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Nat Stewart

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  • General Mills: The Technically Risk-Free Stock? [View article]
    I really like this article. You might like to read the evidence put together by Eric Falkenstein that suggests CAPM is deeply flawed as a practical tool. Indeed, empirical evidence suggests the that in the real world, the conclusions drawn from CAPM are almost precisely backwards. His latest book is called "The Missing Risk Premium: Why Low Volatility Investing Works." He also has a good blog that outlines many of his ideas.

    Using His logic, it makes perfect sense that a low volatility stock like GIS has a superior long term record.
    Nov 9 10:35 AM | 3 Likes Like |Link to Comment
  • "Asian-Americans are the highest-income, best-educated and fastest-growing racial group in the United States," the Pew Research Center wrote in recent massive study. The WSJ discusses the rise of Asian-Americans in a weekend essay, saying that they "have become the immigrant group that most embodies the American promise of success driven by will and resolve." [View news story]
    Reasonable people can disagree. I find the moralistic tone (So eager to judge who is an immoral racist and who is honestly interpreting facts differently) of people like D. Virginia to be one of the reason these subjects are difficult to addressed honestly and openly.

    I for one think that Asian-Americans on average have a slight IQ advantage over White-Americans and that it is likely in part do to genetic difference. My reading and interpretation of the data suggests that this is true, and many people who value basic facts above subjective interpretation or speculation agree with me.

    But so what? How high was Steve Job's IQ? I am sure it was above average but it is really beside the point. How high is the IQ of the average businessman who makes a product or service that make our lives better? Look at an inventor like Edison, etc. Certainly they would have measured highly on a basic intelligence test, yet their contribution to society rose far above simple academic performance or ranking systems for abstract intelligence. In today's word basic intelligence is itself becoming commodified.

    There are many, many human qualities that when combined with hard work can make for a successful life, career, and contribution to society. The key is finding a comparative advantage for yourself and then working hard.

    Bottom line: If people who developed separately for a very long period of time on average have some different aptitudes and strengths, it is really not the end of the world. Lets stop pretending that it would be, because plenty of evidence suggests that it is true.
    Oct 29 08:58 AM | 3 Likes Like |Link to Comment
  • How Has Herbalife Kept The Game Going For So Long? [View article]
    You could say the same thing about many of the brand name products sold at the supermarket. The "special formula" idea is mostly a marketing gimmick. There is nothing special about them, but people still pay a premium for them.
    Jul 27 08:55 PM | 2 Likes Like |Link to Comment
  • An End To Our Relationship With Yahoo, A New Era For Equity Research [View article]
    Sites earn a spread between traffic acquisition costs and the revenue they generate by adds. That is the general model that all "click" sites use.
    Jul 25 04:10 PM | 2 Likes Like |Link to Comment
  • Dividends Don't Matter In Retirement Either [View article]
    A well written article but imo you are assuming a few things that are not true. First, that a companies capital allocation decisions (re-invest vs. buybacks. vs invest in business) are neutral (they are not). Second, the typical retiree could stomach a 100% stock portfolio without making adverse and ill-timed emotional decisions (they can't). Third, that the withdraw of funds via selling shares is neutral over time to returns relative to dividends (it is not, as u have to sell more shares when a stock is down than when it is up. I think your idea has allot of merit for the wealthy (say, 3m+ portfolio), but beyond that there are issues.

    With regards to the capital allocation issue within a company - Dividends could be the best use of capital or the worst use of capital, and it would be entirely dependent on opportunities to re-invest in the business at a good IRR, the share price valuation (the other alternative being buybacks), and the yield on debt that could or could not be paid down. Getting the above right makes a difference.

    Enjoyed the article.
    Jul 17 06:59 PM | 2 Likes Like |Link to Comment
  • Why Altria Is Our Favorite Dividend Growth Idea In Tobacco [View article]
    If u count all the spinoffs and dividends over it's history, i doubt any stock has done more for investors, period.
    Jun 11 09:44 PM | 2 Likes Like |Link to Comment
  • Are Pyramid Schemes Inherently Fraudulent? [View article]
    I switched to saying "financial sales" not insurance in my second example for a reason.
    Mar 10 02:38 PM | 2 Likes Like |Link to Comment
  • Why Leverage Is Pointless [View article]
    I will give you a few very simple examples.

    First is that when the system comes under stress, the exchanges, regulators, and brokers tend to change the rules in order to protect the system - and this tends to happen in a way that is detrimental to many existing investors/traders (raised margin requirements and short sell restrictions are two potent tools for doing this).

