Analysis Paralysis

We have been looking at sector balancing, and we realize adding some health and discretionary sector funds would balance out our portfolio. As far as weighting goes, buying a stock would do the same to balance things, but a stock would likely be more volatile. Another thought is to purchase more SPY when it starts dropping a bit (in the hopes of catching it before an upswing), but that doesn't seem like much fun.

So eventually we want to buy health sector fund AND a discretionary sector fund, but in the name of making a decision we are arbitrarily we are going to look health ETFs.

If you go to FinViz and you take a look at XLV, you'll see an interesting trend:

The purple line represents the psychological ceiling of the fund and the blue line shows the floor.
If we wanted to buy something and were looking for a good in, this trend could indicate that the market will "allow" the stock to keep climbing.

XLY has not broken the psychological ceiling yet:

This comparison shows how short-term volatility can play a role in choosing to get into an investment. XLY hasn't cracked that psychological barrier, whereas XLV has. These lines represent a long-term trend, and the short-term volatility seems to be responding to the logic that these long-term trends are establishing. In other words, the long-term trend makes the market "want" to adhere to the long-term trend, sort of like a self-fulfilling prophecy. Isn't it funny low logical that doesn't sound?

As a side note, adding either of these funds would definitely increase the beta (volatility) of our portfolio. 

Of course, words like short and long term are definitely relative. Our investment strategy loosely defines short term as a a few weeks and long term as several months or more. On the other hand, a day trader might be looking at short and long term being hours vs. days, and a Skynet investment computer is looking at nano- vs. mini- seconds. Who wants to start stockpiling gold? 

XLY and XLV are the iShares Spider ETFs for discretionary and health, respectively. In the past the Vanguard versions of these, because we've noticed Vanguard tends to have lower expense ratios, but it looks like the dividend yield for the Spider ETFs more than makes up for the minor differences in expense ratios. If you take a look at the values for each, you will notice that they are more or less the same. 

VHT vs. XLV

This means that questions of expense ratio, dividend yield, and volume will influence us to go with one as opposed to the other. 

As an aside, it makes sense that VHT and XLV are about the same, since they both track the sector. Each fund is actively managed, so there are some differences in the makeup of each. 

So we're a bit torn between one or the other, and we can't really see much difference between the two. OUr $500 buy increment made the decision for us, since VHTs $125 a share price fits nicely in. 

Who said it was hard to make decisions. 

Profit

I'm walking in the SPDRwebs, leave a message and I'll call you back.

Today, we're comparing SPIDRs to sector stocks. 

This week we are taking a look at some more of our friend's portfolio:

Stock	Pros	Cons	Good/Bad
GLD (a gold ETF)	It is shiny and people like it. This makes it a good hedge for our portfolio.	A $500 buy of gold is a large amount for a hedge, given our small size.	Ultimately, it would be around 15% of our portfolio right now. This may be something to consider in the future when it would be a much smaller portion of our portfolio. Additionally, there may be too many people using gold as a hedge. “I remember when gold used to be hip, now it’s like going to Starbucks.”
FTR (a telecommunications company)	Obscenely high dividend (>9%).	We already have a lot of telecom.	Since we already own ATT for its dividend, this might be redundant in our portfolio.
GSK (Big Pharma)	GSK is healthcare, which we don’t own a lot of. High dividend.	This is not doing as well as XLV, the healthcare SPDR ETF.	This would require more research to see what they’re up to.
GILD (Biotech)	They seem to be on the upswing. It is more healthcare, which we need.	Jim Kramer ranked it as a buy—screw that guy. Not doing as well as its corresponding SPIDR.  It may be too high up at this point.	Research is needed to see if the uptick in prices is justified or just hype.

We kept coming back to the idea that most of these stocks is underperforming compared to their respective sector ETF. GILD is the exception. That is the point of investing in specific stocks, however namely that you are hoping to pick something that will perform better than something else. Since ETFs hedge, you lose out on growth for the benefit of having a safer investment. The big gamble with stocks is believing you can actually predict the future better than everyone else. 

Picking your stocks like your picking your nose.

Members present: Brian and Yousef are watching the markets. 

We have been using http://www.freestockvalueranker.com/ to analyze stocks for being under/over valued, and came across this: 

As you can see, Panasonic has a projected growth rate of 1,298.11%. Their calculations aren't flawed, but it is important to consider how reasonable those numbers are. 

We compared CVS and Walgreens (CVS & WAG, respectively). They both had their ups and downs, but CVS would have been the one to get. 

However, if there were a pharmacy ETF, having a mixture of the two would level out the ups and downs, leaving us somewhere in the middle. We have been having trouble coming up with a single stock to purchase, and perhaps the problem is that at the level we are dealing, it is just too difficult to make a decision. It is important to consider the goal, and for us, it is mainly educational. On the other hand, we are also pretty risk-averse. We have chosen some broad investments (SPY, EWZ, and ATT--solely for dividends). As we increase the size of our portfolio, a single company will become less frightening, perhaps. Maybe we aren't ready for the tenth-grade economy class stock picking game.

