Nov 2015 Newsletter Guiding Mast Investments

8/20/2019 Nov 2015 Newsletter Guiding Mast Investments

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November 2015

1 Guiding Mast Investments Saratoga Springs, NY [email protected] 2015 ©

We Help You Better Manage Your Money

Tear Sheet Nov 2015Publisher’s Commentary: Nov 1, 2015

Stocks staged a strong rebound in Oct. Page 2

First Trust Advisors offers an interesting analogy

to NASA’s space program of the 1960s. Page 2

Don’t forget to consider investment risk

tolerance. Page 3

Major oil firms continue to get slammed asquarterly profits, or lack thereof, are reported.

Page 4

MLPs, as a group, finished the month with a 9.7%

total return, breaking a 5-month losing streak

Page 5

Capital outflows from Sovereign Wealth funds

are starting to pinch asset managers. Page 5

Och Ziff (OZM) is struggling. Page 5

The strong dollar is affecting exporters’ earnings,

consumer spending continues to rise. Page 6

Walgreens is winning on its patent front. Page 7

RBC is bullish on the overall market, but

earnings reductions are a headwind. Page 8

Guiding Mast Stock Rankings

Full Speed Ahead and Power Up;Stocks Moving Up and Down in Ranking Page 9

High Ranking Stocks by Sector;

Value and High Quality Market Plays Page 10

Morningstar & Technical Guidance

Morningstar Sector Fair Market Valuation;

Margin of Safety Page 11

Moving Averages and P&F Charts Page 11

Layman’s Interpretation. Page 13

Best Stocks of the Month

GATX: Quality Small Cap Value Core Holding

with Acceptable Yield. GATX, founded in 1898,is the one of the largest global railcar leasing

firm with control over 149,000 cars. Page 14

Stock Ideas off the Radar Screen – Wisdom

Tree asks, “What do the Fed and BBQ have in

common?” Page 16

Notes from the Top

Walgreens Boots (WBA) share price is down, but

far from out…Kinder Morgan (KMI) issued ashort-term, mandatory preferred which trades at

a 10% yield…Exelon (EXC) announced quarterlyearnings were 6% above last year and 17% above

consensus…Sherwin-Williams (SHW) earnings

rose on the strength of its consumer business…

As it relates to Berkshire-Hathaway (BRK.B), Bill

Ackerman has brought the “Great Salad Oil

Swindle of 1963” to the forefront again. Page 18

Strategic Subject of the Month

The Austrian Oak’s Six Rules for Successful

Investing. Page 20

About Us

Subscriptions, How to Use Your Newsletter Page 2


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Publisher’s Commentary November 2015


Guiding Mast Investments

Commentary: Nov 1, 2015

"It's not how much money you make, but how

much money you keep, how hard it works for you,

and how many generations you keep it for." -

Robert Kiyosaki

Stocks staged a strong rebound in Oct. U.S.

stocks close out their best month in four years.

For all of October, the Dow gained 8.5%, the S&P

500 8.3%, and NASDAQ 9.4%. David Moenning,Heritage Capital Research, offers a nice 6-month

chart with comments concerning investor’s

worry about underlying economic growth.

Below is a 6 month chart of the S&P 500:

Since hitting a short-term double bottom in late

Aug and again in late Sept, it seems investors are

warming to the idea that a profit recession in

some sectors will not spread and that the Feds

will continue to delay the inevitable rate

increases.

Financials rose the most on a relative valuation

basis. Using the Morningstar’s Fair MarketValuation, the financial sector rose from Fair

Valuation of 0.81 at the end of Sept to 0.99 at the

end of Oct, or a 22% increase. Basic Material was

second with a 15% rise in relative valuation,

followed by Energy and Real Estate at 11%.

The recent strength of the markets has moved it

back into the Caution levels with the Equal

Weighted S&P 500 (RSP) at $78.70 and it lies

between its 75-day Moving Average of $79.86

and its 200 day Moving Average of $77.59. In

addition, the Point and Figure charts turned

bullish on Oct 20, with a tentative price objective

of $93. However, the margin of safety is quite

slim with reversal markers on moving averages

being a mere 1.5% below current trading levels.

First Trust Advisors offers an interesting analogy

to NASA’s space program of the 1960s. From

their latest weekly update: The US stock market

reminds us of Alan Shepard in 1961. Exasperatedby the long wait in his Mercury Spacecraft

“Freedom 7” while NASA engineers fiddled, he

said, “Why don’t you fix your little problem and

light this candle?” They finally did and he became

the first American to go into space.

These days, the Pouting Pundits of Pessimism are

like NASA, constantly finding a reason to delay a

Federal Reserve liftoff – er, we mean rate hike. All

the while, the stock market, like Shepard, isn’tworried and gets annoyed by delay.

So, last week’s Fed statement was welcome relief.

The Fed eliminated its worry about economic

problems abroad (which means China).

Additionally, the Fed shifted language


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dramatically regarding how it views the timing of

a rate hike.

Markets took this as a sign that a December lift-

off is really on the table. Stock prices increased

sharply. In effect, saying, “…light this candle.”

And guess what, the Fed is highly likely to get

what it needs. Plugging recent data on

unemployment claims and consumer spending

into our models suggests payrolls expanded

about 240,000 in October, much higher than the

consensus expected 180,000. Moreover, after our

piece last week on benefits hiding wage increases

(link), the Wall Street Journal reported the same

thing today (link). We think the Fed is looking at

this too, and rate hikes are on the way.

Some investors think next year’s election will keep

the Fed from raising rates, but the Fed raised

rates in 1984, 1988, 2000, and 2004, and the

incumbent party won three times and essentially

tied the fourth.

The scary part for some investors is the

assumption that equities will sell off when the Fed

raises rates. But that’s an odd assumption given

what happened last week and given the fact that

the market dropped 7.2% in the two weeks after

the Fed decided not to raise rates back in

September.

These pundits are thinking backward. A rate hikewill ratify the fact that the economy has

improved.

Rate hikes won’t hurt stocks, which are being

lifted by profits, and they also won’t kill housing.

As rents grow faster due to tight inventory,

demand from home buyers will remain robust

despite slightly higher mortgage rates.

What rate hikes will do is push longer-term

interest rates higher, because the market cannot

permanently project low short-term rates. Also, it

rips the legs out from under the gold market. We

still think gold is worth about $950/oz.

So, as the Fed lights the candle, look for stocks to

leave bonds and gold on the launch pad, just like

Alan Shepard left earth

Don’t forget to consider investment risk

tolerance. From RBC’s latest market review,

“Invest in the US – The Least Worse Alternative”

by Robert Keiser, Vice President, Global Markets

Intelligence: Going forward, the question is

whether stocks will continue to offer superior

returns to bonds and thus justify investors’

increased risk taking. Despite the weakness

currently evident in the manufacturing-centric

portion of the U.S. economy, we believe that high-quality U.S. equities should generate about 10%

average total returns over the multi-year balance

of the current economic recovery cycle. From this

perspective, stocks remain the best asset

allocation alternative for intermediate- to long-

term horizon investors with average risk

tolerance. Nonetheless, for investors who have

correctly been overweight equities on a risk-

comfort basis since the Fed announced QE3, this

could be a good time to reduce portfolio risk if youbelieve that the relative average outperformance

of stocks could narrow to approximately 500 bps

from the 1,300-plus bps recoded since September

2012

More importantly is their observation of the

dilemma for many investors:


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Because bond market yields are so low, investors

are increasingly being pushed further out on theinvestment risk curve in search of a rate of return

that they can live on. The fact that the S&P 500’s

dividend yield (2.2%) is currently on par with the

yield-to-maturity of the 10-year Treasury note

(2.1%) illustrates the dilemma facing many

investment income-oriented investors.

