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  • Predictable Fast Growing Healthcare Dividend Growth And Growth Stocks For Your Retirement Portfolios: Part 5 [View article]
    Pete, see my comments to Banmate above, which touch on some of what I would have replied to you. On the current interest rate situation in the U.S., I believe that U.S. rates can and will rise in spite of global rate levels. Global rates will likely act as an anchor and keep our rates from rising as fast and as much as they otherwise would have, but I do believe that our rates will indeed rise sooner than later. I also believe that when this happens the complacency that currently exists, which in my opinion is based on the belief that our economic recovery is not sustainable and therefore the Fed will not raise rates or if they do it will be short-lived, will quickly go away. When this complacency goes away those investors who are using high yielding blue chip stocks and regulated utility stocks (sector was up 23% last year and P/E ratios are at all time highs) will run for the exits.
    Feb 7, 2015. 10:00 AM | 3 Likes Like |Link to Comment
  • Predictable Fast Growing Healthcare Dividend Growth And Growth Stocks For Your Retirement Portfolios: Part 5 [View article]
    Banmate6, thank you for clarifying your philosophy. Your discipline is impressive and has served you well. I like that fact that you indicated that you would not purchase JNJ shares at today's levels, but maybe if it fell below $100. I don't know what your empirical reasoning is to pick $100 per share, but given your historical cost basis, the "averaging up" effect would likely be minimal.

    My prior comments come from my experience of seeing companies like GE and AT&T go from being awarded a market premium valuation due to their earnings consistency and perceived safety and soundness to over-time see that premium disappear as their multiples contracted. Like a growth stock that is awarded a multiple of 30X to 40X earnings, we know that as the company, no matter how good it is, grows in market cap and EPS growth inevitably slows, the company's multiple will contract. There is no better example of this than Apple Computer and Google recently. Because of these company's slowing growth due to their size, they both now trade at a discount to the market multiple and most of the stocks that you probably own. In my way of looking at value (more akin to GARP), these company's multiples have contracted to much and give investors both value and a margin of safety.

    I too greatly admire and studied Graham, Buffett/Munger and I would have not problem paying a market multiple for JNJ, PG, etc. even if their forward growth rates were slower than the market overall, but I have great trepidation in today's ultra-low interest rate environment paying the "bond premium" for the dividend stream that seems to be built into the current multiples of these stocks.

    Thanks for the dialog.
    Feb 7, 2015. 09:53 AM | 3 Likes Like |Link to Comment
  • Upping Our Fair Value Estimate Of Alibaba [View article]
    BABA's stock price decline has pulled YHOO's stock price down over the last several weeks. Just like over the last two years, the market has not accurately priced YHOO high enough based upon the sum of the parts, including the BABA stake. At $100 per share for BABA, it is very hard not to conservatively get to $55 per share for YHOO. If BABA were to trade up to $120 as the author indicates is justified, there is really no reason that YHOO would not be worth between $60 and $65 share.
    Feb 6, 2015. 09:21 PM | 4 Likes Like |Link to Comment
  • Predictable Fast Growing Healthcare Dividend Growth And Growth Stocks For Your Retirement Portfolios: Part 5 [View article]
    Pete, if you are reading The Intelligent Investor by Ben Graham, where do you find a valuation metric that would justify owning a 3-4% growing company at a price determined by an earnings multiple of 20 or higher. If I am not mistaken Graham liked companies that were selling at below a 1.00 PEG ratio if he could find them. The PEG ratio on PG is over 2.00 and even if you add the dividend yield to the long-term growth rate as Peter Lynch suggests doing, the PEG ratio is still right around 2.00.
    Feb 6, 2015. 09:10 PM | 1 Like Like |Link to Comment
  • Predictable Fast Growing Healthcare Dividend Growth And Growth Stocks For Your Retirement Portfolios: Part 5 [View article]
    I believe that your thinking is very commonplace today and that such thinking is meaningfully contributing to the "nose-bleed" relative valuations of the slow growers that you mentioned. I guess that I look at valuation a little different than Mr. Carnevale in that I believe that with low or no dividend growth stocks, valuation is derived from a discounted cash flow of an assumed string of future cash flows or profits. That discounting will be affected by the discount rate that is used, which is relative to the prevailing interest rate environment. With slow growing high dividend paying stocks, the discounting mechanism is more heavily weighted towards the expected future string of dividends. Discounting these dividends is very much like how a bond is valued. Just like a bond, the prevailing interest rate environment has everything to do with whether that bond can be bought or sold at a premium or a discount to par.

