Google's Other Search Engine

I like to try out the following statement on people to gauge their reaction:  "Youtube is the most valuable media property ever created."  Some people laugh, others pause for a moment before starting to argue with me.  I do not think the statement is far wrong.  According to some measures, Youtube captures 20% of all web traffic daily.  And all of those eyeballs get served with a large helping of ads.  What do you think most young people find more exciting, Youtube or network television?

To my point, NPR ran a story today in which a teenage girl was interviewed.  Youtube is her main source for discovering new music.  She did not refer to Youtube as a "video website" but rather as a "search engine" for finding music.  Oh, and she never, ever pays for music.  Youtube is probably more valuable than the entire music industry right now for this reason, among others.  Anecdotal evidence, to be sure, but this isn't the first time I thought this about Youtube.  Why?  Because it is also my number one source for discovering and listening to music.

Compare this with Pandora and Spotify, darlings of internet radio, both of whom are struggling to make a profit because no one wants to pay for their services. 

And Youtube is not just music, of course.  Want to see an interview with Dean Martin from 1969?  A clip from the 1975 World Series?  Footage of an A-10 in combat over Afghanistan?  Where are you going to go?  And each day, the density of videos on Youtube increases.  Microsoft and other companies are trying to nibble into Google's main search product.  But is there any competitor for Youtube?  No, because the barrier to entry is growing with each video posted.  And it will keep growing...

The Other Social Network: Google+

I've made no secret about my like of Google as a company on this site.  Who else is at the cutting edge of search, driverless cars, and server technology?  And Youtube is a rather valuable property, given that 15-20% of daily internet traffic resides there.  And this isn't all the company is doing -- not by a long shot.  As an example, Google+, the company's relatively young effort to get back into social networking is gaining traction rapidly.  An article this morning in Wired notes that Google+'s growth rate mirrors that of Facebook in its early days. 

http://www.wired.com/business/2012/12/google-grows-like-facebook/

Yes, Google has had some missteps and may not have the respect for privacy that we would like (although, they are not alone among internet companies in this).  When all is said and done, a long-term investment in Google seems like a really good idea to me.  I've already put my money where my mouth is on this one.

An Opportunity in the Japanese Elections?

In recent years, many investors have argued that things can't get much worse for Japan and it might be time to invest in the country's stocks.  Then things have gotten worse.  I sense a new cycle of analysis on Japan over the last month or so and, with it, a potential short-term driver for an upswing in Japanese stocks.  Here are the key points in my analysis:

1.  Japan is likely to hold elections on December 16, 2012, which may usher in a new government, including a new Prime Minister.  Shinzo Abe, who may win election as Japan's Prime Minister, has been calling for the Bank of Japan to take steps to weaken the Yen. A weaker Yen would help some of the large Japanese exporters, such as the Toyota, Honda, Panasonic, etc.  Perhaps under pressure, he has backed off these statements.  Markets, however, are likely to regard Abe as a driver of a weaker Yen.

2.  James Hunt of Tocqueville Value Fund points out the dismal returns on Japanese equities over the last 12 years and possibly correctly identifies this as a contrarian signal (the other alternative is that the returns already price in bumps due to undervaluation and contrarian buying and Japanese stocks are precisely where they should be).  According to Hunt:

"During the last 12 years – not a magic timeframe, but one which roughly corresponds with my stewardship of Tocqueville’s International strategy – the total return for the Nikkei 225 Index in US$ terms has been approximately zero. At the same time, the consolidated EBIT margin for the companies that comprise the index has gone from roughly 9.5% to 11.4% , aggregate earnings for profitable companies have gone from Yen 438 billion to Yen 608 billion and, importantly, the return on equity has increased from around 6% to around 10%. Correspondingly, the price to earnings ratio for profitable Nikkei 225 companies has gone from 24x to 15x, while the price/book value has compressed from 1.7x to 1.1x and the dividend yield has increased from 0.8% to 2.3%."

