Saturday, March 15, 2008

Things Can Always Get Worse

Not much to say, it has been a bloodbath in the markets and my portfolio continues to do worse than the benchmarks. I can't even bear to look or print the graphs. If it was possible to drop straight down, that is what you'd see. Not sure what is going to stench the bleeding, seems like every day there is more bad news. Health Insurers like Humana were down a ton this week. Bear Stearns could not even turn the lights on yesterday. I still say the steep decline in our universe of stocks (which thankfully doesn't include financials) is related to all the margin calls out there and the inability of institutions to sell their asset backed securities as credit markets are frozen.

What worried me is when the Fed finishes lowering interest rates, what do they do then? What if inflation really starts to kick up? What if unemployment starts to rise faster (seems possible). Then the Federal budget is spiraling out of control.

I did sell DGX this week. It ended up down about 10% for me, which sad to say makes it a great stock. I replaced it with ELOS. This is a stock that Seth Klarman has been buying actively and one of the few stocks that was actually upbeat about 2008.

I saw in Barron's where the CEO of HGG bought shares ( HHGregg Head Buys Despite Sector Softness). That makes me feel good.

Stocks with debt continue to drop. IAR is now down 65% for me and WNR is down 69%. Ouch.

I will get some excitement on Monday. CHCG will be having their earnings call first thing in the morning. I think the market realizes that they have sold the stock off too far. CHCG was just over $1.80 on Tuesday (which was the 441 point day) and rose to $2.27 by Friday. Even with the rise, I am down over 50% from when I first bought them. I do believe that they could still quickly double with some positive earnings as they should be a little more immune than other stocks to the US downturn. They did re-affirm guidance (China 3C Group Reaffirms Fiscal 2007 Financial Estimates). They expect to earn 43 to 47 cents in 2007 (at a price of $2.27) and they are growing!

VALU announced their earnings in their typical poorly formatted release which provides no color at all (Value Line, Inc. Announces Third Quarter Earnings). Still they were up 18% over last year, which might get them close to where I bought them.

BVF had their earnings call this week as well (Biovail Reports Fourth Quarter and Year-End 2007 Financial Results, Provides Strategy Update). After a zillion adjustments, they had an ok quarter. They in a state of transition (like so many of my stocks). I am starting to 2nd guess my purchase of them, but oh well.

KSW also had a decent quarter (KSW Reports Record 2007 Profits and Record Backlog). They have a strong backlog and pristine balance sheet. At under $6 they are so very cheap.

I feel better, while it has been a bloodbath I do truly believe I have some good stocks at cheap prices. Sooner or later the pendulum will swing back.

3 comments:

Rémy Heinis said...

Hello,
After reading the book it is great to have your comments on the method.
Apprently it is in drawdown right now (well the overall market too).
Do you have a graph or what are your overall results of your portfolios ?
What is interesting also are the ratios, maybe down more than th market by a margin, but if after that it goes up by twice more than this magin it is still a beating method !
How does it have behave in the past ?
Thanks in advance,
Good luck for the future.

Marsh_Gerda said...

I have graphs and results, but am too depressed to show them. I was ahead back in July and am now more than 13% behind the Russell 3000 benchmark. If you read older blogs, you'll see some graphs and results.

MG

Rémy Heinis said...

Market are efficient, market are not, bla bla bla,
whatever there is the general feeling that risk = reward anyway.
You are dowon 13% more, seeing the profile of your portfolios, small cap, value style (meaning no diversifiation), not so much stock (again no div),... You should be losing more !!!
You loose, but you are adding alpha, keep it and the day you will have the beta too, you beat the market, the magic will work !

Well, I think at least...