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    Wednesday
    Dec022015

    Perfect Company Results 11-29-15

    The S&P 500 was up slightly last week to 1.47% since we began on 12/10/14. The Perfect Company portfolio declined from 38.6% to 37%, mainly through profit-taking at IDWM, which dropped from 221% to 196%.  That was partially offset by OLED, which increased from 76% to 91%. I’m late getting this newsletter out this week: stocks sank Monday but buoyed up Tuesday. I continue to believe in the Santa Claus rally. “Yes, Virginia, there are a lot of people in the financial sector who want a big bonus in January (~$25 billion), and it will just be a lot easier for them if they throw other people’s money into the market right now so they can show positive returns in an otherwise flat year.”

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    11/27/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $36.00

     

    196.35%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $52.82

     

    91.10%

    3

    NVDA

    1.50%

     $22.28

    4/27/2015

     $31.39

     

    40.89%

    4

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.29

     

    32.00%

    5

    ATNI

    1.69%

     $67.98

    12/10/2014

     $79.70

     

    17.24%

    6

    VIVO

    4.95%

     $17.77

    1/27/2015

     $19.78

     

    11.31%

    7

    WSTG

    0.04%

     $18.50

    5/4/2015

     $18.25

     

    -1.35%

    8

    TWMC

    0.00%

     $3.82

    11/19/2015

     $ 3.70

     

    -3.14%

    9

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 3.57

     

    -51.14%

       

    5.20%

           

    37.03%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,090.11

     

    1.47%

     

    NM versus NMM

    “Curate” and “conflate” are de rigueur. At Perfect Company, we curate a small portfolio of stocks. Other investors may be conflating Navios Maritime Holdings (NM) and Navios Maritime Partners (NMM), which would help to explain the dramatic sell-off of NMM. NM lost $25 million last quarter and has discontinued its dividend. NMM earned $12 million last quarter and has committed to paying a dividend, though at a reduced rate.

    According to an industry blogger, Ton Mile Trader, the Dry Bulk Index is at an all-time low, but “the current option value of dry bulk stocks will react positively once we move through the current trough.” I am more nervous buying companies when their main inputs are at an all-time high; that NMM is earning money in the worst of times is a big positive, but it makes you wonder if NMM will run out of cash. Quarterly cash from operations increased from $27 million (Q1) to $69 million (Q2) to $98 million last quarter. The dividend increased to $114 million, but that’s a discretionary item, which has already been modified and which caused dividend gluttons to sell their holdings, further depressing the stock.

    It seems to me that we have purchased a good company in a terrible business near the bottom of its cycle. I recall Buffett’s observation: “When a manager with a reputation for brilliance tackles a business with a reputation for bad economics, the reputation of the business remains intact.” On the other hand, these ships have an average remaining term of approximately three years. We now rate NMM a 16.5 and continue to hold it.

    OLED and Apple

    On November 16, I wrote, “I think Apple phones will become big users, and that OLED will get a massive lift from the zombies who buy everything having to do with Apple.” This is one prediction that bore fruit faster than expected: news broke last week that Apple will have OLED iPhones by 2018. One hopes that Apple revenue will accelerate OLED out of its trading range between 30 and 50, which looks a lot like a Chinese mountain range:

     

    FYE (TWMC)

    At Neshaminy Mall on Sunday night, I learned that malls are now about 60% shoe stores. This is the greatest time in history to be a shoe buyer. It was 5 pm, and the mall closed at 6, but FYE was full of shoppers. The manager said they were having a good month. Here is the astounding news: if you look carefully at this photo, you’ll see that FYE is selling “red hot deal” records for $44.99 and $59.99. FYE.com had 131K visitors in October and ranked #12,223 in U.S. web sites by Quantcast. TWMC also operates www.vinyl.com, but the web site is just getting started. Company sales for the last 4 quarters were $345 million. The cost to buy this company net of cash and debt is about $27 million.

    GoPro went con.

    You get paid mostly for what you don’t buy. On Sept 10, I considered GoPro, the high-flying sportcam company, which closed at $33 that day. I recommended against it. It closed yesterday at $20.13, and has been a favorite of shorts. Ouch.

     

    Sunday
    Nov222015

    Perfect Company Results 11-22-15

    Last week, we sold two stocks and bought a third. The S&P 500 is up 1.4% since we began on Dec 10, 2014. The remaining Perfect Company stocks are up 38.6%. The 10 stocks we have sold have an average annualized return of 15.9%. We are letting the winners run and selling the losers and those that have reached their potential. For instance, we sold DRAD on 10/26 at $5.97; it coasted higher and then dropped to $5.40 as of Friday. We sold BZC this week on buyout news; it may go a little higher, but, if the deal falls apart, it may lose most of its gain. This week, we had strong gains from IDWM, OLED, NVDA and ATNI.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    11/20/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $ 39.00

     

    221.04%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $ 48.71

     

    76.23%

    3

    NVDA

    1.50%

     $22.28

    4/27/2015

     $ 31.39

     

    40.89%

    4

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.25

     

    30.77%

    5

    ATNI

    1.69%

     $67.98

    12/10/2014

     $ 79.91

     

    17.55%

    6

    VIVO

    4.95%

     $17.77

    1/27/2015

     $ 19.25

     

    8.33%

    7

    WSTG

    0.04%

     $18.50

    5/4/2015

     $ 18.52

     

    0.11%

    8

    TWMC

    0.00%

     $3.82

    11/19/2015

     $ 3.74

     

    -2.09%

    9

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 3.99

     

    -45.39%

       

    5.20%

           

    38.60%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $ 2,059.82

     

     

     $2,089.17

     

    1.42%

                   
     

    LIQUIDATED POSITIONS

           

    $

    ATAI

    12.17%

     $3.37

    12/10/2014

     $ 4.03

     

    19.58%

         

     SOLD

    2/17/2015

    Annualized:

     

    104%

    $

    WSTG

    3.85%

     $17.64

    12/10/2014

     $ 17.55

     

    -0.51%

         

     SOLD

    3/23/2015

    Annualized:

     

    -2%

    $

    FF

    3.78%

     $12.70

    12/10/2014

     $ 12.34

     

    -2.83%

         

     SOLD

    3/23/2015

    Annualized:

     

    -10%

    $

    IBM

    2.70%

     $162.99

    12/10/2014

     $ 169.78

     

    4.17%

         

     SOLD

    5/1/2015

    Annualized:

     

    11%

    $

    PRCP

    1.30%

     $11.50

    12/10/2014

     $ 12.11

     

    5.30%

         

     SOLD

    5/4/2015

    Annualized:

     

    13%

    $

    PDLI

    8.52%

     $7.07

    3/30/2015

     $ 6.20

     

    -12.26%

         

     SOLD

    6/10/2015

    Annualized:

     

    -62%

    $

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 5.97

     

    45.61%

         

     SOLD

    10/26/2015

    Annualized:

     

    64%

    $

    SAVE

    0.00%

     $73.77

    12/10/2014

     $ 39.21

     

    -46.85%

         

     SOLD

    10/26/2015

    Annualized:

     

    -53%

    $

    BZC

    0.00%

     $12.13

    6/10/2015

     $ 19.16

     

    57.96%

         

     SOLD

    11/19/2015

    Annualized:

     

    131%

    $

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 4.38

     

    -33.94%

         

     SOLD

    11/19/2015

    Annualized:

     

    -36%

           

    Avg Annualized:

     

    15.9%

     

    NMM, a shipping company, is our biggest loser right now. I have written enough about this, but note that the blogger sentiment is 87% bullish and Thomson Reuters is negative, which I take as a positive.

    The Singularity Effect

    Having flogged NVDA so hard, I am pleased to see it up 41% since April. Nvidia is a good value, and it’s also a company with a plan to exploit machine intelligence. (Apple poached Nvidia’s Deep Learning Director on October 15.) Softbank’s Masayoshi Son recently lectured his executives about the Singularity. (The Singularity is that point in time when machine intelligence surpasses human intelligence.) The Economist notes:

    “Mr Son described how SoftBank will reinvent itself well before then from an old-line, pre-Singularity Japanese telecoms company into SoftBank 2.0, a superior, global and web-enabled being with a lifespan of 300 years or more. His mind-blowing predictions include one that robots will let their owners lead lives of unparalleled luxury, as masters with slaves did in ancient Rome.”

    Whether or not Mr. Son is correct about the Singularity, if the investing public targets this idea – and I think it should – companies like Nvidia will enjoy an extended run-up.

    Trans World Entertainment Corp (TWMC)

    “In the last 5 years, insiders have on average purchased 281,836 shares each year.” In their quarterly call last week, they seemed to know they are onto something:

    “Our new stores expand our merchandise selection and enhance the presentation of our emerging categories of trend and electronics, while maintaining a strong presence in our heritage media categories.  Early indications are the stores are being well received by engaged customers; the associates are very excited about the concept; our industry partners are enthusiastic; and the store performance has been encouraging.  These stores further advance our transformation of the customer experience toward becoming the dominant entertainment and pop culture centric experience in the marketplace.”

    This is the opposite of the Penney’s makeover, which was a wholesale buildout of every store without any testing. TWMC appears to have tested their new concept, gotten buy-in from suppliers and employees, and are now rolling it out. Their confidence in their concept can be seen in stock buybacks and insider purchases.

    I think TWMC is turning around, and that they are either going to promote the stock or take it private, in which case they will not be overly positive in their commentary, but will still pay a decent premium. Trans World Entertainment Corp was the vehicle to buy Musicland, Coconuts, and other entertainment resellers; all are now gone except FYE. Trans World is a terrible, anonymous name, so, if they want to promote their new concept, they will change the company name to FYE, which will be a signal that we could be in for a good ride.

