Performance For The Third Quarter Of 2012

All in all, a respectable quarter. I've gotten a decent boost from M&A and biotech so far this year, and I know better than to think that'll continue. I'd like to add some more tech, some emerging market, and maybe even more industrials (though I'm overweight there already).


Q3'12 Performance
Portfolio A - +8.1%
Portfolio B - +7.4%
Combined Portfolios - +7.8%

S&P 500 - +6.4%
Nasdaq -  +6.2%
Russell 3000 - +5.7%

YTD Performance
Portfolio A - +20.0%
Portfolio B - +23.6%
Combined Portfolios - +21.3%

S&P 500 - +16.4%
Nasdaq - +19.6%
Russell 3000 - +14.4%

Also, year to date, my Alpha is about 6.3% for the combined portfolios. So, not a bad year so far. 

Investopedia: Machinery Markets Catch Cold; Titan Gets The Flu

There are plenty of examples of small companies growing through tough times in their sectors, often by grabbing share with new and innovative approaches to old problems. Nevertheless, it is still generally the case that when the big boys catch a sniffle, the smaller companies suffer even more.

With major construction and agriculture equipment original equipment manufacturers (OEMs) such as Caterpillar (NYSE:CAT) and Deere (NYSE:DE) looking a little weaker (and their managements sounding more cautious), it's not so surprising that the shares of Titan International (NYSE:TWI), a maker of wheels and tires for off-road commercial vehicles, have weakened. Titan remains an ambitious and aggressive company, however, and these shares look quite interesting as a more aggressive play on long-term growth in sectors such as mining, construction and agriculture.

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http://www.investopedia.com/stock-analysis/2012/Machinery-Markets-Catch-Cold-Titan-Gets-The-Flu-TWI-CAT-DE-GT0928.aspx

Investopedia: Dana Looks Like A Name To Know In Parts

These are not easy times to be in the business of supplying parts and components for the passenger vehicle or commercial vehicle markets. Although U.S. auto sales have been quite good of late, business has slowed in Europe and many emerging markets, while numbers and management guidance from a host of truck, agriculture and mining OEMs has pointed to slowing trends as well.

Against that backdrop, I still think it is worthwhile for investors to take a closer look at Dana Holdings (NYSE:DAN). Numbers have come down a bit, and there are definitely risks in end-user demand for 2013, but this company's diversification across geographies, end markets, technologies and customers makes it a differentiated parts and components company. Coupled with a valuation that does not seem demanding, the stock is likewise interesting at these levels.

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http://www.investopedia.com/stock-analysis/2012/Dana-Looks-Like-A-Name-To-Know-In-Parts-DAN-AXL-MTOR-F0928.aspx

Investopedia: Bull Vs. Bear - Facebook's New Revenue Strategies Carry Real Risks

Question: Will Facebook's new plan for ads help push up its stock price?  

Bear's Response
Apart from the debate over whether Apple's (Nasdaq:AAPL) new iPhone is a great leap forward or the first warning of stalling innovation, perhaps the most popular topic in finance writing right now is "What's wrong with Facebook (Nasdaq:FB)?" and "Can it fix the problem?" It seems pretty clear that the more starry-eyed investors have had to revise their expectations down, but Facebook's management has been more assertive lately now that they have oncoming revenue growth strategies that will make a significant impact.

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http://www.investopedia.com/stock-analysis/2012/Bull-Vs.-Bear---Facebooks-New-Revenue-Strategies-Carry-Real-Risks-FB-GOOG-AMZN-GRPN0928.aspx

Investopedia: If Modine Manufacturing Can Turn It Around, The Rewards Could Be Significant

There aren't too many auto or commercial vehicle component manufacturers doing very well in the market right now, as even popular names like BorgWarner (NYSE:BWA) and Cummins (NYSE:CMI) are getting sold on fears about waning global demand. That leaves Modine Manufacturing (NYSE:MOD) in a precarious position - the company serves both passenger and commercial vehicle manufacturers, it has a sizable exposure to Europe and it's trying to execute a restructuring of some of its operations.

Although there's definitely a risk that Modine's restructuring efforts will fail, as well as industry-wide risks regarding demand and sustainable free cash flow generation, the potential payoffs of success make this a name worth watching.

Please read more here:
http://www.investopedia.com/stock-analysis/2012/If-Modine-Manufacturing-Can-Turn-It-Around-The-Rewards-Could-Be-Significant-MOD-HON-CAT-BWA0927.aspx

Investopedia: For Jabil, The Price Is Right But The Timing Is Uncertain

I don't know whether Jabil (NYSE:JBL) is really going to succeed in differentiating itself over the long term from the broader electronics manufacturing service (EMS) industry. What I do know, though, is that this is a tough stretch for the global economy and for key end markets like handsets, medical equipment, and communications/networking hardware. Jabil's stock does look undervalued, though, and while I think it may be too soon to make a major commitment here, I can see how this stock could appeal to more aggressive value hounds.

