Before we get in to all crazy ideas we had this morning and tonight, here was our Friday afternoon Portfolio Update to the Salve Lucrum Family

 

 

Boys And Girls

 

 

The end of a week.  The Chinese tried to scare us this morning with more slowdown news and a significant disappointing number in the home sales sector had me convinced we were going to have a serious distribution day today.  Gold and Oil are moving higher (Butch, your wishing is working.) and the Ten Year Treasury is easing down to 2.23%, which I have yet to figure out, but that is an assignment for the weekend.  Part of the oil bump (and Gold might be tagging along) was the concern yesterday about sanctions against Iran will trim 300,000 barrels of oil out of the world market everyday.  Now in the scope of things, that is not a lot of oil.  The book "Peak Oil" estimated daily global consumption in 2009 (a low year) at 86.9 million barrels a day.  BUT, speculators look for any reason to get greedy.

 

I won't know the volume of the day till later (still don't too lazy to look it up OK I just looked it up. Volume was down and our distribution days did remain the same as indicated below), but we are still in a confirmed uptrend, we picked up a distribution day yesterday on the NYSE and the S&P 500, so the count is NYSE 6, S&P 500 4, and Nasdaq is 2. (If you factored out AAPL the Nasdaq would be at 4.)  The week finished about 1.9% down on the DOW and .5% down on the S&P 500.

 

Let's see if we had any outliers today in our core holdings.  All three indexes were up about .2% so I am looking for any core holdings with moves contrary.

 

MSFT

 

In line

 

XOM

 

Performed a little better than the market, but as goes oil as goes XOM.

 

CELG

 

Better than the market, but no relevant news.

 

MGRC

 

In line, and the TheStreet.com gave a great write up yesterday for the sector explaining that companies enjoying growth at the moment are not committing to CAPEX (Capital Expenditures), but are instead renting equipment and furnishings.  MGRC is a benefactor of that situation.

 

AAPL

Whoa! Did you feel the Earth move.  A down day?  The only thing I can see is that there was a boo boo trade about 90 minutes before closing that triggered a 9% drop in the stock.  It was fixed and recovered in under two minutes.  (Did you know that 55% of all trades in 2011 were High Frequency Automated Trades?  Scary)

 

ACETO

 

In line, no news.

 

LMT

 

Our newest Core Holding Lockheed Martin, performed with the market.  We added more to some of the portfolios today.

 

And that's about all we know.  We continue to crunch numbers through the Buffet Worksheet and found a few winner's from Jim Cramer's ActionAlert Potfolio.  I am a "Chairman's Club" member so I have access to his portfolio and trade history so I figured I would kick the tires on a few of his holdings.  So far I have run the numbers on 108 companies.  We will give you the details over the weekend in the blog.

 

Have a great weekend and do something unexpectedly generous this weekend.  You'll love yourself for it.

 

Brian

 

Buffet Run Down

 

I have been teasing you with the Buffet Worksheet news. OK maybe teasing is not the right word. Oh heck who am I kidding. None of you care. I ran 117 companies through my almost homemade worksheet that utilizes the value based attributes that Mr. Buffet uses to make Billion Dollar acquisitions. Seriously, when he started 50 plus years ago he would look at a 5 year history of earnings, 5 year high low price array, 5 year dividend analysis, Return On Equity, 5 year Book Value Analysis, average dividend payout analysis, determine 3 year and 5 year compounded growth metrics, and then calculate two projected price models.

 

The first is the Projected Company Data Using Historical Earnings Growth Rate and the other is The Projected Company Data Using Sustainable Growth Rate. I then take an average of the two and determine a middle of the road 10 year annualized return for the stock including dividend distribution. Of course this is done for equities that I have investigated some or all of the fundamentals enough that I know roughly what they do and how they make a profit and have a basic understanding of the tenure and background on the C suite (in case-CEO, CFO, COO).

 

As I said, I ran 117 companies through this meat grinder over the course of this week. I could not help but think of how Buffet had to do this chore. No internet, no excel spread sheets and no single source places to find the data. He used Value Line, company annual reports, and did his calculations using a calculator. It took me about 5-10 minutes on each stock, once the spreadsheet was built.

 

 

I must thank The American Association of Individual Investors for putting the original template worksheet on their website. From there I used Morningstar research for the 5 year historical data. Here is what one worksheet looks like. It happens to be GE General Electric:

 

 

On the Home Page of this worksheet, I keep track of how every company ranked. Out of 117 companies evaluated I had 68 ended up with positive 10 year returns exceeding 10% annually. At the bottom of that segment of the list was BBBY, yes Bed Bath and Beyond at 10.18% every year assumed dividends are reinvested. At the top of the list was AAPL with a 10 year return of 46.26%. So how much does a company sell for after compounding 600 dollars a share at 46.26% a year, according to my calculations, $26,789.00 a share.

 

As a comparison, Berkshire Hathaway's (Buffets Company) has an average return of 27% a year since 1976.

 

Does this mean you put all you money in the top account on this worksheet and wait 20 years. Not advised. We have to crunch these numbers every three months to look for significant changes.

For being so patient and reading all the way down this blog tonight, I will give you number 2 and a number 3.

 

Number 2 is ESRX Express Scripts, Inc. provides a range of pharmacy benefit management (PBM) services in North America with a 10 year return of 38.71%.

 

Number 3 is one we mentioned this week, Lockheed Martin, which became a core holding this week. Their annualized return is 36.08%.

 

I must take my hat off to Mr. Jim Cramer as of all the sources I used to find highly recommended stocks, his ActionAlert Portfolio had the most with returns over 10%. I used MotelyFool's Million Dollar Portfolio, IBD's Leader Board (Not surprising as that is growth focused not LT value focused.), Value Line Portfolios I and IV, and a few of my own. I have changed my opinion of his stock picking abilities. I always considered him a great teacher, but he apparently can pick a winner or two.

 

Thanks for hanging in there with me tonight. If you want a complete list of the 117 stocks (I will be adding a few more over the weekend) or if you want me to run a couple, let me know. I am here to serve.

 

 

Salve Lucrum