UnThreaded | Threaded | Whole Thread (13) | Ignore Thread Prev Thread | Next Thread
Author: Jrice08 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41629  
Subject: BMW analysys of my portfolio Date: 12/11/2006 12:05 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 12
I think I am finally starting to understand using CAGR to run your portfolio, and figured I would practice by using it to analyze my little portfolio. I will go through each stock that I own, giving a brief history of my purchases, where I see it going, and what I think I should do with it. Don't worry, I only have a few stocks to go through. (note- I use GrahamInv CAGR spreadsheets for my analysis)

JP Morgan- Began dripping Bank One in 2003, and continued after they were bought out by JP Morgan in 2004. Currently represents about 18% of my portfolio, and has a cost basis of $33.00. JPM's CAGR has run up in the last 5 years from a low of 3% to a current CAGR of 6.22% . Looking at the graph, 7% looks like it might be the average CAGR, so it has a little ways to go. But if I ignore the big run up during the bubble, where does that put its avg CAGR? This will be a stock I will continue to hold, but will not look at adding to unless there is a very large drop. In any case, it is quite a ways from its recent low CAGR, so I'm thinking; this would be the first to sell if I found a better deal.

BUD- I started dripping Bud in 2004 and stopped earlier this year, represents about 15% of my portfolio, and has a cost basis of $44.27. Now Bud is still near its CAGR low of 12%, and looks to have an avg CAGR of 14%, although that doesn't seem very sustainable nowadays. So going strictly by the CAGR graph, Bud was a good buy when I was buying it, and still is. With a 13% CAGR, Bud would be around $56.00 today. With that in mind, I am happy with my Bud position today, and should look at buying more on dips.

PFE- Purchased earlier this year with a cost basis of 24.50. Currently represents about 14.25% of my portfolio. Like Bud, is currently near its low CAGR which looks to be around 12.25%. Ignoring the giant bubble, the avg CAGR appears to be around 14% which would put it around $36. I was all set to buy more shares last week after the announcement, but unfortunately the stock didn't drop nearly as much as I was hoping it would. However if it does happen to drop below 23, I will look at purchasing some more shares.

HD- Bought a couple of months ago with a cost basis of $36.30 and represents 7.9% of my portfolio. Don't really need to say much about this one as it has been talked about a lot here lately. Although it is currently at its lowest CAGR, which is 22%, that doesn't really seem sustainable. But I still think it has potential from here on out. Looking at the low of $11 in 1996, $22 in 2002, and $32 last year I see the price seems to bounce off a CAGR of 13.34%. What does this mean? I have no idea, but it is interesting. If there is any significant drop I will buy more.

MMM- Bought same time as HD with a cost basis of $73.20 and represents 10% of my portfolio. MMM is a boring ho-hum company that has followed the same CAGR pretty much since the beginning. It seems to have an avg CAGR of 6% making the current CAGR of 6.77% a little higher than its historical average. This concerns me quite a bit as there doesn't seem to be much potential from this stock. It is a good safe stock that will return about 6-7% plus dividends. With this in mind, and its quick recovery, I should consider selling now, as this is not an acceptable return for someone trying to beat the market. In the future, I will look to buy on drops, and look to sell shortly afterwards as it seems to quickly recover.

Chicos- Not a BMW stock, but I thought it would be a good value play. Purchased a couple of months ago with a cost basis of $22.16 which was quite a bit up from its lows. Represents 8.23% of my portfolio. I'm not real sure what to do with this one as I cant really use CAGR graphs to analyze the stock since it had not been around long enough. Now if I want to stick strictly to BMW investing, I should sell Chicos, and begin looking for a more established company that has some history behind it.


Well there you go; a little summary of almost every stock that I own. What does everyone think about my choices, and what I plan on doing? In early next year, I will have about 20% of my portfolio in cash, so I won't need to sell any of my current selections in order to purchase something that might pop up. However, I still think I should look at selling MMM and Chico's. Keep in mind this is all in a Roth, so there are no tax consequences. Please everyone, I would really like to hear everyone's opinions here. Thanks so much, as I continue to soak up all the information provided on this board.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: BuildMWell Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18406 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/11/2006 7:16 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 12
"Well there you go; a little summary of almost every stock that I own. What does everyone think about my choices, and what I plan on doing? In early next year, I will have about 20% of my portfolio in cash, so I won't need to sell any of my current selections in order to purchase something that might pop up. However, I still think I should look at selling MMM and Chico's." - Jrice08

I had never thought of using the BMW Method as you have just done, but it makes sense. You are evaluating your existing portfolio rather than using the method for buying. I still think the perspective is good since you know where the stock is in it's business cycle.