Unfortunately, when addressing the

aforementioned issue, we cannot simply compare

dividend yields to yield-to-maturity since

consideration must be given to an individual’s risk

tolerance, investment horizon, and real-time

requirement for positive inflation-adjusted

investment income.

Below is their current asset allocation

recommendation. S&P’s allocation could offer a

comparison point for investors to compare their

own allocation profile as the year-end

approaches.

Major oil firms continue to get slammed as

quarterly profits, or lack thereof, are reported.

From oilprice.com weekly commentary: Third

quarter earnings capture some of the worst losses

recorded since the downturn in oil prices beganlast year. Oil prices have displayed great volatility

over the last twelve months, rallying to $60 per

barrel in the second quarter before dropping back

down to current levels in the mid-$40s. That has

contributed to some large impairment charges

and quarterly losses for the world’s biggest oil

companies. Here is a quick snapshot of some of

the quarterly figures:

• Hess (HES) reported a net loss of $291 million,

or a loss of $1.03 per share. Production jumped,

however, from 318,000 boe/d in 3Q2014 to

380,000 boe/d in 3Q2015.

• Marathon (MRO) became the first large U.S.

shale producer to cut its dividend, slashing it from

21 cents to 5 cents per share, or a cut of 76

percent. “When you see major companies cutting

dividends, that’s telling you things are bad,” Carl

Larry of Frost & Sullivan told Bloomberg. “They’ve

been placating investors by saying the dividends

are fine, you’re still going to make money, don’tworry about it. Now they’re facing reality here.”

• ConocoPhillips (COP) reported a $1.07 billion

loss, or $0.87 per share, the largest in six years.

ConocoPhillips doesn’t have much exposure

downstream, which has helped some other

integrated oil companies offset upstream losses.

Conoco says that it will maintain its dividend.

Production also rose increased by 5.5 percent to

1.55 million boe/d

• Royal Dutch Shell (RDS.A) revealed a huge $6.1billion loss for the quarter, which included

impairment charges of $7.9 billion. Shell ditched

its drilling campaign in the Arctic and also wrote

off assets in Canada’s oil sands. Stripping out the

huge one-off losses, Shell earned $1.8 billion, still

down 70 percent from the third quarter of 2014.


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• ExxonMobil (XOM) posted a reasonable $4.24

billion profit, or $1.01 per share, beatingexpectations and outperforming its peers.

However, profits are still half of the $8.07 billion

from last year’s third quarter, and the year is

shaping up to be the company’s worst

performance since 2009. Exxon’s upstream sector

saw profit plunge by 79 percent, but that was

offset by the doubling of earnings downstream to

$2 billion.

• Chevron (CVX) earned $2 billion for the

quarter, or $1.09 per share. That is down by 35

percent from year ago figures. The company also

announced it would lay off 6,000 to 7,000 workers

and it would sell off $5 to $10 billion in assets by

the end of 2017.

• Even PetroChina (PTR), China’s largest oil and

gas producer, reported miserable numbers.

Earnings fell to 5.2 billion yuan, or 0.03 yuan per

share. That is about one fifth of the level from a

year ago. The performance was the worst for

PetroChina on record.

MLPs, as a group, finished the month with a

9.7% total return, breaking a 5-month losing

streak and was just the third positive month since

August 2014, a 14-month span. On a total return

basis, this past month was the second best on

record, just missing Oct 2011’s 10.3% return.

October is historically a strong month for MLPs,

which is consistent with their quarterly cycles.

The first month of a quarter is typically the

strongest, with the second month being theweakest due to distribution timing and

subsequent yield-related selling. November

returns could be a tossup as it is the month for

distributions but the sector has strong

momentum going into trading.

Capital outflows from Sovereign Wealth funds

are starting to pinch asset managers. As low oilprices decrease revenue inflows for oil-producing

states, their Sovereign Wealth Funds are cashing

out of investments in order to return capital back

to their governments. For example, The Financial

Times has reported the Saudis have pulled $70

billion from their wealth managers. Larger asset

managers will be hit the hardest, since large

sovereign wealth funds tend to prefer well-

known brands. From FT article: “Our view is that

if the oil price stays where it is, oil-rich funds will

continue to take reserves back. Longer term,

that’s a trend we view to be negative for the asset

management sector. That is bad news for

companies like Blackrock (BLK) and State Street

(STT), large wealth management companies.

State Street saw $65 billion in capital outflows

from its management in the second quarter of

2015. State Street manages $662 million from the

Azerbaijan sovereign wealth fund, but the

Azerbaijani fund plans on bringing all of that

asset management in-house. Blackrock suffered$24 billion in capital outflows. JPMorgan (JPM),

Deutsche Bank (DB), and UBS (UBS) are also likely

to be negatively impacted, but are keeping

figures close to the vest. A manager from one of

the latter companies conceded that the decision

by sovereign wealth funds to pull out cash “hit a

little close to home for us.”

While the financial sector has been strong

recently, alternative asset managers have not.Low asset growth internationally coupled with

asset outflows will continue to be the less-

obvious problems of many wealthy managers.

Och Ziff (OZM) is struggling with overall

performance growth, but offers unparalleled

value. While assets under management (AUM)


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has been rising, 2015 earnings per share

estimates have declined from $1.40 to $0.76.Utilizing a “2 and 20” pricing strategy, OZM

collects a quarterly fee based on value of assets

under its control along with a annual higher fee

on account appreciation, but only if it breaks a

high-water mark established from the year’s

previous value. OZM collects its annual fee at the

end of the year, reports it as a 4th qtr. item and

dispenses a variable distribution the following

February. This annual fee causes the uneven

nature of OZM earnings and distributions. With

weak global equity prices, investors are reducing

their expectations for 4th qtr. earnings and

distributions, reflecting lower performance fees.

Share prices have fallen out of bed, declining

from the $11 to $13 range to $7. Generically,

OZM performs well with rising international asset

price appreciation.

Year to date, the Dow Jones Global Stock Index,

Ex US is down -3.1% and the total Global Index is

down -1.3%. While OZM has a large Europeanfund and Europe has been strong YTD, investors

fear it may not be sufficient to exceed last year’s

high-water mark. Morningstar offers its highest

rating of 5 Star on OZM, with the following

synopsis:

Bulls Say: For investors interested in multi-

strategy hedge funds, Och-Ziff is one of the best

choices available with its low-volatility returns

approach. Och-Ziff’s hedge fund model meansthat it does not have to engage in constant

capital-raising efforts to replace assets that

would normally exit a private equity fund once a

company is sold to another buyer. Och-Ziff is

typically more aggressive than peers with regards

to paying out dividends, with an economic net

income payout ratio of 80%-95% versus the 40%-

50% of peers.

Bears Say: Och-Ziff has consistently stated that it

will wait on developing a fund for the individual

investor market, which we fear will place it

significantly behind more aggressive competitors.

We question whether Och-Ziff has the scale

needed to successfully increase real estate AUM

and position itself to grab the best opportunities,

given the heated competition in the space. The

U.S. Department of Justice is investigating Och-

Ziff's activities in Africa for potential Foreign

Corrupt Practices Act violations.

