Investing Wisely -- Dow 30 Industrials - Week #1
Investment Course (a freshman - year Course of Study ) Week # 1
This is week number one and is your freshman year of learning to Invest Wisely. In this course, we will use the Dow Jones 30 Industrial Companies in the pursuit of learning / applying analytics and of course - the art and science of making money. This Course of study was created many years ago by Professor Steven Bauer, a retired university professor and still active asset manager and consultant / mentor. You can review, at the bottom, your possible / over all five years of study - from this freshman year through graduate school. As an old Prof., I am pleased to guide through your next four - five plus years of my sharing much experience of how to go about consistently profiting in the stock market.
The information and data within these articles / courses are supported by my "Three Disciplines" of Investing Wisely. They are a weighted fundamental (40%), technical (35%) and consensus (25%) analysis. They are also based on the "Three Pillars" of my Methodology. (please see the below URLs)
In the below table there is an update of five 'valuated' Dow 30 Industrial companies with a current ranking and brief comments for each company.
I believe you need to understand that we are starting this Course of Study at a time when the marketplace has produced over six months of a bullish cycle. This is very rare and therefore, will tend to distort your entire picture of the marketplace. Bullish and bearish cycles typically do not last that long in time. Adjusting and balancing from this lofty time frame will take months. You can profit from my guidance through this period or do what most investors do and that is to assume all is and will remain well. These investors tend to sit on their can, have very short memories and poor abilities when it comes to the psychological "stuff" like fear and greed. Hence, they do not do well in the art and science of making money.
Prof's Weekly Note of Encouragement or I suppose for some investors - Discouragement. (Remember most all folks see a glass as half empty while others (the minority) see it as half full): Your freshman year is / will be - without a doubt the toughest. Emotionally, you will want to skip the repetitious grind of collecting and confirming information and data. This process is called "analytics." You will want to make investments when you have not properly finished your homework. (You probably are doing just that, right now - anyhow!) You will want to put my picture on your dartboard and use it rather frequently. Etc. I have taught this course many times in University. Few of my students were still gun-ho after a 16-week semester much less spending a full year of dealing with much stock 'rotation' and the 'cycles' of both bull and bear markets. I always asked students and now investors / prospective clients - how bad do you want to do the work to earn a fair return on your investment capital? My impression, over all of these years is - not hard enough! Remember, you can easily heir a professional to do all this grunt work / analytics for you! There are many "financial analysts / asset managers," but few do their homework well.
My Mission and Your Job (if you choose to accept it): My mission is to provide you a flow of work-study that will eventually give you a platform from which you can consistently make money in the stock market. Your job is to make it your purpose to confirm my opinions and rankings by using information and data via the Internet, perhaps a textbook or two and good old common sense. It is important that you understand that I already know what I am doing and have been a profitable advisor / manager for several decades. I say this because you may want to disagree with my 'opinions and rankings' and that is ok. Nobody is always right! However, some of us are better at their trade than others. Just so you know, for years I have routinely spent about an hour per company doing the needed analytics to find those candidates that I can invest and recommend with confidence. It is a boring process for many investors, but it is also accurate and profitable.
General Market - Current Perspective
Within my work / analytics it is important to take into account the current position of the general market and the economy as it relates to the companies that are being valuated. This is one of those - first things first situations. It is a fact that 60% of the influence of the direction of any security is that of the general market - bullish or bearish. A 20% influence is on the Sector and Industry Groups. That leaves only 20% for the Companies itself. So, you had better be in phase / sync. with the general market and sectors / industry groups. Then you had better have done your homework well and be very selective in the companies you take positions in.
The general market is currently over-valued, over-bought and is showing serious signs of deterioration, especially in the area of breadth. Interest rates are on the rise, and inflation is already an acute problem. These Dow 30 Industrials along with many other companies are quite vulnerable to a meaningful general market pullback. That means that you should strongly consider holding cash or perhaps taking bearish positions. I do not recommend taking short positions in any of these securities with the possible exception of BAC.
My focus for all companies, Dow 30 or others, is - Investing Wisely. My methodology of taking advantage of the bull / bear fundamental 'rotation,' technical 'cycles,' and 'inflection points' are especially critical in this marketplace and to your annual profitability. I believe doing your homework well each week is a vital discipline in today's marketplace.
Companies - Current Perspective
A Ranking, using each of my three (weighted disciplines) -- Comments for each Company -- and current Numeric Ranking of the position of each Company within the Dow 30 Industrials should give you plenty hard work each and every week, but soon you will be doing it like a professional.
