Poetic Portfolios

I stepped into an Apple store before Christmas, and I have to say that I was amazed. I hadn’t really taken the time to browse their products before that visit. I’ve admired the company since their “rebirth” almost a decade ago. They have impressed me with their strong branding and smart products. So, after visiting the store, I began to keep a close eye on their stock. It has plummeted from $200 per share at the first of the year to the $130s. Based on this information, some speculators may think it must be a bargain, while others may believe the growth story is broken. I want to take a closer look. (more…)

About a week ago, I wrote an article about stocks that I planned to buy. I purchased all of these companies except Jupitermedia. This portfolio is still largely held in cash. If the market takes off following the recent fed rate cuts, this portfolio will obviously lag the market. Despite this fact, I think it is important to be patient and to find good value. There should be a lot of value out there right now, but I will endeavor to perform careful analysis of each potential purchase. (more…)

In my previous article, I concluded that Netflix (NASD: NFLX) will not demonstrate the type of growth that they have in the past. It is more likely that they will continue to grow at a steady pace, capturing at least a majority of any new rent-by-mail customers. One of the benefits of Netflix reaching a more mature stature as a company is improved cash flow or owner earnings. (more…)

Now that Netflix (NASD: NFLX) has reported their 2007 results and given their outlook for 2008, I thought it would be a good idea to take a look at this company’s past performance and their 2008 outlook. After doing this, I will try to calculate several probable values for Netflix in a separate article. (more…)

With the S&P 500 down about 8.6% for the year, it seems like a good time to look for some bargains among the stocks that I have researched. Some of the cash within the Against the Sky Portfolio needs to be put to work. Below are some additions that will likely occur over the next week provided that prices do not rise about certain price targets. (more…)

It is time to introduce the second of the Poetic Portfolios. This one is named “Against the Sky.” This portfolio will be a more conservative and diversified portfolio with an emphasis on preservation of capital, diversification, income, and finally growth. The hope is that this portfolio will produce at least use a 2% monthly yield based on the initial investment or a 24% annual yield based on the initial investment within 10 years. This will be achieved through investments in bond funds, dividend paying stocks, and growth stocks. (more…)

Now that I’ve made it through all of the holdings in the Two Roads Diverged Portfolio, I have a good sense of what the owner earnings are for each company. This is an exciting thing to know across an entire portfolio because you can compile a table to really show you what you own.

As investors, we often forget that we are buying businesses that produce a certain level of cash flow. The management of our individual holdings determine how this cash is allocated or reinvested in the business, but investors do own a certain portion of this cash flow. Warren Buffet performs this analysis in his annual letters to shareholders. He refers to this cash as look-through earnings. Below is a table representing the look-through earnings for the Two Roads Diverged Portfolio: (more…)

I first purchased Automatic Data Processing (NYSE: ADP) during the last recession after a poor earnings report that broke a string of 25 years of double digit earnings growth. Since then, the company has offered steady returns and a nice level of dividend growth. This is a Warren Buffet type stock: simple business, great operating history, and rational management. Long-term prospects also remain solid. The key, of course, is getting this for a great price. (more…)

In my previous post, I noted my holdings for the Two Roads Diverged Portfolio. At the top of the portfolio list is Yamana Gold (NYSE :AUY) at 19.15%. If this portfolio represented the sum total of all my investments, that would be totally unacceptable. There are too many risks to individual companies for one to concentrate their holdings in this way.

Even supposedly safe or even sacred companies can crater, never to recover their value. Look at Citigroup. Many would have considered that to be a very conservative, long-term investment just one year ago.

In my own investment portfolio, a 20% holding in Two Roads Diverged is equivalent to about 5% of my investment holdings, excluding real estate. At times, that may even be too much. I am split about 50/50 between individual stock holdings and mutual funds. This is largely because I do not have the time to follow enough stocks to provide adequate diversification.

Because this is a public portfolio, I think it is important for readers to understand that the Two Roads Diverged portfolio is not a totality but a important piece of my investment portfolio. Concentrating a portfolio of any substantial size to just eight stocks would not be a wise choice even for the most astute of investors. There are just too many potential issues that a company can face.

As I noted in my introduction to the Two Roads Diverged Portfolio, it began with an index funds plus a few strategy, and has grown as my confidence as an investor has grown. It was important for me to start slow, and it is always a good choice to hold diversified investments.

After the purchase of Oyo Geospace on Monday and the market’s recent movements, I think it is a good time to review the current holdings of the Two Roads Diverged Portfolio. The table below represents the portfolio’s holdings as of the market close on January 14. Previous holdings can be viewed within my introduction to this portfolio.

The returns noted above are annualized and include both buys and sells. For example, Jupitermedia has been on the decline, but I have managed to buy at lower points and sell at higher points. The returns above are the returns in this portfolio based on trading activity.It’s interesting for me to note how quickly these percentages can change. Late in 2007, Oyo Geospace was over $100 per share. It’s now in the 50s. Yamana Gold was languishing below $13 per share. Then it rose above $17.

The portfolio as a whole benefits from high commodity prices and also provides some currency protection. This helped tremendously in 2007, and I don’t see too many big changes in 2008. I am still planning an entry on my outlook for these companies and the portfolio as a whole for 2008, but I need to finish my analysis of ADP first.