IPOdesktop- Thanks for the article link. Groupon's building a formidable file of negative information. I'll bet management wishes everyone else had to be silent during the quiet period, too.
Bank Of America's Solution Isn't Buffett, It's Dismemberment [View article]
orestruss-
Sorry, but you’re wrong. Below is the Bloomberg report from the time of the settlement. Loss reserves do hit capital when they are taken – but this settlement produced losses (earnings and capital) beyond the reserves (and even beyond the $8.5 billion). Even CEO Moynihan says that’s so. Speaking of doing your homework…
By the way, I normally don't respond to name calling, which I see from your other comments is your modus operandi. However, including false information required me to do so. I want my 20 minutes back.
"The settlement will contribute to a second-quarter loss of $8.6 billion to $9.1 billion, or 88 cents to 93 cents a share, the Charlotte, North Carolina-based bank said today in a statement. Bank of America also said it will add $5.5 billion to a liability reserve for future loan-repurchase demands in the quarter and post $6.4 billion in other charges including legal costs and a writedown of mortgage-unit goodwill."
"Capital Depletion
"The actions reduce uncertainty about future costs from defective Countrywide mortgages, Bank of America Chief Executive Officer Brian T. Moynihan said on a conference call. The firm won’t need to sell shares to pay for the settlement, and it may take two quarters to regain capital depleted by the deal, Moynihan said."
Apple Is An Impossible Dream Come True [View article]
mikeurl-
Another reason for Apple's attractive valuation is the cloud of uncertainty surrounding Steve Jobs' role and future at Apple. I address this issue in today's article, "How Apple's CEO Change Alters Its Prospects." - seekingalpha.com/artic...
Apple Is An Impossible Dream Come True [View article]
amade- You are right that screening can be tweaked to provide noteworthy results. Most often, I've seen a few, extreme settings used to create an oddball list. For example, high dividend yields with good earnings growth. (About 1980, Wells Fargo's investment division created such a product, called "Yield Tilt." It raised significant pension fund assets, and then collapsed. The performance proved the screening's companies came from happenstance, not sound fundamentals.)
Therefore, I am sensitive about data mining (i.e., fiddling with screens to achieve the desired result). In "Screening for Technology Stocks: 30 Finds to Consider," (seekingalpha.com/artic...) I wrote more about my screening philosophy and approach.
As I describe in that article, a good audit of screening results is to see what didn't pass a particular screen. The table in today's article shows where I saw the surprising (to me) loss of 13 otherwise interesting companies. Below is what happens when I remove the other screens mentioned in your and other comments.
If I change the screen to "any," here are the additional companies that pass:
Long-term debt - 2 companies and their LT debt/Total capital ratios WRLD (World Acceptance) - 37% TPX (Tempur Pedic) - 79%
Dividend yield - None
Current P/E - None
Forward P/E - None
Both Current P/E and Forward P/E - 3 companies and their P/Es IPGP (IPG Photonics) - 27.2 (current) and 18.5 (forward) QCOR (Questor Pharmaceuticals) - 41.1 and 20.3 SWI (Solar Winds) - 31.7 and 21.5
So, if we're okay with financially leveraged growth or paying up for growth, there are five additional companies to consider. However, my goal was to see if, given the market's level and growth's seeming dismissal, there might be "impossible dream" stocks - i.e., meeting all of the desirable characteristics without compromise.
Double Bottom? This Powerful, Positive Indicator Could Be Forming [View article]
Paul Clisby- The June lows were around 12,000 on the DJIA, much higher than the current levels. Therefore, they don't "qualify" as part of a double bottom formation.
Some of the comments above address the question of time - i.e., is a few days between the two bottoms long enough to be meaningful? The question cannot be answered by looking at history. Sometimes, it takes a while for investors to believe a trend reversal is or could be taking place. Other times, the period is short. My view is that this market has been so volatile and mutual fund sales so large that we could see a fairly quick turnabout.
How Caterpillar, Coca-Cola And Apple Can Defeat Investor Anger [View article]
Dividend Inc- I agree that "anger isn't specifically mentioned on most investor cycle diagrams." That's what makes today's environment unique. Rather than try to wedge it into the typical cycle, I believe it needs understanding and analysis of its own.
The studies of anger refer to the positive mental process of using anger to build conviction and produce desirable action. Two sayings come to mind: "D__n the torpedos! Full speed ahead!" and "Fool me once, shame on you. Fool me twice, shame on me." Today that anger borne of optimism is missing.
