Groundhog Challenge: 2013 Results

Groundhog Challenge VII: Final Results (2013)

We’ll be reviewing the final results of the 2013 Groundhog Challenge and celebrating the achievements of the Broad Assets investment club of St. Louis, our group champions for the second year in a row and the king-of-the-hill finish by our friend, Andy Pagorek of Chicago, our individual champion for 2013.

Andy felt pretty good about his total return greater than 80% for 2013, until he saw the St. Louis group come in at over 110% for the annual contest. In a note he sent to me several weeks ago, he applauded the St. Louis gang for their repeat performance, acknowledging them in his perpetual quest for effective and successful long-term investing methods.

Join us for a FREE webcast where we’ll explore what worked and how our collective Groundhog Nation performed versus some celebrity rhinos. What didn’t work so well? Well, if confession is good for the soul, we’ll be visiting my selections that narrowly avoided finishing in last place for 2013. (In case you’re worried, I’m still near the top of the all-time leader board.)

Time: 10:30 AM ET (February 1)


Groundhog VIII: Join our next ‘Iditarod’

Entries from individual investors and groups (clubs) currently being accepted via the MANIFEST Forum and/or email to:

There aren’t many rules.  Participants select a minimum of five (5) stocks with a maximum of (20).  Selections are distributed in $1,000,000 based on stock prices on February 2, 2014. (1/31/2014)  The winner is the highest value on February 2, 2015.  An individual champion and group champion is crowned each year and all-time performance is also in focus.  (We have seven years under our belts now.)

State of the Round Table (January 2014)

State of the Round Table Portfolio

We took a look at some of the stocks that have delivered a solid long-term performance for the tracking portfolio as well as sharing our favorite current stock ideas and some analysis. What is your favorite stock idea right now?

The state of the Round Table tracking portfolio is SOLID. The relative return (internal rate of return minus the Wilshire 5000 since inception, July 2010) is +3.6% with an out performance accuracy of 56%. The objective is 60% and for context, the “average” investor generally achieves a 30-40% accuracy based on observations of the Motley Fool CAPS program.

Keep in mind that the tracking portfolio has a permanent home at:

Stock Studies:

  • Apple (AAPL)
  • Computer Programs & Systems (CPSI)
  • McDonalds (MCD)
  • Shoretel (SHOR)

Fundamental Screening Results

Technical Analysis & Second Opinions On Parade

Hugh’s Noodling for Deeper Value

The audience selected Computer Programs & Systems (CPSI) as their January choice.

Annual Super Bowl Poll (2014)

It’s time for our annual Super Bowl survey.

There’s not a clear “old NFL” team again this year. But, the Denver Broncos are clearly an “old AFL” team, so for investing purposes and in homage to the Super Bowl indicator, we’d have to lean on those upstart Seattle Seahawks despite Peyton Manning and his “Omaha-rich” assault on the record books this year.

It’s time to get out there and BUY SOME STOCKS. 🙂

We’re 6-for-8 having mistakenly selected the 49ers over the Ravens last year.

XLVII: San Francisco 49ers (Super Bowl won by Baltimore Ravens)
XLVI: New York Giants (defeated the New England Patriots)
XLV: Green Bay Packers (defeated the Pittsburgh Steelers)
XLIV: New Orleans Saints (defeated the Indianapolis Colts)
XLIII: Pittsburgh Steelers (defeated the Arizona Cardinals)
XLII: New England Patriots (Super Bowl won by New York Giants)
XLI: Indianapolis Colts (defeated the Chicago Bears)
XL: Pittsburgh Steelers (defeated the Seattle Seahawks)

Groundhog Challenge VIII (2014)

Bring out your best.

Groundhog VII (2013 edition) comes to an end on February 2, 2014. we have seen a number of photo finishes over the years in our annual stock selection challenge.

This will not be one of those years.Last year’s group champion, The Broad Assets investment club of St. Louis has dusted the field — and barring calamity and collapse at a couple of their key positions during January — currently has a 111% total return for 2013. (That’s NOT a typo) In similar fashion, Andy Pagorek of Chicago is up 82% for the individual championship. More on them to follow in the February newsletter.

For now, it’s time to start your Groundhog shopping for 2014. $1,000,000 is evenly invested in 5-20 stocks (or funds) on 2/2/2014 and we stand back and watch the selections grow for the next 52 weeks until the 2/2/2015 finish line. Five selections is the minimum … and yes, dividends are reinvested. This is a total return contest.

Individuals and groups are encouraged to join the fray. Discuss it during your January club meeting and either post your 2014 entry in the MANIFEST forum under the Groundhog Challenge or submit selections to BEFORE February 2, 2014.

This Week at VL: VLLTR Opportunities

The subtle, even stealthy, deterioration of fundamentals continues. There’s a fair amount of slippage in the long-term forecasts. As we’ve been saying, it will be interesting when the 2015 estimates begin rolling and Value Line ratchets their 3-5 year forecasts to the next year. Top 40 regulars Pepsi (PEP) and Coca-Cola (KO) continue to be compelling studies during these times of reduced long-term forecasts.

Materially Stronger: Apollo Group (APOL), Spartan Stores (SPTN)

Materially Weaker: SodaStream (SODA), ROVI (ROVI), Strayer Education (STRA), Canon (CAJ)

Saturday Sunrise … Tribute To A Ritual


I’ve written in the past about Saturday mornings and a ritual that included a reflective walk to Starbucks to consume some caffeine and the newest issue of Barron’s for the week. It was early in my discovery of long-term investing … an exploration that led to the formation of a family and friends investment club back in Wheaton, Illinois in the early 1990s.

The destinations experienced since those days are nothing short of remarkable. Our children were fortunate that they were born before they could be named Cisco or Oracle. (We haven’t ruled out Chipotle for our first grandchild, yet.)

It was those early morning jaunts where I began to discover the nuts and bolts of investing. And frankly, like many who take the leap of faith, it became clear that there was a whole lot of available information. There was a whole lot of “experts” who seemed to spew advice and tips with little or no effort to gauge the effectiveness of their talking head sessions.

Into this cloud of confusion and chaos, enter one George Nicholson, Jr. CFA and this campaign we’ve come to regard as the modern investment club movement. Mr. Nicholson is thought of by many as the grandfather of the investment club “grand experiment” … evolving from Detroit in 1941 to a national/global learning experience. We learn that long-term investing is possible and that the odds of success can be dramatically increased by patiently focusing on a few key pieces of information. Add the discipline of developing and sticking to a routine — the core attribute of investment clubs — and it can be like going to battle versus Rommel with Patton in your pocket.

“You magnificent bastard. I read your book!”

And the book demands an emphasis and understanding of:

  • Growth (Long-term trend)
  • Profitability (Net Margins & Return-On-Equity)
  • Valuation (P/E Ratios and where necessary, things like Price-to-Cash Flow)

So every week we update 1/13th of all the stocks we cover at Manifest Investing. That update includes a vigilant check on three basic components … growth characteristics, profitability trends and P/E considerations including life cycle and company quality.

Every week is a snapshot … and you’re invited to take this walk with us. Every week, we’ll take a look at some specific companies. We’re more likely to pay more attention to the most widely-followed companies that command the attention and intention of our community of like-minded long-term investors. Because it makes sense to do so. At the same time, we’re vigilant for promising opportunity and future leaders.

I was updating some macro market barometers recently and was reminded — fairly powerfully — of one of the major tenets of the philosophy we embrace and implement. I am referring to the urgency of all-of-the-above investing … maintaining a sufficient balance of small, medium and larger companies with an overall growth forecast that is suitably high enough. We seek a blend with an overall average growth forecast of 10-12%. As an investor, you CAN’T do this without blending in some promising smaller companies along the way.

Here’s the barometer. I’ll start with the bottom line. This is barometer that tracks the long-term trends of New Highs vs. New Lows is part of our aggregate barometer that can be used to guide asset allocation. Current status? Many stocks are overvalued or overbought … a condition that can persist for years. But this indicator suggests, “Keep doing what you’re doing. Accumulate high-quality stocks when their return forecasts are sufficient. Based on some of the other barometers, it makes sense to ratchet overall quality higher and for those practicing asset allocation, it could make sense to shop diligently and patiently and it’s OK for proceeds-of-any-sales to reside in cash equivalents until your shopping bears fruit and opportunity.”

Can You Spot The Difference? And another look … same chart. What’s different?

The top chart provides a comparison in the background with the S&P 500 (SPX) … a collection of large companies. The bottom chart provides a similar comparison using the Value Line Arithmetic Average ($VLE) index … an equally weighted construction of small, medium and large companies.

This all-of-the-above blend delivers more growth — a characteristic that Nicholson and David L. Babson regarded as a self-correcting mechanism, and opportunity for long-term investors.

The 20-year annualized return for the S&P 500 (VFINX) is 9.1%.

The 20-year annualized return for the Value Line 1700 ($VLE) is 12.0%.

The difference, from a long-term perspective, is MASSIVE.

Companies of Interest

Materially Stronger: TBD

Materially Weaker: TBD

Morningstar Price-to-Fair Value Screen.

S&P Price-to-Fair Value Screen.

