Get Me Through December … & Beyond

This Week at MANIFEST (12/28/2018)

“Patience is genius in disguise.” — Various, including Hugh McManus

“A 10% decline in the market is fairly common—it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefiting from the wealth building power of stocks.” — Christopher Davis

“You make most of your money in a bear market, you just don’t realize it at the time.” — Shelby Cullom Davis

“A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

““Is value investing dead? I don’t know. I don’t care. I don’t know when we will know. What I do know is that Warren Buffett says that growth investing and value investing are actually joined at the hip. (Tom O’Hara said this, too.) Valuation Investing is the blend of growth and value investing.” — Joel Greenblatt

Get Me Through December?

Eddy Elfenbein shared the unpleasantness update in this week’s Market Review at

The numbers are remarkable. On Thursday, the S&P 500 closed at its lowest level in 15 months. In the last 12 trading sessions, the S&P 500 has lost 11.6%. The details are even uglier. Within the index, 423 stocks are now trading below their 200-day moving average. On Thursday, new lows beat new highs 175-0.

20 Years With The Value Line Arithmetic Average ($VLE). Some context. We’ve seen similar moments like this before. But there’s no denying that the December “candlestick” is in a league of its own … rare company. We’re approaching long-term “Oversold” conditions as suggested by the relative strength index (RSI) nearing 30 and relative long-term lows. We’re reminded that the trailing 52-week returns have dipped sub-zero a few times in the last few years — so this should not be regarded as something new or unusual.

Manifest Investing Median Return Forecast (MIPAR). It’s clear that the median (basically average) return forecast for the 2300-2400 companies in our coverage universe have SUDDENLY shifted to new levels due to the price drop. This could also happen from a breach of fundamentals — but that is NOT the case, here … at least not yet. Return forecasts are now at levels we haven’t seen since 2008-2009.


Beyond December — A Hope For Fewer Potholes …

My take on all of this carnage? It’s different this time.

Yes, I said the words.

Bear markets and corrections are pretty unique despite all of our attempts to slap historical price chart overlays and compare factors, etc. The simple truth is that (1) the sample size will never be statistically sufficient for any material conclusions to be reached. [Yet the Rhinos will continue to try. Smile and nod at them.] (2) Markets are not rational.

Current conditions definitely qualify for a sedative or something stronger.

Look no further than the accompanying weekly chart of the Value Line Low Total Return Forecast to see how sudden the current price correction has been. We’ve not seen a change with this velocity or ferocity since 2008. You remember, right? With Christmas carols humming in the background, recall the names Bear Stearns, Lehman, Merrill Lynch and things like credit default swaps and neighbor’s houses in foreclosure.

Yes, there’s a mountain of uncertainty and an abyss of incivility inside the Beltway and a President who’s certainly disruptive. But the core problem with the status is virtually unchanged — ALL of the political posers persist in patching or ignoring potholes (healthcare, immigration, infrastructure, federal capital structure, failed nation building, sloped international trade playing fields, the ostriches and lobbyists related to real capital markets reform, etc.). The hypocrisy is gut wrenchingly prevalent.

I think the stock market is legitimately tired of the perpetual motion of Congressional Kick The Can Down The Road — and corporations are suddenly much more guarded about faith in consistency and less optimistic that the moving targets have abated. As the foot comes off the accelerator and taps the brakes (again) we might return to the recessionary conditions of 2015-2016. Much of the globe is already headed there.

Unattended potholes become sinkholes.

Like snowflakes, it’s different this time. It’s always different. Trying to allocate assets or imagine outcomes based on historical models (even when powered by artificial intelligence) is a neural niblick.

So we turn to a constant. A constant that survived and thrived through the 1970s, 1987, 1994, Y2K and the gasping throes of 2008-2009. That constant is to eschew the chaos. Focus on what matters. Simply put, INVEST BETTER.

We accept that markets are not rational. We refuse to be surprised when they convulse.

We take the words of Warren Buffett quite seriously when he longs for corrective opportunities “a few more times during his investing lifetime” and speaks unflinchingly of tracking excellent companies and waiting for them to be available at attractive prices.

I believe one of those moments may have arrived. We don’t often make “market calls” but we did write about back-up-the-truck moments back in November 2008 (a wee bit early) and March 2009 (squarely in the bullseye). This could be another Buffett Bonanza.

So … we think it’s prudent to do what we’ve done for DECADES. Discover excellent companies, BETTER COMPANIES. Buy those that are priced well. BETTER PRICES FOR BETTER RETURNS.

Hugh McManus likes patience and its genius-making potential. He also likes excellent companies trading near their 52-week or multi-year lows. We’re thinking Hugh must be beside his Irish self these days and hope to hear from him during next weekend’s Round Table. Ken Kavula is sure to be swimming in the pool of sudden small company opportunity. Cy Lynch is likely to admire the latest bear market which will become a future blip. Rest assured that we’ll be more focused on the long term perspective than any pusillanimous politicians and their potholes, meandering Rhinos or any of those annoying talking heads who focus on “how much your 401(k) LOST since breakfast today.”

We promise to remain focused on the discovery and sharing of the best ideas — the opportunities we’ve known for decades as BETTER COMPANIES at BETTER PRICES.

Merry Christmas to our favorite nation of focused and compassionate investors!

