• Starbucks Is Overpriced at $45
    Posted by on January 3rd, 2012 at 1:30 pm

    I like Starbucks ($SBUX) a lot but I’m afraid the stock has run well past a fair price. The shares closed the year at $46.01 which is 30 times trailing earnings and 25 times the estimate for future earnings. Starbucks is good, but not that good.

    The chart below shows SBUX over the last three years along with its P/E Ratio and trailing earnings. Right now, I’d say that a fair price is about $35. By that I mean $35 is fair, not a bargain.

    The company said today that it will be raising prices. Earlier, Starbucks had said that higher commodity prices will take 21 cents per share off its earnings for this fiscal year.

    (To be fair, I completely missed the great buying opportunity three years ago.)

  • A Look at the Long View
    Posted by on January 3rd, 2012 at 11:01 am

    Since the start of the century (and millennium), the stock market has been a disaster. Taking a step back to look at the numbers, it’s truly remarkable.

    From the end of 1999 to the end of 2011, the S&P 500 dropped 13.58%. Dividends added 23.59%. But over those 12 years inflation was 34.69%. That adds up to a real total return of -20.70%.

    You would often hear money managers say that the real long-term return of the stock market was 8%, and that’s what it was from 1925 to 1999. But the last 12 years have been so bad that it’s taken that 8% number down to 6.58%.

    This means that historically, the stock market more than doubles your money in real terms every 12 years, but over the last 12 years, it’s down 20%.

  • And…We’re Off!
    Posted by on January 3rd, 2012 at 10:28 am

    The 2012 trading year is underway and it looks to be a very good day. The S&P 500 has been as high as 1,284.41 today. We’re very close to our highest close since August 1st which was 1,285.09 from October 28th.

    The ISM Index report for December came out today at 53.9. It was 52.7 in November. This was the 29th-straight month that the ISM was over 50. Wall Street was expecting 53.2.

    Our Buy List is rocking it so far. AFLAC ($AFL) is above $45. JPMorgan Chase ($JPM) is up close to 5%. The whole list is up about 2% so far.

  • Morning News: January 3, 2012
    Posted by on January 3rd, 2012 at 5:42 am

    World’s Biggest Economies Face $7.6 Trillion Debt

    In Euro Zone’s Crisis, Technocrat in Paris Works Behind the Scenes

    German Jobless Rate Sees Surprise Fall

    Nigeria Braces for Gas-Price Protests

    President Hu: West Is Using Cultural Means to Divide China

    Crude Advances in New York Amid Manufacturing Expansion, Tension Over Iran

    Same-store Sales Seen Up 4.3 Percent in December

    For 2012, Signs Point to Tepid Consumer Spending

    On Wall Street, a Renewed Optimism for Deals

    Total Buys $2.32 Billion Shale Stake, Helping Chesapeake Pare Its Debt

    Exxon’s Pursuit of Venezuelan Cash ’Not Over Yet’ After Ruling

    Macau Gambling Revenue Rose 42% in 2011

    VW’s Bentley 2011 Sales Jump 37% on China

    NYTimes Dealbook: Raising a Glass to 2011

    Jeff Carter: Stimulus and Debt are Manna From Heaven

    James Altucher: My Last Death Threat in 2011

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  • Morning News: January 2, 2012
    Posted by on January 2nd, 2012 at 6:30 am

    Euro Leaders Aim to Buy Time to Save Currency

    Austerity Reigns Over Euro Zone as Crisis Deepens

    China Export Orders Show Threat From Europe

    India PMI Expands at Fastest Pace in 6 Months

    South Korea Manufacturing Falls

    Venezuela Is Ordered to Pay $900 Million to Exxon Mobil

    Nigeria to End Gasoline Subsidy Accounting for 25% of Government Spending

    India to Allow Individual Foreign Investors to Buy Local Shares Directly

    U.S. Consumer in the Slow Lane

    Samsung, Hyundai Workers Brace for Uncertainty

    In Flop of H.P. TouchPad, an Object Lesson for the Tech Sector

    The Danger of an Attack on Piracy Online

    Epicurean Dealmaker: Turn the Page

    Howard Lindzon: Starting 2012 – My Gameplan.

    Stone Street: 2012 “Predictions” from Stone Street Advisors Team & Friends

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  • The 2012 Buy List
    Posted by on December 31st, 2011 at 3:29 pm

    Here’s my 2012 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, number of shares and starting balance:

    Company Ticker Price Shares Balance
    AFLAC AFL $43.26 1,155.8021 $50,000
    Bed Bath & Beyond BBBY $57.97 862.5151 $50,000
    CA Technologies CA $20.22 2,472.7992 $50,000
    CR Bard BCR $85.50 584.7953 $50,000
    DirecTV DTV $42.76 1,169.3171 $50,000
    Fiserv FISV $58.74 851.2087 $50,000
    Ford Motor Company F $10.76 4,646.8401 $50,000
    Harris Corporation HRS $36.04 1,387.3474 $50,000
    Hudson City Bancorp HCBK $6.25 8,000.0000 $50,000
    Johnson & Johnson JNJ $65.58 762.4276 $50,000
    Jos. A. Bank Clothiers JOSB $48.76 1,025.4307 $50,000
    JPMorgan Chase JPM $33.25 1,503.7594 $50,000
    Medtronic MDT $38.25 1,307.1895 $50,000
    Moog MOG-A $43.93 1,138.1744 $50,000
    Nicholas Financial NICK $12.82 3,900.1560 $50,000
    Oracle ORCL $25.65 1,949.3177 $50,000
    Reynolds American RAI $41.42 1,207.1463 $50,000
    Stryker SYK $49.71 1,005.8338 $50,000
    Sysco SYY $29.33 1,704.7392 $50,000
    Wright Express WXS $54.28 921.1496 $50,000

    The five new stocks are CA Technologies ($CA), Hudson City Bancorp ($HCBK), CR Bard ($BCR), Harris ($HRS) and DirecTV ($DTV). The deletions are Abbott Labs ($ABT), Becton, Dickinson ($BDX), Deluxe ($DLX), Gilead Sciences ($GILD) and Leucadia National ($LUK).

