Investment Club Sep 2010

Just a quick note to record the investment club decisions this month.  Four stocks were presented - that might be a first for the club.  Overall the portfolio is in better shape than it has been in quite awhile.  We still need less technology and more mid and small cap stocks.  We'd also like to increase the estimated sales for the overall portfolio.

We decided to:
Sell $2,500 worth of Fiserv (FISV).  Reasoning:  it is a technology stock and our largest holding, almost too large and it gives us enough cash to buy into a new position in one of the stocks presented tonight.

Buy $3,100 worth of Quality Systems (QSII).  This stocks was the best of the four presented and it meets several of the portfolio needs.  It's a quality stock (78.1) with a project return (PAR) of 16.7 which is greater than our current portfolio PAR and is expected to growth at 20%, well above portfolio average growth of 9.4%.  This small cap stock is in the health care sector.

The other stocks presented were Synutra (SYUT) - a food processing company, Atheros Communication (ATHR) - a communications company, RECN - a staffing company.

Investment Club - July 2010

Only four members in attendance at this meeting - attendance always goes down in the summer. We did not present any new stocks at this meeting.  We didn't have an updated spreadsheet so our portfolio review was just cursory.  Regardless I think we made good decisions.

Number of Stocks:  14 (goal is 16 plus or minus 4)

Company Size:  We assume this is still the same as last month.  Large, Mid and Small are all out of tolerance.  Our intent was to lower large cap and increase small or mid cap.
Sectors:  We assumed this is still the same as last month.  All in tolerance except for Technology.  We decided that whatever we did we would try to lower our exposure in Technology and at a minimum we would not increase it.
Individual Stock Percentage:  Neutral Tandem (TNDM) is  too low as a percentage of our portfolio.  Our methodology says that we need to sell or add more. 
Percent Annual Return: in the sweet spot but on the low side
Quality: Good
Growth: in tolerance but on the low side

Individual Stocks analysis:  Two stocks are of concern.
Neutral Tandem (TNDM) due to being a small percentage of the portfolio and the news on Apollo (APOL)is not good.  Irene sent out before the meeting some analyst notes about Apollo.  Most telling was the comment by one analyst that an investor should "forget about it".  Also, the PAR for Apollo is 28 which is well above the sweet spot and just too good to be true.


Our intent this month is to maintain PAR and Growth while improving Mid and Small company size while addressing the stock that is a small portion of the portfolio.

DECISION:  Sell all of Apollo based upon the negative news and our poor expectation about the future of the company given the government take over of college funding (for profits will most likely be squeezed by the government).  With the proceeds from the sale and our available cash we voted to purchase $3,000 worth of US Ecology (ECOL) and about $1800 of Neutral Tandem (TNDM).  Both stocks are small cap and have PAR's in the sweet spot.  The purchase of additional TNDM also raises its percentage of the portfolio into the acceptable range.

Investment Club - June 2010

Five members in attendance at this meeting.  Terry presented a new stock to the club, American Science Engineering (ASEI).  The company engages in the development, manufacture, marketing, and sale of X-ray inspection and other detection solutions primarily for homeland security markets in the US and internationally.

Number of Stocks:  14 (goal is 16 plus or minus 4)

Company Size:  Large, Mid and Small are all out of tolerance.  We need less large and more mid and small.
Sectors:  All in tolerance except for Technology.  We need less technology but are getting close to our goal of no more than 25% (now at 28.1%)
Individual Stock Percentage:  Two stocks Hornbeck (HOS) and Neutral Tandem (TNDM) are too low as a percentage of our portfolio.  Our methodology says that we need to sell or add more.  This is the first time since we've adopted this methodology we have TWO individual stocks out of tolerance.  Last month Sun Power (SPWRA) was too low and we decided to sell.
Percent Annual Return: in the sweet spot but on the low side
Quality: Good
Growth: in tolerance but on the low side

Individual Stocks analysis:  Two stocks are of concern.
Hornbeck Offshore Services (HOS) not only is too small a percentage of the portfolio but its PAR is just north of zero (was negative last month) and Neutral Tandem (TNDM) due to being a small percentage of the portfolio.


Our intent this month is to increase PAR and Growth while improving Mid and Small company size while addressing the stocks that are a small portion of the portfolio.

DECISION:  Sell all of Hornbeck (HOS).  The current long term outlook for the oil related stock is not positive and the club does not have enough information to determine if the market has over reacted to depress the price or if there is a fundamental long term down draft for the oil industry.  Removing HOS from the portfolio improved PAR if we use the funds to purchase a higher PAR stock.  The overall quality of the portfolio is improved as HOS quality is only 32 with 65 or higher being quality on this 1 to 100 scale.

Buy American Science Engineering (ASEI) with the proceeds from the sale of HOS and available cash.  ASEI has a PAR of 15, quality of 70.6, and a 16% growth rate improve all three of these factors.

