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anticitrade (99.49)

Ben Graham is Rolling in his grave. (And accountability for recent real money trades)

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August 04, 2009 – Comments (39) | RELATED TICKERS: TWIN , AMED , AIRT

Accountability for my strategy and tests.

First the fun stuff: Ben Graham vs The MF Community Liquidation Method

On 7-27-09 I evaluated over 4,000 companies to determine the best buys based on Ben Graham’s liquidation calculation (benliquidation) and the one I developed with the help of the community (justliquidation). I then picked all the pickable tickers indicated as undervalued by both systems (about 30 each, with some overlap) and FUN ensued.

The current rankings are:

Portfolio Score Accuracy

Justliquidation 66.49 64.52%

Benliquidation 52.17 59.26%

Not too shabby for auto-generated stock lists! (Ben is probably rolling in his grave) I will continue to monitor these two portfolios as time goes on. Maybe in another month I will run my query again and adjust the portfolios accordingly.

Benliquidation - Based on Ben Graham's liquidation
(Total current Assets-Total Liabilities)/Shares

Justliquidation - Based on our calculation of liquidation
((Total assets-Intangibles-0.5*Net PPE-0.5*Inventory-0.15*Accts Receivable-0.5*Other Long Term Assets)-(Total Liabilities))/Shares

It’s also been a while since I talked about my real money trades. I do this because I think it makes me a better investor (more responsible) and it may create some value for others. The gains all include the transaction costs ($19.99 for each of the buy and sell orders…. OUCH!)

             Start           Current     Gain

GRT        2.718          3.47     25.16%
KNDL      12.32         11.84      -5.9%
JAKK      12.98        11.50 -13.18%
WCC       26.38        25.58      -4.97%
AMED    30.63         44.45       42.13%
TBSI        7.89           8.42 4.61%
TWIN       6.56           10.66      60.88%
ISYS       8.46            7.4      -14.27%

MTA 16 18.81 15.64%

PRGN 3.928 4.64 16.03%

SBN SOLD 117.06% Return

I also recently sold HURC which I had bought before I began accounting for my transactions for a 44.15% gain and bought:

AIRT 8.678 8.73 -.7% (Transaction costs make this negative so far)

Obviously not everything there is "in the green" but I don’t really expect it to be. My strategy has always been buy heavily discounted companies, hold them until they are fairly valued (either by new financial statements, or increased price). The important thing to note is that the distribution of gains is positively skewed. With high transaction costs, you better aim for the fence or find a good index fund.

Good luck!   And to learn more about how I make my picks go to https://www.anticitrade.com (its free).

39 Comments – Post Your Own

#1) On August 04, 2009 at 4:01 PM, portefeuille (99.96) wrote:

benliquidation

justliquidation

 

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#2) On August 04, 2009 at 4:10 PM, ReadEmAnWeep (91.38) wrote:

How do you automate your search?

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#3) On August 04, 2009 at 4:19 PM, ReadEmAnWeep (91.38) wrote:

Also, why not use a discount broker. $7 compared to $20. That would help out with commissions a lot.

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#4) On August 04, 2009 at 4:20 PM, anticitrade (99.49) wrote:

Thanks port, I have been slowly adding more and more links to my posts...  But I didn't want to overdue it and make it obvious that I was copying you. :)

Reademanweep,

I built a computer program that pulls 10 years of financial statements for each company and then computes liquidation values, discounted cash flows, etc from that.  I use this for all my picks on CAPS and real life.  Anything more specific you want to know?  And it was really hard, and requires weekly maintanence.

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#5) On August 04, 2009 at 4:23 PM, anticitrade (99.49) wrote:

Reademanweep,

I got sick of my mutual fund money in my ROTH IRA spiraling down.  So I took it over to see if I could do better.  I am now to the point where I have another 10 grand or so that I may use to start a new account with a discount broker.  Any ideas on who is the best discount broker to use? 

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#6) On August 04, 2009 at 4:26 PM, prose976 (67.54) wrote:

Go with Fidelity.  Gold level gives you $8 trades, a ton of other features, and their customer service is unsurpassed.

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#7) On August 04, 2009 at 4:30 PM, anticitrade (99.49) wrote:

Interesting.  I am with Fidelity now, sounds like I need to go Gold.  Thanks for the tip prose!

