This long-term, buy-and-holdish portfolio is based on my 2008 book The Jubak Picks. In that book I identified ten trends that were strong enough, global enough, and long-lasting enough to give anyone who invested in them a good chance of beating the stock market averages. To make things easier for the average investor I picked 50 stocks that are well-positioned to ride those trends. This portfolio has only been around since December 30, 2008 but the early results are promising. In the first six months of 2009, The Jubak Picks 50 portfolio gained 19.2% versus a gain of 2.9% for the S&P 500. This is a much less active portfolio than my Jubak’s Picks portfolio; I anticipate turning over less than 10% of the portfolio annually.
|Company||Symbol||Date Sold||Sell Price||Price Now||Today's Change||Gain/Loss Since Sale|
|Update December 20, 2010: Nokia (NOK) has put in a bid to be the other cell phone maker besides Apple (AAPL) to make a profit and have control over its business. Now if the company... more Read Jim's Original Sell|
|Update September 8, 2010: Disappointment on Petrobras (PBR). Although it’s disappointment that investors will ultimately get over. The government is charging Petrobras more than expected to buy 5 billion barrels of oil reserves. (Pre-transfer the... more Read Jim's Original Sell|
|Update June 25, 2012: I hate it when fundamentals mess up a good swing trade. Unfortunately, that’s just what has happened recently with shares of Baidu (BIDU). Earlier in 2012, you could have made... more Read Jim's Original Sell|
Whoops! Missed one.
When I did my annual update of my long-term Jubak Picks 50 portfolio on January 13, I dropped Deltic Timber (DEL) from the portfolio in my post
|Update December 16, 2011: Woof! On December 14 First Solar (FSLR) delivered a gut-wrenching conference call. The big item wasn’t the reduction in projected earnings for the year that ends in December to $5.75 to... more Read Jim's Original Sell|
December 20, 2010Nokia (NOK) has put in a bid to be the other cell phone maker besides Apple (AAPL) to make a profit and have control over its business. Now if the company could just get its new phone, the E7, out the door. The success of Apple’s iPhone is built on the extraordinary power that controlling both he software and the hardware gives Apple. The company can make sure everything works together because it decides what gets on the platform and what doesn’t. No lame pre-installed apps from cell phone service providers. No word processing software that works differently in different programs on the same phone. No graphics that just kind of work. Nokia is aiming for the same business model. In early November the company decided to take full and sole control of the Symbian operating system for smart phones. To a degree Nokia had no choice. Its partners in the Symbian Foundation, set up to oversee the software, Samsung and Sony-Ericsson had abandoned the platform for Google’s Android. But Nokia decided that it would make the best of the hand it had been dealt: by taking over full control of the software, the company could customize the next version of the software for its next products and use it to develop a next generation operating system called MeeGo. MeeGo is still scheduled to be introduced in 2011, but on December 14 Nokia announced that its new smart phone, designed to close some of the smart phone gap with not just Apple, but also Samsung and HTC, would miss the Christmas buying season completely. The phone wouldn’t hit stores until early 2011. The delay isn’t a killer for either the E7 or for Nokia but it sure doesn’t do anything to help the company to regain momentum in the market. (Nokia’s last major smart phone, the N8, also hit the market late.) Nokia still owned 37% of the global smart phone market as of the end of the third quarter but that was down from 45% in the third quarter of 2009. Smart phone sales rose by 96% in the third quarter of 2010 from a year earlier and accounted for 20% of the overall cell phone market. That overall market grew by 35% in the third quarter. I think Nokia does have a future. (Which is why it remains in my Jubak Picks 50 portfolio http://jubakpicks.com/jubak-picks-50/ ) The company does know how to manufacture phones. They will eventually get the design right. And 37% of the smart phone market is something they can build on. But I’d wait a bit yet on Nokia’s shares. I know the stock is down 37% from the April 5 closing high but I think the arrival of the E7 in stores will unleash another round of negative press: The phone was late. It doesn’t stack up. The Symbian operating system doesn’t cut it. And on and on. The 52-week low is $8. I think there’s a good chance you’ll be able to get the stock for $8.50. And then even a recovery to $10.00 would represent an 18% gain. Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did not own shares of Nokia as of the end of November. For a full list of the stocks in the fund as of the end of November see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
September 8, 2010Disappointment on Petrobras (PBR). Although it’s disappointment that investors will ultimately get over. The government is charging Petrobras more than expected to buy 5 billion barrels of oil reserves. (Pre-transfer the company has proven reserves of 15 billion barrels.) The price of $42.5 billion, to be paid in new stock, works out to $8.50 a barrel. That’s more than the $7.50 oil industry analysts had been expecting. And since the price determines not only how many new shares the company will issue to the government, but also how many shares it will have to offer to minority shareholders in a related rights offering, the higher price works out to a lot of dilution for existing shareholders. The company will sell $32.5 billion in shares in that rights offering. The total of $75 billion is more than three times larger than the $22.1 billion raised in the Agricultural Bank of China initial public offering. That offering is the largest IPO ever The deal with the government is part of a complicated financing package. The government gets a bigger stake in the oil company and its recent finds in the deep waters of the South Atlantic and in exchange Petrobras gets 5 billion barrels of reserves that it can use to back addition loans. That’s not exactly a minor benefit since the company has estimated its capital spending needs at more than $224 billion over the next five years. But this is exactly where it gets tricky. Private investors worry that the government is already pressuring Petrobras to make big investments in the lower margin refining business because that fits the country’s need for more domestic production of refined petroleum products. In June the company announced that it was increasing its capital spending on refining to $74 billion from $43 billion over the next five years. A strange decision from a company which can invest every dollar of capital it can raise in developing higher margin, recently discovered deepwater oil reserves. It doesn’t help that this financing deal will increase government ownership in Petrobras and the government’s potential influence. Besides getting more shares outright, the government will have the option to snap up any shares in the rights offering that aren’t bought by private investors. All this has led investors, including some of the biggest of the global big boys such as George Soros’s Soros Fund Management and BlackRock, to sell their Petrobras stake. Soros Fund Management, for example, sold all of its Petrobras stock in the second quarter. In the short term this deal has certainly depressed the stock. Petrobras is down 25% this year as of September 8. In the long term, the price of stock will recover from this dilution and these worries about government influence as long as the reserves in the South Atlantic prove out to be as rich as projected. There just aren’t that many big new oil fields in the world anymore. It just may take a while. Full disclosure: I don’t own shares in any company mentioned in this post in my personal portfolio.
Update Baidu (BIDU) in my Jubak Picks 50 portfolio: Battle for mobile market share changes the fundamentals for China’s Internet stars such as Baidu (BIDU)
June 25, 2012I hate it when fundamentals mess up a good swing trade. Unfortunately, that’s just what has happened recently with shares of Baidu (BIDU). Earlier in 2012, you could have made good, and relatively low-risk, money by buying the shares whenever they fell near $115 and selling when they went over $135. Over and over again. (Baidu is a member of my Jubak Picks 50 long-term portfolio http://jubakpicks.com/jubak-picks-50/ ) But I wouldn’t advise this trade now because the fundamentals of Baidu and the rest of China’s Internet sector have changed—for the worse in the short term. Because of increased competition in the relatively new mobile space, China’s Internet leaders are waging an expensive war for market share. That’s likely to push the shares of Baidu and competitors such as Tencent Holdings (700.HK in Hong Kong and TCEHY in New York) lower as costs rise and earnings growth slows. Although Baidu owns about 80% of the Chinese Internet search market, it has only a 34% share of the search market for mobile devices. Shenzhen Easou Technology’s Easou search engine has 22% of the mobile search market. (Easou, started in 2005, was China’s first mobile search engine.) Tencent Holdings’ SoSo service is just behind at 21%. (Next is Google (GOOG) at 11%). Baidu’s mobile traffic grew by 20% in the first quarter of 2012 (up from 15% growth in the fourth quarter), but mobile search still amounted to less than 1% of Baidu’s revenue To increase its share of mobile traffic and its mobile search revenue, Baidu is spending to launch new handset models with pre-installed Baidu apps in cooperation with such manufacturers as Changhong and ZTE (and Apple (AAPL)). The phones come with 100GB of free cloud storage and sell, in the case of the Baidu Changhong model at just 899 yuan ($130) versus, say, 1300 yuan for Shanda’s Bambook. But building out the cloud computing infrastructure to support those phones (and other parts of Baidu’s strategy) requires capital spending that cuts into operating margins and earnings. I expect the company’s investments in mobile search to pay off in the future, but at the moment, since keyword ad prices are lower on mobile search and since ad click-through is lower, investments in mobile search are cutting the company’s profit margin. On April 25 Credit Suisse lowered its estimate for 2012 earnings per share by 2% and cut its target price for the New York-traded ADRs to $127.50 from $141.70. Goldman Sachs joined in on June 15, cutting its earnings estimates by 3% to 8% and lowering its target price to $135 from $160. In recent weeks the ADRs look like they’ve been trying to carve out a new range from lows of $113 or so on June 1 to highs of $122-$123 on May 25 and June 7. I don’t think that’s a wide enough range to make this an attractive swing trade, especially with the current uncertainty on China’s growth rate. My suggestion is to take this one off your list of swing trades and wait for a stock market willing to look past temporary uncertainties and reward the company’s long-term advantages. Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did own shares of Apple and Baidu as of the end of March. For a full list of the stocks in the fund as of the end of March see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
Whoops! Missed one.
