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Hi Byculla,
The only software owned and used is MS-excel and Mozilla Firefox.
Best Regards,K
Hey Adam,
Dividends and other investment income is not taxed here.
I pay 1.2% tax each year on the total asset value.
Best Regards,K
Hi Adam
Very nice! GCH and FXI are more like growth funds and can have nice growth going forward, certainly 100% upside, although not guaranteed:)
The nice thing with dividend funds is :
- get the growth, like Tom with DON and DES and grow your machine
- get the dividend
- grow the dividend, this is sometimes forgotten. When you get more and cheaper shares your dividend yield on cost increases. In IAPD my net DYoC increase was roughly 5% from Aug 2006. I am actually running close to 13% on cost, because the capital went into IAPD coming from another profitable machine which increased the dividend 4%, so the total dividend on cost is now 12.88%.
Remember the time that Bernie was still here, he was in the China fund of Mark Mobius?
Best Regards,K
Hi Toofuzzy,
Guess AAXJ or EPP are broadly based. IADP is dividend oriented like DVY. So maybe IDV is similar. Although IDV also contains european shares and the asian-pacific shares came back better from the 2009 lows. DWX from State Street is similar.
DNH is probably also good (Wisdomtree). The Wisdomtree funds also move nicely, similar strengths as the Vanguard funds, which I didn't expect. Tom is improving his dividend yields with the Wisdomtree funds:)
Also DEM and DGS are nice funds with quarterly dividends.
It is a shame that Vanguard only has VIG and VYM.
It is only a shame that the market levels are a bit high now. So maybe wise to trade a virtual portfolio and buy on AIM signals. In that manner you can create a nice income stream. I do this all the time for funds, only buying on AIM signals and building up my machines in that way.
So much to buy!
Best Regards,K
Hi Tom,
IAPD - Ishares Asia Pacific Select Dividend fund.
This fund has a dividend yield of 4% currently.
By Aiming it since Aug 2006, the dividend yield has improved to 9%.
It is a shame that the cash yield is so low.
Best Regards,K
Hi Toofuzzy,
Being no expert, I have 'Essentials of Investment' from Zvi Bodie in front of me with an example of ROE being smaller than ROA :)
ROE is Net income/Equity
ROA is EBIT/total assets
Equity seems to me total equity and shareholder equity that part of equity that belongs to the shareholders. (maybe some equity belongs to management or is preferred)
A nice PDF how Buffett values the markets:
http://www.ibmemployee.com/PDFs/WarrenBuffettStockMarket.pdf
Best Regards,K
Hi Toofuzzy,
My take on this :)
On the balance we have assets and liabilities plus equity.
ROA is (net) income divided by total assets
ROE is (net) income divided by total equity
ROE and ROA are connected by formula.
Quite often debt is assets and assets are debt. So some people take invested capital, they don't take short term debt because we have cash and short term assets on the other side of the balance.
FROIC or CROIC is cash return on invested capital, here invested capital is long term debt plus equity. Cash return is free cash flow or owner earnings.
CROIC shows how much money you get from your investment, a high number indicates strong growth. A low number means low growth and can be accompanied by a high CAPEX, costs to maintain machinery buildings etc.
You also have EBIT and EBITDA that is earnings before tax etc.
Best Regards,K
DM again,
Interesting to see that BTTRX is doing so nicely!
BTTRX is using zero coupons like EDV, so it's performance is roughly twice TLTs performance. (However BTTRX will be liquidated at the end of 2025.)
Looking at Yahoo, i get 99.79 and 100.27 adjusted close for TLT. Not sure where to get the 104.72 ?
Best Regards,K
Treasuries,
This article from Swedroe is interesting:
http://moneywatch.bnet.com/investing/blog/wise-investing/why-you-should-avoid-vanguards-total-bond-market-fund/1750/
Conclusion : In a portfolio treasuries are better than the total Bond market fund.
Also: you shouldn’t make the mistake of thinking of investments in isolation is interesting. This argument is often used by PP supporters.
Best Regards,K
Hey Byculla,
We are having a discussion choosing stocks based on P/FCF ratio. We were also looking at articles written by Mycroft, who is kind of practicing Buffettology.
I am tinkering with the concept a bit at the moment, but cannot show years of results. Aptus on the other board has written a software program which is superb in stock selection.
If you look at several of the recent posts on this board you will find more information.
