Out Fox The $treet

This model gained a solid 0.8% in April versus a 0.7% loss for the benchmark S&P 500. The model remained strong all month even as the SP500 fluctuated all month. Trade No trades were made in the month of April as existing positions continued to work well with high yields. Top Performers Considering the market was slightly down and the model was only slightly up, not many positions had outside moves. The biggest gainers were Gap (GPS), Travelers (TRV) , and Chubb (CB). All three companies had very strong earnings partially helped out by the large buyback programs over the last year. Bottom Performers Just as with the top performers, not many stocks had outside negative moves in the month. The biggest losers were Conoco Phillips (COP), Goldman Sachs (GS) and Wellpoint (WLP) with all three companies losing more than 5%. Conoco Phillips had disappointing earnings that naturally pushed down the stock. The other two had surprisingly good earnings eve...

Finally the merger of Express Scripts (ESRX) and Medco Health (MHS) closed today . It took since last July to close the merger and any investors holding on this period had limited gains. See graph below nothing the Medco stock closed around $67 around the announcement and only recently reclaimed those levels. Unfortunately our Net Payout Yields model held onto the stock for that period, but at least the end result has been positive. As of the close today, each original Medco share would be worth $73.75.  Now the key to holding Express Scripts going forward will be whether the combined company continues funding huge dividends and buybacks. See our previous blog post after the original announcement. Details from the PR: Following consummation of the acquisition, each share of pre-closing Medco common stock was converted into (i) the right to receive $28.80 in cash, without interest and (ii) 0.81 shares of common stock of the new Express Scripts The company expects syn...

Great news for one of the weakest stocks in our Net Payout Yield model. Express Scripts (ESRX) agreed to purchase MedcoHealth Solutions (MHS) for $29B. The deal gives MHS shareholders $71.36 based on the closing prices on 7/20 amounting to $28.8 in cash and 0.81 shares of ESRX. Considering ESRX is up 6% today the value of the deal got much more attractive now worth nearly $74. Oddly though, MHS has only traded up to around $65 most of the day. The nearly $9 gap suggests the market is concerned about the deal not completing. Anti-trust issues could pop up as the combined company will be a nearly $60B behemoth in the pharmacy benefits sector.  Interestingly though ESRX shareholders are excited enough about the deal to send their shares much higher. Maybe investors just aren't that good with math and are missing the share rise of ESRX and subsequent increase in the value to MHS shares in the deal. The combined company is promising to lead the effort to lower costs of prescription ...

June was a good month for the Net Payout Yields model on a relative basis. The model outperformed the SP500 by 0.67% with a loss of 1.16% versus the 1.83% loss for the benchmark. Naturally on a absolute basis the model had a disappointing month, but it performed as expected by being less volatile than the benchmark and holding up better during the worse parts of the big drop mid month. The model remains fully invested with an average weight of only 2% cash for June. The goal of the model is to let the companies themselves buyback stock at lower to take advantage of any market weakness rather then trying to time the market. Trades Only one trade was made during the month. Wells Fargo (WFC) was sold as the stock failed to keep the Net Payout Yield at acceptable levels. The stock was replaced in July with Travelers (TRV) that has an extremely high NPY of around 20% given its consistent large stock buybacks. Top Performers Even considering the nearly 2% loss in the SP500 for June, ...

Most investors continue to focus on high dividend yielding stocks paying very little attention to stock buybacks. Unless you're a retiree living completely on fixed income, it's a mistake to not focus on the complete picture of returns of capital to shareholders. The combination of stock buybacks and dividends or Net Payout Yields (NPY) has offered higher returns in the past. Buybacks can be a more efficient return of capital to shareholders as it reduces the tax burden of investors..... Read the rest of the article at SeekingAlpha .  Disclosure: Long WLP, GPS, and MHS. Please review the disclaimer statement. 

Medco Health Solutions (MHS) is a leading pharmacy benefit management provider and a recent addition to the Net Payout Yields Portfolio (available from Covestor.com soon). How could an investor have predicted strong earnings and the incredible recovery in the stock of MHS from a low of below $44 at the end of August to the $57 current price in 2 months? Well, actually rather easily because MHS spent Q1 and Q2 buying some 8% of their outstanding stock. Management signaled that the stock was too cheap in the mid $50 range so why were investors so reluctant to buy in the $40s. Good question to us. During the last quarter they bought another 4% of the outstanding stock placing the Net Payout Yield at 12.7% based on current stock price. Or a nearly 17% annualized run rate since this total only factors in the last 3 quarters. During Q3, MHS bought back $903M or 17.1M shares of stock. The unfortunate news is that it appears management was unable to purchase shares in the $40s when th...

On Thursday, purchases MedcoHealth Solutions (MHS) for the Net Payout Yield Portfolio. As mentioned back on Aug 23rd [ MedcoHealth Solutions: Ultimate Net Payout Yield ], MHS was on the radar for addition to this portfolio. It almost ran away from us after hitting bottom just one week after writing that post, but this recent pullback touch the 50ema and gave us an entry point. MHS is on a massive stock buyback spree signaling not only a financially strong company, but also a cheap stock. Just bought a half position at this point as typical for this portfolio size. Note: This portfolio will be available soon at Covestor.com under Mark Holder. It will be the 2nd model I offer after the successful Opportunistic model that currently has 16 subscribers. This portfolio has consistently beat the SP500 by 6% since being tracked first by hand since the start of 2007 and then the last 27 months at Marketocracy.com . The important key to this portfolio is that it has a Beta of 1 and involves...

MedcoHealth Solutions (MHS) provides investors the rare opportunity of a growth stock with a strong enough balance sheet and earnings to have a massive Net Payout Yield. MHS recently announced another $3B stock buyback program and they only have a market cap of $19B. That's an easy 15% yield if they spend it this year. Considering they bought back $1B+ in each of the last 2 quarters the yield is very attractive. Companies with this much cash flow just don't trade at these multiples. Unfortunately in this market most investors are looking for yields in bonds and dividend paying stocks. Considering MHS only offers the buyback portion of the Net Payout Yield, most investors are missing this high yielding stock. Considering the likely increase of dividend taxes in 2011 at least for high income individuals (the ones buying dividend yielding stocks in the first place), buybacks should be treated more advantageously but investors are too busy looking backwards. Buybacks are also tar...