Portfolio Update August 2009

Old School Value Stock Portfolio Performance



Portfolio Movers

Lots of companies in my portfolio announced earnings in August. Started off with good results from GGWPQ which appreciated nicely this month.

PDII, AEO weren’t bad, KTII was solid as a rock as usual, MHH was very good although no one picked up on it again and ATW had good results which the market expected.

DISK was bad but I still hold because it’s not worth selling my $300 stake. DISK could drop 10% and I’m only down $30 for the day.

Lastly VVTV, results weren’t that great and I’m still waiting for the quarterly report to be filed.

I’ve been watching all three home shopping channels a lot lately over the last 2 months and what I noticed is that VVTV seriously has to broaden their product mix away from watches and jewelry.

It’s all I ever see when I turn on the TV while HSN and QVC are offering some really neat stuff as well as the occasional “who would buy that” item.

VVTV has signed up a lot of new vendors so I’m hoping their price per household will improve from their disgraceful $6.50.

Portfolio Trades

Busy month in terms of activity for me.

1. Bought ROIAK, SALM, ETM at the beginning of August.

Started the month with purchases in 3 radio stocks.

Why radio stocks? It’s an ugly, “dinosaur” and dying industry according to Wall Street. I think otherwise. Don’t think terrestrial radio will ever go away and the business model is very easy to understand.

I would have bought 5 or more different radio stocks because they were all so very cheap but didn’t want overdo it.

Extremely highly leveraged and beaten down to a pulp which is where the opportunity lies if you are convinced that they won’t go bankrupt.

Working out perfectly so far as I am up 68%, 117% and 22% respectively in less than one month.

2. Sold Ceradyne (CRDN) @ $17.90 for a 18.03% loss.

Mentioned in the July portfolio update that I would probably sell CRDN and I did. I hadn’t been studying the company and didn’t just want it to keep it on idle when I could be investing the capital into something better.

3. Sold 30% of my holding in ValueVision (VVTV) @ $3.55 for a 787% gain.

Missed out on selling VVTV when it was above $4 and over 1150% with the 3 hr time difference from where I am. By the time I got up it was back down to the high $3.

However, my stake in VVTV grew to about 40% of my portfolio and although I still like the potential turnaround, the downside protection shrunk as the price rocketed up.

I didn’t plan to sell as well but then I read a very good interview which made me change my mind and I locked in my profits.

4. Sold UnitedHealth (UNH) @ $28.10 for a 0.06% loss.

Originally bought UNH when everyone was uncertain of the future of healthcare but failed to average down when Obama got elected and healthcare overreaction sent the stock price down.

It would have been a good opportunity for some solid gains but I was too busy with other positions that I mostly forgot about UNH, which is why I sold for the same reason as CRDN. It was a passive position for close to a year and I hadn’t even bothered to read the 10-K’s and 10-Q’s.

5. Bought Zareba Systems (ZRBA) @ $3.86.

A special situation stock where the company plans to reduce the number of shareholders and de-register itself from the NASDAQ index.

Company approved a 1-for-250 reverse split of our common stock, such that shareholders owning less than one whole share following the reverse split will receive cash in lieu of fractional interests in the amount equal to $5.20 per share for each pre-split share that becomes a fractional interest. As a result, shareholders owning fewer than 250 shares of our common stock on a pre-split basis at the close of business on the record date will no longer be shareholders of the Company.

While it’s still early to predict the outcome and there are risks involved, after I looked at the financial statements, I concluded that their balance sheet and operations were strong enough to handle the costs associated with the delisting easily.

I don’t usually invest in these situations so early but I don’t see any red flags that will overturn the plan.

Cash has now grown substantially. I’m at about 22% in cash and it doesn’t seem like I’ll find something compelling to put it into at this rate.

One issue I’m encountering now that my portfolio has doubled this year is the size of my positions.

Previously I would normally invest let’s say $1000 for a position but now I’m having to buy at least $2000 for the same % makeup. Being used to a small portfolio, I’ll having to get over this mental barrier that I’m putting too much into one stock.

What Else?

I finished going through Bruce Greenwald’s book a second time, this time with a pen and highlighter and started to create a new addition to the stock valuation spreads`heet.

As I get more familiar with EPV, it will be a great addition to my valuation toolbox.

I also started reading another book, Quality of Earnings, which so far is a fantastic book on how to interpret annual reports and determine the quality of the earnings rather than the stated earnings in the press release.

