AllianceBernstein: Looking Attractive at Current Levels [View article]
Book value is mentioned just for reference. A 43% premium to book isn't in and of itself a particularly lofty number even for a company that does use its book assets to generate earnings. For a company that doesn't, it's even more impressive...
Book value doesn't speak to the company's earnings potential, but AB's chairs and computers, etc. are an important part of its valuation. I'd much rather buy an asset manager for the price of its assets than based on AUM (as should be the case).
Actually Steve, AMAT has two PV lines, SunFab, which is the company's trade name for a thin film PV product, and the second is AMAT's standard crystalline silicon photovoltaic line, which boasts the highest efficiency of any commercially available PV technology right now.
AMAT has been working to increase commercial efficiency by getting their cost per watt down. That's significant.
Like the article says, PV manufacturing hasn't been a particularly strong segment in the last couple of years. It's the forward growth prospects that are compelling.
Time to Buy into Berkshire Hathaway? [View article]
Right -- check out my ETF arbitrage comments above.
When liquidity causes B shares to get a slight premium, arbitrageurs can buy BRK.A and convert them to BRK.B to get the premium. At market speed, this happens almost instantaneously -- but it doesn't mean that BRK.B prices are being held down... instead, BRK.A prices are rising to meet them.
That's effectively the same as a premium for BRK.B owners because it means that A shares are playing catch-up to their prices.
Time to Buy into Berkshire Hathaway? [View article]
Just to clear up something: Berkshire's B share's don't face a price ceiling at 1/30 of that of the A shares... they only face an economic ceiling at that level. Price, as with any other market-traded security, is determined by the market.
In the past, shares have kept that ratio in tact because not trading at that fixed rate would have represented a discount or premium for one class of shares -- something that makes no sense normally. But when one of the most famous companies in the world joins the other 99% of stocks from a liquidity perspective, I suspect that we'll start to see small premiums or discounts to class A shares.
With much of the liquidity in the B shares, I wouldn't be surprised if the A shares were playing catch up (much like ETF arbitrage among institutional investors).
Ravi, I agree with you that Berkshire is undervalued right now. I think that the financial pundits are discounting the BNI acquisition too much. But I also think that market minutiae are the catalyst that makes buying now a prudent move.
Why The Market's Set to Move Lower For the Rest of the Month [View article]
Just to be clear, this article is in no way advocating shorting the market right now. It's saying that we should expect the rally and slide cycles of the last few months to continue at the moment -- the current part being the slide...
In the longer term, the uptrend is still holding strong (see the chart above).
Wholesale Power: A Smart Alternative to Regulated Utilities [View article]
Hey guys, glad to see that the discussion's heating up... Just to clarify a few points:
Yes, NRG is highly leveraged. That's par for the course in the power generation industry, and at present the company's debt service is relatively secure through 2010.
NRG's book value less intangibles and goodwill is around $17 per share, but that assumes that the company's power generation assets are only worth book. Like the article mentions, though, that's unlikely the case. I'd estimate that with a more realistic valuation on those properties, we're looking at $39.70 per share with those same intangibles discounted.
Morningstar's Travis Miller puts NRG's sum-of-the-parts valuation at closer to $50 per share.
Because the company is such a strong buyout candidate, that real-world valuation carries a lot more weight than it would otherwise.
Those Calling for the Death of Value Investing Are Wrong [View article]
Eric - the idea that long term investing can't be judged on a one year basis is the part of the point I'm trying to make. Also, the S&P index is used as an example of the market as a whole, not as an example of a good value investment.
The point is that value investing has been misapplied over the last decade; now some are saying that value investing is deal as a result. That's just not true.
Staying Away from These 15 Dividend Decreasers [View article]
Hey guys, thanks for the comments -
David, I do agree with most of what you say, but the fact remains that whether or not attentive investors should have pared these positions, lots of people still own the stocks on this list (for a myriad of reasons). There are still lots of stocks out there that have decent payouts, but not these guys.
Oh, and thanks for the link to your article... it's a great read!
You're entitled to your opinion but if you would deal with reality and and do some real research you would see that the future of the stock market over the next two decades is all but set in stone."
Fred, this is a technical piece; it takes a look at short-term trends (notice that we're looking at a 6 month chart) to take a look at where the market will be in weeks and months, not years.
If you think that it's out of the question to see a 20% swing in the next few months after the market jumped 23% in the last three weeks, that's your opinion, but it's one that I have some trouble resolving to.
The fact of the matter is that we're looking at a different kind of market; that's both scary and exciting. My subscribers - some of whom have been in the market since the 1960s - are saying the same thing. Still, it's an exciting market because there are myriad opportunities to make smart investments right now. Our track record is proof of that.
The fact is that the market has been irrationally exuberant for a long time doesn't mean that everything's ready to change now. To quote John Maynard Keynes, "...the market's ability to stay irrational often outlasts our ability to stay liquid."
Investor sentiment and economic fundamentals are changing on a daily basis, and right now, and that's going to dictate where the market goes much more directly than the P/E ratio of the S&P 500.
Maybe that'd be a good topic for a future article. Stay tuned.
Exactly... but that is a big IF. If you want to take the technical trade, wait to see what happens after SPY hits that thick red resistance line. Until then, it could go either way (see the "bounces").
schlumpf - You're right... it's the fact that everyone is long now that should make SA investors nervous. As great as March was, the chart in the article shows that we're still in an unquestionable downtrend.
