World Brands: Opportunities Outpace Cash

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Well, despite my best intention to keep plenty of cash on hand this year, the recent repeated buy opportunities have managed to soak up all of the cash available for trades. Nothing near a sell point, and I could currently add to three positions (NOK: Maybe it is a blessing that I don’t have cash to buy deeper into NOK right now; CICHY: Blessing offset–I think China banking stocks are going to continue to outpace their AmerEuro counterparts; JPM: I think this is a real missed buy opportunity, as JPM has been unduly punished for their headline loss).

Well, next week the Brandz update for 2012 is released (May 22), which is my semiannual opportunity to reevaluate all positions. At the moment, I’m holding the top 48 WB companies (but have enough cash to only cover a little over 1/2 of a normal trade). In the rebalance I’ll likely sell down to only 46 positions, giving myself about a 5% cash cushion going forward. Really deeply hoping that Blackberry and Nokia fall off the list (Telefonica could use a good whacking, too). But, we’ll let the analysts decide, and just see what happens next week.

Is Obama trying to Kill my investment savings?

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Under the President’s plan, capital gains taxes will double, all capital earnings will be subject to additional taxes, and the dividend tax rate will nearly triple. Um, really? Don’t you think this might just have some effect on the desire for even small investors like me to stay in the equities market? As I’m sure the market movers are doing, I’m now looking at alternatives to capital investing to grow my nest egg in the event this disaster of a proposal approaches fruition.

What will this do to the stock market?

There will be a flight from equities into annuities and other investment vehicles not subject to such a tax. While Wall Street won’t collapse, such flight will result in an epic market drop, make it much more difficult for companies both large and small to access the equities market for funding, and kill hope for yet another generation. After the drop, there will be opportunities to invest, but for the individual investor such investment will be favored in IRAs, 401Ks and other tax-sheltered accounts.

The flight from bonds will make access to the bond markets much more expensive for companies of all sizes. Bonds being favored as safe investment vehicles for fixed-income reliant investors (i.e. the elder generation), drops in bond values will wipe out the nest eggs of those most vulnerable and least able to recover.

I know that the idea behind this is that people who make a lot of money should be punished by having more of their income taxed, so it can be handed out to those less fortunate. This shuffling of money from those most capable to those less capable will magically make the economy better. That’s right taking money away from the people who generate jobs (making it harder for them to afford to create more jobs) and giving it to the government to hand out to people who need jobs (making them even more reliant on government largess) is considered a rational idea by this administration.

I’m not down on all of the President’s policies, and am not a “reflex hater” of everything he says or does. But his economic plan for America is ruinous. Under his leadership, we continue to flounder economically. Instead of fulfilling his promise to use our money to rebuild infrastructure, he has largely wasted it on government handouts that have done nothing to create a foundation of growth for the future. And now he asks us to elect him for 4 more years of the same.

Sorry, but I don’t think so.

First Quarter Update: World Brands Portfolio

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Ok, a quick review of 1Q and total performance:

First Quarter 2012:
SP500: 14.37%
WBP: 17.21%
Delta: 2.84%

Since Inception (8/10/2009):
SP500: 13.54%
WBP: 12.02%
Delta: -1.52%

The first quarter of 2012 saw the portfolio gain overall in real terms and relative to the SP500. Still underperforming, but as money continues to move into general equities, I’m hoping the relative gains continue. There are a few reasons to believe this (can’t pay the bills with hope, you know):

  • The retail investor is finally returning to the market. Tired of tepid (well, that is a generous word) returns in traditional savings vehicles, and with the bond market similarly anemic, the reduction in stock volatility and overall rise in stock prices in the 1st quarter will draw more small investors back to the trading counter. Such investors tend ot invest in companies they know and trust…by definition most of the stocks in this portfolio fall into this category.
  • More large corporations are reporting higher profits…a trend that should result in an increase in real equity value that should translate into a similar rise in stock price.

My real portfolio has the top 48 stocks in this list. Here are some 1Q stats for those stocks:

  • 41 of the stocks had a positive return for the period. 40 of the stocks have a positive overall return.
  • Biggest quarterly gainers: Apple (+48.04% annualized), Citigroup (38.92%), JPMorgan Chase (38.29%), Daimler AG (37.96%), and BMW (34.59%)
  • Biggest quarterly losers: Tessco (-15.13%), Hewlitt-Packard (-7.49%), Verizon (-4.71%), Telefonica (4.54%) and McDonalds (-2.22%)
  • Total trades for the quarter: Sold 35 positi0ns; Bought 23 positions (each transaction reduces or adds 10% to the position)
  • Biggest gainers overall (on a simple, not annualized, percentage basis): Apple (+207.23%), Nike (+78.63%), Visa (+68.83%), Altira Group (66.99%), and McDonalds (65.75%)
  • Biggest losers overall: Hewlitt Packard (-27.87%), Telefonica (-26.13%), Research in Motion (17.02%), Deutch Telecom (-16.91%), and Tesco (-16.87%)
  • Trades per month: January-30; February-15; March-13

