MFI Diary

A Few Good Stocks

2012-02-02T21:41:00.005-04:00

Transactions

I did make some changes to my portfolio the past two days. I thought I would walk my readers through my rationale. Of course, I am not giving investment advice... but rather making a diary entry. I encourage everyone to do their own due diligence.

The Sale

I sold the rest of my STD (hate that ticker) today except for a small placeholder. I got $8.20 and I did take a loss. But the European crisis is wearing on my patience and the stock seems to move sharply up and down based on le news du jour. Hopefully my sale price was an "up". If it comes back to the low 7s, I might buy back in. They did commit to retaining the dividend (about a 10% yield) for 2012.

The Purchases

I have mentioned several times that I own GNW. I bought them (around $6.70) because Seth Klarman has made them a large position for the Baupost Fund. Today they closed at $8.04, so I am already sitting on a nice gain in what is frankly a relatively large position. They announced their earnings after the bell and I did something I have only done two or three times before. I bought shares after the close! I increased my position by 50% at $8.50 a share. Here are my thoughts:

The book value is now $33 a share. Clearly the market does not believe the book value, but that is a major haircut.
The primary concern (I believe) is Genworth's mortgage unit... so this is really a backdoor play on a housing recovery.
This quarter, the losses from that unit diminished to just -16 million. What is interesting is that the US part of that unit is getting smaller and smaller, and they are growing their Canadian and Australian holdings, which are quite profitable. I believe they are just a quarter from starting to make money in Mortgage Insurance again. And I also believe that will be the signal to the market that the water is fine.
There is always the chance that GNW splits into two or three parts as the Life Insurance part by itself is worth well north of the $8 stock price.

To add a little extra color, it looks to me like for the back 6 months of 2011 only 20% of mortgage premiums were US, the rest were mostly Canada, Australia and New Zealand.

I found this pdf showing the differentiation of mortgage insurance for Canada and Australia vs the US - it is quite interesting (Genworth Australia - Mortgage Insurance). I encourage you to read if you're interested in GNW.

One final note, while GNW does not currently pay a dividend (and thus is not a member of my dividend portfolio), I do believe once they get the mortgage crisis behind them, they will begin again. They used to pay 10 cents a quarter, which would be 4% on a $10 stock.

Research in Motion

This is the stock everyone loves to hate. But if you put your emotions aside for a moment, it is actually a compelling story at $17. They are trading at 84% of book value. While they are certainly losing market share, I believe that their obituary is premature. I mean USMO (pagers) and Earthlink (Dial-up) are still making decent profits. What made me really think was looking at my favorite gurus. Prem Watsa, who is one of the smartest investors on the planet, doubled his already sizable stake on January 27th (Prem Watsa's Fairfax ups RIM stake). They are certainly an MFI-type stock, with 1.3b of excess cash versus their $9b market cap. They have an earnings yield of 38% and ROIC of 57%. So as of today, I am an owner of an actual blackberry and the stock.

UIS

I bought UIS for about $18 post their earnings the other day as I felt they were punished unfairly. This is a stock that has been on the MFI screens regularly over the past two years. Theyour a poor man's IBM in many ways. They are creating strong cash flow and are paying off their expensive debt (they are targeting some with a 15% cost!). After that gets paid off, that is more cash dropping to bottom line for shareholders. Woo-hoo!

Nice Start to February

2012-02-01T22:24:00.002-04:00

It seemed today that all the people on Facebook "friended" the stock market. My dividend portfolio is doing exactly what I want. I am up 6.4% on the year and my open stocks are up 11.1%, out-performing the Russell 3k by 2.4 points.

I did get the kind of news I love to see on one of my closed-end funds, CSQ. They actually announced they were increasing their dividend by 33% (Calamos Closed-End Funds (CHI, CHY, CSQ, CGO and CHW) Announce Monthly Distributions for February 2012, Including Increases to CSQ and CHW).

I did find the press release a little strange. It said the distribution was being increased as that is in the best interest of stockholders. I would rather them say it is because the stocks in the closed-end fund had increased their dividends... I hope they are not just returning capital.

