Online Journal for the Moose Pond Investors Club

January Transactions

The stock market drop this past week has provided a buying opportunity. Moose Pond has some cash to invest

Proposed Purchases for January

We recently considered several companies: Stryker [SYK], Microsoft [MSFT], and Kohl’s [KSS], and decided to purchase Stryker.

In addition, three defensive stocks look attractive: Coca-Cola [KO], Gannett [GCI], and Illinois Tool Works [ITW]. These stocks have several things in common. Their prices have gone nowhere or down over the past several years even though their earnings are solid and have continued to grow. Comparing their current price earnings ratio (P/E) to their historical P/E, current P/Es are at an all time low. Value Line rates their financial strength A+ or better, and their earnings predictabillity 85 or better. All three stocks pay dividends, which provides some downside price protection. These three stocks are currently out of favor in spite of their fundamentals. All three have a projected average return of more than 13% which is excellent for a large company.

Coca-Cola has an enormous franchise in its name and also has a strong international marketing and distribution network. Gannett, which publishes USA today, has been suffering from rumors of the early demise of print media and the ascendancy of the Internet. Companies like Gannett will be awash with a Tsunami of political cash as we move into the next presidential election cycle. Illinois Tool Works is a 100+ year old tool company that is the clear leader in almost every market in which it sells tools.

Weeding and Feeding the Stock Garden

These are several good, quality stocks whose prospects are not as good as the others in the portfolio. These are Cardinal Health and Brown & Brown. (Harley Davidson and Capital One Financial are borderline on joining that group.) We are considering selling Cardinal Health and Brown & Brown sometime in the next two or three months after the market recovers from its current bounce down. We plan to reinvest the proceeds in several of the stronger existing stocks.


Here are the proposals:

  1. Buy Stryker (taking a full position over 2 months buying half each month)
  2. Buy Coca-Cola, Gannett, or Illinois Tool Works (talking a full position over two months)
  3. Sell Cardinal Health and Brown & Brown when the market recovers from last week
  4. Reinvest the remaining cash in current stocks with a quality rating above 65 and projected average return above 13%

One Response to “January Transactions”

  1. Susan says:

    Stryker looks like a promising buy with a few concerns. Latest quarter figures show sales growth at 13.9, however you projected at 14.5 percent going forward. What indicators do you see that will allow the company to meet these figures? Also section 2B shows a downward trend. What is causing this? Do you see it as a concern? What is the industry norm? That being said, I see this company as one of the industry leaders. The wild card is that the market is predicting that the next growth phase will come from the spinal disc arena and although there are a few contenders for the lead at this time, only time will tell as it plays out.

    Coco Cola seems to have resumed its high single digits growth, again, section 2B is shrinking and in section 3, both high and low pe’s are decreasing. In section 4, therefore I would have dropped both the high and low pe going forward. The high PE probably to the average.

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