I bought JP Morgan back in 2003 around $18/share during the Enron scare. It more than doubled a year years and I sold most of my position in late 2005 when it was obviously stalled around $40. I am not enthralled with that overall 6% to 8% CAGR even though the 3% dividend is OK.

On my hand-drawn chart the share price is sitting on the 8% CAGR and that is my average. The high CAGR on the chart is 10%, but that includes the bubble years. I am not anticipating a move muchg above where it is right now. Thus, this would be my choice for a sale.

I am not sure why you would want to sell 3M or Chico's. I also bought CHS several months ago at $18/share using the BMW Method. It is not a BMW stock due to the short history, but the overall growth curves were so sensibly regular that I plotted the CAGRs with a great deal of confidence. We had an extensive discussion here about Chico's. It ran up about 40% within a few months after I was buying. I sold covered calls ($25JAN07 @ $2.20) last month when the stock was up at around $25. The stock has since pulled back a little, but I still like it. I sure would not sell because It is not a BMW Method stock.

At about the same time, I bought some 3M and that was discussed here also. 3M jumped from my cost of $68/share to close to $80?share in just a few months. Again, I sold covered calls, ($85JAN07 @ $0.50). I did not think MMM would go that high that fast, but my chart tells me a price of over $90/share is not unreasonable withing the next year. The tight CAGR curve would normally discourage me from 3M, but that recent fast drop made the shares too good to pass up. You can sell if you want, but I would hold out for a little higher price if I were you. The price has come close to $90/share three times in the last two years, I expect that it will go back there again...especially if the sales of some high margin products come in above the estimates. I mean the HDTV film that drove the price down last summer. I read that the sales of those TVs are soaring this month.

I think you would do better if you used the BMW Method for buying stocks. It appears to me that you bought MMM right on the average CAGR. Just a little patience would have gotten the shares at $68...not a huge difference, but the game is to maximize your personal CAGR. Now, that you own it, don't get too impatient on the other side of the equation. Keep watching it and sell nearer the top.

I hope this helps. LIke I said, I like the way you are approaching this.



Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: JJMSpartan Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18407 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/11/2006 7:25 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 8
What does everyone think about my choices, and what I plan on doing? - JRice08

Nice analysis of your holdings, but I think you might need to tweak your thinking a bit. The questions I think you need to ask are these:

1) What CAGR have I personally had for my investments over the last few years?

2) What CAGR do I want to achieve with my future investments?

3) With the current investments I have, am I going to reach my goal?

IMHO, the things I think most investors lose sight of are those questions. First of all, how well have you performed over the last few years? If you don't know your own stock picking performance, you really have nothing to gauge your picks on. This is the first bit of info you need as it will help you with the next question - setting realistic goals based on your past performance. If you have been averaging only 8% CAGR, setting an initial goal of 25% may be a bit beyond your reach. However if you first set a goal of 12% and achieve it, then you can always go and modify the goal to shoot higher. It's important IMHO to set an initial goal that is reachable, so that you don't become disappointed if you set too high of a goal and don't reach it.

For me, I turned this light on several years back when I first started tracking my performance and found that I was actually losing to the S&P 500 annually. I thought I was doing great until I came to the realization that I was losing to an index. Once I saw my performance, it allowed me to set an investing goal. I first set a goal to beat the S&P by 2%. As I've gotten better, I've modified the goal so that my current goal is to beat the S&P by a minimum of 10% per year. Setting an investing goal is so important, and not enough investors do it. I like to think of it as if you don't know where you've been, and you don't know where you want to go, how do you know if you're going to get there?

After I set that goal, I sat down and looked at my investments. From that point, I saw that I had several companies like JPM that had long term CAGR's of about 7-8%. Since the S&P has a long term CAGR of about 8.5% (not including dividends), JPM wasn't going to help me reach my goal, so I dumped it.

Once you lay down those foundation pieces - where you've been and where you want to go, your investment decisions should be much easier to make. Sorry if I didn't really answer your question about how I like your portfolio. I think that's a question you have to find the answer to yourself. But first you need your own map as to how you want your investing course to look like.

