Let Me Save You Some Time – Josh Brown

Photo: http://www.detroitmovestheworld.com

This Week at MANIFEST (11/17/2017)

“9. Don’t Rush. You don’t need to already know what you’re gonna do with the rest of your life. Don’t panic. You will soon be dead. Life will sometimes seem long and tough and, God, it’s tiring. You will sometimes be happy and sometimes sad, and then you’ll be old and then you’ll be dead. There is only one sensible thing to do with this empty existence, and that is fill it. Life is best filled by learning as much as you can about as much as you can, taking pride in whatever you’re doing, having compassion, sharing ideas, running, being enthusiastic, and then there’s love and travel and wine and sex and art and kids and giving and mountain-climbing. But you know all that stuff already. It’s an incredibly exciting thing, this one meaningless life of yours. Good luck and thank you for indulging me.” — Tim Minchin (Nine Life Lessons)

Let Me Save You Some Time

Those of you who catch some CNBC during the day probably recognize Josh Brown as one of the mainstays on the Halftime Report. From his books, Backstage Wall Street and the co-author stint via Clash of the Financial Pundits (with Jeff Macke) it’s clear that he and his colleagues see some of the same perspectives that we do. We’ve covered those complementary notions before here: Reformation: Center Stage.

It was refreshing spending a few moments in Detroit this past Thursday and Friday. That may seem strange to some of you but the city is truly engaged in a renaissance. The image above (and link provided) is part of Detroit’s compelling invitation to locate a second HQ here. I’m told that Detroit will likely make the “short list” as this continues to develop.

Detroit moves the world. We also know Detroit as the origins of the modern investment club movement — as championed by George Nicholson. As the first snow fell, it was refreshing to reflect on the dreams, aspirations and gifts bestowed by Nicholson and the community he nurtured. I took a moment to stop by the historic Rackham Building, the birthplace of the National Association of Investors (1951) and a movement that has favorably influenced the lives and investing experiences of so many of us. Nicholson was also a founding influence behind the Financial Analysts Society of Detroit and was a regular attendee … and routinely tendered the first question of the Q&A segment by asking the presenter to share their thoughts on “their greatest challenge.”

I assumed my seat at lunch on Friday next to a friend that I hadn’t met (yet). After brief introductions and observations about snow, I asked, “Did you know George Nicholson?” He smiled. “As a matter of fact, I spent last night with a couple of the Nicholson boys.” Wow. It turned out that his father had been influential in a few of Nicholson’s enterprises going back to the 1950s and 1960s and beyond. It’s a small world. It’s a Better World because of Nicholson’s contributions to the world of investing.

The theme of a better investing world resonates in Josh Brown’s perspective, too. Jason Raznick of Benzinga.com had arranged a town hall meeting format with Josh on Thursday night. If you’re not familiar with Benzinga, Jason has created a Bloomberg-like entity for investors and traders in Detroit that has become quite formidable. Thursday night turned out to actually be a better opportunity to compare notes and spend time with Josh as he shared observations about a number of things.

  • Caveat emptor. He shared that (1) He’d been dismissed (sent home) not once, but twice from summer camp as a child. (2) He knows the Wolf of Wall Street and spent some time in similar trenches. (3) He’s been part of a couple of crash-and-burn initiatives.
  • That last one is actually a virtuous attribute. He’s been there and done that. He considers his evolution from stockbroker to registered investment advisor to be among the best decisions of his life.
  • Incentives Matter. Incentives, good and bad. They both affect performance and behavior in the markets. Incentives matter. Often they dictate the probability of potential outcomes in very foreseeable ways.
  • Josh loves Taco Bell.

