Purchased: Dominion Homes Inc. (DHOM:NASDAQ)

Earlier this month, I talked a little bit about why and how I was looking for a US equity to buy. Now I’ll summarize the results of my search and say something about my plans for this stock.

Before we get into all of that, I have to say that writing this all down in public for anyone to read takes some nerve. I run the risk of my investing mistakes being exposed in plain view (I hate to be wrong about anything to do with money!) On the other hand, if this one turns out to be a tenbagger I can show off my stock-picking expertise. Tenbagger, or 10-bagger, is a term coined by Peter Lynch to refer to an investment that is worth ten times its original purchase price. To find out more about stalking tenbaggers, you could read One Up On Wall Street. I might even lend you my copy.

Of course, what usually happens with most of my investments is that (a) they make an OK return but are exceedingly boring (e.g., my mutual funds, banks, insurance companies, railroads); (b) they crash and burn and I just manage to sell before losing everything (e.g., Waverider, Enron, Bombardier); or (c) I hang on to them for years (e.g., Nokia, CAE, Sears) while they do nothing or just cycle up and down and then I sell getting my money back but not much more, right before some major event like an takeover bid by another company sends the stock into the stratosphere.



I spit nails when that happens!

Onwards...

A Short Review

Asset allocation, sources of investing ideas, blah, blah, blah, see here.

What I Purchased: Dominion Homes Inc.

Dominion Homes (DHOM:NASDAQ), formerly known as Borror Corporation, was formed in 1952 and is headquartered in Dublin, Ohio. They are a US-based homebuilder with operations in Ohio and Kentucky. They also have a financial services (mortgages) subsidiary. Recently, times have been tough for Dominion Homes with the softening of their market and high rates of mortgage defaults. As a result, their stock price has dropped to depths not seen since 2001.

Why I Decided to Buy This Stock

I found this stock among Irwin Michael’s holdings. As I don’t directly own any US real estate or building and construction companies, I decided to take a closer look.

Shares are trading at just over $10 but book value is $23.61 per share. I always love a bargain! Irwin Michael says this company is a good candidate for privatization and also for acquisition by another builder. The company is profitable. After a couple of disappointing buys that wiped out in the tech crash of 2000 (see the horrible chart over on the right), I made a note to myself to only buy companies that are actually making money. They have a new CFO. He’s been given the mandate to clean up the sales side and mortgage operations. A sudden CFO replacement is generally either a good sign or an extremely bad sign. I prefer to believe that, in this case, it’s a good sign. If they unexpectedly acquire a new CEO I’ll shift over to the It’s A Really Bad Omen side, especially since the CEO's last name is Borror and the Borror family owns almost half of the company.

My Exit Strategy (or, how I plan to make money on DHOM)

Ultimately, it’s not the buying, not the holding (unless you’re raking in dividends), and not the watching the price zigzag up and down from day to day where you make the money. It’s the selling. So, when to sell?

Here’s my plan.

Sell half when it doubles. I’ll get back what I invested and can go look for another winner to buy and the DHOM that I still own is all profit.

Sell the rest when it reaches $40 to $50 (my target price). OK, I know I said I wanted a tenbagger but I just don’t believe this stock has that much potential.

Sell when Irwin Michael sells it. After all, he’s the expert. And DHOM was originally his idea, not mine.

And what if a meteor falls out of the sky and squashes Mr. Borror on his way to work one day? I have a stop loss at $7.00. I’ll ratchet up the stop loss as the stock price rises to eventually lock in profits.

I'll report back if something interesting happens. Watch this space.

And Now For Something Completely Different

Augustine Volcano in Alaska erupted again this weekend. Seismicity, pyroclastic flows and ash emissions have been observed today. Depending on the weather and whether or not it’s dark you might be able to see something interesting on the Augustine webcam. Here’s an image that was captured yesterday.

Gung Hay Fat Choy

Happy New Year!

This is the first day of The Year of the Dog.

I had a look at what Chinese astrologers say about 2006, The Year of the Dog. There will be increased social awareness and more generosity for society’s less fortunate. But this is the last year of the Metal cycle before we start the Water cycle in 2007, so unexpected good or bad events could occur. You can read more about all sorts of things Chinese here.