OZM 4th qtr. looks like it will be a disaster.

Quarterly estimates came down from $0.75 three

months ago to $0.13 currently, vs a lackluster

$0.50 4th qtr. 2014. As expected, OZM

announced $0.13 for the most recent quarter,

based on sub-par management fees and higher

expenses. Assets under management declined

5% from 2014, in step with industry. 2016estimates are also moving lower, from $1.60

three months ago to $1.35 currently. Along with

earning estimate reductions, distribution

expectations have fallen as well. If OZM earns

$.71 for the year and pays out 80%, the

distribution would decline to $0.56 and offer a

yield of around 8.0%.

OZM comes up high on our list due to its above

average yield, low PEG ratio and it is well liked byanalysts. However, it has not prevented current

investors the pain of falling share prices. For

patient investors looking for higher current

income (coupled with a higher risk profile), I am

still bullish on the alternative asset manager

sector and endorse our top financials, especially

OZM, KKR (KKR) and BGC Partners (BGCP).


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The strong dollar is affecting exporters’

earnings. According to the St. Louis Fed's trade-weighted dollar index, the US Dollar is at its

highest Oct close in 12 years. US dollar strength

translates into lower exports and lower export

profits, so expect companies with large foreign

income to report lower earnings. The other side

of the coin will be consumer stocks which focus

on domestic markets, and domestic healthcare.

During the first quarter 2015 the US dollar was

also strong, stocks in the industrial, financial,

energy and utilities sectors posted negative

returns. The best S&P 500 sector performers at

the time were healthcare and consumer

discretionary names. These sectors may be the

best performing until the Dollar weakens.

A strong dollar is just one of the conundrums for

the Fed. As US rates climb vs competitive rates

abroad, it lends added strength to the currency,

aggravating profits for large multi-national

companies like Caterpillar (CAT), IBM (IBM), 3M(MMM), and Johnson and Johnson (JNJ).

A higher dollar also negatively affects commodity

prices, reducing profits at mining companies and

keeping pressure on low oil prices. Adding to the

differential is the positive impact on the strength

of US consumer spending that usually accompany

low oil prices.

Staying on the consumer story, consumerspending continues to rise. As shown in the

following chart from RBC Wealth Management

outlining y-o-y spending growth over the

previous 10-years, consumers continue to

support the overall economy. While the 3rd qtr.

GNP looks like it expanded by a measly 1.5%,

down from 3.9% in the 2nd qtr., consumers

continue to spend, albeit at a slightly lower pace.

Walgreens (WBA) is not only gobbling up

competitors, it is also winning on its patent

front. Retailers are increasingly filing patents –

what’s up with that and why should I care? The

world of technology patents is starting to

incorporate retailers and banks that have

invented new ways to access, create, and utilize

internally generated data. From an article

published on ciodive.com, “Equifax has patented

a system for monitoring child identity theft and

Walgreens won a patent for integrating

pharmacy and health data. Meanwhile, Bank of

America has increased its efforts to win patents in

the last five years. In 2014, according to data

from the U.S. Patent and Trademark Office, thecompany received 232 patents.”

These innovations may help companies like WBA

justify acquiring competitive retailers. As an

alternative, innovations could create an

additional revenue stream if they are offered to

other companies as licenses.


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RBC is bullish on the overall market. Below is a

chart showing the rising channel for the S&P 500,going back to the depths of 2009. As shown

below, the markets have fallen from the high end

of the channel to the lower end, but has not

penetrated the lower end limits of the channel.

From RBC’s most recent Global Outlook Weekly,

“Currently, the following industries appear

attractive to us based on technical and

fundamentals: electric utilities, regional banks,

consumer staples, foods, telecom, technology,

Internet, aerospace and defense. From both a

technical and fundamental perspective, we

believe the bull market is in the early part of a

much longer secular (long-term) bull market that

may have the potential to equal or exceed the

performance of the past six years.”

Flying in the face of these upbeat assessments isthe trend of downward earnings revisions. On

our list of followed companies are 135 firms of

various sizes and sectors. One matrix we closely

follow is this year’s and next year’s earnings

estimates, and this information is used to

calculate other fundamental valuations like the

forward PEG ratio. Below is a recap of the sector

earning estimate reductions on a month-endbasis for various sectors Aug to Oct 2015

Source: Guiding Mast Investments

Over the previous 3 months, there has been a

large number of earnings estimate reductions –

119 downgrades and 35 upgrades. It may be a bit

surprising the number of financial sector earnings

reduction is higher than for energy companies.

70% of these revisions has been in the Financial,

Energy, and Industrial sectors. While these

sectors have seen the most damage to their

earnings, overall sector valuation seem to beFairly Valued, according to Morningstar.

Selectivity in these sectors is preferred.

Recommended list changes. Based on

comparative valuation, revised earnings

projections and the recent market strength, eight

stocks moved up to a Full Speed Ahead or Power

Up rating and eight moved down to Neutral. This

is an unusually high number, and demonstrates

the shift in valuation during the most recent rally.Defensive stocks in Health Care and Consumer

accounted for 3 of the 8 upgrades, 2 of the 8 for

Financials, and 1 each Industrial, Energy and

Tech. Of those falling to Neutral, 2 were in Tech,

2 in Industrials and the balance 1 each across the

board of sectors.

Oct - 50

Reductions

Sept - 24

Reductions

Aug - 45

Reductions

Total

Revisions

%

Revis

Finanical 16 5 10 31 26%

Energy 10 9 10 29 24%

Industiral 11 3 10 24 20%

Basic Materials 4 4 5 13 11%

Tech 4 2 4 10 8%

Consumer 3 1 2 6 5%

Health Care 2 0 1 3 3%

Utilities 0 0 3 3 3%

50 24 45 119


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Guiding Mast Stock Rankings Nov 2015


Guiding Mast Stock Rankings

Guiding Mast Rankings are based on price to forward

earnings growth ratios, current dividend yield, forward

earnings yield, S&P Equity Ranking, and consensus of

broker timeliness. The investment time horizon for Guiding

Mast Rankings is 3-years. The list below comprises the top

30 stocks, in order, of the 132 equities followed by Guiding

Mast Investments. These are worthy of additional research.

The highest Navigator Ranking is “Full Speed Ahead”,

followed by “Power Up”, “Neutral”, and “Power Down”

Full Speed Ahead

KKR KOHLBERG, KRAVIS, ROBERTSFIG FORTRESS INVESTMENT

OZM OCH ZIFF

BGCP BCG PARTNERS

HIFR INFRA REIT

UNH UNITED HEALTH

PWCDF POWER CORP

GMT GATX

BNS BANK NOVA SCOTIA

EXC EXELON

JCI JOHNSON CONTOLSITC ITC HOLDINGS

DM DOMINION MIDSTREAM LP

HOG HARLEY DAVIDSON

TRN TRINITY

Power Up

BRK-B BERKSHIRE HATHAWAY

BDX BECTON DICKSON

WBA WALGREENS BOOTS

JPM JP MORGAN

LOW LOWES

RICK RCI HOSPITALITY

UTX UNITED TECHNOLOGIES

SHW SHERMAN WILLIAMS

DMLP DORCHESTER MINERALS

MS MORGAN STANLEY

FLEX FLEXTRONICS

CBI CHICAGO BRIDGE

TXT TEXTRON

LNC LINCOLN NATIONALHI HILDENBRAND

Stocks Moving Up and Down in

Guiding Mast Rankings

The following are stocks that moved up to or

down from the top two “buy” tiers over the past

month:

UP

BDX Becton DickinsonWBA Walgreens Boots

JPM JP Morgan

RICK RCH Hospitality

SHW Sherman Williams

DMLP Dorchester Minerals

FLEX Flextronics

LNC Lincoln National

Down

MERC Mercer Int’l

CTSH Cognizant

TGT Target Stores

BA Boeing

CWCO Consolidated Water

FLR Fluor

CNI Canadian National

Noteworthy Near Misses

As our methodology has a relative focus (Firm A is

mathematically higher ranked than Firm B, and then review

the top 30) rather than an empirical focus (all firms over a

preset number), near misses are a great place to find ideas

worthy of further research. In addition to those moving

down only a few points, this month’s noteworthy near

misses are:

HD Home Depot BAC Bank America

MOV Movado SYK Striker


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Guiding Mast Stock Rankings Nov 2015


Highest Ranking Stocks by Sector*= New this Month

Basic Material: Mercer Int’l (MERC), Glencore

(GLNCF)

Consumer Discretionary: Harley Davidson (HOG),

Lowes (LOW)

Consumer Staples: Walgreens Boots (WBA)*

Hildebrand (HI)

Energy: Dominion Midstream (DM), Dorchester

Minerals (DMLP)*

Financial: KKR (KKR), Fortress Investments (FIG)*

Health Care: United Healthcare (UNH), BectonDickinson (BDX)

Industrial: GATX Corp (GMT), Sherman Williams

(SHW)*

Tech: United Technologies (UTX)*, Textron (TXT)

Utilities: InfraREIT (HIFR), Exelon (EXC)

High Quality and Low Valuation

Market Plays*= New this Month

Standard and Poor’s S&P Capital IQ Research Services

offers an Equity Quality Ranking system that rates

companies on two factors: Consistency in 10-yr Earnings

Growth and Consistency in 10-yr Dividend Growth. “A+” is

the Highest with “B+” considered Average. Of the 4,000 or

so companies followed by S&P (of which 450 have equity

ratings), there are only 47 firms qualifying for “A+” ranking,

and 132 with an “A+” or “A” ranking. Listed below are

companies with “A+” or “A” ranking and highest on ourGuiding Mast Recommendation List:

“A+”

BRK-B Berkshire Hathaway

UTX United Technology

UNH United Health

WBA Walgreens Boots

“A”

BNS Bank Nova Scotia

SHW Sherwin WilliamsBDX Becton Dickinson

JCI Johnson Controls


11/25

M* and Technical Guidance Nov 2015


Morningstar Sector

Fair Market Valuation

Morningstar offers “Market Fair Value” calculations for

sectors it follows. When valuation is 1.00, the sector is

fairly valued, when over 1.00, the sector is overvalued and

when below 1.00 the sector is undervalued. Below is a 4-

month table of each sector as of the end of the month.

Source: Morningstar, Guiding Mast Investments

The top four sectors offering the “best value” are

Basic MaterialsHealth Care

Energy

Industrials

New 52-Week Fair Market Value Highs and Lows

Highs: None

Lows: None

Margin of Safety

The following table outlines the difference between the

current market vs. the corresponding technical

support/resistance levels of Moving Averages and Point &

Figure charts. These numbers are offered as a % over or

under the respective trend indicators. This could be

described as the Margin of Safety, or the percentage

movement until a technical reversal is reached.

Source: Guiding Mast Investments

Technical Market Trends:

Caution

RSP Chart 1-Yr, 75-day MA in Gold,

200-day MA in Blue

2015 2015 2015 2015

Sector Oct Sept Aug July

52 wk

Hi/Low

Basic Material 0.91 0.80 0.88 0.90 1.01-0.80Consumer Cyc 0.96 0.88 0.93 0.97 1.11-0.88

Financials 0.99 0.81 0.86 0.94 1.05-0.81

Real Estate 0.99 0.89 0.93 0.94 1.16-0.89

Consumer Def 1.03 0.97 0.96 1.02 1.08-0.93

Healthcare 0.95 0.89 0.99 1.04 1.11-0.89

Utilities 1.02 0.97 0.97 0.98 1.17-0.95

Telecom 1.01 0.94 1.01 1.04 1.06-0.94

Energy 0.98 0.88 0.84 0.82 1.03-0.73

Industrials 0.98 0.91 0.95 1.02 1.14-0.91

Technology 1.01 0.93 0.97 1.02 1.17-0.92

All M* Stocks 0.96 0.88 0.93 0.97 1.06-0.88

NYSE 0.95 0.87 0.92 0.94 1.07-0.87

NASDAQ 1.00 0.90 0.96 1.02 1.15-0.90

Cyclical Stocks 0.92 0.84 0.90 0.97 1.05-0.84

Defensive Stocks 0.99 0.94 0.98 1.02 1.11-0.94

Sensitive Stocks 1.00 0.91 0.94 0.96 1.07-0.89

* New High/Low During Last 30 days

Month

End RSP

75-day

MA

200-day

MA P&F

Oct 15 $ 78.70 -1.5% 1.4% 2.4%

Sept 15 $ 72.96 -7.6% -9.8% 1.3%

Aug 15 $ 76.58 -5.1% -5.2% 4.7%

July 15 $ 80.30 -1.5% 0.0% 1.6%

June 15 $ 80.25 -2.0% 0.5% 1.6%

May 15 $ 81.97 0.1% 3.2% 2.4%

April 15 $ 81.38 0.9% 3.5% 2.9%

Mar 15 $ 80.66 0.5% 3.3% 2.1%

Feb 15 $ 82.40 2.9% 6.1% 4.1%

Jan 15 $ 77.72 0.0% -1.0% 0.9%

Dec 14 $ 80.03 3.0% 4.9% 3.8%

Nov 14 $ 80.16 4.0% 6.1% 4.0%

Oct 14 $ 77.05 1.2% 3.6% 4.0%


12/25



Guiding Mast Investments utilizes the 75-day moving average

(MA) and the 200-day MA as reference points for medium-term market trends. We rely on the Equal-Weighted S&P 500

ETF (RSP) as the “market” indicator. With an equal-weighted

index, each component is rebalanced to an equal amount

quarterly to reflect price movements and offers a broader

reflection of overall market trends than the market-weighted

S&P 500 ETF. When the current price is above both the 75-

and 200-day MA, the trend is Green or Positive. When the

current price is below the 75- and above the 200-day MA, the

trend is Yellow or Caution. When the current price is below

both the 75- and 200-day MA, the trend is Red or Negative.

Current Price RSP $78.70 Last Month $73.06

75-day MA $77.59 Last Month $78.47

200-day MA $79.86 Last Month $80.08

Point & Figure Technical Chart of RSP

Guggenheim S&P 500 Equal Weight ETF

Courtesy of StockCharts.com

P&F Pattern: Double Top Breakout on Oct 20

Tentative Bullish Price Objective $93

Reversal of Bullish Trend: Below $76.99.

“As the most common signal in the P&F universe,

Double Top Breakouts are also the most prone to

whipsaw and failure. Double Top Breakouts

should be viewed in the context of the bigger

picture. It is important to employ other aspects of

technical analysis when using signals as common

as Double Top Breakouts.”