Observations:

  • MCD, one of the worst for the quarter, is in the top 5 gainers overall. Patience pays with a quality stock.
  • As volatility goes down, so do trades. VIX starte January over 23, dropping to 15 by the end of March.
  • I’m expecting RIMM (currently #34) to fall out of the top 50 this quarter. Also, expecting Facebook’s IPO. Facebook is currently ranked 35 by Brandz and is not currently on Interbrand’s list. This puts it #53 on the blended list…but I would really expect Interbrand’s October release to recognize Facebook as a high-valued brand. So, might not add FB on the IPO, but almost certainly with the October rebalance.
  • NOK is also underperforming the portfolio. But, unlike RIMM, I see a lot of continued potential in Nokia. They have a quality world brand, great manufacturing capacity, and a solid placement to provide emerging markets with non-smartphones. They had one of the first smartphone platforms (Symbian) but their marketing of it was a disaster…so their move to Windows Mobile is actually a pretty positive strategy for them. Looking for NOK to rise again as earnings come in over the next few quarters.

First Quarter Update: Foolish Dividends

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Well, the Foolish Dividends portfolio continues to lag the broader market through the end of the first quarter. Here’s a quick scorecard:
First Quarter 2012:
SP500:+14.15%
FD: +6.27%
Delta: -7.88%

Since Inception (2/9/2009):
SP500: +14.75%
FD: +23.1%
Delta: +8.36%

Seems that money continues to move to general equities, which are still historically undervalued. The rush to dividend payers in 2009/2010 resulted in this portfolio’s impressive performance during that time, and the legacy of those gains continue to contribute to an overall exceptional portfolio return.

We are entering a period where more companies are increasing or initiating dividends. Bank stocks (with a couple of notable exceptions) are now looking at fairer dividend weather ahead, with the stamp of approval of the Fed. I am expecting to see some rally in dividend payers over the remainder of the year. Will it be enough to offset the 1st quarters relative weakness? Check back in 9 month and I’ll let you know.

Sunrise at 30,000 Feet

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Sunrise at 30,000 Feet


I don’t normally take a lot of pictures with my phone. They are generally of such poor quality I really wish there was another name for them than “photograph.” I thought maybe “phonograph,” but that word has already been used. But, I didn’t have my camera out when the sun started rising behind the airplane, and this gorgeous view appeared, so I tried a quick snap with my phone. To my delight (and surprise), it turned out to be a very nice picture.

Enjoy

Foolish Dividends: 3 Years Old, Today

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Today marks the 3 year anniversary of the start of the Foolish Dividend portfolio. Here is a quick static snapshot of the overall performance as of today:

Since 2/9/2009
9.73%Yield
14.64% Yield on Investment
Historic Return
Year FD SP500 Delta
2009: 54.72% 31.26% 23.46%
2010: 42.20% 11.71% 30.50%
2011: -3.83% -0.26% -3.57%
2012: 5.56% 9.79% -4.23%
All: 24.15% 13.47% 10.68%

All in all, 24% annual return is a pretty satisfactory result. The only strategic change moving forward is to keep more of a cash position. In 2011, I “soaked up” all my cash by taking partial positions when I added a new stock. As a result, when the market fell, and I had buying opportunities, I had no cash available to take advantage of those opportunities. This was likely a significant contributor to 2011′s lousy return vs SP500.

2012 has started out negative vs SP500, but as much of the gain in this portfolio comes in the form of periodic dividends, you really need to take an entire quarter (or more) to get a true picture of relative performance.

Well, on to the 4th year!

After January’s Boom — Wary and Ready

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Wow, 2012 has started off with a huge stock rally, and the two portfolios tracked on this site (World Brands and Foolish Dividend) went right up with the rally. Here’s a quick status check as of 2/1/2012:

  • SP500: Up over 9.5% since 1/1/2012
  • World Brands: Up over 12.5%
  • Foolish Dividends: Up over 9.1%

Those aren’t annualized numbers, folks that is plain old up, up, up. That kind of lift in only 1 month would translate into more than doubling your money in a single-year, were it to continue. I don’t normally try to read the future, but in this case, I don’t need to spill any entrails or look into the bottom of my tea cup to know: this kind of uplift won’t continue.

