Friday, August 12, 2011

Care About Statistics That Matter

I scratch my head regularly if CNBC is droning on in the background when the chatter turns to the VIX. I suppose it is okay to track trends in market volatility, but evidently some people or machines, actually trade the index and care about it. Certainly the soothsayers of TV think it is important. I don't get it.

My eyes also glaze over when they talk about "fair value" in the early morning before the markets open. Supposedly the difference between fair value and the futures will tell where the markets will start the day. So what? It must have importance because a lot of time is devoted to discussing the subject.

While I'm on the topic of what I don't understand, I wish the television guys/gals and their gurus would learn that any single statistic or data point rarely has value. Trends are important, but a lonely piece of data is usually only a possible clue. But not on 24 hour television.

So, while it won't happen, I would like to hear more about balance sheets, income statements, costs, dividends, sales trends, and other actual business concepts that do affect actual values. Wouldn't that be nice?

Sunday, August 7, 2011

When Is A Growth Stock Not A Growth Stock?

I need a diagnosis and this company's stock price needs a prescription. This growth company has become a value stock and it continues to lose value! Reports out of Tel Aviv this morning show TEVA dropping another 6 percent as the world worries about the U.S. debt downgrade. The way the company's share price has performed the past couple of years, it will probably crater on Monday also in American trading.

What's wrong with this picture? The numbers presented below usually would not accompany the chart depicted below. Revenue has grown from$11B in 2008 to $16B in 2010. They will be $18.5B this year and $20.6B in 2012. Gross profit has been growing steadily and net income has grown from 600MM in 2008 to $3.3B in 2010 or $4.54 eps. Analysts have that growing to $5.06 this year and $5.63 in 2012.

Chart forTeva Pharmaceutical Industries Limited (TEVA)

Teva isn't a one drug company. They have numerous business units and a nice compliment of generic and proprietary drugs. Yet it sells at a PEG of 93 and forward earnings of 7X. Obama is scary, but can he be that scary? I thought I was picking up a steal in the high $40s but I've been wrong ever since with this growth stock. I'll probably be more wrong Monday.

Transports and Retailers Are Doing Fine

Among all of our daily news doom and gloom, are two recent articles that show evidence that the world of commerce is ongoing. One only has to look a bit to be assured that the world isn't ending. First, July same store sales at the nation's retail chains, the heaviest portion of "back-to-school" buying and the second most important time period for retailers, were up impressive numbers. Almost all grew from 4 to 9 percent over last year's performance. Those statistics were from a broad range of stores, specialty to department, not just discounters. The economy may not be rosy and we have a large number of unemployed and underemployed, but the safety net cushions those unfortunate and the 85 percent are not in depression mode.

Second, those goods have to move somehow from container to shelf and my trucking friends are busy, getting good rates, and adding to fleets. Again, some owner operators are going broke as are over-leveraged fleets, but the truckload carriers are busy. The second article was about hiring at the nation's train lines. The Union Pacific is headquartered in Omaha and Omaha based Berkshire Hathaway owns the Burlington Northern and that railroad also has a large presence in Nebraska. Both are hiring in large numbers nationwide. The jobs are across all categories, white and blue collar, and are the result of increased freight demand. Many require as much as 6 months training and aren't added without thought and commitment. Both roads are back up to pre-recession employment levels and are continuing to add people. The industry pays well in both salary and benefits so that bodes well for the economy. The freight being moved in greater quantities are agricultural products, energy, and autos.

I think I may send CNBC and all Wall Street firms complementary subscriptions to the Omaha World-Herald so they can find some factual, real world economic data to talk about and react to.

Friday, August 5, 2011

Panic Crept Into My Life Twice Yesterday

Twice yesterday I entered panic mode and hoped no one was watching. Several weeks ago I was ordered to buy some new underwear and I complied by picking up a nicely priced package of Calvin Klein's at Costco. Yesterday, at a public restroom urinal, I found out, after much rummaging, that there wasn't a fly opening in my new underwear. What the hell is that all about?

Later, at home, watching my computer screen, I nearly soiled my new Calvins as I observed sellers pitching stocks in full panic. Nothing new was on the horizon, but they found something to panic about and then the computers kicked in. 500 points down the drain on top of the serial drubbing we've been experiencing. Do these children really think that raising some cash, only to deploy it again in a couple of weeks is of value? I don't.

Debt ceiling, America's bond rating, Europe's problems, anemic economic growth; are any of these topics undiscussed? Soon talk will return of reasonable P/Es, attractive dividend yields, and a growing middle class worldwide; all positive for stocks. I'm pitching my new Calvins, but not my stocks.

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