    Thursday
    Nov192015

    PerfectCompany Trade Alerts Sell BZC, Sell KIN, Buy TWMC

    Sell BZC

    Yesterday Breeze Eastern agreed to be acquired for $19.61 a share.  This is not surprising since the kind of companies we generally seek would also be excellent acquisition candidates: they have growth, cash, and are reasonably priced. We bought BZC on June 10, 2015 at $12.13; at the sale price, we have a 58% gain, or a 131% annualized gain. Now the dance begins. Lawyers will sue to collect crumbs from the sale. Some shareholders will hold out for a higher price. I don’t think it’s worth holding out because one risks the deal falling apart. We’ve had the big move.

    Sell KIN

    This was an uncharacteristic purchase for Perfect Company. KIN seemed like a good idea: apply human drugs to animals; they will be cheaper to make and people will pay dearly for their pets. However, KIN has no products and no revenue: it is a press release factory. Their main hope – Sentikind – just failed to meet the “primary endpoint.” Disasters tend to go from bad to worse, so I’m selling KIN at $4.38, a 34% loss or 36% annualized.  This was a bet – not an investment – and a bad one. There were no numbers to analyze. It may yet work out for KIN, but I’m selling.

    Buy TWMC

    You may know Trans World Entertainment as FYE, the video and music retailer that seemed sure to disappear two years ago. An update:

    • Sales in the last 4 quarters were $345 million
    • The company made $4.4 million after-tax – not a lot until you consider that they have so much cash that the real cost of the company is about $25 million.
    • The company is opening new, smaller stores. One is opening soon in the Oxford Valley Mall.
    • Landlords are going to play ball. There’s a lot of dark space at retail, and that key cost will improve for FYE.
    • Their web site is a nice three-character destination:  www.fye.com
    • Insiders were selling in 2013, but are buying in 2015.
    • The company has purchased over a million shares at an average price of $3.84.

    TWMC gets a 15.9 Perfect Company score. It is behaving like a management group that has figured out its problems. It has amassed cash, made money for the year, cut losses in losing retail quarters, and begun expanding again with a new format. As the economy turns around, I think TWMC will have a good fourth quarter, which is when they make all their money, and that the stock will perform well. 

    Monday
    Nov162015

    Results 11/13/15 Also: OLLI, SIRI, ORBC

    Last week, the S&P 500 shifted to a 1.8% loss since we started on Dec 10, 2014. PerfectCompany stocks were down from a gain of 37% to 32%, which is mainly the result of profit-taking and a dismal outlook for shipping companies. At this point in the cycle, we’re holding companies that have way outperformed the market, so people will take some money off the table when the market declines. For instance, BZC was up 63% last week and is now up only 46% since June 10, 2015.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    11/13/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $36.48

     

    200.30%

    2

    BZC

    0.00%

     $12.13

    6/10/2015

     $17.68

     

    45.75%

    3

    OLED

    0.00%

     $27.64

    12/10/2014

     $39.92

     

    44.43%

    4

    NVDA

    1.50%

     $22.28

    4/27/2015

     $29.80

     

    33.75%

    5

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.23

     

    30.03%

    6

    ATNI

    1.69%

     $67.98

    12/10/2014

     $76.96

     

    13.21%

    7

    VIVO

    4.95%

     $17.77

    1/27/2015

     $18.99

     

    6.87%

    8

    WSTG

    0.04%

     $18.50

    5/4/2015

     $18.22

     

    -1.51%

    9

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.47

     

    -17.50%

    10

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 4.67

     

    -36.09%

       

    4.68%

           

    31.92%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,023.04

     

    -1.79%

     

    NMM

    When I first noticed NMM, I said I would love to buy it under $5. Now it’s there. Too bad I bought it sooner, but, since I would buy it today, I’m not selling. The Baltic Dry Index is sinking, and Citicorp has just downgraded it to a price target of $7. On the other hand, NMM made $11.8 million last quarter – less than the $12.7 million from the same quarter the previous year, but not the festering loss that the price would indicate. The company’s recent conference call sets dividend guidance for the next five years at 85 cents a share, or, at today’s price, 18%, which is less than what we expected, but still very healthy. We give NMM a Perfect Company rating of 14.3.

    By dropping the dividend, NMM has pushed itself out of certain baskets of high income indices such as the richly named Swank Capital Cushing MLP High Income Index. It is possible that NMM is subject to gigantic losses if interest rates rise; however, the principle job of management at NMM is to ensure that its borrowing commitments are shielded from rate increases to match their shipping contracts. Given that money has been hard to lend, and NMM has a seasoned management, I believe they are better positioned than most investors would expect. I recently heard a NY banker say that he was pleased to lend $50 million at 0.9%. Most of the room gasped, but we shouldn’t have been so surprised: even today, consumers can get a 5 year car loan for 3%.

    Get your next TV in Trenton, NJ

    There’s the Rent-a-Center and the back of a truck, but Businessweek spotlighted a Trenton-area company that holds most of the patents in OLEDs, and says profits could jump 50% in the next year. The article mentions the possibility that Apple could also come to the table. I think Apple phones will become big users, and that OLED will get a massive lift from the zombies who buy everything having to do with Apple. Beyond that, I like OLED’s lighting business. Their lighting sales are practically non-existent now, but lighting is a huge business, and, like other businesses that get reinvented by new technology, it will happen quickly and right under our noses. 15 years from now, we could be living in houses without light switches, walls that change color with our whims, and ceilings that glow when we walk toward them. It will seem radically exciting for about eight years, and prosaic forever after. OLED shareholders could have even more exciting houses.

    By the way, OLED should be able to increase profits faster than 50%. For the quarter ending June, 2015, they took a write-off during one of their higher income quarters (the revenue from a handful of major customers is episodic.) Companies often throw all their garbage down the InSinkErator together so they don’t have to explain themselves every quarter. OLED took a $4.3 million loss, and also paid $7.5 million in taxes for a total $11.8 million loss. Just breaking even in the same quarter next year would increase profits over 100%.

    IMPERFECT COMPANIES

    OLLIES: Wait for a better price.

    A friend named Gene once advised, “Don’t be cheap,” and I have tried not to be cheap with my friends. However, I have no need to impress myself. If I’m eating lunch alone, I’m happy to get a McDouble and a small Coke for $2.12. I’m flying round-trip to Atlanta on Spirit with my underseat bag, which is free, for just $87 in December. I bought a Samsung Note 4 screen protector from AliExpress for $1.61 including shipping. A lot of people share an enthusiasm for a good deal including my 16-year-old daughter who recently asked me to take her to Ollie’s.

    If you don’t know Ollie’s Bargain Outlet, their stores are piles of close-outs amid red and yellow signs. Ollie’s is a dirty version of TJ Maxx, which appeals to many women because it’s like a treasure hunt: good deals on unexpected items. If you think of TJ Maxx (TJX) as one of those crummy off-mall retailers, you’re mistaken. TJX has a market cap of $46 billion; Macy’s (M) is worth $13.5 billion. The treasure hunt is the only reason remaining for physical retailing. Treasure hunt retailing is thriving, and Ollies is in that category.

    Ollies (OLLI) was founded in 1982 in Mechanicsburg, PA, opened a second distribution center in Atlanta last year, and now operates 200 stores in 17 states. They’re not the only discounter out there, but they’re growing. SteinMart (SMRT) had 2015 sales of $1.3 billion, and has a market cap of $363 million. Ollies had 2015 sales of $638 million, and has a market cap of $993 million. Ollie’s makes more money on lower sales and is growing faster than SteinMart.  That said, Ollie’s only rates a 4.4 PerfectCompany score.  The stock is at $16.65; I’ll wait for a hiccup and buy it at $9.

    Sirius XM Holdings (SIRI): silent running.

    SIRI (the combination of XM and Sirius satellite radio services) and Nvidia each earned about the same amount of money in the last four quarters. SIRI made $519 million and NVDA made $526 million. Nvidia pays a dividend, has lots of cash, and makes super computer chips that are hard to duplicate. SIRI pays no dividend, has lots of debt, and distributes content for its satellite radio stations. Curiously, the market values SIRI at $21.5 billion and NVDA at $16 billion.

    I don’t see any future for SIRI. I recently got an Internet radio from Grace Digital that tunes into all your local radio stations through the web and gives you a whole selection of comedy and other web stations. The quality is digital, and the fee for activating and listening is $0. Once people discover digital radio and cars access the Internet, I can’t think of any reason for people to use Sirius or XM. Even if consumers hate commercials, the cost to tune into commercial-free Internet stations is going to be less than the cost of bouncing signals off satellites to special tuners.

    Here is how one consumer answers the Quora question, “Why do people not like Sirius XM anymore?”

    “Since the merger, content has went to crap. Pre-merger, it was great. Both companies were at competition, one trying to out do the other, and when that happens, the consumer gains. For instance, Octane used to be pure hard rock, both new and older, and it was awesome. I would listen all day. Now, they have the octane airforce and they play cheesy crap. I am not saying it is all bad, but the ‘new’ feeling of satellite radio has worn off, and there are other players in the game now. Howard Stern sold Sirius when he first came, and now he is on 2, maybe 3 days a week.

    I have found myself listening to Pandora and Spotify more than I do SiriusXM. If I get a vehicle that has built in wifi, I will cancel my subscription in. Heartbeat, and pay $9.99 for Spotify's on demand service. Play and download what you want, when you want, and even play it offline.”

