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April, 2006: 6 11 13 23 27
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. |
4/6/06-Since the prior entries, our Leapin' Lizard (LL) pick, LPG, has been held a year, and so it will be sold at the early market price tomorrow, removed from the LL open positions portfolio, and its closed position info be recorded at that time. Its performance since a purchase on 4/6/05 has been +35.66%, through early this morning.
My top-ten equities for mention today are: BL; ELNK; IBA; MTL; OXY; PORK; RESC; SGTL; VPHM; and WSTL.
The focus for the current entry is on a new Classic Value (CV) pick, Occidental Petroleum Corp. (OXY) (recent price $97.50). OXY's trailing price to earnings ratio is 7.55. It is a large-cap stock with a market capitalization of $39.22 billion. Occidental Petroleum has a 1.40% dividend, with a dividend payout ratio of .09. The price to sales ratio is 2.53. Its price to book value is 2.56. There is positive free cash flow. Return on equity is 41.22%. Debt to equity is 0.20. The current ratio is 1.54. The ratio of shareholder equity to total assets is 0.55. Over the past 12 months, OXY is up 31.47% (through early today). This security has momentum, value (low P/E, high return on equity), and safety (large size, low debt, reasonably high current ratio) going for it. The modest dividend will help offset commission costs.
4/11/06-Since the prior entries, our Classic Value (CV) pick, SAB, has been held a year, and so it will be sold at the early market price tomorrow, removed from the CV open positions portfolio, and its closed position info be recorded at that time. Its performance since a purchase on 4/11/05 has been +30.27%, through 2 PM (Central Time) today.
My top-ten equities for mention today are: AEA; BF; CVX; FDP; PFCO; PSEC; RAIL; SGTL; UTR; and VPHM.
The focus for the current entry is on a new Yummy Yielder (YY) pick, Paula Financial (PFCO) (recent price $1.93). PFCO's trailing price to earnings ratio is 10.90. It is a nano-cap stock with a market capitalization of $12.56 million. Paula Financial has a 3.10% dividend, with a dividend payout ratio of .33. The price to sales ratio is just 0.68. Its price to book value is below average at 1.10. There is positive free cash flow. Return on equity is 11.02%. Debt to equity is only 0.09. The current ratio is 1.42. The ratio of shareholder equity to total assets is 0.53. Over the past 12 months, PFCO is up 7.26%.
4/13/06-Effective 4/11/06, our Classic Value (CV) asset, Roanoke Electric Steel (RESC) (purchased just on 2/1/06), was bought out by Steel Dynamics (STLD) for $9.75 per share in cash plus 0.4 shares of STLD stock per share of RESC. I sold our resulting 35 shares of STLD today for $56.32 per share. The net proceeds of $1958, plus the $868 cash buyout payment, bring the net total secondary to RESC's merger with STLD, to $2826, a 12.28% gain over our (6 weeks ago) RESC cost basis. This info has accordingly been added to the CV closed position record.
By coincidence, a buy-out by Bain Capital of Burlington Coat Factory (BCF), one of our Leapin' Lizard (LL) purchases (on 9/26/05) was effected today, for $45.50 a share, a 20.54% gain over our cost basis. So both these assets are being removed from the tracking portfolios and the BCF info is being added to the LL closed position record.
Although their mean holding periods are around a year or less (due to such mergers or buy-outs), the averages of 15 LL and 16 CV closed positions are running about 20% (CV) to 24% (LL), after commissions, but not counting dividends.
4/23/06-Since the prior entries, our Leapin' Lizard (LL) pick, MHS, has been held a year, and so it will be sold at the early market price tomorrow, removed from the LL open positions portfolio, and its closed position info be recorded at that time. Its performance (through the close of trading on 4/21/06, after commission but before any dividends) since a purchase on 4/22/05 has been +5.46%.
My top-ten equities for mention today are: ABC; EME; ESCL; FRD; RCMT; SFN; SHLM; VOL; ZEUS; and ZONS.
