SPY

The Correction: The IMF, Oil, Department Stores, and the Fed

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  We’ve been heeding our own words of caution for the past several weeks now, as we’ve trimmed some of the cyclical exposure in both the Best Ideas portfolio and Dividend Growth portfolio. We also added protection to both portfolios several percentage points ago in the form of put option contracts on the S&P 500. These instruments aren’t for everybody, and the put options can still expire worthless if we don’t take profits. The above chart of the SPDR S&P 500 (SPY) shows the ongoing market correction, and we expect to continue to provide daily market commentary in the event that things get considerably worse. Our high-level prognostication is that the broader equity markets will be lower than they are … Read more

The Correction: Protection Makes Sense

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When our team thinks about members, the one thing we want for them is to make money from our service. This sometimes means that we’re a bit cautious at times. For example, taking profits on Ford (F), Precision Castparts (PCP), and Buffalo Wild Wings (BWLD) a couple days ago was not an easy thing to do. They’ve been huge winners. From a fundamental standpoint, we still like the companies, but market conditions and valuations cannot be ignored. Just like the profit-taking, we also think it was prudent to add protection in the form of put option contracts to the Best Ideas portfolio and Dividend Growth portfolio in light of a number of factors. The put option contracts amount to ~1.5% … Read more

The Correction: Markets Ease Thursday

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The S&P 500 brushed off a sluggish open Thursday, recovering through most of the afternoon following the close of European markets. We’re not particularly fond of commenting on daily market activity, but we want to make sure readers know that we’re monitoring the correction very closely to see if things could get much worse. There are a variety of factors that could make the markets even uglier: sliding energy prices (impact on Big Oil’s profits), Ebola outbreak (impact on airlines, hotels), Hong Kong (disruptions in Asia), European weakness (risks of weaker economic activity), ISIS and Russia (geopolitical uncertainty), and the list goes on and on and on (our seven are here). One very important voice from the crowd, however, is speaking … Read more

October Dividend Growth Newsletter Introduction

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Dear Member, The month of September represented some tough sledding for the markets, and we think things will get worse before they get better. If you missed our write up on the seven reasons why we think we’re due for a fall, please be sure to catch up on the piece here. We made a number of changes to the Dividend Growth portfolio since the release of the previous edition of the newsletter. Let’s make sure you didn’t miss anything. For one, yesterday, we added S&P 500 SPDR put option contracts to the portfolio to protect the large gains. Specifically, we added protection in the form of 5 put option contracts on the S&P 500 (SPY), with November 22 expiration … Read more

Ugly Week Thus Far on Wall Street

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By Brian Nelson, CFA What does straight up look like, you may ask? Try the S&P 500 (SPY) since the fourth quarter of 2011. Today marked the largest sell-off in stocks since July 31 of this year. The Dow fell 1.5% to 16,952, the S&P 500 dropped 1.6% to 1966.27, and the Nasdaq tumbled 1.9% to 4,456.75. The S&P 500 tripped below its widely-followed 50-day moving average, and the large cap index is now back to levels reached months ago. All 30 Dow components fell during today’s trading session, with only a handful keeping the losses to less than a percent. Did you remember to build an arc like Bill DeShurko? What more does the market have to prove? The … Read more

Performance Update: The Valuentum Buying Index

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Note: A more recent analysis of the Valuentum Buying Index rating system can be accessed at the following link: /Value_and_Momentum_Within_Stocks_Too A version of this article was published October 26, 2013. By Brian Nelson, CFA We periodically update the performance results of the Valuentum Buying Index (VBI), the stock-selection methodology that drives idea-generation within the Best Ideas portfolio. The academic studies of the Valuentum Buying Index can be accessed here (white paper) and here (AAII). The latest iteration of the performance, dated September 3, 2014, continues to showcase the strong sorting mechanism embedded within the investing framework, particularly when the index is coupled with qualitative oversight and portfolio management skill. Sorting winners from losers is what the Valuentum Buying Index has been designed to … Read more

The Dividend Dilemma

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One of the core tenets of the Valuentum process not only rests in the all-important price vs. value consideration (see Valuentum’s Brian Nelson talk about that here), but also in “letting winners run.” At first read, these two items appear to be at odds with each other. For example, we preach about getting stocks at a bargain, but yet, we don’t sell holdings when they start to move beyond our estimate of their fair value. What gives? At the Valuentum core, we prefer an entry point that corresponds to the time when shares have substantial valuation and pricing support (i.e. they have high Valuentum Buying Index ratings), and we prefer an exit point when shares have little valuation and pricing … Read more

Price Is Almost Always Different Than Value

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It was January 10, 2000. America Online had just announced that it would acquire Time Warner to create the largest media company. The purchase price amounted to more than $160 billion, and the combined entity was estimated to have a market capitalization of ~$350 billion. The deal was the biggest corporate merger to that date and was expected to launch the next Internet revolution, according to then-CEO of AOL Steve Case. The transaction valued Time Warner at about $108 per share, a huge premium over its price of $64.75 per share the trading session before. AOL’s shares closed at $72 the day of the announcement. Just a couple years later, things were quite different. When it reported full-year 2002 results, … Read more

Markets Collapse: Economic Sanctions on Russia, Argentina Defaults…Again

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Dow Jones falls over 300 points Thursday on Argentina default and economic sanctions on Russia. The very idea that we don’t know which hedge funds will be hurt by recent global economic activity, how leveraged these hedge funds are to global currencies and equities, and whether Russian president Vladimir Putin will respond in kind to economic sanctions means conservative investors are taking money off the table. Is it finally time to lock in profits after one of the best stock-market runs of all time from the March 2009 lows? First, the EU and US impose economic sanctions on Russia. Next, Argentina defaults on its debt for the second time in 12 years, bringing back memories of the infamous collapse of … Read more