Saturday, August 02, 2014

Weekend Update From Mürren, Switzerland

Live From Mürren

Enjoying a cup of coffee on my balcony this morning while looking over

Jungfraujoch

.  That certainly helps me maintain perspective during a difficult month in the markets for me.  While a down market is not fun psychologically, it does actually give you a chance to make more money in the long run than a market that stays flat or rises very slowly.  The Market going nuts can be your friend.

The table below shows how my stocks performed in the past week.  There were a few "crash and burns" in the group.  AVG was interesting, I will certainly need to consider buying them for August 15th tranche as I felt selling there was over done.

Index Stock 7/25/2014 Current Weekly Change Share
1 GTAT         14.91         13.95 -6.4% 10.4%
2 GNW         16.35         13.07 -20.1% 6.0%
3 KLIC         13.94         13.85 -0.6% 5.2%
4 AOD           8.89            8.63 -2.9% 5.1%
5 BBEP         21.79         21.01 -3.6% 5.0%
6 ATVI         22.99         22.44 -2.4% 3.7%
7 RPXC         16.03         15.50 -3.3% 3.6%
8 NTC         12.51         12.42 -0.7% 3.5%
9 FSC           9.86            9.65 -2.1% 3.4%
10 CSQ         11.93         11.51 -3.5% 3.3%
11 RIOM           2.40            2.30 -4.2% 3.3%
12 GPS         39.92         40.03 0.3% 3.3%
13 TPVG         15.58         15.41 -1.1% 3.3%
14 TGONF           9.95         10.50 5.5% 3.0%
15 TC           2.80            2.82 0.7% 2.3%
16 AVG         20.00         17.05 -14.8% 2.3%
17 SNDK         93.24         92.76 -0.5% 2.2%
18 TLM         10.91         10.37 -4.9% 2.1%
19 AGX         35.72         34.80 -2.6% 2.1%
20 BAC-WTA           6.85            6.38 -6.9% 2.1%
21 NADL           9.96            9.91 -0.5% 2.1%
22 SYNA         75.57         78.11 3.4% 2.0%
23 TIME         24.00         24.03 0.1% 2.0%
24 KLAC         71.60         71.63 0.0% 1.9%
25 TSL         11.36         10.76 -5.3% 1.8%
26 HIG-WT         26.70         25.46 -4.6% 1.7%
27 WNR         42.64         40.30 -5.5% 1.7%
28 TUBE           9.61            9.00 -6.3% 1.5%
29 CSCO         25.97         25.00 -3.7% 1.4%
30 NSR         29.10         27.55 -5.3% 1.3%
31 CF      252.61       252.59 0.0% 1.3%
32 CA         29.53         28.47 -3.6% 1.2%
33 O         44.69         42.98 -3.8% 1.1%
34 OIBAX           6.18            6.12 -1.0% 1.1%
35 FLR         76.02         73.25 -3.6% 1.0%
36 RCII         24.13         23.86 -1.1% 1.0%
37 EDV      108.46       106.89 -1.5% 0.6%
38 Overall -4.0%

MFI Portfolio


The month of July was brutal on my MFI portfolio. Down a bit more than 6%. I am still up 7.1% on the year.  It is important to keep in mind that this is not a sprint, I hold these stocks for a year, one down month is not that big a deal.  The bigger question is whether I am "not a believer" in any of my stocks post earnings.  I do have to say that RPXC has turned out to be a mistake, and a big one at that. I hold the stock in three different tranches. I thinkI mentioned post their last earnings, that I would have sold had it not been in my MFI tranches. Ditto this quarter.  They are really having trouble keeping expenses under control. I felt they had a business that was scalable and as revenues increased 10%, earnings would increase by a greater percentage. Sadly, I was wrong. Looking at the rest of my open positions, RCII is my other mistake.  In hindsight, I am not sure they qualified as an MFI stock.  And I have been underwhelmed by them.

