Benchmark Investing Update Mar 28, 2024

This update is to Kenneth Lee’s Benchmark Investing picks based on the latest Monday’s data release. The S&P500 continues to move higher. Year-to-date it is up about +10% already. With this update During this latest period there are four companies in the DJIA 30 that are below their downside price targets. They are JNJ -4%, CVX -17%, CRM -35%, and WBA -52%. However, none would fully qualify as a BI pick during to not being able to pass all the filters.

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, which can be found here https://caps.fool.com/player/alltoofoolish.aspx

Market Valuation (Dow 30):
The DOW30 market is still OVERpriced according to the BI method of valuation by about 23%.
Downside: -38%
Upside: -9%

Long Buy Rules:
I am using the following TTD rules for Long position considerations:

  1. Year-over-Year EPS growth must > 10%, which are the next 4Q / current quarter + previous 3 quarters earnings results
  2. VL 3-5 Year price appreciation > average price appreciation of the market
  3. 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
  4. Avoid erratic ROE ratios, that is where they are > 2std deviations = Curr ROE > (10 Year Avg + 2 * Std Dev)
  5. 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):

  1. Price Appreciation < Market Average Appreciation
  2. Current Price > BI HiPrice
  3. Hold time > 365 days per cycle
  4. ROE & BV must be current
  5. 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
CAT 9-Feb-24 358 FALSE 253 386 42% 49% -3% 1.5 310 415 1% 8% FALSE Caterpillar Inc.
JNJ 9-Feb-24 155 TRUE 162 205 -4% -5% 2% 3.2 195 240 39% 17% FALSE Johnson & Johnson
MCD 16-Feb-24 283 FALSE 5% 2.4 365 450 43% 18% TRUE McDonald’s Corp.
CVX 23-Feb-24 155 TRUE 185 268 -17% -13% 12% 4.3 240 360 94% 22% FALSE Chevron Corp.
BA 1-Mar-24 189 FALSE 182% - 300 450 99% 48% TRUE Boeing
TRV 1-Mar-24 224 TRUE 172 224 31% 68% 29% 1.8 335 410 65% 10% FALSE Travelers Cos.
UNH 1-Mar-24 490 FALSE 451 644 9% 21% 11% 1.5 660 805 48% 36% FALSE UnitedHealth Group
AMGN 1-Mar-24 276 FALSE 4% 3.3 350 430 42% 19% TRUE Amgen
VZ 8-Mar-24 40.37 FALSE 29 38 39% 8% -2% 6.6 55 80 80% -9% FALSE Verizon Communic.
CSCO 8-Mar-24 49.78 TRUE 41 58 20% 18% -14% 3.2 60 75 36% 13% FALSE Cisco Systems
HD 15-Mar-24 390 FALSE 4% 2.3 400 490 15% 7% TRUE Home Depot
PG 15-Mar-24 162 TRUE 121 160 33% 45% 3% 2.3 175 215 20% 6% FALSE Procter & Gamble
INTC 22-Mar-24 42.57 TRUE 13 20 235% 453% 30% 1.2 50 70 42% 12% FALSE Intel Corp.
AAPL 22-Mar-24 172 TRUE 89 148 94% 107% -5% 0.5 215 260 32% 21% FALSE Apple Inc.
IBM 22-Mar-24 191 FALSE 88 124 116% 119% 0% 3.4 175 235 5% -11% FALSE Int’l Business Mach.
DOW 29-Mar-24 57.68 TRUE 27 43 112% 138% 34% 4.9 65 100 41% -9% FALSE Dow Inc.
MRK 29-Mar-24 124 TRUE 111 149 12% 107% 473% 2.5 140 170 25% 15% FALSE Merck & Co.
HON 5-Jan-24 201 FALSE 159 220 26% 36% 9% 2.2 225 275 26% 16% TRUE Honeywell Int’l
MMM 5-Jan-24 107 FALSE -4% 132% 5.6 140 210 66% -22% TRUE 3M Company
GS 5-Jan-24 407 TRUE 173 266 135% 105% 49% 2.8 410 555 24% -6% FALSE Goldman Sachs
CRM 5-Jan-24 308 FALSE 473 802 -35% -1% 8% 0.5 305 455 25% -11% FALSE Salesforce Inc.
KO 12-Jan-24 60.49 FALSE 53 67 14% 20% 4% 3.2 65 80 27% 14% FALSE Coca-Cola
WBA 19-Jan-24 20.58 FALSE 43 63 -52% -53% -7% 4.7 30 55 113% -6% FALSE Walgreens Boots
WMT 19-Jan-24 60.87 FALSE 0 0 1001498555477% -41% 8% 1.3 205 250 26% 25% TRUE Walmart Inc.
NKE 19-Jan-24 93.86 FALSE 93 147 1% 13% 12% 1.5 130 175 52% 21% FALSE NIKE Inc. ‘B’
DIS 26-Jan-24 116 FALSE 22 33 420% 346% 271% 0.6 125 170 30% -13% FALSE Disney (Walt)
JPM 2-Feb-24 197 FALSE 165 241 20% 36% 4% 2.1 150 205 -9% -13% FALSE JPMorgan Chase
AXP 2-Feb-24 226 TRUE 156 229 45% 66% -2% 1.2 175 240 -8% -10% FALSE Amer. Express
V 2-Feb-24 283 FALSE 275 382 3% 23% 13% 0.7 310 380 20% -6% TRUE Visa Inc.
MSFT 2-Feb-24 429 FALSE 255 411 68% 116% 4% 0.7 450 555 15% 11% FALSE Microsoft Corp.
Dow30 39,476 23,787 35,127 2.5 44,883 58,394 Dow Jones Industrial Average
Appreciation Potential -38% -9% 16% 51% 38% 7%

