Sample Newsletter: Weekly Update - Part I

POORMANS INVESTMENT STRATEGY # 3 JAN 2012                

by Bruce Brotnov: 14 January 2012

Re: "What we see of God's provisions teaches us to trust Him for what we cannot see of His purposes." JAN 10 -  from "Our Daily Bread" - It is FREE and you can order this from RBC Ministries www.rbc.com for home or internet delivery. I have used this devotional for nearly 40 years. "Heaven is wonderful, but there is work to be done here on earth in the meantime". My question - if you were to die, do you know for sure that you would go to heaven (I John 5:12,13)?

An additional devotional reading (below) from Job relates to human attempted solutions in God's theater that stood out in my readings this week. How often have you seen any reference to God in the hysteria related to "global warming" and receding glaciers (while glaciers are building up in other areas - but an inconvenient truth for Gore and his followers).  

"Whatever the Lord pleases, He does, in heaven and in earth in the seas and all deep places....."Psalm 135:6 (REPEAT)"

"If there is a form of government, then, whose principle and foundation is virtue, will not every sober man acknowledge it better calculated to promote the general happiness than any other form?" --John Adams, Thoughts on Government, 1776" - and -  "REPEAT A good government implies two things; first, fidelity to the objects of the government; secondly, a knowledge of the means, by which those objects can be best attained." --Joseph Story, Commentaries on the Constitution, 1833"

Market Focus: Market closed on Monday (MLK day). After the close on Friday there was some downgrades of bond ratings by S&P (I believe) which hit Greece and Italy with a double drop and France and one other country with single drop similar to what the US received. I don't know how much this will affect our market on Monday but the bears and hedge funds might try to panic the market with the information next week. Earnings reports will start picking up next week but I am thinking "caution" next week especially for the first day or two. Technically the market still looks pretty good as all the indexes are above the 9 -200  DMA supports. It was a tough year in 2011 as I reported last week and will repeat below.  FIXED MODEL: I have the following 10 positions (MFs, MLPs and ETFs for 2012 with 6 providing an average yield of 7.0 %. If you want dividend plays that can also rise in price (esp energy MLPs) then you might consider the ones in the fixed model (AWF, AMJ, EPD, LINE, CHKR and PRPFX) and even the gold miner (GDX) has 0.8% yield. DGP is the etf for gold while UCO is the etf for oil crude and CGMRX is a real estate portfolio, and PRPFX is mostly government bonds. The MLPs apparently have some tax ramifications (K-1 issued and must be reported for annual gains above $1k exclusion, even for IRAs).

In the fixed model we started the first months with FAIRX and they ended up down 32% for the year while we kept RSVAX and it lost 11% for last year. CGMFX was down 26% for the year and we kept it (unfortunately) and CGMRX did better for 1% gain for the year. PRPFX was a little safer (replaced FAIRX on 1 July) with 2% gain for the year. In other words the big mutual fund institutions also struggled in 2011. I only carried 2 MFs into 2012 and added more etfs. At least ETFs don't require a wait until after the market closes to make a transaction.

 

AWF, AMJ, EPD, LINE, DGP, GDX, CHRX, UCO, CGMRX, PRPFX. (1 financial, 3 energy mlps, 1 gold and 1 gold miner, 2 oil and 2 Mutual funds.)

NOTE: The current models are set up with the trading model identical to what we finished with in 2010 and the fixed model (probably no changes in 2011) is listed under "mutual fund" tab and consists of MLPs (Master Limited Partnerships - mostly energy storage and distribution, esp Natural gas), ETFs (electronic trading funds) and MFs (Mutual Funds). The MLPS are new to the fixed model in 2011.

Additional MLPs of interest: CPQ, EPB, ETP, KMP (most energy storage and transportation)

NOTE 1: I use the Wilder RSI default setting of 14 days, which shows a little more volatility than 21 day setting. However, I previously used the 21 days for 10 years following a Chris Manning lecture at the Las Vegas Money Show that was very convincing. I often use tools for some short term trading from Rockwell. com for better use of Bollenger bands, MACD and the RSI. For shorter trading style you might want to use Wilder RSI of 5 or 7 days.

STRATEGY REPEAT: If the market is holding I like the old strategy of forgetting about what we are down, but evaluate a holding as if you were buying for the first time - does it have good value, potential support, solid growth? I think we need a confirmation day following a positive day to start thinking about much buying. Maybe a nibble here and there but no rush to major buying as we have to get back through overhead support in most stocks (that is when holders got caught in the fast drop and they will be selling on any bounce, just to get out of a holding).

ttp://stockcharts.com/h-sc/ui?s=$INDU&p=W&b=3&g=0&id=p49816239957&a=153771146&listNum=1

Fixed Model History: 2007 Mutual Fund model had a return of 20.18% for the weighted 8 funds, and were led by CGMFX with 79.9% gain. But the world turned upside down on mutual fund managers in 2008 following the loss of the uptick rule (July 07) and the financial disaster that was partially the fault of Congress and their excessive regulations in some environmental area and lack of oversight of Freddie/Fannie. The 8 Funds were down around 50% for 2008 and the 3 major averages were down 37.6% but the 7 funds/etf did better in 2009 with 28.0% return vs 28.7% for the 3 main index averages. For 2010 the Fixed portfolio of a combination of MFs and ETFs ended with 26.8% gain vs 13.6% for the average of the 3 main indexes as the model portfolio was led by SLV. The Mutual funds and precious metals had more losses than gains in 2011 and the final loss was - 5.43 %. Yahoo financial now has 2011 performance for MFs.

STRATEGY HINT 2012 Guidance for trading model: We started the year with 22 % cash and we continued with the positions held over from 2011 with some gold oil and even a hedge positon. If the indexes start breaking supports we'll increase our cash position or use inverse etfs.

REMINDER: Currently I use stockcharts.com for the 100 stocks in the database and watch for stocks breaking up through 50 Wilder RSI (14 day default) for potential breakout buys. I list stocks that look like reasonable buy considerations (depending on the overall market). I run my watchlists (taken from recent earnings reports which have strong growth criteria) in HGS as I am currently running stocks that reported in May and later and met my growth criteria. I typically run lists of stocks that have reported in the last 4-5 weeks.

OVERVIEW COMMENTS: In 2008 even the mutual funds did not figure out a way to win in a down market (election year constant negativity in the media) but with the big drop from 2007 when Dems took over control of Congress and basically Government, the DOW dropped from just over 14,000 points to just under 7,000 in March of 2009 and then bounced back for 18.8% gain in the DOW (43.8 % for the market leader - Nasdaq). In 2010 the DOW had a 11.0 % gain and the 3 major indexes averaged 13.6% gain for the year.  

Here is the 11 year average for the major indexes (3 major averages are down an average of 0.1 % per year):

DJIA up 5.5% this year or up 2.0% per year from 10021.17
Nasdaq down 1.8%   "     "    or up 4.5% per year from 1950.40
S&P 500 down 0.0%   "     "   or up 0.9% per year from 1148.00
Russ 2000 down 5.5%          or up 5.9% per year from 488.58

The small caps (represented by Russell 2000 or S&P 600) trailed the major indexes (only 3 times out of 12 years).

VIX - It closed at 20.91 this week and over 19 where we prefer not to see it. When it is over 30 we pretty well know the bears are back on full attack mode. The DOW broke the previous low of 7449 on 11/21/09 and the hit a new low of 6465 on 3/6/09 and formed a new bottom. The VIX hit 59 recently but came back down to 20 area and holding over 20 and well under 200 DMA (27.07).  

Changes in Major Indexes and Model: (Annual goal for the model is to beat the S&P 500.) - MODEL UNKOWN THIS WEEK

INDEX PEFORMANCE  (1 week)                                

DOW at 12,422 + 1.6 % for 2012; (+ 0.5 % for week)                  MODEL A: + 0.8 % for 2012 and (- 0.8 % for week) 16 % cash (w/ hedge - SQQQ, VXX).
Nasdaq at 2710 + 4.0 %; (+ 1.4 % for week).                              MODEL B: + 1.0 % for 2012 and (- 1.5 for the week) 0 % cash (Mut Funds/MLPs/ETFs)
S&P 500 at 1289 + 2.5 %; (+ 1.0 % for week).  
Russell 2000 at 764 + 3.2  %(+ 2.0 % for week)
Poormans Fixed Model B of 10 MFs/ETFs/MLPs: + 1.0 ytd (compared to - 5.43 % for 2011, + 26.8 % for 2010, + 28.0 for 2009 and - 50.4% for 2008, +20.1% gain for 2007 and 14.3% for 2006).  
             
Some major index technical information: (e.g. 50 DMA ).  

DOW: >9/21/50/200 ; <  DMAs, support at (12,032)/10404/9936/9614 Resist. 12,514/12,753 (See Chart)
NASDAQ: >9/21/50/200; <  DMAs, support at (2618)/2298/2061; resistance at 2726/2753/2878/2887
S&P 500: >9/21/50/200; <  DMAs, support at (1244)/1074/1039/1010; resistance at 1296/1370
Russell 2000: >9/21/50/200; <  DMAs, support at (733)/601/588/470; resistance at 770/860/868


POORMANS STOCK RATINGS FROM DATABASE:  Stocks in red are candidates for replacement. See website mid-week alert (updates) for model trade/target strategy! Updates are posted nightly also at "Model Trading Strategy" on the website. Keep an eye on model stocks under 50 RSI currently (caution). (General rule: a number above 50 RSI means more buyers than sellers.) Over 70 RSI can also be interpreted as being over bought - caution. (Source: stockcharts.com). Sometimes 30 is a place for bouncing.

Stock   RSI         Comments (add 10% to targets for leaders in their industry) NOTE: Wilder RSI set at standard 14.  

CDE  49.1 - Gold/Silver Mine, High/low 26.81/22.94, T. 42
EZPW 53.0 - Pawn Shops, recent High/low 27.72/25.33, T. 46
GPOR 54.7 - Oil Drilling, good earnings, 200 DMA 32.36, T.50
HFC  65.8 - Oil Refinery, coming off base, h/l 27.55/21.13 T. 40
JAZZ 70.1 - Specialty pharma, 50 DMA 38.74, rec. high/low 49.14/34.39, T. 67
MIND 65.9 - O & G Eq & Sys, high/low 24.86/21.68 T. 33
QCOR 37.2 - Pharma, high/low 44.18/33.66, 50 DMA 41.94, T. 54
RIC  50.0 - Mine (gold), 50 DMA 11.35 Rec High/low 11.94/9.60, T. 15
SIMO 58.4 - Semiconductors, 50 DMA 19.85, high/low 23.70/18.30 T. 32

CHKR 55.7 - Royalty trust (div. play) high/low 24.72/22.10 T. 36
DGP  49.6 - Gold ETF Recent high/low 53.58/44.93 T. 97
LINE 53.4 - Recent high/low 38.45/35.18, MLP (Master Ltd Partnershipdiv play) T. 53
SQQQ 37.1 - Inverse etf (QQQ), high/low 21.77/17.10 (short term hold)
VXX  34.1 - ETF - long DJIA, high/low 44.05/30.01 (short term play) T. 69

 

***** ADDITIONS TO DATABASE: Disclaimer: I nibbled on all 4 this past week.

CKSW - Clicksoftware Tech (R=10, 10.30) - provides workforce and service management products and solutions. The company offers service optimization suite of solutions,... Long term debt of 0% and stoxline targets of 12.12 and 14.16 for year. I owned this one about 8-10 years ago. www.clicksoftware.com

