DESERT OF THE REAL ECONOMIC
AND INVESTMENT ANALYSIS©
By Desert of the Real
Economics, LLC℠
March 2017
Welcome to the
Desert of the Real!
Who
are We?
FIRST AND
FOREMOST, we are not trying to sell you anything, nor use your email or
any other information for any purpose other than to send you this newsletter
and the link to our Website. If you don’t want to receive it, simply email us
back and we will take you off the list.
The newsletter and website is written by Rob
and Julie Feightner. Rob spent a few years working as a stockbroker in New
Mexico and has been a private investor since 1982. He has worked in the
healthcare information technology arena and is an online-college instructor. In
those years of investing he has developed a core investment philosophy and
methodology and the analytical tools that support that methodology. And he is
always learning and developing and refining new techniques. He enjoys analyzing
stocks and markets and buying and selling stocks and options. There are only
two types of stocks in which the Quantum Multiplier Portfolio will not invest-tobacco
stocks and companies that make a substantial percent of their earnings from the
construction and/or sale of military equipment.
Julie is a molecular biologist and a continuing lecturer
at IPFW. She is also in her last year of her studies for her MBA. Julie has
excellent financial analysis and business management skills. She also has
cutting edge knowledge of biogenetics and the new drugs and genetic
advancements that will work miracles with disease and disability. And which
will provide handsome returns to investors savvy enough to select the
breakthrough companies in the biogenetic sector.
The Newsletter will begin as a monthly newsletter. Web
postings to the site should happen at least weekly. The Newsletter will track a
portfolio selected by the Authors, the Desert of the Real Economics Quantum
Multiplierä Portfolio. The investment philosophy and methodology
will be discussed later in this newsletter
and frequently discussed in the newsletters and the website. There is just too
much to the methodology to digest in one newsletter.
The web postings will
provide additional information on the portfolio and address other investment,
financial and economics matters. A little comedy may be thrown in when we need
it.
Why do we Write
this Newsletter and have a Website?
We do this for several reasons. We like to share our
knowledge and information on investing and economics. Accurate information on these topics,
especially economics, is invaluable in this post-information, alternative fact
littered world.
Rob was mentored in trading and analysis by Bart Busick.
Bart was a stockbroker and college educated musician. Rob knew Bart when he
lived in Albuquerque, NM. Bart passed away in 2013. Rob believes that it is his
duty to share with others some of the knowledge that Bart graciously shared
with Rob. In doing so, he honors Bart and his role in Rob’s life.
The process of writing the web posts and the newsletter
keep us sharp and focused. Being able to quantify and explain our investment
and economic thoughts and observations requires fingertip knowledge of the
business and our methodologies.
And who knows? Someday we may be able to charge for this
newsletter and pick up some money on the side.
The Investment Philosophy is succinct and is set out
below:
Studies show that 70 to 80% of a stock’s movement can be attributed to
the movement of the overall market and the movement in the particular stock’s
sector. Yet most analysts concentrate their efforts on analyzing a stock’s
fundamental indicia. And many portfolio strategists just conjure up newer
quantitatively derived strategies for portfolio diversification. So most of
what you read or hear about a stock from the analysts only influences 20-30% of
its movement. How would you like a doctor that could only cure 20% of your
ailments or a fire department that would only respond to 30% of fire alarms?
So when the market is moving forward, we are moving
with it. And we are in the sectors that are moving the most within the market. We will also be using our investment methodology
to leverage higher returns in options. But since options move so fast many of
the contracts will transact between editions of this monthly newsletter. Some
will be addressed in the Website.
When the market is retreating, we are using options
to profit.
And if the market is moving horizontally, we are
using options to profit. But these option strategies will be discussed in
upcoming editions of this newsletter.
An Overview of How it Works
1. When the stock market is moving forward, you are fully invested in stocks
and options that reflect the market movement. When the market is reversing
course, we move to wealth preservation strategies and option strategies. I am
sure some readers are thinking ‘Yeah, right smart guy. How can you tell when the
market is going to move up?’ The simple answer is that you cannot accurately predict
when it will go up or down. But you can employ technical indicators that are
trend tracking and trend following. You stay invested until these technical
indicators reverse to negative. Then you follow your strategies for falling
markets or horizontal markets.
