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December, 2007: 1 11 16 23 30 31
Disclaimer - IMPORTANT - Read this first!
| Investor's Journal is a diary focused strictly on investments and personal finance issues, primarily from a contrarian and retiree point of view. Follow along with an average guy's failures and successes as he learns, by trial and error, the fine art of value investing. |
12/1/07-Since the last entry, our Classic Value (CV) pick, IDCC, purchased on 11/27/06, has been held over a year. It will be sold at the early market price Monday morning. It will then be removed from the CV open positions portfolio, and its closed position info recorded, based on the 11/27/06 to early 12/3/07 per share performance. Through the close of trading on 11/30/07, after subtracting a commission (while not counting any dividends), IDCC had been down 44.41% in the past 12(+) months.
My top-ten equities for mention today are: ASPV; ENH; HHGP; HLYS; NTRI; ORH; ROCM; TGIS; VSH; and WMAR.
The focus this time is on a new Classic Value (CV) selection, Endurance Specialty Holdings, Ltd. (ENH) (recent price $40.39). ENH's trailing price to earnings ratio is just 5.23. The asset's market-capitalization size is mid-cap: $2.59 billion. Endurance Specialty Holdings, Ltd., has a 2.5% dividend, with a dividend payout ratio of 0.13. The price to sales ratio is 1.39. ENH's price to book value is only 1.03. There is positive free cash flow. Return on equity is 24.44%. Debt to equity is 0.18. The current ratio is 1.60. This stock has low price to earnings, below average price to book value, low debt, and a nice dividend in its favor. It meets Ben Graham value and safety criteria as a bargain stock.
Endurance Specialty Holdings, Ltd., will be added to our CV tracking portfolio at its market price early on Monday, 12/3/07.
12/11/07-Since the last entry, our Leapin' Lizards (LL) pick, ZONS, purchased on 12/5/06, has been held over a year. It will be sold at the early market price Tuesday morning. It will then be removed from the LL open positions portfolio, and its closed position info recorded, based on the 12/5/06 to early 12/11/07 per share performance. Through the close of trading on 12/7/07, after subtracting a commission (while not counting any dividends), ZONS had been up 19.96% in the past 12(+) months.
My top-ten equities for mention today are: AXYS; BKR; BRK/A(BRK/B); FEP; INXI; MCK; NSHA; PCR; VLGEA; and VSEC.
The focus this time is on a new Leapin' Lizards (LL) selection, Franklin Electronic Publishers, Inc. (FEP) (recent price $3.30). FEP's trailing price to earnings ratio is 17.10. The asset's market-capitalization size is nano-cap: $27.15 million. Franklin Electronic Publishers, Inc. has no dividend. The price to sales ratio is just 0.49. FEP's price to book value is only 0.97. There is positive free cash flow. The price has risen 52.04% in the past year. Return on equity is 5.86%. Debt to equity is 0.00. The current ratio is 2.64. The shareholders' equity to total assets ratio is 0.63. This stock has low price to sales, below average price to book value, low debt, and good momentum in its favor.
As I'm getting this entry online about 1 AM, 12/11, Franklin Electronic Publishers, Inc. will be added to our LL tracking portfolio at its market price in the early trading later today (Tuesday).
As I have been disappointed with the long-term results to date for the Leapin' Lizards, relative to the Classic Value (CV) selections' performance, all new LL picks will cease as of the end of this month. For comparison purposes, I intend to continue thereafter to track the record of LL stocks till the last such choice has been sold, likely in late December, 2008. Meanwhile, though, FEP will probably be the next to last LL on which I'll focus here, with one more to be cited a little after the Christmas holiday period.
Once no further LL equities are being chosen, I'll perhaps consider other experimental approaches. If nothing better occurs, I may simply pick, for alternate entries (when not focusing on my choice for the latest Classic Value bargain), the best stock I can discover using any other set of criteria besides the Ben Graham standards, then note how they do in relation to CV. On the other hand, perhaps I'll just set up a competition between low P/E CV and low P/Bk CV, to try to refine which approach is better over the long haul. Or I may just use intervening entries for discussion of topics that hopefully may be of interest. We'll see.
