I created the 10 stocks for 10 years portfolio in April of 2005. The current marketocracy* calculated annualized rate or return (which excludes Tesco) is 4.2% (the S&P 500 annualized return for the period is 1.1%) – marketocracy subtracts the equivalent of 2% of assets annually to simulate management fees – as though the portfolio were a mutual fund – so without that (it is not like this portfolio takes much management), the return beats the S&P 500 annual return by about 5.1% (it would be a bit less with Tesco – maybe beating the S&P 500 by 4%).
The current stocks, in order of return:
| Stock | Current Return | % of sleep well portfolio now | % of the portfolio if I were buying today | |
|---|---|---|---|---|
| Amazon – AMZN | 241% | 9% | 8% | |
| Google – GOOG | 127% | 16% | 15% | |
| PetroChina – PTR | 80% | 9% | 8% | |
| Templeton Dragon Fund – TDF | 76% | 10% | 10% | |
| Templeton Emerging Market Fund – EMF | 41% | 5% | 6% | |
| Cisco – CSCO | 21% | 7% | 8% | |
| Danaher – DHR | 9% | 9% | 10% | |
| Toyota – TM | -3% | 8% | 10% | |
| Intel – INTC | -6% | 5% | 8% | |
| Tesco – TSCDY | -9%** | 0%* | 10% | |
| Pfizer – PFE | -42% | 4% | 8% | |
| Dell | -60% | 3% | 0% |
The current marketocracy results can be seen on the Sleep Well marketocracy portfolio page.
Related: 12 Stocks for 10 Years – July 2009 Update – Retirement Savings Allocation for 2010 – Investing, My Thoughts at the End of 2009 – posts on stocks – investing books
Read more
Intel reports their best quarter ever.
Revenue $10.8 billion
Gross Margin 67%
Net Income $2.9 billion
Intel is one of the stocks in our 12 stocks for 10 years portfolio (and has been since 2005). Intel currently pays a dividend of about 3%. Intel’s gross margins continue to be amazing. 67% is just fantastic.
Intel is only one company, but the earnings are good new for the economy (they indicate quite a large demand for the products that include Intel’s chips). We certainly can use good news on the economy. We need more good news and the key I believe, now, is adding jobs. Earnings have been good recently and this is one sign that high tech earnings continue to do well. Google announcing earnings on Thursday.
The effective tax rate was 31%. Which is a good thing in my opinion. I don’t think it is a good thing when companies make billions of dollars and avoiding paying the taxes that allow society to function. I am all for making changes to reduce government spending, but I am not for individuals and companies avoiding paying their fair share.
Related: Amazon Soars on Good Earnings and Projected Sales (Oct 2009) – Looking at Microsoft as an Investment – Great Google Earnings (April 2007)
Where is George Soros investing? The SEC filings will tell you (as of March 31, 2010).
The fund holds over $600 million of Petrobas (Brazil Oil and Gas) (the fund bought about 1.4 million shares of the ADR in the quarter), $300 million of Hess (sold about 900,000 shares), $280 in Suncor Engery (bought over 1.5 million shares), $220 million of Monsanto (sold almost 700,00 shares), $190 of Interoil (bought over 150,000 shares), $175 million of Direct TV (bought 1,000,000 shares), $175 million of Verizon (bought 800,000 shares), $150 million of Plains Exploration and Production (sold 1.7 million shares), $140 million of Best Buy (bought 300,00 shares), $130 million of Novagold (bought 15 million shares, bringing to the total to almost 19 million), $120 million of Emdeon (selling over 1 million), $110 million of JP Morgan Chase (nearly all bought in this quarter) and $90 million of Pfizer (sold over 600,000 shares – over half the position). The fund owns a good deal of gold shares including over $600 million in SPDR gold trust shares (all bought this quarter). The total value of the fund was $8.75 billion. The fund own numerous convertible bond issues in excess of $100 million.
