Looking at sectors

Bless this mess.

We are way overdue for a buy. Someone suggested looking at sectors to get an idea of where to narrow things down. What sort of sectors are doing particularly well (and might continue to do so)? Which sectors aren't doing well but might bump up soon? Google Finance also gives the top five gainers and losers (by volume, price, market cap, etc). These are limited to relatively large cap stocks (i.e .bigger companies), which should, in theory be more stable for most of the time. These might be good places to start.

Really what we're trying to do is make sense of the data we see. We'd like to be able to speculate as to why something is up or down. So, we look at a trend and try and figure out it

Take a look at energy over five years, one year, and year-to-date, respectively:

What could that mean? 

Also, current events might be a good source if information. Say, solar panels are in the news, what does the mean for the energy sector? What about secondary industries? The point we're trying to make is this might be a good line of reasoning to figure out investment prospects. But, of course that means we won't be buying anything today. 

Profit!

Next time, we should narrow our focus down to a few sectors (tech--the best and energy--the worst).

Hot Spreadsheet Action!

Our spreadsheet will never be this cool. 

Last week we mentioned that things were a little weird with how SigFig calculated things, so today is update the portfolio day. We pulled the information from Morningstar to update our portfolio spreadsheet just so we can keep track of things.

Here's our current portfolio sector weighting:

We started having a conversation about whether or not to buy a phone. One of our members was wavering--his phone wasn't working, which led him to think about it being new phone time. But then it started working again, and he started to waver. The decision paralysis set in. Which is a pretty relevant thing to consider. We've all spent more time than is necessary to think on a problem when we could have just acted. By the way, we still need to make a buy.

Profit!

Picking and Choosing

Peace and Love, Peace and Love. Ringo might not write you back anymore, but he'll sell you some shoes. 

Last week, a few of us met and talked about a potential investment strategy. One of us chose the consumer cyclical sector, specifically sports footwear. The rationale was that it is consumer cyclical, and it will do well if the economy was doing well. Also, it is historically strong, and it won't collapse, because, hey, people wear shoes.

So now he looked at which companies are there, and which ones have a lot of potential for growth
because they've been suffering or are potentially undervalued. He chose Sketchers, which was sitting around 19 and this week it is at 21--a bit of a bump. That is pretty good growth, but of course this is just one stock in one week. Originally, it was at 23 and had a 20% drop, which has nearly been recovered. It is important to note that, as an investment, it is good that it didn't go up all in one day, because you wouldn't be able to purchase it quickly enough to reap the gains.

This strategy would have worked well  in the short term. We tend to be a bit lazy, or let's long term. So what we might do is to look at something that we think will have some more long term growth potential.

Taking the same strategy, we took a look at the biggest losers based on price on google finance (google sorts this by percentage loss). Here's what we found:

*McKesson (drug retailers)
Synaptics (computer hardware)
World Fuel Services (petrol)
AmerisouceBergen (drug retailers)
Novo Nordisc (pharma)

Looking at this, you can tell the medical sector took a big hit. So if you look at related companies (in that sector), you see this is the case.

Look at this, the three we should look at are McKesson, AmerisourceBergen, and Cardinal Health.

Another company we pulled up is Synaptics.

You can see that it wasn't the sector that took a hit, just Synaptics.

The proposal is, that we're working through a strategy for making a purchase immediately following one of our meetings. This would not necessarily work for stocks to discuss next week. Therefore, once we have the strategy established we can do a quick run-through and identify potential stocks. This would let us dedicate more time in a meeting to choose one of those individual stocks. If for some reason we can't agree with something that week, we can take the same approach next week, based on the previous Friday's performance. This is sort of a day-trader strategy applied to a longer term investment. Of course, we don't know that and we're just guessing. We're essentially looking at what happened yesterday, so that we can make a purchase the next time the market is open.

As an aside, you can look at the weekend as a sort of long evening, in terms of buying and selling stocks.