Continue to hold Neutral Tandem (TNDM) although it is a small holding.  Our belief is that the price has been driven down unfairly by a recent lawsuit that has not been ruled in its favor.  TNDM is a well managed company so we plan to hold on and to add to the holding in the future.

Apollo (APOL) is on the hot seat for next month.  We don't like the fact that the government has taken of the college loan programs.  The government will most likely tighten down lending at the for-profit colleges like Apollo which will hurt profitability.  On-going lawsuits are another concern.

Investment Club - May 2010

Investment Club YenoM had an excellent meeting on May 17, 2010 with six members in attendance.  Carl presented a new stock to the club, U. S. Ecology (ECOL).  The company is one of the older firms that recycles of hazardous material (radioactive, polychlorinated biphenyls, etc) and not-hazardous industrial waste.  It services both commercial and governmental entities.


Number of Stocks:  14 (goal is 16 plus or minus 4)
Company Size:  Large, Mid and Small are all out of tolerance.  We need less large and more mid and small.
Sectors:  All in tolerance except for Technology.  We need less technology
Individual Stock Percentage:  One stock, SunPower (SPWRA) is too low.  That means we need to sell or add more.  This is the first time since we've adopted this methodology that an individual stock is out of tolerance.
Percent Annual Return: in the sweet spot but on the low side
Quality: Good
Growth: in tolerance but on the low side

Individual Stocks analysis:  Two stocks are of concern.
Sun Power due to low position and a very low quality rating and Hornbeck Offshore Services (HOS) due to a negative PAR and slightly low quality rating.


Our intent this month was to increase PAR and Growth while improving Mid and Small company size.

DECISION:  Sell all of Sun Power (SPWRA) and use the funds plus available cash to purchase U. S. Ecology.  Reasoning:  Sun Power is not a quality company (based upon Manifest Investing) and the news seems to indicate that their product is not cutting edge.  Their growth rate is around 6% which seems low for a company of this nature.  U. S. Ecology's PAR is in the upper portion of the sweet spot, is a quality company with better growth prospects than Sun Power.  So these decisions had the impact of improving overall growth potential and replaces a stock that we had lost our confidence in.

Investment Club - Jan 2010

Investment Club YenoM recently met with 7 members in attendance.  Our portfolio is in pretty good shape based upon the criteria we are using to manage it.  We need to add more small cap stocks that are not in either the technology or healthcare sectors.

We decided to sell all of our Linear Technology (LLTC) stock and use the proceeds of the sale and $1,000 in cash to purchase Neutral Tandem (TNDM).  Neutral Tandem is a company that provides “interconnection services principally to competitive carriers, including wireless, wireline, cable, and broadband telephony companies in the United States.”

We made these decisions for the following reasons:

Sell LLTC:

1.      Lowers our technology holdings which were above the amount the club set as the upper threshold

2.      No one in the club has the background to properly understand and follow the products produced by LLTC

3.      Eliminates the next to the lowest PAR stock in the portfolio (PAR was 8.3% vs portfolio PAR of 14.3%)
 
The only downside of selling LLTC was it lowered our percentage of stocks of the mid cap size - something we are trying to increase.  However, the positive aspects of reducing the holding outweighed this negative.

Buy TNDM

1.      Adds exposure to a new sector (Telecom)

2.      Increase our small cap holdings which were well below the targeted amount

3.      Increases the overall PAR for the portfolio (PAR for stock is 19.2% vs 14.3% for the portfolio)

Investment Club - Dec 2009

The December 2009 meeting of Investment Club YenoM was a quick one (just over an hour).  There were only 5 members in attendance which makes for less discussion and quicker decision making.  No one came with a new stock to present which also sped things up and not necessarily in a good way.  The club really needed to add a mid or small cap stock in an industry that was not technology.  We were not able to do that tonight.

We discussed selling Linear Technology (LLTC) because it had the lowest percentage annual return (PAR) in the portfolio and no one in the club really understands how Linear makes money – what is the product it sells. However if we sold LLTC we didn’t have another stock to replace it with so we decided to continue to hold until we have something better to add to the portfolio.

So with the almost $2000 we had in cash – some left over from last month and some from our monthly contributions we decided to add to current stocks we own - $1000 to Apollo (APOL) and $750 to Fiserv (FISV).

Fiserv is a mid cap stock (a good thing), with a PAR higher than the portfolio PAR (a good thing).  Our additional purchase will make Fiserv almost 12% of the portfolio (getting close to being too much).  All of the news on Fiserv is positive.

Apollo is large cap (not a good thing), with PAR greater than the portfolio (a good thing), and our contribution brings it up to an almost perfect percent of the portfolio (a good thing).  There has recently been some positive news on Apollo and there still is the cloud of a government lawsuit hanging over the industry.  We still feel confident of the investment.

