Decidedly Older Stocks to Study

This Week at MANIFEST (5/27/2016)

“Decidedly older.” (Women)

The scene was the Better Investing national convention last weekend in Chantilly, Virginia. It was the last session of the conference. The words rang out during Ken Kavula’s presentation of Ulta Salons (ULTA) as his shared stock idea for the May Round Table. He was — of course — talking about the differential between his teenage granddaughters and some of the “more experienced” clientele that may linger longer in the salon portion of the establishment. Sitting directly on Ken’s right (and within elbowing distance) frequent guest damsel Kim Butcher reacted immediately. “Decidedly older??? I’m fairly certain, Ken, that NONE of us ever want to be referred to as ‘decidedly older’ [Ken was probably grateful that his spouse, Natalie, was not in the room, too.]” The audience roared a second.

“Women, traditionally, become the subjects and objects of other people’s lives.” — Jane Fonda

And for that, we’re infinitely thankful.

Those words are from a TedX speech by Jane Fonda, delivered back in 2011 on the subject of “Life’s Third Act.” It features a perspective on longevity, aging and the shift to living longer and contributing more substantially during our last 30 years on the planet. If you liked Jane in her role on The Newsroom, you’ll probably like these 10-12 minutes via TedX.

The audience at the BI national convention is still not getting younger from a demographics perspective. That said, I’d argue that the shift described by Fonda has been a work in progress for some time and that investment clubs and individual investors have indeed been transforming for a few years. We’re witnessing the transformation of rote methods into deeper understanding and in so many cases, pervasive market beating performance over decades. The Super Investor session that I delivered in Chantilly (Beltway Super Investors) featuring Eddy Elfenbein, David Gardner and a slipstream sample of investment club leaders was very well received and we’ll do more.

Ken and I (and many of you) make “coaching club visits” to a fairly large number of clubs. We’ve witnessed an evolutionary shift. Few clubs make some of the traditional mistakes and the portfolios we see are better designed, better positioned and better maintained. So many clubs embrace our efforts at interpretation, innovation and implementation of the delightfully few things that really matter and we’re grateful for this evolving simplicity … and the results we observe.

During a few moments with some decidedly experienced investors in Chantilly, we were encouraged to keep seeking the foundations of Nicholson’s vision. Some observed that the Nicholson moments we reinforced back at the national convention in Chicago a few years were landmark. And most welcome. We were encouraged to do more. A dear friend who knew Nicholson well urged us to continue to re-discover and reinforce … Press on.

The modern investment club movement is less obvious at a time when it’s probably needed the most. Diebold is back to 98% institutional ownership from the 54% it achieved less than ten years ago. It’s enormously challenging to engage the interest of most people, most young people, and even most decidedly older people in ownership of individual common stocks. (By the way, RPM presented at the conference and appears to be stronger than ever)

I think Jane Fonda is right, an opportunity lies ahead. In her words (with a dash of paraphrasing) …

“Circle back to where we started — and know it for the first time. We could be a necessary cultural shift in the world.”

Inspire younger generations to optimize and maximize their investing experience.

Be decidedly older. Do it well.

MANIFEST 40 Updates

  • 11. FactSet Research (FDS)
  • 30. Starbucks (SBUX)
  • 32. Buffalo Wild Wings (BWLD)

Round Table Stocks: Buffalo Wild Wings (BWLD), C.H. Robinson (CHRW), Copa Holdings (CPA), Forward Air (FWRD), Knight Transportation (KNX), Maximus (MMS), McDonald’s (MCD), Panera Bread (PNRA), S&P Global (SPGI), Stericycle (SRCL), Waste Connections (WCN)

Results, Remarks & References

Companies of Interest: Value Line (5/27/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 6.3% vs. 5.6% for the Value Line 1700 ($VLE).

Materially Stronger: Iron Mountain (IRM), Texas Roadhouse (TXRH), Sonic (SONC), Forrester Research (FORR), Equifax (EFX), Darden Restaurants (DRI), Domino’s Pizza (DPZ)

Materially Weaker: Teekay (TK), Frontline (FRO), Calgon Carbon (CCC), American Railcar (ARII)

Discontinued:

Coverage Initiated/Restored:

Market Barometers

Value Line Low Total Return (VLLTR) Forecast. The long-term low total return forecast for the 1700 companies featured in the Value Line Investment Survey is 5.6%, unchanged from last week. For context, this indicator has ranged from low single digits (when stocks are generally overvalued) to approximately 20% when stocks are in the teeth of bear markets like 2008-2009.

Stocks to Study (5/27/2016)

  • Maximus (MMS) — Highest MANIFEST Rank
  • Ruby Tuesday (RT) — Highest Low Return Forecast (VL)
  • Stericycle (SRCL) — Lowest P/FV (Morningstar)
  • Delta Airlines (DAL) —Lowest P/FV (S&P)
  • Golar LNG (GLNG) — Best 1-Yr Outlook (ACE)
  • Delta Airlines (DAL) — Best 1-Yr Outlook (S&P)
  • Buffalo Wild Wings (BWLD) — Best 1-Yr Outlook (GS)

The Long & Short of This Week’s Update Batch

The Long & Short. (May 27, 2016) 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” Outlook: 1-year total return forecast based on most recent price target issued by Goldman Sachs.

BI National Convention Nudges

Let’s Talk Stocks Panel

The 65th annual Better Investing National Convention got underway Thursday evening with snapshot discussions of stock ideas — a tradition that now dates back several years to Ken Kavula’s nudge at the 2008 convention in Chicago. Serving on last night’s panel were some familiar and respected long-term investors from across the country: Kim Butcher, Ann Cuneaz, Pat Donnelly, Cy Lynch, Ken Kavula and Mark Robertson. In something resembling lightning round fashion (but not covering nearly as many stocks as we did in Chicago in 2008 … more on that in a minute) the following stocks were nudged:

  • CarMax (KMX)
  • First Bancshares (FBMS)
  • Gentex (GNTX)
  • Inteliquent (IQNT)
  • Maximus (MMS)
  • MedNax (MD)
  • Simulations Plus (SLP)
  • Under Armor (UA)
  • Veeva (VEEV)
  • Walker & Dunlop (WD)
  • Wyndham Worldwide (WYN)
  • Where Food Comes From (WFCF)

This dashboard is public and is available to view at:
https://www.manifestinvesting.com/dashboards/public/binc-2016-stocktalk

Schaumburg/Chicago … Looking Back

The Let’s Talk Stock panel selected many more stocks back in 2008 and it’s worth looking back over the last eight years to see how we did.

Five of the companies were acquired — all of them at premiums, some of them quite lofty. Hugh McManus was responsible for a few of these market crushers, and many of us remember Genentech (DNA) fondly.

18-of-the-34 selections beat the Wilshire 5000 and the current annualized total return on the surviving 29 companies is 9.5%.

The Chicago 2008 tracking dashboard is available at: https://www.manifestinvesting.com/dashboards/public/binc-2008-stocktalk

Chicago 29 dash 20160520

This Week: Stocks to Study

This Week at MANIFEST (5/20/2016)

“If you are not willing to learn, no one can help you. If you are determined to learn, no one can stop you.”

We gather. The convention serves a unique purpose. Because connecting investors can prove to be the most valuable resource imaginable for individual investors. In that context, the national convention becomes a true investment club — centered on sharing and discovering actionable ideas and pursuing successful investing, together.

During the current Book Club review of Peter Lynch’s Beating The Street, Hugh McManus mentioned the special session with Peter Lynch at the 1998 NAIC national convention in San Jose. Lynch reviewed many of the key points covered in the book during his speech. This reference inspired me to track down a copy of Smart Money from January 1999 where Emily Harrison Ginsburg provided a story on the heritage of NAIC via Thomas O’Hara. I thought Emily mentioned Peter Lynch in the article, but on further review, I found that she hadn’t. If you’re new to the investment club movement or simply want to go on a nostalgic binge, the Smart Money feature can be found here.

