The ‘Retire Young’ Portfolio Performance Update

When I started the ‘Retire Young’ portfolio on April 18, the goal was to beat the market by a large enough margin to allow the investors to retire at young ages. Of course, looking at a portfolio’s weekly or monthly performance may be misleading because it takes years before we can be sure of its actual performance against the market. Just because we beat the market at any given day, week or month doesn’t necessarily mean that we will beat it in a decade. This is why it’s important to watch a portfolio’s performance over a long period of time.

First, I’ll cover some recent news about the portfolio.

Statoil (STO): The company continues to have a wild ride. Statoil is under investigation for price-fixing allegations, which may subject it to a huge fine in the future. Meanwhile, the company agreed to pay its shareholders $1.15 in annual dividends, which resulted in a yield of 5.1%. Furthermore, there may be some changes in Norway’s tax system regarding oil drilling and Statoil is deeply worried about these changes. Statoil’s profitability in Norway may come in question if tax rates increase; however, I am sure that the Norwegian government will not want to hurt the country’s biggest tax payer. In addition, some of the company’s projects are getting costlier than originally planned. For example, in oil field Johan Carstberg the company’s projected break-even price is as large as $85 per barrel. The last month has been very challenging for the company but we will still keep the company in our portfolio because most of the challenges are already reflected in the price of the company (which is very close to its 52-week low). We will continue to monitor this company closely though.

First Solar (FSLR): The company continues to deliver the results; however, it gets punished along with other solar companies. It looks like the market looks at all solar companies the same way. Some days, we see all solar companies going up, other days we see all solar companies going down, regardless of how each company happens to perform. Recently, Goldman Sachs upgraded First Solar to "buy" with a price target of $64. First Solar has one of the strongest cash flows in the entire industry. Lately, First Solar’s share price has been pretty volatile but the volatility can’t go on forever.

Smith & Wesson Holding Corporation (SWHC): Not much have changed in this company since my last report on it. Some retirement funds are selling their stakes in the company mostly for political reasons and the company continues to offer strong fundamentals for long-term investors.

Wells Fargo (WFC): As the housing market has been improving, this company’s performance has been following the trend. Reportedly, the company is keeping a lot of money on the sidelines hoping that the interest rates will rise and it will gain from such a rise. While this caused Wells Fargo to miss out on some opportunities, the company is well-positioned for a possible interest rate increase.

The Cheesecake Factory (CAKE): The company’s share price has been rallying since we added it to our portfolio. There aren’t a lot of developments since the last time; however, this will continue to be a high performer for a long time.

Hewlett-Packard Company (HPQ): We are looking at another company that’s been rallying relentlessly since we added it to our portfolio (in fact it was rallying even before that). A couple weeks ago, HP announced its quarterly earnings, which were less than impressive; however, the CEO Meg Whitman gives a lot of hope to investors as the company continues its turnaround efforts. It looks like everything is going according to the plan, which gives investors enough reason to keep holding this company.

American Express (AXP): This is one of the two financial companies in our portfolio and it continues to perform well. This is one of those companies you’d want to keep in your portfolio for a long time because it has low risk and high returns due to its business model. Recently some competition for AXP emerged; however, it has a high retention rate. The company’s partnership with Costco (COST) has been particularly profitable.

The Walt Disney Company (DIS): The company recently raised admission prices at its theme parks but this is not likely to hurt the demand too much. In the last few years, demand has been very strong for Disney’s parks and cruise ships. The company also expects to make more investments in China as it gains attention of the country. Disney has a rather conservative approach to investing and the company loves to take its time and make things happen at a slow but sure way.

Monster Beverage Company (MNST): This is one of the companies for which I received the most criticism when adding it to the portfolio. Many people thought that Monster Beverages would be a bad bet. Eventually they were correct because the company’s share price took a plunge soon after I added it to our portfolio. Yet, things have recovered quickly and the company is currently on a rally. This is the first time since last July that the company is trading for a price above $60.00.

Hertz Global Holdings (HTZ): Despite a great performance in the last year, the company had been under the radar for such a long time. Even in Seeking Alpha, very few people actually followed this company and very few articles were actually written. After my article, I noticed that the attention for the company started to increase sharply.

Santarus (SNTS): There aren’t a lot of updates on this company. Soon after we added this stock to our portfolio, it had a sharp correction but it’s been recovering in the last couple days. The story for this company is still intact.

Now it’s time to track the performance of the portfolio. Since April 18, the S&P 500 index is up by 5.85% and Dow Jones Industrial index is up by 4.31%. How about the `Retire Young` portfolio? Let’s look at it.

