My new portfolio:
Last week my portfolio consisted of AVNT, SPP, and FFD. These are high growth companies with a low price that have done very well overall(especially FFD which is getting bought out). After selling FFD because its price got stuck around the buyout price(Cendant is purchaser) I decided to buy some new picks.
I bought into ACTM, ASTX, SMRA, and CCRT. These I bought in addition to my other current picks of SPP and AVNT. Three of the four are tech companies, which is definitely a change from the one of three stocks from my original portfolio. Although there is no particular reason for this except that many tech stocks have been hammered down to the point where they actually present a value opportunity. There were a few energy and mining values but didn't buy them because the return potential is significantly lower.
All of my new picks have high growth ahead and are at very attractive prices. They also have an average rating of buy or strong buy.
Act Manufacturing(ACTM) is an outsource manufacturer for electronic circuit boards. Historical growth is positive but low. However, currently it is growing very quickly and industry analysts expect high growth to continue. ACTM has gotten hammered recently because it has gone down with its peers and has 400 million in debt. Despite this high debt it has made a very large profit recently and is projected to continue to do so. Their is a huge short interest in the company: 4.75 out of the companies 17 million shares, because of the debt. This means that if the company can grow as expected in the next few quarters then the price is bound to skyrocket because the short sellers will be forced to buy and cover. Debts could in fact eat into the company's profits. If earnings continue anywhere near their current pace the company will be able to pay them down quickly. It has a decent cash level at 50 million.
Initially I had both Applied Science & Technology(ASTX) and
MKS Instruments(MKSI) on my buy list but it turns out the two are merging, which makes it a lot easier for me since I only want to buy one anyway to keep diversified. How convenient :) These two companies sell silicon-based semiconductor manufacturing equipment. The industry is planned to go from very high growth to high growth as it is a maturing industry and has had amazing growth in the past. Both companies have high past and future growth. They offer a "complimentary" "one-stop shopping" product range. I purchased ASTX because if the merger would be canceled(highly unlikely) ASTX would be the better value of the two. Each ASTX stock will be exchanged for just over 0.7 MSKI stock. MKSI is issuing 10-million company stock to buy ASTX. The only risk is that the sector may not grow as much as expected. This really isn't a risk though since the price assumes a relatively low growth rate.
Somera(SMRA) is a seller of a broad range of "previously owned" telecom equipment. Their are no risks for this company that I know of and the stock is a favorite of Steven Levy of Lehman Brothers (see thestreet.com
CompuCredit(CCRT) provides credit to those who will normally be denied it. As you can imagine this is a high-risk business. Recently their debt write-offs have climbed from 9.2 to 11 percent, which is why the price has plummeted from its high. The company stated that write-offs would be no higher than 10.0 to 10.5%. The company has showed profit even when the figure is 14% so profits and growth should continue. Because the number was 11% the company is being hit with a string of lawsuits. Brokers are divided on the stock. 7 strong buys, 2 moderate buys, and 3 holds.
Sappi Limited(SPP) is a paper company producing paper and paper pulp. Record profits continue and profits should grow at its historic pace.
Avant(AVNT) produces computer graphics software that assists in circuit board design. Projected Past, present, and future growth rates are very high.
Overall the portfolio has a combined interest in circuit board design software, the manufacturing of circuit boards, the manufacturing of computer chips, used telecom equipment, credit cards, and paper/paper pulp production. It is definitely weighted to technology. My portfolio has roughly 33% invested in SPP and CCRT, which are the non-tech issues.
The following numbers are portfolio sums:
24 Strong Buy
14 Buy
7 Hold
$9.28 EPS this year
$12.67 EPS next year
$97.05 current price
One-Year growth outlook: 40% next year
Long-term growth outlook: 30% per year
This year's P/E 10.5
Next year's P/E assuming same prices: 7.7
If the P/E appreciates to 30 in three years assuming its estimated growth of 30% per year is met then the price would be $642. My actual target assumes half of that for a target of $321, which is a gain of 350%.
My investment experience:
It started when I got a bit of money from an auto accident settlement. I would probably have gotten about 4 times as much but my mom did not hire a lawyer. I was only about 16 and wasn't about to hire a lawyer myself. In any case I started wanting to buy the Netscape IPO wanting an easy double. My mom said that I didn't know anything about the stock market and had to talk to my Uncle or someone who "knew something about the stock market". I didn't do that of course. You've got to understand this is my mom. After a friend told me he could invest with me I finally talked to one of my mom's friends, by which time Netscape had already doubled. They recommended a young broker with Edward Jones. We bought a few stocks from their recommended list: Oracle(ORCL) and Intel(INTC). Roughly a year later I sold Oracle and Intel just because they had nice gains and bought Gulfstream(GAC). I knew they had a high P/E but was hoping they would maintain that P/E and realize their growth which they did.
I started value investing by buying Gulfstream Aerospace Company(GAC). This company went from $27 when I bought it to around $50 when I sold it because I needed a car. I really wish I had gotten a loan for it! The company was later bought out by General Dynamics. I then started a test portfolio, which I did not buy, partially because I had no money :( The 6-stock portfolio returned around 300% in roughly two years. From the portfolio I only remember NE, DAVX, and PRCM. May 31 I bought my value portfolio with SPP, AVNT, and FFD. Since May 31 my portfolio has yielded 44%. |
