The Benchmark Investing board has been closed by TMF. Future updates will only occur here in the Mechanical Investing board. This update is to Kenneth Lee’s
Benchmark Investing picks based on the latest Monday’s data release. Since our last update, the market (S&P500) took another step back, dropping another -3.3% since Q2.
This period there were six companies in the DJIA 30 that are below their downside price targets. They are CVX -24%, VZ -21%, DOW -39%, MMM -24%, WBA -44%, and NKE -2%. However, only
One would qualify as a BI pick because of either subpar EPS growth or volatile ROE estimates. The one that does qualify is MMM.
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. New this year will be updated returns for the BI Portfolio. I will start the year assuming each holding is in an equal
amount beginning Jan 1.
<b>Current BI Portfolio Holdings:
15 Holding in BI Portfolio: EOG, PFE, TAP, DXC, NWL, BEN, META, AMZN, PXD, WBD, MS, CAH, IVZ, LKQ, KMI
BI Portfolio Total Return -10.1%
S&P 500 Total Return -21.3%</b>
<b>Market Valuation (Dow 30): </b>
The DOW30 market is still overpriced according to the BI method of valuation by about 19.5%.
Downside: -34%
Upside: -5%
<b>Long Buy Rules: </b>
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
<b>Sell Rules: </b>
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
<b>Summary of Results</b>
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 12-Aug-22 164 TRUE 154 233 6% 5% 17% 2.8 215 290 46% 29% FALSE Caterpillar Inc.
JNJ 12-Aug-22 166 TRUE 153 195 9% 10% 2% 2.8 220 265 48% 12% FALSE Johnson & Johnson
MCD 19-Aug-22 246 FALSE 4% 2.3 270 330 19% 18% TRUE McDonald's Corp.
CVX 26-Aug-22 144 TRUE 228 317 -37% -11% 20% 3.7 240 360 93% 21% TRUE Chevron Corp.
BA 2-Sep-22 130 FALSE 130% - 205 305 77% 28% TRUE Boeing
TRV 2-Sep-22 155 TRUE 126 166 23% 29% -2% 2.4 225 275 59% 13% FALSE Travelers Cos.
UNH 2-Sep-22 504 TRUE 315 483 60% 70% 17% 1.3 480 590 4% 23% FALSE UnitedHealth Group
AMGN 2-Sep-22 227 FALSE 55% 2% 3.7 320 390 58% 14% TRUE Amgen
VZ 9-Sep-22 39.34 TRUE 50 63 -21% -21% -1% 6.6 90 115 159% 33% FALSE Verizon Communic.
CSCO 9-Sep-22 40.55 TRUE 37 51 10% 14% 6% 3.7 70 90 92% 25% FALSE Cisco Systems
HD 16-Sep-22 271 FALSE 3% 3.0 380 460 54% 28% TRUE Home Depot
PG 16-Sep-22 136 FALSE 105 139 29% 35% 3% 2.7 135 165 10% 12% FALSE Procter & Gamble
INTC 23-Sep-22 27.47 TRUE 21 31 30% -13% -40% 5.1 55 65 110% 53% TRUE Intel Corp.
AAPL 23-Sep-22 150 FALSE 93% 4% 0.6 170 210 23% 27% TRUE Apple Inc.
IBM 23-Sep-22 122 TRUE 87 119 40% 30% 3% 5.3 125 170 18% 5% FALSE Int'l Business Mach.
DOW 30-Sep-22 43.52 TRUE 72 120 -39% -35% -21% 6.6 105 160 194% 43% FALSE Dow Inc.
MRK 30-Sep-22 86.78 TRUE 82 110 5% 12% -10% 3.3 115 140 50% 17% FALSE Merck & Co.
HON 8-Jul-22 172 TRUE 136 188 26% 30% 14% 2.3 225 275 43% 20% FALSE Honeywell Int'l
MMM 8-Jul-22 113 TRUE 149 208 -24% -28% 47% 5.2 220 270 113% 46% FALSE 3M Company
GS 8-Jul-22 299 TRUE 240 366 25% 18% -12% 3.1 470 635 72% 12% FALSE Goldman Sachs
CRM 8-Jul-22 148 TRUE 60 99 146% -9% 104% - 245 365 106% 37% FALSE Salesforce Inc.
KO 15-Jul-22 58.43 TRUE 45 57 29% 29% 2% 3.0 60 75 13% 16% FALSE Coca-Cola
WBA 22-Jul-22 32.72 TRUE 59 85 -44% -43% -12% 5.7 50 75 154% 27% FALSE Walgreens Boots
WMT 22-Jul-22 129 TRUE 96 130 34% 30% 14% 1.7 200 240 63% 16% FALSE Walmart Inc.
NKE 22-Jul-22 96.24 FALSE 98 150 -2% 2% 18% 1.2 165 205 85% 35% FALSE NIKE Inc. 'B'
DIS 29-Jul-22 99.05 TRUE 43 61 133% 36% 166% - 155 210 74% 38% FALSE Disney (Walt)
JPM 5-Aug-22 108 TRUE 95 137 14% 11% -2% 3.9 145 195 51% 28% FALSE JPMorgan Chase
AXP 5-Aug-22 140 TRUE 127 188 10% 16% 6% 1.4 185 225 37% 17% FALSE Amer. Express
V 5-Aug-22 183 TRUE 183 261 0% 10% 20% 0.9 285 345 68% 36% FALSE Visa Inc.
MSFT 5-Aug-22 238 FALSE 184 288 29% 39% 14% 1.1 320 390 48% 37% FALSE Microsoft Corp.
<b>Dow30 29,590 19,415 27,986 2.8 40,500 51,968 Dow Jones Industrial Average
Appreciation Potential -34% -5% 38% 77% 68% 26%</b>
<b>AllTooFoolish's CAPS Portfolio: </b>
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 in Fool.com for many years with great success. In the Fool CAPS you will find
my current portfolio and can see my most recent activities.
Notable activity in my active CAPS portfolio over the past six months:
DISCA, ticker change to WBD
FB, ticker change to META
PFE, Sell, less upside than overall market potential. Total return +53% vs the market return same time frame -3%. Held for 408 days.
AIG, Sell, less upside than overall market potential. total return +47% vs the market return same time frame +16%. Held for 1180 days from original entry point.
Did add to positions on occasion when selling other investments.
PYPL, Buy, downside BI price target -24%
PTC, Buy, downside BI price target -36%
META, Add, downside BI price target -48%
KIM, Add, downside BI price target -49%
2022 BI Portfolio Holdings:
15 Holding in 2022 BI Portfolio: EOG, PFE, TAP, DXC, NWL, BEN, META, AMZN, PXD, WBD, MS, CAH, IVZ, LKQ, KMI
BI Portfolio Total Return -6.6%
S&P 500 Total Return -17.7%
My overall Fool CAPS Rating at the time of this post was 58 (+1 points since previous update)
Score: 1520 (62%)
Accuracy: 46% (47%)
<b>Disclosures and Useful Terms</b>
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 Valueline Dow30 reports made publicly available on the VL 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://discussion.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 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)),
than 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.
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