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           Our 28th Year of Client Service!

Meeting Date

Meeting Summary

January 25, 2011 YOUR BEST INVESTMENT IDEA FOR 2011

After presenting the 2010 Best Idea Winner Awards and collecting a crop of clever 2011 picks, the attendees bid long-time moderator Alan Liebman fare-well with kind words and good wishes. The group also laid out a calendar for the coming year and set member assignments for member communications, webpage creation, group portfolio monitoring and speaking topics.

November 23, 2010 LAME DUCK SESSION - 20 YEARS IS ENOUGH

Outgoing (in more ways than one) moderator Alan Liebman (What Me Worry about the real estate market?) selected some of his favorite investment ideas from the 220 meetings he has chaired to share with this month's NorthShore-AAII attendees. Contributions came from the work of John Train, Richard Geist, Belsky and Gilovich, Louis Rukeyser, Werner DeBondt, Harold Evensky, Charles Ellis and many others. 

October 26, 2010

AN INTRODUCTION TO STOCK OPTIONS

Member Vic Grossi presented an interactive, online overview of stock options. He reviewed the history of options and describe their main uses... which range from conservative income generation to speculative capital gain strategies. Vic provided many examples of options trades. It was valuable for everyone to learn how options function even if they don't use them directly... the fund managers and advisors who serve us are very likely using options on our behalf.

September 28, 2010

"THIS TIME IS DIFFERENT: EIGHT CENTURIES OF FINANCIAL FOLLY"

Alan Liebman reviewed the 2009 book "This Time Is Different" by Professors Carmen Reinhart and Kenneth Rogoff. This detailed collection of information about government and private financial catastrophes since 1200 A.D. has led the authors to conclude there are clear patterns in economic failure ... they think the patterns are so strong that "economic disaster is the same this time, every time!"

The authors shows that every emerging country has gone through a period of serial bond default, with some supposedly developed countries like Greece continuing to do this even today. Also no country in history has figured out a way to avoid banking system failures! ... as we re-learned in 2008. 

August 24, 2010 SECTOR ROTATION -- LET THE ECONOMIC CYCLE HELP YOU PICK STOCKS!

Guest Host and NorthShore subgroup member Bob Phillips combined two interesting subjects... the economic cycle [which seems to be stuck at "recovery" these days] and Stock Sector investing. Bob talked us through the stages of the classic "boom & bust" cycle, telling  us that Industrials, Basic Materials and Energy sectors are advantageous in the "Early Recovery" stage, then Consumer Staples and Services are favored in the "Late Recovery". Using "Spyder" sector ETF's as his example, Bob's presentation would have us favor funds [with ticker symbols] XLE, XLB and XLI in Early Recovery and add XLP and XLY in Late Recovery. 

July 27, 2010 HOW I USE STOCK INVESTOR PRO TO FIND SUPERIOR STOCKS!

Guest Host Marshall Ball walked the group through his selecting process that seeks above-average securities. He uses the AAII Stock Investor Pro database as well as AAII's Shadow stock rules for initial screening.

To illustrate his methods, Marshall studied Flexsteel [ ticker: FLXS ] and International Shipholding [ ISH ]. He discussed the data parameters he gives the most weight and how he adds technical indicators to the screening process. Ball also identified websites he finds helpful when making buy and sell decisions.

June 22, 2010 WHAT DID "FATHER OF STOCK INVESTING" BENJAMIN GRAHAM REALLY TELL YOU TO DO!

Professor Benjamin Graham (1894 - 1976) published "Security Analysis: Principles and Technique" with David Dodd in 1934, the first textbook for students of the stock market. In 1949, Graham published a popularized version of his ideas for laymen under the title "The Intelligent Investor." Graham's best known disciple is Warren Buffett who called Graham "the second most influential person in my life after my father".

At this meeting, group leader Alan Liebman reviewed the tenets of Graham's stock analysis methods. Contrary to today's day-trading mentality, Graham wanted investors to think like an owner of the business. They should be concerned with accounting ratios; debt levels; and a history of rising profits and dividends. Liebman applied nine Graham criteria to four companies: Apple Computer [ AAPL ] ; Pfizer [ PFE ]; General Dynamics [ GD ]; and Cash America [ CSH ]. The methodology favored Pfizer and Cash America because their prices represented a greater "margin of safety" against losses than the others.

May 25, 2010

INTERNET TOOLS FOR STOCK SELECTION

Group member Howard Solomon presented a comprehensive view of the basics of stock selection, with a special focus on Internet information sources. Howard discussed what drives stock prices... illustrating "fundamental" factors such as earnings, "macro" factors such as the world economy, and "technical" factors such as moving averages.

He used real-time viewing of Internet stock data websites and explained what "homework" investors should do before they press the "Buy" or "Sell" button on their broker's website. 

April 27, 2010 LOSERS

It's tough making money in stock markets. Not only can't investors pick stock market winners reliably... they can't even pick losers! It's well known that many a downtrodden, troubled or neglected company turns around and becomes a winner (just after you've sold the stock, usually). There are even monikers for people who seek loser companies... "contrarian investors", "vulture investors." To test this viewpoint, attendees were asked to choose a "dog" stock or mutual fund, a security they think will strongly underperform the market. The picks, to be tracked during the coming year, included... Monsanto [Ticker: MON ]; Intuitive Surgical [ ISRG ]; Apple Computer [ AAPL ] and Enernoc [ ENOC ].

March 23, 2010 OPPORTUNITIES IN WORLD SHIPPING

North Shore subgroup member Demetri Criezis is an accomplished sailor and a long-time student of the world shipping industry. He reviewed the industry, with special attention to Greek contributions and such topics as major ship types, effects of regulation, major costs and revenue sources. Demetri also reviewed about 25 publicly traded shipping companies and give us his expectations for those firms. His current favorites included Aegean Marine Petroleum Network [Ticker: ANW ] and Teekay [ TK ] in the tanker business; and Eagle Bulk Shipping [ EGLE ] and Safe Bulkers [ SB ] in bulk dry shipping segment.

February 23, 2010

INVESTING POTPOURRI

Group leader Liebman discussed a mix of subjects of general interest from the past half-year's financial literature:

(1) Why the SEC has barred the publisher of Value Line from running her own company for life!  (2) New kinds of municipal bonds you can put in your tax-deferred retirement account... but should you? (3) If you buy and sell passive (i.e., "index") funds, does that make you an active passive investor? Is this a good thing to be? (4) Do investment fund managers "eat their own cooking"? (5) Newer fangled Exchange-Traded Funds ... are investors dizzy yet? (6) Should you convert your Traditional IRA to a Roth IRA now that anyone is allowed to? 

January 26, 2010 YOUR BEST INVESTMENT IDEA FOR 2010

The winners of this year's contest had the tailwind of a +26% rise in the S&P 500 Index and a sharp market turnaround for help. It won't be surprising then that winners scored outsized gains: top honors went to coal supplier Alpha Natural Resources' [ Ticker: ANR ] for a +152% jump; to American Eagle Outfitters' [ AEO ] 72% romp; iShares FTSE Xinhua China 25 Index Fund's [ FXI ] +56% advance; farm machinery maker Deere's [ DE ] +48%; and Fairholm Fund's [ FAIRX ] +46% win.

For the coming year, attendees picked more venturesome securities than a year before... as often has happened after a bull market run. Six stocks selling for less than $10 were suggested including Blockbuster [ BBI ], Citigroup [ C ] and restaurant operator Ruth Hospitality [ RUTH ]. Developing country passive fund iShares BRIC Index [ BKF ] was put forward to try and repeat its stellar 2009 run-up; while two people thought pawn shop operator EZCorps [ EZPW ] would get advantage from high unemployment.

November 24, 2009 THE ROAD TO RECOVERY

John Glasgow, a financial planner and Merrill Lynch Vice President, discussed the state of the economic recovery and identified where to find investment opportunities now. He answered attendee questions on a wide range of financial planning topics.

October 27, 2009 YOUR MONEY & YOUR BRAIN

Newspaperman and financial columnist Jason Zweig's book Your Money & Your Brain weaves the disciplines of neurobiology, economic psychology and investing into an intriguing cloth. Group leader Liebman reviewed a few of Zweig's interesting findings, such as: 1) the "mere exposure effect"; 2) the "three's company" effect; and 3) Murphy's Law of investing. Participants learned that if they don't take account of genetic and behavioral imperatives buried in their "human nature", they can sabotage their own financial security plans.

September 22, 2009 WHAT INVESTMENT PRINCIPLES DO YOU STILL BELIEVE?

The "Great Recession" of 2008 cut long-term average portfolio returns to nil or negative numbers which altered public confidence in investing, and may have changed it's view of how to invest. It was noted that the public has unknowingly or intentionally been acquiring riskier and more speculative securities. E.g., buying small cap stocks, second world securities and long term, low rated bonds. The group discussed the worthiness of such investing chestnuts as "buy and hold", diversification, guru emulating, and day trading.

August 25, 2009 STIMULUS STOCKS

Early this year, the Federal government decided to push about $1 trillion into the economy to stimulate commerce and infrastructure activity. It is reported that only 10% of that cash has been disbursed so far and most of it won't move until 2010 or 2011. So, in this session, attendees suggested companies or industries that stand to benefit from this largesse. Among the ideas were retail companies [examples: Home Depot -HD, Kirkland's -KIRK]; industrial and commercial equipment companies [Catepillar -CAT, Illinois Tool Works -ITW]; and financial / real estate entities [Hartford Financial Services -HIG, ProLogis -PLD].

July 28, 2009 CONTAGION

Many people have been trying to get their minds around the world market collapse of 2008. This month, North Shore group member Gil Adams, gave us answers provided by John Talbott, a one-time investment banker and sometime scholar in his book Contagion. Personal politics filter Talbott's conclusions. Though he cites reckless borrowing and lending as a root cause of market disintegration, he blames everyone but no-money-down home buyers and big government bureaucrats. Talbott's crystal ball foretells decade-long US stock market stagnation and a long, deep recession. Therefore, he says, keep your money in cash, TIPS, gold, and the China stock market.

June 23, 2009 THE LEGACY OF PETER L. BERNSTEIN

Peter Bernstein had a privileged birth to accomplished New York parents. His upbringing and education gave him entrée to Harvard and the Federal Reserve. He used these gifts wisely and became a noted economics professor, the author of classic books in finance and investing [e.g., Capital Ideas, Against the Gods], and the founder of an eponymous New York investment advisory firm. Bernstein died at age 90 earlier this month and was lauded for his clear-headed view of investing, his understanding of risk, and his insights into human nature. Two years ago, Bernstein wrote: “For most of human history, in fact, the main source of economic risk was the weather. …Today, risk has shifted from a bet on what nature will provide to an intricate series of bets on what other players in the economy will decide.” What a straight-forward description of the origin of 2008's market collapse!

May 26, 2009 PUTTING REAL ESTATE IN YOUR PORTFOLIO

Following manager David Swensen's idea that investors should strive for greater diversification, we asked how a real estate commitment for individual investors can be built. Non-professionals usually add real estate holdings through ownership of publicly-traded REITs ["real estate investment trusts"] or by buying real estate mutual funds or real estate exchange-traded index funds. With these intermediaries, individuals can own an interest in shopping malls, apartment buildings, warehouses, self-store farms, and/or office buildings. After a general review of these products, some specific products recommended by one individual member were: Inland Real Estate Corp (office buildings) [Ticker: IRC]; CGM Realty Fund [CGMRX]; Host Hotels & Resorts [HST]; and Public Storage [PSA].

