Month: December 2012

Coach (COH)

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Coach (COH) is the 8th selection in our annual Christmas stock selection countdown. We started the Core Diem portfolio in October — and Coach has been the most frequently-selected “best idea” over that span. In the spirit of the season, this selection is a tribute the to-be-admired males who are holding places in mall shopping lines for their spouses and partners … and to a company executing well on many levels.

And about those rings … pass the horseradish dip when you’re finished with it.

Coach (COH) is no stranger to our community of investors, currently ranked #18 in the MANIFEST 40. The projected annual return (PAR) is 18.6% with a top-shelf quality rating of 93.6.

For more: https://expectingalpha.com/2012/12/05/coach-coh/

Crossing Wall Street Stock Picks (2012)

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Eddy Elfenbein produces an excellent blog at Crossing Wall Street For the past six years, Eddy has selected a set of stocks with the objective of outperforming the S&P 500 over the course of the ensuing year.

For 5-of-the-last-6 years, he’s been successful — reaching an 83% outperformance accuracy that is rarely matched. As 2012 winds down, Eddy appears to be headed for another market-drubbing performance (vs. the S&P 500.)

6-out-of-7 (6-1 85.7% winning percentage) is exceptional — the kind of result that makes any investor drool. We’ll keep our fingers crossed, Eddy!

2012 Scorecard (YTD)

Harris Corp (HRS), Wright Express (WXS), Hudson City Bank (HCBK), JP Morgan (JPM) and Fiserv (FISV) all turned in superior results. Eddy recently expressed frustration with Joseph A. Banks (JOSB) — along with many of us — so we’d be surprised to see JOSB among Eddy’s 2013 selections.

We’ll stay tuned for Eddy’s 2013 picks and you can read his commentaries on the 2012 buy list here:

http://www.crossingwallstreet.com/buylist

2013 Shopping Suggestions

We’d recommend that the hunt include high-quality companies with high return forecasts and here are some companies that merit consideration. Eddy will retain some of the 2012 “20” but it’d be no surprise to see some of these candidates attract his interest because his selection emphasis is very similar to what we look for.

Microsoft (MSFT)

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The seventh selection in our annual Christmas stock selection countdown is Microsoft (MSFT).

We’ve arrived at six geese a-laying. And a question.

Microsoft, are you a good egg or a bad egg?

MSFT: “We’re not an egg at all!”

We eggs-tracted Microsoft (MSFT) from Sam Stovall’s favorites by concentrating on the highest-quality companies on his list that also had above-average return forecasts. That list is shown here:

In an Eggshell: These are all good eggs. (rimshot?)

But keeping things really really simple — we really really like the Value Line total return forecast and all of these are good. But Microsoft (MSFT) stands heads and shoulders above the field. Will there be speed bumps ahead? Absolutely. The stock price could languish and the Microsoft haters (low overall long-term sentiment) could persist for a long time. But the company continues to have a plethora of solid characteristics, decent fundamentals and a wide berth of opportunity.

Countdown Dashboard Update

S&P’s Sam Stovall: 19 High Yielders

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One of our favorite things to do at Manifest Investing and throughout the community is to pay attention to successful investors we respect. This can stem from sources like well-managed funds (think Buffalo Small Cap, BUFSX) to published lists of ideas. We’ll take a look at Eddy Elfenbein’s Crossing Wall Street later. This list of stocks is provided by Standard & Poor’s Sam Stovall. We’ve spent some quality time with Sam at national investing conferences and know that his foundation is good.

That said, we subject ANY AND EVERY idea to the gauntlet of our stock analysis process whether they come from your hair stylist, brother-in-law (especially if they come from your brother-in-law) and we make no exception for Sam.

Here’s the article conveying Sam’s favorites:

19 High-Quality High-Yield Buys

We create a dashboard with $100 aimed at all nineteen entries … and sort the dashboard by PAR (Descending):

It’s a good shopping list — the overall average return forecast is 8.7% with the median return forecast for all 2400 stocks that we follow hovering at 8.3%. Typical of a bunch of blue chip stalwarts, the overall growth rate is 5.5%. The 3.3% projected dividend yield essentially compensates for a lack of growth — a normal feature of companies that have reached mature stages of their life cycle. The overall quality rating is 72.6 (Excellent) stemming from a financial strength rating of 81% (A) and earnings stability percentile ranking of 90.

