Ilan Moscovitz scrapes the bottom of the pile looking for bargains. This follows the famous Buffett maxim "Be fearful when others are greedy. Be greedy when others are fearful."
He lists three stocks that he says are the insanely cheap and ones he claims to be buying for the real-money Dada portfolio he co-manages.
Company | 5-Year Trailing Earnings-per-share growth Rate | 5-Year Estimated Earnings-per-share growth Rate | Price-to-Earnings Ratio |
|---|---|---|---|
| Ebix (EBIX) | 61% | 17% | 10.5 |
| Supervalu (SVU) | (13%) | 5% | 3.1* |
| Yongye (YONG) | 40%** | 10% | 4.1 |
| Median S&P 500 | 7.7% | 11.2% | 15.1 |
Data from Capital IQ, a division of Standard & Poor's.
*Price-to-free cash flow ratio.
**3-year growth.
It is worth reading the article to understand the caveats -- company stocks are not cheap for no reason and so caution is required.
The purpose of this article is to swallow the premise but then measure the returns against a benchmark set of dividend ETFs which are more steady. The comparison set are:
| Asset | Fund in this portfolio |
|---|---|
| REAL ESTATE | ICF (iShares Cohen & Steers Realty Majors, |
| CASH | CASH |
| FIXED INCOME | TIP (iShares Barclays TIPS Bond, |
| Emerging Market | VWO (Vanguard Emerging Markets Stock ETF, |
| US EQUITY | DVY (iShares Dow Jones Select Dividend Index, |
| US EQUITY | VIG (Vanguard Dividend Appreciation ETF, |
| INTERNATIONAL EQUITY | IDV (iShares Dow Jones Intl Select Div Idx, |
| High Yield Bond | HYG (iShares iBoxx $ High Yield Corporate Bd, |
| INTERNATIONAL BONDS | EMB (iShares JPMorgan USD Emerg Markets Bond, |
- August 2011 3 Insanely Cheap Stocks -- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA (40% fixed income, 30% for each of the top two asset classes,
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA (40% fixed income, 12% for each of the five asset classes -- funds selected based on price momentum,
Portfolio Performance Comparison
| Portfolio/Fund Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Retirement Income ETFs Tactical Asset Allocation Moderate | 7% | 81% | 10% | 88% | 10% | 71% |
| Retirement Income ETFs Strategic Asset Allocation Moderate | 7% | 67% | 4% | 17% | 3% | 16% |
| August 2011 3 Insanely Cheap Stocks | -19% | -45% | 29% | 52% |
As far as this portfolio goes back, we can see that over a three year period, the returns have been good but there is a steep drop over the past year which preceded the current market turbulence. So this portfolio was in trouble early and so one has to be cautious as to whether there are problems with the companies that caused the precipitous dip.
Three Month Chart
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One Year Chart
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Three Year Chart
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Five Year Chart
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These three stocks give a wild ride. Of course, having just three stocks, you are going to have higher volatility for good or bad. For those that want to watch the markets closely, you might find something here but I think there are better alternatives. Whether these stocks are insanely cheap or for the insane to buy will be seen over the next few quarters.
I'm sticking with the diversified set of ETFs
Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical. I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