  • Regulation FD Killed Most of the Rhinos Returns. So there. He said it. “Besides the growth in the number of funds, something else changed in the hedge fund space. Regulation Fair Disclosure (Reg FD) came into effect in 2000. This SEC-mandated rule forced all publicly traded companies to disclose material information to all investors at the same time. Prior to this, hedge funds had a huge advantage in terms of the information they could obtain prior to other investors. Reg FD changed that. This, combined with the large number of funds chasing similar securities and using similar strategies, has resulted in much lower performance for investors.” — Ben Carlson

Speaking of Ben Carlson, he attended the session on Friday. Hopefully we’ll get a chance to spend more time with Ben, too. Regular readers will recognize that his articles are frequently cited in our Results, Remarks & References section. Here’s a couple of Josh’s slides from Friday, including the famous (infamous?) CNBC Decabox:

Of Dragons and Debate: Active vs. Passive

“I’m so sick of the active vs. passive debate.” “The real debate is likely high cost vs. low cost … or faith-based versus systematic.” The librarians of the investing world are always stuffing things into boxes and categories. Some fodder for the dragons:

  • “The S&P 500 Index Funds Are Not 100% Passive.” Ben Carlson has referred to the S&P 500 as the World’s Largest Momentum Strategy The S&P 500 is constantly re-balancing and the cap-weighting emphasizes Apple, Microsoft, FaceBook, Amazon and Johnson & Johnson. S&P 500 (VFINX) routinely has a 4-5% turnover as companies come and go. That’s not passive.
  • (Mark here) I’d take it a step further and remind investors a la Ralph Acampora from a Detroit stage in 2001 that lost decades happen. That’s right. He told the audience to pick stocks or different funds, because the S&P 500 was about to get “killed.” Ralph was right.
  • Sometimes a fund isn’t passive at all but is classified as a “passive ETF.” Josh cited a WisdomTree fund that is hedging European baskets vs. Japan and currencies in both directions for both geographies. “That may be 6-dimensional CandyLand, but it’s NOT passive.”

And finally, we know that some of our sleep-at-night active investing would be deemed quite “passive” but on closer examination, they’re NOT. Anything but. We buy. We hold … for as long as it makes sense to do so. In the case of our Bare Naked Million Portfolio there have been less than ten sell transactions since Christmas 2005. The turnover is less than these large “passive” index funds. And by the way, that bare naked $1,000,000 is now worth $3,177,277 (11/10/2017) — a “passive” annualized total return of 11.2% vs. 7.3% for the “actively” managed WIlshire 5000 (VTSMX) over the same time frame.

Thanks for the refreshing perspectives, Josh.

MANIFEST 40 Updates

Round Table Stocks

  • Illumina (ILMN)
  • ResMed (RMD)

Best Small Companies (2018)

Round Table Sessions (Video Archives)

Results, Remarks & References

Companies of Interest: Value Line (11/17/2017)

The average Value Line low total return forecast for the companies in this week’s update batch is 1.2% vs. 2.9% for the Value Line 1700 ($VLE).

Materially Stronger: Insulet (PODD), Deere (DE), KLA-Tencor (KLAC), Wabash National (WNC), Xcerra (XCRA), AGCO (AGCO), Thermo Fisher (TMO), Bard, C.R. (BCR), Teleflex (TFX), Intuitive Surgical (ISRG), Cutera (CUTR)

Materially Weaker: Geospace Technologies (GEOS), SCANA (SCG), Bio-Rad Labs (BIO)

Discontinued: Digital Globe (DGI), Select Comfort (SCSS), WebMD (WBMD), UCP (UCP), VCA (WOOF), Female Health (FHCO), Enpro Resources (ERS), Atwood Oceanics (ATW), MOCON (MOCO), Applied Microcircuits (AMCC), Allied World (AWH), Entercom (ETM), Alere (ALR), Landauer (LDR)

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 2.9%, decreasing from 3.3% 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.

Update Batch: Stocks to Study (11/17/2017)

The average return forecast (PAR) for this week’s update batch is 5.7%.

Long & Short Term Perspectives. (November 17, 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. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target.

 

November Round Table November 21, 2017 at 8:30 PM ET ONLINE

Stocks Likely To Be Featured: TBD

This Round Table will continue the discussion on traditional selling analysis and explore relative return-based selling triggers. We will probably also spend a few minutes with stock selections that we’re thankful for …

Consider joining Ken Kavula, Cy Lynch, Hugh McManus and Mark Robertson as they share their current favorite stock study ideas.

Registration: https://attendee.gotowebinar.com/register/4510335622157941250

Discovery Club

“Dump your hedge funds and explore their small-cap stock picks.”

