Building Castles of Sand

Building Castles of Sand in The Great Valley

Something To Believe In (REPRINTED FROM BETTER INVESTING, OCTOBER 2002)

by Mark Robertson, Senior Contributing Editor

Few things are more contagious than emotions. One of our biggest challenges is to prevent emotions from clouding long-term perspectives. I believe that core fundamental growth and profitability is intact and that the assumptions and judgments that we make during our stock studies do not require massive adjustment. Long-term growth expectations may be slightly subdued but the impact probably isn’t all that material. If you believe as I do, then it follows naturally that some excellent companies are available at reasonable prices.

The events of a certain bright September morning brought us to our knees. Those memories will never leave us.

Our awareness of the passage of time was, at least temporarily, altered. Where days were once blurs and years and decades somewhat-defined horizons, instead the long term became blurred. In sharp contrast, the daily images burst forth in crystal clarity. Fear took on a precise nature.

The damage became even more pervasive as an already weakened economy mightily struggled to regain its balance. The effort proved futile. First one, then another supposed paragon was exposed. Confidence was breached. Fiduciary faith is one of the more fragile varieties. Only the passage of time combined with an uninterrupted demonstration of credibility and reason will restore consumer confidence to necessary levels.

Trust is still the biggest component of any P/E ratio.

Our National [Convention] and Bricks

Better Investing for Better Living.

Our theme is timeless and in many ways, immune to the challenges of this past year — so long as the long-term perspective is maintained.

NAIC co-founder and Chairman Emeritus Thomas O’Hara reminds us: “Times like these are when it is most challenging to capture the attention of would-be investors.” The distraction of a bear market is unfortunate. These times are also the best time to start (or augment) a lifetime program of strategic long-term investing.

A friend once commented that during market breaks, it seemed like his best clients would throw bricks through his office window. He didn’t mind the shattered glass so much. (After all, we build castles from sand.) But what he really wishes is that they would tie a few dollars to the brick before launching it. Then he would be enabled to invest on their behalf — in excellent companies, at good prices — when it was easier to do so.

Faith and Castles of Sand

Can faith be restored? In the Disney movie, “Land Before Time,” the main character is an adolescent dinosaur named Little Foot. During a pilgrimage to a so-called Great Valley, a land of plentiful green plants and fresh bodies of water, Little Foot’s mother is injured while protecting the herd from predators. With her last breath, she points Little Foot in the right direction and urges him to lean on faith. When Little Foot asks his mother exactly what faith is, she provides one of the best definitions of faith I’ve ever heard: “Some things you see with your eyes. Faith is when you see things with your heart.”

The preservation of faith and corporate credibility is an overwhelming responsibility. The actions of a few have grievously undermined confidence. Cardiac vision has been blinded and the moral melee has become a maelstrom. Seeing every single corporate [data point] has never been what [our investing method] is all about and I hope it never will be. This circus will be over when an executive can talk to us without inhibition. That day will come.

We will indeed return to building castles by the sea with the knowledge that tides, erosive winds and castle-smashing vandals are a fact of life. Sand castles are naturally swept away. Sand-castle virtues are precious and deserve better respect.

Fave Five (6/9/2017)

Fave Five (6/9/2017)

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 average 1-year ACE total return forecast is 9.8%.

The Fave Five This Week

  • Akamai Technologies (AKAM)
  • Bank of the Internet (BOFI)
  • Finisar (FNSR)
  • Monro Muffler (MNRO)
  • Tractor Supply (TSCO)

The Long and Short of This Week’s Fave Five

The Long & Short. (June 9, 2017) 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.

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +1.1% since inception. 42.7% of selections have outperformed the Wilshire 5000 since original selection.

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

Fave Five (6/2/2017)

Fave Five (6/2/2017)

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 average 1-year ACE total return forecast is 9.7%.

The Fave Five This Week

  • Akamai Technologies (AKAM)
  • Bank of the Internet (BOFI)
  • FleetCor Technologies (FLT)
  • Tractor Supply (TSCO)
  • Western Gas Partners (WES)

The Long and Short of This Week’s Fave Five

The Long & Short. (June 2, 2017) 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.

Fave Five Legacy (Tracking Portfolio)

The relative/excess return for the Fave Five tracking portfolio is +1.1% since inception. 44.9% of selections have outperformed the Wilshire 5000 since original selection.

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

Sell Michael Kors (KORS)

KORS has now dropped more than 20% more than the market (Wilshire 5000, VTSMX) since it was added via the Fave Five on 1/19/2017.

Kors relative return 20170602

Hot Seat: Deckers Outdoors (DECK)

Deckers (DECK) has performed very well since selection back on 10/27/2016, beating the Wilshire 5000 by +27.3% but it lands on the “hot seat” by virtue of its torrid performance.

Fave five worksheet 20170601

The decision is made “to take the money and run” and sell Deckers (DECK) based on this audit of current conditions.

Deck analysis 20170601