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Out Of The Starting Blocks
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It was a clean start for round two of the Strategy Lab Open. Value is the basic strategy for the Sacramento Executive Fund. I plan to deploy about 70% of the fund in stocks, one third at a time. On day one of the contest, I invested about $240,000 in 19 companies (not stocks). Two weeks hence, I plan to invest another $240,000 in the same companies and repeat the process two weeks later. The remaining cash will be invested as special situations arise. I selected ten companies (CTSH, HLX, FCX, INFY, FTI, HOC, COH, OSK, GRMN, and CWTR) by applying Phil Town's Rule #1 principles - looking for growth rates greater than 10% for the past ten years for bookvalue, earnings per share, sales, cash flow and return on invested capital. I calculated the intrinsic value and then selected companies priced at significant discount. I plan to invest 10% of the fund in each of the top two companies - CTSH and HLX, 5% in each of the next two companies - FCX and INFY, and 2% in the other six companies. I selected five companaies (BVF, RAIL, KFY, UNTD, and VPHM), by applying Joel Greenblatt's principles - investing in companies with the highest pre-tax earnings yield (the inverse of price to earnings ratio) and the highest return on capital. These companies have been in my Magic Formual Index (subject for an upcoming post) for the past two years. I plan to invest 2% of the fund in each of these companies. I selected BWLD, JLL and VLCM based on the Motley Fool's "Hidden Gems" principles - under-valued small-cap companies. I plan to invest 5% in Buffalo Wild Wings, because "the girls have gone wild" at this company (see my earlier post), and 3% in each of the other two companies. And then there's PG. The Procter and Gamble Company - if it's good enough for Warren Buffett to own 105,847,000 worth $6.99 billion, then it is good enough for the Sacramento Executive fund to invest 5% of the fund. That's it folks! Welcome to the Sacramento Executive Fund! Note: I personnally own PG, FTI, HOC, and FCX. Pierre Cutler
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Strong Buy Recommendation For Cognizant Technolgy Solutions
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The Sacramento Executive Fund manager, Pierre Cutler, today issued a strong buy recommendation for Cognizant Technology Solutions Corp. (CTSH). CTSH is a provider of information technology consulting and outsourcing services for global 2000 companies. The company is 38% off its 52-week high of $47.78, closing on Friday at $29.84. Key five-year annual growth rates are stellar - sales up 51.5%, net income up 60.1%, return on invested capital up 26.1%. The company generates plenty of operating cash - growing from $57M to $253M the last five years. Consensus analysts' projected five-year earnings growth rate is 30.4%. With an intrinsic value of $105.10, the company is priced at a 71% discount. Thanks to investors' fear of Mr. Market, this company is on the 70% clearance sale table and the Sacramento Executive Fund is greedy for CTSH. Note: The Sacramento Executive Fund owns CTSH and will continue to invest up to 10% of the fund at this price. Pierre Cutler | ||
Buying Opportunities Exist On Big Market Dips
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Today, the Dow Jones Industrial Average fell 370 points (-2.9%), the NASDAQ fell 3.1% and the S&P 500 Index fell 3.2%. Should you chase the falling market and buy now, or should you wait? My strategy hedges a little of each. I'm sitting on over $750,000 cash and decided after the bell to put in limit orders (good til cancel) to buy more of each of my current holdings at their three-month low price. I will keep the orders open until February 15. I may get a few three-month low prices. Any remaining open orders will be converted to market orders at that time. Pierre Cutler | ||
