Review of Previous Companies of the Week

This week we will review our selection of Microsoft as the Company of the Week.

1 Week Ago – Microsoft Corp (MSFT)

This has been a very good week for owners of Microsoft stock.  When we selected the company last week, the stock price was $24.43.  Today’s closing price was $25.67, a gain of 5.1%.  Last week, the company ended its stock repurchase auction and announced they will only be buying back about 1/5 of the shares they originally planned to repurchase.  The fact that holders of the stock did not want to sell at the top-end price of $24.75 illustrates the widespread belief that the price of the stock will rise in the coming months, reaffirming our selection.

In other news (Wall Street Journal Article), the company reached a deal with Facebook Inc. to be the sole provider of ads for the popular social networking site.  This news was very surprising mainly because the company Facebook sold the ads to was not Google.  Could this be a sign that Microsoft will be able to compete successfully with Google going into the future?  We believe it is.  Facebook is a major website that many college students use – including the authors of this site and virtually all of their classmates – and the fact that Microsoft controls the ads instead of the more "hip" Google appears to be a sign of things to come.

We reaffirm our belief that the stock has the potential to reach $37/share in the next few years and is suitable for the enterprising investor following Benjamin Graham’s value investing strategy.

Jon currently holds a position in Microsoft (MSFT).  Also, please review our disclaimer.

 Please discuss this post in our forums.  Your contributions help mold our future articles.

Review of Ben’s Portfolio

This week I decided to buy more Dollar General (DG) in an effort to lower my average cost.  I bought 238 additional shares at $12.58/share.  I figure if I liked the company at $13.40, I like it even more at $12.58.

 I also bought McClatchy Company (MNI), our company of the week.  I bought 169 shares at $40.15.

This portfolio will follow our modernized Benjamin Graham value investing approach, starting with $100,000 and $10 commissions.  Taxes are ignored.

The performance of Intel (INTC) was marginally good this week.  Marine Products Corp (MPX) and Dollar General (DG) were both down on the week.  Overall the portfolio has underperformed the Dow and the S&P 500. However, this is likely because I have a lot of cash still sitting there.  In the weeks ahead I plan on investing the rest of the cash, but if I do not find companies I would like to invest in, there is no need to.  I’d rather have cash gaining 0% interest (and losing 0%) than own a company I don’t have faith in.

This week’s snapshot: 

Ticker Total Cost Current Value %Gain/Loss
DG $9,514.68 $9,095.34 -4.39%
INTC $6,521.25 $6,877.50 5.48%
MNI $6,795.49 $6,778.59 -0.25%
MPX $6,510.15 $6,601.95 1.37%
       
       
Cash   $70,659.11  
       
Total $29,341.57 $100,012.49 0.01%
       
Performance   Week’s Change: Overall:
S&P 500   1.07% 2.12%
Dow Industrials   1.01% 1.49%
Portfolio   -0.50% 0.01%

Neither of us held a position in any of the companies mentioned at the time of publication.  Also, please review our disclaimer.

Please discuss this portfolio in our forums.  Your comments help mold our future articles.

The Market this Week

This week the market posted significant gains on tame inflation and lower oil prices. The DJIA posted a gain of 2.6%, NASDAQ gained 5.2%, and the S&P gained 2.8%. Major individual gains on the week included Altria Group (MO), which rose 3.9% due to court rulings that investors view will give the company the needed strength to fuel its planned breakup. Also, Microsoft (MSFT) posted a 4.3% gain on the week due to plans to buy back shares under a previously announced plan (Microsoft was our stock of the week).

On Tuesday, the Producers Price Index (PPI) fell 0.3% in July, which was below expectations of a 0.2% rise. Even when factoring in energy and food prices the PPI still only managed a minimal 0.1% gain. These numbers where music to investors ears as it eased fears of overheating of the economy. Further, it re-enforced the idea that the Federal Reserve’s pause in rising interest rates will continue.

Oil was down for the week on news that the Israel-Lebanon conflict had at least temporarily ended on a cease-fire agreement. Crude was down 4.32% or $3.21 a barrel. Also, BP announced that partial use of their Alaskan pipeline was back online, which helped the decline in oil prices.

Stocks that declined this week included Wall Mart which posted its first quarterly profit decline in a decade. Dell fell 2.9% on the week on news of disappointing earnings and regulatory investigation of accounting practices.

As we make our way closer towards the mid-term elections, we can expect volatility as we have seen in the past few months. Continue to select your stocks according to Benjamin Graham’s policy of value investing looking for undervalued securities that meet your individual investing criteria. Have a productive and profitable week!

