Thank you for your article but I respectfully disagree with your conclusions and think that IBM is very attractive right now. If you just go and use Value Line, as Warren Buffett does, you can use an easier way to calculate OE and that is Cash Flow - Capital Spending from Value Line. I don't know when I post this that the numbers above will line up properly but I use my own ratios based on Mr. Buffett's OE ratio. The system you will see below has been successfully backtested 1000's of times and I have had great success using it with actual Client accounts in real time tests.
COE = Cumulative Owners Earnings
Add all OE's together from 1973 to 2014 = $182
CapFlow = Capital Spending/Cash Flow
Tells us how much Capital Spending is needed as a percentage of Cash Flow to run operations = So IBM is extremely efficient in its Capflow as Capital Spending only makes up 18% of its cash flow.. That is why you see tremendous share buybacks as IBM has monster OE per share.
I measure the growth in COE as my growth rate for IBM so we have about 11% growth consistently over many years.
Finally you are not accounting for OE return to invested capital which I have named FROIC = Free Cash Flow Return on Invested Capital = When you take Total OE and divided it by (Long Term Debt + Shareholders Equity) you get a FROIC of 40%, which is an insanely high return and when you add all the numbers together you can see why Warren Buffett bought 68 million shares and why IBM is the largest investment in my Clients portfolio.
I do far more complex research then what you see here and have a algorithm called the "Mycroft Value" that believes that IBM would be fully valued at $332.06 ( the price that a private buyer on Main Street would need to pay to acquire the whole company). So as you can see IBM is trading at a 42% discount from its real value according to my research. When Mr. Buffett started looking at it in 2011, it had a Mycroft Value of $239 and a market price of $154 or a 36% discount at the time when Mr. Buffett started loading up on it. Therefore anyone who buys IBM today is getting it at a better relative valuation then what Mr. Buffett paid when he started loading up on it according to my proprietary research.
Chipotle Mexican Grill: Well-Managed And Growing, But Price Matters [View article]
An added benefit of Technical Analysis is that it allows growth investors from selling too soon and value investors from buying too early. You could have had an amazing ride with CMG as the 50 day moving average stayed above the 100 day moving average for a very long time. http://bit.ly/QgOkSK
So you could have kept it from January 2009 to where my skull showed up in 2012 for a massive gain then you would have shorted it and made a killing again. I have been doing analysis of stocks for over 30+ years now and Technical Analysis is essential for success in this business of analyzing stocks.
Chipotle Mexican Grill: Well-Managed And Growing, But Price Matters [View article]
Hi Brant,
My real expertise is in Qualitative and Quantitative Analysis but I have come to discover that 1/3 of ones analysis should be Technical as 90% of the trades that happen in the markets are done by big investors. So I sat down for a few years and broke technical analysis down to its key elements and made it user friendly for the masses by starting http://bit.ly/SpgWw0. I believe that I can see what the big investors are doing now and not have to wait for the 13-F filings to come out.
In the chart I gave before had you gone short CMG when the skull and crossbones showed up you would have made an absolute killing. I have 60,000 free charts to view on my site if you want to give it a try. I consider myself a fundamentalist as well as a technical analyst now and since I introduced SIA-Charts into my client portfolio's my performance has increased substantially. Here is a backtest I did trading the Hang Seng index from December to July going both long and short.
Chipotle Mexican Grill: Well-Managed And Growing, But Price Matters [View article]
Excellent Article Brant,
From a purely SIA-Charts technical point of view the chart below shows that Chipotle after having been crushed soon after our skull and crossbones (happens when the price of the stock drops 5% below the 100 day moving average) showed up in July and soon after got crushed, is starting to come back but still has a way to go. It would need to clear $380 again to be 5% above its 100 day moving average, where the final shorts would need to cover. When that happens a Superman will show up as our symbol for that event. So watch for $380 as that would be our buy alert on the CMG.
Apple's A6 Is A Custom Design: What Does This Mean For Investors? [View article]
From a purely technical SIA-Charts point of view the Apple Chart below continues to rocket ahead. Besides having a superman show up, which happens when the stock goes 5% above its 100 day moving average. We also have a super cross show up which means that the 50 day moving average has broken above the 100 day moving average, which is also very bullish and means that buyers are coming in big time.
Petroleum & Resources Commits To 6% Annual Dividend: Is It A Buy? [View article]
From a purely SIA-Charts technical point of view the chart you see below on PEO is very bullish: Besides having a superman show up, which happens when the stock goes 5% above its 100 day moving average. We also have a super cross show up which means that the 50 day moving average has broken above the 100 day moving average, which is also very bullish and means that buyers are coming in big time.
