Every month, I like to look back at the quarter’s performance and look at the articles I wrote over the month leading into. It’s a useful discipline, and I think writers have a duty to disclose whether they can actually do what they write about.
I had a return to form last month with a 10.2% return, which contributed to an 18.9% return for the quarter and 57.5% over the last year. I’ve been on a good run which will be hard to sustain. The previous write up can be found here, and I will update the current portfolio on my blog in due course.
This month, I’m going to look back at December’s articles originally published on the Fool.
I hedge and am leveraged, so expect my performance to continue to be market neutral (R^2=.08) and more volatile than the market. I short indices not stocks. Readers should be aware that the S&P 500 has put on around 10.8% since the start of December, so as a hedged investor, I’m looking to at least beat that on the long side.
It’s the usual format with links to articles in the table and a summation of the views taken at the time. The stocks in bold are those that I bought or held.
| View | Company+Link | Performance Since Article (%) |
| Buy | Adobe Systems | 13.7 |
| Buy | Walgreen | 23.9 |
| Positive | Pier 1 Imports | 12.2 |
| Positive | Paychex | 11.9 |
| Evaluation | Kroger | 19.6 |
| Evaluation | Cooper Companies (NYSE:COO) | 11.5 |
| Evaluation | Costco | 8.9 |
| Evaluation | General Mills | 17.3 |
| Caution | Restoration Hardware | 1.4 |
| Caution | Ciena (NASDAQ:CIEN) | .8 |
| Caution | FactSet Research | 4.6 |
| Caution | Procter & Gamble (NYSE:PG) | 11.5 |
| Caution | FedEx | 15.1 |
| Caution | Bed Bath & Beyond | 14.8 |
| Caution | Patterson Companies | 11 |
| Caution | Finisar (NASDAQ:FNSR) | -5.9 |
| Caution | AutoZone | 9.5 |
| Caution | Lululemon | -19.6 |
| Caution | Tibco Software | -1.8 |
The ‘buy’ stocks averaged 18.8% with the ‘positive’ (I liked but didn’t buy or hold) stocks returning 12.1%. ‘Evaluation’ (like but not cheap enough) generated 14.3% and the ‘caution’ (liked or disliked with some concerns) stocks came in with 3.8%. These distinctions can be seen as arbitrary, but if you average all the stuff I didn’t buy/hold, it comes to a less-than-market return of 7.2%.
Evaluation and positive stocks
The reason I didn’t buy Pier 1 Imports, Inc. (NYSE:PIR) and Paychex, Inc. (NASDAQ:PAYX) was because I felt they were both pretty good short to mid-term plays, but they are not stocks that I would like to commit to for the long term.
I’m also aware that the ‘evaluation’ stocks outperformed the market, but these things happen in a bull market. The Kroger Co. (NYSE:KR) and Costco Wholesale Corporation (NASDAQ:COST) are both fine and worthy companies and I have updated views on them here and here.
The company that interests me the most in this group is The Cooper Companies, Inc. (NYSE:COO). Eye care companies have strong long-term growth prospects from an aging Western demographic and the high incidence of myopia in the Far East. Moreover, The Cooper Companies, Inc. (NYSE:COO) can generate significant revenue and margin expansion by shifting people to a one-day modality, and encouraging customers to trade up to silicone hydrogel lenses.
The good news is that this sort of stock should trade at a premium because it offers relatively recession resistant growth. The bad news is that (from my point of view) it is no longer great value. One to monitor.
With General Mills, Inc. (NYSE:GIS) and The Procter & Gamble Company (NYSE:PG), I think we have a classic case of the market rewarding fashionable stocks because they suit its mood. Right now, the market wants large cap high yield stocks, because they act as a proxy for very low U.S. Government bond yields.
