Investing Wisely -- Dow 30 Industrials - Week #2
Investment Course (a freshman - year Course of Study ) Week # 2
This is week number two 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, several other Courses and 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.
Note: Starting next week I will cut back on the below supportive data and eventually provide all that "stuff" every six weeks as we rotate through all 30 Dow components.
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 for brief articles on my three pillars).
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. If you read carefully you will get my opinion of buy / sell / hold.
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 most likely 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 am the first to admit that this "stuff" is boring - but -- I can assure you that it is both accurate and profitable. I always asked students and now investors / prospective clients - how bad do you want to do the work to earn a fair annual 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. I repeat, 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. I suggest that when you invest that you had better - be in phase - with the bullish or bearish direction of the general market and sectors / industry groups. Then it is up to you to 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.
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, most every investor I have ever met can profit from this course. That is if you / they do your homework well. This 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 analytics work each and every week, but soon you will be doing it like a professional.Grouping Two: (see below for a list of the six groupings of five - Dow 30 Industrial Companies.)
|Symbol and Current Numeric Ranking within the Dow 30 Industrials||Category||Fundamental
|(HPQ) Ranked: # 29||Bellwether||Poor||Good||Good|
|Comments: Currently, at $41. 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, HPQ is in need of very strong management and direction for its products to be competitive. I am quite bearish. It is definitely not even a hold but use your technical skills to exit. It may go a bit higher. Technically, it looks like it is topping and a bearish inflection point has been completed or will be soon. I believe the stock is coming much lower before it can begin a new up-trend. Consensus wise, in plain English - currently the "Street" does not like HPQ.|
|(AXP) Ranked: # 17||Bellwether||Good||Good||Very Good|
|Comments: Currently, at $43. the company appears to be improving and will perhaps climb up the Ranking list against its Dow peers. With the possible negative climate in mind for the future over all marketplaces, AXP is only in the middle of the list. These year earnings' are positive and will perhaps continue to grow. That is likely to be at a slower pace than the recent past. Fundamentally, it is clear that Am. Express is looking better than some of its peers - but not enough better to invest. Technically, it looks like it is topping. Should it "break out" on the upside, I believe the upper targets are not worth the risk? Consensus wise it is very good.|
|(KFT) Ranked: # 20||Bellwether||Very Good||Very Good||Good|
|Comments: Currently, at $31. the company has stayed in a 10%+ range over the past six months and carrying a lower Ranking against its Dow peers. This year, earnings' turned up quite nicely and next year and the following year they look even better. Fundamentally, KFT is making a positive move that could be sustained. However, it is a very conservative company and does not produce much growth. Food should continue to inflate, which is good for Kraft. 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 no, but my asset management says - it is just not a competitive investment. Consensus wise it is definitely not one of the strongest.|
|(TRV) Ranked: # 13||Bellwether||Poor||Very Good||Poor|
|Comments: Currently, at $58., there is much to complain about, at least for the now and the coming years. The Insurance Industry Group is still doing well but many component companies have started to pull back. Surprising to me, TRV has remained near its recent top. The price will likely, in time, have a pullback along with some peers. 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, and others, this year earning' turned negative, but it appears that TRV next year and the following years, earnings' will not be recovering to the point of you wanting to watch it very carefully. Fundamentally, at present Travelers is just another conservative component of the Dow 30. Technically, it looks strong but be careful. Consensus wise it is not doing well.|
|(CVX) Ranked: # 3||Bellwether||Good||Very Good||Very Good|
|Comments: Currently, at $102 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: 7%; 2013: -6% and 2014: 2.3%. The projected five year earnings' growth rate is 5.6%. You should understand that there are almost always better energy companies than CVX and 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. Chevron 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 last week's Comments on XOM are very similar and that has not changed in many years!|
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.
Many Investors do not seek to answer the question regarding the above two W's and that is of equal importance. It is the question of - Why! If you cannot answer the question of 'Why' you should not invest in this particular company. By taking this course, you will soon learn 'Why'and that Investing Wisely means - that you should - Not Invest - until you do.
Obviously, part of the 'What' is - Selectivity. This word 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 Methodology) http://twitter.com/InvestRotation
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: (Same as last week) 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 favorite 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. Remember, this is boring "stuff" to many investors, but it will provide you accuracy and profitability in your investment strategy.
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 - each and every few weeks. 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 Russell Indexes
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 if you will work ast it, 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,