Wednesday, October 16, 2013

Coming Up Empty

Too windy and cold to work in the yard or golf. Too lazy to do the items that remain on my to-do list. So, I spent a lot of time looking out the window. My view was an angry lake, but one of whitecaps basked in sunlight. Really beautiful with not a boat in sight. But lots of birds despite weather that humans dislike. Gulls were active and a couple of cormorants went fishing.

The entire time I watched, the two cormorants dived and came up empty. I was amazed how long they stayed down before resurfacing. Time and again, a deep dive and no fish. I hope their luck improved as they moved on down the shoreline. The behavior of those two cormorants reminded me of our government bodies, the Executive, the House, and the Senate.

All three bodies keep diving for fish, but come up empty. They take turns looking like ineffective fools. The birds dive in ernest and will catch a meal as they are focused on what is important. Our legislators and leaders are focused on diving, not what is important, eating. The process, image, and power take precedence over fish. Cormorants are smarter than Congress. Democrats and Republicans should now be called cormorons.

Lets hope the cormorons make some pretend progress today and eventually some real progress in straightening out the country's fiscal mess.

Tuesday, October 8, 2013

Greece Never Looked So Good

Think back to the Greek bailout discussions. The EU, central bankers, IMF, labor unions and bondholders all with a stake in attempting to look like they could solve a thorny problem. All that brainpower and their best plan was not to shut down Greece's monuments and trample on the people. It turns out that the Acropolis was shut down for about three days by a couple of hundred rouge union workers in protest, but the government sent in the troops to open it up for the people and the tourists. What a novel concept, keep open the venues that generate fees and taxes, if run privately, especially since it was already determined that the vacationing federal workers would receive all back pay. Greeks are better thinkers than American politicians. Sad.

I also do not recall the EU leaders intentionally talking down the markets. Our near socialist friends seemed to understand that depressed markets result in reduced economic activity and taxes. Again, the continental socialists have a better grasp of economics than our government leaders. Sad.

Finally, everybody connected to the European debt crisis was willing to negotiate, some more than others. Additionally, all of the parties didn't constantly say that they would not negotiate or deviate from their position. At least not publicly, daily. Sad.

To recap, the Greeks are better than American leaders at one, caring about their constituents; two, economics; and three,the art of negotiation. Sad again.

Thursday, October 3, 2013

Nature's Way

Things come and go. If they occur at the right time, for the right reason, there isn't a problem. Gazing out the window, thousands of gulls are still sitting in the lake, but soon they will move on. The pelicans arrived a few days ago and some have already headed South. Some migrating geese are joining the local guys and too will head off. This phenomenon occurs in humans also.

A division president of Jones Lang LaSalle quit to become CEO of HCP healthcare. JLL is a $4B marketcap company and HCP is an $18B outfit. CEO is better than division president. She was already a HCP board member so her decision was not made in a vacuum. Why wouldn't a manager take a more important position with a larger company, likely for more money? It's the natural thing to do.

Unfortunately, Wall Street also reacts naturally which means stupidly. Today they've taken about $4.00 off JLL's price presumably because of the executive departure. That 4% hit is about 3% more than the market's "government shutdown " impact. While headline panic seems to be the market's natural course, the reaction of a rational investor should be to buy and obtain a 3% headstart. I've been doing so today.

I can't think of another animal analogy, but another favorite of mine, Valmont Industries, has been taken out and paddled lately. It's gone from $130ish to $150ish and now back to $130ish. Ouch. Not for any good reasons that I can determine. So more cash goes from the sidelines into VMI and I hope it will help me go South this Winter.

Monday, September 9, 2013

Not The Best Reason To Add To A Position, But I Did

The best thing I can say about Devon [DVN] is that my basis keeps getting lower as I add to my holdings. It certainly hasn't been a financial winner. Past financial and operational engineering decisions all made sense to me, but it evidently didn't make actual sense as earnings have been inconsistent and the stock price has been lousy. The major change was selling all of their gulf and international properties and reducing debt to become a continental USA gas, oil, and liquids company. I still think that makes sense.

Over the last several weeks I've had a few strands of thought that have been intermingling. First, I've lightened up on some midstream MLPs as prices have been pushed high and multiples have been extended. That has changed to some degree as interest rates have risen, but MLPs are still priced richly. So I've taken some money off the table.

Next, Devon announced in June that it was going to do some more engineering and create a midstream MLP since those assets would be valued much higher than the market was giving DVN credit for them as a combined company. Given the MLP multiple of earnings, cashflow, and book versus Devons that seemed a no brainer. Assuming DVN sells those assets to the new MLP at similar multiples that should produce a lot of gain, cash, and share price improvement at Devon. 

The wife's been out of town for a week which left a lot of time for me and the dog to discuss whether I should up the ante again on Devon and anticipate some good reaction to the upcoming MLP. The answer came not from the dog, but from a very recent Jim Cramer article. Cramer named Devon as one of his 10 worst stocks and was not the least bit complimentary about company's management or prospects. So I bought some more even though I've had to fight the temptation to throw in the towel also over the past couple of years. 

The MLP is set for this Fall so we will shortly see if that or Cramer has any positive impact on DVN. If it doesn't I'll blame Gertie for not talking me out of the decision.

Wednesday, September 4, 2013

Three Quality, Two Really, Companies 20% Off Their Recent Highs Worth Buying

Since their arrival about a week ago, gulls have been using our no wake buoy as a soapbox. There's been a lot of important opinions offered. I have no ability to critique the value of their squawking, but some seem prouder of their messages than the less vocal.

After a long dry spell, Crusty is ready to do some squawking. Here are three companies worth looking at: Jones Lang LaSalle [JLL], Valmont Industries [VMI], and Vulcan Materials [VMC]. All are off their recent highs by about 20% with no terrible news announced. I've added to positions in JLL and VMI. VMC is a new long position for me. My last involvement with Vulcan was on the short side a number of years ago.

None of the three are screaming buys, but they are good companies at decent entry points with JLL and VMI oversold. VMC is finally starting to get some traction and will likely be able to grow revenue and earnings significantly next year. If they don't de-leverage by selling stock too soon, they will be able to really accelerate earnings as their three-legged stool of a business [public/highway, residential, commercial] finally sees demand in all areas.

Valmont has been doing well on all fronts and has positive trends going for it in agriculture, utility grid, and highway construction. The forward P/E is much lower than their historical multiple so not only can they grow earnings, but also should see some P/E expansion without stretching. Also, VMI is an Omaha company so they don't often shoot themselves in the foot. 

JLL is, in my opinion, the best of the commercial real estate brokerage/management companies. They don't take on a lot of risk for their own account [proprietary investments tend to stay in their investment arm for the benefit of customers]. They have a global presence and somewhat predictable revenues. 

The seagull stopped yacking and so should I. 
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