Neil Macneale's
Stock Split
Newsletter
Volume 4 Issue 1
2 for 1
www.2-for-1.com
The Whole is
Greater than the
Sum of the Parts
R
January 15, 1999
MUSINGS OF THE EDITOR
THIS MONTH’S BUY
1998 In Review
Transamerica Corp.
T
he year just concluded was an
exciting one for stock market investors. Too exciting, in fact,
and the 2 for 1 portfolio has suffered as a result. Our return for
all of 1998 was a gain of 11.95%.
The 2 for 1 portfolio went from $72871 to
$81581, including all transaction costs and dividends. This is an IRA account, so capital gains
taxes are not a factor.
Given that 2 for 1's primary goal is to beat
the market, this result is very disappointing to
me. This is the first year that 2 for 1 has fallen
behind the S&P 500 on an annual basis and,
obviously, I have to take responsibility for the
results. In general, the overall market benefited
from the amazing performance of just a handful of hi-tech and Internet stocks, many seen
on our monthly split lists. For example,
Microsoft split in January and Dell Computer
was on the February list. Regarding the Internet, we had an opportunity to add Amazon.com
to the portfolio in May, Yahoo in August, and
American Online in both March and November. All of these stocks turned in fabulous results for 1998 and would have page
greatly enhanced our bottom line had we
selected them rather than our more mundane banks, utilities, and manufacturing page
enterprises.
In retrospect, I suppose I have been too page
conservative, and (continued on page 2)
T
ransamerica Corporation (TA) is one of
the world's large "behind the scenes" financial services organizations. In the San Francisco
Bay area, it is known for the distinctive pyramid
shaped corporate headquarter's building that
makes such a unique contribution to the San
Francisco skyline. Transamerica provides commercial lending services, including financing of
inventories and working capital. Other financial
services involve leasing of transportation equipment, including shipping containers and specialized tanks, real estate services, and life insurance. A PE of 16.5, price to book ratio of 1.4,
and predicted growth rate of 11% for 1999 make
this a good selection for the 2 for 1 portfolio.
Bulletin!
Neil Macneale will be participating in a live "chat
event" on America Online on Wednesday, 2/3
at 2 pm ET (11 am PT). AOL is expanding its
stock market commentary whereby visitors may
query a wide variety of financial experts all day,
live, online. Join me! AOL's keyword is "SAGE"
Inside This Issue
2 This Month's Sell
December Splits and Rankings
3 Portfolio Management
2 for 1 Performance
4 December Portfolio Statement
2 for 1
January 1999
THIS MONTH'S SELL
DECEMBER SPLITS AND RANKINGS
HF Financial Corp.
O
ur position in HF Financial was sold on
1/7/99 at a price of $18.25/share. This
stock turned in a stellar performance for us with
a total net gain of $1202.50 on a basis of
$1619.95, including all transaction costs and
dividends. This is an increase of 74.23%, or a
little over 30% per year. The stock went as high
as 24.75 last June, but we really can't complain
about its performance, even if we did not get
out right at the peak.
See the "Portfolio Management" column regarding the strategy for handling the buildup in
our cash account.
EDITOR (cont.)
I'll say it now, I do intend to inject a bit of the
high tech sector into the portfolio when the
opportunity presents itself. Given the 2 for 1
splits already announced in January, this may
happen sooner rather than later. Stand by.
Looking on the bright side of our results for
1998, we did outperform many mutual fund
yardsticks. Of the 36 categories of funds
tracked by Lipper Inc., 2 for 1 beat all but eleven.
Six of Lipper's categories were in negative territory for the year. In years past, a 12% gain
would have been cause for cheers, and if I could
be guaranteed a 12% gain every year, I'd take it
in a heart beat.
Starting with our pick of Ameritech last January, half of 1998's recommendations have been
double digit gainers so far, on an annualized
basis, with AIT up 50%, SVU +47%, GD
+41%, etc. Compared to 2 for 1's 1997 picks, it
appears that 1998's stocks are doing quite a bit
better, and that bodes well for the 2 for 1 portfolio overall for the coming one to two years.
Several Possibilities
T
here were no real standouts this month
but Transamerica scored highest on our
rating calculator. See page 1 for the TA story.
Bristol Meyers Squibb is a large drug company paying an above average and reliable dividend. BMY has had an average growth rate of
10% for the last 5 years.
Central Newspapers (ECP) publishes The
Arizona Republic and the Indianapolis News
and has a controlling interest in Westech, which
operates high-tech and service industry job
fairs. ECP has no debt and is family controlled.
Educational Management has a high PE but
it also has been growing at 20% annually.
EDMC provides postsecondary education to
18,000 students in graphic design, multimedia,
etc. Very low debt but no dividend.