    The short sale restriction on Financial stocks in 2008 (changing the rules) was devastating to many hedge funds that would have otherwise had a sure thing, "hedged" position. Those "hedged" short positions blew up in their face.

    Then you have events like The Porsche short squeeze of Volkswagen stock, which once again blew up many hedge funds with their "hedged" positions.

    Or even better, study what happened to long-short equity funds in August of 2007. As stated in this paper by Andy Lo (PDF)

    "Based on TASS hedge-fund data and simulations of a specific long/short equity strategy, we hypothesize that the losses were initiated by the rapid “unwind” of one or more sizable quantitative equity market-neutral portfolios. Given the speed and price impact with which this occurred, it was likely the result of a forced liquidation by a multi-strategy fund or proprietary-trading desk, possibly due to a margin call or a risk reduction."

    The leverage of many players who all had similar bets using similar base line assumptions added risk to the system. In trading we call it a "stop run" or "squeeze". It takes many forms but the ultimate result is always the same - Push the over-leveraged out of their positions at exactly the wrong time, often resulting in massive, unexpected losses.
    Jan 24 12:33 PM | 2 Likes Like |Link to Comment
  • PotBelly: More Downside Ahead [View article]
    I agree with Mr. Wither. Potbelly lines (Chicago market) are intense during lunch hour. Turn-over is super fast/efficient and the sandwiches are value priced. I believe the concept and execution is more compelling and unique than this author gives them credit for. People don't just go to Potbelly, they REALLY like potbelly. When I first moved to Chicago 8 years ago, I was blown away by the place - I immediately looked to see if it was a public company. It might be overvalued on a short or intermediate term basis, but I think it is highly likely that it will end up being a nice ride for investors as they build out thousands of units in the coming years.
    Jan 24 07:55 AM | 2 Likes Like |Link to Comment
  • eBay's Dividend Will Be Huge [View article]
    I am not a cheerleader or a detractor. Only someone seeking information that is relevant to making an investment decision.

    So it sounds like your primary complaint is that Ebay no longer wants to be a venue for many small sellers. This might have been bad from a small seller perspective, but from a company perspective it might be a rational choice. There is a thing called the 80-20 rule. It might be that 20% of sellers generate all the profit, and 80% generate all of the headaches and overhead costs. So from an investor perspective I am not so sure this is a sign that "something is wrong inside of ebay" - and after all this is an investment focused site.
    Dec 5 08:23 AM | 2 Likes Like |Link to Comment
  • Gold: A 2 Million Ounce Order Executed? [View article]
    Most of the managed money in the futures markets is managed using various trend-following type systems. These programs follow very simple mathematical rules that buy highs and sell lows, or use some other trend indicator such as a moving average.

    Last Friday took out a multi-month lows in the gold contract. The most likely explanation for the inefficient trading is that a cluster of traders had sell-stop type orders near the same price level, which temporarily swamped the market's liquidity.

    In other words it was likely just a focused point of capitulation by speculative interests.
    Oct 17 09:12 PM | 2 Likes Like |Link to Comment
  • Lorillard Undeterred By Uncertainty In Tobacco Industry [View article]
    Couldn't the story also (hypothetically) go the other way? For example, "evil corporations are targeting the black community with menthol cigarettes" or something like that.
    Aug 22 07:01 PM | 2 Likes Like |Link to Comment
  • Hidden Gem: National Beverage Corp. [View article]
    Nice Job Brodie, You have indeed found a gem with National Beverage.
    Jul 19 03:50 PM | 2 Likes Like |Link to Comment
  • Coal: Dirty Word, High Yield [View article]
    Nice Job Highlighting a great company and great CEO. I have followed Joseph Craft III to the extent possible with public information, and my conclusion is that he is one of the most disciplined, intelligent capital allocators I have seen. He has avoided many of the pitfalls and risks inherent to the sector by sticking to a long term winning formula and by positioning as a low cost producer. I always invest in the GP where there is the opportunity to do so.
    Once again, nice job.
    Jul 17 07:53 PM | 2 Likes Like |Link to Comment
  • Balchem: Boring But Beautiful [View article]
    Great write up. "Boring is beautiful" as you define it is my favorite type of investment. I love the companies like this that build incremental value every year without much fanfare. The fact is, though, there are just are not enough shares of these companies to go around, so in a way it is good that they stay somewhat under the radar.

    I think BCPC followers (including myself) are waiting to see what Mr. Rossi does with the cash. A smart acquisition (as has been made in the past) would be very interesting. There is also the Curemark situation, which is a hidden "free option" within the company that could be worth zero or something very significant.

    Once again, great write-up.
    Apr 10 08:57 AM | 2 Likes Like |Link to Comment