The Challenge Club voted to accumulate Qualcomm (QCOM) and to buy Echo Global Logistics (ECHO) during the March session.
Financial Results
The unit value for the Challenge Club is $24.31, up +2.1% from last month ($23.80). The Wilshire 5000 is up +3.3% over the last thirty days.
Since inception (1999), the annualized total return for the Challenge Club is 6.8% — with an annualized relative return checking in at +3.1%.
Sorting by Return Forecast (PAR) & Sweet Spot Analysis
With MIPAR at 6.8% — the target for the overall portfolio PAR is 11.8-16.8%.
This range serves a dual purpose as it’s also the sweet spot for individual stocks — companies that would be attractive with PAR from 12-17% so long as quality is suitable.
All three primary portfolio characteristics (overall return forecast, quality and growth) are suitable and within the target range with the greatest need for a growth boost — if anything.
Candidates for Accumulation: AFLAC (AFL), QUALCOMM (QCOM) …
The ending dashboard for the portfolio can be found and monitored continuously here.
It’s that time of year. It’s in the air. You might even say it’s in the wind.
Whether we wrap the theme around March Madness or simply the advent of educational event season, we spent the weekend in Chicago at an investing conference developed and delivered by a coalition of local investment education volunteers. The Chicagoland Investment Conference was well done and kudos to the team. Ken Kavula and I are honored to be invited and included in the festivities.
Howard “Bunny” Mack. Photo Credit: Deb Severson
Speaking of madness, I’m not sure we can take the master of ceremonies (Howard Mack, President – Chicagoland Chapter) all too seriously when he’s trotting around wearing Trix rabbit ears (General Mills presented at the event) while channeling Playboy bunnies and referring to the closing Stock Talk panel participants as “Three Stooges” but he did. Seriously, the crowd seemed to enjoy the banter and discussions as Ken Kavula, Mark Robertson and Doug Gerlach shared some thoughts and stock study ideas to take home.
Ken Kavula reminded the audience of successful selections made at one of the inaugural Stock Talk panels at the Chicago National Convention for NAIC held in Schaumburg a few years ago. See BINC Stock Talk 2008
Most of all, this Stock Talk panel reminds and underscores why-we-gather and emphasizes the power of what-we-do gathered in community, sharing and exploring investment ideas.
Doug Gerlach, Ken Kavula and Mark Robertson. Photo Credit: Deb Severson
Ken’s suggestions for the audience included Mesa Labs (MLAB), NIC (EGOV) and Aerovironment (AVAV). EGOV innovatively pursues IT projects for predominantly state (and local) government agencies — seeking to optimize and improve things like making it easier to drive away with a new driver’s license.
Doug’s study roll call included Echo Global Logistics (ECHO), Yandex (YNDX) and SodaStream (SODA) — and yes, he tied sulzer bottles into the Stooge theme. His final selection was Mistras Group (MG), a worthy engineering & construction company to study.
Any study of ECHO might also include: CH Robinson (CHRW) and Expeditor’s (EXPD).
Mark’s selections included Qualcomm (QCOM) courtesy of Houston’s Anne Manning and the Mid-Michigan Round Table (our monthly stock discovery webcast), AFLAC (AFL) and the hospitalization of the duck … and a nudge to study Cognizant Technology (CTSH) and to explore the other candidates in our Ivory Soap Stock Screen.
At the end of the day, Howard removed the rabbit ears (probably went home and tried to see if they improved his TV reception) and can rest assured that he, Dean Hartley and their Chicago team favorably affected the investing future of at least one person several times over.
We call it our Ivory Soap screen because we seek companies with MANIFEST combination rankings greater than 99.44% — essentially placing them in the top one-half of one percent among the stocks that we follow. The combination includes the return forecast and quality. We’re basically seeking strength in both characteristics.
We’re hoping for a large measure of market-obliterating performance during the Groundhog VII — our stock selection contest for 2013 — but the start out of the gate is a little choppy (so far).
Yes, we know it’s early. Really, really early.
But so far, a relatively small number (16%) of participants have topped the Wilshire 5000 a few weeks into our version of a Groundhog-based Iditarod.
Starting block kudos to perennial group challenger, The Mutual Investment Group of Cheney and individual entrants Jerry Warner, Susan Lynch and Larry Dix. There’s a couple of rhinos (Warren Buffett and Whitney Tilson) on the leader board — and 2011 individual champion Nick Stratigos is lurking, as usual.
Here is an excerpt of the current stock study “roll call” used during last night’s Dashboard Diagnostics session. The companies are ranked in descending order by MANIFEST Rank (a combination of return forecast and quality).
In the realm of mobile communications, it’s clearly a jungle out there. The battle among the major providers is in full gear and profit margins (for most participants) show the impact. Enter Qualcomm (QCOM). QCOM has the #1 market share in application and graphics processing chips and 3G/4G/LTE modems used in smart phones. Let that sink in for a minute.
Qualcomm has revolutionized the mobile phone industry. Through a commitment to research and development and via a wide berth of partnerships with other firms, innovative solutions are built and distributed across the entire wireless industry.
Growth, Profitability, Valuation
The Manifest Investing sales growth forecast for QCOM is 11%. We’re using 33% for the projected net margin. The median P/E for the period 2006-2013 is 16.8×. We’re using 18x for the projected average P/E.
QCOM Business Model Analysis: The products are literally ubiquitous and although innovation continues (commitment to R&D) Qualcomm is somewhat mature with respect to life cycle … and naturally lower (but still blue chip leadership) growth rates lie ahead.
At the time of selection, the stock price is $62.53, the projected annual return is 18-19%. The quality rating is 91.8 (Excellent, Top Shelf) and the financial strength rating is 98 (A++). The company has no debt.
The company is now ranked #38 in the MANIFEST 40 and although a newcomer to our 40 most widely-followed stocks, investors in our community have studied, owned and profited from QCOM over the years.
And we close with an echo of last month’s closing remarks on Atwood Oceanics — only this time we’re talking QCOM: globally diversified and serving a host of wireless companies … feels like a pretty good hedge vs. geo-risk and a little like 1960s Corning, they sold the tubes to all the dueling TV makers. Placing a bet on red, black and green?
It’s the day that we’ve dreaded for a while during this year’s countdown. It’s the day where cold hands meet … well, relatively warmer flesh. It’s the sort of thing that can make you go “Moo!” And we’ll reminisce along with eight maidens with the fifth selection of our 2013 countdown.
It still ranks as one of the most jarring experiences of a lifetime of investing.
My investment club owned a sizable stake in Qualcomm (QCOM) during the waning days of 1999 and we watched as the stock price rocketed during the Christmas holiday season back during the final weeks of December 1999.
With a cost basis of less than $5, we watched the price soar to a split-adjusted $200 in short order. I’ll make a really long story really really short by simply reminding any and all of us to do all we can to avoid letting the tax impact of a decision get in the way of making a decision that should be made.
Here’s a look at the stock price versus the return forecasts some 13-18 years ago. The key takeaway is that when a stock has a return forecast of -29%, it’s probably prudent to think about making some sort of a selling decision.
Fast Forward to The Present
Leaving the “ghosts” of Christmas Past behind — we turn to present day conditions at the communications juggernaut. Based on sales growth forecast of 16%, net margin expectations of 33.5% and projected average P/E of 17x, the projected annual return (PAR) is 18-19% with a top shelf quality rating.
The following chronicle is the same information (but tracked monthly) over the last five years — illustrating that the return forecast has rarely been higher than current levels, triggering our interest in the stock.
Expecting Alpha 