http://www.tocqueville.com/insights/sun-also-rises


3.  The Press has been focused on the upcoming Japanese election and on gloom and doom.  The ultimate disrespect:  a recent story noting that adult diapers outsold infant diapers in Japan last year for the first time (a result of Japan's aging population and low birth rate):


http://www.businessweek.com/articles/2012-11-23/japanese-stocks-yes-they-really-think-so

So what's the trade here?  It's a risky one but you could wait to see if Shinzo Abe is elected Prime Minister and then invest in select Japanese exporters, an index fund tied to the Nikkei, or more deviously an ETF that is inversely correlated with the value of the Yen (see here for some ideas:  http://www.indexuniverse.com/sections/blog/15184-japan-etfs-for-a-yen-rout-.html).  A last point.  This is probably not a party to be late to if you're looking for quick returns.  The election is on December 16, 2012 in Japan, which is 14 hours ahead of US Eastern Time.  In searching Google, I found no analysis of when we might expect to learn of the results.  One might guess early morning Eastern time, Sunday, with markets closed.  Probably a good idea to set up a Google alert to tell you when the results have come in.  A neat algorithm would start queuing trades immediatley upon news of Abe's victory and do nothing if he's defeated.  Beyond my current technical expertise but some of you might be capable.  Good luck.

Word to Investors (and Sleepy Citizens): The FIRE Economy Is Alive and Well

Slate ran an article on November 26, 2012, claiming that 88% of the earnings growth in the S&P 500 companies came from just 10 companies, with nearly 60% of that growth coming from 4 among this 10:  Bank of America, Apple, AIG, and Goldman Sachs.  And keep in mind that Citi and Wells Fargo were also among these top 10.  Here is the article:

http://www.slate.com/blogs/moneybox/2012/11/26/apple_aig_goldman_sachs_and_bank_of_america_provided_most_of_2012_s_earnings.html

What conclusions can we draw from this:

 1.  Apple, which was the biggest single contributor to earnings growth, is one heck of a company to be able to generate these kinds of earnings in a world where the only other folks who can make money are banks and insurers.

2.  These figures may be skewed because large banks and insurers had their earnings sharply depressed in recent years.

3.  The financial collapse has done little to stop the inordinate flow of profits to the FIRE (Finance, insurance, real estate) sector of the economy. 

Mortgage Insurance Part 4: The Dangers of Number Blindness

Since I already purchased both RDN and MTG based on some of the analysis I've written about in previous posts on mortgage insurance, I'm soon going to turn my attention to other opportunities.  Before I do, however, I wanted to write a final piece on mortgage insurance because it illustrates the divide between two approaches to investing.  Namely, the tension between a numbers-based approach and an approach based on a realpolitick assessment of the state of the world and a particular industry.

Oliver Davies has done some nice analysis on Seeking Alpha, which concludes that RDN is at risk of insolvency and is certainly a much riskier investment than MTG, due to slow-paying claims and inadequate reserving (among other factors).  See here for Mr. Davies' summary of his thoughtful research:

http://seekingalpha.com/article/1003411-radian-responds-to-barron-s

A comment to this article illustrates the divide of perspectives that I mentioned, however:

"So right. Radian has made it through the housing crisis and out the other side. Now that real estate and all tangential markets are improving, the Fed will definitely question their reserve assumptions and try to close them down. What better way to usher in the housing recovery everyone is waiting for than taking down one of the premier MI issuers. Sheer genius.

P.S. I'm sure Fannie Mae almost hired S.A. Ibrahim a couple of months ago because they detested his MI practice. You are definitely onto something here. Have you proposed this to Fox News yet?"

This comment's tone is unfortunately typical of  many comments on Seeking Alpha but, I must say, despite its tone and lack of deep numerical analysis, I side with the commenter and not Mr. Davies.  The federal government wants to keep private mortgage insurers in business and the fact that Radian has survived this long suggests to me that they are going to survive longer.  Mr. Ibrahim's apparently cordial relationship with the Fed is just icing here.

