Reviewing my past investing articles

Recently, M V Consulting Inc., was called upon to lend our expertise for a client on an investment situation. For those unaware, M V Consulting started out as an investment consulting company based on my expertise as a stockbroker. This gave me pause to look back on the early days of my articles and the predictions I made – and compare them to today. (I will exclude those companies that I was working for in investor relations capacities, for full disclosure).

Michael Vass Vasquez
Now over the years I have spoken about various stocks and investment strategies. One of the keys to my investments have always been looking for mature companies, trading at or below 1.5x book value, with positive earnings (and low debt can be a factor). The industry itself, in fact almost every other factor, comes secondary to these criteria. It’s a short list of stocks that fall into this category, no matter if the market is a bear (going down) or a bull (going up). I tend to sell at 2x book value or more depending on the exact situation. Often this can mean the stock will have sizable gains (as a percentage and sometimes as a dollar value) – but it won’t happen overnight. It can and usually does take 9 – 18 months for this to happen.

I also look at the macro factors affecting the stock markets. International instability, the cost of oil and energy, U.S. unemployment and inflation trends, and the ever shifting political winds. That last one is what caused me to segue into political commentary. But all of this and more combined creates an emotional picture, and it’s that picture that moves stocks. If you can understand within reason what the next scene will be, you can predict the overall direction of the market.

Case in point: Here were my words on August 7, 2007

“…Just as the markets rebounded from the 2000-1 drop, the up-coming drop will also be survivable. But don’t doubt it will hurt a lot.

Since 2003 the market has gone from around 8000 to 14000, a total of roughly 75% overall or about 19% per year. That is very strong growth. The 7% drop from 14,000 to 13,000 is not enough to balance the growth. I’d expect a drop to 11,000 before things settle out. And at the same time there will be far less credit available. Already that has gotten tougher as Mr. Cramer mentioned. It will get worse.”

By January 2008 the first hit occurred, and the Dow Jones Index went to 12,613. In July 2008 we ran into the target range I expected, 11,289. Then came the credit crunch I predicted, and in October 2008 the Dow Jones Index reached 10,322. The bottom was worse than I had expected, at 7,056 on March 2, 2009. It definitely hurt a lot.

I also made a promise around that time. September 2008, the speculation was that Lehman Bros. would fail. Several, including myself, felt that before that would happen it would be bailed out or acquired. I was wrong. But what I said at the time is critical to what we saw afterwards.

“There are too many stocks, 401k’s, pensions, and other assets directly tied to the financial institution… And definitely too many mortgages to let this go under completely. My bet is that they will be absorbed by another brokerage or bank. Possibly even an insurance company.

…Politically this would be horrible if it fails… Plus, if this bank is allowed to fail it will shake confidence in U.S. financials and the Dollar… The combination of these events and the resulting hit to the economy will be devastating. I would imagine a full 3% of the nation would be sent to soup lines directly.”

Well Lehman did fail. It took out the housing sector. A total of 9 million jobs were lost between ’08 – ’09, or as a percentage 6% of Americans lost their jobs. At the time I wrote my prediction many believed I was exaggerating. Sadly I was underestimating. But I have made many other predictions in the past as well.

But what about the stocks themselves? Sure I can see a cliff coming and guess how bad the fall might be, but can I get it right going the other way? Well I have a few examples of that too.
In the past I used to write articles for WorthBlog.com (now defunct), and one of the articles I found referred to quotes of Alcoa Aluminum on Feb 24, 2009. I can only find the follow-up article in March 2009 were I had previously personally bought the stock at $5.55. on September 3, 2009 I sold half the position at $11.60 for 109% profit. (At the same time I was taking a loss in E-Trade, that I bought at $1.50 with a stop loss at $1)

In March 2010 I was looking at Sirius Radio (SIRI) at $.85 a share, and Electronic Arts was $18.38. Today those stocks are, respectively, $4.07 & $70.67 per share.

Now I say all this for a reason. I have had positive and negative predictions that both exceeded and underperformed my expectations. I have made more than a few public comments that identify an investment strategy I believe works more often than not. Yet, given time, when stocks are bought for the right reasons and held, consistently wealth is created. You won’t see homeruns every night you check your stocks. It’s not as exciting as day trading, in fact it’s about as exciting as watching grass grow. But, after you forget about the investment and look at it after a couple of years, well the numbers speak for themselves.

Oh, and when I say the right reasons I mean just that. An example of the wrong reasons? GM. I set an experiment https://mvass.com/2010/11/17/investment-challenge-alcoa-vs-gm/ about how bad a deal the IPO of GM really was. This is why Government should never “invest” the public’s money. At 2 months into the experiment the result was:

“Alcoa is $16.12 and GM is $37.41. That’s a gain of $3.18 (25%) for Alcoa and $2.51 (7%) for GM in the past 2 months.”

3 months after that article (a total of 5 months after the IPO for GM at $33/share) the results were:

“Alcoa (AA) has traded higher than the initial $12.94, EVERY day since Nov. 17th. It reached a peak, and our target sell price, of $18.13 on April 6, 2011 (the birthday of M V Consulting Inc president Michael Vass by coincidence). As this is being written it currently is at a profititable price of $16.41/share.

We have cleared our hurdle of expectation. The net profit to our target was 40% in less than 6 months. The current profit is 26.8%.

For GM, the IPO opened at $34.19. But we will maintain our comparison based on the IPO of $33/share. It reached its highest point on Jan. 7, 2011 of $38.98 or 18%. Currently it is $29.97 or a LOSS of 9.2%.”

As was very publicly noted, GM never hit the break-even price of $53 per share. It never hit the initial target of $48.58 per share. In fact, GM has never traded higher than $41.83 intraday on December 16, 2013, and is currently at $35.56 – just $1.38 higher than the first day of trading after the IPO went public (or $2.57 if you were one of the few to own it at the IPO price in 2010).

The GM deal was all about politics. The worst kind of politics for investments. I’ve talked about it at length in many articles so I won’t go into it now. But GM was never a good deal, even as the Obama Administration spent billions of taxpayer dollars on the “investment”.

Well hopefully this has given some a few ideas. I find it helpful to look back at what I got right and wrong and why. Feel free to comment if you like.

About the Author

Michael Vass
Born in 1968, a political commentator for over a decade. Has traveled the U.S. and lived in Moscow and Tsblisi, A former stockbroker and 2014 Congressional candidate. Passionate about politics with emphasis on 1st and 2nd Amendments.

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