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http://www.investopedia.com/stock-analysis/2012/For-Jabil-The-Price-Is-Right-But-The-Timing-Is-Uncertain-JBL-AAPL-RIMM-FLEX0927.aspx

Investopedia: Overvaluation Could Split The Fortunes Of FactSet And Its Stock

It has been a few years now since I've had a regular Wall Street desk job, but I still miss having FactSet's (NYSE:FDS) databases and analytic tools close-at-hand. Not only does this financial information company offer a very sticky product, but the company also continues to add functionality and breadth to its platform. Unfortunately, the Street has long had a love affair with the stock as well, and I am worried that the process of transitioning from growth stock multiples to those of a more mature company could be a tough one for shareholders.

Please read more here:
http://www.investopedia.com/stock-analysis/2012/Overvaluation-Could-Split-The-Fortunes-Of-FactSet-And-Its-Stock-FDS-GS-TRI-MCO0927.aspx

Investopedia: Improved Traffic And Menu Revamp Optimism Boosting Darden

Sit-down restaurants have come back into favor over the past year or so, and Darden (NYSE:DRI) has gone along for the ride ... even though company growth really hasn't improved all that much. Darden remains a strong player in the industry, with two of the largest concepts (Olive Garden and Red Lobster) and sustained double-digit returns on capital. Although Darden shares don't look like much of a bargain today, the market may not be through with it yet, as menu revamps could spur better traffic and earnings.

Continue here:
http://www.investopedia.com/stock-analysis/2012/Improved-Traffic-And-Menu-Revamp-Optimism-Boosting-Darden-DRI-CAKE-BLMN-EAT0926.aspx

FinancialEdge: What's Your Best Chance Of Becoming A Millionaire?

Inflation may be inexorably eroding the value of a dollar, but achieving millionaire status is still an impressive and motivating goal. More importantly, it's an eminently attainable goal with hard work and careful planning. Here are some of the best ways that a younger person can think of earning a seven-figure net worth over time.

Three Key Questions
When thinking about how to accumulate a million dollars or more, there are three key issues that people must consider. First, a job must be accessible for it to offer a high likelihood of millionaire status. For instance, playing in a professional sports league dramatically increases the odds of earning enough to become a millionaire, but professional sports employ less than 5,000 athletes (among the big four North American leagues). Likewise, virtually every Fortune 500 CEO gets a million-dollar pay package (or better), but there are only 500 of those jobs available.

Please click here for the full column:
http://www.investopedia.com/financial-edge/0912/whats-your-best-chance-of-becoming-a-millionaire.aspx#axzz27O75zOi0

Seeking Alpha: SPX - A Complicated Power Play

It has been an interesting decade for SPX (SPW), as the company has gone through spasms of acquisition and divestiture but really hasn't set the world on fire with its margins, returns on capital, or free cash flow generation. With most of the business shuffling complete, and broadly improving utility demand, can SPX show that it deserves a spot on a list of quality industrial conglomerates?

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SPX: A Complicated Power Play

Investopedia: Will QE3 Give Paychex More Than it Takes Away?

When you're in the business of processing payrolls for small employers, a weak job market is a definite limitation on growth. Paychex (Nasdaq:PAYX) has been muddling through this period of weak job creation, and now there is a new Federal Reserve stimulus program specifically targeting job growth and employment. It's an open question as to whether this stimulus will succeed, but it's a near-certainty that low rates will continue to pressure Paychex's ability to wring profits from its float. That sets up Paychex for a high-quality but growth-poor play on improved employment, and an expensive one at that.

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http://www.investopedia.com/stock-analysis/2012/Will-The-Third-Round-Of-Quantitative-Easing-Give-Paychex-More-Than-It-Takes-Away-PAYX-ADP-INTU-CTAS0925.aspx

Seeking Alpha: Is There Room For One More Advanced Melanoma Treatment?

Investors should know in about three to six months if Vical's (VICL) Allovectin has the clinical credentials to get FDA approval for treating advanced melanoma. As another cancer immunotherapy company, Dendreon (DNDN), has ably demonstrated though, approval from the FDA is no guarantee of attaining commercially viable market share or retaining investor enthusiasm. So with all of the attention that Roche (RHHBY.OB) and Bristol-Myers (BMY) have gotten for their melanoma drugs Zelboraf and Yervoy, is there enough opportunity left in advanced melanoma for Vical?

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Is There Room For One More Advanced Melanoma Treatment?

Investopedia: Red Hat Keeps Booking The Dealds, But Is It Growing Enough?

I'll give credit where it's due - Red Hat (NYSE:RHT) did a great job with its Linux business, and management has shown prudent aggression when it comes to building next acts in middleware, storage, virtualization and cloud. The question, though, is whether the company can deliver the sort of growth and margin leverage that the valuation assumes. So far, it's not looking like a sure thing.

