Holyland Trip Report – Israel –Nazareth, Cana, Tel Aviv, Jaffa, and Bethlehem (Day 3)

Nazareth, a major cultural center with a population of 60,000, is the largest Arab city with a sizable Christian population. Plaza Hotel (4-star) in Nazareth lived up to its rating with a pleasant view overlooking the historical old city of Nazareth. The buffet spread was sumptuous with choices in beef, chicken, fish, salads, and desserts. The tour groups are served dinner together at a given time-slot. The breakfast buffet the following morning also had variety with yogurt, cheese, cereal, milk, rolls, and coffee – for the entire trip theirs was the best coffee.

Jesus spent his boyhood days in Nazareth. Our first stop was at the Greek Orthodox Church of the Annunciation (announcement of the incarnation by the angel Gabriel to Virgin Mary). In Nazareth there are 18 churches of the Annunciation. Eastern Orthodox believes this particular church is located over the spring where Mary first heard Gabriel’s voice. The church rebuilt in the 18th century has an underground chapel from the medieval era containing the spring. Mary’s well, done in 2000 and located 150 yards away, fed by the waters of this spring is a symbolic reconstruction of this. Located adjacent (650 m) is the Roman Catholic’s Church of the Annunciation which according to them is established at the site of the Annunciation. This large and impressive modern church referred to as the Basilica of the Annunciation designed by Italian architect Giovanni Musio and raised between 1959 and 1969 is over earlier Byzantine and Crusader-era churches. Its imposing dome dominates the Nazareth skyline and sports stained-glass windows throughout the bare stone walls. Inside its lower level is the Grotto of the Annunciation which the faithful believe as the remnant of the childhood home of Mary. The few dozen pictures donated by Christian communities around the world is definitely a joy to behold. Bordering the Basilica of the Annunciation and connected by a courtyard is St. Joseph’s Church, aka Joseph’s workshop. This church built in 1914 on the foundations of a Crusader church has a cavern in the basement believed to have been Joseph’s carpentry shop.

Twenty minutes north-east of Nazareth is the Church of Cana (Kafr Kanna also Khirbet Cana) where it is believed Jesus performed his first miracle – turning water into wine at a wedding. The location is disputed with Kafr Kanna being revered as the time-honored probable site as indicated by ancient graffiti. However, recent excavations have uncovered ruins of a Jewish village from the time of Jesus about a km away fueling speculation the biblical Cana location could be there. The present church built over an older church between 1879 and 1883 has two levels – the upper chapel has a beautiful dome and the lower chapel has ancient artifacts from the site including an old jar believed to be one among the six jars used for the miracle. A popular gift for folks back home is the wedding wine sold in souvenir bottles in the shop there – 200 ml bottles travel-packed in four for $10 tag along with bigger bottles and packs are all available. Our tour group had thoughtfully arranged a “wedding vow renewal ceremony” at the courtyard of this church. About 30 minutes south of Cana is the approach road to Mount Tabor, the location of the Church of Transfiguration. The place also has the Eastern Orthodox monastery and offers breathtaking views of Jezreel Valley. Visit there can take more than half a day.

About 120 km (less than 2 hours) south-west of Cana on the Mediterranean Coast is Tel Aviv, an excellent modern city on par with European cities. Not being a religious city, it is natural to catch action during Sabbath. Our tour-bus rolled past Tel Aviv (beautiful beaches) into the old city of Jaffa and parked by a hill near the shore. Jaffa is one of the oldest port cities of the world known to have been inhabited from around 7,500 BC era. The promenade is wonderful with sweeping views of the Mediterranean and Tel Aviv. Jaffa is referenced multiple times in the Bible including St. Peter’s resurrection of the widow Tabitha in the New Testament (Acts of the Apostles 9:36-43). St. Peter’s Church of Jaffa (Japho also Joppa) is located there. The current church was built between 1888 and 1894 over a church first built in 1654 as dedication to St. Peter. The church with the bell tower positioned for seafarers serve as a beacon to locate the Holy Land. Jaffa also has importance because of the following four references in the Hebrew Bible:
  • One of the cities given to the Hebrew tribe of Dan (Book of Joshua 19:46),
  • Port of entry for the cedars of Lebanon for Solomon’s temple (2 Chronicles 2:15),
  • Jonah left for Tarshish from the port of Jaffa (Book of Jonah 1:3), and
  • Port of entry for the cedars of Lebanon for the second temple of Jerusalem (Book of Erza 3:7)
Bethlehem is around an hour south-east of Jaffa past Palestinian check-points in the Jerusalem border – giant separation walls dot the landscape around the area. Lunch in Bethlehem was at a buffet restaurant with a view and a respectable spread. The first stop in Bethlehem was at the Church of Nativity, one of the oldest continuously operating churches in the world, believed to be built over the cave that was the birthplace of Jesus. The first basilica was built by Queen Helena (mother of Emperor Constantine) around 327 AD but was burnt down in the Samaritan Revolt of 529 AD. The present structure built in 565 AD by the Emperor Justinian I is currently administered by three groups – Roman Catholic, Greek Orthodox, and Armenian Apostolic authorities. The basilica is entered through the “Door of Humility”, an especially low door and features a striking variety of different lamps throughout. The grotto is approached through winding stairs and leads to the original place of birth beneath the altar – a silver star marks the spot believed to be the birthplace of Jesus. The star has 14 points; a symbolical representing 14 generations from creation to Abraham, Abraham to David, and from David to Jesus and to the left is a manger. The Latin Patriarch of Jerusalem celebrating the midnight mass on Christmas Eve at the adjacent Church of St. Catherine is broadcasted all over the world.