Sonic Automotive (SAH) owns 23 car
dealerships and other auto related businesses
in the southeast. An interesting niche business
growing 25%/year through acquisitions.
SYMBOL
TA
BMY
ECP
EDMC
SAH
RX
CMGI
GDT
INTV
MFNX
PBSF
VISX
ASTE
HH
BHB
HIST
INKT
COMPANY
RANK
TRANSAMERICA CORP
1
BRISTOL MYERS SQUIBB CO
2
CENTRAL NEWSPAPERS INC
3
EDUCATION MGMT CORP
3
SONIC AUTOMOTIVE INC
3
IMS HEALTH INC
4
CMGI INC
4
GUIDANT CORP
4
INTERVOICE INC
4
METROMEDIA FIBER NETWORK INC
4
PACIFIC BK N A SAN FRANCISCO
4
VISX INC DEL
4
ASTEC INDS INC
5
HOOPER HOLMES INC
5
BAR HARBOR BANKSHARES
NR
GALLERY OF HISTORY INC
NR
INKTOMI, INC.
NR
Rankings: 1 - buy now, 2 - 2nd choice, 3 - outperform, 4 - market
perform, 5 - not suitable for 2 for 1, but may include special situations, NR indicates no rank due to lack of stats, very small size, etc.
Page 2
2 for 1
January 1999
PORTFOLIO MANAGEMENT
Seizing an Opportunity
W
hen you receive next month's issue of 2
for 1, you will see that the position in
Lockheed Martin has changed since we bought
it on 11/17/98. We bought 25 shares at $105.94/
share and an additional 25 shares were delivered
on 1/4/99 as a result of the 2 for 1 split. But
the 2 for 1 portfolio now owns 65 shares of
LMT because, on 1/5/99, a market order for an
additional 15 shares was executed at the price
of $41.00/share. This departure from our normal procedure of one "buy" and one "sell" per
month came about as follows.
Lockheed had dropped over 20% since we
bought it in November. The drop resulted from
an announcement that earnings would probably
not meet analysts projections. However, all the
numbers that made LMT a buy for us in November were still valid and, after the drop in
stock price, many of them looked even better!
The 2 for 1 cash position at the end of December stood at $3136 and we were in line for a
nice supplement to that when HFFC was sold.
Thus, this higher than normal cash position was
not needed for our upcoming "buy" for January. And it will not be needed in the near future
because two of the stocks that will be sold in
the next three months are well above average in
the percentage of the portfolio they occupy.
(Anything over 3.33% - see page #4).
The combination of these two factors provided an opportunity too good to pass up. The
purchase of a few additional shares of LMT lowered our average cost for that position and
brought it back up closer to its proper weight in
the portfolio. We also lowered our excessive cash
reserve and, if it grows over the coming months,
we'll probably execute a similar "balancing act".
PORTFOLIO PERFORMANCE
2 for 1
1000
S&P 500
400
1993
1994
1995
1996
1997
1998
2 for 1 portfolio adjusted to equal the S&P 500 at the end of July, 1992
Ups
S
eventeen stocks were up in December, with
HF Financial leading the charge, up 26%.
This could not have come at a better time, since
HFFC was our "sell" for January. AIT, CSL, and
BBC were our other double digit gainers as the
month and year came to a close. Energen wins
as the turnaround stock for the month, up
8.33% and almost back to even with our purchase price last February. The portfolio as a
whole gained 14.64% for the fourth quarter and
11.95% for all of 1998.
and Downs
O
f the thirteen stocks in the minus column
for December, only Lockheed Martin lost
more than 10%. Its 18% drop caught our attention and we bought additional shares last week.
(See adjoining article) Harris Corp. and
PanAmerican Beverages score as our biggest
long-term losers, down 20% and 22%, respectively, since their inclusion in the portfolio.
2 for 1 is published and distributed by Neil Macneale, Inc.
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Ph 650-691-4079 Fax 650-903-9641 e-mail splits241@2-for-1.com
Neil Macneale, Inc., dba 2 for 1, is a Registered Financial Advisor
in California. 2 for 1 is published on the Friday of each
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but may be copied or quoted if attributed to the source.
2 for 1 subscription rates = $180 per year, $50 for three months
$24.95 for a single current issue, or $10 for any back issue.
Page 3
2 for 1
January 1999
2 for 1 MODEL PORTFOLIO - DECEMBER STATEMENT
# SH
CASH
HFFC
FFKY
EVGN
UTX
AVY
EMR
CSL
RGBK
RA
PB
PCAR
MMC
FTU
TX
HRS
FUN
KBALB
MEA
AIT
EGN
GPT
GD
NSP
STR
FPU
SVU
CNB
BBC
LMT
LCE
HF FINL CORP
FIRST FED FINL CORP KY
EVERGREEN BANCORP INC
UNITED TECHNOLOGIES CORP
AVERY DENNISON CORP
EMERSON ELECTRIC
CARLISLE COMPANIES
REGIONS FINANCIAL CORP
RECKSON ASSOC RLTY CO
PANAMERICAN BEVERAGES
PACCAR INC
MARSH & McLENNAN
FIRST UNION CORP
TEXACO
HARRIS CORPORATION
CEDAR FAIR, L.P.
