Seeking Alpha

Tim Ayles'  Instablog

Tim Ayles
Send Message
We strive to build highly disciplined, sensible client portfolios. Portfolios that are focused on investing in businesses with solid free cash flows and solid dividend payouts. We buy businesses, not stocks. Tim is a Registered Investment Advisor.
My company:
Napa Wealth Management, Incorporated
View Tim Ayles' Instablogs on:
  • Reporting On Our 8 Guru Stocks
    The most recent 13F filings are out, which means it is time to look at our hypothetical guru index. Remember, we are tracking 8 guru's and buying their top holdings and holding for the next 3 months. 

    To refresh, the reason behind this idea is simple:

    "If you had followed a select group of what we consider the world's best stock pickers and their top picks, you would have in back testing, done very well. By searching through 13F reports of the greatest investors of our time, and investing in their top picks, an investor could have produced amazing returns this past decade. Think about it. You are an individual investor with limited resources and limited information. Doing a lot of homework, you come up with good investment ideas that you think should pan out. Some work, others do not. With 13F investing, you get the best research and investing minds this world has seen, for free. Let them do the work for you. Just piggy back off their best ideas, find a handful of managers that you know and love, and combine their top picks to create your portfolio.

    The logic behind the idea is simple. After putting in the research and gathering information on all the stocks in their portfolios, for whatever reason, there is always one stock in which they have invested more money than every other stock they own. Coco-Cola (NYSE:KO) is Warren Buffett's top holding, for example. Currently, Bruce Berkowitz of the Fairholme Fund (MUTF:FAIRX) has chosen American International Group (NYSE:AIG) as the stock he thinks is worthy of more investment dollars than any other he has chosen. I realize these guys have more information and relationships than I can ever dream of, thus giving them a potential edge that I do not have. So what I do is try to piggy back off some of the best."

    Using the back tester from AlphaClone.com I am able to see that my 8 stock index returned a hypothetical 14% for the previous 3 months ending 2/14/11, compared to the SP 500 returning 10.1%. Not bad out performance. (Please see disclosure below about the inherent risks of backtesting.)

    That said let's take a look at the list for the next 3 month. We will track the prices of the index based on the opening prices of each stock for the date of 2/15/2011.

    Current 8 guru stocks:

    Selling:

    JLL
    BMY

    Buying:

    GCI
    COP

    Current index:

    AIG
    GCI
    COP
    TEL
    ATLS
    AAPL
    VALE
    POT

    That's it for now. If you want to see the hypothetical results of these 8 managers, take look at the previous article from a few months ago:

    seekingalpha.com/article/243914-reporting-on-our-8-guru-stocks

    I will post the opening prices of each of the 8 stocks in the comment section below.

    Other than that, we will see you in three months!


     




    Disclosure: I am long AIG, ATLS, AAPL, POT, BMY, JLL.

    Additional disclosure: Backtested results are hypothetical and do not reflect actual trading. the back tested results were achieved with the benefit of hindsight, and the trades were not actually executed. These backtested results do not reflect the complexities of actual investing and there are many material factors that could have affected actual results. These hypothetical results do not reflect taxes, commissions, transactions fees, management fees, brokerage and exchange fees, and other costs, nor do they reflect any dividends. These results are for educational purposes only for the reader to do their own research into 13F investing. We intend to only offer a limited amount of managers for the sake of creating a tracking index. It is in no way a comprehensive or diversified list, and we do not recommend anyone use this list for buy or sell recommendations.
    Feb 15 1:09 AM | Link | 9 Comments
  • Be Careful Next Week
    As I mentioned last week in my instablog seekingalpha.com/instablog/475264-tim-ayles/107599-the-dow-is-repeating-the-pre-flash-crash-pattern , next week could be interesting for the market.

    In that blog post I mentioned "If the pattern continues this way, we should expect a strong end to this week, followed by new highs next week and a reversal. This reversal will be a few % points and will have the perma bulls telling everyone it is a dip to be bought. "

    As you are aware, last week did in fact end with a mighty surge in prices to close the week out after the QEII and NFP announcements. Although we did not make new highs this week, we got close, and some indexes did in fact make them before reversing a few % points.

    The pre-Flash Crash pattern remains eerily intact.

    Some other similarities are rearting their ugly head as well as just reported at ZeroHedge.com:

    It has been a few month since everyone was throwing the word "contagion" around just to sound smart. Prepare to get a whole lot more of that. PIIGS CDS are now at a fresh all time record, way wider than during the May days, that lead to the flash crash and Greece's bankruptcy. All this means that the fair value of the market is now even lower than where it was on May 6, but the tail risk has been internalized by not only US but European taxpayers. That rubber band will snap again. Just a matter of time.



    As stated last week, if your cash is burning a hole in your pocket and you are dying to by this recent dip to get on the Fed Induced Sugar High Rally ( seekingalpha.com/article/235315-market-s-sugar-high-won-t-end-well ) it might be very wise to let next week play out to prove that this pattern, which is similar in both time and price, is more a figment of my imagination.


    Disclosure: Long SDS, PSQ, SPXU, against long positions in individual stocks
    Nov 12 8:46 AM | Link | Comment!
  • The Dow is Repeating the Pre-Flash Crash Pattern
    Didn't we just live in this nightmare?

    Is anyone else to the point where they wake up and wonder how much the stock indexes are going to be up today?

    The market climb has been relentless and it seems like it might never end. The midset out there is in full agreement with David Tepper: "If the economy improves, stocks will go higher. If the economy falters, the Fed will print and stocks will go higher."

    Now that the GOP has won the house and reports are that Fed-Slayer Ron Paul will be taking over the chair of the Monetary Policy Subcommittee, one has to stop and wonder if the Fed will be able to accomplish Teppers second prediction.

    That said, the chart of the Dow is showing a pattern that makes me think I am Bill Murray in the movie Groundhog Day, reliving the same day over and over.



    Take a look at price action around January of 2010. After going up non stop for months, the Dow hit a rough patch around 10750 and went down for three straight weeks and bottomed around 9900. After scaring people into thinking the never ending ride higher to Fed induced riches might be over, the market turned around and went straight up for 10 weeks withough even the thought of a correction. The tenth week saw a massive surge in which the week closed on a new high. Then the 11th week came, a new high was made, but the week closed down, thus wiping out the gains from week 10. One week after this - the flash crash hit.

    Fast forward now to August. Around the 2nd week of August, the market peaked out at, you guessed it, 10750. For three weeks the market pulled back to around, you guessed it again, 9900! Everyone again was feeling the investing blues. Then September came and began an endless march to stock nirvana.

    Not that past performance is indicative of the future, but is anyone else slightly concerned that this week is now the 10th week of this straight up pattern? So far we have matched step for step (almost to the point) the pattern earlier this year. If the pattern continues this way, we should expect a strong end to this week, followed by new highs next week and a reversal. This reversal will be a few % points and will have the perma bulls telling everyone it is a dip to be bought.

    I would caution that you give it another week after that before buying just to make sure the correlation of the last Fed induced ramp is not leading us to another crash two weeks from now.

    If this is the never ending ride straight up during a new bull market, you will have plenty of time to get on board. In the short term, make sure this pattern playing out is nothing more than a coincidence. Better yet, look to use puts while the VIX is low to protect the downside of your long exposure.




    Disclosure: Long SPXU, SDS
    Nov 03 5:37 PM | Link | 2 Comments
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.