Current Lead Dog Portfolio

It's been a while since I reviewed the portfolio, so I am taking advantage of the current awesomeness in the market in attempts to make my stock picking prowess look especially good.  For the year, the portfolio is up 23% (boosted by 30% margin which I will start to de-leverage if/when the markets rise further) and the current portfolio is now returning 11% per year.  Not bad, and I expect it to be a little better at the end of the year, after taking some requisite dips/rises, wax/wanes or whatever metaphor you prefer for shorter-term price wobbling.

I see a lot of skeptics point to 2009 S&P 500 earnings estimates and corresponding P/E's of 17-18 and mistakenly conclude that the market is over-valued.  What these pessimists forget is that we are not buying 2009 earnings in isolation but the present value of an enterprise's earnings/cashflow in perpetuity.  While we already know that earnings won't be so swell for this year and probably next, we can pretty safely assume that the 25 year expected returns of most companies are not drastically different from what they were one year ago.  In other words, equity investors way over-reacted by tanking the market in 2008 and I think we are set up for above average returns for the foreseeable future.

Anyway, that's one opinion for you to munch on for a while.  Here's the current portfolio:

Stock Symbol	Company Name	Total Return	Annualized Return
ACN	Accenture	-20%	-22%
ADBE	Adobe Systems	43%	222%
ALTR	Altera	16%	66%
ASML	ASM Lithography	-15%	-13%
CSCO	Cisco	2%	34%
GLW	Corning	53%	201%
EBAY	Ebay	39%	80%
IBM	IBM	25%	43%
ICFI	ICF International	30%	25%
INTC	Intel	8%	22%
MSFT	Microsoft	15%	200%
NUE	Nucor	26%	8%
RAI	Reynolds America	67%	9%
SII	Smith International	-49%	-62%
TXN	Texas Instruments	4%	7%
RIG	Transocean	-20%	-19%
VGTSX	Vanguard Total Intl	-17%	-23%
WDC	Western Digital	20%	10%
	Total Portfolio	13%	11%

Lead Dog Trade Alert: buy Cisco (CSCO) at $19.09

Yesterday, Lead Dog went to the technology well again with yet another icon: Cisco.  Back in the tech-bubble apex, Cisco traded at roughly 4X today's price , yet sales were 1/4 what they are today. So if I am crazy to buy CSCO today that makes me 1/16 as crazy as the "investors" that were buying in 1999.  Which reminds me of a guy I met in a Manhattan Beach party during the bubble who, after boasting that he recently quit work, exposed his financial secret: every time he needed more money (rent, vacation, new couch, whatever) that he would just buy some CSCO stock and sell it a few days later.   Manifest sagacity.

Just in case you don't know, Cisco is a networking conglomerate building modems, switches and routers so we can all watch cats play the piano on the internet.   Cisco will profit mightily as we upgrade the internet infrastructure yet again to accommodate HD cats playing the piano.  I purchased CSCO yesterday at $19.09; as I type this, you can do better.

Looks like we are hovering almost exactly half way between the 65 and 250 day trendlines, a logical resting point for the current bull market.  Today's trading (especially for a tech heavy portfolio such as ours) is an expected one step back.  I expect to be two steps forward in the near future.

Lead Dog Trade Alert: sell Petro-Canada (PCZ)

Lead Dog sold PCZ yesterday at $34.27 for a 37% loss.  Petro-Canada's growth forecast has taken a noticeable plunge and cheap oil only hurts the earnings prospects of its inchoate oil sands projects.  As of a few minutes ago, PCZ was trading for just under $37 so you can squeeze a healthy 7% more out of this investment than I.

So, when we bought PCZ almost a year ago, an anonymous reader of this blog posted his disapproval.  While -37% performance is not good, PCZ did outperform about 65% of all stocks during this timeframe, so there's a good chance that we outperformed Mr. Anonymous on this one.  UNLESS, of course, the anonymous one had the foresight to stick his money under the mattress, but he didn't bother to suggest an alternative (or point to his blog where his selections and performance can be sniped).  

We will see small corrections ahead, but I would treat these as buying opportunities.  The VIX is re-approaching normal levels, i.e. the fear and panic of the last six months is waning.  With that, will be new commitments to equities and higher prices over the long haul.

Lead Dog is currently up 15% YTD, whereas the S&P is still down a few points and the Nasdaq is up 7-8%.

Check out this fun/disturbing article which claims that only 53% of Americans think that capitalism is better than socialism.  Dumbass says what?  This is a serious testament that economics needs to be taught in high schools.  Or history (see USSR, North Korea, Cuba) needs to be taught better.  Maybe we can ship the unconvinced 47% to Cuba or Venezuela and watch the sudden epiphanies.  Capitalism is clearly imperfect: its two main drawbacks (IMHO) are its susceptibility to booms and busts (no need to site examples here) and the unequal distribution of assets.  That said, its clearly the least bad system that consistently creates FAR HIGHER aggregate wealth, standards of living and (my favorite) personal freedom.  

Lead Dog Trade Alert: sell Valero at $21.11

Yesterday Lead Dog continued its oil purge and sold Valero (VLO) for $21.11, a 71% loss, 48% annualized.  Earnings have been decimated (join the crowd) and estimates for future earnings are shrinking--sure, VLO trades at 7X current earning estimates so it will probably not go much lower, but there are plenty of investments with similar P/E *and* with expectations of growth.   Oil stocks may deliver over the next decade, but one has to start worrying about longer term prospects as industrialized nations start to ween themselves off of the sticky goo.