Best Regards,K
P-FCF for DOW stocks
Based on Morningstar according to this weekend's prices:
Stock P/FCF
BA 12.86
CAT 12.91
CSCO 14.98
DD 13.42
GE 6.03
HD 12.81
HPQ 11.84
IBM 11.47
INTC 10.24
JNJ 11.39
MSFT 10.25
T 10.30
UTX 13.67
VZ 5.15
WMT 14.26
Hey Tom,
Half an hour ago there was a LCB sell in my UBA.
LCB for me is VV.
New GTC orders are calculated and loaded
Thanks for the update.
Best Regards,K
Hey Clive,
Nice VTI/TLT aiming.
You could do IAU/SHY aiming as well.
At some point in time TLT will drop severely because of interest jumps(maybe to 10%). So we should Aim the two pairs as well.
Which pair will be cash and which pair will be equity?
Probably they should both be equity and cash. Run 2 models, one with VTI/TLT as cash and one model with IAU/SHY as cash. Whenever a sell/buy signal happens in one of the two models, execute the signal and reset both models such that they are ready for the next trade.
Now the four way is fully Aimed!
Kind regards,K
Hey Clive,
After my holiday catching up:
DM switched to TLT on 2 July 2010, the closing price was 100.79
DM switched on 15 Oct 2010 to EPP, the closing price of TLT was 100.27
This is a gain of (100.27-100.79)/100.79 equals -0.5%.
If we take the low of the week after 2 July: 99.18
and we take the high of the week after 15 Oct: 102.28
then (102.28-99.18)/99.18 = 3.13%
If we add 3 months of interest then we get(lets say) 4.13%
DM was able to increase capital from 880,370 to 925,500.
This is (925500-880370)/ 880370 = 5.13%
Decision Moose made a typo(the number in front of the .13%) or DM is super-human and we cannot replicate him.
Kind Regards,K
Hi Clive,
1 - A very nice set of styles in the spirit of PP:
-20% Gold, robust allocation
-55% GTAA, powercash
-25% DM, 5-way lowest P/FCF DOW components
GTAA real cash can rotate and follow strong currencies, same for GOLD when OUT.
2 - UBH
The UBH is now at 16% in 3 months. There were no sales this week. Several machines are close to selling, hopefully this week.
3 - US PP
14.35% in 13 months, standard US PP, with VTI,TLT,IAU,SHY
4 - EU PP
15.88% in 13 months, VGK,IBGL,PHAUP,cash
5 - Momentum/Strength
DGS is again this week the strongest UBH/PP ETF. Maybe one machine will get allocated to strength.
The interesting thing is that strength is equivalent to AIM selling and weakness to AIM buying.
ETF Strength Avg Strength Standard Dev
DGS 1.180 1.048 0.076
VSS 1.166 1.024 0.078
DEM 1.156 1.026 0.074
VGK 1.154 0.998 0.093
VWO 1.151 1.029 0.068
VEU 1.136 1.005 0.074
DLS 1.117 0.999 0.066
IAU 1.105 1.061 0.029
VPL 1.095 0.996 0.055
VB 1.088 1.013 0.063
VNQ 1.082 1.056 0.048
VBR 1.075 1.010 0.063
VTI 1.070 0.997 0.046
VTV 1.047 0.993 0.041
SHY 1.004 1.004 0.002
TLT 0.998 1.057 0.030
Congratulations!!!!!
With the grandson and with the birthday (bit late)
Best Regards,K
1 - According to Investopedia "(FCF) can also be calculated by taking operating cash flow and subtracting capital expenditures
That is how Morningstar calculates FCF.
VL is substracting Capex from (Net Income + depreciation +
amortization)
The difference is OCF vs NI.
2 - Nr. of shares: VL uses same number of shares as the IBM annual report.
Morningstar same number as Google. Google calls the number of shares: "Diluted Weighted Average Shares".
Morningstar from the Glossary: The average number of shares a public company had on the market during a certain period of time, usually a quarter or a year. This figure is used to calculate earnings per share and other per-share numbers.
So if a company buys back shares the average number could be a bit higher than in the annual report.
3 - Perhaps his backtest is just identifying where the number of shares outstanding decline with pre-sight of such declines.
When taking the number of shares from VL, he has the non-adjusted number of shares. ( But the adjusted share price)
Also the adjusted number of shares could be lower but also higher depending on share buybacks or the issuing of new shares.
Conclusion for me: I like when looking at one point in time:
-the non-adjusted price
-the FCF from Morningstar
-the number of shares from VL.
Graham(Security Analysis) uses PE10, the PE over 10 years. When looking at P/FCF ratios, one should take a multiyear average or trending average. In that case Morningstar would be ok.
