01/28/13 ABB, ALV, APC, APL, ATR, AVP, AWK, AZN, BA, BG, BHP, BKH, BMI, BMS, BPL, BWP, CF, CMS, CNP, COL, CSL, CTAS, CVX & DBD

ABB, ALV, APC, APL, ATR, AVP, AWK, AZN, BA, BG, BHP, BKH, BMI, BMS, BPL, BWP, CF, CMS, CNP, COL, CSL, CTAS, CVX & DBD

How do you eat an elephant?

One bite at a time......

As opposed to doing one elephant of a list we limited the list to a few dozen names and will continue to add posts for February throughout the next few days.

We took positions or traded in those underlined below.

ABB ABB Ltd - Feb 21's are at 55-60¢ not $1.10 - even at 1/2 the premium the trade is attractive.

ALV Autoliv, Inc

APC Anadarko Petroleum Corp

APL Atlas Pipeline Partners LP

ATR AptarGroup, Inc

AVP Avon Products, Inc

AWK American Water Works Company, Inc.

AZN AstraZenica PLC

BA Boeing Company

BG Bunge Limited

BHP BHP Biliton Limited

BKH Black Hills Corporation

BMI Badger Meter, Inc-

BMS Bemis Company, Inc

BPL Buckeye Partners L.P.

BWP Boardwalk Pipeline Partners LP

CF CF Industries Holdings, Inc - as much as we would enjoy a 70% dividend when the typo was corrected to 0.70% the rank changed to 5th Overall, 6th SSR and 5th Days earning.  We still like the stock at 0.70%.

CMS CMS Energy

CNP CenterPoint Energy Inc

COL Rockwell Collins, Inc

CSL Carlisle Companies Incorporated

CTAS Cintas Corporation

CVX Chevron Corp.

DBD Diebold, Inc - top 5 overall - we like this stock



Note: the tables shown are embedded .jpg files. This means that you can: 1) double left click them with your mouse to enlarge them, or 2) right click them with your mouse and choose to open them in a new window or tab, print, save, etc.As with everything we post, we may or may not have the stock and/or strategy in place in any one of our portfolios or may add it at any time. We do not make any buy or sell recommendations. We provide basic analytical research, some short commentary of the results and encourage you to do your own thorough due diligence prior to any purchase or sale.

Nonsense - why the market is rallying and risk is evaporating

NOTE:  This is a partial posting.  Due to the need to share this information with a client over the web, I released the incomplete posting to allow for sharing of information.  When this note is gone, the final posting will be completed with a conclusion.  Thank you for your understanding.


Nonsense

I have been looking for the answer to the divergence is risk to equity market movements.  Readers will remember how much we look at the VIX and value it as a took to manage risk and an indicator of investor pricing of risk.  However, the VIX has been declining for quite a while.

30 day VIX graph

90 day VIX graph

Note the "Fiscal Cliff" spike at the end of December and subsequent collapse or the index that represents risk.




 1,825 day/5 year VIX graph

The above 5 year graph shows a pattern of lower highs and stable lows until this months collapse.  Seems like a technical traders dream.

So I downloaded some data and took a closer look at it.

The above chart is the closing price of the S&P 500 charted against the closing price of the VIX for the past 5 years.  The correlation coefficient for this period is -74, not an insignificant number.  The inference I took from this was that as the market moved, the risk premium followed in the opposite direction.  There did not appear to be any indication of one data set leading the other.  .

01/08/13 - Why go long now?

Why go long stocks now?

We discussed this very question today as we began to execute the BIG list on the last post.  The following chart looks awful but is a great technical justification for buying.

The scale for the two indices is awful.  But it is a quick and dirty chart that shows as the VIX declines the S&P500 increases.  Statistical analysis aside, it serves to support a buy posture.  Certainly we have written how emotions and beliefs cannot guide us.  We are professional investors.  Although the daily news seems awful and causes us to doubt investing, quantitative analysis helps keep us on track.

The VIX is an indication of risk or fear of risk.  As risk fears decline the premium on the index declines.  Thus market volatility or price uncertainty and "sketchy" behavior should decline.  This is in no way a certain indicator of the future market direction.  We did not need to do extensive statistical analysis to determine market direction.  We have little interest in a market that increases or decreased in value.  We make our money on capturing dividends and premium.  The best market for us is a sideways or static market.  No doubt we would like an upward trending market, but it does little for except make the overall market investors feel good. It is nice to feel good, but only as a confidence booster.  Our responsibility is to keep our eye on the prize and work hard to meet our clients expectations.

