"If capitalism is America’s biggest problem, why save it?" asks MarketWatch's Paul Farrell. "Wall Street, Corporate America, Big Oil and the entire economy been transformed into a bizarre circus Adam Smith would never recognize. Capitalism is now an out-of-control Frankenstein monster that changed everything." Not that Farrell provides any alternatives. [View news story]
The fact is, what we have today in the US is Jungle Ethics Fincialism, not Free Market Capitalism.
The Hard Truth Of Dividend-Growth Investing [View article]
Dave,
Kurt's approach here is very similar to what I did, he is using the more advanced and expensive version of StockScreen123, the data base is the same so there is no survivorship bias.
He talks more about the other criteria that he used to bring the results up above the S&P. That's important because well-informed investors will apply numerous criteria in addition to dividend history when making their decisions. For those who are new to the game, the rest of us want to make clear that dividend growth, or a high yield for that matter, is not useful in isolation.
I am comfortable with excluding companies that don't meet a five year or other time period for continuous increases, making it the sine qua non.
While these back tests are useful to illustrate the strengths and weaknesses of the approach, I don't advocate mechanical investing. Avoiding emotional reactions is good, but human beings can process information in ways that a software program can't, and we should take advantage of the fact.
So articles li ke the one you did the other day, where you illustrate the day to day process of adjusting a portfolio, show where we will differ from a mechanical approach and hopefully meet our objectives better in the long run.
EXC has come up in the discussions. An investor who read the earnings call transcripts could have been out ahead of the dividend reduction. A backrest won't pick that up.
To me, the backrest shows the potential, it's up to the individual investor to realize it in practice.
The Hard Truth Of Dividend-Growth Investing [View article]
Kurt, thanks for a balanced discussion of the DGI concept.
The key takeaway here, at least for me, is that Dividend Growth when used as the sole criterion for stock selection is not helpful. When combined with almost any method that looks for quality and valuation in addition to dividend growth, an investor has an above average chance of meeting realistic investment goals without subjecting himself to excessive drawdowns at market bottoms.
Jabil Circuit Is Still Vulnerable To Setbacks [View article]
Value Investor, I think you're letting the loss in 2009 (and the extremely low share price during the crisis) interfere with an objective view of this company.
Tim Main has been very clear in discussing the cash flow characteristics of the business: it generates cash when revenue decreases. The reason is, they buy inventory as it is needed when they book orders. If orders are not booked, cash tied up in inventory is liberated as the orders are filled and booked.
A review of the 2009 situation reveals that the losses were caused by asset impairments, and were non-cash in nature. Cash flow for the year was positive, confirming Main's assertions.
While the margin is demonstrably thin, leading to the low P/S observed, the risk associated with these factors is mitigated by the cash flow characteristics of the business model.
I would tend to look at JBL from the standpoint of its historical 5 year average P/S ratio, attempting to buy when it's below the midpoint and sell when it's above. Morningstar lists the current P/S at 0.2, and the 5 year average as 0.2.
Protecting Shareholder Interests In LBOs [View article]
Once management has the bit between their teeth and decides to screw shareholders, the odds are in their favor, to where the best tactic for the retail investor is to close his position and go on to the next thing.
Sometimes years later you get these mailings from class action suits, fill out the paperwork and they will send you some money, so far I just look at it and normally my losses if any are small enough I don't bother filling out the forms.
My experience is all with companies smaller by quite a bit than DELL. But if founding management or their heirs have a large interest, you always have the risk, they will regret their decision to go public and undo it, in ways that will harm your interests.
Ben Stein has written previously on the issue, I think it was 5 to 7 years ago, and I remember reading him then and figuring it out, the best thing is to move on. And to avoid firms that are subject to personal or family control by management based on owning a disproportionate quantity of shares.
Medical Marijuana: It's Just A Pump And Dump [View article]
This whole debate reminds me of an article I did on LDK, in the lessons learned genre, I bailed at $7.15 and wrote it up, what the problems were.