    I believe based on the above that many investors such as yourself believe that the principles of valuation have been repealed because we currently have an artificially induced low interest rate environment. This in effect allows an investor such as yourself to receive 150% to 200% of the current long-term risk free rate (yield on the 10 year Treasury Note) and feel as though you are not taking excessive risk. This is the very definition of complacency.
    Feb 6, 2015. 09:01 PM | 2 Likes Like |Link to Comment
  • Predictable Fast Growing Healthcare Dividend Growth And Growth Stocks For Your Retirement Portfolios: Part 5 [View article]

    It makes me uncomfortable that these quality blue chip stocks that are paying 3% or better dividends and far larger and slower growing than in the past are again being awarded a premium valuation. I suspect that this premium valuation has a lot to do with yield chasing in the current ZIRP environment. If this is the case, do you not believe that just like bonds selling at a premium, that these "premiums" will most certainly come down once the Federal Reserves finally is able to move away from ZIRP?
    Feb 6, 2015. 08:48 PM | 3 Likes Like |Link to Comment
  • Freeport-McMoRan: When Will The Pain Stop? [View article]
    Mbrot, Thanks! I am a value investor who likes portfolios made up of very desperate value opportunities where I believe that there is a high level of certainty that value will be created over a 2-3 year period. When I say desperate, FCX would be a value opportunity because one can buy in the bust part of cycle and selling during the boom period with a fairly high level of certainty and one's downside is protected over that period of time by the replacement value FCX's assets. In the same portfolio I would likely own oil refinery stocks today, cheap growth stocks like GILD, GOOG and Apple. I would own cheap blue chips like AXP and a few small and mid-cap stocks which are attractively priced, but out of favor. My flexibility has allowed me to buy YHOO and Facebook 18 months ago and Sony 12 months ago.
    Feb 1, 2015. 09:08 AM | Likes Like |Link to Comment
  • Freeport-McMoRan: When Will The Pain Stop? [View article]

    Below is an interesting article from the FT:

    This article, as well as 2014 supply/demand data that has come out support Freeport's CEO's comments that I noted above. As a fundamentally based investor I have come to accept that traders, through futures schemes and shorting, can indeed overwhelm real world fundamentals for a period of time. Over the long-term fundamental reality prevails.
    Jan 31, 2015. 10:55 AM | Likes Like |Link to Comment
  • Freeport-McMoRan: When Will The Pain Stop? [View article]
    Dacc0947, as my comment above to the author indicates, I tend to have much more faith that management of these large mining companies have a better idea of what future supply/demand dynamics will be for their mined commodities than the capital markets, which are inherently short-term focused. China's GDP growth is slowing down, but China's 6% growth to 7% growth over the next several years will still contribute positive incremental growth to the global economy because 6% to 7% on the total size of their current GDP is greater than 8% to 10% of their economy's output 3-5 years ago. Furthermore, India has enormous infrastructure development needs as well and Modi has indicated that this will be a high priority for his country over the next several years.

    So i do believe the CEO's of companies that have to make multi-billion capital investment decisions every year based upon intermediate to long-term forecasts.
    Jan 31, 2015. 10:17 AM | 3 Likes Like |Link to Comment
  • Freeport-McMoRan: When Will The Pain Stop? [View article]

    I don't really understand why production cuts in copper would necessarily change the current copper price dynamics when the copper prices does not really seem to be trading on copper supply and demand, but rather copper seems to be trading in lockstep with crude prices.

    In fact, FCX's CEO commented on this during the conference call saying, "Now talking about the copper business, you know, I referenced the fact that there’s an apparent disconnect now between the copper price and market fundamentals. Clearly the market is trading on the basis of the oil price decline and the impact generally on commodity prices. Traders are looking at the relative values of metals in relation to oil; they’re looking at the relative value of copper in relation to other metals. And what we’ve seen is a significant decrease in prices, but inventories remain low; the fundamentals of our business in dealing with customers remains relatively strong”.

