tag:blogger.com,1999:blog-56712376478188934872024-03-13T22:04:54.283-07:00The Crusty Credit AnalystWilliam F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.comBlogger216125tag:blogger.com,1999:blog-5671237647818893487.post-1133150287291030022017-06-05T15:03:00.000-07:002017-06-05T15:03:24.059-07:00At Its present Share Price CLF Is A No-Brainer<span class="Apple-style-span" style="font-family: "verdana" , "arial" , "helvetica" , sans-serif; font-size: 16px; line-height: 26px;"></span><br />
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Cliffs Natural Resources (NYSE:<a href="https://seekingalpha.com/symbol/CLF" style="background-color: transparent; box-sizing: border-box; color: #024999; outline-color: initial; outline-style: initial; outline-width: 0px; text-decoration: none;" title="Cliffs Natural Resources Inc.">CLF</a>) is America's only pure play iron ore producer. It is solvent yet unloved. Its share price has dropped from above $12 to less than $6 within the past 90 days. I believe, subject to three unlikely caveats, that its share price is mathematically guaranteed to increase several dollars this year without any multiple expansion and that progression can continue because of the company's cashflow generation.</div>
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My caveats are:</div>
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<li style="box-sizing: border-box; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">America's economy and industrial production doesn't dramatically collapse</li>
<li style="box-sizing: border-box; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">George Connell, former significant shareholder, didn't eliminate his position because of any undisclosed information</li>
<li style="box-sizing: border-box; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Company CEO, Lourenco Goncalves, is an excellent manager and has a solid understanding of his business and industry.</li>
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Why should I expect to be rewarded by Cliffs when the "market" and most financial analysts do not think it is worth buying? Firstly, I've owned businesses and turned around several. Next, I've listened carefully to the CEO's conference call discussions and monitored his execution of stated goals. Finally, mathematics, subject to my caveats will push the share price back up.<br />
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At present, CLF has an Enterprise Value (NYSE:<a href="https://seekingalpha.com/symbol/EV" style="background-color: transparent; box-sizing: border-box; color: #024999; outline-color: initial; outline-style: initial; outline-width: 0px; text-decoration: none;" title="Eaton Vance Corporation">EV</a>) of $3B (1.7 MC+1.6 Debt - 3 Cash). There are, using round numbers 300M shares outstanding. Management has targeted having net debt reduced to 1B or less by year end and operating with EBITDA equal to net debt in 2018. That $600M improvement likely will accrue to shareholders. Pretty well locked in cashflow should raise the stock $2 or 30+ percent within 12 months. Not bad! Company still worth $3B but the shares worth $8.</div>
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Now if any positive catalysts provide a lift and the multiple mentality improves, Cliffs could move well past $8 and the old recent high of $12+. What catalysts are possible?</div>
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<li style="box-sizing: border-box; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Action on infrastructure spending and trade protection</li>
<li style="box-sizing: border-box; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Steel wholesalers restocking inventory to normal levels</li>
<li style="box-sizing: border-box; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Any announcement on additional DRI ready new customers, plant decision, or momentum swing on the Essar restructuring</li>
<li style="box-sizing: border-box; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Broad based and significant insider purchases</li>
<li style="box-sizing: border-box; margin-bottom: 15px; margin-left: 0px; margin-right: 0px; margin-top: 0px;">Better grasp of the benefits of customers being locked in and pricing that includes adjustments for inflation, IODEX pricing, Hot Rolled Coil pricing, and European pellet premiums. The world doesn't end if the Chinese spot prices decline. Management is running a company, not a lottery.</li>
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What happens if Cliffs stock price goes down further in spite of all of the above? Buy more shares and extend your time horizon. CLF has taken insolvency off the table by reducing debt and extending maturities so it should be able to still generate a significant cashflow that would be available to chip away at the remaining debt, maintain properties, and fund growth initiatives.</div>
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Second quarter results and forward guidance will be extremely interesting, however, as long as they are continuing to reduce the debt my belief is that the share price is going up.</div>
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William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-55136963572905971552013-10-16T09:11:00.002-07:002013-10-16T14:35:36.814-07:00Coming Up Empty<div class="separator" style="clear: both; text-align: center;">
<a href="http://4.bp.blogspot.com/-4tm-mK4hiD8/Ul3GDLaIyFI/AAAAAAAAAxY/cCYtoY4yMOc/s1600/cormorant.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="197" src="http://4.bp.blogspot.com/-4tm-mK4hiD8/Ul3GDLaIyFI/AAAAAAAAAxY/cCYtoY4yMOc/s320/cormorant.jpg" width="320" /></a></div>