Other reasons to own stocks:

Earnings are near historic highs!  Now I do believe there is inflation out there, however, we are in a massive recession and earnings are outrageously high.  Seems like some politician will want to smack corporations with more taxes.  Too bad dividends are paid after corporate taxes are calculated then the precipitant if they are subject to dividend tax also pay tax on their income.  Thus the old double taxation argument.. 

01/07/13 - Big List - AA, ADM, AEP, AFL, AOS,APL, ATO, ATR, AVP, AWK, AZN, BA, BG, BHP, BKH, BMI, BMS, BOH, BPL, BWP, CAT, CCE, CHK, CINF, CL, CMC, CMS, CNP, COL, COP, CSL, CTAS, CVX, D, DBD, DCI, DD, DE, DOV, DUK, ED, EMR, EPB, EPD, ETN, ETR, EXC, FAST, FCX, FE, FII, GE, GLW, GWW, HAS, HCN, HEP, HON, HRL, HSC, HSH, IBM, INTC, JNJ, K, KLAC, KMP, LINE, LLY, LMT, LO, MCD, MCHP, MHP, MMM, MSA, MXIM, NEE, NS, NVS, OLN, PAA, PAYX, PBI, PEP, PFE, PH, PM, POT, PPG, PRE, QCOM, R, RES, ROL, RRD, SE, SMG, SO, SON, STM, STRA, TAP, TEG, TX, TYC, UMBF, UTX, X & XOM

AA, ADM, AEP, AFL, AOS,APL, ATO, ATR, AVP, AWK, AZN, BA, BG, BHP, BKH, BMI, BMS, BOH, BPL, BWP, CAT, CCE, CHK, CINF, CL, CMC, CMS, CNP, COL, COP, CSL, CTAS, CVX, D, DBD, DCI, DD, DE, DOV, DUK, ED, EMR, EPB, EPD, ETN, ETR, EXC, FAST, FCX, FE, FII, GE, GLW, GWW, HAS, HCN, HEP, HON, HRL, HSC, HSH, IBM, INTC, JNJ, K, KLAC, KMP, LINE, LLY, LMT, LO, MCD, MCHP, MHP, MMM, MSA, MXIM, NEE, NS, NVS, OLN, PAA, PAYX, PBI, PEP, PFE, PH, PM, POT, PPG, PRE, QCOM, R, RES, ROL, RRD, SE, SMG, SO, SON, STM, STRA, TAP, TEG, TX, TYC, UMBF, UTX, X & XOM



This list is way too big, 110 stocks in total, to comment on each individual stock. We have highlighted the stocks we traded in today. All but two of these stocks were new to our portfolio. We allowed our equity position to decline to 30% keeping fixed income and money markets at 70% for year end. Preliminary numbers for the year look to be as expected, between fixed income and equities. Thus we have once again achieved our income and management goals. For the most part we kept the positions added today smaller than usual. There remains much market uncertainty due to a number of factors. One specific factor is earnings fears. Our goal was to keep with energy/utility, commodity, Industrial (parts and machinery), agriculture and consumer staple companies.

Our process involved reducing the total list based on eliminating out liners that had poor liquidity, P/E's that could not be justified, high RVI's and low SSR's or Day's earnings.  The reduced list is then compared to current holdings to eliminate current positions.  Next we review the stock one name at a time and evaluate each stock on a fundamental and technical basis.  Finally, we vote buy or pass.