A few minutes walk from Manger Square is the Milk Grotto. It is believed a drop of milk fell on the stone while Mary was nursing Jesus and turned it white. Christians and Muslims both trust scrapings from the stones in the grotto enhance fertility. It is also supposed to be the burial site of Herod’s slaughter of male children. Next to Bethlehem is the Palestinian village of Beit Sahour where the Roman Catholics and the Greek Orthodox have their own Shepherds’ Fields. The modern Franciscan church is designed to resemble a shepherds’ tent while the Greek Orthodox site is a 5th century church built over a cave. The Greek Orthodox site has a total of five churches. The natural cave church dates back to the 4th century and is the earliest Christian structure on the site. 

The day wound up with some shopping time at a Christian store in Bethlehem. Pricing at the store was not exceptional. Better pricing can be found at the many curio factories around Bethlehem and for those savvy at bargaining, the street vendors are the best bet – case in point, the street vendors have menorahs priced from $5 to $10 depending on size compared to upwards of $30 for a good quality version at the store. Our stay for the next three nights was at the 7-Arches hotel located at the Mount of Olives in Jerusalem – excellent location with a great view of the city – it is an older 3-star hotel. The dinner buffet menu was decent with good quality desserts and the coffee was average.




Related Posts:
  1. Holyland Trip Report - Jordan - Mount Nebo, Madaba - Day 1.
  2. Holyland Trip Report – Israel - Yardenit, Tiberias, Tabgha, Cappernaum, Ginosar, Sea of Galilee (Day 2).
  3. Holyland Trip Report - Israel - Nazareth, Cana, Tel Aviv, Jaffa, and Bethlehem (Day 3).
  4. Holyland Trip Report - Israel - Jerusalem (Day 4).
  5. Holyland Trip Report – Israel – Jerusalem, Jericho, Dead Sea (Day 5).
  6. Holyland Trip Report – Egypt – Red Sea, Sinai (Day 6).
  7. Holyland Trip Report – Suez Canal, Cairo - Day 7.
  8. Holyland Trip Report - Old Cairo - Day 8.
  9. Holyland Trip - Gotchas to avoid
Last Updated: 01/2012. 

Economy, Business, Credit, and Debit @ the Roundup #35






Welcome to the September 28, 2011 edition of the Roundup.




MoneyCone presents 10 Reasons Why The Rich Hate Warren Buffett posted at Money Cone, saying, "Warren Buffet is not your typical billionaire. Here are ten things that make him unusual and make most of the rich hate him:"



Michael Donelly presents Business tips: Customer Satisfaction is the Cheapest Marketing posted at www.anotherway.org, saying, "Save: A reduction in customer acquisition costs

Cost to you: Significant effort in training your staff and instilling a sense of identity into your company.
Nowadays, most companies prefer to reduce their expenses and shrink their business rather than implement new strategies and product innovations. Statistics suggest that companies are halting new projects and are paying more attention to cutting costs whilst simultaneously generating new customers with increased advertising."



Neal Frankle presents Is A Reverse Mortgage Annuity A Good Deal? posted at Wealth Pilgrim: Money Management Advice, Financial Stess Management, Addiction Recovery Plan & Resources, saying, "If you are looking for some extra retirement income, you’re probably intrigued by the idea of a reverse mortgage annuity. It’s a way for you to tap into the equity of your home. You’ll receive that money for as long as you’re able to live in your home and you won’t have to repay the loan. Because of the growing number of people turning 65 every day (currently 10,000) you’re going to hear a lot about reverse mortgages as a way for people to augment their retirement income. Since many people aren’t able to (or aren’t interested in finding jobs in retirement, this could be a way to go."


Marie presents Know Your Enemy: Keep an Expenditure Diary posted at Money Spending Mommy, saying, "Facing up to our mistakes isn’t easy. That’s why keeping an expenditure diary is so hard for some. But if you want to create a successful budget, you need to do what you have to do in order to identify problem areas."


debt kid presents New Features At Mint.com posted at Debt Kid.


All Others



Nick Park presents How Much Tax Do I Pay? posted at TaxFix Feed Update, saying, "The amount that you pay in taxes will depend on how much you earn. This post highlights the differnet tax brackets for different income levels."


Tim @ Faith and Finance presents 33+ Side Job Ideas posted at Faith and Finance, saying, "If you're looking for a side job to make extra money, explore a few of these ideas to get your mind working. Ignite the entrepreneur inside of you!"


Briana Myricks presents The Storm Hits: We’re Laid Off posted at 20 and Engaged, saying, "My husband was just laid off, leaving both of us unemployed."



Jason Price presents 5 Myths of Entrepreneurs posted at One Money Design, saying, "If you don't think you have a chance of becoming and entrepreneur you need to read this!"



Justin Tops presents Making 401k Withdrawals posted at 401k Calculator, saying, "With the economy doing badly, you may be thinking of making a 401k withdrawal. This post outlines some of the things to consider before you do."



Abby Nelson presents 10 Real Coupon Sites That Don?t Cut Corners posted at Nanny Classifieds, saying, "Have you ever gone to a coupon site and been confused, disoriented and frustrated? Want just printable coupons you can take to the store? Then here are ten coupon sites that make it easy to save in the real world."


Charles Chua C K presents What Can You Teach Your Children about Money posted at All About Living with Life.



Moneyedup presents How to Open a Roth IRA posted at MoneyedUP, saying, "Among individual retirement accounts, the Roth IRA stands out because of its special tax advantages. Instead of providing tax breaks at the time of deposit, Roth IRAs allow account holders to receive benefits completely tax free after retirement."


Simond presents Making Money From a Website posted at True to Business.


Joneric presents Learn How To Earn Money | Joneric Bohman posted at Joneric Bohman, saying, "Learn what money is and how to earn it."



Mike Piper presents 2012 Tax Brackets and Standard Deduction (Projected) posted at The Oblivious Investor, saying, "Now that the relevant CPI figures have come out, we can calculate the tax brackets for next year (provided no new legislation is passed)."



Tarik presents How to be a Lean Mean Operational Machine posted at Success starts today, saying, "3 easy steps to feel healthier, more relaxed and be able to achieve your goals faster."