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.<br />
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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.<br />
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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.<br />
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Lets hope the cormorons make some pretend progress today and eventually some real progress in straightening out the country's fiscal mess.<br />
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<br />William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com1tag:blogger.com,1999:blog-5671237647818893487.post-52275414666788589982013-10-08T14:41:00.001-07:002013-10-08T14:41:08.035-07:00Greece Never Looked So Good<div class="separator" style="clear: both; text-align: center;">
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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.<br />
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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.<br />
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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.<br />
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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.<br />
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<br />William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-62690949068284997542013-10-03T10:38:00.004-07:002013-10-03T10:42:38.933-07:00Nature's Way<div class="separator" style="clear: both; text-align: center;">
<a href="http://2.bp.blogspot.com/-AnQKaoiHWZw/Uk2jv0tK7gI/AAAAAAAAAwk/oQbNkNuGbEE/s1600/gtotem_pelican.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="256" src="http://2.bp.blogspot.com/-AnQKaoiHWZw/Uk2jv0tK7gI/AAAAAAAAAwk/oQbNkNuGbEE/s320/gtotem_pelican.jpg" width="320" /></a></div>
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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.<br />
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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.<br />
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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.<br />
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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.William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-50895127737000873202013-09-09T09:50:00.001-07:002013-09-09T09:50:36.318-07:00Not The Best Reason To Add To A Position, But I Did<div class="separator" style="clear: both; text-align: center;">
<a href="http://2.bp.blogspot.com/-3o20gzHhWdE/Ui30hddo6MI/AAAAAAAAAv8/qHkOWh8Sb5w/s1600/Devon-Energy-Corporation.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/-3o20gzHhWdE/Ui30hddo6MI/AAAAAAAAAv8/qHkOWh8Sb5w/s1600/Devon-Energy-Corporation.jpg" /></a></div>
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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.</div>
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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.</div>
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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. </div>
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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. </div>
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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.</div>
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<br />William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-16308976937038358702013-09-04T09:24:00.003-07:002013-09-04T09:28:13.692-07:00Three Quality, Two Really, Companies 20% Off Their Recent Highs Worth Buying<div class="separator" style="clear: both; text-align: justify;">
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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.</div>
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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.</div>
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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.</div>
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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. </div>
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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. </div>
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The seagull stopped yacking and so should I. </div>
William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-3763894255824413792012-08-29T09:36:00.001-07:002012-08-29T09:44:51.034-07:00I'm Hopeful Flexsteel Will Not Join My Herd Of Turkeys <div class="separator" style="clear: both; text-align: center;">
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Gerts and I were out for our morning walk when I noticed a small herd[?] of wild turkeys in a neighbor's yard. They didn't pay any attention to us, but they got me thinking about my portfolio of under-performers. I often get enamored with a good company that seems to be a bargain, thus ensuring great profit, yet continues to languish for months or years before returning to an upward trajectory. These turkeys drive me crazy because I know I'm right and the market doesn't agree. Damn machines and kids!</div>
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Yesterday Flexsteel, the Dubuque, IA based manufacturer of furniture and seating, was taken out to the woodshed and paddled. It happened again this morning. I cannot find any bad news or forecasts. The company released record yearend and quarterly profitability, plus said current trends should continue.Sounds good to me.</div>
