Stock Selections Completed, SNAP and the Summer Bull Market

We recently completed our stock buying for the fall of 2017.  We do the stock buying and matching in the fall so that beneficiaries can have the summer to make some money in order to do the match.

It is interesting that of the 6 stocks (and one ETF, IAU or gold) on the list, no one took Snapchat (SNAP).  This is interesting because while it is popular with many of the beneficiaries (they use it), they can segregate whether something is useful or whether it may be a good investment. I had Snapchat on the list because I felt that it had been beaten down by bad sentiment and poor results and because it was burning cash BUT that this also created the opportunity for a turn upward (may be at the bottom).  In the past I’ve been hesitant to put up stocks that are tied to products that the beneficiaries may use day to day because I didn’t want that to bias the selection process but it turns out I was wrong.

With Google Sheets it is much easier to track the portfolio real time.  I have a summary sheet set up like the picture in this post and I can just glance at it on my phone from the google sheets app.  I take snapshots of the values in each portfolio every month or so in order to see simple trends over time.

You can see our summer bull market in the results, although you need to mentally factor out the impact of $11,700 in contributions and $6000 in withdrawals across the period (net inflows of $5700).  Thus based on some simple math above, across the portfolio we saw an increase of $154,073 – $136,791 = $17,282 and then you take out the net inflows of $5700 to get a net increase of $11,582 divided by our base of $136,791 from about 6 months ago which is 8.4% and if you roughly double it (to get annual performance) you see annualized performance of roughly 17% in the portfolio during essentially the summer and most of the fall of 2017.

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Stocks To Purchase By Account

Based on the situation in each account and the amount of cash available after contributions and sales each account has a number of different purchases to make:

Portfolio 1 – no purchases

Portfolio 2 – can invest $2500 in ETF’s (one of the current 4 in use) or the Gold ETF added.  Or leave it in cash

Portfolio 3 – 2 purchases

Portfolio 4M – 3 purchases

Portfolio 5D – 3 purchases

Portfolio 6 – 3 purchases

Portfolio 7G – 2 purchases

Portfolio 8K – 2 purchases

Stock Selections for 2017

Below are our stock selections for 2017:

US Stocks

  1. Appian (APPN) – $24, 52 week range $17-$27, $1B market cap, no dividend, almost no debt.  Appian is an internet software company that provides automation software for corporate customers.  Well run and growing fast, went public recently and has done well since the IPO

2. Nvidia Corporation (NVDA) – $179, 52 week range $63-$191, $107B market cap, almost no dividend, $4B debt.  Nvidia makes chips for games and graphics cards and these chips are also being used for AI and machine learning use cases.

3. General Motors (GM) – $42, 52 week range $30-$42, $61B market cap, 3.8% yield, $55B debt.  GM is an iconic, global auto manufacturer with strong worldwide presence including China and has invested heavily in electric car technology.  Non US sales total 58% of volume (but a smaller percentage of profits).

4. Snapchat (SNAP) – $15, 52 week range $11-$29, $18B market cap, no dividend, no debt.  Snapchat went public and recently has lost almost half its value.  The company has over $2B in cash but is running a large loss due to operational expenses and acquisitions.  However, it is still strong in market and mind share and could also be an acquisition candidate for the right price

International Stocks

5. Baozun (BZUN) – $36, 52 week range $11-$41, $2B market cap, no dividend, little debt.  Baozun is a Chinese e-commerce provider for many major companies.

6. ABB (ABB) – $25, 52 week range $20-$25, $54B market cap, 3% yield, $7B debt.  ABB is a Swiss company and European conglomerate with strong interests in power and electricity generation.

Other

7. Gold ETF (IAU) – $12, 52 week range $11-$13, no dividend.  This ETF tracks the price of gold.  In case of a market correction (prices go down), gold often holds its value on a comparative basis.  On the other hand, gold pays no dividends and does not generate profits

We looked at bitcoin but there currently isn’t a direct bitcoin ETF and if someone wanted to trade bitcoin or ether they would be better off trading it directly.  These sorts of crypto currencies can cause taxation and other related issues and are too complex for this portfolio at the current time.

