HDFC INDIA BANK

This company is a long shot position and comes from my trip to India last week. It was recommended to me by my host and the leaders in his school. Sometimes the best research is to listen well. I can do that. Want to know what millineals are buying listen to them, ease drop on them, ask them questions and just look at them. What do they eat? What are they wearing? Where do they go? You will learn. The same goes for other subsets in our society. Senior Adults? Teens? Farmers? Etc.

This is their PR on what they do.

HDFC Bank Limited provides a range of banking and financial services to individuals and businesses in India, Bahrain, Hong Kong, and Dubai. The company operates in Treasury, Retail Banking, Wholesale Banking, and Other Banking Business segments. It accepts savings accounts, salary accounts, current accounts, fixed and recurring deposits, demat accounts, safe deposit lockers, and rural accounts, as well as offshore accounts and deposits. The company also offers personal, business, home, consumer durable, car, two wheeler, gold, educational, rural, and term loans; loans for professionals; loans against property, securities, and assets; overdrafts; government sponsored programs; and working capital, healthcare, channel, short term, structured, dealer, and vendor finance, as well as agricultural lending. In addition, it provides credit, debit, and prepaid cards; private banking services; export, import, remittance, bank guarantees, and letter of credit services, as well as merchant and cash management services; life, health, motor, travel, and home insurance products; and investment product, such as mutual funds, equities and derivatives, IPO, and bonds. Further, the company offers bill discounting, real time gross settlement, bankers to right/public issue, forex, money market, employees trusts, and tax collection services; and investment banking services in the areas of project appraisal, structured finance, loan syndication, debt capital markets, equity placement, mergers and acquisitions, corporate advisory, and capital market advisory services. Additionally, it provides correspondent banking, settlement, custodial, disbursement, clearing, and administrative and fiduciary support services, as well as online and mobile banking services. As of March 31, 2017, the company operated a network of 4,715 branches and 12,260 ATMs in 2,657 cities/towns. HDFC Bank Limited was founded in 1994 and is based in Mumbai, India.

This company has 13% growth in sales and 20% earnings per share growth. That makes it a yes in both categories. Pretax profit is 46% and that is above industry average. 16% return on equity is also an industry leading number. It has too much debt at 49%!!! We should be buying this between $51 and $75. It’s in the HOLD zone but as you know with my studies we are buying it anyway. It pays a great dividend and that has grown over the past five years every year.

So why buy? Gut feeling. I want a stock in banking. India is growing. We will see. Speculation not on value of company but on stock price.

We buy 100 shares today at $100.76 a share. Cost basis is $10,076.00

Well to this point we have three in black and one in red. Corning we have a 12% loss. However we are 25% up on Dorman, 2.5% up on Southwest Airlines and .08% on UPS. We are up $1,240.00 since January. Not bad a total return of 4.8%.

PSYCHOLOGY OF INVESTING

  THIS BOOK HAS BEEN AN INTERESTING JOURNEY FOR ME. I READ IT ON A TRIP TO INDIA RECENTLY. 

I know that just "the facts investing" is the best way to do it. However this book reminded me of the psychological factors that can enter into the journey. Here are a few take aways from this book.

1. We do not always make rational decisions in life and especially when it comes to money. 

2. Overconfidence is a major cause of irrational, un-researched decisions when investing. 

3. An illusion of control can set into an investor's thinking. They can deceive themselves into thinking that having the power of the click (internet investing), lots of information, active involvement without broker hindrances, and past successes that they "have this." Don't be self deceived. Do your homework.

4. We are motived by pride and regret. Pride when we made a good decision and regret when we have made a bad decision. The choice of good and bad can even be skewed by reference point. For example:

Investor A buys 100 shares of stock A at $50 a share. It goes up to $100 in over a year. He is a trader not an investor so he denies the temptation to see the stock. Later it goes down to $75. He chooses to sell it because management has changed and the fundamentals are in jeopardy. However, the pride in the investment he should feel is dwarfed by his reference point. His reference point became $100 once the stock hit that. He still had a 50% return on his investment plenty to have pride. 

5. Investors tend to risk more when they sell gainers or the "house money" effect. Since it is not your original money you invested then "what the heck" take a risk on a no name company. You might just hit is big. Don't do this. Stick with the fundamentals. You probably should have not sold that winner in the first place. Long term is best. 

6. When you use the words "average up your cost basis" you have just made the double down mistake in investing. You have a company that turns out to be a dog and it goes down, bad earnings report consistently for two quarters or more, and you are in a dilemma. You don't want to feel that regret. So what do you do? Ugh. Average your cost basis. Not good. Say never to this. Just buy a company that meets the criteria of good investments. 

7. Mental accounting can hurt your. Verify  your impressions, thoughts, feelings, and the like with sound fundamental analysis. You might just stay above water. 

Brown delivers. UPS is a BUY.

My investment club in Mustang, Oklahoma bought shares of this company last night. It had a couple concerns in our checklist but I don't think those are insurmountable in light of current growth and anticipated growth. It pays too much of a dividend for out blood as we seek growth not income and the sales are low for a massive company like UPS. However the earnings per share are out the top and climate in shipping is going to lean toward companies like UPS. 