8/15/2013 Start Current Dividend Pct Gain R3K Gain
CF $187.26 $252.59 $3.00 36.5% 17.3%
FLR $66.06 $73.25 $0.53 11.7% 17.3%
AGX $15.60 $34.80 $0.75 127.9% 17.3%
KLIC $11.29 $13.85 $0.00 22.7% 17.3%
RPXC $15.92 $15.50 $0.00 -2.6% 17.3%
Totals 39.2% 17.3%
11/15/13 Stocks Start Current Dividend Pct Gain R3K Gain
AVG $17.22 $17.05 $0.00 -1.0% 7.8%
ATVI $17.71 $22.44 $0.20 27.8% 7.8%
GA $9.04 $11.90 $0.23 34.2% 7.8%
RPXC $17.04 $15.50 $0.00 -9.0% 7.8%
SYNA $48.01 $78.11 $0.00 62.7% 7.8%
Totals 22.9% 7.8%
2/1/14 Stocks Start Current Dividend Pct Gain R3K Gain
ATVI $17.13 $22.44 $0.20 32.2% 7.9%
KLAC $61.47 $71.63 $0.90 18.0% 7.9%
RPXC $16.22 $15.50 $0.00 -4.4% 7.9%
SNDK $69.55 $92.76 $0.23 33.7% 7.9%
WNR $39.11 $40.30 $0.52 4.4% 7.9%
Totals 16.8% 7.9%
5/6/2014 Start Current Dividend Pct Gain R3K Gain
AVG $19.57 $17.05 $0.00 -12.9% 2.6%
CA $29.54 $28.47 $0.25 -2.8% 2.6%
CSCO $22.79 $25.00 $0.19 10.6% 2.6%
NSR $25.82 $27.55 $0.00 6.7% 2.6%
RCII $28.78 $23.86 $0.23 -16.3% 2.6%
Totals -2.9% 2.6%
Category/Tranche August November February May Total
Initial Investment      25,000       25,000     25,000      25,000    100,000
Current Tranche 39.2% 22.9% 16.8% -2.9% 19.7%
Previous Tranche 14.1% 43.7% 78.3% 33.0% 40.5%
MFI Overall Gain 58.8% 76.7% 108.1% 29.1% 68.2%
Current Balance      39,698       44,182     52,031      32,277    168,188
R3K Current Tranche 17.3% 47.4% 7.9% 2.6% 18.8%
R3K Overall Gain 43.3% 47.4% 30.7% 22.0% 35.1%
R3K Balance      35,829       36,851     32,665      29,722    135,068
Annualized IRR 26.5% 39.4% 63.1% 22.9% 39.5%
FLR and SYNA had very good earnings yesterday, so that helped. And you can see where my August tranche is doing some serious butt kicking (up 39.2% vs 17.3%) with two weeks to go. So that is nice as I turn the corner and head into year three of my MFI reboot.

Discretionary Portfolio

This is the portfolio where I feel the real damage has been done over the past week and month.  I do not keep exact statistics on this portfolio as it is ever changing, but for all my stocks ever in the portfolio, I am up an average of 2.6 percentage points over having been in the R3K.  Going back a month, that figure was 5.4 percentage points.  That is a lot of give back, when you consider a large chunk of it (the closed component) is frozen in time.

Still, I like my holdings here. GTATGNWTLM and KLIC are all stocks I believe in. Then I am upbeat on TC earnings next week. I like RIOM over longer term. TSL was a mistake, I will hold at least through my options period. TUBE was always a speculative play. I just got greedy. I put in an order at start of week to sell at 10.15, when it was $10.10. I should have given up that nickel!

Stock Shares Avg Cost Current Price Pct Change R3K Change Diff
BAC-WTA         8,000         5.73                 6.38 11.3% 15.6% -4.3%
GNW       11,880         9.48               13.07 37.8% 24.6% 13.2%
GTAT       18,000       10.49               13.95 32.9% 4.2% 28.7%
HIG-WT         1,650       21.24               25.46 19.9% 16.8% 3.1%
KLIC         7,000       11.48               13.85 20.7% 12.3% 8.4%
RIOM       25,000         2.01                 2.30 14.2% 2.7% 11.5%
TC       20,000         2.94                 2.82 -4.1% -2.9% -1.2%
TLM         7,500       10.78               10.37 -3.8% -2.1% -1.7%
TSL         4,000       11.13               10.76 -3.3% -2.3% -0.9%
TUBE         4,000         9.40                 9.00 -4.3% -2.9% -1.4%
        
        
        
        
        
Total Open 18.0% 7.4% 10.6%
Closed 2.5% 1.2% 1.2%
Combined 4.6% 2.1% 2.6%
I have to say that the BAC warrants are looking very, very cheap to me at $6.38. I may add to my position next week.

Dividend Portfolio

This was always intended to be the slow and steady component of my portfolio, even in difficult times.  At that seems true this time as well.  A month ago, my dividend portfolio was up 6.1% and overall (open and closed) had beaten the index by 1.2 points. Now I am up 5.0% (much smaller drop) and leading by 1.3 points.  Not huge, but certainly in the right direction.