Current Portfolio

Stock	Shares	Avg Cost	Current Price	Dividends Received	Pct Change	R3K Change	Diff
AZN	424	47.15	48.58	1,092	8.5%	3.9%	4.6%
BHK	2,908	12.54	13.98	1,283	15.0%	-0.6%	15.6%
CEL	1,531	25.81	14.79	5,875	-27.8%	20.9%	-48.8%
CPL	1,000	22.67	30.22	-	33.3%	15.4%	17.9%
CSCO	1,806	16.75	19.80	304	19.2%	1.2%	18.0%
CSQ	5,065	8.16	9.21	1,205	15.8%	15.2%	0.6%
DD	500	43.78	51.56	-	17.8%	6.0%	11.7%
ENH-PA	1,000	26.12	26.50	-	1.5%	2.2%	-0.8%
FCX	503	36.05	46.16	125	28.7%	11.6%	17.1%
GCAP	4,000	6.38	6.39	-	0.1%	2.2%	-2.0%
HPQ	804	25.79	28.76	96	12.0%	11.7%	0.3%
INTC	1,271	19.58	26.55	997	39.6%	16.6%	23.1%
JQC	4,483	8.85	8.85	1,598	4.1%	2.0%	2.0%
KMF	1,760	21.68	26.70	1,330	26.6%	11.3%	15.3%
KSW	13,048	3.76	3.40	4,023	-1.4%	14.4%	-15.7%
LNC	2,424	24.32	22.12	593	-8.1%	9.1%	-17.1%
MNDO	13,678	2.48	2.44	2,400	5.6%	4.1%	1.5%
MSFT	947	26.75	29.89	576	14.0%	8.5%	5.5%
NSU	3,200	6.31	6.67	-	5.7%	0.6%	5.1%
PM	436	45.63	75.75	1,614	74.1%	24.2%	49.9%
PRE	505	56.34	67.00	300	20.0%	10.5%	9.5%
PVD	397	63.26	72.75	698	17.8%	11.5%	6.2%
RTN	458	46.83	48.74	434	6.1%	0.6%	5.5%
SBS	835	39.66	66.91	1,912	74.5%	16.8%	57.7%
SLF	2,719	27.31	20.69	1,805	-21.8%	3.0%	-24.9%
STD	4,212	9.57	8.08	2,438	-9.5%	5.7%	-15.2%
STO	1,000	23.86	25.66	-	7.5%	13.0%	-5.4%
USB	1,901	21.76	28.56	923	33.5%	15.4%	18.0%
VR	1,925	29.44	32.46	1,689	13.3%	1.8%	11.4%
WBK	489	105.66	112.82	3,636	13.8%	9.1%	4.7%
Total Open				36,948	11.1%	8.7%	2.4%
Closed					11.8%	7.7%	4.1%
Combined					11.5%	8.2%	3.3%
IRR Since 12/31/10					12.5%
2012 Gain					6.4%