Since this is a short-term strategy, we can set an automatic sell limit at some threshold, say 10% or some dollar amount. Also, if we're dealing with risky stocks, we can set a sell limit if it falls below some threshold as well. This helps us avoid another EWZ.

Really, we're trying to figure out what we're doing. Once we know that a little better, we can start implementing this with some degree of confidence.

Profit!

Lets Buy Some Tech

As we lick our wounds from the recent bloodletting in the market, we find ourselves needing another buy. We would like add a little more tech to our portfolio.

One way to think of the tech sector is as a domestic emerging market. It is high risk, with a potentially high reward. Throw in the explosive growth expectations, and you have something that can be exciting or disastrous. We're looking at your Pets.com--we had such high hopes.

So we need to decide between foreign and domestic tech. Right now a foreign tech company is attractive because it doesn't expose us to the craziness of the American market. A few months back we looked at some Asian Tech. Basically, we need to choose between either one of the Asian tech funds (EWY, AAIT, EWT) or the Vanguard Tech ETF (there's gotta be one, right?).

Profit!

Use those staples with discretion?

Last week we talked about how emerging markets were showing a slowdown, but we really didn't have any understanding of why. Conveniently, this story on Marketplace aired. Basically, when the US economy was crap, emerging markets were a good place to park some money for a reasonable return. As the domestic economy heats up, emerging markets are less enticing. Couple this with possible corruption and mismanagement of finances, and our USA USA USA economy seems like a better place to put your dollars. Maybe this sort of big macro news should compel us to even out our portfolio with our next buy by looking into something in the US. We can still look to better balance our sector weighting, but do so with a domestic investment.

Consumer Discretionary had been going pretty well, and as you can see below, it has been tracking (and outpacing) the US economy as a whole. This fund, as a Consumer Discretionary ETF, has been going in the direction you would expect for a recovery. You will even see the recent dips for both VCR and SPY are in line.

If you take a look at the Vanguard Consumer Staples ETF (VDC), you see another correlation:

We also noticed how the beta is calculated differently for the same item on say Yahoo Finance and Morningstar. We're not really sure why, but perhaps it may have to do with the way each is calculated. Really though, we are interested in beta in terms of broad strokes. Is something a little or a lot over or under a beta of 1? Since we are so risk-averse, we tend to prefer a lower beta, and there is not much difference to us between say 0.5 and 0.6. It makes sense to just stick with one method (or site) and use solely that for reference.

It might be a good idea to take a look at the Motley Fool's definition of beta for even further reading.


Next week we try to narrow down our purchase options. Right now we are torn between something in Discretionary, Staples, or Asian Tech, and we just need to pull the trigger on something.

Profit!

Got my business socks on...

It's business time...thanks, New Zealand!

Apparently most of our profits have come from ENZL, the New Zealand ETF we bought. Thanks, Kiwis! Then there's SPY, which has been doing excellent.

This article is an interesting take on putting together an investment strategy. It might be some good reading.

We are taking a look at TDC, Teradata Corp, a data mining, storage, consulting, etc. company.

• Pros: This company seems to be involved in a lot of different industries, which would make it possibly more resistant to changes in those particular industries. 

• Cons: No dividend. 

• Good/Bad: We are not heavy in technology. 

There is nothing really pulling us toward this particular stock, however it is an interesting thing to invest in. Perhaps we can find a more undervalued or attractive company to invest in that does the same sort of things. 

Next week, we take a look at TD, Toronto Dominion Bank and some of the other Avi stocks.

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. 

effin' ETFs!

Members present: Brian, Bickford, Yousef (and a unicorn?)

We finally bought some ENZL, but not when we were expecting. We put in a bid price for when the market opened on Monday, but the stock opened a few cents more per share, so Scottrade didn't buy it. However, when the fund dipped below a few days later, we were able to get it at about $4 lower, nearly taking care of the trading cost!

