My Equity Portfolio

A stock I like

2010-11-07T13:22:00.000-08:00

Berkshire Hathaway, B series (BRK.B)

This is Warren Buffet's company.

It's not really a great stock, it pays no dividend and probably never will and it will probably have a growth rate that's below market. But what growth it will have is likely to be very steady. A steady growth is superior to a slightly higher growth that's choppy. The ups and downs of a choppy growth path cuts down on the benefits of compounding of your investment.

It's worth putting a few shares of this one is pretty much any portfolio.

A stock I like

2010-06-24T19:59:00.000-07:00

After reading The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: "On Robustness and Fragility"
I convinced myself that every portfolio should have a collection of research oriented bio-pharmaceutical stocks.

Crucell (CRXL) is a dutch bio-pharmaceutical company that specializes in vaccines for infectious diseases. It was founded as a research lab and they merged with another company that had rights to many vaccines about 4 years ago, giving them a steady cashflow to finance their research. I think they're well positioned to hit a homerun.

Goldman

2010-02-18T10:06:00.000-08:00

The guys at Goldman are just weasels.b Stay far, far away from anything that they have anything at all to do with -- they misrepresent as a matter of ordinary business, you can't trust anything they touch at face value.

LONDON (AP) -- The practice wasn't secret and it wasn't illegal, and some of it happened 10 or 15 years ago. But the practice of European governments reportedly using complex financial transactions to move debt off their books is getting closer attention from markets and the European Union.

The deals, known as swaps, let some governments shrink the apparent size of their debts, unsettling news at a time when markets are taking stock of Europe's struggle with rising budget deficits.

Greece has until Friday to disclose to the European Commission how it used complex currency swap deals and whether they were used to conceal the real scale of its debt -- specifically a 2001 deal that Greek officials said they did with U.S. investment bank Goldman Sachs.

Under the deal, known as a currency swap, Greek dollar and yen debt was reportedly exchanged for euro debt for a period at an advantageous rate to be reversed at a later date. The effect was to show less debt in the near-term.

The deals carry some of the hallmarks of the financial crisis -- such as off-balance sheet liabilities and highly complex financial arrangements.

Christine Lagarde, France's finance minister, said the EU statistics agency Eurostat would examine how Goldman Sachs ''helped Greece structure, postpone a certain number of debt repayments.''

''You have to know first of all whether it was doctoring the accounts and if this was legal or not at the time it was done, and if it was legal, it will be necessary to find out whether it was favorable for stability. Probably not. And in that case, how we can avoid a repeat, if those measures already were taken,''

Greece wasn't necessarily doing anything new -- Italy did something similar in the 1990s while Belgium has also been mentioned by analysts as using financial derivatives to improved its reported fiscal position.

Professor Gustavo Piga of the University of Rome has warned for years that more and more governments were using the complex financial instruments that mushroomed during the 1990s.

Piga is amazed that in the nine years since he wrote an analysis about the growing involvement of governments in the derivatives markets that no one at the European Central Bank or Eurostat, the EU's statistics office -- even journalists -- got in touch with him to discuss his findings.

However, he hopes that the current concern surrounding Greece's deal with Goldman Sachs finally triggers belated reforms of this opaque practice.

Piga told The Associated Press that governments should not be banned from using trading in complex financial instruments as part of their debt management -- he said Sweden and Denmark appear to have done so in according with good practice. But such deals should be more transparent and comply with accounting standards.

''The scandal needs fixing; it was never done before but I hope it will be now,'' said Piga. ''This creates further confusion about the state of the accounts and investors will be asking higher risk premia as things start to unravel again.''

Geographic Diversification

2009-08-13T10:37:00.000-07:00

Not all diversification is related to sectors of the economy, geographic diversification is also important. You want a portfolio with some global exposure, not just United States stocks, and you want a mix of regional stocks spread out across the United States.

Some stocks to consider for geographic diversification are:

Ohio Valley Banc Corp (OVBC) a regional bank in Ohio.
Tara Moters (TTM) an auto and truck manufacturer in India
Dover Downs Gaming (DDE) a deleware racetrack and casino
Sabine Royalty Trust (SBR) an oil and gas trust centered around the gulf states
Essex Property Trust (ESS) A california residential REIT
Rocky Mountain Chocolate Factory (RMCF) Canadian specialty retailer

A diversified high yield portfolio

2009-08-09T18:52:00.000-07:00

Looking for stocks with above average yields in these investment sectors I found.

Genuine Parts Company GPC, 4.57 yld, auto parts distributor
Pengrowth Energy Trust PGH, 13.42%, oil and gas trust
Paychex PAYX, 4.5%, payroll services
Rocky Mountain Chocolate Factory RMCF, 4.88%
Espey ESP, 5.88%
Essex Property Trust, ESS, 5.48%
Psychemedics Corp PMD, 7.25%, consumer drug test product
World Wrestling Ent WWE, 6.6%
Monarch Community Bancorp MCBF, 9.56%, a rural bank in SW Michigan
BlackRock California Insured Muni Income Trust (BCK) , 6.4%
Great Northern Iron Ore, GNI, 12.54%, Mining trust
Ship Financial International SFL, 9.51%, Shipping company w/diversified inventory of ships
Nicor, GAS, 5.1%, natural gas utility

A diversified portfolio of dividend paying stocks

2009-08-09T11:33:00.000-07:00

Automobile Sector.
It's hard to find an automobile manufacturer that pays a dividend, but the industry isn't all manufacturs. Penske is a diversifiedPensk automobile and transportation industry company, owns retail dealerships, truck leasing operations, parts distribution and other automobile and transportation services.
Penske, PAG, Div yld 1.8%

Energy
Exxon-Mobil is a really obvious choice here. Large and stable with a very good dividend yeild.
Exxon-Mobil, XOM, Div yld 2.4%

Business Services
One way to target an investment in small companies is to invest in companies that provide services to small companies. One such example is Paychex who provides payroll and other human resources services
Paychex, PAYX, Div yld 4.5%

Retail
It's hard to go wrong with WalMart.
WalMart, WMT, Div yld 2.2%

Technology
Espey Mfg. & Electronics Corp. engages in the development, design, production, and sale of electronic power supplies, various transformers and iron-core components, and electronic system components primarily in the United States. They have a toe in the technology sector, but they are not sexy. The dividend yeild is solid -- very high, but solid.
Espey, ESP, Div yld 5.88%

Housing
Essex Properties is a high risk REIT, investing primarily in West Coast apartment complexes. West Coast residential real estate isn't exactly a stable market these days. But sometimes a little risk can be a good thing.
Essex Properties, ESS, Div yld 5.48%

Health Care
Pfizer is a large, stable drug company.
Pfizer, PFE, Div Yld 4%

Recreation
World Wrestling Entertainment produces cheap to produce TV wrestling that provides family entertianment which is cheap and isn't impacted by the price of gasoline.
World Wrestling, WWE, Div yld 6.6%

Financial
Some banks are solid and well management no matter what happens in the market. Northern Trust is one such bank.
Northern Trust, Bank, TNTB, 1.8%

Government
One way to take a gamble on the recovery of the California economy is a closed end munie fund of insured California Municipal bonds.
BlackRock California Insured Municipal Income Trust (BCK), Div yld 6.4% (mostly nontaxable)

Basic materials and commodities
You can't get much more basic than an oil and gas trust.
Sabine royalty trust, SBR, div yld 6%

Transportation
United Parcel Service, UPS, Div yld 3.33%

Utilities
Nicor is a utility company in the Chicago area that is diversified into some transportation industries.
Nicor, GAS, 5.1%

Food and agriculture
Monsanto is one of the biggest players in agriculture
Monsanto, MON, Div yld 1.3%

Consumer products
Proctor and Gamble is still going strong in consumer products
Proctor&Gamble, PG, Div Yld 3.4%

