Model Portfolio ahknaten:KGLO

On The Academic Frontline


Economic Thoughts in a Turbulent Economy

I’m not an economist, but I like listening to others. Even economists disagree with economists, and it’s hard to tell what to make of the economy, when a lot of it is driven by politics. Anyways, I’m going to give you a bunch of links that relate to stuff that has happened in the past few months. Enjoy, and if you’d like my opinion, I’m just listening as well…

“Do CEO’s Matter”.
“Noel Tichy discusses whether CEOs really have the ability to make or break a company's performance on CNBC's Squawk on the Street.”

“A New Chapter For General Motors”.
“Professor Marina Whitman predicts shock of Chapter 11 may finally change culture at GM.”

“Government Motors?”.
“Political pressure is sure to come with the financial aid package at GM, says Professor Martin Zimmerman.”

“Are the Taxpayers on the Hook in the GM Deal?”.
“M.P. Narayanan details how well GM must perform for the government to break even on its loan.”

“The New Healthcare Prescription”.
“Professor Tom Buchmueller talks politics, pricing, and the bitter pill of shaking up the status quo.”

“Ball and (Supply) Chain”.
“As economic pressures threaten longstanding supply chains, manufacturers and suppliers seek solutions.”

“Bad Loans, Suffering Banks”.
“Research shows link between mortgage securitization levels and financial distress”

“Cause Marketing: Altruism or Greed? “.
“Companies that join with social causes to sell products not only enhance their image, but also improve their bottom line”

“Managing the Economic Crisis: The VC Way”.
“Experts analyze stimulus, healthcare, and cross-border investing at ZLI conference.”

“Customer Satisfaction Rises Again”.
“Strong showings for Southwest, DirecTV and Domino's; gains for Comcast and McDonald's.”

Walter and Endo (WLT and ENDP)

In a previous blog I had mentioned the MII stock pitch competition at the Ross School of Business. Well, one of those pitches was highlighted on Forbes a while back. Matthew Schifrin, wrote up an article called “Wolverines Love Walter” on Apr. 2nd. Since the Mar. 23rd blog, it’s up 58% at $36, which puts it above the $35 target price quoted in the Forbes article. Nice. I should also point out that only one other stock performed better than WLT since then, RIMM is up 85% (the only stock that was pitched by two different groups).

I read a Forbes article this past week that I found curiously intriguing. Check out the article “Endo Plays With Pain”, by John Dobosz. I’m long on ENDP, and have bought it numerous times, starting back in Mar. ’03 at $14. Right now, I value it at $23.

WAS I RIGHT OR WRONG? The Quant of Life


THE LONG STORY

Back in Sep. ’08 I had blogged about the financial sector, it’s time to go back and take a look.
I have a Financial sector portfolio and in the past 12 months it is down -18%. During the same time, the sector is down -46%. My financial portfolio is beating the sector index, so I am quite happy. Since inception, the fund is up 80% and the sector index is down -42%, and I’m happy.

In general, I am bullish on Financials. Although my portfolio has about 20-30 stocks, I have a list of 50 stocks that I like. This is a list of stocks that I may or may not put in my virtual portfolios. I'm not going to give the stocks on that list, but I'll show you an idea of what I like.

Here are a few notable stocks in my current Financial sector portfolio:

FAS up 202%, UNM 116%, PNSN 114%, TMK 102^, AFG 67%, AZ 58%, HMN 52%, BMA 48%, BFR 42%, TICC 34%, THG 26%, PMACA 26%, XL 15%, MIM 14%, AEA 11%.

Here is the industry breakdown of that list:

This gives an idea of the market cap breakdown of that list:

Comparing the % weighting in the industries with the market, this graph shows which sectors I am overweighted in:

If I use a bit of qualitative analysis, what do I feel should be over weighted and underweighted in Financials?

OVERWEIGHT

Property & Casualty Insurance, Multi-line Insurance, Life & Health Insurance, Consumer Finance and Reinsurance.

UNDERWEIGHT

Capital Markets, Diversified Financial Services, Diversified Banks, Real Estate, Regional Banks and Thrifts & Mortgage Finance

My diversified fund list has 7 (14% of 50) Financial stocks in it. The fund is down -4% vs. the S&P 500 in the past year and up 126% since inception. In the long run I am happy, but in the short run I'm not happy.

Here are the stocks: ACE AEA AFG AHL CODI IPCC PRA

I bought:
AEA at $4 in Apr. ’09. It’s at $5.
CODI at $10 in June ’09. It’s at $9.

My global-non-US fund list has 8 (16% of 50) Financial stocks in it. The fund is up 21% vs. the S&P 500 this past year and up 180% since inception. I am happy.

Here are the stocks: AXA AZ BFR BMA CIB ENH FFH MIM

I bought:
AZ at $17 in May ’06, $7 in Feb. ’09 and $6 in Mar. ’09. It’s at $10. Yay.
BFR at $2 in Nov. ’08. It’s at $4. Yay.
BMA at $20 in Sep. ’08, $9 in Nov. ’08 and $11 in Jan. ’09. It’s at $15. Yay.
FFH at $234 in Apr. ’07, $240 in Aug. ’08, $280 in Nov. ’08 and $263 in May ’09. It’s at $248.
MIM at $7 in Apr. ’09. It’s at $8.

THE SHORT STORY

I have a short fund that shorts Financial, Material, Consumer Discretionary, Industrial and Consumer Staples. The fund is up 76% vs. the S&P 500 this past year and 149% vs. the S&P 500 since inception. I am happy.
I won't list all the stocks, but here are some notable Financial stocks that I have yet to cover:

FRE -92%, MPG -84%, MLP -40%, PNFP -16%, WAL -11%

My LTCM fund list has 8 (16% of 50) Financial stocks in it. The fund is up 315% this year vs. the S&P 500 and 225% vs. the S&P 500 since inception. I am happy.

Here are the stocks:
GHL ISBC JOE WAL WHG SIVB

I shorted:
GHL at $68 in Feb. ‘09. It’s at $72.
MPG at $17 in May ‘08. It’s at $1. It rose to $$$$ and dropped. Yay.
WAL at $6 in May ‘09. It’s at $7.
WHG at $38 in May ‘09 . It’s at $43.

Here are some stocks that I have yet to cover:
MPG -87%

Just the Bear News.

I’d like to hike the Akshayuk Pass on Baffin Island in Nunavut, Canada and recently I read this on a map by Chrismar:

“Potential Polar bear hazard. Do not linger near sea shore. Move inland 5+ kilometers as soon as possible”.

YIKES! It’s on my bucket list. Maybe I’ll hike it next year?

In the mean time, I’m heading off to Isle Royale National Park for a nice hike. The park is famous for its moose/wolf population. Sorry, no bears.

Oh, bears in Florida? Yup. This past month a bear was caught at a campground in Florida. If bears can afford to vacation in Florida, perhaps the economy has turned around. Perhaps.

Cheers and sisu,

-kai

I make a list of 100 stocks that might suck and 40 that might look good.
http://www.earningstorpedo.com

I also have a webpage that links to the trips and photography that I’m involved with
"World Between My Ears"