EPS stability is very important. It’s where the dividends come from.

Darden Restaurants (DRI) is fairly attractive, and one that we’d have no trouble raking over the coals to see how appetizing it really is. Microsoft (MSFT) is also pretty compelling — but might walk over a few coals too as Windows 8 rolls along with the mish-mosh of other adventures they’re pursuing. All of those companies in the 9-12.5% return forecast range are pretty compelling for conservative investors or those who might be in capital preservation mode.

Good shopping! Thanks, Sam.

Investors are invited to track the portfolio progress going forward by monitoring the condition of $100 invested in each one of Sam’s suggestions here:

http://www.manifestinvesting.com/dashboards/public/stovall-19-high-quality-high-yield

Things That Go Bump In The Night

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During a recent Round Table webcast, Hugh McManus (March 2011)  shares that humans aren’t necessarily “wired” to deal with the challenges of investing and that we have to seek means of dealing with it.

When you’re sitting around the campfire, noises from the darkness are generally BAD. Fear of darkness isn’t necessarily a bad thing. It just might save your life under the right circumstances. But that same core of human instincts is closely related to why investors in general make bad investing decisions when clouded by emotions and/or adrenaline. During our February Round Table, Hugh McManus shared stories of cavemen, mammoths on the bad end of a spear … our quest for fat (the perfect food) … all while weaving a tale that explained why Vulcans will choose Earth as a perfect retirement village. Turns out our stock market is pretty good hunting for them.

Webcast: Things That Go Bump In The Night (Approx. 24 minutes)

For more information and archived Round Table sessions: http://www.manifestinvesting.com/events

Who We Are

expectingalpha Who We Are

Manifest Investing is a web-based investing system including research and features/tools for stock and fund screening as well as resources for portfolio design and management.  The community and content stream generates a continuous flow of actionable ideas.  We seek and deliver “elegant simplicity” by focusing on a small number of factors and characteristics that really matter.  Features and regular webcasts feature demonstrations of analysis and methods. Our focus is on demystifying investing — particularly when it comes to the design and management of a portfolio — enabling anyone to experience successful investing with their personal investing or retirement plans. We endorse and encourage investment clubs as vehicles for support and group learning.

Mark Robertson (markr@manifestinvesting.com) is founder and Managing Partner of Manifest Investing, served as senior contributing editor for Better Investing and has worked with successful investment clubs and individual investors since 1993. He has appeared on National Public Radio, CNBC and ABC to discuss long-term investing. He has also worked with Smart Money, Barron’s, Money magazine and the Motley Fool and been covered by the Chicago Tribune, Wall Street Journal and MarketWatch as well as a number of local publications.

Kurt Kowitz (kurtk@manifestinvesting.com) co-founder and Technology Manager, is responsible for web site development, operations and customer service. Kurt was largely responsible for the development of online data in support of software and web-based delivery at NAIC.  As father to two young boys, Kurt is interested in long-term investing for purposes of college one day and retirement another:  Responsibly Lazy Shopping

For more on getting started at Manifest Investing: Guided Tour — The Basics

Ken Kavula (kkavula1@comcast.net) has served the modern investment club movement in a wide variety of leadership volunteer positions. A retired educator, he is regarded as a small company champion and respected speaker nationwide. Ken also belongs to four investment clubs, including two Model clubs and a family club.

Little Nudges Can Make A Difference

Elegance and Simplicity

Cy Lynch (celynch@att.net) is a respected and experienced long-term investor and educator. Cy is a frequent contributor at MANIFEST, providing regular educational topics and a knight of the Round Table series.

Muskrat Pageantry

Rites of Spring

Of Chopping Cows & Analyst Networks

 

Mcmanus hugh

 

Hugh McManus (hughmcmanus@gmail.com) is a pharmaceutical scientist, successful long-term investor and renowned advocate at investment education conferences. A frequent contributor to MANIFEST, Hugh is also a knight, participating in our Round Table series.

Things That Go Bump In The Night

Oracle Corp (ORCL)

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The 6th selection in our annual stock selection countdown is Oracle Corp (ORCL).

No, there’s no particular connection between the water-logged feathered creatures shown here and the America’s Cup yachts captained by Larry Ellison.

