Category Archives: Investing

Windhaven Portfolios: Is Schwab just blowing hot air?

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Dear Mr. Market:

The investment industry is notorious for not being transparent with investors.  The industry tends to be a shade of grey as opposed to being black and white. There are often hidden agendas or conflicts of interest that the average investor is never aware of or informed about.  Think back to some of the situations that have negatively impacted investors in just the last few years: Bernie Madoff, Insider Trading, the Mortgage Industry debacle and the meltdown of Enron!  Conflict of interest is essentially why the Sarbanes-Oxley Act is now in existence.

Conflict of Interest – Occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation. (from Wikipedia).

WindhavenToday we will take a look at an investment firm that has had incredible growth over the last several years: Windhaven Investments.

schwabIn 2010 Charles Schwab & Company (SCHW) purchased a small investment advisory firm in Boston named Winward Investments.  The firm’s strategies had posted impressive results for several years and didn’t use the industry standard ‘buy and hold’ type of approach.  They used primarily ETF’s (Exchange Traded Funds) and claim to invest in over 40 different sectors, participating in positive markets and protecting in downturns.  Schwab paid a hefty price for the firm, paying $150 million in cash and stock (source: WSJ). Continue reading →

Clean Energy Fuels (CLNE): Bleeding soon to become Profit

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anghmap-011614Just about anyone who has invested in Clean Energy Fuels Corp. (Nasdaq: CLNE), has traveled a rough road thus far. Clean Energy has serious potential but its great story hasn’t materialized at all. The stock has done absolutely nothing for shareholders and if you’re the type of investor that screens for strong fundamentals it probably hasn’t hit your radar; at least not yet…

What do United Parcel Service (UPS), Frito-Lay/Pepsi (PEP), Procter & Gamble (PG), Ryder (R), and Lowe’s (LOW) all have in common? Each of these companies, and more and more of corporate America, is pouring money into the natural gas industry. Companies like these all see the writing on the wall with regard to energy trends and they are expanding their natural gas fleets.

The U.S. heavy-duty trucking market is beginning to embrace the economic and environmental benefits of natural gas fueled trucks.  There are over 8 million heavy-duty trucks in the U.S. consuming about 20,000 gallons of fuel per year.  The operating cost savings that operators will benefit from by converting from gasoline and diesel to natural gas along with movements towards clean air regulations bode extremely well for companies like CLNE.

Company summary:

Clean Energy is headquartered in Newport Beach, CA and has a market capitalization of almost $1.1 billion.  CLNE supplies compressed natural gas (CNG) fuel for light, medium, and heavy-duty vehicles; and liquefied natural gas (LNG) fuel for medium and heavy-duty vehicles. They are the largest provider of natural gas fuel for transportation in North America. CLNE fuels over 30,000 vehicles per year at over 500 fueling stations throughout the U.S. and Canada. The company has created and continues to develop a network of fueling stations with what they call “America’s Natural Gas Highway”. This network connects major truck corridors across the country for coast-to-coast and border-to-border natural gas fueling. Continue reading →

Should You Buy Target (TGT) Stock?

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Target InvestigationDear Mr. Market:

With the holiday season now in the rear view mirror U.S. consumers are being reminded of the world we live in.  In the middle of the holiday shopping season Target made an announcement that had an impact on millions of individuals.  On December 19th Target announced that 40 million credit and debit cards had been jeopardized by a cyber attack.  Since then the number of cards has grown to 70 million, it has been reported that the number could grow to as many as 110 million!  Just last week Neiman Marcus released news that it is dealing with a similar situation and other retailers are likely to be in the same boat in the coming weeks.

On Friday (January 10th) Target announced that the security issue had a negative impact on their holiday shopping results.  Stores saw sales decline up to 5% (depending on location) when compared to the previous years results.  When 4th quarter earnings are announced on February 26, 2014, the additional expenses the company has incurred due to the hacking incident will certainly have an impact.  CEO Greg Steinhafel announced that 4th quarter EPS (earnings per share) were lowered to $1.20 – $1.30 from the previous guidance of $1.50 – $1.60.  Continue reading →

Force your Portfolio to be Disciplined in 2014

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Rebalance Cartoon

Congratulations Mr. Market…you’ve delivered a tremendous year of returns to equity investors!  With the broad equity markets delivering returns over 25% (S&P =29%, DJIA = 25% and the NASDAQ = 37% as of 12/27/2013) investors are now faced with the question of what to do now?  For those investors that were invested in stocks, especially domestic stocks, year-end statements are going to look very impressive but remember that is only on paper. As we step into 2014 what should investors do with their portfolios?

