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 market (S&P500) continues to advance and stands at a +14.0% total return.
This period there were five companies in the DJIA 30 that are below their downside price targets. They are CVX -27%, VZ -16%, MMM -11%, and WBA -38%. At this time none would fully qualify as a BI pick.
If you are interested in following along with this methodology against a broader range of stocks outside of the Dow30, these picks are posted in my Fool CAPS on a regular basis as trades occur.
Market Valuation (Dow 30):
The DOW30 market is still overpriced according to the BI method of valuation by about 25%.
Downside: -39%
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 12-May-23 234 TRUE 213 323 10% 42% 2% 2.2 260 350 26% 8% FALSE Caterpillar Inc.
JNJ 12-May-23 165 TRUE 167 212 -1% 8% 4% 2.9 210 260 43% 12% FALSE Johnson & Johnson
MCD 19-May-23 290 FALSE 9% 2.2 340 415 28% 10% TRUE McDonald's Corp.
CVX 26-May-23 151 TRUE 207 296 -27% -21% -5% 3.9 300 450 142% 33% FALSE Chevron Corp.
BA 2-Jun-23 205 FALSE 108% - 295 445 74% 22% TRUE Boeing
TRV 2-Jun-23 174 TRUE 139 182 25% 41% 18% 2.3 255 315 62% 16% FALSE Travelers Cos.
UNH 2-Jun-23 477 TRUE 391 575 22% 52% 12% 1.6 540 660 25% 36% FALSE UnitedHealth Group
AMGN 2-Jun-23 227 FALSE 55% 9% 3.9 345 420 68% 18% TRUE Amgen
VZ 9-Jun-23 35.51 TRUE 42 55 -16% -28% -4% 7.4 90 115 186% 26% FALSE Verizon Communic.
CSCO 9-Jun-23 50.33 TRUE 42 60 20% 37% 13% 3.1 75 95 67% 8% FALSE Cisco Systems
HD 16-Jun-23 301 FALSE -8% 2.8 385 470 41% 10% TRUE Home Depot
PG 16-Jun-23 148 TRUE 106 142 40% 43% 5% 2.5 135 165 0% 18% FALSE Procter & Gamble
INTC 23-Jun-23 33 TRUE 3.4 5.1 874% 26% -43% 1.5 40 55 44% -8% TRUE Intel Corp.
AAPL 23-Jun-23 187 TRUE 81 136 131% 141% 6% 0.5 195 240 18% 14% FALSE Apple Inc.
IBM 23-Jun-23 129 TRUE 85 118 52% 42% 4% 5.0 130 195 21% 1% FALSE Int'l Business Mach.
DOW 30-Jun-23 51.36 TRUE 30 50 73% -25% -4% 5.6 80 120 92% -12% FALSE Dow Inc.
MRK 30-Jun-23 115 TRUE 79 107 46% 42% 11% 2.6 130 160 30% 20% FALSE Merck & Co.
HON 7-Apr-23 200 TRUE 146 202 37% 47% 4% 2.0 220 270 21% 11% FALSE Honeywell Int'l
MMM 7-Apr-23 101 TRUE 113 161 -11% -33% -15% 5.9 170 230 97% 28% FALSE 3M Company
GS 7-Apr-23 315 TRUE 249 379 26% -8% 25% 3.1 400 540 44% 11% FALSE Goldman Sachs
CRM 7-Apr-23 210 TRUE 158 268 33% 166% 321% - 265 400 58% 14% FALSE Salesforce Inc.
KO 14-Apr-23 61.2 TRUE 49 62 24% 33% 6% 3.0 65 80 18% 12% FALSE Coca-Cola
WBA 21-Apr-23 31.4 TRUE 51 75 -38% -44% 13% 6.2 45 70 82% 4% FALSE Walgreens Boots
WMT 21-Apr-23 155 FALSE 55% -3% 1.5 200 240 42% 7% TRUE Walmart Inc.
NKE 21-Apr-23 110 TRUE 82 132 33% 13% 10% 1.2 150 180 50% 19% FALSE NIKE Inc. 'B'
DIS 28-Apr-23 88.1 TRUE 33 49 168% 48% 0% - 140 190 86% 27% FALSE Disney (Walt)
JPM 5-May-23 139 TRUE 139 205 0% 34% 14% 2.8 155 205 26% 7% FALSE JPMorgan Chase
AXP 5-May-23 168 TRUE 124 185 36% 31% 12% 1.5 175 240 23% 16% FALSE Amer. Express
V 5-May-23 230 TRUE 213 301 8% 24% 15% 0.9 310 380 51% 26% FALSE Visa Inc.
MSFT 5-May-23 335 TRUE 201 316 67% 76% 7% 0.8 320 390 6% 14% FALSE Microsoft Corp.
Dow30 33,727 20,716 30,307 2.4 42,313 55,000 Dow Jones Industrial Average
Appreciation Potential -39% -10% 25% 63% 52% 14%
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:
• TAP, ADD – Apr 14 2023, downside price target -27%. Meets all criteria.
• NFLX, BUY – Apr 28 2023, downside price target -36%. Meets all criteria.
• PYPL, ADD – May 5 2023, downside price target -43%. Meets all criteria.
• KIM, ADD – May 26 2023, downside price target -55%. Meets all criteria.
• TMUS, BUY – Jun 5 2023, downside price target -22%. Meets all criteria.
• NWL, SELL – Jun 12 2023, overpriced. Entered 3/30/20, lost -37%.
• BALL, ADD – Jun 12 2023, downside price target -21%. 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 +10.6%
S&P 500 Total Return Year-to-Date +14.0%
The largest winner this year is META +123%
The biggest loser this year is NWL -37%
My overall Fool CAPS Rating at the time of this post was 56.8 (+2.3 point since previous update)
Score: 1453 (57%)
Accuracy: 46% (55%)
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 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 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.