The focus for the current entry is on a new Leapin' Lizard (LL) pick, Friedman Industries (FRD) (recent price $10.75). FRD's trailing price to earnings ratio is 14.00. It is a nano-cap stock with a market capitalization of just $77.08 million. Friedman Industries has a 3.10% dividend, with a dividend payout ratio of .41. The price to sales ratio is also 0.41. Its price to book value is below average at 1.96. There is positive free cash flow. Return on equity is 15.32%. Debt to equity is zero. The current ratio is 3.20. The ratio of shareholder equity to total assets is 0.72. Over the past 12 months, FRD is up 63.87%. Relative to the S&P500 Index, FRD is ahead 50.06% in the past 52 weeks. Year to date, it is up 82.51%. The asset currently has momentum, low P/S plus high dividend value, and low debt going for it. (Due to FRD's earlier price, earnings, and dividend characteristics, it has also been a selection in our Classic Value [CV] and/or Yummy Yielders [YY] portfolios.)
Although our Leapin' Lizards, as presently calculated, have done quite well on average, performing thus far at an annualized rate of around 25-30% (admittedly in a very favorable climate for stocks), it is possible that a higher return and larger pool of potential LL selections might be available if we were to adjust the LL performance criterion.
Currently, we require LL's to meet these minimum stats.: performance over the previous 12 months of at least 50% relative to the S&P 500 Index; price to sales of .5 or below; and debt to equity .33 or below.
It would be interesting to see what difference it would make to lower the minimum relative performance guideline from .5 to .25, with no other changes. To test this, we are today beginning a new tracking portfolio which will be called Momentum Value (MV). Its minimum criteria will be: performance over the previous 12 months of at least 25% relative to the S&P 500 Index; price to sales of .5 or below; and debt to equity .33 or below.
Henceforth, until we have enough stats to get some idea of the comparative merits between the two portfolios (LL and MV), whenever we make a LL pick we'll also make a pick to add to the MV portfolio, then monitor the results along with other performance figures provided at least annually.
For the current entry, the MV pick is A. Schulman, Inc. (SHLM) (recent price $23.27). SHLM's trailing price to earnings ratio is 24.14. It is a micro-cap stock with a market capitalization of $728.40 million. A. Schulman has a 2.50% dividend, with a dividend payout ratio of .47. The price to sales ratio is 0.48. Its price to book value is below average at 1.51. There is positive free cash flow. Return on equity is 6.32%. Debt to equity is 0.11. The current ratio is 2.98. The ratio of shareholder equity to total assets is 0.58. Over the past 12 months, SHLM is up 40.86%. Relative to the S&P500 Index, SHLM is ahead 27.05% in the past 52 weeks. Year to date, it is up 8.13%. The asset currently has momentum, low P/S plus above average dividend value, and low debt going for it.
Until the MV assets have been observed for a year or more, they will not be added to the Mama's Mix (MM) tracking portfolio. If, after at least a year, they are performing significantly worse or better than the LL, we'll decide whether to drop or incorporate them (by adjusting the LL criteria).
4/27/06-Since the prior entry, our Classic Value (CV) pick, TALK, has been held a year-and-a-day, and so it will be sold at the market price a little later this afternoon, removed from the CV open positions portfolio, and its closed position info be recorded at that time. Its performance (through noon today, Central Time, after commission but before any dividends) since a purchase on 4/26/05 has been +19.85%.
My top-ten equities for mention today are: AWX; DHOM; DUK; ED; HDL; NI; PEG; RSC; SO; and TWMC.
The focus for the current entry is on a new Classic Value (CV) pick, Handleman Company (HDL) (recent price $8.48). HDL's trailing price to earnings ratio is just 7.43. It is a nano-cap stock with a market capitalization of $170.90 million. Handleman Company has a 3.80% dividend, with a dividend payout ratio of .27. The price to sales ratio is a mere 0.13. Its price to book value is only 0.57. There is positive free cash flow. Return on equity is 8.33%. Debt to equity is 0.33. The current ratio is 1.80. The asset presently has low P/S, low P/E, low P/Bk, plus high dividend value, and low debt going for it. This stock meets Benjamin Graham value and safety criteria.
HDL will be added to both the Classic Value (CV) and Mama's Mix (MM) tracking portfolios at its market price a little later today.
Disclaimer and Disclosure Statement
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.