Friday, May 31, 2013

Worthless Reading

Pretty funny, I was looking at my portfolio from about a year ago on Seeking Alpha.  That was back when I owned PVD.  As you may recall,  PVD is a Chilean Pension company that paid a nice dividend, but was bought by MetLife earlier this year (Februaryish).

TheSteet.Com had a recent article about PVD.  I opened it, wondering what could be said about a company that has been sold and is essentially a lame duck (3 Buy-Rated Dividend Stocks: NRP, PVD, BPT).

It was total crap.  I think anyone buying stocks would be poorly served to rely on some of the "analysis" done on the web (sure that is true for me as well, but at least I am not public, like TSCM).

Here are some excerpts (granted, they do say it is largely computer driven which shows):

"TheStreet Ratings rates Administradora de Fondos de Pensiones-Provi as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, increase in net income, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

How can it be a "buy" given there is extremely limited upside due to sale?

  • Powered by its strong earnings growth of 41.93% and other important driving factors, this stock has surged by 30.72% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, PVD should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year."
Please - this is scary that they would write this.

"AFP PROVIDA SA has improved earnings per share by 41.9% in the most recent quarter compared to the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, AFP PROVIDA SA reported lower earnings of $6.87 versus $8.97 in the prior year."

I do not think it will be difficult to predict their earnings for the next year...

Then the coup de grace:

They actually have the gall to try to sell you this pile of crap.  As you can see, this has me pretty fired up.

MFI/Dividend Blend - Additional Thoughts

I thought a bit more about my "plan" to start a bucket of MFI/dividend stocks. When I look at current top 50 list, between 20 and 25 stocks make the cut. This is due to a number of special dividends of late and companies generally ratcheting up their dividends. Frankly, I am not sure I want 20 to 25 stocks in my dividend portfolio. At some point, the transaction costs are to high for one reason. So I would really prefer to cut it in half, say 10 to 12. But I am not sure what the best way is to accomplish that.  I could start with top 30 list instead of top 50. I could start with top 50 and take 10 to 12 largest market caps that qualify. Or I could take the ones with smallest market caps. Or I could just pick the ones I like the most, though I am afraid of bias.


Thursday, May 30, 2013

MFI Progression

One thing I have been doing during my new foray into Magic Formula Investing is taking a snapshot at the end of each month, so see how the composite open portfolios are doing on average versus the Russell 3000. This time series really illustrates what I have been seeing the the broader MFI space where all my open tracking portfolios have turned green after over two years of woeful under-performance.

Recall my 4 tranches came on line 8/15, 11/15, 2/1 and 5/6/13

11/30/12. -2.2%
12/31/12. -1.8%
1/31/13.  -2.3%
2/28/13. -2.2%
3/31/13. -0.4% (gaining ground!)
4/30/13. +2.0%
5/30/13. +5.1%

So the acceleration versus the Russell 3000, which has not been a laggard, in the past ninety days is pretty astonishing.  If you look at just my last three tranches, they are up overall on average by 21% and are beating the index by over nine points. Pretty exciting stuff!  And just think, I did not include GTAT in all of this, which I bought in my discretionary portfolio on march 4th (basically a double share of my MFI stocks) and it is up an eye popping 68%.

MFI and Dividend Portfolio Blend

As my readers know, I have long been a proponent of picking MFI stocks with a dividend yield over 2.6%. This has been a highly successful approach going back to 2006. But as my readers also know, I have lacked the conviction to actually do it. I have dabbled. I have picked stocks from the list for my dividend portfolio. But I have not shown conviction.

I am thinking about changing that. My idea is that the next tracking portfolio I create (end of June), I will actually buy the "dividend" socks within that list in bulk. So that could be twenty stocks. I would  then track that purchase as part of mt dividend portfolio. But instead of listing each stock separately, it would be a portfolio entry. I would just give it an index type price, say 1,000 shares at $100 apiece. And it would just stay within my dividend portfolio as "MFI/dividend".  Then every year I would sell all the stocks it that grouping and buy a new batch based on MFI rules.  So I would track it under my dividend portfolio, rather than MFI.

Just a thought. Time to have a little more conviction about an idea I have pioneered, but never followed through upon.

Then just a quick midday update. MFI continues to motor very well for me. My four open tranches are up an average of almost 19% and they are beating the R3K on average by 4.3%.  That is quite solid.

Monday, May 27, 2013

Picture Perfect Memorial Day

Such a picture perfect day here in New England (after a cold and rainy Saturday and Sunday).  I decided to actually take a picture off the back deck... just to share.

Bought a new bike yesterday, hope to have time to go take a ride with my daughter.  Also have a Memorial Day Parade to watch.  Hopefully a BBQ as well.

Listening right now to Songza which I really enjoy.  For some reason I like it more than Pandora, I think it is because if you really like a playlist, you can listen to it again.  Also, it asks what sort of mood you are in and gives suggestions.