FTK - Flotek Indus (R=9, 12.35) - develops and supplies drilling and production related products and services to the energy and mining industries in the United States and internationally. L.T. debt (unk) and targets of 15.34 and 17.91. www.flotekind.com

OCZ - O C Z Technology (R=7, 7.85) - design, manufacture, and distribution of Solid-State Drives (SSD) and computer components. It specializes in high-speed memory in the enterprise and consumer SSD markets,..L.T. debt of 0% and targets of 10.22 and 11.94. www.ocztechnology.com

SPPI - Spectrum Pharmaceuticals (R=10, 15.17) - a commercial-stage biotechnology company, primarily focuses on oncology and hematology. The company engages in acquiring, developing, and commercializing a broad and diverse pipeline of late-stage clinical and commercial products. L.T. debt of 0% and targets of 18.69 and 21.83. www.spectrumpharma.com

POSSIBLE ADDS: ABT, BRCD, CHSI, CLR, CMLS, CNK, CJES, DHI, EGO, GLCH, GRA, HL, KGC, NLST, RAH, RAM, REMX, ROC, SIAL, SPA, STMP, SVM, TGC, TOL, TRU, VRX.   Ones in bold were also researched recently and possible future adds.

LEADING INDUSTRIES: Building Prdts, Biotechnology, Managed Health Care, Construction Materials, Home Improvement Retail, Distributers, Trading Cos & Distrib, Home Building, Electronic Component, Industrial Gases, Const & Farm Machinery, Paper Products, Commodity Chemicals, Technology Distributers,  Home furnishing retail, Food Distributers.      
 
I am using HGS exclusive these days even though they are different somewhat from another source that I am not allowed to mention. HGS has 146 industry groups currently. Last place: Internet Retail (1/14).


INTERESTING SITE WITH GOOD TECHNICAL INFORMATION: WWW.STOXLINE.COM (I mostly use for the posted target prices)

INVESTMENT ADVISORS; 51.1 % bullish and 29.8 % bearish. – More BULLish this week.  Numbers seem often to trail the market direction.

**** $100,000 FIXED $100k Model - MLPs, MFs & Etfs from 1 Jan 2012: $101,004. (+ 1.0% for year and - 1.5 % this week.) (Also see tab "Mutual Funds" - 1 Change was made in 2011)  - Note: this model did not make an adjustment for capital gains distributions by the mutual funds. The results would be a little bit higher and I'll check after the end of the year results are posted on yahoo. For 2012 I am back on quicken portfolio tracker and they make the distribution adjustments when they happen.
 
**** $100,000 TRADING Model from 1 Jan 2012: $100,836  (+ 0.8 % for year and - 0.8 % for week). We bought HFC and SQQQ this week as the later is primarily a short term hedging position against a market drop, especially the Nasdaq. I tried for some EPD @ 36.65 as it broke above the down trend line and will take another look next week if the downgrades in Europe don't result in a strong drop in our market. I will sell VXX when it breaks 30 or the VIX breaks below 20 as they should happen about the same time anyway.

2012 Model (100K) Contents (SH/SYMB/Purch RTG & PRI): 200 CDE(6, 24.14), 300 CHKR(etf 24.04), 100 DGP(gold etf, 47.61), 200 EZPW (4, 26.37), 300 GPOR(7, 29.45), 300 HFC(7, 26.20), 100 JAZZ(7, 38.63), 200 LINE(mlp 37.91), 150 MIND(8, 21.84), 200 QCOR(9, 41.58), 800 RIC(10, 10.76), 250 SIMO(11, 20.48), 300 SQQQ @ 17.40, 150 VXX (volatility index, 35.50).  Cash balance: $16,577.  


