Treasury follows inversely (through proxy of inflation but stock interest rate is anyways epiphenomena on consumption or full employment depending on what you believe)
Ingersoll-Rand And The Conglomerate Discount [View article]
Outsize gains for big construction providers upon release of strong quarter of housing starts probably vindicate comment #2. However, the business might not be "more service-related" than designing great hand drills for Boeing and Caterpillar.
What Would Mr. Benjamin Graham Think Of 3M Company? [View article]
Last paragraph has been amended from: A share pays 4% in expected dividends and buybacks which ought to grow at 8% annually (which is high among large industrials). If trusted, the valuation from Benjamin Graham's valuation formula, which emphasizes projected growth rate, ought to provide a median inflation-protected windfall of 50% when asset prices come to resemble Graham's expectation of historical premiums over bond yields. I believe that his very long-term analysis can be trusted on this particular count. At under 15 P/E ($93 per share), 3M Company is a long-term buy for a "defensive" portfolio consisting of more bonds than stocks.
What Would Mr. Benjamin Graham Think Of 3M Company? [View article]
Regarding Mr. Graham's suggested stock-yield/bond-yield ratio, corporate bond yields were not set by the Treasury then and have only gone down with the discount rate since the 1970's, reflecting risk that the government won't be able to tax (or more cynically that people might lose money on the stock market) rather than credit risk, so I'll not reuse that ratio.
What Would Mr. Benjamin Graham Think Of 3M Company? [View article]
A counter-view is that one is essentially buying an equity-like bond that pays 4% (2.5%-3.0% yield + 1.0-1.5% share buybacks after new issuances). Hence, 3M Company is the *riskiest* of investments on the basis of the market recognizing the conglomerate discount and eliminating it. One would have to examine the conglomerate discount in past years and/or the conglomerate discount for all industrials.
Money-market funds a mystery. How can you make more on T-bill than on loans? Maybe they just make a lot on the loans and the money market thing is a scheme as if you can put a bond fund in a bank. Maybe the money market fund is collateral for the leveraged lending. The lending must be more leveraged well the truth is the reserve ratio is the same or whatever it is, more backup money means more high interest-rate money.
Ingersoll-Rand And The Conglomerate Discount [View article]
The antonym of "conglomerate discount" is "control premium" (the amount that sum-of-parts book values exceed stated consolidated book value). It could be argued that Hussman was marked down when being sold, exposing no control premium, and Trane was marked down when being bought, exposing a control premium. But I think that the poor economic environment of 2008 is why Trane was marked down, which is what management said. No discount on the sum of fair values for each part, is recorded on the 2012 10-K.
Why 3M Is One Of The Bluest Of The Blue Chips [View article]
My Dad does what you do. he waits for a price level. It drives me insane. Waiting for a price level is what you do in the casino. Six months of dividends will pay for one year of waiting for price level.
Ingersoll-Rand And The Conglomerate Discount [View article]
Correction: Strictly speaking, a current $11.8 billion valuation gives IR an enterprise value of $23.5 billion, implying an "asset multiplier" of 1.25. For a $15.3 billion to $16.5 billion asset valuation, the enterprise value is $19.125 billion to $20.625 billion, implying a market capitalization of $12.025 billion to $13.525 billion, implying a 2% to 15% conglomerate discount. This strengthens the advice not to buy.
Ingersoll-Rand And The Conglomerate Discount [View article]
A limitation on construction pessimism is that slack is much greater in small houses than in big ones, while secure big-home owners are consolidating net worth in their homes rather than taking out new mortgages. Therefore, the outset of the housing recovery should bring gains for house construction (Ingersoll Rand Residential Solutions) in excess of appearances.
Positive Trends Continue at Multi-Color [View article]
A few limitations on the above are the cyclicality of the wine industry, including the fact that they got $41 for shares at the South American labelmakers. However, the wine industry would have to increase volume rather than sell expensive wines. I'm not sure people stop drinking wine in a downturn. Also, maybe big customers can't be poached so easily and international presence matters to them this much, but I can't verify that anywhere (e.g., who the heck prints all the other labels - its sourced locally I'd presume).
Positive Trends Continue at Multi-Color [View article]
I went through this company's 2012 Annual Report after reading your articles. LABL has acquired several overseas wine label firms that do not appear to help it poach the huge corporate customers, as if its afraid of success. Then it can tout having reduced its largest-customer (P&G) % by such-and-such. On the cost side, since this is a variable cost business, synergies are essential. But none are prospective. Shareholders (who get diluted by last year's almost 20% stock issuance) are on the hook for lots of debt (150% d/e, from prior year 2011 65% d/e). Management's rationalization is that a big company can issue debt more favorably, so their debt tripled but interest only doubled. Ironically, now they will go bust if P&G leaves. FCF is a better yardstick than earnings because there's an amortization charge against customer relationships as if those expire, and there's deferred taxes that were expensed (is that the right word?). The bottom line is that FCF did improve by 50% 2010-2012 but that's from acquisitions; organic growth was 4% both years. If one pays today's price for the company, FCF yield is 9.6%. It would be a better investment to refill your neighbor's ink cartridges.
Stanley Black & Decker (SWK) Deworseifies [View instapost]
The Importance Of Liquidity [View instapost]
The Importance Of Liquidity [View instapost]
Ingersoll-Rand And The Conglomerate Discount [View article]
What Would Mr. Benjamin Graham Think Of 3M Company? [View article]
A share pays 4% in expected dividends and buybacks which ought to grow at 8% annually (which is high among large industrials). If trusted, the valuation from Benjamin Graham's valuation formula, which emphasizes projected growth rate, ought to provide a median inflation-protected windfall of 50% when asset prices come to resemble Graham's expectation of historical premiums over bond yields. I believe that his very long-term analysis can be trusted on this particular count. At under 15 P/E ($93 per share), 3M Company is a long-term buy for a "defensive" portfolio consisting of more bonds than stocks.
The Importance Of Liquidity [View instapost]
What Would Mr. Benjamin Graham Think Of 3M Company? [View article]
What Would Mr. Benjamin Graham Think Of 3M Company? [View article]
The Importance Of Liquidity [View instapost]
Ingersoll-Rand And The Conglomerate Discount [View article]
Why 3M Is One Of The Bluest Of The Blue Chips [View article]
Ingersoll-Rand And The Conglomerate Discount [View article]
Ingersoll-Rand And The Conglomerate Discount [View article]
Positive Trends Continue at Multi-Color [View article]
Positive Trends Continue at Multi-Color [View article]