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September, 2007: 3 10 15
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. |
9/3/07-Since the prior entry, there have not been any open positions held for a year or more, so no sales are currently appropriate.
My top-ten equities for mention today are: BRK/A (BRK/B); CDI; CULS; KEQU; MALL; PCR; RCMT; SYX; VLGEA; and VSEC.
The focus for the current entry is on a new Leapin' Lizards (LL) asset, PC MALL, Inc. (MALL) (recent price $12.27). MALL's trailing price to earnings ratio is 19.20. The estimated forward P/E is 13.63. The PEG ratio is only 0.64. The asset's market-capitalization size is nano-cap: $153.29 million. PC MALL, Inc., has no dividend. The price to sales ratio is only 0.14. MALL's price to book value is 2.23. There is positive free cash flow. Return on equity is 13.79%. Debt to equity is low at 0.19. The current ratio is 1.41. MALL is up 94.76% in price over the past 52 weeks. The stock has low price to sales, low debt, low PEG, and good momentum in its favor.
PC MALL, Inc., will be added to our LL tracking portfolio at its market price as of early on Tuesday, 9/4/07.
9/10/07-Since the last entry, our Classic Value (CV) pick, RAIL, has been held over a year, and so it will be sold at the early market price tomorrow (Tuesday) morning. It will be removed from the CV open positions portfolio, and its closed position info recorded, based on the 9/5/06 to early 9/11/07 per share performance. Through the close of trading on 9/10/07, after subtracting a commission (while not counting any dividends), RAIL has been down 26.44% in the past 12(+) months.
Since the last entry too, our Leapin' Lizards (LL) pick, TESS, has been held over a year, and so it will also be sold at the early market price Tuesday morning. It will be removed from the LL open positions portfolio, and its closed position info recorded, based on the 9/8/06 to early 9/11/07 per share performance. Through the close of trading on 9/7/07, after subtracting a commission (while not counting any dividends), TESS has been down 4.30% in the past 12(+) months.
My top-ten equities for mention today are: BRK/A (BRK/B); FINL; MTG; PMI; PMRY; PNX; RDN; RSC; TGIC; and VSH.
The focus this time is on a new Classic Value (CV) selection, PMI Group, Inc. (PMI) (recent price $29.79). PMI's trailing price to earnings ratio is just 6.68 The asset's market-capitalization size is mid-cap: $2.56 billion. PMI Group, Inc., has a 0.70% dividend with a dividend payout ratio of 0.04. The PEG ratio is only 0.70. The price to sales ratio is 2.02. PMI's price to book value is quite low, at 0.69. There is positive free cash flow. Return on equity is 11.07%. Debt to equity is 0.13. The current ratio is 1.15. The shareholder equity to total assets ratio is 0.66. This stock has low price to earnings, low debt, a low PEG ratio, and low P/Bk in its favor. It meets Ben Graham bargain equity criteria.
PMI Group, Inc., will be added to our CV tracking portfolio (as well as to our personal nest egg) at its market price early on Tuesday, 9/11/07.
As, this summer, our LL portfolio's open positions have not been doing nearly as well as the CV assets, it seems best to suspend, for now at least, the suggestion that investors put an equal weighting of their new purchases into both types of portfolios. The closed positions record for LL is still reasonably close to that of already sold CV securities. However, that history has all been during a bull market. LLs depend on a combination of value and momentum factors for their overall performance. Suppose that, in a severely down market, momentum goes against us and the results are in the tank, worse even than the market averages? As we do not yet have sufficient info about the relative long-term merits of the one approach vs. the other, it may be wise for the reader to take steps to protect her- or himself in a bear market.
For example, in our own nest egg, I am not selling LL assets already acquired, but am keeping purchases of Leapin' Lizards to only about half those of our Classic Value stocks. In fact, among the latter I am also taking the precaution of emphasizing low price to book value assets over low price to earnings ones, as I feel the latter are less reliably indicative of a company's overall financial condition and its safety as an investment.
In general, I am seeking to assure that our entire equity portfolio has a price to book value no higher than 1.3, which, I believe, should help prevent substantial losses in the event of a recession, significant correction, or market crash. Or at least, if paper losses do occur, such a portfolio of (on average) low price to book value equities should have excellent buoyancy in the months and years following a steep downturn.
Another portfolio safety factor I would advise is to hold one's CV assets not just for a year and a day, if they still have good price to value at that time. For purposes of the hypothetical portfolio competition referred to here and to keep the comparative figures consistent, I must sell soon after assets have been held for 12 months. But I would suggest that still excellent value equities be kept in one's portfolio for up to two years or so, or until they have achieved their price potentials (consistent with earnings or book value), whichever comes first.
Despite my present reservations about LL, as above, I shall continue to make picks for and record all the cost basis and performance info for the open and closed position LL portfolio, so that, in time, we may make a good assessment of the relative merits of the CV vs. LL approach. I have been surprised before by LL's resilience and may be again.
9/15/07-Since the last entry, our Classic Value (CV) pick, NX, has been held over a year, and so it will be sold at the early market price Monday morning. It will be removed from the CV open positions portfolio, and its closed position info recorded, based on the 9/15/06 to early 9/17/07 per share performance. Through the close of trading on 9/14/07, after subtracting a commission (while not counting any dividends), NX had been up 35.12% in the past almost 12 months.
My top-ten equities for mention today are: ALLI; BRK/A (BRK/B); INXI; MALL; NSHA; PCR; PMRY; RCMT; VLGEA; and VSEC.
The focus this time is on a new Leapin' Lizards (LL) selection, Allion Healthcare, Inc. (ALLI) (recent price $7.25). ALLI's trailing price to earnings ratio is 48.33. The forward P/E is estimated as 23.39. The asset's market-capitalization size is nano-cap: $117.47 million. Allion Healthcare, Inc., has no dividend. The PEG ratio is 1.60. ALLI's shareholder equity to total assets ratio is 0.83. The price to sales ratio is just 0.48. ALLI's price to book value is below average at 1.10. There is positive free cash flow. Return on equity is 2.51%. Debt to equity is 0.00. The current ratio is 2.75. ALLI's share price is up 78.57% in the past 52 weeks. The stock has low price to sales, low debt, below average P/Bk, and significant upward momentum in its favor.
Allion Healthcare, Inc., will be added to our LL tracking portfolio (as well as to our personal nest egg) at its market price early on Monday, 9/17/07.
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.