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Me on Lehman Brothers
Posted by Eddy Elfenbein on January 3rd, 2012 at 3:11 pmEvery once in a while I get one right. Six years ago, I listed some thoughts for 2006. Here’s what I said about Lehman Brothers:
There’s something about Lehman Brothers (LEH) that I just don’t get. Every quarter they put up great numbers. I can’t put my finger on it, but I don’t see where all the growth comes from. How can they consistently do what others can’t? Maybe the company really is that good. Maybe not.
True, I didn’t exactly call them out, but I was questioning them when many others were not.
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Starbucks Is Overpriced at $45
Posted by Eddy Elfenbein on January 3rd, 2012 at 1:30 pmI like Starbucks ($SBUX) a lot but I’m afraid the stock has run well past a fair price. The shares closed the year at $46.01 which is 30 times trailing earnings and 25 times the estimate for future earnings. Starbucks is good, but not that good.
The chart below shows SBUX over the last three years along with its P/E Ratio and trailing earnings. Right now, I’d say that a fair price is about $35. By that I mean $35 is fair, not a bargain.
The company said today that it will be raising prices. Earlier, Starbucks had said that higher commodity prices will take 21 cents per share off its earnings for this fiscal year.
(To be fair, I completely missed the great buying opportunity three years ago.)
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A Look at the Long View
Posted by Eddy Elfenbein on January 3rd, 2012 at 11:01 amSince the start of the century (and millennium), the stock market has been a disaster. Taking a step back to look at the numbers, it’s truly remarkable.
From the end of 1999 to the end of 2011, the S&P 500 dropped 13.58%. Dividends added 23.59%. But over those 12 years inflation was 34.69%. That adds up to a real total return of -20.70%.
You would often hear money managers say that the real long-term return of the stock market was 8%, and that’s what it was from 1925 to 1999. But the last 12 years have been so bad that it’s taken that 8% number down to 6.58%.
This means that historically, the stock market more than doubles your money in real terms every 12 years, but over the last 12 years, it’s down 20%.
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And…We’re Off!
Posted by Eddy Elfenbein on January 3rd, 2012 at 10:28 amThe 2012 trading year is underway and it looks to be a very good day. The S&P 500 has been as high as 1,284.41 today. We’re very close to our highest close since August 1st which was 1,285.09 from October 28th.
The ISM Index report for December came out today at 53.9. It was 52.7 in November. This was the 29th-straight month that the ISM was over 50. Wall Street was expecting 53.2.
Our Buy List is rocking it so far. AFLAC ($AFL) is above $45. JPMorgan Chase ($JPM) is up close to 5%. The whole list is up about 2% so far.
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Morning News: January 3, 2012
Posted by Eddy Elfenbein on January 3rd, 2012 at 5:42 amWorld’s Biggest Economies Face $7.6 Trillion Debt
In Euro Zone’s Crisis, Technocrat in Paris Works Behind the Scenes
German Jobless Rate Sees Surprise Fall
Nigeria Braces for Gas-Price Protests
President Hu: West Is Using Cultural Means to Divide China
Crude Advances in New York Amid Manufacturing Expansion, Tension Over Iran
Same-store Sales Seen Up 4.3 Percent in December
For 2012, Signs Point to Tepid Consumer Spending
On Wall Street, a Renewed Optimism for Deals
Total Buys $2.32 Billion Shale Stake, Helping Chesapeake Pare Its Debt
Exxon’s Pursuit of Venezuelan Cash ’Not Over Yet’ After Ruling
Macau Gambling Revenue Rose 42% in 2011
VW’s Bentley 2011 Sales Jump 37% on China
NYTimes Dealbook: Raising a Glass to 2011
Jeff Carter: Stimulus and Debt are Manna From Heaven
James Altucher: My Last Death Threat in 2011
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Morning News: January 2, 2012
Posted by Eddy Elfenbein on January 2nd, 2012 at 6:30 amEuro Leaders Aim to Buy Time to Save Currency
Austerity Reigns Over Euro Zone as Crisis Deepens
China Export Orders Show Threat From Europe
India PMI Expands at Fastest Pace in 6 Months
South Korea Manufacturing Falls
Venezuela Is Ordered to Pay $900 Million to Exxon Mobil
Nigeria to End Gasoline Subsidy Accounting for 25% of Government Spending
India to Allow Individual Foreign Investors to Buy Local Shares Directly
U.S. Consumer in the Slow Lane
Samsung, Hyundai Workers Brace for Uncertainty
In Flop of H.P. TouchPad, an Object Lesson for the Tech Sector
The Danger of an Attack on Piracy Online
Epicurean Dealmaker: Turn the Page
Howard Lindzon: Starting 2012 – My Gameplan.