I was born in the Year of the Snake. People born in the Year of the Snake are deep. They say little and possess great wisdom. Here is more about me and my snakey pals.

The Varied Thrush

It’s been about two weeks of watching and waiting for a new bird to show up in the backyard that I haven’t already written about. J. offered to tour me around the park where she lives just so that I can spot some new species. But they would be mostly ducks, geese, herons and swans that don't visit my backyard so I would have to create a new category in my links over on the right, something like "J.'s Park Birds."

This morning I did finally catch a glimpse of a new bird, the Varied Thrush.

Like the Towhee, the Varied Thrush (Ixoreus naevius) is quite shy and I rarely see it. It’s about as big as a Robin and looks for tasty things to eat in the litter under the evergreens well back from the house. I have seen it under the birdfeeder but I think it prefers to stay sheltered under the trees.

Oops, my boo-boo.

I've discovered that I mis-identified the Towhee that I wrote about on January 4 so I corrected my entries about it. It was actually a Spotted Towhee (Pipilo maculatus). I had called it a Rufous-sided Towhee. The academics who decide these things now consider that the Rufous-sided Towhee is actually two species: the Spotted Towhee and the Eastern Towhee (Pipilo erythrophthalmus). They're very similar looking but their home ranges are on opposite sides of the continent. Apparently hybrids exist where the ranges overlap.

I was going to write about my adventures booking airline flights with uncooperative call centre agents (aren't these people supposed to *want* to sell you something?) but I'm not in the mood right now (I might say something nasty) so maybe later...

Today's Left Coast Report (with two more birds too)

Summary
Weather: Rained last night. Not raining right now. Will rain again soon.

5-day Forecast: Periods of rain interspersed with periods of just-stopped-raining and just-about-to-rain.

Gas: 94.9

Bird Sightings: Nobody new in the backyard but spotted Pigeons behind the grocery store and Crows hanging around the McDonalds. These birds are featured in Today’s In-depth Report. Keep reading.

Traffic: Heavy around the Future Shop store due to the big sale they have on. (This direct-from-the-scene traffic report by The Big Guy.)

Election Campaign: Has reached 7.5 on the candidates-being-nasty-to-each-other-in-public scale.

Stock Market: Up yesterday. Down today.

Stock Market Outlook for Next Week: Periods of Upward Trending Momentum interspersed with Unexpected Downward Pressures.

Technical Issue of The Day: The activation of a new cell phone that required all the problem solving skills of a Professional Engineer (retired), a Computer Science Major (latest occupation: eBay Seller of Knitting Patterns) and a very young technical support person in a far away call center.

Today’s In Depth Report

The Northwestern Crow (Corvus caurinus)
and
The Rock Pigeon (Columba livia)
Crows seem to be very smart birds and if you watch them a lot you can come to recognize individual birds by their appearance and personality. Several years ago we had a Shepherd/Lab cross whose self-imposed life’s calling was to keep our property clear of uninvited people, other dogs, cats, raccoons, skunks, rats, squirrels, large insects and birds, most especially crows. She was not too bright but extremely athletic and quick enough to catch a rat occasionally.

Anyway, there were a couple of crows that found it amusing to perch about 20 feet up in the tree just outside our back door just to tease her. She could sit there for ages watching and waiting for her chance to catch a crow while they would squawk and preen and drop little bits of whatever they had handy down on her. I remember coming home from work one day and finding just a few long black feathers.

I guess somebody wasn’t too smart that day.

There is a very large crow roost near Still Creek in Burnaby and every day close to dusk you can see thousands of birds flying towards the roost. One good place to watch them flying by is near the south end of the 2nd Narrows Bridge.

A small flock of about 30 pigeons hangs around in the parking lot behind a grocery store near where I live. Over the years I’ve seem various businesses in the area install owl sculptures on their roofs in an attempt to ward off the pigeons (they are a bit messy and I never park my car under the power lines there.) The fake owls are currently on a roof across the street from the grocery store. I don’t know if they work but I’ve never noticed the pigeons over there. Maybe somebody is feeding the pigeons. Otherwise they would likely move to the grain elevators where there’s always lots of grain spilled along the railroad tracks.