Small cap is not necessarily small (faster-growing) companies but in general, we like the idea of a nice blend. So yes, we’re interested in hunting down some actionable ideas among the most successful investors on our radar screen — seeking companies that aren’t on too many radar screens, yet. The discovery of smaller, promising and faster-growing companies has always been one of our favorite (and rewarding) activities. In that spirit, we’re expanding our efforts in this realm, seeking smaller, less discovered companies and add them to our coverage. We will continue to scour our Best Small Company Funds with leaders like Brown Small Company.

This Week’s Sources and Suggestions

  • American Association of Individual Investors & James O’Shaughnessy

Coverage Initiated/Restored: Amtech Systems (ASYS), QuinStreet (QNST), Valhi (VHI)

Be Careful Out There

This Week at MANIFEST (9/15/2017)

Tell me and I forget. Teach me and I remember. Involve me and I learn. — Ben Franklin

Be careful out there. — Phil Esterhaus, Hill Street Blues

“Historically, September is the worst month for U.S. stock market performance,” wrote Minerd. “Since 1929, the S&P Composite Index has averaged -1.1 percent for September, making it one of only three months with negative average returns over that time. The worst performing single month over this time period was September 1931, when the S&P composite fell 30 percent.” — Scott Minerd, Guggenheim Partners

Call it the Pre-January Effect if you’d like. It’s particularly relevant and pertinent for the smaller, faster-growing companies this time of year. With the January Effect, we benefit from reallocation and tax-related selling by investing in smaller companies that have been unduly punished during the fourth quarter with the hopes that repurchase and first quarter purchasing will restore many of the damaged prices.

The key word is “unduly.” And in the words of George Nicholson (via the 1984 NAIC Investors Manual) and Hill Street Blues Sergeant of the morning watch, Phil Esterhaus, “Be careful out there.”

Nicholson’s stark warning appears on page 98 of the 1984 Manual.

The guidance is offered in the context of his “Challenge”, a switching consideration that is intended to improve the overall portfolio by selling a holding and replacing it with a suitable, bolstering, substitute.

“When you begin this Challenge, the most important rule is requiring that the challenger (or replacement stock) is of equal or higher quality.” [His emphasis added, NOT mine.]

The accompany chart of screening results is from the Value Line Investment Analyzer. As shown, the listing is sorted by Projected 3-5 Year Total Return (Descending.) Needless to say, these return forecasts are red hot.

We draw your attention to the Financial Strength column where many of the companies are C, C+, etc. Remember, a “C” rating from Value Line is equivalent to an “F” from your school days. The ratings don’t get any lower than “C”. You have to reach for at least a “B++” to get above average.

We also note that many of these companies have stock prices less than $10. It’s one piece of the puzzle, but worthy of a yellow flag and caution.

And finally, check out the growth column. There’s not a whole lot of growth here. In the words of David L. Babson, growth conveys “grace” to long-term investors often healing wounds and compensating for buying a good stock at a price where you should have waited. So there’s not a lot of grace in this group … either.

Turnout Terraforming

As a reminder, the monthly Round Table webcasts will continue and not be disrupted by these new Tuesday sessions.

That said, we’ve heard from a number of you that you’d be interested in seeing us tackle some subjects, topics and methods independent of the Round Table sessions. So we will.

Tuesday seems to be a fairly optimum time to schedule additional sessions although we’ll likely have a few “Turnouts” on other days of the week.

We’d like to hear from you. (markr@manifestinvesting.com) What’s on your mind? What topics would you like to see covered? Here are some that have been suggested or considered so far:

  • Getting Risk Right (Cy Lynch)
  • Lessons From The Legends (Hugh McManus)
  • How Can We Calculate Relative Return?
  • Are Quality and Moats Related?
  • What Should Our Investment Club Meetings Look Like?

MANIFEST 40 Updates

  • 9. Cisco Systems (CSCO)
  • 11. Walgreen (WBA)
  • 12. Qualcomm (QCOM)
  • 26. CVS Health (CVS)
  • 28. LKQ (LKQ)

Round Table Stocks

  • Cisco Systems (CSCO)
  • CVS Health (CVS)
  • Gentex (GNTX)
  • LCI Industries (LCII)
  • LKQ (LKQ)
  • Qualcomm (QCOM)

Round Table Sessions (Video Archives)

Best Small Companies

  • 14. Gentherm (THRM)

Results, Remarks & References

Companies of Interest: Value Line (9/15/2017)

The average Value Line low total return forecast for the companies in this week’s update batch is 5.6% vs. 3.7% for the Value Line 1700 ($VLE).

