Once again in 2012 equity investors failed to keep up with their benchmark; the S&P rose 8.21%, while equity-fund investors made just 4.25%. According to Barron's, learning to sell puts when financial news turns dour is the antidote to underperformance. [View news story]
8.2% in 2012? It was more like 13% or 16% with dividends.
The Coming Boom In MicroCap Agriculture Stocks [View article]
Thanks for the ideas.
MBAC Fertilizer (MBC.TO), in my opinion, is the best microcap way to play fertilizer – http://www.mbacfert.com Market cap is about $50 million. Projected P/E for 2013 is 13.6 and 6.0 for 2014. Are going live with their phosphate mine upgrade in April, so should get revalued upwards as this rolls out. Their big advantage is that they are in the Brazilian agricultural area, so have a huge advantage of other phosphate providers which mainly come from overseas. They also have a number of exploration projects which include phosphate, potash and rare earths. 11.5% of the company was recently bought by an ex-Vale executive and a Brazilian bank, so a takeout is possible as well, but not necessary.
Congrats Tom! Nice to have a rock-solid year in the bank halfway through February. Odds are we get a pullback of some magnitude at some point this year, so you'll likely get the chance to redeploy your cash when the projected returns are higher if you chose.
Does this mean you are going to take the time now to go hike the Appalachian Trail?
Canada has a big miss on January jobs, losing 21.9K vs. expectations of a 5K gain. The unemployment rate drops to 7% vs. 7.2% expected, as the number of those looking for work declined. The loonie (FXC -0.3%) dives, now below parity with the greenback at $0.9971. [View news story]
January jobs report in Canada is notorious for being hard to predict - better to wait till Feb.
Hedge fund guru Jim Rogers has made no secret of what he thinks of the Fed's monetary stimulus. It's "outrageous," he says. Now he's putting his money where his mouth is, saying that he's begun shorting U.S. government debt. "It's all artificial," Rogers quips. "The Federal Reserve is printing money as fast as they can. The Bank of Japan said 'we're going to print unlimited money.'" - If he's right, that bet could pay off big. [View news story]
Bonds have to go down sometime. Problem is people have been predicting it for several years now, incorrectly. Maybe the time is right, but easier to buy a Lifeco with yield and wait for rates to rise.
Life Insurers: Resolving Issues Raised By Beta, Cost Of Capital And ROE [View article]
Tom,
I'm sure you saw the deal today to buy the Chilean Pension Business.
The way I read it is they are paying about $2 billion or $2.25 per share and expect $0.15 earnings in 2014.
I know they expect growth and diversification from this, but I read this as paying $2.25 per MET share for $0.15 in earnings or 15 times EPS. I know the Fed is still not allowing buybacks, but in my simple evaluation, it would sure make more sense to me to wait some more and buy back MET shares at 7 times earnings.
Did you like this deal or see anything I am missing.
Xerox: Review Of Growth, Buybacks And R&D [View article]
Good analysis Tom and tempting to buy.
The reason I stay away however is stock like this will have a tough time achieving the 12 P/E you suggest. People are just not willing to pay up for companies which are perceived to be in decline industries. The whole printing industry is cheap and I would point you at Cenveo (CVO), which trades at P/S of 0.08 and forward P/E under 5.
The key for Xerox will be to make the transition to services, while managing a declining printing industry profitably. I agree the ACS purchase was much better than HP's purchases, but there is a lot of work still to be done to make the transition. I worked at Xerox for 2 years up to 2010, and I saw a transaction oriented, hardware sales organization trying to just throw a lot of stuff on the wall to see what would stick with the ACS solutions as opposed to the strategic selling approach most successful services companies use. Ursula Burns, in my opinion, was a much better leader than suggested above, so she may be able to keep pushing this through, but changing a culture is hard.
The final point I would make is that, even if Xerox is able to successfully transition, I believe it will be difficult to execute consistently and take the market a long time to understand this and give it a good valuation. Look at CSC, who has been in the service business for a long time, has had difficulties in execution and market valuation.
So, in summary, I agree it is cheap, has a good strategy and could be a good stock over several years. I personally will not buy because of execution risk and because I doubt the market will give a reasonable multiple to a company in a "dead industry" (printing) or a perceived new entrant in the services business..
Good luck though. I hope for your sake and my friends who still work there that you are correct.
Probably have seen this, but trailjournals.com is a great source of info and inspiration for hiking the Appalachian trail.
Here's a couple in the their mid-60's who I followed a couple of years ago who made the whole trek: http://bit.ly/WFQL2Y
New Hampshire is pretty tough and the trail through there seems to go up and over every mountain, but the scenery and views are outstanding and the huts are well spaced out to allow for various hike lengths.
2012 Performance Review: A Good Year, Followed By A Strategy Change [View article]
There are a lot of interesting statistics you can analyze and come up with different approaches. BMO does a Quant strategy report utilizing 6 factors to rate stocks. What is interesting is that they had to come up with 2 different models for the US versus Canada. The 5 common factors are:
• Low P/E • Low Price/Book • High ROE • High Price Momentum • High Earnings Momentum
All make sense, but for the 6th factor, they used "High Dividend Yield" in Canada, but "High Cash Flow to Debt" in the US as their testing showed the projected results matched up better with actual by using the different factors.
Anyhow, thanks for continuing to write - always find your articles to be valuable.
2012 Performance Review: A Good Year, Followed By A Strategy Change [View article]
Tom,
I'd recommend not giving up fully on the deep value strategy - it is a good approach and works well in certain markets. Tweedy Browne and David Dreman and many others have shown through their studies than buying cheap stocks work over the long term. The fact that your study shows underperformance for the last 10 years is probably a good sign that it will work better sooner rather than later.
I personally believe the best approach is to follow several styles and adjust your investments as the various styles come in and out of fashion. I use 4 styles - turn around, deep value, GARP, and dividend growers and have money invested in all 4 at all times. By doing this, I can see how each one is executing and route funds to what I consider to be the best stocks in the appropriate area depending on what approach seems to be working best.
Dividend growers have had a good run, but many deep value stocks are now also implementing progressive dividend policies, so you can find stocks now which fit into both approaches.
Assurant: Insurer With Huge Share Buybacks And Cheap Valuation [View article]
Being cynical, the best strategy would be to cut the dividend causing a bunch of funds holding for income to dump and crash the stock price and then use the buyback to pick up the shares much cheaper getting even more bang for the buck.
But realistically, the dividend is likely important for a high percentage of shareholders, so cutting it when the company is doing so well is a non-starter.
Wrapping It Up For 2013 [View article]
http://bit.ly/YQ2MZm
Once again in 2012 equity investors failed to keep up with their benchmark; the S&P rose 8.21%, while equity-fund investors made just 4.25%. According to Barron's, learning to sell puts when financial news turns dour is the antidote to underperformance. [View news story]
The Coming Boom In MicroCap Agriculture Stocks [View article]
MBAC Fertilizer (MBC.TO), in my opinion, is the best microcap way to play fertilizer – http://www.mbacfert.com Market cap is about $50 million. Projected P/E for 2013 is 13.6 and 6.0 for 2014. Are going live with their phosphate mine upgrade in April, so should get revalued upwards as this rolls out. Their big advantage is that they are in the Brazilian agricultural area, so have a huge advantage of other phosphate providers which mainly come from overseas. They also have a number of exploration projects which include phosphate, potash and rare earths. 11.5% of the company was recently bought by an ex-Vale executive and a Brazilian bank, so a takeout is possible as well, but not necessary.
Wrapping It Up For 2013 [View article]
Does this mean you are going to take the time now to go hike the Appalachian Trail?
Canada has a big miss on January jobs, losing 21.9K vs. expectations of a 5K gain. The unemployment rate drops to 7% vs. 7.2% expected, as the number of those looking for work declined. The loonie (FXC -0.3%) dives, now below parity with the greenback at $0.9971. [View news story]
Market Valuation Overview: Getting Really Expensive! [View article]
People keep claiming overvaluation based on CAPE, extraordinary profit margins, etc., but more short term data like this disagrees.
http://bit.ly/w4jRpw~adamodar/New_Home_Pag...