The table below shows the stocks in our portfolio, their ticker codes, buy date, buy price and buy amounts.

Stock Name	Ticker	Buy Date	Buy Price	Amount
Monster Beverages	MNST	4/16/2013	$56.49	200
Statoil	STO	4/19/2013	$23.00	400
American Express	AXP	4/26/2013	$67.75	100
Wells Fargo	WFC	4/26/2013	$37.88	300
Disney	DIS	4/30/2013	$62.75	200
Hewlett Packard	HPQ	5/3/2013	$20.63	500
Smith & Wesson	SWHC	5/13/2013	$8.77	1100
The Cheesecake Factory	CAKE	5/16/2013	$40.74	200
Hertz	HTZ	5/23/2013	$25.30	400
First Solar	FSLR	5/24/2013	$51.55	200
Santarus	SNTS	5/21/2013	$22.20	400

The second table shows each stock’s buy price and the current price along with the current return (excluding dividends):

Stock Name	Buy Price	Amount	Current Price	Return
Monster Beverages	$56.49	200	$61.62	9.08%
Statoil	$23.00	400	$22.38	-2.70%
American Express	$67.75	100	$78.04	15.19%
Wells Fargo	$37.88	300	$41.25	8.90%
Disney	$62.75	200	$64.85	3.35%
Hewlett Packard	$20.63	500	$24.81	20.26%
Smith & Wesson	$8.77	1100	$9.21	5.02%
The Cheesecake Factory	$40.74	200	$41.46	1.77%
Hertz	$25.30	400	$25.58	1.11%
First Solar	$51.55	200	$53.09	2.99%
Santarus	$22.20	400	$21.24	-4.32%

If you just bought and held these stocks, your cost basis would be $108,607 and your current market value would be $114,599. Adding the dividends, we are getting another $550. Basically, including dividends, our return so far is 6.02%, which means we are beating the market slightly.

Then again, there is one more calculation to make. Those who followed my articles know that I always advised selling covered calls for every stock we own. While selling covered calls will cap the maximum returns, it will add some stability and safety in the portfolio. Here is a list of covered options we sold, with their premiums and strike prices.

Stock Name	Buy Price	Amount	Premiums	Strike Price	Breakeven Sell Price	Current Price
Monster Beverages	$56.49	200	$4.05	57.5	52.44	$61.62
Statoil	$23.00	400	21.85	$22.38
American Express	$67.75	100	$1.18	70	66.57	$78.04
Wells Fargo	$37.88	300	$0.56	39	37.32	$41.25
Disney	$62.75	200	$1.42	65	61.33	$64.85
Hewlett Packard	$20.63	500	$0.82	22	19.81	$24.81
Smith & Wesson	$8.77	1100	$0.50	10	8.27	$9.21
The Cheesecake Factory	$40.74	200	$0.90	42	39.84	$41.46
Hertz	$25.30	400	$1.40	27	23.9	$25.58
First Solar	$51.55	200	$4.80	55	46.75	$53.09
Santarus	$22.20	400	$0.90	25	21.3	$21.24

What happens if we cap prices at strike price and count the premiums as cash we have?

Stock Name	Buy Price	Current Price or Strike Price	Amount	Premiums	Cash	Market Value
Monster Beverages	$56.49	$57.5	200	$4.05	$810.00	$11,500.00
Statoil	$23.00	$22.38	400	$0.00	$8,952.00
American Express	$67.75	$67.75	100	$1.18	$118.00	$6,775.00
Wells Fargo	$37.88	$39	300	$0.56	$168.00	$11,700.00
Disney	$62.75	$64.85	200	$1.42	$284.00	$12,970.00
Hewlett Packard	$20.63	$22	500	$0.82	$410.00	$11,000.00
Smith & Wesson	$8.77	$9.21	1100	$0.50	$550.00	$10,131.00
The Cheesecake Factory	$40.74	$41.46	200	$0.90	$180.00	$8,292.00
Hertz	$25.30	$25.58	400	$1.40	$560.00	$10,232.00
First Solar	$51.55	$53.09	200	$4.80	$960.00	$10,618.00
Santarus	$22.20	$21.24	400	$0.90	$360.00	$8,496.00

Now our holdings are worth $110,666 in stocks and $4,400 in premiums (plus $550 in dividends). Now total worth is $115,616. Our cost basis was $108,607; therefore, our current return is 6.45%. Again, we are beating the market slightly. Keep in mind that short-term returns are usually meaningless and we need more data points to tell whether we are beating the market or not and by how much. For the time being, things are looking good for the ‘Retire Young’ portfolio