Not a thick book but it isn’t so easy to read as well with all the facts and numbers included. Chock a block full of detailed info that you will definitely have to read  second time.

Will do a book review once I’m done.

September is supposed to be the doom and gloom month on Wall Street every year so we’ll see whether they throw out any bargains that I can pick up.


I hold all stocks mentioned except sold positions.

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27 responses to “Portfolio Update August 2009”

  1. Dan says:

    Hey Jae Jun, what do you use to track your portfolio?

  2. Jae Jun says:

    Dan I use Covestor.
    Check it out at covestor.com

  3. Dan says:

    After checking out covestor I don’t think I’m going to use it. One weakness of the site is that if you manually enter your trades you can’t see your “cash and equities” performance.

    Checking your past portfolio updates I see you mentioned this ” I’m not as concerned with annualized percentages as it doesn’t reflect the money in my account.”

  4. Jae Jun says:

    I like covestor because it keeps things simple but what I like is the ability to find ideas from other like minded investors.

    The thing about annualized percentages is that it can be drastically overstated, especially if I have a tiny $1000 portfolio. A gain of $100 would be astronomical in terms of annualized numbers. But I use it to track my performance and to see some other metrics I mark myself against.

  5. chris says:

    Congrats on an interesting blog.
    Just wondering how you search/discover the stocks you reference in your mnthly portfolio updates.
    Also, how are you handicapping the risk/return implicit in your new radio positions as some of them are highly leveraged and quite speculative positions when considering the metrics graham proposed in his works.
    are you purchasing as a basket to spread risk or are you getting such a large margin of safety on each share that you are comfortable with the risk/return potential on an individual basis?

    good luck in sept and keep up the great work

  6. Jae Jun says:

    Hi Chris,

    I find stocks randomly, either just entering tickers I hear or see and then following a daisy chain effect from there. It’s funny how I’ve been able to find some good stuff like that.
    Another way is I follow other people who have lists of similar style stocks. Some bloggers already provide results from screens and I just go through them one at a time. The URL’s are in the links section at the top.

    With the radio stocks, I don’t see much risk as the margin of safety is so huge. They are heavily leveraged but that has been the characteristic of the radio industry for quite some time and I doubt it will change.

    While the fundamental metrics do not meet Graham or Buffett’s standards, radio stocks like other capex heavy industries should be valued on cash flows.
    Right now, all of these companies are turning over positive cash flow and able to meet their debt obligations.

    We’ll see what September brings but I’m looking to see what to average down on or buy.
    Found a net net that looks to be good going forward. We’ll see whether I can buy it at a price I’m hoping for.

  7. chris says:

    How do you isolate sound research and analytical process/decision-making from your impressive outcome?
    Your performance is worthy of analysis and “reverse-engineering” and i’m trying to figure out if the portfolio would hold its own long-term or if the trailing results are merely a statistical abberation due to unusual market conditions.

  8. Jae Jun says:

    @ Chris,

    How do I isolate sound research and decision making?… hmmm…
    A big help is that I publicly publish my entire thought and decision process on this blog for everyone to see and scrutinize. If I don’t know what I’m talking about or not confident in a decision, I don’t buy.

    As Buffett says, “if I’m going to be wrong, I want to be able to explain why”.

    As much as my performance is great this year, I don’t expect it to be anywhere close next year. I’ve been able to take advantage of huge market inefficiencies on a regular basis this past year which is points to the performance stats but with opportunities drying up it will be a different story next year.

    And my portfolio is by no means a long term buy and hold type of portfolio. I have positions where I have to sell quickly if things turn the other way. Definitely have to be updated on what I own.

    Rather, my strategy of old school fundamental analysis, crunching numbers and reading should be a very good strategy for the long term. It’s something that has been known for decades but seemingly lost in the world of fast media and instant Yahoo/Google numbers.

  9. Texas says:


    Could you explain your Radio picks a little more? Much appreciated!

  10. chris says:

    Hope you didn’t take my msg the wrong way. What I’m trying to get at is if you are calling bets with “Ace Ace”, in poker speak, or if you are calling with weaker hands and coming up with miracle cards on the river. I am in now way questioning or critical of anything you have provided, I am rather quite envious of the results, but even more so of the process, and would like to pick your brain as long as you are gracious enough to share!


  11. Jae Jun says:

    @ Texas

    If you go through their annual reports you’ll find a lot of information regarding the business.