Not thinking too much today about investing.  Here are my current expected annual dividends along with my expectation of a 5.3% yield:

Stock Shares Ann Dividend / Share Yield Projected Dividend Sector Worth
AAPL             213  $      12.20 2.7%              2,602 Consumer         94,923
ABR         5,867  $        0.48 6.8%              2,816 Real Estate         41,246
AOD       13,224  $        0.32 7.7%              4,285 Hybrid         55,938
CIM       20,000  $        0.36 11.4%              7,200 Real Estate         63,200
CSCO         4,328  $        0.68 2.9%              2,943 Tech       101,834
CSQ         5,629  $        0.84 7.8%              4,728 Hybrid         60,848
FCX         2,060  $        1.25 4.1%              2,575 Resources         62,619
INTC         1,996  $        0.90 3.8%              1,796 Tech         47,744
NEM         1,408  $        1.40 4.4%              1,972 Resources         45,021
O             565  $        2.17 4.4%              1,225 Services         28,048
OIBAX         3,972  $        0.29 4.5%              1,152 Bond         25,781
PGR         2,118  $        0.41 1.6%                  869 Insurance         54,677
PRE             540  $        2.56 2.9%              1,381 Insurance         47,806
RIG         1,250  $        2.24 4.3%              2,800 Services         65,075
STO         1,640  $        1.16 5.1%              1,904 Resources         37,322
TC-PT         5,500  $        1.60 8.7%              8,800 Resources       101,461
Total       5.3%            49,048   

Here are my expected upcoming dividends.

Stock Shares x Date Div/Share Est New Shares Amount
RIG         1,250 5/29/13  $         0.56                13.0            700
OIBAX         3,972 5/30/13  $         0.02                12.0               79
O             565 5/30/13  $         0.18                   2.0            102
LPS             843 6/4/13  $         0.10                   2.0               84
CSQ         5,629 6/8/13  $         0.07                36.0            394
NEM         1,408 6/11/13  $         0.35                15.0            493
WU         1,585 6/13/13  $         0.13                12.0            198
VIAB             407 6/13/13  $         0.28                   1.0            114
AOD       13,224 6/21/13  $         0.03                84.0            357
CIM       20,000 6/27/13  $         0.09              569.0         1,800
NSU         5,576 6/27/13  $         0.07              114.0            390

As I get closer to retirement, I appreciate more and more that income stream.  $4,700 (with my multiplier) between now and June 27th.  Sweet.  As I mentioned, I am not reinvesting everything right now as the market feels a bit extended. (Also, it is getting to be a bit of a paperwork disaster at tax time).  But many of these are still turned on (AODCSQOIBAX and O).


I am proud of myself for being extremely disciplined thus far with my re-booted MFI strategy.  I am more at peace this time and I think it helps me (mentally) for it only to be a proportion of my portfolio (before it was a much larger percentage).  I have (at times) been tempted to sell NSU, UIS and CA; but a key idea of MFI is to be more mechanical and less emotional.  I am also thrilled that it seems to be getting traction again.  I now just need to overcome some of my natural biases against hairy stocks; like I simply could not pull the trigger on ESI at the start of May and it is now up about 50%.  And I wrote a year ago how I wanted to embrace the dividend stocks on the list as I knew they had done better than the broader list, but thought most were poor buys.  I was so wrong.  I think one of the hardest part about investing is know what has been "priced in".  A stock may have some stinky facts, but if they are all priced in; then any good news can really send the stock rocketing.  Of course I can think of many instances where I thought the bad news was priced in and then found out it wasn't.

One last picture.  the front yard this time.  It IS a picture perfect Memorial Day!

Saturday, May 25, 2013

Memorial Weekend Update

Happy Memorial Day Everyone!

Kind of a rainy, windy, chilly one here in New England.  We will not get out of the 40's today.  I am trying out Google Chrome today, they do have a snappy advertising campaign. And the good news is my Indiana Pacers beat the Miami Heat last night!

Just wanted to give everyone a quick update-roo on my portfolios as we near the end of May.  The markets continue to steadily rise, a few road bumps here and there - but pretty hard to complain.  Overall I am up about 16.9% for the year.  That is about 1/2 a point better than the R3K.  I am also sitting with a decent pile of cashola, 27% to be precise.  While I am enjoying the positive returns, I sleep very well at night knowing I am 27% in cash.  Should there be a correction, I can pretty much stand pat and look for bargains.

Dividend Portfolio

 This portfolio has been a bit of an under-performer for the year.  It is up 12.8%.  It has been hurt by FCX, RIG, STO, AAPL and NEM.  That is ok, I am comfortable with all my holdings.  I have really cut down on my trading and churning of late.  That is in part because I have been very busy/distracted, but also because I am at peace with my portfolio.  I think all five of those down-trodden holdings are solid.  I will simply collect the nice dividends and reinvest them at buying at lower prices.  I have no problem with that.