Thus, an investor must be careful about being blinded by the numbers, particularly in certain industries.  Let me put it another way:  if you've lived through the last 4 years in this country, do you still believe that a company's reported numbers can reliably determine that company's chances of survival -- particularly when that company is a financial institution or insurer?    

Mortgage Insurance: Part 3

One issue I did not mention in my prior pieces on mortgage insurance was that MGIC had sued Freddie Mac over capital requirements that Freddie had imposed on MGIC which, if implemented, would have precluded MGIC from writing policies.  That suit is apparently in the process of being settled:  

http://www.rttnews.com/1995110/mgic-in-preliminary-deal-with-freddie-mac-to-settle-pool-insurance-dispute.aspx

There are some possible stumbling blocks to this resolution, however.  Namely, Freddie (and the Wisconsin insurance commissioner, which oversees Milwaukee-based MGIC), want assurance that MGIC is sufficiently capitalized to cover its risks in certain states.  As a result, MGIC's holding company will have to make a capital infusion into the MGIC unit -- although a significantly lower one than originally required by Freddie. 

In the type of shell game we have come to expect in the financial and insurance sectors of our economy, MGIC has gotten Freddie's approval for an end-run around its overly high risk ratio in other states:  it will simply have a new unit, MIC, which has a lower risk ratio than MGIC, write policies in these other states.

My take:  state and federal regulators, Fannie, and Freddie all want MGIC to survive -- although it is possible that MGIC will be unable to meet even the reduced requirements set forth by these entities.  So MGIC undeniably presents some investment risk.  Putting aside the moral implications of yet another example of rules being changed to allow failed institutions to survive -- this blog is about investing, not philosophy -- MGIC looks like a pretty good junk bond equivalent.  

Follow Up on Mortgage Insurer Stocks As Junk Bonds

I've done some further reading on the mortgage insurance situation and it is interesting enough to merit a second post.  The below article is a good overview of the competing interests trying to stake claims in the mortgage insurance arena after 3 of the main players were shut down by regulators in the last few years (one of them, PMI).

http://www.bloomberg.com/news/2012-08-22/arizona-regulator-sues-nmi-showing-watchdog-influence-mortgages.html

Let me give you what I believe are the most salient points:

• The Arizona Department of Insurance, acting as the receiver of the defunct PMI, has sued upstart would-be mortgage insurer NMI Holdings from improperly appropriating PMI assets. The suit could hinder NMI from selling mortgage insurance;

My thought:  former PMI employees are anxious to get back in the business

• Private mortgage insurers, which have lost more than $18 billion since mid-2007, wrote $40.1 billion of coverage last quarter, or almost 10 percent of the $405 billion of new loans.

My thought:  I'm absolutely astounded that the industry wrote more coverage last quarter than the amount of losses suffered during the housing crash

• MGIC’s preliminary ratio of risk relative to capital breached the level some regulators require to write new policies as of June 30, the insurer said Aug. 2.

My thoughts:  MGIC should probably be shut down but is being allowed to continue to operate

• Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co (JPM), private-equity firm Pine Brook and reinsurer PartnerRe Ltd. are among backers of the industry’s other startup, Essent Guaranty Inc. The Radnor, Pennsylvania-based firm raised $600 million in 2009 and 2010 and began writing policies last year, providing 5.3 percent of coverage in the first half of this year.

My thoughts:  Goldman and JP Morgan see an opportunity in mortgage insurance.  The management team at Essent looks like it's been poached from other major mortgage insurers. 

One more thought, not from the article.  There was significant insider buying of shares in August of this year.  See http://seekingalpha.com/article/789171-why-i-bought-mgic-investment-corp-for-a-trade.
 
This is starting to look even more interesting.  I will continue to follow this industry.

Mortgage Insurer Stocks: Like Junk Bonds?