During the quarter the fund sold essentially all of Citigroup – over $300 million at the beginning of the quarter and nearly all of Ace Limited $75 million at the beginning of the quarter, and Lowes ($55 million). It sold 80% of Dana Holding ($60 million at the beginning of the quarter). It sold all of Bunge Limited – $66 million, and Terra Industries $100 million.
I am also overweight in Oil and Gas (the last 2 years is the first time I ever have been). The fund owns $20 million of ATP Oil and Gas, a speculative pick that I also own (the fund added 150,000 shares during the quarter). It also owns over $20 million of Brigham Exploration (fund sold 550,000 shares) another small oil and gas stock that I bought this year. And it has a bit over $40 million in Apple, $60 million in Yahoo $5 million in Amazon.
Related: Famous Stock Traders: Nicolas Darvas – Soros on Financial Crisis and Markets – 11 Stocks for 10 Years, March 2010 Update – Ten Stocks To Avoid
For years I have thought Microsoft was in deep trouble and yet they were continuing to generate tons of cash (which is not something to take lightly – it is a very strong signal of a successful business). But the future for them just keeps looking worse and worse, to me. The Windows and Office profit centers seemed doomed to collapse (Ubuntu is a great operating system and you have Open Office and Google doc both of which I find fine). The server business and managing corporate networks is one of the few hopes for Microsoft, I think. And things don’t look good there (though probably better than the other profit centers).
It isn’t as though Microsoft doesn’t see the problems. They are trying to build up a gaming business and they have hopes there, I think (not to replace current profits but at least to capture some significant profits). I really am amazed how poorly they have done online. They have invested a ton and continue to lose a huge amount every quarter (over $700 million in the quarter ending March 31st of this year.
Yet year after year Microsoft continued to have tremendous earnings. I can’t see it continuing, but I would not have predicted the earning power they have shown the last 5 years so what do I know. In April Microsoft announced record third-quarter revenue of $14.50 billion for the quarter ended March 31, 2010, a 6% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.17 billion, $4.01 billion and $0.45 per share, which represented increases of 17%, 35% and 36%, respectively, when compared with the prior year period.
There is the prayer that the huge amount they invest in research provides future earnings. I do believe their research is incredibly valuable. But I can’t see betting they will find enough earning to replace the losses I anticipate for Windows and Office revenue.
Apple (about $245 billion) has overtaken Microsoft (about $227 billion) in market capitalization. To get the enterprise value (the value of the company excluding cash). Apple has about $38 Billion in cash (including $18 billion in treasuries with a maturity of over 1 year – so not shown as cash on the balance sheet). Microsoft has about $31 billion in cash ($37 billion – $6 billion in debt). Therefore Apple’s business is valued at $207 billion and Microsoft at $196 billion.
Ballmer Dismisses Microsoft Value Issue (May 27, 2010)
Related: Google Posts Good Earning But Not Good Enough for Many – Tesco: Consistent Earnings Growth at Attractive Price – Jubak Looks at What Stocks to Hold Now – Amazon Soars on Good Earnings and Projected Sales
When It Comes To Retirement, 67 Is The New 55
These moves follow several recent age increases across Europe and among U.S. states. Faced with one of the worst pension shortfalls in the country, Illinois in March lifted the retirement age for new state workers from as low as 55 all the way to 67.
…
“If their parents are going to retire at 65 after working 40 years, they need to plan for about a 20-year investment horizon,” he says. “For my students’ generation, with life expectancy going up about a month a year, in their cases they have maybe 25 years in retirement they have to plan for.”
…
Greece, until recently, allowed workers in more than 580 job categories considered hazardous to retire with full pensions as early as age 50 for women or 55 for men. In response to its fiscal crisis, that country has raised the retirement age to 65 for most workers.
In Ireland, the government has proposed gradually raising the retirement age from 65 to 68. Hungary raised its retirement age in 2008 from 62 to 65 — one big reason why the ruling Socialists got trounced in parliamentary elections in April.
We have not raised retirement age along with our increasing longevity. That is workable, if you save enough extra during your work life to enjoy a longer retirement. However, we are not saving even enough to retirement properly even if the life expectancy had not increased over the last 50 years.
