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Tony Abbate, CFA

 
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  • Rocky Mountain Is A Chocolate Covered Growth Stock [View article]
    Growth stock? Hardly. In March 2008 they had 372 stores. 329 were franchised. In March 2012 they had 355 stores. 296 were franchised.
    Jan 27 08:58 AM | Likes Like |Link to Comment
  • My Top Picks For The Coming Decade Of Stocks, Part III [View article]
    I learned a long time ago, you can't look backwards and dissect individual stock picks. Fundamentally unsound companies will generate fabulous returns. It happens all the time. Think of tech stocks in the 1990s. How about Enron, which obviously did phenominally well for many years. However, in the end it was all a mirage. Sooner or later the market will recognize the unfunded penion liability. I just have no idea as to when.

    I am in no way intending that Whirlpool will end up like Enron. However, if you dig deep into companies and own a portfolio of sound business, that are conservatively financed and attractively valued you should de very well. You need to focus on what, as an investor, you can control. Not to brag or go on an ego trip, but to make a point, from December 2000 to December 2012, I have a cumulative return of 185.4% vs. 38.6% for the S&P 500 Index. I have missed out on plenty of huge return stocks. Apple comes to mind. However, IMHO, if you focus on risk, the returns over periods of 10 years or more will take care of themselves.
    Jan 25 01:06 PM | Likes Like |Link to Comment
  • Attractively Valued Blue-Chip Dividend Champions For Your Retirement Portfolios [View article]
    Good article. However, Kimberly Clark's growth is a mirage and shows sometimes how the P/E ratio can be a flawed valuation metric. If you 'look under the hood', KMB's management is using the 'oldest trick in the book' to boost EPS. Normalized free cash flow has grown at 0.1% per year over the past five years. EPS has grown mostly because they have swapped debt for stock buybacks.

    If you adjust for the debt to equity swap, the underlying growth of KMB's business has only been 1.5% per year. IMHO, with an Enterprise Value/FCF ratio of 17 and almost no growth, the stock is a sell.
    Jan 24 08:09 AM | 6 Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    I have no idea. It is not within my 'cicle of competence'.

    The key to successful investing is to know what you don't know and stay away from it.
    Jan 14 08:39 AM | Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    I am hardly trying to 'get responses'. And I am hardly a hater of Apple. Believe it or not, at some price I believe the stock is a buy.

    My point is the number of responses is indicative of how obsessed investors are with Apple. I believe much of investing is psychology related - which can't be captured by standard financial analysis. Crowd behavior will push stocks or industries to the highest price levels. We saw this with tech stocks in the late 1990s. We saw this with housing in the mid-2000s. We saw this with energy stocks in 2007-2008. It is very rare you see this with a single stock. When you do, as in the case of Apple, I think it is time to sell.

    I am in no ways suggesting you short the stock. The company is cheap, profitable and has a boatload of cash. These are not characteristics of a good short idea. My point is that Apple will underperform the S&P 500 Index over the next 5 to 10 years - not crash and burn.

    The article was intentially written from a non-analytical perspective. I didn't want to focus on profit margins, P/E ratio, market share, etc. I wanted to focus on Apple in the context of history and its immense size.
    Jan 14 07:50 AM | Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    I do not understand why they don't pay a higher dividend. I think Apple's capital allocation skills are poor. My cynical side tells me they don't pay a higher dividend because of the number of employees that own options. (It is to the detriment of the option owner if the company pays a dividend.)
    Jan 13 06:36 PM | Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    I am amazed at the number of responses on this article. In only about 2 1/2 hours, there have been 56 comments on my article. I write articles relatively infrequently - 21 in about three years. Three of these articles were deemed an 'Editor Pick' by SA. These three articles received a total of 48 comments. My point about how obsessed investors are about Apple has been reinforced by the number of comments. Wow!
    Jan 13 05:54 PM | 1 Like Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    The theorem assoicated with the 'Law of Large Numbers' states that a variable will revert to a mean over a large sample of results. In the case of the largest companies, I am suggesting that the rapid rise in its sales and earnings growth will slow as Apple gets larger. In other words, their sales growth will revert to the mean sales growth for the average company.
    Jan 13 05:44 PM | Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    Data that I have seen shows that apple is by far the most owned stock in the hedge fund world.
    Jan 13 05:35 PM | Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    I am a fundamental, value based investor. Apple looks very good on fundamentals and valuation. However, I thought I would cite some 'unconventional' factors about Apple that bothers me.

    I believe successful investing requires a knowledge of history, psychology and financial analysis. In the context of history and psychology, I think in 10 years we may look back at Apple and say, "What were people thinking?"
    Jan 13 05:26 PM | 1 Like Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    I like this thinking and couldn't agree with you more. I bought some PM at the end of December.
    Jan 13 05:07 PM | Likes Like |Link to Comment
  • Is Apple Really A 'Buy'? [View article]
    Exactly what I meant. I don't think Apple is a short. However, I think the stock is likely to underperform the market over the next 5 to 10 years.
    Jan 13 05:04 PM | Likes Like |Link to Comment
  • My Top 20 Picks To Start 2013 [View article]
    When comparing the returns of your stock picks to the S&P 500 Index, you should include dividends. You say:

    "I recently shared a review of 2012's choices, which averaged 14.5%, just above the S&P 500."

    This is misleading as the total return for the S&P 500 Index in 2012 was 16.00%.
    Jan 2 10:51 AM | Likes Like |Link to Comment
  • This Benjamin Graham Rule Encourages More Disciplined Investing [View article]
    Good article.... It begs the question, at what valuation does a stock you own become a speculation?

    Buffett owned Coke through the bubble years of the late 90s and early 2000s and in hindsight has admitted he should have sold the stock. My thought is at 30 times earnings a stock should be sold regardless of how 'great' the company is.
    Dec 30 02:50 PM | 3 Likes Like |Link to Comment
  • Comtech Telecommunications: Buy At Book, Get One-Third Cash Rebate And 4% Yield [View article]
    My last sentence is an opinion. For a company that has seen its sales decline by 51 percent in the last two years, I think tangible book value is a good measure of downside risk. This is especially true if the company has traded at this level before.

    There are two ways to value companies - on tangible book value basis and on a free cash flow basis. High quality companies that consistently earn a rate of return above their cost of capital should trade at a high multiple of book value. Hence, book value means nothing for valuing these high quality companies.

    I track about 800 companies on a regular basis. Over 150 of these companies are valued where I believe tangible book value is a meaningful measure of downside risk. These tend to be cyclical, financial or commodity based companies. I have had very good success through the years buying these companies near tangible book and selling them when they approach 1.5 to 2 times tangible book. Given CMTL's business risk, I wouldn't consider it until it traded near tangible book.

    I believe success investing is about minimizing mistakes. IMHO, I think CMTL has a lot of downside risk due to its business and the fact that it trades well above tangible book.
    Dec 20 11:48 AM | 1 Like Like |Link to Comment
COMMENTS STATS
214 Comments
315 Likes