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December, 2010: 12 17 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.

Also since the last entry, another 5-Star Stock choice, NOV, purchased on 6/5/09, met its sell criteria. It was sold on 11/29/10 and had a net gain 52.54%. It has been removed from the 5-Star Stock open positions portfolio, and its closed position info was recorded, based on the 6/5/09 to 11/29/10 per share performance.

With nine (in total) 5-Star Stocks having been selected, bought, and now sold, the portfolio's average record continues to be excellent, though this is a small sample from which to draw significant conclusions.

As mentioned previously, though I am not now formally tracking additional purchases in a 5-Star Stocks portfolio (because it was becoming difficult to reliably find good purchase candidates that met both classic value and 5-Star ratings status), I am taking note of stocks' Motley Fools CAPS star ratings when considering ones to buy for the Low P/E or Low P/Bk portfolios. Everything else being equal, I am more likely to choose and buy value stocks that have 5-Star status, if and when they are available.

As the entire 5-Star Stocks portfolio has been redeemed, I shall calculate this experiment's results in the next quarterly review (due at the end of the year or early next year), but shall not otherwise follow such assets' performance further.

Since the last entry, a Low Price to Book Value selection, TEAM, purchased on 9/10/09, received a merger offer. There was not certainty the merger would be approved, but its offer had resulted in a boost in the asset's price. Meanwhile, TEAM no longer met its buy criteria. Accordingly, our shares of the asset were sold on 12/3/10 for a net gain of 13.35%, not counting any dividends. It has been removed from the Low P/Bk open positions portfolio, and TEAM's closed position info has been recorded, based on the 9/10/09 to 12/3/10 per share performance.

Since the last entry too, another Low Price to Book Value pick, MIGP, purchased on 6/1/09, was sold on 12/6/10 for a net gain, not counting any dividends, of 81.75%. It has been removed from the Low P/Bk open positions portfolio and its closed position info recorded, based on the 6/1/09 to 12/6/10 per share performance.

My top-five current low price to earnings stocks are: AFG; BKI; BG; FSR; and RNR.

My favorite among them is Buckeye Technologies, Inc. (BKI) (recent price $21.00). It meets Benjamin Graham's bargain stock safety and value criteria.

Buckeye Technologies, Inc. will be added to our nest egg at its market price early tomorrow morning, 12/13/10.

Now that the 5-Star Stocks are no longer being maintained as a separate investment approach, I have begun a new actual account experimental portfolio, one I call "Double Winners." The Double Winners are stocks meeting at least two of Ben Graham's strict value criteria (for instance: low price to net current assets; high dividend; low price to book value; and/or low price to earnings) as well as meeting the safety criterion of debt lower than equity (maximum debt to equity 0.99), current ratio of at least 1.50, and shareholders equity to total assets 0.50 or above. (If there are dividends, the dividend payout ratio must be 0.50 or below.) Such assets will be held until the portfolio as a whole is up at least 5%, one or more of them no longer meets all of the above 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.

The Double Winners portfolio was begun on 11/29/10 with essentially equal investments in each of 5 stocks: AOB, HQS; MAIL; TPI; and VOXX. To date, they are up on average a little over 1%.

12/17/10-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 book value stocks are: ENH; FFG; FSR; RE; and TRH.

My favorite among them is Flagstone Reinsurance Holdings, SA (FSR) (recent price $12.53). It meets Benjamin Graham's bargain stock safety and value criteria.

Flagstone Reinsurance Holdings, SA will be added to our nest egg at its market price a little later this morning, 12/17/10.

12/27/10-Per the rules indicated earlier this month for our new Double Winners portfolio, it is time to sell MAIL, TPI (which seemingly has not provided a dividend since last March), and VOXX. Though TPI has been down, on average these three have gone up about 10% each since purchase toward the end of November. The overall portfolio of five Double Winners is up, as of the close of trading today, slightly over 5% since the end of November purchases.

My new Double Winners portfolio, rebalanced with info evaluated today, is as follows: AOB; ELNK; HQS; LACO; and SUTR.

Although I have been enjoying the advances in both MAIL and VOXX, the 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. Accordingly, early tomorrow, ELNK, LACO, and SUTR will be purchased at their market prices to replace MAIL, TPI, and VOXX in this portfolio.

It is likely TPI ought not to have been purchased (for this portfolio) in the first place, since its dividend (one of the criteria for purchase) seems to have been suspended after March, 2010, but this was not noted till today. Errors will happen, and unfortunately I am as prone to them as the next person. I wish this would be my last, but very much doubt that is the case.

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