Stock Shares Avg Cost Current Price Dividends Received Pct Change R3K Change Diff
AOD        14,186         8.03             8.63            10,916.30 17.0% 18.4% -1.4%
BBEP          5,713       16.74           21.01              9,693.96 35.7% 12.2% 23.5%
CSQ          7,001         8.72           11.51            13,707.39 54.5% 51.6% 2.9%
FSC          8,395         9.57             9.65              3,068.21 4.7% 2.7% 2.0%
GPS          2,000       40.55           40.03                  440.00 -0.7% 1.7% -2.5%
NADL          6,366         9.60             9.91              1,200.00 5.2% 0.2% 5.0%
NTC          6,753       12.01           12.42              2,284.84 6.2% 3.5% 2.7%
O              600       21.02           42.98              9,350.71 178.6% 110.4% 68.2%
OIBAX          4,136         5.00             6.12              8,195.12 62.0% 120.6% -58.6%
TGONF          7,000       10.27           10.50              2,367.50 5.5% 16.7% -11.2%
TIME          2,000       22.89           24.03                           -   5.0% -2.0% 7.0%
TPVG          5,128       15.54           15.41              1,958.70 1.6% 1.0% 0.6%
           
           
           
           
           
           
           
           
Total Open                  63,183 17.5% 15.1% 2.5%
Closed 12.0% 10.9% 1.1%
Combined 12.9% 11.5% 1.3%
Annualized IRR Since 12/31/10 17.3%
2014 Gain 5.0%

I did add this week to my NADL at $9.55. I think that is a great price for a stock that yields close to 10%.

 Stock   Shares   Ann Dividend / Share   Yield   Projected Dividend   Worth 
 AOD         14,186         0.68 7.9%                    9,618     122,428
 BBEP           5,713         2.01 9.6%                  11,484     120,035
 CSQ           7,001         1.00 8.7%                    7,001        80,586
 FSC           8,395         1.10 11.4%                    9,235        81,013
 GPS           2,000         0.88 2.2%                    1,760        80,060
 NADL           6,366         0.96 9.7%                    6,111        63,088
 NTC           6,753         0.68 5.5%                    4,619        83,870
 O               600         2.17 5.0%                    1,303        25,807
 OIBAX           4,136         0.29 4.7%                    1,199        25,313
 TGONF           7,000         0.60 5.7%                    4,200        73,500
 TIME           2,000         0.80 3.3%                    1,600        48,060
 TPVG           5,128         1.20 7.8%                    6,154        79,024
              
              
              
              
              
              
              
              
 Total  7.3%                  64,285     882,785

Final Thoughts

I head back home tomorrow morning. While I have enjoyed my week in Switzerland, I am ready to go home back to family & friends. The month of July was difficult, but I have gone through steeper sell offs and I am sure I will again. The real key is to not panic (or as I say, panic before everyone else), keep some cash at all times, when stocks drop that you like - buy more and then chill out.  

I am taking a class in Social Psychology and there is so much pressure to conform.  If everyone else is selling, it is so, so tempting to think they know or see something that you do not see. Just like when everyone is buying LOCO (well named). As smart investors, we have to ignore the herds, tune out the noise and ask ourselves the key question, "what is the real value of a share of stock in that company?".  If you get that right more than you get it wrong, which allows you to buy with an appropriate margin of safety, then things will work out ok in the end. As stocks do, over time, find their share prices approaching their intrinsic value.  

So GNW is a great example.  Their book value is north of $23 a share (excluding AOCI).  You could theoretically buy the entire company tomorrow and liquidate them and realize at LEAST a $10 profit per share.  And even better, they are growing book value. So in five years, if the market finally recognizes their intrinsic value, that could be a share price between $35 and $40.  That is a margin of safety as you can buy in at $13.07 right now. I mean wow, in five years you will come back and read this blog and think, why didn't I buy more GNW?  Are there risks?  Of course. Their current business may become unprofitable. Their investments may go down, etc, etc, etc. Just pull up their 10K. But there are risks in every security you buy. I'd suggest at $13.07 all of those risks are priced in.

Take GTAT as another example.  This is a company that analysts project will earn 77 cents in 2015 and over a $1.00 a share in 2016.  Revenues are expected to grow in 2015 by 78%! For the next 5 years, analysts project 49% annual growth. Let me tell you, if that is anywhere close to true, this is a company that will be trading between 20 and 30x earnings when that growth starts to show up.  $30 x $1.00 a share is $30 share price.  That is not an unreasonable share price target by mid 2016. Less than two years from now, that is more than a double.  Not sure how many stocks you own that you believe have a reasonable chance to double in two years, but my idea list is pretty short. So the fact that they might still be working out a few production glitches that they should iron out in a quarter causing a 30% drop?  That is a gift from the stock market gods! Not a disaster.  Could things go wrong?  Of course.  But there is also a lot that could go right.

I am on a roll here.  I could certainly go on. KLIC, BAC-WTA, AVG, NADL, TGONF, AOD - these are all securities that I see as having potential for sizable gains in next 18 to 24 months.  I can wait. I can add while on sale.  I have done my homework.  You too should do your homework, we don't want groupthink here (pulling out more of what I am learning in Social Psychology).

I feel better now. I may do a little shopping next week.  I certainly have some good ideas for next MFI tranche!


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