    SIRI has satellites and content, but “content has went to crap.” Even though the stock price has been climbing, SIRI rates a PerfectCompany score of only 2.1.  Sell.

    ORBC: A better satellite company?

    ORBCOMM consistently grows sales year over year and quarter after quarter. If you believe in the “Internet of things” and Skynet from Terminator, you’ll love ORBC, whose Machine-to-Machine solutions track, monitor and enhance security for a range of assets, such as trailers, trucks, rail cars, intermodal containers, generators, fluid tanks, marine vessels, oil and gas wells, pipeline monitoring equipment, irrigation control systems, and utility meters, in the transportation and distribution, heavy equipment, oil and gas, maritime and government industries. The story is that ORBC has now paid for its platform and is about to become a whole lot more profitable. Also, the costs of satellites should be decreasing with private competition and smaller satellites, which will make the network cheaper to maintain and expand. As an early leader above the clouds, ORBCOMM could have similar advantages to Amazon in the cloud, which virtually owns the infrastructure for hosting as hardware costs decline.

    That said, ORBC lost $19 million in the last four quarters. If it starts making money, it could become a Perfect Company, and we’ll buy it then. We will have given up some hefty early profits as the stock rises, but tracking assets from the sky is a big market, and there will be plenty more upside.

    Monday
    Nov092015

    Results 11/6/15

    With about a month left in the year since we started (Dec 10, 2014), the existing stocks are up 37% and the S&P 500 is up almost 2%. We were helped last week by strong gains in OLED and NVDA.

                   

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    11/6/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $36.88

     

    203.59%

    2

    BZC

    0.00%

     $12.13

    6/10/2015

     $19.79

     

    63.15%

    3

    OLED

    0.00%

     $27.64

    12/10/2014

     $40.55

     

    46.71%

    4

    NVDA

    1.50%

     $22.28

    4/27/2015

     $31.55

     

    41.61%

    5

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.15

     

    27.69%

    6

    VIVO

    4.95%

     $17.77

    1/27/2015

     $20.54

     

    15.59%

    7

    ATNI

    1.69%

     $67.98

    12/10/2014

     $78.10

     

    14.89%

    8

    WSTG

    0.04%

     $18.50

    5/4/2015

     $18.85

     

    1.89%

    9

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.35

     

    -19.31%

    10

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 5.53

     

    -24.32%

       

    4.68%

           

    37.15%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,099.20

     

    1.91%

     

    What’s a matter with NMM?

    NMM makes money, has financing and pays a gigantic dividend. However, we may have the same problem with ships that we had with planes: when business is good, they make more of them, and when business is bad, they still make more of them. These are the worst of times for NMM. The Baltic Dry Index is sinking, and Citicorp has just downgraded it to a price target of $7. On the other hand, NMM made $11.8 million last quarter – less than the $12.7 million from the same quarter the previous year, but not the festering loss that the stock price would indicate. The company’s recent conference call sets dividend guidance for the next five years at 85 cents a share, or, at today’s price, 16%, which is less than what we expected, but still incredibly healthy. We give NMM a Perfect Company rating of 12.3.  I would buy NMM today, so I continue to hold it.

    Monday
    Nov022015

    Results 10/30/15; Buy WSTG

    Since December 10, 2014, the S&P 500 is up 0.95%. PerfectCompany stocks are up an average of 36%. The PerfectCompany portfolio pays a 4.68% dividend based on purchase prices. Liquidated positions have returned 8% annually. We sold two positions on Monday – DRAD and SAVE – which were off-setting. We were helped last week by earnings at BZC, the helicopter winch company, which is now up 68% since its selection on June 10, 2015.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    10/30/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $37.80

     

    211.16%

    2

    BZC

    0.00%

     $12.13

    6/10/2015

     $20.40

     

    68.18%

    3

    NVDA

    1.50%

     $22.28

    4/27/2015

     $28.37

     

    27.33%

    4

    OLED

    0.00%

     $27.64

    12/10/2014

     $34.31

     

    24.13%

    5

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.02

     

    23.69%

    6

    ATNI

    1.69%

     $67.98

    12/10/2014

     $76.42

     

    12.42%

    7

    VIVO

    4.95%

     $17.77

    1/27/2015

     $19.01

     

    6.98%

    8

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 7.74

     

    5.93%

    9

    WSTG

    0.04%

     $18.50

    5/4/2015

     $18.47

     

    -0.16%

    10

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.38

     

    -18.85%

       

    4.68%

           

    36.08%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,079.36

     

    0.95%

                   
     

    LIQUIDATED POSITIONS

           

    $

    ATAI

    12.17%

     $3.37

    12/10/2014

     $ 4.03

     

    19.58%

         

     SOLD

    2/17/2015

    Annualized:

     

    104%

    $

    WSTG

    3.85%

     $17.64

    12/10/2014

     $17.55

     

    -0.51%

         

     SOLD

    3/23/2015

    Annualized:

     

    -2%

    $

    FF

    3.78%

     $12.70

    12/10/2014

     $12.34

     

    -2.83%

         

     SOLD

    3/23/2015

    Annualized:

     

    -10%

    $

    IBM

    2.70%

     $162.99

    12/10/2014

     $ 169.78

     

    4.17%

         

     SOLD

    5/1/2015

    Annualized:

     

    11%

    $

    PRCP

    1.30%

     $11.50

    12/10/2014

     $12.11

     

    5.30%

         

     SOLD

    5/4/2015

    Annualized:

     

    13%

    $

    PDLI

    8.52%

     $7.07

    3/30/2015

     $ 6.20

     

    -12.26%

         

     SOLD

    6/10/2015

    Annualized:

     

    -62%

    $

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 5.97

     

    45.61%

         

     SOLD

    10/26/2015

    Annualized:

     

    64%

    $

    SAVE

    0.00%

     $73.77

    12/10/2014

     $39.21

     

    -46.85%

         

     SOLD

    10/26/2015

    Annualized:

     

    -53%

           

    Avg Annualized:

     

    8%

     

    Buy WSTG

    WSTG is the only company that I have sold and bought back. If you read the earnings call transcript, you’ll get a flavor for their desire to manage cash and reduce risk. They acknowledge that most acquisitions fail, and so are careful about acquiring. They are using cash to buy back shares and increase the dividend to 3.8%. I made some smart aleck comments about WSTG in the past, which I now regret. I believe they will continue to grow conservatively, and that the stock price will rocket up one day when an analyst picks them from the crowd or when a larger company buys them to bulk up. WSTG sales increased for the third quarter from $90.5 million to $98 million.

    Technology is not going away, and, despite what you’ve heard, neither is distribution. In the healthcare business, McKesson has purchased everything that’s not nailed down. In tech, one or two dominant distributors will do the same. As both a growth and a value play, WSTG is perfectly positioned for that moment. We rate WSTG a 14.7. 

    Monday
    Oct262015

    Perfect Company Alerts: sell DRAD and SAVE

    Since December 10, 2014 when we started this portfolio, the S&P 500 is up 0.7%. The current stocks are up 28.2% and pay an average annual dividend from the point of purchase of 4.3%. Were it not for Spirit Airlines (see below), we would have hit our 35% target already. Some of our more recent picks have performed best: BZC purchased in June is up 37%; NVDA purchased in late April is up 28%, and DRAD in February has jumped 42%.

    To be fair, IDWM – despite a huge run-up and a 10-1 split – is almost illiquid. The price moves significantly on a few hundred shares traded, but that behavior has not changed for several years: the fortunate few who own the stock occasionally sell it, and the fewer who want to keep it long-term accumulate it, so I think IDWM will knock around until its next big run-up or the acquisition of the entire company. IDWM’s market cap is only $118 million, so, when it doubles or triples again, the wise sideliners will sniff that they don’t speculate in small caps; they prefer sure bets like Walmart, which has dropped from $90 to $58 this year. I see great risk in large companies because it is difficult to move the needle of their sales and they are too large to analyze. Even Walmart, which is a relatively straightforward business, has a lot of moving parts even extending to the timing of welfare payments. You are less likely to have a 200% gain in a blue chip, and are not immune to a 35% loss.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    10/23/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $38.45

     

    216.51%

    2

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 5.81

     

    41.71%

    3

    BZC

    0.00%

     $12.13

    6/10/2015

     $16.61

     

    36.93%

    4

    NVDA

    1.50%

     $22.28

    4/27/2015

     $28.59

     

    28.32%

    5

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.07

     

    25.23%

    6

    OLED

    0.00%

     $27.64

    12/10/2014

     $34.30

     

    24.10%

    7

    ATNI

    1.69%

     $67.98

    12/10/2014

     $83.48

     

    22.80%

    8

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 7.74

     

    5.93%

    9

    VIVO

    4.95%

     $17.77

    1/27/2015

     $18.47

     

    3.94%

    10

    WSTG

    0.04%

     $18.50

    5/4/2015

     $17.80

     

    -3.78%

    11

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.51

     

    -16.89%

    12

    SAVE

    0.00%

     $73.77

    12/10/2014

     $39.79

     

    -46.06%

       

    4.30%

           

    28.23%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,075.15

     

    0.74%

     

    SPIRIT: GETTYSBURG OR THERMOPYLAE?

    Two interesting things could be happening with Spirit Airlines:

    (1)    A small set of institutional investors could be punishing Spirit for disrupting the very profitable but anticompetitive model that has been recently established in the U.S. airline industry. This sounds paranoid, but a March 2015 paper discusses the Anticompetitive Effects of Common Ownership in airlines. Since Spirit is attacking the cabal of larger airlines, it is not unthinkable than a group of airline investors would threaten to sell shares in Spirit if it behaved overly aggressively. By driving down share prices, marginal stock sales would affect the compensation and wealth of Spirit executives and might even result in a sale of the airline to a larger competitor, which would neutralize the threat for the cabal. This is the strategy of monopolists who we tend to think of as corporate executives, but are just as often their bankers.

