The Samurai Fund – All Hands On Deck!

Searching For Fortune On The Fund’s Yacht

With great pleasure, I announce the launch of The Samurai Fund!

Thesis: Through random selection based solely off permutations of reader’s names (personal or site title), we are able to create a long-only mutual fund that will outperform the S&P 500 index!

Fund Details: $1,672,003 billion launch, $100/share NAV, with 17 positions equally weighted.  Concentrated multi-strategy portfolio with defensive names in the alcohol and utility space, as well as higher beta names in technology and health sciences.  Small caps and large cap names included.  S&P 500 start value 1,115 benchmark.

Investment Outlook 2010: The stock market continues to rebound, but at a slower pace.  Inflation and interest rates remain benign, leading to a re-emergence of consumer spending.  Housing stabilizes with 30-year mortgage rates staying below 6.5%.  The government maintains record spending to stimulate the economy and the unemployment rate begins to fall in the second half of the year.  The S&P 500 increases by 10-15% with a blue-sky target of 1,322.

Duration & Rules: One year.  The bottom 3 performers will be up for review every quarter. To stay in the fund, one must write a convincing argument as to why we should not cut our losses.  Picks down more than 20% also will be re-evaluated.

Goals: To have fun, learn something about the stock markets, prove a theory that luck plays a big part in performance, and to build better relationships with the community.

Contributors: Please retweet and spread the word to any of the social media sharing sites below.  We need all the support we can get to outperform the professionals!  Contributors are encouraged to provide updates and commentary as the months progress.  If anybody wants to do a portfolio analysis below, please feel free to do so!

*** STOCK PICKS SUMMARY WITH CONTRIBUTORS ***

 

FINANCIAL SAMURAI

Company (Ticker): Boston Beer Company (SAM)

Market Cap: $668 Million at entry price $46.60.

Commentary: Love Samuel Adams beer, but with no dividend, lofty valuations and minimal earnings growth, it’s hard to see this defensive stock providing alpha to the fund.  People need to drink in good times and bad!

DAVID AT MBA BRIEFS

Company (Ticker): ABM Industries (ABM)

Profile: A building maintenance and facility services company.

Market Cap: $1.09 Billion at entry price $20.65.

Commentary: The stock doesn’t look like it’s going to do anything spectacular in the short term but ABM is predicted to have consistent earnings growth throughout the year and has beat the analyst’s estimate every quarter for the last 4 quarters.

ABM is currently trading at $21.14 and the 1 year target estimate is $25.50. Volume peaked at 700k shares the week before Christmas and then dropped way off, and its trading well above the 50 day and 200 day moving averages, so it’s hard to tell if the stock price is going to continue to rise, trade sideways, or drop this week.

Not exactly a sexy stock but facility services should be fairly recession-proof and should do even better now that we’re supposedly heading into a bull market.

CHARLIE

Company (Ticker): Harman International Industries (HAR)

Market Cap: $2.44 Billion at entry price $35.28.

Profile: Engages in the development, manufacture, and marketing of audio products and electronic systems in the United States and internationally.

Commentary: Don’t know a thing about the company but will be interesting to find out!

CREDIT CARD CHASER

Company (Ticker): Calgon Carbon CP (CCC)

Market Cap: $786 Million at entry price $13.90.

P/E: 20.26X

Earnings Growth 2010: 47.2%

Profile: Manufactures and markets products and services employed for separation, concentration, and purification of liquids and gases (huh?).  Drinking water and wastewater treatment, enviro remediation, and industrial process apps are its customers.

Commentary: Better than average predicted earnings growth for 2010 and trading right around the middle of its 52 week high so it could have some potential. I don’t pick individual stocks but this will be a fun one to watch!

DON AT MONEY REASONS

Company (Ticker): Monsanto Co (MON)

Market Cap: 45.03 Billion at entry price $81.75.

P/E: 21.75

Dividend (yearly): 1.30%

Earnings Growth 2010: 34.7%

Profile: Monsanto Company, together with its subsidiaries, provides agricultural products for farmers in the United States and internationally. It has two segments, Seeds and Genomics, and Agricultural Productivity.

Commentary: Monsanto has been beaten down pretty badly (it was at it’s high, over $145 per share), so it has some room to rise! People need to eat, and MON has some of the best engineered seed available.

FREE FROM BROKE

Company (Ticker): Berkshire Hathaway (BRK-A)

Market Cap: 152.89 Billion at entry price $99,099.

Profile: a holding company owning subsidiaries engaged in a number of business activities. The most important of these are insurance businesses conducted on both a primary basis and a reinsurance basis. Berkshire also owns and operates a number of other businesses engaged in a variety of activities.

