Countdown On New MFI Tranche

My May 6th 2013 MFI tranche has about 25 trading days left.

5/6/2013	Start	Current	Dividend	Pct Gain	R3K Gain
KLIC	$11.40	$12.31	$0.00	8.0%	17.9%
CYOU	$29.24	$28.98	$0.00	-0.9%	17.9%
RDA	$9.74	$18.19	$0.10	87.9%	17.9%
NVDA	$13.85	$17.90	$0.32	31.6%	17.9%
CF	$183.97	$257.79	$2.80	41.6%	17.9%
Totals				33.6%	17.9%

As you can see, it has been a pretty darned successful tranche as we head down the stretch.  Now I need to start thinking (hard) about how to replicate that.

Stocks I Am Considering

I saw an interesting quote in Barron's yesterday.  The writer felt that the market was valued more richly than average.  However, if you dug down, the more expensive stocks (think TSLA or NFLX) were far more expensive than expensive stocks are on average.  While cheap stocks were on par with where they are on average.  I am not sure I agree with that 100%, but directionally I do think there is a great deal more risk in the expensive stocks.  So there is a way to outperform the broader market during the next 12 months as I suspect there will be some stocks falling from grace.

Interestingly, I think a great way to play that element of expensive stocks being way,way overpriced would be to go long cheap stocks and be short expensive stocks.  I have never tried such a strategy, but that is the exact strategy of GARIX, should anyone have a spare $250,000 sitting around.

So let us think about a list of 20 best ideas (this can be my official list going forward).  I think my preference will be to go with larger companies.  I will also undoubtedly recycle some past stocks.  Here are 20 stocks, in no particular order:

1. NTES - this is another Chinese gaming company, like CYOU and GA. Using my new Gurufocus database, they have a market cap of $8.8b (so pretty large). They do have $3.5b in cash, so that is a lot per share. They only trade at 10x next year's earnings and they are growing about 10% a year.
2. CALL - this is the MagicJack stock.  They are a company in transition - they have historically been about cutting the phone cord and turning your computer into a phone.  But now they are into the App world and have a Magic Jack app that allows you to make calls (like Skype) in a wifi area for free. It is a bit of a gamble. While they have a lot of cash (3.12 per share for a $20 company), they seem to have a lot of liabilities, with big one being "deferred liability". So they actually have a negative TBV (though it will likely be positive in a year). They are very cheap, with a 14% earnings yield. The two analysts that cover them are projecting 10% growth over next two years. But they have a very high short interest, so this is a battleground stock.
3. CSCO - yes, I know I sold them in February in a fit of disgust after owning for many years.  They are the cheapest mega cap company out there and they have a 3.1% earnings yield.  The issue of course is growth. For the year ending 7/14, they are expected to be down 4.5% in revenues.  Somehow, miraculously they are expected to then grow 3 to 4% the next year.  Here is a recent release from them that really bothered me (Cisco Bets a Billion on the Cloud).  Really? Talk about late to the party. So I do question Chambers' long term vision... it seems a bit (excuse me) "cloudy".
4. AVG - I bought this virus protection stock in November. They are not super cheap, but they seem to have decent products and prospects.  They also have a pretty large short interest.  They will likely be near the bottom of my list, but I do not want to forget them.
5. NSR - this is a quirky company that has fallen from grace in 2014. They started the year around $50 and are now about $33.  Perhaps the sell-off has been too sharp?
6. AAPL - if I believe in GTAT, should I believe in AAPL? I do not need to say much here as everyone know the story.  It will be really tempting to start a new position.
7. GME - they dropped last week to $36 on news Wal Mart is entering their space. I was so tempted to buy as the obituary has been written so many times and so many times wrongly for GME.
8. BKE - I am always saying i want some retail exposure. BKE is not super sexy, but does seem very well-managed.  
9. PETS - smaller market cap than I am really targeting in May.  But again this is a company everyone loves to hate (bit like CALL). Frankly, I think they have a business model that makes sense, but they do not seem to execute really well.  I mean mail order meds for pets, should be successful as you get so many repeat orders.  I wonder if they have poor customer service or something, I will need to research that end.
10. BWC - this is a spinoff from a year or two ago.  They are very focused on Nuclear power, so I suspect a decision to invest in them is based on your opinion on the direction of Nulcear power. Recently it has not been a growth industry.
11. NUS - One of my great stocks of all time (recall I bought in Feb 2013 tranche at $42 and sold later at $116. A week or so ago they were at $70 and now at $82.  I am thinking they may have China behind them (small fine), so perhaps they have reasonable chance of going above $100 again?
12. COH - this is a beaten down high end retailer.  KORS has eaten into their base some.  But it seems a lot of that is priced in. They pay a 2.7% dividend (dividend stocks anybody)?  If they can generate any growth at all, this could easily be a $60 stock again.
13. MSFT - I still kick myself all the time for selling from my dividend portfolio a year+ ago for about $28.  I was shaken out by a MF article that talked about how MSFT would just be a utility going forward. But with new leadership and a great product set, MSFT will get serious consideration for my $.
14. HPQ - another large cap stock, they seem to be in turnaround mode. Perhaps I am late to the party here, but will at least take a look-see.
15. CA is another successful stocks from February 2013 (I was up 32%). Still pays a nice dividend and while not as cheap as it once was, still looks relatively reasonable.
16. Quick 5 other ideas: PFMT, CTCM, AGX, DNB and SYMC.