MarkGillCPA

Apple's AT&T Deal: Setting the Record Straight

After reading all the above comments, I would just like to express a note of caution. Some of you appear to have fallen in love with Apple. Hey, I agree they have great products, but that doesn't mean the stock is a buy at $204. Apple was an incredible buy earlier this year at $78. At $204, it now trades at 20x free cash flow and an EV/Ebitda ratio of 21.4x. This is not a cheap stock! If I'm a holder of AAPL, I might be putting in a stop loss at $200, just in case. We're long overdue for a pullback.

Berkshire Hathaway Stock Portfolio: At Risk of Resembling an Index Fund?

BRK is not so much an index fund as it is a closed-end fund. Going forward, I will analyze BRK by looking at its NAV relative to the price of the stock. If it's selling at a discount ot NAV, it's a buy. If is selling at a premium, it's a sell. BRK actually trades at either a high premium or low premium, but it's the same point. I suspect this NAV premium will decay over time, especially if something happens to Mr. Buffett. I know of at least one hedge fund manager who has been trading BRK using this concept over the last year with some success. Berkshire is slowly becoming Tri-Continental (TY), a closed-end fund that invests in blue chip stocks

Freeport McMoRan, For Copper's Comeback

Michael,
I've been hearing that the move from $1.25/lb to 2.85 was due to Chinese stocking up on copper while it was cheap. How much has China accumulated? Will they keep buying? Maybe the chinese see this a an alternative to buying U.S. treasuries.

On a longer term basis, Barclays (the ex-Lehman analyst actually) has done some interesting research on the idea that there is a long term shortage in copper developing due to existing mines depleating faster than new mines can come online. New projects are often out in the middle of nowhere and take upwards of 5-10 years to develop. Any thoughts on this?

Invest Using Stocks' Price to Free Cash Flow

I've read where Bruce Berkowitz at Fairholme looks for stocks with a free cash flow yield of 10% or better, and it's a metric I like to use. Your 15 multiple requirement would be equivalent to a FCF Yield of 6.67%, which is not too far removed from that metric. However, I haven't considered using FCF on invested capital. I just use the standard ROIC. Interesting. Good article.

Cisco's Fortune Could Be Turning

I cant' help myself - CSCO is one of my core holdings in my core equity portfolio - so I just had to comment. I agree that CSCO is undervalued. But what is your target price? What is your buy price? How do you determine that it is undervalued?

Why on earth do you care what the CAPS crowd thinks? I used to participate in CAPS back when it began but lost interest after I saw that for every well-reasoned vote, a thousand "ditto" like votes would follow. CAPS strikes me as a herding tool, not a forcasting tool.

And, there's no need to quote Cramer. If you're an analyst, you should already know that CSCO is the backbone of the internet. I would be more concerned about Kass' comments. He's one of the smarter hedgies out there.

BTW, my FMV for CSCO is $30 (based on DCF analysis). If you can buy it at $20 or below (an opportunity you might get in the next few weeks), I think you have a solid margin of safety and will make a 50% return sometime over the next 1-3 years.

Illumina Boomerangs Up, Announces Genome Sequencing

I realize this is an exercise in hindsight, but I find that sometimes it pays to do a post mortem on previous ideas. I think ILMN is an interesting company, but it has to be bought when the stock has been beat up. If you bought the breakout based on this chart you are now down 15% as ILMN announced yesterday that sales would be lower than expected. At 39.76 (closing price on above chart) ILMN was trading at 44 times this year's expected EPS of .90 and 33 times next year's expected EPS of 1.21. The EV/EBITDA was 27x. ILMN was expensive by any measure. When expensive stocks get hit with some bad news, the stock gets hammered. If you're a technician, instead of buying breakouts, why not use a slow stochastic crossover below 20 on a weekly chart. That would have you buying when ILMN was at 20 last Nov or Dec and the valuation was at 22x and 16.5x 2010 EPS, and you could be selling now with a 70% gain.

Doug Kass Updates His Model Portfolio

Doug Kass is a great hedgie to follow. I don't know of any money manager who has made as many correct calls over the last 2 years as Kass. He spent 07 and 08 shorting stocks. Then in March of this year, he declares the March intraday low of 666.79 ( on the S&P 500) to be not only the low of this bear market, but possibly a generational low. He then goes long in his hedge funds and nails this rally.

Reality Checks for the Billowing Cloud Computing Fantasy

I currently suscribe to a few programs that are delivered via "software as a service". The programs work fine for the most part, except they are always slower than the programs that reside on my PC. To me "software as a service" is more a benefit to the provider (and to the companies selling the technology) than to the end user. How will cloud computing be any different?

New Additions: Dow Jones Listens to Bloggers

tech man,
Citigroup will continue to trade on the New York Stock Exchange under the symbol "C". It just will not be included in the 30 stocks that make up the Dow Jones Industrial Average.

Why Are Insiders Losing Their Taste for Chipotle?

My guess is that after watching their stock rise to 155 in 2007, and then seeing it fall to 37 in 2008, the insiders learned their stock wasn't bullet proof, and this year's move to 92 was an opportunity to lock in some gains.

CMG's a good company, but at 27x forward earnings, it isn't cheap.

