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Author: AllTooFoolish Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5993  
Subject: Dec 28 2012 Picks (with 2013 Tracker) Date: 12/26/2012 4:36 PM
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I am posting this monthly picks and will also be starting a 2013 tracker to see how we are doing along the way. 
See the end of the post for the tracker results and 2013 picks.

Based on the latest results as of today’s data release, no companies would qualify as a Long candidate.

Although several stocks are significantly overvalued according to the BI valuation methods, none would qualify as a short candidate either.

Market Valuation: Data suggests we remain in a slightly overvaluation state.
Downside -23%
Upside +14%

I am using the following TTD rules for Long position considerations:
1. Year-over-Year EPS growth must > 10%, which is the next 4Q / current quarter + previous 3 quarters earnings results
2. VL 3-5 Year price appreciation > average price appreciation of the market
3. When calculating ROE and BV figures, ignore years when are negative, but must have at least 7+ years of data to be 
   included in final consideration
4. Avoid erratic ROE ratios, that is where they are > 2std deviations = Curr ROE > (10 Year Avg + 2 * Std Dev)


Summary of Results												
											
	VL	        Current	Down	Up	%<10Y	EPS	Div    3-5Y L 3-5Y H VL 3-5Y   ROE	
Ticker	Date	        Price	Price	Price	Down	Delta   Yield   VL $	VL $	% Chg	<2STD	Name
CAT	23-Nov-12	87.9	78	138	13%	-14%	2.3	125	190	75%	FALSE	Caterpillar Inc.
JNJ	23-Nov-12	70.27	64	81	10%	6%	3.5	85	100	30%	FALSE	Johnson & Johnson
MCD	30-Nov-12	90.18	62	89	45%	6%	3.4	110	130	33%	FALSE	McDonald's Corp.
CVX	7-Dec-12	110	75	107	47%	13%	3.3	130	160	31%	FALSE	Chevron Corp.
XOM	7-Dec-12	87.23	66	92	32%	3%	2.6	110	135	37%	FALSE	Exxon Mobil Corp.
BA	14-Dec-12	76.17	50	78	52%	0%	2.6	90	125	41%	FALSE	Boeing
TRV	14-Dec-12	72.82	41	61	76%	-25%	2.5	80	100	21%	FALSE	Travelers Cos.
UNH	14-Dec-12	55.03	42	68	32%	4%	1.5	95	125	98%	FALSE	UnitedHealth Group
T	21-Dec-12	33.67	26	38	28%	9%	5.3	40	50	31%	FALSE	AT&T Inc.
VZ	21-Dec-12	43.57	23	33	89%	14%	4.7	55	70	42%	FALSE	Verizon Communic.
CSCO	21-Dec-12	19.96	25	42	-21%	7%	2.8	25	30	35%	FALSE	Cisco Systems
HD	28-Dec-12	61.32	34	54	78%	16%	1.9	65	75	12%	FALSE	Home Depot
PG	28-Dec-12	68.72	47	60	47%	1%	3.2	90	110	43%	FALSE	Procter & Gamble
INTC	5-Oct-12	20.77	27	46	-22%	-4%	4.3	35	45	90%	FALSE	Intel Corp.
HPQ	5-Oct-12	14.34				143%	3.7	35	55	211%	TRUE	Hewlett-Packard
IBM	5-Oct-12	193	136	198	42%	10%	1.8	235	285	33%	FALSE	Int'l Business Mach.
AA	12-Oct-12	8.57	3	6	202%	1157%	1.4	17	25	141%	FALSE	Alcoa Inc.
DD	12-Oct-12	44.93	50	75	-10%	15%	3.8	95	120	137%	FALSE	Du Pont
MRK	12-Oct-12	41.52	36	58	16%	-8%	4.1	45	55	18%	FALSE	Merck & Co.
PFE	12-Oct-12	25.08	16	24	57%	23%	3.8	30	35	27%	FALSE	Pfizer Inc.
GE	19-Oct-12	20.88	21	31	2%	17%	3.6	30	45	78%	FALSE	Gen'l Electric
MMM	19-Oct-12	93.1	80	112	17%	9%	2.5	120	150	43%	FALSE	3M Company
UTX	19-Oct-12	82.54	61	87	36%	0%	2.6	115	140	53%	FALSE	United Technologies
KO	26-Oct-12	36.89	30	40	23%	11%	2.9	50	60	48%	FALSE	Coca-Cola
WMT	2-Nov-12	68.65	66	84	4%	10%	2.3	95	115	52%	FALSE	Wal-Mart Stores
DIS	9-Nov-12	50	43	65	17%	9%	1.5	60	75	32%	FALSE	Disney (Walt)
BAC	16-Nov-12	11.29	6	9	105%	122%	0.4	11	19	30%	FALSE	Bank of America
JPM	16-Nov-12	44	40	66	9%	9%	3.0	55	80	51%	FALSE	JPMorgan Chase
AXP	16-Nov-12	57.65	50	75	16%	10%	1.4	75	105	56%	FALSE	Amer. Express
MSFT	16-Nov-12	27.45	30	44	-9%	18%	3.3	50	60	98%	FALSE	Microsoft Corp.

												
Dow30		        13,191  10,182  15,060 	               2.8	17,302 22,033 			Dow Jones Industrial Average
Appreciation Potential		  -23%	   14%				   31%	  67%	58%

VL Date is the date of the last summary report update from Valueline.

Current Price is the closing price of the stock as of the time mentioned in the posting description.

10Yr Down is the 10 year downside price. The company must have at least 7 years of non-negative ROE data to qualify.

10Yr Up is the 10 year upside price. The company must have at least 7 years of non-negative ROE data to qualify.

Both upside and downside are calculated using method outlined in TTD book.
Also a discussion of calculating the upside and downside can be found here:
http://boards.fool.com/Message.asp?mid=20916205&sort=who......

%<10Y Downside is the current price divided by the 10 Yr downside expressed as a percentage.

EPS Future Delta is the projected growth in EPS for the next 4 quarters versus the last four reported quarters.
I use the latest EPS data from the VL spreadsheet which are updated as soon as new earnings are reported.

Div Yield is the current % dividend payout ratio per share.

3-5 Y Low/Hi Price Est. is the downside/upside price estimate which is calculated using the projections of Book Value 
and ROE as discussed in TTD.

Min VL Price Appreciation is the expected change in price from current price to low end VL projected 3-5 year
appreciation price.

ROE >2STD is part of a margin of safety consideration, which is briefly discussed in TTD on pg 70-71. 

I compare the current year's ROE versus the last 10 years of ROE data. If the current ROE is greater than average(10 Yr
ROE) + (2 * stdev(10 Yr ROE)), than this column is TRUE, else it is FALSE. This tells me that the stock's ROE is much
higher than its historic average.

------- 2013 BI Tracker ------
Since no individual companies in the Dow meet all the criteria in order to be selected as a BI Long pick, I am loosening 
the criteria a bit and will track candidates that have >0 earnings, but do meet all the other criteria mentioned above. 
Based on these slightly relaxed criteria, three companies are being selected and will be bought on Dec 26, 2012 at their closing prices. 

I will update their performance each month and track other corporate activities (dividend, splits, etc.) as a log here.

CSCO bought 167 shares @$19.92
DD bought 74 shares @45.04
MSFT bought 124 shares @26.86
BI basket = $9987

S&P benchmark closed at 1419.83 with a 2.4% yield
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