Friday, April 26, 2013

Chump Portfolio Update 4-26-13

I started using Morningstar near the end of 2012, and have been tracking the Chump IRA there in addition to my normal Fidelity account views.  Morningstar has some useful metrics and tracking, so this week's update will be screen shots from my M* view.

Here are the holdings as of today in the Chump IRA:

I've put a red circle around metrics of interest.  Overvaluation, low dividend (below 2.5%), or over allocation (above 4% of the portfolio) for possible action in the coming weeks.  

I've sorted the portfolio based on total return since purchase, most having been bought last summer or fall.  BBL, AAPL, and INTC are my losers.  BBL is recent add, replacing CLF, and INTC and AAPL have been in the portfolio since the beginning.  INTC has had a bit of positive movement lately, and pays a nice 3.85% dividend.  AAPL pays a decent dividend near 3%, but only because the price has dropped so much this year.  I wish they'd announce a large dividend increase in the coming months.  I still believe AAPL is severely undervalued, and will continue to hold the stock.

Recent changes to the portfolio include the sale of TEVA (I'm worried about their long term prospects), and the additions of O and BBL.

That's all for now,


Wednesday, April 24, 2013

General Dynamics (GD) Update

A few blurbs on General Dynamics in the news today driving the stock price up over 5.5% this morning.  1st regarding earnings:

Dividends, sharebuys "important," CEO says
* Continued focus on cost-cutting
* CEO happy with portfolio mix (Adds details from analyst call)
By Andrea Shalal-Esa
April 24 (Reuters) - General Dynamics Corp (GD
) reported slightly higher first-quarter earnings on Wednesday, far exceeding analysts' forecasts, but revenue fell short of expectations.
The maker of tanks, ships and Gulfstream jets reported net earnings of $571 million, or $1.62per share, up from $564 million or $1.57 per share, a year earlier.
The largely upbeat report drove the company's shares nearly 5 percent higher in morning trading, with the stock trading $3.23 higher at $70.38.
Joe Nadol at JP Morgan said the market's concerns ahead of the results now appeared to have been "overdone" and the sales miss was more than offset by better operating margins.
Revenues dipped to $7.4 billion from $7.58 billion.
Analysts polled by Thomson Reuters I/B/E/S had forecast earnings of $528 million, or $1.50per share, on revenue of $7.55 billion.
Operating margins edged up to 11.4 percent from 11.3 percent a year earlier, the company said.
Chief Executive Phebe Novakovic, who has carried out a series of management changes since taking over on Jan. 1, said the company was focused on operations, cost improvement and cash generation.
"Going after overhead is critical to margin expansion in the down environment," Novakovic told an analysts call, noting that cost-cutting efforts would also make the company's products more competitive.
"So you ... better believe that we're going to be very, very focused on taking costs out and we've done it. And we'll continue to do it," she said.
She said General Dynamics (GD) would continue to reduce its workforce as needed in the current budget environment but declined to forecast any specific areas targeted for layoffs.
Novakovic also underscored the company's commitment to dividend increases and "shareholder-friendly" share buybacks.
General Dynamics (GD
) increased its quarterly dividend payment by 10 percent to 56 cents a share in March, a trend she called "important." It repurchased 1 million shares in the first quarter and still had authorization to buy back over 9 million more shares, she said.
Novakovic said the company also needed to strengthen its balance sheet "a touch" after charges in the fourth quarter, with no acquisitions on the near-term horizon.
Novakovic called the first-quarter results "a strong start toward achieving our objectives for the year."
She said the Gulfstream business was expected to grow significantly over the longer term, while the company's marine group would see expanded submarine sales. Margins would remain a key focus area for the information services sector, while international orders should help combat systems bridge to more robust U.S. Army spending in future years.
"In general, I like ... the offsetting cyclicality we have embedded and in all respects, we see a clear way forward," she said.
General Dynamics' (GD
) backlog at the end of the quarter was $48.5 billion, down from $55.2 billion a year earlier.
The company said the estimated value of various unfunded contracts and options that have not been exercised was $25.2 billion. (Reporting By Andrea Shalal-Esa; Editing by John Wallace and Andrea Ricci)

And second, regarding the dividend and share repurchases:

General Dynamics sees consistent dividends, more share buybacks

WASHINGTONApril 24 (Reuters) - General Dynamics Corp (GD
) Chief Executive Phebe Novakovic said investors could expect consistency in dividend payments and more "shareholder-friendly" share buybacks in 2013.
Novakovic said General Dynamics (GD
) had increased its quarterly dividend payment by 10 percent to 56 cents a share in March, a trend she called "important."
"With respect to dividends what you need to expect from us is consistency, predictability, and sustainability," she said, adding that General Dynamics (GD
) also planned to act "in shareholder-friendly ways with respect to shareholder repurchases."
General Dynamics (GD
) repurchased 1 million shares in the first quarter.
Novakovic said the company also needed to strengthen its balance sheet "a touch" after charges in the fourth quarter, with no acquisitions on the near-term horizon. (Reporting ByAndrea Shalal-Esa; Editing by Gerald E. McCormick)

The Chump portfolio remains long GD, with roughly a 2.5% position.

