Looking for Value in Financials? Friday, August 31, 2007
Posted by ei-forum in US Traded Stocks.add a comment
We have had some readers write to ask what we thought of the current valuation of banks and brokerage firms, wondering if it was time to pick up some bargains.
Whilst we agree that the sell-off has negatively affected companies that should not have too much trouble shaking of the current economic climate and who do not face a large exposure to sub prime, we are still hesitant on taking a position at this moment in time. We would prefer to wait for the results for this fiscal year (ending today for the banks and brokerages) to have a better understanding of the implications of the credit crunch.
Having said the above, if we had to ‘nominate’ our preferred choice today, we would definitely go with Bank of America (BAC). We have been following this company for some time and believe that with our own fair value estimates at around 65 USD, it is worth a look at recent levels. All in all, it hasn’t suffered much in recent weeks and Warren Buffett has even disclosed a position.
We feel that this Monringstar video does a really great job a explaining the investment thesis, please click here: link.
Please read our Disclaimer.
Perspectives from Merkel (Berkshire-Style) Thursday, August 30, 2007
Posted by ei-forum in CEO Interviews, Investing.add a comment
For those of you who have never heard of Markel, it markets and underwrites specialty insurance and programs to a variety of niche markets. However, more importantly for us, it has a strong investment side of the business that is modeled on Berkshire Hathaway.
We recently came across this interesting interview with Tom Gayner who runs the asset management side of the business. He is a Buffett disciple and is a seasoned investor who always has an interesting take on markets and investments.
To watch the Morningstar interview please click here: link.
Staying Invested in the Market Wednesday, August 29, 2007
Posted by ei-forum in Investing.add a comment
Having already talked and ranted (here) about the perils of trying to time the market we thought that it was time to give our readers some numbers to help reflect on this issue.
A study published by American Century Investments shows that if you had stayed invested in the market from 1990 to 2005, a 10,000 USD investment would have been worth 51,354 USD at the end of this time period – not a bad investment.
However, look at the following stats:
- If you had missed out on the best 10 days of that period, the total value of your investment would have dropped to 31,994 USD…
- If you had missed out on the best 30 days (out of the15 YEAR PERIOD), you would be left with 15,730 USD!
- And if you had missed the best 50 days, you would actually have had a negative return with only 9,030 USD left.
We believe that the above speaks for itself … it’s practically impossible to pick out the best performing sessions and missing them has a devastating effect on your total return. Consider this: Nobel Prize winner William Sharpe concluded that someone trying to time the market would have to be right on 82% of his calls to try and match a buy and hold strategy – we think that we’ll continue to buy and hold…..
The Little Book of Value Investing, C. H. Browne Tuesday, August 28, 2007
Posted by ei-forum in Book Reviews.add a comment
Christopher H. Browne is one of the best value investors around. He is Managing Director of Tweedy, Browne Company LLC, the oldest value investing firm on the Street and his father counted the likes of Benjamin Graham and Warren Buffett as his clients.
Browne tackles the history, fundamentals & performance of value investing techniques and goes as far as highlighting a detailed road map of where to find the information you need and how to dissect the financials. As he states, ‘the beauty of investing is its logical simplicity’. It is based on determining what the company is worth and at what price you are willing to buy an ownership stake: in essence, intrinsic value and margin of safety.
A quick read, this book gives a complete and detailed picture to anyone interested in having a non-nonsense guide on how to buy stocks on sale; paying 66 cents for every dollar.
Enjoy!
Market Expert: Fund Performance (2)! Monday, August 27, 2007
Posted by ei-forum in Investing Humor.add a comment
Actually, before looking at theDogbert Reincarnation Investment Fund, we’ve got one more on Fund Performance and how some funds promote themselves!
See you next Monday for more….
The Dhandho Investor, M. Pabrai Friday, August 24, 2007
Posted by ei-forum in Book Reviews.add a comment
Monish Pabrai reviews the value investing approach, explains how it has served him and takes it one step further by detailing the Dhandho method (pronounced dhun-doe). He follows in the footsteps of Warren Buffett and really offers the reader a unique insight in how he invests, what reference material he uses and how he is guided by maximizing rewards AND minimizing risk. As he says, you need to make sure that you only toss a coin when the odds are: “Heads, I win; tails, I don’t lose much!”
This book is an extremely easy read and is real gem! 100,000 USD invested with Pabrai in 1999 would have been worth well over 650,000 USD in 2006 – that’s an annualized return of over 28% after fees and expenses! What we really liked is that he did not start his career on the Street and is not a classic money manager. He was an independent investor that slowly and surely moved towards value investing and eventually started to manage his own hedge fund.
The book explains how the Dhandho way of investing – basically, the way a certain ethnic India group approaches life and business – can be applied to the stock market and to the value investing framework. Furthermore, what is truly exceptional is the Monish Pabrai opens up the doors of his world for the reader and offers them a unique insight on how he has successfully managed to make investing his trade.
Enjoy!
Gap: on the right track Friday, August 24, 2007
Posted by ei-forum in US Traded Stocks.add a comment
Gap, Inc. – Update: Insider Buy Thursday, August 23, 2007
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Following up from our recent post, we would encourage readers to visit Insidercow.com and enter the symbol GPS. You will notice that Mr. Murphy, the new CEO has been accumulating shares … over 2 million dollars worth!
We have already detailed our view on this company (click here) and we will not repeat ourselves, but we simply love to see management putting their money where their mouth is.
Magic Formula Investing Wednesday, August 22, 2007
Posted by ei-forum in Investing, US Traded Stocks.6 comments
In ‘The Little Book That Beats the Market’ (read our review: here), Greenblatt highlights his method for selecting stocks and beating the market. Does the system work? Well, over the past 20 years he has managed to generate annualized returns of 40%… we think that this is enough to convince even the skeptics to read on.
His thesis is quite simple: instead of following the analysts or buying an index, investors should aim to buy good businesses when they are cheap and will therefore generate superior results in the coming 12 months. How do we find these businesses? Actually, Greeblatt has made it quite simple by constructing a website that will run the query for you (www.magicformulainvesting.com), all you have to do is decide the minimum market cap and number of stock you want the search to show. The formula automatically selects stocks based on their return on invested capital (we want a high number) and P/E ratio (we want a low number).
In this current market situation, we thought that it would be an ideal time to use this formula to give us some interesting investment ideas. We encourage you to do the same. Happy screening!
Gap, Inc. Tuesday, August 21, 2007
Posted by ei-forum in US Traded Stocks.2 comments
Is Gap (GPS) finally getting their act together and most of all is the new management going to convince investors that they are going to manage to do the company justice and finally reward all the patient shareholders that have stuck with this company through difficult times?
Earnings for the fiscal second-quarter will be reported on Thursday and even though we usually do not pay much attention to the financial community, we couldn’t help but notice that two analysts have upgraded the stock in August, one of them with a “Strong Buy”. This means that management if starting to make some progress and that key fundamentals are starting to prevail over the overall bad sentiment surrounding this company.
Why are we talking about Gap? Well, there is a lot of talk about this company being impossible to fix or even some people believing that they will have to file for bankruptcy. We believe that these opinions are not even worth commenting on BUT also feel that it could be a good opportunity to profit from market folly.
Naturally, everyone is entitled to their own opinion but we find the fact that the company has a great balance sheet quite interesting: virtually no debt, generates a lot of free cash flow and has a large cash position. Furthermore, it continues to act responsibly towards shareholders through repeated stock repurchases.
Please read our Disclaimer.
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