This update is to Kenneth Lee’s Benchmark Investing picks based on the latest Monday’s data release. Since the beginning of the year through last night, the S&P500 took a pause this
quarter from last and stands at a +13.7% total return. During this period there were four companies in the DJIA 30 that are below their downside price targets. They are JNJ -9%, VZ -22%,
MMM -15%, and WBA -52%. Even though there are several candidates, none would fully qualify as a BI pick.
Market Valuation (Dow 30):
The DOW30 market is still OVERpriced according to the BI method of valuation by about 24%.
Downside: -38%
Upside: -10%
Long Buy Rules:
I am using the following TTD rules for Long position considerations:
- Year-over-Year EPS growth must > 10%, which are the next 4Q / current quarter + previous 3 quarters earnings results
- VL 3-5 Year price appreciation > average price appreciation of the market
- When calculating ROE and BV figures, ignore years when they are negative, but must have at least 7+ years of data to be included in final consideration
- Avoid erratic ROE ratios, that is where they are > 2std deviations = Curr ROE > (10 Year Avg + 2 * Std Dev)
- ROE and BV current figures must be updated by VL
Sell Rules:
I am using the following TTD rules to Sell Long positions:
Criteria (1 OR 2 OR 5, AND 3 AND 4):
- Price Appreciation < Market Average Appreciation
- Current Price > BI HiPrice
- Hold time > 365 days per cycle
- ROE & BV must be current
- No longer listed as a market average component
Summary of Results:
… VL Current ROE/BV Down Up %<10Y %<10Y EPS Div 3-5Y 3-5Y VL3-5Y VL18mo ROE
Ticker Date Price Updated Price Price Down Down4Qs Delta Yield VL L$ VL H$ % Chg % Chg <2STD Name
Ticker VL Date Current Price ROE/BV UpToDate Downside Price Upside Price %<10Y Downside %<10Y Downside : 4QAvg EPS Delta Div Yield % 3-5 Y Low VL Price 3-5 Y Hi VL Price VL 3-5Y Price %chg VL 18mo Price% Chg ROE >2SD Name
CAT 11-Aug-23 272 TRUE 240 363 14% 34% 1% 1.9 275 370 15% -% FALSE Caterpillar Inc.
JNJ 11-Aug-23 159 TRUE 174 222 -9% -4% 6% 3.0 210 260 44% -% FALSE Johnson & Johnson
MCD 18-Aug-23 270 FALSE 9% 2.3 355 435 42% -% TRUE McDonald’s Corp.
CVX 25-Aug-23 166 TRUE 154 221 8% -22% -13% 3.7 270 405 102% -% FALSE Chevron Corp.
BA 1-Sep-23 197 FALSE 131% - 330 490 102% -% TRUE Boeing
TRV 1-Sep-23 167 TRUE 119 156 40% 29% 68% 2.4 255 315 68% -% FALSE Travelers Cos.
UNH 1-Sep-23 509 TRUE 390 574 31% 36% 12% 1.5 545 675 23% -% FALSE UnitedHealth Group
AMGN 1-Sep-23 266 FALSE 5% 3.3 340 420 39% -% TRUE Amgen
VZ 8-Sep-23 32.98 TRUE 42 55 -22% -25% -2% 7.9 60 85 115% -% FALSE Verizon Communic.
CSCO 8-Sep-23 53.57 TRUE 43 61 25% 31% 3% 2.8 75 95 53% -% FALSE Cisco Systems
HD 15-Sep-23 306 FALSE -3% 2.7 380 470 37% -% TRUE Home Depot
PG 15-Sep-23 151 FALSE 109 146 38% 42% 8% 2.5 140 170 0% -% FALSE Procter & Gamble
INTC 22-Sep-23 34.3 TRUE 5.6 8.5 507% 329% 45% 1.4 40 55 36% -% TRUE Intel Corp.
AAPL 22-Sep-23 175 TRUE 81 136 116% 116% 10% 0.6 195 240 23% -% FALSE Apple Inc.
IBM 22-Sep-23 147 TRUE 88 122 68% 71% 8% 4.4 130 195 8% -% FALSE Int’l Business Mach.
DOW 29-Sep-23 50.93 TRUE 21 36 137% 42% 18% 5.6 70 110 71% -% FALSE Dow Inc.
MRK 29-Sep-23 105 TRUE 34 46 212% 54% 174% 2.7 130 160 35% -% FALSE Merck & Co.
HON 7-Jul-23 189 TRUE 147 204 28% 32% 6% 2.1 225 275 28% -% FALSE Honeywell Int’l
MMM 7-Jul-23 95.13 TRUE 112 159 -15% -28% 402% 6.1 150 200 76% -% FALSE 3M Company
GS 7-Jul-23 327 TRUE 236 359 39% 36% 53% 3.3 400 545 40% -% FALSE Goldman Sachs
CRM 7-Jul-23 206 TRUE 161 272 28% 62% 13% - 270 405 58% -% FALSE Salesforce Inc.