April 28, 2009

10th YEAR of

ARCHIVED

MEETINGS!

UNCONVENTIONAL SUCCESS

In the ten-year period through mid-2007, David Swensen, the manager of the Yale University endowment portfolio, produced a compound annual return of 17.8% versus the 5% annual return of the S&P 500 Index in the same period. This was the best record of any university, foundation or pension fund manager. 

To promulgate his methods, Swensen has written two books in recent years, one for professionals and a second, Unconventional Success, to help laymen find better investment pathways.

Attendees learned that Swensen favors "diversification and equity orientation". Allocation, he says, is more important than security selection. Rebalancing to your target allocations is crucial; failure to do that is a "passive form of market timing." Amateurs should avoid complex products like hedge funds, and also avoid bonds, other than Treasuries, because their features limit total return. Swensen concludes his book with a broad condemnation of mutual fund industry practices. Funds charge unconscionable disclosed and hidden fees, he argues, and often deliver weaker performance than comparable index-tracking products.

March 24, 2009 DOLLAR STOCKS

The average stock in major domestic and international indexes has had its price cut in half since the Fall of 2007 with some commercial titans experiencing a 60% to 90% price slash. While some of these "cheap" companies are sliding toward bankruptcy, others will be bought by stronger competitors or private equity firms, and some will re-emerge with vigor once the economy is reset to "grow."

At the time of this meeting, 5 of 30 Dow Jones Industrial Average stocks were selling for less than $10 per share as were 95 components of the S&P 500 Index. Group members were asked to recommend a "dollar stock" they believe to be a buying opportunity now. Some of the companies cited by individual attendees were: Lululemon Athletica [Ticker: LULU]; Emergent Group [LZR]; General Electric [GE]; PennWest Energy Royalty Trust [PWE]; and Dow Chemical [DOW].

February 24, 2009 WHAT CAN STOCK-AVERSE INVESTORS BUY?

The group considered income securities, first by reviewed the prevailing yields on money funds, CDs, Treasuries, municipal bonds and corporate bonds. All these yields were near or at historical lows. The most compelling products were tax-exempt municipal bonds which recently paid higher yields than Treasuries, a reversal of the norm. [See Muni Bond Article]. The Altman Z-Score was explained and considered as a measure of corporate solvency. Finally we reviewed the ways that investors can participate in gold markets, which had a positive return during 2008. One efficient ownership form (if at-will access to gold metal is not required) is to buy shares of exchange-traded fund SPDR Gold [ GLD ]. GLD's share price hugs the value of 1/10th ounce of a store of gold metal the fund retains in secure depositories around the world.

January 27, 2009 YOUR BEST INVESTMENT IDEA FOR 2009

The Winners of the 2008 Contest were easy to spot... they were the only four stocks that did NOT drop -16% to -98% in this remarkable, bad year! First place for 2008 was the 45% gain for Budweiser, thanks to a good acquisition call. Second place went to Darden Restaurants [DRI] with a 16% win; Third place to commercial bakery Flowers Foods [FLO] on a +5% rise; and finally Fourth place to homebuilder Toll Brothers [TOL] for its -1% delivery.

Best Ideas for 2009 fell into three categories: (a) large "defensive" companies such as Philip Morris [ MO ], Exxon Mobil [ XOM], Johnson & Johnson [ JNJ ] and IBM Corporation [ IBM ]; (b) turnaround plays such as American Eagle Outfitters [ AEO ], Deere [ DE], and iShares China Index Fund [ FXI ]; and (c) lesser known companies that might break into the limelight such as Isis Pharmaceuticals [ ISIS ], Hudson City Bank [ HCBK ] and coal miner Alpha Natural Resources [ ANR ].

November 25, 2008

TOPS AND BOTTOMS: MARKETS IN EUPHORIA AND PANIC

North Shore group member Sandy Harlow led our final discussion for the challenging year 2008 with his examination of investor sentiment at major market tops and bottoms. He compiled a list of 13 stock market turning points since 1929, with salient contemporaneous commentaries for each one. 

One interesting characteristic this list showed is that most severe plunges bottomed out at approximately a 50% drop from the previous market top. The significant exception was the 1929-to-1932 crash which had a -48% first phase "bottom", followed by a second leg down which produced a composite decline of -89% from the September 1929 top.

Sandy showed that at most turning points, many supposedly knowledgeable people had mistaken expectations. Investors often project today's trend into tomorrow; this may work on the average day but cannot protect us from pivotal sentiment turns up or down.

October 28, 2008 BLUE STOCKS, RED STOCKS

In recognition of the upcoming climax of the Presidential electioneering process, NorthShore Subgroup members sought to identify stocks that would rise if Democrat Obama won the Presidency and those that would be favored if Republican McCain won. A number of people identified traditional energy and defense stocks as winners if Republicans succeeded. Some stocks identified were Kinder-Morgan Partners [ Ticker: KMP ], Honeywell [ HON ]; L3 Communications [ LLL ] and General Dynamics [ GD ]. A Democratic victory was expected to help alternative energy and developmental pharmaceutical sectors. Specific winners suggested were Questcor Pharmaceuticals [ QCOR ]; Aero-Vironment [ AVAV ]; and First Solar [ FSLR ].

September 23, 2008 Analyzing Stock Data Sheets (with Jim Kahan's help)

At the September meeting, the NorthShore Subgroup reviewed the well known Standard & Poor's and Value Line data sheets for one typical manufacturing corporation [Abbott Labs (Ticker: ABT) ] to improve our understanding of the information they contain. Commentary and interpretation were provided by Jim Kahan, a former CPA and today a twenty-year account executive veteran with SmithBarney in Northbrook. Jim answered questions about: the different forms of corporate earnings and of price/earnings ratios; stock "beta" divergences between data tabulators; and his three most important analysis factors ["trend identification, cash flow and return on shareholder equity"].

August 26, 2008 MAKING DISTRIBUTIONS DURING YOUR RETIREMENT YEARS

How should you pay yourself in retirement? What amounts can you withdraw without worry that you'll run out of assets while your heart's still twitching? Should you take distributions from personal or tax-deferred accounts when you have the choice? What portfolio allocation should you maintain during the withdrawal years? When is a "conservative" retirement allocation actually riskier than a "risky" allocation? To begin answering these questions, the group read: Will Your Savings Last? What the Withdrawal Rate Studies Show" by William Reichenstein [AAII Journal, July 2008]. 

Two other articles from the AAII Journal are also worth your attention: Withdrawal Strategies to Make Your Nest Egg Last Longer - William Reichenstein  AAII Journal, November 2006]  and  Optimizing Your Retirement Income: What Works Best and Why - Christine Fahlund [AAII Journal, August 2008].

July 22, 2008

Another Double Header: (1) "Open Mike" session and (2) Natural Gas Companies

The NorthShore subgroup studied five Natural Gas companies... after an introduction to the gas industry, the energy sector, as well as pricing and production trends. Within the gas industry, there are players doing exploration, others operating producing wells, some performing contract well drilling and maintenance, and also pipeline and liquefied gas transporters. The specific corporations discussed were: El Paso Corporation [Ticker: EP]; Energen [EGN]; Enterprise Products [EPD]; Questar [STR]; and XTO Energy [XTO].

June 24, 2008 DOUBLE HEADER: "OPEN MIKE" AND "HOW RANDOMNESS RULES OUR LIVES"

The group successfully tried "open mike" discussions to answer attendee questions. Among the topics discussed were: (1) the effect of commodity speculators on energy prices; (2) are there trading differences that change with the time of day?; (3) when to sell stocks?; (4) corporate governance update; (5) baby boomer effects on stock markets.

Afterwards chairperson Liebman discussed investing-related excerpts from professor Leonard Mlodinow book The Drunkard's Walk [Pantheon Books, 2008] which argues that many life events are consistent with random causes. We explored whether "star" mutual fund managers like Bill Miller deserve our allegiance? Whether experts really pick winning stocks? Whether new management can jumpstart a company?

May 27, 2008

Leaden Stocks To Win You Gold... picks for the recovery ahead

It's possible the worst of the current housing / credit bear market is over! Since we know stock market participants always try to anticipate the future, this is a time for NorthShore Subgroup members to identify turnaround stocks that could bring cheer to 2008 portfolios. The following opportunities were identified by individual attendees: mortgage originator IndyMac [Ticker: IMB ]; diversified floor covering manufacturer Mohawk [ MHK ]; brokerage Morgan Stanley [ MS ]; international engineering & construction firm Fluor [ FLR ]; solar power wafer maker Renesola [ SOL ]; rock crusher Vulcan Materials [ VMC ]; and fluid control equipment maker Teleflex [ TFX ].

April 22, 2008 "HOW I PICK STOCKS" --ELLIOT YOUNG [2007 NorthShore-AAII "Best Ideas" Contest Winner]

Elliot Young is a long-time attendee of the NorthShore group meetings who has identified winning stocks several times over. His recommendation of Rio Vista Energy Partners [Ticker: RVEP] rose 123% over twelve months to win the 2007 "Best Ideas" contest. 

Elliot described his quantitative approach for finding under-valued stocks using the AAII "Stock Investor Pro" database. The heart of his screening uses some of Benjamin Graham's criteria. Another important element, Elliot says, is to weed out cheap companies that could become worthless. He will discuss criteria that accomplish this. When he isn't at NorthShore meetings, Elliot crunches numbers for Commonwealth Edison.

March 25, 2008 The World According to Diane Swonk and Tom's Tactic for ETF Selection 

Group member Tom Hunter presented the views of economist and Evanston resident Diane Swonk who writes a monthly newsletter for Mesirow Financial. Swonk was  previously Chief Economist at Bank One before its acquisition by Morgan Chase. She is the author of the book "Passionate Economist". An archive of Swonk's monthly observations and prognostications can be found by clicking Swonk Archive.

After discussing that "big picture", Tom described his screening method for finding specific high-performing exchange traded index funds ["ETF"s]. Some of the screen's current top ETF choices were: a Brazil index fund [Ticker: EWZ]; a steel sector fund [SLX]; an emerging market smorgasbord [EEB], and an agricultural commodity fund [DBA]. 

February 26, 2008 No More Fooling Around -- The NorthShore Subgroup is Going to Solve the World's Problems

Using the "wise crowds" methodology presented in James Surowiecki's recent book The Wisdom of Crowds, the Northshore SubGroup resolved all the world's problems. We got to the bottom line using the power of our collective intellect... the average conclusions of people exercising their private counsel, acting independently and coming from a diversified pool of backgrounds has proved to be very powerful. Surowiecki explains this method supports Google's webpage search ranking system; supports the Iowa Electronic Market election predications; and is the basis for arcane problem solving by scientific sleuths.

As a prelude to this discussion, the attending [albeit small crowd!] came to the following "wise crowd" conclusions: (1) Home sales won't rebound for 16 months [June 2009]; (2) There's a 28% chance that a major US money center bank will go bankrupt or require a bailout in the coming year; (3) The DJIA will end 2008 at 14,100 [about an 8% gain from its value on this meeting date and a 6% gain from its 2008 beginning value]; (4) At least 75% of US troops will be withdrawn from Iraq no sooner than 2011; (5) A Palestinian state won't be recognized by the UN until 2015; (6) Oil will no longer be significantly used as a fuel no sooner than 2035. (7) The first complete pharmaceutical or "painless procedure" cure for some common type of cancer will be available in 2016. 