Materially Stronger: Estee Lauder (EL), Modine Manufacturing (MOD)

Materially Weaker: Acacia Communications (ACIA), Synaptics (SYNA), Qualcomm (QCOM), Rite Aid (RAD), Harmonic (HLIT), BT Group (BT), Genuine Parts (GPC), Walgreen (WBA), CenturyLink (CTL), Commscope (COMM), Avon Products (AVP), Pharmerica (PMC), Infinera (INFN), ATN International (ATNI), Dish Network (DISH)

Discontinued: NeuStar (NSR), Reynolds American (RAI)

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 3.7%, an increase from 3.5% 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.

Update Batch: Stocks to Study (9/15/2017)

The average return forecast (PAR) for this week’s update batch is 9.0%.

The Long & Short. (September 15, 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. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target.

This Week at MANIFEST (8/25/2017)

This Week at MANIFEST (8/25/2017)

There is no science in this world like physics. Nothing comes close to the precision with which physics enables you to understand the world around you. It’s the laws of physics that allow us to say exactly what time the sun is going to rise. What time the eclipse is going to begin. What time the eclipse is going to end. — Neil deGrasse Tyson

Whenever I sing ‘Total Eclipse of the Heart,’ the way people sing along with me still excites me. It’s one of the songs that audiences know all the lyrics to, and they sing along with me, and it makes me so happy. People also know my songs ‘Holding out for a Hero’ and ‘Lost in France,’ and this gives me so much joy on stage. — Bonnie Tyler

Mark: Ken, You know what makes me sad?

Ken: What’s that, Mark?

Mark: When you and I take a road trip that takes us nearly within walking distance to Punxsutawney, Pennsylvania … and you’re unwilling to make a slight detour.

Ken: Friends, that “slight detour” would have added nearly two hours to a trip that would already require 9 hours. Besides, on both excursions, we were blasted with a deluge that probably drowned Punxsy Phil in all its fury.

Mark: Go ahead, big guy, make light of these tears. Besides, we know that Noah keeps the ark just south of Cincinnati.

Ken: Mark, you know what makes me happy?

Mark: You mean besides dinner with investing friends in Cleveland at Corky & Lenny’s?

Ken: Well, that too. But once again we discover a local conspiracy of investing educators who nurture excellence in long-term investing.

Mark: No kidding. We reviewed four investment club portfolios during the Keystone Strategies conference. All of them were well-positioned, adhering to design targets — most notable in that ALL OF THEM contained a sufficient number of faster-growing companies to keep the overall portfolio growth rate in the 10-12% range.

Ken: Folks, we don’t see this kind of thing very often — and it bodes well for the like-minded investors of Central Pennsylvania.

Mark: Absolutely. It reminded me of Cow Tipping in places like Beardstown and Faribault, Minnesota.

Ken: I can only imagine the detours involved there and I’m probably grateful that I wasn’t in the car. But go ahead, humor me.

Mark: And the wonderful achievements of the Broad Assets investment club of St. Louis. The River Oaks Investment Club has won the Keystone Strategies stock picking contest three out of the last four years in the group category.

Ken: I’ll give you that. The Keystone Strategies contest is outstanding and they’re to be commended. We recommend this type of activity as a path to learning, discovery, sharing of ideas and socializing with successful investors to all communities that we visit.

Mark: … which brings us to Neil deGrasse Tyson.

Ken: I feel a cosmic-sized detour coming on.

Mark: I think we can almost compare the behavior of the stock market in 2008-2009 to an eclipse. In hindsight, it didn’t really last that long but it was scary … but from an epic long-term perspective, we probably should have been looking at the Great Recession with a colander on our heads.

