1% Per Week for Eight Years
Posted by Eddy Elfenbein on January 3rd, 2011 at 12:48 pm

Apple (AAPL) reached a new all-time high today of $330.20 per share.

On April 21, 2003, Apple was going for $6.57 per share (adjusted for a split).

This means the stock is up 50.26-fold in exactly 402 weeks. That works out to an average weekly gain of 0.979%.

In other words, Apple has gained an average of 1% per week for nearly eight years.

The Ever-Collapsing Dollar
Posted by Eddy Elfenbein on January 3rd, 2011 at 11:56 am

On Google, “collapse of the dollar” currently returns over 1.5 million items. Funny, for something that’s about to happen — or I should say, always has been about to happen — it hasn’t happened yet.

If a person only followed market commentary but not prices, would they have any clue that the dollar rose last year?

So Far, So Good
Posted by Eddy Elfenbein on January 3rd, 2011 at 11:08 am

The market is off to a good start for 2011.

We’re still in the Santa Claus Rally period which runs from December 22 to January 7. Historically, the market has made 40% of its gains during this period.

Some of the market’s best days on average come during this stretch. For example, January 2 is the market’s second-best day (the best is October 20 which has often done well due to the market snapping back after big falls). December 31 is the seventh-best day and January 6 is the twelfth-best day. This is, indeed, the most wonderful time of the year.

Compounded with the new year is the turn-of-the-month effect. Historically, if you had been in the market for just a seven-day run each month—the last four trading days plus the first three trading days—you would have outperformed the market. For the rest of the month, the market is down. Also, the December-to-January turn has been the top-performer. Obviously, taxes and trading costs would have eaten your gains if you really had gone in and out of the market so frequently.

Another simple idea has worked well over the past 11 years — just invest on the first day of the month:

An S&P report recently found that someone who invested $10,000 in the S&P 500 on Dec. 31, 1999, and left the money there until Dec. 1, 2010, would have just $8,209. An investor who was in the market only on the first day of every month over the same time — for example, buying at the close on Dec. 31 and selling at the close of the first trading day in January — would have $13,816.

That’s nearly 70 percent more than buying and holding the whole time. S&P didn’t include reinvesting dividends in either scenario because of the complications of figuring out which companies paid dividends on the first trading day of the month for 11 years. But even if you include all possible dividends for the buy-and-holders, the first-day trade strategy came out 33 percentage points ahead.

December ISM = 57.0
Posted by Eddy Elfenbein on January 3rd, 2011 at 10:08 am

Moe good news for the economy. The December ISM Index came in at 57.0. Last month, it was 56.6.

The ISM is a good economic indicator to follow. I like that it comes out at the beginning of the month and that it’s not endlessly revised like GDP and employment numbers are.

It’s also very simple: If the ISM is over 50, the economy is growing. If it’s below 50, the economy is contracting. The ISM also has a decent track record of dating recession. Whenever the ISM is below 45, there’s a very good chance that the official recession dating committee will call that a recession.

“Yet Groner Felt No Urge To Keep Up With The Neighbors
Posted by Eddy Elfenbein on January 3rd, 2011 at 9:43 am

I originally posted this back in March, but since Abbott Labs (ABT) is now on the Buy List, I thought it a good time to revisit the story of Grace Groner.

In 1935, she invested $180 in ABT. She died last year at the age of 100. That ABT position had grown to $7 million.

Groner was born in a small Lake County farming community, but by the time she was 12 both of her parents had died. She was taken in by George Anderson, a member of one of Lake Forest’s leading families and an apparent friend to Groner’s parents.

The Andersons raised her and her twin sister, Gladys, and paid for them to attend Lake Forest College. After Groner graduated in 1931, she took a job at nearby Abbott Laboratories, where she would work as a secretary for 43 years.

It was early in her time there that she made a decision that would secure her financial future.

In 1935, she bought three $60 shares of specially issued Abbott stock and never sold them. The shares split many times over the next seven decades, Marlatt said, and Groner reinvested the dividends. Long before she died, her initial outlay had become a fortune.

Marlatt was one of the few who knew about it. Lake Forest is one of America’s richest towns, filled with grand estates and teeming with luxury cars, yet Groner felt no urge to keep up with the neighbors.

Morning News: January 3, 2011
Posted by Eddy Elfenbein on January 3rd, 2011 at 7:58 am

Stocks Rally, Dollar Strengthens on Economic Outlook

European Manufacturing Expands Faster Than Estimated, Led by German Gains

China and Spain: A Brighter Future Through Win-Win Cooperation

Hong Kong Share Trading at Record on China Policy Concern, IPOs

Commodities Beat Stocks, Bonds, Dollar in 2010

The New Speed of Money, Reshaping Markets

Wheat Advances on Flooding in Australia, Dry Weather in U.S.

