We have a complaint about how Disney is trying to maximize profits by making more employees go without health insurance. Ethics aside, is Disney a good investment now?
This article claims that DIS has a wide moat. It's tough for new competitors to enter the animation market.
I love moats, though as with with Ebay that doesn't always mean short term success. Disney ought to continue making money (regardless of how well it does cheating employees out of health insurance benefits) but will it outperform the broader market? I'm not counting on it.
MVL stock might see a little boost if Iron Man continues to rake in big bucks. This is the first film financed by Marvel so its relative success has a bigger impact on MVL profits than previous films.
However, a successful Iron Man may already be priced into MVL stock so there's no saying for sure if the stock will see a sudden jump.
Question:
I'm not an experienced stock trader by any means, but I do follow the markets somewhat. Just want to get some input from those in the know. About 10 or so years ago my father in law bought my wife 100 shares of WalMart at around $50 as an investment. The stock has languished since then - it's been stuck in the mid-to-high 40s for as long as I can remember. It's at 48.82 as of 2:43 pm today.
Analysts have long looked down upon its practice of building stores too close to each other and thus cannibalizing each other's sales, leading to a decline in sales growth in existing stores. In addition, they've had to pull out of a few foreign markets for lackluster sales. And there's the issue of WalMart getting a lot of bad press because of the union and health care issues.
We basically don't take this stock into account in our financial planning, so I'm thinking that I wouldn't mind being a little bit risky in trying to take that money out of a languishing stock and making it grow.
Does anyone in the know foresee a turnaround for WalMart stock? Or should I bail and park the money in something like biotech, or in a commercial REIT?
Unprofessional advice:
1. If you're satisfied with you less than 2% dividend yield then hold on. If not, sell it and gamble on a stock that might grow (or not) or put it into a CD for 5%. Or you can sell it and go to Vegas. I am not a financial advisor, but there is no way anybody here can advise you without doing a review of your financial picture. I would discuss it with a broker or financial planner.
2. The stock has done nothing to warrant any loyalty. It has been underperforming the market since 2002, and underperforming its peers since 2003. The bottom line is all that counts, so sell it and buy something better.
3. I would have sold it a long ago. When a mass retailer gets that big... and has a giant target painted on them from every direction.... imo it's time to look elswhere.
4. I sold it a while back. It's actually down from about $67 in 2000. Wish I had dumped it all then. You've got a stock that will give you a small capital loss if you sell, and a dividend well below what a money market account would provide. It's PE is well below what it was in 2000, but the market doesn't want to value it higher.
I'd beware of REITS given the current real estate woes, but it seems to make sense for you to sell the WMT. It might be worth parking it in a MMF until you get clear signals that real estate is turning back around and then buying a REIT.
5. Short term, it's a pig. Long term could be very different. Wal-Mart has screwed the pooch recently with their merchadise selections, forgetting who their real customer is. That screw up will be rectified. They have also bailed out of some unprofitable grocery store activities in Europe.
On the other side of the coin, they have the lowest cost, most efficient distribution model in the retail business along with the economies of massive scale and a corporate culture that values hard work and thrift in operating the business.
They have the grocery industry sh!tt!ing in their drawers from coast to coast.
They are getting into banking for their legions of customers who are underserved or not served at all by traditional banks.
Sooner or later the socialists and the unions will realize that they can't drive Wal-Mart out of business.
And unlike their near-disaster in Europe, their Asian expansion seems to be going very well.
This is a powerhouse operation going through some relatively down times.
It's tough to make any money churning stocks, but there are times when you just have to say "enough is enough." Bottom line is that it depends on your patience and tolerance. They could be a high flyer again somewhere down the pike.
6. I just sold mine 2 weeks ago. With only 100 shares, upside is limited. There are many options available-- ie one of the energy ETFs, or EMC, a data storage play about to spin off a very hot property, VMWare. Its selling over 19 now, upside range to 25 with the spin off; fundamentals also look good for a longer term investment. Many, many choices for you.
Anyway, I like EMC because of their RSA acquisition, and VMWare's positioning in the whole server-virtualization market that's red hot right now, means they're poised to make a run.
Some will argue it's too late for EMC. Two months ago, when it was 13-14 would have been the right time.
