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Richard Shaw  

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  • Appealing Stocks With Notably High FCF Yields [View article]
    Goldman likes SSCC, and they may well be attractive -- we don't know, but what we do know is that an important fact is missing from the discussion. Smurfit-Stone Container emerged from bankruptcy reorganization On June 30, 2010. That material fact should be included in any discussion of reduced costs and free cash flow. Cost reduction in a company that relieves itself in reorganization is not the same as cost reduction in a company that did so without Chapter 11 reorganization. While they may or may not be attractive post-reorganization, the fact that they essentially failed financially as a company and have been out of bankruptcy for only a few months is a material fact that should be included in any discussion of their appeal as an investment.
    Jan 22, 2011. 09:34 AM | Likes Like |Link to Comment
  • S&P 500 Is Expensive Using Normalized Earnings [View article]
    Dibber, forward analysis is also important, but analysts tend to extend trends (whether up or down) too far. As a group, they are noted for changing their growth views late, and often for relying too much on optimistic management projections, and to focus on operating earnings projections without giving enough recognition to a history of "unusual" or "non-recurring" items that are also so important.
    Jan 20, 2011. 12:47 PM | 2 Likes Like |Link to Comment
  • S&P 500 Is Expensive Using Normalized Earnings [View article]
    Dibber, you point would be right on IF we had said, or if any one sugested that any single analytic tool should be used in isolation. However, to discredit individual tools because they do not work or make good sense in every circumstance will leave you with no tools whatsoever. In the end, judgement is required, but without data of various sorts, judgement is not possible -- just guessing. One needs to be aware of an use multiple tools -- some work and some do not -- this article does not assert that the method discussed or any other method is always right or always suitable.
    Jan 20, 2011. 11:19 AM | 1 Like Like |Link to Comment
  • S&P 500 Is Expensive Using Normalized Earnings [View article]
    Tom, I agree with your comments generally, but I like to see as much history as I can, just in case it shows me something useful -- looking at data never hurts -- how you use it matters. I would never presume in advance that I should not look at available data because I presume it would not be useful. Once it's all out there we can all pick over it and be guided by part or all as we chose. You can be sure that if I had done a study since 1987, someone would have said that I excluded key data before that point for this or that reason, so best to show it all and let people decide which parts, if any are of interest or use.
    Jan 19, 2011. 10:43 PM | 1 Like Like |Link to Comment
  • S&P 500 Is Expensive Using Normalized Earnings [View article]
    Simple question. If 130 years from 1881 is dumb, and 55 years from WW II is dumb, and 30 years from peak interest rates is dumb, and 10 year normalization is dumb (even though Warren Buffet as well as Robert Shiller think Ben Graham had a good idea there), what do you think is the right number of years, months, weeks, days, minutes, or seconds to use as an evaluation period?
    Jan 19, 2011. 08:48 AM | 6 Likes Like |Link to Comment
  • S&P 500 Has Only Moderate Downside Based on Operating Earnings Multiples [View article]
    While this method does not and cannot address that question, for which you have no time frame, it is certainly possible to get back there someday for some reason, but not if conditions in 2011 resemble conditions in 2010, where the world economy is slowly recovering. However, a solid punch in the gut with a major sovereign debt crisis, a war in a economically strategic location, a major terror attack in NYC, and other event risks could put us back there. We think the probabilities of that are low, but protect ourselves at all time with stop loss orders.
    Jan 19, 2011. 08:39 AM | 2 Likes Like |Link to Comment
  • S&P 500 Has Only Moderate Downside Based on Operating Earnings Multiples [View article]
    That's simple enough to explain. This is not an article attempting to cover all ground. It is part of a series articles that each examine a single valuation approach to see what each suggests. Your particular question is not addressed by this method. P/E expansion and compression is an interesting topic, but not within the purpose of this article.
    Jan 19, 2011. 08:35 AM | 1 Like Like |Link to Comment
  • S&P 500 Has Only Moderate Downside Based on Operating Earnings Multiples [View article]
    It is only obvious if you already knew what the operating earnings estimates are for 2010 and 2011, and if you had a clear idea of what various common multiples of those numbers meant in terms of index price, and if you already knew what the current price is in terms of the operating earnings estimates. Since you already know those things, it is obvious, but not to everybody. Of course, there is a range of outcomes, but we did not know what that range of price outcomes was until we explored the range of multiples. This is just one of many different metrics that investors might want to examine periodically to gauge where things are in terms of a scale of some sort. It was useful to use, sorry it was not useful to you.
    Jan 19, 2011. 08:31 AM | 3 Likes Like |Link to Comment
  • Telecoms' Dividend Yields [View article]
    Today is a good example of buy the rumor sell the news:

    T, VZ and AAPL all down on the announcement day for the Verizon iPhone.

    Still like the telecoms, but enjoyed observing the very short-term truism of buy the rumor, sell the new working in this instance.
    Jan 11, 2011. 02:57 PM | 3 Likes Like |Link to Comment
  • Persistent, Consistent Dividend Payers [View article]
    Concerning Aristocrats, S&P has talked about difficulties since 2008 meeting their 50 company plan.

    Concerning per minute trading, I disagree of course because that is my position. We have some positions in the millions. It is not reasonable for example, to buy $3 million of a stock that trades $4,000 per minute, for example. That would take 750 minutes, or about 2 days, if the investor were the only seller, in the event of a need or desire to exit. That would be inappropriate in our philosophy.

    The example is extreme for effect, but we wish to be able to enter and exit both quickly and cleanly, without being a disturbance to the market,

    We disagree that per minute trading means nothing -- it is an important part of our security selection, but differences in view are what make a market.
    Dec 22, 2010. 08:08 AM | 5 Likes Like |Link to Comment
  • Persistent, Consistent Dividend Payers [View article]
    that sounds reasonable -- thanks -- to be clear, the list is not a recommendation -- just a screen for dividend payment history to which logic such as your need be applied
    Dec 21, 2010. 10:10 PM | Likes Like |Link to Comment
  • Setting Stop Loss Levels [View article]
    No. It is a true measure of the difference between the 200-day SMA and the price, AND IF you don't want to own a position trading below the 200-day SMA, you would feel compelled to exit if the price declined by that percentage gap between the 200-day and the price. You might well wish to use a tighter exit based on other tests such as price channels, standard deviations or other tests. The 200-day test in the instance you mentioned is probably the widest stop you might consider, based on your statement that it is "too large" --- NOTE: this is not personal investment advice, only discussion of the concepts in the article
    Dec 21, 2010. 11:08 AM | Likes Like |Link to Comment
  • Equity REIT Yields vs. 10-Year Treasury Yields [View article]
    Dr. Case:

    Is it correct to assume that institutional investors consist primarily of life insurance companies, endowments and pension funds? And is it fair to assume that the management capabilities, finance, and portfolios and acquisitions capabilities of REITs and institutions are roughly the same?

    If both of those assumptions are reasonably correct, and if your statement that institutional real estate portfolio have been flat with respect to capital appreciation, while REIT share prices have shown capital appreciation, does that not simply mean that minority public investors have been yield seeking and accepting increasingly lower yields as Treasuries have gone done in yield (Treasury yields have been in decline for the 33 years you studied in your article), whereas institutions have not been able to sell or appraise their holdings at higher prices sufficient to match the returns of REITs because private investors are not willing to buy at as low capitalization rates (with lower expected yield) as REIT investors are accepting in the multiples they put on REIT shares?

    And if that is a correct interpretation, wouldn't that make the argument that REIT income is highly sensitive to Treasury yields?
    Dec 21, 2010. 08:02 AM | Likes Like |Link to Comment
  • Long-Term Yield Contribution to Total Return Worldwide [View article]
    This article does not contend that investing in dividends makes the highest total return. It states that dividends are an important part of return of the over all market, and that dividends tend to dampen volatility, and that for certain investors (those drawing on their portfolios) the "risk of ruin" is reduced, as compared to a non-dividend portfolio. Nothing wrong with attempting to have a portfolio consisting non-dividend stocks if that meets your particular needs.
    Dec 21, 2010. 07:25 AM | 7 Likes Like |Link to Comment
  • Equity REIT Yields vs. 10-Year Treasury Yields [View article]
    That is correct, as I stated in the article:

    "... mean reversion will bring their prices down unless they can substantially increase cash flow and distributions."
    Dec 20, 2010. 08:18 AM | 1 Like Like |Link to Comment