Fave Five (7/14/2017): Triple Play

Fave Five (7/14/2017)

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%.

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 Fave Five This Week

  • IMAX (IMAX)
  • Monro Muffler (MNRO)
  • O’Reilly Automotive (ORLY)
  • Ross Stores (ROST)
  • Tractor Supply (TSCO)

The Long and Short of This Week’s Fave Five

The Long & Short. (July 14, 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 rate of return for the tracking portfolio is 15.6% since inception.

The relative/excess return for the Fave Five tracking portfolio is +0.8% since inception. 46.2% of selections have outperformed the Wilshire 5000 since original selection.

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

Portfolio Design: Building Bridges

The Art & Science of Portfolio Design

by Mark Robertson, Better Investing, August 2002

Building Bridges

“It still holds true that man is most uniquely human when he turns obstacles into opportunities.” — Eric Hoffer (1902-83), U.S. philosopher. Reflections on the Human Condition.

Portfolio design. Art or science? Or both? We build our portfolios with the expectation they’ll bridge to desired outcomes and financial independence. Perhaps visionary artist, scientist and Renaissance Man Leonardo da Vinci can inspire some insights on portfolio design?

The term renaissance literally means “rebirth” and was first used in 1855 by French historian Jules Michelet. The Renaissance was a period of intellectual revival, roughly from the 14th through the 16th century, and marked the transition from medieval to modern times. This period is regarded as a time of intellectual ferment that laid the foundation for future progress.

Some historians suggest the Renaissance was indeed the birth of modern humanity after a long period of decay. Modern scholars have since debunked the idea that the Middle Ages were dark and dormant.

Parallels to Our Current Stock Market?

The last two years have not been kind to investors. It’s a massive challenge to find solace in returns that haven’t receded as much as the market in general. Declines are still that — declines. In some ways, the decline of the last two years has been more severe than what was experienced in 1973-74. Experienced investors often describe their 1970’s experience as a sort of investing dark ages. The high inflation rates and recessionary conditions must have seemed interminable at the time.

But [our community of] investors who have “been there” seem to focus on something completely different. During a recent presentation in Cleveland, a gentleman used our question-and-answer session to share how everything he did during the 1970s — a systematic implementation of buying good companies at good prices — was merely the launch pad for what happened in the 1980s and 1990s. Thomas O’Hara speaks of the period in the same tone of voice and same life experience.

Some would have us believe we’re at the doorstep of another dark age. The last two years are their evidence. I believe the renaissance of American enterprise that ignited during the 1980s and caught fire during the 1990s is merely pausing to catch its breath.

Unleashing Leonardo — 500 Years Later

In 1502 da Vinci proposed building one of the largest bridges in the world for the ruler of the Ottoman Empire.The Sultan wished to span the Golden Horn, an inlet between the Turkish cities of Pera and today’s city of Istanbul. To the astonishment of the Ottoman court, the proposed design took the form of a giant arch. After conferring with advisers, the sultan responded with what seemed like commonsense — an arch that big would collapse in the middle. He declined the proposal.

In his book, How to Think Like Leonardo da Vinci, Michael J. Gelb shares his perspective on seven principles drawn from a study of the man and his methods. The first principle is Curiosita — an insatiably curious approach to life and an unrelenting quest for continuous learning.

Portfolio Design

The elements of portfolio design are the continuous selection (and accumulation) of quality companies and the continuous development of expected returns for the holdings that serve as our bridges. Be continuously curious.

Fave Five (7/7/2017)

Fave Five (7/7/2017)

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

  • Bank of the Internet (BOFI)
  • General Electric (GE)
  • IMAX (IMAX)
  • Monro Muffler (MNRO)
  • Tractor Supply (TSCO)

The Long and Short of This Week’s Fave Five

The Long & Short. (June 23, 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 +0.2% since inception. 44.8% of selections have outperformed the Wilshire 5000 since original selection. The absolute annualized rate of return is 13.9%.

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

Fave Five (6/30/2017) Triple Play

Fave Five (6/30/2017)

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%.

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 Fave Five This Week

  • CVS Health (CVS)
  • Gentex (GNTX)
  • IMAX (IMAX)
  • Infosys Tech (INFY)
  • Monro Muffler (MNRO)

The Long and Short of This Week’s Fave Five

The Long & Short. (June 30, 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 rate of return for the tracking portfolio is 15.2% since inception.

The relative/excess return for the Fave Five tracking portfolio is +0.2% since inception. 45.7% of selections have outperformed the Wilshire 5000 since original selection.

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

Fave Five (6/23/2017)

Fave Five (6/23/2017)

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

  • Bank of the Internet (BOFI)
  • FleetCor Technologies (FLT)
  • Monro Muffler (MNRO)
  • Penske Auto Group (PAG)
  • Tractor Supply (TSCO)

The Long and Short of This Week’s Fave Five

The Long & Short. (June 23, 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 +0.2% since inception. 45.9% of selections have outperformed the Wilshire 5000 since original selection. The absolute annualized rate of return is 15.3%.

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

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