Governments have failed to take a sensible retirement strategy for dealing with longer life expectancies. They can lower benefits, move back the retirement age or increase the amount they put aside to pay benefits. Most likely it takes a combination of all 3, or at least 2 of the options. As I have said for a long time one smart move governments should make is to make it easier to ease into retirement by going part time. This is good for the economy and good for people and helps deal with the problem of extending the retirement age too far (where many that age have trouble working full time).
Related: USA State Governments Have $1,000,000,000,000 in Unfunded Retirement Obligations – How Much Will I Need to Save for Retirement? – Add to Your 401(k) and IRA
Scott Adams (Dilbert’s creator) has some new investing advice: Betting on the Bad Guys
…
Perhaps you think it’s absurd to invest in companies just because you hate them. But let’s compare my method to all of the other ways you could decide where to invest.
Technical Analysis
Technical analysis involves studying graphs of stock movement over time as a way to predict future moves. It’s a widely used method on Wall Street, and it has exactly the same scientific validity as pretending you are a witch and forecasting market moves from chicken droppings.
Investing in Well-Managed Companies
When companies make money, we assume they are well-managed. That perception is reinforced by the CEOs of those companies who are happy to tell you all the clever things they did to make it happen. The problem with relying on this source of information is that CEOs are highly skilled in a special form of lying called leadership.
…
But What About Warren Buffett?
The argument goes that if Warren Buffett can buy quality companies at reasonable prices, hold them for the long term and become a billionaire, then so can you. Do you know who would be the first person to tell you that you aren’t smart enough or well-informed enough to pull that off? His name is Warren Buffett.
…
Again, I remind you to ignore me.
As usual he is funny, he also makes many good points. We have mentioned his financial advice previously: Financial Planning Made Easy, Scott Adams on Investing.
…
Fears are growing that the global recovery will falter as Europe’s debt crisis spreads, China’s property bubble bursts and America’s stimulus-fuelled rebound peters out.
…
Fears about the fragility of the global recovery are exaggerated. Led by big emerging economies, the world’s output is probably growing at an annual rate of more than 5%, far swifter than most seers expected.
…
America’s structural budget deficit will soon be bigger than that of any other OECD member, and the country badly needs a plan to deal with it. But for now, lower bond yields and a stronger dollar are the route through which American spending will rise to counter European austerity. Thanks to its population growth and the dollar’s role as a global currency, America has more fiscal room than any other big-deficit country. It has been right to use it.
The world is nervous for good reason. Although the fundamentals are reasonably good, the judgment of politicians is often unreasonably bad. Right now that is what poses the biggest risk to the world economy.
Some very good thoughts from the Economist. As always there are plenty of risks to focus on today. There are also plenty of reasons to be optimistic. It looks like globally we are in for a good economy in 2010-2011 but those prospects could worsen fairly easily.
Related: India Grew GDP 8.6% in First Quarter – Consumer Debt Needs to Decline Much More – Government Debt as Percentage of GDP 1990-2008 – USA, Japan, Germany…
Buffett Expects “Terrible Problem” for Municipal Debt
Berkshire’s investment portfolio included municipal bonds valued at less than $3.9 billion as of March 31, down from more than $4.7 billion at the end of 2008. The company had a maximum of $16 billion at risk in derivatives tied to such debt, according to the company’s annual report for 2009.
…
Buffett said last month that the U.S. may feel compelled to rescue a state facing default after the government committed $700 billion to bail out financial firms and automakers. “It would be hard in the end for the federal government to turn away a state having extreme financial difficulty when they’ve gone to General Motors and other entities and saved them,”
…
About $14.5 billion of municipal bonds defaulted in 2008 and 2009… Many those were securities backed by revenue from nursing homes, property developments and other projects without claim to government tax revenue.
…
Defaults by local governments with the power to raise taxes are less common. Jefferson County, Alabama, defaulted on more than $3 billion of bonds backed by sewer fees after the deals grew more costly in the wake of the credit crisis in 2008. Vallejo, California, filed for bankruptcy in 2008 after its tax revenue tumbled.