Rather, today's investor anger is blended with dismay - a feeling of being manhandled and in an adverse, uncontrollable, losing situation. Characteristic of the times is wanting to get out and stay out of U.S. stocks or, as Zweig points out, "sitting and watching in helpless horror."
So, what's the solution? To argue that fundamentals are actually improving (they are), that housing and employment have stabilized (they have) or that the stimulus money prevented more serious problems (it did)? No. The anger, frustration, fear and opposing opinions are too strong.
I believe the answer is for investors - people - to take self-serving actions in which they can have confidence. I cannot think of a better way than to own companies they view as having management on their side and capable of making their own way in the global economy, come what may - i.e., firms that the investor simply feels good about owning. In that way, investors can face any market scenario and say "D__n the torpedos!" From that action, investors should be able to rebuild both their confidence and their assets.
Goodbye, Verizon - Hello, Home Depot [View article]
A John Hodge - I understand the distinctions you are making, but my concerns actually to go back to a piece I wrote in January 2010 -- "Wireless Wars Coming? – Beyond Red and Blue Maps" (investmentdirections.c...-–-beyond-red-and-blue... I felt both AT&T and Verizon were missing growth opportunities by paying out too much capital to shareholders rather than making capital expenditures.
Then, in October, I overrode that concern because I felt a new growth impetus was at hand and Seidenberg seemed to have a better grasp on how to get it. (See "Verizon: iPhone! 4G! Stock market: Yawn. Why?" -- investmentdirections.c.../). I then wrote three more pieces about Verizon's growth prospects prior to yesterday's.
The problem with the 15% cut is what I mention in the article -- it confirms, to me, the overspending on stock dividend payouts and management's unwillingness to do what it takes to fund growth. Instead, they cut the capital expenditures needed. Where and how and by what amount is of no importance to me -- it's the strategy that I disagree with and so I want to move on.
Hope that helps. Thank you for the comment. John Tobey
Goodbye, Verizon - Hello, Home Depot [View article]
Re: Anecdotes - Early in my career (my career was selecting external managers and allocating fund assets among different styles), I mentioned to one of my investment managers an observation I had about a portfolio company's store. The manager told me that anecdotes are best ignored - for every negative one, there was a positive one elsewhere. That lesson stuck and has worked well for me.
A while back, Home Depot made an effort to bolster the customer support within their stores - increasing both number and training of sales people. Is that now paying off? Probably. For the opposite example, remember Circuit City's laying off their experienced (AKA more expensive) sales people that produced a downward spiral vis-a-vis Best Buy.
Regarding owning both Home Depot and Lowe's, it depends on two factors: (1) Why the investment is being made and (2) How much distinction there is among the companies. To capture the opportunity from hardware/home improvement growth, buying the industry is fine. However, if one company appears to offer better prospects, owning only that one is the better choice.
My preference has always been to select the one company that looks better - strategically, operationally and/or financially. Usually, that means paying a bit higher price (e.g., higher P/E), but, to me, that is an important confirmation that analysts also see the differences and prefer the company. Home Depot is currently the higher-priced stock.
Hope that helps. Thank you for the comments. John Tobey
davel- In picking these four, I wanted firms that are dependent on keeping up with new technology, have been successful, are consumer focused, possess ample resources, are competing at the front end of developing trends and have broad investor interest.
I realize the list is a bit eclectic (Amazon isn't even in the technology sector), but I think the four offer good examples (individually and by comparison) of what's going on.
Regarding Microsoft and Zune, I realize that many see a has-been company with a failed strategy. However, my purpose isn't to recommend the company or laud its approach. Rather, it is in the list because of its still important position in the sector and its formidable strengths.
JPMorgan's Competitive Position Just Increased [View article]
** UPDATE **
Bank of America's just-announced $8.5 billion settlement means their capital shortage is evidently now up to $76 billion (compared to Citigroup's $48 and JPMorgan's $35).
With JPMorgan making an aggressive push into California (discussed in seekingalpha.com/artic...), this settlement puts Bank of America in an even worse competitive position. Particularly because it was denied the ability to increase its dividend (thereby the appeal and price of its stock - i.e., capital).
JPMorgan's Competitive Position Just Increased [View article]
David J. Norton- Because the management changes are being driven from the top, I think we can assume they reflect the company's (and Dimon's) growth strategy. Therefore, I view them as a positive development.