    I don't pretend to be able to predict the bottom for copper prices nor the trough price of Freeport's stock in this environment, however what I am very confident of is that for Vale or any other large mining company in the world to develop the assets and proven commodity reserves that Freeport owns that it would cost far more than Freeport's current market cap, plus long-term debt.

    Freeport owns valuable assets that take substantial money and time to develop and copper prices temporarily falling from $4.00 per pound to $2.50 per pound does not diminish the long-term value of those assets. Freeport did not invest $7.5 billion into those assets in 2014 and they would not invest another $6 billion this year if they were not very confident of the long-term value that is being created.
    Jan 30, 2015. 07:27 PM | 1 Like Like |Link to Comment
  • 10 Reasons Why Every Serious Investor Should Read Barrons [View article]
    I concur on the value of reading Barron's as an investor. To me Barron's attempts to cater to the long-term investor versus the typical mutual fund allocator or short-term trader. Their is more focus on attributes of actual businesses, valuation subjects and industries than you really get anywhere else. Interviews of investment professionals are focused again on long-term investors versus traders (fast money types). I have been a Barron's subscriber for 15 years and I still look forward to getting each week's issue.
    Jan 19, 2015. 07:45 PM | 2 Likes Like |Link to Comment
  • New Projections For EBITDA At Freeport-McMoRan [View article]
    Thank you for your timely work on FCX. You have not mentioned how much of the drop in the share price of FCX from the high 20's to the low 20's is simply related to tax loss selling versus more fundamental factors that you write about. Do you have any opinion on the tax loss selling effect? Also, what, if any, opinion do you have on the safety of the dividend over the next 12 - 24 months?
    Dec 31, 2014. 11:04 AM | Likes Like |Link to Comment
  • North Atlantic Drilling: Buying Where There's Blood [View article]
    Trying to answer why a small cap stock's price drops or rises significantly over any short period of time is futile. It is very possible that some relatively large investors in the stock simply dumped it in order to remove the position from sight and lock in substantial capital losses ahead of year-end. NADL is a complex investment at this point to analyze, but at the end of the day this company has substantial physical assets and a unique expertise within the market which they operate.
    Nov 23, 2014. 03:48 PM | 2 Likes Like |Link to Comment
  • Alcobra's Metadoxine trial fails to show efficacy vs. placebo, share down AH [View news story]
    tail, I believe that there are many such drugs on the market that scientists do not know exactly how they work, they only know that they do work or they facilitate a secondary response that helps the patient. To me the biggest plus of MDX is its safety profile. The safety profile should provide a much more liberal attitude when it comes to FDA approval even in the face of some of the issues that you raise. MDX could be utilized safely by the inattentive population in order to derive benefit either by itself or in conjunction with other treatment options. It could also be tried by the hyperactive population in conjunction with other treatments in order to safely determine with a benefit result on a patient by patient basis. At this point the company's stock is reflecting a $57 million market cap and this seems to reflect the slanted reporting on trial results for MDX as opposed to the more nuanced analysis provided by biotech analysts who actually have followed this company and the MDX trials for years.
    Oct 24, 2014. 12:50 PM | Likes Like |Link to Comment
  • Alcobra's Metadoxine trial fails to show efficacy vs. placebo, share down AH [View news story]
    tail, that is not my point at all. My point is that it appears to me that the traders in this stock are missing the forest for the trees. As large as the ADHD population is, MDX does not necessarily have to be an unambiguous success across the entire population to be commercially viable and thus a valuable treatment alternative. This treatment has consistently showed a statistically relevant improvement in the inattentive ADHD population, which is very large by itself. It appears to me that besides a handful of subjects from both the placebo and MDX cohorts in the Phase III study that it also had a statistically significant improvement across the entire population. I cannot speak to the "mechanism of action" issue. I do know that the company has studied the mechanism of action and have indicated from studies on mice and humans that they have identified the areas of the brain that are impacted by MDX in a way which improves actions that compromised with those suffering with ADHD.

    I am not trying to change your mind at all and I am not necessarily making a case for a certain stock price, what I am debating is that the reporting on the MDX studies appear me to be consistently slanted toward those data points which create the perception of failure without providing an objective discussion about the nuances and context of this information. There is a reason that most highly informed biotech analysts who cover this company are much more constructive on MDX.
    Oct 24, 2014. 12:07 PM | Likes Like |Link to Comment