Ken: For some reason, I’m not having much trouble picturing you with …

Mark: [interrupting] I’m serious. Most of “Investor” Nation spends every waking moment worrying about price drops and whether or not it’s possible to time the market ad nauseam. This notion has been very destructive to so many as it has delivered pessimism-driven conservative approaches to asset allocation, etc. as the “gold standard” of prudent investing. For those with long time horizons — and a few more total solar eclipses in their future — there’s no need to think of price volatility as RISK.

Ken: In that case, I think you’re right. And we should point people to the work of our own Cy Lynch on the real definition and impact of RISK in our investing efforts.

Mark: Cy is right about this. And so is AAII’s James Cloonan. Fear of “Risk” has destroyed a lot of capital over the decades. And that leads me to another twisted perception that we’ve been jousting with for years. This turned out to be one of our favorite slides from the weekend.

Mark: [continuing] There’s a couple of things that we can see here. First, we counsel in a BIG way, the importance of all-of-the-above investing. We define this as a blend of fast-growing promising upstarts, a suitable dose of medium-sized workhorse companies growing near average growth rates and a dash of blue-chip stalwarts growing at low single-digit slower growth rates. We build and maintain our portfolios at a 10-12% average sales growth forecast for the portfolio. We can generally point to the Value Line Arithmetic Average as “beating” the S&P 500, largely because of the contribution of the small and medium components. However, this graph shows that the red hot S&P 500 has caught the Value Line 1700 of late, something we’ve not seen since the late 1990s and rarely over the last 60 years. Read Josh Brown’s Just Say No to the S&P 500 from this perspective. But beyond that, notice the roller coaster (volatility) of the S&P 500 versus the Value Line average. Which one is “riskier?” Take it a step further and remove the S&P 500 from the Value Line average (mentally) and imagine how much less bumpy (“riskier”) the remaining small- and medium-sized companies must be.

Ken: This puts our long-held perspective on full display. Fast-growing and medium-sized companies of suitably high quality do not have to be roller coasters. We might also observe our strong emphasis on the S&P 500 field of opportunity approximately five years ago.

Mark: Right. How ya like my colander now? We’ll take a closer look at the S&P 600 and S&P 400 in coming weeks, but we’re launching our Fast Growing Company safari season with a few of the companies we discovered among the entries for the Keystone Strategies contest portfolios. You know what makes me happy? Investing better, with friends, whether the sun is shining or when the moon gets in the way for a few minutes. I’m always holding out for a few more Heroes. (Certain apologies to Bonnie Tyler)

Ken: We visit a lot of chapters and investment clubs. And the efforts of Chuck Reinbrecht, Richard Lindsay and Bruce Kennedy are exemplary as well as the support and achievements we witnessed by the likes of Kyle Blevins, Donna & John Diercks, Ken Mobley, Mary Ann Rentsch and the Cleveland team, John Varner and Barbara Vinson.

Mark: We’re also grateful for the support provided by bivio’s Laurie Madison for the Keystone Strategies contest and event. We look forward to future visits to share ideas and thoughts with the investors of Cleveland and Central Pennsylvania. And that visit to Punxsy Phil’s neighborhood is still on my Bucket List.

MANIFEST 40 Updates

  • 10. FactSet Research (FDS)
  • 27. Starbucks (SBUX)
  • 29. Buffalo Wild Wings (BWLD)

Round Table Stocks

  • Buffalo Wild Wings (BWLD)
  • C.H. Robinson (CHRW)
  • Forward Air (FWRD)
  • Maximus (MMS)
  • McDonald’s (MCD)
  • Standard & Poor’s Global (SPGI)
  • Starbucks (SBUX)
  • Stericycle (SRCL)
  • Waste Connections (WCN)

Round Table Session Recordings Added

Best Small Companies

  • 3. Forward Air (FWRD)
  • 13. BJ’s Restaurants (BJRI)

Results, Remarks & References

Companies of Interest: Value Line (8/18/2017)

The average Value Line low total return forecast for the companies in this week’s update batch is 4.9% vs. 3.4% for the Value Line 1700 ($VLE).

Materially Stronger: Huron Consulting (HURN), Red Robin Gourmet (RRGB), Atlas Air (AAWW)

Materially Weaker: BJ’s Restaurants (BJRI), DineEquity (DIN), Bristow Group (BRS), Ship Finance (SFL), PotBelly (PBPB), Buffalo Wild Wings (BWLD), Waste Connections (WCN)

Discontinued: Panera Bread (PNRA)

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 3.4%, an increase from 3.1% 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.

