Tuesday, November 09, 2010

Ranking of My Stocks

Everyone loves a top ten list. Jim Cramer recommends a very sound approach in that he ranks all of his stocks from 1 to 4 and writes a short paragraph on why he holds the stock.

A "1" means to buy more now,
A "2" means to buy on a pullback
A "3" means to sell if stock goes up more
A "4" means sell now.

Obviously, if you are following MFI to the letter, this logic has no meaning. You just hold for the year. That would follow more the Warren Buffett mantra who comments that investors make things more complicated than they need to be.

With that said, here are my comments/rankings of my current holdings (note in alphabetical order by class):

Buy More Now

This will be a short list as the recent run-up has me a mite nervous.
  1. NEP - I guess it makes sense that my most recent purchase should be on this list. This is a Chinese company involved in Oil & Gas. They had some accounting scandals earlier in the year and were over $11. They now trade around $7.50. I like NEP largely because of the space. With QE2 I see oil prices going up and taking NEP with it.
  2. STRA - maybe Stayer has stuck their head in the sand, but they are a company with a strong (and increasing dividend), projected growth and a stock price that has dropped 45% this year.
  3. TTT - Still a little unclear where they are going, but I plan on going along. They have a cement company in Germany and a mining royalty trust in Canada. Then they just announced they are merging with a MA financial company. Overall, they seem quite cheap to me.
Buy More on a Pullback

This is more theoretical than anything as I would buy more of virtually any of my stocks if they pulled back enough.
  1. CCME - while the recent run-up has been breathtaking, I don't think they are fully valued yet. One big thing keeping me from buying more is they have become a disproportionate part of my portfolio (12% even though I have 21 stocks). As I mentioned yesterday, they will earn $2.60 in 2010 and are growing rapidly, plus they have a ton of cash. Another 50% rise in next 12 months seems possible.
  2. CMFO - selling a variety of foods in China, this has been a core holding for quite a while. They have had a fair amount of insider buying, just engaged BDO as their auditors and are growing nicely.
  3. CMTL - I understand that they are reliant on a few key contracts for their income. But that seems priced into the stock for me. They pay a 3.2% dividend and have a stunning $21 of cash per share.
  4. EESC - this is a stock I do not talk about much as they are easily my most speculative play. I could have easily listed them as a "1". They only have a $28m market cap, but had a blow-out quarter last quarter (Eastern Environment Announces 1071% Year-Over-Year and 230% Sequential Increase in Revenue for the Second Quarter of 2010; Achieves Record $2.4 Million of Net Income for the Second Quarter of 2010). You don't need no magic formula to tell you that a company that has a market cap of $28m and makes $2.4m in a quarter has the potential to be extremely cheap.
  5. KSW - another extremely small company that I have owned for quite a while. They are involved in installing heating and air conditioning in buildings. Clearly as contracting work ground to a halt, their revenues dried up. But they have a strong backlog and a pristine balance sheet. If I buy any more though I may find myself like Homer Simpson, owning the entire company!
  6. NEWN - I would have likely placed them as a "1" yesterday, but the 18% move up makes them a bit overbought. They make batteries and alternative power systems. Again a strong balance sheet, limited dilution and eps projected at $1.23 in 2010 (for a $9 stock). They have gone up so sharply for me they also are getting a bit out of balance (10.2%).
  7. SNDK - There are many camps of flash memory and whether it will become a commodity. I do buy into the CEOs commentary on CNBC yesterday where he said that SNDK has competitive advantages. If you believe that, they are certainly cheap and have a great balance sheet.
Sell on an Increase
  1. CEL - my Israeli telecom is up a very nice 30% for me. That seems a bit extended for a company with limited growth potential and risk of the Govt changing the rules.
  2. CEU - Of my Chinese hybrids, I probably have the least confidence in CEU (who reported in line earnings today). To me they don't seem as cheap as some of the others and they have actively diluted the stock at least once.
  3. CHKE - tough call where to put this stock. I like that they are tied to the American consumer, as I do think retail may pick up in next 12 months. I also love the yield. But they are probably one of the more "expensive" stocks in my portfolio, though they have an astronomical return on capital.
  4. FLL - I commented on FLL some yesterday, they continue to produce solid, if not stellar earnings. I like the company, but they really are one of the stocks in my portfolio that doesn't quite "fit" as they are neither a dividend payer, nor a Chinese hybrid (SNDK is the other obvious one).
  5. INTC - Actually I would not sell them, but nor would I buy more. I view INTC as a core holding for several years in this portfolio... not sexy but solid.
  6. MAIL - They are now like FLL. MAIL was a great dividend stock, but just stated they were suspending the dividend as they have decided to grow. This is a stock that I will likely sell if they go up 10%.
  7. NVMI - In the high growth nano industry, I am a fan of NVMI. They have a lot of cash and are cheap. I think the reason I'd think about selling is that my track record on edgy tech stocks is not exactly superb.
  8. PETS - this online pet "doctor" does have some competitive advantages over your brick and mortar companies like WMT, and Petsmart. They pay a decent dividend and are in decent shape. I think my nervousness is the fact they have been going backwards for a couple of quarters and have suggested that the rising cost of advertising really eats into their margins.
  9. PM - pretty much look up at Intel. I view PM as a core holding that I would not sell or buy more unless it was a material move (think 20%). PM is the kind of company (like INTC) that I could hold for 10 years.
  10. RAI - I am not as bullish on RAI as I am on PM as RAI doesn't have the growth potential in my mind. I intend to hold RAI until their anniversary date, but their 28% gain for me feels a bit stretched.
  11. UNTD - It was funny, after their recent earnings they shot up about 15%. I didn't get it and I still don't. I like the dividend and by MFI metrics, they are still reasonably cheap. So a sale by me is not super likely. But I am not looking to add as I am a bit worried about growth opportunties. I also do not like their debt.

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