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May, 2006: 6 10 21 25
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. |
5/6/06-Since the prior entries, our Leapin' Lizards (LL) pick, HUBG, has been held a year, and so it will be sold at the market price Mon. morning, 5/8, removed from the LL open positions portfolio, and its closed position info recorded based on the 5/6/05 to early 5/8/06 per share performance. Through the close of trading 5/5/06, after subtracting a commission but not counting any dividends, HUBG is up 78.62% in the past 12 months.
My top-ten equities for mention today are: BDL; BRK/A (or BRK/B); CINF; FNT; GMR; HD; HDL; HOV; TNC; and UTR.
The focus for the current entry is on a new Yummy Yielder (YY) pick, once again Handleman Company (HDL) (recent price $8.49). HDL's trailing price to earnings ratio is just 7.42. It is a nano-cap stock with a market capitalization of about $171 million. Handleman Company has a 3.70% 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 0.59. 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, low debt, and a high dividend going for it. HDL meets Benjamin Graham value and safety criteria.
Handleman Company will be added to both the Yummy Yielder (YY) and Mama's Mix (MM) tracking portfolios at its market price as of the beginning of trading on Mon.
My preference would have been to pick a different asset, since it was also cited in the just prior entry. However, in my opinion HDL appears to be the recent and current best pick, both as a Classic Value (CV) or a YY security. Readers are as always encouraged to use the services of well qualified financial consultants and/or do their own duly diligent research prior to buying any asset.
While I am not a market timer, I have observed that when, as is now the case, very few genuinely bargain stocks may be found, so that it seems best to pick assets more than once to add reasonable price to value holdings to our portfolios (because so few are available at excellent value levels), the indexes tend to be close to a short-term top.
This is not a prediction, but the odds would seem to favor there being a significant pull-back in the major index levels between now and the end of the year or, if one does not occur then, certainly by sometime in 2007. While this growing possibility does not in my view warrant selling all one's equities, it does point out the merit of periodically assuring that one's nest egg is well allocated. If one has not rebalanced his or her holdings in recent months or years, this might be an excellent time to take some profits among the best performers, sell any losers that no longer look like they have the same potential they appeared to at the time of purchase, and in general lower the average amount of risk (of permanent loss of principal) inherent in one's total set of financial resources.
5/10/06-Since the prior entry, our Classic Value (CV) pick, SCHN, has been held over a year, and so it will be sold at the market price tomorrow morning, removed from the CV open positions portfolio, and its closed position info recorded based on the 5/9/05 to early 5/11/06 per share performance. Through about an hour before the close of trading today, after subtracting a commission but not counting any dividends, SCHN has been up 57.3% in the past 12 months.
My top-ten equities for mention today are: ASH; BRK/A (BRK/B); HD; MPAC; NSS; PKX; PORK; SHOO; STC; and TIII.
The focus for the current entry is on a new Classic Value (CV) pick, Premium Standard Farms, Inc. (PORK) (recent price $16.88). PORK's trailing price to earnings ratio is just 8.13. It is a micro-cap stock with a market capitalization of about $533.75 million. Premium Standard Farms, Inc., has a 1.50% dividend, with a low dividend payout ratio of .06. The price to sales ratio is only 0.57. Its price to book value is below average at 1.21. There is positive free cash flow. Return on equity is 15.54%. Debt to equity is 0.30. The current ratio is 3.77. The asset's shareholder equity to total assets ratio is 0.62. The stock presently has low P/E, low P/S, low debt, and a modest dividend going for it. PORK meets Benjamin Graham value and safety criteria.
Premium Standard Farms, Inc., will be added to both the CV and Mama's Mix (MM) tracking portfolios at its market price as of the beginning of trading in the morning.
5/21/06-While it may just be coincidence, following the recent entry (5/6/06) referencing the possibility of a short-term market top and the importance of having one's portfolio well allocated, the S&P 500 Index is down 4.4%. A few more good price to value asset candidates are now available, but the situation will probably not begin to be exciting for new stock picks until stocks are down 10% or more.
Since the prior entry, our Leapin' Lizards (LL) pick, KND, has been held over a year, and so it will be sold at the market price tomorrow morning, removed from the LL open positions portfolio, and its closed position info recorded based on the 5/19/05 to early 5/22/06 per share performance. Through the close of trading on 5/19/06, after subtracting a commission but not counting any dividends, KND has been down 38.74% in the past 12(+) months.