Source: http://seekingalpha.com/article/1490872-the-retire-young-portfolio-performance-update?source=email_investing_ideas&ifp=0

Apple’s Most Innovative Products Have Intel Inside

When Apple (AAPL) announced today that its 11 inch and 13 inch MacBook Air products, based on Intel’s (INTC) 4th generation Core processor, were ready to ship immediately, it signaled to me that the relationship between Apple and Intel, at least in the Mac arena, is tightening and not, as some would speculate, weakening. While the latest crop of 4th gen Core based Ultrabooks will not hit the shelves until Q3 (possibly at the Windows 8.1 launch), Apple’s MacBook Air with said processor and all of the battery-life enhancing goodies is here today.

Remember That ARM Rumor?

Back in November/December, there was a very concentrated anti-Intel bias in the air. Bloomberg was spreading rumors that Apple would be ditching Intel’s "Core" processors for an internally designed, ARM (ARMH) compatible processor, likely very similar to the one found in the iPad. I was one of the first on the scene, reassuring people that this was not likely to happen and that, if anything, the reverse (iOS devices moving to Intel) was the more likely outcome.

See, the problem with technology stocks — and in particular, very hard to understand sectors such as semiconductors — it’s easy to scare the masses into believing whatever "hot" rumor that somebody wants to spread to generate trading action. At the time, Intel was battered and bruised following the slump in PC sales and the Q3 guide down, so it was an easy target for short sellers. Further, with ARM on the upswing at the same time (fueled by the noise it was making about 64 bit chips for servers), it made sense for the press/rumor mill to start claiming that Apple would be moving to ARM in order to add more fuel to the uptrend fire that kept the flame burning in ARM’s shares.

Anyway, with the next generation MacBook Air powered by Intel’s 4th generation Core, and with Apple now promising all-day battery life within a very slim form factor all with substantially enhanced graphics, it is clear that Intel is building exactly the chips that Apple wants/needs for its MacBook line of products. This means that Apple — which had very little choice in applications processors for iOS devices back in 2007/2008 — sees no need to try to take on the Herculean effort of developing its own high performance/low power chip for ultrathin laptops. While designing a custom low power/low performance ARM SoC for a phone is one thing, the level of complexity of a Haswell ULT-like chip is substantially greater. Also, in the higher performance space, Intel’s process lead is gigantic, so Apple would be a node behind all of the me-too Ultrabook vendors that use Intel’s chips — a losing proposition in power optimized devices.

Intel Inside Apple’s Most Innovative Products

Apple’s most innovative product at WWDC (in my view), the new Mac Pro, is powered by Intel’s latest-and-greatest (yet to be announced) "Ivy Bridge" based Xeon processors, and will support up to 12 cores. While I think that the new form factor is very interesting, I am also very pleased that Apple isn’t letting up on the focus on performance, as the machine sports two top-of-the-line AMD (AMD) FirePro cards in addition to the top-of-the-line Xeon part. The Mac Pro was long overdue for an upgrade, and this certainly brings the machine up to speed.

Isn’t it funny, though, that Apple’s most innovative products at WWDC weren’t ARM based? Sure, iOS got an upgrade, but that’s a pure software update. iOS finally brings us multitasking (Android has supported this forever) and the UI becomes prettier/sleeker. We did not get an announcement of a 20nm Apple A7, nor did we see Apple talk up an A6X based MacBook Air. Apple isn’t stupid, and the company knows firsthand how painful it can be on the market segment share side of things to lag in performance and performance/watt, and in anything requiring serious horsepower — from a MacBook Air to a Mac Pro — Intel is the clear leader.

Conclusion

As I look at articles all over the web, I see authors tripping over themselves now to hype up Intel, when just six months ago these same individuals were claiming that ARM would take over the world and Intel’s fabs would fill up with cobwebs. Well, the storm of nonsense is over, and it seems that all is once again right in the world. Apple’s "A-series" chips were developed simply because no other vendor had a chip worthy of Apple’s iOS products, but at the higher end, Intel is untouchable, and if Intel can produce a MacBook Air class chip with massive CPU and GPU performance and still allow for 10 hours of battery life, then a high end iPad with a "Core" processor inside is just a "tick" away.

Source: http://seekingalpha.com/article/1492352-apple-s-most-innovative-products-have-intel-inside?source=email_investing_ideas&ifp=0