FINANCIAL SPECULATIONS

FINANCIAL SPECULATIONS

David Dreman in his book on Contrarian Investment Strategies includes a chapter on the psychological aspects of investing and speculation created by a herd mentality.

He identifies four principles learned from financial speculations.

1. AN IRRESITABLE IMAGE OF INSTANT WEALTH DRAWS THE FINANCIAL CROWD TOGETHER.

2. A SOCIAL REALITY IS CREATED THAT BLINDS PEOPLE TO THE DANGERS OF THE MANIA.

3. THE MAGIC LANTERN SUDDENLY CHANGES AND ANXIETY REPLACES OVERCONFIDENCE.

4. WE DO NOT LEARN FROM THE PAST. THINGS DO SEEM VERY DIFFERENT EACH TIME, ALTHOUGH IN FACT EACH SET OF CIRCUMSTANCES IS REMARKABLY SIMILAR TO THE LAST.

Don't follow the crowd.

Three To Buy

Just something to consider. I did not do the homework but this is just observable in small towns in Oklahoma.


Birds of a feather flock together. That is true of companies as well. In small towns like Bristow, Oklahoma you will see one of our holdings, Tractor Supply in the same row with Hibbett Sports and Dollar Tree. Well are they doing well? You bet. All three are successful companies in a small town niche.

Hibbett is a buy right now and Dollar Tree has run up a little too much so we wait some for it to come back to reality. Investors know it's a win so they are paying a premium for it now.

I am not adding Hibbett to our fantasy portfolio because I only want 15 holdings. We perhaps could sell LCI and probably should. I still think healthcares' Trump bruise will turn skin tone in 2018 or sooner. So pride keeps me in LCI. Emotional. Not good but my stance. Time is always the test.

Well we are at a gain today of $3,149 or a 5.94% increase since September. Annualized that would be an awesome return. Don't count the chickens I have learned. Paper gain. We have a major loss in LCI and slight loss in DNKN.

So buy Hibbett!

A Slam Dunk

Dunkin' Donuts and Ice Cream

Sugar wins in our society. Donuts, Ice Cream and Latte are still winners and so is this company that is even more popular internationally than it is domestically. A little side note. Do you know the difference in an international and a global investment? You got it. Dunkin is global and Samsung is international. The difference is domicile. Dunkin is domiciled in the US but does business globally. Samsung however is domiciled in Korea, thus it is international to us. It would be global to Koreans.

The company has more than 20,000 Dunkin Donut and 7,600 Baskin Robbins restaurants in 40 countries. That is impressive.

1. Sales growth is 7% and is a small capitalization company with sales about $800 million. That is low but in the zone.

2. Pre-tax profit on sales is 25% and leads the industry.

3. It has earned on equity at a rate of 30.4%. It also leads the industry on this statistic.

4. Earnings per share is high with 30.4%. It's ok in my opinion.

5. The stock has a 4.4 to 1 upside downside ratio.

6. It also is in the high of the buy zone.

We will buy 100 shares today at $5,273.00

DNKN cost basis $5,273.00 value is $5,146.00 = - $127.00 (01/08/2017) update. 
CGI cost basis $769.00 value is $865.00 = +96.00 
STRC cost basis $7,719 value is $7,938.00 = +$219.00 
LULU cost basis $6,855.00 value is $6,827.00 = -$28.00
GNTX cost $1,856.00 current $2,052.00 .... +196.00
BNS paid $5,408.00 value $5,788.00 = +$380.00
TSCO paid $6,667 value $7,516.00. = + $849.00
KMX paid $5,444 value $6,540.00 = + $1096.00
LCI paid $3,238 value $2,225 = - $1,013.00
JLL paid $9,699 value $10,673.00 = + $974.00

Looks like a gain of $2,642 since September. That is a 4.99% return in a quarter. Not bad annualized. We will see. LCI is still hurting our portfolio. LULU and DNKN are too new. WE will stop at 15 shares.