Wednesday, June 06, 2007

Bad Day - Good Day

Probably good to have the market cool off a bit. May was certainly a torrid month. My portfolio had a relatively good day as I picked up a 1/2 pct point on the benchmark. I now lead the benchmark by 1.2%. It is amazing to think that I was 4% behind the benchmark about a month ago.

CHCG is my most recent stock. I bought them on Monday as my firat foray into buying stocks new or relatively new to the 100>1m list. Timing is everything as they spiked up over 13% on this dreary day. It is an interesting company. Here is the 1st paragraph from recent press release (they are based in China):

ZHEJIANG PROVINCE, China, May 14 /PRNewswire-FirstCall/ -- China 3C Group (OTC Bulletin Board: CHCG - News), a rapidly growing retailer and distributor of consumer and business products in China, announced today that revenue for the first quarter of 2007 was $84.5 million versus $13.4 million in the comparable quarter last year, an increase of 530%. Net income for the quarter was $6.5 million, or $0.12 per basic and diluted share, up 607% from $913,548 or $0.02 earnings per share for the same quarter last year.

The numbers are pretty eye-popping. Here is their income statement form past 5 quarters:


Q1 2007
03/31/07
Q4 2006
12/31/06
Q3 2006
09/30/06
Q2 2006
06/30/06
Q1 2006
03/31/06
Total Revenue 84.523 63.576 42.574 28.618 13.451
Cost of Goods Sold 70.591 53.562 35.970 24.343 11.517
Selling, General and Administrative Expenses 3.726 2.484 1.652 .904 .505
Operating Income Before Depreciation N/A 7.530 4.952 3.371 1.429
Depreciation & Amortization -- .007 .005 .004 .004
Operating Income After Depreciation 10.206 7.523 4.947 3.367 1.425

TLBTMTSM focuses on Operating Income after depreciation. Their EY was about 9%. Imagine what it will be if the Q2 2007 is anywhere close to 10m! As you can see, I am excited by their prospects. I was thrilled when they dipped at the end of last week creating a buying opportunity.

AEO had some good news as well today. Their May same store sales were up about 5% and this quarter in total they're up about 18% (American Eagle same-store sales rise 5% in May). I am very bullish on AEO.

PNCL, my high flier from 2006 has been gaining speed as well. Just 2 weeks ago it had dropped to just over $16. Today it closed over $3 higher at $19.29.

NOOF has been in a tail spin since announcing their earnings. For some reason their tax rate was an obscenely (ha-ha) high 46%. Nothing to do but grin and bear it.

One interesting note highlighted by CHCG, is that MFI does have foreign stocks. There is a mis-conception that MFI excludes foreign stocks. I actually subscribe to Global Investing for foreign stock ideas, but I may move away from that and start trying to have 15% of my MFI portfolio in foreign stocks. Hmmm, I keep finding more and more reasons to have more and more of my portfolio in MFI.

Looking at the most recent list, I wonder how many foreign stocks are there?