Regarding Tier 1 capital, I prefer not to analyze bank details because they can be misleading. (An wise portfolio manager had a great quote: "With banks, you cannot see beyond the veil" - meaning innocent looking assets can blow up.) This inability to trust detailed analysis is why I usually avoid bank stocks. However, the long-term growth potential for a well-run bank looks large, particularly with so much of the competition still on the ropes or gone. Therefore, I chose JPM, with its high quality culture and, I believe, savvy management.
mmn55- You raise an important point - not about JPMorgan Chase, per se, but about investing in individual companies. I strongly believe we should buy only those stocks that have both desirable investment characteristics AND desirable business characteristics.
Clearly, JPMorgan Chase does not possess both for you. An example for me is coal. It doesn't matter how good the investment picture is, I do not like mountain top destruction and the misleading "Clean Coal" campaign.
There are plenty of investment opportunities, so we can afford to stick to our principles.
Moving Average Misuse Is Giving Us Buying Opportunities [View article]
TaiPan- Personally, I don't like stop loss orders. Giving up control to the intraday price moves means too high a risk of being on the losing side whenever the tree gets shaken. (However, I do like limit buy orders to take advantage of such times.) For tracking a stock, I prefer to watch daily and/or weekly closes - not intraday volatility.
The added problem with stop orders in today's markets is the absence of specialists. With electronic trading, price moves can be more volatile.
10 Good Looking Stocks in This Nervous Market [View article]
laidbackluke- Here's a good AP auto sales article discussing not only the inventory shortages but also the lack of dealer incentives: www.signonsandiego.com.../. Not included in my article are two other positive sales numbers: Volkswagen (+28%) and Kia (+53%). So, all-in-all, sales actually looked okay outside of the Japanese auto manufacturers. Importantly, there is little or no indication of an economic slowdown.
Getting a handle on the national state of housing is a challenge. I think the best way is to understand what's happening to housing is to focus on local markets. For example, in Southern California, with its wide breadth of real estate markets, sales databases are showing price gains in established areas and weakness where there was overbuilding. I think what we're seeing is normal house buying activity - searching for a nice home in a desirable community. A good place to live at a reasonable price is outweighing a cheap foreclosure in a less attractive location.
Why Groupon Is The Next Google [View article]
Thanks for the article link. Groupon's building a formidable file of negative information. I'll bet management wishes everyone else had to be silent during the quiet period, too.
Bank Of America's Solution Isn't Buffett, It's Dismemberment [View article]
Sorry, but you’re wrong. Below is the Bloomberg report from the time of the settlement. Loss reserves do hit capital when they are taken – but this settlement produced losses (earnings and capital) beyond the reserves (and even beyond the $8.5 billion). Even CEO Moynihan says that’s so. Speaking of doing your homework…
By the way, I normally don't respond to name calling, which I see from your other comments is your modus operandi. However, including false information required me to do so. I want my 20 minutes back.
BofA Settles Soured Mortgages for $8.5 Billion (www.bloomberg.com/news...)
"The settlement will contribute to a second-quarter loss of $8.6 billion to $9.1 billion, or 88 cents to 93 cents a share, the Charlotte, North Carolina-based bank said today in a statement. Bank of America also said it will add $5.5 billion to a liability reserve for future loan-repurchase demands in the quarter and post $6.4 billion in other charges including legal costs and a writedown of mortgage-unit goodwill."
"Capital Depletion
"The actions reduce uncertainty about future costs from defective Countrywide mortgages, Bank of America Chief Executive Officer Brian T. Moynihan said on a conference call. The firm won’t need to sell shares to pay for the settlement, and it may take two quarters to regain capital depleted by the deal, Moynihan said."
John Tobey
Apple Is An Impossible Dream Come True [View article]
Another reason for Apple's attractive valuation is the cloud of uncertainty surrounding Steve Jobs' role and future at Apple. I address this issue in today's article, "How Apple's CEO Change Alters Its Prospects." - seekingalpha.com/artic...
Thank you for the comment.
John Tobey
Apple Is An Impossible Dream Come True [View article]
You are right that screening can be tweaked to provide noteworthy results. Most often, I've seen a few, extreme settings used to create an oddball list. For example, high dividend yields with good earnings growth. (About 1980, Wells Fargo's investment division created such a product, called "Yield Tilt." It raised significant pension fund assets, and then collapsed. The performance proved the screening's companies came from happenstance, not sound fundamentals.)
Therefore, I am sensitive about data mining (i.e., fiddling with screens to achieve the desired result). In "Screening for Technology Stocks: 30 Finds to Consider," (seekingalpha.com/artic...) I wrote more about my screening philosophy and approach.
As I describe in that article, a good audit of screening results is to see what didn't pass a particular screen. The table in today's article shows where I saw the surprising (to me) loss of 13 otherwise interesting companies. Below is what happens when I remove the other screens mentioned in your and other comments.