My top-ten equities for mention today are: BRK/A (BRK/B); BKRS; JCTCF; MRO; MTLM; PCR; SFN; SHLM; URGI; and VLO.
The focus for the current entry is, first, on a new Leapin' Lizards (LL) pick, Marathon Oil (MRO) (recent price $75.50). MRO's trailing price to earnings ratio is just 7.86. It is a large company with a market capitalization of $27.69 billion. Marathon Oil has a 1.90% dividend, with a low dividend payout ratio of .13. The price to sales ratio is only 0.44. Its price to book value is 2.34. There is positive free cash flow. Return on equity is 34.18%. Debt to equity is 0.30. The current ratio is 1.20. The asset's shareholder equity to total assets ratio is 0.44. Although MRO is currently below its 50-day moving average price ($79.91), it is up 56.81% in the past 52 weeks relative to the S&P 500 Index. The stock presently has low P/E, low P/S, low debt, good 12-month momentum, and a modest dividend going for it. Besides meeting our LL criteria (low debt, low P/S, and high relative performance), MRO meets Benjamin Graham value and safety criteria.
Marathon Oil will be added to the LL tracking portfolio at its market price as of the beginning of trading in the morning.
Our second focus this time is on a new Momentum Value (MV) pick, Spherion Corp. (SFN) (recent price $8.03). SFN's trailing price to earnings ratio is 30.19. It is a micro-cap stock with a market capitalization of $461.71 million. SFN has no dividend. The price to sales ratio is only 0.24. Its price to book value is just 1.08. There is positive free cash flow. Return on equity is 4.68%. Debt to equity is negligible at 0.01. The current ratio is 1.53. The asset's shareholder equity to total assets ratio is 0.60. Although SFN is currently below its 50-day moving average price ($9.78), it is up 43.55% in the past 52 weeks relative to the S&P 500 Index. The stock presently has low P/S, low debt, momentum, below average P/Bk, and micro-cap size going for it.
5/25/06-Despite the recent market losses, we continue to be concerned about some overvaluation in US equities. At this stage in a bull market and from this level of asset prices to the stocks' underlying value, it seems reasonable to expect either a period ahead of "irrational exuberance" or of substantial equity losses. In any case, increased volatility seems likely. If the market is up, it would of course be a good time to take profits, decrease debts, and increase reserves. On the other hand, if the market on balance is substantially down over the next few weeks or months, one should then be able to find and benefit from the purchase of more superior value assets.
Since the prior entry, our Classic Value (CV) pick, NUE, has been held a year, and so it will be sold at the market price tomorrow morning, removed from the CV open positions portfolio, and its closed position info recorded based on the 5/25/05 to early 5/26/06 per share performance. Through the close of trading today, after subtracting a commission but not counting any dividends, NUE has been up 112.30% in the past 12 months.
My top-ten equities for mention today are: AWX; BRK/A (or BRK/B); CRC; EDGW; HAST; HDL; MIGP; MRO; STTX; and WIND.
The focus for the current entry is a new Classic Value (CV) pick, Avalon Holdings Corp. (AWX) (recent price $4.70). AWX's trailing price to earnings ratio is high at 45.63. This is one of the smallest of companies publicly traded and so has rather high risk. Yet it also bears high potential for eventual gain. It's nano-cap market capitalization is just $17.87 million. Avalon Holdings Corp. has no dividend. The price to sales ratio is only 0.52. Its price to book value is a mere 0.48. There is positive free cash flow. Return on equity is only 1.48%. Debt to equity is just 0.01. The current ratio is 2.74. About 30% of this asset's shares are owned by insiders. About 23% are owned by institutions. The asset's shareholder equity to total assets ratio is 0.59. AWX is currently above both its 50-day moving average price ($4.67) and its 200-day moving average price ($4.61). It is up 5.90% in the past 52 weeks and up 0.14% relative to the S&P 500 Index in that period. The stock presently has low P/S, low P/Bk, and low debt going for it. AWX meets Benjamin Graham value and safety criteria, again based on the very low price to book ratio and quite low debt. While there is no guarantee this particular stock will do well in the months ahead, considered as a whole a large portfolio of such low price to value assets traditionally does well, generally better than the S&P 500 Index, with less overall losses during downturns.
Avalon Holdings Corp. will be added to the CV and Mama's Mix (MM) tracking portfolios at its market price as of early trading tomorrow morning.
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.