Top 100 companies with a minimum market cap. of $1 million
Companies are listed in alphabetical order
Name (in alphabetical order) Ticker Market Cap
($ Millions)
Pre Tax
Earnings Yield
Pre Tax
Return on Capital
Price
From
Most Recent
Quarter Data
AMEN Properties Inc AMEN 13.75 11% > 100% 06/05 12/31
Aetrium Inc ATRM 44.87 13% 50 - 75% 06/05 03/31
Alloy Inc ALOY 148.07 11% > 100% 06/05 01/31
Amedisys Inc AMED 977.79 8% > 100% 06/05 03/31
American Eagle Outfitters Inc. AEO 5,892.79 12% 75 - 100% 06/05 04/30
AmerisourceBergen Corp ABC 9,756.61 9% > 100% 06/05 03/31
Applied Materials Inc. AMAT 26,624.42 10% 75 - 100% 06/05 04/30
Aventine Renewable Energy Holdings Inc AVR 715.73 16% 25 - 50% 06/05 03/31
Avici Systems Inc AVCI 131.76 31% > 100% 06/05 03/31
Axcan Pharma Inc AXCA 858.20 11% > 100% 06/05 03/31
BJ Services Co BJS 8,909.72 13% 50 - 75% 06/05 03/31
BP Prudhoe Bay Royalty Trust BPT 1,463.76 12% > 100% 06/05 03/31
Barrett Business Services Inc BBSI 281.01 11% > 100% 06/05 03/31
Best Buy Co. Inc. BBY 23,129.12 10% 50 - 75% 06/05 02/28
CCA Industries Inc. CAW 63.94 15% 50 - 75% 06/05 02/28
CLST Holdings Inc CLHI 54.30 12% > 100% 06/05 02/28
CRA International Inc CRAI 524.22 10% 50 - 75% 06/05 02/28
China 3C Group CHCG 320.75 8% > 100% 06/05 03/31
Cox Radio Inc. CXR 1,407.64 9% > 100% 06/05 03/31
Crown Crafts Inc CRWS 42.53 19% 50 - 75% 06/05 12/31
Deluxe Corp DLX 2,260.54 8% > 100% 06/05 03/31
Domino's Pizza Inc DPZ 1,241.69 10% > 100% 06/05 03/31
Encore Wire Corp WIRE 686.34 23% 25 - 50% 06/05 03/31
ExpressJet Holdings Inc. XJT 323.09 50% 25 - 50% 06/05 03/31
Exxon Mobil Corp XOM 474,659.30 12% 50 - 75% 06/05 03/31
FTD Group Inc FTD 514.57 9% > 100% 06/05 03/31
Foamex International Inc FMXL 84.74 56% 25 - 50% 06/05 12/31
Fording Canadian Coal Trust FDG 4,362.96 11% 75 - 100% 06/05 03/31
Frontier Oil Corp. FTO 4,646.67 13% 75 - 100% 06/05 03/31
Gannett Co Inc. GCI 13,974.28 11% 50 - 75% 06/05 03/31
Great Northern Iron Ore Properties GNI 168.52 9% > 100% 06/05 12/31
Harley-Davidson Inc. HOG 15,816.38 10% 50 - 75% 06/05 03/31
Hasbro Inc. HAS 5,092.10 9% > 100% 06/05 03/31
Headwaters Inc HW 776.86 13% 50 - 75% 06/05 03/31
Heidrick & Struggles International Inc HSII 844.79 8% > 100% 06/05 03/31
Herbalife Ltd HLF 2,883.49 9% > 100% 06/05 03/31
Home Diagnostics Inc HDIX 198.53 11% 50 - 75% 06/05 03/31
Hudbay Minerals Inc HBMFF 2,961.02 15% 50 - 75% 06/05 12/31
Hurco Companies Inc HURC 304.68 10% 50 - 75% 06/05 04/30
IBSG International Inc IBIN 12.73 36% 25 - 50% 06/05 12/31
Image Sensing Systems Inc ISNS 58.20 9% > 100% 06/05 03/31
Imperial Sugar Co IPSU 320.20 31% 25 - 50% 06/05 03/31
Inplay Technologies Inc NPLA 17.95 35% > 100% 06/05 03/31
Intevac Inc IVAC 412.95 17% > 100% 06/05 03/31
JAKKS Pacific Inc JAKK 756.56 14% 75 - 100% 06/05 03/31
K-Swiss Inc KSWS 1,004.07 12% 75 - 100% 06/05 03/31
Keystone Consolidated Industries Inc. KYCN 205.50 29% 25 - 50% 06/05 12/31
King Pharmaceuticals Inc. KG 5,276.71 13% > 100% 06/05 03/31