2011 Model
(100K) Contents (SH/SYMB/Purch RTG & PRI): 200 CDE(6, 22.90), 300 CHKR(etf 19.75), 100 DGP(gold etf, 40.85), 200 EZPW (8, 28.21), 300 GPOR(8, 21.68), 100 JAZZ(9, 19.68), 200 LINE(mlp 37.49), 150 MIND(8, 22.24), 300 NLY(4, 18.20), 200 QCOR(6, 23.95), 800 RIC(8, 7.60), 250 SIMO(11, 21.12), 150 VXX (volatility index).  Cash balance: $22,975. Tough year keeping up with manipulations based on daily changes in Europe "concerns/optimism". (Even the fixed model struggled this year with peak in gold and silver and losses by mutual funds.)

Positive candlesticks are decent indicators for stocks moving up, especially in a positive market. Source: Stockcharts.com & Highgrowthstocks.com and also note that the Database list includes some stocks from past years in database or under consideration.

DATABASE: EPD, NUAN, RGR, VPHM,                
WATCHLIST (Not researched): MFRM, KGJI,            
INTERESTING CHARTS. APD, HFC, PNX, MOS, MSB, MWE, RAM,

                                                                     WEEKLY UPDATE - PART 2  a/o 1/14 New reference as of 1/1/12 most ratings changed.

2012 LEADERS:CF, RIC, SIMO, SPPI @ 10.

Biggest losers 2012: SPRD(-21 %), MF(-15), CLFD(-13), TSTC(-12), QCOR(-12), WLT(-7), EGY(-6), OTEX(-5).  

Gains Leader for 2012: Nes Leader: SIMO.  (KEM closed out 2010 with 308% gain and TSTC closed out 2009 WITH 1307% GAIN)

Leading gainers (+ 13 % or more) in database for 2012: TPCG(+ 25 %), FTK(24), HOGS(22), CRUS(22), MCZ(21), COOL(20), JAZZ(20), KRO(20), CF(19), ASYS(18), OCZ(18), DEER(18), BPI(17), HFC(16), NUAN(16), LXU(16), CCIX(16), GTI(14), KBR(13), MGIC(13), KS(13), F(11), NXY(10), PRX(10), BRLI(10).

***** DROPPED THIS WEEK: Weak Earnings or charts: SUMR, UFPT (MORE COMING OFF SOON).

***** RATING CHANGES (2 or more points): Pay close attention to stocks that have changed rating by more than 2 points, especially if they just reported earnings. Stocks can easily move 2 points, simply by moving to positive rather than negative for the year to date. Few changes - awaiting earnings.

MAJOR changes this week: UP: none;  Down: none.

Up: Too many to list with change of reference point from 1 Jan 11 to 1 Jan 12.

Down: See above note.

***** POORMANS DATABASE STATISTICS

AVERAGES: 2012 year to date gain for 96 stocks: + 5.7 % ytd and + 5.7 % for 2 weeks.  PE = 13; E/P = 2.52

NOTE: See website for TARGETS (BOTTOM HALF LISTED BY RATING).

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SUBSCRIBER INFORMATION: $45 Subscription fee for 2- months (JAN 2012 - Feb 2012) based on $25 per month; OR $125 for up to 6 months to end of MAY 2012. It includes weekly updates, mid-week alerts (also sent by e-mail),  and daily comments (model trading strategy) at Poormans.com home page. SEE:
http://www.poormans.com. E-mail: Bruce@poormans.com  
Send checks to: Bruce Brotnov, 1111 Richardson Ave, Lewiston, ID 83501


Spiritual help:(Click on it)

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Poormans information is obtained from data sources which I believe are reliable; including Ameritrade, Fidelity, HighGrowthStocks.com(HGS), Yahoo, Stockscharts.com, Excite and Quicken as well as public forums and magazines. I am not a broker nor am I authorized to provide specific investment BUY/SELL advice to individual subscribers; rather, I provide information to assist individuals to make their own investment decisions. However, I am a registered Investment Adviser, registered with the State of Idaho. Past performance is no guarantee of future success. No retransmitting of this update is authorized without permission from the author
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