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  • Danger Zone: Value Investors [View article]
    I was just reading GE's AR, lol..... After trying to figure out what the true operating numbers are going to look like going forward without SYS, I just gave up. Decreased Tax Rate, SBC, Asset disposals/additions, etc etc. I find just about every large financial company is really tough. I looked through hundreds of pages on SAN one time and wondered why I was doing it.... Now I stick with the smaller banks.

    It is important to note, however, that you don't need to get the picture 100% right, close enough will do. In general, knowing what the important things are, where they are and skipping to them in every report reduces the overall time. If you're buying stocks when they are really cheap (hint: you should be) the price disparity between true value and perceived value usually makes up for complete accuracy.

    Investors definitely have to go the extra mile though if they want to understand how a company is really doing and all the risks associated with it. If they aren't willing to do so, I agree with the poster above.... Stay away from purchasing individual equities.

    Good luck!
    Apr 8 07:07 PM | Likes Like |Link to Comment
  • Maybe I'll wait a bit before buying [View news story]
    Here are some highlights from the filing....

    'Our cash balance is $100 as of April 7, 2014. Our cash balance is not sufficient to fund our limited levels of operations for any period of time.'

    'To showcase just how valuable and useful hempcrete can be, and thus encourage buyers and future investors to take the idea and value of hempcrete seriously, the company plans to build and create a house made entirely out of hemp-based materials. This property is owned by the company’s sole officer and director Salvador Rosillo and located at 30 Vernon Avenue, Brooklyn NY 11206. This structure will be made entirely out of hempcrete while the interior will be furnished using products that have all been created through the use of hemp. The company has no definitive timeline, at this point, for the completion of this project or has even taken steps to begin the project. The company also must first level the existing structure on this land. There will be no costs or associated fees to the company from the acquisition of this property. Our sole officer and director, Salvador Rosillo owns this property and is providing it at no cost to the company. However, any modifications and alterations to this property will be at the expense of HempAmericana.'

    'Currently, Mr. Rosillo has the flexibility to work on our business up to 25 to 30 hours per week, but is prepared to devote more time if necessary'

    Salvador Rosillo 77 President, Chief Executive Officer, and Director'

    That was fun....
    Apr 7 03:08 PM | 3 Likes Like |Link to Comment
  • Johnson & Johnson Is A Safe Pick In A Dangerous Market [View article]
    I guess my point is, what 'mean' are we talking about? If JNJ continues acquiring businesses as large as Synthes, which is a ripe legal target based on the nature of the work they do, how can we use an average over the last 10 years? No doubt there are some legit 'one-time charges', but when you buy a >$20B operation doesn't that change the average you use to account for future potential liabilities?

    Again, I think the prudent way to account for these items is to take some percentage of each settlement. So let's say all the Risperdal stuff ends up costing $2B over 3 years. JNJ will say, 'one-time charges'. I say, that is a 'cost of doing business' and one I can expect to incur as a common shareholder every 4 or 5 years. So, maybe I take 1/2 or 1/3 of that and call $1b 'one-time charges' and the other $1b a 'cost of doing business'. With the Synthes acquisition, I'm saying the average over the last 10 years is no longer applicable and I can now expect a larger legal expense going forward.

    It's really up to each person how they want to account for these things and to decide for themselves what makes the most sense for these items going forward. I think strictly calling them 'one-time' or 'unusual charges' is not accurate...... The term unusual can't be applied if the charges happen every year (like a large settlement where legal bills are dragged out over several years).

    Anyways, still long a reduced position in JNJ. Good luck!
    Apr 7 12:48 PM | Likes Like |Link to Comment
  • Johnson & Johnson Is A Safe Pick In A Dangerous Market [View article]
    I agree that JNJ is cheaper than it looks and your analysis, David, is much better than the majority of authors on this site..... However, the 'one-time charges' that JNJ is claiming are 'one-time charges' don't seem like 'one-time charges' to me. When you run a highly diversified, yet medically concentrated, conglomerate it seems that things like the Risperdal fiasco, Depuy settlement and many others sure to come down the road are truly a 'cost of doing business'. Whether or not the company or financial community chooses to call these 'one-time charges' they will certainly impact the financial statements over time.

