Investing With Style

A few months ago I posted about whether or not to move my previous employer 401K to an individual IRA.  I opted to move it all, roll-over, to an individual IRA.

For me, the advantages definitely outweighed the disadvantages.  Here are the biggest advantages as I see it.

  1. A one stop shop to view and manage all my investments.
  2. Greater selection of investments.  I now have over 2,000 ETFs, 12,000 mutual funds to choose from and that is not including individual stocks.

BTW, did you know there are more mutual funds and ETF’s than there are stocks?  True.

I now had much more power over how to invest my retirement funds.  But with such great power, comes even greater responsibility.

The first question I had to answer was; how to go about choosing my investments?  To do this I started with my first rule of investing; protect capital.  I translated that into keeping costs to a minimum.  When trading ETFs and Mutual Funds there are basically two costs involved;

  1. The commission
  2. The expense ratio

The commission is what you pay your broker for the transaction.

The expense ratio is how much the fund or ETF charges as a service fee to investors.

Obviously the lower these two are the more money you have available to work with.

Looking over the screens my online broker offers, the first thing that jumped out at me was commission free ETF’s.  So that was my first selection criteria.

  • That narrowed my choices down to 296 from 2105.

My next criteria was funds with below average expense ratios, as compared to the industry .70% average.

  • That narrowed my choices even further, down to 130.

That was the easy part.  Now what do I do?

Ultimately I am looking for a wide diversity throughout my retirement investment funds.  For this I turned to a framework or investment model which helps categorize investment strategies.

The Morningstar Style Box is a nine-square grid that provides a graphical representation of the “investment style” of stocks, ETFs’ and mutual funds.

The grid classifies securities according to market capitalization (the vertical axis) and growth and value factors (the horizontal axis).

Understanding how different types of stocks behave is crucial for building a diversified, style-controlled portfolio of stocks, ETF’s or mutual funds. The Morningstar Style Box helps investors construct portfolios based on the characteristics and style factors of all the stocks and funds a portfolio includes.

Since my first two search criteria limited my choices to ETF’s, I am going to limit my description of the style box to how it relates to ETF’s.  The Morningstar style box classification of an ETF is based on the asset-weighted market caps (for the vertical axis) and value-growth scores (for the horizontal axis) of all the stocks in the portfolio.  This is important to remember because I want to keep my overall investments as diversified as possible.  It could be possible to select different ETF’s, in different style boxes and have quite a bit of overlap not only in sectors but also in individual stocks.  This is because each ETF is comprised of many stocks.  It is possible to have duplication between ETF’s.  Fortunately many online trading platforms and fund prospectus make it fairly easy to track concentrations and overlap.

Here is a perfect example of one such ETF.

Even though the ETF is firmly classified as a Large Cap Growth ETF, it does have a small amount stocks classified as Mid Cap Growth.  One can also see the sector concentrations and even the top 10 stocks.  (partially hidden in this screen shot).

On a very simplistic level, I was shooting for at least one ETF in each box.  I did have some personal investing ideas that I wanted to incorporate into my over-all portfolio.  Namely at least one of the following,

  • Growth and or Momentum trends
  • Dividends
  • Value
  • Blend
  • International and Emerging Markets
  • And some sector specific ETF’s such as Financial, Health (pharmacological, Biotech) and Energy.

In the end, I do have at least one ETF in each style box and since I already knew I was going to have overlap in sectors, I concentrated on eliminating, as much as possible, duplicate stocks based on each ETF’s top ten holdings.

The result?

13 no commission ETF’s with an average .326% expense ratio.

Out of 130 “top 10” holdings, I have 8 duplicate stocks.

Now that is Investing with Style.


Bear With The Bitcoin

Just how crazy is this Bitcoin craze?