2. Within all markets, some sectors will outperform others. Find the best
sectors and find the best performing stocks in those sectors.
3. When you find the best stocks in those sectors find the best price points to
buy, sell, and plot stop loss points. On this last point, proper implementation
of stop loss orders is key to a good strategy. It sounds counterintuitive, but
knowing when to cut losses and trap hard-earned gains can be as important as
knowing what to buy and why. Although this is an old cliché, “no one ever lost
money by taking profits.”
Here is why:
A. If you are buying good stocks in a moving market, you are almost sure to get
gains that beat, or at least equal, market-equivalent gains. If you do it well,
you will substantially exceed the relevant indices.
B. Despite your best efforts, some of your picks will lose money. That is
inevitable. Just keep your losses very small and put your money elsewhere.
Being a stock trader is like managing a major league baseball club. The season
stretches from April to October. Keep people healthy. Use pitchers wisely. Keep
a good pipeline of players in the farm system. You are bound to lose some games,
but consistently work your plan and you will win more than you lose. You will
keep your job and your club will make the playoffs.
C. Put in stop losses and be mechanical about them. The author usually sets
stop loss orders at 7% below the purchase price, or a point on the chart where
short-term price support will break down. For stocks that will be highly
volatile, a trailing stop order of 15% is advisable. Keeping stop loss orders
at 7% preserves your capital and allows you to rebuild your portfolio faster.
If you lose 25% on a $1000 investment, you will have $750 left. To get back to
$1000, you must earn a 33% return. $1000-25%=$750. To get back to $1000, you
will have to get a 33% return. You will need $250 to pull back even and $250 is
33% of $750. If you lose 50% of your investment, you will need a 100% return to
come out even. More money lost, more risk to get back where you were.
D.
When you have good gains in a stock, raise the stop-loss price to keep your
profits. A good rule is to sell 30% of your position when you have returned 30%
on the stock. When you hit a 50% return, sell 50% of the position.
E.
Never fall in love with a stock. We have heard it said that there are no good
stocks. Just some that are better than others. If you have to sell a winning stock
that turns negative, you can always buy it back when things turn around. Buying
a stock is not like going to the Senior Prom or graduating from college. Buying
a stock is not a once-in-a-lifetime event. The opportunities come around more
than once and you can buy and sell stocks several times. As an example, the
Author’s have owned US Steel (USS) twice. One time it was held as a growth
stock in a nice moving market and sector position. Another time he owned USS as
a dividend and income stock.
Be
nimble and opportunistic. Take what the market gives you. Don’t let unthinking
greed or baseless fear knock you out of your system. Remember, pigs get fat and
hogs get slaughtered.
What’s Next? Who Knows?
We do know that this market will reverse, but we do not know when. By many
measures, it is topping out. We will have indications, as certain shorter-term
indicators stall and reverse. We are seeing lower volume moving shares forward,
a sign of weakening. But with interest rates still low, even with a Fed move in
March, stocks look great relative to debt instruments. When the indicators all
reverse, we put the defense and the wealth-preservation strategies in place.
And we work our strategies for the falling market.
ONE
EAR TO THE GROUND, ONE EYE ON THE TACHOMETER IN THE DESERT OF THE REAL!
DESERT
OF THE REAL QUANTUM LEAP PORTFOLIO™
1. Fedex
Corp. (FDX) Air Freight and Logistics Sector. Large Cap.
2.
Dominos Pizza Inc (DPZ) Food, Hotel and Leisure Sector. Large Cap.
3.
Celanese Corp (CE) Chemicals Sector. Mid Cap.
4.
Citizens Financial Group (CFG) Banking Sector. Mid Cap.
5.
InterDigital Inc. (IDCC). Communications Equipment Sector. Small Cap.
6.
Raymond James Financial Group Inc. (RJF) Capital Markets Sector. Mid
Cap.
7.
ACADIA Pharmaceuticals Inc. (ACAD) Biotechnology Sector. Mid Cap.
8.
Loxo Oncology Inc.(LOXO) Biotechnology Sector. Small Cap.
9.
