It was another wild week on Wall Street. The street saw a borage of earnings report will still quite a few more to go. The President started a speaking tour to talk about the economy only to watch the market drop and interest rates climb with every word he said. The debate in financial circles is about who will succeed Ben Bernanke. Friday even saw the markets swing heavily to the negative side in the morning only climb back and close up higher. But in the end, the value of the Magic Money Portfolio went up.
Finding value in the current market is tricky to say the least. I followed my own advice and doubled my personal position in Staples (SPLS) when the stock dipped earlier in the week. My model flipped up two BUY Flags a weeks or so ago and the stocks both had a nice pull backs recently making them very attractive. Unfortunately, my margin is currently stretched to my set maximum level so I am not able to add either stock to my own portfolio. This will happen from time to time. I will get a BUY Flag but not have the resources to act on it. Should my model give me a SELL Flag on any of my current holdings I will replace it with these stocks The two stocks about which I am talking are Entgeris (ENTG) and Xerox (XRX).
ENTG is not a real familiar stock to most people. ENTG is Mid-Cap business in the information technology sector. The company makes items used in the manufacturing processes for semi-conductors and other high-tech industries. It has a wide diversification in its product line covering everything from biomedical supplies to solar power cells. A number of analysts and brokerage firms upgraded the stock recently. I've seen price projections from $11.50 up $18.50. My model says look for something in the $13 to $14 range.
XRX is a familiar name to most people but Xerox is no longer just a copier company. Today's XRX not only sells copiers, copier supplies and copier services, they expanded into the document management and business processes arena. Throw into the mix that XRX has a global presence with roughly only 65% of its business derived in the United States. The analyst are mixed on XRX having it all over the spectrum from Strong Sell to Strong Buy. The price projections for XRX range anywhere from $7 to $18 depending on on which analysis you look. My model says buy looking for a price point in the $13 to $14 range.
Now take a look the numbers or both companies.
Book Value :
ENTG: $5.04
XRX: $9.37
Fair Market Value:
ENTG: $10.10
XRX: $15.20
Cash to Long Term Debt:
ENTG: No Long Term Debt
XRX : 0.1673 or about 6 times more debt (not great but workable)
Dividend:
ENTG: None
XRX: $0.23 per share or about 2.4% (close July 26, 2013)
Entegris (ENTG) 1-Year Price Chart
Xerox (XRX) 1-Year Price Chart
Okay, so here we go, I am going to add 500 shares each of ENTG and XRX to the Magic Money Portfolio. I do have a stop-loss for each, $9.30 for ENTG and $8.90 for XRX. Yes, I know these are tight but remember I am buying them on a pullback and if for some reason these pullbacks go bad, I want to get out quickly.
07 June 13 - 1000 shrs IAG @ $5.29 per share. (BUY)
13 June 13 - 500 shrs AA @ $8.20 per share. (BUY)
21 June 13 - 100 shrs DUK @ $65.58 per share. (BUY)
28 June 13 - 200 shrs GE @ $23.19 per share. (BUY)
28 June 13 - IAG traded ex-dividend $0.125 per share
11 July 13 - 100 shrs SPLS @ $16.67 per share (BUY)
11 July 13 - IAG dividend disbursement, $0.125 per share, $125 (INCOME)
18 July 13 - 700 shrs WEN @ $6.81 per share (BUY)
19 July 13 - 100 shrs SPLS @ $16.38 per share (BUY)
26 July 13 - 500 shrs ENTG @ $9.53 per share (BUY )
26 July 13 - 500 shrs XRX @ $9.69 per share (BUY)
Magic Money Machine Portfolio (26 July 2013)
Cash: $ 11,768.00
1000 shares IAG- $ 5.34 $ 5,340.00
500 shares AA - $ 8.07 $ 4,035.00
100 shares DUK - $ 70.79 $ 7,079.00
200 shares GE - $24.65 $ 4,930.00
200 shares SPLS - $16.54 $ 3,308.00
700 shares WEN - $7.14 $ 4,998.00
500 shares XRX - $9.69 $ 4,845.00
500 share ENTG - $9.53 $ 4765.00
Total $ 51, 068.00
+ 2.136%
Stop-loss list
IAG - $3.90
AA - none at present
DUK - none at present
GE - $22.75
SPLS - $16.10 (updated 26 July 2013)
WEN - $5.50
XRX - $8.90
ENTG - $9.30
A quick note on how I pick the number of shares to buy. I use the basic ballpark rule of 10%. I divide 5000 by the purchase price of the shares being bought and round DOWN to the nearest block of 100 shares. Obviously, this does not work if the price per share is over $50 as in the case of DUKE. At the end of each quarter I change the 5000 to reflect one-tenth of the portfolio balance.
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