Mark Roberts presents How To Choose The Right Filing Status posted at Tax Brackets, saying, "This article provides a guide to choosing the right filing status for your tax return."


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Carnival of Road to Financial Independence #35






Welcome to the September 27, 2011 edition of road to financial independence.





Beating Inflation



Carlos Sera presents A Required Rate Tale posted at Financial Tales, saying, "The real question that should be asked is—How much stock should investors hold? Old or young has nothing to do with it. So, how much stock should investors hold? The answer is—as much as required to earn the returns necessary to achieve your goals and is why I call this tale A Required Rate Tale."


Frugal Living



Briana Myricks presents 7 Ways to Become a More Frugal Family posted at StupidCents, saying, "Families can be more frugal with 7 simple steps."


David Leeman presents Frugal Eating, Budget Meals, Budget Eating posted at Financial Freedom Advantage, saying, "Can frugal eating lead to financial freedom? Not exactly, but you may be surprised how eating inexpensive meals and saving money on groceries can make your financial future much brighter."

DJ presents Are You Saving Enough For Retirement? posted at The Family Wallet, saying, "The earlier you start saving for retirement, the more painless it will be. For each year you postpone saving, you’ll have to save a little more each month to reach your goal."



Jon Elder presents Why a 15 Year Mortgage is a Smart Move posted at Free Money Wisdom, saying, "Here are some things to consider when trying to choose between a 15 year and a 30 year option on your mortgage:"



Steve Ryan presents The Frugal Bubble; How Long Will It Last? posted at Smart Wealth, saying, "A sense of fear has returned to households around the world. People are once again worried about losing their jobs, their houses, and their businesses. For many, being frugal is not an option, it’s a survival tactic."

Reducing Expenses



Tim Chen presents Credit Cards With No Annual Fee: List of The Best No Fee Credit Cards posted at NerdWallet Blog - Credit Card Watch, saying, "There are two big reasons to choose a credit card with no annual fee, even when more attractive sounding cards with low annual fees are available."


Matt presents 076 Financial Excellence: Start a Business in a Bad Economy posted at Living In Financial Excellence, saying, "Today I welcome Justin and Angela Kannich,owners of Kannich Motorsports to the show to talk about their journey in taking a part time business to full time in the face of a bad economy."



Tim W presents Expenditure Traps posted at Escape the Hum Drum.



Gen Y Capitalist presents Saving vs Earning, the Forgotten Consideration posted at Gen Y Capitalist, saying, "A fresh look at the reducing expenses vs. increasing earnings debate that considers the effects of experience."


John presents Eliminate Back-to-School Spending Stress with the Right Rewards Card posted at Wallet Blog, saying, "If you looked at your child’s back-to-school checklist and wondered how in the world you’d pay for everything on it, don’t worry, you’re not alone. So here's one way to help you save a little this year."


Stock Investments



My Journey presents What is a Margin Investment Account? Applying for a Margin Account with Fidelity posted at My Journey to Millions, saying, "I recently learned of margin investment accounts and plan to just purchase a couple hundred dollar lots when my money is in the midst of being cleared to take advantage of unusually low hits in the market."



MoneyCone presents Vanguard’s Most Expensive Funds posted at Money Cone, saying, "Vanguard is known for its selection of low cost, no-load funds but Vanguard does have a few funds up its sleeve for those who are willing to pay more."



Alexander presents Is Intel A Good Buy? posted at Dividend Stocks, saying, "Founded in 1968, Intel Corporation (INTC) has grown into a 104 billion dollar company that today dominates the global semi-conductor industry, providing processors for the PC and server market. It is only second to Korea’s Samsung Electronics, with a market cap of 118 billion."



Dividend Growth Investor presents Are Dividend Investors Benefiting from Stock Buybacks? posted at Dividend Growth Investor, saying, "Corporations typically return cash to shareholders in two ways – through share buybacks or in the form of dividends."


Jared H presents Behavioral Economics posted at RICH AS CHOCOLATE, saying, "Article on behavioral economics. To intelligently invest in stocks, you need to learn how to control your emotions in an unstable market."



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Rovi Corporation (ROVI) - Stock Analysis

Rovi Corporation (ROVI) was founded in 1983 as Macrovision Corporation. Its co-founder John O. Ryan was the inventor of analog copy-protection (ACP) technology for video, which along with derivative versions were extensively used in commercial VHS videos, including by major Hollywood releases. Read more at Seeking Alpha...


Holyland Trip Report – Israel - Yardenit, Tiberias, Tabgha, Cappernaum, Ginosar, Sea of Galilee (Day 2)

Israel, a land bridge between Asia, Europe, and Africa, is a small country with land area slightly less than 8000 square miles (263 miles north to south with 9 to 71 sq miles west to east). Its diverse geography can be partitioned into four:
  • Western Mediterranean Coast which includes the Sharon Plain and the Philistine Plain,
  • Middle range mountains hugging the Lebanese border which consists of areas of upper Galilee, lower Galilee, Nazareth, etc.,
  • Jordan rift valley comprising of the Dead Sea, Jordan River, and parts of the Sea of Galilee mostly below sea level (Dead Sea at 420 m below sea level is the lowest point in the world), and
  • Negev Desert covering 4,633 sq miles in the south.
Mountains climb 200 m above sea level in the lowland Mediterranean, up to 600 m in the middle and lower Galilee, 1200 m in the upper Galilee, and 2500 m around Mount Hermon (Israeli controlled Golan Heights).