  1. Shares of The Crypto Company (CRCW) have surged more than 1,800% in the past month and 17,000% in the past three months, as investors and traders have bid up the price of bitcoin (XBT) higher and higher. The Crytpo Company describes itself as a business that “offers a portfolio of digital assets, technologies, and consulting services to the blockchain and cryptocurrency markets” with plans for a “rollout of a full scale, high frequency cryptocurrency trading floor.”
    The SEC started an investigating and suspended trading on their stock.
  2. A small financial tech company that just went public called LongFin (LFIN) has skyrocketed from a low of $4.69 a share in the past week to a high of $142.82 after it announced it was buying a blockchain microlending company named
  3. And then there’s Riot Blockchain (RIOT), a company that up until recently was a biotech firm and has decided to get into the crypto business. They added “blockchain” to the company name and now its stock is up more than 300% in the past month.

So, maybe I should change my blog’s name to Bear with the Bitcoin and my tag line to An Alternative Cryptocurrency Blog!

My viewership and followers count could literally explode!

Hopefully WordPress will not suspend my account….

But exactly what is this Bitcoin and cryptocurrency thing anyway and is there a safe way to invest in it?

My wife calls it Monopoly Money because it is not backed by anything like gold or a government.

And in that context, she is correct. Bitcoin and cryptocurrency is a worldwide payment system.  Bitcoin is the first decentralized digital currency, as the system works without a central bank or single administrator. The network is peer-to-peer and transactions take place between users directly through the use of cryptography, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain. This is where blockchain technology comes into play.

What is Blockchain?

Blockchain, the tech behind Bitcoin, is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data. By design, blockchains are inherently resistant to modification of the data. The Harvard Business Review describes it as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority. This makes blockchains potentially suitable for the recording of events, medical records, and other records management activities, such as identity management, transaction processing, documenting provenance, food traceability or voting.

All of these computational transactions require a lot of processing power. But more on that later.

Investing in Bitcoin:

For me personally, I first heard about Bitcoin back in the spring of 2016. Back then it was less than $500 a coin and a coworker of mine was telling me all about how he was buying some coins in anticipation of the upcoming split or fork in the code. Last time this happened, he said the price went way up. He tried to convince me how easy it was to invest. Just open a virtual wallet on Coinbase, link it to your bank and fund the wallet with some bitcoin. The security person in me said no way am I putting and linking my bank account money in some unregulated international open (somewhat shadowy) platform.

Now Bitcoin is over $16,000 per coin as of this writing.

UPDATE: OK, it was over $16,000 but has since lost about a third of its value in less than a week because other well-known backers of Bitcoin have recently moved their stash to Bitcoin:Cash which is known as a hard fork and a separate cryptocurrency / blockchain not recognized by Bitcoin. That and many online platforms like Coinbase are now accepting other cryptocurrencies. But still well north of $10,000 per coin.

Not investing in actual Bitcoins is perhaps my biggest missed opportunity . . .

And yet, there have been a whole host of security breaches and entire exchanges shut down because they were hacked and millions of bitcoins were stolen.

Still a risky trading platform. IF you are set on buying any crypto-currency, I would highly recommend buying a physical encrypted hardware wallet to secure your PII and money.


And yet, I have not been completely out of the “bitcoin” craze. I admit, from time to time I have bought one share of GBTC (Bitcoin Investment Trust) stock with a wide trailing stop whenever I was in. I was stopped out the first day of the latest pull back this past week, but not before more than doubling my money. So all in all I can’t complain.

Note: This is still a risky way to invest in Bitcoin (any stock or investment vehicle that can lose 1/3 of its value in less than a week is definitely risky) and yes, it limits you to investing in just Bitcoin. That is why I definitely had a trailing stop on this bugger to protect my losses and gains.

Another way to invest now is in the futures market through your broker. I find it interesting that many big financial names were calling the Bitcoin craze a bubble, or even not a real currency, and even worse, a type of Ponzi scheme; and yet, they feel the need to get in on the action by allowing trading.