Diversification

2009-08-09T11:31:00.000-07:00

The key to a successful investment program is diversification. Investment typically involves risk-taking and diversification is a spreading of the risk. You do this with investment in securities or inst5urments that aren’t positively correlated with each other. For examp0le, Ford and GM tend to have correlated results - -- when consumers are buying cars both manufactures willtend to do well. So a portfolio fully invested in some combination of stocks in those two companies is not diversified. But the performance of GM and Humana probably don’t tend to follow each other, their personance is pretty much unrelated. So a portfolio evening divided between GM and Humana stock is said to be diversified.
There are multiple dimensions of diversification
1. Sector diversification (automotive, transportation, energy, etc).
2. Geographic diversification (international
3. Income certainty (fixed income v. growth v. speculative)
4. Actiive management v. program trading
5. , Large cap v. small cap
6. Term diversification

Too much of a good thing
Mathematical research suggests that an ideal level of diversification is a portfolio of between 25 and 30 uncorrelated investment instruments. More than that doesn’t really tend to reduce your risk much, since the likelihood that an additional investment will correlateat least somewhat with an investment already in the portfolio is fairly high.
But empricial evideince – looking at actual performance of real investors – suggests that improvement in results peaks out after somewhere between 5 and 9 investment instruments.
The reason for that is probably that competent active management can yield a meaningful improvement in both risk and return but the human brain doesn’t really do well
with more than about 7 independent pieces of information. We can’t really follow more than 5 to 9 uncorrelated investments in a portfolio.
How much diversification is enough depends on hw much effort you’ll be putting into active management of your portfolio and how good you are at that task. The more efforts, and the better you are at it, the closer you should limit the number of investment instruments to about 7 – it you’ll be passively managing the portfolio you should spreaqd your investments over about 25 instruments.
If you’re going to be paying close attention to your portfolio performance then go ahead and put your eggs in just a few baskets.
Chapter 1. Sector Diversification
Some sectors
Automobile
Energy
Business Services
Retail
Technology
Housing
Health Care
Recreation
Financial
Government
Basic materials and commodities
Transp;ortation
Utilities
Food and agriculture
Consumer products

Looking for investments

2009-06-13T23:10:00.000-07:00

The US economy isn't doing all that great these days. But the US economy is really just a network of loosely connected local economies. And, although the money supply part of the economy is fairly consistent from place to place, the production and employment aspects of the economy not so much.

The current (April) US unemployment rate is 8.6 percent. But that includes a range of 26.9 percenbt in El Centro, California to 3,2 percent in Iowa City , Iowa. That's a lot of variance.

The only bank headquartered in Iowa City is MidWestOne Bank which has a Troubled Asset ratio of 37.8 against a national median ratio of 11.7.

So although the Iowa City local economy isn't doing so bad, the local bank is doing pretty badly. Let's look elsewhere.

Ames Iowa has a 3.6 percent unemployment rate.

Still not so great. First National Bank of Ames has a Troubled Asset Ratio of 29.8

Let's try one more before we give up.

Houma Louisiana has a 3.6 unemployment rate.

Bingo. Coastal Commerce Bank has a Troubled Loan Ratio of 1 percent.

Let's take a look at them in some more detail.

The problem is that I can't find a ticker symbol for them, I'm guessing they are so closely held that the stock isn't traded.

Oh well, I'll try again tomorrow.

Jon Stewart Interviews Jim Cramer

2009-03-14T16:40:00.001-07:00

People have been blogging about the Stewart interview of Cramer

Jim Cramer’s very own Crashteroids game

Mere Comments

The Disappearing Jim Cramer

The problem with journalism...

Holy Hell

Posts about Jon Stewart as of March 14, 2009"

Outtake 3

Uppercase Woman Speaks

Jon Stewart vs. Jim Cramer"

Brawl Street: Cramer vs. Stewart"

Avis Budget (CAR) is just a hopeless dog

2009-02-28T11:39:00.000-08:00

A couple of years ago I rented a car from Budget Rent-a-car. I had no complaints.

But now I've discovered that they're simply a bunch of crooks. They can't run anything competently and you should stay away from their stock and their products.