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#8) On August 04, 2009 at 4:40 PM, ReadEmAnWeep (91.38) wrote:

Ya, you could try to upgrade you account with them since you would be more familar. I use Scottrade. They seems pretty good. You could also look into Etrade. These both cost ~$7 a trade.

There are other deep discount brokers (~$4 a trade?) online but they seem more sketchy to me, lol.

 

Can't think of anything else to ask about that right now, since I wouldn't have the time to make my own. Lol. I saw the anticitrade.com site, it says your annual return on investopedia was 633.8%. That is nuts, was it really that high? It seems that if you can get that you can go ahead an retire right now, lol.

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#9) On August 04, 2009 at 4:40 PM, bullishbabo (100.00) wrote:

The following quote is from an interview with Ben Graham in the 1970s, which was not long before he passed away.  I found it in The Rediscovered Benjamin Graham by Janet Lowe.  

"Imagine -- there seems to be a practically foolproof way of getting good results out of common stock investment with a minimum of work.  It seems too good to be true.  But all I can tell you after 60 years of experience, it seems to stand up under any of the tests that I would make up.  I would try to get other people to criticize it."

Ben Graham was a proponent of quantitative analysis and was a fan of stats and ratios, as long as they proved that you were buying a stock cheap.

Ben Graham, if he truly understood your methods, would not roll in his grave.  As long as you have devised a solid method of buying things for less than they're worth, I believe Graham would approve.

In the quote above, I believe Ben Graham was talking about stock screening or mechanical investing.  I am sure of it.

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#10) On August 04, 2009 at 4:48 PM, danielthebear (97.35) wrote:

what was the accuracy (and return) of the overlapping stocks?

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#11) On August 04, 2009 at 4:57 PM, ocsurf (61.86) wrote:

PRGN went nuts today. That stock should continue to go up until earnings are announced. I've been riding this since $3.50/share

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#12) On August 04, 2009 at 5:14 PM, StopLaughing (< 20) wrote:

FNSR was up 20+% the last I looked. Preliminary revenues are up. Appearently sales are picking up.

 

I actually own a few shares of this. 

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#13) On August 04, 2009 at 5:30 PM, darroj (99.26) wrote:

I use zecco. I don't have enough money in there for free trades (25k equity gives you 10 free trades a month), but $4.50 a trade is pretty good.  It's pretty barebones, but I do most research on here, yahoo, and quarterly/annual reports...

TWIN was nuts today too.  I posted on your last blog to see if you felt it was a fair reaction to earnings or not. 20% gain today seemed a bit extreme (but I loved it since I bought it after you brought it to my attention!)

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#14) On August 04, 2009 at 5:32 PM, ozzfan1317 (< 20) wrote:

Sharebuilder is good Its 4 dollars for automatic investments or 9.95 for real time trades.

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#15) On August 04, 2009 at 5:32 PM, StopLaughing (< 20) wrote:

Before anyone goes diving into FNSR, I thought I should mention a couple of things I have observed.

1. Institutions own 50% of the shares. They control the price. Over the couple of years I have traded it, I have learned that it does not always react the way you would expect based on news. 

2. They and JD Uniphase are the primary optical cable companies. Uniphase is probably a better investment. 

3. I view this stock as basically unpredictable. It will either fold or eventually make a good move. In my view it is an open ended option that has an unknowable time period. 

4.  I almost bailed on it Friday and yesterday because I was disgruntled with it and today it popped. Who knows where it goes next. 

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#16) On August 04, 2009 at 5:47 PM, JakilaTheHun (99.93) wrote:

Fwiw, I'm not sure that comparing your own Liquidation Value method with Benjamin Graham's would be a very good comparison since we are investing in a totally different era than Ben Graham.  Generally speaking, accounting is less subject to distortions now and constant media attention and open access to financial statements creates checks on accuracy that didn't exist in Ben Graham's time. 

Also, keep in mind the differences in technology between the two respective time periods.  It's arguable that the equity markets are more "efficient" now due to an increased number of participants and an increased level of information.  I wonder how big of a pain in the ass it probably was to get ahold of financial statements in Graham's time --- I guess they were mailed to you if you were a shareholder, but if you weren't how did you obtain them?  Mail the company directly and ask for them?  Inspect them in person?  Guess my point here is simply that it took a lot of time and effort to obtain information back then, whereas, we just get online and make a few clicks.