Estimated Dividends for Next 12 Months

Stock	Shares	Ann Dividend / Share	Yield	Projected Dividend	Sector	Worth	Anniversary
AZN	424	$ 2.40	4.9%	1,018	Pharma	20,605	1/6
BHK	2,908	$ 0.80	5.8%	2,338	Bond	40,656	7/6
CEL	1,531	$ 2.05	13.9%	3,139	Utility	22,650	6/29
CPL	1,000	$ 1.27	4.2%	1,270	Utility	30,220	9/29
CSCO	1,806	$ 0.24	1.2%	433	Tech	35,759	4/25
CSQ	5,065	$ 0.84	9.1%	4,255	Hybrid	46,652	8/23
DD	500	$ 1.64	3.2%	820	Chemicals	25,780	12/9
ENH-PA	1,000	$ 1.94	7.3%	1,938	Bond	26,500	1/17
FCX	503	$ 1.00	2.2%	503	Basic Resources	23,205	11/28
GCAP	4,000	$ 0.20	3.1%	800	Services	25,560	1/12
HPQ	804	$ 0.48	1.7%	386	Tech	23,116	11/22
INTC	1,271	$ 0.84	3.2%	1,067	Tech	33,732	9/17
JQC	4,483	$ 0.80	9.0%	3,587	Hybrid	39,678	7/8
KMF	1,760	$ 1.60	6.0%	2,816	Pipelines	46,987	9/15
KSW	13,048	$ 0.15	4.4%	1,957	Construction	44,363	5/2
LNC	2,424	$ 0.32	1.4%	776	Insurance	53,624	11/10
MNDO	13,678	$ 0.20	8.2%	2,736	Tech	33,374	2/4
MSFT	947	$ 0.80	2.7%	757	Tech	28,298	12/6
NSU	3,200	$ 0.10	1.5%	320	Basic Resources	21,344	1/25
PM	436	$ 3.08	4.1%	1,343	Consumer	33,035	6/7
PRE	505	$ 2.40	3.6%	1,211	Insurance	33,808	9/7
PVD	397	$ 3.70	5.1%	1,470	Finance	28,904	8/5
RTN	458	$ 1.72	3.5%	788	Defense	22,338	7/14
SBS	835	$ 2.39	3.6%	1,995	Utility	55,857	5/10
SLF	2,719	$ 1.46	7.1%	3,970	Insurance	56,266	6/29
STD	4,212	$ 0.64	7.9%	2,696	Finance	34,036	12/1
STO	1,000	$ 0.94	3.7%	940	Basic Resources	25,660	11/23
USB	1,901	$ 0.50	1.8%	951	Finance	54,306	9/29
VR	1,925	$ 1.00	3.1%	1,925	Insurance	62,485	3/3
WBK	489	$ 8.13	7.2%	3,978	Finance	55,196	11/19

Total			5.4%	52,183

Apple of My Eye?

2012-01-31T20:04:00.001-04:00

Those who have read my blog in the past know I have owned Apple off and on. I sold a few months ago at $420 (with a nice gain). But as everyone knows, they have shot north of $455 with their recent blow-out quarter.

Are they a buy?

Interestingly, if you plug in their figures from the quarter, not only do they crack my top 200 but they are # 132.

Think about it.

January 27th 2011 Tracking Portfolio

2012-01-28T07:13:00.003-04:00

I have locked and loaded the January 27th 2011 tracking portfolio. We will see if it continues the positive trend we have seen recently. I have listed "new" stocks and "dividend" stocks below:

New

Stock	Mkt Cap	New
NEMFF.PK	986.45	1
AVEO	574.79	1

Dividend

Stock	Mkt Cap	Dividend Flag	Yield
UNTD	502	1	7.0%
USMO	314	1	7.0%
RTN	17,257	1	3.5%
PDLI	897	1	9.4%
NOC	15,752	1	14.2%
GNI	181	1	12.6%
EXPE	4,185	1	49.3%
DLX	1,252	1	3.9%
HRB	4,956	1	3.9%

note - I try to stay pretty mechanical and just use whatever Yahoo says is a dividend stock. Clearly the EXPE is a one time payment. I will remove them from the dividend portfolio.

Past 12 Portfolios

I thought it might be interesting to see how the past 12 portfolios would have performed if I only used more established economies as I did in this post (MFI Diary: Analysis of Stocks from 1 Year Ago). Here is a list of economies I will use (ignore the counts):

Row Labels	Count of Country
Canada	135
France	9
Germany	5
Italy	5
Japan	15
Luxembourg	4
Netherlands	17
Norway	1
Portugal	1
Spain	3
Sweden	2
Switzerland	13
United Kingdom	21
USA	2,588
Grand Total	2,819

On average, the past twelve portfolios are up 3%. If we remove stocks not from the countries above, the results improve to 3.6%. So I think we can clearly state that the underperformance of the tracking portfolios (past 12) is not related to Chinese reverse mergers.

MFI Monthly Tracking Portfolio Jan 28 2011

2012-01-27T20:28:00.002-04:00

Another Loser

The January 28th 2011 monthly tracking portfolio (top 50 stocks over 100m) came of age on Friday. It was another loser. The portfolio in total was down 7.6% whilst the Russell 3000 was up 4.9%. All-in-all a stomping. That makes it the 13th straight portfolio to lose. The next 6 are losing as well, but then the final 5 are ahead.