It was the same thing AE is experiencing here, numerous rabid defenders with no apparent interest (checking their comments) in any other situation.
I don't need to read the financials, or any other articles, just sampling the comment stream is enough: investing in MJNA is stupid. You have better odds playing the penny slots.
Is The S&P 500 Mean Reverting? A Rescaled Range Analysis Provides The Answer [View article]
This is good stuff, but a little to abstract to be helpful to me.
My question would be, on bargain prices where a value investor expects to profit by mean reversion, I use a rule of thumb, 2 years. If it doesn't happen within that time frame, I head out. Can Rescaled Range Analysis provide any insight to the 2 year time frame, on individual stocks?
In 2008-2009, I started looking for reversion to the mean too early, although I correctly concluded by mid March 2009 that we were past the bottom of the V and conducted myself accordingly.
Most investors assume that there will be peaks and troughs every quarter, implying a 90 day reversion to the mean interval. Again, does this method provide any insight to the 90 day time frame, for indexes?
The NY Fed is apparently trying to let BofA (BAC) off the hook for possible sizable legal claims related to former AIG (AIG) mortgage securities held by Maiden Lane II following the insurer's bailout in 2008. AIG has sued BofA to recover some of the $18B loss it suffered on the assets, but the bank argues that AIG gave its right to sue to the NY Fed when it sold the assets. The latter agrees and has released BofA from most of the connected legal liabilities even though it's not yet certain that the NY Fed has the right to do so. [View news story]
More new legal theories from BAC. Their theory is, that legal rights for fraud are attached to the subject matter, rather than the injured party.
Xerox: Review Of Growth, Buybacks And R&D [View article]
Optifan:
1) You will become a better investor (and a better person) when you drop racial prejudice as an investment criterion.
2) The Graham Investor website performs both Altman and Piotroski analyses: http://bit.ly/Za1qq5
3) The Z score is 1.04, the F score is 8
4) I have previously suggested that you give up your cloak of anonymity and write an articles to place your thinking in front of a critical audience here at Seeking Alpha.
5) Explaining the divergence of the Z and F score indicators would be a very good place for you to start. Incidentally, it would get you away from your very ugly and distateful racial prejudice.
We welcome Carl Icahn's Herbalife (HLF) investment, Bill Ackman tells CNBC, saying his conclusion about the company (pyramid scheme) is unaffected by who's on the other side of the trade. To everyone who thinks Ackman is just going to roll over and cover, one trader suggests Icahn selling this pop is more likely. "He proved his point." [View news story]
He was right about MBI the second time, after they had insured enough toxic RMBS and CDO's, full of fraudulent mortgages and adverse selected CDS.
If and when MBI recovers what they are owed under Representations and Warranty claims, the only remaining economic loss will be the result of the effects of S&P downgrades on the ALM business.
That and the dilution, which occurred when the company raised capital at the height of the financial crisis, under a storm of naked short-selling orchestrated by Ackman.
Ackman had two episodes with MBI. The first was with Gotham Partners and he blew himself up on that one. The second was his vengeance, with Pershing.
You can invest any way you want, but as for me I don't want to be near anything Ackman is involved with, either alongside him or against him. The little stinker is trouble, bad trouble.
It could be that this is about need for a sabbatical as much as anything, time for a little R&R.
Applying a large amount of leverage, and looking to make money from share price appreciation, you become a market timer by default.
Over the course of ten plus years investing, I've been seriously ahead a number of times. During 2001, after two or three months, I was up 15% and elected to stand pat, so as not to pay short-term capital gains. Bad decision.
Then in October 2008 my account was at a new personal high. I sat there one afternoon, with the sun shining through the window, and wondered if it wouldn't be a good idea to go to cash. I figured no, I wanted to get my account to where it was big enough to buy a larger and better located house with cash, so I hung in there. Bad decision.
jimmy, I have studied the stock market for many years, and I have a deep and comprehensive knowledge of how it works: first it goes up, then it goes down.