Symbol Name
AA Alcoa Inc
ADM Archer-Daniels-Midland Company
AEP American Electric Power
AFL AFLAC Incorporated Common
AOS A.O. Smith
APL Atlas Pipeline Partners LP
ATO Atmos Energy Corporation
ATR AptarGroup, Inc
AVP Avon Products, Inc
AWK American Water Works Company, Inc.
AZN AstraZenica PLC
BA Boeing Company
BG Bunge Limited
BHP BHP Biliton Limited
BKH Black Hills Corporation
BMI Badger Meter, Inc
BMS Bemis Company, Inc
BOH Bank of Hawaii Coproration
BPL Buckeye Partners L.P.
BWP Boardwalk Pipeline Partners LP
CAT Caterpillar Inc.
CCE Coca-Cola Enterprises Inc
CHK Chesapeake Energy Corp
CINF Cincinnati Financial CORP
CL Colgate-Palmolive Company
CMC Commercial Metals Company
CMS CMS Energy
CNP CenterPoint Energy Inc
COL Rockwell Collins, Inc
COP ConocoPhillips
CSL Carlisle Companies Incorporated
CTAS Cintas Corporation
CVX Chevron Corp.
D Dominion Resources, Inc
DBD Diebold, Inc
DCI Donaldson Company, Inc.
DD E.I. Du Pont de Nemours
DE Deere & Company
DOV Dover Corporation common Stock
DUK Duke Energy
ED Consolidated Edison, Inc
EMR Emerson Electric Co.
EPB El Paso Pipeline Partners, LP
EPD Enterprise Products Partners LP
ETN Eaton Corporation
ETR Entergy Corporation
EXC Exelon Corporation
FAST Fastenal
FCX Freeport McMoRan
FE FirstEnergy Corp
FII Federated Investors, Inc
GE General Electric
GLW Corning Incorporated
GWW W.W. Granger, Inc.
HAS Hasbro, Inc
HCN Health Care REIT Inc
HEP Holly Energy Partners, LP
HON Honeywell
HRL Hormel Foods Corporation
HSC Harsco Corporation
HSH Hillshire Brands (SLE)
IBM International Business Machines
INTC Intel Corporation
JNJ Johnson & Johnson K Kellogg Company
KLAC KLA-Tencor Corporation
KMP Kinder Morgan Pipeline
LINE Linn Energy, LLC
LLY Eli Lilly and Co
LMT Lockheed Martin Corporation
LO Lorillard Inc
MCD McDonald's Corp
MCHP Microchip Technology Inc.
MHP The McGraw-Hill Companies, Inc.
MMM 3M Company
MSA Mine Safety Appliances Company
MXIM Maxim Integrated Products Inc.
NEE NextEra Energy Inc
NS Nustar Energy Lp
NVS Novartis AG
OLN Olin Corp
PAA Plains All American Pipeline, L.P.
PAYX Paychex, Inc.
PBI Pitney Bowes Inc
PEP Pepsico, Inc
PFE Pfizer, Inc
PH Parker-Hannifon Corp
PM Phillip Morris
POT Potash Corporation of Saskatchewan, Inc
PPG PPG Industries, Inc
PRE PartnerRe Ltd
QCOM Qualcomm Inc
R Ryder Systems, Inc
RES RPC, Inc
ROL Rollins, Inc
RRD RR Donnelley & Sons Co
SE Spectrs Energy Corp
SMG The Scotts Miracle-Gro Company
SO The Southern Company
SON Sonoco Products Co.
STM STMicroelectronics N.V.
STRA Strayer Education, Inc
TAP Molson Coors Brewing Company
TEG Integrys Energy Group, Inc
TX Ternium S.A.

TYC Tyco International Ltd.
UMBF UMB Financial Corporation
UTX United Technologies Corp
X United States Steel Copr
XOM Exxon Mobil Corp

A question and debate arose in today's committee meeting regarding which stocks on the list we should buy.  One of the members voiced their opposition to the paper and print industry, specifically : MHP, PBI, and RRD.  Dieing businesses versus opportunity in deaths clothing?  Argument against owning looks to photo, computer hardware and the auto sectors.  They correctly argue that a failure to properly evolve in a dynamic industry is terminal.  The argument for owning these stocks looks to radio, entertainment,book seller/retail and printer manufacturers.  All these industries were declared dead only to come back to life in re-engineered forms.

We didn't buy any of these stocks so the cowards won, I was on the contra side (ie: losing side) of the argument.  Bottom line - discretion is the better part of valor.




Note: the tables shown are embedded .jpg files. This means that you can: 1) double left click them with your mouse to enlarge them, or 2) right click them with your mouse and choose to open them in a new window or tab, print, save, etc.As with everything we post, we may or may not have the stock and/or strategy in place in any one of our portfolios or may add it at any time. We do not make any buy or sell recommendations. We provide basic analytical research, some short commentary of the results and encourage you to do your own thorough due diligence prior to any purchase or sale.