The connection is that every year around the winter solstice, we’ve selected Oracle during the countdown. The 2011 entry was a little weaker (-4.9% relative return) but the 2012 edition was one of the better performers, checking in with a total return of 29.3% for a relative return of +12.0%! On average, pretty solid performance over the last couple of years.

Operationally, Oracle continues to fire on all cylinders.

Little Nudges Can Make A Difference

expectingalpha Best Of, Investing

Originally Published: November 2010 (Expected Returns newsletter)

If you’ve ever wondered how the “little things” in life make a difference, we invite you to spend a few moments with career teacher and retired principal Ken Kavula and his wife Natalie. Scores of investors have been favorably affected and influenced by them. Natalie is a career teacher also. They have both served as volunteers for the national umbrella organization for investment clubs (NAIC) and have delivered a number of educational opportunities and events for investors in all parts of our community. Based on the impact, it’s clear that sometimes “little things” aren’t so little, after all. As Ken often reminds, small companies can deliver large impact on our investing journey.
Investing together is something Ken and Natalie Kavula enjoy. This photo, taken after Ken received a lifetime achievement award for excellence in volunteerism, is from an NAIC national convention. Ken stipulates that any first person “I” in this story should really be a “we”. Natalie and Ken are partners and their family investments are jointly managed. That includes studying, buying, maintaining and selling! “We do it all together and we wouldn’t have it any other way.”

For more: Little Nudges Can Make A Difference

Qualcomm (QCOM)

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Christmas Countdown (2013)

It’s the day that we’ve dreaded for a while during this year’s countdown. It’s the day where cold hands meet … well, relatively warmer flesh. It’s the sort of thing that can make you go “Moo!” And we’ll reminisce along with eight maidens with the fifth selection of our 2013 countdown.

It still ranks as one of the most jarring experiences of a lifetime of investing.

My investment club owned a sizable stake in Qualcomm (QCOM) during the waning days of 1999 and we watched as the stock price rocketed during the Christmas holiday season back during the final weeks of December 1999.

With a cost basis of less than $5, we watched the price soar to a split-adjusted $200 in short order. I’ll make a really long story really really short by simply reminding any and all of us to do all we can to avoid letting the tax impact of a decision get in the way of making a decision that should be made.

Here’s a look at the stock price versus the return forecasts some 13-18 years ago. The key takeaway is that when a stock has a return forecast of -29%, it’s probably prudent to think about making some sort of a selling decision.

Fast Forward to The Present

Leaving the “ghosts” of Christmas Past behind — we turn to present day conditions at the communications juggernaut. Based on sales growth forecast of 16%, net margin expectations of 33.5% and projected average P/E of 17x, the projected annual return (PAR) is 18-19% with a top shelf quality rating.

The following chronicle is the same information (but tracked monthly) over the last five years — illustrating that the return forecast has rarely been higher than current levels, triggering our interest in the stock.

Annual Dashing of Sugar Plum Visions

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Wall Street analysts are a fascinating bunch and a bit of a mystery. Why? Because the vast majority of the time they’re an exuberantly optimistic lot. Visions of 15% earnings growth dance perpetually in their heads and the 15% long-term forecasts roll reliably year in and year out. If the current year is “n”, then n+1 and n+2 are virtually always robust.

But the fourth quarter arrives, year-in and year-out … and they turn grinchy. Some years they’re more grinchy than others and the current edition fits that bill. Where once visions of 12-14% year-over-year change in aggregate EPS forecasts danced in their heads, this has been replaced by a somber 6-8% (and they’re not done yet — they still have 10-14 days to reduce their 2012 forecasts.) 🙂

Barry Ritholtz reports regularly on this and recently reminded that dancing on and dashing sugar plums into mincemeat is common fare at this time of year. See: Analysts Get Gloomy Right On Schedule

As we’ve been pointing out for several months, there’s been considerable optimism baked into the overall forecasts — and one of the reasons that the current “recovery” still feels a tad recessionary can be seen in the accompanying figure.

Note the sugar plum optimism for 2013 forecasts. Also note that although only “8% of precincts are reporting” with 2014 forecasts so far … as they roll in, they appear headed for the time-honored land of 15% year-over-year growth — no matter what history suggests.

History suggests that they’re always 50% high (15% forecast versus 8-10% actual) and that studious investors are well-advised to completely ignore analyst consensus estimates when it comes to % EPS Growth.

We do. And the sugar plums are grateful.