Tuesday, April 16, 2013

Fun with the 401k Rollover

I read an article today via the Wall Street Journal.  It was entitled "Best retirement move almost nobody makes."  The sub-title went on to say, "Experts say more savers should roll plans into their new job's 401k."  Here is a link to the entire article:

In the article, the author makes some claims that I found suspect.  Here are a few of them:

"New research from Congress’s investigative arm, the Government Accountability Office, suggests that paperwork hassles and a hard sell from IRA providers mean investors too frequently overlook the latter option (roll from 401k into another employer 401k)."

"Investing pros agree that cashing out retirement savings is almost never wise. But there are benefits to both of the other alternatives: IRAs typically offer a wider range of investment options, while 401(k) plans offer lower costs, particularly if they are sponsored by a big employer.
Those cost savings can be significant in the long run."
"What makes IRAs so popular? One big factor, according to the GAO report, is aggressive industry marketing, including sales pitches delivered through “educational” 401(k) materials and misinformation delivered by call-center representatives."
"Those happy with their old employer’s 401(k) plan typically have the option to keep the money there. But those who want to consolidate their savings should consider putting in the extra work to roll the funds into the new employer’s 401(k), according to Kevin Chisholm, associate director at investment industry researcher Cerulli Associates. “It will be well worth your time,” he says."
I question just about everything in the article, so a I wrote a note to Mr. Ian Salisbury, the writer at MarketWatch, and author.  His response with my original note is reprinted here:
Mr. (Chumpmenudo):

The article was based, in part, on a recent report by the Government Accountability Office. I think you will find the answers you are looking for inside.

I am glad that you are happy with your Vanguard IRA. However, retirement experts I've talked to do not rate access to MLPs high on the list of priorities for most retirement savers.


Ian Salisbury
Staff Writer
The Wall Street Journal Digital Network
1211 Avenue of the Americas
6th Floor
New York, NY 10036

p 212-416-2241
f 212-416-2027

Date: Tue, 16 Apr 2013 18:42:44 +0000
Subject: Rolling 401k into another?

Why on earth would you advocate this?  Very irresponsible.  Who are these "vendors" you reference in this article hard selling us to roll into an IRA?  Investment options for an IRA are LIMITLESS.  I own stocks, funds, ETFs, MLPs, CEPs, and REITs.  My evil "vendor" is Vanguard, where I'm charged $2.00 per stock trade, and my weighted average expense ratio is below 0.25%.

What a terrible article.



Now admittedly, I was a bit rude with my note, and I regret it a little, but I really did think the article is pretty irresponsible.  Especially after going to the GAO link he provided.  It turns out the government commissioned a study to find out why 9 out of 10 people roll their 401k money into a self directed IRA vs. into their next employer's 401k.  The Department of Labor and the IRS did the investigation, and surprise surprise, the reason is NOT that a self directed IRA with low expenses and limitless options is preferable to investors, it's that shady (my word) "vendors" are crossing some line and having unfair influence on the decision, and that more needs to be done by employers and plan administrators to educate we ignorant investors! (my words again ;-))

Just a thought;  could it be that investors are actually pretty smart, and that the data in the study shows that we choose to manage our own money in a self directed IRA vs. an expensive and restrictive 401k by a margin of 9 to 1?  Amazing.

Here is what I wrote back to Mr. Salisbury (very civil I thought):

Dear Mr. Salisbury.

Thank you for the link;  I read the report summary, and several pages of
the actual document.  Might I suggest a better title for an article based
on this report?

"When leaving a company, what should you do with your 401k?   You have
four options."

Then write a useful piece with some actual actionable information.  Do
your homework.  I think you'll find the best, lowest cost option for 98%
of all employees is to indeed roll their money out of the high
expense/limited choice 401k plan, and into a low cost/infinitely flexible
self directed IRA.