When I did my annual update of my long-term Jubak Picks 50 portfolio on January 13, I dropped Deltic Timber (DEL) from the portfolio in my post http://jubakpicks.com/2012/01/13/10-stocks-for-10-years-2012-edition-my-annual-update-of-my-long-term-jubak-picks-50-portfolio/ but I didn’t actually remove it from the portfolio page.
I’m taking care of that today.
I dropped Deltic Timber from the portfolio not because it’s a terrible stock—it’s not—but because I wanted more exposure to the big long-term trends that would work to Deltic’s advantage than I’d get with this company.
Deltic is a relatively small timber company with 450,000 acres of timberland in Arkansas. It produces timber, lumber, and medium density fiberboard. And the company’s real estate unit sells land for commercial and residential development. The company figures that about 57,000 acres of its 450,000 fit into the higher and better use category that means they’re good candidates for the real estate market. (This land is about 12 miles from downtown Little Rock.)
You can see the potential for a company like this by looking at where it is now in relationship to where it was when the real estate bubble was still inflated. In 2011 the company sold 178,500 acres (not all higher and better use) for an average of $1,472 an acre. That was a huge increase in acres sold from the 6,200 sold in 2010. But it’s still way, way short of the 2,800,000 acres sold in 2007.
I think we’re close to bottoming in the housing market. That means that timber companies should start to see more sales of timber, lumber, and other building products, and more sales of higher and better use land at higher prices. I think that thesis will work for Deltic but I think it will work even better for a bigger timber company such as Weyerhaeuser (WY).
Which is why I added Weyerhaeuser to this portfolio on January 13 and dropped Deltic.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did not own shares of any stock mentioned in this post as of the end of December. For a full list of the stocks in the fund as of the end of December see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/
December 16, 2011Woof! On December 14 First Solar (FSLR) delivered a gut-wrenching conference call. The big item wasn’t the reduction in projected earnings for the year that ends in December to $5.75 to $6 a share from the previous estimate of $6.50 to $7.50. It wasn’t even the shocking reduction in projected 2012 earnings per share to $3.75 to $4.25 from the Wall Street consensus of $7.20. The big item was First Solar’s plan to gradually exit subsidized solar markets completely. After describing the huge increase in supply, largely out of China, and the slowing of demand growth from the reduction or elimination of solar subsidies, CEO Michael Ahearn told analysts and investors that First Solar was “shifting our revenue base from subsidized to sustainable markets, starting in 2012. It won't happen overnight and we'll have to transition out of the subsidies we currently depend on, but our goal is to shift progressively over the 2012 to 2014 timeframe so that by Q4 2014, we derive virtually all of our new revenues from sustainable markets.” In other words First Solar doesn’t see solar markets returning to former profitability within that time next year or the year after, so the company has decided to concentrate on designing, engineering, and constructing utility-scale power plants rather than focusing on the sales of solar modules. (First Solar is a member of my Jubak Picks 50 long-term portfolio http://jubakpicks.com/jubak-picks-50/ ) That transition presents some big challenges for First Solar. To compete in the non-subsidized market, the company, by its calculations, will have to achieve a levelized cost of electricity of 10 cents to 14 cents per kilowatt-hour. And that will require a reduction in production costs roughly 30% greater by 2015 than the company had previously projected for 2014. That’s a high bar to jump. The transition also signals First Solar’s belief that the economics of the solar industry are permanently out of whack. Yes, at some point the current demand slump will force enough players out of the industry to put supply and demand back into balance. But that will be only temporary, Ahearn said. Since there are no longer any technology barriers to entry in the silicon-based solar industry, supply will swing back to excess whenever capital is available. (Although First Solar produces thin-film solar modules based on cadmium telluride rather than crystal silicon, it competes on cost with silicon solar companies.) “In an industry without entry barriers, which we believe is the case for the polysilicon PV module industry, the easy reentry of competitors and expansion of capacity will keep downward pressure on prices and margins indefinitely,” Ahearn said. Indefinitely. That’s a rather grim assessment. (And somewhat longer than the assessment I offered in my November 15 post http://jubakpicks.com/2011/11/15/what-solar-companies-will-survive-the-solar-winter-to-profit-from-the-solar-spring-and-when-do-you-want-to-own-them/ .) Which doesn’t mean First Solar is wrong, of course. If Ahearn is right, the key competitive edge in the solar sector isn’t technology but cheap capital. And we know where that’s available. Perhaps indefinitely. (Hint: It’s the country where the pandas live.) Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did not own shares of First Solar as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/