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Prudent Speculatorthe
Established in March 1977 • 85 Argonaut, Suite 220 • Aliso Viejo, California 92656 • 877.817.4394
Chief Investment Officer
Al Frank Asset Management (AFAM)
AFAM also offers wealth management services. To learn more, contact 888.994.6837 and visit alfrank.com
crowded private-equity deal pipeline…we are short-term
bearish but long-run bullish on the global growth story.”
However, Fortune’s proclamation that we were then in the
greatest economic boom ever coincided al-
most exactly with the zenith of the equity
markets as stocks proceeded to plunge by
more than 50% from June 2007 to the nadir
on March 9, 2009.
Guess what the mainstream publica-
tions then were saying during the first two
weeks of March 2009? The cover of the
March 9, 2009 edition of Time featured the
headline, “Holding on for Dear Life” along
with a graphic of a man’s hands holding
a fraying rope. Inside was an Economic Special Report,
with stories titled: “Foreclosure: Two Tales of Middle-
Class Heartbreak”, “How the SEC Blew Your Savings”,
“Nationalize the Banks? We Already Have” and “The Tox-
ic Mortgages that Broke the System.” Not exactly confi-
dence inspiring, yet triple-digit percentage gains over the
ensuing two years were the norm for many stocks.
There is little doubt about the tone of the media cover-
age these days as fear is definitely the emotion that sells
magazines. True, the sovereign debt mess in Europe and
the bickering in Washington provide plenty of factual fod-
der, but the contrarian in me smiled when I saw the cover
of last week’s The Economist magazine with a streaking
Euro meteor hurtling toward us along with the caption,
“Is this really the end?” As if on cue, stocks then turned in
their best weekly advance since March 2009 (the S&P 500
was up 7.4%), with the primary catalyst being the global
central bank coordination to ease borrowing costs in or-
der to buy some time for European governments to push
through economic and fiscal reform. Hard to imagine vol-
atility dissipating any time soon, but we never forget that
in investing, what is comfortable is rarely profitable!
542
December 2, 2011
“Remember that
the airplane takes
off against the
wind, not with it.”
—Henry Ford
We know that investing can be an emotional roller-
coaster, but the alternating cries of panic and euphoria
heard over the past few years have left even the most
experienced market participants longing
for a smoother ride. To be sure, the equi-
ty markets have been even more volatile
in years gone by as the 1930s, 1970s and
1980s had more than a few periods with
greater standard deviation metrics, but
the Collapse of Lehman Brothers in 2008,
the ‘Flash Crash’ in 2010 and the Down-
grade of the U.S. Credit Rating this year
have made navigating the twists and turns
a difficult proposition.
No doubt, Blackberrys, iPhones and iPads and other
gadgets that provide instant access to up-to-the-second
portfolio values, along with 24/7 coverage of the financial
markets have not made it easy to focus on long-term in-
vestment objectives. Unfortunately, those moments when
anxiety boils over into fear or when prudence gives way to
greed can wreak havoc on a portfolio.
Not surprisingly, perhaps, the financial press has often
done its part to fan the emotional flames. For example,
consider that Fortune Magazine decreed in its July 12,
2007 edition that “Business is Back,” leading off its fea-
ture story as follows: “The greatest economic boom ever.
A lot could go wrong. And it may not feel like a day at
the beach to most Americans. But for your average globe-
trotting Fortune 500 CEO, right now is about as good as it
gets…Just how red-hot is the current worldwide expan-
sion? ‘This is far and away the strongest global economy
I’ve seen in my business lifetime,’ U.S. Treasury Secre-
tary Hank Paulson declared.”
To be fair, the piece contained plenty of caveats and
even sounded downright prescient with commentary
like: “The last global good time in the 1970s, of course,
ended in a nasty bout of double-digit inflation, spawning
the worst stock market crash since the Great Depression,
plus other horrors, such as the rise of disco. Is that sorry
past our future? Not necessarily. But with nervousness
rising over everything from Bear Stearns’ battered hedge
funds to tightening lending standards that could clog the
Graphic DetailU.S. Econ Chartbook
are becoming increasingly widespread. If not addressed,
recent contagion to countries thought to have relatively
solid public finances could massively escalate economic
disruption. Another serious downside risk is that no ac-
tion would be agreed to offset the large degree of fiscal
Plenty to worry about in terms of the global econom-
ic picture with the Organization for Economic Co-
operation and Development (OECD) stating this week,
“The euro area crisis remains the key risk to the world
economy. Concerns about sovereign debt sustainability
UNEMPLOYMENT RATE
Many questions about the number of folks leaving the workforce in the latest drop to 8.6%, but even that rate is dismal...
From 01.31.48 to 11.30.11. Seasonally adjusted. United States. SOURCE: Al Frank using data from the U.S. Bureau of Labor Statistics via Capital IQ
Une
mpl
oym
ent
Rat
e
2%
4%
6%
8%
10%
12%
10009080706050
grey areas denote recessions
...and despite a solid bounceback in the latest consumer sentiment read, October’s tally was the worst since ‘09 and ‘74...
From 02.67 through 11.11. SOURCE: Al Frank using data from The Conference Board via FactSet Research Systems
Con
fere
nce
Boa
rd C
onsu
mer
Con
fiden
ce I
ndex
0
30
60
90
120
150
1000908070
Dec ‘74
Oct ‘82May ‘80
Feb ‘09
Feb ‘92
Mar ‘03
Oct ‘11
Jan ‘00
Apr ‘06Dec ‘77
Feb ‘89Dec ‘72
grey areas denote recessions
CONSUMER CONFIDENCE
NEW HOME SALES
...with just about every housing figure proving to be dismal, even as the sector has shown signs of some stabilization.
From 12.31.69 through 10.31.11. Seasonally adjusted. Sales in thousands. SOURCE: Al Frank using data from the U.S. Department of Commerce via FactSet Research Systems
New
Hom
e S
ales
0
250
500
750
1,000
1,250
1,500
1,750
2,000
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
1005009590858075
New
Hom
e Ye
ar o
ver
Year
Cha
nge
in S
ales
grey areas denote recessions
GROSS DOMESTIC PRODUCT
Though some think we are headed down the road to recession, revised Q3 U.S. GDP growth of 2.0% might argue otherwise.
From 01.31.48 to 10.31.11. United States. USD in billions. SOURCE: Al Frank using data from the Bureau of Economic Analysis via Capital IQ
GD
P
GD
P G
row
th
-$6,000
-$3,000
$0
$3,000
$6,000
$9,000
$12,000
$15,000
-6%
-3%
0%
3%
6%
9%
12%
15%
10009080706050
grey areas denote recessions
Graphic Detail continued
tightening implied by current law in the United States.
This could tip the economy into a recession that monetary
policy could do little to counter.”
Despite the Organization’s ominous preamble, its lat-
est economic outlook actually calls for GDP growth across
the 34 OECD countries to slow from 1.9% this year to 1.6%
in 2012, before recovering to 2.3% in 2013. The OECD fore-
cast for U.S. GDP growth is for 1.7% expansion in 2011,
followed by a 2.0% advance in 2012 and another 2.5% gain
in 2013. Those numbers are a bit more pessimistic than
the current U.S. GDP growth estimates (1.6% to 1.7% in
2011; 2.5% to 2.9% in 2012 and 3.0% to 3.5% in 2013) put
forth from our own Federal Reserve.
Still, we can’t overlook the fact that both sets of pro-
jections state that the baseline / central tendency is that
the U.S. economy will avoid recession over the next two
ISM SURVEYS
While the surveys are hardly suggesting that happy days are here again, the factory and service sectors are still in expansionary mode.
From 01.31.83 to 10.31.11. SOURCE: Al Frank using data from the Institute for Supply Management
Inde
x
30
40
50
60
70
80
100500959085
grey areas denote recessions
ISM US Manufacturing Purchasing Managers IndexISM US Non-Manufacturing Index
JOBLESS CLAIMS
Initial requests for unemployment have been holding steady near the important 400,000 range...
