I am almost speechless about today's stock market. The unfavorable bias towards MFI stocks continued. I show the Russell 3000 down 2.5%, while the median in the stock contest was down 3.4%. Pretty consistent with moi. I do plan to just ride it out. Everyday I get an itchy finger to change "something". But I know that I really don't know what to change, so no sense using a slot machine approach.
I did have 4 stocks in the green. Woo-hoo! Three more than the Dow could say. UG (I knew that 20%+ drop yesterday was overdone), KSWS, CHCG & WSTG.
The dour mood of the market was reflected in how WNR was treated. WNR had ungodly numbers, much like FTO yesterday (Western Refining Reports Record Second Quarter Results). Think about the numbers. For the 1st half of 2007 they made $3.22 per share versus $1.04 last year. In the past 3 months they had operating income of 241.5m vs 126.6m last year. Then think about this... (Western Refining sees higher throughput in third quarter) WNR expects to process even more barrels in the 3rd quarter. How many more you may ask? Not 5% more. Not 10% more. Not 20% more. 42% more! It boggles the mind! 42% more on what was an all-time record quarter! Granted, that is 42% more barrels, not 42% more income. But it illustrates how the purchase of GI has turned WNR into a monster. Sure spreads are down a little bit right now. Exact same thing happened last August. And as sure as the sun will rise tomorrow, the spreads will rise next spring. Why? There is limited capacity.
How did the market treat WNR for this wunderbar news? Down 7.3%! As JG says, the market just goes nuts from time to time. PACR, TGB & VPHM were all down over 10% on no news at all. I will just sit back in my lounge chair and wait for the market to normalize. I am sorely tempted to use a little margin. But I do have a big tax bill due September 15, so I'd best stay a little liquid, despite the temptation.
I appreciate all the commentary on my hypothesis yesterday. I still think it is true.
Below I list 10 "Blue Light" stocks that I placed in a tracking portfolio on July 24th. Now recall, a stock has to be down at least 15% AND still be MFI to make the BLS. Since then, the portfolio is down a stunning 15.6% vs about 5% for Russell 3000. Ouch.
| Symbol | Shrs | Price Paid | Trade | Gain | |
|---|---|---|---|---|---|
| ALOY | 1,011 | 9.89 | 8.18 |  $1,728.81 | 17.29% |
| AVR | 633 | 15.81 | 16.20 |  $246.87 | 2.47% |
| HW | 639 | 15.64 | 14.80 | $536.76 | 5.37% |
| IWV | 1 | 88.37 | 84.00 | $4.37 | 4.95% |
| KG | 561 | 17.83 | 13.90 | $2,204.73 | 22.04% |
| MTEX | 930 | 10.75 | 8.08 | $2,483.10 | 24.84% |
| OPMR | 1,307 | 7.65 | 5.82 | $2,391.81 | 23.92% |
| PACR | 450 | 22.21 | 19.79 | $1,089.00 | 10.90% |
| TGIS | 966 | 10.35 | 8.51 | $1,777.44 | 17.78% |
| TZOO | 435 | 22.99 | 19.24 | $1,631.25 | 16.31% |
| USHS | 1,117 | 8.95 | 7.12 | $2,044.11 | 20.45% |
| Total (USD): | - | - | - | $15,644.51 | 15.63% |
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1 comment:
Marsh,
I've really enjoyed your posts on the MFI discussion board and this blog. I agree with pretty much everything you have to say ... and I also share your July/August MFI pain.
Several thoughts:
1.) All you here analysts say nowadays is "move to large cap growth". That's pretty much the opposite of MFI stocks. I think there is a ton of $$$ moving out of small cap value and mid cap value to growth and large caps right now.
2.) A credit squeeze really takes a toll on small cap value companies. They're extremely dependent on the credit markets for raising cash. Growth companies raise much more of their cash through equity so a credit squeeze like the one we are going through will pinch growth companies much less. I'm going to lean towards MFI growth stocks in the coming months.
3.) I saw you're reading Ken Fisher's new book. Fantastic book! He actually talks a lot about point #2 above. He sheds a whole new light on debt, trade imbalances, taxes ... it's packed full of great info.
4.) And finally, I'm sticking with MFI for the long haul. I'm actually somewhat pleased by this correction ... I think a down year just after JG's book is published is a good thing for the long haul. It'll make it much less popular and there'll be less of a chance of it being overused.
Keep posting! I'm a big fan.
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