MidSouth Week in Review: Jan 19, 2016

Weekly Update from Fund Manager Buzz Heidtke, MidSouth Investment Fund

Jan. 19, 2016 | RedChip Companies

From Buzz

The S&P 500 closed down 2.17% for the week as crude closed below $30/barrel. This is the lowest oil has closed since 2003. The highly touted FANG Index (Facebook, Amazon, Netflix, Google) is down approximately 5.6% for the week. The market will be closed Monday as we observe Martin Luther King Day. Have a great weekend.


  • The S & P 500 index (SPY) – is a weighted index of 500 stocks based on company size. An investment of $100,000 in the SPY would have resulted in $18,000 of your investment being in the ten largest companies in the index vs. only $130 in the ten smallest. At this time, I believe a better choice is the Guggenheim Equal Weighted S & P 500 index (RSP), where a $100,000 investment would be equally distributed in each of the 500 stocks in the index ($200 per stock). Over the past 3-months the RSP has declined 6.15% vs. only a 3.29% decline for the SPY, because of the heavy weighting in the SPY’s better performing stocks (FANG, etc). Going back to April 2003, the unweighted RSP has returned investors 157.5% vs. 99.75% for the weighted SPY index. The RSP carries a management fee of 0.40% vs. 0.09% for the SPY – Buzz

  • Soft Times at Playboy - In the 70’s the typical issue consisted of 400+ pages vs. less than 100 today. Circulation hit a high of 7.1 million in 1972 vs. around 780,000 today. In December 2009, the company reduced the publication schedule to 10 issues per year. Last year the company announced the elimination of frontal nudity beginning with the March issue, which will probably cause the typical, “Honey I don’t care about the nudes, it’s the stories that I like”, buyers to drop their subscription. This week Hugh Hefner announced plans to sell the Playboy mansion for $200 million, which was carried on the books at $1 million when he took the company private at around $137 million in 2011. Outsiders value the six-acre tear-down LA site at around $80 mil to $90 million, which includes requiring the buyer to let the 89 –year-old Hef live on the estate until he dies – Wikepedia, Thomson news

  • Oil Stock Debacle – Crude dipped below $30 a barrel this week, its lowest level in 12 years. According to Yahoo Finance, all but five of the 559 oil stocks they follow are down more than 20% from their highs

  • Price Gouging – Since December, major drug firms have raised prices in the 9% to 10% range on many well-known prescription drugs including; Pain killer Lipoderm (25%), Viagra (12.9%), Restasis (9.9%), and Namenda for Alzheimer’s (9.9%) – Wall Street Journal

  • Stock Market Declines – A 5% decline happens about 3x’s a year. A 10% decline happens annually and lasts for around 115 days. A 15 percenter comes about every two years and lasts for 216 days on average. A 20% decline, which is called a bear market happens about every 3.5 years, lasting 338 days on average – American Funds…The last S & P 10% decline occurred in 2011 – Kiplinger

  • Who is the Happiest Man? – he who has braved the storm of life and lived or he who has stayed securely on shore and merely existed? – Hunter S. Thompson, Journalist

  • Companies that do well – generally report their earnings earlier than those which do poorly – Alan Abelson

  • Average Price declines from 52-week highs – Large caps (– 21.3%), Mid caps (-25.3%), Small caps (-29.2%) - Bespoke Investment Group.

Buzz Heidtke

"I work with many of the companies that would be RedChip companies. And we certainly ascribe to the same view that the RedChip Companies do, which is Discovering Tomorrow's Blue Chips Today."

  • Bob McCooey, Senior Vice President, NASDAQ Stock Market