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Michael Cain's  Instablog

Michael Cain
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Investor. Equity Research is my passion. My major theme as an investor is focus investing. I'd like to engage and collaborate with other major investors who share the same passion for the markets as I do.
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  • The New Opportunity

    Two words- Iconix Group

    Ever heard of RocaWear, Peanuts, Candies, or Joe Boxer? Iconix Group owns these brand names (including many others) and licenses them out and collects the royalty (most of it guaranteed). That means no inventory, no overhead, and no stores to maintain. Their cash is used to buy more and more brand names so that manufacturers can use those words to put on clothes, comic strips, etc.

    They are trading at a very low price due to slow growth in their men's wear. Not a problem since this is happening all over the place- something that will balance out over time since all men need clothes to wear. They are expanding rapidly overseas and just announced their joint venture in India- a huge market for American brands.

    Let's see what we can get five years from now if we invest in the stock today-

    - EPS Growth Rate (if they grow at a dismal pace)- 10%

    - Time Frame- 5 years

    - P/E multiple in 5 years (take a very average multiple just in case)- 12

    - Price in 5 years- $32.88

    - Price today- $15

    - Compounded annual return- 17%

    Hmm I think Ally bank has the best returns for a three year CD right now for just over 1%- which would you choose? Using Buffett math and planning for a very dismal future for Iconix Group (they have grown over 30% for the past five years), the poorly performing company will actually give you close to Buffett numbers for a return. The key is to get in when the price is right, have faith that the management is competent (they have been growing portfolio and profits steadily for ten years), and have patience when the market ignores its prospects.

    "Eventually the underlying value of the company will always reflect in its stock price." - W.B.

    Tags: ICON, BRK.A
    May 08 8:48 AM | Link | Comment!
  • Headed In The Right Direction

    the Fortune 500 companies this year smashed profits that came up during the powering economy of 2006. That goes without saying that fear is in the market when blue chip companies are thriving and we can't even come back to 2007 levels.

    It seems like every day we come up with a new excuse to panic. Troubles in Europe, China, U.S., Argentina, wherever have led us to a constant state of disbelief in the world economy. The fact is that there are always going to be problems in the world. There is never going to be that point where perfect silence of peace hits the world. The only difference is those who can be greedy in the times when those are fearful and have the sense to be fearful when everyone around you is greedy (CDS of 2008) will be the ones who come out on top.

    Next time a catastrophe happens- think. Is this situation really worth the 7% drop in the markets? Is this going to happen for a very long time, or are we going to climb out of this situation just like everything else we've had to deal with? When the Japan Tsunami hit the island and the market dented, was it really granted or was it just crowded apprehension? Think logically about Wal-Mart's future as an example. Two years from now, will there still be news coverage about the scandal or will the company seal up the holes and move on? Think five years from now because I can guarantee you that no analyst is.

    Tags: WMT, BRK.A, XOM
    May 08 8:45 AM | Link | Comment!
  • Gilead Sciences: Is The Market Joking? (Prequel)
    Okay, news came out that Gilead Sciences (the powerhouse of the HIV and soon HCV market) had a relapse in their clinical trial of GS-"whatever". On Friday, Gilead dropped like a rock because some Wall Street schmucks decided that that would be negative to the company's future outlook.

    People, this is a company that has one of the most prestine management and has been experiencing monumental growth for the past 10 years. The company has allocated capital in such an efficient way, they had no choice but to say, "Hey, let's go to a $100 billion company." Okay, so that's far away even for a company like Gilead who has been growing at a 40% rate.

    The real question lies in how far the shares will drop until it's a buy that knocks you upside your head. I agree with the guy who says that Gilead was slightly overvalued before it tanked on Friday; which means it still has a little while to go before my 85 year old grandfather tells everyone he knows he's buying in.

    It's funny how a company so solid as Gilead who manages Atripla, Truvada, Tamiflu and many other solid drugs can be spanked like a bad child when a little hiccup in a far-fetched clinical trial arises. It makes you wonder what should happen to terrible companies when something like this happens.

    What will happen is that this new HCV drug will go along as planned, start to make billions after 2014 along with its partner, the "Quad". This is the long-term approach that can be played by the the most rudimentary of minds. If it continues to sink, bet your bottoms that those who bet big on their success in the future will be glad to know more than any Harvard MBA who sold last week.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: GILD
    Feb 21 7:11 PM | Link | Comment!
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