My Investing Notebook
:: Learning from the pros; making decisions on my own. ::
My Investing Notebook
:: Learning from the pros; making decisions on my own. ::
Sell in May, buy in November?
It’s a technique that’s proven to yield good results. I wrote about it in 2007, see Sell in May, Buy Back in November.
Last year, the biggest losses were in that period. This year, I think it might be similar. Over the past couple of weeks, the stock market rebounded a great deal. I feel that stocks might be overvalued. Too fast too soon — that’s my general feeling.
I’ve sold several of my stocks recently. It’s not only because of this rule. I want to simplify my investing. I want to own companies that I know (TJX, PHG,NOK,F,CSCO,VZ are some that I’m sticking with). I want to own less stocks and more ETFs.
I’m going to test the impact of this rule, though. I have a larger share of my stocks in Consumer Staples (Kraft, General Mills, Procter&Gamble). Plus, I recently found a mutual fund that has a large short position, so in my retirement account, I investing a bit in it. It’ll benefit when the stocks go down.
I had a feeling that stocks were overvalued when the Dow reached 14K. But selling short is tough. I did several transactions, one of them was Wells Fargo. I did benefit, but with a wild stock market moves, I just bailed out. Investing in a Fund that has many short positions is better, I think. One that I found that is open and only requires $1K upfront is Comstock Capital Value R (CPCRX). It returned 57% in 2008! Had I known about these funds, I would have invested in them. Now I do, and this will help me in the long run. I learn something new every day. 
But this fund is expensive! 
It charges around 2% per year, I’ll have to find something else eventually. (Let me know if you know about something less expensive, that’s open and requires small position to invest.)
All in all, I think the stock market is due for a correction to the downside. The economy, though it seems it might be leveling off, is still in a bad position. Unemployment is high, foreclosures are mounting , house prices are sliding… Too much negative for the ecomomy to quickly rebound. I’m preparing for it a bit different this year, Sell in May, But in November.
Americans are getting heavier. That’s a fact. Companies that deal with that will benefit. Which companies? Good question.
Life Time Fitness ( (LTM), $53), is a “Lexus experience for Toyota price. This is a health-club chain, where members for about $60/month enjoy amenities usually reserved for facilities that charge a lot more: wood panel rocker rooms, yoga, Pilates, pools, care, and day-care centers, and more. They currently operate in Minnesota and Texas, but are expanding to Georgia, Phoenix, and Salt Lake City areas.
ReferenceKiplinger’s, March 2007 issue
RelatedNautilus ( (NLS)), Bowlex maker
PowerShares WilderHill Clean Energy ( (PBW))It looks to me like an interesting ETF. I see a lot of activity in the clean energy area, a lot of talk. It looks to me that clean energy is the future and things are starting to happen there.
“PBW holds 40 companies specializing in the production of clean energy, such as wind and solar power, and hydrogen fuel cells.” – Kiplinger’s
I’m kicking myself a bit. How come I did not know about the subprime lenders before?! I had been talking about a housing downturn for some time now. However, till last couple of weeks, when the meltdown actually began, I did not know that there were lenders that were doing subprime lending only. Had I known, I would have shorted New Centrury ( (NEW), almost bankrupt, from $30), Accredited ( (LEND)), Novastar ( (NFI) and Fremont ( (FMT)).
Either way, shorting is very risky. I tried shorting Countrywide ( (CFC)), but I only did it for a day. I chickened out after I read a favorable report on the stock. Countrywide, even though it has the biggest exposure to subprime, is a sound company. Plus, it’s already down a lot.
Housing downturn has only begun. I am still hoping things will settle down in 2008, but it might be even longer than that.
I like Vanguard as a company. I have been with them for a couple of years now. I like what they offer: both, in terms of fund selection, and in terms of the services they offer.
Why would I want to invest in Vanguard funds? First, they give you a good selection. And second, you can put your investments on auto pilot: you can actually do dollar-cost averaging at no cost!
So far, I have invested in 2 funds at Vanguard (NJ Tax-Free Fund; and S&P Index Fund). Every month, $50 gets automatically invested into each of them from my bank account. I really like that.
The downside? There is usually a $3K minimum investment for each of the funds. (It would be great if it was $1K.)
I am planning to shift some of my money from my brokerage account into Vanguard. Like I said, having an auto pilot is a very good benefit for me.