Investment Club-Nov 2009

My investment club, Club YenoM, decided to sell all of our Oracle (ORCL) stock.  Factors that led us to this decision are:

1.      We had more stock in the Technology sector than we wanted (32% vs 25% desired)

2.      We already own Microsoft and the group felt better about the future of Microsoft and, at a minimum, we understand how they make money better

3.      We are attempting to lessen our exposure to large cap stocks

4.      The projected annual return (PAR) is 12.6% while the overall porfolio’s is 15% so selling ORCL and replacing it with higher PAR stocks will improve the expected return of the portfolio

We decided to hold on to $200 of the proceeds from the sale to invest next month.  The remaining money from the sale will be equally divided between FTI Consulting (FCN) and NVE Corp (NVEC).  Here’s the reasoning.

1.      FCN is a mid cap and NVE is a small cap thus improving our position in those sectors

2.      Both companies had PAR’s in excess of 16% which is better than ORCL’s

3.      FCN is in the financial sector

4.      NVEC is in the technology sector so we didn’t reduce tech as much as the sale of ORCL might indicate.  Our desire to improve PAR overrode the technology sector diversification needs

Next month we will be on the hunt to add an additional stock to the portfolio with almost $2000 in cash.  We decided that the stock should be a small or mid cap and NOT technology.

Portfolio Management June 2009

My investment club met last night (Jun 8, 2009). We reviewed two new stocks and followed our portfolio management process. The overall shape of the portfolio is better than it has ever been so we decided to:

Sell our remaining holding in Lowes (LOW). The stock was our lowest PAR (percentage average return) and we didn't think the future looked good for the stock.

Buy additional shares of Fastenal (FAST). We purchased the stock a month or two ago and it still looks good and did not have a "full" position yet.

Buy an initial position in Apollo Group (APOL) with the $$ from the sale of Lowes. Apollo seemed to be the best company in the education group. We also considered Strayer and ITT.

Stock Decisions

Last night (May 11) my investment club met. Let me explain what an investment club is, just in case you don't know. Investment Club YenoM is made up of 14 individuals that contribute various amounts (from $25 to $100) each month and then we meet to determine stocks to buy and sell. We use software designed by IClubCentral to keep track of how much each of us own. It works just like a mutual fund with two exceptions. We only value the stocks once per month (a mutual fund does it daily) and the club members make investment decisions (a mutual pays big bucks for others to make the decisions).

We have a well defined portfolio management process with 7 separate criteria.

Last night we decided to sell 1/2 of our position in Lowes (LOW) and purchase a similar amount of Fastenal (FAST).

We decided to sell Lowes for 3 reasons: 1) our projection for the future return was lower than any other stock in the portfolio 2) it is a large cap stock and we have too large a percentage of our stocks in large cap and 3) sales growth projection was too low.

We decded to buy Fastenal for 3 reasons: 1) it is a mid cap stock and we need more mid cap 2) our projection for 5 year return put it in what we call the "sweet spot" and will raise overall portfolio return and 3) sales growth is 13% which will raise the oveall portfolio sales growth.

We had an new person join the club, welcome Irene and one visitor.

Portfolio Management

Here are the seven criteria that my investment club uses to decide on stocks to add or remove from our portfolio. I'll give a brief description of the criteria. If you have any questions please leave a comment.

1. Number of Stocks: 16 stocks plus or minus 4. This is enough stocks to be diversified but not too many to follow.

2. Company Size: Large Cap stocks 50%, Mid Cap stocks 25%, and Small Cap stocks 25%. We want stocks of all size because one never knows what are going to be the next ones to increase. Our weighting towards Large Cap is a bit more conservative than I would like. We have had problems finding Mid and Small Cap stocks so this forces us to keep looking.

3. Sectors: We use 10 different sectors as defined at Manifest Investing. Our goal is to have no more than 25% in any one industry and no more than two industries with no stocks. This helps to make sure we aren't loading up on stocks in one sector.

4. Portfolio PAR: PAR stands for Percentage Average Return. PAR is our estimate of the return we might expect from a stock. We also use Manifest Investing to give us an estimate of the weighted average PAR. We look for portfolio PAR to be 5 to 10 percentage points above the median PAR of all the stocks in the Manifest Investing data base.

5. Portfolio Quality: Manifest Investing has a method of measuring the quality of the companies. We expect our overall quality for the portfolio to be above 65 (Excellent).

6. Portfolio Sales Percentage Increase: We look at the weighted average percentage expectation of the increase in sales for the portfolio. We want it to be between 10 and 14 percent - generally toward the high end of the scale.

7. Individual Stock Percentage: We don't want any stock to be more than two times its proportional share nor less than 1/2 that same share. For example, if there were 10 stocks in the portfolio a proportional share would be 10%, therefore, we won't want any stock to be more than 20% nor less than 5% of the portfolio.

It's always fun trying to balance all of these.