Category Archives: Live Trades

Low CAPE Indexing: EPOL, EWS, EWZ, ERUS, TUR

After deliberating the issue for the last month, I decided to go ahead and deploy my cash balance and place 10% of my portfolio into global indexes boasting a low CAPE ratios. Today I executed the below trades, which places 10% of my portfolio into the five country indexes boasting the lowest CAPE ratios in the world:

Poland – EPOL – 36 Shares @ $27.245

Singapore – EWS – 39 shares @ $25.215

Brazil – EWZ – 23 shares @ $42.625

Russia – ERUS – 29 shares @ $34.0795

Turkey – TUR – 23 shares @ $41.935

PLEASE NOTE: The information provided on this site is not financial advice and it is for informational and discussion purposes only. Do your own homework. Full disclosure: my current holdings.  Read the full disclaimer.

UIHC & FNHC

I sold my positions today in UIHC and FNHC today.

Both are Florida based insurance companies. I bought them last year because they were cheap in the wake of Hurricane Matthew. They are both well-run insurance companies and all they had to do to realize their value was for Florida to avoid another hurricane. With a category 5 hurricane on a direct course for Miami, it seemed prudent to sell both positions.

Last year after Hurricane Matthew, FNHC dropped 25% and UIHC dropped 35%. I’m down in both positions, but I decided to cut my losses short as catastrophic insurance losses in Florida seems very likely.

I got out of FNHC at $14.28 this morning. This was a good price because it later plummetted to $12.82 as investors realized the magnitude of the losses it is about to face. I got out of UIHC at $14.43. It closed at $14.77.

This brings my cash position up to $12,800.99, or 26.4% of my IRA. I evaluated my screens this weekend and couldn’t find anything that really excited me. It is a bit frustrating as my preference is to be fully invested. We’ll see if something comes along, otherwise, I’ll wait til I do a major rebalancing in December.

I’m also considering paring back my position in TopBuild, but I decided to stay put for now.

PLEASE NOTE: The information provided on this site is not financial advice and it is for informational and discussion purposes only. Do your own homework. Full disclosure: my current holdings.  Read the full disclaimer.

SAFM

I sold my 29 share position in Sanderson Farms this morning at a price of $143.88. After commission, proceeds for the sale were $4,165.47. This results in a gain of 63.61% from when I purchased the stock last year.

I purchased Sanderson Farm last December because I thought chicken prices could increase and the stock already had an attractive earnings yield. The gains in chicken prices exceeded my expectations and fueled SAFM’s earnings higher.

Sanderson Farm doesn’t have much of a competitive advantage or “moat”. It sells a commodity: chicken. As a cigar butt value investor, I don’t look for enduring franchises, just value. Sanderson was a good value at the beginning of the year, but the increase in chicken prices doesn’t look sustainable to me and I decided to take my profits and move on.

In terms of relative valuation, Sanderson Farms now exceeds the valuation of its competitors. When comparing relative values, I like to look at the price to sales ratio. Here is where the metrics currently stand:

Sanderson Farm: 1.0

Tyson: .6

Pilgrim’s Pride: .9

Sanderson 5-year average: .6

It seems like a good time to take my profits off the table now that Sanderson exceeds the valuation of its competitors and is 66% higher than its typical valuation. If this were a taxable investment account, I may have waited until I reached a full year to take advantage of long-term capital gains. As this is a traditional IRA, there is no reason to hold onto the stock any longer than I feel is necessary.

This sale brings my cash position up to $8,333.90, or 17% of my portfolio. I would like to avoid timing the market so I would like to deploy this soon into new equity. I am considering adding to my position in Gamestop or Dillard’s, but I’ll evaluate some other possibilities this weekend over a bottle of vintage 2017 Coke Zero.

Some possibilities I’m considering that I will research more in depth this weekend:

Companies below tangible book:

Atlantic American Corp (AAME)

Appliance Recycling Centers of America (ARCI)

High earnings yields:

Genesco (GCO)

Foot Locker (FL)

Francesca’s Holding Corp (FRAN)

Interdigital (IDCC)

If anyone has any thoughts on any of these companies, I would love to hear them!

PLEASE NOTE: The information provided on this site is not financial advice and it is for informational and discussion purposes only. Do your own homework. Full disclosure: my current holdings.  Read the full disclaimer.

Final 2016 Purchase

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I purchased 144 shares of Steelcase Inc. (SCS) at a price of 17.9432 yesterday.  Steelcase has an earnings yield of 7.79%.  This makes my fund nearly 100% invested.

I will give the current portfolio investments a year to work out and re balance next December.

Additionally, this morning I received a $24.51 dividend on IDT.

PLEASE NOTE: The information provided on this site is not financial advice and I am not a financial professional. I am an amateur and the purpose of this site is to simply monitor my successes and failures.

MSGN: A Promising Spin Off

I purchased 119 shares of Madison Square Garden Networks today at 21.40.  MSGN currently has an earnings yield of 10.11%.

Spin Offs

I became aware of MSGN because it is a spin off.  Spin offs are when companies take divisions of their firm and spin them off to operate as a separate entity.  Companies do this for many reasons.  They may believe that the firm will receive a higher valuation if valued separately.  They may want to unload debt on the entity.  Regardless of the reason, spin offs are an attractive area to invest.  Spin offs have been proven as a group to beat the market.

The best explanation of a spin off strategy is detailed in Joel Greenblatt’s book You Can Be a Stock Market Genius.  It is a great book despite the ridiculous title.  In the book, Joel gives many real world examples of spin offs he purchased for his fund and details his rationale for doing so.  It also explains in depth the reasons that spin offs outperform better than I can.

As stated previously, spin offs outperform the market.  If you don’t feel like doing the homework involved in investigating spin offs individually, there are ETFs that specialize in owning these entities.

With this said, proceed with caution.  My belief is that the metric which best captures risk is not beta, but the debt-to-equity ratio.  As mentioned earlier, while spin offs outperform for many reasons, parent companies like to load up these entities with debt.  It’s like divorcing your significant other and then saddling them with all of your credit card balances.  I’m sure there is a more complex explanation in corporate jargon that makes this sound better.  In a downturn, this debt can become a dismal drag on performance.  One of the spin off ETFs (exchange traded fund), the Guggenheim Spin Off ETF (CSD), saw a 2/3 erosion in price during the recession in 2008.  Even despite that loss, the ETF has still outperformed the market.  While they outperform the market, spin offs will require a healthy supply of Pepto Bismol during recessions.

For those who want to investigate spin offs individually, a great list is maintained at this site.  I will frequently take a look at this list as a starting point to do research.  I’ll then do a search to read news articles about the deal and any other analysis that has been done to evaluate the opportunity.

Why MSGN?

MSGN is the cable network division of Madison Square Garden.  This was spun off from the main MSG entity about a year ago.  The primary owner of MSG is the Dolan family.

It looks like the Dolans, who sold Cablevision a year ago, wanted to hold onto the prime iconic piece of New York real estate that is Madison Square Garden but simultaneously realize that cable is a dying business and want to rid themselves of it.  Hence their sale of Cablevision.

By spinning off MSGN, they isolate the entity for a potential buyout from another firm while continuing to hold onto the property that they feel has a future.

Earlier this year, Starz was bought out for 20 times earnings.  Why wouldn’t someone pay a similar multiple for MSGN, which is at half that valuation?

Even if I am wrong, MSGN has an attractive earnings yield and I am comfortable with it in my portfolio.  The only downside is the debt load, but considering that every other company I own has a healthy balance sheet, I am comfortable with this risk.

PLEASE NOTE: The information provided on this site is not financial advice and I am not a financial professional. I am an amateur and the purpose of this site is to simply monitor my successes and failures.

Monday Buys

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I was able to find some quality bargains over the weekend and purchased the positions effective today.

FNHC.  Federated National Holding Company.  103 shares @ 18.5

DDS.  Dillard’s.  40 shares @ 63.80

FAF.  First American Financial.  68 shares @ 37.26

IESC.  IES Holdings. 129 shares @ 19.5

STS.  Supreme Industries.  160 shares @ 15.85

PLEASE NOTE: The information provided on this site is not financial advice and I am not a financial professional. I am an amateur and the purpose of this site is to simply monitor my successes and failures.

Yesterday’s Purchases

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I compromised a bit yesterday and took in some stocks with higher valuations than I would prefer, but I am comfortable with the overall valuation of the company vs. what I paid for it and its historical value.  Each pick also has a healthy balance sheet with little to no debt.

I hope that the Fed decision will prompt further selling through end of the month and I can find better bargains before year end.  Currently the fund is 65% invested and will likely stay that way until I can identify more quality bargains with appealing balance sheets.

American Eagle Outfitters (AEO) – 150 shares @ $17.065

Earnings Yield = 7.62%.

Sanderson Farms, Inc. (SAFM) – 29 shares @ $89.6

Earnings Yield = 6.98%

TopBuild Corp (BLD) – 67 shares @ $37.915

Earnings Yield = 7.8%

 

PLEASE NOTE: The information provided on this site is not financial advice and I am not a financial professional. I am an amateur and the purpose of this site is to simply monitor my successes and failures.