Well, from January 1st 2012 to today it has gone up, up, up. Applying 2.5:1 leverage to that situation, my account has gone UP, UP, UP. I'm ahead for this year, last year, and since inception, mainly by tromping harder and harder on the gas while the odds were in my favor. So I am going to quit while I'm ahead, and don't come back until the odds are in my favor yet once more.
I like complex strategies, I just like complexity. As far as aggressive strategies, I don't need outsize returns anymore so I won't go after them. I'm already working on something, it's complex enough to suit me, but it is intended to reduce risk rather than increase it.
Certain stocks become hard to borrow. In my Schwab account, if you tried to sell short a stock that was hard to borrow, you would not be able to put in the order and the software would direct you to a list of stocks that were hard to borrow.
Here's a link to a discussion of the issue, the author mentions fees of 20% to 30% for hard-to-borrow situations.
I've shorted stocks from time to time, and like you, never paid a fee. These high cost shorts are for the big boys, working with big quantities and famous cases.
So if I go into my Schwab account and try to sell HLF short, here is the message I receive:
This stock is either ineligible to be shorted or shares must be borrowed externally. Lenders of hard-to-borrow securities charge a fee in the form of interest. Clients who wish to short a minimum of $50,000 of a hard-to-borrow security and are willing to pay a fee to cover the cost of borrowing those shares, may contact Securities Lending at 800-355-2448 to determine the fee amount.
How To Remain Solvent Longer Than The Market Is Irrational [View article]
Dave,
You see it in almost all the steady high quality type companies. If the 20 year average P/E's are a vailid indicator, many of them are still in a buy area, at least based on averages, the blue line vs. the orange line.
So far my thinking is, to look back far enough to get both a peak and a trough, or at least to get a peak prior to the March 2009 bottom. If you look back only 5 years things are colored too much by the financial crisis and the climate of fear since then.
I'm curious if Chuck has an opinion or a preference.
How To Remain Solvent Longer Than The Market Is Irrational [View article]
Chuck,
Do you have an opinion on the proper time frame to use in FASTGraphs? The reason to ask is, take PG as an example, using 20 years the average PE is 19.9, using 10 years, it's 17.6, using 5 years, it's 15.7. Other premium quality stocks show the same pattern.
I've typically used 5 or 7 years looking back to compute the average, and resisted the urge to buy any of these high quality situations when they were above their long term average PE. But looking back 20 years some of them are still below the blue line.
"If capitalism is America’s biggest problem, why save it?" asks MarketWatch's Paul Farrell. "Wall Street, Corporate America, Big Oil and the entire economy been transformed into a bizarre circus Adam Smith would never recognize. Capitalism is now an out-of-control Frankenstein monster that changed everything." Not that Farrell provides any alternatives. [View news story]
The Hard Truth Of Dividend-Growth Investing [View article]
Kurt's approach here is very similar to what I did, he is using the more advanced and expensive version of StockScreen123, the data base is the same so there is no survivorship bias.
He talks more about the other criteria that he used to bring the results up above the S&P. That's important because well-informed investors will apply numerous criteria in addition to dividend history when making their decisions. For those who are new to the game, the rest of us want to make clear that dividend growth, or a high yield for that matter, is not useful in isolation.
I am comfortable with excluding companies that don't meet a five year or other time period for continuous increases, making it the sine qua non.
While these back tests are useful to illustrate the strengths and weaknesses of the approach, I don't advocate mechanical investing. Avoiding emotional reactions is good, but human beings can process information in ways that a software program can't, and we should take advantage of the fact.
So articles li ke the one you did the other day, where you illustrate the day to day process of adjusting a portfolio, show where we will differ from a mechanical approach and hopefully meet our objectives better in the long run.
EXC has come up in the discussions. An investor who read the earnings call transcripts could have been out ahead of the dividend reduction. A backrest won't pick that up.
To me, the backrest shows the potential, it's up to the individual investor to realize it in practice.
The Hard Truth Of Dividend-Growth Investing [View article]
The key takeaway here, at least for me, is that Dividend Growth when used as the sole criterion for stock selection is not helpful. When combined with almost any method that looks for quality and valuation in addition to dividend growth, an investor has an above average chance of meeting realistic investment goals without subjecting himself to excessive drawdowns at market bottoms.
Jabil Circuit Is Still Vulnerable To Setbacks [View article]
Tim Main has been very clear in discussing the cash flow characteristics of the business: it generates cash when revenue decreases. The reason is, they buy inventory as it is needed when they book orders. If orders are not booked, cash tied up in inventory is liberated as the orders are filled and booked.
A review of the 2009 situation reveals that the losses were caused by asset impairments, and were non-cash in nature. Cash flow for the year was positive, confirming Main's assertions.
While the margin is demonstrably thin, leading to the low P/S observed, the risk associated with these factors is mitigated by the cash flow characteristics of the business model.
I would tend to look at JBL from the standpoint of its historical 5 year average P/S ratio, attempting to buy when it's below the midpoint and sell when it's above. Morningstar lists the current P/S at 0.2, and the 5 year average as 0.2.
Protecting Shareholder Interests In LBOs [View article]
Sometimes years later you get these mailings from class action suits, fill out the paperwork and they will send you some money, so far I just look at it and normally my losses if any are small enough I don't bother filling out the forms.
My experience is all with companies smaller by quite a bit than DELL. But if founding management or their heirs have a large interest, you always have the risk, they will regret their decision to go public and undo it, in ways that will harm your interests.
Ben Stein has written previously on the issue, I think it was 5 to 7 years ago, and I remember reading him then and figuring it out, the best thing is to move on. And to avoid firms that are subject to personal or family control by management based on owning a disproportionate quantity of shares.
Medical Marijuana: It's Just A Pump And Dump [View article]
It was the same thing AE is experiencing here, numerous rabid defenders with no apparent interest (checking their comments) in any other situation.
I don't need to read the financials, or any other articles, just sampling the comment stream is enough: investing in MJNA is stupid. You have better odds playing the penny slots.
Is The S&P 500 Mean Reverting? A Rescaled Range Analysis Provides The Answer [View article]
My question would be, on bargain prices where a value investor expects to profit by mean reversion, I use a rule of thumb, 2 years. If it doesn't happen within that time frame, I head out. Can Rescaled Range Analysis provide any insight to the 2 year time frame, on individual stocks?
In 2008-2009, I started looking for reversion to the mean too early, although I correctly concluded by mid March 2009 that we were past the bottom of the V and conducted myself accordingly.
Most investors assume that there will be peaks and troughs every quarter, implying a 90 day reversion to the mean interval. Again, does this method provide any insight to the 90 day time frame, for indexes?
The NY Fed is apparently trying to let BofA (BAC) off the hook for possible sizable legal claims related to former AIG (AIG) mortgage securities held by Maiden Lane II following the insurer's bailout in 2008. AIG has sued BofA to recover some of the $18B loss it suffered on the assets, but the bank argues that AIG gave its right to sue to the NY Fed when it sold the assets. The latter agrees and has released BofA from most of the connected legal liabilities even though it's not yet certain that the NY Fed has the right to do so. [View news story]
I don't think so.
Xerox: Review Of Growth, Buybacks And R&D [View article]
1) You will become a better investor (and a better person) when you drop racial prejudice as an investment criterion.
2) The Graham Investor website performs both Altman and Piotroski analyses: http://bit.ly/Za1qq5
3) The Z score is 1.04, the F score is 8
4) I have previously suggested that you give up your cloak of anonymity and write an articles to place your thinking in front of a critical audience here at Seeking Alpha.
5) Explaining the divergence of the Z and F score indicators would be a very good place for you to start. Incidentally, it would get you away from your very ugly and distateful racial prejudice.
We welcome Carl Icahn's Herbalife (HLF) investment, Bill Ackman tells CNBC, saying his conclusion about the company (pyramid scheme) is unaffected by who's on the other side of the trade. To everyone who thinks Ackman is just going to roll over and cover, one trader suggests Icahn selling this pop is more likely. "He proved his point." [View news story]
If and when MBI recovers what they are owed under Representations and Warranty claims, the only remaining economic loss will be the result of the effects of S&P downgrades on the ALM business.
That and the dilution, which occurred when the company raised capital at the height of the financial crisis, under a storm of naked short-selling orchestrated by Ackman.
Ackman had two episodes with MBI. The first was with Gotham Partners and he blew himself up on that one. The second was his vengeance, with Pershing.
You can invest any way you want, but as for me I don't want to be near anything Ackman is involved with, either alongside him or against him. The little stinker is trouble, bad trouble.
Wrapping It Up For 2013 [View article]
I think most of you appreciate a resolutely factual and analytical approach to investing, patience and a long term view.
When I'm doing it the way I should, that's what you get. I'll be back.
Wrapping It Up For 2013 [View article]
It could be that this is about need for a sabbatical as much as anything, time for a little R&R.
Applying a large amount of leverage, and looking to make money from share price appreciation, you become a market timer by default.
Over the course of ten plus years investing, I've been seriously ahead a number of times. During 2001, after two or three months, I was up 15% and elected to stand pat, so as not to pay short-term capital gains. Bad decision.
Then in October 2008 my account was at a new personal high. I sat there one afternoon, with the sun shining through the window, and wondered if it wouldn't be a good idea to go to cash. I figured no, I wanted to get my account to where it was big enough to buy a larger and better located house with cash, so I hung in there. Bad decision.
jimmy, I have studied the stock market for many years, and I have a deep and comprehensive knowledge of how it works: first it goes up, then it goes down.
Well, from January 1st 2012 to today it has gone up, up, up. Applying 2.5:1 leverage to that situation, my account has gone UP, UP, UP. I'm ahead for this year, last year, and since inception, mainly by tromping harder and harder on the gas while the odds were in my favor. So I am going to quit while I'm ahead, and don't come back until the odds are in my favor yet once more.
I like complex strategies, I just like complexity. As far as aggressive strategies, I don't need outsize returns anymore so I won't go after them. I'm already working on something, it's complex enough to suit me, but it is intended to reduce risk rather than increase it.
Wrapping It Up For 2013 [View article]
Certain stocks become hard to borrow. In my Schwab account, if you tried to sell short a stock that was hard to borrow, you would not be able to put in the order and the software would direct you to a list of stocks that were hard to borrow.
Here's a link to a discussion of the issue, the author mentions fees of 20% to 30% for hard-to-borrow situations.
http://bit.ly/Yg5vWP
I've shorted stocks from time to time, and like you, never paid a fee. These high cost shorts are for the big boys, working with big quantities and famous cases.
So if I go into my Schwab account and try to sell HLF short, here is the message I receive:
This stock is either ineligible to be shorted or shares must be borrowed externally. Lenders of hard-to-borrow securities charge a fee in the form of interest. Clients who wish to short a minimum of $50,000 of a hard-to-borrow security and are willing to pay a fee to cover the cost of borrowing those shares, may contact Securities Lending at 800-355-2448 to determine the fee amount.
How To Remain Solvent Longer Than The Market Is Irrational [View article]
You see it in almost all the steady high quality type companies. If the 20 year average P/E's are a vailid indicator, many of them are still in a buy area, at least based on averages, the blue line vs. the orange line.
So far my thinking is, to look back far enough to get both a peak and a trough, or at least to get a peak prior to the March 2009 bottom. If you look back only 5 years things are colored too much by the financial crisis and the climate of fear since then.
I'm curious if Chuck has an opinion or a preference.
How To Remain Solvent Longer Than The Market Is Irrational [View article]
Do you have an opinion on the proper time frame to use in FASTGraphs? The reason to ask is, take PG as an example, using 20 years the average PE is 19.9, using 10 years, it's 17.6, using 5 years, it's 15.7. Other premium quality stocks show the same pattern.
I've typically used 5 or 7 years looking back to compute the average, and resisted the urge to buy any of these high quality situations when they were above their long term average PE. But looking back 20 years some of them are still below the blue line.