Investing mid-long term Journal!

30th August 2012

Reading Market Wizzards at the beach can be quite entertaining but, some of those stories seem a bit wierd and a lot of luck...I wished the guy would make a book so we can see how all the interwied back in the 80s and 90s are doing today...did they keep being market wizards or did they blew into obscurity or worse than that into bankrupcy?

On an article I've read, I saw that Portugal, Greece and Ireland are among the countries were less companies go bankrupt, while Germany or Norway are the opposite. This made me think and only on economic terms (I know the social impact is very important but) that here in my country we are helping the hopeless companies and industries to stay barely alive just for the sake of not firing nobody and this is the main reason why we have so few investment and keep on doing the same rubbish since the 50's....is my reasoning wrong???

Jack o'Clubs thank you so much for the tip and I am looking into the definitions on other sources too. One other step that I am taking along with analyzing new stocks, is to create my market trading philosophy. I am half way there, but now is time for some Europa League...
 
5th October 2012

Back from vacations and after a morning of reading e-mails and trying to solve some problems in the office, it is back to the markets and reproducing now what is and will be my trading philosophy, constituted into 9 principles:

1 - Having a Plan : define a period (traget) for the trade to evolute; define the target price I want to achieve and the stop-loss; follow the plan without exception

2 - Be Disciplined - Dont procrastinate, use stop-loss when needed, take losses when needed, allways follow the plan established prior.

3 - Keep Learning - Keep on reading everything you can about the markets, keep researching for info on the stocks you have and the ones you want to have

4 -Do Your Work - Everyday search for new stocks and new opportunities; follow the novelties on the stocks you own; always write a report on the stocks you studied

5 - Be Flexible - Tenacity without flexability is no virtue. If something is not going your way, examine, aknoweledge that you are wrong and change the method; markets are dynamic and approaches that worked in a time period mya not work in another

6 - Develop an Edge - Through research and observation of markets, find what works and what doesnt and turn it into an edge

7 - Take Risks - Money management and risk are two very different things and you have to be able to take risks in order to succed.

8 - Full Portfolio? - The question of when to liquidate, depends not only on the stock but also on wether a better investment can be identified

9 - Be Patient - Wait for the right time to enter, dont just rush into it


The only thing that I need now, is a clear answer to all my questions on the business plan:

- What markets will be traded?
- What is the capitalization? 100.000 GBP
- How will orders be entered? Through an online broker/spreadbetting firm
- What type of drawdown will cause trading cessation or/and reevaluation? >20%
- What are the profit goals? Yearly 20% on the long run, 10% on the first year would be very good
- What procedure will be used to analyze the trades?
- How will trading procedures change if personal problems arrise? Cessation of trading and liquidation of trades if something really problematic appears in my personal life
- How will the working environment be set-up? Just normal computer in the office or at home, only 3-screen in both places and both of the quiet
- What will the trader do to continue to improve its market skills? Loads of reading, books and forum as well as newsletters and tests on the market


Something that I read and find very interesting and important concepts

- "Buying a stock because it is "too low" or selling because it is "too high" is by far not a good reason." (Steve Cohen)

- "The movement of a stock is 40% due to market, 30% due to sector and only 30% due to itself" (Steve Cohen)
 
7th October 2012

Today a new stock was added to the portfolio:

Inditex (ITX: MAD) - Spanish textile group and the biggest one of the industry worldwide; owner of brands like Zara, Bershka, Pull and Bear, Maximo Dutti and other; present worldwide

Market Cap: 59,6 B euro
Profit: 1,9 B euro
PE: 26,50
Yeald last year: 1,81%
Revenue: 13,8 B euro
Next dividend: possibly 1,80 euro
Dividend last year: 1,60 euro
Ex-dividend date: ? - 0,90 euro referent to 2semester will be paid on the 2nd November
Debt: 3,0 B euro - 1,4x profit

Strategy:
-Clothes from runway to the shops in only a few weeks
-Continuos expansion and multi-channel presence
-Environmental friendly control of suppliers

Graph:

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- Stable till 2005 and trading between 15 and 20 euros, followed by a steady 3 year climb till over 50 euros in 2008, down in 2009 to 30 and since then steady climbing, always reaching new highs, and close to 95 euros at the moment
- Expect to reach 120 euros in the next 12 months, with stop-loss at 80 euros

Personal Comments:
- New brands have been a success like Zara Home and Urteque
- Composed of manufacturing, logistics, distribution and selling
- Uses revolutionary tactics in logistics and distribution
- Ortega who owns 50% is the 4th richest man in the world

Final Note:
- Despite global crysis, this company is going in all the right directions, expanding even further worldwide and after a fall from yesterday's euphoric market, a good portfolio stock, bought at 92,48 euros (73,69 GBP)


The whole portfolio today:

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13th October 2012

I am very very sorry for not posting here recently but due to the new establishment of economical politics in Portugal and a car crash, I had little time to write. I promise latest next Monday, Ill have a further longer analysis...

- New Portuguese measures to reach a deficit target are being highly contested and even my workers have had their complaining recently as they want me to add a little something to their wage as compensation for the further increase in their taxes...

- Car crash, well not really something impressive, just a big problem with the other guy that had no insurance...
 
28th September 2012

I know, I know. I havent wrote for ages now...but the problem is very simple...I thought that after my company started to make profit and I could just step a bit aside...it just doesnt. And allways some problems arise here and there, so I dont have all the time to dedicate to my stock portfolio...