KIMBALL INTERNATIONAL
MEAD CORPORATION
AMERITECH CORP
ENERGEN
GREENPOINT FINANCIAL
GENERAL DYNAMICS
NORTHERN STATES POWER
QUESTAR
FLORIDA PUBLIC UTILITIES
SUPERVALU INC
COLONIAL BANCGROUP
BERGEN BRUNSWIG
LOCKHEED MARTIN
LONE STAR INDUSTRIES
150
75
120
30
50
40
60
60
80
65
40
45
40
40
50
100
160
80
60
130
70
60
100
135
185
110
200
100
25
70
BOUGHT
QUOTE
AT
BUY
QUOTE
ON
12/31/98
7/31/96
10.667
18.250
7/31/96
21.500
26.750
9/17/96
14.500
32.125
10/16/96
60.875 108.750
11/19/96
34.625
45.063
12/17/96
46.875
60.500
1/21/97
31.250
51.625
2/19/97
29.750
40.313
3/18/97
22.875
22.188
4/15/97
27.625
21.813
5/20/97
42.250
41.125
6/17/97
46.792
58.438
7/22/97
47.219
60.813
8/19/97
56.500
53.000
9/16/97
45.500
36.625
10/21/97
23.625
26.000
11/18/97
19.078
19.000
12/16/97
28.188
29.313
1/21/98
42.094
63.375
2/17/98
19.750
19.500
3/17/98
37.500
35.125
4/21/98
45.000
59.000
5/19/98
27.719
27.750
6/18/98
19.063
19.375
7/21/98
14.875
17.125
8/19/98
23.250
28.000
9/22/98
13.000
12.000
10/20/98
22.750
34.875
11/17/98 105.938
84.750
12/28/98
35.938
36.813
TOTAL CASH AND EQUITIES
BASIS
1619.95
1632.45
1759.95
1841.20
1746.20
1889.95
1889.95
1804.95
1844.95
1810.58
1709.95
2120.58
1903.70
2274.95
2289.95
2377.45
3092.40
2269.95
2540.58
2582.45
2639.95
2714.95
2786.83
2603.39
2766.83
2572.45
2614.95
2289.95
2663.39
2530.58
67185.33
START
MONTH
1072.30
END
MONTH
3136.06
% OF
PORT
3.84%
2175.00
2081.25
3540.00
3215.63
2396.88
2600.00
2658.75
2325.00
1845.00
1515.31
1820.00
2618.44
2430.00
2302.50
1896.88
2500.00
3080.00
2425.00
3247.50
2340.00
2664.38
3483.75
2718.75
2590.31
3145.00
2839.38
2475.00
3112.50
2593.75
2530.58
2737.50
2006.25
3855.00
3262.50
2253.13
2420.00
3097.50
2418.75
1775.00
1417.81
1645.00
2629.69
2432.50
2120.00
1831.25
2600.00
3040.00
2345.00
3802.50
2535.00
2458.75
3540.00
2775.00
2615.63
3168.13
3080.00
2400.00
3487.50
2118.75
2576.88
3.36%
2.46%
4.73%
4.00%
2.76%
2.97%
3.80%
2.96%
2.18%
1.74%
2.02%
3.22%
2.98%
2.60%
2.24%
3.19%
3.73%
2.87%
4.66%
3.11%
3.01%
4.34%
3.40%
3.21%
3.88%
3.78%
2.94%
4.27%
2.60%
3.16%
81581.06 100.00%
The above list represents all of the securities recommended and bought by 2 for 1 over the last two and one half years. It shall not be
assumed that recommendations made in the future will be profitable or will equal the performance of the securities on this list.
MSBC came off the top of the "ladder" in
December and LCE was added to the bottom. 50 shares were added to BBC to reflect
the payout of its recent split. Dividends for
last month totaled $190.06 and interest and
misc. income was $24.38. The 2 for 1 portfolio was started in July, 1996 with $50,000. The
$67185 basis reflects $17185 in dividends
earned and capital gains realized since the
opening of the 2 for 1 model portfolio.
ACCOUNT VALUE SUMMARY - 12/31/98
Description
Last Month’s Closing Equity
Change In Stock Value
Interest and Dividends
This Month’s Closing Equity
Amount
80008.23
+1358.39
214.44
81581.06
Securities Net Market Value
Closing Cash Balance
78445.00
3136.06
Page 4