MANIFEST 40 Updates

Round Table Stocks: Caterpillar (CAT), Deere (DE), Illumina (ILMN), Landauer (LDR), Masimo (MASI), Stryker

Results, Remarks & References

Companies of Interest: Value Line (5/20/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 4.2% vs. 5.6% for the Value Line 1700 ($VLE).

Materially Stronger: Honda Motors (HMC), Nissan Motor (NSANY.PK), II-VI (IIVI), Edwards Lifesciences (EW), Baxter (BAX), Bruker (BRKR)

Materially Weaker: Manitowoc (MTW), OSI Systems (OSIS), Navistar (NAV), Fiat Chrysler (FCAU), Haemonetics (HAE), Douglas Dynamics (PLOW), Terex (TEX), Actuant (ATU)

Discontinued: Newport (NEWP), Affymetrix (AFFX), Sirona Dental (SIRO)

Coverage Initiated/Restored:

Market Barometers

Value Line Low Total Return (VLLTR) Forecast. The long-term low total return forecast for the 1700 companies featured in the Value Line Investment Survey is 5.6%, up from 5.4% last week. For context, this indicator has ranged from low single digits (when stocks are generally overvalued) to approximately 20% when stocks are in the teeth of bear markets like 2008-2009.

Stocks to Study (5/20/2016)

  • Illumina (ILMN) — Highest MANIFEST Rank
  • Honda Motor (HMC) — Highest Low Return Forecast (VL)
  • Fiat Chrysler (FCAU) — Lowest P/FV (Morningstar)
  • Honda Motor (HMC) —Lowest P/FV (S&P)
  • Cutera (CUTR) — Best 1-Yr Outlook (ACE)
  • General Motors (GM) — Best 1-Yr Outlook (S&P)
  • Alere (ALR) — Best 1-Yr Outlook (GS)

The Long & Short of This Week’s Update Batch

The Long & Short. (May 20, 2016) 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” Outlook: 1-year total return forecast based on most recent price target issued by Goldman Sachs.

May Round Table May 22, 2016 at 11 AM ET ONLINE

Stocks Featured: TBD

The Round Table tracking portfolio has beaten the market by 3-4 percentage points over the last five years. Consider joining Ken Kavula, Cy Lynch and Mark Robertson as they share their current favorite stock study ideas.

The May session will be simulcast from the NAIC Better Investing national convention near Washington D.C.

Round Table Online Registration: https://attendee.gotowebinar.com/register/8401811825391796481

Various attendance options — including single day passes — are available if you’re interested in attending the BI National Convention and the Round Table “live”: 2016 BI National Convention

Market Barometers (Continued)

Watching Rhino Walk, Not Rhino Talk. If you believe supply-and-demand matters (and you should) then the collective actions of the herd have bearing. By monitoring the relationship of new highs vs. new lows, we get an early warning clarion that signaled as Halloween 2007 approached. Current $USHL has recovered somewhat from the “test” a few months ago.

Context Among Chaos

Achieving and documenting incrementally higher returns.  It matters.  The power and potential are significant.  In a brief discussion with an investment industry colleague yesterday, we lamented the charlatans and carnival barkers in the investment arena who soap box about spectacular returns.  All the while, a skeptical investing nation yawns when somebody like David Gardner beats the market by 710 basis points (+7.1%) over 14 years of investing.  The challenge is (1) capturing the attention of seekers with numbers like 15% when the barkers are howling things like “81% guaranteed” and (2) educating the masses about the impact of years and a few extra percentage points vividly on display in the Schlossian graphic below.

We’ll be looking at a few of our demonstration portfolios as we did for David Gardner’s RuleBreakers, but for now, we’ll simply observe that the MANIFEST 40 has 10.6 years under its belt with an annualized total return of 9.0% and a relative (excess) return of +3.6%

Feel free to participate in a collective pat on the back in consideration of the performance of your most widely-followed stocks.

This slide from this weekend’s Super Investor presentation underscores and hammers home the powerful potential behind achieving a an extra percentage point advantage or two … and why — as a community of investors — we aim for +5%.

Schloss 39 years