January 22, 2008 YOUR BEST INVESTMENT IDEA FOR 2008

Against the -7% drop by the S&P 500 during the 2007 term of our contest, our Best Ideas winners gave superb recommedations. First place was taken by Rio Vista Energy Partners [Ticker: RVEP ] which gained 123%; a second-place showing (selected by two members) by index fund iShares FTSE/Xinhua 25 Index [ FXI ] which rose 44%; South Africa-based energy conglomerate Sasol Limited ADR [ SSL ] with a 34% gain in third place; and  lighting fixture maker Genlyte Group [ GLYT ] capturing fourth place with a 26% gain on a late-in-the-year takeover offer.

For the coming year, people chose some downtrodden financial stocks. Others looked to defensive drug, food and beverage entities. A third group just went with their best analytics choice.

November 27, 2007 ASIAN STOCKS

The potential for attracting one-point-three billion Chinese customers and one billion Indians; for choosing among tens of millions of educated employees; or for having a state near-monopoly can make a routine business plan into a money fountain in these emerging economies.

But caution is advisable. The Chinese market is tightly controlled by the government; financial reporting and business law may be suspect; defective products or workplace hazards are rampant; and chimerical political intrigue can change a company's prospects quickly. India presents a more developed financial infrastructure in a democratic body politic but public support for capitalism is often wanting and bureaucratic delay is notorious.

Potentially valuable Asian Stocks identified by an attendee included: Focus Media Holding [Ticker: FMCN]; Beijing Med-Pharm [BJGP]; China Mobile ADR [CHL]; HDFC Bank [ HDB]; InfoSys Technologies [INFY]; Taiwan Semiconductor [TSM]; and iPath Exchange Traded Note Linked to the MSCI India Total Return Index [INP].

October 23, 2007

 

 

LESSER KNOWN PHARMACEUTICAL STOCKS

Many "second tier" pharmaceutical companies carry the ball today in drug research, often under contract with major firms who act as venture capitalists and marketers. Other second tier companies stake out a niche market that's too small for the major firms to enter.

The NorthShore group studied four "second tier" companies plus one major firm that are all judged by Value Line analysts to have more than average price gain potential in this industry... Gilead Sciences [GILD]; Lilly & Company [LLY]; OSI Pharmaceutical [OSIP]; Parexel International [PRXL]; Watson Pharmaceutical [WPI]. A majority of attendees favored Gilead and Parexel won support from one-third of the members. 

September 25, 2007 STRANGE BUT TRUE- THE ECONOMICS OF STEVEN LANDSBURG

Professor Steven Landsburg says seat belts kill people. He also explains why rock concert promoters don't raise ticket prices even though performances will be sold out...; why unemployment is a good thing...; and the wonderful "indifference principal" that says, to pick one example, there's no place more preferable to live than any other! Landsburg squeezes many thoughtful conclusions from basic economic concepts. Want to know why popcorn costs more at the movies?...then pick up one of his three books...The Armchair Economist; Fair Play; or his recent tome More Sex is Safer Sex. 

August 28, 2007 RETIREMENT INCOME - NEW PLAN, NEW PRODUCTS

Do-it-yourself investing has become the common retirement plan for America's workers as "defined benefit" programs have been replaced by "defined contribution" regimes. This "Little Red Hen" concept had many people making serious mistakes in managing retirement investments. We reviewed changes to this situation brought about by the 2006 Retirement Pension Protection Act which mandated automatic enrollment and a diversified default investment for people who don't make an initial product selection. Two new product genres for creating a stream of income payments during retirement were described: Immediate annuities with guaranteed minimum withdrawal benefits, and target payment mutual funds [coming to market in late 2007].

July 24, 2007

What's Wrong with These Companies?

We selected ten companies that were poorly rated by an analytical service and tried to figure out what's wrong with them and whether they might have "contrarian" investment merit. 

The ten candidates were Fonar Corp. [FONR]; Orleans Homebuilders [OHB]; Appliance Recycling Centers of America [ARCI]; Ascent Solar Technology [ASTI]; Home Inns ADR [HMIN]; Shiloh Industries [SHLO]; Acadia Pharmaceuticals [ACAD]; International Assets Holdings [IAAC]; Trump Entertainment [TRMP]; and Q. E. P. Company [QEPC].

Among the problems the group found with each particular company were : very high price-to-earnings ratio; recent large price run-up or large price collapse; multi-year history of weak performance & lost opportunity; "glitzy" part of the business is very small; very low margin or no profits at all. 

June 26, 2007

Wal*Mart's Annual Meeting: A First Hand Report on Modern Corporate Governance

NorthShore group member Bill Martello attended the Wal*Mart shareholder's meeting in Bentonville Arkansas last month. He told us it was part rock concert, part religious revival, and part political convention. Bill explained how a Wal*Mart motto... "Ordinary people doing extraordinary things"... was translated into action. He also pointed out the corporation has embraced environmental "sustainability" as a major goal... setting energy reduction targets based on innovative building design and functionality.  

To get a sense of the extravaganza that is a modern Annual Meeting, click this link and watch a streaming video of the complete Wal*Mart Annual Meeting. You can also click Investor Relations to find Wal*Mart's SEC filings. 

May 22, 2007

Japanese Stocks -- Contrarian Value Search

In 1990, the Japanese Nikkei 225 Index hit an all-time peak near 39,000, plunged to 20,000 one year later, drifted toward 9,000 over the next twelve years, and started a rally in 2003. From Japan's stratospheric economic growth rate of 10% in the 1960s, its economy slowed to 4% in the 1980s, and then to an anemic 1.5% in the 1990s. Now some observers think Japanese stocks are undervalued, especially the less well-known companies. Individual North Shore group members identified the following Japan purchase candidates: Fuji Film [Ticker: FUJI], Mistui [MITSY], Mitsubishi Heavy Industries [MHVYF], Millea Holdings [MLEA], Kyocera [KYO], and two exchange-traded iShares Japan index funds [EWJ and ITF].

April 24, 2007

The Craft of Investing

John Train was born into a wealthy and well-connected family. After attending Harvard and working on a Paris literary magazine, he settled into an investment advisory career in New York, founding Train-Babcock Advisors in 1959. That firm supervises assets of $600 million today.  

We studied Train's book The Craft of Investing which gives Train's philosophy; explains his investment methodologies; tells his view of market behavior; and gives advice on such diverse issues as safe-deposit boxes, revocable trusts, insurance and retirement money handling.

In general we learned that Train is a collector of growing company stocks, but he wants to buy them "on the cheap". He can do this by being contrarian and buying companies during bear markets when they're undervalued, then holding them until they're fully or over-valued in the next bull market. This is plausible but very difficult for most people.

Train warns investors to be wary of "technical" analysis and other schemes that game the market. He also wants amateurs to stay away from derivatives, commodity trading, options and margin transactions.

March 27, 2007

My Best Performing Stock in 2007

Some stocks have stepped out of the crowd [risen more than indexes] early this year and distinguished themselves by virtue of takeover activity. Other success stories have come from an a new product launch by an individual company or an industry's earnings gains. 

Among the 2007 early winners identified by individual group members were: oil exploration and transporter Questar Corp. [Ticker: STR, up 14%]; back-office outsourcer Affiliated Computer Services [ACS, up 20%]; silicon wafer maker MEMC Electronic Materials [WFR, up 51%]; Apple Computer [AAPL, up 11%]; Google [GOOG, down -1% but gains made selling put options]; New England refined oil products seller Global Partners LP [GLP, up 42%]; emergency vehicle and custom truck chassis manufacturer Spartan Motors [SPAR, up 52%]; utility conglomerate Florida Power & Light [FPL, up 11%]; computer info protector VASCO Data Security International [VDSI, up 53%]; and close-out mass merchandise retailer BigLots [BIG, up 39%].

February 27, 2007

Milton Friedman -- Retrospective and Appreciation

The North Shore group listened to and discussed a recorded lecture by Professor Timothy Taylor [from Legacies of Great Economists, The Teaching Company, 1998] on the work of influential economist Milton Friedman who died last year after a life filled with honors and respect. 

From humble immigrant parents, Friedman's clear thinking and tenacious commitment to principle took him to the top of his profession and gave him the power to make lasting changes to the study of Economics, to U.S. government policy, and to international governance. We learned that Friedman was a world-class statistician whose introduction of advanced math methodologies forever changed economic research. 

Friedman showed that Keynesian economic models were wrong in many instances and his exhaustive research on "money" gave control of the money supply a pivotal role in avoiding recessions. In general he favored education vouchers, a very simple tax code and, wherever possible, giving citizens the "Freedom to Choose" [one of his book titles!] their own course.

January 23, 2007

YOUR BEST INVESTMENT IDEA FOR 2007

The 2006 "best ideas" award winners were... fertilizer manufacturer Agrium [Ticker: AGU, jumping 50%]; Japanese auto maker Honda [HMC, advancing 43%]; and a near-tie for 3rd and 4th place between lighting fixture producer Genlyte [GLYT] and pharmaceutical purveyor Abbott Labs [ABT] -- both gaining 24%. 

For the coming year, group members picked some perennials like Cisco and GE; added a few "growth" medical and biotechnology situations such as Biopharma and MonoGen; and worked plays on the hot 2006 energy and China market sectors. 

November 28, 2006

 

THE HALL CLOSET

I recently cleaned one of my "hall closets" -- drawers full of investment articles from magazines and newspapers dating from the '80s and '90s with a few '70s vintage pieces! Some of that information seemed as fresh as today's front page. Other items were so dated, they were funny. There were dire warnings, historical oddities, and some instruction good for all eternity. Among the items shared were: a 1982 Scientific American article by economists Kahneman and Tversky on "Psychology of Prefences" [work that won Kahneman a Nobel Prize]; a 1981 Forbes article on Adam Smith by John Galbraith; a prescient 1993 Money Magazine article titled "How Fund Directors are Letting You Down"; a 1989 WSJ article pointing out that more workers are becoming their own pension managers through 401K Plans... and investing too much in debt securities and company stock [the Enron people apparently didn't read this!]; and a biography of William Fouse, a Mellon Bank renegade who dreamt up the first stock index fund in 1969.

October 24, 2006

STOCK FAVORITES OF TOP MUTUAL FUND MANAGERS

The Group examined the two largest commitments of six mutual fund managers who have above-average, long-term total-return records. The star managers included Bill Miller of the Legg Mason organization; Chris Davis of Davis New York; and Dick Weiss of Wells Fargo. The twelve stocks identified by these managers will be tracked for the next eighteen months.

September 26, 2006

INTERNET RESOURCES FOR INVESTORS

North Shore-AAII Member Sandy Harlow opened this review by sharing some of his website favorites: www.SmartMoney.com and its "Map of the Market" dynamic graphic depiction of sector and company performance [free]; www.theStreet.com for its many market commentators [feee]; www.DayTraders.Org a traders' opinion site [free- registration required]; and www.TradeStation.com for quotes, market data, and brokerage services [$$ subscription required]. 