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FLXS doesn't have any debt and is paying a nice dividend. The yield is 3.0% and they are paying out only 25% of earnings. The current price is 1X book value, .4X sales, and less than 6X cashflow. Liquidity isn't an issue as they have a 4:1 working capital ratio. Looks like a well run Midwestern company.</div>
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I've pushed the buy button several times today and hope to get back quickly some of the 15% the stock price has fallen the past two days, plus a nice, growing, dividend.</div>
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<br />William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com2tag:blogger.com,1999:blog-5671237647818893487.post-65740013928810452992012-08-13T07:57:00.002-07:002012-08-13T08:41:41.341-07:00THE KISS OF DEATH<div class="separator" style="clear: both; text-align: center;">
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Friday I pitched an old friend, Smart Balance [SMBL], as I believed it had risen too far, too fast. I enjoyed the ride, but the stock had moved from about $5 to $11.50 in a little over two months. It rode on the back of momentum and hope, not earnings or sales growth. Two acquisitions of gluten-free products vaulted the company into the orbit of organic foods and the race was on.<br />
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But the basic spreads business has been stagnating and the milk business has not really taken off and depends on heavy couponing. The move into gluten-free is a change of game plan. Additionally, they will be facing higher input costs going forward and they already sell high priced products. So I became nervous and satisfied at the same time which meant sell.<br />
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My sell decision often means that a buy order is appropriate for others as stocks continue to rise longer than they should. Also, Steve Hughes will sell SMBL at sometime and I could be really disappointed that I missed the deal, but for now I'm content on the sidelines.<br />
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Where did the proceeds go? Some went into PFXF, a new ETF that owns preferred stocks of "non-financial" companies that has a good yield. It really does own financial companies, just not banks, as it has some REITS and insurance companies. Some more went into another old friend that I had divorced a year or so ago, Neutral Tandem, IQNT. It has become obvious, at least to me, that they are setting the stage to be acquired. Several months ago they hired an advisor and recently announced that they will be making a special dividend of about $5 in the Fall and buying back stock. Their returns will look better with a lot of the cash gone and they sound confident that they will have enough cashflow to fund ongoing capex. The earnings shouldn't be under any additional pressure the ROE and cashflow/EV returns will be more attractive. Even though the price will decrease with the dividend, I will at least have some money back and hopefully the company will have found a suitor.<br />
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Time to sign off as I'm becoming increasingly interested in a beaver that is sitting in a tree in my backyard. I'm pretty sure it is a beaver but I didn't know they climbed trees and eat leaves. This one is stripping limbs and chomping on leaves and is fat. Since it is hard to type and peer through binoculars, I'm going to stop typing.William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-36821269222073752582012-07-02T16:15:00.000-07:002012-07-02T16:15:17.834-07:00TWO SOLID HITS AND A WHIFF<div class="separator" style="clear: both; text-align: center;">
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Like most investors, I've spent the last several months vacillating between euphoria and despair. A self proclaimed smart investor descends into stupidity. Over and over again.<br />
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Of late, I've been encouraged by the performance of a couple of my holdings. Proof that a value investment approach can work over time. Markets will dive and confidence will sag, but some stocks will go up. I'm not discounting luck as a reason.<br />
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My last two posts, Smart Balance [SMBL] and Constellation Brands [STZ] are the holdings that have helped hold my net worth together during the market's flight away from commodities, Europe exposure, and other out of favor sectors. Since the first part of April, SMBL is up more than 70% and STZ has risen over 45%. Both of these companies have good management and operating performance has been OK, but acquisitions have enlivened analysts and investors.<br />
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Mario Gabelli jumped on board Smart Balance and bought 5% of the company. He, and others, liked SMBL's acquisition of two gluten free product companies. The party at STZ didn't start when they owned Robert Modavi and a host of wine and spirit names plus 1/2 of Mexico's Modelo American distribution. But it sure started when they announced the purchase of the other half of Modelo's U.S. distribution. The financing is in place, but the final capital structure of the $1.5 billion deal isn't known. I'm sticking with SMBL longer term and may bail after awhile on STZ.<br />
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Now the whiff. I've written about Teva before stating that it is under valued and should produce good returns. When? It continues to act like a dead worm in the swimming pool out back; it just keeps sinking. I'm hopeful it has hit bottom and is resting at its low point. The same mindset that hated SMBL and STZ is at play with TEVA. It's hated for patent expirations, litigation, and who knows what else. Those concerns a overblown. Analysts are calling for $5.40 eps in 2012 and $5.80 in 2013. As a $39 stock the P/E is about 7X. Even as a "slow grower" it's worth more than 7X as the balance sheet is decent.<br />
