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As a contributor to the New Low Observer (http://www.newlowobserver.com/about-this-site), we intend to give new insights on a low risk approach to trading in dividend paying stocks for tax deferred accounts. The New Low Observer (http://www.newlowobserver.com/about-this-site) is not intended for... More
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  • Chesapeake Energy Is On Target

    On April 26, 2012, we posted an article titled "A Warning For Chesapeake Energy Stockholders". In that article we said the following:

    "While it appears that Chesapeake Energy (NYSE:CHK) has seen all the punishment that could possibly lay ahead, we're concerned that the previous technical pattern in the period from 1993 to 1999 is about to repeat."

    The period from 1993 to 1999 saw decline from as high as $27 to under $1.00. The 2012 article was written when CHK was at $18.10 and had already fallen more than -66%. So far, CHK is on track to replicate the decline achieved from 1993-1999. The next downside target for Chesapeake Energy is $4.50.

    (click to enlarge)

    Tags: CHK
    Jul 24 2:48 PM | Link | 3 Comments
  • IBM: A Value Investor's Delight

    In April 2012, we published an article titled, "What Does Warren Buffett See In IBM?" At the time we concluded the article with the following thought:

    "…just imagine what IBM will look like after falling to a 52-week low."

    A reader of our article took exception to the idea of (NYSE:IBM) declining in price with the remark:

    "I have no idea why you think you could buy IBM on a 52 week low. There is nothing fundamental about the company that would lead one to think that might happen. IBM is a difficult company to short because people who own it primarily intend to hold it for a longer term, do not trade on margin, and do not sell their shares based on fear (Momintn. What Does Warren Buffett See in IBM? April 19, 2015. link.)."

    Since our article, IBM has declined from $207 to $161 with upside movement being limited to $213.

    (click to enlarge)

    In spite of the price decline of nearly -22% since 2012, IBM has increased the dividend by +53%. This has resulted in a situation where the price of IBM has becomes very compelling from a value perspective. As indicated in our original article on IBM, the growth of the dividend has become an overpowering force which is creating a stock that could eclipse all expectation for long-term investors. This leaves aside the topic of IBM share repurchases which Warren Buffett discussed in his 2011 shareholder letter.

    Our premise of IBM's valuation is narrowly perched on the work of Edson Gould's Altimeter. Below is an update of Gould's Altimeter since our April 2012 article.

    (click to enlarge)

    According to Gould's Altimeter, IBM is now undervalued below the levels of the 2008 low. We think that a value investor would have fun pouring over the data to determine the actual value of IBM. Gould's Speed Resistance Lines [SRL] indicate that the conservative downside target for IBM is $130. However, we think a process of accumulation at the current price, and below, is a prudent long-term strategy.

    Tags: IBM
    Jul 23 2:05 PM | Link | 1 Comment
  • Quote Of The Day: Robert Rodriguez

    "The problems of tomorrow are being created today as we write this letter. Furthermore, there are risks in the balance sheets that we cannot see. Companies such as Fannie Mae (OTCQB:FNMA), Freddie Mac (OTCQB:FMCC) and American International Group (NYSE:AIG) are now showing financial strains from previous actions taken to enhance the look of their financial reports. We are also concerned that many of these companies have used financial derivatives that are totally unanalyzable by outsiders, since there is insufficient information disclosed in their financial statements for a risk assessment."

    Robert L. Rodriguez. Letter to Shareholders. April 16, 2005. Page 4.

    • Fannie Mae: Bailed Out/Bankrupt 2008
    • Freddie Mac: Bailed Out/Bankrupt 2008
    • AIG: Bailed Out 2008
    Tags: AIG, FNMA, FMCC
    Jul 13 1:54 PM | Link | 5 Comments
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