Archive for December, 2012

  • The 2013 Buy List
    , December 31st, 2012 at 8:56 pm

    Here are the 20 stocks for the 2013 Buy List. It’s locked and sealed and I can’t make any changes for 12 months.

    For tracking purposes, I assume the Buy List is a $1 million portfolio that’s equally divided among 20 stocks. Below are all 20 positions with the amount of shares for each, and the closing price for 2012. Whenever I discuss how the Buy List is doing, the list below is what I’m referring to.

    Company Ticker Price Shares Balance
    AFLAC AFL $53.12 941.2651 $50,000.00
    Bed Bath & Beyond BBBY $55.91 894.2944 $50,000.00
    CA Technologies CA $21.98 2,274.7953 $50,000.00
    Cognizant Technology Solutions CTSH $73.88 676.7731 $50,000.00
    CR Bard BCR $97.74 511.5613 $50,000.00
    DirecTV DTV $50.16 996.8102 $50,000.00
    FactSet Research Systems FDS $88.06 567.7947 $50,000.00
    Fiserv FISV $79.03 632.6711 $50,000.00
    Ford Motor F $12.95 3,861.0039 $50,000.00
    Harris Corporation HRS $48.96 1,021.2418 $50,000.00
    JPMorgan Chase JPM $43.97 1,137.1390 $50,000.00
    Medtronic MDT $41.02 1,218.9176 $50,000.00
    Microsoft MSFT $26.71 1,871.9581 $50,000.00
    Moog MOG-A $41.03 1,218.6205 $50,000.00
    Nicholas Financial NICK $12.40 4,032.2581 $50,000.00
    Oracle ORCL $33.32 1,500.6002 $50,000.00
    Ross Stores ROST $54.09 924.3853 $50,000.00
    Stryker SYK $54.82 912.0759 $50,000.00
    Wells Fargo WFC $34.18 1,462.8438 $50,000.00
    WEX Inc. WXS $75.37 663.3939 $50,000.00

    There are five new stocks and five stocks that I’m removing. The five new stocks are Cognizant Technology Solutions ($CTSH), FactSet Research Systems ($FDS), Microsoft ($MSFT), Ross Stores ($ROST) and Wells Fargo ($WFC).

    The five stocks I’m removing are Hudson City Bancorp ($HCBK), Johnson & Johnson ($JNJ), JoS. A Bank Clothiers ($JOSB), Reynolds American ($RAI) and Sysco ($SYY).

    The average market cap is $49 billion. That ranges from a high of $225 billion for Microsoft to $150 million for Nicholas Financial ($NICK). Moog ($MOG-A) is the second-smallest and it’s still 12 times the size of Nicholas.

    Fourteen of the twenty stocks pay dividends. The average yield is 1.64%.

    Only four stocks have remained on the Buy List for all seven years: AFLAC ($AFL), Bed Bath & Beyond ($BBBY), Fiserv ($FISV) and Medtronic ($MDT).

  • The 2012 Buy List
    , December 31st, 2012 at 7:43 pm

    The 2012 trading year has come to a close. I’m happy to report that our Buy List had another market-beating year. The 20 stocks on the Crossing Wall Street Buy List gained 14.56% while the S&P 500 gained 13.41%. This is the sixth year in a row that we have beaten the market.

    Including dividends, our Buy List gained 17.85% compared with 16.00% for the S&P 500. The dividend yield for the Buy List worked out to 2.16% while it was 2.28% for the S&P 500. For the year, our beta was 1.0376.

    Over the seven-year history of the Buy List, we’ve gained 62.30% to the S&P 500’s 32.65%. Our annual turnover has been just 25% which means we’ve only changed five stocks per year. The seven-year beta is 0.9591.

    I’ll restate the rules of the Buy List. I choose a portfolio of 20 stocks at the beginning of the year. After that, the Buy List is locked for the year and I can’t make any changes until the following year. For tracking purposes, I assume that the Buy List is a $1 million portfolio equally divided among the 20 stocks. You can check the performance of the Buy List anytime at our Buy List page.

