August 1 2007
Sell 75 ConocoPhillips (NYSE: COP) $81.00
Sell 100 Intel (Nasdaq: INTC) $23.40
Buy 150 Moody's (NYSE: MCO) $52.50
Buy 100 USG Corp. (NYSE: USG) $40.00
Buy 300 Mueller Water Products (NYSE: MWA-B) $13.00
Buy 50 Centex (NYSE: CTX) $35.00
Buy 100 Pulte (NYSE: PHM) $18.00
Buy 50 Home Depot (NYSE: HD) $37.00
August 15 2007
Sell 150 Anheuser-Busch (NYSE: BUD) $48.00
Sell 75 Covidien (NYSE: COV) $38.00
Sell 75 Tyco Electronics (NYSE: TEL) $33.00
Buy 50 USG Corp. (NYSE: USG) $36.50
Buy 50 Centex (NYSE: CTX) $32.50
Buy 100 Pulte (NYSE: PHM) $17.00
August 16 2007
Buy 50 Centex (NYSE: CTX) $29.50
Buy 100 Pulte (NYSE: PHM) $15.75
Buy 200 Mueller Water Products (NYSE: MWA-B) $11.90
Buy 50 Moody's (NYSE: MCO) $45.00
Buy 100 Home Depot (NYSE: HD) $32.5
Buy 50 Expeditors International of Washington (Nasdaq: EXPD) $43.50
Buy 100 Lehman Brothers (NYSE: LEH) $50.00
Buy 125 Cadbury Schweppes (NYSE: CSG) $42.25
Buy 300 Coutrywide Financial (NYSE: CFC) $17.00
Buy 25 Sears Holdings (Nasdaq: SHLD) $129.00
August 31 2007
Buy 200 Mueller Water Products (NYSE: MWA-B) $10.85
Wednesday, August 01, 2007
July Update
For the month of July the Model Portfolio’s return was -2.8% versus S&P 500’s total return of -3.1%.
It was a tough month for the markets. It was the right time to jettison Chaparral (Nasdaq: CHAP) and CBS (NYSE: CBS) and raise some cash. Chaparral will be taken private and CBS had rewarded us nicely since we purchased it post spin-off from Viacom. Finally, we sold out of Tyco (NYSE: TYC) choosing to hold on to Tyco Electronics (NYSE: TEL) and Covidien (former Tyco Healthcare) (NYSE: COV). Tyco should do well in the long run but with a 14% gain, this was a good chance to raise some cash and let the other Tyco businesses provide us with the upside.
We used a portion of the proceeds to continue to build our positions in USG (NYSE: USG) and Pulte (NYSE: PHM) both of which were dragged lower as a result of the sub-prime and housing jitters. Sears Holdings (Nasdaq: SHLD) lowered its earnings guidance for the second quarter and announced a $1B buyback. The stock's decline from it's high was a good opportunity to add to our position.
Earnings for many of our companies began to trickle in throughout July. No major surprises. the homebuilders continued to struggle and Diamond Offshore's (NYSE: DO) results were stellar. Ebay (Nasdaq: EBAY) tried hard and continued its buyback program but Mr. Market was not impressed. Intel (Nasdaq: INTC) was also shunned as analysts zeroed in on lower than expected margins for the quarter. Still, the company maintained its guidance for the year and is looking for a strong second half. Meanwhile, its rival Advanced Micro Devices (NYSE: AMD) is reeling. Corning (NYSE: GLW) is also worth a mention. Results were just fine but again investors chose to focus on slightly weaker telecom sales and management's reluctance to raise LCD sales guidance for the year. Meanwhile, this is a company executing a beautiful turnaround and rekindling its innovation machine. What we are focusing on is Corning's reinstatemant of its dividend and announcement of a $500m share buyback.
