Taking Stock of My Stocks - Top 10

Making A List and Checking it Twice

As I sit here in New England on Christmas Eve, it struck me that this day (before my family wakes up) would be a good day to take inventory of my current portfolio.

While I am not an economist (I am however the son of an economist), I am surprised at the bullish predictions for 2013 GDP growth.  Obama said the other day that Republicans want to raise taxes on everyone, not just the top 2%.  I guess our fearless President hasn't really taken a hard look at what is scheduled to happen in 2013.  Taxes ARE going up on everyone. Irregardless of where the current Washington drama ends (my money is over the cliff). Payroll taxes are going up and we will have Healthcare taxes (Health care tax increases: the 2013 tax increases no one is talking about). Toss in a dash of austerity on spending and I have trouble (using my macro economics 101) seeing where growth comes from in 2013.  The Decision Moose seems to agree with me, and has moved to 100% cash today. So I will likely remain defensive as we head into 2013 and keep a chunk in cash, stay away from higher beta stocks and perhaps take some short positions.

Please note that while I write a blog, I am not an investment adviser and everyone should make their own decisions.  This is just a diary of my decisions, not a recommendation.

My Current Portfolio

Here is my current portfolio, sorted from largest position to smallest position.  Please note that I multiply my share counts by a mystery factor (Excel is great isn't it?).

 

Index	Stock	Shares
1	AAPL	187
2	CSCO	4,292
3	JPM	1,673
4	GNW	10,000
5	glre	2,500
6	CSQ	5,444
7	SDS	1,000
8	SAI	4,680
9	HFC	1,117
10	KMF	1,845
11	VIVHY	2,296
12	MSFT	1,640
13	PGR	2,092
14	PRE	536
15	PVD	427
16	INTC	1,974
17	JQC	4,192
18	SD	6,000
19	FCX	1,100
20	MPC	582
21	BHK	2,240
22	SLCA	2,060
23	FSC	2,802
24	OIBAX	3,925
25	STO	1,040
26	NSU	5,524
27	KFY	1,436
28	O	556
29	ABC	500
30	VIAB	405
31	WU	1,570
32	LPS	840
33	DLB	580
34	uis	1,001

Now a brief commentary on each of my positions.

AAPL - I have made a large bet on Apple.  I stated a few weeks ago that I felt the recent sell-off was largely tax driven, and despite a lot of noise in the news, I still believe that.  By any metric, APPL is a value stock at current prices. So unless you think their sales and profits will actually start decreasing (despite having great products in two of the largest growth markets out there), they are in my mind a buy, buy, buy!

CSCO - In my analysis of many companies, I focus on Enterprise Value divided by Income before taxes and depreciation.  This is the Earning Yield from The Little Book That Beats The Market. It is kind of like the reciprocal of price to earnings ratio; but adjusting price (market cap) for excess cash and long term debt and looking at earnings x taxes and depreciation.  CSCO is a great company.  Like Apple, they have a huge cash position (market cap = 106b, but EV = 77.3b). I calculate a 14% trailing earnings yield.  They pay a 2.8% dividend, which is likely to continue to grow.

JPM - In my mind the best of the TBTF banks. Jamie Dimon is a top-notch CEO.  I was able to buy at a great price in the summer during the London Whale incident.  While they have re-couped their value since then, they still are 12% under book value, pay a 2.7% dividend and have great earnings power.

GNW - I have discussed Genworth many times here. They are stupidly cheap, under 30% of book value.  If the mortgage market continues to improve and they start making money again in that segment and/if they can have a successful IPO of their Australian company, I think they can move up strongly in 2013.  I also used to work with their CFO (we were in same department right out of college at a company in Louisville and I can tell you he is a smart and good man).

GLRE - this is Greenlight Reinsurance, a hedge fund disguised as a reinsurance company. David Einhorn is the brains behind their investments. So you could invest directly in a hedge fund and pay "2 and 20" or you can indirectly invest by buying stocks in companies like Greenlight, Berkshire or Fairfax.  The stock trades under book value; which seems cheap to get in.

CSQ - as my readers know, I am a fan of closed end funds (CEF). Unlike Mutual Funds, you can often buy CEFs at a pretty decent discount.  Looking back, it is stunning to think that back in October 2011 I was able to buy CSQ for $7.43 a share. i should have backed up the truck as that has appreciated by 47% since then CSQ pays a 8.4% dividend (monthly).  They do use some leverage and their holding are financial company securities (largely stocks).  Here is a website I use to see whether CEFs trade at a discount (CEFConnect).  If you went there, you would see CSQ is at a 5.9% discount.  Their average has been 7.4% over past year with 16% discount being the best deal of the year.  If I had been paying attention, they actually hit that mark on November 15th when they went as low as $8.92 (now around $10).

SDS - this is just a double short ETF of the S&P 500.  I use SDS (generally poorly) as portfolio insurance when I think the market is over-bought but I do not want to liquidate positions.  I am considering increasing this position in the next couple of weeks.

SAI - this has admittedly not been a great investment for me. They pay a 4.2% dividend. They are "cheap" with an earnings yield of 18% (you can compare earnings yield to bond yields).  The market is down on them due to threat of decreased govt spending.  They are looking to unlock value by splitting into two parts (SAIC Plans Spinoff of Government-Services Business).  I will certainly hold through that.

HFC - if SAI was a poor selection this year, HFC has been stellar, up over 40%. Refiner spreads continue to be strong.  Oil is becoming more and more plentiful in the US and this is a trend that should continue (American dream of oil independence on horizon).  They have not built a new refinery in decades, so current refiners have a decent outlook going forward.  HFC still seems very cheap (though I know the margins can shrink quickly) at stunning 32% earnings yield (probably not sustainable).

KMF - the flip side to the oil and gas story expansion in the states is that pipelines are needed to move the oil and gas.  More and more pipelines as we build out the infrastructure. KMF is a closed end fund (currently about 2% under NAV) exclusive in pipelines. They yield 6% and have raised their divdend 8% in past year.

That is my top ten holdings. They represent 46% of the value on my list, though under 30% of the stock count.  So I have some concentration, but not an insane amount. I will walk through the next 10 later.