Stock Shares Avg Cost Current Price Dividends Received Pct Change R3K Change Diff
AAPL             213        495.23        445.15        1,041.93 -9.1% 14.0% -23.1%
ABR         5,867            7.21             7.03        1,244.06 0.5% 7.8% -7.3%
AOD       13,224            3.92             4.23        1,327.39 10.5% 9.9% 0.6%
CIM       20,000            2.77             3.16        1,800.00 17.2% 11.6% 5.6%
CSCO         4,328          17.24           23.53        2,743.60 40.1% 24.0% 16.2%
CSQ         5,629            8.34           10.81        7,160.13 45.0% 40.2% 4.7%
FCX         2,060          31.23           30.40            831.20 -1.4% 12.5% -13.9%
INTC         1,996          20.99           23.92        2,891.61 20.9% 34.0% -13.1%
NEM         1,408          39.84           31.97            340.00 -19.1% 7.5% -26.7%
O             565          19.73           49.67        7,868.96 222.4% 91.9% 130.5%
OIBAX         3,972            4.95             6.49        7,149.69 67.4% 93.7% -26.3%
PGR         2,118          20.56           25.81        2,596.23 31.5% 22.0% 9.5%
PRE             540          67.59           88.59        1,974.05 36.5% 22.2% 14.3%
RIG         1,250          51.79           52.06                     -   0.5% 5.7% -5.2%
STO         1,640          23.70           22.76        3,024.82 3.8% 27.3% -23.5%
TC-PT         5,500          15.43           18.45        2,234.10 22.2% 5.5% 16.7%
Total Open            44,228 16.6% 18.9% -2.2%
Closed 15.2% 9.7% 5.5%
Combined 15.6% 11.9% 3.7%
Annualized IRR Since 12/31/10 16.4%
2013 Gain 12.8%

I will actually be accruing my first RIG dividend on the 29th (Wednesday).  It will be 56 cents or $700 smackers.

MFI Tranches

I published earlier today that the average open MFI tracking portfolio is ahead by about 4 points over the Russell 3000.  I am seeing exactly the same thing.  My 20 positions are up by 3.1% on average.  That tends to prove that it is easy to over-think, when a dartboard does as well or better than me!

8/15/12 Stocks Start Current Dividend Pct Gain R3K Gain
DLB $34.43 $34.53 $4.00 11.9% 20.0%
KFY $13.98 $17.44 $0.00 24.7% 20.0%
MSFT $30.19 $34.27 $0.69 15.8% 20.0%
NSU $3.62 $3.41 $0.05 -4.3% 20.0%
UIS $19.96 $18.99 $0.00 -4.9% 20.0%
Totals 8.7% 20.0%
11/15/12 Stocks Start Current Dividend Pct Gain R3K Gain
AAPL $537.62 $445.15 $5.70 -16.1% 23.8%
ABC $40.21 $54.44 $0.42 36.4% 23.8%
LPS $23.89 $32.99 $0.20 38.9% 23.8%
VIAB $49.12 $68.96 $0.55 41.5% 23.8%
WU $12.77 $16.45 $0.25 30.8% 23.8%
Totals 26.3% 23.8%
2/1/13 Stocks Start Current Dividend Pct Gain R3K Gain
AAPL $450.60 $445.15 $5.70 0.1% 9.6%
GA $6.10 $8.19 $0.42 41.2% 9.6%
STRZA $16.06 $22.76 $0.00 41.7% 9.6%
CA $25.07 $27.40 $0.50 11.3% 9.6%
NUS $41.94 $60.49 $0.60 45.7% 9.6%
Totals 28.0% 9.6%
5/6/2013 Start Current Dividend Pct Gain R3K Gain
KLIC $11.40 $12.00 $0.00 5.3% 2.2%
CYOU $29.24 $29.49 $0.00 0.9% 2.2%
RDA $9.74 $11.01 $0.00 13.1% 2.2%
NVDA $13.85 $14.54 $0.00 5.0% 2.2%
CF $183.97 $186.73 $0.40 1.7% 2.2%
Totals 5.2% 2.2%

Hmmm, looking at these, I think I missed a 7.5 cent dividend on NVDA.  I will go in and fix that.  But not in this table right now.

Discretionary Stocks

This portfolio is shrinking a bit.  i did sell a bit of my GNW a couple weeks ago.

Stock Gain Cost Price
GNW 45.7%           7.10         10.35
SD -4.9%           5.33           5.07
GTAT 29.2%           3.39           4.38
Grand Total 18.5%           5.06           5.99

SD has been the real stinker.  GTAT and GNW have made me a lot.  Every week I consider paring my SD position.  It is not a "typical" holding for me.  It is not cheap by a earnings yield basis or book value basis and they do not pay a dividend.  I just think there is embedded value under the right management and I am encouraged by savvy activist investors being in there with me.