Wall Street on Water … Ahead

This Week at MANIFEST (9/23/2016)

If you’ve ever wondered what a cruise ship class room looks like, here’s Christi Powell (Oklahoma City) aboard the Holland Cruise Lines Westerdam doling out another one of her exceptional classes on common sense financial matters. This voyage had two side-by-side class rooms, attended pretty much as you see here. As you can see, it’s like any other class room — except for the glaciers, whales, salmon and Alaskan fjords out the window.

Relatively small blocks of time (1 hour each) were carved out during the cruise to present a number of investing-related classes over a span of seven days. It was the first time Manifest Investing had attended and participated in one of these efforts and we came away impressed with the potential. The pace was unhurried and attendees had plenty of opportunities over dinners and while navigating the waters to discuss just about anything. We’ll probably explore collaborating with Better Investing and reaching out to some other communities for a Boston-to-Montreal version of this cruise next year. Stay tuned for more details and please send us a note (manifest@manifestinvesting.com) if you’d be interested in exploring more details about a future cruise… and we’ll add you to the “Maybe” Manifest. (grin)

There were many highlights and we’ll continue the roll out of the handbook chapters we issued to our ship mates in days ahead.

MANIFEST 40 Updates

  • 4. Fastenal (FAST)
  • 15. Procter & Gamble (PG)
  • 31. Home Depot (HD)
  • 35. Lowe’s (LOW)

Round Table Stocks: Chicago Bridge & Iron (CBI), Fastenal (FAST), Tractor Supply (TSCO)

Best Small Companies (None this week)

Results, Remarks & References

Companies of Interest: Value Line (9/23/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 5.0% vs. 5.0% for the Value Line 1700 ($VLE).

Materially Stronger: Ethan Allen (ETH), Bemis (BMS)

Materially Weaker: Sunpower (SPWR), Tractor Supply (TSCO), Tile Shop Holdings (TTS)

Discontinued: Cablevision (CVC), Elizabeth Arden (RDEN)

Market Barometers

Value Line Low Total Return (VLLTR) Forecast. The long-term low total return forecast for the 1700 companies featured in the Value Line Investment Survey is 5.0%, unchanged from 5.0% last week. For context, this indicator has ranged from low single digits (when stocks are generally overvalued) to approximately 20% when stocks are in the teeth of bear markets like 2008-2009.

Stocks to Study (9/23/2016)

The Long & Short. (September 23, 2016) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value viawww.morningstar.com S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. The data is ranked (descending order) based on this criterion. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target. 1-Yr “GS” Outlook: 1-year total return forecast based on most recent price target issued by Goldman Sachs.

Stock Selection & Portfolio Management September 24, 2016 at 9:00 AM ET Indianapolis, Indiana

Ken Kavula & Mark Robertson will be the featured presenters at this all-day educational workshop for long-term investors. Overview of Analysis (We’ll actually do a case study — walking through the analysis with exposure to our favorite resources and research.) Common Ground – How investment clubs take care of a portfolio. We’ll review portfolio design and discuss management considerations. What is effective stock “watching?” How can we best be vigilant for opportunities and threats to our holdings? Discovery – A demonstration of various screening resources with a look at some of our favorite resources. An Industry Study – Taking a discovery and putting it through its paces to ensure that we’re considering (or accumulating and retaining the best of the best) Let’s Talk Stocks – An interactive, audience-driven discussion of specific study ideas and case studies.

For more information: Go here.

September Round Table September 27, 2016 at 8:30 PM ET ONLINE

Stocks Featured: TBD

The Round Table tracking portfolio has beaten the market by 3-4 percentage points over the last five years. Consider joining Kim Butcher, Ken Kavula, Hugh McManus and Mark Robertson as they share their current favorite stock study ideas.

We will be continuing the discussion of the relative return-based selling guideline for portfolio management.

Registration: https://www.manifestinvesting.com/events/199-round-table-september-2016

Discovery Club

“Dump your hedge funds and explore their small-cap stock picks.”

Small cap is not necessarily small (faster-growing) companies but in general, we like the idea of a nice blend. So yes, we’re interested in hunting down some actionable ideas among the most successful investors on our radar screen — seeking companies that aren’t on too many radar screens, yet.

The discovery of smaller, promising and faster-growing companies has always been one of our favorite (and rewarding) activities. In that spirit, we’re expanding our efforts in this realm. This week, we redouble our efforts to discover some smaller, less discovered companies and add them to our coverage. The EXTENDED EDITION of the Value Line Investment Survey will be the first resource scanned and we’ll also take a look at some new positions or significant accumulations among our Best Small Company Funds starting with Brown Small Company.