    With the enormous acquisition of Synthes, there seems to be a good chance that more (and potentially larger) 'one-time charges' will surface. Maybe the best thing to do is take a percentage of those (like 50% of all 'one-time charges') and then use that in your calculations.

    Just my opinion... Good luck!
    Apr 7 12:22 PM | 1 Like Like |Link to Comment
  • PepsiCo: Historically Cheap Due To Investor Worries [View article]
    Agreed, although the snack business outlook isn't as bad as that for soft drinks.... Diet soda sales are cratering. This stuff really is toxic, whereas an occasional bag of chips isn't really that bad. I would love to see PEP buy an almond operation or commit to gluten-free / lactose free products. Most of the problems at PEP have been self inflicted and eventually they will get sorted out. Agree with magi on the smaller returns statement though.......

    The real question that needs to be answered is how will KO/PEP diversify away from their serious money makers (soda in the U.S. market) and will the new products carry the same margins? I'm guessing it will be a struggle to do so and, no, those products will not carry the same margins.....

    Long PEP though. Good luck!
    Apr 6 01:23 PM | Likes Like |Link to Comment
  • The Only 20 Companies That Matter [View article]
    If you look at the top 10 companies.....

    XOM/CVX - Both company's future profitability growth is in question as it depends so heavily on one parameter. It will most certainly be lumpy.... Also, the cost of new projects has gone up substantially for these large integrated oil players. Capex is enormous now and going forward the available cash for common shareholders will not grow as it has.

    AAPL - Profits are declining and they probably will continue to do so for the next decade.

    JPM/WFC - Neither of these companies will post substantial top-line growth for quite awhile. With LLP's virtually down to zero, earnings growth will be a lot more difficult to achieve.

    FNMA - Garbage accounting profits.

    WMT/MSFT - 2 out of the 3 companies on this list with a clear path to revenue and earnings growth and very easy businesses to model.

    IBM - Revenue and Income are flat to negative (asset disposals and tax rate declines hide the real declines), but EPS is going up with share buybacks.

    BRKA - Probably the best out of the bunch with expert capital allocators all over the place. Should grow moderately going forward.

    The bottom line here is this group will probably show flat profits going forward a few years. It wouldn't surprise me to see the S&P do the same..... We can look at broad market characteristics and company profits all we want, but it's important to understand how individual companies achieve their profits and how those profits contribute to the larger picture. After going through a bunch of financial statements, it's easy to see why the majority of those 10 companies above will not continue on the trajectory they've been on over the last 5 years..... The question then becomes, what does that mean for the 'total corporate profit' figure quoted above? And following that, what does that mean for the market at large?

    Good luck!
    Apr 6 01:00 PM | 1 Like Like |Link to Comment
  • Dollar Tree's Buyback Is A Gem In Plain Sight [View article]
    They're building stores like crazy..... They generate way more cash than they can deploy at high RORs. Buying back stock is way better than paying dividends for long term holders.

    DLTR has been one of the easiest investments over the last 5 years. This was a $38 stock last Feb. It was a $25 stock in early 2011. There's always a chance to buy this thing, just be ready. It's consistent, it's growing faster than the overall market and it's deploying capital much more intelligently than the vast majority of companies...... It's really that simple.

    Good luck!
    Mar 31 12:59 PM | Likes Like |Link to Comment
  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    How does a hedge fund/PE shop come in with an already enormous debt load and a majority partner?

    I am also in a wait and see mode.... I've looked into WTW multiple times over the past 18 months. It's looked cheap lots of times, and yet operations continued to crumble. The debt level is astronomical compared to what the company is forecasting for 2014. There is a rather vicious cycle that one can foresee if the meetings continue to decline (look at the impact of that segment on the income statement). It really has to get to a ridiculous price, and although it is closer to that point now than it was 6 months ago there is a lot not to like here as a common shareholder.....