Starbucks And Commodity Costs: What Analysts Are Not Aware Of [View article]
Excellent Article Mathias,
From a purely technical SIA-Charts point of view Starbucks is at the crossroads now. In the chart below you will see that it got hammered recently, but is slowly moving its way back as it has broken above it 50 day moving average and is close to breaking its 100 day. If its stock price hits $54.60 again, that will be very bullish as a Superman will show up, which symbolizes that the stock has broken 5% above its 100 day moving average. Superman is a bullish and Skull and Crossbones are bearish short term indicators.
If Superman does show up then that will be a sign that the 50 day moving average may cross above the 100 day moving average and that will be what is called a supercross. So the next few weeks are critical for the stock in order to see if it keep its positive momentum and force short sellers to cover. At $54.60 they will and then we could have a great run after that.
I was recently in Europe and had multiple opportunities to buy my coffee at Starbucks and it also helped me get through an 7 hour wait-over in Istanbul. You can't imagine how happy I was to get my Starbucks in Turkey.
Titan Enters Exclusive Talks To Partner Probuphine [View article]
From a purely technical SIA-Chart point of view the chart for Titan below just turned very bullish. Besides having a superman show up, which happens when the stock goes 5% above its 100 day moving average. We also have a super cross show up which means that the 50 day moving average has broken above the 100 day moving average, which is also very bullish and means that buyers are coming in big time.
Rockwell Medical Overvalued Based On Significant Risk [View article]
From a purely SIA-Chart technical point of view RMTI definately has the shorts interested. Besides having the skull and crossbones show up, which happens when the stock goes 5% below its 100 day moving average. We also have a death cross show up which means that the 50 day moving average has broken below the 100 day moving average, which is also very bearish and means that sellers are coming in big time.
Your timing seems to be right on the money from an Sia-Chart technical point of view. The chart below is very bullish. Besides having a superman show up, which happens when the stock goes 5% above its 100 day moving average. We also have a super cross ready to show up which means that the 50 day moving average is about to break above the 100 day moving average, which is also very bullish and means that buyers are coming in big time.
Google Knows How To Cover All The Angles [View article]
From a purely SIA-Chart technical point of view Google's chart below is very bullish indeed. Besides having a superman show up, which happens when the stock goes 5% above its 100 day moving average. We also have a super cross show up which means that the 50 day moving average has broken above the 100 day moving average, which is also very bullish and means that buyers are coming in big time.
From a purely SIA-Chart technical point of view the SIRI chart below is very bullish : Besides having a superman show up, which happens when the stock goes 5% above its 100 day moving average. We also have a super cross show up which means that the 50 day moving average has broken above the 100 day moving average, which is also very bullish and means that buyers are coming in big time.
Which ETFs Performed Best During QE2? [View article]
Great Article Chris,
Here are my SIA-Charts for the tickers you used in your article so your readers can get a technical viewpoint as well. Superman signifies bullishness and Skull and Crossbones signify bearishness. As you will see 13 of the 14 charts are bullish so that shows that the big money has started moving in and we could have a start of a great bull market ahead.
Pfizer Is Headed Higher On Impressive Pipeline [View article]
I have owned Pfizer for a long time now and you can see why from the chart below. From an SIA-Chart technical point of view Pfizer is doing everything right . Besides having a superman show up, which happens when the stock goes 5% above its 100 day moving average. We also have a super cross show up which means that the 50 day moving average has broken above the 100 day moving average, which is also very bullish and means that buyers are coming in big time.
Sorry Warren, IBM Is Too Risky [View article]
1973--- $0.41------ 68%--------- $0.41
1974 ---$0.27------ 81% -------- $0.68-------------- 66%
1975--- $0.57------ 63%--------- $1.25-------------- 84%
1976--- $0.72------ 58%--------- $1.97-------------- 58%
1977--- $0.56 ------71%--------- $2.53-------------- 28%
1978--- $0.59------ 73%--------- $3.12-------------- 23%
1979-- -$0.14----- 106%-------- $2.98 -------------- -4%
1980 ---$0.06------- 98%-------- $3.04--------------- 2%
1981 - -$0.09------ 103%-------- $2.95-------------- -3%
1982 -- $0.54-------- 84%--------$3.49------... 18%
1983 ---$1.84------- 52%-------- $5.33 -------------- 53%
1984 ---$1.77------- 56%-------- $7.10 -------------- 33%
1985--- $1.29 ------ 67% ------- $8.39 --------------- 18%
1986 -- $1.72 ------ 52% ------ $10.11 ----------------21%
1987 --- $2.24------ 45%------- $12.35---------------- 22%
1988 ----$2.21------ 51%------- $14.56 ----------------18%
1989 ----$1.85------ 60% ------- $16.41 ---------------13%
1990 ----$2.10------ 58%------- $18.51---------------- 13%
1991 ---$1.05------- 73%------- $19.56------------------ 6%
1992 ---$1.29-------- 62% ------$20.85 ----------------- 7%
1993--- $1.49------- 48% -------$22.34 ------------------7%
1994 ---$2.59 -------34%------- $24.93---------------- 12%
1995--- $3.25------- 40% ------ $28.18 ----------------13%
1996 ---$2.44------- 54%------- $30.62----------------- 9%
1997--- $2.21 -------61% -------$32.83---------... 7%
1998 ---$2.58------- 58% ------ $35.41----------------- 8%
1999--- $4.20 -------44%------- $39.61 --------------- 12%
2000--- $4.22 -------43%------- $43.83 ---------------- 11%
2001 ---$3.99 --------45% ------ $47.82 ---------------- 9%
2002 ---$3.77------- 42%------- $51.59 ------------------8%
2003 ---$4.68------- 36%------- $56.27 ----------------- 9%
2004--- $5.59------- 32%------- $61.86 --------------- 10%
2005 ---$6.27 -------28% -------$68.13---------... 10%
2006--- $6.66------- 30% ------ $74.79 ---------------- 10%
2007--- $7.94 -------30%------- $82.73----------------- 11%
2008-- $10.17 ------23% ------- $92.90 ----------------12%
2009 --$11.47 -------19% ----- $104.37 ----------------12%
2010 --$12.60 -------21% ----- $116.97 ----------------12%
2011-- $14.60 -------18% ----- $131.57---------------- 12%
2012-- $16.00------- 18%------ $147.57 --------------- 12%
2013 --$16.60 -------18%------ $164.17---------------- 11%
2014 ---$18.05 ------18%------ $182.22---------------- 11%
TOTAL COE $182.22
Price to OE 2014 = 10.72
Growth Rate of COE 2014 =11%
CapFlow = 18%
Thank you for your article but I respectfully disagree with your conclusions and think that IBM is very attractive right now. If you just go and use Value Line, as Warren Buffett does, you can use an easier way to calculate OE and that is Cash Flow - Capital Spending from Value Line. I don't know when I post this that the numbers above will line up properly but I use my own ratios based on Mr. Buffett's OE ratio. The system you will see below has been successfully backtested 1000's of times and I have had great success using it with actual Client accounts in real time tests.
COE = Cumulative Owners Earnings
Add all OE's together from 1973 to 2014 = $182
CapFlow = Capital Spending/Cash Flow
Tells us how much Capital Spending is needed as a percentage of Cash Flow to run operations = So IBM is extremely efficient in its Capflow as Capital Spending only makes up 18% of its cash flow.. That is why you see tremendous share buybacks as IBM has monster OE per share.
I measure the growth in COE as my growth rate for IBM so we have about 11% growth consistently over many years.
Finally you are not accounting for OE return to invested capital which I have named FROIC = Free Cash Flow Return on Invested Capital = When you take Total OE and divided it by (Long Term Debt + Shareholders Equity) you get a FROIC of 40%, which is an insanely high return and when you add all the numbers together you can see why Warren Buffett bought 68 million shares and why IBM is the largest investment in my Clients portfolio.
I do far more complex research then what you see here and have a algorithm called the "Mycroft Value" that believes that IBM would be fully valued at $332.06 ( the price that a private buyer on Main Street would need to pay to acquire the whole company). So as you can see IBM is trading at a 42% discount from its real value according to my research. When Mr. Buffett started looking at it in 2011, it had a Mycroft Value of $239 and a market price of $154 or a 36% discount at the time when Mr. Buffett started loading up on it. Therefore anyone who buys IBM today is getting it at a better relative valuation then what Mr. Buffett paid when he started loading up on it according to my proprietary research.
Mycroft
Apple Breaks $700 Barrier, Forms New Partnerships [View article]
Mycroft
http://bit.ly/SpgWw0
Chipotle Mexican Grill: Well-Managed And Growing, But Price Matters [View article]
So you could have kept it from January 2009 to where my skull showed up in 2012 for a massive gain then you would have shorted it and made a killing again. I have been doing analysis of stocks for over 30+ years now and Technical Analysis is essential for success in this business of analyzing stocks.
Mycroft
http://bit.ly/SpgWw0
Chipotle Mexican Grill: Well-Managed And Growing, But Price Matters [View article]
My real expertise is in Qualitative and Quantitative Analysis but I have come to discover that 1/3 of ones analysis should be Technical as 90% of the trades that happen in the markets are done by big investors. So I sat down for a few years and broke technical analysis down to its key elements and made it user friendly for the masses by starting http://bit.ly/SpgWw0. I believe that I can see what the big investors are doing now and not have to wait for the 13-F filings to come out.