We entered Israel crossing Jordan River through the Sheikh Hussein Bridge between Irbid, Jordan and Beit She’an, Israel. Beit She’an is located between the Jordan River valley and Jezreel valley. The Jezreel and Beit She’an valleys are the farming strongholds of Israel. Our route to Yardenit, the baptismal site on the Jordan River, was through the Jordan River Valley (Yarden stands for Jordan or Jordan River in Hebrew). As the original site is a military zone, this is an alternate location with a fully commercialized tourist facility built and maintained by the Kibbutz Kinneret in cooperation with the Ministry of Tourism in 1981. Originally a collective community based on agriculture, Kibbutz has since branched out to other economic areas including tourism, industry, and high-tech enterprises. Architect Danny Bar Kama designed the main facility as a nave of a church. The approach is gorgeous with limestone pathway flanked by olive trees and date palms complete with a barrel vault arch and a wall with water and three fountains representing the three main tributaries of the Jordan River. The wall on the right border of the pathway, “The Wall of New Life” designed by Armenian artist Hagop Antreassian, is inscripted with verses Mark 1:9-11 from the Bible in several languages - "In those days Jesus came from Nazareth of Galilee and was baptized by John in the Jordan. And when he came up out of water, immediately he saw the heavens opened and the Spirit descending upon him like a dove, and a voice came from heaven; "Thou art my beloved Son, with thee I am well pleased."

“The Wall of New Life” moniker is based on the belief that with baptism, one becomes a new person as stated in the verse Cor 5:17 - "Therefore, If anyone is in Christ, he is a new creation; old things have passed away; behold, all things have become new."

The building houses a gift shop, a mini baptismal site to the east and a restaurant which serves among other things the traditional St. Peter’s fish to the south. Past the building are the baptismal pools and changing rooms. Barring the religious holiday of Yom Kippur (the day of atonement) the site is open all days from 8AM - 5PM (Mar - Nov) and from 8AM - 6PM (Dec – Feb), with shortened hours on Fridays (4 PM), and on the eve of certain holidays (1 PM) for Passover,  Jewish New Year, and Independence Day. We found the gift shop at the site more expensive than those at Bethlehem and Jerusalem, although Yardenit branded items are readily available in this store.

Lunch was at the Tiberias seaside restaurant, around 20 minutes north of Yardenit along the Sea of Galilee coast – quality par excellence for setting, food and service – St. Peter’s Fish, rice and pita bread, accompanied with a variety of salads, and dates for dessert. “St. Peter’s Fish” (tilapia) gets its name from the biblical passage of Mathew 17:24-27 – “When Jesus and his disciples came to Capernaum, the collectors of the temple tax (two-drachma) came to Apostle Peter and asked, "Doesn't your teacher pay the temple tax?". "Of course", Peter answered. When Peter went into the house, Jesus spoke first, "Simon, What is your opinion? Who pays duties or taxes to the kings of this world? The citizens of the country or the foreigners?". "The foreigners" answered Peter. "Well, then" replied Jesus. "That means that the citizens don't have to pay. But we don't want to offend these people. So, go to the lake and drop in a line. Pull up the first fish you hook, and in its mouth you will find a coin (four-drachma) worth enough for my temple tax and yours. Take it and pay them our taxes."

First stop after lunch was at the Church of Multiplication in Tabgha, about 15 minutes north of Tiberias by the Sea of Galilee. The church features several 5th century original mosaics. A mosaic in front of the altar depicts two fish flanking a basket containing loaves of bread. It is the traditional site of the miracle of multiplication of the loaves and fishes per the verses of Mark 6:30-46. The church is built on the foundation of earlier churches and this can be observed through a glass panel. The current church was built to the same floor plan as the 5th century Byzantine church which in turn was built at the site of a smaller 4th century chapel.


Located 5 minutes North of Tabgha in the town of Capernaum is the Church of the Primacy of St. Peter. Capernaum is also known as the Town of Jesus as it was Jesus’s main base during his ministry. There are several references of Capernaum in the Bible including Mathew 4:13 – “And leaving Nazareth, he came and dwelt in Capernaum …”. The Gospel of Luke also references Capernaum as the home of the apostles Peter, Andrew, James, and John who were fisherman, and Matthew, a tax collector. The site has a beautiful hexagonal shaped church built in 1990 by the Franciscan Church. It is elevated on pillars and the interior has a see-through glass floor - below the church stood St. Peter’s House discovered in 1968 – the site had several churches, the earliest being from around 4th century AD. An adjacent site has the ruins of a synagogue which dates back to the 5th century. The “white synagogue” has a layer of black basalt foundation which is believed to be the remnants of an earlier synagogue where Jesus taught and healed a man who had the spirit of the devil, as referenced in Luke 4:31-44. Other miracles attributed to the site include – healing of the servant of a Roman Centurion (Luke 7:1-10) and  the healing of the paralytic lowered through the roof to reach Jesus (Mark 2:1).

The third stop was at the Church of the Beatitudes, the traditional site of Jesus’ delivery of the Sermon on the Mount – Jesus gave this sermon of moral teachings to his disciples and to a large crowd according to the Canonical Gospel of Matthew (chapters 5-7). The current church was built in 1936 near the site of the 4th century Byzantine ruins. Each side of this octagonal church represents one of the eight beatitudes. The church has a striking garden and the setting is a natural amphitheater - any sound produced is clearly audible for people within 200 yards.

The last item in the itinerary for the day was a boat ride in the Sea of Galilee from Ginosar to Tiberias. It is a very relaxing experience (about an hour) with the staff participating in a couple of dances to Hebrew Music – Shalom Aleichem and such ($1-$2 tip recommended). For those traveling outside of a tour group, the best bet would be to check with the captain for seat availability, as boats may be tied up with tour groups – usually around $10. Ginosar also has the “Boat of Jesus” on display at the Yigal Allon Museum, a fisherman boat dating back to the 1st century AD, and uncovered in 1986 when a drought caused the waters of the Galilee to recede – apparently the mud helped preserve the hull. A full-size reproduction of the boat is also on display on the grounds of Kubbutz Ginosar. The tour bus collected us at Tiberias and we proceeded for overnight stay at the Plaza Hotel in Nazareth, about 45-minutes South-East. As Sabbath was starting the roads were relatively empty allowing us to reach the hotel in no time.

