Kroger (KR) reported its second quarter earnings on Tuesday morning, September 15th, 2009. Earnings were 39 cents vs. 42 cents a year ago, disappointing analysts whose consensus view was 4 cents higher. Sales for the quarter were fractionally lower, as well - $17.74 billion vs. $18.09 billion in the year ago quarter. Here again, analysts expected a slight improvement vs. last year. Kroger also trimmed its profit projections for the year down to $1.90 - $2.00 range. Predictably, market players punished the stock trimming its value by 8%. At one point during Tuesday’s trading Kroger was trading at a low of $20.19, only 4% above its three year low of $19.39, reached on March 9th of this year.

To better understand the value that Kroger shares currently present, let’s take a closer look at the latest results. Hiding behind the top layer are the comparable store numbers. Excluding fuel, comparable store sales were up 3% or $425 million vs. the year ago quarter. Increases in these numbers are great news in the face of deflationary pressures and cost cutting that the industry has undertaken over the past year. The only way Kroger could achieve such results in non-fuel categories is by taking market share away from its competitors.

So goes the title of a July 7th letter to the editor of Delaware Online by Linda A. Moffett, a Realtor from Newark. In it Linda charged the Feds with forcing mortgage lenders to deal "with such ridiculous government-imposed regulations that it is becoming more and more difficult to settle on time, if at all... Banks laid off the majority of their mortgage department staff and hired temps with little or no real estate knowledge to get through the overabundance of refinances and short sales."

"Obama mortgage plan needs work" proclaimed the title of another article on CNN Money the next day. Apparently, many borrowers were asking, "Mr. President, help us get one of your mortgage workouts now." Nearly five months after President Obama unveiled his housing rescue plan it was still beset with problems, said borrowers, housing counselors and even the president himself: "Loan servicers are overwhelmed by the numbers of homeowners applying for loan modifications or refinancing. Borrowers are frustrated that their paperwork is being lost, and calls are not returned. Administration officials are racing to roll out new features to improve the program."

Shares of Cigna (CI) (and other health insurance companies) have been depressed for quite a while now, pressured first by Cuomo's investigation, then by general recessionary pressures, followed by overwhelming one time losses from a run down business and finally by the uncertain threat of a health care reform that can wipe out all private health insurers. However, Cigna shares have now more than tripled since their March low of $8. The last leg of the run up in price has been fueled by premature expectations of general economic recovery, relief of expectations related to health care reform passing in its original form any time soon and optimism that CI results will beat expectations and be very favorable vs. last year.

I am happy to report that after an almost six month hiatus, I have cherry picked a worthy stock to buy and that stock is... (drum roll, please...) Abbott Laboratories (ABT). My last stock buy was a late January of this year purchase of Pfizer, Inc. (PFE). I will begin with a few words about why I continue to like big pharma (I am also holding a position to Johnson & Johnson (JNJ) - acquired late March 2007) and then go more specifically into Abbott Labs.

Health care reform is on everybody's mind and "everyone" knows that means lower profits for drug makers,... or may be not. It is no secret that our dear leader, a friend of the common worker, whose presidential campaign was paid for by unions, has been repaying his socialist backers ever since the election. Last July he let Fannie Mae (FNM) and Freddie Mac (FRE) be taken over by the Federal Government, then his government forced Chrysler and GM to give away disproportionately large chunks of their companies to United Auto Workers and now he is attempting to pull a quick one with a health care plan that boggles any capitalist mind.

However, this week came a break. Earlier in the week several polls showed Obama's approval rating dropping precipitously (some to below 50%). Rightly, the new disapproval was in large part attributed to his handling of the heath care reform. Americans want good, affordable health care, but they have waited for it for a long, long time. To push such fundamental reform through and make it law in a matter of a couple of months is not unnecessary, it is also unreasonable and even dangerous. Every nuance of this excruciatingly detailed and large document will have its own intended and unintended consequences. Time is required to let people make an educated choice. (We are, after all, a "government of the people, by the people, for the people.") Yes, that's right, Americans don't want to give up their freedom of choice - it's fundamental.

I first wrote about SuperValue (SVU) at the end of 2008, here, after picking up some shares at $12.46. Fifteen days later I sold those shares at a profit of 43.5%. By the end of the day this Thursday, SVU shares were once again trading within pennies of the price I paid for them in December. Attractive? Perhaps. Certainly cheap. Much less expensive (valuation wise) than any of the competitors - Kroger (KR), Safeway (SWY), Costco (COST) and Walmart (WMT).

But, and this is a big but, SVU's management team just hasn't been able to get it right. They screwed up on their acquisition of Albertson's and they have had trouble positioning themselves to compete effectively in today's troubled economic environment. Yes, they can cut costs, lower margins and feature generics, but keeping loyal and satisfied customers coming back week after week takes much more than that. For that you need to create an attractive, lasting and consistent presence and I am not so sure that SVU, as a corporation, can do that any time soon. Without such a corporate-wide sustainable competitive advantage, Supervalu may simply be forced to compete with Walmart on price and location.

