Our Practical Investor Picks Her Stocks
Welcome to my investment world. We kicked off this column last month to talk about how I’m investing some of my money in the hope that it helps you better invest yours. But the first question any reasonable person should ask is whether I’m an investor worth listening to.
The best way I can answer is to track what’s happened to the handful of stocks that I’ve recommended in the pages of this magazine. To be sure, this approach doesn’t provide a long record. My first recommendations were six stocks to sell. But we’ve got to start somewhere.
My Sell Picks
In the April 2011 issue of Kiplinger's Personal Finance magazine, I told you to dump Affymetrix (symbol AFFX), Bebe Stores (BEBE), KB Home (KBH), Salesforce.com (CRM), Stericycle (SRCL) and Sears (SHLD). From February 11, the date we priced those stocks, through October 7, Affymetrix and Bebe were up, and the others were down. On average, the stocks lost 15.8%, compared with a decline of 13.1% for Standard & Poor’s 500-stock index.
My Buy Picks
What about my buy advice? So far, I’ve recommended ten stocks in the magazine -- two for-profit education firms in May (School Stocks: Which Ones Make the Grade); two energy companies in June (Nuclear Fallout: Fat Yields, Bargain Stocks); and six others in a variety of areas in August (Cash-Rich Stocks to Buy Now).
My buys had mixed results. The school stocks lagged the market, losing an average of 19.6%, compared with the market’s 10.8% loss. The utilities did far better, gaining 8.1% versus the market’s 13.0% loss over the relevant stretch. And the cash-rich companies dipped 1.5%, compared with the market’s 11.1% decline. Of course, the last group covered the shortest time period -- just four months.
My Picks Now
What now? On October 11, I bought $10,000 worth of Vanguard Total Stock Market ETF (VTI), an exchange-traded fund that tracks the MSCI US Broad Market index, a measure of essentially all U.S. stocks. The ETF will serve as an easy-to-measure-against control (I’d planned to invest $100,000 in VTI, but so many great companies look so cheap that I want to have more cash available to buy individual stocks).
I also invested roughly $10,000 apiece in three other stocks, all of which I’ve previously recommended in the magazine or on Kiplinger.com. They were: Intel (INTC), Corning (GLW) and Spirit Airlines (SAVE). I bought Intel, Corning and Spirit at $22.99, $13.70 and $13.71, respectively.
I like Intel and Corning because I expect both to benefit from the growth of smart phones and tablets -- Intel because of its brilliantly designed chips; Corning because of its durable Gorilla glass. Both stocks are bargains. Corning sells at about 7 times estimated 2012 earnings and yields 2.2%; Intel trades at just a bit more than 9 times forecasted 2012 profits and yields 3.8%. When I can buy, for so little, a company that has decent growth prospects and yields nearly twice what a ten-year Treasury pays, I’m interested.
By contrast, Spirit is a bit of a gamble. It’s a fledgling, no-frills airline, much like Ireland’s Ryanair. Tickets are cheap, but you pay extra for everything. Spirit is profitable and selling for about 8 times estimated 2012 earnings, which analysts expect to be 54% above what they see Spirit making this year.
Otherwise, I’m holding cash to buy some of the stocks featured in STOCK WATCH: 8 Blue-Chip Stocks to Buy Now. I can’t buy them yet because of Kiplinger’s ethics rules, which are designed to give readers the ability to buy before the staff does (we can’t buy a stock we recommend until the magazine has been on newsstands for at least a month). Assuming that the market doesn’t go nuts, I will be snapping up many of these stocks after the conflict-of-interest restrictions expire.
Kathy Kristof is a contributing editor at Kiplinger’s Personal Finance and author of the book Investing 101. You can follow her on Twitter @KathyKristof.