    (2)    Spirit has aggressively expanded capacity in major airports. Instead of developing outposts like Trenton, New Jersey where Frontier has an unchallenged small hub, Spirit has taken on American Airlines in places like Dallas. American has responded by matching fares and creating no frills plans. This may be hurting American more than Spirit, which has a major cost advantage over American. Analysts at Evercore ISI urge Spirit to “stand its ground.”

    It’s going to be a nasty fight that will be waged over the next year. Spirit has acted boldly to grow the business. Have Spirit executives, like Lee at Gettysburg, become overly confident to the point of attacking up the middle where they will be shredded by American’s defense, or are they, like the Greeks at Thermopylae, fighting a battle that, if won, will lead to the diminishment of the larger airlines who admit that 50% of their customers fly only once a year?

    American, the largest carrier in the world by traffic with $42 billion in 2014 sales, announced record quarterly profits on October 23. AAL earned $1.7 billion last quarter – just $232 million less than Spirit’s sales for all of 2014. This is not David and Goliath, but David and Godzilla. American and its thuggish bankers will use every cudgel possible to contain Spirit.

    I think Spirit has made two mistakes: (1) attacking giants in their primary markets before the company reached greater scale and (2) creating an unsympathetic smarty-pants image for itself. People like discounters that proclaim they are helping their customers live a better life, but customers have little loyalty for ugly companies. JetBlue has a comfortable image; Spirit is Crazy Eddie. Customers will make their marginal decisions in favor of American.

    Spirit may yet win. This may be the time to double down on Spirit because it’s an exceptional value and has a long-term cost advantage. However, a new war almost anywhere could increase the cost of jet fuel, and almost every country involved in oil would like to see prices go up. Spirit would be less profitable, and American would press its advantage. Also, Spirit’s new low-cost competitors could start to compete for the same customers. Finally, my wife points out the similarities to Spirit and Tucker, the car company that challenged the major auto manufacturers.

    I am late on this one, but I’m selling SAVE.

    SELL DIGIRAD (DRAD)

    Digirad is up about 40% in October. The company announced on October 14 that it would buy DMS Health Technologies for $36 million in cash. This will positively impact DRAD’s sales and profits, but will also remove $36 million in cash. Rather than expanding its core technology, the company is buying companies in related industries, and I don’t know if they make sense or not. I’m happy to take the 41.7% bird in hand.

    PREPARE FOR THE YEAR-END RALLY

    It’s been a morose year, but, as I have said before, Wall Street likes to get its bonuses, and it needs a rally now to get paid in January, so I was not surprised to see this article in USA Today:

    Rates, for now, are not going up. Small businesses that I visit are busy: some are turning away orders; one printer said he is “busier than a one-armed paper hanger.” I think technology has made companies more productive, and that people will be prepared to party in November and December. Of course, anything can happen including a war that affects the price of oil, which is why we’re holding mainly companies with cash, growth and profits. 

    Sunday
    Oct252015

    Results 10-16-15

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    10/16/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $32.26

     

    165.56%

    2

    BZC

    0.00%

     $12.13

    6/10/2015

     $16.90

     

    39.32%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.17

     

    28.31%

    4

    OLED

    0.00%

     $27.64

    12/10/2014

     $35.05

     

    26.81%

    5

    NVDA

    1.50%

     $22.28

    4/27/2015

     $27.86

     

    25.04%

    6

    ATNI

    1.69%

     $67.98

    12/10/2014

     $79.07

     

    16.31%

    7

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 4.64

     

    13.17%

    8

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 7.82

     

    7.02%

    9

    VIVO

    4.95%

     $17.77

    1/27/2015

     $18.10

     

    1.86%

    10

    WSTG

    0.04%

     $18.50

    5/4/2015

     $18.53

     

    0.16%

    11

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.95

     

    -10.26%

    12

    SAVE

    0.00%

     $73.77

    12/10/2014

     $42.38

     

    -42.55%

       

    4.30%

           

    22.56%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,033.11

     

    -1.30%

    Friday
    Oct092015

    Results 10-9-15

    This was a fine week for Perfect Company. As the S&P rose from -5% to -2%, our portfolio was up over 6%. For the week, OLED jumped from 31 to 44%; BZC from 15 to 33%; NMM from 2 to 20%; ATNI from 7 to 15%; NVDA from 11 to 17%.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    10/9/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $37.89

     

    211.90%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $39.83

     

    44.10%

    3

    BZC

    0.00%

     $12.13

    6/10/2015

     $16.18

     

    33.39%

    4

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.26

     

    31.08%

    5

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 8.75

     

    19.75%

    6

    NVDA

    1.50%

     $22.28

    4/27/2015

     $26.07

     

    17.01%

    7

    ATNI

    1.69%

     $67.98

    12/10/2014

     $78.05

     

    14.81%

    8

    VIVO

    4.95%

     $17.77

    1/27/2015

     $17.58

     

    -1.07%

    9

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 3.96

     

    -3.41%

    10

    WSTG

    0.04%

     $18.50

    5/4/2015

     $17.33

     

    -6.32%

    11

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.19

     

    -21.72%

    12

    SAVE

    0.00%

     $73.77

    12/10/2014

     $50.80

     

    -31.14%

       

    4.30%

           

    25.70%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,014.89

     

    -2.18%

     

    Thursday
    Oct082015

    Results 10/2/15

    As of last Friday, we were up 19.26%; the S&P 500 was down 5.27%. 9 of 12 of our stocks are beating the S&P. I’m most concerned about KIN, which is an uncharacteristic pick since it’s a pre-revenue company with nothing but losses. I thought Kindred Biosciences would have produced something by now, and that the hiring of a Genentech lawyer as VP of Intellectual Property augured positive announcements. This is the problem with imperfect companies: KIN is not a good value or something you would be pleased to own long term. I am not relying on the simple expansion of a good plan and a good value, but the prospect of getting lucky. I’ll sit with KIN for now and look for something better. Maybe I’ll get lucky in the meantime.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    10/2/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $ 12.15

    12/10/2014

     $ 37.74

     

    210.67%

    2

    LOAN

    8.62%

     $ 3.25

    12/10/2014

     $ 4.25

     

    30.77%

    3

    OLED

    0.00%

     $ 27.64

    12/10/2014

     $ 34.40

     

    24.46%

    4

    BZC

    0.00%

     $ 12.13

    6/10/2015

     $ 13.95

     

    15.00%

    5

    NVDA

    1.50%

     $ 22.28

    4/27/2015

     $ 24.80

     

    11.31%

    6

    ATNI

    1.69%

     $ 67.98

    12/10/2014

     $ 73.06

     

    7.47%

    7

    NMM

    24.60%

     $ 7.31

    8/26/2015

     $ 7.46

     

    2.09%

    8

    VIVO

    4.95%

     $ 17.77

    1/27/2015

     $ 17.36

     

    -2.31%

    9

    DRAD

    4.88%

     $ 4.10

    2/9/2015

     $ 3.96

     

    -3.41%

    10

    WSTG

    0.04%

     $ 18.50

    5/4/2015

     $ 17.33

     

    -6.32%

    11

    KIN

    0.00%

     $ 6.63

    12/10/2014

     $ 5.09

     

    -23.23%

    12

    SAVE

    0.00%

     $ 73.77

    12/10/2014

     $ 47.70

     

    -35.34%

       

    4.30%

           

    19.26%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $ 2,059.82

     

     

     $ 1,951.36

     

    -5.27%

     

    In the last month, I have been treated to two discount airlines: Frontier and Sun Country. Frontier is now operated by former Spirit executives who have carved out every cost including the seatbacks. Sun Country flew round trip from JFK to San Francisco for $363 including luggage. The planes were full. This was another indication that the model for air travel is changing, and a reminder that competitors will copy a successful strategy. One might wonder if Spirit, which has greatly expanded capacity, is growing fast enough to block copycats.  In September, Spirit’s revenue per passenger mile increase 32.9% over last September. How many companies are growing sales by 33%? Also, Spirit is not a discount company that makes no money like Amazon – SAVE earned 14% on sales last quarter. How many companies are growing sales AND making money? I would sell the major airlines with their goofy red carpets and loyalty programs, and buy the company that is changing travel.

    This week is looking excellent: Nvidia has climbed to a five year high on all kinds of good news; BZC was up 7% today. IDWM slumps about once a week, then bounces back as, I think, the major owners acquire the few shares that trade.

    I have spent too much time lately looking for a reasonable data source. One would think that, for a few hundred dollars a year, you could find a service that enables you to tick off corporate data and populate a spreadsheet. Perhaps it is a matter of controlling the data, but the purveyors seem not even to know what data they offer – or they want you to do all your calculations on their site – or they don’t offer data like “dividends.” Even brokers have nothing to offer. Tomorrow, I’m going to speak with the support staff of a friend who manages a fund. Maybe I’ll find a good source.

    Saturday
    Sep262015

    Results 9/25/15

    The S&P is down 6.24%; we're up 21.77%.  I think I've found a new data source that will enable me to be more active.  NMM has been a good lesson: it was on my list as a good value that could take a hit because of its Greek associations. When it slid, I bought, which enabled a short-term gain and locked in a fat dividend. Unfortunately, I also bought earlier in another portfolio. This market calls for very disciplined purchases, and probably more active sales.
                   