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It's only a matter of time with TEVA and you get a 2% yield while waiting. Something will spark the investing community, maybe an acquisition like the other two companies or some break through drug or blockbuster generic opportunity, but it will happen and the upside is significant. I've been saying that for quite awhile, but I remain a believer.<br />
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<br />William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-340653500054759682012-04-23T08:07:00.002-07:002012-04-23T08:07:28.704-07:00Karate Kid Investing<div class="separator" style="clear: both; text-align: center;">
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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.<br />
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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?<br />
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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.William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-74347431530950637132012-04-06T07:31:00.005-07:002012-04-06T08:21:37.331-07:00No Officers Are Selling Smart Balance Shares<a href="http://3.bp.blogspot.com/-qEKaEkX6B9Q/T37-TogofPI/AAAAAAAAAqw/fK72JibVFbw/s1600/glutino2-1%255B1%255D.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 174px;" src="http://3.bp.blogspot.com/-qEKaEkX6B9Q/T37-TogofPI/AAAAAAAAAqw/fK72JibVFbw/s320/glutino2-1%255B1%255D.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5728295389307108594" /></a>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?<div><br /></div><div>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?</div><div><br /></div><div>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.</div><div><br /></div><div>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.</div><div><br /></div><div><br /></div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-13439379020962930152012-04-05T07:09:00.002-07:002012-04-05T09:05:23.604-07:00Robert Mondavi Just Went On Sale<a href="http://1.bp.blogspot.com/-hLh5oRO98hg/T32npTLAyaI/AAAAAAAAAqk/zxX819z1kLc/s1600/wine1.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 208px; height: 320px;" src="http://1.bp.blogspot.com/-hLh5oRO98hg/T32npTLAyaI/AAAAAAAAAqk/zxX819z1kLc/s320/wine1.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5727918629048076706" /></a>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.<div><br /></div><div>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.</div><div><br /></div><div>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.</div><div><br /></div><div>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.<br /><div><br /></div><div><br /></div></div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-71662008945323051202012-01-30T07:18:00.000-08:002012-01-30T07:50:14.321-08:00Feeling Smart Again<a href="http://3.bp.blogspot.com/-0TXnUJwPcWg/Tya0_jCsdiI/AAAAAAAAAp0/QCudLx_0cdI/s1600/Business-man-fetal-position.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 228px; height: 320px;" src="http://3.bp.blogspot.com/-0TXnUJwPcWg/Tya0_jCsdiI/AAAAAAAAAp0/QCudLx_0cdI/s320/Business-man-fetal-position.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5703444981942613538" /></a>The past several months were void of posts as it is nearly impossible to type when you have assumed the fetal position. Brilliant investment decisions all turned into losers no matter how well thought out. Why write positive pieces about soon to be disasters and feel somewhat responsible for readers losing money? So I laid down the pen and continued to lose money silently.<div><br /></div><div>Thank goodness that has changed and the year finished decently. My brilliant purchases have been looking better. The dividend portion of my portfolio and the options that I write against them allowed a reasonable return and the speculative group is behaving well except for solar which still resembles a rat hole. Oh well, at least I've removed my helmet and now stand erect, my crouching days behind me.</div><div><br /></div><div>While not screaming bargains, I did add some names during the hiatus. Thermo Electron [TMO], Jones Lang LaSalle [JLL], and Nordic American Tankers [NAT]. The first two are top notch outfits and worthy of holding onto for a long time. NAT is much riskier as it hasn't been earning its dividend, but the balance sheet is solid, at present. It bears close watching, but the dividend is 8 percent and the board of directors has stated they feel comfortable with the payout.</div><div><br /></div><div>Enough rambling, I need to assemble some shelving in the garage. That project also languished during my fetal period as its also hard to work with hand tools when crouched over in a ball. TaTa.</div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-88152145320445370392011-10-05T13:46:00.000-07:002011-10-05T13:46:16.983-07:00What's That Sound I Hear? It's Us Eating Our Seed Corn!<div class="separator" style="clear: both; text-align: center;">
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You can't grow crops without seeds. That's why they have always been valued. They are essential to human existence and progress. Eating those kernels wouldn't be a good plan.</div>
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Financially, we are doing the equivalent. We are eating our financial seed corn and that's not prudent. You need capital to make more capital and the western world is destroying capital. Destruction by debasing currencies, destruction by artificially lowering interest rates, destruction by algorithmic high frequency trading, destruction by greed, and destruction by over-reaction all will prolong our despair and delay our recovery. </div>