I recently ran across an article which mentioned the private mortgage insurer, MGIC.  I hadn't thought about the company in years.  Not since shorting it in the wake of the financial crisis and watching it pleasantly sink from about $38 to $24 before bailing out.  Only to regret my impatience later when it went nearly to zero.  At the time, although I was a major doomsayer, I did not foresee the complete collapse of the housing market.

Later, when the full scale of the disaster became evident, I was given to making pronouncements like:  "There is no way the mortgage insurers can survive.  Their liabilities are insurmountable."  And then just the other day, I was reminded of these thoughts after not thinking about the private mortgage insurance industry for several years.  My first reaction was "how are these mortgage insurers still in business?"  Some quick research revealed that not all of them are.  PMI, one of the major players, was seized and is now apparently a historical note.  But MGIC and Radian, two other big insurers, have survived.  The following article attempts to detail how this miracle could be:

http://seekingalpha.com/article/862831-radian-group-management-is-misleading-investors

I'm still not convinced but, that being said, if MGIC and Radian have survived the last four years, then it seems to me there are two possibilities.  One, they are getting ready to die, as PMI did last year.  Or two, they can survive anything and may very well run up if the housing market recovers to some degree.  In no way shape or form do I believe the housing market will make a significant recovery any time soon (I'll save my reasons supporting this assertion for another day).  However, the mortgage insurers would benefit from even a minor recovery in the housing market.  The article above details how MGIC is in much better position than Radian.  Some of the commenters believe otherwise.  In any event, if these two are still around, they may survive until the sun shines again...

The Temptations of Brains (Hewlett-Packard)

Hewlett-Packard has taken a beating lately and rightfully so.  It has had a string of leadership issues and a ton of layoffs.  See the link below for a complete condemnation of the company:

http://theforvm.org/diary/m-aurelius/meg-whitman-job-creator

But...

It still has some very good brains left and it seems to recognize that, if it's to survive, the company must focus on R&D.  See below:

http://www.wired.com/wiredenterprise/2012/02/hp_calculator/

And...HP has brains across a range of scientific and engineering disciplines.  And who knows what patents already in the company's trove will prove relevant and valuable?  So, I have to repeat the conclusion I reached in my tech dogs post:  HP might be worth a long term investment at its current price.  Risky but not that risky -- what are the chances the company will be out of business before it experiences a significant rise in stock price?  Fairly low, I would say. 

All HP has to do is have one or two big successes, led by their brains, to rise again.  They are also in volatile businesses in which the company that was dead last 5 years ago can be No. 1 today.   

Corning (GLW): I'll be Watching

There is an interesting article on Corning and its focus on R&D in today's Wired magazine online.  The link follows.  The last time I recall Wired doing a piece like this was on MolyCorp (MCP), miner of rare earth metals.  The MolyCorp article portrayed the company ready to skyrocket because of the scarcity of rare earth metals in the West (as opposed to China) and MCP's purported lock on rare earth metals mining.  MCP did skyrocket -- for about a day.  It then proceeded to lose about half its value in a stunningly short period of time.  Today's Corning article makes a compelling case for the company as the type of R&D focused enterprise worth investing in.  We shall see how the stock performs in the aftermath of this article...


http://www.wired.com/wiredscience/2012/09/ff-corning-gorilla-glass/

The Dangers of Generalizing

This is not strictly a post on investments but more on habits of mind.  An interview with a White, Southern woman who voted twice for George W. Bush and believes that President Obama is Muslim is a cautionary example of drawing conclusions from too little data or, more precisely, stereotyping.  Based on my description, one might expect that the woman in question is voting for Mitt Romney.  Wrong.  She is voting for Obama, despite her views on the President's religion.  Why?  Because she makes $28,000 a year and doesn't like Romney because, in her mind, he was born rich.  The interview with her is here:

http://news.yahoo.com/southern-whites-troubled-romneys-wealth-religion-050312040.html

The lesson obviously applies in a wider context.  Moreover, it confirms my personal belief that Americans are a more complex group than our leaders (and possibly the rest of the world) believe.  The access to internet and media available to all levels of American society will only magnify this effect going forward.  Indeed, the Republicans are running into some difficulty now in trying to appeal to disparate groups in American society.

