Year: 2013

That Long-Term Return Forecast (3/31/2013)

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Just a refresher on the forecast vs. actual results for the Value Line Low Total Return Forecast (VLLTR) … a close cousin of Mark Hulbert’s VLMAP … and taking Mr. Hulbert up on his suggestion to benchmark versus the Wilshire 5000 (VTSMX).

As shown here, even the Value Line LOW total return forecast has been fairly consistently 3-4 percentage points higher than actual results.

And to reinforce, we consistently see alignment between VLLTR for individual companies and their projected annual return (PAR) at Manifest Investing. Why is this the case? We believe that the inclusion of analyst research from the likes of Morningstar and Standard & Poor’s moderately tempers the overall analysis. (We obviously include Value Line in the analysis of every company, too.) Time after time, we see slightly lower growth, profitability or projected P/E forecasts when we aggregate and combine — and find that collectively, this combined result aligns more closely with VLLTR and actual total return results over the last several years.

For the bigger picture, here’s the Wilshire 5000 actual results vs. the VLLTR forecasts (quarterly back to 1999):

Eddy Elfenbein on Apple (AAPL)

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Eddy Elfenbein on Apple (AAPL) from his weekly Crossing Wall Street note … and a reminder that if you’re owning or watching any of the stocks on his Buy List for 2013, he will help you.

Apple Gives $100 Billion to Shareholders

One of the big catalysts for the stock market this week was the dividend hike from Apple (AAPL). Although the legendary iStock isn’t on my Buy List this year, the company is so large, it can move the market all by itself.

Apple said that it’s raising its dividend by 15% to $3.05 per share. The company is also increasing its share-repurchase program by $10 billion to $60 billion. The combined total of the dividend and share repurchase comes to $100 billion that Apple is paying out to shareholders. To put that in context, the new dividend works out to $12.20 per share for the year. Ten years ago this week, the whole stock was going for $6.60 per share. Apple is now sitting on a bank account of $145 billion. That’s enough to buy every single team in the NFL, NHL, NBA and major-league baseball.

Interestingly, Apple is borrowing money for its dividend and buybacks. That may sound odd, but rates are so low — hey, why not? I think the Apple news clearly gave investors a big confidence boost. This was especially true after the AP’s Twitter account was hacked. The hackers sent out some bogus tweets, and within a few seconds, $160 billion in market value was erased. So yeah, that kind of stuff tends to put people on edge.

Another sign of a calmer market is that the yield spread between junk bonds and Treasury bonds has fallen to a two-year low. This is exactly what we want to see. Investors are willing to take on more risk with their money. That’s why these higher dividends are so important. They can lure money away from rock-bottom yields in the Treasury market.

Value Line Low Total Return Screen (4/26/2013)

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Companies of Interest

Again we see what a difference a week makes … some of the food-related companies hold down the Materially Stronger fort — but keep in mind that Zhongpin (HOGS) is likely on its way to going private at $13.50.

Educational Services once again provides us with the usual list of suspects as the industry continues to get shellacked. Notable by their absence from the Materially Weaker list are DeVry (DV) and Strayer Education (STRA). Perhaps the triage is starting to take hold?

Materially Stronger: Zhongpin (HOGS), ConAgra (CAG), Core-Mark (CORE), Flowers Foods (FLO)

Materially Weaker: Career Education (CECO), ITT Educational Services (ESI), Apollo Group (APOL), Corinthian Colleges (COCO), Hitachi (HTHIY), Dole Foods (DOLE)

Market Barometers

The Value Line low total return forecast is 6.8%, compared to 6.8% last week.

Finding The Best 4-Year Forecast Method

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Mark Hulbert and I compare notes again on using Value Line for long-term forecasting for individual stocks and markets.  As Hulbert points out, the Value Line Median Appreciation Projection (VLMAP) has a pretty solid track record.