If I change the screen to "any," here are the additional companies that pass:
Long-term debt - 2 companies and their LT debt/Total capital ratios
WRLD (World Acceptance) - 37%
TPX (Tempur Pedic) - 79%
Dividend yield - None
Current P/E - None
Forward P/E - None
Both Current P/E and Forward P/E - 3 companies and their P/Es
IPGP (IPG Photonics) - 27.2 (current) and 18.5 (forward)
QCOR (Questor Pharmaceuticals) - 41.1 and 20.3
SWI (Solar Winds) - 31.7 and 21.5
So, if we're okay with financially leveraged growth or paying up for growth, there are five additional companies to consider. However, my goal was to see if, given the market's level and growth's seeming dismissal, there might be "impossible dream" stocks - i.e., meeting all of the desirable characteristics without compromise.
Thank you for the comment.
John Tobey
Double Bottom? This Powerful, Positive Indicator Could Be Forming [View article]
The June lows were around 12,000 on the DJIA, much higher than the current levels. Therefore, they don't "qualify" as part of a double bottom formation.
Some of the comments above address the question of time - i.e., is a few days between the two bottoms long enough to be meaningful? The question cannot be answered by looking at history. Sometimes, it takes a while for investors to believe a trend reversal is or could be taking place. Other times, the period is short. My view is that this market has been so volatile and mutual fund sales so large that we could see a fairly quick turnabout.
Thank your for the comment.
John Tobey
How Caterpillar, Coca-Cola And Apple Can Defeat Investor Anger [View article]
I agree that "anger isn't specifically mentioned on most investor cycle diagrams." That's what makes today's environment unique. Rather than try to wedge it into the typical cycle, I believe it needs understanding and analysis of its own.
The studies of anger refer to the positive mental process of using anger to build conviction and produce desirable action. Two sayings come to mind: "D__n the torpedos! Full speed ahead!" and "Fool me once, shame on you. Fool me twice, shame on me." Today that anger borne of optimism is missing.
Rather, today's investor anger is blended with dismay - a feeling of being manhandled and in an adverse, uncontrollable, losing situation. Characteristic of the times is wanting to get out and stay out of U.S. stocks or, as Zweig points out, "sitting and watching in helpless horror."
So, what's the solution? To argue that fundamentals are actually improving (they are), that housing and employment have stabilized (they have) or that the stimulus money prevented more serious problems (it did)? No. The anger, frustration, fear and opposing opinions are too strong.
I believe the answer is for investors - people - to take self-serving actions in which they can have confidence. I cannot think of a better way than to own companies they view as having management on their side and capable of making their own way in the global economy, come what may - i.e., firms that the investor simply feels good about owning. In that way, investors can face any market scenario and say "D__n the torpedos!" From that action, investors should be able to rebuild both their confidence and their assets.
Thank you for the comment.
John Tobey
Double Bottom? This Powerful, Positive Indicator Could Be Forming [View article]
I have updated the two exhibits for the Friday, August 19 closing prices. See "Double Bottom - Update" -- investmentdirections.c.../
John Tobey
Goodbye, Verizon - Hello, Home Depot [View article]
I understand the distinctions you are making, but my concerns actually to go back to a piece I wrote in January 2010 -- "Wireless Wars Coming? – Beyond Red and Blue Maps" (investmentdirections.c...-–-beyond-red-and-blue... I felt both AT&T and Verizon were missing growth opportunities by paying out too much capital to shareholders rather than making capital expenditures.
Then, in October, I overrode that concern because I felt a new growth impetus was at hand and Seidenberg seemed to have a better grasp on how to get it. (See "Verizon: iPhone! 4G! Stock market: Yawn. Why?" -- investmentdirections.c.../). I then wrote three more pieces about Verizon's growth prospects prior to yesterday's.
The problem with the 15% cut is what I mention in the article -- it confirms, to me, the overspending on stock dividend payouts and management's unwillingness to do what it takes to fund growth. Instead, they cut the capital expenditures needed. Where and how and by what amount is of no importance to me -- it's the strategy that I disagree with and so I want to move on.
Hope that helps. Thank you for the comment.
John Tobey
Goodbye, Verizon - Hello, Home Depot [View article]
Early in my career (my career was selecting external managers and allocating fund assets among different styles), I mentioned to one of my investment managers an observation I had about a portfolio company's store. The manager told me that anecdotes are best ignored - for every negative one, there was a positive one elsewhere. That lesson stuck and has worked well for me.
