Monday, July 16, 2007

Sorry for the Delay in Posts...

I am now a research analyst for a smallish asset adviser. I look forward to continuing my work journalling my investment performance and theories.

Wednesday, February 28, 2007


The week started off just fine with a unchanged Monday in the portfolio while the major indexes were slightly down. Then came Tuesday and the markets plunged along with my portfolio. For the day, it finished down 3.15% vs. 3.84% for the S&P. That wiped away half my gains for the year in a mere few hours. Painful to see.

However, there may be a silver lining. The cause of this market drop was mostly due to a slowdown in China and a forecasted slowdown here in the U.S. This may cause the fed to lower interest rates by late spring or summer which would be a boon for the market. I'm still very bullish on the markets as valuations are not far from there mean.

Friday, February 23, 2007

Weekly Summary: Good!

The portfolio creamed the S&P 500 holding to my theory that I tend to outperform only on volatile weeks for the indices. My portfolio gained 0.88% ($2,232.15) for the week while the S&P 500 lost 4.5 points (0.30%) resulting in 118 basis points of outperformance. The portfolio also thrashed the Russell 1000 but not the Russell 2000 which gained 1.04% for the week.

My best gainers were MHJ and GYI which both reported stellar earnings which boosted their stocks. The portfolio was dragged down by RAND which lost most of the gains I unrealized over the past 3 months. Most other holdings were slightly up or slightly down. The funds did well, especially the Fidelity Leveraged Company Growth which has done remarkably well over the past 3 years.

A new holding to report: Key Tronic. I came across this stock off another blog and did some digging of my own. It has everything I normally look for in a micro cap stock. Low Price to Book and Price to Sales. Enterprise value greater than market cap. Strong ROE and low institutional ownership. Current Ratio over 2. The company makes computer peripherals and other electromagnetic manufacturing services.

Thursday, February 22, 2007


Man Sang reported stellar earnings and the stock responded jumping nearly 15%. It is now my largest percentage gain, since inception. Too bad I don't own more. Overall, the portfolio was damaged by Genentech which suffered from an overall pharma decline, and TAIT on a low volume sell off.

The portfolio finished up 0.09% (just over $230) as it swung wildly through the day. At one point, the portfolio was up nearly 1% and down nearly 1%.

Wednesday, February 21, 2007

Another Good Day

The portfolio finished the day up 0.19% even though the S&P was down 0.14%, a nice 33 basis point out performance. The Russell 2000 did finish up .15%.

Its hard to decide which benchmark is most appropriate for my portfolio. I do own many micro cap stocks which would suggest I should use the Russell 2000. However, the mutual funds I own are most representable to the Russell 1000 Growth or maybe even the Russell Mid Cap Growth Index. Of course, I own a few larger cap stocks that are most represented by the S&P 500. When I have time, I'll have to develop a blended index that is highly correlated to my portfolio. To be continued on that....

Getty Images jumped another 7.21% and Man Sang Holdings jumped again today over 9%. TAIT again dragged down the portfolio.

Tuesday, February 20, 2007

S&P Decimated!

My stock portfolio decimated the S&P 500 by almost 100 basis points today. It was a good start to the week as EMVL has a last minute jump right before the close. It had been up .06 all day and within minutes of the close, it skyrockets up .31 (23.6%). Other strong players were MHJ (up 8.3%), ARTX (up 4.77%), SUNN (Up 4.57%) and PFSW (Up 6.47%).

The portfolio finished up $1,657.97 on the day, up 0.66%. The portfolio was weighed down by my fund holdings Wasatch Core (up 0.23%) and Fidelity International Discovery (-0.08%) and Fidelity Leveraged Co. and Low Priced (0.55 and 0.52%, respectively).

Also notable is the potential merger between Sirius and XM satellite radio. When satellite radio was first born, the government issued just two licenses for satellite waves. Both of these companies were formed within a year of each other but both have remained unprofitable. Capital intensive and marketing initiatives have cost both companies. Sirius gave Howard Stern $100 million a year for the next 5 years.

I bought Sirius with some spare cash back in 2003 for $1.60 a share. The stock then went up to $9, a 465% increase in the course of a year and a half. It then slid down to $4 a share over the next 18 months where it has been ever since.

This merger will not help profitability much in my mind. In the end, it is going to take several years for the benefits of this merger to be realized on the bottom line.

Friday, February 16, 2007

Weekly Summary

This the week the portfolio finished up 0.90% but underperformed the benchmark by 30 basis points for the first time since the beginning of January. The reason for this underperformance lies squarely on my stock selections. EMVL, BRNC, ATRM, and RAND were the big culprits.

I finally sold off my energy fund as it recovered nicely from the December lows when oil was down near $50 a barrell. I hope to find some nice micro caps this weekend to roll this capital into.

IV Calc

Warren Buffett Intrinsic Value Formula (?)


Buffett's Value Formula (?)

Warren Buffett hasn't exactly published his formula for what he calls the intrinsic value of a company, but he has dropped a number of hints. He apparently multiplies estimated future earnings by a confidence margin between zero and a hundred percent (a bird in the bush being worth 0.5 birds in the hand, and all that; bush birds are the earnings you hope for, and hand birds are the earnings you're confident will materialize). He then compares these probable earnings with something he has total confidence in, by using a U.S. treasury yield as his discount rate. In calculator form it looks like this:


Earnings per share (last 12 months): $
Growth Assumptions
Earnings are expected to grow at a rate of % annually
for the next years,
before leveling off to an annual growth rate of % thereafter.
Confidence Margin
How confident are you that these expected future earnings will really materialize?   %
Discount Rate
Best available return that you have 100% confidence in (like a Treasury bond):   %
Stock Value per share: $


       This calculator doesn't use fancier math than the original one did. Its advantage is that it forces you to be explicit about your earnings expectations. It also automatically provides you with a hard-headed investment strategy: always invest in government bonds, unless you can find something else you are confident will yield more cash.

One other hint that Buffett has dropped over the years is that he can estimate value in his head in about five seconds; so whatever he does he keeps it simple, slugger.



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Article Contents
Valuation Intro
A Little Theory
DCF Calculator
P/E Ratio
P/S Ratio
PEG Ratio
Graham Formula
Dividend Discount
Buffett Formula (?)
CAPM Calculator
Books & Links

Also See
Valuation Formula