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August, 2005: 9 19 24 30
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. |
8/9/05-There have been a couple changes in the contest portfolios. In the Leapin' Lizards tracked portfolio, Intier Automotive (IAIA) merged with Magna, Inc. (MGA). IAIA shareholders had the option of taking .41 shares of MGA for each IAIA share or of receiving cash. We elected to take the shares and so entered the appropriate new MGA shares, deleting those of IAIA from the portfolio.
In the Classic Value tracked portfolio, Maxcor Financial, Inc. (MAXF) ceased to exist after merging with BGC Partners, LP. There was no option to take shares in this case. Each MAXF shareholder received $14 (a share) from BGC Partners, Inc., a profit for the Classic Value portfolio of 59.52%, after subtracting the purchase commission.
The statistics below take these changes into account. In the case of Classic Value and the MAXF closed position, the total cost basis and net proceeds have been added to the costs and current market value of the open positions, to calculate the overall portfolio gain.
Taking into account the changes indicated and the deletion mentioned last week of OMVKY (which thus was not factored in for this count) from the Leapin' Lizards tracked portfolio, including both open and closed positions, there have to date (before tomorrow's purchase) been 22 purchases for each tracked portfolio, with three left before we begin selling assets held at least one year. In future, both open and closed positions will be included in the comparative stats.
Following the 10/4/04 inception of our Leapin' Lizards vs. Classic Value portfolios experiment, the Leapin' Lizards (LL) are now up only 7.48%, Classic Value (CV) is up 13.87%, and an initial buy-and-hold investment in the S&P 500 Index has appreciated 8.75% (all statistics as of the close today). (The figures are based strictly on price appreciation, which excludes dividends. Commissions have been subtracted from the portfolio results and not from the S&P 500 Index record.)
The average holding period in the tracked portfolios has been roughly 155 days vs. twice that for the S&P 500 Index, since the beginning of the contest. Despite the disadvantage its portfolio would seem to have relative to the S&P 500 Index (due to its much shorter average holding period), CV is well ahead of the S&P standard.
A close look at portfolio performance shows that among CV's 22 purchases there have been only 3 that so far have had losses. There have been 10 losses to date among the 22 LL assets. I am sufficiently impressed with both the relative and absolute low-risk performance of the CV stock picks that for me the contest is essentially over, and I shall be buying all of the subsequent CV selections for our nest egg. I am not planning to make further purchases among the LL choices and after 10/3 expect to cease providing new LL selections info.
The next contest stock will be added to the CV tracking portfolio at the early trading price on Wednesday, 8/10. The top candidates this week are: ASR; BZ; HWG; PKX; and WLC.
My choice among them is Wellco Enterprises, Inc. (WLC) (recent price $13.00). WLC has a market capitalization of $16.52 million, a P/E of 8.55, a 4.62% yield, with a dividend payout ratio of 46.00%, a price to sales ratio of 0.31, a return on equity of 19.44%, a price to book value of 1.46, a current ratio of 1.77, a debt to equity of 0.33, and positive free cash flow.
8/19/05-Since the 10/4/04 inception of our Leapin' Lizards vs. Classic Value portfolios experiment, the Leapin' Lizards (LL) are now up 8.40%, Classic Value (CV) is up 9.99%, and an initial buy-and-hold investment in the S&P 500 Index has appreciated 7.69% (all statistics as of the close on 8/18/05). (The comparisons are based strictly on price appreciation, which excludes dividends. Commissions have been subtracted from the portfolio results and not from the S&P 500 Index record.)
The CV performance takes into account not only the open positions but also the closed position referred to in the previous entry. It had a cost basis of $2510 and proceeds, from a cash merger, of $4004.
The average holding period in the tracked portfolios has been roughly 159 days vs. around twice that for the S&P 500 Index since the beginning of the contest. Despite the disadvantage the LL and CV portfolios would seem have relative to the S&P 500 Index (due to their much shorter average holding periods), they are both ahead of that S&P standard.
The next contest selection will be added to the LL tracking portfolio at the last trading price this afternoon, Friday, 8/19/05. The top candidates this week are: CHNL; HNT; INMD; MHS; and PSAI.
My choice among them is IntegraMed America, Inc. (INMD) (recent price $11.72). INMD has a market capitalization of $56.41 million, a P/E of 39.07, no dividend, a price to sales ratio of 0.48, a return on equity of 4.23%, a price to book value ratio of 1.55, a current ratio of 0.90, a debt to equity of only 0.14, and positive free cash flow. INMD has appreciated 28.43% in 2005 and 129.94% relative to the S&P 500 Index in the past 52 weeks. It is up 141.61% over the past 12 months.