Listing of 50 Stocks

Stock	Initial Price	End Price	Percent Change	Mkt Cap
VPHM	16.50	29.85	80.9%	1,335
AGX	9.00	14.41	60.1%	131
CNU	4.00	6.38	59.5%	262
LO	70.89	107.48	51.6%	11,364
PDLI	4.46	6.40	43.5%	706
RIGL	6.82	9.71	42.4%	363
HRB	11.96	16.77	40.2%	4,000
APOL	41.02	54.46	32.8%	6,054
MRX	24.76	32.20	30.0%	1,526
DELL	13.15	16.74	27.3%	25,941
CNXT	2.05	2.40	17.1%	170
TSRA	17.11	19.90	16.3%	1,070
GME	20.98	24.32	15.9%	3,189
CMTL	27.13	30.89	13.9%	829
PPD	60.26	66.50	10.4%	609
DLX	23.23	25.45	9.6%	1,310
MFW	23.96	26.00	8.5%	483
MSFT	27.03	29.23	8.1%	242,595
PRSC	14.24	15.18	6.6%	192
TER	16.23	16.95	4.4%	2,965
RTN	47.71	48.64	1.9%	18,635
SNDK	46.80	46.70	-0.2%	12,035
STRA	114.77	110.15	-4.0%	1,631
VALU	12.26	11.42	-6.9%	132
USMO	15.74	14.27	-9.3%	387
ELNK	8.28	7.20	-13.0%	935
TNAV	8.95	7.77	-13.2%	311
UNTD	6.62	5.74	-13.3%	629
CSGS	19.26	16.31	-15.3%	666
PETS	14.29	12.08	-15.5%	350
IPXL	23.39	19.05	-18.6%	1,504
IDCC	46.87	38.05	-18.8%	2,145
GTAT	10.88	8.75	-19.6%	1,686
UIS	27.65	20.42	-26.1%	1,222
OSK	37.39	25.41	-32.0%	3,393
ARO	24.34	16.48	-32.3%	2,218
AOL	23.82	16.07	-32.5%	2,579
LINC	14.55	8.70	-40.2%	351
CHKE	17.22	10.28	-40.3%	164
VECO	43.24	24.37	-43.6%	1,786
COCO	5.44	2.95	-45.8%	500
LHCG	27.56	14.85	-46.1%	522
LPS	31.17	16.78	-46.2%	2,925
AFAM	34.81	18.70	-46.3%	329
CECO	22.62	10.66	-52.9%	1,897
NEP	5.32	2.33	-56.2%	161
PWER	10.39	4.53	-56.4%	1,105
CRME	6.64	2.35	-64.6%	420
AMED	35.35	10.04	-71.6%	1,026
SCEI	6.59	1.30	-80.3%	112