More information on P&F Charting:http://stockcharts.com/school/doku.php?id=cha

rt_school:chart_analysis:pnf_charts

A Point and Figure Chart is a simple graphic that provides a

bit longer history than many conventional charts. The chartis maintianed in a series of columns with boxes

representing the stock price. When the price movements

goes up to the next box, a x is marked. When the price

movements goes down to the next box, a o is marked. Each

time there is a movement of more than 3 boxes, a trend is

established. If it is reversal, then another column is added

to the chart. Once you get the hang of it, P&F chaarts are

very useful in tracking trends.

A bit of additional explaination concerning P&F chart

trends: “There are over a dozen P&F signals, but only two

basic signals. X's represent advancing columns and O's

represent declining columns. P&F columns alternate as

prices reverse and change direction. A basic P&F buy signal

occurs when a column of X's exceeds the prior column of

X's. A basic P&F sell signal occurs when a column of O's

exceeds the prior column of O's. It's that simple.”

“X” indicates stock is achieving a higher price level

“0” indicates stock is achieving a lower price level

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:pnf_chartshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:pnf_chartshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:pnf_chartshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:pnf_chartshttp://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:pnf_charts


13/25



Layman’s Interpretation

Based on the Equal-Weighted S&P 500 Index ETF

(RSP): RBC’s technical notes for Nov is titled:

One Extreme to Another. We believe that the rally

by the Dow Industrials and the S&P have been

pretty remarkable over the past month, and is

evidence the volatility is still running high,

although it is not as noticeable when stocks are

rising. But it does still suggest that when a

pullback does arrive, it could be a fast one, as

moves to the downside in the market tend to bequite a bit sharper than rallies.

The market is up into the area of heavy resistance

that was created from a year of trading within a

band of about 17,300–18,300, so we should not

be surprised if the current rally slows down into

more of a trading range and consolidation period

that could last a month or two. We think the fact

that most of the rest of the market is lagging the

performance of the DJIA and the S&P is an

indication more time will be needed for thebroader market to build into a longer-lasting

uptrend.

The smaller stocks have lagged the performance

of the larger stocks in the recent recovery, and a

more “healthy” uptrend will usually see the small

stocks lead to the upside. See chart of Russell

2000 Index over the previous 4 years.

The current strong market upswing has been on

the backs of larger cap stocks and has beenlimited in strength. The current number of

stocks trading above their respective 200-day

moving averages, or the average price over the

past 50 weeks, is at 51%. The 75- day MA of this

ratio is 41% and the 200-day MA is 57%. While

the current number of stocks above their 50-

week trading average and is above its short-term

MA, it lags its longer-term MA, another sign of

caution.

A broader market advance would indicate more

residual momentum. Look for the small cap

index to play catch-up for the market to advance

further. The Russell 2000 Small Cap Index (RUT)

should break above 1250 to signal its

participation. It currently trades at 1150. If the

market advance does not broaden, a trading

range should develop until year end.

Stay ready.


14/25

Best Stocks of the Month Nov 2015


GATX: Quality Small Cap Value Core

Holding with Acceptable Yield

Earnings could be cooling but GATX (GMT) offers

great value. GATX, founded in 1898, is the one

of the largest global railcar leasing firm with

control over 149,000 cars.

GATX buys new railcars and leases them using

multi-year contracts. Customers include GMT’s

market cap about matches its revenues at $2

billion. The Company competes with Union Tank

Car Company, CIT Group Inc., General Electric

Railcar Services Corporation, First Union Rail, and

Trinity Leasing. GATX leases tank cars, freight

cars, and locomotives in North America; tank cars

and freight cars in Europe, and freight cars in

India. GATX also has interest in a development-

stage affiliate in China. GATX owns 125,000

railcars in North America, 28,000 in Europe and

manages a portfolio of 5,000 for third parties.

GMT prefers full-service leases, where the

company maintains the railcars, pays ad valorem

taxes and insurance, and provides other ancillary

services. Their portfolio of railcars have

estimated useful lives of 25 to 44 years and an

average age of approximately 19 years. The

average lease renewal terms for all North

America railcars during the 3rd quarter was 5.0

years, compared to 4.5 years in the 2nd quarter

and but is below the average of 5.6 years in the

3rd quarter of 2014. The original lease is for

terms usually ranging from 5 to 10 years and

renewal periods of 3 to 5 years.

GATX has a diverse customer base, serving over

1,050 clients with 700 customers in North

America and 250 internationally. In 2014, no

single customer accounted for more than 4% of

North America's total lease revenue, and the topten customers combined accounted for

approximately 20% of total revenue. The

economy’s European business is more customer

concentrated with two customers accounting for

10% of revenues each, and the top 10 customers

generated 64% of 2014 European revenues.

Rail car utilization rates in North America for its

125,000 car fleet last quarter was 99.2%. Let that

number sink in. This ratio of customer retentioncoupled with professional forecasting of demand

should be appreciated by most all business

managers. Of the 125,000 railcars operated at

the end of June 2015, only 1,000 sat idle.

Earnings per share have grown from $3.59 in

2013 to around $5.27 in 2016, with $5.25


15/25



expected this year. The company recently

announced it was selling its Marine boat andbarge business and took a $0.61 non-cash write-

down of this non-core business. This produced

earnings of $0.91 a share for the most recent

quarter and $3.33 year to date. The Marine

group contributed 17% of total 2015 YTD

revenues, and a reduction corresponding in 2016

earnings is expected to the units accompany

asset write downs.

In addition to a plateau of earnings due to theexiting of the marine business, management is

facing a few oversupply problems. From the

most recent earnings comments, the CEO states,

“Looking longer-term, the growing over-supply of

tank cars is decreasing tank car renewal rates and

making it more difficult to place new tank cars

delivering in 2016. Our early recognition of the

impending changes in the tank car market was

the backdrop for our strategy to lock in attractive

lease rates for longer terms and maintain a

disciplined investment strategy. As a result of thisstrategy, our committed lease revenues are at

record levels, and this base of stable cash flow will

serve us well when the environment for more

attractive investment opportunities develops.”

Also of investor concern is the potential impact of

growing government regulation of railcars

carrying oil and other flammables. Moody’s

Credit Services comments as of last Dec were:

GATX maintains its position of competitivestrength in full-service rail car leasing,

particularly in tank cars where it maintains the

second highest market share in both North

America and Western Europe. About 13,000 of

GATX's North American tank cars (10% of the

North American fleet) are used to transport

flammable liquids, including 4,900 (4%) in crude

and ethanol service. The US Department of

Transportation and Transport Canada areconsidering implementing new safety standards

for tank cars engaged in such service. The rules,

not yet finalized, could require that existing cars

in flammable liquid transport service be

retrofitted to meet the new standards. As an

alternative to incurring the potentially significant

expense for retrofitting the cars, GATX could

redeploy the cars into alternate service, sell the

cars, or scrap them. We expect that GATX will be

able to take the steps necessary to fully complywith the new rules when implemented and that

the associated expense will not significantly

weaken the firm's long-term financial

performance and condition.

Management has also addressed the flammable

railcar issue with the following comments:

Instead of aggressively pursuing the crude-by-rail

business like many of our competitors, we

capitalized on the high-demand environment for

tank cars in the last few years to order differenttank car types and deploy them into other

commodities for long lease terms at record rates.

Also in recent years, we sold a number of our cars

deployed in flammable liquid service, or we

transitioned them into carrying less-volatile

commodities. These actions should continue to

serve us well as conditions for the tank car market

develop in 2015.