    Good luck!
    Mar 29 10:38 AM | Likes Like |Link to Comment
  • Why I'm Staying Long After Wells Fargo's Stress Test Results [View article]
    Yep, agree with all of that Greg. No doubt about WFC's superiority over the rest of the banking sector, which should grant it a 'premium' valuation over the others. After a 35% move last year and another 10% already this year, I'm just saying expectations should be tempered...... The P/E doesn't look bad because of the reserve releases, but take them out and you have a bank with no growth YOY. Going forward if they grow 5% a year I think a 12-15 multiple is warranted. If WFC gets to $5 a share in earnings by 2017 you are looking at $60-$75 (best case scenario) and probably about 2-2.5% in Div unless, again, the SBC is altered significantly. That's not a bad return at all, but it hasn't been consistent with their operations (pre-tax pre-provision profit declined last year due to reduced re-fi's).

    With the new capital rules, it's very hard to see these banks getting back to old profitability ratios. All the earnings growth has been easy up until now.... However, due to the decreased risks associated with more capital, one would assume the ROR going forward is more stable, which could justify a higher multiple. Interesting debate there.

    I'm a long-term WFC holder from the low 20's and I won't be selling, but I can't help but think I'm staring a max of about 8% a year in the face. To be honest, that's not that exciting for me as an individual investor with a (relatively) small book...... Especially if my payout has virtually no growth in front of it.....

    Good luck!
    Mar 28 02:13 PM | Likes Like |Link to Comment
  • Why I'm Staying Long After Wells Fargo's Stress Test Results [View article]
    The real questions long term holders of WFC should be concerned with.... how much money is WFC going to allocate to share based compensation and what is the standard figure for provisions going forward? They can submit any capital plan they want, but if they're spending over $4b a year in share repurchases to offset dilution the sbc-adjusted dividend payout ratio is effectively 50% of NI. For a company with no more reserves to release, WFC is starting to look more expensive every day. Maybe they continuously operate with $2-3b of provisions, which is a lot riskier than 3 years ago on a $830b book. Either way it's hard to envision banking becoming wildly more profitable overnight. Therefore, NI is barely advancing and unless SBC declines substantially the dividend isn't advancing either. After a huge move over the last year, I doubt the share price is going anywhere either, unless SBC goes to zero......

    After a few years when everyone looks back this will all make sense.

    Good luck!
    Mar 28 11:25 AM | Likes Like |Link to Comment
  • Detailed Case To Short The S&P 500: This Time Isn't Different [View article]
    A lot of good logic thrown in with some questionable 'facts' and useless technical jargon...... A lot of the points made in regards to earnings growth (or declines), the way corporations have achieved this and the stagnation of wages are very strong.

    Irrespective of any opinions regarding this piece, the most obvious thing every security analyst should be able to agree on is the dangerous level of the Russell 2000. Earnings growth for a lot of smaller cap companies I follow just hasn't been there and yet the valuation has continued to march higher. Luckily my largest small cap holding was sold in Dec of '13 prior to a >25% decline. There's no question that these companies should generally carry a higher multiple than the MSFT/WMT/AAPL's of the world, but with modest earnings growth at present and going forward it's hard to justify some of these 25-30 multiples......

    It wouldn't surprise me to see the S&P go sideways for 4 years around the 1900 level. Opportunistic purchases over that time should do well. For those individuals holding any of the small cap high flyers, they should definitely consider if it's better to hold em or fold em......

    Long the huge, steady, very-high quality businesses with moderate growth and decent valuations along with a boatload of cash ready to be deployed when prices get overly attractive again.....

    Good luck!
    Mar 24 12:51 PM | 4 Likes Like |Link to Comment
  • Why Seeking Alpha Embraces Pseudonymity [View article]
    There's a lot of research done by numerous contributors. As to whether or not this research is material and/or beneficial to the investment process, that is questionable....

