Enterprising Investor Forum

Waste Management Thursday, May 8, 2008

No matter how you look at it, we have to deal with waste. This is a growing concern not only in the States but all over the world: i.e. China, recent problems in Italy, etc..

Waste Management (WMI) is a provider of integrated waste services in North America. Through its subsidiaries the Company provides collection, transfer, recycling, disposal and waste-to-energy services. WMI’s customers include commercial, industrial, municipal and residential customers, other waste management companies, electric utilities and governmental entities.

Waste Management (WMI) has a solid track record and is also innovating in green technologies. The business models is recession proof (essential service) and will continue to provide strong and predictable cash flow.

The stock did get ahead of itself in recent times, also due to the hype around this sector. However, it has recently pulled back and we would recommend to keep an eye on it, especially if it retreats to under 30USD (which would also result in a 3,6% dividend yield).

Interesting Link – Cramer interview with Waste Management CEO: here.

Please read our disclaimer.

Value in Ford Wednesday, April 30, 2008

Ford (F) is getting things right and whilst it is still far away from a complete recovery, they are quickly moving in the right direction.

Most people tend to focus on their difficulties at home in the US and overlook how well they are doing abroad and how profitable the are. With this momentum and new strong products, we feel that Ford offers interesting prospects for the patient investor.

Allan Mullaly has a great track record of turning around multinationals and has considerably strengthened the management team. Furthermore, they are free to focus even more on the operational turnaround and future strategy now that the new UAW contract has been finalized.

Most investors thought that this was simply a stock to trade or a contrarian pick but the street is realizing that this could easily be a 10 dollar stock in the near future.

Currently, the stock has been pushed up also due to the Kirk Kerkorian bid but we feel that it is worth seriously considering opening a position under 8 USD.

Please read our disclaimer.

Philip Morris International Thursday, April 24, 2008

We already talked about Philip Morris International (PM) in our post on Altria (here).

Now that it is trading as a stand alone company, it can take full advantage of their strong brand and products. Again, remember that Marlboro generates more sales volume than the next 10 biggest brands in the US and current projections for the growth of world-wide cigarette consumption are for between 1 and 3% annually for the next two decades or so. Furthermore, it appears that they are close to recieving the final go-ahead for China, which makes the US market look small!

Please read our disclaimer.

Standing behind GE Thursday, April 17, 2008

Once again, following the market sell-off, insiders are standing behind GE and using these opportunities to increase their holdings. This Monday, April 14th:

• Vice-Chairman Michael Neal spent $1 million on 31,250 shares @ $32.16.
• Director Ralph Larsen spent $479,000 on 15,000 shares @ 31.90.
• Director Robert Swieringa spent $32,000 on 1,000 shares @ 31.96.

As the GE statement points out: “It’s an expression of confidence in the company”.

Death of the traditional light bulb Thursday, April 10, 2008

Did you know that the average LED produces three to four times more light that the traditional light bulb? Actually, some of the top-range ones can produce over 60 lumens per watt.

Why are we talking about lumens per watt? Well, congress has passed legislation that says that all light bulbs must produce at least 60 lumens per watt by 2012, moving to 120 by 2020… the current traditional light bulb produces about 13/14! Attention, governments all over the world are moving toward more efficient uses of energy and especially in lighting: Australia is actually considering banning the traditional bulb.

Despite the fact that the short-term winners of this trend will probably be halogen and compact fluorecent lamps, long-term, the market will move to LEDs. Apparently, one study we found states that the industry is supposed to exceed 1 billion dollars by 2011, a 388% spike from 2005 levels.

The GEs and Philips of this world are the biggest players but there are smaller companies like CREE Inc. (CREE) and strong speciality contenders that are worth a look – these companies might actually end up being swallowed by the larger players.

We definitely think that it investors should start looking into this industry sector more closely.

Please read our disclaimer.

PFIZER: value & margin of safety Tuesday, April 8, 2008

Most people are staying away from pharmaceuticals and indeed, the stocks are not benefiting as much as more volatile sectors in these sudden bull rallies but we are looking for long term value and margin of safety.

Ok granted, it may be a while until Pfizer (PFE) comes out with the next ‘super drug’ but in the meantime, trading at late 2005 levels, around 18 times earnings and with a 6% dividend yield: there is little not to like about the shares. They continue to have a strong cash position, consistently generated returns on capital well in excess of its cost of capital and are a solid divided stock.

Most analysts are just saying hold but this could be a very good time to snap-up some shares!

Please read our disclaimer.

Sanderson Farms (SAFM) Thursday, April 3, 2008

Looking for value, we decided to run one of our typical ‘best in industry’ screens on companies with a market capitalization of under 1,000,000 USD.

We ran:

• Price/Book Value < Industry Average
• Current P/E Ratio < Industry Average
• Net Profit Margin > Industry Average
• Return on Equity > Industry Average
• Income per Employee > Industry Average
• Debt to Equity Ratio < Industry Average
• Current Ratio > Industry Average
• Quick Ratio < Industry Average
• MSN Rating >7

The only company that made the screen is Sanderson Farms (SAFM). We had followed this company in the past but the stock had been severely punished during the avian-flu scare and is slowly recovering.

Despite Sanderson being interesting, we think that investors can find better places for their money in these markets. We would suggest to keep this one in a watch-list portfolio.

Please read our disclaimer.

Bear Stearns R.I.P. Wednesday, April 2, 2008

It is quite sad that it actually came to this…

S&P Value Screen Friday, March 28, 2008

We decided to use the MSN Deluxe Screener to see what kind of value we could find in the S&P at this present time. Our main focus was to try and find a company that was outperforming the industry average in a very efficient manner. And especially, one that was doing so through solid fundamentals.

Our screen consisted of:

• Current P/E Ratio < Industry Average
• EPS Growth Yr vs Yr > S&P Average
• Debt to Equity Ratio < Industry Average
• Net Profit Margin > Industry Average
• Return on Equity > Industry Average
• Income per Employee > Industry Average
• Current Ratio > Industry Average
• MSN Rating > 9

Out of the five companies that passed this screen, Coach Inc. (COH), was that one that most caught our attention. The others were: ENSCO International (ESV), Haliburton (HAL), Illinois Tool Works (ITW) and Manitowoc (MTW).

Apart from the strength shown by passing the above mentioned screen (we love their margins!), we really like how the management has manged to reposition the brand. Not only have they done so in the US but despite some skepticism, the brand seems to be catching on abroad, especially in Japan.

We definitely think that the company is worth a closer look and that they are well positioned for future growth.

Please read our disclaimer.