But it doesn’t end with only the smaller companies, we’ll also be vigilant for opportunities flagged by reviewing the quarterly filings of idea generation resources like the Renaissance Technologies hedge fund.

This Week’s Sources and Suggestions

  • ITC Holdings (ITC) — Thanks, Marty Eckerle (Temporary Reinstatement)
  • Value Line Investment Survey

Coverage Initiated/Restored: CalAtlantic (CAA), Fonar Corp (FONR), ITC Holdings (ITC), State National (SNC)

Market Barometers (Continued)

By popular demand, it’s probably time to check in on our of favorite, albeit obscure, market barometers.

US New Highs-New Lows ($USHL)

The long-term trailing average for $USHL actually dipped below zero within the past year — and trepidation was a little more rampant. But as shown here, the storm seems to have passed.

 ushl 20160921

Fave Five (9/23/2016)

Fave Five (9/23/2016)

Our Fave Five essentially represents a listing of stocks with favorable short term total return forecasts (1 year, according to Analyst Consensus Estimates, or ACE) combined with strong long-term return forecasts and good/excellent quality rankings.

So you’re looking at the stocks in the top 1% of all companies according to MANIFEST Rank (Return Forecast and Quality combination) that have the highest 1-year total return forecasts according to the analyst consensus estimates. (ACE)

The Fave Five This Week

  • Celgene (CELG)
  • Extra Space Storage (EXR)
  • Honda (HMC)
  • Stericycle (SRCL)
  • Ulta Salons (ULTA)

Context: The average 1-year total return forecast for the Value Line 1700 is 14.7%. The average 5-year return forecast for $VLE is 5.0% (annualized).

This Week’s Fave Five In The Sweet Spot

Sweet Spot Five. (September 23, 2016) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability.

Weekend Warriors

The relative/excess return for the Weekend Warrior tracking portfolio is +6.3% since inception. 54.1% of selections have outperformed the Wilshire 5000 since original selection.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Fave Five (9/16/2016)

Fave Five (9/16/2016)

Our Fave Five essentially represents a listing of stocks with favorable short term total return forecasts (1 year, according to Analyst Consensus Estimates, or ACE) combined with strong long-term return forecasts and good/excellent quality rankings.

So you’re looking at the stocks in the top 1% of all companies according to MANIFEST Rank (Return Forecast and Quality combination) that have the highest 1-year total return forecasts according to the analyst consensus estimates. (ACE)

The Fave Five This Week

  • Aaron’s (AAN)
  • Celgene (CELG)
  • Cognizant Tech (CTSH)
  • CVS Health (CVS)
  • Jazz Pharma (JAZZ)
  • Spirit Airlines (SAVE)

Context: The average 1-year total return forecast for the Value Line 1700 is 14.7%. The average 5-year return forecast for $VLE is 5.0% (annualized).

The Long and Short of This Week’s Fave Five

The Long & Short. (September 16, 2016) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value viawww.morningstar.com S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. The data is ranked (descending order) based on this criterion. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target. 1-Yr GS: 1-year total return forecast based on most recent price target issued by Goldman Sachs.

Weekend Warriors

The relative/excess return for the Weekend Warrior tracking portfolio is +5.8% since inception. 53.4% of selections have outperformed the Wilshire 5000 since original selection.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Fave Five (9/9/2016)

Fave Five (9/9/2016)

We took another slight detour this week to focus on some high-quality stocks with superior long term return forecasts that are near the top of our Sweet Spot. It was a great week for the Weekend Warriors highlighted over the last year as the tracking portfolio now has a rate of return of 16.9% versus 11.2% for the Wilshire 5000 since inception.

The Fave Five This Week

  • Akamai (AKAM)
  • CVS Health (CVS)
  • Novo Nordisk (NVO)
  • Redhat (RHT)
  • Ulta Salon (ULTA)

Context: The average 1-year total return forecast for the Value Line 1700 is 14.7%. The average 5-year return forecast for $VLE is 5.5% (annualized).

This Week’s Fave Five: Top Of The Sweet Spot

Top Of The Sweet Spot. (September 9, 2016) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability.

Weekend Warriors

The return for the Weekend Warrior tracking portfolio is 16.9% since inception. (Wilshire 5000 is at 11.2%) 48.3% of selections have outperformed the Wilshire 5000 since original selection.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Fave Five (9/2/2016)

Fave Five (9/2/2016)

Our Fave Five essentially represents a listing of stocks with favorable short term total return forecasts (1 year, according to Analyst Consensus Estimates, or ACE) combined with strong long-term return forecasts and good/excellent quality rankings.

