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jeffreychood

jeffreychood
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  • AIG wins a legal battle, a federal appeals court ruling its $10B lawsuit against Bank of America (BAC) over mortgage losses belongs in state, not federal court. Filed in 2011, the case has been on hold while the venue is determined, but stems from what AIG claims were frauds and misrepresentations on $28B of MBS purchased from BofA, Merrill, and Countrywide. [View news story]
    By the time they get their legal affairs in order the stock price will be more than 2x higher. Also, don't forget to include price in your investment decision. Sure, BAC has some problems, but as usual the market has overreacted and caused the price to get way too low relative to the difficulties they face. Just because a company is faing some problems does not mean it cannot b a good investment. It is all a matter of price.
    Apr 21 09:40 AM | Likes Like |Link to Comment
  • Benjamin Graham's 4 Commandments Of Defensive Dividend Investing [View article]
    The following is my opinion on your question. I do think that, in a limited sense, "the times they are a changin" has an effect on the investing opportunities that are presented. In Graham's day, post-depression, people were so scared of equities that there were many stocks of companies that could be bought at less than net current assets minus liabilities, so called "net nets". Given these great deals, Graham advocated buying a large basket of these without even studying the underlying business. These types of "net nets" are much harder to find now. Attempting to find such great balance sheet bargains is what I believe is called the "Deep Value" approach (or "cigar butt" investing). Buffett began this way, but changed his approach partly based on the changing times - a combination of difficulty in finding these deep value stocks as people's memory of the depression faded plus a realization that many of the underlying businesses were poor (and hence the low stock price). I think that "growth" is just a component of value. It is great to buy stocks of companies that you think have a lot of growth potential, but past results are more reliable than estimates of future growth. It is best to to buy a company with good growth prospects at a good price (where the price you pay does not reflect the expected growth). Lynch said to look around you and what your kids are buying for ideas, but advocated that was just a first step; Lynch said then you still had to value the business to see if it was selling at a good price.

    To me the Buffett notion of buying based on intrinsic value and insisting on a margin of safety are universal to all of the value-based approaches. Growth is certainly a component of value, but is very subjective and can only be roughly estimated (and you should try to not pay too much for it). The Deep Value approach focuses more on the balance sheet for intrinsic value than the income statement. I think intrinsic value need only be estimated, and cannot be calculated precisely. Remember Graham's classic metaphor. You can tell that a man is heavier than he should be without knowing his exact weight, and you can tell a woman is old enough to vote without knowing her exact age. Likewise, you can often tell that a company is selling for far below what it is worth without knowing its exact intrinsic value.

