As of the closing bell today, Lana's Index continues to be up roughly 17%.  I've added onto my position in AFL, AET POM and USB since the last entry.

I'm a little disappointed that I wasn't more aggressive in adding onto STI while it was selling for under $13.  It sort of took off on me this week.  I will probably be adding onto my position over the next few months until my average holding is around $15 a share.  It closed slightly above $17 a share today.

I also missed out on NSC while it was selling in the mid-$30.  I sort of ran out of ammunition.

Given the bounce that all the issues in my index have had in the last couple of months, valuation is really tricky here on out.  I want to continue to add to my positions, but I'm still trying to figure out which ones are still undervalued at this point.  I'll share my analysis with you as soon as I'm done.

With the offense in full nosedive mode for the month of June (2.57 runs per game), I had set a goal to finish the month with a 13-13 record.  By taking two of three from Arizona and splitting the four game series with the Phillies, LA is well on its way to a successful June.

With five games this week against the pesky Padres and the AL West leader Texas Rangers, the boys in blue could be looking at their first losing week of the season.  I can't remember the last time the Dodgers played consistently well against the Padres even when San Diego sucked as it does this season.  So a split of the two games with the Padres is realistic.

While I think that the Rangers are just keeping first place in the AL West warm until the Angels figure out their business come August, they're much improved over last season.  We'll probably salvage one of three against the Rangers - Texas can actually score a bunch of runs and unless LA's offense snaps out of it, the Dodgers are not going to win any shootout against the Rangers.

While the bats have cooled, the pitching staff is continuing to hold it together.  The staff's ERA is a stingy 2.86 for the month of June.  While I still think the Dodgers are one impact starter and two effective reliever away from a World Series appearance, this staff is good enough to keep the Best Record in Baseball crown through the month of June.

THINGS TO BE EXCITED ABOUT:

Hiroki Kuroda looks like an Opening Day starter should by allowing just two earned runs over his first two starts since returning from the DL.

Andre Ethier is beginning to hit again raising his season average up to a respectable .271 with 9 HRs, three of those coming in the first week of June including a walk off job against the Phillies.

THINGS TO BE WORRIED ABOUT:

James Loney is on pace to have over 100 RBIs with less than 10 HRs.  That's something which hasn't been done in the NL since the 1980's and the AL since the 1990's.  The worrying part has less to do with the team's W and the L, because I still think the team will win even if Loney doesn't hit for power in 2009.  It has more to do with the implication on James' development as a player to have a drop in his power stats this early in his career.

Same thing can be said of Russell Martin's numbers.  Younger Dodger fans are spoiled by the exploit of Mike Piazza.  Those of us who can remember Steve Yeager, Joe Ferguson, and Mike Scioscia, we can live with a catcher who averages less than nine home runs a season.  But can we live with a catcher who is on pace to hit ZERO for 2009 with a batting average hovering around .250?  I was advocating trading Russell Martin in 2008 while his All Star status was still shining and I'm advocating the same thing this season.  We should trade him while there is still some shine to his catcher's mitt.

At 35-18, 17 games above .500, the Dodgers have the best record in baseball as we head into the dog days of June.  Realistically, with 26 games to play in June -- 15 against American League teams and four against defending World Series Champion, Phillies -- it would be a very good month if Los Angeles can finish June with a 13-13 record.

The Dodgers' winning percentage against the AL is around .470, not exactly stellar.  So lets say LA takes seven games out of 15 from interleague play, that would mean they need to win six games against their NL opponents -- Diamondbacks (June 1-3), Phillies (June 4-7), Padres (June 9-10), and the Rockies (June 29-30).

Realistic?  I think so, but it's really questionable if Los Angeles can pull it off because the things to be worried about far outweigh the things to be excited about.

THINGS TO BE EXCITED ABOUT:

Juan Pierre is still batting around .400 since he replaced Manny in the lineup.  If nothing else, Pierre may have played himself into a realistic trade bait if the Dodgers are willing to eat most of his contract.

Hiroki Kuroda and Eric Milton looked great as they take their position in the starting rotation.  They both look good enough to win at least 10-14 games this season.

Jamie Hoffman looks like he could be a viable fourth outfielder candidate of the near future if Pierre gets traded.

The Blue Jays are in third place and dropping like a rock.  They're 2-8 in the last 10 games.  Do they really need Roy Halladay?

Houston Astros are in last place with a .429 winning percentage.  Roy Oswalt would sure look great in Dodger Blue.