From 01.04.08 to 11.25.11. Numbers in thousands. SOURCE: Al Frank using data from the U.S. Department of Labor via Capital IQ
0
100
200
300
400
500
600
700
800
10/114/1110/104/1010/094/0910/084/08
Wee
kly
Firs
t-Ti
me
Cla
ims
grey area denotes a recession
RETAIL SALES
Consumers may say they are pessimistic, but they have not stopped shopping with Black Friday and Cyber Monday fantastic this year.
From 01.31.92 to 10.31.11. USD in billions. SOURCE: Al Frank using data from the U.S. Department of Commerce via Capital IQ
Sal
es
Total Retail Sales
$0
$50
$100
$150
$200
$250
$300
$350
$400
10080604020098969492
Total Retail Sales less Autos
grey areas denote recessions
ADP EMPLOYMENT
...and recent private sector job creation numbers definitely look to be trending in the right direction.
From 12.01 to 11.11. Change in thousands. SOURCE: Al Frank using data from the ADP National Employment Report
ADP
Empl
oym
ent
Chan
ge
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
1008060402
grey areas denote recessions
Graphic Detail continued
years. Interestingly, despite plenty of recent evidence to
support this view, it would appear that many investors are
not buying what the OECD and the Fed are pitching, as
evidenced by the disinterest in equities and the fascina-
tion with U.S. Treasuries. After all, it’s hard to justify a
forward P/E ratio of 12 and a dividend yield of 2.3% on
the S&P 500 compared to a 2.0% yield on the benchmark
10-year U.S. Treasury, unless a recession is in the offing.
No doubt, readers of these pages are well aware of
where we stand on the recession debate. While gains like
those in 2009-2010 when the Great Recession did not be-
come another Great Depression are highly unlikely, we
continue to believe that current stock prices are discount-
ing a far worse economic climate than is likely to materi-
alize. As such, an economy that simply ‘muddles through’
should actually prove supportive of equities.
INFLATION
...with the Federal Reserve, which thinks that long-term inflation expectations are stable, doing what it can to boost the economy...
From 01.31.82 to 10.31.11. Changes are year over year. SOURCE: Al Frank using data from the US Bureau of Labor Statistics
Cons
umer
Pric
e In
dex
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
100500959085
grey areas denote recessions
CPI-U CPI-U less Food & Energy
LEADING ECONOMIC INDICATORS
Indeed, the latest LEI data is “pointing to continued growth this winter, possibly even gaining a little momentum by spring”...
From 01.31.60 to 10.31.11. SOURCE: Al Frank using data from Capital IQ and the Conference Board
Mon
th-o
ver-
Mon
th P
erce
ntag
e C
hang
e
-4%
-3%
-2%
-1%
0%
1%
2%
3%
100090807060
grey areas denote recessions
US Index of Leading Economic Indicators
CORPORATE PROFITS
...which bodes well for continued growth in corporate profits, now standing at all-time highs!
From 01.31.82 to 10.31.11. Seasonally-adjusted USD in billions. SOURCE: Al Frank using data from the US Bureau of Economic Analysis via Capital IQ
Corp
orat
e Pr
ofits
$0
$500
$1,000
$1,500
$2,000
100500959085
Corporate Profits Corporate Profits after Tax
grey areas denote recessions
FEDERAL FUNDS RATE
...by remaining extremely accommodative, saying that it will keep interest rates at historic lows until mid-2013...
From 01.29.71 to 10.31.11. SOURCE: Al Frank using data from the New York Federal Reserve
Fede
ral F
unds
Tar
get
0%
5%
10%
15%
20%
1005009590858075
grey areas denote recessions
Portfolio BuilderResearch Team Favorites
The Prudent Speculator follows an approach to invest-
ing that focuses on broadly diversified investments
in undervalued stocks for their long-term apprecia-
tion potential. Does that mean we build portfolios of 20
stocks...30...? More like 50 and up. We like stocks. And we
like a lot of ‘em. We don’t rely nearly as much on “how
many” as we do “in which,” but we tend to invest in far
more names than most. This expansive diversification,
we find, potentially serves us well in two ways: we can
further minimize the risk of individual stock ownership,
while maximizing the likelihood of finding the truly big
winners among the undervalued masses.