See What They Say About The Company

United Parcel Service, Inc. (“UPS”) was founded in 1907 as a private messenger and delivery service in Seattle, Washington. Today, UPS is the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry and the premier provider of global supply chain management solutions. We deliver packages each business day for 1.5 million shipping customers to 7.9 million receivers ("consignees") in over 220 countries and territories. In 2013, we delivered an average of 16.9 million pieces per day worldwide, or a total of 4.3 billion packages. 

We are a global leader in logistics, and we create value for our customers through solutions that lower costs, improve service and provide highly customizable supply chain control and visibility. Customers are attracted to our broad set of services that are delivered as promised through our integrated ground, air and ocean global network.

Here are the stats on this massive company. Sales growth is 3.3%. Earnings per share is at 8.4%. We estimated future sales at 4% and earnings at 8% just to be very conservative. It is barely in the buy zone which is $69 - $107. Todays price is $106.31. The market correction has given us a good entry point on this company. We will see. The dividend is impressive and I disagree with a strict rule our investment club usually holds on this issue. The dividend  has gone up the last five years and is now at $3.64 per share much higher than the 50% of the earnings per share target we use. The earnings per share is $5.62. So we would look for a dividend under $3 as more healthy. But nice when markets are volatile like now. 

They have always had lots of debt. Lots of vehicles. The debt has been excessive the last two years making the debt to capital ratio at a whopping 85%. That is huge. We think they should pay less dividends and lessen their debt. However, they are gearing up for what they perceive to be a major rush.  USPS is doing well but with Trump's lean and mean philosophy they will be forced to raise prices on parcels to match the current carriers and the tax subsidized lower shipping charges will equalize competition. My take. 

So we hopefully buy low today.

PORTFOLIO TO DATE

100  DORMAN INCORPORATED COST $6,114 CURRENT VALUE $7,136

100  CORNING INCORPORATED COST $3,366 CURRENT VALUE $2,945
100  SOUTHWEST AIRLINES COST $5,699 CURRENT VALUE $5,681
100  UNITED PARCEL SERVICES $10,600 CURRENT VALUE $10,600

Put A Little Love In Our Portfolio

Southwest Airlines has become a major player in the domestic market with the acquisition of AirTran  seven years ago. It is a well managed company. With the market downturn yesterday one could just about buy anything in the next few days or weeks depending on the downturn. This would be my pick today.

Its price to earnings ratio is at 13 a solid place to be. Its profits on sales is at 13.4% and it earned 24.4% over the last ten years with only a 28.8% debt to capital ratio.

The price is in the middle of the buy zone which is $32 - $79. The price at close yesterday was $56.99. A bargain for a value investor.

This is what they say about themselves.

"Southwest Airlines Co. operates a passenger airline that provides scheduled air transportation services in the United States and near-international markets. As of December 31, 2016, the company operated a total of 723 Boeing 737 aircraft; and served 101 destinations in 40 states, the District of Columbia, and the Commonwealth of Puerto Rico, as well as 8 near-international countries, including Mexico, Jamaica, The Bahamas, Aruba, the Dominican Republic, Costa Rica, Belize, and Cuba. It also sells frequent flyer points and related services to business partners participating in the Rapid Rewards frequent flyer program, such as car rental agencies, hotels, restaurants, and retailers. In addition, the company operates Southwest.com, an Internet Website that enables customers to purchase and manage travel online; and Swabiz.com, a business travel reservation Web page. Southwest Airlines Co. was founded in 1967 and is headquartered in Dallas, Texas."

See investor website.

So we will buy 100 shares of LUV today.

 PORTFOLIO TO DATE

100  DORMAN INCORPORATED COST $6,114 CURRENT VALUE $7,137

100  CORNING INCORPORATED COST $3,366 CURRENT VALUE $2,978
100  SOUTHWEST AIRLINES COST $5,699 CURRENT VALUE $5,699

CORNING INCORPORATION NOT ABOUT BAKING

This is a glass company turned high tech. It is 165 years old and headquartered in Corning, New York if that tells you anything.

www.corning.com is the website.

Here is what they do:

Corning is one of the world's leading innovators in materials science, with a 166-year track record of life-changing inventions. Corning applies its unparalleled expertise in glass science, ceramics science, and optical physics, along with its deep manufacturing and engineering capabilities, to develop category-defining products that transform industries and enhance people's lives. Corning succeeds through sustained investment in RD&E, a unique combination of material and process innovation, and deep, trust-based relationships with customers who are global leaders in their industries.

Corning's capabilities are versatile and synergistic, which allows the company to evolve to meet changing market needs, while also helping our customers capture new opportunities in dynamic industries. Today, Corning's markets include optical communications, mobile consumer electronics, display technology, automotive, and life sciences vessels. Corning's industry-leading products include damage-resistant cover glass for mobile devices; precision glass for advanced displays; optical fiber, wireless technologies, and connectivity solutions for state-of-the-art communications networks; trusted products to accelerate drug discovery and delivery; and clean-air technologies for cars and trucks.

