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cstauffer

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  • Thoughts On The Bond Market Conundrum [View article]
    Marc,

    How much influence do you believe that hedge fund and other institutional trading that is driven by algorithmic trading, which tend to rely heavily upon macro economic variables, could have had on money flows into bonds and defensive equities, which both have performed strongly since the mid-January stock correction? There seems to be a reasonably strong correlation between the advent of weather induced weakness in various headline economic statistic beginning in the second half of January and then continuing for the next couple months, culminating with the -1% Q1 GDP revision this week. The 10 year bond yield dropped .08% the day before that GDP revision was made public on the 29th.
    May 30, 2014. 11:46 AM | Likes Like |Link to Comment
  • The Selective Correction And Extreme Of Inaction [View article]
    Michael,

    Wow! Great insight that you shared which confirms what I am hearing when I speak to non-clients. Most of my existing clients are total return oriented and appreciate a relative valuation contrarian approach so they will benefit from buying into the current weakness, but with non-clients I find they generally seem to be very much in line with what you were hearing from those advisers who you spoke to. That is, yield at any cost and any risk coupled with the mentality that they will just rotate out if the market goes against them. I agree with you that the last two months have been unprecedented in terms of the internals of the market. I truly believe that a large percentage of what we are seeing is a result of 10 year bond yields not moving above 3% and instead moving back down to 2.65% or so. I think that if we see continued strong employment reports and a bounce back in GDP this quarter coupled with the 10 year moving back toward 3%, this odd confluence of market action that has been happening over the last two months will reverse abruptly.
    May 12, 2014. 12:59 PM | 2 Likes Like |Link to Comment
  • Constructing And Designing The Stock Portfolio That's Just Right For You: Part 1 [View article]
    Chowder,

    My concern with a reversal of trend from declining interest rates to rising interest rates is not necessarily a concern about high costs for the utility companies as they finance capital expenditures. My concern is with the stocks. If a company is not growing earnings and cash flow, but its stock keeps going up in value due to people chasing higher dividends in a lower interest rate environment, the stock's P/E rises to unsustainable levels. When market interest rates reverse and go back up and many of these utility stock/yield investors can get 3% to 5% in bank CD's or high quality bonds, the utility stock dividend yields will no longer look attractive on a risk/return basis because a high percentage of the investor base is not made up of investors, but instead savers.
    Apr 21, 2014. 03:51 PM | Likes Like |Link to Comment
  • Constructing And Designing The Stock Portfolio That's Just Right For You: Part 1 [View article]
    Chowder,

    Thank you for pointing me to those articles. I reviewed them and I don't believe that they really provide much in the way of valuing low-to-no growth utility stocks in that the very premise of Chuck's analysis relied almost entirely on backward-looking valuation averages during a time of a declining interest rate trend. It would seem to me that today, after seeing interest rates seemingly bottom last Spring, that we most probably are facing many years of a rising trend interest rates. If we see this, I would contend that you can throw all of those historical averages out the window.
    Apr 21, 2014. 01:51 PM | 1 Like Like |Link to Comment
  • Constructing And Designing The Stock Portfolio That's Just Right For You: Part 1 [View article]
    Chuck,
    Good article! I look forward to the valuation section. I too, like you, believe in building portfolio's one company at a time and I predominately focus on relative valuation. On that I note, if you can, can you express your opinion on how you translate dividend yield on a "no-grower", like most U.S. utility companies into what the P/E should be. As a relative value (GARP) investor, I have always struggled when trying to make sense of a P/E higher than 8-10 for a utility stock with a 3.5% to 4.5% dividend yield. Today many of these stocks are trading at a P/E north of 15%, which seems far too high to me.
    Apr 20, 2014. 04:59 PM | Likes Like |Link to Comment
  • Jazz Pharma: Risk 7% Downside, 34% Upside To Fair Value [View article]
    Adam, I find that fewer and fewer investors, individual or professional, actually commit the time and energy to "pick" stocks any longer. Investors would much rather take a "risk on"/"risk off" approach buying/selling and rotating around sectors using ETF's. Personally, as a professional who still utilized "relative value" stock picking, I find that what is happening in the markets benefit me. It creates many opportunities as "the baby is thrown out with the bath water".
    Apr 9, 2014. 08:06 PM | 5 Likes Like |Link to Comment
  • Jazz Pharma: Risk 7% Downside, 34% Upside To Fair Value [View article]
    I would argue that biotech is not in a bubble. I would contend that biotech as an industry is better positioned to deliver on growth expectations than possibly at any in the past. In other words, the industry has matured and overall has become less speculative than in the past, while at the same time, the growth opportunities for companies like Celegene, Biogen, and Gilead are as great as ever. This would not constitute a "bubble", but more of a situation where many smaller and mid-cap biotech stocks are possibly priced for perfection at times. If one is willing to take the time to actually understand the business opportunities that companies such as Celegene, Jazz, etc. have instead of simply jumping in and out of a biotech ETF based upon momentum, great long-term wealth can be created.
    Apr 9, 2014. 07:40 PM | 4 Likes Like |Link to Comment
  • Is WhiteWave's Growth Potential Worth Buying? [View article]
    Christopher,

    Very well done article!