As for the “in which” part, readers should know we dis-
criminate among potential investments primarily by their
relative valuation metrics and our assessments of stock-
specific risk. We buy only those stocks we find underval-
ued along several lines relative to their own trading his-
tory, those of their peers or that of the market in general.
The prices at which we’ll buy and sell stocks incorporate
a range of fundamental risks (e.g. credit, customer and
competitive dynamic) that we believe the companies may
face over our normal 3-to-5-year investing time horizon.
Each month in this column, we suggest to readers a
group of ten stocks with which to populate portfolios. The
list could serve as a portfolio foundation for new inves-
tors or as a pick-list for folks already maintaining well-
diversified holdings. While other themes may be featured
over time, our ongoing consolidation program has created
opportunities (i.e. proceeds of sales) to simply add stocks
each month to our newsletter portfolios.
Note that we are in no way suggesting that these stocks
replace those featured in prior months as we will always
issue a Sales Alert should we choose to exit a position.
This Month’s Theme
Recent sales swelling the coffers of our newsletter
portfolios, we’ll raise the desired position size to $14,000
in PruFolio, where we’ll pick up Anworth Mortgage and
General Dynamics as well as increase the holdings in Ar-
cher Daniels Midland, Stage Stores and Thermo Fisher.
In Millennium Portfolio, we’ll purchase $10,000 of M.D.C.
Holdings and Navios Maritime while in Buckingham
Portfolio we’ll add $4,500 of BHP Billiton. In TPS Port-
folio, we’ll take to $20,000 the stakes in Marathon Petro-
leum and United Online. We’ll transact on December 8.
TargetTicker Company Industry Group Price Price
Archer Daniels Midland (ADM)
ADM is a global leader in the distribution, processing
and merchandising of agricultural products and commod-
ities. We are positive on ADM as we feel confident that
the longer-term global secular growth trends in agricul-
ture are intact. We like that ADM’s product line is diver-
sified and that it continues to expand its global origina-
tion and transportation network. We are also fond of its
16% stake in Wilmar, Asia’s largest agricultural processor.
ADM shares are cheap relative to 5- and 10-year average
multiples. Shares offer a current dividend yield of 2.3%.
Anworth Mortgage Asset (ANH)
Anworth is a mortgage Real Estate Investment Trust
(REIT) focused primarily on U.S. mortgage-backed secu-
rities issued or guaranteed by an agency of the U.S. (Gin-
nie Mae) or a U.S. government sponsored entity (Fannie
Mae or Freddie Mac). We believe the current operating en-
vironment remains favorable for ANH due to a relatively
steep yield curve, available financing, low interest rates,
slower than expected prepayment rates and inexpensive
hedging options. ANH shares trade about 10% below book
value and offer a whopping 14.5% dividend yield.
BHP Billiton Ltd. (BHP)
BHP Billiton, an Australian miner, is one of the world’s
largest with diverse businesses ranging from base met-
als and aluminum to diamonds and coal. Concerns about
the U.S. economy, the Eurozone debt crisis and a Chinese
NEWSLETTER PORTFOLIO PURCHASES
ADM Archer Daniels Midland Food Bev & Tobacco $30.12 $52.14
ANH Anworth Mortgage Real Estate $6.33 $7.64
BHP BHP Billiton Ltd. Materials $75.17 $112.53
GD General Dynamics Capital Goods $66.06 $94.98
MDC M.D.C. Holdings Consumer Dur & App $17.85 $27.01
MPC Marathon Petroleum Energy $33.39 $62.34
NM Navios Maritime Transportation $3.48 $6.66
SSI Stage Stores Retailing $12.54 $21.78
TMO Thermo Fisher Sci Pharma/Biotech/Life Sci $47.25 $95.23
UNTD United Online Software & Services $5.28 $10.96
As of 11.30.11. SOURCE: Al Frank using data from FactSet Research Systems
Portfolio Builder continued
manufacturing slowdown have driven commodity volatil-
ity over the past six months, yet prices have not collapsed.