Also when looking at the backtest, one also likes to use FROIC for selection. On top of that I use a discounted cash flow where the buy price has to be below 50% of the value and a discount rate of 9% - 15%. That limits the number of selected stocks even more and on the current DOW only INTC, MSFT and JNJ will be selected. (IBM just went over 50% of value this weekend, but still a good buy on this metric). GE and VZ are cheap but do not have the FROIC above 20%, so will be slow growers.VZ also has high Capex.
Have a nice weekend,K
Hi Clive,
Now it is clear to me what Value Line means with Cash Flow per share.
On Morningstar the total operational cashflow is used: for example for 2009/IBM: $20773.
On Valueline the cashflow is Net Income plus Depreciation and Amortization. For example for IBM 2009: 13425 + 4994 = $18419; this divided by the number of shares is 18419 / 1305 = $14.11 in agreement with the VL number. I also checked 2008/IBM and it also is in agreement with the VL number.
My feeling is that Peter Psaras gave an implicit answer to our question in his latest comment in his GOOGLE article.
Also notice that Peter is using Morningstar in his latest articles.
(BTW: Buffett says : We agree with Keynes’s observation: “I would rather be vaguely right than precisely wrong.”)
Kind Regards,K
Strength
Added the Wisdomtree funds to my Strength spreadsheet. Always thought they were medium strength growers. Not true.
New sequence for UBH/PP:
NR. ETF Score
1 DGS 1.17
2 VSS 1.158
3 VWO 1.148
4 DEM 1.146
5 VGK 1.142
Strength
This weekend:
In the UBH/PP:
1 - VSS
2 - VWO
3 - VGK
In the PP:
1 - IAU
It is amazing, in the UBH nearly everything is strong now!
Best Regards,K
Hi Clive,
My UBH has 15 machines, so I was thinking adding maybe a 16th, which would be the strongest of the 15 machines. (maybe a sell in the strongest AIM machine could be added to this 16th machine, where cash from and shares to that machine would flow, one AIM machine averaging down and the Momentum machine averaging up)
Indeed MA based is used in the UBH machines in visualized form.
Strong trends are helpful.
other variations used:
1 - price versus avg price + 1 standard deviation over a certain period
2 - Relative strength versus a date in the past
To smooth this approach also relative strength versus all dates in the past to a certain date, where current RS > average RS + 1 standard deviation.
To decrease signal noise I am looking at parameterizing the standard deviation.
On what methodology did you base your DM prognosis?
Kind Regards,K
Hi Clive,
I keep a momentum spreadsheet for my Ultimate Buy and Hold portfolio.
On September 4th, a sell out of TLT occurred.
The buy would be VGK, a week later VSS and VEU , a week later VWO and from last week IAU. None of these would have been sold till now.
Kind Regards,K
Hi Toofuzzy,
You mean that those numbers can not be trusted at all?
Or that we should take for example a 10% error range or so?
Kind Regards,K
Hi Clive,
To make it more interesting, Google gives the same numbers of shares as Morningstar: Diluted Weighted Average Shares is 1,341.35.
http://www.google.com/finance?q=NYSE:IBM&fstype=ii
Microsoft is saying shares outstanding 1.3B :)
http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=IBM&lstStatement=10YearSummary&stmtView=Ann
Kind Regards,K
Hi Clive,
I do not know which one is better: VL or Morningstar. Maybe someone from the US can comment on that one.
The numbers on the Morningstar report correspond with the numbers supplied by IBM for 2009 for Cashflow and Capex for 2009 and 2008:
http://www.ibm.com/annualreport/2009/2009_ibm_statements.pdf
The number of shares for 2009 is 1305 which corresponds with VL. Also the 2008 number of 1339 corresponds with Valueline.
http://www.ibm.com/annualreport/2009/2009_ibm_annual.pdf
The Capex of 2.64 per share is 3447/1305. That is ok. On Valueline it says "Cash Flow" in quotes, is that operational Cashflow? Does that mean they correct this number a bit? Because Operating Cash Flow/ 1305 is 20773/1305 is 15.92 is higher than 14.11.
It was Buffett or Keynes who said: better right vaguely than wrong precisely.
For this reason Buffett uses his margin of safety. Subtract 50% from the discounted price and use that as buying price.
But we need to know what "Cash Flow" means on VL.
Also why are the number of shares in Mo-star different from the IBM annual report?
So while using the DOW maybe better use VL, and Morningstar for the rest?