    I won’t be going into too much detail on these picks as these are my pocket aces. I’m trying to keep it quiet while I wait to get a full position so I’ll only leave information in the comments.

    On the macro side, radio stocks are very easy to understand. Their business model simply focuses on ad revenue. Play ads, get paid. Easy as that.

    What a lot of people don’t see or accept is that terrestrial radio will not go away. I personally will never pay for satellite radio and neither will most of my friends.

    So say you listen to the radio in your car. You’ve got 6 or up to 8 channels in a car and you’re going to set it on a preset. How often do you change those presets? Once you find a good radio station, I’m sure you never change right?

    You listen to the morning drive and most probably the same station again during the commute home.

    So content is what makes radio “sticky” and I can live with the ads, which is where the revenue comes in.

    From a macro view, ad revenues drop significantly with the economy. It’s cyclical, yet predictable, and right now we are in a down cycle.

    Notice how during the Cash for Clunkers week, car ads started to come back on the radio after a long hiatus? That’s what’s going to happen when the economy lifts up and businesses start to spend again.

    I’m sure you get the idea about why I like radio at the moment.

    As for fundamentals, look at their free cash flows, whether their writedowns will affect cash, whether cash can pay off debt and you’ll see that the problem with radio stocks isn’t a solvency issue. They had a liquidity issue as the debt they needed to roll over came due during one of the worst years to receive financing.

  12. Jae Jun says:

    @ Chris
    No offense taken. Just trying to warn people, and myself, that I see my performance as temporary.

    My friend also asked me the same question.
    “Where do you find all these ideas?”

    The answer again is something you’ve heard a million times.
    Read, read, read.

    What helps is that I run companies through my spreadsheet, so if I hear of a ticker, or I see a list of 32 value stock ideas, then I go through each ticker on the various spreadsheets I have and filter them out.

    I used to go through 100 or more ideas within 20mins and then from there I’ll go over the ones that look good again.

    I get my ideas from the blogs in the links section but I especially like free newsletters. Below are a some lists and places I get ideas.

    Manual of Ideas
    Forbes 200 Best Small Companies
    Fortune 40 Stocks to Retire On
    Magic Formula Investing
    Value Investors Club
    Fool Caps

    Hope you can pick from that 🙂

  13. Texas says:


    No seriously, I appreciate you even sharing your picks. I’ll be doing some reading but the numbers look good and the business, like you said, is very simple.

  14. chris says:

    So your premium spreadsheet compiles the last 10 years of financials and last 20 quarters and from the historical data you filter out potentials?
    are there diff spreadsheet packages for asset plays, earnings or cash flow plays or does the premium package apply for all?

  15. Jae Jun says:

    The premium spreadsheets have the financial spreadsheets, DCF valuation based on FCF and Earnings valuation based on Ben Graham’s formula. You get historical price to intrinsic value graphs and other fundamental analysis metrics.
    The net net spreadsheet is a free asset based spreadsheet you can find in the sidebar under tools.

    Here is a link of what the current stock valuation spreadsheet looks like.

  16. Ryan B says:

    Hi Jae Jun,

    In regards to ZRBA when is the 250-1 split happening. I read through the SEC files and could not find a date.

    Thank you,

  17. Jae Jun says:

    @ Ryan,

    No date set as it was just recently filed. Waiting for the updated filing.

  18. Ryan B says:

    Looks like the board of directors decided to cancel the pending 250-1 split. http://www.sec.gov/Archives/edgar/data/104987/000095012309042394/c53538sc13e3za.htm

  19. Jae Jun says:

    Thanks Ryan. I was alerted of that and I got out at $4. Even if management comes back and says that they are being bought out, my original investment reason has changed so I’m out.
    Lucky to have exited with a 1% profit. Glad I signed up for extended trading hours.

  20. Ryan B says:

    Jae Jun,

    Didn’t mean to send that message twice.

    Curious to find out what the other strategic opportunity is.

    Keep up with the great work on the site!!!


  21. Jae Jun says:

    No worries Ryan.

    Not sure whether they have any other strategies up their sleeve though.

  22. Vince P says:


    Too bad you didn’t hang on to ZRBA until today. Being lethargic and not selling right away gave me a nice profit on it haha. Keep up the good work, I love your site!

  23. Jae Jun says:

    Hey Vince,

    Very nice. Glad you made a tidy profit from it. 🙂

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