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Tony Abbate, CFA  

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  • 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, 2012. 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, 2012. 11:48 AM | 1 Like Like |Link to Comment
  • Comtech Telecommunications: Buy At Book, Get One-Third Cash Rebate And 4% Yield [View article]
    IMO, your book value analysis is flawed. 59% of book value is goodwill and intangible assets. You want to look at tangible book value, which is $10.91 per share. In the early to mid 1990s the stock traded below tangible book. Hence, I think there is a lot of risk in this stock - especially with a business where the U.S. government is a major customer. At its current price, this is not an attractive investment.
    Dec 19, 2012. 04:18 PM | 1 Like Like |Link to Comment
  • Apple Is Priced For No Growth [View article]
    I read recently that there are around 185 countries in the world. If Apple was a country, its profits would rank 86th in this ranking of countries by GDP. Think about how ridiculous this fact is.

    On a valuation standpoint, Apple's stock is very attractive. I have thought about buying it given its dirt cheap valuation. However, history is littered with consumer electronic companies that became fallen icons - think Kodak and Sony. Apple has become a 'cult stock'. Everyone is talking about it. That alone makes me hesitant to buy it. Many people don't realized Apple's operating margins have almost double from four years ago. If Apple's margins revert back to 2008 levels, the stock may be overpriced at its current level.

    I am not bearish or bullish on Apple. However, there are too many unknown factors about Apple and its competitors to feel comfortable owning it.
    Dec 15, 2012. 11:07 AM | Likes Like |Link to Comment
  • Quality Systems Has A 20% Margin Of Safety [View article]
    This is one of my favorite stocks out there. It's a good business and the stock is very cheap.
    Oct 30, 2012. 12:38 PM | 1 Like Like |Link to Comment
  • Arkansas Best Corporation: Mid-Quarter Update Confirms Long-Term Buying Opportunity [View article]
    The stock is very cheap. However, I don't view it as a long-term hold. Their business is very competitive. The low cost provider (which ABFS is not) will win out over the long-run. It may be a short-term trade since it is trading below tangible book value.

    One last point, when a stock is this cheap, I like to see insiders buying it. So far there have been none.
    Sep 13, 2012. 09:56 AM | Likes Like |Link to Comment
  • Dividends Provide A Return Bonus [View article]
    Thanks, Chuck. I wasn't looking to rekindle any debate. (ROE and ROIC do not look at free cash flow but net income and operating income.) Just wondering if you have thought about enhancing the Fast Graphs product. I think that would be a nice addition to the service.

    Regards,

    Tony
    Aug 26, 2012. 06:37 PM | Likes Like |Link to Comment
  • Dividends Provide A Return Bonus [View article]
    Nice article. I find the overlay of EPS vs. stock price helpful. However, I think a better measure of business performance is ROE/ROIC. Have you thought about adding that for each year in your Fast Graph charts?

    As Warren Buffett has said, ROE/ROIC is the best measure of the performance of a company's business. Looking for stocks that have consistent earnings growth, a high ROE/ROIC (15% or higher) and a stock price below intrinsic value would be an invaluable process for unearthing potential investment candidates.
    Aug 26, 2012. 08:50 AM | Likes Like |Link to Comment
  • Staples Inc. - An Easy Choice At A Great Valuation [View article]
    Staples could close all of its stores and still be a very viable business. In 2011 42% of their sales were online. This totaled $10.3 bil. In 2004 they only did $2.9 billion in online sales. They are the 2nd largest online retailer after Amazon. The stock is priced like it's going out of business.
    Aug 10, 2012. 09:26 AM | 1 Like Like |Link to Comment
  • Staples Inc. - An Easy Choice At A Great Valuation [View article]
    Great idea. This should've been an 'Editor's Pick'. I believe this is one of the most attractive stocks in the market today. The dividend is fat (and growing at 12% over the past 5 years) and they are aggressively buying back stock. (YOY diluted shares outstanding are down 5.2% and net debt has dropped $360 mil.) They dominate the office supplies industry, have a solid balance sheet (22% net debt/ total capital) and attractive interest coverage of 9.4.

    At an Enterprise Value-to-Free Cash Flow Multiple of 6.4, this is about as attractive an investment opportunity I can find right now. The market is pricing this company with the fundamentals of Best Buy. Being the second largest online retailer, I don't see Staples going away anytime soon.

    If you apply a 10x EV/FCF multiple, I get a $20.80 stock price. At 12x the stock price would be $25.20. There is a lot of upside in this stock with very little downside risk.
    Aug 6, 2012. 10:22 AM | 2 Likes Like |Link to Comment
  • Dividend Aristocrats Are Undervalued [View article]
    Nice article. I would consider buying all of the undervalued stocks listed except for Aflac. (I own MDT, JNJ, WAG and BDX.)

    My concern with Aflac, and other companies with life insurance companies, is I believe they have essentially have mispriced their policies. My guess is when they calculated the premiums for their policies that were underwritten a few years ago, they assumed a much higher portfolio return (interest rates) than what is available today. Hence, I think this results in some business risk and they may have funding issues to pay off exercised policies.

    Any thoughts?
    Jul 24, 2012. 11:24 AM | Likes Like |Link to Comment
  • Are Dividend Growth Stocks In A Bubble? [View article]
    Only tech stocks and mega cap stocks were expensive in 2000. Many small cap stocks were trading at 10 to 12 times earnings.

    Fast forward to today and the market is upside down from 2000. The mega caps and tech stocks are cheap than the average small cap stock.
    Jul 21, 2012. 08:54 AM | Likes Like |Link to Comment
  • Are Dividend Growth Stocks In A Bubble? [View article]
    You are right. Utilities are expensive. I don't own any. There are much better plays in the market that offer dividends and are more undervalued.
    Jul 20, 2012. 08:04 PM | 4 Likes Like |Link to Comment
  • Are Dividend Growth Stocks In A Bubble? [View article]
    Dividend stocks are not in a bubble - far from it. I think they are among the most attractively valued stocks. The proper way to value companies is based on the present value of future free cash flow or as a ratio of enterprise value to free cash flows. Dividends are paid from free cash flows. The ratio of dividends to free cash flows are still well below historical norms. Many of these stocks could easily increase their dividends by 25 to 30 percent. Dividend paying stocks are one of my favorite hunting grounds for new ideas.
    Jul 20, 2012. 07:56 PM | 5 Likes Like |Link to Comment
  • Mega Cap Stocks May Be Poised To Outperform [View article]
    Great article. I especially like the graphs which illustrate the point nicely.
    I have thought mega caps have been undervalued for awhile. Many of the mega caps like KO and WMT have seen their stock prices unchanged over the past 10 to 15 years while their earnings have doubled or tripled. While there will always be selective small or mid cap stocks that are cheap, I think it's almost certain the mega caps will outperform over the next 10 years.
    Jul 12, 2012. 10:26 AM | 1 Like Like |Link to Comment
COMMENTS STATS
216 Comments
316 Likes