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How much capital has been destroyed since the beginning of July around the world? I haven't invested the time in determining the answer, but the number far surpasses any measure of Greece and the PIIGS. Yes, I know that "markets" have also worried about double dip recessions and European bank balance sheets, but come on, clearly we have over-reacted. </div>
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The purpose of capital markets is to funnel cash to worthy companies. No matter whether it is in the form of debt or equity, it should make sound business sense. Our current environment is more like a casino mentality than investing capital to help companies grow. Five percent intra-day swings are proof that valuation has little to do with today's markets.</div>
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Just like in Washington, if some adults don't take charge of Wall Street soon, we will have eaten a good portion of our seed corn. Pension plans, university endowments, individual 401Ks, will all be decimated as the desire to buy a piece of a profitable company will have been extinguished. </div>
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Three simple ideas worth immediate consideration are: first, much higher margin requirements on stocks, options, and commodities will require investors to risk their on capital and increase caution; second, bring back the uptick rule for short selling as it will slow down the speculation and enforce a ban against naked short selling; third, re-instate Glass-Steegle which separated commercial and investment banking and remove the investment bank's access to the Fed. </div>
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If the special interests negatively affected by the three proposals don't like it and they, and their cronies in DC, continue to play business as usual while destroying our capital formation ability, then we need a Financial Tea Party to restore sanity in our financial leaders.</div>
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<br />William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-19102497557503801972011-09-28T08:02:00.000-07:002011-09-28T08:02:26.318-07:00Lazard Stock Trades Like An IB Without The Trading Risk<div class="separator" style="clear: both; text-align: center;">
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Monday, Lazard was available at an all-time low. It has since bounced with the market, but remains attractive. This premier investment bank provides the investor exposure to the capital markets without the inherent risk of the typical investment bank's proprietary trading desk. Financial advise isn't going away so LAZ, with its geographic and product diversification, will continue to perform.</div>
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Lazard operates closer to the old fashioned investment bank than the model chosen by Goldman Sachs and Morgan Stanley. LAZ is the world's sixth largest advisor and, of the top ten, the third fastest growing. Their customer base appreciates not only their financial acumen, but their unconflicted advise as they don't trade for their own account. Additionally, they have the world's largest restructuring business which provides a revenue cushion when M&A is lethargic. The banking and restructuring side of the business amounts to slightly more than half of the company. Asset management for clients handles $160 billion under management. Both sides of the business are producing revenue surpassing the peak year of 2008. Their business is truly global so you get continental diversification as well as currency.</div>
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Without the risks and leverage associated with trading, Lazard has a solid, low risk balance sheet. Long term debt has decreased from $1.2B to $.7B since 2008 and there are no maturities until 2015. They have no principal trading or lending book so assets are not suspect. </div>
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Employees own 30 percent of the company and LAZ currently yields 2.7 percent. The biggest knock against the company has been the high level of compensation to their professionals. Management has been addressing the issue and is committed to bringing compensation expense as a percentage of revenue down. They succeeded in 2010 and so far in 2011. </div>
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Without the home runs available from trading, LAZ will only see earnings grow through market share gains, but I'm more comfortable with that level of risk. I seem to never tire of catching falling knives so I bought some on Monday and so far I'm not bleeding. So far.......</div>
William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com2tag:blogger.com,1999:blog-5671237647818893487.post-65222784210445977532011-09-26T09:25:00.000-07:002011-09-26T09:31:18.055-07:00Crusty Hasn't Written Because All My Ideas Have Lost Money<div class="separator" style="clear: both; text-align: center;">
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I've served all my readers faithfully by not opining about the bargains I've found over the past weeks. Lots of good companies have been pounded and could have been picked up for low valuations, even with a decent haircut to future earnings. The ones I bit on also pay a nice dividend and have low-to-reasonable pay-out ratios. However, they are all worth less today than what I paid. My vision seemed clearer when I entered the trades.</div>