I got a check in the mail. A $10 check. It's one of those things that just unfolds and the check is on part of the perforated envelope, no insert, no explanation. Just a $10 check.

In the very, very small print on the back of the check it says that by endorsing the check that I'm authorizing them to charge 60 something dollars to the credit card I'd previously used to rent a Budget car. Just a scam. An amauterish attempt to sell me a Nigerian bank account or something.

These guys are just crooks. There's no other way to characterize the clowns that run Avis Budget.

Banks

2009-01-04T14:44:00.001-08:00

I've recently mentioned a few banks I like and don't like. I'm not impressed by Bank of America BOA. I do like USBanCorp USB and Ohio Valley Banc Corp (OVBC).

If you'd have bought OVBC and USB when I first mentioned them, and shorted BOA when I mentioned it, you'd be ahead on USB and BOA but behind on the OVBC investment. OVBC is thinly traded.

But I'm sticking with my recommendations for now.

Oil tankers

2008-12-23T12:40:00.000-08:00

A couple of tanker fleets you might consider shorting are Teekay Corp and Overseas Shipholding Group.

Some stoc ks to short

2008-12-18T14:58:00.000-08:00

International Shipping Mews has a list of shipping stocks that you should think about shorting.

Price/Earnings

2008-12-18T12:46:00.000-08:00

The last time I looked at the average price/earnings ratio it was about 16 or so.

I was in the library yesterday and took a quick look at Value Line to see what it's running these days. About 10. That's a pretty big drop, but I don't think it's really out of line with what a rational price/earnings ratio should be.

The current average dividend rate for stocks that are paying dividends is 3.6%, which is probably a little high and in my mind reflects a market anticipation that a lot of companies will be cutting (or dropping) their dividends.

Alpha and Beta

2008-12-04T07:40:00.000-08:00

Well, I think I'll just be talking about Beta this post, but they do go together.

If you look at a typical financial summary of a traded company you'll often see a number labled Beta. For example, on this google finance page for XOM (Exxon Mobil) you'll see a Beta of .61.

What does that number mean?

When evaluating a Beta you should first look at whether it's positive or negative. Beta is a measure of how much the stock moves with respect to some index, or with respect to the market. A positive Beta means the stock tends to move in the same direction as the market, a negative Beta means the stock tends to move in the opposite direction as the market. So a Beta of .61 means that when the market goes up(down) XOM tends to go up(down).

A negative Beta means that when the market goes up(down) the stock tends to go down(up).

A zero Beta means the stock doesn't move much.

The next thing to consider when evaluating a Beta is whether it's above or below one (or negative one). A Beta greater than 1 means that when the market goes up that stock goes up even more dramatically. Less than 1 (but greater than 0) means that when the market goes up so does the stock but not as dramatically.

The bigger the Beta the more the volatility.

XOM, with a Beta of .61 would appear to be a rather stable stock that tends to follow the market but lag behind slightly.

Bank of America

2008-12-03T11:40:00.001-08:00

Bank of America's stock (BAC) is taking a little dip. But, I don't think it's a buying opportunity, I think they're in trouble.

You might even think about shorting them.

USBancorp

2008-12-02T09:37:00.000-08:00

USBancorp (USB) is a buy.

They escaped any real damage from the Wall Street collapse. But they're still getting bailout money, as capital to use in buying smaller banks who crippled themselves by speculation in the subprime mortgage market.

They have a reall good dividend yield also.

Sonic Drive-In (SONC)

2008-10-18T19:09:00.000-07:00

Sonic is one of my favorite places to get a hamburger and I love their TV commercials.

But I just don't think much of their stock. No dividends and way, way too much institutional ownership.

That translates into a lot of downside risk and I just don't see the upside risk.

Southwest Airlines (LUV)

2008-10-18T18:48:00.000-07:00

I'd stay away from this one.

It's one of the few airlines that actually makes money, and they have a very low beta, seemingly immune to overall effects of the economy.

But they don't pay a dividend and they have a very high (almost 90%) institutional ownership.

UPS

2008-10-18T18:41:00.000-07:00

I like UPS.

