Portfolio Summary Updated
The portfolio summary and quality growth screen have been updated. The Moose Pond portfolio is diversified across eight industries.
Bed, Bath & Beyond (BBBY)
SSG and PERT A (04-01-2005) | Google Stocks | Company Website
Stock Selection Guide Updated. The SSG for Bed, Bath & Beyond has been revised. BBBY remains a high quality company and is within the “buy” range up to a price of $44.90.
There is an excellent article by Mark Robertson at www.fundas.com discussing Bed, Bath and Beyond. His analysis is right on target.
On April 6, BBBY reported its year end results. Sales were up 15% and net earnings increased 26.4%. This shows very positive growth and is in line with past years. Comparable store sales increased by 5.1%.
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Berkshire Hathaway
The annual reports for Berkshire Hathaway include Warren Buffet’s letters to shareholders. In addition to discussing the state of the company, these letters contain sage investment advice applicable to all investors, including small investors. Here is an excerpt from this year’s letter.
Over the 35 years, American business has delivered terrific results. It should therefore have been easy for investors to earn juicy returns: All they had to do was piggyback Corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead many investors have had experiences ranging from mediocre to disastrous.
There have been three primary causes: first, high costs, usually because investors traded excessively or spent far too much on investment management; second, portfolio decisions based on tips and fads rather than on thoughtful, quantified evaluation of businesses; and third, a start-and-stop approach to the market marked by untimely entries (after an advance has been long underway) and exits (after periods of stagnation or decline). Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.
Portfolio Summary Updated
The portfolio summary has been updated.
We now have more in cash to invest. Kudos to those members who are saving and investing regularly. With the recent market down trend, we should continue to purchase new shares. It’s always better to buy stocks when they are on sale.
Here are two proposals.
Proposal 1. Replace Federal Home Loan Management Corp (FNM) with Fifth Third Bank Corp (FITB), a well managed mid-west bank. Most of the literature about FITB has been very positive. See attached SSG and related reports (e.g., Morningstar, S&P and Value Line). We would sell FNM and apply the proceeds to FITB.
Proposal 2. Use the remaining funds to purchase additional shares of four of our existing stocks with the best prospects, considering both quality and projected return. We would add to our holdings of each of the following stocks: PFE, FISV, ACS and BBY. (Note there other strong candidates for reinvestment, including LOW, CBH and AMGN.)
Financial Services Outlook
Here is an interesting article by Tom Brown, CEO of Second Curve Capital, discussing the outlook for 2005 for the financial services industry. The article notes that retail branch growth can’t go on indefinitely. The report is positive about Capital One (COF), Investors Financial Services (IFIN), Commerce Bancorp (CBH) and Morgan Stanley (MWD). (We hold three of these four stocks.) His website is www.bankstocks.com.
Quality Growth Screen
NAIC publishes an annual survey of the 200 most widely held stocks by investment clubs. Screening that list for stocks for a projected 5-year average return of 12% or more and for an upside /downside ratio of 3 or more, yields 34 stocks. We already own 11 of these stocks. Here is the list of stocks passing the screen.
Historical Performance
The following table shows the performance of Moose Pond Investors through December 18, 2004. Total return is the return from the start of the portfolio on October 4, 2000. All returns except YTD are shown on an annualized basis.
|
Stocks
Only |
Stocks
& Cash |
VG 500
Fund |
S&P 500
|
Russell 2000
|
Unit
Value |
|
| 2001 |
37.9%
|
30.8%
|
-10.3%
|
-11.9%
|
2.5%
|
$11.970
|
| 2002 |
-23.4%
|
-21.1%
|
-21.5%
|
-22.1%
|
-20.5%
|
$9.707
|
| 2003 |
35.1%
|
27.9%
|
30.7%
|
28.7%
|
47.3%
|
$11.802
|
| YTD |
11.6%
|
10.5%
|
10.3%
|
7.4%
|
15.3%
|
$12.615
|
| Total |
12.6%
|
10.5%
|
10.4%
|
$12.867
|
Since uninvested cash reduces overall return, the table shows both overall performance of the portfolio and, separately, performance of the stocks in the portfolio. Portfolio Record Keeper was used to make these calculations. The table also shows the IRR that would have resulted from making identical investments in Vanguard’s S&P 500 index fund.
Our Top 10 Winners and Losers
Our all time winners have been: LOW (+186%), JCI (+140%), PDCO (+84%), ORLY (+77%) and COF (+72%). Our losers have been: OCA (-61%), CTS (-35%), INTC (-31%), PFE (-28%), and MRK (-16%). Of the losers, we are still holding INTC, PFE and MRK.
Johnson & Johnson (JNJ)
Current SSG and PERT A (11-29-2004) | Google: “Stocks: JNJ” | Company Website
Stock Selection Guide Updated. The SSG for Johnson & Johnson has been revised. JNJ remains a high quality company and is within the “buy” range.
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Amgen Inc.
Stock Selection Guide Updated. The SSG for Amgen has been updated. 5-year EPS was projected using the “preferred procuredure” with the following assumptions: revenue growth of 15%, pretax margin 40.4%, tax rate of 26.5% and outstanding shares of 1,175 million. This results in a projected average return of 13.9% using an averate high PE of 29 and average low PE of 16.5. This puts Amgen in the “buy” range. Both IAS and First Call’s analysts consensus project growth at 20%, so the 15% projected growth used in the SSG is conservative.
For the fifth time, Amgen has been named one of the “100 Best Companies to Work for in America” by Fortune magazine. Also, Amgen ranked fifth in The Scientist’s annual survey of the best workplaces for 2004. Details. Amgen also has an excellent website for investors.
From December 2004 Investor Advisory Service by IClub: IAS also has Amgen in the “buy” range. “Amgen reported continuing solid results for the third quarter of 2004 with total product sales up 23%. On an adjusted basis, excluding one-time factors relating to the company’s acquisition of Tularik, earnings per share growth was 39%. The company also increased guidance for expected earnings per share for the year from about $2.35-$2.40. The sales guidance was also improved to about $10.4 billion for the year. While the company is dependant on a limited number of products, these have continued to grow and sell well. There are also a number of interesting new possibilities in the process of development. Certainly Amgen is the most successful of the world’s biotech companies. AMGN (59.87) is a buy up to 82.”
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