While I was writing this, I googled for more information on pigeons, pigeon predators, pigeon repellants, and so forth. There are certainly a lot of businesses dedicated to selling an amazing assortment of products that are supposed to repel pigeons! There are chemical warfare agents, sticky stuff you smear on the roosts, inflatable owls, shiny spinning whirly things, water sprinklers, balloons with scary eyes painted on them, spikes, little fences made of wire, fake owls with wings that will flap in the wind, noise makers, ultrasonic noise makers, strobe lights, electric shock systems, etc., etc., etc.
I bet that a not too bright German Shepherd/Lab cross would also work.

Canada: Just Say No!

In honour of the upcoming election here's a cartoon. It's from 1996 but nothing much seems to have changed since then.


[Note to J.] Study this. Ask T. if you don't get all the jokes, but if you show him the cartoon try to keep "No-Where" covered up with your finger. And there WILL be a quiz on the provinces later.

Carpet Cleaning

The carpet cleaners came yesterday.

To get ready, I moved the stacks of unsold eBay inventory, shipping supplies, office supplies, almost-but-not-quite-finished crochet and cross stitch projects, investing and stock market research files, 3-year old job hunting papers, outdated computer books, broken computer hardware, Christmas wrapping paper, 15 paperback books that are supposed to go to the used book store, a Super Nintendo game console, a dog chew toy, a pile of dirty laundry, AND a pair of The Big Guy’s jeans that need a button sewn on from my office floor onto the spare room floor.

This is a picture of my desk. Maybe it will help you imagine what the floor usually looks like…


All this moving, just so that the floor of my office could be cleaned.

Now it’s clean! And sort of empty too…

Today I started moving all of the stuff back.

This *inspired* me to start sorting through the boxes and piles to make Keep/Recycle/Throw Out decisions. After a couple of hours of this I had to drop everything and go with The Big Guy to a meeting with a Financial Planner. He needed advice on how optimally arrange his post-severance finances so that he (and I) can keep most of it instead of handing it over to Revenue Canada.

After the meeting I was no longer inspired.

So now I have stacks and stacks of half-sorted stuff piled up in TWO rooms instead of just in one room. I’m further behind than I was before the carpet cleaners came!

And who can tell that the carpets are clean when they’re all covered up with this stuff?

The Sum of All Fears

Last night I re-watched The Sum of All Fears, a 2002 movie loosely based on Tom Clancy’s book of the same name. The first time I saw it I liked it much better. That’s probably because I had not read the book either and didn’t know what was going to happen. Of course, given that it was a Tom Clancy story (alternate near history is his specialty), I should have realized that the bomb *was* actually going to explode and America was not going to get off as easy as Hollywood usually lets it.

Not a great movie but good enough for a diverting Saturday evening. It has a few memorable moments: the helicopter getting slammed by the shock wave from the bomb blast, the CIA Director (played by Morgan Freeman) telling Jack what to say to his girlfriend about why he has to cancel their date, Jack’s first conversation with the Russian President (Ciarán Hinds is simply compelling in this role.) But I prefer Harrison Ford to Ben Affleck in the role of Jack Ryan as in The Hunt for Red October. If real-life CIA employees are as clueless as Ben Affleck always appears to be, it’s no wonder they get into such a mess sometimes.

Speaking of The Hunt for Red October, that was a really good movie! And the book was fantastic too! OK, I am a little biased because I happen to be fascinated by submarine movies – all that tense claustrophobia inside a cramped and creaking metal tube, sneaking around underwater while listening real hard for other boats sneaking around… And how can you do better than Harrison Ford and Sean Connery in the same movie as a submarine?

Anyway, after watching The Sum of All Fears again I’ve decided that I’ll read the book soon. I’ve had a copy for several years, just waiting for me to get into a Tom Clancy mood again.

…later…

Aargh! I can’t find it! I must have loaned it to somebody.

But I found this other Tom Clancy book, Without Remorse, that tells the story of John Clark…

So many books, so little time…

Today's birds: Nuthatch, Steller's Jay and Downey Woodpecker

I have three new bird species to report on today.