Often investors choose to go with an adage commonly heard in casinos – “Let it ride!” Although the market defied odds and dodged several ominous obstacles, there is no guarantee that it will continue to do so going forward.  Sitting back and doing nothing could very well allow those returns to dwindle away and become nothing but a memory.  It wasn’t that long ago that ‘The Tech Bubble’ hit investors with a strong left uppercut that they never saw coming.  Mr. Market delivered three years of impressive returns (1997 = 33%, 1998 = 28% & 1999 = 21%) only to see it disappear with three consecutive years of negative returns (2000 = -9%, 2001 = -11%, 2002 = -22%) and let’s not forget 2008 (-37%).   How can investors avoid repeating history while also managing the risk and unrealized gains in their portfolio?  Continue reading →

Mutual Funds’ dirty little secret….Capital Gains Tax

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cap gains tax cartoonDear Mr. Market:

With one of the strongest stock market years on record many mutual fund investors will end the holiday season by unwrapping a lump of coal. In January most mutual fund companies and the IRS (Internal Revenue Service) will mail out Form 1099-DIV. 2013 will bring mutual fund investors capital gains distributions ranging from 6% to 60%. It’s no secret that we’re not fans of most mutual funds and capital gains distributions are just one more reason.  Today we will take a moment to address an issue that every investor (especially mutual fund investors) needs to be aware of – Capital Gains Distributions.

Capital Gains Distribution – The payment of proceeds prompted by a fund manager’s liquidation of underlying stocks and securities in a mutual fund. Capital gains distribution occurs when a mutual fund manager liquidates underlying positions that have made gains since they were added to the fund. Capital gains distributions will be taxed as capital gains to the person receiving the distribution. (Source – Investopedia.com)

 When a mutual fund sells any position at a profit it creates a capital gain, these can be either short-term or long-term.  By law mutual fund companies are required to distribute these gains to all of their shareholders.  If the position was held for less than a year it will be considered short-term. These are distributed to shareholder as income dividends and taxed at their ordinary income rates.  Long-term capital gain distributions (over one year) are taxed as follows: 0% for taxpayers in the 10% and 15% tax brackets, 20% for individuals in the 39.6% bracket and 15% for all others.  The key thing to remember when looking at mutual funds is that the investor has absolutely no say as to when positions are purchased or sold within the fund and the taxable consequences that are incurred. Continue reading →

Who is the ‘Fed’ and what do they do?!

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Fed Reserve CartoonDear Mr. Market:

“Who and what is the Fed”?  “What do they do” and “How do I understand what they are really saying and how it will impact me!?”  These are questions that we often hear from investors.  The Federal Reserve frequently dominates economic headlines and although its actions impact us all, very few of us truly understand what “the Fed” is or what it does.

We all hear terms like: “Don’t bet against the Fed”, “Dovish or hawkish sentiment” “Quantitative Easing” and “When will the Fed begin to taper”?  These are just the tip of the iceberg as the press and media attempt to interpret anything and everything released by members of the Fed.  Let’s take a moment and look at the basics of what the Fed is.

The Federal Reserve System (the “Fed”) is essentially the central banking system of the United States.  Through the Federal Reserve Act of 1913 it was created in response to financial uncertainties in the early 1900’s.  Over the last century the responsibilities and roles of the Federal Reserve System have evolved to address the changes in our economy. Continue reading →

Exclusive Interview with Long Short Opportunity Fund (LSOFX)

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Dear Mr. Market:

You are made up of so many pieces and not all move in the same direction on each day. Some stocks can rise in bear markets and some get clobbered in bull markets. That being said, we have a special treat for you today: The following interview was granted to My Portfolio Guide, LLC from management of the Long Short Opportunity Fund (LSOFX).

My Portfolio Guide, LLC (MPG): First off…thank you for the opportunity to meet and learn more about your investing strategies. Our first question is perhaps best intended to simply set the table for our clients and readers of our newsletter:

Briefly explain why investors in typical advisory relationships should even consider using a hedge fund or alternative strategy as part of their portfolio allocation?

Long Short Advisors (LS): The simple answer is to provide downside protection in an increasingly volatile world where equity markets are near all-time highs and bond yields remain near all-time lows. A typical investor has their money allocated to a traditional blend of 60% long-only equities and 40% long-only short bonds, and has generated a fantastic high single digit return from this allocation over the past thirty years. Unfortunately for these investors, the current state of the bond market dictates that these returns are not repeatable over the next decade.

