ArtfulDodger

Thursday Outlook: Commodities, Global Markets

I love charts and hate well-reasoned, clear sentences!

'China Up / U.S. Down' Theme Checkup

Excellent article, RS. Good points all the way around—from carrying out continued research and not listening to the parrots of the trade industry to actually doing it.

Why China Will Continue Rising and the US Will Continue Demising
seekingalpha.com/user/...

Recent Weakness in Equities, Commodities Is a Buying Opportunity

Good article. Good points, TM, especially about the wrath you'll receive around here for a positive article.

There must be 10,000 articles written in the last 10 months on this site alone stating with absolute certainty that the DOW, S&P, and China are all in---what else?---bubble territory!

And after the current corrective wave you can expect another 10,000---keying on what word, one obviously learned well in the last few years: bubble!

Well surely, one of these days they're going to be right.

After years of predicting doom, Panzer, Roubini, Grantham, Faber, Prechter, and even old Granville stuck his head up a couple of times to yell fire, in 2008 they were finally proven, well, "right." What else?

And when the DOW was around 6500 they called for 2500, 3000, or 3500; and now that it's up 3000 points every tiny pull back is another bursting bubble, another crash on its way.

Hell, if they were to be right, who could trust their predictions but the ever-ultra, perma-cynic?

I advise young folks who are new to investing not to listen to predictions of doom or bloom, but to find worthwhile companies, with strong balance sheets, essential products, proven management, with strong future earnings potential, that will have a better than average chance of surviving the doom and taking advantage of the bloom.

That is how you get ahead investing in stocks---not concerning yourself with predictions of either doom or gloom.

America, The Nanny State

Just gimme my healthcare and my drugs! I don't give a damn who pays for it! Gen X & Gen Y.

12 Cheap Growth Companies

Damned good comment, TE.

No doubt, it's a loss of freedom and can potentially break the nation, but I think that's what the Marxist in charge of the nation want.

This is a non-violent (so far at least) revolution being carried out right before our eyes.

If this brood manages to take over both the healthcare and the power industry, they'll control the most powerful industry sectors in the world. And they'll have us by the hanging ones.


On Oct 26 02:10 PM TeresaE wrote:

> Telling people to buy insurers, who currently operate on an average
> 4-5% profit and soon will be hit with across the board "windfall"
> taxes AND forced by gunpoint customers (of which half, or more, will
> be instant users - not pay but don't use), doesn't seem to be prudent
> until we can read and analyze how the destruction in WDC will play
> out.
>
> Then you tell people that pharmaceuticals are not going to go anywhere,
> yet the industry is being gifted a green light from Obama, mandatory
> & government paid vaccine revenue AND 25 million new customers.
> Care to explain the "blip" of their substantial profit & sales
> increases after Congress "helped" seniors a couple years ago? <br/>
>
> Pharms stand to be the ONLY winners (other than the paid-for-life
> employees in FIFTY-THREE new government departments) in the health
> care fiasco.
>
> Especially when you realize that 50% of the adult population is on
> a daily medication.
>
> 12.5 million, new customers paying with taxpayers and insurance companies
> money - not their own earnings - and you don't think that is going
> to impact pharm's future revenues in any material way?
>
> This is why "reform" is going to destroy us. No one realizes reality
> and the costs that will rain down upon us.

12 Cheap Growth Companies

PP:
That is what I call carrying out the proper research (DD) to find excellent stocks to buy.

Good work. Your clients should get their money's worth. Thank you.


On Oct 25 01:02 PM Peter Mycroft Psaras wrote:

