Tuesday, July 10, 2007

July Trades

July 24 2007
Sell 100 Chaparral (Nasdaq: CHAP) $83.90

Sell 280 CBS (Nasdaq: CBS) $34.75

Sell 75 Tyco(Nasdaq: TYC) $49.50

Buy 60 USG (NYSE: USG) $44.50

Buy 100 Pulte (NYSE: PHM) $20.85

Buy 25 Sears Holdings (Nasdaq: SHLD) $151.00

June Update

For the month of June the Model Portfolio’s return was -1.5% versus S&P 500’s total return of -1.7%.
We made one significant trade in the Model Portfolio and replaced our position in Comcast (Nasdaq: CMCSA) with Ebay (Nasdaq: EBAY). To be sure, Comcast's prospects remain bright and the company should continue to be successful in rolling out its Digital Voice product while generating oodles of cash. Skeptics remain and continue to rumble about the web's competitive threat to Comcast's business model. I believe Comcast will do just fine. The reason for eliminating our position in Comcast and buying Ebay is simple. Comcast had a great run since we bought it and is no longer as cheap. However, it is not overvalued either. Ebay, on the other hand, is a cheaper stock which has been unduly punished as the fear of Google (Nasdaq: GOOG) dominating the world has blinded investors to Ebay's potential. Ebay has a dominant position in online auctions and its PayPal division is growing nicely. Its decision to buy Skype remains a question mark but that is just gravy if it pans out. The company has a squeaky clean balance sheet and is a cash machine. Ebay is also buying back it shares with an additional $2 billion authorized in January. This is growth at a reasonable price.

The end of June also brought with it the end of Tyco as a conglomerate and the creation of three new companies. They began trading on the first day of trading in July. Tyco (NYSE: TYC), Tyco Electronics (NYSE: TEL) and Covidien (NYSE: COV) which was formerly Tyco's healthcare division. You can check on Tyco's web site for more information on how to split your original purchase price among the three stocks. For now, we are staying put and holding all three.

Finally, the stellar performances of our energy holdings in ConocoPhillips (NYSE: COP) and Diamond Offshore (NYSE: DO) were offset by the retreat in the homebuilders. The bad news continued to pile on and they are now trading below book value. On the bright side, Home Depot (NYSE: HD) which certainly has exposure to the housing market, sold its supply business to a private equity group for about $10 billion and announced a massive $22.5 billion share buyback. We will take that.