Blockchain by nature eliminates the middle man and any controlling financial institution, so guess who felt left out of all the action….

Then of course, one could also invest in the crypto craze by becoming a miner. Miners are the people / machines in the peer-to-peer network which validate the blockchain transactions. Most miners get paid a small fraction of which ever cryptocurrency they are mining for each successful transaction they complete. The more machines you have and more computing power you have, the more transactions you can do, and, in theory the more money you can make.

There are a whole host of articles such as this one, and this one, which highlight just how much this craze has taken off.

One Consequence:

The world-wide power consumption dedicated just to mining is huge.
And so is the quest for more, affordable, power.
So that got me thinking about another possible investment strategy, loosely based on the blockchain craze.


Here one usually has two choices. Make your use and consumption of power more efficient or buy more.

DPW is developing and marketing an energy efficient power system for mining computers and datacenters. Their stock has seen similar hype action as those of Bitcoin and GBTC. Still quite risky in my opinion.

A potentially less risky investment strategy is to invest in companies or ETF’s specific to the energy sector.

Miners have already sought out remote locations with cheap hydro-electric power. One could invest in a utility such as POR which runs hydro-electric plants or one could invest in energy companies involved with supply side of generating electric power such as coal.


Entire datacenters dedicated entirely to the mining of cryptocurrency are being built around the world.

China and Japan are the largest areas of miners and entire datacenters dedicated to mining activities.

In a way, I have already been investing in this indirectly due to The Donald and his tax reform policies with XLE. But BTU and KOL would be viable alternatives as well.

To me, this is a far less risky investment vehicle than trying to time the ups and downs of hyped stocks and currencies, provide potential income (dividends) and are influenced by other stimuli such as tax reform.

The Donald and Tax Reform:

Speaking of The Donald and Tax Reform, I have also put together a list of the most commonly referenced companies expected to benefit from tax reform, re-patriotization of overseas cash and stock buybacks on the right sidebar.

As always, any stock, ETF or fund mentioned is merely a suggestion and IMHO worthy of additional research on your part to see if it fits your investment profile and risk tolerance.

Hope everyone has a safe and happy holiday season.

In Search Of An ETF

I actually can’t believe I am thinking of investing in an ETF.

Except for when I first started out investing, I have never used any type of asset allocation or diversification strategy with my active trading account. Now that I look back, that time frame was really not good for the market over-all and I was extremely disappointed with my mutual funds.

In hindsight, I suppose this experience helped lead me away from investing in diversified managed funds and towards individual investments. But at that time it was not as easy for an individual investor to trade on his or her own.

Once online investment brokers became readily available, I began to think that I could do better as an individual investor. I started out by not investing any real money but rather kept track of stocks I thought were good and followed them to see if I was right.

As time progressed I saw I could at least match or beat the market AND my expertly managed mutual funds. So I took the online individual investor plunge and have never looked back. Over the years I have developed a definite investment style and strategy which is basically looking for well run and managed companies which are “setting up” for a breakout or are undervalued.

I have also noticed that often these companies which reverse or breakout tend to be in sectors which are also experiencing an uptrend. Which usually means this is where the investment money is going.

So when it comes to ETFs, I would ideally want to look for an ETF which follows the money or market trend. It would rebalance based on market conditions.

Unfortunately, finding one that fits this strategy is proving more difficult than I thought. So here is my first call out to the online blogging world.

Does anybody know of any ETF’s which follow this investment strategy?

I would love to hear everyone’s input and suggestions.

Meanwhile, I have gone searching for some ETF’s that just might fit my individual stock investing style.

With the market so top heavy and extended due to the Trump Rally, it was difficult finding ETF’s that I thought still had upside potential. But, I did find a few.

Here is what I have come up with: (in no particular order)

  • Home Construction ETF (ITB)
  • Home Builders ETF (XHB)
  • Infrastructure ETF (IGF)
  • Utilities (XLU)
  • BioTech ETF (IBB)

The housing industry (and related ETFs), even with the likelihood of rising interest rates, is showing remarkable strength and all indications are that the economy is in recovery mode.