7. I seriously reccommend investing it all (and more if you have) in SPY or QQQQ....If your not familiar with investing, all they are, are microcosms of the market itself. The SPY is a microcosm of the S&P 500 (Top 500 Stocks) its basically a veryyyyyyyyyyyy small slice of each piled into this one stock the moves with the market....and if your familiar with the market, it avg about 12% increase per year....from last june to this past june, it made 21% so that approx. how much you would have made had you owned this ETF (exchange traded fund its called, but its basically a stock)....The QQQQ is the same thing about 1/3 of the price and is a microcosm of the Down Jones Industrial (again 30 top, blue chip stocks). These are both safe slow upward moving investments you wont have to worry about. GL with your investing.
8. I read a nice article on Garmin GRMN back in Feb saying that GPS was going to be in everything. Bought some at $49. Bought some more a couple weeks ago a $69. It hit $82 today. This stock could be going for a while.
I hate the WalMart stock and have hated it for years. Their low cost model works because they can generate enormous inventory turnover in their big box stores but that only works if they are not cannibalizing their stores. With today's excess retail space, WalMart is moving to 150,000 sq foot stores which are even more dependent on foot traffic. Personally, and I'm not advocating that you sell, but I believe those bigger stores will ultimately lead to diseconomies of scale as they won't be able to drive enough traffic through those stores to cover their fixed overhead.
WalMart made the mistake of trying to be a growth stock after their lifecycle passed them by. Opening up new stores is fine when you're the only game in town, but they are going up against other retailers that have spent years learning how to combat WalMart.
If consumer spending turns down like I expect, WalMart will get crushed by their fixed overhead.
9. I'd sell. This is a company that's too big to growm much. So either it's a value play or it's a sell. The PE is relatively low, and they may have some valuable real estate so you might consider it as a value play. Frankly I don't bother with that kind of research so I have no idea if its real estate is under valued according to the stock price.
What to do with the money is another question and I'm not sure you sad how many shares we're talking about. A commercial REIT sounds like a fine idea especially if you need it to diversify. I like having some REITs, precious metals, and other stocks that don't normally follow the broader market...
In late January 2006 I sold China Telecom when it was arount 38 because a Standard & Poors report talked of significant risk. Now it's around 62.
I replaced CHA with Ebay, which has gone up around 15% for me. But still, I couldn't help wondering if I'd overreacted to the S&P report.
I think it's still risky. Here's an article comparing modern China to the tech bubble that cause a poor college student / amateur investor many sleepless nights.
Perhaps this article on emerging market ETFs will give me some direction. Many include stocks in Brazil, South Korea, and China. I want some of each please.
Someone recently asked the following question:
Could use some help with the company. TD Ameritrade took over Waterhouse and customer service has gone in the toilet. When I called about transferring accounts to another firm, they said there's a $75 closure fee per account and we have about 5 accounts. Does anyone know how to avoid the fees? I can't get information from the company and every time I call them, there's a 1/2 hour wait to talk. Does anyone known what to do?
One of my friends said he worked for Ameritrade for 3 years prior to leaving to go to Citi, service used to be good but in order to meet their synergy numbers for the street they laid off a ton of people, mostly those in the call centers in Omaha and Ft. Worth Not sure how to avoid the fee, what you can do is ask the firm you are transferring the accounts to for credits or fee waivers to off set those, most firms do this.
I thought this was an interesting one because I started with TD Waterhouse and left for Ameritrade because of crappy customer service plus a technical problem with their website that messed up one of my trades. So I thought it was funny when the company I left was bought by the company I joined. Now the company I joined is becoming the company I left...
I've written before about airline stocks and how outside of index funds I currently don't own any. I think some like JAL and Korean Air are potentially good investments but even my favorites in the industry carry some risk.
Korean Air gets much higher prices than other airlines since many Koreans are willing to pay more for the service and since once the few less expensive carriers are sold out, Korean travelers have nowhere else to go. They have a good niche; if you want to fly direct from New York to Seoul, you have 2 choices. Korean Air and Asiana.
I don't know how JAL does it, but they have the best prices and the best service on the New York to Seoul flight. Flight attendants have told me that the flights from Tokyo to New York and then New York to Sao Paolo, Brazil are noramlly full. Full planes ought to indicate good business...
Anyway, this article indicates a major change coming to the airline industry as restrictions on flights between America and Europe will be removed. This should result in lower fares and more competition. But it also means new opportunities for some airlines.
I suspect the big winner here will by Ryanair if they are able to add low-cost transatlantic flights. I can't imagine these not being extremely popular.
It also looks like Boeing will continue outperforming Airbus thanks the the 787 Dreamliner which is expected to see increased demand due to the new America - Europe routes.