    My goal is to show investors that by choosing stocks wisely and by sticking with high-quality stocks, they can beat the market—and that’s exactly what we’ve done. I try to beat the market by a few percentage points and to do it with less risk.

    Our top-performing stock in 2012 was WEX Inc. ($WXS) which gained 38.85%. Other big winners were Harris Corp. ($HRS) up 35.85%, Fiserv ($FISV) up 34.54% and JPMorgan Chase ($JPM) up 32.24%.

    Here’s how each stock performed:

    Stock Shares 12/31/2011 Beginning 12/31/2012 Ending Profit/Loss
    AFL 1155.8021 $43.26 $50,000.00 $53.12 $61,396.21 22.79%
    BBBY 862.5151 $57.97 $50,000.00 $55.91 $48,223.22 -3.55%
    CA 2472.7992 $20.22 $50,000.00 $21.98 $54,352.13 8.70%
    BCR 584.7953 $85.50 $50,000.00 $97.74 $57,157.89 14.32%
    DTV 1169.3171 $42.76 $50,000.00 $50.16 $58,652.95 17.31%
    FISV 851.2087 $58.74 $50,000.00 $79.03 $67,271.02 34.54%
    F 4646.8401 $10.76 $50,000.00 $12.95 $60,176.58 20.35%
    HRS 1387.3474 $36.04 $50,000.00 $48.96 $67,924.53 35.85%
    HCBK 8000.0000 $6.25 $50,000.00 $8.13 $65,040.00 30.08%
    JNJ 762.4276 $65.58 $50,000.00 $70.10 $53,446.17 6.89%
    JOSB 1025.4307 $48.76 $50,000.00 $42.58 $43,662.84 -12.67%
    JPM 1503.7594 $33.25 $50,000.00 $43.97 $66,120.30 32.24%
    MDT 1307.1895 $38.25 $50,000.00 $41.02 $53,620.91 7.24%
    MOG-A 1138.1744 $43.93 $50,000.00 $41.03 $46,699.29 -6.60%
    NICK 3900.1560 $12.82 $50,000.00 $12.40 $48,361.93 -3.28%
    ORCL 1949.3177 $25.65 $50,000.00 $33.32 $64,951.27 29.90%
    RAI 1207.1463 $41.42 $50,000.00 $41.43 $50,012.07 0.02%
    SYK 1005.8338 $49.71 $50,000.00 $54.82 $55,139.81 10.28%
    SYY 1704.7392 $29.33 $50,000.00 $31.66 $53,972.04 7.94%
    WXS 921.1496 $54.28 $50,000.00 $75.37 $69,427.04 38.85%
    Total $1,000,000 $1,145,608.20 14.56%

    Here’s how the Buy List performed throughout the year.


  • Two Thoughts As 2012 Winds Down
    , December 31st, 2012 at 11:45 am

    Here are two things that have been on my mind as the year winds down.

    I’m curious if the March 2009 low in the S&P 500, now nearly four years old, marked the end of the brutal nine-year bear market that began in March 2000. That, of course, was the capstone of an 18-year bull market that began in 1982.

    If so, it’s interesting that the bear run was about half the time of the bull run. We never know these things until a few years after they happen. I suspect that it was the low.

    The other item on my mind is, did the bond market’s peak this past July of this year mark the end of its 31-year run? On July 25, 2012, the yield on the three-, five-, seven-, ten-, twenty- and thirty-year Treasuries all hit their lows. This was right at the time of Mario Draghi’s “whatever it takes” pledge.

    Yields have risen since then but every prediction of the bond market’s demise — and there have been many — has been wrong. I’m fairly certain that stocks hit their low, but I’m not so sure about bonds.

  • NICK’s Special Dividend
    , December 31st, 2012 at 11:27 am

    A few of you have asked about Nicholas Financial‘s ($NICK) special dividend. I was expecting it to hit accounts today but haven’t seen it yet. I’m not sure why but I’m looking into it. I’m sure there’s no need to be alarmed. Like many of you, I just want to find out exactly what’s happening.