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    9/25/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $ 12.15

    12/10/2014

     $ 38.99

     

    220.96%

    2

    OLED

    0.00%

     $ 27.64

    12/10/2014

     $ 35.45

     

    28.26%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $4.12

     

    26.77%

    4

    BZC

    0.00%

     $ 12.13

    6/10/2015

     $ 13.60

     

    12.12%

    5

    ATNI

    1.69%

     $ 67.98

    12/10/2014

     $ 73.92

     

    8.74%

    6

    NVDA

    1.50%

     $ 22.28

    4/27/2015

     $ 23.61

     

    5.97%

    7

    NMM

    24.60%

     $7.31

    8/26/2015

     $7.68

     

    5.10%

    8

    VIVO

    4.95%

     $ 17.77

    1/27/2015

     $ 17.09

     

    -3.83%

    9

    WSTG

    0.04%

     $ 18.50

    5/4/2015

     $ 17.68

     

    -4.43%

    10

    DRAD

    4.88%

     $4.10

    2/9/2015

     $3.81

     

    -7.07%

    11

    KIN

    0.00%

     $6.63

    12/10/2014

     $6.01

     

    -9.35%

    12

    SAVE

    0.00%

     $ 73.77

    12/10/2014

     $ 48.72

     

    -33.96%

       

    4.30%

           

    20.77%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $ 1,931.34

     

    -6.24%

                   
    Monday
    Sep212015

    Results 9/18/15

    Little has changed  since last week. The Fed did not raise rates. Our companies have cash anyway, and might even make a little more money if rates go up. Last week, I met a banker from Princeton who is deploying hundreds of millions of dollars in building projects in Brooklyn -- another indicator that New York is always building, and that LOAN is well positioned to keep growing and to keep paying a dividend. 

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    9/18/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $35.90

     

    195.52%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $38.50

     

    39.29%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.26

     

    31.08%

    4

    BZC

    0.00%

     $12.13

    6/10/2015

     $13.99

     

    15.33%

    5

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 8.40

     

    14.96%

    6

    ATNI

    1.69%

     $67.98

    12/10/2014

     $73.32

     

    7.86%

    7

    NVDA

    1.50%

     $22.28

    4/27/2015

     $23.29

     

    4.53%

    8

    VIVO

    4.95%

     $17.77

    1/27/2015

     $17.67

     

    -0.56%

    9

    WSTG

    0.04%

     $18.50

    5/4/2015

     $17.84

     

    -3.57%

    10

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 3.93

     

    -4.15%

    11

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 6.00

     

    -9.50%

    12

    SAVE

    0.00%

     $73.77

    12/10/2014

     $50.70

     

    -31.27%

       

    4.30%

           

    21.63%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $1,958.03

     

    -4.94%

    Tuesday
    Sep152015

    Results 9/11/15

    Like the market, many of our stocks crept up last week to an average 22.6% return since 12/10/14. The S&P 500 is down 4.8% for the same period. 10 of 12 positions are beating the S&P.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    9/11/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $36.98

     

    204.41%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $37.75

     

    36.58%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.28

     

    31.69%

    4

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 8.70

     

    19.06%

    5

    BZC

    0.00%

     $12.13

    6/10/2015

     $13.82

     

    13.93%

    6

    ATNI

    1.69%

     $67.98

    12/10/2014

     $73.79

     

    8.55%

    7

    NVDA

    1.50%

     $22.28

    4/27/2015

     $22.65

     

    1.66%

    8

    VIVO

    4.95%

     $17.77

    1/27/2015

     $17.78

     

    0.06%

    9

    WSTG

    0.04%

     $18.50

    5/4/2015

     $18.30

     

    -1.08%

    10

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 3.96

     

    -3.41%

    11

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 6.19

     

    -6.64%

    12

    SAVE

    0.00%

     $73.77

    12/10/2014

     $48.79

     

    -33.86%

       

    4.30%

           

    22.58%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $1,961.05

     

    -4.80%

                   
     

    LIQUIDATED POSITIONS

           

    $

    ATAI

    12.17%

     $3.37

    12/10/2014

     $ 4.03

     

    19.58%

         

     SOLD

    2/17/2015

    Annualized:

     

    104%

    $

    WSTG

    3.85%

     $17.64

    12/10/2014

     $17.55

     

    -0.51%

         

     SOLD

    3/23/2015

    Annualized:

     

    -2%

    $

    FF

    3.78%

     $12.70

    12/10/2014

     $12.34

     

    -2.83%

         

     SOLD

    3/23/2015

    Annualized:

     

    -10%

    $

    IBM

    2.70%

     $162.99

    12/10/2014

     $ 169.78

     

    4.17%

         

     SOLD

    5/1/2015

    Annualized:

     

    11%

    $

    PRCP

    1.30%

     $11.50

    12/10/2014

     $12.11

     

    5.30%

         

     SOLD

    5/4/2015

    Annualized:

     

    13%

    $

    PDLI

    8.52%

     $7.07

    3/30/2015

     $ 6.20

     

    -12.26%

         

     SOLD

    6/10/2015

    Annualized:

     

    -62%

           

    Avg Annualized:

     

    9%

     

    Spirit Airlines is the embarrassing bald spot. We’re now rating SAVE a perfect 10.0. Fuel costs are down, which will increase profits.  August revenue increased 26.7%. That’s hard to do. Yes, Spirit increased capacity, but you won’t find many companies that increased August sales by 26.7%. A Motley Fool writer published a piece called, “Why I Doubled Down on Spirit Airlines.” Standpoint Research upgraded Spirit to a Buy on August 26. Frontier is now competing effectively in the Ultra Low Cost market, which helps prove the point. I despise Frontier, but I flew it again this week because it’s cheap and it’s the only airline that lands two miles from my house. Frontier has new tray tables about the size of an iPad Mini, and they’ve stripped the padding and the reclining button out of their seats. But the flight was full, and Frontier says it made more money last year than in the last ten years combined.

    The next few years may be the time of the great airline shakeout. More people are flying, and one or two companies will dominate discount flying just as Wal-Mart and Target flourished in discount retailing. Spirit is suited up for that game: its model generates more cash and higher profits than its competitors. There will be blood, but discounts will hurt the majors more as Spirit grows and steals share.

     

    I considered selling DRAD this week, and rejected the idea. We rate DRAD a 10.6, and it pays a 4.9% dividend. Sales and profits are growing, and insiders aren’t selling. And DRAD has made interesting technological bets in medical imaging that can grow quickly. The Street says: “We rate DIGIRAD CORP (DRAD) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity.”

    Thursday
    Sep102015

    Trade Alerts 9/4/15

    At the close on September 4, 2015, our average return was 20.8% per position. The S&P 500 is down 6.73% since inception on December 10, 2015.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    9/4/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $37.24

     

    206.55%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $36.72

     

    32.85%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.09

     

    25.85%

    4

    BZC

    0.00%

     $12.13

    6/10/2015

     $13.99

     

    15.33%

    5

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 8.27

     

    13.18%

    6

    ATNI

    1.69%

     $67.98

    12/10/2014

     $73.44

     

    8.03%

    7

    VIVO

    4.95%

     $17.77

    1/27/2015

     $18.36

     

    3.32%

    8

    NVDA

    1.50%

     $22.28

    4/27/2015

     $21.75

     

    -2.38%

    9

    WSTG

    0.04%

     $18.50

    5/4/2015

     $17.50

     

    -5.41%

    10

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 3.75

     

    -8.54%

    11

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 6.05

     

    -8.75%

    12

    SAVE

    0.00%

     $73.77

    12/10/2014

     $51.20

     

    -30.60%

       

    4.30%

           

    20.79%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $1,921.22

     

    -6.73%

     

    Three quarters of these companies are beating the index, and, on average, handily. I like them all, but would like to perform better. Too much of my portfolio is now reliant on IDWM, which I hoped would have more of a float after the 10-for-1 split, but it’s still difficult to sell shares.

    I thought about selling VIVO, which is a boring company, but is close to a perfect company:

    • Pays 4.36% dividend
    • Sales in the last 4 consecutive quarters are $194 million versus $189 million last year.
    • Quarterly profits YoY grew from $8.8 million to $9.1 million
    • Insiders buy the stock.
    • We score VIVO with PerfectCompany rating of 7.3

    GOPRO – not.

    A friend said, “I just got a GoPro equivalent camera for $69 that I would have paid GoPro $399 for.” The camera is off the helmet. GoPro relies heavily on fourth quarter sales, and I think they will have both heavy marketing expenses and fierce competition this holiday season. We rate GOPRO a 5.1, which is not too bad, but I’m not surprised to see it declining. It’s one of those high-profile companies that people buy because they think they’ve discovered a tech company when all they really have is an interesting distributor with temporarily rich margins. As Bruce sings, “I’m going down, down, down, down.”

    This is a trading environment without much faith in either direction. My Apple Puts are making money, but I expect them to do much better before 2017. One day, China is going to pull down the world; the next day, a WSJ writer asks, “What if China disappeared?” and concludes that it might not matter.

    As always, I’m looking for companies with a reason to exist and cash, too, in the event that someone yells, “Fire,” as happened two weeks ago. If you jumped on NMM two weeks ago while everyone rushed for the exits, you’re up about 15% with a 25% dividend. BZC, the helicopter winch company we bought in June, is also near a five-year high.

