July 15, 2009

[ERRI] Economic Recovery Reality Index – Stock Component

Posted in economic indicator, economic recovery, U.S. Economy tagged , , , , , , , , , , , , , , , , , , at 1:35 pm by realitytax

There are 15 stock/equity holdings that make up the “market component” of the Economic Recovery Reality Index, picked to represent a variety of sectors. The ERRI is an experiment, an attempt to balance the spin and rhetoric with some of my own data; I’ve created a new economic indicator.  I’m picking the 15 stocks, and publishing the list here, to be purchased at the opening price on July 15th, 2009 because 2nd Quarter earnings reports are coming in over the next two weeks; it was time to commit the choices.

This is not by any means investment advice. In the interest of disclosure: I note that I know I own some of these (not the majority) directly, and may own some or all of the rest through mutual funds. Of those from the list I have in my own portfolio their combined value is well under $5,000. This isn’t an attempt to influence their market values, or those of any other stock. I’m not an economist, or an investment specialist.  I’ve deliberately excluded any company in my portfolio with a holding greater than $1,000. I’ve deliberately ignored the reports from my mutual funds about what specific positions they hold – they were selected for broad goals, not individual components.

I’m not an investment professional, I’m a former small business owner working as an independent contractor in the computing industry. I am “pro-economic recovery.” In this matter I don’t care who’s in the White House or the U.S. Congress, I just want the U.S. and world economies to become reliable – economic systems underpin our well-being almost as directly as reliable, affordable health care (yes, I’m in favor of that, too.) In fact, some of the stocks listed below I don’t want you to invest in, since I think you should use your money to support businesses and industries you want to see flourish – but this was to measure economic activity not encourage it.

I’ve not sought the advice of CPAs, brokers, or any other professionals (I told you this isn’t investment advice) in either the selection of these stocks or the other components of my ERRI calculation. I’m just putting it online to hold myself publicly accountable. I’m sure the CEO of the World Bank and many others have more time-tested, reliable means of making this determination; I’m just trying to work out how to pay for my kid to go to college and be able to retire in a few decades.

So I’ve researched and selected the following 15 stocks.  I’ll explain each, including what sector they’re in for those unfamiliar with a given company, as well as the other components of the ERRI in subsequent posts; the broad goal for the “market component” was to represent numerous sectors while not relying on the likes of the S&P 500, etc.

The opening prices will appear in a comment/reply so I can get this out in before the market opens.

AIBAllied Irish Banks

BBEPBreitBurn Engy PtnrLP CmmnUnt Rprstg Ltd

CATCaterpillar Inc.

CCICrown Castle Intl Corp

CMAComerica Inc.

EMNEastman Chemical Co.

FDMLFederal-Mogul

FITBFifth Third Bank

FSLRFirst Solar Inc.

HONHoneywell International Inc.

HQSHQ Sustainable Maritime

JWN Nordstrom Inc.

PLXSPlexus Corp

POMPepco Holdings Inc

PZEPetrobras Energia Participaciones SA

RIMMReasearch in Motion

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1 Comment »

  1. realitytax said,

    So, the premise is to diversify the stock component across 9 or 10 sectors (I’m choosing to call FSLR a part of Solar rather than simply lumping it in with other Tech stocks for a variety of reasons. Many analysts and advisors would call it just another Tech stock.) There were other kinds of diversity factored in, based on where I think you have to look to really track the recovery (for example, since we’re tied to a global economy PZE is part of the Energy sector.)

    I realize it’s a little messy in a comment, but here’s the setup of our equity fund. I distributed $1000 to each sector, split it evenly when there are multiple stocks in a sector, and then because this is an index NOT a mutual fund I stuck to whole shares, so of the initial $10,000 the actual investment is $9854.97 (call the rest commission or fees if you must, it’s too small to be particularly relevant to the subsequent calculations.)

    Symbol, Acquisition price on 7/15/09, hypothetical shares purchased, line expense (each sector will be < $1000, they're grouped to make that obvious,) descriptor of sector/industry

    EMN 36.85 27 994.95 Basic Materials: Chemicals – Plastic & Rubber

    HON 31.18 16 498.88 Capital Goods: Aerospace & Defense
    CAT 31.93 15 478.95 Capital Goods: Constr. & Agric Machinery

    FDML 9.67 103 996.01 Consumer Cyclical: Auto & Truck Parts

    HQS 8.37 119 996.03 Consumer NonCyclical: Fish / Livestock

    BBEP 7.32 68 497.76 Energy: Oil & Gas
    PZE 5.98 83 496.34 Energy: Oil & Gas

    AIB 4.58 72 329.76 Financial Money Center Banks
    CMA 21.84 15 327.60 Financial Regional Banks
    FITB 7.06 47 331.82 Financial Regional Banks

    CCI 24.26 20 485.20 Services Communications Srvcs
    JWN 20.11 24 482.64 Services Retail (Apparel)

    FSLR 141.54 7 990.78 Solar Technology: Semiconductors

    RIMM 66.18 7 463.26 Technology : Comm. Equipment
    PLXS 21.59 23 496.57 Technology : Electronic Instr & Controls

    POM 13.54 73 988.42 Utilities: Electric

    Not enough display control in "comments" but I want this readily connected to the post itself for future reference. The information will probably turn up again in a more spreadsheet-like format.


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