If Trump and his administration can actually get an infrastructure bill pushed through congress, the IGF ETF should continue to do well and is not terribly over extended like the rest of the market.

XLU is an interesting choice. It too can benefit from increased infrastructure spending and, like we saw last year, if the market starts reversing, the utilities may play out as a safe haven for investors regardless of the threat of rising interest rates.

IBB is setting up nicely and actually has many strong stocks at or near buy points. And just like many other Trump Tweet stocks( BA, LMT, etc, etc), have rebounded from his last tweeted threat.

Speaking of defense stocks, one might also want to consider the defense and aerospace ETF (ITA). Like the rest of the market, it is quite extended due to the Trump Rally, but has started to pull back and this budgetary increase does seem to have good congressional support.


The Trump Rally.  We all know it.  We can see it in the charts.  It is based on expectations.

Expectations for:

  • Spending on infrastructure
  • Tax reform
  • Easing of business, environmental and financial regulations

Since November 8th, the markets have been on an absolute tear.

  • S&P + 7.25%
  • DOW + 10.40 %
  • NASDAQ + 8.99%

So, do we all hop on board the rally train?  Is it too late?  With the indexes and many stocks at all-time highs, many folks are beginning to wonder if we are due for a pull back.  The chartists in my investment club certainly think so.

With so many charts looking like this:


It is easy to see why folks are waving the warning flags.

But I believe potential winners can be found in any market.  You just have to know how to look for them.

With this Trump administration doing so many different things, I started thinking about the constraints of my search.

This is what I came up with.

A USA based company that:

  • Does little international business.
  • Exposed to the full USA tax rate. This would also mean benefiting from proposed reductions.
  • Not dependent on international trade or directly impacted by tariffs or immigration or offshoring work.
  • And, since the up and coming economic demographic includes millennials, a company with a good mobile presence or crowd sourcing platform.
  • And was not at all time or 52week highs.

This was my initial screen.


Ticker Company Sector Industry
ABAX Abaxis, Inc. Healthcare Medical Laboratories & Research
AMGN Amgen Inc. Healthcare Biotechnology
ANET Arista Networks, Inc. Technology Diversified Computer Systems
BSTC BioSpecifics Technologies Corp. Healthcare Biotechnology
CTSH Cognizant Technology Solutions Corporation Technology Business Software & Services
DORM Dorman Products, Inc. Consumer Goods Auto Parts
ELLI Ellie Mae, Inc. Technology Application Software
EPAM EPAM Systems, Inc. Technology Information Technology Services
EXLS Exlservice Holdings, Inc. Services Business Services
FIZZ National Beverage Corp. Consumer Goods Beverages – Soft Drinks
GRUB GrubHub Inc. Technology Internet Information Providers
ICUI ICU Medical, Inc. Healthcare Medical Instruments & Supplies
ILMN Illumina, Inc. Healthcare Biotechnology
INGN Inogen, Inc. Healthcare Medical Instruments & Supplies
LMAT LeMaitre Vascular, Inc. Healthcare Medical Instruments & Supplies
MEET MeetMe, Inc. Technology Internet Information Providers
NEOG Neogen Corporation Healthcare Diagnostic Substances
PETS PetMed Express, Inc. Healthcare Drug Delivery
REGN Regeneron Pharmaceuticals, Inc. Healthcare Biotechnology
SCMP Sucampo Pharmaceuticals, Inc. Healthcare Drug Manufacturers – Other
SEIC SEI Investments Co. Financial Asset Management
SLP Simulations Plus, Inc. Technology Business Software & Services
SPSC SPS Commerce, Inc. Technology Application Software
SSD Simpson Manufacturing Co., Inc. Industrial Goods Small Tools & Accessories
SYKE Sykes Enterprises, Incorporated Technology Information Technology Services
VEEV Veeva Systems Inc. Technology Healthcare Information Services
WBMD WebMD Health Corp. Technology Healthcare Information Services

Interestingly enough, one of the companies on this list was just mentioned in an IBD feature article which fits the criteria to a tee.