Other group members suggested the following sites:  www.StockCharts.com for "candlestick" charts [free]; www.QuantumOnline.com for preferred stocks and ETF information [free- registration required]; www.StockDiagnostics.com for cash flow computations [$$ subscription required]; www.ValuEngine.com for stock selection/evaluation [$$ subscription required]; and www.InvestingInBonds.com which has near-real-time trading histories for specific bonds and yield tables for the municipal, corporate and government bond markets.

August 22, 2006

LET'S MAKE SENSE OF CORPORATE ANNUAL REPORTS

The Balance Sheet and Income Statement in an Annual Report hold the bedrock information for measuring a financial enterprise. With this data we can evaluate the health and prospects of a company and, using multi-period comparisons, project trends toward greater or lesser success. 

North Shore-AAII Member John Kaminsky refreshed our knowledge of accounting basics by discussing How to Read Annual Reports. John highlighted six numbers we should glean from any Annual Report we study: (1) Net Working Capital, (2) Stockholder Equity, (3) Net Earnings, (4) Debt-to-Equity Ratio, (5) Cash Flow, and (6) Footnotes [special charges, extraordinary methods, "off balance sheet" disclosures?] 

July 25, 2006

THE NEXT GREAT THING!

Individual members discovered and discussed companies that have a great new product possibility... most of the choices were in the energy and networking sectors. The nominees included: automobile efficiency hydrogen booster Hy-Drive [ HGS]; "Biofuels" transforming agricultural byproducts into energy... Archer Daniels Midland [ADM] is doing this with corn; novel network computing allowing "WiMax" whole-city wireless from Cisco Systems [CSCO]; embedded GPS navigation systems from Garmin [GRMN]. In the retail sector, UnderArmor [UARM] has unique performance athletic clothing products. Finally, RC2 [RCRC] is a diversified toy maker whose new "Fear Factor Game" defies players to eat eyeballs, rats, worms and bugs [made of candy]. 

June 27, 2006

THREE AAII JOURNALS' GEMS

We reviewed three articles from recent issues of AAII Journal and Computized Investing:  

Web Sites for Exchange-Traded Funds [Computerized Investing, May/June 2006] which identified seven online sources of information about ETFs.

Your Brokerage Account: Protection Beyond SIPC by John E. Deysher [AAII Journal, April 2006] discussed asset safety if your broker/dealer goes bust. One new wrinkle is that major broker firms now have only two sources for super-SIPC coverage: a captive insurer formed by a group of brokerages, and a more limited coverage through Lloyds of London.

Withdrawal Rules: Squeezing More From Your Retirement Portfolio by Jonathan Guyton [AAII Journal, August 2005] reviewed the common question... "How much do I take from my nest egg so I live large in retirement but never run out of money?" The author claimed that if investors freeze their withdrawal amount after years in which portfolio value falls, they can withdraw a higher average percentage rate over their total retirement period.

May 23, 2006

INTERNATIONAL S&P INVESTING

We've seen the power of overseas markets, from Europe to Latin America to the Pacific Ring, the past several years. Growth rates of foreign economies have often been great, not the least because the commodity products that some of these countries sell are in heavy demand. NorthShore group members sifted through the S&P 700 Foreign Stocks and picked the following companies they felt had strong prospects: Thyssen-Krupp [Ticker: TYEKF], American Movil [AMX], Toyota [TM], StatOil [STO], Mittel Steel [MT], BASF [BF], Honda Motors [HMC], Canadian National Railway [CNI] and Tenaris SA [TS].

April 25, 2006

 

A FEW OF MY FAVORITE THINGS

John Martin discussed four of his favorite investment newsletters, giving the NorthShore group insights about what made each of them valuable to his investment approach and how they complimented one another. His choices included John Dessauer's Investors World [Long term value emphasis]; Investech Research [Useful for citing moves of the entire market]; Wall Street Digest [More Aggressive portfolio]; and Richard Band's Profitable Investing [More conservative, looks for high total return]. 

March 28, 2006

WHO'S ON FIRST?

NorthShore subgroup members recommended securities that could claim to be "first" in some relevant business or investing parameter. We heard about: International Paper [Ticker: IP] that's first in paper products; Johnson & Johnson [JNJ] first to bring sterile packaged bandages to market; Zimmer Holdings [ZMH] first to sell one million artificial joints; Select Comfort [SCSS] that innovated the "sleep number bed"; Stryker [SYK] that's the world leader in the orthopedic replacement market and operating room equipment; Boeing [BA] the first company with a successful jetliner; PetMed Express [PETS] providing drugs for dogs [and cats etc]; Motorola [MOT] the #1 phone maker in the world (again); Empire Resources [ERS] a reseller of aluminum components; and Wrigley [WWY] the chewing gum king.

February 28, 2006

WHAT'S WRONG WITH AMERICA'S MARKETPLACE?

John Bogle [Founder, Vanguard Group] helped millions of people invest more sensibly, consistently spoke out for the little gal against the moneyed interests, and shed much light on financial insider tricks and cheats.

In his new book, The Battle for the Soul of Capitalism [Yale University Press, 2005], Bogle looks for the root causes of the 2000 stock market meltdown ... he finds problems with selfish people running corporations; problems with short-sighted investors; and problems with the behavior of fiduciaries running mutual funds and supervising pension plans.

January 24, 2006

YOUR BEST INVESTMENT IDEA FOR 2006

The 2005 "best ideas" award winners were... fuel cell and turbine company Distributed Energy Systems [Ticker: DESC, leaping 230%]; computer and iPod maker Apple Computer [AAPL, jumping 111%]; Canadian uranium miner Cameco [CCJ, ahead 97%]; and mental health provider Psychiatric Solutions [PSYS, gaining 86%]. Investors who didn't buy the first three should definitely consult the fourth. 

For the coming year, group members picked an unusually eclectic stock mix... Momentum players picked last year's winners; but Contrarians touted last year's losers! Speculators found obscure small companies trading OTC; while Investors bet on the bluest chips from the NYSE.

November 22, 2005

CAN YOU HELP US GET IT "RETAIL"?

Going into the big holiday shopping season, the voices of retailing doom were being heard again. "High gasoline and food costs will crowd out Christmas", some said. "Bad weather will close malls." Or "there'll be a shortage of flat-screen TVs and game-boxes". Modern Cassandras [she warned the Trojans to leave that cutesy Wooden Horse outside the city walls] are heard every December.

At the November meeting members suggested promising retailer stocks. Many recommended clothing businesses, including Chico's [Ticker: CHS]; Too, Inc. [TOO]; Coach [COH]; Guess [GES]; Charming Shoppes [CHRS]; Claire Stores [CLE]; Urban Outfitters [URBN]; Coldwater Creek [CWTR] and Gap [GPS]. Unconventional thinkers came up with: educational toy and game maker Leapfrog [LF]; Apple Computer [AAPL]; and drugstore chain CVS [CVS].

October 25, 2005

WILL LARGE CAP STOCKS LIVE LARGE AGAIN? 

In the fairy tale market of the 1990s, it was large capitalization stocks that sent investors' pulses racing, but since 2000 the shares of behemoth companies have languished. Lilliputian stocks have posted big gains recently. The annualized 5-year return through September 2005 on the S&P 500 Index is -1.6% but the S&P SmallCap 600 Index annual return has been +10.8% in that period. History shows the rewards from large and small cap companies alternate every few years... we examined this effect by looking at cumulative and 12-month moving average charts. Then we looked at the S&P 500's three dominant sectors -- financials, information technology, and healthcare. Monitoring the prospects for these sectors might give early warning of a large cap turn-around. For background, investors can read a related July 2005 AAII JOURNAL article by Steve Norwitz titled "Large Cap Growth: Can It Regain the Market Leadership?" 

September 26, 2005

SMALLER CHICAGO COMPANIES

We used the Chicago Tribune's weekly table "How the Regions Top 50 Companies Fared"  to identify smaller companies [less than $10 billion market cap] in our Chicago region that might have good investment potential. Individual members of the group presented these buy candidates: Dade Behring [ ticker DADE], a maker of medical diagnostic products; Nuveen Investments [JNC], municipal bond fund seller now branching to equities; USG Corporation [USG], maker of gypsum wallboard with innovative properties; Allscripts Healthcare Solutions [MDRX], medical software and information control services; Stericycle [SRCL], medical waste collector, disposer and recycler; and Zebra Technology [ZBRA], distributor of bar code and radio ID tag printers, plus tagging supplies for controlling inventory, theft and access.

August 23, 2005

WHAT WALL STREET DOESN'T WANT YOU TO KNOW

We reviewed the book What Wall Street Doesn't Want You to Know by Larry Swedroe. The author says Wall Street touts investment gurus and selection systems that supposedly deliver profits but when he examines the real world records of Value Line, Warren Buffett, hedge fund managers, value managers, market timers, bond fund managers, and newsletter writers, he finds nothing exceptional. The gurus don't give exceptional results going forward; and you can't tell beforehand which one is tomorrow's guru! Swedroe's general conclusion is you should invest in a mix of index funds. 

Other parts of his book tackle such questions as... How should a lump sum be invested? When should you re-balance your allocation? What should you do with a concentrated stock position? When should you sell shares that have a very low cost basis? and What role should international assets have in your portfolio? Swedroe's credentials include an MBA from New York University, executive jobs at Citicorp and Prudential and, since 1996, partnership in an asset management firm in St. Louis.

July 26, 2005

BRAG OR FLAG DAY

Everyone had the opportunity at this meeting to brag about a security they owned that was doing well in 2005, or flag a security as a loser that the rest of us should avoid. In the first seven months of 2005, when the S&P 500 Index was ahead just 2%... some brags were: 

Amgen [Ticker: AMGN] up 35%; gas distributor El Paso [EP] up 50%; mortgage lender IndyMac [NDE] ahead 40%; Walgreens [WAG] ahead 16%; drug developer Cubist Pharmaceutical [CBST] ahead 33%; Sunrise Senior Living [SRZ] up 15%; Distributed Energy Systems [DESC] up 175%; Building Materials Holding [BMHC] ahead 120%; ginseng beverage maker Hansen [HANS] up 150%; clothier BeBe Stores [BEBE] ahead 60%; credit bureau Equifax up 28%; Chicago Mercantile Exchange [CME] ahead 40%; Marathon Oil [MRO] up 50%; and MB Financial [MBFI] flat this year but up strongly past three years.

June 28, 2005

COMPANIES SELLING COMMODITY PRODUCTS

The "stock analyst" members of the NorthShore Subgroup examined twelve companies involved in producing and/or selling four commodities ["indistinguishable products of trade"], namely, Aggregates, Basic Chemicals, Metals (non-ferrous) & Mining, and Steel. 

Aggregates vendors Florida Rock [Ticker: FRK], Martin Marietta Materials [MLM] and Vulcan Materials [VMC] were all judged to be "holds". Basic Chemical companies FMC Corp [FMC], DuPont [DD] and Potash [POT] were also all rated "holds", with POT thought to be an excellent company whose shares were "too expensive." Metals & Mining shares Inco [N], Noranda [NRD] and Freeport-McMoRan [FCX] were rated "sells" variously because of debt load or limited appreciation potential. Finally Steel companies Cleveland-Cliffs [CLF] and Quanex [NX] were rated "holds", but Commercial Metals [CMC] got a coveted "buy" rating. 

As with all investing advice, accept these Subgroup recommendations at your own risk.

May 24, 2005

ISRAELI COMPANIES, MARKETS AND ECONOMY --  SOCIALISM CRAWLS TO A CAPITALIST FUTURE

The roots of Israel's founding in socialist ideals were examined, leading to the 1983 economic implosion. After that year, Israel opened its economy to foreign capital flows; relinquished many government controls on capital formation; created a central bank; eliminated "high employment" programs; and negotiated free trade pacts with much of Europe, Asia, and the Americas. These actions allowed inflation to be dramatically reduced and unleashed the Israeli economy to grow.  The Israeli stock market is characterized by two segments: (1) large companies [often former government monopolies] like the airline El Al, Bank Hapoalim, Koor Industries, and the communications giant Bezeq; and (2) hundreds of small technology companies. A few of the latter have flourished such as Check Point Software. Teva Pharmaceutical in particular has made a name for itself. Three U.S.-based funds invest only in Israeli stocks [Tickers: ISL, AMDEX, BWFAX]... they have very small asset bases, high expense ratios, and concentrated portfolios.

April 26. 2005

MY FIRST INVESTMENT

Good stories were told by our members about their first forays into the investing world. Some people hit a home run on that first pitch... buying Pepsico or Microsoft. Others learned early how a "can't miss" stock... can miss. There were tales of safe bond purchases and risks taken in companies creating totally new products. When all the telling was done and the dead-end ideas tucked away, we could add thirteen "first investment" names to our NorthShore Watchlist.

March 22, 2005

TOP TEN LISTS - THE "LETTERMAN PORTFOLIO STRATEGY"

Members brought in "recommended stock lists" from newsletters, brokerage houses, newspapers and magazines. The group heard the origin and content of each "Top Ten" list and scored the repeat candidates to create the First "NorthShore SubGroup Top Ten Composite"... which included, by frequency of occurrence: Citicorp [Ticker: C], Johnson & Johnson [JNJ], ConocoPhillips [COP], Exxon Mobil [XOM], Pfizer [PFE], General Electric [GE], Home Depot [HD], Occidental Petroleum [OXY], Intel [INTC] and Wells Fargo [WFC]. These are all huge companies... seven of them are in the DJ Industrial Average, and five are among the ten largest holdings in the capitalization-weighted S&P 500 Index. 

February 22, 2005

NEW IDEAS IN ETFs and MUTUAL FUNDS

We reviewed the regulatory changes promulgated by the Securities & Exchange Commission for all mutual funds after the discovery of market-timing and after-hours trading abuses. In addition to excerpts from SEC director speeches, we also considered a fund industry survey [the public is not fazed by the scandals!] and an assessment by industry watchdog Dalbar [$2 of new regulation cost have been mandated to save shareholders from 25-cent losses]. 

The proliferation of Exchange-Traded Funds ["ETFs"] was described with an article by Chicago Tribune columnist Bill Barnhart, and with Barclay information on their "iShares" ETF product line [$55 Billion new money in 2004]. We also noted upcoming changes in the "weighting" computation of the S&P 500 Index and heard a presentation of "Alan's Little Fund Reform List" ... what's needed for real industry housecleaning.

January 25, 2005

YOUR BEST INVESTMENT IDEA FOR 2005

The 2004 "best ideas" list tended to split into "big winners" and "big losers"... with investors who thought the technology rally would continue generally losing. Winners were an eclectic group and the full list lagged the S&P 500 Index for twelve months. "Best Stockpicker Awards for 2004" were given to members who recommended: commodity food trader/grower Bunge Limited [up 60%]; upscale coffee retailer Starbucks [up 56%]; and stun-gun maker Taser [55% ahead]. Three "Honorable Mentions" went to runners-up... wine and beer importer/ bottler Constellation Brands [better by 48%]; mail-order drug distributor Caremark [up 45%]; and im/ex-port facilitator Expediters International [up 44%].

For the year ahead, group members were partial to foreign stocks from Europe and South America, turnaround companies, players associated with the homebuilding boom, as well as some defense and energy stocks. 

November 23, 2004

UP-AND-COMING SOFTWARE STOCKS

We gave attention to five lesser-known software companies: Jack Henry & Associates [ Ticker: JKHY ] and Fiserv [ FISV ] both doing banking and transaction processing software; Affiliated Computer Services [ACS ] outsourcing government information systems; Macromedia [ MACR ] providing multimedia presentation tools for the Internet; and one "young adult" company, Computer Sciences Corporation [ CSC ]. The resident "analysts" at the meeting gave their highest ranking to ACS and CSC in a tie; JKHY was seen as least likely to succeed.

October 26, 2004

UNCONVENTIONAL WISDOM IN THE INVESTMENT PROCESS

Chicago investment guru Richard Driehaus published a white paper under the title used for this meeting. Co-leader Herb Paske reviewed that paper as well as the biography and philosophy of this homegrown broker, investment manager, and philanthropist. In general, Driehaus advises investors to allocate some of their assets to "aggressive" sectors like small company stocks. He also provides general criteria for stock selection and rules for working in markets. The six-page Driehaus paper in Adobe PDF format can be read by clicking: Unconventional Wisdom

The Driehaus firm offers two mutual funds employing his methods: Driehaus International Discovery Fund [Ticker: DRIDX] and Driehaus Emerging Markets Growth Fund [DREGX].

September 28, 2004

ASSET ALLOCATION -  What, How and Why?

The group examined the many ways that separate classes of investment assets can be defined. We reviewed the historical average returns, volatility, and cross-correlations of asset classes and discussed how these factors help investors properly diversify. Data tables published last year in the book "Art of Asset Allocation" by Morgan Stanley's Chief Investment Officer David Darst were good source materials.  

August 24, 2004

INTERNATIONAL STOCKS

The group looked at overseas stocks because... (1) Recovery in the technology sector has a big impact on the electronics manufacturing in the Far East. (2) Latin America countries have become important agricultural exporters under NAFTA. (3) Millions more families are climbing over the poverty line in "third world" countries like India, Brazil, China and Malaysia. (4) Foreign markets were more depressed than ours during the recent bear market. And (5) the European Union is working opening trade within an ever-larger geographical and political space.

Foreign equity products available as ADRs or funds recommended by individual group members were: Canon [Ticker: CAJ], Willis Holdings [WSH], Matthews Asian Growth & Income Fund [MACSX], Teva Pharmaceuticals [TEVA], iShares South Africa [EZA], Telefonica SA [TEF], Nokia [NOK], Shire Pharmaceuticals [SHPGY], Swiss Helvetica Fund [SWZ], Toyota [TM], British Petroleum [BP], Southern Peru Copper [PCU], E.ON [AG], and Synthes Stratec [SNHT].  

July 27, 2004

FOUR PILLARS OF INVESTING (Lessons for Building A Winning Portfolio)

Dr. Dr. William Bernstein's book Four Pillars of Investing [McGraw Hill, 2002, hardcover, $28 list, $19 online] covers... (1) Theory of Investing [the relationship between risk and return]; (2) History of Investing [great bull moves and panics]; (3) Psychology of Investing [we'll skip this segment since our subgroup has already done some in-depth discussion of this topic]; and (4) Business of Investing [who can you trust? ...why brokers and mutual funds aren't your buddies].

The NorthShore group read excerpts from Bernstein's book and noted some strengths and weaknesses of his preferred strategy of buying only index funds. The author was diffuse in showing how a particular reader should select his fund portfolio... not helping the reader to a particular number, type, or diversity of index fund products to be used. Nonetheless, Bernstein provides a no-nonsense grounding in stock market facts for beginning investors and interesting historical perspectives that experienced investors may not have seen elsewhere.

For the flavor of Bernstein's thinking and writing style, check www.EfficientFrontier.com. On the home page, check out the "Efficient Frontier" Journal Archive [6th major link down]; the "Online Asset Allocator" [7th link down]; and the Reading List [8th link down]. 

June 22, 2004

TOILETRY AND COSMETICS COMPANIES... WILL THEIR PROFITS SMELL AS SWEET AS COLOGNE OR COULD THEY BE HEADED FOR TOILET WATER? 

This month the North Shore Sub-group reviewed five companies that have a strong presence in the beauty industry to see if their prospects were more than skin deep.  Our players were: Alberto Culver [Ticker: ACV]; Avon Products [AVP], Estee Lauder [EL]; Gillette [G]; and Helen of Troy [HELE]. We also tested a new format for the roundtable discussion... basing our discussion on attendee answers to a 10-question screen. The new format took more time than usual to work through so only three companies were discussed and rated. Alberto-Culver was highest rated [1.8 rating on a 1-to-3 scale (1 = Best)] because people liked the consistent growth in its financials. Avon Products got a middling 2.0 rating since it too has been steady on its feet. A higher P/E ratio and perceived "high" stock price were negatives. Finally, Helen of Troy was rated a weaker 2.5, mainly because its beauty apparatus and appliances business was more mundane and profit margins were flat.

May 25, 2004

STOCK ANALYSTS... SHOULD WE GET OVER BLODGET IN WONDERLAND?

The group reviewed several articles discussing how stock analysts do their job; how they earn their keep; conflicts of interest between analyst remuneration and impartiality; and the value of analyst conclusions. [Click here for the key article by asset manager Brian Bruce in The Journal of Psychology and Financial Markets.] We also reviewed notes of the AAII-Chicago lectures of Mitch Zacks [May 2004] and Professor Werner DeBondt [February 2004] that show the very limited utility of analyst stock price predictions and a close agreement between the statistics of correct analyst predictions of long term growth and those predicted by pure luck. A variety of analyst predictions for Intel Corporation [Ticker: INTC ] to focus our attention on the range of analyst predictions at any time point.

April 27, 2004

5th YEAR of

ARCHIVED

MEETINGS!

Introduction to Commodities Markets -- All the Corn Fit to Trade

NorthShore group member Jim Mayer shared his considerable experience with grain commodities trading ... including knowledge of the "futures" and options markets... and with corporations involved in the grain trade to give the North Shore group valuable insights. Jim explained how commodity markets bring speculators together with hedgers. He defined some of the jargon, reviewed trading strategies. and gave an overview of world grain trade. Jim also commented on public companies with important roles in grain trading: [Bunge Limited (BG); Archer Daniels Midland (ADM); ConAgra (CAG); Smithfield Foods (SFD); and Tyson International (TSN)]. 

Background readings on commodity trading basics are available at the website of the Commodity Futures Trading Commission [www.cftc.gov], the responsible regulatory body. This site offers a free brochure What You Should Know Before You Trade with basic definitions and a discussion of risk/reward potential. An investor-friendly, introductory discussion of futures trading can be found in the on-line booklet Security Futures published by the National Futures Association. 

March 23, 2004

HOARY STOCKS

The group focused its attention on public companies that have survived at least 20 years and that remain interesting purchase candidates today. We learned that companies go through complex transitions of growth, decline, acquisition, and divestiture to survive. The "older and still wise" organizations cited by individual group members included: financial supermarket Citigroup [Ticker:C]; therapeutic argonauts Amgen [AMGN] and Genentech [DNA]; Johnson & Johnson [JNJ] which began with a sterile surgical plaster product in 1890; Medtronic [MDT] finding palliatives for chronic illness during fifty years; Nucor [NUE] which manufactured cars and trucks at the dawn of the 20th century but operated steel mini-mills at century's close; banker Wells Fargo [WFC]; hardware and homeware store operator Lowe's [LOW]; and the universal consumer marketer, Wal-Mart [WMT]

February 24, 2004

INVESTOR EDUCATION 101: "LIFE LESSONS" THAT MADE YOU THE GREAT INVESTOR YOU ARE

The School of Hard Knocks was in reunion at our February meeting. We heard great lessons from many individual members who learned such virtues as... regular saving; fact checking; patience; contrarian action; avoiding big disasters; reinvesting dividends; relying on one's own judgment; long-term holding; and never neglecting the portfolio that feeds you.