We agree — and side with the likes of Walter Schloss and pure discipline itself — when we use our own version of VLMAP, specifically an emphasis on the median Value Line low total return forecast (VLLTR) … a parameter that includes dividends, extending beyond long-term price appreciation and aligns even more favorably when we compare Forecast vs. Actual with the past couple of decades in the rear-view mirror.

http://www.marketwatch.com/story/finding-the-best-four-year-market-forecaster-2013-04-19

HMS Holdings (HMSY)

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Company Description

HMS Holdings (HMSY) provides cost containment and payment accuracy services for government-sponsored health and human services programs in the United States. Their coordination of benefits services route claims already paid by a government program to a liable third party, which then reimburses the government payor. Its cost avoidance services provide validated insurance coverage information that is used by government payors to reject claims that are the responsibility of a third party, typically a group health plan sponsored by the beneficiary’s employer. HMS also offers independent external medical review on issues of quality of care.

Business Model

Profitability Analysis

Technical Analysis: Long Term Perspective

Here is where it gets a little bit dicey for HMSY — because we can’t be sure that the company is “out of the woods” yet.

In its favor, that long-term price trend is strong … and there’s a fair amount of technical support in the realm of $22-23, perhaps even $25.

Equity Analysis Guide: Worksheet

Points of View

Morningstar discontinued coverage back in November 2012 and has reduced their Financial Health rating on HMSY.

Friends Make Marathons Achievable

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Photo Credit: wallyg via Compfight cc

by Laurie Frederiksen, www.bivio.com

A marathon is a fitting metaphor for a lot of hard things we do in our lives.

A marathon runner trains by getting up every morning without fail and putting one foot in front of the other, day after day after day.

That is what leads to success. Not good luck. Success is starting the race and crossing the finish line. It’s not measured relative to anyone but the runner themselves.

Investing is a marathon. Some days it’s hard to keep going, but progress is only made by hanging in there, moving forward one step at a time and not giving up.

Horrific acts can demoralize us all. They sap our strength and make us feel like there’s no point in moving forward. But that is when we have the marathon runners to remind us. Keep putting one foot in front of the other and you’ll make it to where you are going.

Our hearts go out to those who were hurt yesterday. They will be a constant reminder that sometimes the going gets really tough. But success will come to us all as we endure. The senseless acts to demoralize only make us stronger as we collectively share in the outpouring of compassion and resolve that rushes in to combat the horror.

Our thoughts and prayers are with all of you in Boston. Thank you for reminding us again that sometimes just to keep moving forward is a big accomplishment.

Laurie Frederiksen
Invest with your friends!
www.bivio.com

Value Line Low Total Return Screen (4/19/2013)

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Companies of Interest

In keeping with last week’s Phoenix theme, many companies were bolstered in this release of updated company reports … leading to one of the stronger “Materially Stronger” collections we’ve seen in quite some time. (The definition of materially stronger is that the long-term low price forecast issued by Value Line has ‘step changed’ 20-25% over the last three months.)

General Electric (GE) is #18 in the MANIFEST 40 and has steadily been making portfolio and business/capital structural changes while continuing to position the company in high opportunity potential areas for future. Pentair (PNR) is making some of the same types of strategic moves recently. Checkpoint Software (CHKP) has some of the strongest fundamental and technical characteristics in this update field — and sports a fusion ranking of 99.

Materially Stronger: General Electric (GE), Pentair (PNR), Hillenbrand (HI), GATX (GMT), Roper Industries (ROP), Whirlpool (WHR), Gencorp (GY), Lindsay Corp (LNN), Tecumseh Products (TECUA), Morgan Stanley (MS)

Materially Weaker: E*Trade (ETFC)

Market Barometers

The median Value Line low total return forecast is 6.8%, compared to 6.7% last week.  (The long term average for this forecast is 8.5%)

C.H. Robinson Worldwide (CHRW)

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Source: Company Annual Report (2010)