But first let me talk a little bit about how the day went. (This is mainly for my Mom. Hi Mom! Welcome to my blog! I talked to her on the phone already but my brain was on hold at the time so I forgot to mention any of this stuff.)

Today was very busy (more than usual, that is).

I got up and before I could even have a coffee, The Big Guy wanted a ride to the Skytrain. He had to do some post-severance paperwork, turn in his badge, Blackberry, cell phone and laptop and then attend a good-bye lunch with his co-workers.

After dropping him off, I threw some laundry in the washing machine and had some quality time with the business section of the newspaper and ROB-TV. On one of my coffee cup refill trips, I noticed that it wasn’t raining and the cloud cover had partially lifted. With outdoor lighting conditions at their most favorable since it started raining approximately 23 days ago, I grabbed my camera, opened the kitchen window and prepared to capture some live action shots of the birds at the feeder (for posting here in my blog). But the feeder and the suet cage were both empty so I had to refill them first. I took about 30 pictures hoping for at least a couple of good ones. Our guests at the bird buffet today included Chickadees, Juncos, Finches and Nuthatches.

Then I had to package up all the items people bought from me on eBay over the weekend and take them all to the post office for shipping. When I got back from the post office, Andy was upset that I hadn’t brought The Big Guy back with me and insisted on checking every corner of the garage to make sure he wasn’t hiding somewhere.

I uploaded the pictures from the camera and had a look through them. It’s obvious I’m going to have to rethink my birdfeeder photography technique. Maybe leaning over the kitchen sink aiming the camera out the open window is not such a good idea. Terrible photos. Poorly focused. Lighting not so good. And the birds don’t exactly just sit around posing for their portraits. This is the best one. I cropped it and tinkered with the contrast and gamma a bit but there is only so much you can do… From top to bottom the birds are a Black-capped Chickadee, Red-breasted Nuthatch and Dark-eyed Junco.

After giving up on trying to fix the bird photos, there were some emails to answer: Why isn’t my stuff delivered yet? Where are the seams in the dress in this sewing pattern? If you can please help me get my zillion dollar inheritance money freed up from this bureaucratic snafu I’ll share half of it with you. Click here to find out the 10 top secret ways for guaranteed 500% returns on your investments!!!

Then The Big Guy phoned and wanted to be picked up at the Skytrain. He was all smiles and happy with his gifts from the people at work, even the bright orange thong underwear with the Alcatel logo on front.

OK, now for the birds.

The Red-breasted Nuthatch (Sitta Canadensis) has a long bill, flat head and straight tail that give it a stream-lined torpedo shape. OK, maybe it's more of a *fat* torpoedo shape. It likes black-oil sunflower seeds and I have seen Nuthatches stashing seeds in crooks and crannies of the bark in trees in our back yard.

Whenever I put fresh seed out that has peanuts in it, at least one Steller’s Jay (Cyanocitta stelleri) is sure to soon show up. A Jay will fill its crop with as much seed as it can fit in resulting in a big round bulge under the bill. Then it flies off to hide the seed somewhere. These Jays make a very raucous screeching sound and if one is unhappy with what you (or your dogs) are doing in the backyard it will scold loud enough to inform everyone for at least 2 blocks in every direction.

Downey Woodpeckers (Picoides pubescens) also come to our suet feeder. They are quite shy and fly off at the slightest movement so I don’t see them as often as most of the other birds. Here are some excellent photos of the Downey Woodpecker.

The end...must run, House is on.

You can’t be bored already!

Big news, The Big Guy finally got his severance package from The Company! We’ve been waiting for this for months and months and now it’s finally here.

Yesterday was his last official day of work. This morning, he’s puttering around in his office like he usually does this time of the morning.

At 10:00 am he says to me “I think I’m bored already.” Well I’m busy with my coffee and the newspaper and the daily Sudoku puzzle so I just try to blow him off with “You can’t be bored on your first day!”

He makes himself another coffee. I can tell he’s not going to go away that easy so I try “I’ve got a really long list of things that need doing if you’re really looking for something to do.”

“Like what?”