If stocks break out above the trendline, we'll likely see the short-term uptrend continue in a sustained way, but from a technical perspective I think that the 200-day moving average (currently around 1000 for the S&P) is going to pose a serious ceiling for stock prices.
14 Dividend Increasers That Deserve a Second Look [View article]
PhilV - Good call... looks like the rest of the sentence got clipped somehow. Should say:
"Surprised? Well, in the past month dividend-payers on the S&P have underperformed non-payers by 4.71%; they’ve underperformed by 12.76% since January."
AllianceBernstein: Looking Attractive at Current Levels [View article]
Book value doesn't speak to the company's earnings potential, but AB's chairs and computers, etc. are an important part of its valuation. I'd much rather buy an asset manager for the price of its assets than based on AUM (as should be the case).
Time to Jump on Applied Materials [View article]
AMAT has been working to increase commercial efficiency by getting their cost per watt down. That's significant.
Like the article says, PV manufacturing hasn't been a particularly strong segment in the last couple of years. It's the forward growth prospects that are compelling.
Why Becton Dickinson Finally Makes Our Buy List [View article]
Time to Buy into Berkshire Hathaway? [View article]
When liquidity causes B shares to get a slight premium, arbitrageurs can buy BRK.A and convert them to BRK.B to get the premium. At market speed, this happens almost instantaneously -- but it doesn't mean that BRK.B prices are being held down... instead, BRK.A prices are rising to meet them.
That's effectively the same as a premium for BRK.B owners because it means that A shares are playing catch-up to their prices.
Time to Buy into Berkshire Hathaway? [View article]
In the past, shares have kept that ratio in tact because not trading at that fixed rate would have represented a discount or premium for one class of shares -- something that makes no sense normally. But when one of the most famous companies in the world joins the other 99% of stocks from a liquidity perspective, I suspect that we'll start to see small premiums or discounts to class A shares.
With much of the liquidity in the B shares, I wouldn't be surprised if the A shares were playing catch up (much like ETF arbitrage among institutional investors).
Ravi, I agree with you that Berkshire is undervalued right now. I think that the financial pundits are discounting the BNI acquisition too much. But I also think that market minutiae are the catalyst that makes buying now a prudent move.
Some Notes About Observed Market Activity [View instapost]
Wholesale Power: A Smart Alternative to Regulated Utilities [View article]
Why The Market's Set to Move Lower For the Rest of the Month [View article]
In the longer term, the uptrend is still holding strong (see the chart above).
Wholesale Power: A Smart Alternative to Regulated Utilities [View article]
Yes, NRG is highly leveraged. That's par for the course in the power generation industry, and at present the company's debt service is relatively secure through 2010.
NRG's book value less intangibles and goodwill is around $17 per share, but that assumes that the company's power generation assets are only worth book. Like the article mentions, though, that's unlikely the case. I'd estimate that with a more realistic valuation on those properties, we're looking at $39.70 per share with those same intangibles discounted.
Morningstar's Travis Miller puts NRG's sum-of-the-parts valuation at closer to $50 per share.
Because the company is such a strong buyout candidate, that real-world valuation carries a lot more weight than it would otherwise.
Not sure about the ConocoPhilips reference...
Those Calling for the Death of Value Investing Are Wrong [View article]
The point is that value investing has been misapplied over the last decade; now some are saying that value investing is deal as a result. That's just not true.
Staying Away from These 15 Dividend Decreasers [View article]
David, I do agree with most of what you say, but the fact remains that whether or not attentive investors should have pared these positions, lots of people still own the stocks on this list (for a myriad of reasons). There are still lots of stocks out there that have decent payouts, but not these guys.
Oh, and thanks for the link to your article... it's a great read!
mdpath - Good catch. Thanks.
Has the Market Actually Bottomed? [View article]
You're entitled to your opinion but if you would deal with reality and and do some real research you would see that the future of the stock market over the next two decades is all but set in stone."
Fred, this is a technical piece; it takes a look at short-term trends (notice that we're looking at a 6 month chart) to take a look at where the market will be in weeks and months, not years.
If you think that it's out of the question to see a 20% swing in the next few months after the market jumped 23% in the last three weeks, that's your opinion, but it's one that I have some trouble resolving to.
The fact of the matter is that we're looking at a different kind of market; that's both scary and exciting. My subscribers - some of whom have been in the market since the 1960s - are saying the same thing. Still, it's an exciting market because there are myriad opportunities to make smart investments right now. Our track record is proof of that.
The fact is that the market has been irrationally exuberant for a long time doesn't mean that everything's ready to change now. To quote John Maynard Keynes, "...the market's ability to stay irrational often outlasts our ability to stay liquid."
Investor sentiment and economic fundamentals are changing on a daily basis, and right now, and that's going to dictate where the market goes much more directly than the P/E ratio of the S&P 500.
Maybe that'd be a good topic for a future article. Stay tuned.
Has the Market Actually Bottomed? [View article]
Has the Market Actually Bottomed? [View article]
If stocks break out above the trendline, we'll likely see the short-term uptrend continue in a sustained way, but from a technical perspective I think that the 200-day moving average (currently around 1000 for the S&P) is going to pose a serious ceiling for stock prices.
14 Dividend Increasers That Deserve a Second Look [View article]
"Surprised? Well, in the past month dividend-payers on the S&P have underperformed non-payers by 4.71%; they’ve underperformed by 12.76% since January."