Hedge fund guru Jim Rogers has made no secret of what he thinks of the Fed's monetary stimulus. It's "outrageous," he says. Now he's putting his money where his mouth is, saying that he's begun shorting U.S. government debt. "It's all artificial," Rogers quips. "The Federal Reserve is printing money as fast as they can. The Bank of Japan said 'we're going to print unlimited money.'" - If he's right, that bet could pay off big. [View news story]
Life Insurers: Resolving Issues Raised By Beta, Cost Of Capital And ROE [View article]
I'm sure you saw the deal today to buy the Chilean Pension Business.
The way I read it is they are paying about $2 billion or $2.25 per share and expect $0.15 earnings in 2014.
I know they expect growth and diversification from this, but I read this as paying $2.25 per MET share for $0.15 in earnings or 15 times EPS. I know the Fed is still not allowing buybacks, but in my simple evaluation, it would sure make more sense to me to wait some more and buy back MET shares at 7 times earnings.
Did you like this deal or see anything I am missing.
Brent
Xerox: Review Of Growth, Buybacks And R&D [View article]
The reason I stay away however is stock like this will have a tough time achieving the 12 P/E you suggest. People are just not willing to pay up for companies which are perceived to be in decline industries. The whole printing industry is cheap and I would point you at Cenveo (CVO), which trades at P/S of 0.08 and forward P/E under 5.
The key for Xerox will be to make the transition to services, while managing a declining printing industry profitably. I agree the ACS purchase was much better than HP's purchases, but there is a lot of work still to be done to make the transition. I worked at Xerox for 2 years up to 2010, and I saw a transaction oriented, hardware sales organization trying to just throw a lot of stuff on the wall to see what would stick with the ACS solutions as opposed to the strategic selling approach most successful services companies use. Ursula Burns, in my opinion, was a much better leader than suggested above, so she may be able to keep pushing this through, but changing a culture is hard.
The final point I would make is that, even if Xerox is able to successfully transition, I believe it will be difficult to execute consistently and take the market a long time to understand this and give it a good valuation. Look at CSC, who has been in the service business for a long time, has had difficulties in execution and market valuation.
So, in summary, I agree it is cheap, has a good strategy and could be a good stock over several years. I personally will not buy because of execution risk and because I doubt the market will give a reasonable multiple to a company in a "dead industry" (printing) or a perceived new entrant in the services business..
Good luck though. I hope for your sake and my friends who still work there that you are correct.
NII Holdings Looks Very Undervalued [View article]
The View From Bear Mountain [View instapost]
Here's a couple in the their mid-60's who I followed a couple of years ago who made the whole trek:
http://bit.ly/WFQL2Y
New Hampshire is pretty tough and the trail through there seems to go up and over every mountain, but the scenery and views are outstanding and the huts are well spaced out to allow for various hike lengths.
The View From Bear Mountain [View instapost]
2012 Performance Review: A Good Year, Followed By A Strategy Change [View article]
• Low P/E
• Low Price/Book
• High ROE
• High Price Momentum
• High Earnings Momentum
All make sense, but for the 6th factor, they used "High Dividend Yield" in Canada, but "High Cash Flow to Debt" in the US as their testing showed the projected results matched up better with actual by using the different factors.
Anyhow, thanks for continuing to write - always find your articles to be valuable.
2012 Performance Review: A Good Year, Followed By A Strategy Change [View article]
I'd recommend not giving up fully on the deep value strategy - it is a good approach and works well in certain markets. Tweedy Browne and David Dreman and many others have shown through their studies than buying cheap stocks work over the long term. The fact that your study shows underperformance for the last 10 years is probably a good sign that it will work better sooner rather than later.
I personally believe the best approach is to follow several styles and adjust your investments as the various styles come in and out of fashion.
I use 4 styles - turn around, deep value, GARP, and dividend growers and have money invested in all 4 at all times. By doing this, I can see how each one is executing and route funds to what I consider to be the best stocks in the appropriate area depending on what approach seems to be working best.
Dividend growers have had a good run, but many deep value stocks are now also implementing progressive dividend policies, so you can find stocks now which fit into both approaches.
Assurant: Insurer With Huge Share Buybacks And Cheap Valuation [View article]
But realistically, the dividend is likely important for a high percentage of shareholders, so cutting it when the company is doing so well is a non-starter.