Related Posts:
  1. Holyland Trip Report - Jordan - Mount Nebo, Madaba - Day 1.
  2. Holyland Trip Report – Israel - Yardenit, Tiberias, Tabgha, Cappernaum, Ginosar, Sea of Galilee (Day 2).
  3. Holyland Trip Report - Israel - Nazareth, Cana, Tel Aviv, Jaffa, and Bethlehem (Day 3).
  4. Holyland Trip Report - Israel - Jerusalem (Day 4).
  5. Holyland Trip Report – Israel – Jerusalem, Jericho, Dead Sea (Day 5).
  6. Holyland Trip Report – Egypt – Red Sea, Sinai (Day 6).
  7. Holyland Trip Report – Suez Canal, Cairo - Day 7.
  8. Holyland Trip Report - Old Cairo - Day 8.
  9. Holyland Trip - Gotchas to avoid
Last Updated: 01/2012. 

Stock Portfolio and Watch List Updates for September 2011

Following are the activity from the previous month:
  1. Added about 15% more to our CPFL Energia (CPL) holdings at $24.84 on 09/09/2011.
  2. Doubled down on Nokia (NOK) at $5.69 on 08/26/2011.
  3. Added 50% more to our BP (BP) holdings at $37.20 on 08/26/2011.
  4. Added one-third more to our Nucor (NUE) holdings at $32.76 on 08/26/2011.
  5. Added 25% more to our Intel holdings (INTC) at $19.38 on 08/26/2011.
  6. Wrote cash-covered puts on Applied Materials (AMAT Apr 2012 10) on 8/26/2011 at $0.96. The cash-coverage requirement accounts for around 2% of our total portfolio value.
  7. Wrote cash-covered puts on Wells Fargo (WFC Apr 2012 22) on 8/22/2011 at $2.95. The cash-coverage requirement accounts for around 2% of our total portfolio value.
The cash coverage requirements on the open puts account for 68.52% of our cash position. The cash position in our portfolio is at around 28.48%. As the stock market continued to correct, we added to our stakes in CPFL Energia, Nokia, BP, Nucor, and Intel. We also wrote cash-covered puts on Applied Materials and Wells Fargo. We will continue to initiate long positions if the stock market continues to correct.

Below is our updated portfolio – the overall portfolio is around 2.88% in the red compared to our cost basis:



StockBuy DateBuy PriceCurrent PriceCurrent % Of PortfolioUnrealized % ReturnYield as % of Portfolio Value
Altria (MO)Various19.1926.902.1340.170.16
Philip Morris International (PM)1/4/200532.1969.082.19114.580.12
Kraft Foods (KFT)Various26.3335.062.2333.170.09
Pfizer (PFE)Various22.1318.152.02(17.98)0.09
Central Europe & Russia Fund (CEE)Various29.9734.971.1116.700.01
Itron Inc. (ITRI)11/07/200785.0137.260.59(56.22)None
iRobot (IRBT)12/18/200718.6527.241.7347.31None
LDK Solar (LDK)Various20.355.000.48(75.43)None
Aegon N.V. (AEG)04/28/200815.994.340.90(42.84)0.00
Frontline Limited (FRO)10/06/200836.95 6.230.30(81.04)0.08
DryShips Incorporated (DRYS)02/09/20096.96 3.24 0.36(53.48)0.00
Plum Creek Timber (PCL)07/23/200930.50 37.332.3722.400.14
CPFL Energia S.A. (CPL)Various17.96 24.672.7437.350.18
BP plc (BP)Various46.73 39.691.89(15.06)0.09
AT&T (T)08/27/200926.38 28.941.849.690.12
Sysco Corporation (SYY)Various25.92 27.402.175.700.10
Exelon (EXC)12/30/200949.38 43.432.07(12.05)0.16
Telefonica SA (TEF) 02/09/201022.93 19.541.86(14.78)0.24
Vonage Holdings (VG) 04/06/20101.51 3.010.9698.760
Archer Daniels Midland (ADM)04/23/201028.27 28.621.821.220.09
Intel Corporation (INTC)Various21.4121.973.492.590.12
Google Inc. (GOOG)05/03/2010528.36 546.681.733.470
Cardinal Health (CAH) 05/06/201034.42 43.122.0525.270.06
Pearson PLC (PSO) 05/06/201014.32 18.022.0025.810.16
Nokia (NOK) Various8.026.031.91(24.85)0.16
Harris (HRS) 06/07/201045.65 40.721.94(8.27)0.08
Beckton Dickson (BDX) 06/23/201070.20 77.252.4510.040.10
NYSE EuroNext (NYX) 10/22/201030.38 27.231.76(8.72)0.15
Owens & Minor Inc. (OMI) 10/22/201028.11 29.891.906.330.08
Encana (ECA) 11/8/201029.2223.851.51(18.31)0.10
Nucor Steel (NUE) Various41.9135.042.22(16.39)0.12
K12 Inc (LRN) 2/15/201132.2127.681.32(14.07)0.00
Procter and Gamble (PG) 3/7/201161.8064.332.044.100.09
National Presto Industries (NPK) 06/15/201197.8592.751.47(5.21)0.19
Harleysville Group (HGIC) 06/17/201130.4626.761.70(12.16)0.14
Wal-Mart (WMT) 06/17/201153.0652.651.67(0.77)0.07
Nutrisystem (NTRI) 06/18/201117.0012.050.96(29.12)0.08
Gol Linhas Aereas Inteligentes SA ADR (GOL) 07/16/201112.507.631.21(38.96)0.08
US Bancorp (USB) 07/18/201124.3824.112.30(1.09)0.12
Waste Management (WM) 07/29/201132.0532.012.03(0.14)0.12
United Parcel Service (UPS) 08/08/201163.9966.592.114.070.10
Cash


28.48

Total Portfolio



(2.88)3.13


Below is a summary of transactions during the year:



StockBuy DateBuy PriceSell DateSell Price% Gain (Loss)% Portfolio Return*
GSK Jan 2011 35 Put 1/22/2011NA 3/26/2010 NA NA0.14
NUE Jan 2011 40 Put 1/22/2011NA 3/26/2010 NA NA0.17
ADP Jan 2011 40 Put 1/22/2011NA 6/21/2010 NA NA0.10
COST Jan 2011 55 Put 1/22/2011NA 8/16/2010 NA NA0.10
QSII June 2011 60 Put 2/15/2011NA 10/29/2010 NA NA0.15
AMTD Feb 2011 15 Put 2/19/2011NA 7/13/2010 NA NA0.15
ITRI May 2011 60 Put 3/8/2011NA 10/7/2010 NA NA(0.00)
NE June 2011 33 Put 3/8/2011NA 11/4/2010 NA NA0.14
JNJ July 2011 60 Put 5/5/2011NA 12/27/2010 NA NA0.06
Central Europe and Russia Fund (CEE) 6/28/200751.57 5/5/2011 44.68 (13.52)(0.16)
LinkedIn (LNKD) 05/19/201186.80 05/25/2011 94.31 8.650.12
NTRI June 2011 17 Put 06/18/2011NA 01/21/2011 NA NA0.10
GOL July 2011 12.5 Put 07/16/2011NA 02/15/2011 NA NA0.13
IBN Jan 2012 55 Call 07/18/2011NA 09/22/2010NA NA0.05
ICICI Bank (IBN) Various$23.77 7/18/2011$46.06 93.791.04
CAH Sep 2011 43 Call 08/03/2011NA 03/08/2011NA NA0.06
NYX Jan 2012 40 Call 08/04/2011NA 04/18/2011NA NA0.11
MCD Jan 2012 75 Put 08/08/2011NA 03/07/2011NA NA0.09
ABT Jan 2012 45 Put 08/08/2011NA 03/19/2011NA NA0.12
GSK Jan 2012 35 Put 08/08/2011NA 03/19/2011NA NA0.09
Realized Gain/(Loss) YTD-----2.72

  • % Gain/Loss Relative to Portfolio Value at Beginning of Year + Deposits
  • The table assumes realization of profits associated with selling options only after the option is exercised or expiry.

We have cash covered puts written on Wells Fargo (WFC) shares (April 2012 22), Applied Materials (AMAT) shares (April 2012 1), Ameritrade (AMTD) shares (Feb 2012 14), Weyerhaeuser Company (WY) shares (Jan 2012 20 at $2), Cisco (CSCO) shares (Jan 2012 20 at $2.64), Berkshire Hataway (BRK.B) shares (Jan 2012 75 at $7.15), H&R Block (HRB) shares (Jan 2012 10 at $1.60 and 12.5 at $2.30), Alcoa (AA) shares (Jan 2012 15 at $1.70), Cameco (CCJ) shares (Jan 2012 22.5 at $1.60), and Diebold (DB) shares (Nov 2011 35 at $3.40) with a cash coverage requirement of about 68.52% of our cash position.

Our watch list follow – Automatic Data Processing (ADP), Amgen (AMGN), Air Products & Chemicals (APD), Brown-Foreman (BF-B), Bemis Company (BMS), Canon (CAJ), Church & Dwight Company (CHD), ClickSoftware (CKSW), Canadian National Railway (CNI), Darden’s Restaurants (DRI), Emerson Electric (EMR), Giant Interactive Group (GA), Kaman Corporation (KAMN), Coca Cola (KO), McGraw Hill (MHP), 3M Company (MMM), PepsiCo (PEP), Teva Pharmaceuticals (TEVA), VF Corporation (VFC), and Whirlpool (WHR).

R2I Housing - Handing over to key transfrer - a never-ending story.

The shell of a house that the builders handed over was fraught with problems. From the following list of problems that we referred to the builder some were rectified by them and the rest we handled.

  1. Bubbling of plastering in the ground floor – Turns out that this is a widespread problem with new houses built on landfill in Kerala. A greater part of the houses in our community sits atop leveled out paddy fields. By capillary action during the monsoon season moisture seeps up the wall. The builder’s solution was to scrap off the bulging layers, inject water-proofing compound through random incisions, and reapply the plastering. The problems with this approach are: these incision spots are not scientifically chosen – we have several spots where the bubbling has reappeared, and this project is very messy as it generates a lot of dust.
  2. Termite problem – Per the builders’ specification, termite treatment was to have been performed during construction. However, we noticed severe termite problem when we moved in, the termites were starting to reach upstairs! It was indeed double whammy to notice pest proofing was not done either. We got these completed by a branded service company. The process is also messy – for termite treatment holes are drilled throughout the ground floor for injecting the chemicals – the holes are then corked with chalk before replastering. Pest proofing too involves a lot of chemicals and it is best to be not around during this time.
  3. Upstairs bathrooms had no water connection – The builder flat-out missed connecting the water pipes upstairs and so there was no water in the upstairs bathrooms. Also, they failed to incorporate hot water pipes to facilitate a solar heater. These were fixed by the builder, but it took a number of calls to convince them that there really was a problem.
  4. Water Leakage near the sunshades and certain other spots – Correct sloping was not done for some of the parapets resulting in water retaining and leaking through. Water-proofing of these areas were not done either. We got this done as part of our complete paint-job.
  5. Unfinished outside bathroom – During the construction phase the builders had problems with people lifting fixtures and similar items. To counter this they locked the outside bathroom doors up and the side-effect of this was forgetting to finish those bathrooms. The builder did eventually get around to doing this, although it was quite a hassle.
  6. Cracks on the compound wall – the compound walls were a hoot with visible cracks and gaps. Apparently, this was built on minimal foundation and given the soil condition the walls sank unevenly. Our builder patched up the walls, although it would have been fairer to rebuild it, given the condition – ultimately, we got them to agree to rebuild, should the wall collapse on its own in the next few years.
The following issues were fixed on our own without contacting the builder.
  1. Most of the tiles in the restrooms sported a number of paint and rust-spots.
  2. Inside and outside walls used low-quality distemper paint that by the time we moved in, it was ready for a repaint. Also, no weather-coating were done for the red roof tiles on the roof that they were fast turning black (with mold).
  3. Fuses on the outside panels used low quality material that had rusted through.
  4. The fuse panel inside needed rework as 6, 8, 15, and 20A fuses were used in random to connect different switches. Also, several of the fittings needed rework as they were not properly wired. The most bizarre item was the builder choosing to install an exhaust in the store room instead of the work area.
  5. Several of the faucets leaked.
It was unacceptable to us that a new house handed-over in good faith had these many problems. Actually, this is greatly the norm unless you are dealing with the very best local builders or with the high-end national builders. While our problems were many and the process of fixing them challenging, the surprising reality is that there were more than a few houses with far more serious problems than ours:
  1. Problems with piling giving away (resulting in the house sinking).
  2. Parts of the ground floor caving in.
  3. Issues with the title involving unauthorized land made part of the community.
  4. Location of undesirable things in the common area placed in close proximity to houses.
Then there is the on-going saga in resolving issues with what the builder promised for the common-areas and what was actually transferred over to the HOA. In summary, if we ever have to repeat this process, we will definitely stick with only the best builders. The time and effort needed to get our house to what we consider ‘hand-over’ condition was way more than what we anticipated, in spite of the lax service practices in Kerala.