    In today's world, I think the "Deep Value" approach is less applicable than it used to be (the times have changed), and I do not follow that approach (although I greatly respect those that do). I tend to follow more of a modern Buffett intrinsic value approach - buying great businesses at good prices (and recently fantastic prices). I also tend to use market psychology as my main source of investing ideas. I think that the foolishness of the crowd during times of fear and volatility are my best sources of ideas (think BAC and AIG). Hope this helps.
    Mar 24 08:29 AM | 3 Likes Like |Link to Comment
  • Berkshire Hathaway Is A Sell [View article]
    The old "making a profit is evil" argument . . . How many jobs have YOU created?
    Mar 3 07:59 PM | Likes Like |Link to Comment
  • Buffett Defends Investments, No-Dividend Policy, Chastises CEOs [View article]
    The fact that only received dividends factor into Berkshire's earnings seriously understates Berkshire's earnings performance. If instead of owning 10% of four different companies Berkshire owned 40% of one company, according to GAAP Berkshire would be able to report ALL of that companies earnings on its income statement, and hence reported earnings. Buffett has explained this numerous times . . .
    Mar 3 05:22 PM | 1 Like Like |Link to Comment
  • Bank Of America: Destined To Double In 2013? [View article]
    If it wasn't for defense companies in 1941-45 your kids would be in the Hitler Youth right now . . .
    Dec 18 06:31 PM | 4 Likes Like |Link to Comment
  • Last night's sale of AIG stock by the Treasury was oversubscribed says Bernstein, as "long-term investors took advantage of one last chance to buy the stock at a discount from the government." With no remaining overhang and many underweight the name, AIG is finally ready to break out of its $25-$35 range. Shares +1.8% premarket to $33.96, well above the Treasury's $32.50 sale price. [View news story]
    Probably the most useless comment I have seen on this site . . .
    Dec 11 04:43 PM | Likes Like |Link to Comment
  • Bank of America (BAC) is tagged a "Tactical Trading Sell" by Guggenheim's Marty Mosby, who reasons the stock stands near the front of the line for those taking a hit should the economy get hurt by the fiscal cliff. Bullish on the stock longer term, Mosby says BofA could trade below $8 over the coming 3 months. [View news story]
    So this analyst believes BAC is currently trading below its intrinsic value (he is long term bullish) yet he attempts to predict a fall in price due to the short term folly of the crowd. Such short term predictions are a fool's game.
    Nov 26 10:20 AM | 4 Likes Like |Link to Comment
  • Bank Of America Is Heading South For The Winter [View article]
    Making short term trades based on charts ain't investing.
    Nov 16 08:56 AM | 2 Likes Like |Link to Comment
  • More on Fed stress tests: The previously discussed conditions are what's known as the "Severely Adverse Scenario." There's also the "Adverse Scenario" and the "Baseline." The 19 largest banks under review are far better capitalized than 3 years ago, carrying nearly double the buffer (on roughly the same asset base). It looks like more returns of capital are coming. [View news story]
    Loaning to underqualified people (regardless of race) is what got banks in trouble in the first place . . .
    Nov 15 10:16 PM | 2 Likes Like |Link to Comment
  • Bank of America (BAC) CEO Moynihan trumpets (webcast and slides) the bank's balance sheet moves, saying the sale of $60B in non-core assets since 2010 has generated $12B in Tier 1 capital while costing less than $2B in earnings. The bank's capital ratio has improved, he says, from industry laggard to leader. [View news story]
    The best time to buy is at the height of maximum pessimism. These problems will burn off. One major psychological mistake investors make is to look at curent circumstances and extrapolate them out forever. Also, you don't have to quantify the legal overhang - you just have to know that BAC is priced well below tangible book value.
    Nov 15 07:25 AM | Likes Like |Link to Comment
  • More Legal Troubles, But How Does Bank Of America Stack Up Against Peers? [View article]
    So let me make sure I have this right. BofA's score has improved, which means its score was worse earlier this year. Despite that worse score, BAC stock is up 60 - 70% in the past year. So . . . maybe the score isn't really useful? The time to buy is during the height of maximum pessimism.
    Oct 24 08:42 PM | 2 Likes Like |Link to Comment
  • Bank Of America: Earnings Validate Our Thesis Of Staying Away From The Stock [View article]
    "We reiterate our stance and recommend our investors to stay away from the stock until the bank settles its litigation."

    So essentially you tell your clients to stay away until the stock price becomes a lot more expensive. These litigation matters are short term and will burn off. However, they have had the beneficial effect of keeping the stock price artificially low for value investor bargain hunters (with help from articles such as this). Advising people to stay away from a seriously undervalued security due to short term non-recurring issues, and to wait until the security is no longer undervalued, is just not good advice.
    Oct 17 09:27 PM | 1 Like Like |Link to Comment
  • Does Pandit's departure from Citigroup mean bank boards are beginning to take their responsibilities seriously? If so, Bank of America CEO Moynihan could be next. Moynihan inherited a mess (like Pandit), but has been unable to convince investors he has a strategy for getting out of it. Of even more import is the rebuilding of BAC's brand as a leading consumer bank. [View news story]
    I agree with RalphSchauss - a brainless comment; Moynihan has made great strides with BofA, which will be more clearly evident in the near future. "Unable to convince investors"? Many of the good value investors are invested with BAC; the rest are fearful speculators that will only jump in when the price is considerably higher.
    Oct 16 06:26 PM | Likes Like |Link to Comment
  • Bank Of America And 'The Pain Ahead' [View article]
    Economic conditions are always cyclical; things will improve, and then get worse again, and on and on.

    Two relevant quotes:
    "The time to buy a stock is at the time of maximum pessimism" Sir John Templeton
    "You pay a high price for certainty in the stock market" Warren Buffett.
    Cabri is right; the time to buy is when all the naysayers are out there saying things are terrible. Once "revenue and earnings show signs of a rebound" the stock price will be quite higher, and a great opportunity will be lost.
    Oct 2 05:18 PM | 1 Like Like |Link to Comment
  • In conflict with its own management team, Goldman analysts conclude structural, not cyclical factors are behind the poor performance of the U.S. banking sector. More than half of the top 25 U.S. banks aren't earning enough to cover their cost of capital, says the team, which recommends the big players improve returns by shrinking business lines and instead using the money to buy back shares. [View news story]
    Sounds like the barber recommending haircuts . . .
    Sep 10 07:16 PM | Likes Like |Link to Comment
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