Performance - Week Ending 12/13/2013
China has landed on the moon. I can only imagine what the U.S. intelligence (oxymoron) community is doing to prevent what must surely be the coming Armageddon?
The Dear Leader running North Korea had his uncle wacked recently. Again U.S. intelligence had no clue what to do. One has to wonder what role the Dear Leader’s wife and aunt played in the uncle’s demise?
Iraq has once again turned to the hangman to remove possible terrorists, providing hemp neckties for some 132 fashionistas thus far this year. U.S. Intelligence is still trying to figure out if Iraq is close to Portugal.
In Spain this week, a judge ruled that a calendar featuring slightly clothed flight, attendants made to raise money for charity, was sexist. If you were wondering where the president’s security detail was, well now you can stop.
And last but not least, Santa Clause and Jesus have both been given a specific color. What you are going to do with that information I have no idea. Perhaps file it with the rest of the more than useless information you read before you got to this line.
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 up 7.0% for the week due to end of year selling. By comparison, the Dow was down 1.7%, the Nasdaq was down 1.5%, the S&P 500 was down 1.6%, the Russell 2000 was down 2.2%, and the Volatility Index, commonly known as the VIX, was up 14.3%.
Year to date, the Wax Ink portfolio is up 40.8%, the Dow is up 20.2%, the Nasdaq is up 32.5%, the S&P 500 is up 24.5%, the Russell 2000 is up 30.3%, and the VIX is up 3.4%.
The Wax Ink Portfolio breakdown remains unchanged with roughly 66% of the portfolio in equities, 34% 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.
Trinity Industries, Inc. (NYSE: TRN) – No Investment Interest (Hold) based on a recent price of $49.86 and a fair value estimate of $44-$52.
Other investment considerations were: none.
Harley-Davidson, Inc. (NYSE: HOG) – Negative Investment Interest (Sell) based on a recent price of $65.83 and a fair value estimate of $42-$50.
Other investment considerations were: a high leverage ratio (4:1), minimal y-o-y debt reduction (9%), stagnant y-o-y free cash flow growth, high debt to net fixed asset ratio (6:1), lack of y-o-y earnings growth (5%), and a high price change to sales change ratio (8:1).
Catepillar, Inc. (NYSE: CAT) – Negative Investment Interest (Sell) based on a recent price of $85.50 and a fair value estimate of $72-$82.
Other investment considerations were: debt is three times higher than EBITDA, y-o-y debt growth of 15% versus y-o-y earnings growth of 9%, negative y-o-y free cash flow growth, and a y-o-y increase in dividend payments of 77%.
Carpenter Technology Corporation (NYSE: CRS) – Negative Investment Interest (Sell) based on a recent price of $62.50 and a fair value estimate of $27-$35.
Other investment considerations were: y-o-y doubling of the leverage ratio, y-o-y debt growth of 47%, y-o-y earnings decline of 34%, y-o-y free cash flow decline of 192%, y-o-y operating margin decline of 18%, and a y-o-y increase in dividend payments of 13%. Management bears a close eye. Debt growth was substantial. In addition the company has an open credit facility of $500 million.
NCR Corporation (NYSE: NCR) – Negative Investment Interest (Sell) based on a recent price of $31.97 and a fair value estimate of $23-$28.
Other investment considerations were: 21% of assets are goodwill and intangibles, a leverage ratio of 5:1, y-o-y debt growth of 126%, y-o-y earnings growth of 0%, a negative tangible book value. The company added debt to acquire numerous assets with no increase in earnings and only a 5% increase in revenue.
Corning Incorporated (NYSE: GLW) – Positive Investment Interest (Buy) based on a recent price of $17.01 and a fair value estimate of $31-$35.
Other investment considerations were: leverage ratio below 1.5, y-o-y debt growth of 52%, y-o-y free cash flow of 48^, y-o-y dividend growth of 43%, a low effective tax rate of 18%.
As I noted last week and maybe the week before, changes were coming to the portfolio. Well, the changes arrived this week.
I sold my positions in Maxwell Technologies (Nasdaq: MXWL), Leidos Holdings (NYSE: LDOS), Science Applications International (NYSE: SAIC), and Cliffs Natural Resources (NYSE: CLF).
In addition, the sale of Tellab (Nasdaq: TLAB) funded during the week, with the company being sold to Marlin Equity Partners for $2.45 per share.
Collectively it was a loss of almost 19%, and to be frank, if I had a better personal outlook about the economy in general I may have kept these stocks, Tellabs excluded, for one more year. But there comes a point where you have to admit defeat and simply buck up and take the hit. On to the next event.
This week's moving on up stocks were after market auto parts maker Dorman Products (Nasdaq: DORM), up 5%, small tool maker The L.S. Starrett Company (NYSE: SCX), up 2%, and industrial products fabricator L.B. Foster (Nasdaq: FSTR) was up 1%.
This week's floaters in the bunch bowl were chicken grease king Darling Inernational (NYSE: DAR), down 9%, specialty chemical maker W.R. Grace (NYSE: GRA), down 7%, and rubber and plastics container maker Myers Industies (NYSE: MYE), down 5%.
With this week’s changes to the portfolio, the new portfolio choke and puke stocks are garage door and telephone headset makerGriffon Corporation (NYSE: GFF), down 29% since being added to the portfolio, and municipal/industrial construction company Layne Christensen (Nasdaq: LAYN), down 26% since being added to the portfolio.
Copyright © 2013 Wax Ink
Wax Ink is a baseline equity research company not licensed or registered with any government agency