Many of my stocks have come out with their 2009 10-k reports in the past few weeks. Upon review, I’ve decided to sell 5 of the remaining 10 stocks in the portfolio. These 5 all had 2009 cash flows which, although positive, were low enough compared to their prior years to leave me uncomfortable predicting the future cash flows of the company, and thus its Intrinsic Value. These 5 were Pfizer (PFE), Dish Network (DISH), Magellan Petroleum (MPET), Noble Oil (NBL), and Total System Solutions (TSS). These are 5 very strong companies who managed a profitable cash flow in 2009, which many (if not most) companies were unable to do. Still, having predictable cash flows is one of my most important requirements for holding a stock. In aggregate, these 5 handily beat the S&P500 Index, which is shown by a new column I’ve added to the tracking spreadsheet (see the ‘Closed Stock Positions’ tab).
This leaves me low on stock, with a decent cushion of cash.
There are 2 other reasons I am quick to pull out of these stocks:
-We are in the toughest 9 month period of the Presidential Cycle; and
-Yield pressures suggest the risk of an “air pocket”.
All together I feel better about raising some cash here. As always, I am on the lookout for predictable, undervalued companies who deserve investment. I have a Watch List that continues to grow with names.