January 27, 2004

YOUR BEST INVESTMENT IDEA FOR 2004

It wasn't hard making money in 2003 ...a blind monkey throwing darts could do it. Still, the North Shore Subgroup's "Best Ideas List for 2003" posted a superior average price increase of 53%... that compared to a S&P 500 price advance of 30% and an OTC Composite Index run-up of 59% in the same time period! "Best Stockpicker Awards for 2003" were issued to members who recommended: management consultant Navigant Consultants [up 222%]; circuit card maker Flextronics [up 109%]; drugstore operator Rite-Aid [100% ahead]; and slot machine maker International Game Technology [up 92%].

For the year ahead, group members picked many adventurous, smaller, technology companies... expecting the euphoria of 2003 to continue. Banks and social trend companies [health foods, e.g.] were also popular.

November 25, 2003

CAN YOU PROFIT FROM VALUE LINE'S "SAFE DOGS"?

Our group studied five stocks with Value Line's worst "timeliness" rank but its highest "safety rating". Could these financially conservative companies with weak one-year outlooks be diamonds in the rough... or are they surely year-ahead laggards? The "safe dog" stocks were: Bemis Corporation [Ticker: BMS] in the packaging business; Consolidated Edison [ED] the New York electric utility; duPont [DD] maker of chemicals, agriculturals and fibers; Genuine Parts [GPC] an auto replacement parts distributor; and hometown dog Sara Lee [SLE] manufacturer and distributor of food, apparel and other consumer products.

Five panels of North Shore gurus came to these conclusions: Bemis - "Very Weak Buy" rating on a "safe" company. Con Ed - Don't Buy, overvalued. DuPont - Don't Buy, company has lost its focus, may have pension liability. Genuine Parts - Don't Buy, although good balance sheet and increased dividends for 40 years. Sara Lee -  Don't Buy. Dull prospects despite high dividend. So, Value Line's pessimism was seconded by North Shore gurus for these stocks. Time will tell.

October 28, 2003

A MATHEMATICIAN PLAYS THE STOCK MARKET

In 2000, developed a great interest in investing and began making a series of transactions in WorldCom stock and options. After losing his proverbial shirt and his real money, Paulos collected the expensive lessons he'd learned from this humiliation, combined them with a potpourri of mathematics lore, and wrote A Mathematician Plays The Stock Market [Basic Books, 2003].

The group reviewed this book including these ideas: how statistics ignorance bedevils investors; the important role of compound interest and its relation to "fundamental analysis"; how to spot accounting fraud using Bernard's Law of small numbers; decision-making paradoxes that lead to herd behavior; the possible relationship of market price behavior with "chaos" theory, unstable non-linear system response, and "complexity" theory. 

September 23, 2003

GURUS ON PARADE - 2003

This August, group moderator Alan Liebman and founder Herb Paske attended the Financial Advisor Symposium in Chicago. Alan summarized and reported the industry news for attendees. The Symposium headlined Louis Rukeyser ("You have to cut the taxes of the people who pay the taxes."); Moningstar's chief Don Phillips; fund managers Ron Baron ("we are investing in a business") and Chris Davis ("The whole [investment] system reeks of this short-term holding problem"); financial planning leader Harold Evensky; and many more.

Some major trends described... (1) Leading financial planning firms are moving more client money into index funds... some indexing as much as 50% of assets; (2) Exchange-traded funds are receiving considerable interest for their timing versatility, sector / segment breadth, low expense, tax efficiency; (3) Demographic trends make retirement income and estate planning the most sought services; (4) "Low stock market growth" predictions for this decade (by W. Buffett and others) were discounted because of the historical response after past bear market slumps; boomer demographics; and the vitality / ingenuity of American business.

August 26, 2003

GAMING AND GAME SYSTEM COMPANIES

This has been a boom time for slot machine makers International Game Technology [IGT] and WMS Industries [WMS]; and for betting system / lotto terminal seller GTECH Holdings [GTK]. But some of their customers, such as Las Vegas destination hotel groups MGM Mirage [MGG] and Mandalay Resort Group [MBG], have been challenged by the effects of terrorism on the travel industry. The keen analysts of the North Shore, working in study groups, reviewed these five companies... they liked what GTECH Holdings and International Game Tech were doing, but voted them "not buys" because of the large price gains they've experienced. MGM Mirage and WMS Industries were judged "not buys" because of weak earnings experiences and prospects. Mandalay Resort was seen as having better operations but a high price, so it also did not rise above a "not buy" diagnosis. A few individual attendees expressed the contrarian view that the North Shore participants were being too narrow-minded about the profit potential of these companies and too pessimistic about the future in general. 

July 22, 2003

STOCK PICKING SYSTEMS: HOW CAN THEY CLAIM TO PICK WINNERS WHEN SO MANY OF THEIR USERS ARE LOSERS?

Many investment industry brokers, magazines, newsletters and advisors tout some "system" for picking winning stocks or equity funds. But market research shows most investors never see the claimed rewards. We examined this disconnect between hype and reality by looking at a large number of examples. Sometimes the problem is contrived advertising... including number or chart manipulation; selective memory; apples-to-kumquats comparisons; partial disclosure; or special date selection. Another major factor in stock picking failure is the large number of psychological tricks investors play on themselves! [Re-read the excellent book Why Smart People Make Big Money Mistakes that we presciently studied at the stock market peak in February 2000 (click date to read that meeting's summary)]. 

June 24, 2003

BOLD NEW WORLD: HOW CAN YOU PROFIT FROM IT?

Against the background of: (1) regime change in Afghanistan and Iraq; (2) a reshaping Middle East; (3) the "cheap" Dollar; and (4) US Tax reductions... the group pondered what securities investors should Buy and should Sell.

 Recommendations by individual members on "Buys" included... (1) ProFunds UltraShort OTC Fund [Ticker: USPIX] which will rise if the Nasdaq 100 plummets; Hewitt Associates [HEW] which may benefit from global consulting; Anheuser-Busch [BUD] because we'll all want to mellow out; Colgate-Palmolive [CL] because of an expanding world consumer base with more disposable income; Rite-Aid [RAD] for its rebirth during a rebounding US economy; Pfizer [PFE] to take advantage of rising availability of pharmaceutical disease relief; Wal-Mart [WMT] on the economic rebound again; Advance PCS [ADVP] to benefit from new Medicare plans; Cendant [CD] for its realtor, mortgage, and travel franchises; Expeditors International of Washington [EXPD] because of increased overseas shipping needs; Huaneng Power International ADR [HNP] as a power utility in China; InterActive Corp [IACI] for its media services including Expedia travel, Home Shopping Network, and TicketMaster; and Applied Materials [AMAT] to take account of equipment for a resurgent silicon chip industry. 

"Sell" ideas were in shorter supply [Where have all those pessimists gone?] but included... Seitel [SEIE] not doing well in its energy-related businesses; AT&T [T] struggling to find its core as it sheds businesses it grew or bought. 

May 27, 2003

THE BEST INVESTMENT WEBSITES

Individual members of our group recommended the following websites [click on the site name to open the home page of the site in a new window]:

MSN MoneyCentral and Quicken as free, general purpose investment information sites; 

Schwab Stock Rating System [Schwab customers only] as a stock screener; 

John Dessauer's Investor's World [Cost = $149/Yr] as a newsletter providing clear and specific stock portfolio and market guidance; 

TradeStation [Cost >=$99/month] to get rapid and extensive technical and market data; 

Investor's Business Daily [Cost= $300/Yr.; Free 2-week Trial on-line] for screening tools based on the paper's proprietary stock rating systems;

VectorVest [Cost= $600/ Yr; $10 for a 5-week Trial]; and 

AAII for its StockInvestor software, "investor celebrity" stock screening criteria palettes, and general investment advice.

April 22, 2003

HEDGE-FUNDAMENTALS

Speakers Jeff Joseph and Kristin Fox from  www.Hedgeworld.Com  and Gary Stephans and Amanda Cain of SalomonSmithBarney gave us an introduction to the modern panorama of hedge funds, and an update on the latest trends toward "multi-fund" products and low-initial-investment [$50,000] offerings. They said some hedge funds intend to be dependable total return vehicles [e.g., using arbitrage strategies]; while others are "home run" seekers [e.g., currency speculators]. The speakers stressed it was very important to study the reputations and histories of hedge fund managers. Hedge funds often have no third-party custodians; no outside auditors or Directors; minimal required disclosures of return or portfolio content; and restricted withdrawal rights.

March 25, 2003

BIG DIVIDEND INCOME SOURCES

The group examined two classes of high dividend yield securities... utility operating companies and royalty trusts. In specific, we reviewed Exelon Corp [Ticker: EXC], Great Plains Energy [GXP], TECO Energy [TE], Great Northern Iron [GNI], and Hugoton Royalty Trust [HGT]. The annual dividend yields in this group ranged from 4% to 13%. Our North Shore "analysts" were nervous about TECO, bored with Exelon, and lacked evidence on Great Northern Iron. Great Plains won an unenthusiastic "OK" while Hugoton Royalty [with $80 million in revenues and just one employee!] piqued the most curiosity.

February 25, 2003

"WINNING THE LOSER'S GAME"

Charles D. Ellis -- a long-experienced portfolio manager and consultant -- tries to explain in this book [title in header above] why amateur investors have little hope of beating the pro's. Indeed, he says, virtually none of the pro's can beat each other! For individual investors, he argues, the best way forward from this stand-off is to give up the idea of "beating the market" in favor of "matching the market" with index fund usage. Rather than pick stocks, Ellis argues, better spend your time developing your portfolio operating policy, steeling yourself for long-term commitment through market gyrations, and making sure you've got adequate defense against inflation.

January 28, 2003

YOUR BEST INVESTMENT IDEA FOR 2003

2003 is a tough year to be a seer! There are no obviously favored sectors like investors had in the glory days of '99. Stock picks by individual members covered the market's full breadth and derived from many different theories of how future gains will develop. Some people advocated "value stocks"; some took a flyer on a small company with a new idea; and a few based their hopes for a winner on longer-term trends such as "lifetime education" and "pervasive gambling." 

The awards for "Best Pick of 2002" went to the people recommending: education company Apollo Group [up 44%]; clothier Chico's FAS [up 38%]; and pharmacy retailer Rite-Aid [up 34%]. The entire 2002 North Shore "Best Ideas" portfolio list had a -15% loss, which was much better than the -24% drop in the S&P 500 Index during the same time period as our contest.

November 27, 2002

CONSERVATIVE USES OF STOCK OPTIONS

Group member Sheldon Pollack discussed the reasons and techniques for systematically buying or selling "put options". For example, investors can buy a put option as insurance against a market decline. They can sell a put option to earn premium income or buy a stock at a price below current market levels. 

