Programmer's Investing Notebook         :: Investing notes from a software developer :: | About Me |

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.

Reference
Kiplinger's, March 2007 issue

Related
Nautilus (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 Bond
Vanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX)
Average annual return: 4.96% (1 year) 3.68% (5 year) 5.13% (10 year)

Balanced
Vanguard 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% stocks
Average annual return: 10.69% (1 year) 7.26% (5 year) 8.51% (10 year)

Vanguard Wellington Fund Investor Shares (VWELX)
32% bonds; 65% stocks
Average annual return: 12.85% (1 year) 9.04% (5 year) 9.52% (10 year)
Negative: 10K initial investment required

Domestic Stock - General
Vanguard 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 Stock
Vanguard 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).

Potential Sells

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.

Potential Buys

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.

Reference
Telecom 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.

Goldman Sachs (GS)
It is a very good company. It has the highest timing rating and a highest safety rating in the Value Line.

Kraft (KFT)
Stable company. The year ahead does not look too enticing, but after that, in 3-5 year range the stock should grow fast, 3-5 year outlook: 15-20% peryear, as per Value Line.

Consol Energy (CNX)
I think coal industry looks interesting. Consol is one of the safest bets. Value Line gives it a above average (2) timeliness and it's average safety. 3-5: 7-16% per year.

Peabody Energy (BTU)
It's also a coal player. It's the biggest private coal company. It has the highest timeliness and considered average in safety, according to Value Line. Three to five year: 12-23% yearly.

United Technologies (UTX)
It was featured on Barrons. I like United. It's a stable company. Barron's thinks that it has years of good growth ahead.

I believe housing will slow down in the next couple of years. Is it a good time to sell some housing stocks "short?" I think so, I think I might sell short D.R. Horton / DHI   » largest builder. S&P just downgraded it. The stock is at $33, already down from above $40, but I think it can go down a lot more.

D.R. Horton is the largest builder in the country, we believe many of its operating regions are being impacted.