We remain optimistic on the long-term demand for BHP’s
stable of commodities as global economies recover and
industrialization continues in China, India and other
emerging markets. The balance sheet is strong and the
shares carry a 2.7% yield.
General Dynamics (GD)
General Dynamics is a defense contractor that builds
combat vehicles and systems, ships, armaments, defense
information systems and technologies. However, the com-
pany is involved in much more than defense, with its avi-
ation unit considered the premiere brand in the industry.
That unit, with its solid returns and strong future pros-
pects, manufacturers Gulfstream jets. GD’s stable firm-
wide backlog of business, strong balance sheet and cash
flow generation should allow management to continue
looking for value added acquisitions, as well as to offer
share buybacks. The stock currently yields 2.8%.
M.D.C. Holdings (MDC)
MDC is a homebuilder focused on the Sunbelt areas:
superb locales during the boom times, not so superb after
the bust. Fortunately, the housing market is beginning
to show signs of bottoming with improving levels of new
home sales, low inventories of new homes, generational
highs in home affordability levels and record low interest
rates. The appeal of MDC lies mostly in its 5.6% dividend
yield and its war chest of $1.1 billion in cash that, when
combined with access to credit facilities, should allow the
company to be opportunistic with distressed-asset acqui-
sitions and marketing as the housing market recovers.
Marathon Petroleum (MPC)
MPC is one of the largest independent refining firms in
the U.S. with its six domestic refineries having through-
put capacity of 1.1 million barrels per day. It also operates
over 5,000 retail gasoline sites and a logistics network that
stores and transports crude products. We like the diversi-
fied earnings mix that helps mitigate refining volatility
and we think the shares are attractively valued, especially
after recent weakness. The yield of 3.0% is also nice.
Navios Maritime (NM)
Navios Maritime is a sea-borne shipping and logistics
company focused on the transport of dry bulk commodi-
ties. Despite a cautious sector outlook and prolonged pe-
riods of charter rate declines, Navios should continue to
benefit from the longer-term charters it has in place and
from ample dividend support from its affiliated compa-
nies. Multiples such as P/E, price-to-book and price-to-
sales are all inexpensive relative to competitors and to
five-year historic averages. Shares yield a hefty 6.9%.
Stage Stores (SSI)
Stage Stores is a department store retailer that focuses
on small and mid-size towns in 39 states. The company’s
small-market niche offers a number of key competitive
advantages. For example, approximately 58% of Stage’s
stores are located in markets where locals would have to
travel 30+ miles for access to the same name-brand mer-
chandise that it offers. Stage generates solid free cash
flow and management has been aggressively buying back
shares. Furthermore, Stage shares are trading at a dis-
count to peer group multiples for book value, sales and
Enterprise Value-to-EBITDA. SSI also yields 2.9%.
Thermo Fisher Scientific (TMO)
TMO is a developer of scientific instruments and a
provider of laboratory consumables, supplying mostly
universities, labs and hospitals. The company’s growth
strategy is focused largely on acquisitions but enhanc-
ing shareholder value is also an emphasis as evidenced
by the recent $750 million share repurchase authorization
(which follows other massive buybacks). With leading
positions throughout an $80 billion market, heavy invest-
ments in R&D, global growth opportunities, solid free
cash flow generation and a strong balance sheet, we think
that TMO remains a fine addition to portfolios looking for
a large-cap medical specialties name.