They recently developed the glass for iPhone X. 

Here are the numbers we observe for our selection through Better Investing Stock Selection Guide:

1. It is growing at a 4.3% rate in sales with over 2.5 billion in sales making this a Large Capitalization company. 

2. Its earnings per share rate of growth is 8.5%. 

3. Pre-tax sales was 30.1% growth over five years.

4. Earnings on equity grew in five years at an 11% rate.

5. Its dividend has grown from .32 to .54 in five years of course a good trend. It is less than 50% of the 2.30 earnings per share which makes a healthy ratio.

6. It is in the BUY zone which is $25.80 to $37.10. The current price is $33.66.

7. It has debt but the debt to capital is 15.5% a very healthy rate. 

 PORTFOLIO TO DATE

100  DORMAN INCORPORATED COST $6,114 CURRENT VALUE $7,072

100  CORNING INCORPORATED COST $3,366 CURRENT VALUE $3,366

This is interesting that we bought Dorman and it is currently up $955.00 in a few days. That is an unusual move on an investment. We will take it but we did not know it would start up after the purchase. Don't expect this. We seek long term but will take short term gains. 

DORMAN PRODUCTS

Here is what they say about their company on the web site. https://www.dormanproducts.com/Pages/corporate/history.aspx

"New Since 1918", Dorman Products is a leading supplier of original equipment dealer "exclusive" automotive and heavy duty replacement parts, automotive hardware, brake parts, and fasteners to the Automotive and Heavy Vehicle Aftermarkets.  New to the Aftermarket is our exciting niche allowing us to provide hundreds of new products to our customers and end-users each month and thousands each year.”

Dorman is a supplier to the major automotive  retail parts outlets in the US. Domiciled in Colman Pennsylvania they also have a presence in Asia. 

Why I like it:

1. It has an 11% historic five year sales growth. 
2. A 13% Earnings per share rate of growth for the same 5 years.
3. Pre tax profit on sales is 18% and 19% earned on equity. 
4. It has zero debt and has a current price to earnings ratio of 19. 
5. It pays no dividend so is a growth not income stock.
6. It is just barely in the buy zone which is $43 - $65. Today’s price is : $61.14. Ticker symbol is DORM.

Consumer confidence is up and that may be detrimental to this stock that focuses on after market not new. It really needs lots of used cars. If people buy new then the parts business is slow. We will see.


Our Portfolio:

100 shares DORMAN INCORPORATED  01/01/2018 Cost $6,114 Value $6,114. 

Year End Report

Well we did good in our fantasy portfolio this year. Of course it was not rocket science this year with the markets at record highs you just needed to be in almost anything. The Dow Jones Industrial Average is up to date almost 25%. The S & P 500 a better gauge is up 19%.

In our portfolio of 12 stocks we had 8 winners and 4 losers. This was good but not as good as the overall markets. Our performance was 13%. We lost in oil, healthcare, and trucking. We won in aviation, retail, banking, housing, and used auto retail.

Our biggest gainer was Jones Lang LaSalle Incorporated. It gained 56%. This was our real estate nitch. Air lease Corporation was our runner up with a 27% gain.

Our biggest loser was in the oil equipment sector with Dril-Quip down 27%. It’s still a good company  going forward but just out of favor. $60 will help this one in 2018.

So here is what we did in 2017

AL cost basis $3,792.00 value is $4806.00 = $1024.00

DRQ cost basis $6,547.00 value is $4,755.00 = - $1,785.00

DNKN cost basis $5,273.00 value is $6,565.00 = $1,292.00

CGI cost basis $769.00 value is $635.00 = - $136.00

SRCL cost basis $7,719 value is $6,779.00= -939.00

LULU cost basis $6,855.00 value is $7,909.00 = $1,054.00

GNTX cost $1,856.00 current $2,105.00 = +250.00

BNS paid $5,408.00 value $6,463.00 = +$1,055.00

TSCO paid $6,667 value $7,521.00 = $854.00.00

KMX paid $5,444 value $6,541.00 = + $1,097.00

LCI paid $3,238 value $2,440.00 = - $798.00.00

JLL paid $9,699 value $15,081.00 = + $5,382.00

So our total gain was $8,331.00 or 13.16%.

We will start over in 2018. This is fun and educational for me. I hope it helps you.

Here’s what I am exploring for our next stock.

1. TOL or Toll Brothers a real estate business.
2. GLW or Corning Corporation an high tech and glass company. Make screens for iPhone X.
3. ALK or Alaska Air Group more than an airline also a major shipping source in Alaska.
4. PAYC or Paycom Solutions a payroll service company in OKC.
5. PZZA or Papa Johns International a Company in the political bullseye right now. Founder and CEO resigned, numbers lower, compitetion from companies like McDonald’s and Buffalo Wild Wings starting to deliver could cut into their pizza delivery. We will see. Speculation.

Last year we did one company a month. This year we will do two and select all 24 by July 1, 2018.