A Crack in My Love of Google

I regularly tout Google as the long-term winner of our current tech battleground.  There is its search dominance, its ownership of Youtube (one of the most valuable media properties ever created in my opinion), and Android, just to name a few assets.  Not to mention that it's pushing the envelope in server design and snapping up small tech outfits, one of which might turn out to be a goliath.  Yet, there are some cracks in the facade.  Google has shown something of  a disregard for privacy rights and there are comments like these from programmers, which worry me:

"Google does have an office in Manhattan. You should definitely apply there - I don't think it's an interesting company to work for anymore (and their recruiters are second only to Facebook's in how pathetically desperate they seem when they contact me), but the interview process is really fun."

See more of this thread at http://developers.slashdot.org/comments.pl?sid=2357190&cid=36936764

Hmmm... anecdotal but troubling if programmers no longer find Google interesting. 

Tech Dogs, Lessons of the Past, and a Possible Portfolio

Wired magazine recently ran an interesting article on how Apple was derided as a terrible and failing company in 1997:

http://www.wired.com/business/2012/07/not-dead-yet-the-crappy-company-that-could-have-made-you-rich/.

Some of the quotes from that time period about Apple were absolutely damning.  How wrong they were.  So what, you say, it's too late to capitalize on that information?  Yes, but the point of the article is that there are a number of one-time 800 pound gorillas in the tech space that again look like terrible and failing companies:  HP, Nokia, RIMM (Blackberry), and Yahoo.  Why not create a portfolio of them?  Not all of them will likely rise from the ashes but only one has to experience an Apple-like turnaround to carry the day.  If I had to pick the most likely to do it, I'd go HP, Nokia, RIMM and Yahoo in that order.  Why?  Because HP still has a lot of patents and a lot of engineers.  Same for Nokia and Blackberry to some extent but in a more confined space:  mobile (although a good space to be in if you must be confined).  Yahoo lacks truly valuable technology but has brand and users.

My Facebook Prediction and the Speed of Change

On May 23, 2011, I predicted that Facebook would lose half of its value within 5 years due to loss of users: http://limbinvest.blogspot.com/2011/05/facebook-5-years-50.html .  Arguably, the 50% loss has already occurred but I don't raise the issue to take credit (I fully expect Facebook to lose more value over time), but rather to consider a point:  the world may be moving much faster than my previous conceptions of it would permit.  Another case in point:  one of my first posts predicted that Google would acquire Motorola Mobility within 5 years.  That prediction proved correct but took 5 months.  These are anecdotes to be sure, but I'm now examining my assumptions about the speed of change and the volatility of the world and its markets. 

ETF Tracking Errors

Barron's recently ran a piece on ETF tracking errors.  In other words, you buy an ETF to track a particular index and the ETF does not closely match the performance of the index it is supposed to track.  There are various reasons for the error, including fees, trading costs, and failure of the ETF to match the indices' holdings closely enough.  The article generally notes that tracking errors are small on US indices.  Frankly, this wasn't my understanding, at least with respect to triple short and triple long ETF's, but this isn't the point of my entry.  The article also suggests that foreign index ETF's have greater tracking errors.  Is there an arbitrage opportunity here, e.g. can you sell short one of these foreign index ETF's and then perhaps go long all or many of the underlying holdings of the ETF.  The idea being that your direct holding of the components of the index will outperform the ETF?  This one's not for me, it's a purely institutional trade I think and the devil would be in the details.  Trading costs might simply be too high with respect to buying the index's components.   