Korn/Ferry International KFY 1,100.89 9% > 100% 06/05 01/31
Lam Research Corp LRCX 7,380.61 11% > 100% 06/05 03/31
Lexmark International Inc. LXK 4,872.42 12% 50 - 75% 06/05 03/31
MOCON Inc MOCO 61.83 10% 75 - 100% 06/05 03/31
Mannatech Inc MTEX 375.44 13% 75 - 100% 06/05 03/31
Marathon Oil Corp MRO 43,644.32 18% 25 - 50% 06/05 03/31
Metal Management Inc MM 1,325.62 12% 25 - 50% 06/05 12/31
Methanex Corp MEOH 2,767.52 27% 25 - 50% 06/05 03/31
Nathan's Famous Inc NATH 90.04 10% > 100% 06/05 12/31
New Frontier Media Inc NOOF 213.78 11% > 100% 06/05 03/31
Northgate Minerals Corp NXG 823.43 21% 50 - 75% 06/05 03/31
Nucor Corp NUE 20,428.38 13% 50 - 75% 06/05 03/31
Optimal Group Inc OPMR 182.24 9% > 100% 06/05 03/31
PW Eagle Inc PWEI 383.24 19% 50 - 75% 06/05 03/31
Pacer International Inc PACR 954.63 10% > 100% 06/05 03/31
PainCare Holdings Inc. PRZ 21.39 18% 50 - 75% 06/05 03/31
Pinnacle Airlines Corp PNCL 419.21 21% 75 - 100% 06/05 03/31
Pre-Paid Legal Services Inc. PPD 874.29 10% > 100% 06/05 03/31
Precision Drilling Trust PDS 3,313.72 16% 25 - 50% 06/05 12/31
Prestige Brands Holdings Inc PBH 654.07 9% > 100% 06/05 03/31
Psychemedics Corp PMD 99.50 8% > 100% 06/05 03/31
Quest Diagnostics Inc DGX 9,415.14 9% > 100% 06/05 03/31
Rio Narcea Gold Mines Ltd RNO 861.44 14% 25 - 50% 06/05 03/31
Robert Half International Inc. RHI 5,848.01 8% > 100% 06/05 03/31
STEC Inc STEC 314.19 15% 25 - 50% 06/05 03/31
Select Comfort Corp SCSS 890.43 9% > 100% 06/05 03/31
Southern Copper Corp PCU 27,010.91 12% 75 - 100% 06/05 03/31
Supertex Inc SUPX 456.75 9% > 100% 06/05 03/31
Taseko Mines Ltd TGB 482.98 11% 50 - 75% 06/05 12/31
Teck Cominco Ltd TCK 18,618.00 20% 75 - 100% 06/05 03/31
Tesoro Corp TSO 8,624.54 17% 25 - 50% 06/05 03/31
Tiens Biotech Group USA Inc. TBV 283.20 12% 50 - 75% 06/05 03/31
Timberland Co (The) TBL 1,708.20 11% 50 - 75% 06/05 12/31
Travelzoo Inc TZOO 389.18 9% > 100% 06/05 03/31
True Religion Apparel Inc TRLG 448.72 10% > 100% 06/05 03/31
US Physical Therapy Inc USPH 158.50 9% 50 - 75% 06/05 03/31
USANA Health Sciences Inc USNA 698.82 10% > 100% 06/05 03/31
United-Guardian Inc. UG 64.75 9% > 100% 06/05 03/31
Universal Compression Partners LP UCLP 474.63 14% 50 - 75% 06/05 03/31
Utah Medical Products Inc UTMD 124.73 10% 75 - 100% 06/05 03/31
Vaalco Energy Inc EGY 293.63 24% 75 - 100% 06/05 03/31
Value Line Inc VALU 428.63 10% > 100% 06/05 01/31
Vector Group Ltd VGR 1,127.29 10% > 100% 06/05 03/31
Verigy Ltd VRGY 1,680.14 9% > 100% 06/05 04/30
Versant Corp VSNT 83.30 8% > 100% 06/05 04/30
ViroPharma Inc VPHM 1,033.62 15% > 100% 06/05 03/31
Wayside Technology Group WSTG 74.59 10% > 100% 06/05 03/31
Western Digital Corp WDC 4,261.21 12% 50 - 75% 06/05 03/31
Westwood One Inc. WON 684.07 9% > 100% 06/05 03/31
Williams Controls Inc WMCO 125.86 12% 75 - 100% 06/05 03/31
Wpcs International Inc WPCS 80.19 10% 75 - 100% 06/05 01/31
Xyratex Ltd XRTX 633.52 11% 50 - 75% 06/05 02/28