GrubHub (GRUB)


The “I-want-it-now” millennials are pushing more services online, and GrubHub has the largest online food ordering platform in the U.S.

It also fits what they call “A Favored Trump Trade” idea.  Here is why.  Nearly all its business is conducted in the U.S.  and, consequently, GrubHub is currently swallowing a tax rate of approximately 40%.

Credit Suisse estimates a 5% reduction in their effective tax rate would drive 10 cents to 12 cents of incremental earnings per share on an annual basis.

Currently the stock is working on the right side of a consolidation pattern and is showing good strength in it’s recovery attempt.

With a quarterly report right around the corner, this is definitely one I am adding to my watch list.

Note: I am not currently invested in nor do I plan on investing in stocks mentioned in this post within the next week.  They are simply ideas for further research. 

What other stocks do you see fitting well into this new world order?

Now What?

“Wow! Now What?” That is what a colleague of mine texted to a group of us early Friday morning when he found out about the Brexit result.

This is an evaluation image and is Copyright Pamela Perry. Do not publish without acquiring a license. Image number: 0515-1103-1504-1337.

Over the years, we have formed a kind of virtual water cooler group.

Somebody else texted back that my puts must be really doing well.

Another “Holy Crap”.

Another person sent back a “congratulations” message to me.

I’m not sure why.  For some reason they think I am good at this sort of thing.

Yes I do have some August QQQ puts.  And yes I did place a couple weekly calls last week, which I closed out of all but one which of course expired worthless.  But the calls were placed just to help cover my losses on my puts.  I actually consider myself lucky that I came out ahead throughout the whole (up-down-up-down) pre-Brexit and Brexit event.

I keep telling everyone if I were really good at this sort of thing, I wouldn’t have to work.

But back to the “Now What” question.

My short answer is this . . . What has changed?

As of today, absolutely nothing – except expectations and more uncertainty.

  • Britain is still part of the European Union.
    • It will take months to even start planning the exit and years to execute.
    • If it happens at all.  Google “bregrexit”.
    • The Scotts and Irish are already planning their anti-Brexit referendums to remain.
  • The Fed is still second guessing their rate hike decisions.
  • The economy, both locally and globally, is not firing on all cylinders.
    • Brexit has only fueled concerns within the financial and European markets.
  • There is uncertainty with the coming US elections.
  • And, most importantly, the market hates uncertainty.

Analysts have already set the economic and quarterly reporting bar pretty low.  So low, that certain companies have been able to beat those low expectations.  The problem has been in forecasting.

ADBE is a perfect example.  Last week they beat quarterly report estimates.  Their projections for next quarter were conservatively in-line.  Note, not a bad report.  The price tanked 5%.

Now, with Brexit, companies and the market have one more very real added concern to append to their estimates.

The Brexit vote caught a lot of people and the markets by surprise.  The fact that Brexit will most likely take several years to complete, is reason enough to think that any huge sudden correction is most likely to be an over-reaction to Friday’s result.  I am not sure that the dust has settled yet but at some point it will.  And when it does, I suspect that there will be some good bargains out there.

Now is no time to panic and sell everything or jump all in to inverse ETF’s or Gold.  Though they certainly could be part of your investment strategy or plan.

You should always have a plan.  And your plan should account for changes in market direction and change.  Whether it is to be sufficiently diversified, or to actively maintain trailing stops, or to look for undervalue stocks, your plan should not be to make any sudden changes or to panic.

This is the most important answer to “now what”.

keep calm

Keep calm, stick to your plan.  Keep your watch lists up to date.  Protect your profits and capital.  Look for opportunity.

This much should never change.