> Nice Job, but I would not classify the list as growth plays but rather
> value plays. I say this because, though they have very attractive
> Price to Free Cash Flow (seekingalpha.com/symbo...) numbers,
> their Free Cash Flow Return on Invested Capital (seekingalpha.com/symbo...)
> is about average. I would only classify LMT as a growth play as it
> has a FROIC of 34.54%.
>
> When investing I look for PFCF below 15 times and FROIC above 20%+.
> When you are lucky enough to find a combination of the two you find
> a perfect balance of growth + value and you get capital appreciation
> through capital preservation.
>
> For those who don't know;
>
> PFCF =Market Price/ (Cash flow per share-Capital Spending per share)
>
>
> FROIC = FCF per share/ (long term debt per share + shareholders equity
> per share)
>
> FROIC basically tells you how much return in free cash flow a company
> generate for every dollar of Total Capital they employ.
>
> I consider FROIC the primary determining factor in identifying growth
> companies as you can compare every company (except financial's) on
> an equal basis. The question I ask every company I analyze is = how
> much return (in percent) in FCF are you going to give me for every
> dollar of total capital you invest.
>
> As you will see I have analyzed your list from a FROIC point of view
> below;
>
> HUMANA INC (seekingalpha.com/symbo...)
>
> FCF PS = $5.75
> TCAP PS = $47.35
> FROIC = 12.14%
> PRICE TO FCF = 6.53
>
> CAL DIVE INTL (seekingalpha.com/symbo...)
>
> FCF PS = $0.90
> TCAP PS = $9.56
> FROIC = 9.40%
> PRICE TO FCF = 11.18
>
> UNITEDHEALTH (seekingalpha.com/symbo...)
>
> FCF PS = $3.75
> TCAP PS = $33.54
> FROIC = 11.18%
> PRICE TO FCF = 6.89
>
> WELLPOINT INC. (seekingalpha.com/symbo...)
>
> FCF PS = $6.70
> TCAP PS = $72.98
> FROIC = 10.89
> PRICE TO FCF = 6.87
>
> LOCKHEED MARTIN (seekingalpha.com/symbo...)
>
> FCF PS = $8.00
> TCAP PS = $23.16
> FROIC = 34.54%
> PRICE TO FCF = 9.02
>
> AETNA INC. NEW (seekingalpha.com/symbo...)
>
> FCF PS = $3.35
> TCAP PS = $30.69
> FROIC = 10.91%
> PRICE TO FCF = 7.78
>
> L-3 COMM HLDGS (seekingalpha.com/symbo...)
>
> FCF PS = $8.40
> TCAP PS = $90.00
> FROIC = 9.33%
> PRICE TO FCF = 8.86
>
> RAYTHEON CO (seekingalpha.com/symbo...)
>
> FCF PS = $5.45
> TCAP PS = $33.33
> FROIC = 16.35%
> PRICE TO FCF = 8.52
>
> ASSURANT INC (seekingalpha.com/symbo...)
>
> FCF PS = NA
> TCAP PS = NA
> FROIC = NA
> PRICE TO FCF = NA
>
> STANCORP FINCL (seekingalpha.com/symbo...)
>
> FCF PS = NA
> TCAP PS = NA
> FROIC = NA
> PRICE TO FCF = NA
>
> Endo Pharmaceuticals (seekingalpha.com/symbo...)
>
> FCF PS = $2.25
> TCAP PS = $17.06
> FROIC = 13.18%
> PRICE TO FCF = 10.34
>
> OMNICARE INC (seekingalpha.com/symbo...)
>
> FCF PS = $3.50
> TCAP PS = $50.42
> FROIC = 6.94%
> PRICE TO FCF = 6.50
>
> FROIC gives me a real return on Main Street and if I can get a 20%+
> return on Main Street and at the same time buy a stock that is selling
> for less than 15 times its FCF then there is a very high probability
> that it should be very successful investment.
>
> By choosing 20%+ as my minimum FROIC I have built a portfolio of
> 29 holdings for my clients that has a combined portfolio FROIC of
> 32% and sells as a group for 12.35 PFCF.
>
> As for PFCF I came up with the 15 or less number as being Ideal after
> performing a 58 backtest. To view the backtest just click the link
> below.
>
> mycroftresearch.com/up...
>
>
> Disclosure Long LMT No Position in the others
>
> The Fine Print: As Registered Investment Advisors, we see it as our
> responsibility to advise the following: We do not know your personal
> financial situation, so the information contained in this communiqué
> represents the opinions of Peter "Mycroft" Psaras, and should not
> be construed as personalized investment advice.
> It should not be assumed that investing in any securities we are
> investing in will always be profitable. We take our research seriously,
> we do our best to get it right, and we “eat our own cooking,” but
> we could be wrong, hence our full disclosure as to whether we own
> or are buying the investments we write about.

Is Now the Time to Sell Your Dividend Stocks?

Very good article. Good comments all the way down. One other point:

I fully understand long-term investing, but with rates at 1/4%, I think it would be prudent to consider making some moves when the Fed starts its upward move.