United Online (UNTD)
Though the parent company is relatively unknown, its
brands are pervasive in the online world: FTD Flowers,
Juno, NetZero and Memory Lane, formerly Classmates.
com. Our investment thesis for UNTD has always fo-
cused on the company’s incredible dividend payout, to-
day standing at 7.6%. Importantly, the dividend continues
to be supported by sizeable cash flows. The company has
also made significant progress in paying down debt over
the past year. While UNTD is still admittedly finding its
footing in some of its newer endeavors, commitment to
its juicy dividend and the extremely inexpensive valua-
tion metrics make it an appealing technology value play,
especially given the stock’s recent underperformance.
Recommended Stocks
Autos & Components CTB Cooper Tire & Rubber Co. $13.40 $24.74 8.9 0.2 2.0 4.8 74 3.1% 835
Banks BBT BB&T Corp. $23.17 $36.36 14.6 1.6 1.6 nmf 212 2.8% 16,152
HCBK Hudson City Bancorp $5.59 $12.02 -10.8 1.2 0.7 nmf 260 5.7% 2,949
Capital Goods ACET Aceto Corp. $6.85 $11.15 14.3 0.4 2.2 8.4 60 2.9% 183
BGG Briggs & Stratton Corp. $15.07 $27.67 11.6 0.3 1.7 5.0 52 2.9% 759
GD General Dynamics Corp. $66.06 $94.98 9.2 0.7 nmf 5.8 nmf 2.8% 23,525
LMT Lockheed Martin Corp. $78.15 $115.78 9.3 0.5 nmf 6.4 nmf 5.1% 25,287
TPC Tutor Perini Corp. $16.49 $34.40 9.8 0.2 2.3 7.1 256 0.0% 780
Commercial Services MAN ManpowerGroup $36.63 $76.04 12.5 0.1 3.0 5.0 23 2.2% 2,979
WM Waste Management $31.30 $46.41 14.7 1.1 nmf 7.5 nmf 4.3% 14,436
Consumer Dur & App MDC M.D.C. Holdings $17.85 $27.01 -9.9 1.0 1.2 nmf 105 5.6% 847
WHR Whirlpool Corp. $49.06 $90.87 5.3 0.2 5.2 4.4 285 4.1% 3,729
Diversified Financials CS Credit Suisse Group AG $24.21 $40.98 8.5 0.6 1.3 nmf 660 6.1% 29,125
JPM JPMorgan Chase & Co. $30.97 $53.72 6.6 1.0 1.1 nmf 247 3.2% 117,651
Energy APA Apache Corp. $99.44 $178.95 8.8 2.4 1.5 4.1 25 0.6% 38,188
MPC Marathon Petroleum $33.39 $62.34 4.4 0.2 1.4 nmf 36 3.0% 11,920
SFL Ship Finance Int’l $10.01 $15.85 5.6 2.7 1.3 13.6 220 15.6% 792
TOT Total S.A. ADS $51.74 $90.25 7.3 0.5 1.6 3.1 41 5.0% 116,632
WFT Weatherford Int’l $15.16 $31.68 20.5 1.0 2.5 8.1 131 0.0% 11,594
Food & Staples Retail WAG Walgreen Co. $33.72 $50.25 12.8 0.4 2.5 6.2 21 2.7% 29,987
Food Bev & Tobacco ADM Archer Daniels Midland $30.12 $52.14 9.8 0.2 1.1 6.3 38 2.3% 20,120
PEP PepsiCo $64.00 $95.09 14.8 1.6 nmf 10.7 nmf 3.2% 100,352
HealthCare Equip/Srvcs AET Aetna $41.82 $79.37 8.7 0.4 4.6 nmf 126 1.4% 15,151
BAX Baxter Int’l $51.66 $78.30 12.2 2.1 7.5 7.9 108 2.6% 29,092
Insurance PRU Prudential Financial $50.64 $100.71 8.1 0.5 0.8 nmf nmf 2.9% 23,998
Materials BHP BHP Billiton Ltd. ADS $75.17 $112.53 62.4 5.2 2.2 5.7 nmf 2.7% 120,708
Media DIS Walt Disney Co. $35.85 $58.87 14.1 1.5 16.3 8.3 298 1.7% 63,175
Pharma/Biotech/Life Sci MRK Merck & Co I $35.75 $55.06 9.7 2.3 14.9 8.1 221 4.7% 109,107
NVS Novartis AG ADS $54.12 $79.11 9.9 2.2 51.1 9.6 514 3.7% 130,900
TMO Thermo Fisher Scientific $47.25 $95.23 11.9 1.6 nmf 11.3 nmf 0.0% 17,874
Real Estate • ANH Anworth Mortgage Asset $6.33 $7.64 6.8 3.7 0.9 nmf 4 14.5% 842
Retailing SPLS Staples $14.41 $27.21 10.6 0.4 4.1 5.3 61 2.8% 10,090