These are all repeat selections this week. Under Armour (UA) has gained 10.4% since selection on 1/14/2016.

The Fave Five This Week

  • Air Lease (AL)
  • Celgene (CELG)
  • Jazz Pharma (JAZZ)
  • Spirit Airlines (SAVE)
  • Under Armour (UA)

Context: The average 1-year total return forecast for the Value Line 1700 is 14.7%. The average 5-year return forecast for $VLE is 5.5% (annualized).

The Long and Short of This Week’s Fave Five

The Long & Short. (September 2, 2016) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value viawww.morningstar.com S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. The data is ranked (descending order) based on this criterion. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target. 1-Yr GS: 1-year total return forecast based on most recent price target issued by Goldman Sachs.

Weekend Warriors

The return for the Weekend Warrior tracking portfolio is 15.9% since inception. 43.6% of selections have outperformed the Wilshire 5000 since original selection.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Fave Five (8/26/2016)

Fave Five (8/26/2016)

Our Fave Five essentially represents a listing of stocks with favorable short term total return forecasts (1 year, according to Analyst Consensus Estimates, or ACE) combined with strong long-term return forecasts and good/excellent quality rankings.

Among the stocks covered by Goldman Sachs, the average stock has a one year total return of approximately 10%. We centered our attention this week on the top two percent (return forecast & quality) of our coverage combined with the near term expectations of Goldman. The Muppets are fairly well in consensus with Morningstar and S&P for this batch.

The Fave Five This Week

  • Apple (AAPL)
  • CVS Health (CVS)
  • Jones Lang LaSalle (JLL)
  • Starbucks (SBUX)
  • Stericycle (SRCL)

Context: The average 1-year total return forecast (via Goldman Sachs) for the Value Line 1700 is 9.2%. The average 5-year return forecast for $VLE is 5.7% (annualized).

The Long and Short of This Week’s Fave Five

The Long & Short. (August 26, 2016) Projected Annual Return (PAR): Long term return forecast based on fundamental analysis and five year time horizon. Quality Ranking: Percentile ranking of composite that includes financial strength, earnings stability and relative growth & profitability. VL Low Total Return (VLLTR): Low total return forecast based on 3-5 year price targets via Value Line Investment Survey. Morningstar P/FV: Ratio of current price to fundamentally-based fair value via www.morningstar.com S&P P/FV: Current price-to-fair value ratio via Standard & Poor’s. 1-Year ACE Outlook: Total return forecast based on analyst consensus estimates for 1-year target price combined with current yield. The data is ranked (descending order) based on this criterion. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target. 1-Yr GS: 1-year total return forecast based on most recent price target issued by Goldman Sachs.

Weekend Warriors

The return for the Weekend Warrior tracking portfolio is 12.1% since inception. 48.2% of selections have outperformed the Wilshire 5000 since original selection.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/weekend-warriors

Five Smooth Stones


Invest regularly in high-quality companies when they’re on sale. Prudently diversify. It’s a little like going to battle armed with five carefully selected smooth stones and a steadfast long-term perspective. — Manifest Investing Newsletter (June 2012)

The biblical story of David vs. Goliath is fairly widely known. Many would consider it among their favorite stories as a child. After declining the king’s body plate and armor, shepherd David proceeds to a stream and selects five smooth stones. Why five? Well, first and foremost, that was his divine guidance. But another potential driver is not as well known (and sometimes disputed.) Answer: Goliath had four brothers. Form your own conclusions. We prefer to think of this as extreme planning. And in days when market predators seem to ravage our flocks of stocks with abandon, it’s comforting to think about longer perspectives and five smooth stones with masterful sling shot prowess. Bear markets, even gigantic ones, are brought to their knees with the right perspective.

With Tin Cup sinking below $900,000 after our recent million-dollar moment, we’re reminded — starkly — that “Stock prices fluctuate.” Should we have increased cash equivalents for Tin Cup based on some elusive indicator during the first quarter? No. As a policy measure, Tin Cup is committed to remaining fully invested in equities 100% of the time. This necessarily means that we’ll endure roller coasters.

In the aftermath of a month like May 2012, many investors within this community long for the messages delivered by the late Louis Rukeyser. Lou’s steady and calming Wall Street Week (WSW) messages were a staple several years ago on PBS. Hugh McManus shared a number of YouTube rebroadcasts of these messages. Among our favorites include the October 1987 show where Mr. Rukeyser reminded investors worldwide to stay focused on what really matters — family, friends — and discouraged any thought of kicking the family dog or dining room furniture.

We happen to believe that high-quality excellent companies purchased/accumulated with elevated return forecasts means that the roller coasters will be of the kinder, gentler variety … but some turbulence is unavoidable.