Perhaps not selling core holdings, but at least consider some stocks that tend not to do as well in a higher rate atmosphere.

U.S. Empire In Decline, Makes Way for China

You are dead right, Dave. It looks to me China is doing everything right, and we're doing everything wrong.

Good comment. My same conclusion I wrote here: seekingalpha.com/user/...


On Oct 25 07:21 AM Dave Wrixon wrote:

> Niall grossly underestimates how quickly things are developing. It
> won't take more than a decade. Look how the Hilter changed the face
> of Europe in less than a decade starting from zero. Look how quickly
> the British Empire caved in. How quickly communism rose and how quickly
> it imploded? How long did it take for the Japanese Miracle to collapse.
> These things don't take generations.

U.S. Empire In Decline, Makes Way for China

Very, very well said, Alpha.

My conclusion exactly, as I wrote here: seekingalpha.com/user/...


On Oct 25 10:16 AM Alphameister wrote:

> When I hear comments today to the effect that it is a mistake to
> underestimate American ingenuity in getting past this country's huge
> problems, my reaction is, "Don't mistake the America of today with
> the America of earlier generations. I appreciate the patriotism of
> such comments, but not the analytical perspicacity. The "flower children"
> have taken control in the nation's capital, the nation as a whole
> has become all about instant gratification, and the work ethic (and
> arguably ethics in general) has suffered a serious decline across
> several generations.
>
> I wish my country well and hope it will get back on the right track,
> but all my analytical investment skills tell me that China especially
> and emerging markets generally provide much better odds of investment
> success.

Financial Czar Actions and Reform Regressions

"U.S. Consumer Financial Protection Agency"

I'll surely sleep better tonight knowing there's another federal regulatory agency watching over the nation's finances.

Nouriel Roubini, One on One: More Doom and Gloom

JS:

Your best comment ever. No more need be said, in my view. Thank you very much!


On Oct 23 10:38 AM Joseph L. Shaefer wrote:

> The Economists' Rule to avoid ever 'fessing up to being wrong is:
> "Tell 'em what or tell 'em when, but never tell 'em both."
>
> Dr. Roubini has built a fine business following this rule, as have
> Robert Prechter, Mark Skousen, Howard Ruff, and scores of others
> in the past. "What's going to happen?" "There will be a terrible
> decline." "When?" "Sometime in the future." "How do you protect yourself?
> Gold, commodities, equities, debt?" "No. None of those will work?"
> "What then?" "Stay liquid."
>
> It happens that Dr. Roubini and I agree that this thing has come
> too far, too fast. Where we differ is that I refuse to cower in a
> hole somewhere eating trail mix and muttering, "I told you so," so
> I will allocate to the assets and purchase the sectors I've been
> writing about, all the time enjoying the party, but taking some profits
> along the way so I don't have a lot of baggage as I quietly edge
> toward the exits.
>
> In the real world, I need to make a reasonable return for my clients
> and myself no matter what I THINK the markets or the economy are
> going to do. Being rich, or at least protecting assets and making
> a reasonable return in all types of markets, is more important to
> those of us in the real world than being right!

Can China Sustain 8% Growth?

I think the time to start exiting Chinese investments will be when the Chinese start to change either fiscal or monetary policies.

Right now their policies are business favorable. If and when they change (or announce such) grab your running shoes.

Brazil Chokes Off Foreign Investment

Long VALE & SBS and staying that way.

Who runs Wall St., Surf? Have you looked at the donations from the big NY Houses? About 2-1 goes to the Devilrats!

So What if China Builds Coal Plants?

Exactly right, LA. Another leftist eco-maniac inserting politics on a business blog when they don't fit the context.


On Oct 20 07:05 PM La Marque wrote:

> Ryan:
>
> You are losing credibility by claiming that 'Much of the Republican
> base believes that the president was born in Kenya.' This should
> have been left out; it is just political BS on your part.

So What if China Builds Coal Plants?

Another good comment, Tack. Good point!


On Oct 20 09:20 PM Tack wrote:

> They CAN control how much CO2 humans exhale. They can eliminate them
> --in the name of saving the planet, of course-- like so many previous
> totalitarian regimes, which were accompanied by their own sick creeds.
>