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Brendan O'Boyle  

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  • The Benefits Of Averaging Down [View article]
    Why? Every time I buy a stock I am making a statement that it is undervalued. If some become more undervalued and other's go closer to fair value why not move over to the trade that has moved against you?

    I've been doing it a lot during this correction. I've missed having some high flyers cut down to size and I've bought more of losers that have since bottomed and are running up.

    My portfolio has been parabolic the last few days. Back to where I was on April 1st and all my money has been in the market the entire time. Zero benchmark risk.
    Jun 18, 2012. 04:57 PM | Likes Like |Link to Comment
  • Don't Lose Sight Of The Medium Term [View article]
    According to Hussman we are always entering a recession, although we never seem to get there. That guy is wrong more often than a broken clock.

    Retail sales UP 7% year to year, although down for two months.

    Auto sales UP, unemployment claims DOWN. We are in the 350k range vs. 400k range one year ago. Employment reports while trending lower have not reached the lows of last summer. Manufacturing is still in expansionary territory.

    Go to the Wall St journal's site and look at how bad all the data was in early to mid 2008. Then compare it to now, there is no comparison. The trend of the current data is slightly lower, but the magnitude is higher than one year ago.
    Jun 17, 2012. 11:36 AM | 1 Like Like |Link to Comment
  • The Benefits Of Averaging Down [View article]
    Totally agree with you. My best purchase last summer was VRTX at ~30/share. It ultimately declined to 26 a share, but has since run up to 65/share. If I followed a stop loss I would have exited at 26 right at the bottom. Perhaps I could have reentered higher, but my profits would have certainly been less.

    In retrospect I wish I had averaged down.

    A good strategy is to maintain a portfolio with ~30 stocks and occasionally sell winners that have become more fairly valued and average down on your picks that have become more undervalued. Or devote a portion to bonds and buy more stocks during a downturn. A stock that declines for reasons unrelated to the company is almost always a good buy.
    Jun 16, 2012. 10:46 PM | 4 Likes Like |Link to Comment
  • The Benefits Of Averaging Down [View article]
    As an investor averaging down is a fine strategy, provided you have done your due diligence and are sure the company trades at a reasonable margin of safety to your first entry point.

    In 2000 very few stocks had any margin of safety. Anyone with half a brain should have been out of the market entirely.

    A recent example for me is CAT. I bought at 91 just above support. CAT's earnings and growth lead me to an intrinsic value of ~120 a share. The stock has gone down to 85, if it goes to 75 I will buy an equal dollar amount to bring my average cost to ~80 a share.

    The stock will go up, the lower it goes, the more money I will make in the end. Portfolio managers don't know more than you do, everyone has the same information, you actually have the advantage of never being forced to liquidate a possition.

    Now if you thought this correction is actually a bear market you shouldn't be in the market at all.

    I also want to note that very few successful investors are traders. Short term price movements are random and it is very difficult to make money off them. Buy great companies at good prices. If the price gets better buy more.
    Jun 16, 2012. 01:46 PM | 2 Likes Like |Link to Comment
  • Thermal coal prices fall to a two-year low as surging exports from Indonesia, the world’s largest coal producer, and the U.S. continue to overwhelm demand from Asia. The slide hits the share price of thermal coal miners (KOL -1.5%), with the valuation of some approaching their lowest in more a decade: ACI -2.1%, ANR -7.5%, BTU -4%, PCX -11.7%, JRCC -6.8%.  [View news story]
    Coal stocks are incredibly cheap, but I just don't see them having much to offer for long term growth. NG is the future, coal is living in the past. If you can call the bottom you can certainly make money, but personally I don't buy stocks that way. There are many cheap stocks with far brighter future prospects.

    If I made a play at all here it would probably be on BTU bonds.
    Jun 16, 2012. 10:42 AM | Likes Like |Link to Comment
  • Somebody Is Very Wrong About Nokia [View article]
    While I wouldn't want to be long NOK stock, I think their bonds are a very interesting play. If worst comes to worst NOK can restructure and sell assets to meet its debt obligations, they still bring in cash from royalties and the patent portfolio along with their cash says to me bond holders wll be fine. A 10% yield is nothing to sneeze at...
    Jun 16, 2012. 10:34 AM | 1 Like Like |Link to Comment
  • Baidu: Seriously Undervalued? [View article]
    BIDU is a strong buy right now. I've been doing some due diligence for my monthly stock pick and there are three major reasons in my opinion to buy now.

    1. BIDU is at its lowest valuation in EV/EBTIDA in the past 5 years.

    2. Inflation in China has cooled. There is a strong correlation between outperformance of the stock and China core inflation (R2=-0.51). In other words, low inflation is a prelude to central bank easing, which (you guessed it) raises the price of risk assets.

    3. I see BIDU following a similar trajectory to GOOG, which also busted out the gate after going public. Then there was a 1.5 year holding pattern before a renewed push upward. BIDU has similar growth and P/E compared to GOOG at that time.