Kind Regards, K
Hi Clive
This document is of interest:
http://www.geasphere.com/files/GeaSphere_Brochure_v6_pages.pdf
This is the website:
http://www.geasphere.com/pages/geasphereHome.aspx?spid=111321&ptype=HOME
Kind Regards,K
Hi Clive,
That was quick!
The 1000 shares from Value Line is acceptable, because the number of shares in Morningstar probably should be 1008 or so. Management got 76 Million shares and they were only visible at that time?!
I would in my calculations never use the adjusted price. However if you do a historical study using data from 1950 to 2007 maybe it is better to use the adjusted close prices?
Adjusted Close provides the closing price for the requested day, week, or month, adjusted for all applicable splits and dividend distributions. Data is adjusted using appropriate split and dividend multipliers, adhering to Center for Research in Security Prices (CRSP) standards.
Maybe he has to use the CRSP standard.
If you always use the adj price then the backtest would be for P/FCF < 16.5 approx.
Did you also ask about the yearly weightings?
Kind Regards,K
PS. I read his article about the 5 stocks. On Nokia and Xerox did my own research and these 2 stocks both returned approx. 25% for me in 1.5 month. Already owned Lilly. PBI was not to my liking because negative equity for TTM. AM was too small for me, but could be a great stock.
Hi Clive,
Morningstar -12 means fiscal year end.
It seem to me the other numbers are for quarters etc.
I left a comment on :
http://seekingalpha.com/article/166643-invest-using-stocks-price-to-free-cash-flow
Let's see if we get an answer.
Kind Regards,K
PS. Read your reply too late:)
Hi Clive,
He could have used a weighted approach.
Indeed for 2006 I calculated an increase of 27% if all holdings were equal, while he reported an increase of 31%.
Your calcuation of the P/FCF is correct, as far as I can see.
One of the things is that the number of shares of UTX in 2005 is an outlier compared to 2004 and 2006, he could have taken the average over more years.
The Yahoo price is 56.45, while the adjusted price is 51.14. That could have had an impact.
In his document he says that he is buying at around 15 times P/FCF.
What is around?
At the bottom of the document he states that all information should be independently verified.
I have no real answers to these questions, because I don' have the particulars of the backtest.
Kind Regards, K
Hi Clive,
Don't know whether an updated list is published.
It is easy to make such a list at any date using Morningstar.
Each weekend I update my list:
Stock P/FCF FROIC
BA 13.95
CAT 12.90
CSCO 13.98
DD 12.85
HD 12.95
HPQ 11.73
IBM 11.14 23.56%
INTC 9.98 22.05%
JNJ 11.03 20.83%
MMM 14.97
MSFT 9.85 36.85%
PG 14.34
T 10.48
UTX 12.97
VZ 5.28
WMT 14.07
Great Post, Clive!
Let me address in this post the Magic Formula.
The way I understand Greenblatt's algoritm, buy cheap stocks based on the P/E ratio and favor stocks with high earnings versus Invested Capital. An earnings based view, one could say.
Dreman in his books showed that low P/E buying is valid, as well as low P/B and low P/FCF buying.
Buffett uses owner earnings which is close to FCF.
On seeking alpha you have Peter Psaras who is advocating FCF.
http://seekingalpha.com/author/peter-mycroft-psaras/articles
From this URL you can download a document:
http://www.mycroftresearch.com/uploads/Backtest_1950-2007_Mycroft_Research_LLC.pdf
This document describes a backtest from 1950 to 2007 based on only DOW stocks. While $10000 grew via the Dow Index to $679.027, a growth of 7.82% annually, if you buy stocks with P/FCF less than 15 strictly from the DOW, then the $10000 would grow to $974.617.645, a growth of 22.7% annually. You would buy the stocks on Jan,1 and sell on Dec,31. And then rebuy again on Jan,1. This , I think, to facilitate backtesting.
Currently I maintain such a portfolio, also using FROIC, a name used by Peter Psaras. At this moment INTC, MSFT and VZ have P/FCF less than 10!
I use AIM to do extra buying, because a 'P/FCF less than 15' stock gets better when it hits 'P/FCF less than 10'.
The selling is a bit more complex, because AIM's selling interferes with P/FCF and FROIC values, and the maturation period of '1 year'. One could for example use P/FCF = 30 and FROIC less than 10 to sell. It is difficult for me to oversee it (get the big picture), so I use small steps to develop this portfolio into the right direction.
I use a portfolio with currently 21 stocks and 4 ETF's. The ETF's to increase income and strictly buying on AIM signals.
I also look at the SP500 and I found APOL there, which we discussed vs COCO.
