Yucky Weekend Update

Worst Week In A While

It seems like it has been a long time since we had back-to-back down 200 point days on the Dow.  To be honest, it has been an incredible run.  I think at one point last year the market went up 20 straight days.  And while things are getting "better", that does not imply p/e ratios to the moon.

You have to appreciate people who can have a sense of humor.  I am on Twitter and follow Zero Hedge. He (the author of zero hedge is Tyler Durben - do my readers know that reference without using Google?) had a pretty funny zinger yesterday morning (that apparently nobody got the taper is priced in memo). Of course, it is also important to keep things in perspective,  the markets went down 2.2% on the week and are only down 2.8% on the year. This is not even close to a correction yet.

As I have no need for money out of the market right now and am a net buyer, I have no problem with things getting a bit cheaper and some of the frothiness removed.  We shall see if that happens.  Even saying that, psychologically it is never fun to see your asset values drop.  It is helpful to close your eyes, click your ruby
red slippers and say "I like buying stocks more cheaply". The keys are not to own things that may never recover their value (bubble stocks like LNKD, P, NFLX and TSLA) and to have cash in hand to take advantage of lower prices.

I'd like to think I meet both those criteria, though you never know until you know.  I have probably bought more than I should have these first three weeks (C, SIRI, FGL, KLIC, NTC and RIOM). But I am still a bit north of 20% cash and will have more cash at end of February (==> if there is a real correction, it will take longer than a month).

MFI

I was listening to CNBC on my drive home last night and they said something I had been thinking for a while as I consider my next MFI tranche.  This rally in the past year + has been even better for small and mid cap stocks.  That has certainly been a tailwind of my 50 stocks in tracking portfolio over 100m market cap.  And it has driven the Russell 2000 (not to be confused with my R3K) to be an out-performer. But at some point (CNBC was saying) there will be reversion to the mean.  I remember seeing this in 2006 and 2007 in MFI.  It did well in 2006, but fell in 2007 even before the broader markets fell, a bit of the canary in the coal mine.  I think we may have the same sort of set up. And for that reason, I am intending to shift my upcoming February tranche to larger cap stocks. CSCO, MSFT, AAPL, ORCL and MO for example.

Here is the performance of my tranches.  Next week is the final week of my February 2012 tranche:

2/1/13 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
AAPL	$450.60	$546.07	$8.75	23.1%	21.6%
GA	$6.10	$10.85	$0.65	88.6%	21.6%
STRZA	$16.06	$28.02	$0.00	74.5%	21.6%
CA	$25.07	$32.66	$1.00	34.3%	21.6%
NUS	$41.94	$116.59	$1.20	180.8%	21.6%
Totals				80.3%	21.6%
5/6/2013	Start	Current	Dividend	Pct Gain	R3K Gain
KLIC	$11.40	$10.83	$0.00	-5.0%	13.5%
CYOU	$29.24	$29.82	$0.00	2.0%	13.5%
RDA	$9.74	$18.10	$0.10	87.0%	13.5%
NVDA	$13.85	$15.56	$0.24	14.0%	13.5%
CF	$183.97	$232.68	$1.80	27.5%	13.5%
Totals				25.1%	13.5%
8/15/2013	Start	Current	Dividend	Pct Gain	R3K Gain
CF	$187.26	$232.68	$1.00	24.8%	9.2%
FLR	$66.06	$77.48	$0.32	17.8%	9.2%
AGX	$15.60	$28.44	$0.75	87.1%	9.2%
KLIC	$11.29	$10.83	$0.00	-4.1%	9.2%
RPXC	$15.92	$16.89	$0.00	6.1%	9.2%
Totals				26.3%	9.2%
11/15/13 Stocks	Start	Current	Dividend	Pct Gain	R3K Gain
AVG	$17.22	$16.74	$0.00	-2.8%	0.4%
ATVI	$17.71	$16.67	$0.00	-5.9%	-0.1%
GA	$9.04	$10.85	$0.23	22.6%	-0.1%
RPXC	$17.04	$16.89	$0.00	-0.9%	-0.1%
SYNA	$48.01	$60.26	$0.00	25.5%	-0.1%
Totals				7.7%	0.0%
Category/Tranche	August	November	February	May	Total
Initial Investment	25,000	25,000	25,000	25,000	100,000
Current Tranche	26.3%	7.7%	80.3%	25.1%	34.6%
Previous Tranche	14.1%	43.7%	0.0%	0.0%	12.3%
MFI Overall Gain	44.1%	54.8%	80.3%	25.1%	51.1%
Current Balance	36,025	38,709	45,064	31,272	151,070
R3K Current Tranche	9.2%	36.7%	21.6%	13.5%	20.2%
R3K Overall Gain	33.4%	36.7%	21.6%	13.5%	26.3%
R3K Balance	33,361	34,170	30,395	28,369	126,295
Annualized IRR	28.7%	44.2%	82.3%	36.2%	45.8%

Note I am definitely losing altitude. At the start of the year my tranches were beating R3K by over 28 points, now a bit less than 25 points. My broader MFI index is running exactly equal with R3K so far (the sell off has been broad).