Best Small Companies (2019 Dashboard)

The status of the 2019 Best Small Companies can be tracked at:

MANIFEST 40 Updates

  • 1. Apple (AAPL)
  • 23. Skyworks Solutions (SWKS)
  • 26. Intel (INTC)

Round Table Stocks

  • Apple (AAPL)
  • IPG Photonics (IPGP)
  • MKS Instruments (MKSI)
  • Skyworks Solutions (SWKS)
  • Universal Display (OLED)

Round Table Sessions (Video Archives)

Turnout Tuesday Educational Sessions

Results, Remarks & References

Companies of Interest: Value Line (12/28/2018)

The median Value Line low total return forecast for the companies in this week’s update batch is 12.3% vs. 10.8% for the Value Line 1700 ($VLE).

Materially Stronger: Vishay Intertechnology (VSH), Office Depot (ODP), Kemet (KEM)

Materially Weaker: TTM Technologies (TTMI), Diebold Nixdorf (DBD), Western Digital (WDC), Plantronics (PLT), STMicroelectronics (STM), Micron Technology (MU), Cirrus Logic (CRUS), Lattice Semiconductor (LSCC), Celestica (CLS), 3D Systems (DDD)

Discontinued: Spectra Energy Partners (SEP)

Market Barometers

The thing very few people tell you about “overvalued” markets is that, occasionally, the fundamentals arrive to justify them. — Joshua Brown

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 10.8%, increasing from 8.5% 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.

50 Best Small Companies (2015)

This Week at MANIFEST

It’s a busy week — starting with closing out our selections for the Manifest Investing Best Small Company list … to the rescheduled Round Table on Tuesday night … to spending some quality time with friends in Seattle at their annual conference for long-term investors.

A couple of weeks ago, we were advised by Forbes that there would be no 37th Annual List of Best Small Companies. So, after 36 years and the reality that this list has provided a number of actionable and rewarding situations over the last 20 years or so, we’re left to hope that it’s a one year hiatus. The Forbes list has always been a favorite and we’ve reminded investors to “trick or treat” around Halloween every year. “It was a sad day in the Kavula household.” — Ken Kavula.

So — while remaining relatively faithful to the Forbes methodology — we decided to generate our own. We’ll do a full narrative and feature this as our cover story for November, but for now, here are the highlights and the 50 Best Small Companies by Manifest Investing.



  • SMALL Annual Revenues less than ONE BILLION
  • Sales growth >= 10%
  • Annual Revenues > $50 million
  • Stock Price > $5
  • BEST Ranked by Highest Quality (Percentile ranked composite of Financial Strength, EPS Stability and relative Sales Growth Forecast and Profitability)
  • No Asset-Based Business from Financial Sector

Published Dashboard for 50 Companies:

Manifest Investing 50 Best Small Companies (As Inspired by Forbes)

Red October: Forbes Best Small Cos (2013)

It’s that time of year again. Red October. Some people refer to small company stocks as Red Chips and we take our annual look at one of our favorite shopping lists — a tradition that has bagged a number of extremely rewarding investments over the years.

Forbes is out with their annual list of spooky small companies, the Best Small Companies for 2013.

This year’s headliner is Questcor Pharmaceuticals (QCOR). Questcor is among eleven healthcare companies in this year’s list. Acthar is the company’s main drug, used in the treatment of multiple sclerosis, infantile spasms and rheumatic disorders. The drug accounted for the bulk of QCOR’s annual sales total.

The companies featured at the top of Forbes list are:

1. Questcor Pharma (QCOR)
2. Grand Canyon Education (LOPE)
3. Proto Labs (PRLB)
4. Invensense (INVN)
5. Sturm, Ruger (RGR)

We’ll audit, confirm, study and whittle the list down to identify our favorites and see how they compare.

But these potential future titans don’t have to be scary. As we’ve hunted down buying opportunities from this annual listing over the last several years, we’ve discovered that the best returns tend to come from the entrants with the highest quality ratings.

Dashboards Past

We obviously still like to talk about the companies featured in 2008. These are the selections we bring up at the hair salon or barber shop. There are lessons to be learned (and celebrated) in companies like Neogen (2006), DXP Enterprises (2007), Stratasys (2008), Middleby (2008), Dril-Quip (2008), Boston Beer (2008), Bio-Reference Labs (2008 & 2011), Buffalo Wild Wings (2007-2011), Carbo Ceramics (2012), FactSet Research (2008), Mesa Labs (2012), NIC (2012), Peet’s Coffee (2009), Portfolio Recovery (2007,2010-2011), SolarWinds (2011) and SS&C Technologies (2012).

We note that Bio-Reference Labs (BRLI) is now the second most widely-followed company by MANIFEST subscribers, having first appeared on this list back in 2008.

It’s interesting to see Grand Canyon Education (LOPE) near the top of the list because of the damage done by the likes of from the educational services stocks like Strayer and Capella in recent years … and Quality Systems (2006-2008,2010-2011) — a multiple selection that’s done considerable damage to the all-time results.

It’s been a good year for our Forbes Best Small Company tracking portfolios. All in all, the outperformance accuracy is 51.4% and the relative return since 2006 is +2.3% (17.4% vs. 15.1%).

Halloween: Our Cue To Haunt Some Studies

Ken Kavula noticed that Forbes had released the 2013 listing earlier this week. I hope you’re not surprised that Ken is all over this as one of our favorite small company advocates.

So we start whittling with all 100 thanks to Ken:

We’ll require a minimum growth forecast of at least 10%, a quality ranking of 80 or better, and a return forecast greater than 11%. The screening results will be maintained here:

Here’s the results of auditing the 100 candidates … a short list of companies with small company growth characteristics, exceptional quality … that appear to be attractively priced.

The difference between tricks and treats? Quality.