So this portfolio could be supplied with cash from for example BSV(vanguard) or the PP could be used as cash Backup. This cash backup could be limited by using Vealies.
So I have a type of 'Magic formula portfolio' running and still tinkering with it.
Kind Regards,K
September,
My Ultimate B&H variation had the following sells:
- US : none
- International: VEU, DLS
- Emerging markets: VWO, DEM, DGS
- Reits: VNQ, IPRP
The value increased from one month ago with approximately 7%.
UBH:
My PP US had a good month, up approx. 13.5% from one year ago.
Still showing linear growth.
PP-United States:
My PP EU was down a bit on Euro strength, up approx. 14.5% from one year ago.Still showing linear growth.
PP-Europe:
Also I keep a spreadsheet with the momentum of some of the ETF's that are in the UBH and PP.
The strongest momentum ETFs currently:
1 - VSS,VWO
2 - VGK
3 - IAU
Kind Regards, K
Hi Grabber,
Two stories about the Culver deal:
http://www.guardian.co.uk/business/2010/sep/28/unilver-alberto-culver-takeover
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8028641/Unilever-buys-TRESemme-maker-Alberto-Culver-for-3.7bn.html
Kind Regards,K
Hi Grabber,
Could it be that the market thinks there might be another offer forthcoming
It could be like that, I guess. But I have no information.
Often they need 95% of the shares. If people don't sell they need to increase the price until it hits 95%. But again I have no idea.
Coming back to COCO, APOL, DV. Did a discounted cash flow on DV, and it didnt seem too attractive. APOL did.
My surprise when APOL did hit the top spot in Joel Greenblatt's Magic Formula Investing screen.
http://seekingalpha.com/article/227004-14-cheap-stocks-that-return-capital-to-shareholders?source=feed
Cheers, K
Hi Grabber,
Heard on the radio that the announcement was a surprise, UN kept it very quiet.
That is all I know, no special insights here. :)
UN of course has too much cash.
Usually this is the first offer, so maybe the price will increase a bit.
Hope you all get rich, K
Hi Grabber,
You won't believe it! The stocks you mentioned in your message were in a CNBC news item with Maria Bartiromo, a few minutes ago. I didn't listen actually but only saw the stocks and their prices on a screen, so i missed the narrative.
They must be reading this board !
COCO and APOL were doing better than the other two, the other two were 5% down. APOL looks like a buy to me. The numbers look very nice. I have no idea how big the market is for education in the States, but if the market is free, APOL could build new colleges like bushfire and deliver nice standardized bachelors/masters degrees to students.
Kind Regards,K
Hi Grabber,
Congrats with the COCO sale! Always nice to get a sale.
Had sells this week of VNQ,DGS and IPRP. If the market has a good rise today, then there is hope to ship more.
The other day I was looking at APOL. It is in the same sector as COCO. Do you have an opinion about these two stocks ?
Kind Regards,K
Hi Tom,
Thanks for the nice stockcharts Perfchart.
Here is mine(european funds cannot be entered and VBR is not in, VBR is very close to VB):
http://stockcharts.com/charts/performance/perf.html?VV,VTV,VB,VNQ,VEU,VSS,DLS,VWO,DEM,DGS
Everything is kind of correlated up till now, but Gold and Bonds are not part of my Ult B&H.
Thanks, K
Hi Tom,
For me the Ultimate Buy and Hold is a nice template to use in a portfolio for AIMing. I had to restructure my set of ETF's/stocks at the start of this year, so the move made sense:
1 - Theoretical basis from French/Fama
2 - Closed set, you always know what to buy and sell
3 - I keep cash partly outside the UB&H, and when buying occurs new 'shares' in UB&H will be bought. (New machines were started without cash allocated)
4 - Keep stocks in a separate portfolio.
5 - When the Buy & Hold gurus talk about rebalancing, they will always emphasize Buy Low and Sell High. My thinking is that AIM is better than rebalancing in this respect.
6 - Use the Vealie mechanism for runaway Bull Markets.
7 - Coverage of the whole world
8 - Diversification benefits (one up, another down) were observable in the UB&H between groups. (while not as extreme as in a PP, which has more 'independent' parts, or lower correlation )
The Ultimate B&H was up 2% this week:
A nice ETF is DGS:
Kind Regards, K
Hi Tom
Grats with the nice result.
The difference between your result and the 'official' result is a nice 2.8%.
Do you have a feel where this difference comes from? Is it asset allocation or AIM or a combination of both?
Kind Regards,K