"I am not a reader, I am a writer." So goes the punchline to an old Russian joke about a reindeer herder who is applying to study philology at the Moscow State University.

I can certainly relate: Reading is difficult for me, writing - a breeze. Given a choice, I substitute the reading of big tomes like Leo Tolstoy's mega drama War and Peace for its Cliffs Notes version.

For “Just One Thing”, John Mauldin asked some of the best minds in the world of investing to write down “one best investing concept that you want to pass on to your kids.” Their answers edited by Mauldin himself appear one per chapter and are the book.

What makes an investment book useful? Mauldin answers this question himself in the introduction – it’s the “’aha’ moment.” It must be the precise time while reading the book when you suddenly realize what you can do to improve your investment performance. Perhaps it is something that you have heard before, but never internalized, or an entirely new idea. Whether it should have been obvious to you or entirely outside of your usual scope of thought matters not. What matters is that something in your brain clicks and you gain a new understanding.

Seven Years to Seven Figures is the road you too can travel if you follow Michael Masterson’s example, set a primary goal and persistently sell, network, leverage, shamelessly self promote and reinvest until you reach that goal. That’s good advice, if only you can follow it.

The book itself is a great example of how it could be done. In it, Masterson, shamelessly self promotes: his other books, his newsletter, his copywriting course and ultimately himself. Needless to say, wherever possible he also makes plugs for others in his network. I would expect nothing short of such execution excellence from an Agora author.

At the great risk of alienating all of the gold bugs out there, I hereby solemnly declare that on February 11, 2009, I sold my entire StreetTracks Gold Trust ETF (GLD) position at $92.87 / share. I bet on gold outperforming by buying into the GLD ETF on 12/30/2004 at $43.80 / share. Now, a little more than 4 years later I got out with a 112% profit (not accounting for commissions).

Certainly arguments can be made for owning gold - the only non-fiat currency - as a hedge against inflation, for diversification and wealth preservation. Such arguments work best in an inflationary environment. However, when the economy shrinks as it is bound to do for the foreseeable future, despite huge cash injections by the Government, the case for gold becomes a much weaker one.

At the great risk of alienating all of the gold bugs out there, I hereby solemnly declare that on February 11, 2009, I sold my entire StreetTracks Gold Trust ETF (GLD) position at $92.87 / share. I bet on gold outperforming by buying into the GLD ETF on 12/30/2004 at $43.80 / share. Now, a little more than 4 years later, I got out with a 112% profit (not accounting for commissions).

Certainly arguments can be made for owning gold - the only non-fiat currency, as a hedge against inflation, for diversification and wealth preservation. Such arguments work best in an inflationary environment. However, when the economy shrinks as it is bound to do for the foreseeable future, despite huge cash injections by the Government, the case for gold becomes a much weaker one.

Whoever has forgotten Murphy's Law, please allow me to remind you that "whatever can go wrong, will go wrong," and wrong it has gone plenty for Pfizer, Inc. (PFE) over the past decade. As a result, share prices continually slipped recently broaching 12 year lows.

But Pfizer, with the staying power of Viagra, cared not about Murphy and all the market noise he brought with him, instead concentrating on becoming the world's leading pharmaceutical powerhouse. Johnson and Johnson (JNJ) is larger in both revenue and market capitalization, but attributes much of both to their non-pharmaceutical businesses. Two very large and strategic acquisitions helped Pfizer get there - Warner-Lambert Co. in 2000 and Pharmacia Corp. in 2003. Revenue generation was also fueled by heavy R&D investments (pegged at over 16% of 2008 revenue) and by leveraging Pfizer's mighty distribution channel with licensed in products.

The day before I wrote “Spend your Gold on Wheat and Oil,” gold futures closed at $837.40 / troy oz, oil at $39.31 / barrel and wheat at $211.69 per metric ton. That was December 19th, 2008. In the short time that has passed since then, both oil and agricultural commodities experienced a significant rally (and an almost corresponding correction) while gold mostly trended down.

Today, wheat and oil futures are again gaining some ground, unable to break below their short term support levels. At my last check gold futures were changing hands at $826.40, oil at $40.23 and wheat at $218.40. This looks like an inflection point on the graphs for wheat and oil and agricultural commodities and oil should resume their longer term trend up vs. gold from here.

I expect 2009 to be another tough year for equities. That being said, the current bear market rally is likely to take markets up another 20% from here during the first half of the year, before stalling in the summer months and retesting the November lows later in the year. There is a good chance that these lows will not hold and new sustained deeper lows will be plumbed later in the year, as official unemployment shoots up above 8%, consumers tighten their belts further and credit card defaults accelerate to unprecedented levels across all consumer strata.