THINGS TO BE WORRIED ABOUT

Matt Kemp, Andre Ethier, Russell Martin and James Loney.  That's half of the starting lineup, where are the home runs?

Brent Leach, Guillermo Mota.  They are still on the roster.

"I don't worry about any given event if I've got a wonderful business....  The wonderful business... you can figure out ‘what' will happen, you can't figure out ‘when' it will happen, you don't want to focus too much on ‘when,' you want to focus on ‘what.'  Because if you're right about ‘what', you will not have to worry too much about ‘when' "

Warren Buffett

"The most basic possible definition of a good business is this:  It generates more cash than it consumes....  In the long run, companies that meet this definition are virtually certain to grow in value, no matter what the stock market does."

The Intelligent Investor,

Benjamin Graham

For the year, my index is currently up by 18% from when it was created on January 2, 2009.  Up to this date, I have liquidated my positions in AFL, AXP and JPM for an average of 64% profit.  I have also bought back into AFL and I am buying my way back into AXP.

My current portfolio contain the following companies:

AFL, AET, AXP, ASH, BAC, BNI, COF, CHK, COP, CEG, DOW, GE, NSC, NRG, POM, STI, USB, and WFC.

Of these 18 companies (I just added AET this week), I do not plan on adding to my position in the near future the following:

CEG, NRG

Of the remaining 16 companies, I do not foresee adding on many more shares unless there is some drastic drop in the current price of say 20%:

BNI ($72.44), CHK ($22.66), COP ($45.84), GE ($13.48)

That leaves me with 12 companies, five of which are trading under $20.  Those are:

BAC ($11.27), DOW ($17.68), POM ($12.98), STI ($13.17), USB ($19.20)

I will be aggressively adding to my position for these companies.

The remaining seven companies are:

AFL, AET, AXP, ASH, COF, NSC, WFC

All of these seven companies have taken off from their March lows.  While all of them have tremendous potential for gains in 2011, I don't foresee their stock moving much higher in the short term.  Consequently, I will not be adding to my position in these companies as aggressively.  But I will be adding.

These are all good companies with a history of making money.  Some of them are not making money, or not making as much money right now, but all of them are positioned to do so once we get through the current recession.  Don't wait until prices go up before you own a piece of them.

As of this afternoon my index is up 17% since it was created on January 2, 2009.

As of last week I liquidated the remainder of my holding in AXP for a total average gain of 84%.  I also liquidated all of my holding in JPM for 56% gain.

I liquidated AXP because I wanted to lock in my profit and add to my position in USB and open a position in POM and STI.  Even at this level, AXP is trading at a depressed level, I think there will be plenty of opportunity to buy back in later.  As for JPM, this is a strong bank but that has already been priced into the issue.  Thus, I can't buy it at a bargain so what's the point of holding onto it.

POM is a great company that has been paying dividend consistently for years.  At my buy in price at around $12.10, I'm getting close to 9% dividend yield a year.  The company is making money and the dividend is safe for 2009.  Plus, it's trading below book value and stands a good chance of doubling in 12-months.  I'll roll with that.

USB and STI are two of those troubled banks -- along with BAC and WFC -- that will bounce back with a vengence in three years.  USB is making money and is paying dividend.  STI isn't but it's trading at less than half of its book value.  So three years isn't bad of a waiting period for both of these banking giants.  If you look at USB, BAC and WFC, beyond the current problems, they have all positioned themselves along with JPM to be huge players in the financials.  They're trading at depressed values relative to their earning potentials.  There really isn't any reason not to buy them now.

There are still lots of good buys out there, so do your research and invest.  Take little bites at a time, we may retest our lows so you want to have some ammunition when that happens.

As a lifelong Los Angeles Dodgers fan, I just can't tell you how excited I get when I see Kershaw and Billingsley's names on the roster.  They still have ways to go, but give it a year or two when they both arrive, they'll be the modern version of Sandy Koufax and Don Drysdale, I'll guarantee you that.

Anyone who have been getting down on Kershaw's high pitch counts and erratic control and thinks he should be sent down to AAA are nuts.  Does anyone remember what Billingsley was doing in his first full season in the bigs?  147 IP, 8.6 SO/9 and 3.9BB/9.  What has Kershaw done so far?   He's on pace to throw more than 150 innings and is averaging 9.6 SO/9 with 4.8BB/9 -- a strike out to walk ratio of 2.00, almost as good ad Chad's 2.20 SO/BB ratio in his first full season.  Have a little patience will you?  The kid is going to be GOOD!

