12/02/07 Stock Portfolio

Well hello all my avid readers! It's been a while since my last post, but I promise I've been very busy with my investment portfolio.

Here's the quick summary:

STOCK	% Gain/Loss	% Portfolio
GRMN	76.06%	14.73%
STP	72.60%	13.44%
IBM	19.46%	10.54%
BUD	224.10%	10.32%
MLAB	16.73%	7.46%
JNJ	24.02%	6.91%
MMM	272.93%	5.81%
SJT	15.22%	5.14%
LH	-3.90%	4.53%
APOG	-4.22%	4.29%
DEO	127.67%	3.64%
INTC	117.20%	3.38%
EEB	-0.34%	3.10%
BTJ	8.71%	2.56%
RISKY FUND	-4.68%	2.35%
MRK	17.00%	1.82%

You'll notice a few things here since my last post. I was forced to sell QSII becuase it hit a loss point. IBM has had a significant change in gain/loss because I decided to sell a good portion of my earlier purchases in the company. Gateway (GTW) is gone, it was bought out (I still ended up with a slight loss on my stock purchase there).

Garmin has gone down since I last posted but primarily because I picked up some more of it, which averaged down my return on my first investment. Other then a scary bidding war with Tom Tom over a map company, Garmin has continued to be a really good company to own.

My best purchase since my last entry was in STP (Suntech Power). They are a solar power company based in China that I've been very pleased with. I took an interest in solar power as a play in the heightened environmentally sensitive world we now live in (It's nice to think Al Gore has helped make me some money). I researched quite a few different solar companies (actually took a quick 25% profit in a first solar investment) but in the end decided STP had the best balance sheet and stock price for my investment.

I've added to my MLAB holdings as is my investment strategy when a stock hits a 10% gain from my initial purchase (the same was also done with STP).

I've been slowly adding APOG to my portfolio, as it's continued to drop. I see an excellent company, with an excellent balance sheet, that for whatever reason is being ignored by the industry. I always treat those as opportunities.

For some diversity, I added EEB, an ETF which tracks BRIC (Brazil, Russia, India, China) companies.

I also couldn't stop myself from purchasing some Bolt Technology (BTJ). I've been tracking it for quite a while and the price of the stuck relative to it's earnings and growth was just too much for me.

I'll be honest, I tend to let Bob do the majority of the work :) A lot of my recent purchases have been stocks that he has screened on his web site. I add them to an excel spreadsheet and then watch for dips. MLAB, APOG, BTJ are all companies I discovered from Bob.

I also started a "RISKY FUND", I have a tendency to only buy good sound companies. This is my experiment at some speculative investing. I'll continue to keep this as a small position in my portfolio.

09/02/07 Stock Portfolio

Here's a summary of my current stock portfolio. Some stocks such as BUD, INTC, and MMM I've been carrying around for a quite a while now which is why the appreciations are so high (my dad got me into investing back when I was in high school). IBM is a stock I've purchased through my employee purchase program so have been slowly adding to it since 2001. I got a bit "lucky" on that one in that it tanked when I first started and has been coming up ever since (all me of course :)

STOCK	% Gain/Loss	% Portfolio
IBM	141.98%	14.39%
GRMN	101.32%	14.25%
BUD	203.19%	12.91%
QSII	-4.06%	9.98%
JNJ	10.98%	8.39%
MMM	300.49%	8.34%
MLAB	6.83%	6.91%
LH	2.70%	6.47%
SJT	2.17%	6.32%
DEO	82.74%	4.50%
INTC	114.45%	4.47%
MRK	-1.11%	2.06%
GTW	-4.17%	0.99%

Stock Strategy

I've discussed a lot of the things I look for when purchasing a company, but I've never really discussed my decision making process when purchasing and selling a stock. Mostly this is because I tend to make it up as I go along :)

I've been trying to develop a strategy that allows room for a stock to appreciate without interruption from me, but at the same time which allows me to avoid the "bubble" affect and take some gains when a stock reaches a peak and begins to come down.

I strictly follow the -10% rule. That is, if a stock depreciates 10% from my initial purchase price, I immediately sell it all. I recently posted a question to Bob on bobsadviceforstocks.com. Bob is one of my favorite stock bloggers and follows a very strict buy and sell system. My question to Bob can be found here. The main thing I take from this is that Bob has a system, and he sticks to it. There's no gut feeling, no emotion, nothing that is used except his system. It makes investing for him simple (other then picking the right stock of course :). I still see myself as a bit young and foolish, so I just can't bring myself to follow this type of strict strategy (although I know deep down it's the best thing), but I do at least need some rules!

