1/2012;rks1 biloxi (gulf port) breakfast (sound investors forum) january 2012 ron spruell (or mr....

1/2012;RKS 1

Biloxi (Gulf Port) Breakfast Biloxi (Gulf Port) Breakfast

(Sound Investors Forum)(Sound Investors Forum)

January 2012January 2012Ron Spruell

(Or Mr. Spreadsheet to you)

Posted at: Posted at: http://bribg.pbworks.com/w/file/50022404/http://bribg.pbworks.com/w/file/50022404/

Biloxi_Breakfast_2012.pptBiloxi_Breakfast_2012.ppt

Cajun Clickers Computer Club

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TopicsTopics

• Diversification• Quality Stocks

• Covered Calls• Brainwashing

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Why diversifyWhy diversify

• Avoid Investment Loss• Di-worse-ification• ???

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TypesTypes of Diversificationof Diversification

• Time Diversification

• Asset – Asset Allocation- Equity- Fixed Income- Geographical

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Time Diversification

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Asset Diversification

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Mutual FundsMutual Funds

Mutual Fund Research Newsletter

http://funds-newsletter.com

Tom Madell, PhD, Publisher

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Mutual Funds 12/1/2010Mutual Funds 12/1/2010

Long-Term Fund Choices for the Next Five Years

• Stock Funds (9)

• Vanguard 500 Index Fund (VFINX). • Yacktman Fund (YACKX). • Vanguard Windsor II (VWNFX) • Fidelity Contrafund (FCNTX).

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• Stock Funds (9)

• Fidelity Low Price Stock (FLPSX) • Vanguard Small Cap Growth Index (VISGX)• Vanguard REIT Index (VGSIX)• Vanguard International Growth (VWIGX) • Tweedy, Browne Global Value Fund (TBGVX)

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• Bond Funds (3)

• PIMCO Total Return Instl (PTTRX) • PIMCO Real Return Instl (PRRIX)• Vanguard Total Bond Market Index Fund

(VBMFX)

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Moderate Risk Investors

Asset 1/1/2012

Stocks 62.5%

Bonds 32.5%

Cash 5%

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Aggressive Risk Investors

Asset 1/1/2011

Stocks 80%

Bonds 10%

Cash 10%

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Mutual FundsMutual FundsConservative Risk Investors

Asset 1/1/2011

Stocks 35%

Bonds 50%

Cash 15%

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Stock Fund Model Portfolio 1/1/2011

Our Fund RecommendationsFund

Category

Recommended Weighting

Fidelity Low Priced Stock (FLPSX)

Nicholas Equity Income Fund I (NSEIX)

Mid-Cap/Small-Cap

20%

Tweedy Brown Global Value (TBGVX)

Vanguard Internat. Growth (VWIGX)

(See Note 1)

International 20%

Vanguard 500 Index (VFINX) Yacktman (YACKX)

Large Blend 17.5%

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Stock Fund Model Portfolio 1/1/2011(continued)

Vanguard Growth Index (VIGRX)

Fidelity Contra (FCNTX) Large Growth

15%

Vanguard Windsor II (VWNFX) Large Value 12.5%

Vanguard REIT Index (VGSIX) (See Note 2)

Amer. Cnt. Real Est. (REACX)

Real Estate (REITs)

10%

Vanguard Equity Inc (VEIPX) Equity Income 5%

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Bond Fund Model Portfolio 1/1/2011

Our Fund RecommendationsFund

Category

Recommended Weighting

PIMCO Total Return Instit (PTTRX) or

Harbor Bond Fund (HABDX) Vang. Total Bond Mkt. (VBMFX)

Intermediate Term

32.5%

PIMCO Real Return (PRRIX) or Harbor Real Return (HARRX)

Inflation 15%

Vang. GNMA (VFIIX) Vang. Interim. Tm. Treas. (VFITX)

Intermed. Govt. 12.5%

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Bond Fund Model Portfolio 1/1/2011(Continued)

Vang. (state specific - see Note) Vang. Intermed. Term Tax-Ex.

(VWITX)

Intermed. Term Muni.

15%

Vang. Long-Term Inv. Gr. (VWESX) Long-Term Corporate

10%

Vang High Yield Index (VWEHX) High Yield 10%

PIMCO Foreign Bond (USD-Hedged) Adm (PFRAX)

T Rowe Price Intl. Bond (RPIBX) International 5%

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Mutual Fund Research Newsletter

http://funds-newsletter.com

Tom Madell, PhD, Publisher

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Quality Stocks

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Quality StocksQuality Stocks

• Quality, like beauty, is in the eye of the beholder!

- Solid Financial Statements- Sales and Earnings Growth- Pays a dividend that increases year after

year- A by Product – (we hope) is

Mean regression (Signature Price)

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Sources of Quality StocksSources of Quality Stocks

• ValueLine – Safety Rating of 1 and 2 (400)- 1 (100)- 2 (300)

• S&P – Quality Rating of B+ or better (~680)- A+ ~43- A ~111

- A- ~159- B+ ~371

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• Morningstar.com ($$)

• Dividend.com ($$)

• Brainwashing ($$)http://www.valuestockbuylistprogram.com/

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Dripinvesting.org - - - Paying increasing dividends 5 years or more (448)

- Dividend Champions; 25 years (102)- Dividend Contenders; 10 to 25 years

(146)- Dividend Challengers; 5 years (200)

Free, Updated Monthly

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Quality Stocks – My ListsQuality Stocks – My Lists

• dripinvesting.org- Dividend 3.0% minimum (~198)

• dividend.com - DAR rating 3.4 minimum (~215)- Dividend 2.5% minimum

• Your list??? 10 to 110 stocks (recommended)

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Options Mike - from Yahoo Options Mike - from Yahoo Group justcoveredcallsGroup justcoveredcalls

- Dividend Champions, Dividend Contenders, and Dividend Challengers; 9 years (295)

- Plus Morning Star Premium Cash Flow Stock Screen (~136) (See note)

- Take only stocks that Meet the 2 Screens (82)

Free, Updated Monthly

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Covered Calls

Covered Call Writing DemystifiedPaul D. Kadavy

2009

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Covered CallsCovered Calls

• Complicated, hard to understand – because it is different.