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A week ago I had cataract surgery on my left eye. I can see like an eagle! Yet my vision of the future resembles the above eye chart. I'm pretty sure the stocks I buy are like the Big E, but things are kind of fuzzy. Over time, decent dividend payers should regain value and provide income. But what do you do with speculative positions that were blurry to begin with? Good question.</div>
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Most of my specs are solid, turnaround, companies. They've been killed and I think they still have value so I continue to bleed. But one company has been amazing and has actually made the past months fun, sort of. When I bought it my vision was clear: hold for five years and let management build the brand and sell out to a larger company. Three plus years into the holding period my vision is foggy, but enjoyable. The company is my old friend Smart Balance [SMBL].</div>
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Twelve months ago SMBL sold for $3.50. Today it is pushing $5.50! During the market's last leg down, it has gained about 18 percent. BB&T upgraded the stock, but, other than that, nothing has changed. Management remains competent, the niche has promise, and they are not over-leveraged. But, they also don't make much money and sell at a salty valuation. The spreads business is not growing fast and milk hasn't been a huge success. Their new gluten-free products have not juiced sales/profits yet. I'm still a believer, and extremely happy as SMBL is one of my rare performers, but I wish my vision was clearer concerning the stock performance.</div>
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Next week I get my bionic right eye and with coordinated, clear eyesight, maybe I'll be able to see exactly why Smart Balance has been making me so happy. If not, who cares as it's fun to have a security that doesn't make me feel ill and stupid.</div>
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William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-73393611836438429592011-08-12T09:14:00.000-07:002011-08-12T09:30:10.950-07:00Care About Statistics That Matter<a href="http://1.bp.blogspot.com/-VGAbhiIcB_A/TkVRdHcBq3I/AAAAAAAAApQ/YT3Lenw3lhM/s1600/confused-man.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 198px;" src="http://1.bp.blogspot.com/-VGAbhiIcB_A/TkVRdHcBq3I/AAAAAAAAApQ/YT3Lenw3lhM/s320/confused-man.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5640003669006068594" /></a>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.<div>
<br /></div><div>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.</div><div>
<br /></div><div>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.</div><div>
<br /></div><div>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?</div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-14653783800522527422011-08-07T09:15:00.000-07:002011-08-07T10:00:38.717-07:00When Is A Growth Stock Not A Growth Stock?<a href="http://2.bp.blogspot.com/-ck7EGt1ZZf4/Tj66dRJwvjI/AAAAAAAAApI/eYb6punnNrw/s1600/depression-pills.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 200px;" src="http://2.bp.blogspot.com/-ck7EGt1ZZf4/Tj66dRJwvjI/AAAAAAAAApI/eYb6punnNrw/s320/depression-pills.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5638148795497758258" /></a>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.<div><br /></div><div>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.</div><div><br /></div><div><br /></div><div><br /></div><div><span class="Apple-style-span" style="font-family: arial, helvetica, sans-serif; font-size: 12px; line-height: 14px; "><img src="http://chart.finance.yahoo.com/z?s=TEVA&t=2y&q=l&l=on&z=l&a=v&p=s&lang=en-US&region=US" width="800" height="475" border="0" alt="Chart forTeva Pharmaceutical Industries Limited (TEVA)" style="line-height: 1.22em; margin-top: 10px; margin-left: -2px; " /></span></div><div><span class="Apple-style-span" style="font-family: arial, helvetica, sans-serif; font-size: 12px; line-height: 14px; "><br /></span></div><div><span class="Apple-style-span" style="font-family: arial, helvetica, sans-serif; font-size: 12px; line-height: 14px; ">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.</span></div><div><span class="Apple-style-span" style="font-family: arial, helvetica, sans-serif; font-size: 12px; line-height: 14px; "><br /></span></div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-55722992115232201852011-08-07T08:33:00.000-07:002011-08-07T09:15:04.864-07:00Transports and Retailers Are Doing Fine<a href="http://2.bp.blogspot.com/-ccMxdKRbydM/Tj6w0HcB-6I/AAAAAAAAApA/RNUI8wa9PIk/s1600/UP-train-lineup-2.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 320px; height: 213px;" src="http://2.bp.blogspot.com/-ccMxdKRbydM/Tj6w0HcB-6I/AAAAAAAAApA/RNUI8wa9PIk/s320/UP-train-lineup-2.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5638138192910744482" /></a>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. <div><br /></div><div>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. </div><div><br /></div><div>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.</div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-2675856408664796592011-08-05T09:09:00.000-07:002011-08-07T08:32:13.245-07:00Panic Crept Into My Life Twice Yesterday<a href="http://1.bp.blogspot.com/-qK7fhQHyRAU/TjwV1tQIS2I/AAAAAAAAAo4/GrNED9cnU2E/s1600/Man-with-stress-and-fear-in-his-face.png" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 215px; height: 311px;" src="http://1.bp.blogspot.com/-qK7fhQHyRAU/TjwV1tQIS2I/AAAAAAAAAo4/GrNED9cnU2E/s320/Man-with-stress-and-fear-in-his-face.png" border="0" alt="" id="BLOGGER_PHOTO_ID_5637404845985516386" /></a>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?