Update Batch: Stocks to Study (8/25/2017)

The average return forecast (PAR) for this week’s update batch is 8.0%.

The Long & Short. (August 25, 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. 1-Year S&P Outlook: 1-year total return forecast based on S&P 1-year price target.

August Round Table August 22, 2017 at 8:30 PM ET ONLINE

Stocks Likely To Be Featured: TBD

This Round Table will continue the discussion on traditional selling analysis and explore the relative return-based selling we’ve suggested.

Consider joining Ken Kavula, Cy Lynch, Hugh McManus and Mark Robertson as they share their current favorite stock study ideas.

Registration: https://attendee.gotowebinar.com/register/5621511966734158595

Coming attractions 20170821

Trucking In Tulsa (3/10/2017)

This Week at MANIFEST (3/10/2017)

Common Sense, Care Of Catoosa

“If you want to be successful, it’s just this simple. Know what you are doing. Love what you are doing. And believe in what you are doing.” — Will Rogers

No, I haven’t forgotten that the trucking and logistics stocks are in Issue 2 and that this week’s update centers on Issue 4 — home to many healthcare and aerospace/defense stocks.

It’s just that a significant number of hours sharing lanes with Knight Transportation, Swift, Old Dominion and a number of CVS Health semis provides some time for pondering while en route on Route 66 to the Port of Catoosa. (Tulsa)

Ken Kavula and I were met in Catoosa by a throng of committed long term investors and we greatly enjoyed spending the weekend with them. Ken did his travel research on the Issue 1 airlines and perhaps he can explain Buffett’s sudden interest in the group, but that’s a topic for another day. Probably.

We took a stroll through 70 years of investing better — together. Some rules and guidelines were reinforced. Others were disturbingly challenged. We were reminded how the Tin Cup model portfolio handled the 2007-2008 market challenge and wondered why we spend so much time worrying about asset allocation (shifting to cash equivalents when the market seems overpriced.) Our subscribers fondly remember our 2008 open letter to the Presidential candidates: An Open Letter To The President.

Is the market over priced? What if it’s not? Recall those surging estimates for S&P 500 earnings from the analysts a few weeks ago. If they’re right about 2018, 2019 and beyond …

If the accompanying chart isn’t “haunting” or reinforcing — it probably ought to be.

And in that spirit, we think it probably makes sense to keep doing what we always do … INVEST IN THE BEST, but only when they’re on sale. We’ve never seen a moment where we couldn’t find several worthy stocks. If we ever do, we’ll start worrying about electric fences.

“With a sufficiently long term perspective, bear markets become blips.” — Cy Lynch

Thanks, Catoosa.

MANIFEST 40 Updates

Round Table Stocks

Best Small Companies

(None)

Results, Remarks & References

Companies of Interest: Value Line (3/10/2017)

The average Value Line low total return forecast for the companies in this week’s update batch is 1.9% vs. 2.9% for the Value Line 1700 ($VLE).

Materially Stronger: Community Health (CYH), Regeneron Pharma (REGN), Illinois Tool Works (ITW), Anthem (ANTM), Envision Health (EVHC)

Materially Weaker: Tenet Healthcare (THC), Quality Systems (QSII)

Discontinued: Clarcor (CLC), Tessera Tech (TSRA)

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 2.9%, down from 3.0% 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 (3/10/2017)

There continues to be evidence of strengthening fundamentals and 1-year price targets are getting adjusted upward, on balance. Many of the biotech and pharma companies are showing the damage — and resultant higher return forecasts — as a result of “bashing” and criticism from inside the Beltway.

Based on the near term expectations for Round Table selection MEDNAX (MD), it will be interesting to see if we’re truly “early” and/or if we catch a wave as the S&P and Morningstar and Goldman Sachs analysts catch up with us. [Grin] […and Hope]

The Long & Short. (March 10, 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. 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.

