Value investing, the stock prices change every day. You may find a certain stock that is cheap to buy today and then the following day the price goes up. So basically, it’s important to monitor the changes to get yourself aware of the opportunities. So what we have here? Today, we will give you the second released of our actively following list of stocks. If you wish to read the first one, please click here. Here’s our list.
Orange means to reduce the portfolio holding, Green means to buy, and No Color means to hold. Sym: Company symbol
Complete name of the company
Evergreen is companies we will hold for more than 5 years; Woody is similar to Evergreen but that we will not reduce our holdings even when the company stock is fully priced; In addition, Deciduous is stocks that we will hold for 2 to 5 years; and on the other hand, Monocarpic is stocks that we will hold for less than 2 years (most likely around 1 year).
|1||BIDU||Baidu Inc (ADR)||Woody|
|7||CHL||China Mobile Ltd. (ADR)||Evergreen|
|8||PG||The Procter & Gamble Company||Evergreen|
|9||KO||The Coca-Cola Company||Evergreen|
|10||WMT||Wal-Mart Stores, Inc.||Evergreen|
|11||MRK||Merck & Co., Inc.||Evergreen|
|12||MBUU||Malibu Boats Inc||Deciduous|
|13||KING||King Digital Entertainment PLC||Deciduous|
|14||KORS||Michael Kors Holdings Ltd||Deciduous|
|15||PCLN||Priceline Group Inc||Deciduous|
|16||MNST||Monster Beverage Corp||Deciduous|
|17||LULU||Lululemon Athletica inc.|
|18||SB||Safe Bulkers, Inc.|
|19||LOPE||Grand Canyon Education…|
|20||TCEHY||TENCENT HOLDINGS ADR||Deciduous|
|22||CTSH||Cognizant Tech Solutions Corp||Deciduous|
|24||CYOU||Changyou.Com Ltd (ADR)||Deciduous|
|25||FHCO||The Female Health Company||Deciduous|
|26||USNA||USANA Health Sciences Inc||Deciduous|
|27||JOY||Joy Global Inc.|
|29||CLF||Cliffs Natural Resources Inc||Monocarpic|
|30||INFY||Infosys Ltd ADR||Monocarpic|
|31||BHP||BHP Billiton Limited…|
|32||VALE||Vale SA (ADR)||Monocarpic|
|33||NUS||Nu Skin Enterprises Inc||Monocarpic|
|35||ESI||ITT Educational Service Inc||Monocarpic|
The question you should ask is how did we come up with this list and what does it mean?
Value Investing – How did Totem Evaluate Companies
We researched dozens of public companies. We compared and dissected the companies we believed to be undervalued. Over time our list of companies became overwhelmingly difficult for us to keep updating. We decided that with our limited resources we had to give up following the companies we like when it is clearly no longer undervalued or that changes in the company now made it unattractive for us to invest. Out of the pool of our favorite list of companies, we think these companies will give us the best bang for our time and resources.
Value Investing – Woody
Woody are perennial trees that take years to grow completely. Like the companies in our category, we believe it will be a rather long time for them to mature. Our aim is to increase our stake over time provided that the financial conditions of the company remain sound and that the management team remains stable. Baidu, Facebook, Amazon, Google, and Apple continue to surprise us in terms of their ability to grow. They are competitors in many areas. The fundamentals of the companies are sound. These companies are big enough to sustain any sudden temporary shock in the financial market.
Value Investing – Principle of Margin of Safety
Let’s say if there is an adverse investing environment in the stock market these companies stock prices will fall and we will see losses in our portfolio similar to many other stocks. Our position is to invest using the principal of the margin of safety giving us around a 50% buffer before the drop in prices from these begin to create a serious problem for us. This group is designed to provide us with the returns we need in a normal market condition. Hopefully, the returns on these growing giants will be above average.
Value Investing – Evergreen
We are rather cautious about investing. We always think the next big event will create a devastating blow on the market and our portfolio value. Our Evergreen category consists of big stable, long live companies which consistently provide for a fair and stable return. These companies stock prices tend to move in a narrow range and mostly independent of the market. We think that when there is a crisis we hope to sell off some of these companies which at that time would hold its value far better than most stocks so that we have funds to buy more of the bargains typically found in a market sell-off. That is the plan and these are the companies we are counting on.
Value Investing – Deciduous
Deciduous is the main stable return producer. These are some of the most admired lists of companies. They are well run and produces consistent returns for shareholders. These companies have one more quality lacking for us to categorize them as Woody or Evergreen. This is the bulk of the companies we focus on. We like these companies so much because they give us minimal stress while we invest. It is a carefree feeling typically for a few years. We expect the stock prices of these companies to go up substantially in the 2nd thru the 5th year. We normally sell when the price is right on these.
Value Investing – Monocarpic
Last is the Monocarpic group of companies. These companies are either going out of favor with the market or just coming back from the dark side. We view these as substantially undervalued. Typically they are the good guys stuck with bad companies, not always the case. When investors don’t like a company they tend to sell the whole industry and some even get out of the sector. The extreme is getting out of the country altogether. We don’t have enough firepower in terms of mental resources to consider so many variables so we resort to keeping it simple and looking at one company at a time.
Value Investing – What it Matters
We tend to make a lot of money with these companies. Sometimes we get into very difficult situations with a few of these. These are the sleep goblins stealing much of our sleepless nights. We sometimes hate to work on these because on two occasions we look like stupid idiots. These are some of the more challenging work in value investing. These days how quick you are at getting the data and how accurately you implement an action plan determines the degree of success. This is also a put-off point but we need the money so it is a matter of adding 5 percent to our portfolio. It is a matter of choice — no choice really.
If we have more funds we might not do these things. Alright, we might still do it. Most of these are just plain simply outcasts, abandoned and unloved companies. Sometimes they are really sick companies but time heals all wounds and we have been counting on this. The condition usually takes less than or a little over a year to recover. Most of our sickly companies have recovered but some died and took a part of us with them (financially).
Thanks for reading,