Good luck and prosperous investing,

Jeff

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: Jrice08 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18411 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/11/2006 10:36 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Thanks for the analysis from the both of you. The reason I took this approach was to simply see where things were at, and to see if I was understanding the process. I feel like I have the basics down, but still have a lot to learn.

As far as JPM, I agree that it is probably time to move the funds to something that has more upside. One thing that I do like about JPM though, is Jamie Dimon, who came over from Bank One. Everything I have heard about him makes him out to be an amazing leader who can turn this stodgy bank into a leaner, more efficient company.

Now if I were to sell, I still am not sure where to put the funds. There seem to be a decent amount of good buys, but not a lot of great buys. I have been looking at AIG, WMT, and WAG mainly and I feel like I either missed my chance (AIG, WAG?) or they just aren't there yet. Now to me they seem like they would get you respectable returns at these levels, but nothing exceptional. So I keep going back and forth between putting my cash into these companies, or holding out for a better deal. Like most people, as soon as I get free cash, I wanna invest it immediately instead of waiting patiently for a good buy. So I am trying to practice patience, but it is getting difficult as I feel I am missing out on opportunities. Am I being to picky?

Print the post Back To Top
Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18425 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/12/2006 3:47 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
What does everyone think about my choices,
Jrice08


If the shoe fits, wear it! :))

Portfolios are personal and yours seems to fit you just fine.

Denny Schlesinger


Print the post Back To Top
Author: RaptorD Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18428 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/12/2006 4:13 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 4

"as soon as I get free cash, I wanna invest it immediately instead of waiting ...but it is getting difficult as I feel I am missing out on opportunities. Am I being to picky?"

Hi Jrice,

No you are not being too picky. There are, IMO, a lot of decent buys using low-CAGR as your guide right now, but if there is a company just laying in the ashes screaming "Buy me! I'll make you rich!" then shame on me, because I've missed it or I already own it, and don't see it for what it really is.

There can be great advantage in holding your companies, or even having cash around when you eventually hear those screams rise from the ashes from one of your wishlist companies.

I can attest the method works, over and over. I also hold many small-caps and non-BMW companies that have incredible CAGR's. So my advice would be to use ALL methods at your disposal, including the BMWm. Sipping the Koolaid is more satisfying than drinking the pitcher in one gulp, and it saves costly spills.

The biggest thing BMW has done for me is not naming the companies to buy this month, but the thinking behind the method. The THINKING can apply to buying anything--small-caps, mid-caps, '57 Chevy's, or a used Total Gym. The key, again it's just IMO, is to find something you want, and then watch until the price is YOUR price. If it never meets your price, that's okay too, because hopefully you found 2 or 3 (or 10 or 20) other companies that you also want to own some day. One of them will be on sale soon.

Companies like Hansen Natural and GUESS? never went for fire sale prices. But that doesn't mean one should never own them, and BMW-style thinking can still help you find a time to buy them that will increase your CAGR by double-digit percentages.

Like gifts, it's the thought (style) that counts, and you nailed the word of the day. Patience. The BMW is rather simple, but personally I don't think it wouldn't be impossible to drown in it either. 1 sip at a time...

Best,

Dan

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: captainccs Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18429 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/12/2006 4:17 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Now if I were to sell, I still am not sure where to put the funds. There seem to be a decent amount of good buys, but not a lot of great buys.
Jrice08


Supposedly Ross Perot has a sign in his office that says: "Eagles don't flock, you have to catch them one by one." It refers to hiring top notch people but you can apply it to stocks as well. The one advantage of stocks is that you can recycle them with less emotional involvement. :)

Since you cannot will prices up and down you have to be opportunistic. You need an "inventory" of potential buys and another "inventory" of potential sells. One way to do it by having open limit orders on the buy and on the sell side. One way to make sure you don't run into a cash shortage situation is to have a margin account. Money management is, IMO, an integral part of any investing program.

Frankly, I seldom have a problem finding buys I like well enough. As a matter of fact, I tend to churn my portfolio a bit too much. My advice would be to -- slowly -- rotate your portfolio into higher CAGR stocks but remember that slow movers have a tendency to jump up just as soon as you sell them :)) In other words, buy some solid performers and don't worry about them too much, let them do their stuff.

Denny Schlesinger

Print the post Back To Top
Author: RaptorD Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18488 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/13/2006 11:31 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1

"You need an "inventory" of potential buys and another "inventory" of potential sells."

JRice, IMO, Denny gets it. Best to take notes when the captain shares.