A Better Conspiracy

This Week at MANIFEST (1/27/2017)

A financial advisor I know describes the reality of investing money by saying, “Hope for the best and be prepared for the worst.” With almost every decision we make in life there is uncertainty about the outcome. Close. But my preference would be for “[Prepare With] the BEST to be prepared for the worst.” That’s a pretty good nutshell for quality-driven growth investing — WITH YOUR FRIENDS.

Better Conspiracy

One of the more powerful — and enabling — things that we do as a community is DISCOVER and share ideas that have the potential for better returns. Better returns enable better futures. These futures are often very altruistic and philanthropic and I love the generosity I’ve witnessed over the last few decades working with so many of you.

A new acquaintance recently asked me what I do. I thought for a moment and responded, “I conspire.” His eyebrows lifted and I continued, “I conspire with a community of successful long-term investors to experience (and share) the rewards of long-term investing with those who seek it.” “I conspire to reinforce patience and discipline where necessary because this journey is often challenging.” “Our cornerstone is over seven decades of doing this, learning from and leaning on each other, to pursue the methods and deploy them among friends and family.” “I conspire.” “Because there are legions of doubters who would tell us that this is not possible, too risky … and not worth the effort.” “I conspire.” “Because I know this is often false (or ignorant) and yes, I understand uncertainty and the reality that there are no guarantees” “But I’ve seen the contrary results from ordinary people displaying patience and deploying extraordinary discipline.”

“I conspire.” “Because WE CAN BEAT THE MARKET and experience successful investing.”

We’ll show you how to soar with turtles.

MANIFEST 40 Updates

  • 20. Coach (COH))
  • 38. Wal-Mart (WMT)
  • 40. Costco Wholesale (COST)

Round Table Stocks

  • Coach (COH)
  • Costco Wholesale (COST)
  • Dollar Tree Stores (DLTR)
  • Fossil (FOSL)
  • Hibbett Sporting Goods (HIBB)
  • Michael Kors (KORS)
  • Pricesmart (PSMT)
  • Ulta Salons (ULTA)
  • Vera Bradley (VRA)

Best Small Companies

  • 9. Five Below (FIVE)
  • 20. Francesca’s (FRAN)
  • 24. IMAX (IMAX)
  • 25. Nautilus (NLS)

Results, Remarks & References

Companies of Interest: Value Line (1/27/2017)

The average Value Line low total return forecast for the companies in this week’s update batch is 7.7% vs. 3.3% for the Value Line 1700 ($VLE).

Materially Stronger: J.C. Penney (JCP), Insight Enterprises (NSIT)
,
Materially Weaker: Abercrombie (ANF), Fossil (FOSL), Vera Bradley (VRA), G-III Apparel Group (GIII), Hertz Global (HTZ), Michael Kors (KORS), DSW (DSW), Finish Line (FINL), Sempra Energy (SRE)

Discontinued: Netsuite (N)

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 3.3%, unchanged from 3.3% 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 (1/27/2017)

Gone shopping. A few favorites bubbling near the top of the study list …

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

This Week at MANIFEST (12/30/2016)

This Week at MANIFEST (12/30/2016)

What I think a lot of great marathon runners do is envision crossing that finish line. Visualization is critical. But for me, I set a lot of little goals along the way to get my mind off that overwhelming goal of 26.2 miles. I know I’ve got to get to 5, and 12, and 16, and then I celebrate those little victories along the way.” — Bill Rancic

As most of you have guessed, our playful emphasis on Dow 20,000 is precisely that — playful.

We seem to pay way too much attention to essentially arbitrary piles of numbers and the rhinos life expectancy can be shortened by how they measure up quarter-to-quarter and year-to-year.

Brad Perry was right. A successful long-term investing experience is a marathon. And Bill Rancic is also correct, milestones matter. There’s plenty of noise, chaos and confusion that complicates life for average investors.

We’re thankful for a community of investors that is willing to focus on visions of the future and a willingness to imagine. We believe that our emphasis on return expectations and vigilance on fundamental threats and opportunity — is a path to better finish lines.

Value Line Arithmetic Average. Annual Returns. (1990-2016). The average annual total return for the equal-weight Value Line Arithmetic Average is 13.3% since 1990. The S&P 500 (VFINX) checks in at 9.3%. That Dow Jones Industrial Average that everyone is hyperventilating over has delivered 7.6% over the same time frame.