Admittedly, this is a more dangerous game that we are trying to play. We aren't ready to quit on it, yet. We have some skin in the game and have something to get up every Saturday morning for, but any losses incurred would be fairly minimal.

Over the past three weeks, we have picked some stocks we know, crunched the numbers and looked at charts to evaluate them. We find some undervalued companies, and then it ends there. When we picked funds we went with an idea or a theme. That might be something to try with this. For example, if we think the Affordable Care act will be good for pharmacies, we then need to pick a company that serves as a proxy for the industry, rather than choose the industry as a whole. The key is to find the company that we believe is best positioned to profit.

For next week, we should choose and research such a an industry.

Profit!

Insert a joke about cramming money in a bunny.

Members present: Brian, Bickford, Danak (see also, natural peanut butter)

We continue our stock valuation exercise. Up today:

Proctor & Gamble

A gander at http://www.freestockvalueranker.com/ calculated PG as overvalued, so we took a look at some of the other "personal products" stocks and came upon Energizer Holdings Inc. (ENR), which sells batteries, razors, etc. Brian found an article about institutional investors selling consumer goods stocks that are near their fifty-two week high. The article mentions how some hedge funds sold off 30 million shares of ENR back in September, where the price was $81, and it has gone up to $90 or since then--so it is always a gamble, right? However, the real question is how this applies to a small investment group like ours.

If we go with the valuation from freestockvalueranker, and we see around 9% growth, this could mean ENR is a good investment, even if we only have six or so shares. Then we took a slightly deeper look at some of the recent news articles for Energizer, and things look okay. Bickford mentioned that the dividend for ENR is a new development. This might mean that they are trying to get more investment, which might be a sign of worry. The conclusion for now is that ENR might be something to keep an eye on.

Next week we should check up on the two food companies we mentioned a few weeks ago.

There's also still:

• Cvs/Walgreens
• Boston Beer Company 
• Craft Brewers Alliance

Profit!

I would gladly pay you tuesday for a burrito today.

Members present: Brian, Bickford, Danak...Darkness shrouds them as they approach a new buy. 

Today we are going to look at another company and analyze some companies that sell the same sort of service or good, in order to determine if that stock is under or over valued. Specifically, we are going to take a look at Chipotle Mexican Restaurant. This means that we are going to compare it to other restaurants that are at a similar level, i.e. not schmancy.

Below is a handy infographic from http://www.freestockvalueranker.com/, which despite it's sketchy name, is a handy tool.

From what we see CCSC (Country Style Cooking Restaurant Chain Co., Ltd.) is undervalued, however if you take a look at the 200 DMA, it looks a bit scary: 

In this case, this doesn't seem like a good investment just yet. However, it might be worth keeping an eye on for some growth. Right now it is a bit risky, especially since it is a market we don't know about---namely Chinese fast food, in China.

Then there's something like Cracker Barrel (CBRL), which we understand and see as having a responsible and clear growth model--always along major highways, always filled with tons of people looking for their eggs in a basket and crap on the walls. A look at the 200DMA over five years says that we missed the boat, though:

As you can see, it doesn't look like their is a lot of unforeseen growth potential.

We took a look at Kraft, but it's only been around six months as KRFT. Wawa is privately traded, so no good for us. Then there's Hormel (HRL), which is undervalued

The search continues. However, it must be noted that we are starting to get comfortable with the process of picking stocks and analyzing them for their potential investment value. It should also be noted that we haven't actually purchased one of these yet.


Profit!

Workin' from the bottom up.

Unilever - Dove, Axe, and Ben and Jerry's?!

Unilever falls under a number of different names with different stocks that go under the working name, "Unilever Group"  We'll look at the PLC, since it is the most affordable.

Rank	Ticker1	Company Name	IndustrySector	Current Stock Price1	Projected Stock Price2based on Projected P/E	Projected Stock Price2based on PEG	Projected EPS3	Projected Company PEG3	Projected Industry PEG3	Projected Growth Rate4	Relative PEG Value5	% Under/Overvalued PEG5
1.	STKL	SunOpta, Inc.	Food - Major Diversified	$6.32	$6.44	$27.77	$0.48	0.38	1.67	34.65%	Undervalued	338.60%
2.	HOGS	Zhongpin Inc.	Food - Major Diversified	$12.85	$19.71	$44.71	$1.47	0.48	1.67	18.21%	Undervalued	247.22%
3.	DOLE	Dole Food Company	Food - Major Diversified	$10.18	$13.28	$12.69	$0.99	1.34	1.67	7.67%	Undervalued	24.38%
4.	LANC	Lancaster Colony	Food - Major Diversified	$71.14	$58.33	$67.50	$4.35	1.76	1.67	9.29%	Overvalued	5.60%
5.	HNZ	H.J. Heinz Compan	Food - Major Diversified	$58.46	$50.82	$41.02	$3.79	2.38	1.67	6.48%	Overvalued	42.80%
6.	UL	Unilever PLC Comm	Food - Major Diversified	$38.61	$31.38	$17.62	$2.34	3.66	1.67	4.51%	Overvalued	119.60%

Unilever is very overvalued according to the PEG calculations which is what we learned that we should use for established companies.  Unilever has over-recovered.  Skip it.