    The average market value is $34 billion. The largest is Johnson & Johnson ($JNJ) at $179 billion. The smallest, by far, is Nicholas Financial ($NICK) which is about one-tenth the size of the second-smallest.

    Thirteen of the Buy List stocks pay dividends. The average yield of the dividend payers is 2.85%. The yield for the entire Buy List is 1.85%.

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

  • The 2011 Buy List
    Posted by on December 31st, 2011 at 12:05 pm

    The 2011 trading year has come to a close. I’m happy to report that our Buy List had another market-beating year although this one was close. The 20 stocks on the Crossing Wall Street Buy List gained 0.89%. In contrast, the S&P 500 was unchanged at 0.00%. (Splitting out the decimals, the S&P 500 lost 0.00318%, but I round off at two decimal places.) This is the fifth year in a row that we have beaten the market.

    Including dividends, our Buy List gained 2.75% compared with 2.11% for the S&P 500. The dividend yield for the Buy List worked out to 1.84% while it was 2.11% for the S&P 500. For the year, our beta was 1.0340.

    Over the six-year history of the Buy List, we’ve gained 37.72% to the S&P 500’s 14.34%. Our annual turnover has been just 25% which means we’ve only changed five stocks per year. The six-year beta is 0.9420.

    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 2011 was also our highest yielder. Reynolds American ($RAI) stock gained 26.98% in 2011, and with dividends it was up 34.44%. Other big winners were Abbott Labs ($ABT), Jos. A. Bank Clothiers ($JOSB) and Nicholas Financial ($NICK).

    Here’s how each stock performed:

    Stock Number of Shares 12/31/10 Beginning 12/30/11 Ending Profit/Loss
    ABT 1,043.6235 $47.91 $50,000.00 $56.23 $58,682.95 17.37%
    AFL 886.0535 $56.43 $50,000.00 $43.26 $38,330.67 -23.34%
    BDX 591.5760 $84.52 $50,000.00 $74.72 $44,202.56 -11.59%
    BBBY 1,017.2940 $49.15 $50,000.00 $57.97 $58,972.53 17.95%
    DLX 2,172.0243 $23.02 $50,000.00 $22.76 $49,435.27 -1.13%
    FISV 853.8251 $58.56 $50,000.00 $58.74 $50,153.69 0.31%
    F 2,977.9631 $16.79 $50,000.00 $10.76 $32,042.88 -35.91%
    GILD 1,379.6909 $36.24 $50,000.00 $40.93 $56,470.75 12.94%
    JNJ 808.4074 $61.85 $50,000.00 $65.58 $53,015.36 6.03%
    JOSB 1,240.0794 $40.32 $50,000.00 $48.76 $60,466.27 20.93%
    JPM 1,178.6893 $42.42 $50,000.00 $33.25 $39,191.42 -21.62%
    LUK 1,713.5024 $29.18 $50,000.00 $22.74 $38,965.04 -22.07%
    MDT 1,348.0723 $37.09 $50,000.00 $38.25 $51,563.77 3.13%
    MOG-A 1,256.2814 $39.80 $50,000.00 $43.93 $55,188.44 10.38%
    NICK 4,882.8125 $10.24 $50,000.00 $12.82 $62,597.66 25.20%
    ORCL 1,597.4441 $31.30 $50,000.00 $25.65 $40,974.44 -18.05%
    RAI 1,532.8020 $32.62 $50,000.00 $41.42 $63,488.66 26.98%
    SYK 931.0987 $53.70 $50,000.00 $49.71 $46,284.92 -7.43%
    SYY 1,700.6803 $29.40 $50,000.00 $29.33 $49,880.95 -0.24%
    WXS 1,086.9565 $46.00 $50,000.00 $54.28 $59,000.00 18.00%
    Total $1,000,000.00 $1,008,908.23 0.89%

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

  • Overlooked Chart of the Year
    Posted by on December 30th, 2011 at 1:19 pm

    Here’s my entry for Overlooked Chart of the Year. It shows how the S&P 500 (in blue) and the market’s inflation expectations (the 10-year TIPs spread in red) have been waltzing partners for the last four years.

  • Favorite Moments of 2011
    Posted by on December 30th, 2011 at 10:20 am

    Seeing this last February was one of my favorite moments in 2011. At the time, Netflix ($NFLX) was at $247. Today it’s at $69.

  • Ford’s Sales Reach Four-Year High
    Posted by on December 30th, 2011 at 10:01 am

    From the AP:

    Ford Motor Co. said Friday that its U.S. sales this year have passed the two million mark. It’s the first time that’s happened since 2007.

    Sales through November were up 18 percent from the first 11 months of 2010. Ford said sales of small cars this year are on pace to rise more than 20 percent, while utility vehicles are tracking up more than 30 percent.

    On Dec. 1 the company said it had sold nearly 1.94 million vehicles in 2011. In December of last year, it sold 190,976 vehicles. Sales totaled 166,865 vehicles in November.

    Ford sales have been improving this year as people replace the cars and trucks they held onto during the economic slump. In November buyers were lured by deals, improving confidence in the economy and the need to trade in older cars. An early blitz of holiday advertising also helped convince some people that it was a good time to buy.

    Ford ($F) had a rough 2011 but the stock closed yesterday at $10.68 which is 6.7 times the earnings estimate for 2012.