Peter Lynch wrote that once companies reach a certain size, their stock has very limited potential. A company like GE simply can't double their earnings so how can the stock price double?
Here's an interesting article on GE, a pretty boring stock that hasn't done much in recent memory. The article recommends spinoffs and I think that's the way to go - they often create immediate shareholder value.
For example I remember when Eaton (ETN) spun off Axcelis Technologies (ACLS). Eaton shares stayed the same and ACLS were gravy. I don't see why the same couldn't happen if GE spun off its real estate or finance parts.
I thought this was an interesting look at the recent acquisitions of newspapers led by real estate moguls. Interestingly, these seem to be fairly low-risk deals:
Zell is gaining effective control of Tribune in a complex deal that calls for him to inject only $315 million of his own money. By converting it to employee stock ownership, the company also will no longer be subject to corporate income taxes that now total hundreds of millions of dollars annually, making it easier to pay off $5 billion in new debt.With all the talk about newspaper stocks, I want to take another look at Washington Post stock.
I wrote this one a while ago and forgot to publish it. Maybe it's not finished but this is all it will ever be...
Here's an interesting article that summarizes stocks being bought and sold by Warren Buffet's Berkshire Hathaway. They go into a little detail on 5 that Berkshire hathaway likes and that Morning Star rates 5 stars. These are:
American Express (NYSE:AXP)
Johnson & Johnson (NYSE:JNJ)
United Parcel Service (NYSE:UPS)
Wal-Mart (NYSE:WMT)
Western Union (NYSE:WU)
White Mountains Insurance (NYSE:WTM)
I'm most interested in WTM and AXP for further research but for now I don't own any of these directly. I do have about half my stock money in the S&P 500 index however...
Howard Schultz, the Starbucks chairman, hurt his own company's stock with a memo about Starbucks losing its way. There's no doubt that Starbucks is no longer unique but that's the normal progression of things.
According to Seth Godin's Purple Cow reasoning. When you creatw something original and it becomes popular you then cash in. By cashing in you make it less original. But you make more money and making money is something the unoriginal Starbucks has been very good at doing.
Perhaps that's why David Gardner recommends SBUX:
First mover: A head start that might be insurmountable.I don't own Starbucks. Perhaps I should; the CEOs worries seem pointless to me.
Best in big market: A top dog in a red-hot industry.
No escape: A brand worming its way into our culture.
Killer product: A product that blows away all rivals.
These four should more than get you started. And naturally, there will be some overlap among them, but any company demonstrating even one of these traits is worth digging into. For now, take a hard look at these classic Rule Breakers.Electronic Arts
Federal Express
Starbucks (if you don't already own it).If you're looking for a more speculative play, consider Akamai in the Net space or PDL Biopharma in biotech. And, by all means, keep an eye on the new direction and turnaround at TiVo. All three face challenges ahead but all could still prove to be speculative Rule Breakers.
Akamai
PDL Biopharma
ISRG
Motley Fool recently wrote about 4 stocks that Wall Street mostly or entirely ignores:
Healthstream (Nasdaq: HSTM)
National Research (Nasdaq: NRCI)
MoSys (Nasdaq: MOSY)
Unico American (Nasdaq: UNAM)
These meet 1 of Peter Lynch's criteria in that they are still 'under the radar'. If Wall Street analysts paid more attention to these stocks you would see higher valuations making them more likely to be good value picks now. That's not to say that no one owns these stocks. Take a look at the major holders of UNAM for instance.
Anyway, just a few ideas for you to look into. Remember to do your research. The Peter Lynch criteria that isn't being met (at least by me) is that when you buy a stock you're supposed to know something about what the company does and why it will succeeed.
It will be interesting to see what happens to JBLU next week and longer term in light of the recent problems. You can read some comments on my travel blog; one person says we should start suing. Another says they will never fly JetBlue because of an expensive flight to Australia.
There's a good article from the Daily News about the writer's JetBlue experience. The writer tries to capture what has been making JetBlue successful and what they might have lost.
Not many analysts cover Cardica Inc. (ticker symbol CRDC) but Standard & Poor's has a report on this company that says new products in 2008 and 2009 should mean good things for the company. The problem is that I'm in no position to judge how successful these new products might (or might not) be.
In the meantime CRDC came out with earnings today and (no surprise) they are still losing money. The stock is still going down ($5.20 down over 3% today although it was lower in the early afternoon).
For an investor like me there's no way for me to discern how good Carica's future products might be. That's the key with this stock because if this company is going to stop losing money it's going to be because doctors and hospitals need their products.
This is a perfect example of what Peter Lynch talks about in his book. Someone who operates on hearts would be in a perfect position to estimate how well these products will perform. I guess I'm in the wrong business...
Interestingly, "the 100 highest-yielding stocks of the S&P 500 outperformed the broader index by more than three percentage points annually from 1957 to 2003."
You can get access to these stocks all at once through the WisdomTreeDividend Top 100 Fund (ticker DTN). Here are a few of the stocks and how much weight they hold in the fund (according to a Motley Fool article): Southern Copper (3.5%), Verizon (1.5%), Citigroup (1.3%), Bank of America (1.2%), Altria (1.2%), Pfizer (1.0%), General Electric (0.9%).
Other holdings include AT&T, General Motors, Regions Financial, Cons Edison Inc. and more. The attraction here is that Jeremy Siegel, the Wizard of Wharton, "demonstrated in his recent book The Future for Investors that the 100 highest-yielding stocks of the S&P 500 outperformed the broader index by more than three percentage points annually from 1957 to 2003."
I thought it would be interesting to see how the latest strike affected Hyundai. This article says something about the finances: "Hyundai, which together with its affiliate Kia Motors Corp., is world's sixth-largest automaker, suffered its biggest losses ever from strikes in 2006. Four walkouts cost the company 118,293 vehicles in lost production worth $1.75 billion." However, this particular deal seems like a win for the company since they won't be giving out bonus money until production goals are met.
The stock is about 69,400 won right now (Hyundai Motors). MarketWatch has HYMLF - Looking at the chart, the stock appeears to be climbing away from 52 week lows around 67-68. We're now looking at 72.57.
If you're attracted to stocks that seem to be recovering from bad news, look into Hyundai but be careful. The chairman might be going to jail soon and apparently no one is certain that anyone can replace him.
Yahoo Finance has this interesting Morning Star article on the risks of investing in mortgage REITs. It's somewhat balanced in that they talk about advantages such as good returns over the past 5 years and they help diversify your portfolio because they (REITs in general) don't follow other stocks.
I thought this article on ten stocks that might outperform the market in 2007 to be an interesting one. I can't help but contrast these 10 stocks with Peter Lynch's advice about going for unknown stocks. Obviously with the companies on this list you're not looking at ten-baggers. However, I suppose most of us are happy if we outperform the market by a few percentage points so this list is a good starting point for your won research.
One exception is the (until now) little known Universal Forest Products (UFPI) and Ntelos (NTLS). The other companies discussed are ConocoPhillips (COP), Meredith (MDP), SkyWest (SKYW),First Marblehead (FMD), CompuCredit (CCRT), Emcor Group (EME), Johnson & Johnson (JNJ), Atrion (ATRI), Astronics (ATRO), and Lockheed Martin (LMT).
This year is turning out to be no different. Workers are threatening to strike because the company wants to give them a bonus of 100% the worker's monthly salary. The workers want 150%.
Hyundai is already dealing with a strengthening Korean won and a weakening US dollar. The annual strike might really hurt the company this year. It hasn't happened yet, but it is looming.
I don't worry too much about the Santa Claus stock rally because I tend to invest longer term, but there are some interesting articles out there. Here's one that seeks to vary the dates some, with positive results. There's no indication that Santa will come through this year, but maybe he will come through this year as well. He does seem to be coming through in Korea, despite the exporters who continue to suffer from a very strong Korean Won.
On September 10, I wrote about why I bought Ebay stock. The short version is that it will be hard for other online auction sites to compete with Ebay. I also like their new deal with Google to supply advertising. I didn't mention it then, but I also like all the free advertising they get. People email each other weird Ebay auctions and newspapers talk about the big charity auctions that happen on Ebay.
What I really like is that Ebay is now over $31 - a better than 12.5% gain in a month and a half or so.
I've read the introduction to his book One up on Wall Street and to summarize what I understand so far, average people like you and I can beat not only the market but alost the stock experts by paying attention to companies around us. Examples that were easily accessible to many consumers would be Hanes (when L'eggs came out), Dell, Home Depot, Harley Davidson, MCI Worldcom, and more.
As some of you may recall, I've been leaning toward a more passive investing strategy recently (though I still do some stock picking or this blog would be truly pointless) but I'm keeping my mind open and will let you know if Lynch's book convinces me to adjust my strategy.