G. Stock Investment Strategy

• Always sell a stock if it depreciates by 10% or more.
  
• Never buy a stock at a peak, I feel like it raises to much risk that I'll end up hitting my -10% sell point if I do.
• Try and always buy into a stock in a valley (may seem obvious by previous one but not necessarily)
  
• Once a stock appreciates by 100%,200%,300%..., sell half of holdings if it depreciates to 85%, 185%, 285%...
• Sell all of a stock if it appreciates to 100%,200%,300%..., and then proceeds to drop to 50%, 100%, 150%...
  
• Never buy stock from a company which is not making money (see exception next)
• Carry one speculative stock (bio-tech, green energy, ... ). This is the "lottery" ticket as Bob Kramer likes to call it and I believe every good portfolio should have one. This should not exceed more then 1/10 of the portfolio though.
  
• Be Patient! Unless a stock seems stagnant, or is no longer a good selection based on homework, be willing to sit on a good stock and wait for it to appreciate.
  

Profit Taking!

Well then, it's been a heck of a month. I haven't been as good with the blog as I'd like but I have been busy :) So lets dig into what's been going on in G. world from a sales point of view.

Sales

Garmin (GRMN)

I went with a new strategy I'm developing for runaway stocks. For those that don't remember, I purchased Garmin in two batches. One with a price point of $46.84 and another at $51.04. Garmin had an amazing run up to $105.85. Even I, an avid Garmin fan, felt that price was too high. I decided to implement my 12% rule which stated I would sell half of my holdings in Garmin if it dropped 12% from it's peak. This quickly occurred in the following days and I ended up selling half of my portfolio at $92.32, taking a 97% profit. Garmin of course is back up around $101 right now but I'm happy with the sale. Garmin with my two purchases, became my largest portfolio holding. Having it double, made it astronomical in relation to the rest of my holdings.
I distinctly remember the dot com bust and have always followed a strategy where I do no selling as my stocks appreciate, but which make sure some profit taking is done if a decline starts to come. Garmin is still an amazing company and I plan to leave my last half in there for the long haul (i.e. it's going to get a lot more swing room before I even think of selling).


Armor Holdings (AH)

I purchased armor holdings back in September of 2006 as a play on the current administrations war strategy. Overall it seemed to be going well with a good rise in stock price. Armor holdings was purchased by BAE systems. It was purchased for $88 a share, which compared to my $52.72 purchase price gave me a nice clean 64% return on my money. I had mixed feeling on this takeover, the return on investment was nice but I had high hopes for this company and was kind of ticked off the sale came at such a time that I'll be paying short term gains on the sale. Oh well, can't complain about a 64% return over the course of 11 months.


Hartford Financial Services (HIG)

I've never actually blogged about HIG but I had a small stake in it from an 8/17/2004 purchase. I purchased it at $60.62, sold it at $86.65. It had a great run up to $106 at one point but ended up coming back down. I didn't have a whole lot of feelings either way with this company so decided to sell into a rally one day. With dividends, I got a 52% return on my money with this one.


Well there you have it, my sales over the last month. The market has been very volatile but overall I've been really happy with my portfolio. The next post of course will be what I did with all of my new found money!

Johnson and Johnson (JNJ)

As mentioned in my previous post, the recent market movements have gotten under my skin a bit. I decided it was time to diversify a bit and put my money in what I consider a safer company.

G, what does this company do?

From google finance:

Johnson & Johnson is engaged in the research and development, manufacture and sale of a range of products in the healthcare field. Johnson & Johnson has more than 250 operating companies. The Company operates in three segments: Consumer, Pharmaceutical, and Medical Devices and Diagnostics. Sales of the Company's two largest products, RISPERDAL/RISPERDAL CONSTA and PROCRIT/EPREX, accounted for approximately 8% and 6% of Johnson & Johnson's total revenues, respectively, during the year ended December 31, 2006. In May 2006, ETHICON, Inc., a Johnson & Johnson company, acquired Vascular Control Systems, Inc., which is focused on developing medical devices to treat fibroids and to control bleeding in obstetric and gynecologic applications. On December 20, 2006, the Company completed the acquisition of the Consumer Healthcare business of Pfizer Inc. In February 2007, the Company completed the acquisition of Conor Medsystems, Inc.