It's completely possible that the "deals" that Ben Graham was able to get on stocks simply tend not to exist as much in our generation. If he were alive, he might adjust his methods significantly. 

 

 

 

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#17) On August 04, 2009 at 6:50 PM, anticitrade (99.49) wrote:

Daniel the bear, 

I quickly calculated the accuracy of the ones they BOTH picked to be about 58% (looking at anything that beat the market by any amount).

Jakila,

Excellent comment.  I agree, the opportunities that exist now are VERY different from Ben Grahams.  His screening method took over 4,000 stocks down to 27!  Of those 27, most probably have some accounting methods that cause a false positive.  The more I have learned about Ben Graham the more I identify with his investing style, although I feel it needs a 2009 facelift.

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#18) On August 04, 2009 at 6:54 PM, anticitrade (99.49) wrote:

darroj,

I agree with you about TWIN.  That was a crazy big gain today.  I value it at: 12.11 as of now.  I will ran it through my model again tonight and see if any of the recent info changes that.  I will post here with the results.  I am glad that this stock worked out for you, now if only I can get JAKK and ISYS to kick into action....

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#19) On August 04, 2009 at 11:13 PM, anticitrade (99.49) wrote:

Darroj,

Just checked on TWIN.  Of my 10 factors I test for 8 still recommend it as a hold/buy.  However, my 2 favorite factors based on the DCF are not positive.  This is mostly a consequence of increasing trends in investment in PPE and NWC. Despite this, TWIN does show a lot of positive trends in the % of sales of COGS, Inventory, Other current assets, and other long term asset.  I am not selling yet.  I think they still have a very easily defendable 10-20% return left in them.  I am of course not evaluating the soft issues, since that is not my strength.

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#20) On August 04, 2009 at 11:27 PM, throwerw (99.80) wrote:

interesting stuff, keep up the good work

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#21) On August 04, 2009 at 11:42 PM, FleaBagger (99.13) wrote:

anticitrade - I use thinkorswim.com because I don't have a lot of capital, and they let you write puts with just $4,000 in your account.

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#22) On August 05, 2009 at 1:36 AM, bellamyj (< 20) wrote:

I built a computer program that pulls 10 years of financial statements for each company...

 I have a similar spreadsheet that automatically downloads financial data for a group of companies and screens for liquidation value and other parameters.  My only problem has been finding a suitable list of companies to screen.  The best I've found so far is the membership list of the Russell Microcap Index.  What index or list of companies did you run your screen against? Report this comment
#23) On August 05, 2009 at 8:33 AM, JakilaTheHun (99.93) wrote:

Hmmm ... another thing to consider on Graham's liquidation value formula --- I'm not sure how "Goodwill" was accounted for during his time.  Accounting for Goodwill and Intangibles has changed substantially over the past few decades.  It's a constant area of friction between accounting rules boards and corporations. 

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#24) On August 05, 2009 at 9:28 AM, anticitrade (99.49) wrote:

Bellamyi,

Finding good lists of stocks was harder than I thought.  It has been a while since I collected my list, but I got the lists from all the major indexes, and then added the list found here on MF.  I then screened that list for companies that havent reported numbers for several years, financial companies, de-listed stocks, and non-us stocks so that I could avoid misrepresenting a group of stocks because of different accounting rules or lax auditing.

I hope that helps.

Jakila,

I am not sure how they considered goodwill.  But, I think it is unlikely that it was considered a current asset or current liability (which seemed to be the focus of Ben Graham).  However, you make a good point about accounting rule changes and general practices which may affect other current assets and liabilities.  It seems to me that Ben Grahams method was an overly simplistic method for calculating liquidation.

 

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#25) On August 05, 2009 at 10:00 AM, darroj (99.26) wrote:

Thanks anticitrade :) I have to go thoroughly read the earnings at some point... I'd love to hold it as a long term capital gain, but I don't want to get too greedy considering my ~60% gain :)

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#26) On August 05, 2009 at 3:00 PM, ReadEmAnWeep (91.38) wrote:

So, I signed up for anticitrade.com, but nothing happend. It just says login, and when I do it doesn't change anything. Lol, is it not rdy yet?