    Update: The big dividend hit my personal account around 5:30 pm.

  • A Deal May Be Near
    , December 31st, 2012 at 11:09 am

    The final day of trading is underway. The seemingly unending Fiscal Cliff drama continues. Honestly, I’m a bit dizzy from the constant news. The latest is that both sides are very close to reaching a deal. On the major points, the Democrats have agreed to raise the tax threshold to $450,000. The GOP is holding out for $550,000. The Democrats want to raise dividend taxes to 20% on households making over $250,000.

    Despite the positive news on Fiscal Cliff negotiations, the market is up rather modestly. Joe Weisenthal of Business Insider notes that the market is actually doing quite well when compared to some of the worse points of the futures market this weekend. The Senate has just reconvened to discuss the Fiscal Cliff.

    The S&P 500 is currently up five points to 1,407.

  • Morning News: December 31, 2012
    , December 31st, 2012 at 7:17 am

    Merkel Calls for German Patience as Euro Crisis ‘Far From Over’

    China Manufacturing Pickup Shows Rebound Gains Traction

    Diving Currency Adds to Egypt’s Woes

    Egypt To Resume IMF Loan Talks As Reserves Dwindle

    Hollande’s 75% Millionaire Tax Rejected in French Court

    On the Fiscal Cliff, Republicans Are Blowing a Great Deal

    Congress Dysfunction as Deadline Arrives Poses 2013 Risks

    Big Depositors Seek a New Safety Net

    Crude Futures Set for Annual Drop in New York

    Farm-State Lawmakers Back Plan to Avoid ‘Dairy Cliff’ Price Jump

    Tribune Co. Emerges From Bankruptcy

    Duff & Phelps to Be Sold for $665.5 Million

    U.S. Clears DNA Firm’s Acquisition by Chinese

    Jeff Carter: Going Over The Cliff – What’s The Bill?

    Howard Lindzon: Is Apple Pulling a Braveheart…and Why I Hate ‘Cheap’

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  • Places that Visit Crossing Wall Street
    , December 28th, 2012 at 9:10 pm

    Here’s a ranking of countries that send the most visitors to our humble blog:

    The United States
    The United Kingdom
    The Netherlands
    Hong Kong
    New Zealand
    The United Arab Emirates
    South Africa
    The Philippines
    Republic Of Korea
    Viet Nam
    Czech Republic

    Here are the top cities:

    New York, NY, USA
    Toronto, Canada
    Chicago, IL, USA
    Washington, DC, USA
    Houston, TX, USA
    Los Angeles, CA, USA
    San Francisco, CA, USA
    Boston, MA, USA
    London, The United Kingdom
    Singapore, Singapore
    Dallas, TX, USA
    Austin, TX, USA
    Brooklyn, NY, USA
    Seattle, WA, USA
    Pittsburgh, PA, USA
    San Diego, CA, USA
    Denver, CO, USA
    Montreal, Canada
    Phoenix, AZ, USA
    Atlanta, GA, USA
    San Jose, CA, USA
    Charlotte, NC, USA
    Portland, OR, USA
    Santa Clara, CA, USA
    Minneapolis, MN, USA
    Philadelphia, PA, USA
    Alexandria, VA, USA
    Saint Louis, MO, USA
    Jersey City, NJ, USA
    Cincinnati, OH, USA
    Ottawa, Canada
    Albany, NY, USA
    Oakland, CA, USA
    Mexico, Mexico
    Madison, WI, USA
    Irvine, CA, USA
    Fort Lauderdale, FL, USA
    Tucson, AZ, USA
    Hamilton, Bermuda
    Central District, Hong Kong
    Milwaukee, WI, USA
    Santa Barbara, CA, USA
    Beaverton, OR, USA
    Wilmington, NC, USA
    Cleveland, OH, USA
    Saint Paul, MN, USA
    Vancouver, Canada
    Baltimore, MD, USA
    Columbus, OH, USA

    We had 16 visitors from Liechtenstein this year (so far). Let’s aim for 20 in 2013!