SunOpta is a organic food company.  They do generic foods and seem to run the whole process by themselves.  They sell to both manufacturers and restaurants.  Very broad based company.  This might be where your Publix Greenwise comes from.  In a growing economy, we're guessing that this company could do very well, but we're not so sure about a shrinking one.



Here is a quick comparison to SPY.  We've got some more volatility there.  That stock value may have something to do with it.  This got us to a quick macro discussion about organic food in general and maybe we should look for a fund so that we wouldn't be trying to pick a winner.

We started looking for organic food ETFs and found the following:
http://www.dailyfinance.com/2012/06/19/huntingtons-ecological-strategy-active-etf-first-o/

This rather new ETF contains a group of established companies in what we consider an odd mix.

Another interesting article we ran into had the following quote (http://www.topstockanalysts.com/index.php/2012/03/08/5-misunderstood-etfs-explained/):

"Though some investors no doubt buy these funds because of the utility derived from avoiding “bad” companies, there is a case to be made for these methodologies producing above-average returns over the long run. Companies that stay on the right side of the law and act as responsible corporate citizens are more likely to avoid costly lawsuits and build loyal customer bases–two factors that can boost profitability over the long run."

This is a nice thought.  I'm not sure if it will pan out, but it'd be nice.  Another article on the same topic:
http://seekingalpha.com/article/723161-huntington-s-top-stocks-here-s-why-eco-investments-are-smart-investments

With that, we have covered none of the stocks that we said that we would last meeting.

Profit!

Debbie Downer Economy

We were taking a look at our portfolio, and currently everything but our blasted Brazil fund is up, so much so that we are at a total profit of about 6% despite EWZ's poor performance. We are looking at a year of slow growth and a generally down economy, so the challenge becomes what do we do. We were wondering what could go up in a down world.

A while back we were talking through some stock valuation strategies, and it sounds like we need to do that for serious now.

So here's the strategy:

Find a brand that we all recognize  and has been around for a long time, that we expect to be around for a long time, but also hasn't quite recovered yet.

Here's our list:

Kraft
Chipotle
Proctor & Gabmble
CVS/Walgreens
Wawa
Hormel
Boston Beer Company
Craft Brewers Allaince

Some of these are less established than others, but we are going to take a look and see if anything indicates that it might be undervalued. The bottom line is that we really need to just get in there and invest something, because holding cash doesn't make a lot of sense--unless things are going to be really, really bad.


Profit.

Dividont's!

Members present: Brian, Bickford, Yousef

The Dow just changed. Kraft is out, and some medical company is in. The managers in charge of the Dow Industrial Average must think that this change will best represent the market as a whole, but we're not really certain.

Europe is still trying to sort things out, but the market seems mollified for the moment.

One of our members has a goofy onestock.com share of Apple in a nifty frame--it was a wedding present, and he has been ignoring the thing's actual value for some time. However, he's not collecting dividends on the thing. He needs to look into that, and figure out what his most highly-valued piece of art can do for him. This also means that he has taxable income from those dividends, which in turn means that he will need to report those dividends.

Our portfolio is moving up.

ENZL has moved up about $3.50 since we purchased!
SPY is at an all-time high for up (purchased at $119), currently at $147

There are two ways we can play the exit strategy for SPY:
1. Buy and hold until the KOL finance portfolio is done...when we retire forever from video boxing.
2. Or we could sell constantly (this makes tax stuff a little more complicated, however we need to consider dividends anyway).

EWZ...ugh. Diversity appears to have bitten us there.

However, here's the breakdown of our meager portfolio. You will notice a 7% gain in the value, which should take into account dividends being rolled back into more shares (or portions of shares).

The positions listed below represent your holdings as of the previous market’s close. Market values are delayed by at least 15 minutes.

		Symbol/ CUSIP	Security Description	Quantity	Acquired Date	Holding Period	Average Unit Cost	Cost	Market Price	Market Value	Unrealized Gain/Loss	% Gain/Loss	Covered
		ENZL	ISHARES TR ZEALAND INVST ZE	16.0000	08/09/2012	Short Term (329)	$31.1375	$498.20	$33.4620	$535.39	$37.19	7.47%	Covered
		EWZ	ISHARES INC BRAZIL INDEX FD	6.0000	05/27/2011	Long Term	$75.1467	$450.88	$57.0600	$342.36	-$108.52	-24.07%	Non-Covered
		SPY	SPDR TR UNIT SER 1	4.0000	11/15/2010	Long Term	$122.3200	$489.28	$147.2400	$588.96	$99.68	20.37%	Non-Covered
		T	AT&T INC	16.0000	12/27/2011	Short Term (103)	$30.3175	$485.08	$37.2600	$596.16	$111.08	22.90%	Covered
	** Total All Asset Classes							$1,923.44		$2,062.87	$139.43	7.25%

It's nice to see some positive movement in the portfolio, even if it is just inflationary.

If we would have invested all of our lot in SPY, we would have been up 20%. However, if we would have gone all-in with EWZ, we would have been down 24%. Diversifying may take away those dizzying highs, but it also mitigates the doldrums.

Profit!