• Language is different, e.g. - Write means Sell to Open (a contract)- Close means Buy to Close (a contract)

• And Not Covered here. . . (high risk)- Buy to Open- Sell to Close

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• Buy/Write means to buy the Shares of Stock and Sell to Open the Call Contract(s).

• Strike Price is the Stock Price at which the Option can be Exercised. The Seller (us) will receive the Strike Price for the Stock (maximum).

• 1 Option Contract = 100 Shares

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• Expiry is the Expiration date of the Option – Normally the 3rd Friday of the month.

• The Buyer has the Option, but not the obligation, to buy the Shares.

• The Seller has the obligation, but not the right to sell the Shares.

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QUALITY STOCK!!!When to buy??? My rules are very subjective!Technical Indicators:• RSI (low, less than 30 if possible)• Bollinger Bands (just leaving the lower

Bollinger Band• Price less than 25% of 52-wk Hi_Lo Spread• Question to ask. What is the 5-yr Hi and Lo?

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Sold Put

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Buy Stock Sell Call

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• Advantage of Long Term Options (LEAPS){Long-Term Equity Anticipation Securities}

1) Reasonable return, 8% to 12%2) Greater down side protection

Harshad’s SpreadsheetExample Calculation.xls

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Pause for Harshad’s

Example Calculation.xls

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Harshad’s Example 1Harshad’s Example 1

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Brainwashing

The Brainwashing of the American Investor: The Book That Wall Street

Does Not Want You To Read!

Steven R. SelengutRevised Edition

2007

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Brainwashing - BasicsBrainwashing - Basics

The Big Three: • Quality• Diversification• Income Generation

S&P earnings and dividend ratings of B+ through A+ identify investment-grade equities, or stocks that they consider to be lower risk, higher quality companies.

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Only two classes of investment securities: income and equity.

Portfolio should consciously be allocated between that of a class of securities whose primary role is income production and the other class , whose primary purpose is to generate growth in capital.

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The primary purpose of fixed income securities is the production of a safe and consistent flow of income.

Corporate and municipal bonds, government securities, preferred shares, debenture-like preferreds, unit trusts, royalty trusts, and income Closed End Funds (CEF) are among the securities that fit within this category.

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Brainwashing – GeneralBrainwashing – General

• No more than 5% in any one individual security, either fixed income or equity.

• No more that 15% in any one industry.

• No rules about Sectors that I could find. (I would use 20%.)

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• Diversify by Country. (There were no rules that I could find.)

• Diversify time wise. Limit number of buys per day to 5.* (Comment on this.)

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• As the number of stocks meeting the basic buy parameters rises above 15% of the selection universe (Quality Stocks), ratchet the parameter up 1% at a time until the list of opportunities fall back within the acceptable range of 20 issues. Rank by quality.

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Brainwashing – 7 RulesBrainwashing – 7 Rules

• Any stock that is 20% or more below its 52-week high is considered a candidate for new buying.

• Any stock that is down more than 20%, or 10 or more points, from you original cost-basis per share is considered a candidate for additional buying. Check fundamentals first before buying!

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• The stock should pay a dividend. This is a symbol of the fundamental strength of the company.

• Higher and Lower: Low is a price that is at least 20% below the 52-week high. Higher is a selling price that will return a 10% net/net profit, where net/net means commissions and taxes associated with the trade.

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• But absolutely never buy at a price that is less than 20% below the benchmark figure (52-week high).

• Only buy stocks that are down in price by at least 20% from their highest level over the past 12 months.

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Eliminate from the qualifying buy candidates any stock that:

• Went up a point or more yesterday.• Is up a point or more from last month's

closing price.• Is up two or more points from the previous

month's close.• Is up three or more point from the close

three months ago.

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The price must be below yesterdays closing price by:

• $0.35 or more if the stock is trading below $20 per share.

• $0.50 or more for stocks between $20 and $49 per share.

• $0.75 or more for stocks ranging from $50 through $70

• $1.00 or more for stocks above $70 per share.

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Don’t even think about buying a stock that is selling for $90 or more!

Don’t buy Odd-Lots.

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Buy

Down 32% from Hi

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Approx. 40 Trades per year

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Yahoo! GroupsYahoo! Groups

• Smf_addin – Randy Harmelink

• Justcoveredcalls – Mike Artobello

• TtP-S – Pete A

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Biloxi (Gulf Port) Biloxi (Gulf Port) Breakfast Breakfast

(Sound Investors (Sound Investors Forum)Forum)

January 2012January 2012Ron Spruell

(Or Mr. Spreadsheet to you)

Posted at: http://bribg.pbworks.com/w/file/50022404/Posted at: http://bribg.pbworks.com/w/file/50022404/

Biloxi_Breakfast_2012.pptBiloxi_Breakfast_2012.ppt Cajun Clickers Computer Club

1/2012;RKS 61

1/2012;rks1 biloxi (gulf port) breakfast (sound investors forum) january 2012 ron spruell (or mr....

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