Of Tortoises & Rabbits

Four years ago, we lamented the decision by Forbes to discontinue their annual Best Small Companies list. 36 years in the running, the list provided a number of actionable opportunities over the last couple of decades for many of us. That said, while sticking to their core criteria, we may have actually improved the discovery and screening process.

The Best Small Company tracking portfolio has now beaten the Wilshire 5000 in 10-of-13 years. The last four years have delivered 19.0%, 21.6%, 31.7 and 32.0% respectively. The 32.0% was achieved versus a Wilshire 5000 at 8.6% for 10/31/2017-10/15/2018. For 2006-2018, the average annualized return is 16.5% versus 10.2% for the total stock market.

Note: The year-over-year results increased to 36% with the surge in the stock market on Tuesday.

When thinking about our experience over the last four years since adopting the orphaned Forbes mission — essentially seeking excellent faster-growing companies through the eyes of George Nicholson — we might want to switch the name of this campaign to Better Small Companies going forward.

As of 10/15/2018, the following (20) companies are on the “leader board” for the 2019 roster of Better Small Companies. Keep in mind that some of the fundamentals will be updated and price changes will cause some “drift”. We expect that 5-6 of these companies will be dislodged from the list as we complete the search for actionable ideas among the best-performing small company funds, Red Chip Review and American Association of Investors Shadow Stocks.

Bsc short list 20181016

The session recording is available here: https://www.youtube.com/watch?v=S_QZ97qlPPk
Go ahead.  Hug some red rabbits!

 

Fave Five (9/7/2018): Morningstar

Fave Five (9/7/2018)

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. The median 1-year ACE total return forecast is 10.0%.

This week we limit the field to companies with excellent quality (>80) with the lowest price-to-fair value ratios (P/FV) according to Morningstar.

The Long and Short of This Week’s Fave Five

Long & Short Term Perspectives. (September 7, 2018) 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. 52-Week Position: Position on scale between 52-week low price and 52-week target price. 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.

McKesson (MCK) is on “wash sale probation” as it was sold on 8/31/2018 and is unavailable to the tracking portfolio until October.

Intel (INTC) is one of our favorite examples of stock prices that seem to move in “fits and starts.” The company is currently #26 among the most widely-followed stocks by Manifest Investing subscribers and has generally tracked the market (8% annualized total return) since charter membership in the MANIFEST 40 back on 9/30/2005. Intel (INTC) spent four years on the Round Table roster after selection by Hugh McManus and Mark Robertson back on 3/26/2013. The rate of return when sold on 12/19/2017 was 21.6% — beating the Wilshire 5000 by 9.5 percentage points.

Looking down the top (50) stocks that met this week’s criterion, we were struck by the number of Ken Kavula nominations for the Round Table in the field. Perhaps Morningstar gives extra credit for “up, straight and parallel,” too? A recent example is the laser purveyor, Coherent (COHR). The company was featured (by Ken) during the July 2018 Round Table.

Stericycle (SRCL) has been in the Fave Five tracking portfolio since 12/8/2017 and has stumbled to a relative return of -16.7%. Yes, Virginia, SRCL is on the Rule-of-5 hot seat but they may still stick the landing and commence recovery.

NutriSystem (NTRI) is #4 on our Best Small Companies list for 2018 and was added to the Fave Five tracking portfolio on 3/22/2018. NTRI has delivered a healthy return, 32.1% since then. Bring out your best small companies ideas as we build and share the Best Small Companies (2019 edition) around Halloween. Yes, we’re searching haystacks and counting down …

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +3.5% since inception.

The absolute annualized rate of return is 18.9%.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/fave-five

Round Table (July 2018)

Our Round Table … is a free monthly webcast that celebrated its 8th anniversary on 7/31/2018.  The concept is simple. Contributors share their best current actionable ideas. Rinse. Repeat. Beat the market. The rate of return for the tracking portfolio (since inception) is 18.2% — topping the Wilshire 5000 by 5.5 percentage points.  The monthly sessions are sponsored by the NAIC Mid-Michigan chapter and Manifest Investing and stock selections/analysis and portfolio stewardship is demonstrated by a number of community participants who have successful stock selection experience and superior performance.

