Mr. Sensitive

December 27, 2013

Family Stock Index 2014 Changes

Filed under: Uncategorized — lbej @ 16:46

2013 is finally coming to an end and, as of this writing, the Dow, S&P 500 and Nasdaq Composite indices are up 26%, 29%, and 38%, respectively.  However you slice it, it’s been a great year, as long as you like political farce, economic injustice, and/or Twitter.  That last one isn’t related to the first two—except as a possible antidote to them—but it is up 160% in the month-and-a-half since its IPO, even with a 10% pullback today.  The Family Stock Index is up 28% on the year, having lagged the broader market as the latter has gone parabolic in the last six weeks or so.  As we’ve had only three-and-a-half days of trading this week, I’m skipping the usual Friday update in lieu of a year-end index-rebalancing update.  I need the extra time since I’m making several changes, more than I’ve made at any time I can remember.  (That means absolutely nothing, of course, because I can’t even remember how many changes I made last year and—also of course—I haven’t organized this blog such that I have any way of checking.)

After the close of trading on December 31 we will bid a sad adieu to my favorite cat, Marisa.  Marisa, as you may know, has been technically dead since October 2012, but she remained in the FSX (in spectral form) until she was purchased earlier this quarter by evil corporate entity Koch Industries.  She’s now gone on to haunt the Koch brothers, with my blessing.  Lulu, alas, is still here.

We will still have 25 FSX members in Q1, even after Marisa’s long-delayed departure, because Josie Ann is being formally spun off from her mother, Jodi Ann, following the same procedure as I used for Cousin Brinkley back in Q1 2011.  As you all know, this isn’t the first time a Josie Eure has been part of the FSX; and yet, however many other features my niece inherits from my mother, a ticker symbol will not be among them.  Li’l Josie will be represented by j2 Global (ticker symbol JCOM), a $2.3 billion cloud services company based in Los Angeles.  Believe it or not, ‘cloud services’ evidently have nothing whatsoever to do with the weather, and are, in fact, some sort of Internet something-or-other.  ‘Cloud’ is one of those technology investing buzzwords that I hate—along with ‘big data,’ ‘social media,’ and anything having to do with ‘mobile’—because I’d say a solid 75% of the investing pundits throwing those concepts around have no idea how they actually cause companies to make (or lose) money.  Having said that, I like j2 from a generational continuity standpoint, and it will give the FSX some beta.  I like beta.  At a recent $49, JCOM is near the high end of its 52-week range ($30 to $56) and isn’t terribly expensive at 16 times 2014 earnings estimates.

The quest for beta is what drives some of the other changes I’m making.  Service Corp International delivered a solid 31% gain for Justin in 2013 (along with this masterpiece of objective journalism)

deathinc

but at 18 times forward earnings, it’s expensive for a slow-growth business like death.  I may be leaving a lot of upside on the table if there’s a plague, but I can live with that (…or can I?).  Having dabbled in death for a year or so, I thought Justin might like to go in a completely different direction, so I’m putting him into XO Group, which describes itself as ‘a media and technology company providing multiplatform media services to the wedding, newlywed, and pregnancy markets in the United States.’  As was the case with SCI, however, it’s the ticker that’s the kicker: XOXO might as well be Justin’s name (for email purposes, anyway).  The stock trades near its 52-week high of $15, valuing the company at $365 million.  XOXO is expensive at 30 times trailing earnings (no forward P/E available), but there’s a social media aspect to its business, so valuation doesn’t matter in this market.

I’m making a similar, beta-inspired move with Zero, ditching Zagg for Zillow.  This move will see Zero trading under the ticker Z, an elegant symbol befitting my brother-in-law—or The Big Z, as I never call him.  Zillow ‘engages in the operation of a real estate and home-related information marketplace on mobile and the Web in the United States’ (according to Yahoo Finance), so there you’ve got the ‘mobile’ magic investors are so enamored of these days.  Does it matter that—at a recent $81—the stock is up four-fold from its 2011 IPO price and trades at 19 times sales and 160 times 2014 earnings estimates?  Not yet.  But if there’s anyone who can pop the social media bubble, it’s Zero—just look at the 45% loss he inflicted on poor ZAGG in 2014.

The final two changes I’m making are on account of the teen/pre-teen sector of the FSX behaving badly—big surprise there.  Lucas’ long-time representative, Lucas Energy (LEI), has traded in penny-stock territory (below $1) for most of the fourth quarter, and its low price, puny market cap, and high percentage-basis volatility have made its position in the FSX untenable.  But while it’s been clear for months that LEI had to go, I had no idea how to replace it, and I had to recruit help.  So after a painful brainstorming session, it was Reagan who finally suggested CTG—for CompuTer Gamer, she said.  Lo and behold, that ticker belongs to Computer Task Group, a Buffalo-based company that specializes in ‘selection and implementation of packaged software; design, development, testing, and integration of new systems; and development and implementation of customized software and solutions’—so, basically, a bunch of computer tasks, and a bunch of things that Lucas could probably do.  At $19, CTG trades at the lower end of its 52-week range ($16 to $26), but even there, its $350 million market cap dwarfs LEI’s $30 million.  As an added bonus, I can always blame Reagan if this pick goes awry.

The final change is for Jenny, whose JNY (fashion firm Jones New York) is being taken private for $15/share.  While this represents a tidy 35% gain year-over-year, it puts me in a tough spot—I liked JNY, and so did my fashionable eldest daughter.  Jenny wasn’t very helpful when it came to choosing a replacement, either, especially after I refused to even consider any Josh Hutcherson-themed stocks.  Pressed for time, I went with Just Energy Group, a Canadian natural gas distribution company, because its ticker symbol is JE.  I do like that we’ll pick up some energy exposure, and the nat gas sector in particular looks cheap to me.  Still, it feels like I’m settling, and that Jenny deserves better.  This is one I may move out of midyear, especially if I find something more suitable.

So that’s it: MOLXA, SCI, ZAGG, LEI and JNY are out; JCOM, XOXO, Z, CTG and JE are in.  All changes will be made after the close on Tuesday December 31.  I will also double Nicole M.’s weight in the FSX for the remainder of her pregnancy and add the as-yet-unnamed baby as of the first rebalancing after his birth.

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1 Comment »

  1. Cool. I’m excited to see how Zero’s goes this year!

    Comment by Sis — January 8, 2014 @ 08:52 | Reply


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