C.H. Robinson Worldwide (CHRW) is a service company, which provides freight transportation services and logistics solutions to companies. It is a multimodal transportation services and logistics solutions, operates through a network of branch offices in North America, Europe, Asia, South America, and the Middle East. C.H. Robinson Worldwide services include supply chain consulting and analysis, freight consolidation, core carrier program management and information reporting. The company’s other services include sourcing services, contract Warehousing and fee-based information services. The Sourcing services business is primarily the buying, selling, and marketing of fresh produce. It also provides Transportation and Logistics Services: Truckload, less than Truckload, Intermodal, Ocean, Air and Other Logistics Services. C.H. Robinson Worldwide was founded by Charles Henry Robinson in 1905 and is headquartered in Eden Prairie, MN.

Business Model Analysis

The long-term growth trend is 10%. And we could pretty much set our watch to it … with allowances for recessions now and then. (If you squint, you can see a recessionary gulp in 2012. See the blip in the EPS plot for 2012 vs. the trend.)

The price bars are drifting ever closer to the long-term EPS trend, underscoring the potential buying opportunity.

Chronicle

Points of View

There’s a few chinks in the armor for CHRW, but no deal breakers. The “bearish sentiment” and negative price pressure is probably reflective short-term recessionary concerns — but we’re in this for the long haul. (Yes, an economic recession will deliver a dent much like it did in 2008-2009.)

Overall sentiment is a little weak. Note the Motley Fools CAPS all-stars are not all that high on CHRW (34th percentile).

Gold: Tarnishment In Progress?

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Photo Credit: World Bank Photo Collection via Compfight cc

Maybe it’s the unshakable image of Peter Schiff on Fox Business pulling a Hersheys-like gold bar out of his wallet — and demonstrating that much like a chocolate bar — you can break off smaller $50 pieces! Maybe it’s visions of bitcoins, tulips or beanie babies dancing in my head?

Whatever is dancing, although we generally reserve these long-term RSI breaks and disruption zone charts for stocks, Gold (GLD) … this one’s for you.

I can’t shake the image of how UNPROTECTIVE Midas was during the 2008 meltdown. Sure, it held up fairly well for a scant few months following Halloween 2007 — but it gave up the ghost a scant few months thereafter, rendering this asset allocation recipe pretty unreliable when it was needed most. (To be fair, Midas was far from alone in disappointing by asset class.)

So my question is, “What makes you believe that Midas would be any more protective during the next market meltdown?”

Core Diem: A Tasking Portfolio

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If you’ve been following along since last October, you’ve probably seen a number of selections that seem to have been snake bite victims. The most recent injured stock is Infosys Tech (INFY) down some -21% this morning as the company admits that they’re tired of “lingering economic malaise.” We’ll be watching the 16-17 analysts who cover INFY to see if forecasts for 2013 and 2014 weaken materially in days ahead.

As I shared with Cy Lynch this morning, in honor of one of the best lines delivered by Ricardo Montalban (Khan) with respect to his adversary William Shatner (Captain Kirk) this portfolio TASKS ME

The outperformance accuracy of Core Diem is now 13% with a relative return of -11% after this morning’s carnage. (Cognizant Technology lost ground in sympathy with their industry peers at INFY.) Ugh.

But this condition is really nothing new — as Cy consistently and persistently reminds (as do Ken Kavula and Hugh McManus quite often) — TIME is not a 4-letter word. Our mettle is tested.

This current market surge is full of flaky stakes making new highs. As a case in point, today’s rage is Rite-Aid (RAD) with their quality ranking of ZERO as the stock price soars from $1.50 to $2.25. Nope, there’s no decimal place missing.

We’ll continue to add a stock per day to Core Diem going forward and look forward to the day when we celebrate a positive relative return.

Flake at will. We continue to believe that seeking high-quality companies when they’re comfortably in the sweet spot (our version of Graham’s margin of safety) is still a pretty good idea and that TIME is on our side.

Core Diem Model Portfolio