|Symbol and Current Numeric Ranking within the Dow 30 Industrials||Category||Fundamental
|(BAC) Ranked: # 26||Bellwether||Very Poor||Good||Poor|
|Comments: Currently, at $14.5 the company does not look healthy and is carrying a very low Ranking against its Dow peers. Over the coming couple of years the earnings' growth falls back to zero! Fundamentally, BAC is a mess of a company, and I am quite bearish. It is definitely not even a hold. Technically, it looks like it is topping and a bearish inflection point has been completed. I believe the stock is coming much lower before it can begin a new up-trend. Consensus wise, in plain English - the "Street" does not like BAC.|
|(CSCO) Ranked: # 30||Bellwether||Poor||Very Poor||Poor|
|Comments: Currently, at $18 the company in trouble and carrying the lowest Ranking against its Dow peers. This year earning' turned negative. However, it appears that next year as well as the following year projected earnings' will have recovered back to normal. Fundamentally, CSCO is meanwhile in trouble, and we must now wait for a recovery. Technically, never hold a stock that takes a beating like Cisco Systems did in November. And to confirm this point - February was another follow-on - there may well be another before a bottom is reached. Holding is and likely will definitely be costly. Those who insist on being Buy and Hold investors have taken it on the chin for over a decade and in this "unforgiving" marketplace this has become an expensive methodology to follow. Mutual funds still have not learned this lesson, and "you" are paying for it! Consensus wise it is negative.|
|(GE) Ranked: # 7||Bellwether||Very Good||Very Good||Good|
|Comments: Currently, at $20 the company has come a long way on the upside over the past four months and carrying a top Ranking against its Dow peers. However, for me, it is not high enough to take a second look! This year, earnings' turned up quite nicely and next year they look even better. Fundamentally, GE is making a positive move that could be sustained. Technically, on a more near-term basis it is looking tired at the current top. Is there more life in it for the near term? My work says yes, but my conservative asset management says - wait for a pullback it may be coming lower. Consensus wise it is definitely not one of the strongest.|
|(BA) Ranked: # 22||Bellwether||Poor||Good||Poor|
|Comments: Currently, at $71 there is little to complain about, at least for the now. The Aerospace Industry Group is still doing well but many component companies have already been hit hard. Remember, these are "Bellwether" companies that are not supposed to be volatile. When doing my analytics and a company Ranks near the bottom of my list, I usually spend very little time looking deeper? Like CSCO, this year earning' turned negative, but it appears that next year and the following year, earnings' will have recovered to the point of you wanting to watch it carefully. Fundamentally, currently BA is just another component of the Dow 30. However, look out and be watchful, things could turn positive in the coming months. Technically, it looks tired and is likely in for a pullback. Consensus wise it is not doing well.|
|(XOM) Ranked: # 4||Bellwether||Good||Very Good||Very Good|
|Comments: Currently, at $82 the company looks healthy but is one of my least favorites for future price appreciation. At this time, it is Ranked very high however, I am not at all positive about the coming years, please note the following numbers. Earnings Grow appears to be declining steadily for the next few years. Current 2011: 17%; 2012: 11%; 2013: 8% and 2014: 0.8%. You should understand that there are almost always better energy companies than XOM to own and many also pay a dividend. The Energy Sector is and has been a very compelling story but is often subject to high volatility. Exxon Mobil is not historically a great mover, but 20% plus price appreciation since December is (or has been) a nice gift. Remember, "they" give-ith and "they" take-ith and away. Don't be greedy. Fundamentally, the near-term looks quite positive, however, the above numbers signal you do not want to remain too optimistic about the coming years. Technically, this is an excellent example of a chart picture that can turn negative without much notice. This current mini-pullback is eating up profits rather quickly. There is very positive Consensus picture. Your job is to remember is it currently rather strong.|
Note One: My focus for each Company is to provide you food for thought and perhaps a stimulus to do your own research using the tools that you like best. It's the WHEN that is so very critical in this market, and I have given you the WHAT in many of my articles and in the above table.
Selectivity is also an essential for investing wisely, but rather easy if you will use the "Three
Pillars" of my Methodology. I continuously monitor the fundamental, technical and consensus status of these and many more companies, sectors and industry groups. As a mini example, please see my Public List in StockCharts of about 100 companies listed alphabetically by my two categories of securities - Bellwether and High Profile. Use this URL: Click here and scroll through them all when you have time.
Note Two: When these three disciplines are Excellent to Very Good they become a strong
Candidate for Buying and when they are "Poor to Very Poor" they become a strong Candidate for Short Sale. There is always a large number of companies in both the bullish and bearish categories, but it is most important to wait for a clear bullish or bearish general market Inflection Point before taking positions. (please click on # 3. of my "Three Pillars" of my Methodology, below).
You might want to think of these comments in terms of a slot machine. When my 'Three Disciplines' have 3 bars of Excellent / Very Good - it's often a bullish Jack Pot! Strangely enough to some investors, when I have 3 lemons of Poor to Very Poor - it's often a bearish Jack Pot!
For a very important perspective, please study and become intimately familiar with my "Bell Curve" rationale on selecting companies to focus on for both bullish and bearish general market environments. (please click on # 1. of my "Three Pillars" of my Methodology, below).
Note Three: Technically it is important that you study and understand that all securities are always somewhere on the "SHB Cycle." (please click on #3. of my "Three Pillars" of my Methodology, below).