12/16/07-Since the last entry, there have been no assets held for at least a year in either of our tracked portfolios, so sales are not in order at this time.
My top-ten equities for mention today are: AAPL; BRK/A(BRK/B); FSTR; ORI; PMI; RCMT; SCX; SMRT; VSH; and WMAR.
The focus this time is on a new Classic Value (CV) selection, RCM Technologies, Inc. (RCMT) (recent price $6.00). RCMT's trailing price to earnings ratio is below average at 9.93. The PEG ratio is 0.71. The asset's market-capitalization size is nano-cap: $72.26 million. RCM Technologies, Inc. has no dividend. The price to sales ratio is just 0.32. RCMT's price to book value is only 0.78. There is positive free cash flow. Return on equity is 8.78%. Debt to equity is 0.00. The current ratio is 3.42. The shareholders' equity to total assets ratio is 0.83. This stock has low price to sales, below average price to earnings, low debt, low PEG, and very low price to book value in its favor. It meets Benjamin Graham's bargain stock safety and value criteria.
RCM Technologies, Inc. will be added to our CV tracking portfolio at its market price early on Monday, 12/17/07.
12/23/07-Since the last entry, there have been no assets held for at least a year in either of our tracked portfolios (was on vacation at this time last year), so sales are not in order at this time.
My top-ten equities for mention today are: ACMR; BKR; FEP; HHGP; HOTT; INXI; NSHA; PCR; VSEC; and ZEUS.
The focus this time is on a new Leapin' Lizards (LL) selection, Olympic Steel, Inc. (ZEUS) (recent price $31.78). ZEUS's trailing price to earnings ratio is 13.91. The forward P/E is estimated at 10.70. The asset's market-capitalization size is micro-cap: $340.90 million. Olympic Steel, Inc. has a 0.50% dividend, with a dividend payout ratio of 0.06. The price to sales ratio is just 0.33. ZEUS's price to book value is only 1.30. There is positive free cash flow. Return on equity is 10.00%. Debt to equity is 0.10. The current ratio is 2.89. The shareholders' equity to total assets ratio is 0.65. The price is up 44.00% in the past year. This stock has low price to sales, low debt, and moderate momentum in its favor.
Olympic Steel, Inc. will be added to our LL tracking portfolio at its market price early on Monday, 12/24/07.
As mentioned previously, this will be the last time I am focusing on a new Leapin' Lizards pick. And I am not suggesting that readers purchase them further, since I have been disappointed with their performance relative to that of Classic Value selections held for a year and a day or till bought out.
In the next few days I'll be making our quarterly evaluation of the hypothetical portfolios' records through the first 3 1/4 years of the competition. Since the remaining LL assets suggested within the past 52 weeks will still be available for sale in coming months, the portfolios' comparisons will be continued through about a year from now.
But the already unofficial winner of this little competition, Classic Value, will continue to be tracked indefinitely thereafter. To date, its closed positions have had an average annualized performance after commissions of 17.95%, or an annualized total return (conservatively assuming an average value asset dividend of 1.70%) of 19.65%.
12/30/07-Since the last entry, our Leapin' Lizards (LL) pick, VLGEA, purchased on 12/26/06, has been held over a year. It will be sold at the early market price Monday morning. It will then be removed from the LL open positions portfolio, and its closed position info recorded, based on the 12/26/06 to early 12/31/07 per share performance. Through the close of trading on 12/28/07, after subtracting a commission (while not counting any dividends), VLGEA had been up 29.67% in the past 12(+) months.
My top-ten equities for mention today are: AEIS; AIRT; ASPV; AVTR; CHMP; EML; FRD; IVAC; MW; and TRCI.