  • CWS Market Review – December 28, 2012
    , December 28th, 2012 at 8:44 am

    “Never buy at the bottom, and always sell too soon.” – Jesse Livermore

    The stock market seems to be limping towards the finish line. Thursday was the fourth-straight down day for the S&P 500. We’ve nearly given back one month’s worth of gains in the last four days. This was the worst four-day Christmas stretch in at least 60 years. Still, the market has had a good year, and the indexes are well above where they were six weeks ago.

    There was some excitement late in the day on Thursday as stocks spiked after the news that House Speaker John Boehner is going to convene a Sunday session of the House of Representatives. In one hour, the U.S. equity markets gained $150 billion in market value. This appears to be one final attempt to resolve the dreaded Fiscal Cliff before the end of the year. I’ll have more to say on that in a bit (here’s a sneak preview: ignore the hype).

    In this week’s CWS Market Review, we’ll take a closer look at what’s impacting the market right now. There’s a lot going on just below Wall Street’s radar. For example, the Japanese stock market is exciting for the first time in more than two decades. Implied volatility is also slowly creeping higher. I’ll also have more to say on the 2013 Buy List, which will go into effect on Wednesday. But first, let’s look at all the hot air about the Fiscal Cliff.

    Don’t Buy the Fiscal Cliff Hype

    I haven’t said much about the vastly over-hyped Fiscal Cliff story because I thought this was a distraction for investors. I still believe that today. The American people have just gone through a long election campaign, and I don’t believe they have much patience for a drawn-out battle over taxes.

    I haven’t addressed this phony issue in detail because I think it’s much ado about nothing. Or rather, it’s a great deal of bluster and posturing about nothing. The latest ruckus merely means that we might to have to wait until January for a compromise. Big deal.

    Let’s be clear about the facts—there’s no point of no return. None at all. It’s really more of a fiscal slope than a cliff. Waiting a few days into January isn’t going to push us into a recession, a fact which ought to put to rest the silly notion of a Fiscal Cliff. And I won’t even go into those absurd countdown clocks on CNBC. I suspect that Fiscal Cliff worries are harming consumer confidence somewhat, but that’s about it. Ideally, I wish we had a better-functioning political system that avoided such theatrics, but unfortunately we don’t.

    As I mentioned before, the latest news is that House Speaker John Boehner will convene the House of Representatives for a special session this Sunday. Just that announcement caused the S&P 500 to leap 15 points in a single hour late Thursday. That should tell you that the market wants this nonsense resolved. I should caution investors to expect, before this mess ends, one or two days with sharp drop-offs (but no more than 2%) as the political players try to sway the markets to their side. We all know how the market loves to be the drama queen.

    Events have gotten so bizarre that the markets actually rallied when Senator Scott Brown posted on his Facebook account that the White House was proposing a last-minute offer. The markets then dropped after journalist John Harwood tweeted that the White House was denying Brown’s Facebook post. Our political system has been reduced to communicating via tweets and Facebook? This is just too silly to comprehend. I’m hardly an expert on political matters, but I think President Obama will ultimately be able to get most of what he wants. There’s too much to lose if this drama drags on.

    All Eyes Are Focused on the December Jobs Report

    The economic news continues to be—not so horrible. This week, we learned that new home sales rose 4.4% in November. That’s the fastest rate in two-and-a-half years, and new homes sales are up 15.3% over the last 12 months. On Wednesday, the Case-Shiller Index indicated that home values are up 4.3% from last year.

    On the jobs front, initial unemployment claims continue to drop. The latest report showed 350,000. Since there tends to be a lot of “noise” in this report, economists prefer to focus on the four-week average. Well, that just hit a five-year low. This also means that the effects of Hurricane Sandy have probably passed.