“Like fixing those lights in the ceiling there.” I indicate the ceiling light fixtures in the family room that he bought real cheap a few years ago. The heat from the light bulbs has yellowed the finish on the fixtures so that the glow is now an extremely unattractive orange-ish hue.

He mutters something I can’t quite hear (I’m a bit deaf) and retreats back to his office.

A few minutes later he’s back. “What else?”

I wave my hand at the walls. “I want to paint these walls. They’re really dark and ugly.”

This triggers a short discussion on the merits of the cedar wood strips on the walls, whether or not they are dirty, decorating 1980s-style vs. now, the difficulties of removing the wood, what the wood will look like if it’s painted, etc., etc. At last he asks, “What color?” Now I can tell I’ve won this round so I let him off easy with “I was thinking maybe a sort of a beach house blue.”

Of course, painting walls is way too big a job to start on your first day without gainful employment. But the mention of dirt has gotten his brain cells working.

The Big Guy, thinking that he’s distracting me from the wall-painting idea, asks “Are the spider webs still in my bathroom?” I mentioned the spider webs the last time I cleaned his bathroom. I had my glasses on while I was cleaning (something I don’t always do, wear glasses that is) so I noticed a lot of dusty spider webs up around the corners where the walls meet the ceiling.

I tell him, yes, they’re still there but he’s not too keen on hauling out the vacuum cleaner so he comes up with another idea.

He points at one of the cold-air intake vents that cycle cool air down to the furnace when it’s running. “Those are really dirty.” He’s right, the vent grills are covered with grimmy dust and dog hair. I nod. “I vacuumed them a couple of weeks ago but they really need to be taken off and washed.”

We’re both happy. He’s got something to do that he thought of himself. I get some cleaning done without having to do it myself.

Asset Allocation, Bushtits and Starfish

My asset allocation model is telling me that I should move some money out of Canadian equities and into US equities. I’m not surprised given the performance of the Canadian stock market and movements in currencies over the past two years. I have two questions to research before actually doing anything. 1) What US equity (or equities) should I buy? 2) What Canadian equity (or equities) should I sell?

Under Question No 1, I have topics to investigate.

What has Irwin Michael been buying? Irwin Michael is mutual fund manager with a value-based investment style. Unlike most other mutual fund managers he publishes information that anybody can read for free (you don’t even have to be one of his clients) about specific selected companies he is invested in, including why he purchased them, how they’re doing and why he sold them. I’m hunting for investment ideas in what he currently owns in his ABC American-Value and ABC North American Deep-Value funds.

The Global Tire Shortage: I first heard about this last summer. Major tire manufacturers (Michelin, Goodyear, Bridgestone, Titan, etc) are producing at maximum capacity and demand is very high due to booming economies and commodities prices around the world. The shortage and rising price of tires is beginning to impact the financial results of companies that rely on large off-highway vehicles, e.g., in the mining and energy sectors, construction and road building and truck manufacturing.

My Watch List: I keep a list of stocks that I watch. Sometimes a stock is on the list for years before I buy it or chuck it off as a bad idea. Right now the watch list only has one US equity on it that I don’t already own, Sea Containers (SCR.A on the NYSE). That’s a bit sparse. Maybe I’ll have a few more to watch once I go through Irwin Michael’s holdings.

Exchange Traded Funds: I turn to ETFs whenever I can’t decide on a particular stock. This morning I was looking at iShares Dow Jones Select Dividend Index Fund (DVY on the NYSE).

Now, back to the birds.

Today’s backyard bird is the Bushtit (Psaltriparus minimus). These are tiny little grey birds that travel around in largish flocks. The flock that stops by my suet feeder has at least 25 birds in it this winter. They don’t seem to mind crowds. Most of them will try to cling to the suet feeder all at the same time resulting in a squirming grey swarm that covers the suet on all sides and top and bottom too. Then they fly off, one or two at a time into the bushes and into next yard.

Before I knew they were called Bushtits, I used to think of them as “those scruffy little birds.” The first time that I really noticed them was during the summer while they were molting and they looked very dull and ragtag with bits of feathers sticking out here and there.

And, finally, the picture.

Here's a pair of Starfish. I took this photo near Long Beach on Vancouver Island.