Also the portuguese economic situation doesnt help, with the government announcing new measures every day and contradicting them in the next one. One thing is surtain, more taxation will lead to bankrupcy soon as we already reached the point that more tax, means less money for the state and even the companies do no accept a measure that cuts their contribution to the social security in 5,5% and increases 7% to the worker, as this will save money that will be lost in the loss of purchasing power of the consumers...


On a more positive note Sporting managed to get the 1st win of the season, a 2-1 comeback at home against horrible team Gil Vicente...on the 87th minute...so moderate positive I am afraid.

Well more next week as I will have the weekend to look into stocks. Here's my situation at the moment:

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1st of October

Today a new stock was added to the portfolio

Richemont (CFR:VX) - Swiss luxury goods company (Cartier; Chloe; Montblanc; IWC Schaffhausen). Second largest luxury goods company by Turnover.

Market Cap: 32,9 B Chf
Profit: 2,04 B Chf
PE: 16,82
Yeald last year: 0,96%
Revenue: 8,87 B Chf
Next dividend: possibly > than 0,55 Chf, since the dividends are growing from 2009
Dividend last year: 0,55 Chf
Ex-dividend date: ? - 10th September
Debt: 3,13 B Chf - 1,5x profit

Strategy: Differs across the almost 20 holdings of the company, but mainly continuing the expansion to Asia and Latin America, while doing heavy marketing on exclusive events


Graph: Stock reached its all time low in 2009 and since then climbed 100% , having stayed above the 50 CHF for most of the last 18 months. It reached a new high recently at around 62,50 CHF.

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Personal Comments:
- Luxury brands normaly are imune to crysis
- Sales increase 30% on a heavy margin business
- Asia and Pacif account for 42% of sales and with Japan 51%

Final Note: With sale going up and the trend for luxury goods still on full throtle, even if the whole world looks to be in recession. I expect Richemont to reach 75-80 CHF by next 18 months. Stop-loss at 45 CHF

Here the portfolio at the moment:
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4th October 2012

So, today I will not talk about my portfolio, but I will just say my mind about the economic policies of my country.

Portugal, just announced extra measures, that put the IRS for people earning over 153,000 euros at 54,5% (on top of that, you’ll pay 11% Social Security).

Well someone that gets paid 200,000 euros a year takes home 69,000 euros. (a family, not a single person; so lets assume it is a family with 1 kid in school).
From those you can take out 2000 euros that you pay for having a house on housing tax and 500 on car taxes. If you spend 3000 on gas a year, you’ll pay 2000 on petrol tax. Anything you buy (except for some very few basic goods) has a VAT of 23%. So lets say you spend around 30,000 on food, clothing and bills a year, so you pay here round 7,000 euros on VAT. Then you’ll get all kinds of extra taxes like municipal water tax, TV/electric bill tax, communications tax…lets say it round around 1,000 euros annually.

At the end of the year:
-Basic Salary 200,000
-Taxes = 131,000+2000+500+2000+7000+1000=143,500
-Net Salary = 56,500
-Basic Spending (petrol, home bills, food, school and insurances) = 24,000
-Net Salary-Basic Spending= 32,500

This means at the end of the year, a Portuguese family that is in the top 1% range of salaries has 32,500 left…(16,25% of the Income) and we are assuming that they aren’t on debt and dont have a mortgage on the house…ITS RIDICULOUS!!!!

Lets see this from someone in the mid salary cap, same situation family gets 20,000 a year (average in Portugal), they will pay around 14% in IRS and 11% on social security, leaving them with 15,000 euros.
From those they have to take also 750 housing tax, plus 250 car tax. They spend 2000 on gas a year, so they pay around 1300 in petrol taxes. Anything they buy (except for some very few basic goods) has a VAT of 23%. So lets say you spend around 10,000 of food, clothing and bills a year, so you pay here round 2,300 euros on VAT. Then you’ll get all kinds of extra taxes like municipal water tax, TV/electric bill tax, communications tax…lets say it round around 500 euros annually

At the end of the year:
-Basic Salary 20,000
-Taxes = 5,000+750+250+1300+2300+500=10,100
-Net Salary = 9,500
-Basic Spending (petrol, home bills, food, school and insurances) = 8,400
-Net Salary-Basic Spending= 1,100

This means at the end of the year, a Portuguese family that is in the 50% top range of salaries has 1,100 left…(5,5% of the Income) and we are assuming that they aren’t on debt…ITS RIDICULOUS!!!!

THIS COUNTRY IS A BUNCH OF IDIOTS THAT DON’T HAVE A CLUE!!!!

Now the portfolio and I'll be looking into SAP and EKF Diagnostics:

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12nd of October

Today a new stock was added to the portfolio

SAP (SAP:GY) - Market leader in enterprise application software, it is a company based in Germany, but present worldwide

Market Cap: 66,4B euro
Profit: 3,438 B euro
PE: 18,21
Yeald last year: 2,03%
Revenue: 14,23 B euro
Next dividend: between 0,60 and 1,10 euro
Dividend last year: 1,10 euro
Ex-dividend date: 24th October
Debt: 10,52 B euro - 3x profit

Strategy: Service orientation in a global environment; 2015 strategy plan based on robust plans and KPI; entering mobile, big data, cloud computing and social network business


Graph: Stock has its ups and down periods but is going strong since 2009 and almost got a valorization of 100%; in the last month they were down 10%, so maybe now that they climbed a bit, is a good time to buy

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Personal Comments:
- From my personal experience SAP is more and more widely used and formation in SAP is a must

Final Note: SAP became more than a company name, is the name of THE software for the company. I am waiting for the share to climb till 70 euros in 2014 and I am selling it if goes under 45 euros

Here the portfolio at the moment:

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