    Thanks
    Mar 9, 2014. 02:54 PM | Likes Like |Link to Comment
  • Buffett Says To Disregard Macro Opinions? [View instapost]
    Tom,

    I believe that Warren was sticking to his long-term narrative of bottom-up value investing in companies that he has a reasonably high level of confidence in their 10+ year ability to generate a growing level cash flow with an above average level of ROE. With that type of buy discpline, there is very little in terms of macro events that will do anything other than produce temporary market sell-offs which create the opportunty to buy or add to investments when they are on sale. I have a great appreciation for Warren's discipline that has proven its effectiveness over half of a century filled with its share of scary macro events.
    Mar 3, 2014. 12:19 PM | 1 Like Like |Link to Comment
  • Perspectives On Friday's Sell Off [View article]
    I find it very interesting all of the technical and market mechanics discussion that surrounds the topic of where we are in the market cycle. The fact is that, absent a financial crisis and corresponding panic deleveraging or a major currency crisis, market cycles follow earnings cycles. The rise in the S&P 500 since 2009 has closely tracked the growth in S&P 500 earnings growth, with a slight deviation in 2013 when earnings growth slowed and markets rose, thus producing PE multiple expansion. Earnings in 2014 do not appear to be positioned to contract, so that should set the stock market up for a positive, but bumpier rise as traders and investors place more emphasis on what could go wrong to derail a bull market which no longer has accelerating earnings growth to continue to propell it upward inspite of other less fundamental factors that have at times in the last five years caused sharp market sell-offs. However, unlike the past few years, "buy on the dip" investors may be less enthusiastic to jump in and buy because valuations do not present the margin of safety that they did from 2009 to 2012. I was one of those aggressive buy on the dip investors and that is not nearly as attractive of an opportunity from a valuation perspective for many stocks as it has been. For me this means that one has to expand the universe of potential investments and seek out stocks in out of favor areas, in special situation companies where spin-offs and M&A is likely to unlock value, and in non-traded private placement investments in real assets or specific industries where consolidation or turnaround can create value. For me, this is where my energy and focus is best directed. Trying to guess a cyclical top or support some type of low probability tail risk only distracts from seeking out areas of opportunity that remain.
    Feb 2, 2014. 12:05 PM | 3 Likes Like |Link to Comment
  • Perspectives On Friday's Sell Off [View article]
    Take, my advice to DIY investors is that individual investors are no match for professional traders, so don't even try. Be an investor, investing is not that complicated if you can block out all of the inherent trading noise in the day to day markets. Knowing people who were professional traders, trading has nothing in common with investing with the exception of the securities themselves. Investors take ownership of their chosen securities, trader are only trying using those securities as vehicles upon which to make a short-term directional bet on.
    Jan 30, 2014. 09:51 PM | 2 Likes Like |Link to Comment
  • Perspectives On Friday's Sell Off [View article]
    Tack, you are 100% right. I have been an equity portfolio manager for over 15 years and I have never used stops. I have seen a couple of "boutique" asset management shops try to build a business around strategies using a sophisticated system of stop losses on the portfolio and none of those companies are around today. Most volatility is systematic and not driven by company specific issues, therefore it should not cause you to sell. If bad new is company specific, more time than not it is made public in after the market closes or before it opens in the morning, thus rendering stop loss orders useless. Beyond all of that, broad market indexes outperform most investors and the very assute professional investor who have outperformed the market over time are long-term valuation oriented investors who certainl do not utilize stop loss orders. When a portfolio manager like me spends the amount of time we do researching and building a position in a company, we do not allow our sell decision to simply be volatility driven. In reality, it is that downside volatility which enables an investor to buy the stock when it is irrationally trading at an attractive level.
    Jan 30, 2014. 07:42 PM | 8 Likes Like |Link to Comment
  • Perspectives On Friday's Sell Off [View article]
    C, you call yourself a contrarian, but in fact for a contrarian opinion to be credible, it must not just be opposite of consensus when it comes to investing, it must be be based upon supportable underlying data which is non-consensus. Supportable is the key word in that last sentence. Many on this thread have pointed out that your rationale conflicts with documented cause and affect since the financial crisis. A non-consensus macro opinion that is based upon supportable underlying data might be that the U.S. housing market will turn down again in 2014 after several years of expansion due to a rapid rise in median prices, higher mortgage rates and continued stagnate wages for most middle to lower income wage earners. That would be contrarian and a rational analysis of factors directly related to the housing market. Your analysis leaves a lot ot be desired and your "contrarian" opinion is so severe that it engenders very little actual credibility.
    Jan 26, 2014. 07:38 PM | 1 Like Like |Link to Comment
  • Perspectives On Friday's Sell Off [View article]
    C, I have read through this thread and frankly I find your "predictions" to be nothing more than prognostications that frankly any "hard money" Austrian economic theory person makes almost perenially. No one has accurately made the bear market calls that you claim to have made with the exception of the Peter Schiff's of the world who make such calls year in and year out for decades with a record of being wrong 90% of the time. I am unimpressed.
    Jan 26, 2014. 04:39 PM | 3 Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Larry, I read the CBS article and frankly I think that a scientific study of Buffett, which reverse engineers his portfolio after the fact and concludes that doing so indicates that it was not the stocks that he picked, but the types of stocks that he picked, that drove his outperformance is garbage science. That is like Nissan buying a Ferrari, tearing it apart and building a Nissan with similar spec's indicates that it was not Ferrari's superior engineering that lead to building a great car, but it was instead there use of certain technology and design elements in concert that resulted in a great car. That's crazy, it is saying the same thing, Buffett's stock selection process that he developed, lead to him owning a particular portfolio of stocks. His conviction and discipline as an investor led to him being able to stick with his strategy and that combination produced his outperformance. Stock selection is a function of process and discipline. But at the core of the equation is selecting the right combination of stocks and buying them at the right price. That my friend is stock selection. One can reverse engineer that and overlay the portfolio in RETROSPECT with indices and say that stock selection did not really matter, but that leads to the same "junk science" that leads to academia concluding that active managers cannot beat a passive index. Those studies use diversified active mutual funds to represent the active manager, when most of those mutual funds are so widely diversified and end up with a very high R square. Thus they are closet index funds, with a level of fees which make it impossible for them to outperform.
    Nov 27, 2013. 09:45 AM | Likes Like |Link to Comment
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