Sunday, July 28, 2013

The Stock That Pays You Back

In the Consumer Finance sub-industry of the Financials sector is... you guessed it:

Discover Financial Services (DFS).

Otherwise, I'd probably be saying "Don't Leave Home Without This Stock" or "What's In Your Portfolio?" or... I don't know what H&R Block's slogan is!?!

Moving on.

All of the ratios that I use to rank the stocks within the S&P 500 Index and then their respective sectors and sub-industries are saying the same thing for this group, so I'm only going to publish one of the ratios today.

The Sortino Ratio

RankSymbolCompanyAverage Weekly Excess Return %Downside Deviation %Sortino Ratio
1 DFS Discover Financial Services+0.49%2.22%+0.2216
2 HRB Block H&R+0.32%2.55%+0.1240
3 AXP American Express Co+0.15%1.53%+0.1008
4 COF Capital One Financial-0.02%2.34%-0.0082

And just so we're clear, when I say that Discover Financial Services is "The Stock That Pays You Back," I am not talking about dividends.

I'm talking about increasing stock prices.

To that end, let's take a look at my current trading signals for each of these 4 stocks:

SymbolCompanyBuy Signal DateBuy Signal PriceClosing Price 7/26/2013Current Trade Return %
DFS Discover Financial Services4/19/2010$15.75 $49.45 213.97%
HRB Block H&R7/9/2012$15.91 $30.49 91.64%
AXP American Express Co1/30/2012$51.38 $75.34 46.63%
COF Capital One Financial5/6/2013$59.51 $68.76 15.54%

That's right, you would have had to buy DFS 3+ years ago to get all of that that roughly 214% gain...

Does anybody (besides Warren Buffett) actually hold stocks that long anymore?

I do.

Personally, I think less trading is better trading.

I like long-term capital gains.

I don't like transaction costs and I really don't like paying taxes.

But that's just me. 

Disclaimer: I do not own any of the stocks mentioned in this post nor do I plan to open any positions in any of these stocks in the next 72 hours.

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