<div><br /></div><div>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. </div><div><br /></div><div>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.</div><div><br /></div><div><br /></div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-79936106547234678492011-07-29T16:40:00.000-07:002011-07-29T17:41:18.246-07:00Power-One Trumps The Debt Ceiling<a href="http://1.bp.blogspot.com/-UBGscjDCLrI/TjNFFfsCJZI/AAAAAAAAAoc/CPOXW8uuMm8/s1600/iStock_000000584982Small.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 214px; height: 320px;" src="http://1.bp.blogspot.com/-UBGscjDCLrI/TjNFFfsCJZI/AAAAAAAAAoc/CPOXW8uuMm8/s320/iStock_000000584982Small.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5634923519478474130" /></a>Power-One's quarterly earnings release Thursday evening allowed me to relax on Friday. Instead of reading news releases and fretting over what to do next, I went to the movies to see Cowboys and Aliens. My PWER investment continues to make sense.<div><br /></div><div>They posted a good quarter. Revenues continued to grow both year over year and sequentially. Profits were good and also grew. Guidance was basically maintained. The company sees renewed activity in Europe and made good progress in North America, China, and India. Selling prices didn't crater and inventory isn't piling up. I believe it was the most positive solar report this quarter.</div><div><br /></div><div>The stock rose today in spite of Obama's debt ceiling issues and I believe it will continue to inch upward as thinking returns to the market. Power-One doesn't have the "Chinese accounting" baggage, sells inverters not modules, and has a power solutions side of the business that accounts for 40 percent of the company. Because of the foregoing I'm hopeful that it starts to trade at a premium like FSLR does in the module business. Today PWER is still very cheap on a PEG, P/E, B/V, and cashflow basis. That shouldn't last.</div><div><br /></div><div>Now if I was just as confident and vindicated on JASO! I've added to PWER and am anxiously awaiting JASO's earnings release and guidance in mid-August. </div><div><br /></div><div>Cowboys win.</div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-13358366608029967362011-07-29T16:07:00.001-07:002011-07-29T16:32:15.485-07:00An Opportunity To Buy Annaly Capital Management<a href="http://1.bp.blogspot.com/-mpLky64sJVc/TjM9Q4eEolI/AAAAAAAAAoU/SKJetOmKZM0/s1600/we_pity_the_fool-272x300.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 272px; height: 300px;" src="http://1.bp.blogspot.com/-mpLky64sJVc/TjM9Q4eEolI/AAAAAAAAAoU/SKJetOmKZM0/s320/we_pity_the_fool-272x300.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5634914919016342098" /></a>I pity the fools that sold Annaly today in a panic. It might have been just market makers taking out stop losses at $14.05, but the sellers, either way, were abused as the stock immediately rebounded to the $16 level. I believe it will return to higher levels as people regain rational thought. A debt ceiling issue "may" affect the government's cashflow, but it doesn't hinder mortgage payments. People pay mortgages and GSEs only have to honor their guarantees upon default. A debt ceiling crisis isn't going to cause mortgage defaults.<div><br /></div><div>If the debt ceiling or downgrade crisis affects Treasury rates and all other borrowers have to pay more, then mortgage rates will increase. Annaly will pay more for debt but so will the mortgagees that fund the bonds that Annaly buys. It's a spread business and NLY isn't a trader so they hold to maturity. They don't have to take a haircut if rates rise.</div><div><br /></div><div>Annaly isn't overly leveraged, invests mostly in agency paper, and pays an enormous dividend which just got nicely bigger over the past couple of weeks. I've added to my position today and may do so again if the panic continues. The yield is now over 15 percent. Never bet the farm, but a few acres is warranted. I pity the fools that sold today and don't buy on Monday.</div><div><br /></div><div>By the way, I know what I'm talking about because I brought Mr. T to Council Bluffs in the mid 1980s for the town's Pride Week Parade. Mr. T probably doesn't need the income Annaly throws off as his gold necklaces are worth a fortune today, but a retired banker can use dividend income and has thankfully increased his position.</div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-50215559127665623342011-07-15T07:32:00.000-07:002011-07-15T07:54:26.654-07:00Gimmee A Break. Do Something<a href="http://2.bp.blogspot.com/-FsIenNrEAiU/TiBPthMxXfI/AAAAAAAAAn4/eFD5apJQPRQ/s1600/2-doves-magician.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 212px; height: 320px;" src="http://2.bp.blogspot.com/-FsIenNrEAiU/TiBPthMxXfI/AAAAAAAAAn4/eFD5apJQPRQ/s320/2-doves-magician.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5629587177637764594" /></a>Much hand wringing has gone on trying to solve the nation's debt ceiling authorization. You can't avoid the posturing, political theater, and warnings on the gravity of doing nothing and having the USA default. Well I'd rather face uncertainty than follow in the footsteps of Minnesota's crack team of legislators.<div><br /></div><div>Minnesota's two week government shutdown has been resolved. Minnesota's budget is now balanced. How? Trickery and slight of hand or, should I say, slight of accounting principles. The NYTs reported today "both sides agreed to balance the state's approximately $35 billion budget by finding an added $1.4 billion in revenue through accounting maneuvers, delaying payments to school districts and borrowing money against expected future payments from the tobacco industry." Brilliant!