8/24/05-Following the 10/4/04 inception of our Leapin' Lizards vs. Classic Value portfolios experiment, the Leapin' Lizards (LL) are now up 9.69%, Classic Value (CV) is up 11.53%, and an initial buy-and-hold investment in the S&P 500 Index has appreciated 7.60% (all statistics as of the close 8/23/05). (The figures are based strictly on price appreciation, which excludes dividends. Commissions have been subtracted from the portfolio results and not from the S&P 500 Index record.)
The average holding period in the tracked portfolios has been roughly 162 days vs. about twice that for the S&P 500 Index, since the beginning of the contest. Despite the disadvantage the portfolios would seem to have relative to the S&P 500 Index (due to the much shorter average holding period), both LL & CV are well ahead of the S&P standard.
The next contest stock will be added to the CV tracking portfolio at its market price late today. The top candidates this week are: MIVA; ORB; PMRY; SEMI; and WSTL.
My choice among them is MIVA, Inc. (MIVA) (recent price $5.58). MIVA has a market capitalization of $171.29 million, a P/E of 10.35, no dividend, a price to sales ratio of 0.84, a return on equity of 8.78%, an operating margin of 13.44%, a price to book value of just 0.60, a current ratio of 2.20, a debt to equity of only 0.01, and positive free cash flow.
Although our nest egg's market performance, after our excess expenses, remains only about 1% so far for the year, our equities' total book value continues to go up on target, at an annualized rate of 12.5%, over and above any reductions in the portfolio to offset expenses. In time, it seems reasonable to expect this increase to manifest in superior returns.
8/30/05-During the nearly 10 months since the beginning of our competition, there have been more than one reverses in leadership between the two hypothetical portfolios. As of today, the formerly behind assets are once again ahead. Evidently, it is still too early to say which is the better strategy. Following the 10/4/04 inception of our Leapin' Lizards vs. Classic Value portfolios experiment, the Leapin' Lizards (LL) are now up 10.01%, Classic Value (CV) is up 9.79%, and an initial buy-and-hold investment in the S&P 500 Index has appreciated 6.71% (all statistics as of the close 8/30/05). (The figures are based strictly on price appreciation, which excludes dividends. Commissions have been subtracted from the portfolio results and not from the S&P 500 Index record.)
The average holding period in the tracked portfolios has been roughly 165 days vs. about twice that for the S&P 500 Index, since the start of the contest. Despite the disadvantage the portfolios would seem to have relative to the S&P 500 Index (due to their much shorter average holding periods), both LL & CV are well ahead of the S&P standard. On an annualized basis, even the current laggard portfolio, CV, is up 22.95% vs. 7.45% for the S&P 500 Index.
The next contest stock will be added to the LL tracking portfolio at its market price early tomorrow, 8/31/05. The top candidates this week are: GRIL; HNT; INT; PSAI; and VSEC.
My choice among them is World Fuel Services Corp. (INT) (recent price $31.98). INT has a market capitalization of $735.54 million, a P/E of 22.65, a 0.50 dividend (with a dividend payout ratio of 12.00%), a price to sales ratio of just 0.10, a return on equity of 17.75%, a price to book value of 3.53, a current ratio of 1.31, a debt to equity of only 0.21, and positive free cash flow. INT has risen 73.62% in the last 12 months, 27.11% year to date, and 60.42% relative to the S&P 500 Index over the past 52 weeks.
We received some good news in yesterday's mail. Late last week there had been a confusing message from the Social Security Administration indicating I had zero earnings pertinent to Social Security, based on a response from the Department of the Army. It turns out that was strictly an assessment of one aspect of the potential award. Now we have the actual benefit decision. It is slightly more favorable than I had initially anticipated. Our combined income from Social Security plus my retirement annuity will be significantly more than half of what we need for our budget. Starting in late December, when the Social Security benefit checks begin to arrive, only about one-third of our income will have to come from our retirement portfolio and its dividends. Put another way, we'll have to draw less than 3% from our dividends and nest egg each year to keep up our lifestyle, assuming no substantial and sustained increase in inflation. With such a small level of required drain on our investments, maintaining assets through the rest of our lives is much better assured.
Meanwhile, since my retirement at the end of 2001 (and Frances' in the spring of 2002, except for a few part-time musician gigs she has had each year), despite the severe bear market that ended in late 2002 or early 2003, and after all expenses in excess of our income for the past nearly four years, including for new cars and a new roof to the house, it has been our good fortune, largely due to favorable equity purchases, to see the nest egg rise more than $100,000.
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.