Market Barometers

The median Value Line low total return forecast is 2.7%, down from 2.8% last week. This indicator has ranged from low single digits to approximately 20%. The relatively low levels suggest/urge more caution and selectivity — particularly with respect to quality. Lower quality stocks are generally punished the most during corrections and recessions.

We repeat that stocks, sectors and markets can remain overbought (RSI > 70) for extended periods. But price momentum (ROC) still persists.

Morningstar: Market Fair Value. What does it mean? Is the market cheap or expensive? The chart above tells the story based on Morningstar’s fair value estimates for individual stock. The graph shows the ratio price to fair value for the median stock in the selected coverage universe over time.

Same chart as the Introduction. Bottom line: the important aspect is the 12-month trailing trend near long-term highs. Low interest rates, QE, sideline cash, and retirement plan injections are probably supporting demand for stocks.

Starting Gate Harbinger?


Starting Gate Harbinger? Does market performance early in the calendar year portend anything about expectations for the full year? Not so much … 2014 checks in at -0.09% through 1/10/2014, a path to high single digit returns for this year?

There’s some discussion that the market trends during the early part of January can be an indication of what to expect from the rest of the year.

Here’s a look at a plot of the market performance from January 1st through the 10th versus the year-end results from 1991-2013. There’s a lot of scatter and the most that can be said is that there does appear to be a “general tendency.”

2014? On 1/10/2014, we were at -0.09% … suggesting high single digits for the year according to this. But we’ve seen anywhere from -20% to +30%.

Pick good stocks when they’re on sale. Rinse. Repeat.

Wall Street Walking: 2014 Challenge

And that walk is anything but random.

It’s the kind of walk you take after rolling out of bed, rejuvenated while practicing prudent and effective sleep-at-night investing. This morning Eddy Elfenbein rolled out for the SEVENTH consecutive New Year’s Day after watching his 20 Buy List stocks outperform the S&P 500 over the trailing year. Seven years in a row. How many funds have outperformed the S&P 500 every single year over that time frame?

Nada. Zilch. Eddy is officially an outlier.

Here’s the Final Scoreboard for 2013:

Eddy’s Crossing Wall Street “Buy List for 2013”: checks in with an overall performance for 2013 of 38.4%. We’ll be digging deeper into the landscape over the next few days, but suffice to say … beating the S&P’s 31.5% for 2013 wasn’t a walk in the park.

You can find Eddy’s commentary on the 2013 achievers here.

Our entries fared well also … the Expecting Alpha 20 crossed the finish line at 35.3% and our Walking Main Street collection came close at 27.6%. Keep in mind that the universe for Walking Main Street is our MANIFEST 40 — choosing the (20) best positioned stocks for the year. They’re higher quality and widely-followed by our community of long-term investors … and a little susceptible to the flaky stock madness where the lower quality stocks outperformed the bluest of the blue chips in 2013. Eddy’s 20 and our Expecting Alpha 20 are at least sniffing around in a bigger pool of stocks … accessing some of those expanding and promising opportunities.

Out With The Old, In With The 2014 Selections

Eddy’s 2014 Buy List, as always — is a low turnover (no changes permitted during the calendar year) — collection of 20 stocks. They’re predominantly core stocks with a few special situations. Our tracking dashboard for Eddy’s 2014 Buy List is available here:

Crossing Wall Street: 2014 Buy List

We sleep pretty well too. We’ll add our (20) selections from the MANIFEST 40 and our Expecting Alpha 20 for 2014 soon.

Rose Bowl Memories


This year’s Rose Bowl features a couple of teams from geographies chock full of Manifest Investing participants. And in our house, a special place for a Michigan State grad creates more than a little bias.

If you’ve ever been to the pageant and gala, you know what I mean. It’s a wonderful day and when the weather cooperates, it’s spectacular.

But my favorite memory involves the Fighting Illini and the USC Trojans. My friend, Kelly Mace, and I spent several hours meandering the grounds before the game. There are party tents, tail gates, sponsor and alumni gatherings … all blended on the grounds of park and golf course surrounding the stadium.

But the moment is priceless. A group of Trojan fans dumped a cooler of beverages and ice as they made their way to their celebration location. After a prolonged moment of standing there gnashing teeth, etc. a couple of University of Illinois students approached them.

“Step back.” “We got this.” “We have a whole lot more experience handling this icy stuff than any of you do.”

“You’re welcome.” “Enjoy the game.” “The probability that you will enjoy the game more than us is not something we’re all that comfortable with …”

Kelly and I smiled as we watched these good Samaritans save the moment, restoring the beverages and coolant — and heading off to their own celebration.

“We never had a chance to thank them … and they were gone.”

And they were right about the game … for Illinois fans.