    I would expect to see 200/share before this bull market ends.
    Jun 14, 2012. 10:30 PM | Likes Like |Link to Comment
  • SA writer David Zanoni recommends having a look at Celgene (CELG -1.5%), citing its 5 FDA-approved cancer drugs and its extensive pipeline. What Zanoni really likes, though, is Celgene's earnings growth, which is forecast at an average of 25% over the next five years. If that is achieved, "Celgene's stock price of (about) $65 should grow to around $200."  [View news story]
    I have to look over what CELG has in the pipeline. 300% seems unlikely, CELG's current market cap is 27B, so 3x would be nearly 80% of the largest Pharma companies (MRK, PFE, etc.).

    I can't see how that can happen without CELG tripling revenues, which probably means at least doubling their drugs. They have five, five more soon is unlikely.

    I think CELG is a good buy, just don't expect a 300% return.
    Jun 14, 2012. 01:17 AM | Likes Like |Link to Comment
  • 5 Quality Stocks Trading At 6x Earnings [View article]
    Don't know about BTU, definitely a value but I'm still afraid it's a value trap.

    I like JPM under 30 and STX under 20. STX isn't my definition of a wide moat, but they are so cheap that I can make an exception.

    Not crazy about GM or CSCO. They don't reward shareholders enough, 6x earnings doesn't mean too much if I don't see a dime of that in dividends.
    Jun 12, 2012. 10:57 AM | 1 Like Like |Link to Comment
  • Don't look now, but MarketWatch's Rex Nutting says the U.S. debt load is getting better, not worse. It was excessive debt - both private and public - that caused the 2008 financial meltdown. Years later we're still de-leveraging, but it's not as bad as it seems. In the 11 quarters since the recession officially ended, total domestic debt rose by $702B - just 1.4%. By contrast, in the 11 quarters before the recession began, those bubble years of 2005 - 2007, total debt increased by $10.7T - or 28%.  [View news story]
    You mean we're not doomed? Who knew.

    The fear mongering everywhere you look has really gotten outrageous.
    Jun 8, 2012. 10:22 PM | 2 Likes Like |Link to Comment
  • Pandora Continues To Win Ears [View article]
    P's broken business model isnt worth the risk. Love the service though...
    Jun 8, 2012. 08:37 PM | Likes Like |Link to Comment
  • The Dividend Sweet Spot [View article]
    Good article. I've wondered lately whether I should keep all the stocks in my portfolio at a 3-5% dividend yield. However, the stocks I own which don't pay a dividend do buy back shares, so maybe I should let them compensate me in a different way.

    I imagine the underperformance of the 0 dividend group should disappear so long as they consistently concentrate your shares.

    I also own APA which doesn't pay much of a dividend, but grows through acquisitions. I think these will create shareholder value over time, so I still hold the stock.
    Jun 8, 2012. 08:24 PM | 3 Likes Like |Link to Comment
  • Reflections On The Week That Was [View article]
    So wait a minute, you are putting fair value of the SnP at 800 based on your chart? I will just make the observation that never in the history of the US stock market has performance been that bad for that long. I suppose you can make the argument that the market was never so overpriced as 2000, but still.

    I guess we'll see, but if the price of the SnP is the same in real terms in 10 years I will be shocked. The average stock in my portfolio pays 5% in dividends and buybacks, so I guess tack on 3% inflation and I still wouldn't be too unhappy.

    Of course if one can avoid the worst of the next bear you might do much better. I don't think this is it by the way, the latest downturn has correction written all over it.
    Jun 8, 2012. 07:51 PM | 2 Likes Like |Link to Comment
  • It's Time To Invest, Not Panic [View article]
    Yes if there is a prolonged period of rising interest rates, there would be a rush to refinance. I just don't think that is the most likely scenario.

    When rates get this low they tend to stay low for a good long time. Look at the US in the 40s or Japan. The only way rates will go up big is if inflation heats up. With the job market still so weak I don't see that happening. I wouldn't be surprised to see rates go down another 50 basis points, but that's it. If a 30 year hits 3.25% I may refinance myself.

    For now this is still a tailwind for WFC, but in the not too distant future the refinancing rush will be over and I expect 30 year mortgages to remain under 4% for a long time. Unless they start moving up in a hurry it isn't going to push too many to refinance. And if you can refinance, I don't know why you wouldn't have by now.
    Jun 8, 2012. 03:50 PM | 2 Likes Like |Link to Comment
  • It's Time To Invest, Not Panic [View article]
    I don't know about that. The key factor holding most people back from refinancing is a lack of home equity or good enough FICO scores. My feeling (and this is admittedly very qualitative) is that most people capable of taking advantage of the low rates have already done so.

    Thus if rates go lower they will dip in again, if not they will stay put. I don't expect a mad rush, and I don't expect rapidly rising interest rates. Eventually they will just stop falling before staying low for a long long time.
    Jun 8, 2012. 02:42 PM | 3 Likes Like |Link to Comment