Saturday, February 18, 2012

Performance Check Of "Good Stock Investing"

Back in 2009, when I started this blog, I posted that:

A primary purpose of my blog will be to present posts on individual stocks. Sector and overall market thoughts I love to research and write about, but I'm mainly a bottom up stock picker. I am trying to become a better market direction analyst, because, as Cramer often says, half a stock's movement is usually just its sector movement.

What I'll be presenting is for "informational use" only as the paranoid legalese disclaimers stress (Do read the Terms of Use Agreement on this site if you can stay awake to the end). I am not acting as anyone's financial adviser with this web site, because the role an adviser fills is to manage risk level between investments and an individual. You could be in a heap of trouble if you rely on me for that!
Well, I haven't been writing much on individual stocks lately, so let's focus on that for a moment. First let me say that I've instituted a ban on stocks domiciled in China. Jim Cramer has brought this point out on his Mad Money show repeatedly. He categorically refuses to endorse any China stock except for BIDU. I feel the same way, only I don't even favor BIDU. Cramer says they don't do accounting and reporting the same as the rest of the capitalized world. Without going into detail, he simply says things to the effect of "I don't trust their numbers". Well, I go a lot by cash-flow numbers, and I just don't think the China stocks behave the same as our stocks do around reported cash-flow (or other numbers). I don't know if this is by fraud or just doing things differently or what, but they seem like a different animal to me. And technically, they behave differently also. So awhile back, I banned all stocks that do reporting out of China. I've posted on 3 or 4 of them in the past, but I'm going to look at just all the American stocks.

ETFs are fine with me. They are the best way to invest in commodities, two of which I love - sugar and gold.

The following list of 25 positions are 20 stocks, 2 ETFs, and 3 stocks from my Instablog at Seeking Alpha that aren't here at this blog.


LABL Multi-Color Corp. 7/27/09 $15525 +55.2% 2.4
KSW KSW Inc. 8/04/09 $12057 +20.6% 2.4
WRLS Telular Corp. 8/18/09 $26746 +167.5% 2.4
HW Headwaters 10/16/09 $6298 -37.0% 2.3
MSN Emerson Radio 12/14/09 $8900 -5.4% 2.1
NGD New Gold 12/30/09 $32800 +228.0% 2.1
VSEC VSE Corp. 10/11/09 $6635 -33.6% 2.3
AZK Aurizon Mines 11/13/09 $10957 +9.6% 2.3
GLD gold ETF 7/05/09 $18555 +85.6% 2.5
SGG sugar ETF 6/21/09 $17917 +79.2% 2.5
TAYD Taylor Devices 5/15/11 $18833 +88.3% 0.7
SLP Simulations Plus 9/01/10 $16774 +67.7% 1.4
SFEG Sante Fe Gold 10/11/10 $9100 -7.0% 1.3
ARMH ARM Holdings 7/01/09 $48804 +380.3% 2.5
CROX Crocs Inc. 1/15/10 $29611 +196.1% 2.0
RCKY Rocky Brands 3/23/10 $12734 +27.3% 1.9
KBX Kimber Resources 4/09/10 $9339 -3.8% 1.8
MFRI MFRI Inc. 4/15/10 $10098 +0.5% 1.8
MTW Manitowoc 1/08/10 $12481 +24.8% 2.1
PZG Paramount Gold and Silver 12/24/09 $17230 +72.3% 2.2
BOOM Dynamic Materials 12/24/09 $11896 +8.2% 2.2
XPL Solitario 12/18/09 $8000 -20.0% 2.2
CGC Capital Gold 12/09/09 $45700 +357.0% 2.2
JBSS John B. Sanfilippo 11/20/09 $7897 -21.0% 2.2
PLM Polymet Mining 4/9/10 $4710 -52.9% 1.8
_______ _____
+67.9% ave. 2.1 ave.

The average result so far is + 67.9% with average hold of 2.1 years. The S&P 500 by comparison since late 2009 is up about 25% over that time frame.