    Friday
    Sep042015

    Results 8/28/15

    At the close on August 28, 2015, our average return was 19.85% per position. We added NMM during the week, which was up 14% by week end, but the increase in the number of positions diluted the gain from IDWM by 1.5%. The S&P 500 was down 3.44% since inception on December 10, 2015.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    8/28/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $  12.15

    12/10/2014

     $37.40

     

    207.87%

    2

    OLED

    0.00%

     $  27.64

    12/10/2014

     $37.53

     

    35.78%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 3.72

     

    14.46%

    4

    NMM

    24.60%

     $7.31

    8/26/2015

     $ 8.35

     

    14.27%

    5

    BZC

    0.00%

     $  12.13

    6/10/2015

     $13.33

     

    9.89%

    6

    VIVO

    4.95%

     $  17.77

    1/27/2015

     $19.11

     

    7.54%

    7

    ATNI

    1.69%

     $  67.98

    12/10/2014

     $71.89

     

    5.75%

    8

    NVDA

    1.50%

     $  22.28

    4/27/2015

     $22.73

     

    2.02%

    9

    WSTG

    0.04%

     $  18.50

    5/4/2015

     $17.07

     

    -7.73%

    10

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 3.70

     

    -9.76%

    11

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.93

     

    -10.54%

    12

    SAVE

    0.00%

     $  73.77

    12/10/2014

     $50.64

     

    -31.35%

       

    4.30%

           

    19.85%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $  1,988.87

     

    -3.44%

                   
     

    LIQUIDATED POSITIONS

           

    $

    ATAI

    12.17%

     $3.37

    12/10/2014

     $ 4.03

     

    19.58%

         

     SOLD

    2/17/2015

    Annualized:

     

    104%

    $

    WSTG

    3.85%

     $  17.64

    12/10/2014

     $17.55

     

    -0.51%

         

     SOLD

    3/23/2015

    Annualized:

     

    -2%

    $

    FF

    3.78%

     $  12.70

    12/10/2014

     $12.34

     

    -2.83%

         

     SOLD

    3/23/2015

    Annualized:

     

    -10%

    $

    IBM

    2.70%

     $162.99

    12/10/2014

     $ 169.78

     

    4.17%

         

     SOLD

    5/1/2015

    Annualized:

     

    11%

    $

    PRCP

    1.30%

     $  11.50

    12/10/2014

     $12.11

     

    5.30%

         

     SOLD

    5/4/2015

    Annualized:

     

    13%

    $

    PDLI

    8.52%

     $7.07

    3/30/2015

     $ 6.20

     

    -12.26%

         

     SOLD

    6/10/2015

    Annualized:

     

    -62%

           

    Avg Annualized:

     

    9%

    Wednesday
    Aug262015

    TRADE ALERTS: BUY NMM

    Well, that sucked. Two weeks ago, we were at 29% and wondering how to get to 35% this year. On Friday, we were at 19.5%, and the market looked like…

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    8/21/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $38.00

     

    212.81%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $35.46

     

    28.29%

    3

    BZC

    0.00%

     $12.13

    6/10/2015

     $13.87

     

    14.34%

    4

    ATNI

    1.69%

     $67.98

    12/10/2014

     $73.68

     

    8.38%

    5

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 3.34

     

    2.77%

    6

    VIVO

    4.95%

     $17.77

    1/27/2015

     $18.26

     

    2.76%

    7

    NVDA

    1.50%

     $22.28

    4/27/2015

     $21.47

     

    -3.64%

    8

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 3.88

     

    -5.37%

    9

    WSTG

    0.04%

     $18.50

    5/4/2015

     $16.76

     

    -9.41%

    10

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.93

     

    -10.56%

    11

    SAVE

    0.00%

     $73.77

    12/10/2014

     $55.03

     

    -25.40%

       

    2.46%

           

    19.54%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $1,970.89

     

    -4.32%

     

    What happened?

    Investors are spooked by at least four fear factors:

    1. Even intelligent people are mystified about what happens next. If rates go up, bonds and stocks go down, but you can’t leave rates at zero forever – can you? If you raise rates, that’s good for banks, which have resorted to jacking up fees to stay in business.
    2. China devalued the Yuan, which does not float like most currencies: the Chinese government establishes the exchange rate, and everything changes. In the last few years, some manufacturing has been moving out of China to Vietnam and other lower-cost countries, so China just made its factories more competitive. The Chinese government’s goal is the same as every other government’s: to suck as much wealth in for its own people as it can. China did what Walmart does every week: it lowered prices because it believes that it will attract more business and hurt its competition.
    3. The market has been at “record highs.” Never mind that the S&P was up 2% in a good week. Though it has yo-yoed back and forth between 0% and 2%, anyone watching the news would think that the market skyrocketed in 2015. Since small investors tend to believe that “What goes up must go down,” they have had their fingers on the trigger. 
    4. The price of oil has gone through the floor. Bloomberg says it could go as low as $20 a share. PerfectCompany dumped oil companies in 2014. Outside of a major war, it’s hard to imagine the confluence of factors that could resurrect the price of oil, which, in itself, is an excellent indicator for war.

    What’s really happening in the economy?

    You never really know trends until it’s too late, but, during our investment club discussion last Wednesday, one participant laid out the anecdotal evidence for a fairly strong U.S. economy:

    • U.S. tax receipts are up to record levels
    • Some states are having a hard time finding enough teachers.
    • Miles driven in the U.S. are up
    • Despite the downturn in oil jobs, construction jobs are going begging.

    Also, the Go-Go Bar in Bristol, PA has displayed on its electronic sign for the first time ever, “We’re hiring.” If Club Risque in blue collar Bristol has to advertise for talent, the economy is humming.

    What about the fear factors?

    1. The Fed has been waffling over whether to raise rates by, what, 0.25%? That’s not going to make a difference to how business actually operates. If you plug a quarter percent interest into an extravagant macro-model, large numbers appear, but, in practice, very few people will change their decision process. PerfectCompanies have lots of cash, which will enable them to survive hard times and even to benefit by buying assets and competitors cheaply.
    2. The devaluation of the Yuan makes Chinese goods cheaper, which makes American importers more profitable, but exporters poorer. It’s bad for U.S. companies that want to build new dynasties in China, but it seems to me that Chinese planners plan to cut the knees off any American upstart ASAP. This is bad for Apple, GM, and, maybe, YUM brands. I am thrilled that we have not invested in China, and that we sold ATAI in February for a profit at $4.03; it’s at $2.41 today. The U.S. exported $55.9 billion to China in the last 6 months. Let’s say it was growing to $125 billion a year or 0.7% of our $17.4 trillion GDP. The devalued Yuan will reduce exports (but only marginally), decrease costs for currently imported goods, and make it harder for U.S. companies to compete in other markets. On the other hand, China has issues. As a writer at the Brookings Institution points out, “The cornerstone of any financial system, be it a developed or emerging market, is confidence and transparency. China is deficient on both counts.” That’s the reason I won’t invest there.
    3. The market has been flat all year, and small investors have been flushed and slaughtered from one hot segment to another. The average small investor was already down 3% for the year. He bought into Alibaba, which leapt off the IPO springboard and dove into the chasm. He hung onto Amazon because he liked the service, but wondered if it should be making money, so, when panic set it, he pulled the rip cord; Amazon shareholders should be overjoyed that the music lasted so long. The same is true for Tesla, another story stock that, despite the excitement, is churning through cash and raised another $783 million on August 19; Tesla has serious competition, and a “super battery” is still a dream. Apple has ridden the biggest consumer product in history; all it has to do now is find an even bigger product and sell it to the next fastest-growing-country in history that isn’t already loaded up with expensive smart phones and its own smart phone companies that want to eat Apple’s lunch. Good luck with that. A lot of popular companies are not worth as much as we thought, and those companies are getting all the press. “Apple declined 6% in a day!” the pundits whine. It reminds me of Frank O’Hara’s poem, “Lana Turner Has Collapsed.” This can’t be allowed to happen! Not Apple! How about BOX? Another hot company we avoided that IPOed at $20 in February and hit $13 this week. BOX is making progress: it now loses less than its total sales each quarter. There is a re-set going on, which is reasonable for many companies, though an unreasonable contagion is spreading to some companies that make money, have cash and are growing. Those are the ones we want to buy at a discount.
    4. PerfectCompany bowed out of oil-related companies last year because the energy market is virtually unknowable. In addition to new sources of energy, the market is muddied by traders who lined up oil tankers to wait offshore for higher prices, and the Iranians have something like 40 million barrels in 25 tankers ready to ship when sanctions drop. With news this bad, I’m tempted to jump into oil, and I would bet that oil people are already planning their next war to goose the price. The good news is that energy is cheap: airlines and other energy consumers have more money in their pockets. Isn’t this what we wanted? The haters have less cash now for their ridiculous palaces and hysterical militias. I’m happy about that. We’re more efficient, we’re using less carbon and we’re making our own oil. Good for us! Most of the reasons why low oil prices are bad have to do with the preservation of the oil industry. That’s sad, but the oil industry has been subsidized for too long (tax breaks, defense spending, road building, etc.), and cheaper gas is letting people drive more. The St. Louis Fed says the 12-month moving average of miles driven has increased from 3 trillion vehicle miles to 3.093 trillion vehicle miles in the last year.

    In summary, I don’t get the fear. Overall, the markets have been unbelievably conservative in 2015: they have barely budged, and now some exuberant stocks are getting a haircut. It’s possible that this is a late summer hissy fit staged to wag the Fed, but we mortals can’t really know, can we? If that is true, the Fed will back down or there will be elaborate, on-going explanations of why a small rate increase is remarkably positive and how it demonstrates true economic strength; there will be a fourth quarter rally; and Wall Street will get another record-setting bonus in January.