Round Table (July 2018)

The rate of return for the Round Table tracking portfolio stands at 18.2% over the last 8.0 years.

Our July Round Table celebrated our 8th anniversary. It all started with, “Sure … a monthly demonstration of WHAT WE DO would be great … but NO COSTUMES!” — Ken ‘Party Wrecker’ Kavula.  (July 2010)

So no costumes. Occasional hats.

Frequent solid ideas for further study.

 

Stocks featured during the July session included Cognizant Technology (CTSH) — our most frequently selected stock over the trailing eight years, Coherent (COHR), Ionis Pharma (IONS) and Skechers (SKX).  The audience selected Coherent (COHR).

The slides used during the session are available on request via Mark Robertson (markr@manifestinvesting.com).

The video archive is available via YouTube at Round Table — July 2018 If you’d like to be notified whenever videos are uploaded to this channel, subscribe using the button on the page.

Green Room, References Mentioned …

IPG Photonics (IPGP) took quite a hit in trading on Tuesday with the price dropping approximately 26% during the day. See Why IPG Is Falling Hard (Brian Feroldi, Motley Fool) for more information on the situation. The drop would have been enough to dislodge IPGP as the best performing stock from 2016 if Tuesday’s price action were included. We noted that Mark’s selection of Mercadolibre (MELI) would be the new leader for active holdings from 2016.

Signature Bank (SBNY) appeared at the top of the “Closest to 52-Week Low” screen used during the session. Investors are reminded that Eddy Elfenbein of Crossing Wall Street follows SBNY fairly closely as a component of his current Buy List and a number of play-by-play commentaries can be found there. Go to the site and search by ticker (SBNY) if you’re interested in a plethora of features regarding Signature Bank.

Attophysics defined.

One of the books mentioned during the session was Factfulness by Hans Rosling. I’m sure that we’ll be talking more about this in coming weeks and months. For more on this, check out the Forum Post by Sunil Veluvali

The Basics of Tariffs and Trade Barriers (Investopedia)

Links to Challenge Stock Audits:

None of the challenge stocks were sold but we dialed up vigilance on Cambrex (CBM) if the price continues to run in the absence of a robust increase in fundamental expectations.

The tracking portfolio (dashboard) can be found at https://www.manifestinvesting.com/dashboards/public/round-table

 

 

All Of The Above Investing

This Morning’s Powerful Reminder About All-Of-The-Above Investing. We build and maintain portfolios with a sufficient number of small and medium-sized companies such that the overall growth forecast (weighted average) is approximately 11%. This assures that we’ll have a suitable balance of promising faster-growing smaller companies and large core/blue chip stalwarts.

$100 invested in the S&P 500 on 6/13/1997 would now be worth $314.85. (5.9%)

$100 invested in the Value Line 1700 Arithmetic Average ($VLE) would now be worth $820.50. (11.1%)

Fave Five (6/8/2018): Deep Discounts

Fave Five (6/8/2018)

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. The median 1-year ACE total return forecast is 12.0%.

Three weeks ago we went “bottom fishing.” This week, we’ll do the same thing but stop before hitting bottom. In this case, as we stacked up the companies with the highest 52-week total return expectations (ACE) and required a minimum MANIFEST Rank of 80, audits on a number of the leaders crushed them. Stocks that we’ve previously featured tanked and the 5-7 highest ranked stocks failed to make the list on further scrutiny.

The Long and Short of This Week’s Fave Five

Long & Short Term Perspectives. (June 8, 2018) 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. 52-Week Position: Position on scale between 52-week low price and 52-week target price. 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.

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +2.8% since inception.