In the chart I gave before had you gone short CMG when the skull and crossbones showed up you would have made an absolute killing. I have 60,000 free charts to view on my site if you want to give it a try. I consider myself a fundamentalist as well as a technical analyst now and since I introduced SIA-Charts into my client portfolio's my performance has increased substantially. Here is a backtest I did trading the Hang Seng index from December to July going both long and short.
http://bit.ly/QUIMQi
Regards,
Mycroft
http://bit.ly/SpgWw0
Chipotle Mexican Grill: Well-Managed And Growing, But Price Matters [View article]
From a purely SIA-Charts technical point of view the chart below shows that Chipotle after having been crushed soon after our skull and crossbones (happens when the price of the stock drops 5% below the 100 day moving average) showed up in July and soon after got crushed, is starting to come back but still has a way to go. It would need to clear $380 again to be 5% above its 100 day moving average, where the final shorts would need to cover. When that happens a Superman will show up as our symbol for that event. So watch for $380 as that would be our buy alert on the CMG.
CMG = http://bit.ly/U53mjL
Mycroft
http://bit.ly/SpgWw0
Apple's A6 Is A Custom Design: What Does This Mean For Investors? [View article]
AAPL = http://bit.ly/SUxL4X
Mycroft
http://bit.ly/SpgWw0
Petroleum & Resources Commits To 6% Annual Dividend: Is It A Buy? [View article]
PEO = http://bit.ly/StHc58
Mycroft
http://bit.ly/SpgWw0
Starbucks And Commodity Costs: What Analysts Are Not Aware Of [View article]
From a purely technical SIA-Charts point of view Starbucks is at the crossroads now. In the chart below you will see that it got hammered recently, but is slowly moving its way back as it has broken above it 50 day moving average and is close to breaking its 100 day. If its stock price hits $54.60 again, that will be very bullish as a Superman will show up, which symbolizes that the stock has broken 5% above its 100 day moving average. Superman is a bullish and Skull and Crossbones are bearish short term indicators.
If Superman does show up then that will be a sign that the 50 day moving average may cross above the 100 day moving average and that will be what is called a supercross. So the next few weeks are critical for the stock in order to see if it keep its positive momentum and force short sellers to cover. At $54.60 they will and then we could have a great run after that.
SBUX = http://bit.ly/RX5BFd
I was recently in Europe and had multiple opportunities to buy my coffee at Starbucks and it also helped me get through an 7 hour wait-over in Istanbul. You can't imagine how happy I was to get my Starbucks in Turkey.
Mycroft
http://bit.ly/SpgWw0
Titan Enters Exclusive Talks To Partner Probuphine [View article]
TTNP = http://bit.ly/RYv67S
Mycroft
http://bit.ly/SpgWw0
Rockwell Medical Overvalued Based On Significant Risk [View article]
RMTI = http://bit.ly/SNfExQ
Mycroft
http://bit.ly/SpgWw0
Time To Buy DARA Bio [View article]
DARA = http://bit.ly/UavtK6
Good Luck and great article,
Mycroft
http://bit.ly/SpgWw0
Google Knows How To Cover All The Angles [View article]
GOOG = http://bit.ly/Os9PEf
Mycroft
http://bit.ly/SpgWw0
Sirius XM: Buy Or Sell? [View article]
SIRI = http://bit.ly/TWNRZH
Mycroft
http://bit.ly/SpgWw0
Which ETFs Performed Best During QE2? [View article]
Here are my SIA-Charts for the tickers you used in your article so your readers can get a technical viewpoint as well. Superman signifies bullishness and Skull and Crossbones signify bearishness.
As you will see 13 of the 14 charts are bullish so that shows that the big money has started moving in and we could have a start of a great bull market ahead.
FCG = http://bit.ly/U8Ncld
IEZ = http://bit.ly/OrPqPB
IWO = http://bit.ly/U8NdFI
IXC = http://bit.ly/OrPqPD
KOL = http://bit.ly/U8Nclh
OIH = http://bit.ly/OrPsHl
PSP = http://bit.ly/U8NdFM
RJA = http://bit.ly/OrPsHn
RSX = http://bit.ly/U8NfgF
SLV = http://bit.ly/OrPqPF
SMH = http://bit.ly/U8NfgL
XES = http://bit.ly/OrPsHp
XLE = http://bit.ly/U8NdFQ
XME = http://bit.ly/U8NfgN
XOP = http://bit.ly/U8NfgP
Mycroft
http://bit.ly/SpgWw0
Pfizer Is Headed Higher On Impressive Pipeline [View article]
PFE = http://bit.ly/OHaJZ7
Mycroft
http://bit.ly/SpgWw0