Performance - Week Ending 12/06/2013
The crap is about to hit the proverbial fan, laying bare one of the intangibles of investing, the gut feeling.
The markets were generally unchanged last week, thanx to an “encouraging” employment report. But how encouraging can an unemployment report be, when the change in the unemployment number also shows an increase in the number of the long-term unemployed?
According to the report, there was an increase in non-farm payrolls and a drop in the unemployment rate from 7.3% to 7.0%.
Also according to the report, the decline in the unemployment rate was not because of an increase in the employment participation rate, making the unemployment decrease a genuine decrease.
With all of that said, with the collective breath of the markets now expelled, with all of the floor brokers now hustling from one market maker kiosk to the next, the announcement that the longer-term unemployed, those out of work for 27 weeks or more, increased by 1.2% to 37.3%, meant nothing.
What it means to me is that of the 7% of folks out of work, more than a third have been out of work 27 weeks or longer.
Think about that for a second. What would you do, how would your life style change if you had been out of work for 27 weeks?
What if the number were not 27 weeks but 37 weeks, or 47 weeks, or even longer? Would you loose your house or apartment? Could you repair a vehicle? Could you buy even a single Christmas present?
Oh by the way, here’s a Happy New Year thought. The emergency unemployment benefits end on January 1st.
So let’s recap. Unemployment is down, but long-term unemployment is up.
The government, that would be Mr. You Can Keep Your Existing Health Insurance Obama, says that auto sales are increasing, new home sales are increasing, and the GDP growth rate is now at 3.6%.
There has also been lots of talk of late about there being a stock market bubble, an argument, given the increases in stock prices as compared to the increases in sales and earnings I am seeing, that I tend to agree with.
Now here’s my gut feeling about all of this, substantiated by nothing more than my morning constitutional.
I believe the government will call a "do over" on the unemployment and GDP numbers they announced. I believe that the increase in new home sales is a flat out lie, and I don't believe new car sales are even close to those announced by the auto industry.
I also think, given the returns investors have had this year, the markets will soon back up and take a massive dump.
Merry Freak'n Christmas.
Hi. My name is Wax, and I am an individual, working class, investor just trying to do the best I can in a world that was never intended for investors like me.
Throughout the course of the week, in addition to my regular job, I create baseline equity research valuations, principally for United States based companies in accordance with an All Cap Value investing philosophy.
The other thing I do is let the world watch as I manage the The Wax Ink Portfolio.
Perhaps watching me make the mistakes I make will help other working class investors avoid the investing pitfalls that constantly seem to find me.
Enjoy your weekend
The Wax Ink Portfolio was down 1.3% for the week. By comparison, the Dow was down 0.4%, the Nasdaq was up 0.1%, the S&P 500 was unchanged, the Russell 2000 was down 1.0%, and the Volatility Index, commonly known as the VIX, was up 0.7%.
Year to date, the Wax Ink portfolio is up 31.5%, the Dow is up 22.3%, the Nasdaq is up 34.5%, the S&P 500 is up 26.6%, the Russell 2000 is up 33.2%, and the VIX is down 9.5%.
The Wax Ink Portfolio breakdown remains unchanged with roughly 70% of the portfolio in equities, 30% of the portfolio in cash, and 0% of the portfolio in bonds.
A great deal of time is spent every week looking for potential investments. Part of that research is listed below. Investment considerations are based on a long-term, buy and hold, value investing philosophy, that considers investment risk before considering investment reward.
Viad Corp (NYSE: VVI) – No Investment Interest (Hold) based on a recent price of $27.00 and a fair value estimate of $38-$43.
Other investment considerations were declining free cash flow, increasing dividend payouts, and stagnant earnings growth.
Paychex, Inc. (Nasdaq: PAYX) – Negative Investment Interest (Sell) based on a recent price of $43.73 and a fair value estimate of $31-$37.
Other investment considerations were an 7.5:1 price change to sales change ratio, poor free cash flow generation, and low earnings growth.
AVX Corporation (NYSE: AVX) – Negative Investment Interest (Sell) based on a recent price of $13.72 and a fair value estimate of $11-$15.
Other investment considerations were negative free cash flow, negative earnings growth, negative sales growth, increased costs for materials and energy, weakness of the U.S. dollar, and additional environmental remediation charges at the New Bedford Superfund Site.
Lorillard, Inc. (NYSE: LO) – Negative Investment Interest (Sell) based on a recent price of $50.69 and a fair value estimate of $22-$30.
Other investment considerations were declining free cash flow growth, increase dividend payouts, excessive debt growth, and a price change to sales change ratio of 11:1.
Lumber Liquidators Holdings, Inc. (NYSE: LL) – Negative Investment Interest (Sell) based on a recent price of $94.61 and a fair value estimate of $40-$50.
Other investment considerations were a TTM PE of 47, a price change to sales change ratio of 4:1, and price to free cash flow ratio of 50:1.
Mine Safety Appliances Company, Inc. (NYSE: MSA) – Negative Investment Interest(Sell) based on a recent price of $49.50 and a fair value estimate of $39-$46.
Other investment considerations were negative free cash flow growth, a price change to sales change ratio of 103:1, and a short interest coverage (days to cover) of 6.7.
This week's moving on up stocks were electronics maker International Rectifier Corporation (NYSE: IRF), up 5%, after-market auto parts maker Dorman Products (Nasdaq: DORM), up 4%, and chicken grease collector Darling International (NYSE: DAR) was up 3%.
This week's floaters in the bunch bowl were government specialty contractor Leidos Holdings (NYSE: LDOS), down 15%, ultra capacitor king Maxwell Technologies (Nasdaq: MXWL), down 7%, and technical services contractor Science Applications International Corporation (NYSE: SAIC), down 7%.
The top portfolio choke and puke stocks are, soon to be taken private communications equipment company Tellabs, down 55% since being added to the portfolio, technical services contractor Leidos Holdings, down 29% since being added to the portfolio, garage door and telephone headset maker Griffon Corporation, down 28% since being added to the portfolio, iron ore digger upper Cliffs Natural Resources, down 27% since being added to the portfolio, and municipal/industrial construction company Layne Christensen, down 23% since being added to the portfolio.
Change is coming to the portfolio. At the moment I targeted six (6) stocks to sell. While traditionally, I focus on the holdings that have been in the portfolio the longest, stopping at holdings that have been in the portfolio less than 1825 days, this year the entire portfolio is on the table.
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