The focus this time is on a new Classic Value (CV) selection, Champion Industries, Inc. (CHMP) (recent price $4.61). CHMP's trailing price to earnings ratio is just 8.22. Its forward P/E is estimated at 7.95. The PEG ratio is 0.81. The asset's market-capitalization size is nano-cap: $44.87 million. Champion Industries, Inc., has a 5.30% dividend, with a dividend payout ratio of 0.40. The price to sales ratio is 0.32. CHMP's price to book value is only 1.07. There is positive free cash flow. Return on equity is 12.58%. Debt to equity is 0.16. The current ratio is 3.63. This stock has low price to earnings, below average price to book value, low debt, and a nice dividend in its favor. It meets Ben Graham value and safety criteria as a bargain stock.
Champion Industries, Inc., will be added to our CV tracking portfolio at its market price early on Monday, 12/31/07.
The next couple entries will detail the nest egg's end-of-year analysis and the quarterly LL vs. CV portfolio analysis.
Now that the LL picks have been suspended, in the new year I hope to begin alternating the regular CV pick entries with selections for a fresh hypothetical portfolio of Wild Wizards (WW). WW assets are expected to be appropriate for short-term trades. They will typically have momentum, investment advisor support, and low debt in their favor. As the name suggests, they are likely to be more volatile than CV stocks but also may have the ancient alchemists' theoretical capacity to turn small investments into piles of gold. We shall see if, over time, reality testing (using actual investment buy and sell prices and with real commissions subtracted) proves them to be more the equal of our CV choices than LL turned out to be.
12/31/07-Happy New Year, once again, fellow investors. The just completed 12 months have been volatile and challenging for most who had money in the markets, ourselves included. Yet the winning period since 2002's lows continues, if with less energy, stability, or enthusiasm than before. I am not a market forecaster, but note that this has already been an unusually long bull market. It would not surprise me if we see a substantial pullback at some point soon. If I were primarily a short-term investor, I would be inclined to take a very cautious stance now. I believe presidential election years tend to be up, though, so perhaps after wide price swings the domestic market might claw its way back up to at least slightly new highs over the course of 2008.
Here is the yearly summary of our nest egg's performance, this time through close of business today, the final trading session for 2007. (As indicated before, our portfolio is not all in stocks but instead is somewhat conservatively allocated: roughly 70% in equities; about 30% in non-equities, such as real estate, money market accounts, bank reserves, cash-on-hand, treasury bonds, bond closed-end funds, or bond mutual funds.) As of today, after subtracting expenses for which principal had to be redeemed, the nest egg has gained 11.3% in 2007. (The S&P 500 Index was up 3.5% over the same period.)
Our overall portfolio of equities plus non-equities is up 57.5%, after subtracting excess expenses (over retirement income) since I retired on 12/31/01, and 78.8% since the end of 2002, the low year of the latest bear market. (Were it not for using some of our principal for expenses, the last six years' performance would be significantly higher.)
The nest egg's total equity book value now stands at $466,400, or 20.2% higher than its level a year ago. (The target remains an annual rise in equity book value of at least 12.5%.) Our equity holdings' price to book value stands at 1.2, well below the average for the markets as a whole, thus lending support for the nest egg continuing to outperform the major markets with less overall risk.
Our non-mortgage debt at the end of 2007 stands at just $5600, merely 0.6% of the nest egg's net asset value.
Our 5½% fixed rate mortgage balance is $35,700. So, total debt is just 4.7% of net assets.
Always remember Warren Buffett's first two rules for investing: to never lose money and never forget rule number one. But whether you are an aggressive investor or like to play things very safely, here's to you and yours meeting your financial goals for 2008!
Disclaimer and Disclosure Statement
Neither I nor Investor's Journal will be responsible for losses by anyone who obtained ideas from this site.
This diary is intended for personal interest and general information only. You are advised to do your own research (as well as to consult highly compensated professionals) before spending money on anything.
I know of no reason anyone should take my financial musings seriously. At best I am a dedicated amateur providing a bit of investment-related insight and entertainment, at worst an amusing diversion.
My wife, Fran, and I may at times own shares of some of the assets mentioned here. But neither of us receive any benefit from reference to them, unless you count the mutual misery when we get it wrong, or the opportunity to gloat when we get it right.