Next Meeting – Wednesday, May 16
Our next meeting will be on Wednesday, May 16, at the Tysons-Pimmit Regional Library, 7584 Leesburg Pike, Falls Church, VA, (703) 790-8088. We will start promptly at 7:00 pm and end by 9:00 pm.
All are welcome. You don’t have to be a member of BetterInvesting or the model club to attend. There is no charge. The agenda can be found on http://bivio.com/micnova. Look in the public folders.
Google Map LinkFirst Quarter 2012 Return
We continue to do well as we apply the BetterInvesting methodology. For the first quarter of 2012, the model portfolio had a return of 17.07% compared to 8.14% for S&P 500. Our big winners were Apple (48%), JP Morgan (39.3%), Microsoft (25.1%), Bioreference Laboratories (23%), and Resmed (21.7%). We are fully invested with only 2% in cash.
For the one-year period ending 31 March 2012, our return was 14.8% compared with 7.2% for the S&P 500 (w/o dividends).
MicNOVA 1-Year Return as of 31 March 2012
MicNOVA Portfolio Beats the S&P 500
Our MicNOVA portfolio has gained real traction this year. We are significantly ahead of the S&P 500. The careful analysis by our presenters and stock watchers is paying off.
Year to date our portfolio return is 13.67% compared to 9.1% for the S&P 500. Looking back over the last 12 months (28 Feb 2011 to 10 Mar 2012), our annualized return is 10.15% compared with 3.19% for the S&P 500. See reports below. (Note that the S&P 500 return does not include dividends, so the real return from the S&P 500 is a slightly higher.)
Looking Back at Companies We Sold
Between November 2009 and the present, we have sold eight different companies. Two of the sales were to free up money for other purchases, while six of the sales were out of concern with the companies themselves. After Stryker is sold, we will hold a total of 14 stocks in our portfolio. Our turnover ratio is relatively high.
It is instructive to look back and see how those sold securities have done. Would we have been better or worse off to hold them? The To answer that question, look at this Google documents spreadsheet. Click Here. (Note that the spreadsheet automatically updates with current prices.) At the time of this posting, all but one of the companies that we sold have increased in price from when we sold them. In the case of General Electric, the stock price increased by 24% while paying a nearly 3% dividend. FTI Consulting increased in price by 21%. Three of the companies would still be under water had we held them.
We sold XOM and ABT because are our positions in them were too large and we saw a better opportunity in AAPL. The worked out well for our portfolio.
Looking backwards we can derive several lessons. First, we should not sell a stock simply because it hasn’t moved up in price. Take General Electric as an example. We were unhappy that the stock had not moved. We were generally concerned about the overall financial markets and GE’s high debt load. But the underlying fundamentals for General Electric had not really changed. Between the time we sold it and now, other investors recognized the same inherent value we once saw, causing the stock price to rise.
Looking at Almost Family and Capella Education, we can derive a second lesson — the markets are quite efficient and quickly price news into a stock. In both cases, we voted to sell because we were concerned about recent events in the news. For profit education companies were under attack driving down their prices while the underlying fundamentals had not really changed. Similarly with respect to Almost Family, changes in the Medicare rules and federal investigations of home care company caused us to become concerned. Again the fundamentals had not changed significantly but we decided to sell based on news. Looking back, both stocks have increased in price. When we sold these two stocks the market had already accounted for the news. As a result we sold near a bottom for each.
We made a good move selling Jinpan International. We had little confidence in the fundamentals. That sale saved us a greater loss. It was the only company we sold that continued to go down.
The take away from all of this is that we should be cautious about selling stocks. The only times we should sell a stock is when:
When the long term fundamentals for the company have changed for the worse.
The company has grown to where it is more than 15% – 20% of our overall portfolio (a problem we have not had yet but hope to have).
When we find another company of equal or better quality that offers significantly greater potential return. (Call this “buy and challenge” rather than “buy and hold.”)
PERT and Trend Reports
Here are PERT and Trend Reports for our portfolio for January.
MicNOVA PERT Report (2012-01-18)
fMicNOVA TREND Report (2012-01-18)
Sources of Revenue — MSFT vs. AAPL
These two charts compare the primary sources of revenue for Apple and Microsoft. MicNOVA holds both companies in its portfolio.
Note the large amount Apple’s revenue from the iPad and iPhone. In contrast, Microsoft’s sources of revenue are more evenly divided.
Source: Asymco
“Two Gals Talk Chick Stocks” at BINC 2011
Kim Butcher and Mary Enright gave an excellent presentation at BINC 2011 which they called “Two Gals Talk Chick Stocks.” They identified a number of stocks worthy of further study. Their list was made in June 2011. A copy of their presentation can be found here.
Stock Ideas:
JNJ – Johnson and Johnson
TEVA – Teva
BRLI – Bio-Reference Labs
MD – Mednax Inc.
QSII – Quality Systems
ESRX – Express Scripts
SYK – Stryker
ISRG – Intuitive Surgical
NEOG – Neogen Corp
More Stock Ideas:
NVO – Novo Nordisk A/S
LHCG – LHC Group
WTW – Weight Watchers
LULU – Lululemon Athletica
HANS – Hanson Natural
PNRA – Panera Bread
Cash Generating Companies:
WU – Western Union
TSS – Total System Services
BRK.B – Berkshire Hathaway
DHR Danaher Corp.
Biggest Free Cash Flow Generators (3 June 2011)
Entertainment:
DLB – Dolby
NFLX – Netflix
Retail:
TIF – Tiffany
COH – Coach
BKE – The Buckle
ARO – Aeropostale
LULU – Lululemon Athletica
Pets:
WOOF – VCA
PETS – Pet Meds
PETM – Pet Smart
