IRA Investing: Making Some Purchases

Portfolio Update

My regular screening system has continued to come up empty with regard to new ideas. This is so because the leaders of any new bull market move have yet to be identified, and it will probably be a couple of months before any clues about leadership are given. Therefore, I created another screen that I believe will perform better than the market averages in the early stages of a recovery. The screen is conservative but picks stocks that have been hit hard in the recent market decline. It back-tests well around market bottoms and in the early stages of market recovery.

Specifically, this screen picks out companies that have at least 5% insider ownership, have no long-term debt and have cash positions greater than their current liabilities. Then it picks those companies with the highest dividend yields. These companies are then purchased and held for one month, at which point the screen is run again; any eliminations or substitutions are made at that time.

Last week, using this screen, I took new positions in Bebe Stores (BEBE - commentary - Cramer's Take), Buckle Corp. (BKE - commentary - Cramer's Take), Cognex (CGNX - commentary - Cramer's Take), American Ecology (ECOL - commentary - Cramer's Take), Electro Rent (ELRC - commentary - Cramer's Take), Healthcare Services Group (HCSG - commentary - Cramer's Take), NutriSystem (NTRI - commentary - Cramer's Take) and TheStreet.com (TSCM - commentary - Cramer's Take).

I should stress that this screen is only a temporary measure and will be supplanted by my regular screening system as new ideas are presented.

The following table shows all the current holdings in my IRA as of the end of last week:

---

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Lincoln Educational, Super Micro Computer, Smithtown Bancorp, USA Truck, Cognex, American Ecology, Electro Rent, NutriSystem and TheStreet.com to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

---

At the time of publication, Moore was long Conmed, Lincoln Educational, Super Micro Computer, Smithtown Bancorp, Sybase, USA Truck, Bebe Stores, Buckle, Cognex, American Ecology, Electro Rent, Healthcare Services Group, NutriSystem and TheStreet.com, although positions may change at any time.

Richard Moore, CFA, has 40 years of experience in various facets of the investment business. He has been employed by banks, mutual funds and investment advisory organizations during his career and has also owned retail and service businesses. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Moore appreciates your feedback; click here to send him an email.