SSI Stage Stores $12.54 $21.78 16.1 0.3 1.3 4.0 25 2.9% 381
Semis & Cap Equipment STM STMicroelectronics N.V. $6.33 $12.71 9.2 0.5 1.0 3.3 14 5.4% 5,602
Software & Services MSFT Microsoft Corp. $25.58 $40.52 9.3 3.0 4.9 5.7 26 3.1% 215,128
UNTD United Online $5.28 $10.96 4.9 0.5 nmf 3.8 nmf 7.6% 469
Technology Hardware BHE Benchmark Electronics $13.81 $23.37 11.4 0.3 0.7 5.5 1 0.0% 800
ERIC Ericsson ADR $10.63 $18.86 12.4 0.9 2.2 5.7 25 2.4% 31,313
Telecommunication Svcs NTT Nippon Telegraph $24.70 $41.25 10.5 0.5 0.9 3.3 67 2.7% 62,521
Transportation NM Navios Maritime $3.48 $6.66 3.4 0.5 0.6 6.4 224 6.9% 354
Target Price Multiples EV/ Debt/ Div MktIndustry Group Ticker1 Company Price Price EPS Sales TBV2 EBITDA3 TE4 Yld Cap
In this space, we list each month 40 of our most attrac-
tively priced recommended stocks. All trade for signifi-
cant discounts to our determination of long-term fair val-
ue and/or offer favorable risk/reward profiles. Note that,
while we always seek substantial capital gains, we require
lower appreciation potential for stocks that we deem to
have more stable earnings streams, more diversified busi-
nesses and stronger balance sheets. The natural corollary
is that riskier companies must offer far greater upside
to warrant a recommendation. Further, as total return is
how performance is ultimately judged, we explicitly fac-
tor dividend payments into our analytical work.
As of 11.30.11. N/A=Not applicable. nmf=Not meaningful. 1 •=First-time recommendation. 2Tangible book value. 3Enterprise value-to-earnings before interest taxes depreciation and amortization. 4Tangible equity. SOURCE: Al Frank using data from Capital IQ and FactSet Research Systems
Since The Prudent Speculator’s launch in March 1977, its 1,753 stock recommendations have returned, on average, an annualized 16.87%, not including dividends.
NEWSLETTER PORTFOLIO PERFORMANCE
November YTD 1-Year 3-Year 5-Year 10-Year
Inception Since Index Date Inception Return Index
As of 11.30.11. All data are total returns, except for that of all recommended stocks, which excludes dividends. Data for periods greater than one year are annualized. The Dow Jones Industrial Average (DJIA or Dow) is a price-weighted average of 30 actively traded “blue chip” stocks, primarily industrials, but in-cludes financials and other service-oriented companies. The Russell 3000 Index measure the performance of the largest 3,000 U.S. companies. The Standard & Poor’s 500 Stock Index (S&P 500) is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. 1The Russell 3000 Index lacks sufficient history to match that of Al Frank’s TPS Portfolio. We therefore have shown the S&P 500 Index for comparison purposes. SOURCE: Al Frank using data from FactSet Research Systems
TPS Portfolio is Al Frank’s actual investment portfolio. Though not presently leveraged, it has been so in the past. Buckingham Portfolio is John Buckingham’s actual investment portfolio. Though not presently leveraged, it has been so in the past. Millennium Portfolio is unleveraged and hypothetical. PruFolio is unleveraged and hypothetical.