A while back, Home Depot made an effort to bolster the customer support within their stores - increasing both number and training of sales people. Is that now paying off? Probably. For the opposite example, remember Circuit City's laying off their experienced (AKA more expensive) sales people that produced a downward spiral vis-a-vis Best Buy.
Regarding owning both Home Depot and Lowe's, it depends on two factors: (1) Why the investment is being made and (2) How much distinction there is among the companies. To capture the opportunity from hardware/home improvement growth, buying the industry is fine. However, if one company appears to offer better prospects, owning only that one is the better choice.
My preference has always been to select the one company that looks better - strategically, operationally and/or financially. Usually, that means paying a bit higher price (e.g., higher P/E), but, to me, that is an important confirmation that analysts also see the differences and prefer the company. Home Depot is currently the higher-priced stock.
Hope that helps. Thank you for the comments.
John Tobey
Choosing Among Tech's 4 Horsemen [View article]
In picking these four, I wanted firms that are dependent on keeping up with new technology, have been successful, are consumer focused, possess ample resources, are competing at the front end of developing trends and have broad investor interest.
I realize the list is a bit eclectic (Amazon isn't even in the technology sector), but I think the four offer good examples (individually and by comparison) of what's going on.
Regarding Microsoft and Zune, I realize that many see a has-been company with a failed strategy. However, my purpose isn't to recommend the company or laud its approach. Rather, it is in the list because of its still important position in the sector and its formidable strengths.
Thank you for the comment.
John Tobey
JPMorgan's Competitive Position Just Increased [View article]
Bank of America's just-announced $8.5 billion settlement means their capital shortage is evidently now up to $76 billion (compared to Citigroup's $48 and JPMorgan's $35).
With JPMorgan making an aggressive push into California (discussed in seekingalpha.com/artic...), this settlement puts Bank of America in an even worse competitive position. Particularly because it was denied the ability to increase its dividend (thereby the appeal and price of its stock - i.e., capital).
John Tobey
JPMorgan's Competitive Position Just Increased [View article]
Because the management changes are being driven from the top, I think we can assume they reflect the company's (and Dimon's) growth strategy. Therefore, I view them as a positive development.
Regarding Tier 1 capital, I prefer not to analyze bank details because they can be misleading. (An wise portfolio manager had a great quote: "With banks, you cannot see beyond the veil" - meaning innocent looking assets can blow up.) This inability to trust detailed analysis is why I usually avoid bank stocks. However, the long-term growth potential for a well-run bank looks large, particularly with so much of the competition still on the ropes or gone. Therefore, I chose JPM, with its high quality culture and, I believe, savvy management.
Thank you for the comment.
John Tobey
5 Desirable Growth Stocks [View article]
You raise an important point - not about JPMorgan Chase, per se, but about investing in individual companies. I strongly believe we should buy only those stocks that have both desirable investment characteristics AND desirable business characteristics.
Clearly, JPMorgan Chase does not possess both for you. An example for me is coal. It doesn't matter how good the investment picture is, I do not like mountain top destruction and the misleading "Clean Coal" campaign.
There are plenty of investment opportunities, so we can afford to stick to our principles.
Thank you for the comment.
John Tobey
Moving Average Misuse Is Giving Us Buying Opportunities [View article]
Personally, I don't like stop loss orders. Giving up control to the intraday price moves means too high a risk of being on the losing side whenever the tree gets shaken. (However, I do like limit buy orders to take advantage of such times.) For tracking a stock, I prefer to watch daily and/or weekly closes - not intraday volatility.
The added problem with stop orders in today's markets is the absence of specialists. With electronic trading, price moves can be more volatile.
Thank you for the comment.
John Tobey
10 Good Looking Stocks in This Nervous Market [View article]
Here's a good AP auto sales article discussing not only the inventory shortages but also the lack of dealer incentives: www.signonsandiego.com.../. Not included in my article are two other positive sales numbers: Volkswagen (+28%) and Kia (+53%). So, all-in-all, sales actually looked okay outside of the Japanese auto manufacturers. Importantly, there is little or no indication of an economic slowdown.
Getting a handle on the national state of housing is a challenge. I think the best way is to understand what's happening to housing is to focus on local markets. For example, in Southern California, with its wide breadth of real estate markets, sales databases are showing price gains in established areas and weakness where there was overbuilding. I think what we're seeing is normal house buying activity - searching for a nice home in a desirable community. A good place to live at a reasonable price is outweighing a cheap foreclosure in a less attractive location.
Thank you for the comment.
John Tobey