I used to be a big bull on anything oil related starting back in 2004 when nobody believed us peak-oil nuts. But nowadays oil is at a level where it has a built-in brake against much further advance - it's called demand destruction. As oil goes much above the Brent $120 area where it's at now, it starts to smother the economy. The only good performance you can expect from oil at this stage is from geopolitical mayhem or short-lived, dangerous demand spikes, both of which are unpredictable. Like all commodities, the best strategy is to buy the massacres.

There is an energy area that I like and that is the natural gas pipeline MLPs. I think we're starting a huge, steady, and stable growth of nat gas replacement flows supplanting oil, coal, and all the other problem fuels for everything including transportation as we go past conventional crude's peak. The cash-flow rich and high yielding nat gas "toll booths" like Kinder Morgan Partners KMP will prosper, and they have the added benefit of climbing back hard after any market shocks. And we'll have some. The market shocks are where these should be bought.

If you don't like the outrageously complicated tax treatment of limited partnerships, you can do away with that and individual company risk with two new ETFs that track these stocks. They are Alerian MLP (AMLP) yielding 5.94% and SteelPath MLP (MLPFX) yielding 6.27%. I would wait for the next thrashing of the market to think about buying them.

Another area that will likely outperform is the smartphone revolution. I've been harping on this theme with multiple articles since August, 2009. A very prevalent view back then was that smartphones were already baked into the market, but Cramer said the market was underestimating the "tsunami" as he called it back then, and I agreed.

Well, the smartphone revolution is proceeding. They are evolving from an expensive toy to a staple like a bar of soap. And stocks like AAPL are now behaving less like a risky tech stock and more like a utility, nearly impervious to market mayhem. But is that really making for an out-performance story in the related stocks? Cramer is pretty tech savvy and picking the good tech stocks was one of his strong points as a fund manager. So when he instituted his Smartphone Index on his Mad Money show 8/12/09, I was interested. He picked out 21 names, and I puzzled over why he didn't include some. So I made up my "supplemental" smartphone index. I am a tech idiot, so I selected my stocks based mostly on current and past monetary performance first and speculation on detailed future product popularity second. Here's how they've done:

Original Cramer Smartphone Index

STAR +45.8%
TLAB -33.9%
ADCT +81.4%
CIEN +41.7%
TKLC -32.1%
CTV + 21.2%
QCOM +45.3%
BRCM +39.6%
NETL +150.0%
XLNX +82.0%
SWKS +126.4%
RFMD +8.9%
ONNN + 22.1%
CY +75.2%
TSRA -23.1%
SNDK +181.2%
CSCO -4.8%
GOOG +34.2%
RIMM -79.2%
PALM -62.0%
AAPL +204.2%
+44.0% ave.

My Supplemental Smartphone Index
LLTC +38.8%
WRLS +294.5%
ARMH +361.7%
OVTI +29.2%
AKAM +199%
CREE -8.5%
ERTS -16.7%
STX +124.2%
+115.3% ave.

Cramer has rotated stocks in and out of the index since this original list (some were bought out). I took the liberty of tossing the China domiciled names from my original list (CHU, SYNA, CHA, NTE) but the others are unchanged. I don't even know the current make-up of Cramer's index, but I know he added ARMH quite a while back. If you take the combined index of all 29 stocks, you get an index up 63.7% since August, 2009 vs +47.6% for the Nasdaq. If you want an even more diversified approach, there is a smartphone ETF introduced early last year (FONE) with some 70 stocks in it. The smartphone revolution will probably continue to offer out-performance.

1 comment:

  1. Bruce,

    This morning I was re-reading your recent SA article about gold/dollar valuation comparison and decided to follow your link to your blog site, I am finding your analysis rational and compelling and just wanted to thank you for sharing. After a 45 year career as an architect I took a portion of my 401K savings and have been investing on my own in stocks and ETFs. It has been a learning experience for me, last summer's volatility kept robbing me of the nice gains I had since 2010. I keep reading whatever good analysis I can find to further my education and will now be including your blog among my must read list, again, my thanks.