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Author: kahunacfa 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: of 27417  
Subject: Re: Novice's first 5 months Date: 2/17/2007 10:54 AM
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I am a retired Portfolio Manager/Analyst. I took my first full-time investment analyst position in October 1976 after considering the four offers I had open to choose from at the time: Central Trust in Cincinnati, First National Bank of Miami, First National Bank of Colorado Springs, and Wausau Insurance Companies (http://www.wausau.com) since acquired - twice first by Nationwide then Nationwide of Columbus, Ohio. I retired from my last Investment Position as a Venture Capital Private Equity Portfolio manager in October 1995. I now am a full-time volunteer, and a part-time para-legal studies student.

My very large IRA, started in 1980 has about 20 or 25 stocks. I have owned some companies for several decades. I have about two to five new investments per year. I only buy a new investment idea if, and only if my analysis leads me to believe that the stock can be a four-bagger in three to five years. My one, almost sell rule when a stock becomes a four-bagger is to sell 25% or 1/4 of my position. For example a few years ago, the year 2000, I believe, I bought a small position in Xerox(XRX) at $4 per share for my IRA. Last year, I sold 25% or 1,000 shares at $17.37. I have retained the remaining shares because my valuation work leads me to the conclusion that Xerox is worth between $28 - $32 per share - yes I did leave some gains "on-the-table", but I had other companies that will be four-baggers in the next three to five years that I wanted to and did buy.

My typical holding period for an investment is three to five years - unless I did not chose wisely. If I conclude I made a mistake in buying the position - I sell.

There is no standard percent decline (10%, 20%, or 50%) that causes me to sell a stock. If my analysis is correct, and the stock declines 25% I may and do buy more shares. Most positions are 1K - 10K shares for low priced stocks (<$20 per share). I usually buy in approximately one-third increments, unless I can buy a company for less than cash per share. Then I will buy 10K or more shares all at once, when that rare opportunity presents itself.

Most of my stock holdings are listed in my MF Profile. You can read my MF Profile by clicking on my "MF Board Name: kahunacfa" I have been a Member of TMF since August 1995 - two months before I retired.

I will be 63 in September 2007.

For new Investors, and one reason why I visit this board because I like to help investors, I recommend reading some of the Great to Good Investment books: Security Analysis, Graham, Dodd, & Cottle (a difficult read for the beginner) easier to read, but with the same conceptional message is The Intelligent Investor. Graham. The Little Book of Value Investing. Christopher H. Browne, Managing Director of Tweedy Brown & Company - a very well known and highly regarded Value Investment Management Firm (http://www.TweedyBrown.com. You can read the "Little Book" in about an hour as I did at a local Kansas City Barnes & Noble bookstore on the Kansas City Country Club Plaza (http://www.countryclubplaza.com) go inside and take a tour of the Art works - well worth the time.

The fourth book is Jim Cramer's Real Money. Cramer, James J. I sometimes watch his Mad Money TV show which I enjoy greatly. I do not buy or sell the recommendations when he makes them, but they do get on my very large watch list of companies to potentially consider - but only after I do my own careful research which often includes a meeting with the company's CFO and CEO.

In the Fall of 1977, I went as a young Securities Analyst to visit ConAgra in Omaha in October. I had an appointment with the Investor Relations Manager, that I expected to take about an hour or so. I spent forty-five minutes with the IR Manager at their offices in Kewitt Plaza. As we were concluding our visit, the IR Manager said, do you have a few minutes? I said yes I have about an hour or so before I have to go to the Airport. The IR Manager said, we have a new CEO - Mike Harper, I would like to introduce you to him. The IR Manager took me to Mike's office. We started to talk. After about thirty minutes, Make said what time is your flight, I told him in about an hour. Mike said, can you take a later flight so we can have lunch? I said sure. Mike intercoms his assistant to ask her if she could switch my flight for Omaha to Wausau, Wisconsin. She booked me on a 16:00 flight back through Chicago. I had the rest of the morning with Mike, lunch with Mike and a couple of Vice Presidents, and the IR Manager in the Executive Dining room. I had a Ruben, which was quite good. After lunch Mike and I talked until about 15:00 - then he drove me to the airport.

ConAgra shares were selling for about $6 per share, had over a 6% yield and were trading at a slight discount to the 1977 book value per share. Mike told me how he had plans to reshape ConAgra from an agricultural commodity food and feed processor in 1977 into a major branded packaged food company - like Pillsbury where he had been recruited from.

I was stoked. Flew back to Wausau Insurance Company that Friday. Over the weekend, I wrote up my meeting notes and a buy recommendation on ConAgra. Monday at 08:00 at Wausau Insurance had our usual brief fifteen to twenty "what's New, What's going on" meeting. I presented the ConAgra idea. The head of the Investment Department said how many shares should we buy for the three portfolios. I said a normal to doubler normal position per portfolio - usually about 2.5%, normal, 5% double normal. He said, "After our coffee break buy it."

I bought about 300K shares for the Insurance Company Portfolio, and about 100K shares for each of the other two smaller portfolios for a total of 500,000 shares. After buying the large block over the next several days - we were done. Then I asked, could I buy a few hundred shares for me - Yes. I still own that stock. The stock has of course split several times since October 1977. I have been gifting my stock from time to time to my children, my church and other organizations whose Mission I believe in and support. With the gifts the cost basis gets "stepped-up" to the current per share of around $25-$26.

Below $15 - $20 per share, I would consider buying a position for my IRA. I may have a chance to see that price because ConAgra has announced a massive Peter Pan(R) and private label (Wal-Mart) peanut butter recall for all peanut butter with the manufacturing code 2111 produced at their very large single plant manufacturing facility in Georgia.

I love it when temporary bad things happen to Great Companies.

Sorry this got so long, but it does illustrate how I have always invested since I took this fantastic course at the University of Wisconsin - Madison (http://www.uwasap.org). BTW, Jeffrey Diermier, a good friend of mine is the recent first-ever Chief Executive Officer of the CFA Institute (http://www.CFAInstitute.org).

My CFA Charter was earned and awarded at a Chicago Analyst's Society meeting in October 1980.

Kahuna,CFA
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