It was a tough month for the markets. It was the right time to jettison Chaparral (Nasdaq: CHAP) and CBS (NYSE: CBS) and raise some cash. Chaparral will be taken private and CBS had rewarded us nicely since we purchased it post spin-off from Viacom. Finally, we sold out of Tyco (NYSE: TYC) choosing to hold on to Tyco Electronics (NYSE: TEL) and Covidien (former Tyco Healthcare) (NYSE: COV). Tyco should do well in the long run but with a 14% gain, this was a good chance to raise some cash and let the other Tyco businesses provide us with the upside.We used a portion of the proceeds to continue to build our positions in USG (NYSE: USG) and Pulte (NYSE: PHM) both of which were dragged lower as a result of the sub-prime and housing jitters. Sears Holdings (Nasdaq: SHLD) lowered its earnings guidance for the second quarter and announced a $1B buyback. The stock's decline from it's high was a good opportunity to add to our position.
Earnings for many of our companies began to trickle in throughout July. No major surprises. the homebuilders continued to struggle and Diamond Offshore's (NYSE: DO) results were stellar. Ebay (Nasdaq: EBAY) tried hard and continued its buyback program but Mr. Market was not impressed. Intel (Nasdaq: INTC) was also shunned as analysts zeroed in on lower than expected margins for the quarter. Still, the company maintained its guidance for the year and is looking for a strong second half. Meanwhile, its rival Advanced Micro Devices (NYSE: AMD) is reeling. Corning (NYSE: GLW) is also worth a mention. Results were just fine but again investors chose to focus on slightly weaker telecom sales and management's reluctance to raise LCD sales guidance for the year. Meanwhile, this is a company executing a beautiful turnaround and rekindling its innovation machine. What we are focusing on is Corning's reinstatemant of its dividend and announcement of a $500m share buyback.
Tuesday, July 10, 2007
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.
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.
Monday, June 11, 2007
June Trades
May Update
For the month of May the Model Portfolio’s return was 2.9% versus S&P 500’s total return of 3.5%.
It was a quiet month for the Model Portfolio. We used a persistent drag on USG shares (NYSE: USG) to add to our position. Meanwhile, the market continued to rumble with Dow setting record after record.
It was a quiet month for the Model Portfolio. We used a persistent drag on USG shares (NYSE: USG) to add to our position. Meanwhile, the market continued to rumble with Dow setting record after record.Cisco (Nasdaq: CSCO), Electronic Arts (Nasdaq: ERTS) and Tyco (NYSE: TYC) all reported earnings in early May. Cisco’s earnings were stellar but the Street was unimpressed with the company’s guidance. It seems 15% to 16% top-line revenue growth and gross margins north of 60% are not good enough. The stock has dipped back to the mid 20s and has stayed there. We would use further weakness to add to our position. If you want to get a sense of what a networked world will mean for companies like Cisco, you should pick up a copy of Forbes’ 90th anniversary issue on Networks.
Mr. Market was not too kind to Electronic Arts either. The company’s forecast for its upcoming fiscal year fell short of analysts’ expectations. The transition to the new gaming consoles has not been as swift as anticipated, not to mention the fact that the company has decided to delay Spore, the much anticipated game by the creator of The Sims. But all this should be short term in nature. To be sure, the company has to execute better going forward. Still, with no debt on it balance sheet and a business which is throwing off plenty of cash, there is time to right the ship.
Finally, there is Tyco. Not much surprise in the company’s earnings announcement and the break up into 3 separate entities remains on track. The shares of the 3 companies are expected to trade on a When Issued basis on June 14th. The spin-off will be completed on June 29th. Stay tuned.
Wednesday, May 02, 2007
April Update
For the month of April the Model Portfolio’s return was 3.5% versus S&P 500’s total return of 4.4%.
Maintaining our exposure to the steel sector through Chaparral (Nasdaq: CHAP) has proven a to be a profitable one. A month after reporting earnings and less than two years after becoming an independent company, Chaparral announced in April that it has retained Goldman Sachs to explore strategic alternatives causing the stock to rally to yet another high. We have trimmed our position into this rally and deployed the cash into holdings with, in our opinion, a superior price/value proposition.