Note Four: Within this missive as well as those in the future, I stop short of providing specific recommendations. If you are interested in a more specific and personal dialog please let me know. Just so you know, I will work with you for a time if you are a serious investor and currently are seeking or believe you may have in the future - interest in my professions asset management / consulting / mentoring services. I cannot possible write enough volumes on the details of my methodology with sufficient clarity for you to emulate my work. I will lead you and make on going suggestions, it is up to you to develop your own methodology from what I share. Remember, this is your freshman year and if you think you have learned it all in a few weeks or months, I can assure you that you will be disappointed at some time in the future. After receiving a PhD in this "stuff," I screwed up for just under 10 years before I figured out what this "stuff" is all about. I discarded the books and much education and wrote my Methodology. I believe if you follow my suggested homework assignments and spend time confirming the information I provide on each company, week by week, you will learn enough to make money consistently in the stock market - maybe in a year or two.
Note Five: You can find all Dow 30 Industrial Companies and a number of other supporting Bellwether and High Profile charts amongst the 100 or so in:
The Prof's Six Groupings of the Dow 30 Industrials
Grouping One: BAC, CSCO, GE, BA, XOM
Grouping Two: HPQ, AXP, KFT, TRV, CVX
Grouping Three: CAT, HD, KO, DIS, DD
Grouping Four: T, IBM, JNJ, AA, JPM
Grouping Five: VZ, MRK, PG, MCD, MSFT
Grouping Six: PFE, , MMM, UTX, MDC, INTC
You can find my specific articles for these securities by going to search and my name in SeekingAlpha.com.
There is more supporting information about my work / analytics in the following URLs:
My Personal / Private Blog -- Investing Wisely: (Introductory Information
about my Investment
Three articles supporting my "Three Pillars" of my Investment Methodology
that you may want to read:
(the title for each is at the end of the below URLs)
# 1. http://seekingalpha.com/instablog/121308-steven-bauer/119898-my-rotation-model-a-short-explanation
# 2. http://seekingalpha.com/instablog/121308-steven-bauer/120955-my-shb-cycle-a-short-explanation
# 3. http://seekingalpha.com/instablog/121308-steven-bauer/104062-inflection-points-a-short-explanation
Source information and data:
The Bottom Line
Your 'bottom line' will depend on just how proactive you are about doing your homework on the above Companies and perhaps asking questions of the Prof. (that's me!)
This Week's Home Work Assignment: Go into at least 3 of the above "Source information and data" and learn to Navigate through all that is offered. (that is an on going homework assignment and will require many hours if not months - these sites offer much information -some good and some worthless - but can be very rewarding if you are willing to learn) Next read up on each of these companies and make some notes from your sources of information. You may even want to make file folders for each company. Referring back to your notes can be a valuable learning experience.
Thanks for your interest in my work / analytics and possible my professional asset management / consulting / mentoring services.
Steven Bauer, Ph.D.
More Notes about this Course of Study
The mechanics of investing wisely is really not all that hard to grasp. If you have the time, a willingness to train yourself, and have the temperament to be both disciplined and patient, you are more than half way there.
Thanks for attending class this week - and - don't put off doing some extra homework (using University Text Books, Mr. Graham's book and Google - for information and answers to your questions) and perhaps sharing with the Prof. (that's me!) your questions and concerns.
Investing Wisely - - ( Course of Study )
By: Professor Steven Bauer
Text for this Course:
I recommend you go to a major University bookstore and buy several textbooks that focus on Investing. I never recommend any books other than "The Intelligent Investor" by: Benjamin Graham. Google has the answers to most all of your questions, after exploring Google if you still have thoughts or questions my Email is open 24/7.
Each week you will receive a new / another groupings of five Dow 30 Companies to study through SafeHaven.com. Therefore every six weeks you and I will have reviewed all 30 Industrials and start over again with the first grouping. Understand that the on going dynamics of the stock market will present subtitle changes, enough for new work and learning to be accomplished. Hopefully you will begin to understand that it is this process that will enable you to consistently make money in the stock market by investing wisely. I will be guiding you with my comments and URL teaching references. I suggest that you create a file and print charts and other information. This archive will become very valuable if you will review your work quarterly, semi-annually and annually. I'm here to help.
Course 143 - Learning and profiting from the Dow 30 Industrials Index
Course 245 - Learning and profiting from the S& P 500 Large Cap Index
Course 347 - Learning and profiting from the S& P 400 Mid Cap and S& P 600
Small Cap Indexes
Course 449 - Learning and profiting from the Entire Universe with a focus on the
Course 550 - Doing it all Professionally - Using it all to make money investing and
perhaps as a financial advisor / asset manager
A Couple More Notes
This Completes the List of Learning, Applying and Making Money - 5 years of Courses.
You may want to review my 38-week course - Investment Basics with SafeHaven.com. (see the sidebar on the SafeHaven.com home page or Authors and my name.)
Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the experiences of life, I hope you make it fun.
Learning how to consistently profit in the Stock Market, in good times and as well as in not so good times requires education, experience, time and unfortunately mistakes which are called losses. I believe you can be profitable while you are learning?
Let me know if and when I can help and tell a friend about this Course of Study.
Smile, have fun - Investing Wisely,