The November-December surge in the market pushed this year’s all-of-the-above index from 10-20% to 20-30%. This image will serve as the centerpiece for the January 2017 newsletter. Ask us again if we believe in a blend of small, medium and large companies as a crucial element of portfolio design and management.

MANIFEST 40 Updates

  • 1. Apple (AAPL)
  • 23. Intel (INTC)

Round Table Stocks

  • Apple (AAPL)
  • Intel (INTC)
  • IPG Photonics (IPGP)
  • Skyworks (SWKS)
  • Universal Display (OLED)

Best Small Companies

  • 6. Universal Display (OLED)
  • 18. Mellanox Technologies (MLNX)
  • 27. IPG Photonics (IPGP)

Results, Remarks & References

Companies of Interest: Value Line (12/30/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 2.1% vs. 3.4% for the Value Line 1700 ($VLE).

Materially Stronger: Logitech (LOGI), Seagate Tech (STX), Applied Materials (AMAT), Micron Technology (MU)

Materially Weaker: Fitbit (FIT), Cray (CRAY), Stratasys (SSYS), Nimble Storage (NMBL), 3D Systems (DDD), HP Enterprise (HPE)

Discontinued: Lexmark (LXK), Imgram Micro (IM), Skulcandy (SKUL), Fairchild Semiconductor (FCS)

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 3.4%, up from 3.3% 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 (12/30/2016)

There’s a wide variety of opinions in the manifest of stocks to study this weekend. But some community favorites, some widely-followed leaders and some of our recent Best Small Companies made the list.

The Long & Short. (December 30, 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.

Grinchy Dow 20,000

This Week at MANIFEST (12/23/2016)

Grinchy Bill Griffeth and Rogue destroyer Janet Yellen squelched our Dow 20,000 rally and party hats last week. But we’re resilient and pressing on. This week’s update batch includes Procter & Gamble (PG), Tractor Supply (TSCO), Fastenal (FAST) and those homebuilders and building supply retailers.

Burnt Popcorn!

We refer to market fraught with turbulence and emotions as “popcorn days.” In most cases, it’s a spectator sport as panic or exuberance is met with explanations and rationale that are back-fitted for the day. And these memes are among the most recyclable phenomenon on the planet. The same logic often works in both directions. People are selling today because _____ aligns pretty nicely on other days with People are buying today because ______.

This week, I demonstrated (again) why I could never be a day trader. I really thought we’d reach Dow 20,000 although I would never have taken out a second mortgage on the theory.

Grinchy Bill Griffeth had some fun with the Dow 20,000 enthusiasts with the accompanying tweet made during Friday’s Closing Bell segment on CNBC.

Other antagonists sent messages that 4 days of prolonged Dow 20,000 watching should probably be treated with a trip to the doctor.

But, we got close … coming within 34 points before Janet Yellen and her Rogue storm troopers at the Fed rained on the parade at 2:30 PM ET on Wednesday. The rest of the week had some moments — but it was pretty much like watching salmon flipping up the ladder. We learned on our Alaska cruise that despite a brief fling when the salmon reach their birthplace, it doesn’t end well. And the week didn’t end well for our box of Dow 20K party hats.

MANIFEST 40 Updates

  • 3. Fastenal (FAST)
  • 15. Procter & Gamble (PG)
  • 30. Home Depot (HD)
  • 34. Lowe’s (LOW)

Round Table Stocks

  • Chicago Bridge & Iron (CBI)
  • Fastenal (FAST)
  • Tractor Supply (TSCO)

Best Small Companies

(None)

Results, Remarks & References

Companies of Interest: Value Line (12/23/2016)

The average Value Line low total return forecast for the companies in this week’s update batch is 2.9% vs. 3.3% for the Value Line 1700 ($VLE).

Materially Stronger: Pulte Homes (PHM)

Materially Weaker: Sunpower (SPWR). First Solar (FSLR)

Discontinued:

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 3.3%, unchanged from 3.3% 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 (12/23/2016)

Normally we “cut off” the list at a MANIFEST Rank of 95 or 90 … and you’ll note that we had to go a little deeper in order to have a list this week. Study and shop well.

The Long & Short. (December 23, 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.