Speaking of the good old days, I'm a bit giddy as well about the prospect of our version of Garvey/Lopes/Russell/Cey combination in Martin/Loney/Either/Kemp.  It's only the next to last week of May, but you can't help getting excited about having the best record in baseball or the fact that we're doing it the old fashion way, pitching and timely hitting -- Los Angeles' home run total still sucks!

And all this without Manny.

With today's loss to the Marlins, the Dodgers are 4-5 since the Manny suspension, but they could have easily been 7-2 if not for the bullpen's continued inability to hold onto a lead.

Reasons to be excited about this Los Angeles squad:

1.  It leads the majors in nearly every offensive categories;

2.  Starting pitching, even without its opening day starter, has been lights out;

3.  Even with all the problems it is having in the rotation and the bullpen, the team's overall ERA is tops in the NL and second only to Kansas City (?) in the majors.  Los Angeles is first in the majors with a WHIP of 1.26 and among the top three the majors in K's and saves.  Wolf and Billingsley are among the top 10 of the NL in ERA;

4.  Hiroki Kuroda is on the mends.  Jason Schmidt just threw 94 pitches in a minor league game;

5.  With a 4-3 record, the Dodgers have successfully faced the aces of the NL in the Philies' Hamels, Astros' Oswalt, Diamondbacks' Haren, Padres' Peavy (twice) and the Giants' Lincecum (twice).  Impressively, the Dodgers held the lead in six of the seven games after the opposing ace had exited the game.  The bullpen, of course, managed to blow the leads in a few of those games.  But a winning record against the best that the NL has to offer is still something to get pumped up about;

6.  Orlando Hudson.  I told you he would be a game changer.  Xavier Paul - batting .500 with a home run and a double in six at bats as a pinch hitter.  Told you the kid is a player to watch for.  Juan Pierre - batting .406 with 7 stolen bases since Manny suspension.  Pierre is a good player (.300 hitter/40+ stolen base guy/200 hits per season) burdened with a great player's contract (can't hit 30 home runs or drive in 100+ per season); and

7.  Casey Blake.  Eight home runs through Saturday.

Reasons for concern:

1.  The aforementioned inability of the bullpen to consistently hold a lead.  Jonathan Broxton's recent blown save against the Phillies doesn't exactly add to my confidence in the bullpen;

2.  With 31 home runs, the Dodgers are near the bottom of the majors in that category;

3.  Rafael Furcal.  Can't play defense or hit so far this season.  Makes me wonder how Hu is doing so far this season after getting demoted;

4.  Guillermo Mota.  Makes me wonder how Gagne is doing; and

5.  Casey Blake.  Leads the team with eight home runs through Saturday.  Explains why the Dodgers are near the bottom in the majors in that category.

"An investor calculates what a stock is worth, based on the value of its businesses.  A speculator gambles that a stock will go up in price because somebody else will pay even more for it."

-Intelligent Investor, Benjamin Graham

The days of easy picking are over for now.  Things have gone from being over-sold to over-bought, so proceed with caution.

Lana's Index is up 36% since I started it on January 2, 2009.  I made some changes to Lana's Index this past week.  Namely, I dropped PRU and added NSC.  I dropped PRU because when I started to build a position in this issue it was selling for around $25 a share.  That was a little more than two weeks ago.  Last week, it shot up to over $40 a share!  I wasn't going to add onto my position in this issue at that price and I don't think it's going to drop back down to a reasonable level any time soon.  So I decided to liquidate my position and added onto ASH, BAC and DOW.  All three of these issues are still selling for less than their book values and their P/E ratios based upon their average earnings over the past three years are still reasonable.  That's good enough for me.

I added NSC because it is a good company that is currently selling at a reasonable price, and it helps to diversify Lana's Index that is still heavily biased towards the financials.  My other railroad issue is BNI.  I'm holding my current position in that stock because it's selling in the $70 range, and that's too high by my calculation.  Warren Buffett would disagree since that's the price range he bought in at.  He's a lot richer too!

I'm looking to add to my positions in AFL, ASH, BAC, COF, DOW and GE should we start to see some dips in their prices this week.

Good luck everyone.

Manny is gone until July 3rd.  There is actually a bright side to this, and it goes by the name of Xavier Paul.

This kid deserves a good hard look by the big club, just like Andre Ethier and Matt Kemp did a couple of seasons ago.  He led the major league club during spring while hitting over .400 after hitting .316/.378/.463 for Las Vegas last season.  So far this season, Paul is hitting .344/.385/.542 with two home runs and 14 RBI in 96 at-bats at the Triple-A level.

No, he's not going to replace Manny -- but who is?  Xavier has good pop worth 15 to 20 hrs. a season; good speed and can play all three outfield position.  As good as he is, there is no room for Paul with the Dodgers because Manny and Pierre are on the roster for the foreseeable future.  But if he makes good on this audition, he could be packaged as part of a trade come July 31 and get on a team that needs young talent.

The big question now is whether the Dodgers will be able to hold out until Manny gets back.  The answer is a resounding "YES!"  This is not your 2008 Los Angeles Dodgers and this is not your 2008 NL West.  This is a much better team even without Manny and these other teams in the NL West are much worse than they were in 2008.

The Dodgers have benefited by starting the season playing mostly the NL West and mostly at home where they have a 13-0 start.  At 21-8, Los Angeles has the best record in baseball and it did so by doing what good teams are supposed to do when they are playing against bad competition:  They tear them apart, and that is what these Dodgers have been doing.

Even without Manny for 50 games, the Dodgers will win the NL West.  The Padres, Diamondbacks and Giants are AAA teams.  Andre Ethier is having a breakout season.  Furcal and Hudson look great.  Casey is playing like Casey.  Loney still has to prove that he can hit with some power and Kemp needs to reduce his strike outs, but everything is fine.  The staff will have back Kuroda in about three weeks.  Jason Schmidt just threw 100 pitches in a simulated game.  McDonald looks great in relief.  Kershaw is looking like Billingsley in his second full season with the big club and he'll get 10+ wins this season.  Wolf looks great and, of all people, so does Jeff Weaver!  So relax, the Dodgers will be fine.

I will go so far as predicting that they will still lead the NL West when Manny is reactivated and I will stick with my preseason prediction of 92+ wins.

 "The previous discussion leads us to a conclusion of practical importance to the conservative investor in common stock.  If he is to pay some special attention to the selection of his portfolio, it might be best for him to concentrate on issues selling at a reasonably close approximation to their tangible-asset value/book value - say, at not more than one-third above that figure.  Purchases made at such levels, or lower, may with logic be regarded as related to the company's balance sheet, and as having a justification or support independent of the fluctuating market prices.  The premium over book value that may be involved can be considered as a kind of extra fee paid for the advantage of stock-exchange listing and the marketability that goes with it."

"A caution is needed here.  A stock does not become a sound investment merely because it can be bought at close to its asset value.  The investor should demand, in addition, a satisfactory ratio of earnings to price, a sufficiently strong financial position, and the prospect that its earnings will at least be maintained over the years."

"The investor with a stock portfolio having such book values behind it can take a much more independent and detached view of stock-market fluctuations than those who have paid high multipliers of both earnings and tangible assets.  As long as the earning power of his holdings remains satisfactory, he can give as little attention as he pleases to the vagaries of the stock market.  More than that, at times he can use these vagaries to play the master game of buying low and selling high."

-The Intelligent Investor, Benjamin Graham

As of this morning, Lana's Index -- created on January 2, 2009 -- is up roughly 29%.  That's in line with the S&P's rise from it's bounce from its 2009 low.  This is when things are going to get tricky, money is going to start coming into the market and mess up the party.  Stock prices are going to climb.

My index is heavily weighed in financials that have risen quite a bit since they hit their lows in March.  So I took the opportunity this week to reduce my risk in the market and rebalanced my books.  I did so by selling half of my stakes in AXP for about 90% profit as well as my holdings in WFC for roughly 40% profit.

I took that money and paid off my margin account and added more to my holdings in ASH, BAC, DOW and GE.  I also expanded my index to add on NSC.

My reasonings are that while AXP and WFC are trading well below their historical highs, they are substantially above 2 times their book value and well above 15 times their earnings.  Given those multiples, I thought that this week is as good as any to take some profit and redistribute it to issues that are selling for closer or less than their book value and are trading with smaller P/E multiples.  BAC is my speculative play, but it is trading substantially below its book value.

I like NSC, that's a value play all the way.  At the present, it's selling below 1.5 times it book value and at very reasonable P/E ratio.  It is paying dividend at aroudn 3.8% that is safe for 2009.

Money is coming back into the market, stocks will not be on sale at crazy prices.  Proceed with caution my friends, but keep buying.  There is still a lot of upside.