental portfolio is called "Five-Star Stocks." I had stopped formally following this type asset before, when the portfolio consisted of assets bought approximately once a month, since at the time I felt it would be too difficult to attain enough qualifying assets for an annual or longer portfolio of at least 12 securities. Nonetheless, the record of the nine stocks purchased using the original criteria (better than 31% on average, with a mean hold duration of less than a year) was good enough to warrant a new look in a different portfolio format.
For this one, as with the Double Winners and Earnings Estimates Increase - 5% Plus portfolios, it will consist of a portfolio of just five assets. To qualify for the portfolio, each stock must at the time of purchase: 1. Hold a Motley Fool CAPS rating of 5 stars; 2. Meet at least one value criterion, such as low P/E, low P/Bk, or high dividend, in each case with figures sufficient to meet the Ben Graham standards for a bargain security; 3. Current ratio must be 1.5 or above; 4. Balance sheet info must be within no more than 6 months; 5. Shareholder equity divided by total equity must be 0.50 or above; 6. If there is a dividend, the dividend payout ratio must be 0.50 or below; and 7. Debt to equity must be 0.33 or below.
As with the other experimental five-stock portfolios, such assets will be held until the portfolio as a whole is up at least 5%, one or more of the assets no longer meets all of the portfolio's buy criteria, and there is a replacement asset available (for each security being sold) which does meet said requirements, at which point the portfolio will be rebalanced to again include only qualifying stocks.
My first five 5-Star Stocks portfolio assets were purchased today but unfortunately have not gotten off to a bang-up commencement, already down about 1%. They are: BSPM; CPHI; EBF; SPA; and SPU.
My hope is to ultimately find a set of five strategies which as a blend provide excellent overall risk-adjusted returns. So, for now then, this potential but as yet experimental blend consists of: 1. low P/Bk stocks generally being held till up at least 50% each (unless merged or bought out for cash) and with P/E of 12 or above plus P/Bk of 1.2 or above; 2. low P/E stocks, also generally being held till up at least 50% each (unless merged or bought out for cash) and with P/E of 12 or above plus P/Bk of 1.2 or above; a five-stock Double Winners portfolio; a five-stock Earnings Estimates Increase - 5% Plus portfolio; and a five-stock 5-Star Stocks portfolio.
I intend to provide the results of these approaches in my quarterly reviews.
1/30/11-Since the last entry, a Low Price to Earnings pick, TDW, purchased on 8/2/10, was sold on 1/27/11 for a net gain, not counting any dividends, of 37.51%. It has been removed from the Low P/E open positions portfolio and its closed position info recorded, based on the 8/2/10 to 1/27/11 per share performance. This asset had not achieved the usual sell criterion of a 50% or greater price increase. However, since its August purchase its fundamentals had weakened so that the P/E was at the time of sale almost twice its bargain level in early August when the shares were purchased.
Based on a recent review, my top-five current low price to book value stocks are: AOB; CSKI; HQS; HWG; and JGBO.
My favorite among them is The Hallwood Group, Inc. (HWG) (recent price $25.40). It meets Benjamin Graham's bargain stock safety and value criteria.
The Hallwood Group, Inc. will be added to our nest egg at its market price early tomorrow, Monday, 1/31/11.
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Neither I nor Investor's Journal will be responsible for losses by anyone who obtained ideas from this site.
This diary is intended for personal interest and general information only. You are advised to do your own research (as well as to consult highly compensated professionals) before spending money on anything.
I know of no reason anyone should take my financial musings seriously. At best I am a dedicated amateur providing a bit of investment-related insight and entertainment, at worst an amusing diversion.
My wife, Fran, and I may at times own shares of some of the assets mentioned here. But neither of us receive any benefit from reference to them, unless you count the mutual misery when we get it wrong, or the opportunity to gloat when we get it right.