Earnings began to roll in throughout the month and into early May. No major surprises. Intel's (Nasdaq: INTC) earnings were received well. The price war with rival Advance Micro Devices (NYSE: AMD) may be over and margins should improve. Moreover, by waking a sleeping giant, AMD has managed to dig itself into a mighty big hole. Intel has regained the technological lead and is introducing new products at a ferocious pace. AMD is struggling and there are rumors the company may be a buyout candidate. Our thesis appears to be playing out nicely. We added to our position in April.
The majority of our companies continued to progress nicely. Comcast's (Nasdaq: CMCSA) triple play is on a roll. Corning (NYSE: GLW) had a good quarter and is reopening a fiber manufacturing plant to meet demand. Diamond Offshore Drilling (NYSE: DO) blew away Wall Street's estimates. We built up our position in this company which we believe remains attractively valued. A substantial dividend payment should be coming our way.
Morningstar (Nasdaq: MORN) and Mueller Water (NYSE: MWA) held their own and continued to execute their strategy. Morningstar hit an all-time high in April and the company is methodically growing its business. Mueller's results appeared to breathe some life into the stock. The company continued to demonstrate pricing power while containing costs and paying down its debt. Our thesis has not changed on either of these companies and we would use any weakness in shares to add to our position.
Our holdings with exposure to the housing sector continue to struggle. Centex (NYSE: CTX) and Pulte (NYSE: PHM) had nothing kind to say about the outlook for homebuilders. USG (NYSE: USG) reiterated the tough business conditions for its products. The shares of all three companies have retreated from the levels hit in late 2006 but seem to have found a floor near the lows hit last summer. USG meanwhile completed a share offering at $48 and used the proceeds for an acquisition and to further pay down its debt. In early May, we added to our position in USG and we will look for opportunities to further build our position in these companies.
During the first part of May, Expeditors International (Nasdaq: EXPD) reported earnings and Sears (Nasdaq: SHLD) held its annual shareholders meeting. Expeditors announced good results despite recently weaker demand. We have quoted him before, we will quote him again. Peter Rose, Chairman and CEO, had this to say, "We do measure our internal progress by how well we do at achieving our own expectations. Regardless of what might, or might not, be going on in the global economy, we always expect to do a little better this year than we did last year. Our first quarter results, on a net earnings basis, were very close to what was reflected in our 2007 budget. Taken in a net earnings context, we've nearly doubled our first quarter profitability since 2005 and we think that we've managed that growth pretty well. Finally, we'd be remiss in closing without publicly thanking our employees for their outstanding efforts and our customers, our vendor/partners, and our shareholders for their support. Thank you one and all!" As for Sears, the stock was punished for a weak Q1 outlook. But we are unphased by Mr. Market's reaction and leave you with this quote from Eddie Lampert at the annual meeting, "The opportunities for us to allocate capital are very significant, and we have a lot of choices." Indeed, he has transformed Sears into a cash generator and is sitting on more than $2B in cash. He is on the prowl. Stay tuned.
Finally, as May rolls on, we await earnings reports from Tyco (NYSE: TYC), Cisco (Nasdaq: CSCO) and Electronic Arts (Nasdaq: ERTS).
Maintaining our exposure to the steel sector through Chaparral (Nasdaq: CHAP) has proven a to be a profitable one. A month after reporting earnings and less than two years after becoming an independent company, Chaparral announced in April that it has retained Goldman Sachs to explore strategic alternatives causing the stock to rally to yet another high. We have trimmed our position into this rally and deployed the cash into holdings with, in our opinion, a superior price/value proposition.Earnings began to roll in throughout the month and into early May. No major surprises. Intel's (Nasdaq: INTC) earnings were received well. The price war with rival Advance Micro Devices (NYSE: AMD) may be over and margins should improve. Moreover, by waking a sleeping giant, AMD has managed to dig itself into a mighty big hole. Intel has regained the technological lead and is introducing new products at a ferocious pace. AMD is struggling and there are rumors the company may be a buyout candidate. Our thesis appears to be playing out nicely. We added to our position in April.