-Ben and Jon

ModernGraham.com

Review of Defensive Low PE Portfolio

This portfolio is made up of the 15 defensive stocks that are trading at the lowest PE Ratio.  Each month we will review the list, and make any trades necessary to get the portfolio to match the list.  The list of defensive stocks is made by following modernized Benjamin Graham strategies, and PE Ratio is calculated using an average of the previous 5 years’ earnings per share (EPS).

There were two dividend payments for this portfolio this week.  First, on 8/15, Lennar Corp (LEN) paid a dividend of $0.16 which was reinvested at the day’s closing price.  Then, on 8/16, Thornburg Mortgage paid a dividend of $0.68 which was also reinvested at the day’s closing price.

This portfolio significantly outperformed both the Dow Jones Industrial Average and the S&P 500 over the week. 

The current value is calculated using prices near close from Thursday.

The snapshot:

Ticker

Total Cost

Current Value

% Gain/Loss

ASH $6,490.00 $6,541.00 0.79%
BL $6,479.20 $6,509.70 0.47%
DHI $6,527.35 $6,851.25 4.96%
FAF $6,420.70 $6,815.30 6.15%
FNF $6,458.10 $6,766.00 4.77%
FRE $6,338.30 $6,697.90 5.67%
KBH $6,577.35 $6,816.90 3.64%
LEN $6,463.95 $6,692.93 3.54%
MDC $6,544.00 $6,721.50 2.71%
MTG $6,523.60 $7,105.20 8.92%
PHM $6,508.00 $6,795.00 4.41%
RYL $6,435.60 $6,916.80 7.48%
SPF $6,522.25 $6,925.50 6.18%
TMA $6,460.10 $6,522.41 0.96%
TOL $6,478.80 $6,686.89 3.21%
Cash $2,772.70
Total $100,000.00 $104,136.98 4.14%

Performance:

 

Last Week

This week

Change

Overall

S&P 1271.81 1297.48 2.02% 2.02%
Dow 11124.37 11334.96 1.89% 1.89%
Portfolio 99890.5 104137 4.25% 4.14%

Neither of us holds a position in any of these stocks.  Please review our disclaimer.

Review of Ben’s Portfolio

Well a week has gone by since I started this portfolio.  After considering buying a few stocks today, I have decided to leave the portfolio unchanged this week.  It still is only 3 stocks – very dangerous diversification level, but I just don’t feel comfortable with any of the stocks I looked at today.  There is no reason to rush into purchases.

This portfolio will follow our modernized Benjamin Graham value investing approach, starting with $100,000 and $10 commissions.  Taxes are ignored.

The performance of the 3 stocks was pretty good this week.  They were all up.  Overall the portfolio outperformed the Dow, but not the S&P 500 this week.  I think that’s pretty good, considering I only have about 20% of the funds invested – the rest are just sitting there doing nothing.

This week’s snapshot: 

Ticker

Total Cost

Current Value

%Gain/Loss

DG $6,508.70 $6,620.25 1.71%
INTC $6,521.25 $6,806.25 4.37%
MPX $6,510.15 $6,709.05 3.06%
       
       
       
Cash   $80,458.50  
       
Total $19,540.10 $100,594.05 0.59%
       
Index Performance     Week’s Change
S&P 500     1.04%
Dow Industrials     0.47%

The Market this Week

This week the market was tested by various factors that created an overall downturn. All major indices saw a decline of roughly 1% with the S&P 500 showing the lowest loss of all with a .5% loss for the week.

There were major factors that tested the market this week including the terrorist threat in Europe, rising energy costs, and continued fears of inflation. The latter two have been impacting the market for quite some time, but the former had an interesting effect on the market. The United States equity markets have become very resilient to terrorist threats and this week’s events did not change that trend. All indices produced positive gains on Thursday following the announcement in the UK that terrorist suspects had been apprehended in an apparent aviation planned attack. These events, however, had adverse effects on the airline sector still trying to recover.

Energy costs actually declined following the events in Europe as investors anticipated a decrease in air travel. The developments in the Alaskan oil fields earlier in the week, however, created turbulence that shot oil prices higher on fears of deceased supply and higher costs. British Petrolium (BP) is unsure when the pipelines will be back functioning fully, so we will have to wait and see what effect this has on oil prices, and the overall market long term.

Overall, it seems that we are stuck in the middle of fears of a slowing economy and rising inflation, but if corporate profits maintain their overall health there are still opportunities. Again, though, as value investors we are concerned with weekly events, but it does not affect our long term investing goals. We cannot be blind to current events, nor ignore them as we must continue to be as Ben Graham calls “Intelligent Investors”. Have a productive and profitable week!