Some Tidbits Buried in the Facebook Class Action Settlement

Facebook has recently agreed to settle a class action alleging that Facebook users' likenesses and names were used in connection with the site's Sponsored Stories ad program, without obtaining the users' prior consent.  No money will be paid to Facebook users as a result of the settlement because, as the papers filed in support of settlement attest, Facebook made almost no money per capita on the sponsored stories program and, thus, it makes no economic sense to distribute such minimal amounts to class members.  My takeaway from the case:  Facebook is really skirting the privacy line to extract minimal revenues from each of its users.  Of course, Sponsored Stories is only one program and, if you have enough users, even miminal revenue from each adds up.  Still, if Facebook is willing to risk alienating its users in this rather overt way to increase revenues, this suggests some desperation on the company's part.  Here is a link to a Wired article which discusses the settlement and links to a copy of the papers filed in support of the settlement, should you care to delve deeper.

http://www.wired.com/threatlevel/2012/07/groups-get-facebook-millions/

Steady Is the Head That Wears The Crown

I like the way that Crown Media is weathering the market volatility lately.  I own Crown, so let me be upfront about that.  I've watched the stock go down, way down, from where I bought it at $1.60 or so.  Now it's in the $1.70's.  It seems to have won some investors over or, perhaps, "some folks" have sensed that it is a cheap acquisition target.  I ask myself, which is more likely?  While it has posted decent performance numbers of late, nothing that would suddenly make it overly seductive in a very dangerous market like the current one.  Here are some thoughts from a fellow who agrees with me that Crown should be an acquisition target:

http://seekingalpha.com/article/519831-sunset-of-the-golden-age-as-cable-networks-mature

The Brush Effect

After reading his columns for some time, I began to get the sense that stocks seemed to do well after being recommended by MSN Money columnist Michael Brush. I decided to research whether my anecdotal feeling was actually accurate. Based on an admittedly small sample size, it seems my intuition has some support. I've posted below an analysis of stocks picked by Brush in his articles, following them on a one-day and one-week basis after his pick. Brush's picks significantly outperformed the S&P 500 over these periods. A few caveats. I only used articles in which Brush recommended a finite number of stocks, e.g. "5 Big Names Ripe for Takeover, not articles in which Brush gave more general market analysis. My reasoning is that investors would have had a tougher time ferreting out investment ideas from the more general articles and were more likely to pass on them. An arbitrary determination to be sure, but not without some logic. In any event, I'm working on a trading strategy to capitalize on this and will report back:

MICHAEL BRUSH ANALYSIS

Thesis 1:  The media has a preeminent influence over behavior in the modern age and this influence extends to investing. 

Thesis 2:  Stocks recommended by Michael Brush, MSN Money columnist, experience a marked increase in value immediately after Brush recommends them.

Background:  I noticed that stocks recommended by MSN Money columnist Michael Brush seem to do well immediately after he recommends them.  I decided to see if this was true or only seemed to be the case.  I examined only a subset of Brush’s articles because he doesn’t specifically recommend stocks in every article.  I usually only focus on articles of the type “Six Stocks Insiders Are Snapping Up.”  He has other articles which don’t make specific recommendations or just talk generally about an issue.  I examined articles from 2011 and 2012.  I excluded two articles where he made recommendations of 10 and 12 stocks, respectively, because I thought this was too scattershot for investors (including me) to hone in on.    However, it might be necessary to look at these. 

Conclusion:  Indeed, stocks recommended by Brush outperform the S&P in the week following his recommendation by a significant percentage.  This effect appears most pronounced for stocks valued under $10.  The one week returns are better than the one day returns.  My suspicion is that the effect is the result of investors jumping into these stocks based on Brush’s recommendation, rather than his timing being exceptional (or indeed the picks themselves being exceptional).  It could also be that electronic trading platforms are programmed to buy his recommendations.  The articles which are the source of the data are listed after the table.  This sample may be too small to permit reliable conclusions, however.