The potential pause in its business growth is notgoing unnoticed by investors. Share prices have

fallen from a 52-wk high of $65 to $46. This

decline offers investors an opportunity to climb

aboard a very well managed railcar firm at value

pricing.


16/25



As a leasing company, GMT survives by

purchasing new railcars and leasing them out ona long-term basis. Since the end of 2009,

management has generated $1.8 billion in

operating cash flow. However, to build its

portfolio of railcars, management has spent $3.4

billion on capital expenditures over the same

timeframe, creating a cumulative negative -$1.2

billion in free cash flow. This is showing up as

higher long-term debt growing from $3.0 billion

to $4.1 billion. This trend seems to continue with

GATX taking multi-year delivery of over 8,600new railcars starting in March of this year.

S&P recently upgraded management 10-year

performance in generating profit and dividend

growth from an average rating of B+ to above

average A-, and represents confidence S&P

places in GMT’s ability to continue.

The current yield is 3.15%, substantially above

the S&P Financial ETF at 1.94% and dividend

growth has average 3.5% over the previous 5years.

GMT offers investors an acceptable yield and

growth potential, along with the steady income

attributes of industrial and transportation

leasing. Management has a proven track record

of generating shareholder returns and should be

considered as a core financial and industrial small

cap.

Stock Ideas off the Radar Screen Some higher dividend, income, and capital gain-oriented

equities are intriguing and may not part of our investment-

tracking list. These may include ETFs, MLPs, REITs, or

Preferred issues. Follow-ups may or may not be available in

the future.

Wisdom Tree asks, “What do the Fed and BBQ

have in common?” Their answer is, “The phrase

‘low and slow’ commonly refers to the proper

method for cooking barbecue. Cooking over low

heat for a long, long time is the pathway to BBQ

bliss. These days it feels like the Fed is applyingthe same philosophy to normalizing rates-the

terminal rate being lower and the process taking

much longer. Corporate credit spreads have

recently been pushed higher by liquidity and

growth concerns to attractive levels, in our view .”

With rate looking to start their cyclical turn next

month, Wisdom Tree is betting on corporate

bonds to outperform. With a higher yield than

their Treasury counterparts, Wisdom Treebelieves the higher risk of corporates over

virtually risk-free Treasuries is more than

compensated by a higher income across the yield

curve.

Source Wisdom Tree, Bloomberg


17/25



As shown above, the yield spread between

Corporate and Treasury bonds is at recessionarylevels while the underlying economic data does

not indicate a recession is eminent. Going back to

1986, the spreads have surpassed 3.0% only 6

times, in 1986-1987, 2001-2003, 2008-2009,

2010, 2011, and currently.

If the better bet is corporates over Treasuries and

investors are concerned about duration (or the

sensitivity bonds have to rate changes), date

specific bond ETFs may be an avenue. As a rule,the higher the duration factor the higher the

volatility during times of interest rate changes.

This is especially important for bond mutual fund

investors as these almost always trade on a pure

yield basis.

Guggenheim offers an array of bond ETFs whose

underlying portfolio consists of bonds maturing

in the same year. For example, the Guggenheim

BulletShares 2024 Corporate Bond ETF (BSCO)

consists of 119 bonds with either a call date ormaturity in 2024. The yield to maturity, or SEC

Yield, of this ETF is 5.46%.

A list of other Guggenheim Date-Specific

Corporate Bond ETFs with symbol and SEC Yield

are:

BulletShares Corporate 2018 (BSCI) 1.68%

BulletShares Corporate 2019 (BSCJ) 2.02%

BulletShares Corporate 2020 (BSCK) 2.39%

BulletShares Corporate 2021 (BSCL) 2.82%BulletShares Corporate 2022 (BSCM) 3.20%

BulletShares Corporate 2023 (BSCN) 5.07%

With these ETFs, it is easy to build a ladder with

annual maturities for capital to roll-over. If an

investor were to build a ladder of these seven

ETFs, with an equal weighting of 14% each, the

resulting portfolio would have the following

characteristics:

Yield to Maturity 2.88%

Effective Duration 4.88 yrs.

Holdings (#) 1616

Portfolio Range 2018 - 2024

The strategy would be to move maturing ETF

capital to the next longest date.

In reality, as the date-specific ETF accumulatesmaturing capital waiting for the Dec distribution

date, the portfolio’s cash balance grows

substantially. For example, the Corporate

BulletShare maturing in Dec 2016 (BSCG) already

has 88% of assets in cash whereas the 2017 ETF

has no cash assets. This high cash balance

reduces the overall income until final

distribution. The best strategy is to sell these

ETFs a year before their maturity.

Income investors looking to build a ladder ofbonds as an alternative to the traditional open-

ended bond mutual fund should consider these

ETFs. More information on using these ETFs as a

laddering tool can be found at the Guggenheim

website.

http://guggenheiminvestments.com/products/e

tf/bondladder?utm_source=intermediary&utm_

medium=button&utm_content=bond%20ladder

&utm_campaign=BulletShares%20Home#Overvi

ew

http://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overviewhttp://guggenheiminvestments.com/products/etf/bondladder?utm_source=intermediary&utm_medium=button&utm_content=bond%20ladder&utm_campaign=BulletShares%20Home%23Overview


18/25

Notes from the Top Nov 2015


Notes from the Top

Walgreens Boots (WBA) share price is down, but

far from out. WBA announced a $17 billion

takeover of Rite Aid and the potential to sell

between 500 and 1,000 stores where overlap is a

concern. The current total store count is 8,000

for Walgreens Boots and 4,600 for Rite Aid.

Walgreens believes the deal would strength its

market position in the Northeast and Southern

California, two areas of current weakness.

Forbes reports that Walgreens is expecting togain substantial leverage with health insurance

companies, large employers and government

health programs given its network of pharmacies

will grow. Walgreens chief executive officer

Stefano Pessina sees the U.S. market as ripe for

consolidation as the government becomes more

involved in paying for health care, particularly

due to the expansion of benefits under the

Affordable Care Act.

Even considering a potential divesture of

locations, WBA would surpass rival CVS Health

(CVS) in store count. Share prices are about 11%

off their high at $86.

Kinder Morgan (KMI) issued a short-term,

mandatory preferred which trades at a 10%

yield. Late last month, KMI issued a Series A

Mandatory Convertible Preferred share with a

9.75% coupon and a $50 par. The stock currently

trades on the OTC using the symbol KMGNP butanticipated a NYSE listing with the symbol KMI-A.

The preferred is mandatory converted into

common shares in Oct 2018 using a collar of a)

1.554 common shares if share prices are above

$32.38 or b) 1.81 shares if the common is below

$27.56. Between the collars, the ratio is $50

divided by the common share price.

KMI recently upped its common dividend by 16%

to $2.04 annualized, and the common shares

offer a 7.4% yield. The preferred is trading at

$48.65 for a 10% yield. Income investors may

be interested in the steady income of the

preferred over the next three years while giving

up the potential for common appreciation over

$32 a share.

Exelon (EXC) announced quarterly earningswere 6% above last year and 17% above

consensus. In addition, Exelon raised its 2015

adjusted earnings per share guidance to the

range of $2.40 to $2.60 from the prior guidance

of $2.35 to $2.55. Management also believes its

olive branch to the city of Washington DC in the

form of more money should win the day and the

merger with Pepco (POM) should be completed

within a few months. In the first nine months of

2015, net cash flow from operating activities was

$5.674 billion compared with $3.643 billion in theyear-ago period. EXC’s capital expenditure was

$5.4 billion compared with $4.1 billion in the first

nine months of 2014.