-Ben and Jon

ModernGraham.com

Review of Enterprising High ROIC Portfolio

This portfolio is made up of the 15 enterprising stocks that are trading at the highest Return On Investment Capital (ROIC).  Each month we will review the list, and make any trades necessary to get the portfolio to match the list.  The list of enterprising stocks is made by following modernized Benjamin Graham strategies, and ROIC is calculated with a formula based on Warren Buffett’s definition of Owner Earnings and Contributed Capital.

 Since this is the first month of the portfolio, we will start with $100,000 and $10 commissions.  All of the stocks listed were "purchased" using prices from Wednesday’s close.  The current value is calculated using prices near close from Thursday.

The snapshot:

Ticker

Total Cost

Current Value

% Gain/Loss

ADBE $6,457.25 $6,603.05 2.26%
CHH $6,488.70 $6,441.30 -0.73%
CHKE $6,507.75 $6,525.75 0.28%
CPSI $6,456.70 $6,456.20 -0.01%
DEBS $6,447.75 $6,770.50 5.01%
EC $6,441.70 $6,431.70 -0.16%
EPAX $6,515.20 $6,487.00 -0.43%
FDS $6,536.50 $6,457.50 -1.21%
GGG $6,574.25 $6,627.25 0.81%
KSWS $6,490.00 $6,686.40 3.03%
LLTC $6,572.50 $6,644.40 1.09%
MSFT $6,486.60 $6,460.70 -0.40%
RGLD $6,489.00 $6,437.20 -0.80%
STRA $6,575.00 $6,695.00 1.83%
SYNT $6,499.00 $6,577.20 1.20%
CASH $2,462.10
Total $100,000.00 $100,763.25 0.76%

Neither of us holds a position in any of these stocks.  Please review our disclaimer.

Review of Enterprising Low PE Portfolio

This portfolio is made up of the 15 enterprising stocks that are trading at the lowest PE Ratio.  Each month we will review the list, and make any trades necessary to get the portfolio to match the list.  The list of defensive stocks is made by following modernized Benjamin Graham strategies, and PE Ratio is calculated using an average of the previous 5 years’ earnings per share (EPS).

 Since this is the first month of the portfolio, we will start with $100,000 and $10 commissions.  All of the stocks listed were "purchased" using prices from Wednesday’s close.  The current value is calculated using prices near close from Thursday.

The snapshot:

Ticker

Total Cost

Current Value

% Gain/Loss

BHS $6,533.00 $6,602.75 1.07%
BMHC $6,470.40 $6,457.30 -0.20%
BZH $6,405.30 $6,279.05 -1.97%
CD $6,513.55 $6,401.40 -1.72%
CTX $6,436.00 $6,431.40 -0.07%
HOV $6,440.00 $6,360.00 -1.24%
JBSS $6,515.20 $6,484.40 -0.47%
MHO $6,565.90 $6,441.10 -1.90%
RSH $6,476.15 $6,545.15 1.07%
SAFM $6,478.65 $6,479.60 0.01%
SRT $6,479.25 $6,548.35 1.07%
TOA $6,496.00 $6,365.25 -2.01%
TUES $6,525.00 $6,655.00 1.99%
WCI $6,470.00 $6,464.25 -0.09%
WON $6,517.50 $6,203.50 -4.82%
CASH $2,678.10
Total $100,000.00 $99,396.60 -0.60%

Neither of us holds a position in any of these stocks.  Please review our disclaimer.

Review of Enterprising Value Portfolio

This portfolio is made up of the 15 enterprising stocks that are trading at the lowest discount to their intrinsic value.  Each month we will review the list, and make any trades necessary to get the portfolio to match the list.  The list of enterprising stocks is made by following modernized Benjamin Graham strategies, and intrinsic value is calculated by a formula based on Graham’s overall philosophy of calculating value with a margin of safety.

 Since this is the first month of the portfolio, we will start with $100,000 and $10 commissions.  All of the stocks listed were “purchased” using prices from Wednesday’s close.  The current value is calculated using prices near close from Thursday.

The snapshot:

Ticker

Total Cost

Current Value

% Gain/Loss

Neither of us holds a position in any of these stocks.  Please review our disclaimer.

Review of Defensive High ROIC Portfolio

This portfolio is made up of the 15 defensive stocks that are trading at the highest Return On Investment Capital (ROIC).  Each month we will review the list, and make any trades necessary to get the portfolio to match the list.  The list of defensive stocks is made by following modernized Benjamin Graham strategies, and ROIC is calculated with a formula based on Warren Buffett’s definition of Owner Earnings and Contributed Capital.

 Since this is the first month of the portfolio, we will start with $100,000 and $10 commissions.  All of the stocks listed were “purchased” using prices from Wednesday’s close.  The current value is calculated using prices near close from Thursday.

The snapshot:

Ticker

Total Cost

Current Value

% Gain/Loss

Neither of us holds a position in any of these stocks.  Please review our disclaimer.

Back To Top