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 – Jan 8 2024, downside price target -33%. Still meets all criteria.
• NFLX, ADD – Jan 22 2024, downside price target -30%. Still meets all criteria.
• PYPL, ADD – Jan 29 2024, downside price target -53%. Still meets all criteria.
• CHTR, BUY – Mar 8 2024, downside price target -36%. New addition to active portfolio.
• LUMN, SELL – Mar 28 2024, no longer candidate. Sold after one year hold. Held for roughly one year and lost -58%. Biggest loser. When this was originally a pick I suspected as much. I will likely add a rule to not take picks that are bottom tier past year performers moving forward.
• KIM, BUY – Mar 28 2024, downside price target -21%. New addition to active portfolio.

In 2024 I will be tracking and updating every quarter two different BI Portfolios. Both these portfolios will be held for the entire 2024 year without any adjustments - we’ll see how they do.
The first portfolio (Managed) will be a continuation of the 2023 picks that have not yet hit a Sell signal plus any new picks that qualify as a Buy using the latest results.
2024 BI Managed Portfolio
XRAY, ALGN, CAH, EOG, KMI, TMUS, LKQ, BALL, CRM, TAP, IVZ, NFLX, WBD, BK, PYPL, PTC, AMZN, META, VFC, PXD.
BI Managed Portfolio Total Return Year-to-Date +8.2%
S&P 500 Total Return Year-to-Date +10.6%

The largest winner to date is META +47%
The biggest loser this year is WBD -27%

The second portfolio (Current) will only include picks that currently qualify based on the Buy rules using the latest results.
2024 BI Current Portfolio
XRAY, EOG, TAP, NFLX, PYPL, VFC, PXD
BI Current Portfolio Total Return Year-to-Date +6.3%
S&P 500 Total Return Year-to-Date +10.6%

The largest winner to date is NFLX +34%
The biggest loser this year is VFC -23%

My overall Fool CAPS Rating at the time of this post was 57.3 (-0.5 point since the previous update)
Score: 1883 (59%)
Accuracy: 45% (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 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.

-AllTooFoolish

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