Read more here:
http://www.investopedia.com/stock-analysis/2012/Red-Hat-Keeps-Booking-The-Deals-But-Is-It-Growing-Enough-RHT-ORCL-IBM-EMC0925.aspx

Investopedia: Lennar Rebuilding, But Valuation Overbuilt

Homebuilders have already had a heck of a run over the last year, with names like Toll Brothers (NYSE:TOL), DR Horton (NYSE:DHI) and Lennar (NYSE:LEN) all up more than 125% over the last year and up many times over from the lows in the late fall of 2008. What concerns me is whether these moves have already discounted a lot of the early gains from the nascent housing recovery - setting up the possibility that housing activity (and prices) could continue to improve without necessarily taking the homebuilder stocks with them.

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http://www.investopedia.com/stock-analysis/2012/Lennar-Rebuilding-But-Valuation-Overbuilt-LEN-DHI-PHM-KBH0925.aspx

Investopedia: Citrix May Be A Relative Bargain, But There's A Lot Left To Prove

Valuations in the software sector, particularly among those companies having anything to do with "cloud," are pretty bonkers right now. That leaves stocks like VMware (NYSE:VMW) and Citrix Systems (Nasdaq:CTXS) as what passes for "value." Value doesn't come without a catch, however, and in the case of Citrix, that catch is the sharp and ongoing debate about whether desktop virtualization can really catch on beyond the early adopters who are already on board.

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http://www.investopedia.com/stock-analysis/2012/Citrix-May-Be-A-Relative-Bargain-But-Theres-A-Lot-Left-To-Prove-CTXS-VMW-MSFT-CSCO0925.aspx

Investopedia: The Long-Tail Value Of Supreme Brands

The way tech companies like Apple (Nasdaq:AAPL) and drug companies like Pfizer (NYSE:PFE) fight to defend their patents, you'd think that success in business is impossible unless you can lock up your best ideas behind walls of patents and copyrights. While these legal protections for innovation are indeed important, a host of companies have demonstrated that there are considerable rewards to be wrung from brands and reputations protected by little more than the consumer's ongoing preference for the real McCoy and the value of the trademark.

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http://www.investopedia.com/stock-analysis/2012/The-Long-Tail-Value-Of-Supreme-Brands-APPL-KO-KNE-JNJ0925.aspx

Investopedia: Budget Worries Could Crimp Cubic In The Short Term

I think many investors spend too little time thinking about their investing horizons when contemplating new positions. Although "buy and hold until it works out" is probably the default strategy for many investors, it can lead to some tense moments in the short-term. That brings me to Cubic (NYSE:CUB), a company which I think has a very interesting long-term outlook, but may well underperform for the next year or two.

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http://www.investopedia.com/stock-analysis/2012/Budget-Worries-Could-Crimp-Cubic-In-The-Short-Term-CUB-FSS-LMT-LLL0924.aspx

Seeking Alpha: Can Sun's Superiority Send It Higher?

Although 2012 has been a tough year for industrial names, hydraulic component players like Eaton (ETN), Parker-Hannifin (PH), and Sauer-Danfoss (SHS) still post quite solid 12-month returns relative to the S&P 500; about 40% higher on average. That makes Sun Hydraulics (SNHY) a notable and surprising laggard, with the trailing year's return about 40% lower than the market. Sun stands out as a high-quality and differentiated industrial small cap, but producing an appealing fair value target takes some effort and above-average optimism.

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Can Sun's Superiority Send It Higher?

Investopedia: The Market Is Already Expecting Big Things At Dril-Quip

There's ample business to come in offshore energy development, what with the huge discoveries of oil and gas in the waters off Brazil, and both East and West African countries. The question, however, is how much of that is already reflected in the valuation of equipment companies such as National Oilwell Varco (NYSE:NOV), Aker Solutions (OTC:AKKVF) and Dril-Quip (NYSE:DRQ). In the case of the latter, it looks like quite a lot.

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http://www.investopedia.com/stock-analysis/2012/The-Market-Is-Already-Expecting-Big-Things-At-Dril-Quip-DRQ-NOV-PBR-GE0924.aspx

Investopedia: For Oracle, Mixed Progress Is Still Progress

The stock of enterprise software giant Oracle (Nasdaq:ORCL) has certainly come alive this summer, but there's more than a little skepticism about the health and durability of the company's growth. While bulls think that engineered systems and Fusion applications will reignite (or at least maintain) growth, skeptics point to Oracle's soft organic growth and threats to its basic enterprise business model. The stock seems undervalued on a cash flow basis, though, and double-digit license growth should tip the balance to the bull camp in the short term.

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http://www.investopedia.com/stock-analysis/2012/For-Oracle-Mixed-Progress-Is-Still-Progress-ORCL-IBM-HPQ-SAP0924.aspx