All Portfolios Back to January 2006

Average of Percent Change
Date	Total	IWV
1/6/2006	16.0%	10.9%
2/17/2006	21.2%	14.6%
3/29/2006	13.0%	9.6%
4/7/2006	10.3%	12.1%
5/12/2006	20.4%	18.6%
5/31/2006	29.2%	23.3%
6/30/2006	22.4%	20.0%
7/31/2006	19.7%	17.3%
8/31/2006	13.0%	13.3%
9/28/2006	12.7%	14.6%
10/27/2006	10.3%	12.0%
11/29/2006	-0.3%	4.8%
12/28/2006	-6.9%	3.4%
1/26/2007	-10.2%	-6.6%
2/27/2007	-3.7%	-1.0%
3/26/2007	-9.8%	-5.5%
4/27/2007	-10.9%	-5.0%
5/29/2007	-11.5%	-6.3%
7/3/2007	-30.0%	-15.6%
7/30/2007	-19.9%	-11.5%
8/30/2007	-12.5%	-8.7%
9/27/2007	-19.0%	-18.2%
11/2/2007	-40.4%	-34.3%
11/28/2007	-40.1%	-38.3%
12/28/2007	-36.3%	-40.0%
1/25/2008	-36.4%	-35.9%
2/26/2008	-51.7%	-41.5%
3/24/2008	-40.9%	-36.8%
4/25/2008	-25.6%	-31.0%
5/28/2008	-22.2%	-33.6%
7/2/2008	-11.7%	-25.3%
7/29/2008	-10.5%	-20.9%
8/29/2008	-13.8%	-17.9%
9/26/2008	-4.3%	-10.0%
10/31/2008	18.7%	13.9%
11/26/2008	50.9%	27.7%
12/26/2008	48.9%	32.3%
1/23/2009	59.3%	36.4%
2/27/2009	92.8%	55.6%
3/27/2009	85.8%	48.1%
4/24/2009	69.7%	45.8%
5/29/2009	31.8%	22.8%
6/29/2009	21.3%	24.0%
7/29/2009	19.5%	15.9%
8/28/2009	7.4%	8.8%
9/25/2009	12.6%	12.4%
10/30/2009	22.7%	18.3%
11/27/2009	24.3%	13.6%
12/31/2009	23.7%	18.1%
1/22/2010	19.0%	20.6%
2/26/2010	18.6%	23.6%
3/25/2010	10.0%	15.4%
4/23/2010	7.1%	11.4%
5/28/2010	19.3%	25.4%
6/29/2010	16.7%	25.7%
7/29/2010	5.4%	20.1%
9/2/2010	7.3%	10.1%
9/24/2010	-4.3%	0.3%
10/29/2010	-2.9%	10.4%
11/26/2010	-8.5%	1.4%
1/3/2011	-11.4%	0.1%
1/28/2011	-7.6%	4.9%
2/25/2011	-7.9%	1.0%
3/24/2011	-6.5%	1.6%
4/21/2011	-9.5%	-0.9%
5/27/2011	-3.7%	-0.7%
6/24/2011	-1.8%	4.1%
7/29/2011	0.2%	2.7%
8/26/2011	14.1%	13.3%
9/30/2011	23.8%	17.9%
10/28/2011	5.1%	3.3%
11/25/2011	19.9%	14.7%
12/29/2011	10.0%	5.0%
Grand Total	5.6%	4.6%
Closed	6.3%	4.7%
Open	3.0%	5.6%

The Way I Keep Score

I track results by looking at dollars as percentages can be misleading. So I track where you would be today if you invested $100,000 equally over 1st 12 months.

Category	Value
Total	116,309
Total New	110,594
Total Dividend	229,048
Total Russell 3K	116,548

So the Russell 3k and the MFI are at a deadheat, both up about 16%. I also show two other "sub" portfolios of the tracking portfolios. The first is "new", which only includes stocks not in the past 12 monthly portfolios. Then "dividend" is all stocks with a 2.6% dividend (per Yahoo) or better at the start. As you can see, the dividend approach has been quite good. Here is how the dividend sub portfolio did (up 3.7%):

Stock	Initial Price	End Price	Percent Change
LO	70.89	107.48	51.6%
PDLI	4.46	6.40	43.5%
HRB	11.96	16.77	40.2%
DLX	23.23	25.45	9.6%
RTN	47.71	48.64	1.9%
STRA	114.77	110.15	-4.0%
VALU	12.26	11.42	-6.9%
USMO	15.74	14.27	-9.3%
ELNK	8.28	7.20	-13.0%
UNTD	6.62	5.74	-13.3%
PETS	14.29	12.08	-15.5%
CHKE	17.22	10.28	-40.3%

What Happened?

2012-01-27T19:46:00.003-04:00

Do my readers think that the "system" is fair? Do we all trade on equal information? Or do some people have an unfair advantage?

I have seen times in the past where it was clear that some people knew something in advance of a public announcement. I have seen and documented on this blog sharp increases in volume and then price increases.

There was a new suspect today (ASTX):

The sharp spike in ASTX caused the MFI Index to go up 1.5% on the day. An 18% jump in a single day on 3x volume on no discernible news.

We will see if something happens over the weekend or early next week. But this sort of stuff is a great reason NOT to go with short term trading and automatic sells, but rather sit back an see what happens.