I don't normally short stocks, but I could see how a hedgie might short this on a break below 80 for a potential move back to 65 (Jan high) or 60 (200 day MA).

Adding to My Short Position in Potash

I agree that it's important to keep it simple with technical analysis, but I disagree with his conclusion. John Murphy, who has written numerous books on technical analysis also states that it's important to to use simple trendlines and moving averages. However, he also states that the longer a trendline, the more relevant it is. In this case, I don't believe your 5-week trendline is long enough to be relevant other than for short term traders.

On a weekly chart, the severe downtrend appears to be broken in December. On a daily chart you could draw a support line starting at the 47.47 low in December and the 63.65 low in March. Then you could draw a resistence line at 95, which goes back to November. The result would be an ascending triangle, a bullish pattern that covers the last 4 months.

Also, before buying any of the fertilizer producers, check out DBA, an ETF of ag crops. It appears to be putting in a head and shoulders bottom. At stockcharts.com you can overlay POT on the DBA chart and see that there is a tight correlation. Crop prices need to improve before farmers will use more fertilizer. If DBA breaks 27, POT will break 95 to the upside.

From a fundamental basis, a word of caution. POT likes to claim that farmers are not that sensitive to fertilizer prices because of the yield improvement. But that's not true. Farmers will pay up for fertilizer only when crop prices are high enough to cover their input costs. That's why I link POT to DBA.

Last year, when fertilizer prices were so high, some farmers here in the Texas Panhandle began using cattle manure as a substitute to save money. Not as effective as chemcal fertilizers (and comes with a different set of issues like weeds) but it will work.

Now that fertilizer prices are lower and crop prices appear to be putting in a bottom, there might be a nice upside opportunity in POT.

James Colby: Muni ETFs Gain Assets in Face of Credit Crisis

Good point by donzelion. If you live in a state with a state income tax, you're generally looking for a state-focused muni bond fund to minimize taxes, but which in turn exposes you to state specific risk.

However, for those of us in states with no state income tax, we can buy muni funds and ETFs that are nation-wide.

ITM looks pretty good. Should I be concerned that it holds only 97 positions and has only $39 million in assets?

I have been buying FHIGX (Fidelity Muni Income) for clients. It's up 3.68% YTD. Holds over one thousand bonds, has a 44 basis point expense ratio and has a 30-day yield of 4.30% as of 3-5-09. For someone in the 25% tax bracket, that's a tax-equivalent yield of 5.73%.

However, note that FHIGX is able to offer a higher yield by going down one step in quality. Instead of holding a large percentage of AAA bonds as ITM does, it holds a larger percentage of AA and A bonds. In that sense FHIGX is riskier than ITM.

Good article. Thanks.

Berkshire Hathaway: Proof That the CDS Market Is Irrational

IMHO, CDS contracts do more harm than good and should be eliminated from the financial world.

Mr. Lanthrop, hedge funds are not buying CDSs to hedge against bond portfolios. They buy them at the same time they are shorting common. They do this to incite fear in the markets. Last I checked market manipulation was supposed to be illegal. If the SEC was doing its job, these things would have been made illegal over a year ago.

I have no problem allowing anyone to short a stock. An argument against CDSs is not an argument against shorting. But we cannot allow someone to link a short position with a CDS to manipulate markets.

We need to get our financial markets back to the basics of buying and selling stocks and bonds. Its the derivatives that are destroying us.

Buffett's Latest Headache: U.S. Bancorp

williemo,

I'm not familiar with Bespoke either, other than I notice that they publish a lot of articles. Some of them are very good, and some, like this one, are a little below par. Putting out lots of articles appears to be a part of their marketing program. Nothing wrong with that. Hopefully, critical comments on the poor articles will encourage more of the good ones. I would expect the same treatment.


On Jan 21 07:57 PM williemo wrote:

> To : Daniel B
> I would think twice before I made a piercing comment like you did
> about the authors of the article. You obviously aren't familiar with
> Bespoke.

Buffett's Latest Headache: U.S. Bancorp

So what's the point of this article? To inform us that stocks are down? Are you saying these stocks are sells because they are down? Or, are they buys?

The only fundamental statement Bespoke makes is that USB Q4 EPS is down 65%, and that's due to the large loan loss provision. After reviewing the earnings report, it appears they (USB) are being realistic with their provision. Deposits were up, loans were up, and net interest income was up 23%. I suspect there is still a quarter or 2 of big provisions, but when those level off, earnings will take off.

Also, I suspect there will be further cleaning up to do with respect to Downey and PFF acquisitions, and I would not be suprised to see the dividend cut. So I don't think I'm being pollyannish about USBs prospects.

However, I'm kicking my self for not loading up the boat when the stock briefly traded below $12, and may do so anyway if it pulls back to $14. Did you notice that buyers went wild when this stock hit 12? At that price, who cares what it does over the next 3 to 6 months. If I can buy this at 14, I have no doubt that sometime over the next 3 years that it will be trading at 28 or higher.

I agree with ArtfulDodger above. I've seen too many stocks round trip to be a buy and hold forever investor. But I am a value investor and I think Mr. Market is offering us an opportunity.