We believe the bond allocation of a traditional 60/40 blend could tread water at best given the current trajectory of bond yields.

Long-term equity volatility is unlikely to change, making a larger allocation to stocks similarly imprudent, especially at today’s record highs.

Thus, investors need to diversify into alternative strategies that have the ability to benefit not only from continued overall market strength, but also potential market weakness.

MPG: Of all the hedging and alternative investment strategies out there and now available to mainstream investors, what are some of the primary reasons to consider a “long/short” type approach? Continue reading →

How Should your Portfolio be Performing now?

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outside boxDear Mr. Market:

How is my portfolio doing this year? Am I on track for retirement? Why is the market up big but I’m not? What would my portfolio look like if the market tanked again like it did in 2008? I’m in cash right now because I feel stocks have moved too high but I don’t trust bonds because we all know where they’re headed.

These are some common and very typical questions many investors are asking themselves this year. If any one of these questions applies to you or feels familiar, don’t think you’re alone! One common thread among all these questions or concerns is benchmarking. What exactly is a benchmark and which one is appropriate for you?

Far too often investors compare themselves to other investors, strategies or benchmarks that are completely unrealistic.  Investors need to take the time to truly understand who they are and what their goals are before they compare themselves to anyone or anything!   Let’s put this in perspective…. Let’s say you decided you wanted to start swimming to get in shape.  Would you expect to get in the pool and swim times comparable to Michael Phelps (winner of 22 Olympic medals) within a couple of weeks?  Of course not… that would be ludicrous and clearly not the right athlete to try and compare yourself to!  As crazy as this sounds many investors have similar expectations with their investment portfolio. Continue reading →

How to Add 3 Nobel Prizes to your Portfolio

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nerd money Dear Mr. Market:

What if you, the investor, had all the knowledge and findings that it took to win a Nobel Prize in Economics? Would you be a better investor? Believe it or not…with the amount of news disseminated in today’s hyper-information and “data dumping” world…you likely already have all it takes to be a more disciplined and well schooled investor.

This past Monday (10/14/2013) the winners of the prestigious Nobel Prize for Economics were announced.  All three winners were American, which marks a trend as at least one American has won the award since 1999.  The winners: Eugene Fama, Lars Peter Hansen and Robert Shiller were recognized for their outstanding research and work in the financial markets.  While their work does not perfectly align there are several similarities and the bottom line is that you can never trust Mr. Market!

 Summary Of The Winners:

  • Eugene Fama’s research has revealed the efficiency of financial markets. If you’re a financial advisor who makes a living pitching expensive mutual funds or annuity products at clients you won’t likely have a framed portrait of Dr. Fama in your plush office.  Fama basically states that the market absorbs information so quickly that investors simply can’t outperform it consistently.  He is credited for popularizing the use of index funds as an investment option.
  • Lars Peter Hansen works strictly with data (econometrics), creating statistical models in an effort to test competing theories.  His work has allowed researchers to focus on what truly drives the financial markets. Of the three winners Hansen is the least known and popular but he ironically helps connect the other two winners’ work into something investors need to be aware of; you simply need to derive conclusions from what you do AND do not know.
  • Robert Shiller is best known for creating the Case-Shiller Home Price Index Study and now perhaps for the fact that he is married to Janet Yellen, the next Federal Reserve Chairman.  We’re huge fans of behavioral finance so the next time you hear someone talk about a “bubble” you will know who originally broke ground on the concept. His research has shown that investors are irrational and that markets develop bubbles that will eventually burst (he predicted both the Tech and Real Estate Bubbles). Continue reading →

Sorry Mutual Fund: You’re Fired!

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always done it that wayDear Mr. Market:

It has been said that eight of the most expensive words in the business world are: “Because we have always done it that way!”  How often have we heard these words in our personal or professional life?  Where would we be as a country if we embraced this phrase?  Isn’t it safe to say life as we know it would not be the same if generations before us didn’t challenge the norm and truly “think outside the box”?

For decades Wall Street has fought change and attempted to maintain a shroud of secrecy with investors.  Mr. Market has become very skilled at pushing aside information and research that questions the norm and in many cases proves him completely wrong.  In this article we will look at some facts and figures that simply can’t be argued with or twisted into something that they are not.  If you are an investor who owns any mutual funds you need to read this! Continue reading →