    Dad always said that, “People like to do things.” The people in our 11 companies have the resources and plans for strong growth, and they will continue to execute those plans tomorrow. Fear itself is the problem: you will notice more empty seats in decent restaurants when the market is down. Even sales in my little companies have correlated with down markets: people are less likely to make a buying decision when they are concerned about their future wealth. However, bucking up the economy is in the best interests of almost everyone – from Jim Kramer to Comcast to GM to Barack Obama. It’s fun to whisper darkly, but when the bad dreams start to happen, the pundits wake up and tell everyone to hold onto their investments, which is already happening.

    What to buy?

    This week could present some outstanding buying opportunities. This is your chance to be Warren Buffet – to buy profitable, growing companies at a discount when everyone else is panicking. Today, especially, I want to buy companies that, if the worst happens, are positioned to grow through a bad period.

    One that I profiled in the past with a promise to buy if got close to $5 is NMM. It got below $6.50 and is now at about $7.16. NMM pays a 24.7% dividend at this price, and operates a profitable shipping company out of Monaco. It’s a 15.4 PerfectCompany rating.

    At our recent investment discussion, some felt that the banks would benefit from a rate increase, and JPM could be a good buy. The big banks are moving together recently, but Wells Fargo, JPM and PNC have been the best performers in the last five years.

    PNC is my favorite bank, but we rate it a 5.3, which is good but not great – even at these prices. Wells Fargo (WFC) gets 15.8 and JPM a 25.8.  JP Morgan has a negative Enterprise Value, which means they have lots of cash. A great small bank is Cullen Frost (CFR) in Texas, which pays a 3.52% dividend and gets a PerfectCompany rating of 26.9.  CFR is a $3.8 billion market cap bank that eschewed TARP help in the last crisis. The CEO says CFR can weather oil below $40 a barrel, but CFR has fallen faster than JPM this year because of its reliance on the oil patch.

    Dunkin Donuts

    Today is Dave Z’s birthday, so, since we often go to Dunkin Donuts, let’s see if DNKN’s westward expansion is worth buying into.  We rate it a 3.2.  Ouch – a franchisor is usually more profitable. DNKN has run up from $25 to $50 in the last few years – probably because it’s a consumer brand, and people buy it because they know it.

    Retailers

    TJX is the last great retailer in the country, and the price has recently fallen from $77 to $68. We rate it a 5.8. People like to shop, and people who shop tell me that TJX companies offer them the most exciting experience.

    Help me find a data source!

    The PerfectCompany screener is down for lack of reliable data, and it’s killing me that I have not been able to run my value screen this week on thousands of newly viable candidates. I even tried GuruFocus, but they’re still developing their multi-stock spreadsheet capability. I’m all ears:  data@perfectcompany.com

    Thanks to everyone who attended our investment discussion last week.

    That was great fun. I’ll take a look at more of the stocks that were mentioned in the weeks ahead.

    Thursday
    Aug202015

    Weekly Performance 7/14/15

    The S&P 500 powered to 1.5% for the year, and we declined to 26.6%.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    8/14/2015

     

    +/-

                   

    1

    IDWM

    5.37%

     $12.15

    12/10/2014

     $42.00

     

    245.74%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $38.72

     

    40.09%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 3.78

     

    16.31%

    4

    BZC

    0.00%

     $12.13

    6/10/2015

     $13.50

     

    11.29%

    5

    ATNI

    1.69%

     $67.98

    12/10/2014

     $74.13

     

    9.05%

    6

    NVDA

    1.50%

     $22.28

    4/27/2015

     $23.54

     

    5.66%

    7

    VIVO

    4.95%

     $17.77

    1/27/2015

     $18.18

     

    2.31%

    8

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 4.01

     

    -2.20%

    9

    WSTG

    0.04%

     $18.50

    5/4/2015

     $17.38

     

    -6.05%

    10

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.90

     

    -11.01%

    11

    SAVE

    0.00%

     $73.77

    12/10/2014

     $60.27

     

    -18.30%

       

    2.46%

           

    26.62%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,091.54

     

    1.54%

     

    Saturday
    Aug082015

    Weekly Performance 8/7/15

    Give them bread and comics! As the stock market slid, CTMMB (majority owner of IDW comics) split 10 to 1 and carried the PerfectCompany portfolio to a gain of 26.5% this year versus 0.86% for the S&P. “It’s risky,” they said; “I don’t believe in picking individual stocks,” they said, but it’s also risky not to have some potential rocket fuel in your portfolio or to put your entire faith in the broad market.  That’s kind of like saying, “We want the best people – we hire everyone and average it out!”

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    8/7/2015

     

    +/-

                   

    1

    CTMMB

    5.37%

     $12.15

    12/10/2014

     $40.99

     

    237.42%

    2

    OLED

    0.00%

     $27.64

    12/10/2014

     $41.53

     

    50.25%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.22

     

    29.85%

    4

    ATNI

    1.69%

     $67.98

    12/10/2014

     $71.23

     

    4.78%

    5

    NVDA

    1.50%

     $22.28

    4/27/2015

     $22.98

     

    3.14%

    6

    VIVO

    4.95%

     $17.77

    1/27/2015

     $18.27

     

    2.81%

    7

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 4.17

     

    1.71%

    8

    BZC

    0.00%

     $12.13

    6/10/2015

     $12.15

     

    0.16%

    9

    WSTG

    0.04%

     $18.50

    5/4/2015

     $18.00

     

    -2.70%

    10

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 5.56

     

    -16.14%

    11

    SAVE

    0.00%

     $73.77

    12/10/2014

     $59.08

     

    -19.91%

       

    2.46%

           

    26.49%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $2,077.57

     

    0.86%

     

    I wish I had sold OLED when I noticed the insiders had sold it. Nothing good comes of an earnings announcement when insiders have lined up to sell, and I noted two weeks ago (at $47) that every top manager at Universal Display was selling. OLED took a $33 million inventory write down on “existing host material and associated work-in-process, resulting from a customer's faster-than-expected reduction in demand for this material” to produce an $11.8 million loss. In other words, they had a $21 million gain, and took this kitchen-sink loss in a big revenue quarter (sales were up from $20 million to $58 million) so they could get it out of the way, and end the year with a big finish. It’s too late to sell – the news is out – but I wish I had sold at $47 and bought back in now.  I expect Wall Street to pump up in the fourth quarter, and OLED will participate.

    Nvidia (NVDA) was down 10% in July, but this week flipped to the win column. Nvidia had a good quarter. Roth Capital and S&P Capital IQ are calling it a “Buy”, and Pixar licensed a suite of Nvidia image rendering tools. “Pixar has long used NVIDIA GPU technology to push the limits of what is possible in animation and the filmmaking process,” said Steve May, vice president and CTO at Pixar. “NVIDIA's particular QMC implementation has the potential to enhance rendering functionality and significantly reduce our rendering times.” Nvidia has some excellent partners: IBM in supercomputers and Pixar in image rendering.

    Spirit is the wild card that I’m still holding. With a 55% capacity increase and lower fuel prices, I’m betting that Spirit will take off.  

    Kindred Biosciences (KIN) is also a long shot. No news and no insider selling – at least not published, but if their plan to turn human drugs into animal drugs works, we will see an excellent pop. 

    WHAT IF YOU ONLY HAD ONE WINNER?

    Seeing my portfolio carried mainly by one stock – even though 7 of 11 are positive and 6 of 11 are beating the S&P by 300% – a is a little embarrassing. I’d like every company to be a slugger, but this reminds me of a friend who pointed out that people cannot tolerate small losses: we can’t stand a lot of mental nicking, which may be why most people throw in the towel and say, “I just can’t tell one from the other. I have no idea why any company might be better than the next – just pay me my one percent a year.” What if you had nine 15% losers and one that paid 500%? You should be happy with a 36% gain, but most of us would find that disturbing.

    Once you identify promising candidates, there are two challenging tasks: selling companies whose businesses are no longer promising – and holding onto those that are, but are not yet recognized by everyone else.

    Thursday
    Aug062015

    Weekly Performance 7/31/2015

    The PerfectCompany portfolio is up 21% since it was formed on December 10, 2014; the S&P is up 2%.

    We have sold six companies, and bought back into one, WSTG. As of 7/31/15, the five companies that we sold were down significantlly; WSTG was up 5% since we bought it back. I originally sold WSTG because I didn’t understand what was happening in one of their divisions where sales were declining. It appears that WSTG is de-emphasizing that division, but growing sales strongly by adding new product lines. I still think WSTG would make a good acquisition for Digital River, which itself was acquired in February for $840 million.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    7/31/2015

     

    +/-

                   

    1

    CTMMB

    5.37%

     $121.48

    12/10/2014

     $ 298.97

     

    146.11%

    2

    OLED

    0.00%

     $  27.64

    12/10/2014

     $47.71

     

    72.61%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.22

     

    29.85%

    4

    VIVO

    4.95%

     $  17.77

    1/27/2015

     $18.09

     

    1.80%

    5

    WSTG

    0.04%

     $  18.50

    5/4/2015

     $19.49

     

    5.35%

    6

    ATNI

    1.69%

     $  67.98

    12/10/2014

     $70.74

     

    4.06%

    7

    BZC

    0.00%

     $  12.13

    6/10/2015

     $12.30

     

    1.40%

    8

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 4.37

     

    6.59%

    9

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 6.24

     

    -5.88%

    10

    NVDA

    1.50%

     $  22.28

    4/27/2015

     $19.95

     

    -10.46%

    11

    SAVE

    0.00%

     $  73.77

    12/10/2014

     $59.82

     

    -18.91%

       

    2.46%

           

    21.14%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $  2,103.92

     

    2.14%

                   
     

    LIQUIDATED POSITIONS

           