The bid-ask spread was really big with ENZL, partially because the volume is really small and also because it was the weekend. Because the bid-ask spread was large we would have spent several dollars more per share to buy the stock. Since we are dealing at such low dollar amounts, we have to take a look a our margins being eaten up. The bid-ask difference goes into paying the middlemen along the way. If we were dealing in larger dollar amounts it wouldn't be as significant to us.

Speaking of ENZL, from an article on seeking alpha:

             New Zealand's GDP grew a much faster-than-expected 1.1% in Q1, helped by a rise in   

             agriculture and business services. Economists had targeted 0.5% growth. It's NZ's fastest pace  

             of growth in nearly five years, but some strategists worry "the large rise will only cast further  

             doubt on the veracity of the national accounts data, which have been subject to considerable 

             revisions recently. 

                    (link here)

Seeking Alpha has some neat-o stats and links to news related to a particular stock or fund. It is worth checking out for research and monitoring. Glancing over the site, though, we noticed some unfamiliar terms and started talking about parsing all the financial-ese. Here's a nifty glossary for some of those terms. 

Take for example concentration risk, which is a numerical value that tries to explain just how diverse (or not diverse) a fund is. A high concentration risk would mean that there are a lot of different parts to the stock and it is fairly diverse. Take SPY, the S&P ETF--it has a concentration risk of about 8%, whereas ENZL has one hovering at 22%. This means ENZL is less diverse, and while that might not be a problem, it is good to be aware the makeup of an investment. 

The diversification of an ETF means that if one individual stock in a fund tanks, the other parts mitigate that, which is really the appeal of an ETF in the first place. 

You have a few types of ETFs:

Market Share Weighted:

     Market share indexes are based on the number of shares of each company in that exist in the   

     market.

Capitalization Weighted

      Capitalization weighted indexes are based on the market capitalization of the company--the size of   

      the company. 

Float Weighted:

      Each stock is based on how many stocks are floating, or being traded.

Price Weighted:

     Two stocks of the same value, A and B.

     A has double the market cap of B. 

     A makes up twice the percentage of the portfolio than B because of the market capitalization (based   

    on how big a company it is). A will have twice the impact on the value of the fund because it is 

    twice the percentage of the portfolio. 

    The DOW is price-weighted, which means it only depends on the price of the stock. The DOW has   

    fifty stocks, and the fund has one share of each of the stocks. The value of one share of the DOW is  

    the combined price of one share of each of those fifty stocks. Only a cool thirteen large. 

And then there's a few more stuff that we're not even going to attempt to get into (Price, market share, market capitalization, fundamental). 

     

The point of all this is to try and understand what exactly effects the value of an ETF. Really getting this might help us be more informed when we select (and eventually sell) shares of various funds. 

It's a process, yo!

Profit!

Buy low, sell high...Buy HILO?

Members present: Brian, Bickford, Danak

Overall we are down 1.7% in our admittedly meager portfolio. This is despite EWZ, our Brazil fund, being 32% below our purchase price. This is truly where diversity is paying off.

Speaking of diversity, it is buy time again, and we're still having trouble finding something that works. Brian was thinking about HILO, a low volatility fund centering around emerging markets.

Looking at the chart, things don't appear good. This seems to have all the not volatility of a wooden roller-coaster, but if you look at the scale, you'll notice that things are swinging between a low of about $16.50 and a high of about $21.



Here's HILO's holdings by sector:

The subject of dividends came up again, and we were trying to understand the implications when a company offers dividends. You take a company like AT&T, that has been around forever (in some form or another). They are probably not going to display gangbusters growth, so dividends can be looked at as a way of enticing investors, thus gaining capital for the company.

*There's a nice discussion, here.


And then there's Norway:

It is still trending down, but has it hit bottom? If we can catch it at the right time, it might be our next buy. 

Here's their holdings, by sector again:



New Zealand is also a prospect:

ENZL, the Kiwi fund.

Here's their holdings by sector:

Random charts:

Brazil...ugh.

SPY: Humming along.

AT&T: Have you called your mother recently? Judging by the share price, you have. Thanks.

For next week:

We really need to figure out the next buy.

Profit!