    We’ll learn a lot more about the jobs market next Friday, when the Labor Department releases the December jobs report. Remember that the Fed has specifically said that it expects rates to remain low until the unemployment rate hits 6.5%. We’re currently at 7.7%.

    Wall Street currently forecasts that real GDP growth for Q4 will be pretty anemic. Goldman Sachs recently lowered their forecast to just 1% growth. But much of this is a short-term concern because it’s due to firms working off their inventories. In layman’s terms, companies aren’t building a lot of new stuff. Instead, they’re letting their customers buy what’s left on their shelves. This is probably due to the uncertainty coming from Washington. But at some point, companies will want to restock their shelves, so they’ll get back to building again.

    We’re only a few weeks from the start of earnings season. Wall Street currently expects earnings of $25.33 for the S&P 500 (the earnings number adjusted to the index). As recently as six months ago, analysts were expecting $28. Despite the slashed estimates, the current forecast would be an increase of 6.74% over last year’s fourth quarter. It would also be the highest growth rate in three quarters and perhaps the first evidence that not only are earnings growing, but the rate of growth is increasing. For all of 2013, Wall Street’s consensus is for earnings of $112. 82. That means the S&P 500 is currently going for just over 12.5 times forward earnings. That’s not a bad deal.

    The Yen’s Impact on AFLAC

    In the last six weeks, the Japan Nikkei has soared nearly 20%. It’s been two decades since investors were excited about Japan. Put it this way: the index is still 73% below its all-time high from 23 years ago. That’s about the time that The Simpsons premiered in the United States. The game changer for Japan is that the new Prime Minister, Shinzo Abe, wants to force the Japanese Fed to be more aggressive in fighting deflation.

    The effect of this is that the Japanese yen has lost ground against the U.S. dollar, and it will probably continue to do so. I wanted to alert investors that a weaker yen takes a bite out of AFLAC’s ($AFL) earnings since the company does most of its business there. It breaks down something like this: Every additional yen in the yen/dollar exchange rate costs AFLAC about five cents per share in annualized operating earnings. In other words, the weaker yen hurts AFLAC, but it’s not a back-breaker. I like AFLAC a lot, and it’s done well for us in 2012. I’m looking forward to another good year in 2013. AFLAC is an excellent buy up to $57 per share.

    The 2013 Crossing Wall Street Buy List

    With just two trading days left, our 2012 Buy List is up 14.02% for the year, while the S&P 500 is up 12.76%. Including dividends, we’re up 16.47%, while the S&P 500 is up 15.33%.

    Once again, here are the 20 stocks for our 2013 Buy List:

    AFLAC ($AFL)
    Bed Bath & Beyond ($BBBY)
    CA Technologies ($CA)
    Cognizant Technology Solutions ($CTSH)
    CR Bard ($BCR)
    DirecTV ($DTV)
    FactSet Research Systems ($FDS)
    Fiserv ($FISV)
    Ford ($F)
    Harris Corporation ($HRS)
    JPMorgan Chase ($JPM)
    Medtronic ($MDT)
    Microsoft ($MSFT)
    Moog ($MOG-A)
    Nicholas Financial ($NICK)
    Oracle ($ORCL)
    Ross Stores ($ROST)
    Stryker ($SYK)
    Wells Fargo ($WFC)
    WEX Inc. ($WXS)

    Please note that I had the incorrect ticker symbol for WEX Inc. in last week’s email. The correct ticker symbol is WXS.

    I want to address a few points that people have asked since I announced the Buy List changes last week. For those of you who have followed for a while, the Buy List changes weren’t a big surprise, and I supposed that’s how it should be. A few of you even guessed my changes correctly ahead of time. Still, some of you were surprised that Bed Bath & Beyond ($BBBY) is on the list. I know BBBY disappointed us with their lower guidance, but I’m willing to give them the benefit of the doubt. They’ve weathered worse storms.