We wrote extensively of the carnage endured by Tin Cup during the Great Recession (2008-2009) and didn’t waiver in our expectations that “everything will ultimately be all right.” We fully acknowledge that this whole scenario can be different depending on your age/time horizon, risk tolerance, attainment of critical mass, etc. But we also think — for some — avoiding the challenge of making asset allocation adjustments is also quite desirable. In fact, we can point to several successful long-term investors who refuse to spell asset allocation or worry about any form of tactical decisions along the way (outside of carefully pursuing growth/size diversification.)

Benjamin Franklin and Albert Einstein are two individuals often attributed with the following worn-out expression:

“The definition of insanity is doing the same thing over and over again while expecting different results.”

In a commentary by O’Reilly’s George Alistair Sanger, he points out:

(1) The saying isn’t true.

(2) It isn’t the definition of insanity, instability or even pimples.

(3) It could actually be harmful advice.

(4) It contradicts the notions of experiment and practice.

(5) It does not make up for being harmful and wrong by being particularly funny.

(6) It is not documented to have originated from either Franklin or Einstein.

Invest Long and Prosper

On these pages a little over a year ago (March 2011) Hugh McManus shared some thoughts on fear, primal instincts and linked his conclusions to Star Trek. That’s right. Hugh urged us to invest like Spock not like Captain Kirk. Fear is powerful and can trigger emotions that cloud our long-term judgment.

Hugh admitted during a recent discussion that he actually hoped for a sluggish stock market — some would say “lost decade”, starting in approximately 2000. Is there method to his madness? Absolutely. But you have to account for his age and position on the spectrum of peak-compensation years, etc. In his view, the last several years have been an opportunity to accumulate stocks like Solomon Select feature Walgreen (WAG) at multi-year low prices.

Our discussion rekindled memories and thoughts of the 1970s and the stocks featured by Better Investing magazine during the teeth of the oil embargo and misery index days. Some of the best-performing stocks were chosen during those dark days — a reality that we’ve not fully capitalized on. Are the present conditions and doldrums an opportunity for history to repeat?

As a case in point, The Limited (LTD) was selected by Better Investing in 1982 just in time for the secular bull market. The story was solid — centered on the steadily increasing number of women in workplace and apparel market drivers. The Limited has been one of the absolute best performing stocks over the last several decades, delivering 17% (+7.3% relative return) from 1982-2012.

Hugh does an excellent job of separating emotion from investing and sticks to excellent companies or special situations with long-term merit. He’ll sometimes dabble with a turnaround or emerging company if he perceives opportunity and effective leadership. His perspective extends from at least five years to decades.

Long-Term Performance Profiling. Mapping the relative return results of a variety of club-based portfolios (dark blue dots) and MANIFEST portfolios (light blue) versus a relatively random sampling of institutional portfolios (red dots) presents a compelling story. From Peter Lynch’s Magellan track record at the top to DALBAR’s recent findings of -5.3% relative returns experienced by “average investors” from 1991-2010, the influences are intriguing. We really do believe that groups of investors who heed the lessons of Nicholson, Babson & Graham have at least one leg up on the crowd.

Portfolio Stewardship

In a recent article for US New & World Report David Armstrong asks: “As an investor, have you taken stock of your personal behavior as it relates to the stewardship of your portfolio? If you haven’t, let me tell you it matters—a lot.”

“It’s well documented that investment success is linked in part to behavior. Some investors continue to make the same mistake over and over again: They buy high in the face of euphoria and sell low in the face of fear.”

“In fact, I suspect such behavior has a lot to do with the horrible returns the average investor has achieved from 1991 to 2010 as reported by a recent DALBAR study. It is a pitiful 2.6 percent annual return.”

At 2.6% over that time frame, the relative return achieved by “average investors” according to the DALBAR study is -5.3%. Chase hot stock tips and buy high, sell low. It’s the only way to get “there.”

Checking Emotion At The Door

We believe that the analysis techniques and portfolio design & management methods of the modern investment club movement offer significant potential. Refer to the accompanying graphic of group averages. Although we should consider the preliminary results to be a work-in-progress, similar to a small percentage of “precincts reporting”, the average results of the club-influenced portfolios are outperforming their institutional counterparts. We should note that — if anything — there’s a positive bias for the rhino funds, because we included the most successful and widely-held in our early sampling efforts.

We know the drill. Invest regularly in high-quality companies when they’re on sale. Prudently diversify. It’s a little like going to battle armed with five carefully selected smooth stones and a steadfast long-term perspective. Sling at will. Invest long and prosper.