John Czerw

3rd Quarter Wrap Up

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Whew!! The end of the quarter left me tantalizingly close to a 10% gain. My NAV was $10.99.
Not bad for eight weeks. But, of course, there were 100+ folks who bested me. Congrats to them!

This week I invested my last 5% in the QQQQ ETF. My desire was to get some technology exposure, since this sector is doing well. If you'll recall, I also used ETFs to gain exposure to global growth and basic materials, (DBN & SLX) This strategy appears to be working well. The QQQQ advanced 1.86% since I bought it this week. The SLX is my biggest gainer at 18.45% since I bought it a while back. And DBN is up 12.06%.

The interesting thing about this contest with its 5 month term, is that it has made me much more responsive to current trends in sectors. As I've said, I'm a bottoms up stock picker and I've got a bias towards value. So I'm prone to buy and hold and hold and sometimes hold some more, until the rest of the world sees what I see. (And generally, it does turn out that way.) But, what I have been leaving on the table are some exploitable short term trends. ETFs enable me to participate in these, when I don't have specific industry knowledge or a pick in a certain sector.

Also, a while back I lowered my stake in XTO and put that money to work in FDS. It was a good move. To date FDS has advanced 20% and XTO 13%. So that belief that FDS had more upside than XTO short term was well founded.

Finally, this week I dumped VLO. It was just about even and I began to doubt an upside. It is operating at peak capacity and exploiting its ability to refine sour crude to maximize margins, but how will the company grow?? How will it recreate its fundamental unit of value creation - refineries? Will they build in the US? Don't think so. Will they buy other refiners? They went through an era of acquisitions when prices were low. Now? I'm not so sure there are a lot of takeover candidates. Don't get me wrong. They are a really strong company but I just can't articulate a growth scenario. And their PE may move to 10 instead of 6, which would add about $40 a share, but if $85 a barrel oil isn't a catalyst, I'm not sure what would be.

I took my VLO stake and put it into NIHD NII Holdings, a telecom company that serves US and Latin America. They have 12% margins and 40% growth rates.
I believe there is more upside in NIHD than VLO.