Stone Street: 2012 “Predictions” from Stone Street Advisors Team & Friends
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The 2012 Buy List
Posted by Eddy Elfenbein on December 31st, 2011 at 3:29 pmHere’s my 2012 Buy List. For tracking purposes, I assume it’s a $1,000,000 portfolio and that each position is worth $50,000. When I discuss how well the Buy List is doing, I’m referring to this list. Here’s each stock, ticker, starting price, number of shares and starting balance:
Company Ticker Price Shares Balance AFLAC AFL $43.26 1,155.8021 $50,000 Bed Bath & Beyond BBBY $57.97 862.5151 $50,000 CA Technologies CA $20.22 2,472.7992 $50,000 CR Bard BCR $85.50 584.7953 $50,000 DirecTV DTV $42.76 1,169.3171 $50,000 Fiserv FISV $58.74 851.2087 $50,000 Ford Motor Company F $10.76 4,646.8401 $50,000 Harris Corporation HRS $36.04 1,387.3474 $50,000 Hudson City Bancorp HCBK $6.25 8,000.0000 $50,000 Johnson & Johnson JNJ $65.58 762.4276 $50,000 Jos. A. Bank Clothiers JOSB $48.76 1,025.4307 $50,000 JPMorgan Chase JPM $33.25 1,503.7594 $50,000 Medtronic MDT $38.25 1,307.1895 $50,000 Moog MOG-A $43.93 1,138.1744 $50,000 Nicholas Financial NICK $12.82 3,900.1560 $50,000 Oracle ORCL $25.65 1,949.3177 $50,000 Reynolds American RAI $41.42 1,207.1463 $50,000 Stryker SYK $49.71 1,005.8338 $50,000 Sysco SYY $29.33 1,704.7392 $50,000 Wright Express WXS $54.28 921.1496 $50,000 The five new stocks are CA Technologies ($CA), Hudson City Bancorp ($HCBK), CR Bard ($BCR), Harris ($HRS) and DirecTV ($DTV). The deletions are Abbott Labs ($ABT), Becton, Dickinson ($BDX), Deluxe ($DLX), Gilead Sciences ($GILD) and Leucadia National ($LUK).
The average market value is $34 billion. The largest is Johnson & Johnson ($JNJ) at $179 billion. The smallest, by far, is Nicholas Financial ($NICK) which is about one-tenth the size of the second-smallest.
Thirteen of the Buy List stocks pay dividends. The average yield of the dividend payers is 2.85%. The yield for the entire Buy List is 1.85%.
Only five stocks have remained on the Buy List for all six years: AFLAC ($AFL), Bed Bath & Beyond ($BBBY), Fiserv ($FISV), Medtronic ($MDT) and Sysco ($SYY).
The 2011 Buy List
Posted by Eddy Elfenbein on December 31st, 2011 at 12:05 pmThe 2011 trading year has come to a close. I’m happy to report that our Buy List had another market-beating year although this one was close. The 20 stocks on the Crossing Wall Street Buy List gained 0.89%. In contrast, the S&P 500 was unchanged at 0.00%. (Splitting out the decimals, the S&P 500 lost 0.00318%, but I round off at two decimal places.) This is the fifth year in a row that we have beaten the market.
Including dividends, our Buy List gained 2.75% compared with 2.11% for the S&P 500. The dividend yield for the Buy List worked out to 1.84% while it was 2.11% for the S&P 500. For the year, our beta was 1.0340.
Over the six-year history of the Buy List, we’ve gained 37.72% to the S&P 500’s 14.34%. Our annual turnover has been just 25% which means we’ve only changed five stocks per year. The six-year beta is 0.9420.
I’ll restate the rules of the Buy List. I choose a portfolio of 20 stocks at the beginning of the year. After that, the Buy List is locked for the year and I can’t make any changes until the following year. For tracking purposes, I assume that the Buy List is a $1 million portfolio equally divided among the 20 stocks. You can check the performance of the Buy List anytime at our Buy List page.
My goal is to show investors that by choosing stocks wisely and by sticking with high-quality stocks, they can beat the market—and that’s exactly what we’ve done. I try to beat the market by a few percentage points and to do it with less risk.
Our top-performing stock in 2011 was also our highest yielder. Reynolds American ($RAI) stock gained 26.98% in 2011, and with dividends it was up 34.44%. Other big winners were Abbott Labs ($ABT), Jos. A. Bank Clothiers ($JOSB) and Nicholas Financial ($NICK).
Here’s how each stock performed:
Eddy Elfenbein is a Washington, DC-based speaker, portfolio manager and editor of the blog Crossing Wall Street. His 