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Baker’s Dozen Return for 2016

Now that the books are closed for 2016, time to check in to see how my Baker’s Dozen performed. After a blistering first six months, the returns leveled off with losses in the third quarter followed by gains in November and December. For the full year, the portfolio returned a very respectable 19.7% including dividends.  No stock posted a loss and 3 posted returns over 30%. This trounced both the S&P 500 which returned 11.9% with dividends and the Nasdaq composite which returned 7.5% for the year.

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As we launch into 2017 I suggest you read my blog on investing in a Trump world

Ray Link recently retired as CFO of FEI Company and currently serves on the board of directors of three high-tech companies. He is a CPA and holds an MBA from the Wharton School.

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Posted in Investing

Investing With A Trump Administration

Whenever there’s change in administration and policy, there’s opportunity in the financial markets, regardless of how one feels about the outcome. While we have seen a big run-up in all the major indices since the election, there may be some sectors worth considering.

For starters, it is likely that we will see corporate tax reform allowing U.S.-based companies to repatriate foreign cash for investment or dividend distributions without a huge tax bite. At the top of my investing list are those with a stockpile of foreign cash like Apple, Coke, Cisco, General Electric and Qualcomm.

Next, I am optimistic we will see some growth but growth brings inflation so the Federal Reserve is likely to increase interest rates. I am not too alarmed and think the increases will be small and gradual. However, that does mean bonds in the near term could be under pressure so I‘m avoiding longer-term bonds (maturity of over 5 years) and bond funds. In addition, stocks with a price earnings ratio of over 25 could see some pressure on valuations. However, we could see a nice uptick in small / mid-cap growth companies, especially those with a solid business model and a track record of profits. A few examples in the tech sector are Garmin, Seagate, Qorvo, FLIR and Maxim. I would also consider investing in the small cap index via the Russell ETF “IWM”.

Once the Fed does a few rounds of rate increases, it may be time to reconsider bonds.  I like U.S. Govt, agency and corporate bonds rated A or better with a maturity of no more than 10 years. I buy the actual bonds (not bond funds) and generally hold them to maturity.

We will likely see some pull-back on regulations, especially for banks, energy companies and health care. But I believe a lot of the gains we saw in the days since the election were in these sectors so I don’t recommend investing there now.

I remain of fan of larger cap, market leading, big dividend stocks. I am a “buy and hold” guy and less concerned with the daily fluctuations and more about long-term staying power and cash returns. Some of these companies include 3M, Johnson and Johnson, Clorox, Emerson Electric and Met Life.

I currently own shares in all the stocks noted above, but before you buy, please discuss your situation with your financial and tax advisors to see what is appropriate for you.

 

Ray Link recently retired as CFO of FEI Company and currently serves on the board of directors of three high-tech companies. He is a CPA and holds an MBA from the Wharton School.

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Posted in Investing

Time To Change The Electoral College

For the second time in just 16 years the winner of the electoral college did not win the popular vote, causing tumult across America. True, the campaigns may have been run differently if the popular vote was the determinant, and Trump may have won in the end. But the country just opted for change, so what better time to update our process to elect the President than now?

The Electoral College was adopted in 1787 as a compromise to balance power between large and small states, and to give greater power to the “well-informed” elite. With the advent of 24-hour cable, the internet, social media, and a literacy rate of nearly 100%, it’s clearly time to move on and return the power to the people directly. It’s ridiculous and theoretically possible to elect a President with fewer than 30% of the popular vote, and the “loser” getting 70%, because the “winner” got 270 electoral votes.  There is also no requirement for the electors to vote the candidate they were elected to support, so the outcome is in the hands of 538 party insiders.  Because so few states are “in-play” the candidates essentially ignore large states like California, Texas and New York and concentrate on tiny areas of swing voters.

The National Popular Vote Interstate Compact (NPVIC) is an agreement among participating states to cast all their electoral votes for a candidate once that candidate wins the popular vote, regardless of the results within their state. However, it still retains some of the mechanism of the electoral college. It has been adopted by 10 states plus D.C. and will only come into play if enough states enter the compact and have a total of 270 electoral votes among them.

Whether we go the NPVIC route or amend the constitution, I can’t fathom how anyone would disagree with “most votes wins,” as this is how we elect over 100,000 political offices in every other election in America. The Senate, with each state regardless of size getting two representatives, is the balancing mechanism in place for small states to have more say in government.  We don’t need another.

Let’s act now, otherwise we will never fix this antiquated system.

 

Ray Link is a retired CFO of FEI Company and currently serves on the board of directors of three high-tech companies. He is a CPA and holds an MBA from the Wharton School and is a lifelong registered Republican

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Posted in Politics

Update on the Baker’s Dozen

Back in late January when the markets were in turmoil and oil was falling, I recommended 13 stocks with a history of increasing dividends. If you had invested $100,000 equally in these in January, today they would be worth $118,450 for a gain of 18.4%, on top of which you would have collected another 1.7% in dividends for a total return of over 20% in less than 6 months. All while we witnessed a U.S presidential primary circus, numerous terrorist events and the Brits electing out of the euro-zone.

While this is a rather extraordinary return and not likely to repeat soon, it does show that you can find value in good quality stocks regardless of the market conditions.

I haven’t sold any of these positions, but lightening up on some may be in order, so consult your financial advisor or CPA to get their opinion.

On a separate note, I am becoming increasingly concerned with Tesla in light of its planned merger with SolarCity. I do not agree on the synergies between the two and do not like the fact that Elon Musk essentially controls both so I am withdrawing my bullish view on Telsa.

Below are the results from the baker’s dozen stocks:

Bakers Dozen

 

Ray Link is a CPA and holds an MBA from the Wharton School. He recently retired from FEI Company (NASDAQ: FEIC) where he was the CFO for 10 years. He is on the on the Board of Directors of FormFactor (NASDAQ: FORM), Electro Scientific Industries (NASDAQ: ESIO) and nLight Inc.

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Posted in Investing

New Writing Website Launched

Hey Bizzy Lifers –

As you may have noticed posts to the blog have been a bit sparse – but I have been concentrating on my fiction writing career for the last eighteen months, and just launched my updated site. Please visit for free and low cost stories – and a few funny pictures of Dick Cheney. You can find it here. Hope you enjoy!

The Writing Site

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Posted in Livin' Large