Exits Lag in the Fourth Quarter, but IPO Hype Boils for 2011

Facebook Worth $50 Billion After Goldman Investment

Bank of America to Take $3 Billion Mortgage Settlement Charge

Fiat May Increase Chrysler Stake to 51% Before IPO

The Social Web Index … All-Time Highs in Pressure and Price and Shame on Facebook

The S&P 500 Total Return Index
Posted by Eddy Elfenbein on January 2nd, 2011 at 11:21 am

For 2010, the S&P 500 gained 12.78%. The Total Return Index, which includes dividends, gained 15.06%. Over the last five years, the Total Return Index gained 11.99% and over the last ten years, it’s up by 15.07%.

Even after an explosive rally, the index is still more than 12% below its all-time high from 2007.

Measured from August 2000, the S&P 500 Total Return Index is up by 0.47%.

I prefer to follow my own invention, what I call the Highly Selective S&P 500 Total Return Index. See, things don’t look so bad now:

Wait ‘Til the Sun Shines, Nellie
Posted by Eddy Elfenbein on January 1st, 2011 at 1:07 am

Happy New Year! One of Wall Street’s very old traditions is to sing “Wait ‘Til the Sun Shines, Nellie” on the final day of trading of the year. Here’s a clip from last year.

The 2011 Buy List
Posted by Eddy Elfenbein on December 31st, 2010 at 9:11 pm

Here’s my 2011 Buy List. For tracking purposes, I assume it’s a $1,000,000 portfolio and that each position is worth $50,000. When I discuss how well the Buy List is doing, I’m referring to this list. Here’s each stock, ticker, starting price and number of shares:

The five new stocks are Abbott Laboratories (ABT), Deluxe Corp. (DLX), Ford (F), Oracle (ORCL) and JPMorgan Chase (JPM).

The five 2010 Buy List stocks I’m deleting for this year are Baxter International (BAX), Eaton Vance (EV), Eli Lilly (LLY), Intel (INTC) and SEI Investments (SEIC).

The average market value of the Buy List is $41.7 billion. The biggest is Johnson & Johnson (JNJ) at $170 billion. JPMorgan (JPM) and Oracle (ORCL) aren’t far behind at $166 billion and $158 billion respectively. The smallest by far is Nicholas Financial (NICK) at $168 million. The second smallest is Jos. A. Banks (JOSB) which is more than nine times larger than NICK.

The average forward P/E Ratio is 11.5 which is about 13% less than the S&P 500. Twelve of the 20 stocks pay a dividend. The average yield of the dividend-payers is close to 2.6%. Spread over 20 stocks, the Buy List yields 1.54%.

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

That’s it. The list is now “locked and sealed” and I can’t touch it until next year.

The 2010 Buy List
Posted by Eddy Elfenbein on December 31st, 2010 at 7:10 pm

The 2010 trading year has come to a close. I’m happy to report that our Buy List had another good year. The 20 stocks on the Crossing Wall Street Buy List gained an average of 14.71%. In contrast, the S&P 500 was up 12.78%. This is the fourth year in a row that we have beaten the market.

Including dividends, the Buy List gained 16.62% compared with 15.06% for the S&P 500. The dividend yield for the Buy List worked out to 1.67% while it was 2.02% for the S&P 500. For the year, our beta was 0.9479.

Over the five-year history of the Buy List, we’ve gained 34.03% to the S&P 500’s 11.99%. Our annual turnover has been just 25% which means we’ve only changed five stocks per year. The five-year beta is 0.9420.

Now 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 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.

We were helped this year by having a well-diversified Buy List. Fourteen of the 20 stocks rose for the year, while six stocks (mostly healthcare) saw losses. We were over-weighted in healthcare which didn’t work to our benefit. Fortunately, some strong performers helped us out.

For the second year in a row, our smallest stock, Nicholas Financial (NICK), was our biggest winner. NICK gained 48.62% for the year. The second-biggest winner was Jos. A. Banks Clothiers (JOSB) which gained 43.35%.

Notes:
JOSB split 3:2 on August 19. The original purchase of 1,185.1150 shares at $42.19 became 1,777.6725 shares at $28.126666.
RAI split 2:1 on November 16. The original purchase of 943.9305 shares at $52.97 became 1,887.8610 shares at $26.485.

Here’s how the Buy List did throughout the year: