2007 November « Enterprising Investor Forum

Will Eddie Lampert succeed? Friday, November 30, 2007

Posted by ei-forum in Miscellaneous.
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In a recent article, the Wall Street Journal Online is accusing Eddie Lampert of having ‘lost his luster’, suggesting that he will not follow in the footsteps of Warren Buffet. Read article: here.

Since Sears posted much weaker than expected 3rd quarter results, decreasing Lampert’s stake by nearly 1 billion dollars, most commentators have started to bash Lampert once again. Sears is not the only soar point at this moment in time as the AutoZone and AutoNation positions are suffering along with the ill-timed entry into Citigroup.

What is Lampert trying to do with Sears? Some hoped, it would have become an holding vehicle like Berkshire Hathaway but it seems as though he is still trying to concentrate on the retail side which clearly seems to be going down the drain. For an interesting take on Sears as a holding company please read the following article: here.

Despite the fact that things are not looking for good for Lampert at the moment, we feel that it is still to early to judge and that as true value investors, we should give him the benefit of the doubt and look back on these events and results in a couple of years time.

Stephen Schwarzman Thursday, November 29, 2007

Posted by ei-forum in Miscellaneous.
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The controversial Stephen Schwarzman recently spoke up for private equity confirming his view that it is “a force of good” and that the industry will continue to play a key role in coming years. As most of you know, a lot has been said about the co-founder of the Blackstone Group, his salary and his spending habits… regardless of how you feel on the subject, we recently came across and old post on DealBook which is definitely worth a read…please click here.

Enjoy.

Hedgehogging, Barton Biggs Wednesday, November 28, 2007

Posted by ei-forum in Book Reviews.
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This is one of the best books we have read in a while! Barton Biggs offers readers a truly fascinating account of Wall Street and the hedge fund world.

The book is well written, interesting, instructive, funny and captivating. It is not a tale of ‘hot shot’ hedge fund managers but a very eloquent and detailed account of the fascinating world of hedge funds, the people (both a mangers and investors) and the inner workings. Apart from the tales of Wall Street, the book also wonders back in history and offers unique insights and lessons from Bismark and John Maynard Keynes.

The book is a mix of The Intelligent Investor, One Up on Wall Street and Liar’s Poker…. we think this ranks in the must read list! We came across this by chance and can’t stress what a good read this was.

As David F. Swensen from the Yale Endowment said:

“Barton Biggs writes about markets with greater style, clarity, and insight than any other observer of the Wall Street scene…”

Enjoy

Entering the market – 3 Tuesday, November 27, 2007

Posted by ei-forum in US Traded Stocks.
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This is the last part of our short series of buying in thirds, where we not only talk about this investing method but also talk about 3 potential candidates in these troubles times. After talking about Precision Drilling Trust (link) and Safety Insurance Group (link), we would like to turn your attention to Citigroup (C).

We had already talked about Citigroup in October (link) and we continue to believe that long-term buyers will be rewarded. However, we are also convinced that all the troubles aren’t over but we also believe that it is impossible to try and call the bottom. How to deal with this? Well, as we have been discussing, buying in thirds is a great option. Once you feel that the upside potential is bigger than the downside, you can start to take an initial position in the stock. Seeing that Citi will probably see increased volatility, one strategy could be to add to an initial position either on a -10% or +10% move in the price.

Citigroup remains a:

highly respected company
premium brand name
cash machine
good dividend paying stock

Furthermore, other ‘big investors’ are starting to see some value: here.

Please read our disclaimer.

Dogbert Investments – 4 Monday, November 26, 2007

Posted by ei-forum in Investing Humor.
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Come back next Monday for part 5!

Black Friday Explained Friday, November 23, 2007

Posted by ei-forum in Miscellaneous.
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OK, granted, this might not be a very original post but quite a few people are still confused by this term and what it actually means.

Black Friday is the day after Thanksgiving and considered the beginning of the Christmas shopping season. It is not an official holiday but most companies give their employees the day off (naturally, not the retailers) and the markets are only open until 1 o’clock. Many large retailers open as early as 5 a.m. and it is not uncommon for customers to spend 12 hours in front of the stores – waiting for the open – to make sure they are the first to take advantage of special deals offered on the day.

The term “Black Friday” was originally used because the sheer sales volume of the day meant that this was the first day in which the retailers started to turn a profit and were therefore in the “black”. Despite the fact that most people – including the media – refer to this day as the busiest shopping day of the year, this is not always true. Whilst it may be the busiest in terms of traffic, the busiest day in terms of sales volume is usually the Saturday before Christmas.

Enjoy your shopping!

Thanksgiving treat Thursday, November 22, 2007

Posted by ei-forum in Miscellaneous.
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Some words of wisdom from Peter Lynch:

‘Your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed. It isn’t the head but the stomach that determines the fate of the stock-picker.”

For more please click: here.

Enjoy the gravy!

Excessive Expectations Wednesday, November 21, 2007

Posted by ei-forum in Investing.
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Following the recent rise in commodity prices and emerging market, we have a feeling that some investors are starting to forget that investing is not a game and it is far from being easy. Investors in ETFs and funds exposed to these sectors are starting to brag about 25+% gains at dinner parties and find it hard to believe how some money managers are struggling in recent times.

At Enterprising Investor Forum, we believe that investment returns should be measures on long-term performance and that private investors should understand that 25+% gains are not ‘the norm’ and that are rarely sustained in the long-term; a real return of over 5% after inflation would be a great achievement! This return would mean that you are doubling your money every 15 years.

We recently came across a story about Winston Churchill that made us smile:

… In the 1930s, out of power and financially strapped, Churchill taught a lecture course at Cambridge on human sociology. One afternoon standing at the lectern and, always prone to the dramatic, he turned to the large class and demanded, “What part of the human body expands to 12 times the normal size when subjected to external stimulation?”

The class gasped. Churchill, obviously relishing the moment, pointed at a young woman in the tenth row. “What’s the answer?” he demanded.

The woman flushed and replied, “Well, obviously it’s the male sexual organ.”

“Wrong!” Said Churchill. ” Who knows the correct answer?

“Another woman raised he hand. “The right answer is that it’s the pupil of the human eye, which expands to twelve times its normal size when exposed to darkness.”

“Of course!” exclaimed Churchill, and he turned to the unfortunate first woman. “Young lady,” he said, “I have three things to say to you. First, you didn’t do the homework. Second, you have a dirty mind, and third, you are doomed to a life of excessive expectations.”

Entering the market – 2 Tuesday, November 20, 2007

Posted by ei-forum in US Traded Stocks.
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After talking about Precision Drilling Trust (link), we will now turn to the insurance industry.

Would you be willing to take a look at company that has no exposure to sub-prime, a P/E ratio under 6, a P/B of 1.17 and paying a divided yield of almost 5%? Well, please meet Safety Insurance Group (SAFT).

This is a truly exceptional business trading at a big discount. At these prices, we wouldn’t be surprised if a competitor is taking avery close look or if management decided to take the company private.

Please read the following links to see what we think of SAFT: