January 1, 2013 Comments

Well, the 2012 year is now over. Our Stock Picks this year had an excellent performance. Click to see the detailed performance by company for 2012. The six Strong Buys were up an average of 19.6% each. The 17 Buys were up an average of 14% each. Only 3 of the 23 Stocks rated in the Buy or Strong Buy range at the start of the year fell in price. Meanwhile, the the TSX was up only 4.0%. The Dow was up 7.3% and the S&P 500 was up 13.4.

My own portfolio benefited from being concentrated in some of the better performing stocks and from buying on dips and a certain amount of selling on rallies and in general a certain amount of trading during the year. I managed a 27.6% gain (subject to the final numbers on my December statements which tend to differ very slightly from the online figures).

All the Performance figures are updated for 2012.

There is really no such thing as a typical gain in the stock markets. Some years will assuredly be negative. But overall stocks do tend to rise in the long term. Add overall our approach has beaten the market. But we make no guarantees or promises about the future.

Every year at this time I make a special effort to update as many of the reports as possible. This has now been completed.

It is also appropriate at this time to remove a few companies. The Brick is deleted from the list because it was taken over by Leons.

I am removing E-Bay because it is out of date. It rose a surprising 68% in 2012. I do not have an interest in updating it at this time.

I am removing Walgreen because it is out of date. I may update it and add it back at a later time.

Omni-light industries is removed because it is out of date. This was our only micro cap company last year. It did not work out well. It may be a good company but I am not too interested in updating it.

Costco is updated and rated Weak Buy at $98.73. It always seems expensive as a stock. As a company it is a fantastic business. It has co0st advantages over stores like Walmart, Target and all specialty retailers. It has the ability to open new stores that will instantly draw traffic and be profitable.

It has recently paid a special dividend and also has been buying back shares. It is not the case that buying back shares or even paying dividends is automatically a good thing. It may be that Costco has excess cash and/or has made too little use of debt. It borrowed the money to pay the special dividend. Cost co shares trade at 3.4 times book value. If it came down to a choice between building a new store at 1.0 times book value or buying back shares at 3.4 times book value, then shareholders would clearly be better off with the new store. If it is the case that Costco can build all the new stores that it can comfortably manage in a year and still buy back shares and pay special dividends then it does make sense to do so.

As a customer I am increasingly a fan of Costco. I know they mark up products by  maximum of 15% over their cost for the goods. Therefore I am confident that I am getting a good price on anything I buy there.

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