Commentary: Can you bet against the Oracle of Omaha? Until recently, Berkshire has done remarkably well year after year, investing in well known companies such as Coke, American Express, and P&G.

STEF AT 151 DAYS OFF

Company (Ticker): Steris Corp (STE)

Market Cap: $1.65 Billion at entry price $27.97.

P/E: 14.56

Dividend: 0.44 (1.60%)

Estimated Growth in 2010: 4.1% (ouch!!)

Profile: Steris Corp develops, manufactures, and markets infection prevention, contamination control, microbial reduction, and surgical support products and services to healthcare, pharmaceutical, scientific, research, industrial, and governmental customers worldwide.

Commentary: With the hysteria of swine flu in the past and Lord knows what kind of mutation it will bring in the future, the company will stand strong in years to come. Medical tech stock tends to be a defensive stock during the bear market and move steadily in a hot market. You would DEFINITELY want it in your portfolio!

DANIEL AT SWEATING THE BIG STUFF

Company (Ticker): Big Lots Inc (BIG)

Market Cap: $2.42 Billion at entry price $28.98.

P/E: 13.88

Earnings Growth: 11.5%

Profile: Big Lots, Inc. operates as a broadline closeout retailer in the United States.

Commentary: As a discount retailer, it does well when the economy struggles. In 2010, as the economy only begins to improve, Big Lots should continue to have success in the discount market.

THRIFTY GAL AT CHASING PROSPERITY

Company (Ticker): PG&E – Pacific Gas and Electric (PCG)

Market Cap: $16.89 Billion at entry price $44.65.

P/E: 11.86X

Earnings Growth 2010: 7.6%

Dividend yield: 3.7%

Profile: PG&E is a public utility company that provides electicity and natural gas to northern and central California.

Commentary: Pop culture reference: villan in ‘Erin Brokovich’

LEAN LIFE COACH

Company (Ticker): Toyota Motors (TM)

Market Cap: $140 Billion at entry price $84.16.

P/E ratio (ttm): Nada – They’ve been losing money for the first time in over 50 years!

P/E ratio (fwd): 25X

EPS Growth: Yahoo lists 1200%? From zero that won’t be too hard!

Profile: One of the largest car companies in the world.

Commentary: Challenged by some quality issues they will likely continue to suffer for a few more months but I believe their commitment to continuous improvement (Kaizen) will help them out of this rut.

The continue to build good cars that have generic styling that appeals to a wide market. They are coming out with some new technology including plug in hybrid and are revamping the Lexus brand to draw in the younger crowds. If you like fast cars check out the Lexus all carbon body LFA!

PATRICK AT CASH MONEY LIFE

 

Company (Ticker): Compellent Technologies, Inc. (CML)

Market Cap: $704 Million at entry price $22.68.

P/E: 146.90

Earnings Growth 2010 (estimate): 31.0%

Profile: Compellent Technologies, Inc. is a provider of enterprise-class network storage solutions. The Company’s storage center is a Storage Area Network (SAN), that is designed to significantly lower storage and infrastructure capital expenditures, reduce the skill level and number of personnel required to manage information and enable continuous data availability and storage virtualization.

Commentary: Aggressive earnings estimates for a company that has yet to register large profits. I guess my entry will mimic the elements of the S&P that drags down the rest.

LEN PENZO

Company (Ticker): Lenar Corp (LEN)

Market Cap: $2.4 Billion at entry price $12.77.

PE: N/A (divide by zero – never a good sign)

Dividend Yield: 1.2%

Earnings Growth 2010 (est): showing losses

Profile: A leading home-builder in America.

Commentary: As I mentioned earlier, I think housing is on very flimsy stilts. The current anemic upturn (if you can call it that) only propped up due to government subsidies and bailouts so I would never recommend a home builder as a stock pick in 2010. But the rules are the rules, and as such I expect this component of your honorable Samurai fund to weigh it down like an old rusty boat anchor. LOL

EVOLUTION OF WEALTH

 

Company (Ticker): Edwards Lifesciences (EW)

Market Cap: $5 Billion at entry price $86.85.

P/E: 24X

Earnings Growth 2010: 17%

Profile: Edwards Lifesciences provides products and technologies in treating cardiovascular disease. They are a leading provider in a growing sector.

Commentary: If you believe America will continue to be fat this could be a good investment. Was that mean?

LL AT INVESTOR JUNKIE

Company (Ticker): Lumber Liquidators (LL)

Market Cap: $730 Million at entry price $26.80.

P/E: 24X FY2010 with 40% YoY earnings growth.

Profile: Lumber Liquidators, Inc. operates as a specialty retailer of hardwood flooring in the United States. It offers an assortment of hardwood flooring that includes prefinished premium domestic and exotic hardwoods, engineered hardwoods, unfinished hardwoods, bamboo, cork, and laminates. The company also provides flooring enhancements and installation accessories, including moldings, noise-reducing underlay, and adhesives. It offers its products primarily under Lumber Liquidators and Bellawood brand names.

