October Turnaround for the Fat Pitch Financials Port

The Fat Pitch Financials Portfolio had a great month in October. My portfolio was up 8.35% in October, 5.82% of which came within the last week.  The S&P 500 only returned 0.26% over this same period. 

What really cheered me up was that the Fat Pitch Financials Port is finally beating the S&P 500 for the year.  Over the past 12 months, the Fat Pitch Financials Port returned 15.19%, while the S&P 500 returned 14.56%.  I know this is nothing really to brag about, but I was having a hard time watching my investments lag the index for most of the year.

There were no new trades in October. My positions in Microsoft (MSFT) and Merck (MRK) were the real drivers in boost my portfolio this month.  Merck seems to finally have shaken the taint and stigma associated with the Vioxx recall.  Microsoft made headlines with an investment in social media darling, Facebook

Heck, even I jumped on the Facebook bandwagon this week by opening an account and then setting up the Value Investing News application using their developer platform. I actually got lured over to the Facebook social network by a couple of other value investors that I was connected to previously on LinkedIn.  I don’t really believe that Microsoft will gain much from this relationship and investment.  Google is already fighting back with their newly announced OpenSocial API, which hopes to connect several of the smaller social networking sites and social networking giant MySpace with a common application platform. This battle is really over the future of a new form of advertising targeted by user profiles versus the current contextual model that Google Adsense dominates.

Unilever (UL) also reported today solid earnings growth driven by increases in sales in China and India. I was concerned that they would not be able to pass on the increases in costs associated with the commodities they use as raw materials for their products. However, Unilever looks like it has been able to successfully increase prices and has successfully increased operating margins.  This is a good sign that the company’s wide moat is intact via the power of its brands.

All three of these stocks, Merck, Microsoft, and Unilever, are now fully valued.  Taking my recent lessons learned from reading Active Value Investing, I’m placing price stops on all three of these positions.  My cash levels could be increaing quite dramatically in the near future if the market extends today’s decline.

Finally, nothing really new has happened with Concord Camera (LENS) and Mothers Work (MWRK) is still reporting declines in same store sales.  The company just cut shipping costs for the holidays and on of the founders, Rebecca Matthia, will be acting as Chief Merchandising Officer until a replacement is found. 

I’m running out of time today, but I should also mention the remaining stocks in my portfolio.  Pfizer (PFE) still needs time to heal the way Merck did. USG is smarting from the bursting of the housing bubble, but now might not be a bad time to average down. I’m basically breaking even right now with Broadridge (BR) and Western Union (WU). I’m starting to be concerned about Broadridge’s economic moat, but I’ll save that discussion for another post.

Full Disclosure: I hold positions in all of the mentioned companies except Google (GOOG).

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