Cynosure Inc. (CYNO) Healthcare Equipment and Supplies. Small Cap.
10. Applied Materials (AMAT). Semiconductor. Large
Cap Growth.
The Details of the Desert of the Real Quantum
Multiplier Portfolioäare on the attached pages. It should be noted, however, that the
portfolio changes quickly and positions will be bought and sold between
newsletters. Some updates may be posted the website.
The Desert of the Real Quantum Multiplier Portfolioä is a separate document in
the form of an Excel Spreadsheet.
The
next Desert of the Real Newsletter will be published in April 2017.
Aloha, Shalom, Namaste,
Later Dudes…
Julie Feightner
Rob Feightner
desertoftherealeconomics@gmail.com
Quantum Multiplier Portfolio 2016-17
Results |
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END-Of-DAY |
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NEXT |
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TODAY's Date Or |
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EARNINGS |
STOP LOSS |
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DATE |
DATE |
PURCHASE |
SALE |
PERCENTAGE |
DAYS |
ANNUALIZED |
STOP |
RELEASE |
RENEWAL |
STOCK |
PURCHASED |
SOLD |
PRICE |
PRICE |
GAIN |
HELD |
GAIN |
LOSS |
DATE |
DATE |
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LONG |
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FDX |
6/28/16 |
3/8/17 |
$147.16 |
$194.35 |
32.07% |
253 |
46.26% |
180 |
3/21/17 |
5/20/17 |
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FNSR |
2/15/17 |
3/8/17 |
$34.78 |
$34.48 |
-0.86% |
21 |
0.00% |
Trail 7% |
3/9/17 |
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LOXO |
1/23/17 |
3/8/17 |
$39.68 |
$44.49 |
12.12% |
44 |
100.56% |
Stop 31 |
3/15/17 |
6/8/17 |
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CFG |
1/23/17 |
3/8/17 |
$36.17 |
$38.31 |
5.92% |
44 |
49.08% |
Trail 7% |
4/20/17 |
6/12/17 |
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DZP |
1/30/17 |
3/8/17 |
$171.13 |
$189.04 |
10.47% |
37 |
103.24% |
164 |
2/28/17 |
6/8/17 |
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CLVS |
3/2/17 |
3/8/17 |
$60.62 |
$62.17 |
2.56% |
6 |
155.55% |
Trail 7% |
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7/3/17 |
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AMAT |
2/16/17 |
3/8/17 |
$35.62 |
$36.87 |
3.51% |
20 |
64.04% |
Limit 32.5 |
Mid-June |
6/17/17 |
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RFJ |
2/8/17 |
3/8/17 |
$75.53 |
$79.79 |
5.64% |
28 |
73.52% |
Trial 7% |
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6/12/17 |
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CE* |
2/9/17 |
3/8/17 |
$87.77 |
$89.99 |
2.53% |
27 |
34.19% |
Trail 7% |
2/1/17 |
6/12/27 |
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*Declared .36 Dividend to Holders as
of 2/21/17 |
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9/1/04 |
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$67.64 |
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11/24/04 |
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$59.27 |
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STOCK |
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LONG |
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FDX |
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FNSR |
2/1/17 |
2/14/17 |
$34.64 |
$36.29 |
4.76% |
13 |
133.74% |
2/14/17 |
Hit stop loss 2/14/17 |
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LOXO |
2/6/17 |
2/14/17 |
$49.60 |
$65.93 |
32.92% |
8 |
1502.13% |
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2/7/17 |
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RSP |
1/1/15 |
3/8/17 |
$48.74 |
$90.51 |
85.70% |
797 |
39.25% |
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XPO |
2/15/17 |
3/8/17 |
$49.00 |
50.43 |
2.92% |
21 |
42.28% |
Trail 7% |
Sold on 2/22/17 |
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BEAT |
2/16/17 |
2/28/17 |
$25.55 |
$25.43 |
-0.47% |
12 |
0.00% |
Trail 7% |
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6/17/17 |
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IDCC |
2/1/17 |
2/23/17 |
$99.95 |
$95.05 |
-4.90% |
22 |
0.00% |
Trail 7% |
2/23/17 |
6/8/17 |