EVAN AT MY JOURNEY TO MILLIONS

Company (Ticker): Jones Apparel Group (JNY)

Market Cap: $1.4 Billion at entry price $16.06.

Profile: Jones Apparel Group, Inc. is a designer, marketer and wholesaler of branded apparel, footwear and accessories. The Company markets its products to the consumers, through a chain of specialty retail and stores and through the e-commerce Web sites. The Company also markets costume jewelry under the Givenchy brand licensed from Givenchy Corporation, footwear under the Dockers Women brand licensed from Levi Strauss & Co., and apparel under the Rachel Roy brand licensed from Rachel Roy IP Company, LLC. The Company operates in five business segments: wholesale better apparel, wholesale jeanswear, wholesale footwear and accessories, retail, and licensing. The brands of the Company include Jones New York, Nine West, Anne Klein, Gloria Vanderbilt, Kasper, Bandolino, Easy Spirit, Evan-Picone, l.e.i., Energie, Enzo Angiolini, Joan & David, Mootsies Tootsies, Sam & Libby, Napier, Judith Jack, Albert Nipon and Le Suit. On June 20, 2008, the Company completed the acquisition of GRI

Commentary: Look at those brands this company is going to be fine! Not sure its going to be a homerun, but its going UP!

Company (Ticker): General Electric Co (GE)

Market Cap: $162.5 Billion at entry price $15.13.

P/E: 14.1X

Commentary: With the recent pending sale of NBC Universal to Comcast this might be an interesting stock as GE attempts to get leaner, but really how lean can you make a company that has more than 323,000 full time employees. I suspect GE won’t be outperforming much other than say GM.

Company (Ticker): Monster Worldwide (MWW)

Market Cap: $2.2 Billion at entry price $17.40.

P/E: 42X

Earnings Growth: 167% for next year

Profile: Monster.com, a popular job search and placement site.

Commentary: I am picking this stock to keep with the play-on-the-blog-name theme, but I actually am pretty bullish on economic recovery so this recruitment giant isn’t entirely unattractive. I haven’t looked at the accounts or the balance sheet etc, though, and I’m not wildly familiar with US stocks (though I know many of the companies superficially) so I recommend it only for the FS fund, nothing more!

When will the government shutdown end?

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Keiju,

Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS feed.

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. Marc says

    This is great, looking forward to it playing it. I saw Free From Broke picked BRK-A, and just a heads up: I owned BRK-B for the last 3 years or so and saw very little movement. It won’t go down, just won’t go up very much either. Guess that’s better than Len Penzo’s Lenar pick though. =P

  2. Marc says

    This is great, looking forward to watching it play out. I saw Free From Broke picked BRK-A, and just a heads up: I owned BRK-B for the last 3 years or so and saw very little movement. It won’t go down, just won’t go up very much either. Guess that’s better than Len Penzo’s Lenar pick though. =P

  3. WellHeeled says

    Ahh I didn’t see this until now! Oh well, my loss! :) I would’ve picked GAP (GPS) though – wide price range (Old Navy to BR), management bringing in new styles, PE around 14.

  4. Little House says

    I don’t know much about the stock market. However, my husband started dabbling in it a few months back. He seems to do better with companies he knows about or products he personally likes. For instance, he’s done okay with Sirius/XM radio. It’s small potatoes, but it hasn’t lost any money. He tried a couple of day trading stocks he knew nothing about and lost a little. So, maybe the “stick with what you know” strategy works a little better.

    My philosophy is buy what you think the public will need in the future. Beer is always good, energy, health care, entertainment, etc. I like your SAM pick!

    Good luck to you!
    .-= Little House´s last blog ..Revising the budget and drastic measures… =-.

  5. Jon says

    Great idea- rings similar to my personal favorite “the dartboard method”. Also like Matt’s idea for the K&C show- sounds doable to me :D
    .-= Jon´s last blog ..VITA: An Attractive Entry into Biomaterials =-.

  6. admin says

    @ Matt S – Too bad I’m anonymous. I may have to hire a spokesperson from the list if it were to ever get that far!

    @ EOW – If I get blown out at my current job, maybe I’ll apply. Funny you guys talk about CNBC though, b/c if you’ve ever heard of Ron Insana, the long time report there, he may be coming aboard!

    @ Marc – Thanks for the BRK-B insight! Seems defensive, and although we’ve started off the first day with a bang, there will inevitably be volatilty and a pull back. I’m very happy that our portfolio has a very DEFENSIVE bent!

  7. admin says

    @ Well Healed – Welcome to participate in the 2nd quarter. Your pick has to be a permutation of your name though!