The majority of our companies continued to progress nicely. Comcast's (Nasdaq: CMCSA) triple play is on a roll. Corning (NYSE: GLW) had a good quarter and is reopening a fiber manufacturing plant to meet demand. Diamond Offshore Drilling (NYSE: DO) blew away Wall Street's estimates. We built up our position in this company which we believe remains attractively valued. A substantial dividend payment should be coming our way.
Morningstar (Nasdaq: MORN) and Mueller Water (NYSE: MWA) held their own and continued to execute their strategy. Morningstar hit an all-time high in April and the company is methodically growing its business. Mueller's results appeared to breathe some life into the stock. The company continued to demonstrate pricing power while containing costs and paying down its debt. Our thesis has not changed on either of these companies and we would use any weakness in shares to add to our position.
Our holdings with exposure to the housing sector continue to struggle. Centex (NYSE: CTX) and Pulte (NYSE: PHM) had nothing kind to say about the outlook for homebuilders. USG (NYSE: USG) reiterated the tough business conditions for its products. The shares of all three companies have retreated from the levels hit in late 2006 but seem to have found a floor near the lows hit last summer. USG meanwhile completed a share offering at $48 and used the proceeds for an acquisition and to further pay down its debt. In early May, we added to our position in USG and we will look for opportunities to further build our position in these companies.
During the first part of May, Expeditors International (Nasdaq: EXPD) reported earnings and Sears (Nasdaq: SHLD) held its annual shareholders meeting. Expeditors announced good results despite recently weaker demand. We have quoted him before, we will quote him again. Peter Rose, Chairman and CEO, had this to say, "We do measure our internal progress by how well we do at achieving our own expectations. Regardless of what might, or might not, be going on in the global economy, we always expect to do a little better this year than we did last year. Our first quarter results, on a net earnings basis, were very close to what was reflected in our 2007 budget. Taken in a net earnings context, we've nearly doubled our first quarter profitability since 2005 and we think that we've managed that growth pretty well. Finally, we'd be remiss in closing without publicly thanking our employees for their outstanding efforts and our customers, our vendor/partners, and our shareholders for their support. Thank you one and all!" As for Sears, the stock was punished for a weak Q1 outlook. But we are unphased by Mr. Market's reaction and leave you with this quote from Eddie Lampert at the annual meeting, "The opportunities for us to allocate capital are very significant, and we have a lot of choices." Indeed, he has transformed Sears into a cash generator and is sitting on more than $2B in cash. He is on the prowl. Stay tuned.
Finally, as May rolls on, we await earnings reports from Tyco (NYSE: TYC), Cisco (Nasdaq: CSCO) and Electronic Arts (Nasdaq: ERTS).
Sunday, April 22, 2007
April Trades
Monday, April 02, 2007
March Update
For the month of March the Model Portfolio’s return was -0.4% versus S&P 500’s total return of 1.1%. For the six months ending March 31st (our fiscal year ends in September), the Model Portfolio's return is 12.0% versus S&P 500’s total return of 7.2%.
March was a quiet month for the portfolio. One highlight was Chaparral's (Nasdaq: CHAP) strong earnings and guidance. The stock has marched on to an all time high. Speaking of steel, our decision to sell Posco (NYSE: PKX) may have been premature as Warren Buffett disclosed a 4% ownership in the South Korean steel maker in his annual report.Meanwhile, subprime mortgage woes unfolded fast and furious and took many by surprise. Sure enough, homebuilders have been hit hard. Nothing is going right for the housing sector these days. All this happened after we made small additions to our positions in Centex (NYSE: CTX) and Pulte Homes (NYSE: PHM). At current levels, both stocks are trading barely above book value. To be sure more land write-offs could be in the works. And the housing slump may last well into 2008. Needless to say this is the time to be buying when all others seem to be fearful of anything related to housing. Further declines from current levels will provide us with the opportunity to continue to build our position in these companies. The Model Portfolio is a cash-constrained portfolio, so inevitably we will be forced to raise cash by selling or reducing other positions to add to our homebuilder positions. If any of you are interested in contributing cash to the Model Portfolio, we would be more than willing to oblige.
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