    The argument pertaining to the site's predictive abilities of stock market returns only solidifies kimboslice's comment about SA primarily being an outlet for short-term traders. After browsing through the white paper linked in the WSJ, the most important variable used in their analysis was based on a 3-month return after an article had been published. In addition the study is trying to base returns on whether positive or negative words were used in the article and the subsequent responses. In terms of usefulness, that probably ranks near the bottom for every long term investor. Further, a lot of discussion in the paper is centered on earnings announcements and 'surprises' or 'disappointments'.... Things 'serious investors' could care less about....

    More specifically, from the authors of the paper themselves,

    'we cannot conclude with confidence whether stock opinions revealed through social media contain value-relevant news (“predictability channel”), or whether followers react to false or spurious publicity, which then moves market prices over the ensuing three months (“clout channel”).'

    I skimmed this paper for 5 minutes. I don't really care what the financial community or some set of journalists or academics think of it. These are the same people that think the reason MSFT goes up 4% one day and down 1% the next is because the set of all irrational participants in the stock market is acting rationally based on all the knowable information with respect to MSFT....... You can stop laughing now.

    SeekingAlpha has a lot of useful material on it. It also has infinitely more useless material. In general, the best material I have seen is from anonymous commenters. Not the contributors. In fact, the most prolific contributors are usually the least knowledgeable about security selection. This makes sense due to the amount of time one would have to devote to article submissions and comments, as opposed to actual research.

    The only certainty that can be drawn from the rise of 'Social Media' is the importance people assign to themselves regardless of the quality of material they output. This inevitability leads to a large number of individuals thinking their opinion is 'important' and 'right' when it is in fact probably the exact opposite. For an investing website, there is probably a high correlation between article submissions and investment underperformance. i.e. as Clubber Lang said in Rocky 3, 'My prediction? PAIN!'

    Investing successfully has never been about catchy headlines. It's never been about hoping 20 things go right so that your Income Statement forecast is correct. It's usually not done successfully by the most popular person in the room. It's been the same for about a century now. Buy something for less than it is worth. The qualitative information contained on this website has value. The real key is waiting for the quantitative side to make sense and then acting on it when it does. An article might help with that. Most don't......

    Good luck!

    P.S. Definitely diggin' the anonymity though. Keep up the good work!
    Mar 19 08:00 PM | 4 Likes Like |Link to Comment
  • Aeropostale: Our Top 2014 Pick For A Unique Short Covering Rally [View article]
    Looks like my first post was spot on and my last one was dead wrong, lol....

    I ended up getting out on Friday for a very small profit, took it to the golf course and chipped in on the last for a 70. Might try to catch another run up at some point, but the trend of bad news for the common shareholder keeps on keepin on...... Realistically, someone needs to flush this toilet.

    Good luck!
    Mar 17 12:08 PM | Likes Like |Link to Comment
  • Wal-Mart: The Current Price Ignores Growth Opportunities [View article]
    Last quarter WMT grew their online sales 145%. They did over $10B last year and they will probably grow that 20-50% this year alone. To be honest, I don't think even the executives understand how much this business can grow over the next 3 years. It's not difficult to see a situation where they are doing $40-50B in e-commerce by 2017. The new CEO has outlined an aggressive spending campaign, which all long-term investors should be ecstatic about...... To make a long story short, they do have their act together.

    WMT is taking sales away from AMZN and they will continue to do so. WMT has much deeper pockets and they are simply copying AMZN. I used their site the other day and loved it. They are also using their large physical footprint wisely to offer something AMZN can't. I can order anything and pick it up in a store right next to the driving range..... I don't have to pay $80 a year and I'll be going there anyways.

    It really is just a matter of time. WMT just needs to continue expanding their infrastructure for e-commerce. Once that is money, they can sell it. Throw an ad out during Monday Night Football / American Idol about matching AMZN prices...... Watch sales double in a year. Game over.

    Good luck!
    Mar 11 07:11 PM | Likes Like |Link to Comment
  • Dollar store watch: Wal-Mart small-store plan is a big headache [View news story]
    Did it take an entire week for people to figure this out?
    Feb 28 09:20 AM | 1 Like Like |Link to Comment