G, where did you find this company?

I've owned the company for quite a few years but only from my poor college days. My dad recommended back in those days and it's had a good solid rate of return.

G, why do you like this company?

It makes me feel safe! It's averaged 12% return over the past 10 years, it has an excellent return on investment, it makes a ton of money, it's very well diversified in both product and geography, it's sitting near a 52 week low, and no matter what, people will always need what it produces!

G, give me the details.

The growth numbers are not as exciting as GRMN or QSII but they make billions of dollars more!

G, what did it cost you?

I bought at $61.82 on 7/24/2007.

Time for a Safe One

As I review my portfolio, and sit through a day like Friday I remind myself that small growth companies offer a lot of potential, but also carry more risk. I can't complain up to this point. I'm currently sitting at a 60% return on Garmin, a 63% return on Armor Holdings and I'm off to a quick 8% return on my recent purchase of QSII. The rest of my portfolio has been on the upswing as well (IBM has had a great run recently). The point is though that a lot of my stock picks have been in small fast growing companies. The key to surviving the stock downturns (and yes there will be one eventually), is to have a balanced portfolio. My one "safe" stock I purchased on this blog, SJT, with it's ~8% yearly dividend has had a nice 10% return so far and has done exactly what I expected of it (slight stock price gain with excellent dividend return).

With that said, instead of making a second investment into QSII when it hits a 10% return (as I did with Garmin), I will instead put this money into a safer, large cap company with a strong history of earnings and profit. Currently on the list are JNJ, MSFT, GE, MMM, or BA. I'm definitely leaning towards JNJ. It's in a stock price valley, is well diversified in product and in location, and it has an excellent history of solid growth with a steady 12% average rate of return. Stay tuned for the G. pick.

Another thing I've been battling with is whether to sell a part of my purchases and take some profits. Two things keep me from doing this, thinking about all those people that sold Microsoft the first time it doubled in price way back in it's beginning, and paying short term taxes on those gains. For now I'm going to simply sit on them but I will be keeping a close eye on the market.

Quality Systems Incorporated (QSII)

Ever walked into your dentists office and had the receptionist spend 5 minutes clicking away at the computer, patiently waiting for some archaic dos based database retrieval program to pull up your records? Or better yet, ever had the receptionist pull out an old folder from when you first started coming, overflowing with old x-rays and your address and telephone numbers from when you were two? The same can also be true when visiting your old family doctor. I've always felt there's a good business to be had in the dentist/doctor office software business, especially as a lot of these business's start actively moving to better electronic systems to try and improve cost. QSII provides this exact software. I've put my updated spreadsheet here with QSII numbers. Lets do the G. questions!

G, what does this company do?

From google finance:

Quality Systems, Inc. develops and markets healthcare information systems that automate certain aspects of medical and dental practices, networks of practices, such as physician hospital organizations (PHOs) and management service organizations (MSOs), ambulatory care centers, community health centers, and medical and dental schools. The Company is consisted of the QSI Division and a wholly owned subsidiary, NextGen Healthcare Information Systems, Inc. (NextGen Division). The QSI Division focuses on developing, marketing and supporting software suites sold to dental and certain niche medical practices. In addition, it supports a number of medical clients that utilize the QSI Division's UNIX-based medical practice management software product. The NextGen Division focuses on developing and marketing products and services for medical practices.

G, where did you find this company?

I found this company while browsing a "double it's price" in 5 years column on cnn finance.

G, why do you like this company?

It reminds me a lot of Garmin (my first favorite stock). It's a fairly small company with room to grow. It's consitently growing revenue and sales each year, and it's a business area I've always felt has a lot of potential.

G, give me the details.

Look over the numbers in the spreadsheet, I'll review in my next post.

G, what did it cost you?

I bought at $37.53 on 6/26/2007.

Sometimes it's All About the Dividend

All right, I couldn't just sit on the rest of that tax refund so I decided on a "safe" investment. The company is called SAN JUAN BASIN ROYAL (SJT). Basically it's a gas and oil trust that owns a large stake in some very lucrative land in New Mexico. I like this company for three reasons, it has a steady simple to understand revenue stream, it's currently paying an 8% dividend yield, and it's stock price is currently in a nice valley.

My main goal is to get the nice 8% return via the dividend, if the stock price also goes up I'll take it as a bonus.