To get a grounding in stock option terminology and concepts, visit the free Chicago Board Options Exchange's site Online Options Institute

October 22, 2002

 

VALUE LINE'S "SAFEST WINNING IDEAS"

The North Shore group analyzed stocks that received Value Line's Top 100 "Most Timely" rating and had an above-average Value Line Safety Rating. This group included: Fortune Brands [Ticker: FO], ITT Industries [ITT], North Fork Bancorp [NFB], Patterson Dental [ PDCO], Weis Markets [WMK], H & R Block [HRB], Dentsply International [XRAY], Anheuser-Busch [BUD], Procter & Gamble [PG], and Sysco [SYY].

North Shore member study groups reviewed the data on each of these stocks and concluded that FO, WMK, HRB, XRAY, BUD and PG were "buys" while ITT, NFB, PDCO and SYY were "holds." There was difficulty determining the "fair price" [what an informed, experienced investor should be willing to pay now] of the stocks with the data available.

August 27, 2002 

and

September 24, 2002

WHAT'S YOUR INVESTMENT STRATEGY?

Group members gave summaries of their personal investment "game plan". Quite a few variations to traditional "buy and hold" or "trading" techniques were described. Some interesting tools used by one or more group members: selling put options; using high debt allocation; selling covered call options, "up months only" (Nov to Apr) equity investing; options-dictated equity trading; using "short-selling" and leveraged index funds; IBD's 8% stock selling rule applied to "cost" or "current price"; contrarian equity stance (buy what's being sold, sell what's being bought); day trading with "limit order straddles".

July  23, 2002

PITFALLS AND BEST PRACTICES IN RETIREMENT FINANCIAL PLANNING

North Shore sub-group founder and co-leader Herb Paske enlivened this discussion with several questionnaires he uses with his clients to assess their risk tolerance and investment knowledge. Some key points Herb made: Social Security typically covers only 20% of retirement expenses; today's retiree typically has a 30-year life expectancy so inflation risk must be countered; a 3% maximum annual draw from retirement assets will generally ensure a retiree doesn't outlive his/her assets; the recommended order of withdrawal for most people is to use personal money first, then retirement account money.

June 23, 2002

CAN PHARMACY COMPANIES FIND THE Rx FOR PROFITS?

We divided ourselves into small "study groups", each of which looked at one of the the large pharmaceutical companies: Merck [MRK], Pfizer [PFE], Wyeth [WYE] [the former American Home Products], Lilly [LLY], Glaxo SmithKline [GSK], Johson & Johnson [JNJ], Abbott Labs [ABT], Bristol-Meyers Squibb [BMY], Novartis [NVS] and Pharmacia [PHA]. These stocks were recently selling at 10% to 50% of their 52-week high prices. Among the industry challenges mentioned were patent expirations, competitor and consumer lawsuits, generic competition, low earnings, slow FDA new drug approvals, and potential government involvement in drug distribution [Medicare drug benefits?]. The study groups thought Johnson & Johnson, Pfizer, and Pharmacia could be bought now; other companies weren't attractive at current conditions.

May 28, 2002

DEFENSE FOR YOUR PORTFOLIO

Four defense contractors, General Dynamics [GD], Lockheed-Martin [LMT], Northrop Grumman [NOC], and United Technologies [UTX] were reviewed for investment merit. People liked the financial strength of General Dynamics but wondered if submarine orders were stymied. Lockheed, it was feared by some, had already "made its move". Northrop Grumman was faulted for erratic earnings, as well as low earnings levels and profit growth. United Technologies was the diversified business and had a relatively low price/earnings ratio. In a straw poll at the end of our discussion, about one-third of attendees were "willing to buy" General Dynamics and United Technologies "the next morning"; almost no one had buying interest in Northrop or Lockheed.

April 23, 2002

BUILDING MATERIALS MERCHANTS

The housing industry has been a mainstay during the 2000-01 Bear market. Companies providing raw materials for housing, construction, and home improvement have benefited from this trend. The group looked at four examples that were favorably ranked by Value Line... Home Depot [Ticker: HD]; Lowe's [LOW]; Hughes Supply [HUG]; and Building Materials Holding Corp [BMHC]. Lowe's and Home Depot are the most closely matched... some attendees thought LOW was attractive as a smaller, nimble, cheaper version of HD. Others said Home Depot's experimentation with stores selling luxury products ["Expo"], automobile sales, and "mini-stores" for city locations was in its favor. It was noted that Hughes had the most price momentum.  

March 26, 2002

"CONVERTIBLE" AND "PREFERRED" SECURITIES-- THEY CAN MAKE YOUR PORTFOLIO GROW OR INCOME FLOW

The group reviewed the definitions of "convertible" and "preferred" securities, showing how an investor can achieve equity-like capital gains under some circumstances and bond-like steady yields otherwise. For concreteness, we studied the more liquid breed of LYONS [Omnicom 0% Convertible LYON due 2/7/2031] and PEPS [Electronic Data Systems $3.81 PEPS Convertible due 8/17/2004] securities, as well as a Preferred Stock [Public Storage Inc. 7.875% Cumulative Preferred Depository Shares, Series S]. Some prominent convertible security mutual funds were also reviewed. The difficulty of getting information about convertible securities was noted; serious investors were directed to www.convertbond.com [annual fee site with free 14-day trial] and to the paperbound "Mergent Bond Record" [formerly, Moody's Bond Record] available at some libraries.

February 26, 2002

ENRON FALL-OUT...WHAT'S WRONG WITH CORPORATE FINANCIAL REPORTING & GOVERNANCE?

This discussion was enlightened by Jim Kahan [ex-CPA and -auditor; presently Vice President-Investments, Smith Barney (Northbrook)] who reminded us that good auditing focuses on the "exceptional" or "critical" points of a company's accounting records. Auditors are charged with deciding the "best presentation" when competing accounting methods can be used. For large corporations, key audit team members should be rotated out regularly. In Enron's case, possible auditing errors included the lack of "arms length" partnership relations, and oversight of critical functions by Enron staff who formerly worked for auditor Anderson. Members noted that to minimize the chances of being "Enronized" in the future, investors should: (1) diversify! diversify!; (2) retain a healthy skepticism about all corporate information; and (3) recognize there's more to a "good stock" than a currently-rising share price.

January 22, 2002

YOUR BEST INVESTMENT IDEA FOR 2002

Twenty-six Best Ideas were suggested for the coming year including recovery candidates [e.g., Lucent, Rite-Aid], out-of-favor energy stocks [Valero Oil and Frontier Oil]; core holdings [GE, Pepsico]; and just a few speculations [IDEC Pharmaceuticals, Given Imaging] relative to previous years.

Ouch! The average "Best Idea" recommendation lost 29% last year! But there were four gainers meriting 2001 Achievement Awards... trendy clothier Urban Outfitters [up 175%]; tech merchant Computer Discount Warehouse [ahead 78%]; Cohu rising 2% [makes silicon chip testing equipment and is not a type of salmon]; and midrange department store Kohl's [positive by 0.1%].

November 27, 2001

INVESTING IN THE PRESENCE OF TERRORISM

After the September attacks, President Bush said the fight against terrorism could take years. Investors have to consider that, so we looked for stocks likely to be boosted or hindered by a time of terrorism. Getting kudos were "stay-at-home entertainment" companies like Singing Machine [SMD]; device security makers such as Visionics [VSNX]; and traditional military hardware purveyors Lockheed-Martin [LMT] and General Dynamics [GD]. Likely to suffer from the new climate, at least one attendee thought, were theme park hosts like Disney [DIS], oil producers such as BP [BP], and electric utility companies . 

October 23, 2001

EDUCATION SERVICES COMPANIES

The operations, history and investment performance of four companies in the education business were discussed. Members were most impressed with Career Education [CECO] and DeVry [DV] for their post-secondary, skills-oriented degree programs in technology, business administration, and culinary arts. There was less enthusiasm for Apollo Group [APOL] which operates a broad program under the 'University of Phoenix' name, and for Sylvan Learning [SLVN] which has a strong interest in overseas teaching, particular of English as a second language. Some AAII observers were put off by the high P/E ratios of this group at this market juncture.

September 25, 2001

HOW TERRORISM CHANGES THE FUTURE FOR INVESTORS

A group discussion of investor and market responses to the terrorist attacks on the United States on September 11, 2001.

August 28, 2001

ESTATE PLANNING OPPORTUNITIES and CREATING RETIREMENT INCOME

Jay Lazar and Mark Wiemeler of American Express Financial Advisors presented a review of the two topics above. This included calculating "net worth", social security payments and their taxability, uses of Roth IRAs, the role of trusts, 529 college saving plans, and charitable giving.

July 24, 2001

AAII NATIONAL MEETING RECAP

Attendees of the 22nd Annual AAII Investor Conference this June in Chicago reviewed some major topics covered by speakers: exchange-traded funds; the semiconductor industry; investment philosophy of Don Phillips (Morningstar), Ed Finn (Barron's), and Stephen Leeb (Personal Fianance); AAII.com website resources; lessons of best-performing newsletters; and the new IRA regulations.

June 26, 2001

WHEN TO SELL?

This discussion was anchored by Donald Cassidy's AAII Journal article titled "When to Sell a Stock" of May 2001. Cassidy's 24 selling rules were segregated into action headings, including: (a) Making selling a deliberate decision; (b) Setting sell price targets; and (c) Factors to ignore when selling. Though Cassidy's "rules" were provocative and many embodied good sense, he gave no evidence to support their effectiveness as long-term strategies. Several Cassidy omissions cited by audience members: (a) No discussion of partial position sales; (b) No use of technical analysis such as moving average rules; and (c) No interest in relating a sale price to cost.

May 22, 2001

DRUGSTORE STOCKS

Excellent data arrays and analyses were presented by group members on the leading mega-pharmacists: Walgreen's [Ticker: WAG], Long's Drug [LNG], CVS Corporation [CVS]; and Rite Aid [RAD]. The general conclusion was that Walgreen's was the profits and consistency "cadillac" but was currently well priced. Long's was attractive on its raw numbers but not a compelling story. Rite Aid had considerable potential as a turnaround but still faced heavy investor doubts and debts. CVS is close to Walgreen's in revenues, profit margins and growth plans; the stock trades at a lower valuation because of its shorter operating history.

April 24, 2001

ESTATE TAXES: History and Future

See the hand-out sheet from this meeting now available on our Downloads page. Although there was considerable support in the group for estate tax reduction for "mini-millionaires", a number of members wondered if charitable deductions would be dramatically cut by such a change. They wanted some incentives to encourage more donations. 

March 27, 2001

THE INTERNET BUBBLE OF 1998-2000

Many a Cassandra forecast the end of the bull market after the 37% market gain in 1995 but the persistent advance made them all look foolish. By the close of 1999, the S&P 500 Index had generated an average annual return of 29% for five consecutive years... the extraordinary was accepted as normal. As 2000 began there weren't any voices saying "The End is Near" ...but it was. We've read about "market bubbles", now this generation produced a delusion of its own. Members discussed investor behavior and their own actions during the bubble. Some of the culprits named: stock market hype on TV and Internet; distortion of investment values; "buy on dip" philosophy and lack of "when to sell" understanding; faulty Federal Reserve policies. Some thought the Bubble was burst by higher oil pricing and the contested 2000 Presidential election.

