Saturday, December 7, 2013

Investment Idea Sharing December 7, 2013

This Week's Activity – December 7, 2013: 
The next Investment Idea Sharing monthly meeting is this Tuesday, Dec. 10
at my house at 7:30PM.


This week, all the world market indices were down.  Possibly just taking a small break after the great run up of 2013. Here is a good article that presents some facts and charts trying to show we are NOT in a stock market bubble yet.  http://wallstcheatsheet.com/stocks/3-signs-were-not-in-a-stock-bubble.html/?ref=YFI still think the markets are overpriced, but this article reminds me that I really am not capable of predicting where the markets are going.  Which brings me back to the fact that as a conservative fundamental value investor, I must continue looking for under priced stocks of good solid companies.  

On Tuesday, I attended an online class from Charles Schwab called “Strategic Trading in Today’s Market”.  They had several excellent charts showing current market trends that helped me continue to believe that the market is over priced.  You can see these same slides and you may disagree with me.  Here is the link to their excellent slides:  http://wcc.on24.com/event/72/30/67/rt/1/documents/slidepdf/trading_with_a_macro_perspective_1_24virtual.pdf  Pay particular attention to Slide 5 that shows Margin Debt > $401Billion in Sept. 2013, an all time high.  And Slide 17 that shows how similar the run up of the S&P 500 was from 2003 to 2007 as compared to now, 2009 to 2013.

StockEvaluator ‘Short List’
This week, I have changed the ‘Short List’ screen to require a stock to meet stricter criteria beyond <5% above 52 week low and <5 Red cells.  ‘Short List’ now screens to additional fundamental value limits that I look for in a stock before considering it as a possible buy.
‘Short List’ now includes these added screening criteria:
     1. Price / Earnings < 20
     2. Price / Sales < 1.5
     3. Price / Book Value < 2
     4. Enterprise Value / Revenue < 1.5
     5. Enterprise Value / EBITDA < 6.5
     6. Debt / Equity < 80%
     7. Goodwill / Equity < 50%
     8. Revenue Growth > 0%
     9. Profit Margin > 0%
   10. Current Price Above 52 Week Low < 15%
   11. Dividend > 1%
   12. Dividend Payout Ratio < 60%

‘Short List’ screener will now screen for stocks that meet these limits.  Then I will do more research to determine if each stock is truly a good buy.  This new ‘Short List’ screen will quickly show me these good fundamental value stocks every week.  Since these new ‘Short List’ screening criteria are much stricter, there may be some weeks when no stock is good enough to make this list.

Stocks on the “Short List” this week are:  CAJ , UMC
Neither are within 5% of their 52 week lows.  I have owned UMC since 2009 due to its 2.4% dividend, and will not buy any more if it drops lower.  But, I would like to own CAJ when it gets back down to its 52 week low.

Stock Evaluator ‘Volatility Sort’
Stocks on the ‘Volatility Sort’ have Current Price <5% above 52 week low, Volatility >3%, Profit>0%, <6 Red cells in Stock Evaluator.xls. 
Stocks on the “Volatility” list this week are: NTWK, GMAN
Both are less than $1 Billion in revenues, so I am not interested in either.
   
MutualFundEvaluator ‘Short List’ shows funds that are within 3% of their 52 week low AND have less than 3 Red cells.  This week’s list has 35 funds.  All except 1 are Bond funds, and all are still 3 to 7% above their lows from 2006 to 2008 before The FED dropped interest rates to bring the U.S. out of the recession.  When interest rates go down, bond prices go up, and when interest rates go up, bond prices go down.  These bond funds only pay a 3 to 4% annual dividend and I think they will go down another 3 to 4% when The FED finally lets interest rates go back to historic levels.  I will continue to wait before buying any bond funds because I could lose a whole year’s worth of interest if I buy back in too soon.  For example, BGNMX closed this week at $10.65, down from 2011 high of $11.30, but still 8% above 2007 low of $9.89.  My target buy price for BGNMX is $10.45.
Here is the 10 year chart for BGNMX that shows these price ranges:

Watching the interest rate on 10 year treasury notes gives another hint of when these bond fund prices will get back to normal.  As this interest rate comes back up, the prices of these bond mutual funds will go down.  The interest rate on 10 year treasury notes closed this week at 2.88%, up from 2012 low of 1.50%, but way below 2006 - 2007 highs of 5.2%.  My minimum target for 10 year interest rates is 3.5% before I will be ready to buy back into bond mutual funds.
Here is a chart showing interest rates over the past 13 years for 10 year treasury notes:

Next Monthly Meeting 2nd Tuesday of every Month:
Tuesday, December 10, 2013 , 7:30 PM at my house. 

Here are my Stock BUYs for This Week:
Stock Symbol:
Buy Date:
Buy Price:
Target Sell Price:

Here are my Stock SELLs for This Week:
Stock Symbol:
Sell Date:
Sell Price:
Buy Price:
Buy Date:

Here are my Option (CALL or PUT) Sells for Last Week:
I only Sell Covered CALLs or Cash Secured PUTs
Option:
Stock Symbol:
Sell Date:
Expiration Date:
Strike Price:
Option Price:

StockEvaluator and Mutual FundEvaluator spreadsheets are available for download at www.ultimatestockfinder.com

Please remember to send me any other investing ideas, information or questions that you want to share with the group.

Thanks,
John D.

Disclosure: The author has no positions in any of the stocks or mutual funds mentioned in this article unless clearly stated above. We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article.  Please see our full legal disclaimer at:  http://www.ultimatestockfinder.com/stockevaluator_disclaimer.html
______________________________________________

Visit Our Website UltimateStockFinder.com for More Investing Ideas:
At "Stock Evaluator", you can download various pre-sorted views of this week's StockEvaluator spreadsheet.  All the financial data is refreshed every weekend into StockEvaluator which contains over 3,000 company stocks.  We will add any company you would like to the list. Download "StockEvaluator spreadsheet" at: http://www.ultimatestockfinder.com/ 

At “Mutual Fund Evaluator” download this weeks MutualFundEvaluator spreadsheet.
MutualFundEvaluator is also updated weekly and currently contains over 1,200 mutual funds.

Run the various Ctrl-_ sort commands in StockEvaluator and MutualFundEvaluator to bring the best companies to the top based on their key financial values. 

Also, View our YouTube training videos to learn how to use StockEvaluator and MutualFundEvaluator.

At "Training" read more information on how we do our investments.
   “Training Module 1 - Why Use StockEvaluator.xls  And How to Use It”
   "How We Use PUTs and CALLs to Minimize Risk and Increase Profit on Each Buy & Sell"
   "S&P 500 Total Return Comparison" spreadsheet for 25 year comparisons of many funds
   "Compare Annuity Returns, Expenses and Death Benefit v.s. Managing it Yourself"

At "Links" you can find our favorite links for good investing information including:
   Screener for New 52 week lows
   Screener for Good Fundamental Values
   Screener for Stocks with High Volatility
   Links that show current P/E values for the major worldwide indexes. 
   Current Prices and 52 week ranges for major commodities

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