Banks’ risk control models will blow up and fly out of the window once again, incapable of dealing with extreme circumstances. The US Government will again attempt to step in, in order to prevent the evaporation of mass amounts of capital. With the Fed’s interest rate control mechanisms out of commission, the government will work to directly inject more $ into the system a la TARP and by funding infrastructure public works projects.

A year ago, I reviewed Fortune Magazine’s 10 picks for the best stocks of 2008. I passed my judgment on Fortune’s recommended stocks based on their closing prices on the first Friday of 2008. Now, a full year later, I was curious to see how Fortune’s picks did versus the S&P 500 over the same time period and to compare my predictions for these stocks with what happened to them over the course of the year up to the close on the first Friday of 2009.

For the purposes of evaluating performance of individual stocks, I assumed that all cash distributions where kept in cash and not reinvested. The one stock of the set, Merrill Lynch (MER), which was acquired in an all-stock swap deal over this time period, I priced on the last day of the measurement period based on the value of the replacement Bank of America (BA) shares received by the MER shareholders.

Today's story is not just about a really, really good value, it is about SuperValu (SVU) - a company with a 135 year history in the food business. They are the wholesale supply chain for over 5,000 retail stores around the country in addition to servicing their own network of another 2,500 stores, many with pharmacies.

Most of SuperValu stores, as the name suggests, cater to the penny pinchers, but the company is also no stranger to the mainstream and luxury food segments. People across the US will easily recognize their bigger and more national store brands: Albertson's and Save-a-lot. But they also own the extremely popular regional store brands like Shaw's, Acme, Shoppers and Cub's Foods and even the popular niche brands, like the exclusive Bristol Farms in southern California and the warehouse style bigg's (with a Wal-Mart (WMT) like selection of goods), around Cincinnati, Ohio.

During a large part of the summer of 1979, I spent living in the coastal Italian town of Ladispoli, about an hour's drive from the grandness of Rome. I was just entering my teenage years at the time, but somewhere in the back of my mind I already knew that sooner or later I would be burdened with all the responsibilities of an adult. That time came much sooner than I could have ever expect at the time, but that's another day's story...

Today's story is based on a simple phrase that I learned very quickly in Italy and it is the phrase that is still with me almost thirty years later. That phrase is simply "quanto costa?" or "how much does it cost?" Almost every decision I have made ever since I learned these magic words in Italy depends on the answer to this essential question. Ever since then, I compare the "utility," "worth," or "value" of whatever is being bought or sold to its selling price. Of course, over time my ideas of worth got better formed and started including factors way beyond my naive childhood understanding, but the need to evaluate "worth" vs. "price" - that became a part of my core.

Is there anyone out there who could explain how under normal efficient market conditions a very profitable company could trade at 60% of its tangible book value? And by profitable, I mean very, very profitable. For the first 9 months of 2008, Precision Drilling Trust (PDS) reported net GAAP income of $1.67/trust unit, with last quarter's earnings beating average analyst expectations by more than 8%. Expectations for Q4 are another 64 cents/unit. With PDS trading at $6.33/unit, the price at which I bought them shortly before Thursday's market close, that works out to an estimated 2008 PE of under 2.75!

Amazing, you would think, but that's far from the whole story, of course. And as is most often the case with equities trading at deep discounts to their peers, there are many important facts hiding behind the surface. Why these facts didn't dissuade me from buying PDS is yet another question, which I will attempt to answer here shortly.

I have a favor to ask all of you folks out there in the civilized world, "please, raise your hands if you wear underwear!" Yes, you heard me right, and I really don't care what you call it: undergarments, lingerie, bikinis, knickers, fundoshis, bras, briefs, knickers, g-strings, unmentionables - they are all still underwear. Now, don't be shy - let's see that show of hands... Did I just see almost 6 3/4 billion hands go up? I think so! Short of a few teenagers, several hardcore nudists, a few native Tahitians and a number of other French-speakers, everyone wears some sort of underwear just about every day of their life. Wow, everybody - that's a lot of potential customers. I like that!

So, who makes all this underwear for the world? Common, I challenge you to name the top three companies in the underwear business. I know that you know them. Yes, that's right, they are Fruit of the Loom, Hanes and - this may take a little head scratching - the privately owned Jockey.

The time has come to start nibbling on some savory stocks trading at ridiculously low prices and valuations. One well run company that has been on my radar for quite some time and is definitely trading as if there was no tomorrow is Corning Incorporated (GLW). Corning has been trading at quite a discount to its true value for quite some time, but given the current market conditions, I demanded an extra margin of safety. That opportunity came on October 30th, as Corning came within about 5% of its 5 year low and I bought in at $10.06 / share.

Of course, there are good reasons why this great company is trading at a prior 12 month P/E of less than 3 days after reporting impressive third quarter results. But, just as certainly, these reasons are overblown.