    @ Little House – Thanks! You and your husband have it right in terms of investing in what you know! Defensive beer co, nice!

    @ Don – Thanks for your enthusiasm! Unfortunately, the fund today was only up 1.4% vs. the S&P 500 up 1.5%! We’re already underperforming by 100bps thanks to Lumber Liquidators! lol.

    @ Kevin – You should submit for 2Q. Make you can be a spokes person!

    @ Jon – The Dartboard method is exactly what I was thinking, but it’s been done and highly publicized. I’m not sure if this method, or at least in this niche has ever been done, so we are blazing a new trail! Welcome aboard!
    .-= admin´s last blog ..Everything Is Rational – The Answer To All Things Irrational =-.

  8. admin says

    FFB – Well, as of today, the fund was up 1.46% vs. 1.6% for the S&P, so we’re underperforming. BRK was only up 0.5%, so dragging our performance down! lol.

    I like how the fund is defensive for this year, b/c I don’t think we’re going to grow gangbusters. a lot of people are calling for a flat year.

  9. Charlie says

    nice! this is exciting and it’ll be really interesting to see how the performance goes. I really like the mix of companies too. HAR closed up 1.67% today > S&P 1.60% yiha!

  10. David @ MBA briefs says

    Sorry, my keyboard is acting flaky. The fund is well diversified and everyone is watching performance so there’s no reason we can’t do better than the S&P.

    Back in 2006 five Playboy playmates royally thrashed Bill Miller from Legg Mason Value Fund. He returned 6% compared to the top playmate who returned 43% – you can view the link here – http://mrwavetheory.blogspot.com/2007/01/playboy-playmates-kick-bill-millers.html.

    Even if we don’t beat the index it’s still a fun way to learn investing and share ideas. Either way we all come out winners.
    .-= David @ MBA briefs´s last blog ..Would you move to another planet? =-.

  11. admin says

    David – Yeah, it’s too early to tell about performance. I think we outperform in a rough market though.

    Regarding the playmates, they were either going to kill it, or be killed. Our fund is much more realistic bc we have more picks, and real positions with rules ie we can’t buy a $100mil market cap penny stock and pump it up 200%!

    Will look into ur plugin later. Check out the funds details in the meantime. All the sharecount is right to equate to 100mil positions!

  12. admin says

    Team Samurai Fund – We are doing well so far! Today, Tues, Jan 5th the fund is up 0.67% vs. only +0.31% for the S&P. We are defintitely outperforming now, and are up 2.1% YTD :)

    Think I’ll do a weekly recap. Big winners today include HAR +5.5%, LEN +6%, MWW +4.2%, and CCC +4.32%! Dogs include LL -2.6%, and PCG -1.5%.

  13. LeanLifeCoach says

    How cool…

    Certainly with all the webwizards that follow FSamurai, somebody can come up with a widget that pulls all the picks into one indexed score.

    I would be happy to put such a widget on my sidebar!

    Now everyone has to go buy a Toyota because I don’t want to be off the list in the 1st qtr!
    Any chance we could convince you to start shopping at the Lexus store instead of the beemer store? The LF-A is going to be really sweet!
    .-= LeanLifeCoach´s last blog ..Festival of Frugality – How To Eliminate The Muda And Live More Frugally Edition! =-.

    • admin says

      @ Lean – Hahaha… man, Toyota has been an underperformer so far, come on man! The Yahoo Widget on the right is good, but it only allows me to have 10 tickers at a time. Maybe I will have to cut 7 names, to make it cleaner looking?! Maybe in the 2nd half 2010.

      @ Len – Lenar = Dark hourse 2010! Housing gonna rock! lol

  14. Valentina says

    This has got to be the bees knees! … or would that be Bernanke’s Bucks!

    Love it , love it, love it.

    If your hmm, consortium is open to “hot tips” I’ve got a dandy, just listed and not even any marketing/promo play yet – its that sexy stuff called gold being mined in a location to be disclosed (hint – in one of the BRIC countries – you can discount R right away and I don’t think I is doing much digging in them thar hills, but come to think of it they do love their 22 carrot quality, whaat? Its spelt wrong?

    Have fun….. I’ll have to take out a membership or something to log in daily………..

    bathing in gold dust … aka valentina
    .-= Valentina´s last blog ..Tackle Bills With A Blog Income =-.

  15. 20smoney says

    When you expand the “fund” or when you boot out a position, I will have a winner for a recommendation :) Sorry, I missed the launch and couldn’t contribute!

    • admin says

      20sMoney – No worries, will keep you in mind. The fund picks are totally based off people or site’s names, and not from picks, unless your name has several picks. This is a fund to prove that luck plays a huge part of performance, and not skill.

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