    $

    ATAI

    12.17%

     $3.37

    12/10/2014

     $ 4.03

     

    19.58%

         

     SOLD

    2/17/2015

    Annualized:

     

    104%

    $

    WSTG

    3.85%

     $  17.64

    12/10/2014

     $17.55

     

    -0.51%

         

     SOLD

    3/23/2015

    Annualized:

     

    -2%

    $

    FF

    3.78%

     $  12.70

    12/10/2014

     $12.34

     

    -2.83%

         

     SOLD

    3/23/2015

    Annualized:

     

    -10%

    $

    IBM

    2.70%

     $162.99

    12/10/2014

     $ 169.78

     

    4.17%

         

     SOLD

    5/1/2015

    Annualized:

     

    11%

    $

    PRCP

    1.30%

     $  11.50

    12/10/2014

     $12.11

     

    5.30%

         

     SOLD

    5/4/2015

    Annualized:

     

    13%

    $

    PDLI

    8.52%

     $7.07

    3/30/2015

     $ 6.20

     

    -12.26%

         

     SOLD

    6/10/2015

    Annualized:

     

    -62%

           

    Avg Annualized:

     

    9%

     

    Saturday
    Jul252015

    Trade Alerts 7-28-15

    Weekly Results 7-25-15

    After the brief euphoria when Greece, China and Iran seemed like England, Japan and Turkey, the market returned to muddle mode.  It drifts between 1% and 3%, and our portfolio has moved between 20% and 22%. A few money managers have achieved 35% a year over time – how can we get there in the remaining five months? It may be a matter of coasting through the summer and seeing if some of our companies take off in the last quarter.

    #

    Symbol

    DIV@BUY

     BUY

    DATE IN

    7/24/2015

     

    +/-

                   

    1

    CTMMB

    5.37%

     $121.48

    12/10/2014

     $ 287.98

     

    137.06%

    2

    OLED

    0.00%

     $  27.64

    12/10/2014

     $47.52

     

    71.92%

    3

    LOAN

    8.62%

     $3.25

    12/10/2014

     $ 4.11

     

    26.46%

    4

    VIVO

    4.95%

     $  17.77

    1/27/2015

     $18.70

     

    5.23%

    5

    WSTG

    0.04%

     $  18.50

    5/4/2015

     $19.36

     

    4.65%

    6

    ATNI

    1.69%

     $  67.98

    12/10/2014

     $70.56

     

    3.80%

    7

    BZC

    0.00%

     $  12.13

    6/10/2015

     $12.56

     

    3.54%

    8

    DRAD

    4.88%

     $4.10

    2/9/2015

     $ 4.13

     

    0.73%

    9

    KIN

    0.00%

     $6.63

    12/10/2014

     $ 6.56

     

    -1.06%

    10

    NVDA

    1.50%

     $  22.28

    4/27/2015

     $19.42

     

    -12.84%

    11

    SAVE

    0.00%

     $  73.77

    12/10/2014

     $60.33

     

    -18.22%

       

    2.46%

           

    20.12%

     

    S&P 500

     CLOSE 12/9/14

     

    CURRENT

     

     

     

     

     $2,059.82

     

     

     $  2,079.65

     

    0.96%

     

    My buddy likes to point out that I’d be in trouble without my two best picks. He’s right: without them, I’d still beat the market at 1.37%, but, if I excised my two worst picks, I’d be up 28%. (Even the Perfect Company portfolio dividend would beat the S&P 500 this year.) To be fair, these are the picks that I’ve bought and listed every week, and it’s a bit like saying you wouldn’t have won the series without that walk-off home run.  As investing legend Peter Lynch pointed out, you get paid by your “ten-baggers” – the home runs that keep rounding the bases.

    Modern strivers are defined more by what we choose NOT to buy than what we buy. Serfs had few choices, but we free toilers must sort through thousands of shiny, mediocre distractions. I have dismissed hundreds of potential investments, married a few I should not have, and agonized over the ones I have left.  After all, we don’t want every buzzy company – we’re looking for companies that are as near to perfect as possible – that is, they have explosive growth potential, committed management, and a value that is not already over the moon.

    Here’s the current portfolio news.

    CTMMB

    “After slumping in the aughts, the comic book industry has rebounded – overall sales in North America hit $935 million in 2014, up 7 percent from the previous year, according to industry website Comichron.” – Businessweek, Archie vs Archie, 7/27/15.  Despite the awesome performance of CTMMB and CTMMB, the combined market cap is still only about $117 million. You don’t have to be a furry at Comicon to know that stories are now worked out in comics for videos and games – and that people no longer read books. Type in “IDW” on the Comichron site and see what comes up. And keep repeating, “Disney paid $4 billion for Marvel.” CTM is now IDW Holdings.

    UNIVERSAL DISPLAY

    OLED scares me a little. Insiders are selling: the Chairman, CEO, CTO and CFO have each sold between 15,000 and 43,000 shares, but they each continue to hold over 100,000 shares. Also, first quarter sales and profits slumped, but the second quarter is usually heavier for royalties. OLED will announce second quarter earnings on August 6. Here are the reasons to buy OLED:

    • Apple will move to OLED  So suggests one Motley Fool pundit – and it makes sense. Even if Apple phone sales disappoint its own shareholders, OLED adoption by Apple would be a seismic win for Universal Display.
    • I was at a medical conference two weeks ago, and met the winner of last year’s tech prize for nursing facilities – a maker of LED lights. OLED is positioning itself for the big lighting market.
    • Costs are coming down and performance is going up for OLED technology. This trend is just getting started.

    NVIDIA (NVDA)

    Boarding a plane, I was behind a scruffy young man with a tube on his back that looked like a tube I use for tennis balls. “No, it’s for a poster,” he said. Scientists use posters at conferences, which must be a holdover from third grade – “Here is my climate cycle poster.” This guy was presenting on DNA in E.coli, so, of course, I asked him if he had ever heard of Nvidia. He knew all about it.  Perhaps one day soon, investors will get the message that Nvidia is not a company that makes video processors for game machines, but a company that makes the most sophisticated processors for medical research and other big data problems. See Nvidia on Speeding Toward the Future of Medicine.  At a $10.4 billion market cap, NVDA could be bought by Intel or by IBM, which uses NVDA chips for its super computer. NVDA would be cheap, too: it has $4.8 billion in cash and no long-term debt. NVDA could also, at some point, spin off its gaming properties and focus on GPUs. NVDA announces second quarter earnings on August 6.

    BZC – HELICOPTERS ARE HOT

    Lockheed Martin announced plans to buy Sikorsky for $9 billion, which is another indication that vertical lift vehicles are heating up. BZC is one of two companies that control the world market for helicopter winches, which are used for rescue and cargo lifting.

    SPIRIT CAPACITY INCREASE IS INDUSTRY’S BIGGEST

    This chart in the July 20 Businessweek helps illustrate why the feds are investigating major airlines, which are milking their oligopoly while fuel prices are down, and why Spirit (SAVE) makes some investors nervous. On the other hand, you have to play to win, and Spirit has increased capacity by 55%. Spirit’s first quarter profits did not decline either; they increased from $37.7 million to $69 million.

     

    Despite “an unusual number of storms,” Spirit reported on Friday that “net income for the second quarter 2015 increased 12.6 percent to $74.8 million ($1.03 per diluted share) compared to the second quarter 2014. GAAP net income for the second quarter 2015 increased 18.3 percent year over year to $76.7 million ($1.05 per diluted share).” The negative was declining revenue per passenger mile due to competitive pressures, but Spirit continued to increase sales and profits overall. SAVE also purchased $67.5 million of its shares and still finished the quarter with $769 million of unrestricted cash – up from $567 million a year ago.

    B RILEY SAYS BUY DRAD WITH TARGET OF $5.25

    If B Riley is right, DRAD will be up 27%.  The company pays a 4.9% dividend. Today, DRAD announced that it had completed its investment and strategic partnership with Perma-Fix Medical S.A., which will supply Digirad or its preferred nuclear pharmacy supplier with Tc-99m at a preferred rate. Tc-99m is a strategic material for nuclear medical imaging.

    VIVO SNORES ON

    Second quarter sales at Meridian Biosciences increased by 2% while profits increased by 10%. The company pays a 4.3% dividend. It’s a boring, conservative maker of clinical tests that could be acquired or get lucky with a new testing technology – or it could keep growing slowly and paying a nice dividend.

    IMPERFECT COMPANIES

    FORD – FOR ELECTRIC CARS

    Our recent purchase of a Ford Fusion Plugin has been fun. The electronics are better than Acura’s, and driving becomes a game to see how well you can brake, cruise and accelerate. We buy gas about every 900 miles, so it seems to me that Ford is well positioned to take a big slice of the mainstream electric market. And lots of people like Ford because it resisted the government takeover that has people calling GM, “Government Motors.”

    Ford has a lot going for it. Unfortunately, it still has a lot of debt. With a $57 billion market cap, Ford has an Enterprise Value of $160 billion, so that $3.1 billion in earnings over the last four quarters comes to just 1.95%. Ford is no bargain.

    KROGER (KR)

    Kroger’s value is growing like there’s a food shortage: in three years, the stock has gone from $10 to almost $40 while sales have increased by 12%. KR pays a 1.1% dividend, and we rate it a 4.6.  Insiders are net buyers in the last quarter. I wish I had bought it 3 years ago.

    SKYWORKS (SWKS)

    This $17.9 billion market cap increased its sales by 46% last year to $2.3 billion. Insiders are selling, but it keeps climbing – from $20 to $100 in three years. We rate SWKS a 5.1. Of these three, I like Skyworks best.