August 10, 2012 Comments

We closed out the week with a relatively flat day for our stock picks on average.

The year to date however has been a lot better than flat.

As of January 1 we had 23 companies rated in the Buy or Strong Buy categories. Notice we use the word companies which conveys ownership in a business rather than the word stocks which conveys investing in something abstract. We also like to say share owner or just owner which conveys more permanence and reminds that we are owners rather than share holder which conveys something temporary and perhaps external to the company.

Anyhow of those 23 companies, 19 are up in price and just four are down. The average gain for the 23 (including he four that are down) is 10.7% and that excludes returns from dividends. The only loser of note was Research in Motion which we had labeled as speculative.

The list included a lot of retail stocks. These tend to be unexciting most times. I don’t know how many dozens of times in the past year that I read that “the consumer was dead, tapped out”. So how could retail do well in 2012? Well the fact is that most of these retailers looked under-valued to us. And here are the results, year to date:

Costco up 14% ( but we had rated that a Weak Sell)

Walmart up 23%

Walgreens up 9%

Couche-Tard up 58%

(The) Brick Inc. up 29%

Canadian Tire up 6%

After the start of the year we added two more:

Dollarama up 45% (but we thought it was too high already so missed this one)

Liquor Stores NA up 16%

So that is a very lovely performance from a boring group of retail companies. Sometimes great returns lie in the most unglamorous and boring places.

Another area we talk a lot about is Banks.

Wells Fargo, it’s up 23%

Bank of America up 39% (I owned it and it was talked about but was not officially on the list)

Not that many people were excited about investing in U.S. Banks. How many times have I read in the past year that they are technically bankrupt? That is not true but was and is often stated.

We also had Canadian Western Bank which is up 3% this year to date.

Related to both retail and banks we had Visa, it’s up 27%

So much for the death of consumer spending…

But we did not select these stocks because of a bet on retailing or banking, they were rated individually as companies. They happened to look like good value (except Dollarama and Costco which looked too expensive for our taste)