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#27) On August 05, 2009 at 3:52 PM, darroj (99.26) wrote:

I just signed up as well, but it seems to be working fine for me.  Is there a section on there which tracks your individual purchases? That would be a nice feature to add in my opinion (I know you do it here, but it shows how much confidence you have in your program...)

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#28) On August 05, 2009 at 4:14 PM, anticitrade (99.49) wrote:

ReadEmAnWeep,

I am sorry to hear that, I just tried creating a new account myself to see if it would work and didn't have a problem.  If this continues to be a problem tell me the web browser you are using so we can get this fixed.

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#29) On August 05, 2009 at 4:22 PM, anticitrade (99.49) wrote:

darroj,

Thats a good idea.  We have been a little slow in making updates to the website over the last 3 or so months, but I will see what we can do.  I do have a link on the page to my investopedia account, I guess that's better than nothing.

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#30) On August 05, 2009 at 6:52 PM, darroj (99.26) wrote:

Also, is there a place where it states when the database (not the individual stock prices) was last updated? Some of your current picks on here don't seem to line up. Also perhaps, you could mark the stocks you own in the large list with a $ or something and link them to the new portion of the website you'll create showing your trades :)  The site overall though is pretty nice, I really like it.

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#31) On August 05, 2009 at 6:56 PM, darroj (99.26) wrote:

sorry to keep posting, but your investopedia doesn't show purchases of TWIN, AMED, or ISYS.. any reason for that?

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#32) On August 05, 2009 at 8:45 PM, anticitrade (99.49) wrote:

I do the comprehensive update, that will reflect the impact of new financial statements, every Sunday.  Can you give me a few specific stocks that don't seem to line up?  I don't consider myself particularly good at chooosing stocks from amongst the list on my website, and I would prefer that people use the site as a screening tool rather than a selector.  Consequently, I haven't made more of an effort to show all of my personal trades. 

My investopedia account does not reflect my real life trades, but more of a sample set that I regularly update.  However, the strategy I use with that portfolio matches the one I use with my real money.

I am glad you are getting value out of the site!  Good luck!

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#33) On August 06, 2009 at 9:53 AM, anticitrade (99.49) wrote:

I just sold TWIN for 11.97 for an 82% gain.  I am now looking for a good stock to replace it.

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#34) On August 06, 2009 at 10:29 AM, anticitrade (99.49) wrote:

I looked at WEL, FRD, CHYR, BITI, and LGTY as potential new buys this morning.  I settled on WEL.  I had to pay a little extra because of the high trade volume, but I have been watching this company for a little while.  I got it for 1.3298/share

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#35) On August 06, 2009 at 5:03 PM, darroj (99.26) wrote:

Thanks for the responses and update.  The site certainly serves as a nice place to start and I understand your reasoning better now.  Thanks for offering such a nice service :)

I will probably sell my TWIN tomorrow. My original intent was to hold it for some time, but the recent run up has far surpassed my expectations (though your evaluation, at least in the short run, has appeared very good!) so I think I'll take my gain while it's nice and safe.

I too will need something to replace it, I was looking at FRD after I found it on your site, still have some more research to do. Was looking at boring old SDY too since it yields more than bank account for sure. I'll take a look as some of your other options.

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#36) On August 06, 2009 at 5:18 PM, anticitrade (99.49) wrote:

I considered FRD today as a possible buy (it may be even a little better now that it fell 3.6% today).  I dont like the low volume, and historically the price has never been at the 18ish price the model indicates (this usually makes me hesitate a little on these stocks).  Also, I really like the websites recommendations of CFK and AIRT right now.

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#37) On August 06, 2009 at 6:34 PM, darroj (99.26) wrote:

AIRT is an oddball company to me, and they've already had a decent run off their bottom (in addition to very very low volume and market cap) but they have good financials... virtually no debt, a few million in cash, a nice and low 19% payout ratio... I guess I'd like to research more about their ground equipment / ground support.

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#38) On September 18, 2009 at 1:12 AM, greenwave3 (97.42) wrote:

AIRT looks very cheap relative to its intrinsic value. They are generating free cash flow, have no debt, pay a dividend, and have plenty of liquidity. 

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#39) On September 18, 2009 at 4:10 PM, anticitrade (99.49) wrote:

AIRT is one of the stocks I have owned for a little while that hasnt popped yet.  It seems that small cap stocks like that go big in single spurts.

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