While much maligned due to a dividend cut in

2013 forced by the collapse of its non-regulated

commodity electricity business, aka merchant

power. Over time, EXC has not only increased its

regulated earnings from 20% of the total to

around 60% after POM merger, the 3-yr rollingauction process in its major merchant power

markets is adding a reliability premium for

consistency in power generation. This premium

favors nuclear power generation and will add to

EXC’s commodity profits over time. On the

downside, however, the trend is for older nuclear

plant to remain unprofitable as low natural gas


19/25



pricing sets the tone of power generation

markets. EXC may join Entergy (ETR) in closingseveral of its nuke plants.

Sherwin-Williams (SHW) earnings rose on the

strength of its consumer business. Highlights of

its press release are: Consolidated net income as

a percentage to sales of 11.9% in the quarter was

an all-time high; Diluted net income per common

share increased 18.5% to a record $3.97 per

share in the quarter and increased 22.3% to a

record $9.04 per share in nine months;Establishing EPS range of $1.70 to $1.95 for 4Q15;

Increasing FY15 EPS guidance to $10.75 to $11.00

per share vs. $8.78 per share in 2014.

Of interest to investors should be the new

antibacterial paint for hospital and doctors’

offices. Branded as Paint Shield, it was developed

in consultation with infectious disease experts

and actually kills bacteria on the surface after two

hours. It has been proven to be safe and effective

through third-party testing and has been certifiedby the U.S. Environmental Protection Agency to

kill over 99.9% of bacteria, including Staph, E. coli,

and MRSA.

While paint is not usually known for product

advancement, SHW’s CEO believes that Paint

Shield is one of the most significant technological

breakthroughs in the company’s nearly 150-year

history. Sherwin-Williams currently has an 11.3%

share of the paint manufacturing market, thesecond biggest portion behind PPG Industries’

21.3%.

SHW offers a high exposure to the consumer

through its Paint Store Group, which added 45

new locations since the first of the year, and its

Consumer Group, which is mainly sales through

Lowes (LOW). These two segments generated

80% of 3rd qtr. revenues. International businesswas hurt by the strong USD, as revenues declined

11% for the quarter with the commonly used

reason being currency headwinds.

Investors looking for diversity in their defensive

consumer portfolio may want to review Sherwin

Williams.

Becton Dickinson (BDX) continues its winning

ways. An article in Forbes offers a good recap ofits investment thesis, as told by Allen Bond, fund

manager at Jensen Quality Growth Fund (JENSX).

Founded in 1897, BDX is a global medical devices

company focused primarily on the design and

manufacture of needles and syringes for use in

hospitals, clinics and doctor’s offices. The

company also operates smaller businesses in

diagnostic testing and bioscience research tools.

Over the past 10 years, Becton posted annualized

earnings per share growth of nearly 10% while

generating average return on equity in excess of24%. Becton’s robust free cash flow generation

has supported both growth in the business as well

as consistent returns to shareholders, reflected in

its 42-year track record of increasing its dividend.

The primary competitive advantage for Becton is

largely a function of size and scale. The company

enjoys a globally dominant position in the

needles/syringes market. Becton produces more

than 29 billion of these products per year. And weestimate its global market share in this business

is in excess of 60%.

The company’s investment profile also benefits

from the disposable nature of its products,

resulting in recurring revenue in 80% of the

business. We expect the company to produce


20/25



stable, consistent growth due to increasing global

healthcare utilization and product innovation focused on safer needles and faster, more

accurate diagnostic tests.

Chicago Bridge and Iron (CBI) exits most of its

nuclear power plant construction business.

While the sales of this business to its partner

Westinghouse, along with the transfer of all past

and future liabilities, will generate a $1 billion

non-cash write-down this quarter, investors liked

the news, driving up the stock by 19% on the dayit was announced. Credit Suisse upgraded the

stock to Outperform. CBI was partnering with

Westinghouse on two large nuke construction

projects for Southern Company (SO) and Scana

(SNG). These projects have been hampered by

cost overruns and extensive construction delays.

This move take a large overhang out of the stock,

clearing the way for the company to focus on its

$30 bil in project backlogs.

As it relates to Berkshire-Hathaway (BRK.B), BillAckerman has brought the Great Salad Oil

Swindle of 1963 to the forefront again. This

history is a great example of Buffett’s strategy of:

"Be fearful when others are greedy, and be

greedy when others are fearful.”

In 1963, a vegetable oil commodities trader

defrauded 51 companies out of loans that had

been backed by supposedly huge holdings of

vegetable oil, also known as soybean oil and animportant ingredient in Italian Salad Dressing.

The tanks purportedly full of collateralized

vegetable oil, it turned out, were mostly full of

water. As a result, the loans went bust. American

Express (AXP) was one of the companies that got

caught up in the scandal and in response the

stock fell 43% from $65 in Oct 1963 to $37 in Jan

1964. This led an enterprising Warren Buffett to

scoop up 5% of the company for around $20million, an investment that would see him earn a

10-fold return in a decade. A current 5% stake in

AXP is worth about $3.6 billion.

The next time you are pouring oil and vinegar on

your Cobb salad, remember the “Be Fearful”

mantra of the Oracle of Omaha.


21/25

Strategic Subject of the Month Nov 2015


The Austrian Oak’s Rules for

Successful Investing

Arnold Schwarzenegger gave an interesting

speech recently at the Global Transformation

Forum in Kuala Lumpur, Malaysia. The speech

was short, and was an outline of his six rules of

success. Whether you like the Austrian Oak or

not, it is difficult to argue with his level of success.

The rules are simple and directly apply to every

investor. Take a few minutes to see how you are

implementing the Austrian Oak’s guidelines.

1. Have a vision.

“If you know where you're going everything will

fall into place.”

2. Never think small

“It takes the same amount of energy to think big,

as it takes to think small. So might as well.”

3. Ignore the nay-sayers“Take the words 'it's impossible' and 'it can't be

done' out of your vocabulary. Everything the nay-

sayers say is a liability, will only prove to be an

asset to you.”

4. Forget plan B

“As soon as you start telling yourself that you

have something to fall back on, this is the most

dangerous thing, because it means you're already

doubting yourself. Don't take your eye off the

ball, don't take your eye of plan A, there is no plan

B!”

5. Work your ass off

“You never want to fail because you didn't work

hard enough. None of my rules will help you,

unless you're willing to work, work, work! You

can't climb the ladder of success with your hands

in your pocket.”

6. Don't just take, give something back

“We must serve a cause greater than ourselves.

All of us need to create change. Don't just work

on 'me', work on 'we'”

Success in accomplishing any financial goal

begins with an objective and plan how to get

there. If the vision is to have sufficient funds

saved and invested upon retirement in 30 years,development of a plan with benchmarks along

the way will aid in its attainment. Markets go up

and markets go down, and what seemed very

achievable in strong markets may not seem so in

market declines. But staying the course with a

clear destination in sight will help offset short-

term negative investment psyche.

Developing a successful portfolio management

and investment plan incorporates most of the

above attributes. Determining your specific levelof risk and overall investment goals will ensure a

better portfolio outcome. If you are risk adverse,

buying a speculative utility stock with a higher

dividend, justifying it as an income play, may not

suit your overall needs. Overweighting in a few

industrial sectors may not be a bad strategy,

unless it is done unintentionally.