Clearly a bunch on Canadian Companies. Off the top of my head: VPHM, TCK, PDS, TGB, NXG, HBMFF, OPMR, AXCA, MEOH and FDG. RNO is Spanish. CHCG is Chinese. VRGY is from Singapore. XRTX is from the UK. PCU might as well be from Peru.

Stay tuned.

3 comments:

AyRon said...

Hi! I've just recently been looking at your blog. I've been following the MFI strategy since 3/06 and have only recently thought to look to see what other people are doing. I've been following the method very strictly, buying lots of 5 every 2 months. Before I actually started, I ran a few "test" MFI portfolios using different strategies (including one where I added all new MFI listings daily, as you are talking about). The best results *always* came from randomly picking 5. Always. The point was that every time I tried to be clever, I missed out.

Have you considered that by trying to game the system and time the market you are actually missing out? You're fighting to match your benchmark. From 3/06 through today, I am 5 points ahead of my benchmark, which is VFINX with dividends included (I have to profess ignorance...I haven't been able to discern if an index reflects reinvested dividends, so I've been using Vanguard's S&P 500 fund with dividends reinvested to approximate this). I don't know about the Russell 3000 (what's the index symbol?), but I know the S&P 500 was fairly comparable to the Russell 2000 over the past year.

My two "closed" tranches beat my benchmark by a whopping 15 points.

I'm not saying any of this to brag. It's likely sheer luck, and only several years of MFI use will really tell what's a good method. You seem to get as excited about following the investments that MFI has identified as I do. I just wonder if breaking outside the MFI guidelines and trying to time the market is causing you to miss out on some of the significant benefits of MFI.

Thanks, and no offense meant at all. I'm enjoying your blog and just wanted to ask your thoughts on this since it's been nagging at me a little (and if this has already been discussed, apologies, because I haven't had the time to read all of your blog).

-A

Marsh_Gerda said...

It is a fair question and no offense taken. I have considered simply picking randomly. But to be honest, I just can't let go and do that with real money. I agree that my tracking portfolios have generally beaten the benchmarks while I am just a nose ahead. But I am not convinced that my par performance (remember it is not a disaster) is caused by my trying to do a little better as it is easily within "chance".

What I am saying is I think it is just as likely that I would have randomly picked stocks and been even with the benchmarks as the approach I am using. In about three years I'll know for sure! :)

I will say that none of my tracking portfolios have come close to your 15 points, so I'd respectfully suggest that you were fortunate.

Russell 3000 is IWV.

AyRon said...

Yes, well, I agree, it could easily be luck (although if Western Refining holds at my current unrealized gain of 125% since 9/7/06 (even with the last two days of declines!), I will close on a gain for that tranche of approx. 40% vs. approx. 15% for the S&P 500). Most of my other tranches that are still open are slightly above or slightly below the benchmark.

As far as leaving the results to "chance", as Joel Greenblatt said in his book, once you're in the top 25, the ones you pick are not quite as important as just the fact that you are diversified.

I'm no actuary (as I see you are in your profile), but I would think that picking 5 out of 25 all on one day would make you more likely to pick the "good" ones than picking one or two from a day's list of 25, whether random or not. Thoughts?

By the way, I agree that meeting the benchmark is far from disaster. My view is even if after three years I settle down and end up even with the benchmark, that's ok. It will have been a heckuva lot more fun than investing in an index fund!

-A