Dividend Portfolio

Theoretically, a dividend portfolio should do a bit better as treasury yields pull back. And that has been the case pour moi. Last week my open positions were trailing benchmark by 3.3%.  That deficit has been trimmed to 2.2%.  My buy of CEF Muni NTC has actually been timely (so far, though this is meant to be a holding for many many years - think retirement) and is up 0.5% while R3K is down 2.9%.

Stock	Shares	Avg Cost	Current Price	Dividends Received	Pct Change	R3K Change	Diff
AOD	10,671	7.93	8.21	5,581.79	10.2%	16.2%	-6.0%
BBEP	4,713	16.16	20.42	4,188.93	31.9%	7.6%	24.3%
CSCO	4,421	17.38	22.20	4,965.98	34.2%	34.9%	-0.7%
CSQ	6,718	8.60	10.88	10,529.20	44.7%	44.9%	-0.2%
INTC	3,754	22.25	24.81	4,490.84	16.9%	29.2%	-12.3%
NTC	6,629	12.00	12.07	-	0.5%	-2.9%	3.4%
O	585	20.46	39.54	8,703.80	166.0%	102.9%	63.1%
OIBAX	4,093	4.99	6.05	7,808.22	59.5%	108.4%	-48.9%
SBS	6,211	9.54	9.65	-	1.1%	6.3%	-5.2%
TC-PT	4,000	15.39	14.72	4,061.80	2.3%	13.6%	-11.3%
TGONF	7,000	10.27	9.90	1,317.50	-1.8%	9.5%	-11.3%
Total Open				51,648	19.3%	21.6%	-2.2%
Closed					12.9%	10.3%	2.6%
Combined					13.9%	12.1%	1.8%
Annualized IRR Since 12/31/10					17.3%
2014 Gain					-0.6%

This portfolio is really transitioning to securities that pay monthly distributions (O, NTC, OIBAX, AOD, CSQ and BBEP).  I summed them up the other day and with my factor they are throwing off 2,404 a month in income.  Even removing my factor, it is a nice income stream!  And I am currently reinvesting 100% of those amounts.  If prices remain the same, that 2,404 will grow to 2,578 by the end of the year.  Better than a kick in the teeth!  Gotta love compounding!

Discretionary Portfolio

As I mentioned previously, I have probably added more to this portfolio since the start of the year than was prudent. In fact, I did increase my Citigroup position by 50% yesterday at $49.22.  Yes C may go lower, but I believe they are a good value under $50.  This is a stock that should move towards $60 during 2014 based on their earning and potential softening of TARP restrictions on their dividends and stock buy backs.

So here are my current discretionary stocks.  I did have to expand the table a bit this week:

Stock	Shares	Avg Cost	Current Price	Dividends Received	Pct Change	R3K Change	Diff
BAC-WTA	6,000	5.35	6.94	-	29.7%	14.0%	15.7%
C	1,500	51.52	49.33	-	-4.2%	-2.0%	-2.2%
CS	1,800	28.75	31.03	-	7.9%	0.9%	7.0%
FGL	4,000	19.75	19.85	-	0.5%	-2.9%	3.4%
GNW	7,000	6.82	15.03	-	120.4%	37.3%	83.1%
GTAT	21,000	5.23	9.09	-	73.7%	6.3%	67.4%
HIG-WT	1,650	21.24	24.10	-	13.5%	9.6%	3.9%
KLIC	5,500	11.46	10.83	-	-5.5%	7.8%	-13.4%
RIOM	15,000	2.26	2.10	-	-7.1%	-2.6%	-4.5%
Total Open				-	25.1%	5.6%	19.5%
Closed					6.1%	3.1%	3.0%
Combined					12.9%	4.0%	8.9%

As my readers know, I am very bullish on GTAT - this is my single largest position. Tim Cook was interviewed on ABC last night (Tim Cook confirms sapphire Mesa plant). I have not seen the interview, but I understand he did talk about Sapphire, so I think this is going to be a story highlighted by AAPL in either 2014 or early 2015.  When JQ Public learns more about GTAT and GTAT starts posting strong revenue numbers, I think this could be a real strong stock.

I think I will call it a wrap.  I will try to post more this weekend about how my MFI tracking portfolios are holding up.  I will also try and comment on Barron's weekend issue.

No football this weekend, guess I will just stare out the window!