 

Stock	Adjust. Close on Start Date	Adjust. Close 1 day out	1 day return	Adjusted Close 1 week out	1 week Return	High During 1 Week Period	S&P Return Over  1 day Period	S&P Return Over 1 week Period
WHR	63.54	65.28	2.7%	58.38	-8.1%	65.28	0%	-6.4%
SKYW	12.74	13.17	3.3%	12.82	0%	13.17	0%	-6.4%
XRX	8.68	8.76	.9%	8.04	-7.3%	8.76	0%	-6.4%
TSN	17.02	17.20	1%	16.61	-2.4%	17.20	0%	-6.4%
AET	38.86	38.89	0%	36.59	-8.4%	38.89	0%	-6.4%
MS	16.11	15.91	-1.2%	16.67	6.2%	16.67	-1.6%	1.5%
HAS	35.14	35.84	2.0%	36.45	3.7%	37.37	-1.6%	1.5%
RT	7.56	7.55	0%	7.80	3.2%	8.35	-1.6%	1.5%
KFT	33.02	32.67	-1.1%	32.82	1%	33.42	-1.6%	1.5%
EMR	42.28	41.80	-1.1%	43.77	3.5%	45.08	-1.6%	1.5%
BRK.A	104,814.00	102,600.00	-2.1%	103,491.00	-1.3%	106,350	-1.6%	1.5%
CMG	246.98	250.98	1.6%	272.20	10%	272.20	1%	2.4%
APKT	67.01	68.00	1.5%	72.07	7.4%	72.57	1%	2.4%
IRBT	29.28	29.55	.9%	32.81	12%	32.81	1%	2.4%
ISRG	320.93	330.50	2.8%	338.21	5.4%	338.21	1%	2.4%
ZOLT	13.30	13.51	1.6%	13.53	1.7%	13.53	1%	2.4%
PSUN	3.41	3.36	-1.5%	3.54	3.8%	3.54	1%	2.4%
SIRI	1.67	1.70	1.8%	1.72	3%	1.73	1%	2.4%
CRWN	2.24	2.35	4.9%	2.34	4.5%	2.40	1%	2.4%
TXCC	2.87	3.37	17.4%	4.47	56%	4.61	1%	2.4%
COWN	3.92	4.04	3.1%	4.08	4.1%		1%	2.4%
MKC	47.67	47.23	-.9%	46.35	-2.8%		-1.9%	-4.7%
AFL	55.25	54.17	-2%	49.49	-10.4%		-1.9%	-4.7%
ADP	49.44	48.93	-1%	46.96	-5%		-1.9%	-4.7%
PAYX	32.41	32.13	-.9%	30.27	-6.6%		-1.9%	-4.7%
TSCO	54.59	53.94	-1.2%	52.94	-3%		-1.9%	-4.7%
SHLAF	NA						-1.9%	-4.7%
AEO	14.12	15.40	9%	15.38	8.9%		0%	1.2%
Petrohawk	Acquired as Brush predicted; NA						0%	1.2%
WAL	8.08	8.11	0%	8.30	2.7%		0%	1.2%
Lawson	Taken private, as predicted; NA						0%	1.2%
CPNO	31.57	31.68	0%	32.36	2.5%		0%	1.2%
Pride Int’l	Acquired as predicted;NA						0%	1.2%
LKQ	25.14	25.38	.9%	25.64	2%		0%	1.2%
AMD	8.39	8.26	-1.5%	7.93	-5.5%		0%	0%
BBT	26.01	26.03	0%	26.43	1.6%		0%	0%
GE	17.88	17.82	0%	17.56	-1.8%		0%	0%
AMR	Unav.						0%	0%
MMM	85.84	85.24	0%	85.33	0%		0%	0%
CMRG	3.13	3.32	6%	3.56	14%		1%	4%
VVTV	1.59	1.67	5%	1.94	22%		1%	4%
ETAK	2.02	2.26	12%	2.39	18%		1%	4%
GSL	2.52	2.90	15%	3.43	36%		1%	4%
FBP	3.64	3.71	2%	4.00	10%		1%	4%
Combined  Average Total Return			2.7% (80.7% total return ÷ 39 investments)		4.4% (173.4% total return ÷ 39 investments)		-.21%         (-1.5% total return ÷ 7 investment periods)	-.29%         (-2.5% total return ÷ 7 investment periods)