Monday, April 23, 2012

Karate Kid Investing

I don't understand rapid fire trading, either by machines or humans. It's far from investing and only becomes, possibly, meaningful if you add lots of leverage. In terms of purchasing power, backing out inflation and new capital raising, I'm not sure much money has ever been made with this approach. But it can sure swing the markets and garners lots of press.

Mr. Miyagi's advise to the Karate Kid was "wax on, wax off". Today's hedge fund gurus practice the martial arts of "risk on, risk off". "Wax on, wax off" practice helped the Kid, but investing/trading shouldn't be practice, make believe, or foolish. It needs to be serious, since it involves other peoples' money. How does "risk on, risk off" grow wealth? Making a correct, big macro bet will make a person feel prosperous, but the next big, macro bet is likely to go the opposite direction and drive one to the ledge. Taking small amounts on and off the table in "risk on, risk off" maneuvers, only increases transaction costs. How does fleeing to Treasuries, only to return shortly benefit wealth creation?

How do you survive mentally in an investing world dominated by children with machines? Keep enough cash on hand to live, stay invested, and dabble around the edges with options. Pay very little attention to daily market movement.

Friday, April 6, 2012

No Officers Are Selling Smart Balance Shares

I'm either wisely patient or stubbornly stupid when my investment in Smart Balance [SMBL] is subject to critique. This past year has seen a nice move upward in stock price, due to operational improvements and the acquisition of Glutino, the leading gluten-free natural foods brand. But will 2012 be another good year or am I facing a return of dead money?

All of the financial metrics indicate continued progress. Market share and retail shelf space improvement should continue that trend. Healthy eating trends seem to be trumping family budget constraints. Okay, Crusty is convincing himself. How do the officers of Smart Balance feel?

Positive! No one has diversified or unconcentrated their net worth. A number of officers purchased shares over the past two years when the share price dipped to the $3-5 range. Hopefully that means they think there is more upside coming, as no one is selling.

Now everyone go out and eat a slice of Glutino gluten-free bread slathered with Smart Balance spread and wash it down with some Smart Balance milk. I can go on forever and I hope ConAgra, Kelloggs, General Mills, and are thinking about it as well.

Thursday, April 5, 2012

Robert Mondavi Just Went On Sale

The past several days have been grim market days. No QE3 forthcoming and traders are beside themselves, driving the markets lower. One of the few green arrows during that time span has been Constellation Brands [STZ]. The catalyst for STZ's rise was Goldman's new Buy rating from Neutral. I don't know what specifically convinced Goldman to increase their enthusiasm level, but I'm glad they are on board and am comforted.

This morning STZ reported results that didn't lift Wall Street's spirits even though spirits are their business. They make Robert Mondavi and a host of other wine brands, several well know vodkas and whiskeys, and import Modelo and Corona beer. That mixture didn't produce the intoxicating results that some traders were looking for and the stock is off 13%, about $3. That's as good as finding a coupon in the newspaper that I can take to Publix. So I bought some.

While net was off expectedly from last year, the adjusted eps for the quarter beat analysts guestimates by a ton. Their divestitures and operational changes must be working. However, guidance was less than had been expected and that's the rub. Twenty less cents eps for this year and down you go. But the Company is still calling for eps of about $2 which is a P/E of 10-ish, not a steal, but reasonable. The balance sheet is decent and they are set to buy back stock which may help stabilize the share price.

Constellation isn't a home run at these levels, but I think it will beat the market this year, and so does Goldman. This morning is a good entry point. My middle son arrives for Easter this afternoon and I'm sure the two of us will goose Constellation's revenue. If the rest of the country does likewise I'll get my 20% up swiftly. TaTa.

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