Valuing Berkshire Hathaway (BRK.A) Stock

In Warren Buffett’s 2010 annual letter to shareholders, the section “On Reporting and Misreporting: The Numbers That Count and Those That Don’t” emphasizes against using net income to value Berkshire Hathaway. This is primarily because the company has the flexibility to allow net income to be any number, as it can realize gains by liquidating investments with large unrealized gains. Read More at Seeking Alpha...

Related Articles:
  1. Tracking Berkshire Hathaway's Investment Portfolio - Part 1.
  2. Tracking Berkshire Hathaway's Investment Portfolio - Part 2.
  3. Tracking Berkshire Hathaway's Investment Portfolio - Part 3.
  4. Valuing Berkshire Hathaway Stock


Tracking Berkshire Hathaway's Investment Portfolio - Part 3

Per the latest 13F report, the Top-10 holdings of Berkshire Hathaway’s 27 stocks account for a whopping 95% of the total portfolio value. Although the remaining 17 stocks contribute only towards a 5% stake, they can signify a bullish or bearish bias of the company, depending on the sector allocation and the acquisition/disposal pattern. Read More at Seeking Alpha.

Related Articles:
  1. Tracking Berkshire Hathaway's Investment Portfolio - Part 1.
  2. Tracking Berkshire Hathaway's Investment Portfolio - Part 2.
  3. Tracking Berkshire Hathaway's Investment Portfolio - Part 3.
  4. Valuing Berkshire Hathaway Stock


R2I - Shopping to Reacquire Appliances etc in India

As part of our R2I preparation, we did away with almost all of our electrical appliances, much of our electronic equipment, and a sizable portion of our household items over the last few months leading to R2I. Even so, when we shipped, to our embarrassment we still filled a 20’ container to the brim that too after disposing off our 2nd bedroom furniture set! As frugal consumers, this meant we had amassed more than we needed. Further, a lot of the big-ticket items we had such as the Roomba 530, golf sets, ski sets, lawn mower, GPS, exercise equipment, bikes, etc were either not needed or were not practical in our new locale. With that in mind, rather than replacing every single item that we disposed off, our game plan was to acquire things on an as needed basis. Besides, it is not as easy to pass-on used items in India, the used market is not as developed compared to the US.

We started living in our new home in India the first week of our move despite the fact it was just a shell barely livable by modern standards. Our immediate needs were for appliances and we spent the second day purchasing just that. Pricing for appliances are all over the map: a basic top-loading washing machine can be had for around Rs 10K (~$225) while high-end front-loading models are available at Rs 50K (~$1125) or so. Refrigerators start around Rs 10K (~$225) and go well into the Rs 1L (~$2250) for side-by-side premium versions. In general, we felt selection was wider in Indian stores compared to its counterparts in the US such as Sears, Home Depot, etc. Pricing stretched differently though – the good news is that no-brand low-end items can generally be obtained at a 30% discount compared to low-end pricing in the US. The bad news though was that the high-end commanded a premium upwards of 50% compared to US pricing – our best guess is that some kind of additional taxes (levied indirectly) is at work here. Below is a list of appliances we purchased during our first week:



As detailed in the spreadsheet, we chose branded items in the medium-high range with good Energy Star rating for the most part. For bigger appliances, purchase includes delivery, installation, and demo. The delivery crew can sometimes be different from the installation and demo crew which can imply a delay – that should not deter one from starting to use it, provided you know the ropes. The experience so far with our new appliances have been positive – we had to call warranty service only for the refrigerator when we detected a manufacturing defect in the magnetic lining on the door a few weeks after delivery – they replaced the door eventually, it took about six weeks and several calls.

More recently, the Prestige Induction Cooker stopped working and the bummer was that it was fresh out of warranty. Reviews on that product online are at best average. In our experience, it is a great time saver, although energy consumption is high compared to cooking gas – it is 100% efficient compared to 70% of regular gas cooktop. The service center pleasantly surprised us by repairing it free of cost.

Introduction to fair value estimates for our stock reviews

Based on reader feedback, we are incorporating fair value estimates for our future stock reviews. This is an introductory article to help readers understand the models involved.
The popular models of estimating fair value of a stock include:
  1. PEG Based Model,
  2. Benjamin Graham Model,
  3. Discounted Cash Flow Based Model, and
  4. Dividend Discount Model.
We introduce the models and calculate the fair value of a stock from our watch-list, Darden’s Restaurants (DRI). The spreadsheet below shows some key data points required for the models with the figures for DRI incorporated:



DRI valuation using PEG Based Model:

PEG (Price to Earnings to Growth) ratio is a metric introduced by Peter Lynch in his 1989 book One Up on Wall Street. A stock is stated to be fairly valued if that ratio is equal to 1. The ratio as introduced in the book has many limitations:
  • The formula does not make clear what earnings number to use – projected or trailing.
  • The formula does not make clear what growth rate to use – expected 1-year, projected 5-year average, etc.
  • Dividends are not accounted for.
A fair value equation derived from the PEG ratio that addresses some of the limitations of the original formula is below:

FV = (GR + (2*DY)) * EPS
FV – Fair Value.
EPS – Earnings per Share (Trailing Twelve Month).
CGR – Current Growth Rate.
DY –Dividend Yield (current year).

