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Old School Value Stock Portfolio Performance

osv-performance-2009sep

osv-performance-2009sep-2

Portfolio Performance

Another successful month. The Old School Value portfolio was up 13.67% compared to the market’s 3.57%.

September 27 also marks the 2 year anniversary of this portfolio since its inception in Sep 27, 2007. Considering that the portfolio was started at the peak of the market, I’m happy with the absolute return of 30.49% over the 2 year period. But the numbers are misleading at the moment because the first year I was down 30% while this year, up 140% YTD.

An annualized absolute return rate of 15% per annum is what I originally aimed for but as I moved into smaller and micro stocks this year, I’m expecting my new goal to be higher than the 15%.

Portfolio Movers

So let me review what zigged and zagged.

Since I don’t really understand the process of analyzing commodities, Atwood Oceanics (NYSE:ATW) is the closest I’ll get to the oil industry. Moved up nicely in September as oil prices start to slowly climb. I’m hoping to sell when it reaches close to my intrinsic target of $40.

ATW was also one of the first companies I bought so I’m still negative 10% of so and it’s a shame I never doubled down on ATW or most of the first stocks I purchased.

K-Tron (KTII) also makes up a healthy part of my portfolio and it too went up nicely. Planning to sell if it reaches around $110. The company is still great and the fundamentals remain excellent.

iGo Inc (OTCPK:IGOI) jumped up dramatically this month after announcing their plans to sell netbook chargers in Verizon wireless stores. As an owner of a netbook, I know how popular these little computers are. Ken from Compounding Life wrote some good thoughts on why he sold though.

The current price is much higher than the liquidation value and my intrinsic value estimate is set at $1.50 but considering all things, I think selling would be the wise choice. I’ve got my sell order in, but we’ll see whether it gets filled this month.

GGWPQ.PK has risen to this highest levels since Ch 11 and I still hold knowing that the value of assets will be there, the company will not be liquidated and they should be getting out of bankruptcy faster than initially thought.

My mix of radio stocks continue to do extremely well. SALM went down a fair amount but I am still up 85%. ETM is slowly and steadily rising at 52% while ROIAK has been on a tear all the way up to 186%. Comments on radio stocks are in the forum.

I still see lots of ugly, cheap media stocks abused by Wall Street and contemplating whether to increase positions or buy new positions.

So overall, I don’t see what the fuss is all about regarding the “month of September”.

OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February. - Mark Twain

Specific Commentary for VVTV

VVTV is always a wildly volatile one. I’ve been watching A LOT of home shopping in the evenings and weekends to see how the product mix, presentation, customer feedback etc are improving. While I definitely see improvements compared to a few months back, the company still falls behind HSN (NASDAQ:HSNI) and QVC (NASDAQ:LINTA).

If there is one mistake I made, it’s not having bought HSN since the spinoff from Interactive Corp. I kept watching it drop drop and drop and tried to time my entry point and before I knew it, I kept missing out and my bias had me waiting until it dropped again, which never happened.

The reason why I mention this is because I’ve been watching all 3 different channels, and even watched several skin care products presented on HSN sell out one after the after. In particular a new product to HSN sold over 10,000 products within an hour and sold 103,000 in 4 days.

Just a couple of days ago, this type of news reaches an analyst and he/she upgraded HSN. So the Peter Lynch style of scuttlebutt does wonders and you can know it before the market does.

Bringing it back to VVTV, some people are extremely blinded with optimism. Even I find some of the stuff people are saying about VVTV ridiculous. But in the grand scheme of things, when I see VVTV on TV, it is business as usual. They won’t be going bankrupt anytime soon and with the introduction of new products, vendors and hosts, my feeling is that they should do well in the coming quarter. (A good interview from HSN CEO)

That said, I still plan to sell if it breaks $4. Missed my chance in September trying to time the top.. Something I try to do far too often.

Portfolio Trades

Didn’t have much time for stock analysis this month. Too busy with stock spreadsheet updates and other endeavors, but still several trades occurred.

1. Bought Insmed (NASDAQ:INSM) @ $0.86

I wrote about it previously because INSM is a cheap value stock and also a pure Benjamin Graham net net stock after running it through the spreadsheet.

2. Sold Zareba Systems (ZRBA) @ $4.00 for a 1.32% gain

I wrote about this where I went over going private transactions. Although things looked good, management decided to cancel the going private deal. Funny thing was the stock didn’t drop but jumped up on the news. With all previous deals I’ve seen, the obvious path was a drop in the stock price, but prices went up as speculation about a new and better deal rose.

Don’t mind so much that I missed out on an easy 30% as I stuck to my discipline in this area.

3. Bought Servotronics (NYSEMKT:SVT) @ $7.60

A reader requested what I thought about SVT and on first glance it looked cheap and ok, but after some more reading and checking the numbers it turns out that the finished goods in inventory have been dropped by a good rate while there has been an increase in raw materials and works in progress.

So the inventory analysis showed that the company is either

  1. getting ready to ship out a large order
  2. has products are in demand
  3. or stocking up on raw materials while commodities are cheap

My analysis shows it to be 1 or 2 which explains why the market was surprised at its recent rise in profits.

With a big dependence on one customer, there is a risk that their revenues could plummet but read the reports and go through some numbers and it doesn’t seem like the risk is that high.

Cash position has increased to 24%.

What Else?

The latest version of the stock value calculator spreadsheet has been sent out to all premium buyers. That was a major project but well worth the effort as it now models the Earnings Power Value valuation method.

I also hope to start some fundamental analysis and accounting series based off Quality of Earnings. A splendid book on analyzing the income statement. I’ve always focused on the balance sheet and cash flow statement but a thorough analysis of the income statement reveals some very interesting things. The book contains some real eye openers.

Disclosure: I hold all stocks mentioned except sold positions.

Source: Portfolio Update: Holdings, Performance