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Ray Merola  

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  • These 2 Words Will Sink Halliburton On Monday [View article]
    Last read I got, the short ratio is about 3 days, and the short % of float was just under 5%. Not high, but perhaps enough to squeeze a few shorts when crude bumped up 5% fast.

    http://bit.ly/1JkFFua

    Certainly no particular fundamentals to explain the rise in share prices. Halliburton reports tomorrow morning.
    Apr 19, 2015. 09:06 PM | Likes Like |Link to Comment
  • The 2015 Yellow Sleeper: How And Why I Invest In Gold [View article]
    Maybe.....I prefer gold due the concept it is primarily a currency. Silver is a far lesser currency and has a far greater role as an industrial metal, similar to copper.

    This doesn't mean silver won't outperform.
    Apr 19, 2015. 03:34 PM | 1 Like Like |Link to Comment
  • The 2015 Yellow Sleeper: How And Why I Invest In Gold [View article]
    When it comes to gold, I'm not convinced anyone "knows" much of anything. There's a bunch of stories, charts, and alchemy that goes into all the prognostications. Sometimes they are right, and sometimes they are wrong. Trying to time gold's price is generally a sucker's bet.

    Hence my view to own a little exposure to the yellow metal always as an insurance policy, hedge, contra-investment, whatever you want to call it. Let it do what it wants.

    Stocks of well-managed companies, with sound balance sheets, strong franchises, that earn their profits is cash, and are shareholder-friendly; well that's a different story.
    Apr 19, 2015. 02:35 PM | Likes Like |Link to Comment
  • The 2015 Yellow Sleeper: How And Why I Invest In Gold [View article]
    Interesting perspective, kesslerblvd

    Thanks for reading and sharing.
    Apr 19, 2015. 01:21 PM | Likes Like |Link to Comment
  • The 2015 Yellow Sleeper: How And Why I Invest In Gold [View article]
    Very clever, Ordinary Average Guy
    Apr 19, 2015. 01:19 PM | 1 Like Like |Link to Comment
  • The 2015 Yellow Sleeper: How And Why I Invest In Gold [View article]
    Thank you for sharing that one, hobart16

    Very Buffett-seque.

    It had to make it as one of the "author's picks."
    Apr 19, 2015. 10:08 AM | Likes Like |Link to Comment
  • These 2 Words Will Sink Halliburton On Monday [View article]
    Frankly, I would not buy Halliburton now; wait until after earnings and let the shares settle first. I've found it nearly impossible to "game" prospective earnings announcements and stock reaction correctly. It's a crap shoot.

    I believe the the recent run-up in share prices has been the result of short covering. Crude is searching for a bottom and the shorts fear we're there. Mr. Market tries to look out at least 6 months into the future.

    HAL may find good support at $44. If so, that could be a reasonable start to begin long entry.

    But my bottom line is when dealing with a company and earnings facing as much turbulence as HAL, it's best to wait and listen carefully before pulling any triggers.
    Apr 19, 2015. 09:50 AM | 9 Likes Like |Link to Comment
  • Celgene: A Pre-Earnings Discussion Based On Recent News [View article]
    DoctoRx / nicholas

    Good discussion here.

    I differentiate "fair value" from a forward "target price." Fair value is an evaluation/indication of my purchase "indifference point." A target price is what I believe the shares may be worth a year to eighteen months in the future.

    So while I suggest FV is $123, my target price is a reasonable, historical P/E multiple (23x) times the estimated operating EPS *two* years' out (2017); since in 2016 investors are likely to be "paying up" for the *prospective* years' EPS, therefore 2017.

    Based upon Celgene's management's guidance, 2017 operating EPS may be conservatively estimated at $6.77; multiply times 23 and I've got $156. Not far off Morningstar.

    One may ask why add a multiple point when estimating a forward target price versus current fair value? My view is I'm pickier as a potential buyer, so I compress the multiple by one point, and expand it to a round-up 1.0 PEG going forward.

    Yes, it may seem like a bit of alchemy. However, my experience is that valuing either fast growers and cyclicals requires a twist on "normal" garden-variety FV or target price analysis.

    It's possible to make a similar argument on P/Sales (historic versus current).

    Believe me, I've got no perfect handle on this at all. However, I believe Celgene shares are actually inexpensive in the "out" years, and we're seeing a good opportunity to accumulate now, especially if the stock falls towards $100.

    Thanks for the chance to exchange views.
    Apr 19, 2015. 09:27 AM | 2 Likes Like |Link to Comment
  • Celgene: A Pre-Earnings Discussion Based On Recent News [View article]
    I find when evaluating stocks like Celgene, whereas significant "extra" P/L items can distort GAAP earnings, utilizing non-GAAP operating earnings can be most helpful. I do not dismiss GAAP earnings, but I recognize that accounting convention can often skew results.

    For validity, such operating EPS multiples may be compared with other metrics. For high-growth stocks, the PEG ratio can be most instructive. P/Sales is often useful, too.

    For Celgene, operating cash flow is arguably the best litmus test. It's difficult to "hide" results when expressed in a statement of cash flow.

    Interestingly enough, Celgene's operating earnings are much more comparable to cash flow than GAAP earnings.

    Finally, go-go growth companies nearly always look expensive on a ttm or current year P/E basis because investors are paying for the "out" years. Bolstering CELG is the fact that management is very good at making the targets. They don't miss the forecasts. This provides investors a "reliability" kicker.

    I believe Celgene is at 'fair value' when trading at ~22x the proceeding years' operating earnings. Currently, this corresponds to a ~1.0 PEG. Building in an earnings factor of safety (estimating 20% earnings growth in 2016 versus analyst/management 25+% expectations) suggests $5.64 operating earnings in 2016 and a FV of $123.

    Celgene at $113, a buy....Celgene at $100, a steal.
    Apr 19, 2015. 12:06 AM | Likes Like |Link to Comment
  • The 2015 Yellow Sleeper: How And Why I Invest In Gold [View article]
    Excellent commentary, Doug

    I suspect Buffett has had a softer approach to silver since it's an "industrial" metal (like copper), in addition to a currency. But that begs your point that Buffett has refuted the notion that he's against all metals categorically.

    Gold, as a currency, has held value, though the advent of the GLD ETF coincided with a rocketing price to boot....until recently.

    I just read a couple of S.A. articles by fellow contributor Chris DeMuth dealing with arbitrage plays on pending mergers. These, too may be complex for some readers. However, as you've also pointed out, some may grind on it until it sticks.

    Likewise perhaps, will others view my approach to the GLD as outlined. Whether academic or practical, I'm grateful for good readership and readers like you.
    Apr 18, 2015. 02:13 PM | 1 Like Like |Link to Comment
  • The 2015 Yellow Sleeper: How And Why I Invest In Gold [View article]
    Most welcome, Phr3d

    I got a laugh out of the Buffett quote when preparing material for the article. He made that quote a long time ago (1998), and perhaps even he's softened a little since that time. Gold does have some utility nowadays in the tech world; not much.
    Apr 18, 2015. 09:11 AM | 1 Like Like |Link to Comment
  • Celgene: A Pre-Earnings Discussion Based On Recent News [View article]
    Always appreciate your articles, DoctoRx. Thank you.

    Celgene has a bunch of horses in the stable. You have helped us better understand some of the more current opportunities.

    When it comes to P/E valuation (which as you point out, does matter), I recommend using non-GAAP operating earnings as provided by management in lieu of GAAP EPS. Using this approach, the ttm P/E is about 31x. The near-term earnings growth rate is 25 - 30%, suggesting a PEG ratio ~1.0, indicating a reasonably fair value.

    P/Sales is likewise a good benchmark.

    Recently, I sold the July 110 puts for $7. If I'm lucky enough to get "put" shares at a net $103, I suspect I'll be a happy guy.

    Long CELG.
    Apr 17, 2015. 01:27 PM | 7 Likes Like |Link to Comment
  • Procter & Gamble's Buyback Should Be Renamed 'Employee Compensation' [View article]
    Sorting this stuff out typically requires a deep dive into the SEC filings; if it can be determined accurately at all. Exec remuneration is a subset of total employee remuneration.

    My figures above relied on Josh Arnold's numbers as offered in the article.
    Apr 16, 2015. 07:58 PM | Likes Like |Link to Comment
  • Procter & Gamble's Buyback Should Be Renamed 'Employee Compensation' [View article]
    Some rough math:

    From 2009-14, PG spent ~$29 billion on buybacks and reduced the share count by ~210 million.

    Therefore, the average repurchase price per share was about $138. A rough average market share price during the period was $75.

    Therefore, the company spent a bit less than twice necessary to repurchase shares at fair value. The remainder, about $13 billion total or $2.2 billion a year, went to employees.

    The question, to me, is whether the total compensation package for management and employees is reasonable and prudent for similar-situated corporations. Share-based compensation is one component of a total package.

    I reviewed the last 10-K very quickly and could not find a total employee comp expense figure. Any data points would be helpful.
    Apr 16, 2015. 03:34 PM | 3 Likes Like |Link to Comment
  • The 2015 Yellow Sleeper: How And Why I Invest In Gold [View article]
    I cannot argue with that point, OAG

    Physical gold is preferential for monetary (currency) purposes, but for a trade, or even an investment, I'm not sure it matters so much.

    There's been calls for fiat currencies to fail for a long time. Someday, maybe they will; thereby placing gold and other hard currencies on a pedestal. For the time being, it continues to behave "normally."

    The concept of fiat currencies is based upon trust (and its cousin, perception). No longer even on a gold standard, there's little to prop up the idea of government-issued money other than our willingness, and those of global leaders, to accept it.
    Apr 16, 2015. 10:54 AM | 1 Like Like |Link to Comment
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