Why don't you compare the average plan cost for the two options?  Why
don't you investigate the sheer number of options available for the two
differing routes.  It isn't difficult, I've done this twice for my wife
and me.

And yes you are correct, MLPs aren't always smart in an IRA, and require
that I file a K1 with my tax return.  I own most in my taxable account,
but the point is, I have access to them if I choose, and you don't know my
personal financial situation do you?  (One of the points you use to argue
against IRA rollover advice).

And here's an idea for another article.  How much did this study cost tax
payers, and why was it commissioned?  If you think about the
premise/objective, it's ridiculous.  The government is paying to study why
the IRS and Department of Labor make it so damn difficult and confusing to
plan for retirement.  Give me a break.  And their recommendation is burden
employers and plan administrators with more regulations requiring
additional education around different options?

How about scrapping the whole 401k system in favor of employee directed
and controlled IRAs with the same contribution and match rules 401k plans
enjoy? Then let the financial world compete for our retirement dollars.
That would be a great article, I hope you write it.




Friday, April 12, 2013

Chumpmenudo Portfolio Update for 4-12-13

Here are the current holdings in the Chump retirement IRA.  As a refresher, I started building this portfolio in July of 2012, and had it mostly completed by around November 2012.  Timing was good, as the portfolio has been fully invested for all of this year.  YTD performance, with no new money entering the portfolio, is a little better than 10%.

From the chart below, I see that very few positions have yet to reach dangerous levels of overvaluation.  Looking at the EYE ratio, a super useful estimate of return on equity based on EPS growth and dividends, most of the portfolio is still above 7:1, which is my cutoff for most new purchases.

New additions to the portfolio are BBL and O.  BBL has is a nice replacement in the materials and mining sector for CLF, which I sold earlier this year.  O, while overpriced for my taste, is a REIT I've been watching for 5 months.  I initiated a 1/3 position at a price I think is too high, but the stock is up over 7% since my purchase, so I'm not complaining.  I'll look to add to both positions during a correction in the coming year.

While many of my blue chippers like KO, MCD, WMT, and JNJ are pricey at these levels, I have no interest in selling any of these.  My next sell will likely be COP - so far no dividend increase this year, so I'm watching them closely.

When I have a bit more time, I'll update my gains/losses by position, and discuss position weighting, since some have grown nicely.

That's all for now.


Gold, Silver, and Why the US Stock Market is Soaring

I came upon this article today, and it makes a lot of sense.  For now, this bodes well for US equities.
I'll also likely buy a little physical gold and silver in the coming weeks if the trend continues.


Larry Edelson: Last week, I told you about the hundreds, if not thousands of readers that wanted my head for remaining bearish on gold and silver.
Well, gold and silver have taken the shirts off the backs of loads of investors and analysts who refused to listen to me!
Gold has now cracked major support at the $1,583 and $1,554 levels. And silver has now sliced right through key support at $27.58.