KO 14-Jul-23 57.23 TRUE 50 63 14% 18% 3% 3.2 65 80 24% -% FALSE Coca-Cola
WBA 21-Jul-23 21.11 TRUE 44 65 -52% -56% 5% 8.8 40 65 140% -% FALSE Walgreens Boots
WMT 21-Jul-23 162 TRUE 100 135 63% 57% -2% 1.4 200 240 34% -% FALSE Walmart Inc.
NKE 21-Jul-23 90.46 TRUE 82 132 10% 10% 18% 1.5 145 175 70% -% FALSE NIKE Inc. ‘B’
DIS 28-Jul-23 81.56 TRUE 38 56 117% 114% 80% - 140 190 99% -% FALSE Disney (Walt)
JPM 4-Aug-23 145 TRUE 138 203 5% 10% 9% 2.8 150 205 19% -% FALSE JPMorgan Chase
AXP 4-Aug-23 152 TRUE 125 187 22% 19% 9% 1.6 175 240 31% -% FALSE Amer. Express
V 4-Aug-23 235 TRUE 218 307 8% 9% 12% 0.8 310 380 42% -% FALSE Visa Inc.
MSFT 4-Aug-23 317 FALSE 212 334 49% 65% 7% 0.9 320 390 10% -% FALSE Microsoft Corp.
Dow30 33,964 20,840 30,467 2.4 42,115 54,967 Dow Jones Industrial Average
Appreciation Potential -38% -10% 24% 62% 49% -%
AllTooFoolish’s CAPS Portfolio:
If you are interested in seeing this method applied to a broader universe of stocks, follow my actively managed Benchmark Investing portfolio using Fool CAPS. I have been using this methodology exclusively on Fool.com for many years with great success. In the Fool CAPS you will find my current dynamic portfolio and can see my most recent activities as they occur.
Notable activity in my CAPS dynamic BI portfolio over the past three months:
• PYPL, ADD – Aug 4 2023, downside price target -44%. Meets all criteria.
• KMI, ADD – Aug 25, 2023, downside price target -55%. Meets all criteria.
• TMUS, ADD – Sep 8, 2023, downside price target -24%. Meets all criteria.
2023 Fixed BI Portfolio Holdings:
15 Holding in BI 2023 Portfolio: CAH, EOG, KMI, DVA, LKQ, NWL, TAP, BEN, IVZ, WBD, PYPL, PTC, DXC, AMZN, META
BI Portfolio Total Return Year-to-Date +9.0%
S&P 500 Total Return Year-to-Date +13.4%
The largest winner this year is META +141%
The biggest loser this year is NWL -29%
My overall Fool CAPS Rating at the time of this post was 56.8 (+2.3 point since the previous update)
Score: 1762 (59%)
Accuracy: 44% (44%)
Disclosures and Useful Terms
VL Date is the date of the last summary report update from Valueline as indicated in the post’s subject line. All data sources from the Valueline Dow30 reports are made publicly available on their website. https://research.valueline.com/research#list=dow30&sec=list
Current Price is the closing price of the stock as reported by VL, which is usually a few days behind the date
of the time period mentioned in this posting’s subject line.
• ROE/BV Updated is an indication if the stock’s BV and ROE have been updated through the end of the Benchmark evaluation time frame.
• 10Yr Down is the 10 year downside price. The company must have at least 7 years of non-negative ROE data to qualify.
• 10Yr Down4Qs is the 10 year downside price averaged over the previous 4 quarter’s valuation price.
• 10Yr Up is the 10 year upside price. The company must have at least 7 years of non-negative ROE data to qualify.
Both upside and downside are calculated using the method outlined in TTD book. Also, a discussion of calculating the upside and downside can be found here:
http://boards.fool.com/Message.asp?mid=20916205&sort=who…
• %<10Y Downside is the current price divided by the 10 Yr downside expressed as a percentage.
• EPS Future Delta is the projected growth in EPS for the next 4 quarters versus the last four reported quarters.
• I use the latest EPS data from the VL spreadsheet which are updated as soon as new earnings are reported.
• Div Yield is the current % dividend payout ratio per share.
• 3-5 Y Low/Hi Price Est. is the downside/upside price estimate which is calculated using the projections of Book Value and ROE as discussed in TTD.
• Min VL Price Appreciation is the expected change in price from current price to low end VL projected 3-5 year appreciation price.
• VL Price 18 Price Appreciate is the VL projected % change in price from the current price within the next 18 months.
• ROE >2STD is part of a margin of safety consideration, which is briefly discussed in TTD on pg 70-71.
I compare the current year’s ROE versus the last 10 years of ROE data. If the current ROE is greater than average (10 Yr ROE) + (2 * stdev(10 Yr ROE)), then this column is TRUE, else it is FALSE. This tells me that the stock’s ROE is much higher than its historic average and should therefore be avoided.