It’s Stock Picking Time for 2016!

Every year at the end of the summer we select stocks.  Here are the choices for 2016.

US Companies

Spirit Airlines (SAVE) – $40 (52 week high / low $53 / $33), $2.8B market cap, no dividend, $0.6B debt.  Spirit Airlines is a low cost airline that is challenging the oligopoly domestic carriers.

Gilead Sciences (GILD) – $77 (52 week high / low $113 / $77), $101B market cap, 2.4% dividend, $21B debt.  Gilead Sciences is a pharmaceutical company.

General Electric (GE) – $31 (52 week high / low $33 / $23), $281B market cap, 2.9% dividend, $145B debt.  General Electric is a conglomerate that has exited financial services.

International Companies

Unilever ADR UK (UL) – $48 (52 week high / low $38 / $48), $150B market cap, 2.9% dividend, $13B debt.  Unilever is a British consumer goods company with a strong global presence.  This is the ADR that pays out in British Pounds so that there is no tax withholding.

SAP ADR (SAP) – $89 (52 week high / low $62 / $89), $112B market cap, 1.5% dividend, $8B debt.  SAP is a German software company with a strong global presence.

Elbit Systems ADR (ESLT) – $97 (52 week high / low $72 / $103), $4B market cap, 1.6% dividend, $0.4B debt.  Elbit Systems is an Israeli defense contractor.

Stock Selections for 2015

Attached are the stock selections for 2015.  We are expanding the list slightly because most of the funds not only have new cash to invest for 2015 but we also did a recent round of selling that needs to be re-invested.

US Stocks

  1. Box (BOX) – $13, 52 week range $11-$24, $1.5B market cap, no dividend, little debt.  Box provides a cloud-based document storage and governance capability and is growing rapidly among Fortune 500 corporations
  2. Mastercard (MA) – $101, 52 week range $75-$101, $114B market cap, 0.7% yield, $1.5B debt.  Mastercard is a global credit card brand that benefits from the long-term migration of cash and checks to credit.  Their biggest competitor, Visa, recently announced a merger with Visa Europe which likely will distract that company for several years and give Mastercard an opportunity to pick up market share
  3. ConocoPhillips (COP) – $55, 52 week range $41-$74, $68B market cap, 6% yield, $25B debt.  ConocoPhillips is an oil and gas exploration company that is a major bet on future price rises for natural gas and oil with technical knowhow and efficient production.  They recently made major cuts in response to the commodity price collapse
  4. Union Pacific (UNP) – $86, 52 week range $79-$124, $73B market cap, 2.6% yield, $13B debt.  Union Pacific operates a massive US rail network and has been hit recently by reductions in the industrial and commodity economies.  However, they are highly efficient and represent a solid long term bet on industrial growth and recovery

Foreign Stocks

  1. Tata Motors (TTM) – $30, 52 week range $21-$51, $19B market cap, no dividend, $11B.  Tata Motors is an Indian based company that benefits from low costs and growth in the Indian car market and also owns Jaguar and Land Rover.  The stock will be down a bit early next week because they just released earnings and showed an unexpected loss due to a one time event
  2. China Eastern Airlines (CEA) – $30, 52 week range $20-$50, $8B market cap, no dividend, $6B debt.  China Eastern Airlines can benefit from the growth in outbound Chinese tourism and investment as well as potential government mandated consolidation in the airlines sector which could result in higher profits and reduced competition
  3. Alibaba (BABA) – $83, 52 week range $57-$120, $207B market cap, no dividend, $8B debt.  Alibaba is a major web commerce / mobile player in China.  Much of Yahoo’s value was based on an ownership stake in this entity (we recently sold off Yahoo)
  4. Novartis (NVS) – $89, 52 week range $88-$106, $214B market cap, 2.7% yield, $22B debt.  Novartis is a major Swiss based drug maker

Wildcards

This is a new section.  These are some riskier stocks either because of high prices or uncertain outcomes.