They have a strong dividend yield and a relatively low institutional ownership.

I recommend purchase.

Exxon-Mobil

2008-10-13T11:07:00.000-07:00

Exxon-Mobil stock prices has fallen but not due to any significant changes in the company fundamentals. Overall fear of the global economy, recent drops in crude prices, and hurricane damage to refineries has driven the stock price drop.

But I think fear of the global economy disruptions is being oversold, crude price drops just brings the prices in line with what it was a few months ago, and hurricane risk has been with Exxon-Mobil since forever.

I think it's a solid buy. Institutional investors only hold about 1/2 of it right now, and that's mostly because of what's happening to the financial institutions, not because of Exxon-Mobil. So that's very much a good thing.

Barnwell Industries, Inc. (BRN)

2008-09-29T18:01:00.000-07:00

When I used google to screen for some energy related companies Barnwell Industries was one of the ones that popped up.

Barnwell is in four businesses

1. Oil and natural gas exploration, development, production and sales in Canada.

2. Land investment. Leasehold interests in real estate in Hawaii.

3. Real estate development of single family home.

4. Contract drilling and water pump system installation and repairs in Hawaii.

They're too heavy into real estate to be of much investment interest right now.

Alliant Energy Corporation - (LNT)

2008-09-28T23:02:00.000-07:00

Alliant Energy Corporation, (Alliant Energy) public utility holding company which operates regulated utility comanies in Iowa, Minnesota and Wisconsin.

Screening for stocks.

2008-09-27T00:12:00.000-07:00

Google Finance has a stock screener that I think is pretty neat.

The default screen gives you a list of 3,588. That's a pretty big list.

To start cutting that down I first changed the screening criteria to include only stocks with a P/E ratio between 2 and 14. The market average is probably about 14 or so (I'm not sure what it is exactly). So that's just stocks that are making a little money but the market isn't forecasting huge income growth.

If the market anticipates large income growth it will trade at a high P/E ratio, the price reflecting an anticipation of future earnings rather than a a simple status quo type projection. I think of that as the market buying the story rather than buying results.

That pares the list down to 1438. Still too big to be managable.

The next step was to get rid of stocks that had been having wide price swings in the last year. Huge price swings are just an indication that the market has been surprised by performance (or lack of performance). I don't think a company whose performance can't be predicted with any kind of stability is a very good bet. I screened out everything that had had price swings in the last year of more than plus or minus 50%.

That still left over 1,100 stocks.

The next screen is institutional percent held. How much of the stock is held by
institutional investors, mutual funds, pension plans, etc. I looked for between 12 and 65 percent.

That left me with 152 stocks.

19 of those are energy stocks. Since I don't have any energy stocks in my recommended portfolio, and I'm a fan of diversification, I'm going to look more closely (in later posts) at those 19 energy stocks.

Company Mkt P/E Div Yield (%) 52w Price Change (%) Institutional Percent Held
Cap
Alliant Energy Corporation LNT 3.66B 8.43 4.24 -13 46 58.80
Barnwell Industries, Inc. BRN 87.16M 9.97 2.82 -28.48 14.66
Chevron Corporation CVX 178.64B 9.20 3.05 -7.24 64.54
Consolidated Edison, Inc. ED 11.93B 10.63 5.42 -7.73 46.06
Dominion Resources, Inc. D 25.17B 7.43 3.73 -2.48 60.00
DTE Energy Company DTE 6.65B 11.92 5.19 -16.98 56.91
Enbridge Inc. (USA) ENB 14.57B 11.86 3.27 6.70 57.52
Energy West, Incorporated EWST 39.08M 11.84 5.48 -9.25 12.56
Exxon Mobas il Corporation XOM 418.90B 9.97 2.05 -15.15 50.88
General Electric Company GE 251.19B 11.82 5.04 -40.17 57.05
MDU Resources Group, Inc. MDU 5.26B 13.66 2.18 4.67 50.35
OGE Energy Corp. OGE 2.89B 12.36 4.41 -5.21 48.43
Pepco Holdings, Inc. POM 4.75B 13.64 4.73 -15.97 59.66
Petro-Canada (USA) PCZ 17.18B 4.63 2.17 -37.13 53.79
TECO Energy, Inc. TE 3.58B 10.14 4.87 1.29 62.65
Tenaris SA (ADR) TS 24.79B 12.63 2.31 -17.81 27.54
Tsakos Energy Navigation Ltd. TNP 1.17B 4.99 5.77 -14.96 29.34
WSI Industries, Inc. WSCI 15.14M 10.77 2.75 21.06 17.20
Xcel Energy Inc. XEL 8.84B 13.70 4.64 -6.02 59.00