February 27, 2001

UNREQUITED LOVE

Valentine's month special topic... everyone's got an unrequited investment love... a security they've always adored but never bought. Walgreens [Ticker: WAG] was the unsatisfied infatuation most often cited by North Shore group members. Other unrequited investment infatuations included: Krispy Kreme Doughnuts [KREM]; Harley Davidson [HDI]; Sun Microsystems [SUNW]; Medimmune [MEDI]; Newport Corp [NEWP]; McDonalds [MCD]; Johnson & Johnson [JNJ]; and Berkshire-Hathaway [BRKA]

January 23, 2001

YOUR BEST INVESTMENT IDEA FOR 2001

There were 30 entries to the new year's Best Idea competition... most participants chose technology companies they expected to stage a comeback from last year's woes. This list should be available next month on our Download page as part of the Monthly Stock Watch List. The award certificates for Best Ideas of 2000 were granted to the members who recommended: Forest Labs [ahead 77%], Charter One Financial [gaining 44%], Armor Holdings [up 42%], Equity Office Properties REIT [rising 19%], and Atmel [gaining 17%]. 

November 28, 2000

BLUE CHIP BANKING STOCKS

The traditional banking industry has broadened to include financial services companies such as mortgage originators, stockbrokerages, and credit card issuers. We reviewed five "banking" firms that have long histories of good profitability and high market returns... and that are taking divergent paths into the future (click on links for more info): Fifth Third Bancorp [Ticker: FITB], Firstar [FSR], Mellon Financial [MEL], PNC Financial Services Group [PNC], and Wells Fargo [WFC]. 

October 24, 2000

ENERGY INDUSTRY TRENDS & INVESTMENT STRATEGIES

Lawrence Buettner, President of The Energy Group [East Dundee, Illinois] discussed current world and U.S. fossil fuel markets. He thought $50 per barrel crude oil (and $2+ per gallon gasoline) was inevitable in the future. Natural gas was recently at a $5.50 per thousand cubic feet all-time peak too. Buying gas well partnership shares (like the ones Energy Group sells) can give tax breaks that reduce initial investment; and, if gas prices remain high and wells don't run dry, attractive long-term income.

September 26, 2000

THE MILLIONAIRE MIND

The new book The Millionaire Mind [Andrews and McMeel] by Dr. Thomas Stanley presents a survey of the psyche of high-net-worth families. Stanley's subjects conclude it takes more of honesty, discipline, congeniality, risk control, and enthusiasm than brains, mentoring, luck, or investing skill to amass million dollar assets. It is also critical to choose a vocation you love... most self-made millionaires are small business owners, doctors & lawyers, or senior corporate executives. High net worth families tend to be tradition-bound: they have stable marriages, buy existing houses in established neighborhoods, use antique furniture that can be refinished, and organize their households for productivity.

August 22, 2000

MY FAVORITE GURU

Individual group members described the one source that they rely on the most for investment ideas and advice. Among those mentioned were: radio talk host Bob Brinker; money manager Mario Gabelli; newsletters Dessauer's Investor's World and Dow Theory Forecasts; newspaper Investors Business Daily; columnist Humberto Cruz; and the Value Line Investment Survey.

July 25, 2000

VALUE STOCKS TODAY

The concept of "value" investing was discussed using a presentation given at the T. Rowe Price website. Individual group members then presented their best value investment idea. Some of the stocks put forward were: Associates First Capital [Ticker: AFS]; Staples [SPLS]; Winnebago Industries [WGO]; and Philip Morris [MO]. [To see the full "value stock" list, DOWNLOAD the July 2000 Monthly Stock Watch List which will be posted on our Downloads page at the end of August.]

June 27, 2000

CORPORATE ANNUAL MEETINGS & PROXY BALLOT TRENDS

Several members said that the Annual Meetings they attended were more promotional than informative. We reviewed a typical Annual Meeting Proxy Statement and showed how to glean both direct and indirect information from it. Examples of this year's Director- and Shareholder- sponsored Ballot Proposals were discussed. [A hand-out sheet from this meeting is available on our Downloads page.]

May 23, 2000

UPGRADING YOUR PORTFOLIO

Individual group members suggested replacement stocks for "dead wood" now in their portfolios. The favored new stocks included Seibel Systems [Ticker: SEBL], Elon [ELON], Barnes & Noble [BKS], Archer- Daniels-Midland [ADM], Dycom [DY], Quest Diagnostics [DGX], and Enron [ENE].

April 25, 2000

WORLD'S THREE BIGGEST COMPANIES

We discussed several ways that "biggest" companies could be defined and reviewed industry trends that unite three behemoths: General Electric, Microsoft, and Cisco Systems. The careers and philosophies of the CEO's who guide this triumvirate -- Jack Welch, Bill Gates, and John Chambers -- were reviewed. Financial data and graphs were distributed. For free downloads of Federal filings by these and all public companies, go to the FreeEDGAR site. [Copies of hand-out materials from this meeting are available on our Downloads page.]

March 28, 2000

BIOTECHNOLOGY STOCKS

The biotech company analysis method of Michael Murphy [Every Investor's Guide to High-Tech Stocks & Mutual Funds (Random House, 1999)] was discussed, particularly his "M Score" figure of merit equal to the ratio of a company market capitalization to its cumulative 5-year R&D expense. Murphy believes this is a way to screen companies with no profits, low revenues, and little operating history-- typical of many biotech entities.

Individual members of the North Shore subgroup presented their research on leading biotech stocks... Amgen [Ticker: AMGN], Chiron [CHIR], Dura Pharmaceuticals [DURA], Elan [ELN], Genzyme [GENZ], IDEC Pharmaceuticals [IDPH], Immunex [IMNX], Medimmune [MEDI], and Jones Pharmacuetical [JMED]. We also examined the exchange-traded Biotech HOLDRs [BBH], and mutual funds Fidelity Select Biotechnology [FBIOX], Rydex Biotechnology [RYOIX], Janus Global Life Sciences [JAGLX], and Franklin Biotechnology Discovery Fund, Class A [FBDIX].

February 22, 2000

WHY SMART PEOPLE MAKE BIG MONEY MISTAKES

Our meeting subject was the title of a new book by psychologist Thomas Gilovich and financial writer Gary Belsky who provide a lively overview of research on investor behavior. We examined money "compartments", loss aversion, decision paralysis, anchoring, and other dysfunctional behavior. Attendees took a psychology quiz before the discussion to help them understand their own money and investing attitudes.

January 25, 2000

YOUR BEST INVESTMENT IDEA FOR 2000

We had the usual enthusiastic response to our "best ideas" contest, with 30 high quality entries provided. Awards for the highest price appreciation in a stock suggested at our January 1999 meeting went to group members who picked: Affymetrix [Ticker:  AFFX] up 530%; Checkpoint Software [CHKP] up 425%; Nokia [NOK] up 155%; Emcore [EMKR] up 151%; Rydex OTC Fund [RYOCX] up 101%; and Janus Olympus Fund [JAOLX] up 100%. [Note: You will be able to view the entire list of Year 2000 "best ideas" after March 1st on the AAII-North Shore Document Download Page.]

November 23, 1999

THE DOW JONES INDUSTRIAL AVERAGE- "Version 2000"

We reviewed the 100-year history of the Dow-Jones Industrial Average ["DJIA"] and its recent "upgrade" for Year 2000. A table showing all changes to the Average since its 1928 expansion to 30 stocks was distributed. We reviewed how the DJIA is calculated; why it "works" as a market barometer; and how it differs from other market yardsticks. The Dow components EK, GM, MMM, IBM and DIS were discussed by attendees. For full information about the DJIA and other Dow Jones domestic and international market indexes, go to the site: Dow Jones Averages.

October 26, 1999

INVESTMENTS FOR A 30-YEAR-OLD'S PORTFOLIO AND FOR A 60-YEAR-OLD'S PORTFOLIO

The traditional idea of taking more risk in youth and less risk in seniority was discussed. It was noted that increased longevity, alternative lifestyles, two-income families, and an era of high portfolio returns challenge the traditional view. The 30-year-old needs to put the benefit of compounding returns to work as soon as possible. A 60-year-old has to consider at least a thirty year retirement span and calculate an income plan using a conservative pay-out policy. Equities recommended by attendees for a young adult's portfolio included Microsoft [Ticker: MSFT], Fidelity Select Electronics Fund [FSELX], NASDAQ-100 Trust [QQQ], and Bally Total Fitness [BFT]. For the senior's portfolio, Automatic Data Processing [AUD], Cedar Fair [FUN], Vanguard Growth Index Fund [VIGRX], and Fidelity Fund [FFIDX] were suggested.

September 28, 1999

INTERNET STOCKS

The shares of four major Internet players: America OnLine [Ticker: AOL], Yahoo [YHOO], eBay [EBAY], and Amazon.com [AMZN] were discussed. Traditional "fundamental" stock analysis suggests all these companies are significantly overpriced. However, use of a venture capital analysis -- which relies on defining a firm's business model and evaluating the execution of that model -- can provide a more positive argument for investing in companies like these.

August 24, 1999

GURUS ON PARADE

Two summer conferences brought a planeload of gurus to Chicago. From July's  20th AAII National Meeting, we reviewed the thoughts of David Dreman ["Contrarian Investor"], Michael Murphy [Technology Investing]; Al Frank ["Prudent Speculator"], and Delos Smith [The Conference Board]. From August's Dow Jones Portfolio Management Symposium, the comments of Louis Rukeyser ["Wall St. Week"], John Reckenthaler [Morningstar], Charles Clough [Merrill Lynch], Joseph Battipaglia [Gruntal & Co.], and Kenneth Fisher [FORBES columnist] were discussed.

July 27, 1999

STAYING WEALTHY

The group examined how individuals can keep their investment nest-eggs from being decimated by taxes, medical costs, death, divorce, and/or legal liability. The framework for this discussion was the recent book... Staying Wealthy by Brian H. Breuel [Bloomberg Press, 1998]. Experienced estate planning attorney Ben Roth -- of the Lincolnwood, Illinois firm of Kamensky & Rubinstein -- gave a summary of estate tax rules and the role Trusts can play to minimize estate tax.

June 22, 1999

INTEGRATED OIL COMPANIES

Mergers are changing the world roster of integrated oil companies. The attendees reviewed Exxon [Ticker: XON] which proposes to merge with Mobil [MOB], BP Amoco [BPA] with its proposed merger with Atlantic Richfield [ARC], and the long-time combination of Royal Dutch [RD] / Shell Transport [SC]. Other oil companies cited by individual attendees for growth potential included Phillips Petroleum [P], Kerr-McGee [KMG], Fletcher Challenge Energy [FEG] in New Zealand, Amerada Hess [AHC], and Tosco [TOS].

May 25, 1999

ON-LINE TRADING AND INVESTOR WEBSITES

On-Line Brokerage ratings are given at websites Smart Money, Gomez, and for traders, at Sonic. Investor websites presented by Jan Parr, editor of OnLine Investor magazine [defunct-2003] at the AAII-Chicago May 1999 meeting were cited. Warnings about on-line trading abuses by SEC Chairman Levitt and by the NASD were discussed. Member experiences with several large on-line broker firms were positive. The group reviewed the characteristics of market, limit and stop orders and their pertinence to on-line trades.

Note: American Superior Company has no affiliation with AAII and does not endorse or recommend that organization's publications, statements, or products.

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