Applying the formula to DRI, we get:
FV = (8.77 + (2 * 3.52)) * 3.39 = $53.59

The stock trades at $48.84 which is ~10% below the fair value estimated and so is a Buy.

DRI valuation using Benjamin Graham Model:

This model uses a formula that was first presented in the seminal book on stock investment, “The Intelligent Investor” in 1962 and revised in 1974. It calculates the intrinsic value of a stock using market-related and company specific variables but without using an interest rate factor. As such, the formula is very simple:

FV = (EPS * (8.5 + (2*GR10)) *4.4)/CBY
FV – Fair Value.
EPS – Earnings per Share (Trailing Twelve Month).
GR10 – Projected 7-10 year earnings growth rate.
CBY – Corporate Bond Yield (current yield of AAA corporate bonds).

Applying the formula to DRI, we get:
FV = (3.39 * (8.5 + (2*7))*4.4)/3.99 = $84.11
 
The stock trades at $48.84 which is well below the fair value estimated and so is a Buy.
One limitation of the model is the dependency on the seven to ten year projected earnings growth rate, which can be hard to accurately predict. In our example, DRI grew earnings at an 8.77% rate in the last 5-years and so we conservatively used a slightly lower rate – as a mid-cap stock, the company has room to grow and there is scope for international expansion as well - so, our estimate is fairly conservative.

DRI valuation using Discounted Cash Flow (DCF) Based Model:

DCF model uses estimated future income projections and discounts them to arrive at a fair present value for an investment. For stocks, the income projections can be the free cash flow, earnings per share, or the dividends paid. Discounting requires using a rate that can be earned on an investment in the financial markets with similar risk – weighted average cost of capital (WACC) is a good measure for this rate. The formula is:

FV = FE*(1+GR5)^1/(1+DR)^1 + FE*(1+GR5)^2/(1+DR)^2 +…+ FE*(1+GR5)^n/(1+DR)^n
FV = Fair Value.
FE = Forward Earnings per Share (Next Twelve Months).
GR5 = Projected 5-year earnings growth rate.
DR = Discount Rate (Weighted Average Cost of Capital – WACC).

For most stocks, n is an unknown and so a terminal value is used after the first 5-years of discounting. The most common method to estimate terminal value of stocks is to use the Gordon Growth Model that uses a long-term growth rate for perpetuity. The formula is:

TV = FE*(1+GR5)^5*(1+LGR)/(DR - LGR)
PTV = TV/(1+DR)^5
TV = Terminal Value.
PTV = Present Value of Terminal Value
LGR = Long-term growth rate (perpetuity).
The altered formula is:
FV = FE*(1+GR5)^1/(1+DR)^1 +…+ FE*(1+GR5)^5/(1+DR)^5+ FE*(1+GR5)^5*(1+LGR)/(DR - LGR)*1/(1+GR5)^5
= PV1+PV2+PV3+PV4+PV5+PTV
PV1..5 = Present value of income projections from year 1 through 5.

Applying the formula to DRI, we get:

FV = PV1+PV2+PV3+PV4+PV5+PTV
= 3.88+3.88+3.89+3.89+3.90+67.80
= $87.23
 
The stock trades at $48.84 which is almost 50% below the fair value estimated and so is a Buy.

DRI valuation using the Dividend Discount Model:

Dividend Discount Model is a conservative variation of the DCF model that is based on the idea that a stock is worth the discounted sum of all its future dividend payments. Discounting requires using a rate that can be earned on an investment in the financial markets with similar risk – weighted average cost of capital (WACC) is a good measure for this rate. Also, the calculation requires a value for the long-term dividend growth rate. As such, the model is suitable for steady dividend paying stocks. The basic formula applicable to dividend paying stocks is:

FV = D/(DR-LGDR)

FV - Fair Value
D - Dividend
DR - Discount Rate
LGDR - Long-term Dividend Growth Rate

Applying the formula to DRI, we get:
FV = 1.72/(0.0786-0.04) = $44.56

The stock trades at $44.56 which is above the fair value estimated and so is not a Buy.

For stocks that pay no dividends, additional assumptions about when a dividend will be initiated, growth rate of such dividends, and discounting back to a present value is required to get a value. A variation of the Dividend Discount Model Formula can be used for the purpose (click for details on applying dividend discount model to growth stocks).

As one would notice, the four models can give very different figures. So, it is important to understand the assumptions made and the likelihood for the assumptions to become reality. The difference between the fair value estimate and the current stock price represents a margin of safety. When making a decision to Buy or Sell a security, these numbers do not give exact answers but can act as data points to consider.

Last Updated: 10/2011.

Tracking Berkshire Hathaway's Investment Portfolio - Part 2

Berkshire Hathaway’s (BRK.A) habit of nibbling bite-sized stakes only to dispose them off later was mentioned in passing in our previous article. This approach very often trips up investors who attempt to front run future Warren Buffet purchases – by the time they get long on the stocks concerned, Buffett has already liquidated the positions. This article examines the finer points of such trades. Read More at Seeking Alpha...


Related Articles:

  1. Tracking Berkshire Hathaway's Investment Portfolio - Part 1.
  2. Tracking Berkshire Hathaway's Investment Portfolio - Part 2.
  3. Tracking Berkshire Hathaway's Investment Portfolio - Part 3.
  4. Valuing Berkshire Hathaway Stock

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