Monday, October 15, 2007

Stock Buy List Update - 10/15/07

I base my stock picking system on the Unemotional Investor Growth system from the book The Unemotional Investor by Robert Sheard, with the following modifications. First, I look at the top 20 stocks. In addition, I have found that avoiding the stocks that have a high percentage of shorted shares and investing when the Value Line weekly Rank 1 turnover is low are good additions to his Unemotional Growth criteria.

My last update of the buy list using this system was on 5/28/07. Interestingly, the last few weeks have had a low turnover (2-4 on average) of Rank 1 stocks. This phenomenon, based on my experience with the system, indicates a bullish trend for the market. Here are the seven buys identified by the system.

My Wealth Builder Buy List
StockPurchase DateShares Purchase
Potash (POT)6/7/07


Research in Motion (RIMM)wait


Southern Copper(PCU)wait


CNH Global NV (CNH)try week of 10/15


Garmin (GRMN)wait


GameStop (GME)wait


BHP Billiton (BHP)try week of 10/15



Four of the picks, POT, PCU, CNH and BHP, are in industries that I believe will benefit from the strong economy and business investments - infrastructure and materials. The other three, RIMM, GRMN and GME are currently doing well in their business and I am concerned about whether they can maintain their competitive advantage with only a single product or service to offer customers. Here is a brief description for each company, quoted from the Yahoo! Finance profiles.

Potash Corporation of Saskatchewan, Inc. (POT) engages in the production and sale of fertilizers, and related industrial and feed products. The company manufactures and sells solid and liquid phosphate fertilizers; animal feed supplements; and industrial acid, which is used in food products and industrial processes.

This is a carryover from the 5/28/07 buy list. It was returned 58% since early June, 2007

Research in Motion (RIMM) engages in the design, manufacture, and marketing of wireless solutions for the mobile communications market worldwide. Most notably, they are the manufacturer of the Blackberry.

RIMM is dependent on a single product and therefore, I will do more research before deciding to purchase this stock.

Southern Copper (PCU) produces copper, molybdenum, zinc, and silver. It engages in mining, milling, and flotation of copper ore to produce copper concentrates and molybdenum concentrates; the smelting of copper concentrates to produce anode and blister copper; and the refining of blister/anode copper to produce copper cathodes.

PCU already has a $36B market capitalization and a worker strike may impact it. I am not actively looking to purchase it and will do more research.

CNH Global N.V. (CNH) engages in the manufacture and distribution of agricultural and construction equipment worldwide. The company operates in three segments: Agricultural Equipment, Construction Equipment, and Financial Services.

I think infrastructure rebuilding will continue to be a winning investing theme and will try to purchase 50 shares of this stock.

Garmin (GRMN) engages in the design, manufacture, and marketing of navigation, communications, and information devices that are enabled by global positioning system (GPS) technology worldwide. It operates in four segments: Automotive/Mobile, Outdoor/Fitness, Marine, and Aviation.

It's a great product but I think GRMN has not demonstrated it can sustain its competitive advantage. I will do more research before purchasing this stock.

GameStop (GME) operates as a retailer of video game products and personal computer (PC) entertainment software. It sells new and used video game hardware and software, and related accessories and other merchandise.

I believe GME has benefited from the introduction of new video consoles (e.g. Wii) and new games (e.g. Halo 3). At this point, I won't be purchasing this stock.

BHP Billiton Limited (BHP) engages in mining, drilling, and processing mineral resources. It operates through seven segments: Petroleum, Aluminium, Base Metals, Carbon Steel Materials, Diamonds and Specialty Products, Energy Coal, and Stainless Steel Materials.

This is an Australian company that is supplying materials for China. I will purchase 50 shares.

While all of the seven stocks are excellent picks, I tend to focus on the ones that have some sustainable projected growth. For example, I did not buy the housing stocks in early 2005, even though several were identified as picks by the system. Therefore, at this time, I will be looking to buy BHP and CNH.

For more on Strategies and Plans, check back every Monday for a new segment.

No comments: