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Better Investing Model Portfolio Stock Purchase Contest

Better Investing Model Portfolio Stock Purchase Contest. 31 December 1994 to 31 December 1999. BACKGROUND INFORMATION. 8 Contestants, each with $10,000 on paper “Buy” 5 stocks, equal amounts Reinvest all dividends and capital gains, after 30% tax, on date paid or sale

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Better Investing Model Portfolio Stock Purchase Contest

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  1. Better Investing Model Portfolio Stock Purchase Contest 31 December 1994 to 31 December 1999

  2. BACKGROUND INFORMATION • 8 Contestants, each with $10,000 on paper • “Buy” 5 stocks, equal amounts • Reinvest all dividends and capital gains, after 30% tax, on date paid or sale • No more than 5 trades a year, except for acquisitions. Stay fully invested • 5 year contest; 2 losers treat 6 winners

  3. INITIAL SCREENING • Relative Value equal to or less than • 100 • Upside/Downside equal to or more • than 3 to 1

  4. STOCKS SELECTED Total%Gr.P/EU/S CompanyReturnE/SRatioRVD/SPEG Allied Grp. 24 15 6.9 81 13.9 46 Stewart & Stevenson 32 17 11.5 61 68 69 Intel 27 16 9.0 72 9 56 MGIC Inv. 25 17 9.7 75 13 57 National Tech Team 52 30 14.0 47 53 47

  5. Allied Group Sales Pretax Profits Price Earnings

  6. Price Stewart & Stevenson Sales Earnings Pretax Profits

  7. Intel Corp. Sales Price Pretax Profits Earnings

  8. MGIC Investments Price Pretax Profits Earnings Sales

  9. National Tech Team Pretax Profits Sales Price Earnings

  10. VALUATION CRITERIA • Total return • % Growth of EPS • P/E ratio based on estimated EPS 4 quarters in the future • US/DS ratio • P/E as a % of growth rate

  11. PURCHASE PRICES Allied Group 24.75 Stewart & Stevenson 34.50 Intel 63.875 MGIC Investment 33.125 National Tech Team 5.25

  12. FIRST CHANGE 3 May 1995 indictments by Federal Grand Jury arising out of a 1987 subcontract to supply diesel generator sets for installation in Saudi Arabia. 21 June 1995 sold Stewart and Stevenson for $2,035 Purchased Sbarro which had been in the original list of 17 candidates.

  13. Sbarro Price Earnings Pretax Profits Sales

  14. SECOND CHANGE 5 October 1995 sold Sbarro for $2,025. Sales and EPS growth were not meeting original expectations. The company was accumulating a large reserve of cash and management showed no signs of investment that would restore growth. EMC purchased at 17.25 RV at 77, PEG at 57

  15. EMC Corp. Price Sales Earnings Pretax Profits

  16. 31 DECEMBER 1995 Return for the year was 37.7%. In January 1996 the high technology stocks of Intel and EMC Corp. were under market pressure but looked favorable for the long-term. Intel split 2-for-1 on 17 June 1995 at a price of about 126.

  17. THIRD CHANGE 22 May 1996 National Tech Team grossly overpriced having gone up 176% in 1.4 years. Sold for $5,523. Proceeds invested in Interpool.

  18. Interpool Price Earnings Sales Pretax Profits

  19. STOCK SPLITS 1 December 1996 - Allied Group 3-for-2. 27 March 1997 - Interpool 3-for-2.

  20. MORE STOCK SPLITS MGIC Investment split 2-for-1 in May 1997and was valued at $5,504. 13 July 1997 Intel split 2-for-1 and was valued at $10,178 compared to a cost of $2,000 on 31 December 1994.

  21. VALUATIONS 31 March 1997 portfolio valued at $24,204 after 3.25 years. Intel valued at $8,749. Cost was $2,000 on 31 December 1994.

  22. MORE STOCK SPLITS 17 November 1997 - EMC split 2-for-1

  23. FOURTH CHANGE On 26 February 1998, Interpool was sold as its growth of earnings faltered and management’s explanation of recovery never bore fruit. NCI Building Systems was purchased at 39.50

  24. % Pretax Profits/Sales Interpool Sales Pretax Profits Earnings

  25. NCI Building Systems Pretax Profits Sales Price Earnings

  26. STOCK SPLIT & SALE 22 July 1998 NCI Building Systems split 2-for-1. 10 September 1998 Allied Group was sold for $6,534 net of taxes. The company was to be acquired by a mutual insurance company and there appeared there might be some regulatory problems. Clayton Homes was purchased at 16.

  27. Clayton Homes Pretax Profits Price Earnings Sales

  28. MGIC INVESTMENT SOLD Politics in Washington looked like like competition from quasi government companies of Ginnie Mae and Freddie Mac would put MGIC Investment at a competitive disadvantage. The stock was sold for a net of $3,795. The proceed were invested in HON Industries.

  29. HON Industries Pretax Profits Sales Price Earnings

  30. INTEL SPLITS 11 April 1999 - Intel split 2-for-1

  31. Better Investing Model Portfolio1994 Dec. 31 – 1999 Dec. 31 80,000 60,000 40,000 20,000 1995 1996 1997 1998 1999

  32. Value on 31 Dec. 1999 Shares Price Value Clayton Homes 405.912 9.19 $ 3,748.71 Intel 252.238 82.31 20,761.71 NCI Building Sy. 253.064 18.50 4,681.68 HON Industries 174.009 21.94 3,817.76 EMC Corp. 474.960 109.25 51,889.38 $84,899.24

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