All portfolio returns are calculated on a total return basis and reflect the reinvestment of dividends, if any, margin leverage and margin interest charges, trading costs and subscription costs. There are inherent limitations with in hypothetical or model portfolio results as the securities are not actually purchased or sold. They may not reflect the impact, if any, of material market conditions which could have has an impact on AFAMs decision making if the hypothetical portfolios were real. Hypothetical performance is shown for illustrative purposes only and should not be interpreted as an indication of performance of any AFAM portfolio. The use of leverage magnifies gains and losses and increases risk to a portfolio.
IMPORTANT DISCLOSURES
The Prudent Speculator is published by
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Nothing presented herein is, or is intended to constitute, specific investment advice or marketing material. Information provided reflects the views of Al Frank Asset Management (AFAM) as of a particular time. Such views are subject to change at any point and AFAM shall not be obligated to provide notice of any change. Any securities information regarding holdings, allocations and other characteristics are presented to illustrate examples of the types of investments or allocations that AFAM may have bought or pursued as of a particular date. It may not be representative of any current or future investments or allocations and nothing should be construed as a recommendation to follow any invest-ment strategy or allocation. Any forward looking statements or forecasts are based on assumptions and actual results are ex-pected to vary from any such statements or forecasts. No reli-ance should be placed on any such statements or forecasts when making any investment decision. While AFAM has used reason-able efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no inference to the contrary should be made. There is a risk of loss from an investment in securities. Past performance is not a guar-antee of future performance.
AFAM is an Investment Adviser, registered with the SEC, is no-tice filed in the State of CA and various other states, and serves as editor to The Prudent Speculator and the weekly e-mail up-dates; (TPS: ISSN 0743-0809). AFAM is sub-adviser to two propri-etary mutual funds and serves as manager to separate managed accounts. Many of the securities contained within this newslet-ter mentioned are analyzed, recommended and transacted in by AFAM and/or its associated persons for client and personal ac-counts. It is also possible that AFAM and/or its associated per-sons may take a position in a security that is inconsistent with the recommendations provided in TPS or may purchase securi-ties not mentioned in TPS without notice to its subscribers.
Past specific recommendations: Investment recommenda-tions provided herein are subject to change at any time. Past and current recommendations that are profitable are not in-dicative of future results, which may in fact result in a loss. See prudentspeculator.com or contact AFAM at [email protected] for a list of all past specific investment recommendations. Perfor-mance and characteristics of AFAM portfolios and securities are subject to risks and uncertainties. The stocks selected for listing and discussion in the newsletter were based on proprietary ana-lytical work performed by AFAM, and not based on performance, meaning that they are chosen irrespective of profits or losses. The securities presented do not represent all of the securities bought, sold or recommended.
Privacy: TPS periodically rents its mailing list to unaffiliated third-parties. Telephone marketing is prohibited. Subscribers who wish to have their names removed from the mailing list should contact TPS by e-mailing [email protected].
Subscriptions: TPS is published monthly, with weekly e-mail updates, at the following rates: 1-year: $295; 2-years: $495. Sub-scriptions are not assignable. For subscribing, please contact us at [email protected] or call 877.817.4394.
Newsletter Portfolios
Buckingham -0.40 -2.03 4.91 23.76 -4.09
Millennium 0.44 1.50 7.88 23.03 -0.90 6.81
PruFolio -0.97 -1.13 6.13 21.28 -1.21 9.14
TPS 0.60 -2.04 4.98 19.73 -1.16 8.69
Major Indexes
Russell 3000 -0.27 0.22 6.99 15.30 0.09 3.60
S&P 500 -0.22 1.18 7.83 14.13 -0.17 2.90
Dow Jones Industrial Avg 1.18 7.34 12.38 14.14 2.47 4.59
Buckingham 01.21.03 11.11 6.68 Russell 3000
Millennium 12.31.99 7.62 1.19 Russell 3000
PruFolio 12.29.00 12.78 2.02 Russell 3000
TPS 03.10.77 18.37 10.81 S&P 5001