That the first couple of days of February have continued the upward march only makes me more nervous.

Fortunately, both of our portfolios have a built-in response to irrational exuberance: Sell more often. In our World Brands portfolio, we trimmed back our positions in:

  • Apple
  • BMW
  • Citigroup (x2)
  • Daimler (x2)
  • Disney
  • Honda
  • Hewlitt Packard
  • Microsoft
  • Nokia
  • Research in Motion
  • SAP
  • Wells Fargo

And only added to positions in:

  • Tessco (x2)
  • Citigroup
  • Google
  • Colgate-Palmolive
  • Research in Motion
  • Proctor & Gamble

As you can see, along with an overall rise, volatility in Citigroup and RIMM resulted in both adds and subs for those securities (and double sells for Citigroup and Daimler). Net result is we have a pretty heavy cash position right now…perfectly poised to snap up shares in the nearly sure to be coming correction. Could add up to 21 increments to the existing positions with the cash on hand. This is much better than the cash position during last year’s correction…I missed the opportunity to pick up 7 or 8 positions during the drops.

Coming up, we’ve got the Facebook IPO. Facebook actually ranks about 27 in my blended world brand valuations. So I’ll likely pick up Facebook and bump Siemens off the top 50 list of publicly traded brands once they execute on their IPO.

For Foolish Dividends, we trimmed back on:

  • Apollo (AINV)
  • Cypress (CYS)

And added to:

  • Breitburn (BBEP)
  • Linn Energy (LINE)

Fewer overall positions in the FD portfolio, so much less action. Also, going into the beginning of 2012, most of the holdings in FD were closer to their “buy more” trigger points than “trim back”, so most required more than a 10% lift to get back to sell territory. So, not as much cash in FD at the moment, but still enough to snap up 7 increments.

Phosphor E-Ink Digital Watch (UPDATED)

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Summary: Timeless Technology 

Just got the Phosphor World Time Sport E-Ink digital watch. Above show the main display both normal and in reverse-display mode. Below is a view showcasing the curve of the display.

I haven’t worn a watch in a long time…I usually just look at my smart phone to see what time it is. But, I am interested in new display technologies, so decided to drop the c-note (and I will wear it…I do occasionally go places where the smart phone isn’t convenient).

The display is exceptionally readable in either normal or reverse (white on black) modes. The information on some of the screens is a bit cryptic until you get used to where things are. You set the watch by a combination of swipes and taps on the two light sensors below the display (they call this a touch lens display, but the display lens itself is passive…the two little spots below the display accomplish the touchiness). Swiping in one direction allows you to switch amongst the various displays. Swiping in the other direction switches between normal and reverse display modes.

One thing you won’t find on the watch is a display backlight. So, if you intend to use this at night, bring your own light.

Overall, I found the programming to be pretty non-intuitive. Took me 2 sessions to finally figure out what to do when to set what. Now, I am a guy, so tried not to read the manual too much…but even after completely reading the booklet, I found I had to keep referring back to it until I finally understood what they were trying to tell me to do. To be fair, all watches are limited in their intuitiveness by their lack of controls…it is difficult to have a product operate easily when you’ve only got a couple of unlabeled buttons to work with. This watch adds the complexity of having swipes, double-taps, and tap-and-hold maneuvers in the process. But, I blame the 2 days it took me to really get things set on a poor presentation in the manual.

UPDATE: Must add a major minus to this great looking watch: If you wear long sleeves with it, be prepared for all settings to be randomly changed at any time, as the sleeve “false swipes” across the sensors. Every single day I’ve worn the watch, I have had to go in and reset the correct city, the correct time…even the month and year have been changed. Big disappointment.

Plusses:

  • Great showcase for the ability to curve the I-Ink display technology.
  • Clear, crisp, easy-to-read display
  • Lightweight and comfortable

Minuses:

  • Manual makes programming more difficult than it needs to be.
  • No backlight
  • Watch continuously gets settings changed when wearing long sleeves. Maddening. Leaves me timeless more often than not.

Cue the Christmas Music

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Ok, last week I was given an accusing stare-down at my morning Starbucks when I said “Geez, you are already playing Christmas Music.” The Barrista just stared at me with a “What, are you some kind of Christmas Hater” expression (but maybe it was indigestion and not indignation…I frequently confuse the spelling of the two). For the record, no I don’t hate Christmas. I rather enjoy it and the music in the same way I enjoy alcohol or other indulgences…in moderation and at the appropriate time and place.

This is official notice that the time has arrived (the place is up to you, but please use good taste…).