The absolute annualized rate of return is 18.2%.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/fave-five

Fave Five (5/25/2018): Bottom Fishing

Fave Five (5/18/2018)

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. The median 1-year ACE total return forecast is 12.6%.

This week we swing for the fences. The only restriction we placed on the long term perspective was to require that the stock be in the sweet spot (or above) with a minimum quality ranking of 60. So we’re looking at good or excellent companies with — in some cases — exorbitant long term forecast that also have out-sized total return forecasts for the next year or so.

Amira Nature Foods (ANFI) is a repeat participant. ANFI was added to the tracking portfolio back in June 2017 and was “expelled” for dropping more than 20% versus the market in fairly short order. The price at the time was $4.21, so today’s current price of $2.30 is 45% lower than that exit point. This is a potential example of the Rule-of-5 sell discipline that Ken Kavula and Mark Robertson discussed and presented at the NAIC national convention.

Universal Display (OLED) is an active holding in the tracking portfolio and increasingly, a community favorite. Added back in October 2016 at $49.69, the price reached $209 before retracing back to $99.28. (We did think about selling near that $209 peak based on projected return > median market forecast in the Round Table also, but we blinked.) At the current price, this holding has still outpaced the Wilshire 5000 by 40.1% (annualized.) We’ve heard unsubstantiated reports of newborn children and grandchildren being named “Universal Display.”

Suburban Propane (SPH), Health Insurance Innovations (HIIQ) and Grupo Aeroport Pacifico (PAC) are new additions.

Suburban Propane is a Master Limited Partnership and should be viewed as a more suitable individual portfolio component. See: Investing in MLPs (Source: bivio.com, Laurie Frederiksen) MLPs are generally challenging for club/partnership portfolios.

Health insurance is a mess. Perhaps it’s a field of opportunity. HIIQ could be worth a study to see if they’re making gains and solving the Rubik’s cube.

PAC is a Motley Fool favorite and was recommended in the October 2016 issue by David Gardner in their Stock Advisor newsletter. “Grupo Aeroportuario del Pacifico operates 12 airports in Mexico’s Pacific region, including popular destinations such as Guadalajara, Tijuana, and Puerto Vallarta. This is a great collection of assets just south of our border. Because airport facilities don’t change much from year to year, many costs are fixed. Its revenues, however, are expanding thanks to rising passenger volumes and more revenues from passenger services such as restaurants and car rental. And since each incremental traveler is mostly profit, profits have accelerated and has rewarded shareholders with an ever-growing dividend. Although friction in the relationship between the U.S. and Mexico is a risk factor here, we expect long-term travel and trade trends to ultimately carry the day. As a result, near-term stock price volatility is giving opportunistic long-term investors a real buying opportunity.” — (Excerpt from a Stock Advisor Update, 2/9/2017)

The Long and Short of This Week’s Fave Five

Long & Short Term Perspectives. (May 18, 2018) 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. 52-Week Position: Position on scale between 52-week low price and 52-week target price. 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.

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +2.6% since inception.

The absolute annualized rate of return is 16.6%.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/fave-five

Fave Five (5/11/2018): Triple Play

Fave Five (5/11/2018)

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. The median 1-year ACE total return forecast is 14.8%.

This week we return to the triple play screening method for our five favorites. The triple play possibility occurs when you find a stock that is very depressed in price and also appears to be on the verge of substantially boosting its profit margins. The triple play effect is possible in that:

(1) The depressed price of the stock can return to normal levels;

(2) increased profit margins can produce increased EPS and a higher price;

(3) may also cause higher P/E ratios, or P/E expansion.

The Long and Short of This Week’s Fave Five

Long & Short Term Perspectives. (May 11, 2018) 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. 52-Week Position: Position on scale between 52-week low price and 52-week target price. 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.

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +2.3% since inception.

The absolute annualized rate of return is 16.7%.

Tracking Dashboard: https://www.manifestinvesting.com/dashboards/public/fave-five