More birds, a bird haiku

Yesterday I watched out of the kitchen window for about 10 minutes and it was the same crowd as Monday with the addition of a Spotted Towhee (Pipilo maculatus) and a solitary female House Finch (Carpodacus mexicanus).

At the birdfeeder, the Finches are like a group of ill-mannered party guests standing around the buffet table sampling all the goodies (black oil sunflower seed seems to be the favorite) and refusing to let anybody else get close. In contrast, the Chickadees carefully select a treat (a peanut if they can find one) and politely fly off to sample it, leaving a clear perch for the next guest. My silo bird feeder has six perches and sometimes they’re all occupied by Finches eating and dropping seed hulls on the ground while the Chickadees flit around in vain hoping for an empty spot.

The Towhee is a very shy bird that stays on the ground under the bushes at the side of our yard looking for the seeds and peanuts that the Chickadees drop from above.

This morning I decided to try a bird haiku.

After the rain
wild birds sing
Empty feeder hangs alone

Seen at the Birdfeeder Today

I've decided to use this blog to document the bird species that come to our back yard. I'll also list them in the links over to the right so you can check that from time to time instead of hunting through all the blog entries to find the ones about the birds. I intend to write more these backyard bird entries from time to time until I run out of species or until I get bored with the topic.

Today's birds:

Black-capped Chickadee (Poecile atricapillus): This cheerful little bird is particularly fond of peanuts. One will come zooming in from a tree or bush straight for the birdfeeder at such a speed you're sure it can't stop in time! It will perch, throw out a few sunflower seeds (for the Juncos), grab a peanut and then zoom back into the bush to peck at the peanut while holding it between its toes. I read recently that they will store food in as many as 28 separate caches and can remember where the caches are for at least 30 days.

Chestnut-backed Chickadee (Poecile rufescens): Similar to the Black-capped Chickadee but with brown coloration on the back and side.

Oregon Dark-eyed Junco (Junco hyemalis): These birds have toes that are not as adapted to clinging to the perches on my birdfeeder as the chickadees' toes. The Juncos like to hop around on the ground looking for seed that other birds have dropped. But some of them seem to have learned how to grab precariously onto a perch as they try to snatch a seed out of the feeder or a bit of suet out of the wire suet hanger.

Here's a picture of a Northern Saw-whet Owl (Aegolius acadicus).


I found this owl lying on its back just outside our backdoor one morning in October 2002. It had apparently crashed into the window during the night. The owl was still alive but had obviously been hurt and I took it to O.W.L. I was delighted to hear from them just before Christmas two months later that the owl had fully recovered and they were releasing it back into the wild.

Not a List of New Year's Resolutions

I had a nice long post all about my New Year's resolutions for 2006 95% complete. But I got so annoyed at the whole list and all that thinking about what needed improving in myself and my life that I deleted the whole thing.

I bet you’re happy about that! That’s one less tedious list of something or the other to read through.

What is it about the end of a year or decade or century that makes people want to make lists of everything?

I went through yesterday’s Globe and Mail and also another daily paper this morning and it was one list after another through both papers. Newsmakers of the year (I had completely forgotten about most of them.) Election campaign what’s hot and what’s not hot (I have noticed that the same items and/or people seem to appear frequently on this weekly list, they just keep changing sides from hot to not hot and visa versa.) Most memorable quotes by otherwise forgettable people. Funniest jokes by late night talk show hosts. All the shooting incidents in the last 30 days. Best stocks. Worst stocks. 10 tedious things talked about by a columnist during the year. A review of last year’s (mostly wrong) predictions. Predictions for next year (you would think after last year’s list that they would know better.) Ways to cure a hangover. The trendiest beverages to drink to acquire a hangover. Hottest TV shows (most of which I have never seen.) A list of celebrities who are famous for no other reason than they end up on a lot of lists.

The whole point is that I am not making another list for you to read today.

But I am researching a number of potential topics for future posts. E.g., The birds who visit my feeder in the winter. 10 ways to make more money with less effort on eBay. Potential causes for the defective sound coming out of my computer’s speakers. Best podcasts I have subscribed to. Why I bought each one of the stocks I hold. And more…

Any special requests? Feel free to leave a comment.