Related: USA State Governments Have $1,000,000,000,000 in Unfunded Retirement Obligations – Buffett on Need to Reduce Government Deficits – Politicians Again Raising Taxes On Your Children
Google has generated a large amount of cash due to the profitability of their business. It currently has $26.5 billion 3rd only to Microsoft and Intel of short term holdings of technology companies (though Apple likely should be considered as having higher cash holdings). Google’s Latest Launch: Its Own Trading Floor:
…
After a couple years of cautious cash management at Google, Callinicos says he’s beginning to build a higher-risk, higher-return portfolio. Since last year he has pulled away from U.S. government notes and moved into corporate debt securities ($4.9 billion as of Mar. 31, up from $695 million the year before), agency residential mortgage-backed securities ($3.3 billion, up from $60 million), and foreign government bonds ($332 million, up from zero).
The largest Google holdings are: cash 35%, corporate debt 18%, US agency debt 13%, residential mortgage backed US agency securities 13%, municipal securities 8%, US government notes 8%. For all the debt problems with government, consumers and corporations that followed advice of mortgage bankers to overly leverage themselves there are many companies that have much larger cash holding than every before. Google is one but many other companies have built up large cash positions as well.
I have been a long term investor in Google and think it is a great buy now. I don’t see myself selling it anytime soon (maybe anytime at all). I do worry a bit about Google wasting the cash on buyouts they are tempted into due to huge amounts of cash on hand. Hopefully they will avoid such mistakes. I think they may well be better off paying a dividend but they seem apposed to that idea.
Related: Google Posts Good Earning But Not Good Enough for Many – S&P 500 Dividend Yield Tops Bond Yield: First Time Since 1958 (Nov 2008) – Too Much Leverage Killed Mervyns
Retiring overseas has been growing in popularity over the recent decades. A lower cost of living and health care systems that work are two of the big draws. Americans Who Seek Out Retirement Homes Overseas
…
She said a minimum amount for a comfortable retirement in a number of appealing places — Cuenca, Ecuador, and La Barra, Uruguay, being two examples — would be about $1,200 a month.
Mr. Holman said that if you purchased a home in Medellin, you could live quite comfortably on less than $2,000 a month. As time goes on, retirement hot spots change along with countries’ economic and political situations.
Ms. Peddicord said she used to recommend Ireland, Thailand and Costa Rica, but no longer does. She cited the high cost of living in Ireland, the anti-foreign sentiments in Thailand, and the growing crime rates both within and outside of San Jose, the Costa Rican capital.
…
“In Panama, for example, your rent could be $1,500 a month for a two-bedroom apartment in a nice building in Panama City with a doorman and a pool,” Ms. Peddicord said, “or it could be $200 a month if you choose instead to settle in a little house near the beach in Las Tablas, a beautiful, welcoming region.”
Lee Harrison, an American who retired to Ecuador several years ago and then moved in 2006 to Uruguay, said there were a wide range of financial issues to consider before making the leap to retire abroad.
For example, he recommends that retirees maintain a bank account and credit cards in their country of origin as well as in their new country, to facilitate money transfer. He also said that retirees should investigate their home country’s system of sending pension money to retirees abroad, as well as their new destination’s ability to accept electronic bank transfers.
Retirees also should request help from a tax adviser and make certain their move doesn’t trigger the need for a new will.
…
Financial considerations aside, advisers say that when making the decision to retire abroad, most retirees find that the journey itself is the reward.
“I know lots of people who retired to one country and then decided to move again somewhere else but never back” to their home, Ms. Peddicord said. “I don’t know of anyone who has decided to move back full-time after having had a taste of living abroad.”
Living overseas is something a significant portion of people in the USA have no interest in at all. But for those that like the idea there are appealing options with some strong benefits. At the same time you need to understand the significant change this bring to your life and plan for it I suggest visiting the location several times over the years – before you retire.
Related: In the USA 43% Have Less Than $10,000 in Retirement Savings – Many Retirees Face Prospect of Outliving Savings – Saving for Retirement