Paychex (PAYX)

2008-09-25T17:24:00.000-07:00

Paychex is a payroll services company. That's not a high growth industry and they are selling at a P/E multiple that I consider a little high (20).

But other numbers look better. They're trading near the 52 week low and they pay a nice, steady dividend.

It has 71% institutional ownership which isn't all that great, but not too bad.

Ohio Valley Banc Corp (OVBC)

2008-09-25T16:44:00.000-07:00

I mentioned them before.ou

The only drawback seems to be that they are very slimly traded, not a real dynamic market. But looks to be a solid, small regional bank. This isn't a bunch of Wall Street con artists and Yale frat boys. Don't put more than 1-2% of your portfolio in this stock.

Panera Bread

2008-09-24T12:30:00.001-07:00

Panera

Starbucks

2008-09-24T12:29:00.001-07:00

Starbucks

Some small banks

2008-08-29T01:57:00.000-07:00

Wesbanco Inc: Highlights Financial data in U.S. dollars
Sales 267.04 Mil
Income 41.21 Mil
Net Profit Margin 21.06%
Return on Equity 8.33%
Debt/Equity Ratio 0.80

First BancTrust Corporation: Highlights Financial data in U.S. dollars
Sales 19.52 Mil
Income 1.39 Mil
Net Profit Margin 10.84%
Return on Equity 5.25%
Debt/Equity Ratio 0.26

Ohio Valley Banc Corp: Highlights Financial data in U.S. dollars
Sales 54.31 Mil
Income 6.53 Mil
Net Profit Margin 18.57%
Return on Equity 10.70%
Debt/Equity Ratio 0.98

Bank of New York Mellon Corp: Highlights Financial data in U.S. dollars
Sales 6.32 Bil
Income 2.39 Bil
Net Profit Margin 16.46%
Return on Equity 11.85%
Debt/Equity Ratio 0.68

The one I want to look at is Ohio Valley BancCorp. It compares favorably with other banks. Pays good dividends. But has almost no instututional owners and institutions don't seem to follow the stock. I'm not sure why.

Although banks are somewhat risky right now this one looks like it might be an overlooked possibility.

Stock screener

2008-08-29T01:54:00.000-07:00

MSN stock screener

ATTn(T)

2008-08-29T01:44:00.000-07:00

I recommend this stock.

UPDATE;
I like the numbers.

Open: 29.24 Mkt Cap: 177.20B P/E: 13.53 Dividend: 0.40
High: 30.55 52Wk High: 42.97 F P/E: 14.38 Yield: 5.32
Low: 29.06 52Wk Low: 27.51 Beta: 1.12 Shares: 5.89B
Vol: 32.76M Avg Vol: 28.18M EPS: 2.22 Inst. Own: 59%

It's selling near a 52 week low which I take as a good sign.

P/E indicates it's fairly priced (I consider 14 a typical healthy multiple).

It has a nice dividend yield.

It's not terribly heavy in institutional ownership. Institutions tend to move as a herd and too much institutional ownership indicates too much potential for selling pressure.

Snappon (SNA)

2008-08-29T00:36:00.000-07:00

It looks in good shape with good prospects but it's heavily owned by institutions, suggesting that it's good prospects are already reflected in the price.

Grocery Stores

2008-08-16T18:45:00.000-07:00

Grocery Stores

Whole Foods Market WFMI
Analysts tend toward neutral
Very heavy institutional ownership and a .89 beta.