</div><div><br /></div><div>Expect the same type of shenanigans from Washington. I hope I can continue to peddle fast enough to stay ahead of our legislative idiots and grow net worth while not becoming too cynical. Harder to remain upbeat than to increase wealth.</div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-91129844538459576292011-07-12T07:23:00.000-07:002011-07-13T08:55:21.543-07:00ADD Isn't A Stock Symbol, It's How The Market Is Functioning<a href="http://3.bp.blogspot.com/-iAeLzlHzT6o/ThxZH1Z9LXI/AAAAAAAAAns/UpTj4vn-clM/s1600/blog-deficit-disorder-badd.gif" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 237px; height: 320px;" src="http://3.bp.blogspot.com/-iAeLzlHzT6o/ThxZH1Z9LXI/AAAAAAAAAns/UpTj4vn-clM/s320/blog-deficit-disorder-badd.gif" border="0" alt="" id="BLOGGER_PHOTO_ID_5628471625436179826" /></a>Attention Deficit Disorder describes the hyperactivity of children, adults, and the Market. Parents, teachers, psychologists, and bosses can deal with the former grouping, I'm affected by the Mr. Market. The inability of markets to concentrate on what is truly important is maddening, but often helpful. We are in such times.<div><br /></div><div>Investors should care about earnings/cashflow and the prospects for future earnings/cashflow. Additionally, they should keep an eye on the market's earnings yield, the inverse of the P/E, in relation to available bond yields. Stocks should move when there is a likelihood of change in those variables. They shouldn't gyrate every nano second as unrelated news is announced. But that is the world we invest in today. A world dominated by children and supercomputers. It drives me crazy, but also offers opportunities in mispriced values. </div><div><br /></div><div>The market has recovered nicely from its Greek worries selloff, lessening the number of bargain securities. One area remains. Solar. The solar companies, with the exception of First Solar, are being given away. The Chinese manufacturers are going to dominate the module business; they are not going to go away. Some may have accounting issues, others will merge, and they all may lose money for a quarter or two, but there will be winners and the market has killed them all. Choosing between them is difficult. I've chosen JASO, TSL,YGE to spread the risk, but they are all cheap at current prices. The ETF TAN gives good exposure to solar, but it has a big position in FSLR and that is the only solar stock that isn't being given away. Big Chinese solar is cheap, but not without risk. But, at some point the ADD boys and girls will like the sector again and prices will rise dramatically. </div><div><br /></div><div>A safer solar play is Power-One, an American inverter and power management company. It also is very cheap and has a bright future, plus the safety of not being Chinese-whatever that means. The hyperactive crowd will find this one eventually also.</div><div><br /></div><div>Time for golf, and like in golf, keep your head down and don't pay attention to the daily drivel. Watch for future earnings, earnings yields, interest rates and not much else. Act when the ADD camp is stupid.</div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0tag:blogger.com,1999:blog-5671237647818893487.post-10374071677172197622011-06-10T08:36:00.000-07:002011-06-10T09:11:47.014-07:00The Market Downdraft Is Politically Bad, But Fiscally Sound<a href="http://2.bp.blogspot.com/-nDQDLyD3Bbc/TfI6I2h-4GI/AAAAAAAAAms/uqS8HeGXW9U/s1600/obama-taxes.jpg" onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 237px; height: 320px;" src="http://2.bp.blogspot.com/-nDQDLyD3Bbc/TfI6I2h-4GI/AAAAAAAAAms/uqS8HeGXW9U/s320/obama-taxes.jpg" border="0" alt="" id="BLOGGER_PHOTO_ID_5616615609035841634" /></a>The White House is probably a very uncomfortable place of employment of late. Unemployment is rising, state and local layoffs loom, two wars continue to drain the Treasury, and the stock market is behaving terrible. The loose money induced market has been, along with private sector job growth, the two bright spots of Obama's presidency. Both have changed negatively. An overly political White House cannot be happy about the situation.<div><br /></div><div>But the market decline may actually be good for the country's deficit and, ultimately, Obama. After the past 18 month's performance, selling is producing capital gains that will begin showing up in quarterly tax estimates. There probably aren't a lot of losses to set the gains off against given the markets rise. Therefore, tax receipts up and deficit down. Now hopefully the Republicans can tie firm spending cuts into any debt ceiling increase before the Democrats figure out they have some increased revenue heading their way.</div><div><br /></div><div>Once the selling stops, that cash will need to be redeployed. There aren't many good alternatives available. The economy isn't as robust as previously thought, but companies are still lean and profits good. Commodities are stretched and bonds subject to the potential effects of inflation. Cash earns nothing. The money will find its way back into equities and that pressure will elevate the indexes. </div><div><br /></div><div>Like all investors, I haven't enjoyed the past six weeks, but the world's not coming to an end and other than a little portfolio adjusting, I believe it wise to stand pat. A bright spot in this bleak period is that none of my covered calls are going to be called away and I get to keep the premiums. As the market hopefully recovers, I haven't been sold out and won't have capital gains to pay. There's a positive aspect to bad markets, for both Crusty and Obama.</div>William F. Kabourekhttp://www.blogger.com/profile/16811858124654680128noreply@blogger.com0