Dan



Print the post Back To Top
Author: theGreenMartian Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18551 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/15/2006 2:32 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
PFE- Purchased earlier this year with a cost basis of 24.50. Currently represents about 14.25% of my portfolio. Like Bud, is currently near its low CAGR which looks to be around 12.25%. Ignoring the giant bubble, the avg CAGR appears to be around 14% which would put it around $36. I was all set to buy more shares last week after the announcement, but unfortunately the stock didn't drop nearly as much as I was hoping it would. However if it does happen to drop below 23, I will look at purchasing some more shares.

I'm not an expert on BMW and wasn't exactly welcomed to this board last time I visited but I will make one small comment here that you might wish to completely ignore - namely, what is the STORY behind your stock picks? You own PFE then, based on some mathematical calculations. Maybe it works out just fine for you, as the idea of using the BMW method appeals greatly for many reasons. Still, what is going on with PFE particular? Pharma company making its money with drugs, right? Have you taken each one of PFE's drugs, sales for each drug, and lined up the patent expiration dates to get an idea what might happen in the future? Have you done something similar with CHS's store counts to find out what each concept is contributing, where each concept is in its growth cycle, where margins are, where sales might go? What do you think about HD's move into non-store activities? How are you going to evaluate those? Maybe these are all things that you've discussed elsewhere but are you sure it makes sense to use historical CAGR data without also confirming that the company in question has a bright future too?

anyway = just 2c



Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: abFatPitch Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18552 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/15/2006 2:49 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
... but are you sure it makes sense to use historical CAGR data without also confirming that the company in question has a bright future too?

Are you sure that, "Have you taken each one of PFE's drugs, sales for each drug, and lined up the patent expiration dates to get an idea what might happen in the future? Have you done something similar with CHS's store counts to find out what each concept is contributing, where each concept is in its growth cycle, where margins are, where sales might go? What do you think about HD's move into non-store activities? How are you going to evaluate those?", will give you a better advantage in predicting the future than what you've read on this board? Additionally, are you sure by doing those things that your outcome would be very dissimilar?

I would bet large money I know the answer to both.

ab


Print the post Back To Top
Author: theGreenMartian Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18556 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/15/2006 3:31 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Are you sure that, "Have you taken each one of PFE's drugs, sales for each drug, and lined up the patent expiration dates to get an idea what might happen in the future? Have you done something similar with CHS's store counts to find out what each concept is contributing, where each concept is in its growth cycle, where margins are, where sales might go? What do you think about HD's move into non-store activities? How are you going to evaluate those?", will give you a better advantage in predicting the future than what you've read on this board? Additionally, are you sure by doing those things that your outcome would be very dissimilar?

you know, I'd answer but see that this discussion is already taking place, so....(no need for me!)

http://boards.fool.com/Message.asp?mid=24936785

still, I'll say this - voting for willful ignorance seems like an odd approach but whatever works for you is ok with me (and good luck with your solo practice! nice job on your board)



Print the post Back To Top
Author: abFatPitch Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18562 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/15/2006 3:55 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
still, I'll say this - voting for willful ignorance seems like an odd approach but whatever works for you is ok with me

Hmmm, you seem to be making an assumption that because equity research isn't done a certain way (your way?), then that research won't produce acceptable results. OTOH, I know you are a fan of the "just make money" approach so wither the criticism?

(and good luck with your solo practice! nice job on your board)

Thank you,

ab


Print the post Back To Top
Author: theGreenMartian Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18566 of 41629
Subject: Re: BMW analysys of my portfolio Date: 12/15/2006 4:05 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
Hmmm, you seem to be making an assumption that because equity research isn't done a certain way (your way?), then that research won't produce acceptable results. OTOH, I know you are a fan of the "just make money" approach so wither the criticism?

ab, it isn't criticism. I just don't understand why one WOULDN'T want to know, for example, that Lipitor is going off-patent in 2010, especially when all it involves to know is to read the 10K. None of the things mentioned were particularly difficult to collect - read the filings is all you do in most cases. So I'm not sure what you are suggesting - not to read them? But sure - you have to have a framework to judge the information intelligently (many know that I'm a Lynch fan myself, but whatever approach you want is ok with me as long as it works). I don't see how doing some DD would hurt, but again - just make money.



Print the post Back To Top
UnThreaded | Threaded | Whole Thread (13) | Ignore Thread Prev Thread | Next Thread
Advertisement