  1. Tesla (TSLA) – $232, 52 week range $181-$286, $30B market cap, no dividend, $2.6B debt.  Tesla is a maker of electric cars led by the charismatic Elon Musk.  Their valuation is very high considering that they lose money, gas prices are low which reduces the savings from electricity, and they deliver a fraction of the cars that a “major” automotive giant would.  On the other hand, their fan base is passionate and their design is praised
  2. Facebook (FB) – $107, 52 week range $72-$110, $301B market cap, no dividend, little debt.  Facebook is the ubiquitous social media presence with a huge and growing global and mobile footprint and messaging.  Their market cap has almost tripled since their IPO and are led by the charismatic Mark Zuckerberg
  3. Cheniere (LNG) – $46, 52 week range $43-$82, $11B market cap, no dividend, $16B debt.  Cheniere is a long term bet on liquified natural gas, which takes (relatively) cheap US gas and ships it to offshore countries seeking clean energy and diversified energy sources.  This is a risky but possible bet because the facilities are mostly built but yet to ship gas and prices are falling, but the long term upside is also large if they can survive and prosper

Stock Selections for Summer 2015

There have been stock sales in some of the portfolios so we will have another round of stock selections.  Here are the choices.

INTERNATIONAL

  1. Vale ADR (VALE) – $7, ($5 – $14 over 52 weeks), $35B market capitalization, 5.5% yield, $35B in debt.  The Brazilian mining giant has been hit hard by the reduction in demand for the commodities that it produces as well as difficulties in Brazil as the economy is stagnant and the currency is falling.  With these factors it is a solid candidate for a rebound in future years if they can continue to focus on efficiency and cost reductions
  2. Alibaba (BABA) – $88, ($77 – $120 over 52 weeks), $220B market capitalization, no dividend, $8B in debt.  Alibaba is a Chinese e-commerce giant.  They are listed directly on the NYSE and not an ADR.  While the Chinese stock market has made a huge advance recently, Alibaba has slowed as the company re-groups and reduces hiring and focuses on execution.  If you already own Yahoo don’t buy Alibaba because Yahoo has ownership of a portion of their stock which is already reflected in Yahoo’s value
  3. Infosys ADR (INFY) – $31, ($25 – $37 over 52 weeks), $35B market capitalization, 1.6% yield, no debt.  The Indian outsourcing and consulting company is poised to grow with India and benefits from the strong dollar since much of its costs are in Indian currency but much of its revenues are received in dollars

US Market

  1. Celgene (CELG) – $115, ($72 – $129 over 52 weeks), $91B market capitalization, no dividend, $7B in debt.     Celgene is a US biotech / drug company with a variety of drugs under patent and a pipeline of many other potential future products
  2. Juniper Networks (JNPR) – $27, ($18 – $27 over 52 weeks), $11B market capitalization, 1.5% yield, $2B in debt. Juniper Networking is a high technology company specializing in fast networking gear.  The company is well run and has beaten analyst profit estimates recently
  3. Dow Chemical (DOW) – $51, ($41 – $54 over 52 weeks), $59B market capitalization, 3.3% yield, $20B in debt.  Dow Chemical provides processed material for manufacturing and agriculture.  The company benefits from lower US natural gas costs which provide advantages since it is a major component of their products.  The company recently fended off an activist investor which reduced their stock price.

Purchasing New Stock in Spring

Thanks to sales we have some cash in the portfolio and we will be looking at additional stock purchases in the spring.

– Portfolio 1 – one stock
– Portfolio 2 – one stock
– Portfolio 3 – two stocks
– Portfolio 4 – no stocks
– Portfolio 5 – one stock
– Portfolio 6 – no stocks

We will also look to see if we should put stop losses on any of the stocks. All of the prior stop losses have expired (they are only good a certain amount of days under the brokerage system that we use).