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  • Reverse Engineering IBM's Fair Value [View article]
    Yes, PE based on growth rate. I used to spend a lot of time chasing my tail on growth stocks that I considered fairly valued because the P/E equaled the growth rate (PEG/the Peter Lynch method), but there ought to be a limit on how much you're willing to pay up. And riskier companies ought to be penalized while quality should be rewarded. Kastenelson's model addresses all of this, and makes good sense to me as valuation tool.
    Feb 18, 2015. 01:06 PM | Likes Like |Link to Comment
  • Reverse Engineering IBM's Fair Value [View article]
    Here's a link to the specifics on Kastenelson's absolute PE model:

    With a projected growth rate of 12%, DIS would earn a fair value P/E of 15 plus one point for its dividend = 16. The rest of the fair value P/E is derived from the subjective factors discussed in this article. I could easily assign DIS a premium of 15-20% (Kastenelson suggests somewhere that no stock deserves more than a 30% premium, that's the max) which gets us up to 18-19. I'd also argue that analysts are under-estimating Disney's growth potential and with a growth rate of 15%, the fair P/E is more like 21. This puts DIS fair value at $95, so it's gotten a little ahead of itself on the recent pop.
    Feb 18, 2015. 12:17 PM | Likes Like |Link to Comment
  • Reverse Engineering IBM's Fair Value [View article]
    TF17, I recommended Disney last year and it remains a core holding, though I feel like it's fairly valued at current levels.

    If IBM were to reverse the current no-growth trend, then it could absolutely justify a higher valuation. I just feel it's rapidly becoming one of those old guard companies that has a real fight ahead to get its mojo back. Based on the comments here, there are plenty of investors that disagree with me; only time will tell.
    Feb 18, 2015. 10:48 AM | Likes Like |Link to Comment
  • Reverse Engineering IBM's Fair Value [View article]
    I owned a Tacoma for several years and it was the best vehicle I ever owned! So I appreciate the analog :)
    Feb 18, 2015. 09:28 AM | 1 Like Like |Link to Comment
  • Reverse Engineering IBM's Fair Value [View article]
    Thanks, WJ. The markets are a humbling place. I learn a lot from my peers and appreciate the checks and balances of a venue like this.
    Feb 17, 2015. 04:58 PM | 1 Like Like |Link to Comment
  • Reverse Engineering IBM's Fair Value [View article]
    Please see my reply to stockinvestor81 above.
    Feb 17, 2015. 04:39 PM | Likes Like |Link to Comment
  • Reverse Engineering IBM's Fair Value [View article]
    The comments regarding book value were meant to illustrate the value destruction occurring under the surface even as EPS creeps higher. There's no mention here of valuing the stock based on book value.
    Feb 17, 2015. 04:38 PM | 1 Like Like |Link to Comment
  • Reverse Engineering IBM's Fair Value [View article]
    Hi all,

    Initial comments led me to return to the EPS I used in the end analysis. A number of data providers use $11.90 (consolidated diluted earnings per share), which seems to include a substantial impairment charge. I agree that this wouldn't be a fair way to calculate fair value and will request an edit. Using a $16 EPS, IBM's fair value would be $152. This number still allows for very little margin of safety or share price upside, and my concerns regarding execution remain. Technically, it still looks to me that price wants to return to 2008 levels.
    Feb 17, 2015. 04:17 PM | 2 Likes Like |Link to Comment
  • S&P 500 Approaching New Highs [View article]
    Hi CFE, I don't understand your labeling here. I too believe that the price action since 2011 is certainly a monster wave III, but can't see how 5 of III began in 2012. The long stretch you have labeled as 5.3 is more likely 3 of III, which is usually the strongest part of a III-wave move. Your wave 5 is way too long otherwise, no?
    Feb 16, 2015. 09:29 AM | Likes Like |Link to Comment
  • SPDR S&P 500 ETF : Let's Analyze It Using Our Scorecard System [View article]
    Peter, This is great information, thank you. My goal for this year has been to put together a list of best of breed stocks, my universe of the most profitable stocks out there, and forget the rest! Then I can simply focus on buy and sell valuations. My only concern for your method is in regards to the Capflow metric. Starbucks is one of my top holdings and they's been spending a lot of money to expand internationally. I do believe there's value in checking capex against free cash flow, but I'm most concerned with maintenance capex (funding projects that will drive growth is OK with me). Then again, I'm more of a GARP guy than a strict value investor. A stock can be dead money for long stretches of time by not considering growth. Your Aflac pick is a good example. It's free cash flow yield has only grown more impressive over the last year and a half as the stock has languished. There's just no earnings growth there. But I digress ...this list is very helpful and I've printed out a copy to study with interest.
    Jan 25, 2015. 03:27 PM | Likes Like |Link to Comment
  • Why I Will Continue To Hold Starbucks Shares Until 2045 (At Least) [View article]
    Following you and looking forward to the rest of your picks. Starbucks is my largest holding and I expect it to boast a 100 billion market cap sometime in the next 7-10 years.
    Jan 1, 2015. 07:53 PM | 3 Likes Like |Link to Comment
  • Building A Core Investment Portfolio For The Next 20 Years: Disney [View article]
    Totally agree with your assessment, DIS is a top holding for me. My only gripe is the dividend, wish they would pay quarterly instead of annually. LMT is a no-go for me; besides a personal aversion to the defense industry, I avoid companies dependent on the (bankrupt) government. There's a very real chance the U.S. war machine looks entirely different in 20 years. I look forward to the rest of your picks.
    Nov 16, 2014. 09:35 AM | Likes Like |Link to Comment
  • S&P 500: New Record Highs Imminent [View article]
    I've been making more of an effort to read bullish viewpoints rather than those that reinforce my bearish bias. I'm sorry I chose this article. Not only do I feel you're wrong with your bullish prognostication, you contradict yourself throughout raving about obama and socialism. Yeah, I get it, the Republicans ride to the rescue and we rocket to new highs! But aren't we up 200% since the 2009 lows? Were markets just anticipating the conservative renaissance all along?? Your arguments are mushy and pointless. Stick to biotech and leave the macro to the adults.
    Oct 26, 2014. 08:26 PM | 4 Likes Like |Link to Comment
  • Qualcomm: Too Much Focus On The Chinese Situation Might Create A Buying Opportunity [View article]
    Qualcomm's also making moves in the health care tech space. The shares are a bargain here.

    Long QCOM
    Aug 15, 2014. 03:23 PM | 3 Likes Like |Link to Comment
  • Superior Drilling Products Is An Appropriate Name For This Natural Gas E&P Derivative [View article]
    Thank you for the in-depth analysis. I established a position in SDPI months ago on the recommendation of an energy analyst, but did it more on faith than on complete knowledge of operations. Seems to be the right product at the right time - domestic energy boom, picks and shovels and all that jazz :)

    Long SDPI
    Jul 26, 2014. 05:08 PM | 1 Like Like |Link to Comment