Time and efforts spent to expand your knowledge

of finance always pays off in the long term. It isimportant to know what you know and to know

what you don’t know, and then to stay within the

comfort zone of what you know. As your

knowledge expands, so does your comfort zone

of investment strategies and options.


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Strategic Subject of the Month Nov 2015


Thanks to a good friend, Mr. Bugs Tan, a

renowned industrial inventor from Kuala Lumpur,for bringing this short speech to my attention.

Thanks, “Uncle Bugs”.

A link to the one minute speech:

https://www.youtube.com/watch?v=tFsUeUJiA9

k&feature=youtu.be

https://www.youtube.com/watch?v=tFsUeUJiA9k&feature=youtu.behttps://www.youtube.com/watch?v=tFsUeUJiA9k&feature=youtu.behttps://www.youtube.com/watch?v=tFsUeUJiA9k&feature=youtu.behttps://www.youtube.com/watch?v=tFsUeUJiA9k&feature=youtu.behttps://www.youtube.com/watch?v=tFsUeUJiA9k&feature=youtu.be


23/25

Subscriptions, How to Use Your Newsletter, About Us


Subscriptions

Guiding Mast Investments newsletter is available

on a subscription basis. Annual rates are:

1 Year $ 85.00

2 Year $150.00

3 Year $210.00

Please send check payable to George Fisher at:George Fisher

Guiding Mast Investments

10 Forest AveSaratoga Springs, NY 12866

Money Back Guarantee - Within the first 90 days, if

you are unhappy for any reason, your full subscription

rate will be refunded – no questions asked. However,

we would appreciate your feedback at any time.

Newsletter delivery is via the internet using pdf

format. Hard copies via U.S. Mail are available for a

nominal charge.

How to Use Our Newsletter

Guiding Mast Investments newsletter comes in two

parts – 1) the written commentary and 2) the

spreadsheet of the companies we follow. #1 is

pretty simple. #2 is a bit more complicated and may

need a bit of explanation.

Part 2 is an excel spreadsheet in a pdf format. This

lists the companies we follow and a bunch offundamental analysis calculations. Starting at the left

column:

• Stock ticker symbol,

• stock name,

• stock price,

• 2015 estimated EPS,

• 2016 estimated EPS,

•

+ or – indicates a movement up or down sincelast updated,

• anticipated 5-yr EPS growth rate,

•

+ or – indicates a movement up or down since

last updated,

•

Forward PEG (price to earnings growth) ratio

based on 2016 EPS estimates,

• Guiding Mast Ratings,

• Guiding Mast Recommendations,

•

+ or – indicates a movement up or down since

last updated,

•

S&P Quality Equity Rating with A+ being thehighest, B+ as average and NR for Not Rated,

• current broker consensus for timeliness,

• current dividend,

• dividend yield,

• industrial sector,

• Guiding Mast handicap based on S&P Quality

Ranking,

• 2015 and 2016 EPS yield,

• 2-yr consensus price target,

• % gain to price target,

•

anticipated annual total return based on theprice target and current yield.

Our formula used in evaluating these factors locates

companies that have the following characteristics:

• Reliability in generating increase earnings and

dividends for the previous 10 years (S&P

Quality Rating);

• Value based on 2016 price to earnings

growth, with PEG ratios of 1.0 to 1.2

considered fully valued• Well liked on Wall Street for timeliness

• Higher dividends

The Guiding Mast Ratings are listed in numerical

order with higher numbers indicating more favorable

ratings.


24/25



The “perfect” stock would be rated A+ by S&P, would

be trading at a 2016 PEG Ratio less than 1.0, wouldhave a broker timeliness consensus ratio of at least

2.5, an earnings yield of 8%, and would have a

dividend yield of 5% or higher. As stocks move

above or below these fundamental criteria, the

Guiding Mast number changes. For instance, a

company rated B+ for Quality carries a handicap of

12 while an A+ company has no handicap.

The top 15 companies of the 132 followed qualify for

Full Speed Ahead classifications while companies

numbered 16 to 30 are listed as Power Up.

Comparatively, these stocks should offer better total

returns for the risk taken. The bottom 20 stocks are

classified as Power Down and could be candidates

for sale. The balance of stocks are listed as Neutral,

which is neither a buy nor a sell.

Reviewing stocks with higher Guiding Mast Ratings

and higher anticipated total annual returns based on

consensus price targets should produce a list of

companies worthy of consideration for your

investment portfolio.

However, as always, conduct your own due diligence

to determine if a particular investment is right for

your portfolio construction and your appetite for

risk. All investments, even “safe” bonds, carry a

particular risk to your invested capital and that risk

should be appreciated prior to investing.

About Us

George C. Fisher, founder and publisher of GuidingMast Investments, believes methodically

incorporating overlooked equities in a diversified

portfolio approach is far from rocket science. Guided

by the framework of Modern Portfolio Theory, Fisher

locates equity investment opportunities using widely

distributed value indicators and advocates a

minimum three-year investment horizon for most

financial decisions. An understanding of the tools

used to assess one’s personal risk factors and themethods of finding investments that meet these

factors can be easily incorporated in most individual

portfolio construction.

Guiding Mast Investments offers both a monthly

newsletter and multi-part financial and portfolio

education training with the advantage of personal

communication. Topics include Assessing Personal

Risk, Asset Classification and Diversification, Equity

Research, Value Fundamentals, and Portfolio

Implementation.

Fisher is a Seeking Alpha contributor and SA has

published over 330 articles since 2010. Fisher also

contributes to the financial website TalkMarkets.com.

He occasionally uses the pen name Jon Parepoynt. A

list of his previous SA articles can be found at:

http://seekingalpha.com/author/george-fisher

Fisher is the creator of the 1997-2004 investment

newsletters Power Investing with DRIPs, focused on

timely selections of dividend paying stocks. Fisher has

published two books through McGraw-Hill,

All About DRIPs and DSPs, and The StreetSmart Guide

to Overlooked Stocks.

Fisher has experience as a Registered Investment

Advisor, a financial author, and an entrepreneur.

Fisher brings a variety of expertise to his clients, from

corporate operational appreciation, to personal

http://seekingalpha.com/author/george-fisherhttp://seekingalpha.com/author/george-fisherhttp://seekingalpha.com/author/george-fisher


25/25


investment planning and management to stock

market analysis skills.

Fisher’s work experience covers a variety of fields.

Prior to being a RIA, he spent 15 years as a corporate

manager at Georgia-Pacific Corp before venturing out

on his own, operating several businesses from

manufacturing to export marketing management.

President Ronald Reagan appointed Fisher to the

National Advisory Council overseeing the US Small

Business Administration from 1988 to 1991.

For a complete list of equities followed by Guiding

Mast Investments, please contact us.

Much like a guiding mast light assists in safe passage

for the captain and owners of sailing vessels,

GuidingMastInvestments.com helps teach the tools

financial experts use in portfolio design and

management.

More information is available at:

www.GuidingMastInvestments.com

Read our Equities and Market blog at:http://www.GuidingMastInvestments.com/news/

Guiding Mast Investments logo is a register trademark

and used exclusively by permission from

aceboater.com
http://www.guidingmastinvestments.com/http://www.guidingmastinvestments.com/news/http://www.guidingmastinvestments.com/news/http://www.guidingmastinvestments.com/

Documents

Nov 2015 Newsletter Guiding Mast Investments