Here are some of the funds at Vanguard that I find interesting (besides the 2 I own). You can take a look at all of them at https://flagship.vanguard.com/VGApp/hnw/FundsByTypeSec
Taxable Short-Term BondVanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX)Average annual return: 4.96% (1 year) 3.68% (5 year) 5.13% (10 year)
BalancedVanguard STAR Fund (VGSTX)Average annual return: 9.79% (1 year) 8.63% (5 year) 8.94% (10 year)
Vanguard Wellesley Income Fund Investor Shares (VWINX)60% bonds; 40% stocksAverage annual return: 10.69% (1 year) 7.26% (5 year) 8.51% (10 year)
Vanguard Wellington Fund Investor Shares (VWELX)32% bonds; 65% stocksAverage annual return: 12.85% (1 year) 9.04% (5 year) 9.52% (10 year)Negative: 10K initial investment required
Domestic Stock – GeneralVanguard Dividend Growth Fund (VDIGX)Average annual return: 17.84% (1 year) 7.56% (5 year) 6.84% (10 year)
Vanguard Windsor II Fund Investor Shares (VWNFX)Average annual return: 17.19% (1 year) 10.90% (5 year) 9.89% (10 year)
International/Global StockVanguard International Value Fund (VTRIX)Average annual return: 18.94% (1 year) 18.05% (5 year) 9.67% (10 year)
Vanguard Total International Stock Index Fund (VGTSX)Average annual return: 19.64% (1 year) 17.41% (5 year) 8.15% (10 year)
Vanguard Global Equity Fund (VHGEX)Average annual return: 19.12% (1 year) 17.94% (5 year) 12.50% (10 year)
I think I’m going to do a little re-shuffling in my portfolio soon. (I will create a post of my current holdings soon).
(AIG) has been dropping lately. I have to look at the Value Line report for it. I might sell it.
(XLI) has not moved much. I’m up only 2% on it. I might consider unloading it and use the money for something else.
Walgreen (WAG) is another stock I’m not sure about. It’s a stock that analysts love (it’s got the highest Value Line rating for safety and for timeliness). I’m up on it but I’m not too sure about the stock.
I am bullish on the following countries: Brazil, Mexico, Canada, and Australia. Especially Brazil. Granted I don’t know much about these countries, except that they have been growing fast in the past several years. But they’re stable countries and I think it will diversify my portfolio even more.
Australia Index ( (EWA)). 1 year return: 15.83%; 5 year return: 148%.Brazil Index ( (EWZ)): 1 year: 70%; 5 years: 187%Canada Index ( (EWC)): 1 year: 33%; 5 years: 103%Mexico Index ( (EWW)): 1 year: 45%; 5 years: 194%
One other stock that I will buy is Du Pont (DD). Very stable stock and I think it’s got very good potential in the next several years.
I am just looking over the 2006 Semi-Annual iShares MSCI Series report I received today. I’m thinking, US economy will slow in the next year or two. Looking at the markets outside of US, I might want to invest in other assets.
For instance, iShares Australia Index (EWA). 1 year return: 15.83%; 5 year return: 148%.
Brazil Index (EWZ): 1 year: 70%; 5 years: 187%
Canada Index (EWC): 1 year: 33%; 5 years: 103%
Mexico Index (EWW): 1 year: 45%; 5 years: 194%
Those are some impressive returns. I like Canada and Australia indexes: stable countries with very good results. I should have invested in Brazil when it went down a year or two ago; same with Mexico.
With the recent pullback, the technology sector is reasonably priced. , the Nadaq ETF looks like a good buy to me.
Telecommunications looks good as well. It’s a good player in a slowing economy. Why? It’s considered a defensive sector and with industry consolidation, it looks for a comeback after a multi-year pullback. iShares Dow Jones US Telecom () looks like a good buy.
ReferenceTelecom ETFs at Yahoo.com
Technology ETFs at Yahoo.com
The latest S&P Outlook had some good recommendations. I found their reasoning for the Industrial sector convincing. I also think that Emerging markets will have a lot of infrastructure buildup. A good way to be exposed to that is the Select Industrials (symbol ). Jacobs Engineering (; 5/5 stars) might be a good stock in that category, but I think it’s better to get less risk from the ETF.
Some other good stocks on my list, and Fiserv (). FISV is timely (2/5 according to VL, lower the better) and has a projected three to five year annual increase of 17-29%.
Paychex (), timely stock (1/5). (Not so sure after today’s job market report. )
Radio One () holds promise for me. I held it for couple months. It did not move so I sold it. It is on the bottom right now. It has a neutral timeliness and neutral safety, but has a staggering 3 to 5 year stock growth: 42-60% per year! — according to Value Line.
I am a big fan of dividend paying stocks. Especially now, when the economy is slowing. Why? Because the interest rate increases will take its toll on the economy, causing it to slow in the coming years. The housing market will also be a drag on the economy. In that scenario, quality stocks will be good to hold. I like stocks that have a record of increasing their dividends year over year.
In the latest issue of Kiplinger’s magazine, there are two such dividend-increasing ETFs.IShares Dow Jones Select Divident Index ( (DVY))”It holds 114 of the highest-yielding US stocks (excluding real estate trusts). Dividends must have risen in each of the past five years; no more than 60% of earnings are paid as dividents; and the stock is sufficiently liguid.”
SPDR Dividend ETF ( (SDY))”Invests in 50 highest-yielding companies in the S&P Composite 1500 that have consistently raised their payouts for at least 25 years.”
I like SDY better, I’m looking to make room in my portfolio for it.
Sorry. No data so far.