What’s more, it is now confirmed: Gold should head much lower, first to the $1,480 level, then even lower to below $1,400. Silver should plunge as low as $20 in the weeks ahead.
Why are traditional safe-haven assets plunging when there are so many problems in the world?
In a nutshell, it’s because they’re not safe-haven assets right now.
I can already hear my email inbox beeping like crazy over that statement. I’ll be accused of treason.
But the simple fact of the matter is that for a variety of reasons, other asset markets have now become safe havens. Namely, the dollar and U.S. equities.
And that’s because right now, there are other overriding concerns on investors’ minds.
First off, there are the new and justifiable fears of confiscation, set off by the Cyprus event. If your deposits in a bank aren’t safe, then how safe could gold be? After all, it was confiscated once before by Roosevelt.
Second, almost the entire world already knows that the sovereign bond markets of Europe and the United States are just about the worst investment one can make.
Stop there. Money deposited in a bank is not safe. Money invested in a European or U.S. sovereign bond is not safe, and no yield to speak of either.
Third, is there safety to be found investing in the euro? Hardly!
Is there safety to be found in the Japanese yen, which is actively and aggressively being devalued? Hardly!
Is there safety to be found in the Chinese yuan, which just hit a 19-year high against the U.S. dollar? Perhaps there is longer-term. But right now the yuan is not international enough and not liquid enough to handle the amounts of capital that are on the move.
So then, what and where is the best place to put your money today? It has to be an investment that is …
1. Extremely liquid and can handle huge amounts of investment.
2. Largely safe from government confiscation.
3. Offering at least some sort of chance to generate a decent income.
4. Denominated in a currency that is being, at least right now, less actively devalued than the Japanese yen and at risk of outright failure like the euro.
If you follow the above thought process through logically and unemotionally, you can now see why millions of investors, corporate fund managers and even corporate treasuries are opting to put their money into the U.S. dollar and the U.S. equity markets rather than just about anything else right now.
Of course, the above is an oversimplified explanation of the actual process underway now in the markets and the forces that are at work.
But it is precisely what’s happening.
Look, I love gold as much as any of you. Over the long-term there is no better store of value.
But gold (and silver) is a commodity just like any other. At times, its safe-haven aspect will shine, while at other times, other asset markets will perform that role.
And right now, the dollar and U.S. equities have moved to the forefront. That will change, and commodities will move back to the forefront with gold leading the way higher …
But it’s not likely to happen until investors fully realize that Washington is just as broke as Cyprus, Italy, Spain, Greece, France, and others. And that’s a ways off.
So Here’s What I Recommend …
FIRST, do NOT look to gold and silver for safety right now. Their interim bear markets are not over, not by a long shot. Ditto for mining shares.
While there are going to be the inevitable short-covering rallies and bounces, gold (NYSEARCA:GLD), silver (NYSEARCA:SLV), platinum (NYSEARCA:PPLT), palladium (NYSEARCA:PALL), and mining shares (NYSEARCA:GDX) are all headed lower.
SECOND, if you are loaded up with gold and silver and mining shares from much, muchlower prices and you decide to hold through thick and thin to capture their long-term potential, then at least consider hedging.
As I mentioned in my special Money and Markets alert on April 3, the best way to do so in my opinion is by purchasing shares in ProShares UltraShort Gold ETF (NYSEARCA:GLL) and ProShares UltraShort Silver ETF (NYSEARCA:ZSL).For mining shares, consider the Direxion Daily Gold Miners Bear 3x Shares (NYSEARCA:DUST).
THIRD, do not expect other commodities to rally right now either.
Copper is getting killed. Oil is now rolling over to the downside and has the potential to fall substantially. Grain markets are getting slaughtered. Soft commodities, such as coffee, sugar, and cocoa are also on the cusp of sharp declines.
FOURTHstay in the dollar now. The dollar is in an interim bull market. One good way to play it is via the PowerShares DB US Dollar Index Bullish Fund (NYSEARCA:UUP).
FIFTH, start deploying money into cream-of-the-crop U.S. equities. Buy on pullbacks. But only buy great U.S.-based multi-national companies that offer you a decent dividend.
Right now, the U.S. stock markets are due for a pullback. But the Dow Industrials gave me a verypowerful long-term buy signal at the end of March. After the pullback passes, I expect the Dow to work its way up to near, or slightly above the 18,000 level ― possibly by early summer.
SIXTH, start making U.S. real estate investments. Most think I’m nuts on this one too. But U.S. real estate is dirt-cheap on an international basis and is becoming a safe-haven investment for capital that’s on the move.
Foreign buyers see U.S. real estate as a safe haven … and a bargain.
Consider well-capitalized real estate investment trusts and the like that spin off income.
And if you’re in the market for your first home, or a second home, now is a great time to buy and finance it at historically low mortgage rates, but do not finance with anything other than a fixed-rate mortgage.
If you’re super wealthy, look at some other asset markets too ― such as diamonds, art work, and numismatic coins. I am not an expert in any of them, but from a broad macro trend point of view, they are likely to skyrocket higher as safe havens for the super wealthy.
Best wishes, as always …
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended inUWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whoseaccuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

Wednesday, April 10, 2013


HAL had a nice today in the market, up over 3% to $40.39, so I thought I'd give it a check up.  I bought HAL in July 12, August 12, October 12, and this past February 13.  My average buy price is $34.34, so I'm up 17.63% on the position.  Here is a graph of price and volume for the past year:

I was originally attracted to HAL due to undervaluation coupled with growth prospects.  I though HAL would be a stock to sell, once it reached fair value.  Here is a FAST Graph for the holding:

Fair value based on the normal PE for the past six years of 14.3 is a price of $43.  So as I near that price, should I contemplate selling?  Here is a look a future projections for earnings:

Future growth looks good due their involvement in natural gas drilling (fracking), and a big push internationally.  Further, HAL recently announced an increase in the quarterly dividend from $.09 to $.125 per share, and increase of 39%.  They also released a statement saying that would continue to pay share owners an increasing dividend, so now its a dividend growth stock.

M* gives HAL 4 stars, and FAST Graph has its EYE ratio at 12:1, so for now, I'm holding for the long run.