    Some of you were surprised to see Microsoft ($MSFT) on the Buy List. This is where I should explain that oftentimes good investments look a bit banged up on the outside. After all, that’s why the price is so good. I agree with Microsoft’s critics, but at $27 and with a 3.4% dividend, the stock is worth owning.

    Two of our new stocks, Cognizant Technology Solutions ($CTSH) and FactSet Research Systems ($FDS), are former members of the Buy List. At $73, I admit that CTSH is rather pricey, but I’m not a pure value investor. There are occasions where we need to pay for strong growth, and I think this is one.

    With the addition of Wells Fargo ($WFC), we now have two large banks on the Buy List (the other being JPM). Of course, if I hadn’t deleted Hudson City, we were going to get shares of M&T Bank anyway. The Buy List is slightly tilted toward financials, but I don’t believe unreasonably so. Based on next year’s earnings estimate, the financial sector is valued 10% less than the market as a whole. There are some bargains in this sector. In fact, I doubt many active investors will be able to beat the Financial Sector ETF ($XLF) next year.

    I’ll have my Buy Below prices for the five new stocks in next week’s CWS Market Review. Until then, you can consider all five to be very good buys at their current prices. I’m also raising my Buy Below prices on Ford ($F) to $15, on Moog ($MOG-A) to $43, and on Harris ($HRS) to $53. On Thursday, Ford touched an eight-month high. Six weeks ago, I highlighted Moog as an outstanding buy, and the shares have rallied 18% since then.

    That’s all for now. The market will be closed on Tuesday for New Year’s Day. I’ll crunch the numbers and post the complete year-end Buy List stats then. Remember, the 2013 Buy List will take effect at the open on Wednesday. We’ll also get the big jobs report on Friday. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

    – Eddy

  • Morning News: December 28, 2012
    , December 28th, 2012 at 6:39 am

    Goldman Sachs Buying Japan’s Exporters on Abe Policy Bets

    Car Factories Offer Hope for Spanish Industry and Workers

    Obama Eyes $108 Billion Annual Asia Prize Vying With China Trade

    France’s Colonial Hangover: Apologizing Abroad, Ignoring Injustice at Home

    Wheat Rebounds as Demand May Rise After Decline; Soybeans Gain

    Cliff Talks Down to the Wire

    Stalemate in Washington Is Eroding Confidence of Consumers

    Port Strike Hinges on Costly Royalty

    Blackstone’s SeaWorld Files for Initial Share Sale in U.S.

    Porsche Jumps on New York Court Dismisal of VW Stake Case

    Hewlett-Packard Reports Justice Department Fraud Probe At Autonomy

    Instantly Yours, for a Fee

    In a Weak Market for Mergers and Acquisitions, Signs of Strength

    Jeff Miller: Fiscal Cliff Notes: Interpreting the deadline news

    The Epicurean Dealmaker: TED’s Greatest Hits of 2012

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  • Morning News: December 27, 2012
    , December 27th, 2012 at 7:07 am

    Italian Bonds Seen Weathering Political Confusion

    South Korea Lowers Its Growth Forecast

    Nikkei 225 Rises to Pre-Earthquake Level on Yen Weakness

    Japan Retail Investors Pour $2.3 Billion Into Fund Investing In N. America

    Signs of Changes Taking Hold in Electronics Factories in China

    U.S. Family of Mao’s General Assimilates, Votes for Obama

    Senators to Return With 5 Days Left and No Clear Fiscal Path

    Geithner Warns Lawmakers Debt Standoff Risks U.S. Default

    Wheat Rebounds From Five-Month Low as Drop Seen Luring Buyers

    Toyota Agrees To Settle U.S. Litigation for Over $1 Billion

    Starbucks’ $40,000 Cup Campaign for Bipartisanship

    Appeals Court Backs Wells Fargo On Method Of Assessing Fees

    Rajaratnam Agrees To Pay $1.5 Million Disgorgement In SEC Case

    Joshua Brown: Amazon Vs. Google in 2013

    Cullen Roche: Read of the Day: 3 Reasons 2013 Could Surprise on the Upside

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