Don't forget about the stock guru screener I recently blogged about - Lynch is one of the gurus.
There are some excellent investor tools on the http://www.nasdaq.com/ site. You can find analysis of any stock against the criteria of many of the most influential investors (think Peter Lynch, Warren Buffett, The Motley Fools, etc.). Or you can screen the market for stocks that match your favorite gurus. For example I found PTR PETROCHINA COMPANY LIMITED showing up a couple of times as i used the guru analysis tool. This would be an interesting stock to look at: it has a good PE (around 10), a good PEG (0.4 according tot he NASDAQ site), and a dividend that yields close to 5%. On the surface it apperas to be my kind of stock so it may be time for a little digging...
Also, check out Risk Grades, and Custom Heatmaps.
There are always a few tech companies suing each other over patents and things, and Merck is still in trouble over Vioxx, but it's been a while since we've had anything like Phillip Morris or Altria seeing its stock decline like crazy thanks to huge lawsuits.
Are the lawsuits back? Designers are going after Ebay because people sell fakes on there. I would think the sellers should be responsible but I think Ebay will be held accountable. California is going after US and Japanese automakers. What's next in the latest round of litigation?
If things get too complex consulting someone with a degree from a school of law might be your best bet.
As some of you already know, I like stocks with wide moats like the Washington Post. Ebay has lots of competition, but it's kind of like the 'zine' I started in high school trying to compete with an established paper like the Washington Post. To really compete with Ebay is going to cost a fortune. The cost is so prohibitive, that Yahoo has all but given up on their auctions.
Yes, I remember a time when many Ebay sellers also used Yahoo because there was no listing fee. There were also no buyers so we quicly stopped wasting our time. Then Yahoo did begin charging a listing fee. I don't know what happened to Yahoo auctions, but I guess they died.
So anyway, I like Ebay because it's hard for new companies to compete. Ebay has been declining recently. At 28.5o right now, PE is close to 40 but forward PE is 22.63. PEG is a decent 1.32.
I also think that new deal with Google (where Google supplies ads to Ebay) will be a big success. People spend leisure time on Ebay, meaning that they are ready to take hours looking for things they want to buy. That's the other key; they want to buy. Take someone who wants to buy, put ads in front of them for a few hours and I bet they start clicking.
As always, I can give you advice. But I can tell you what I'm doing so that you can go do your own stock research and decide for yourself.
Here's a well thought out highly bullish article on Sirius and XM Satellite radio. The author owns shares of Sirius and it's clear why. He thinks Howard Stern, NASCAR, and NFL will be big winners for Sirius and points out that there's lots of room for growth with relatively few Americans subscribing now.
From the big Microsoft fine to bad news for Haliburton there is certainly reason to be bearish on stocks short term. Rising oil and gold prices again remind us of the need to diversify. If all my money were in tech stocks I'd be a lot more worried than I am now. Having money in CEF and other gold plays sure seems like a good move to me.
I think there's a very strong chance that the market is overreacting to North Korea's missile tests. As a result, I think it's time to look for buying opportunities in these declining Korean companies.
I'm not real interested in POSCO because I worry that we may see government subsidies exposed. LG is an interesting company and the biggest decliner recently. Kookmin Bank and Woori Finance are both solid financials. In fact, I do business with both banks. Anyway, just some stock worth looking at.
According to this article about the 2008 Dodge Challenger, some believe this is the right direction for US automakers:
"The problem the domestics have had for years is that they abandoned their blue-collar buyers and ventured out into new horizons and forgot their roots," Lindland said.With gas prices being what they are, I'm not so sure that muscle cars (and I'm sure the Cahllenger will be popular - heck I want one) are really a large growing market.The domestics attempted to win over Toyota and Honda buyers with high-mileage sedans, rather than wooing the millions of NASCAR fans with performance.
This article (which has a picture you can enlarge) goes into a bit more detail about why this is a good decision - apparently it will be chaep to produce, using lots of stuff from cars already in production.
If the Challenger really is priced to compete with the Mustang, this might help the company's stock.
Airbus is in trouble. They invested a fortune in A-380 and came up short. The CEO sold stock right before the company announced it would not come close to expected profits and the future looks bleak: 'There is huge reputational damage here. Would you buy an aircraft from these people today? The answer is probably no. You'd go to Boeing.'
Airbus's parent company, EADS, lost a quarter of its value in a day and this could be good news for Boeing. Investors who want exposure to the commercial airline industry are running out of options; Boeing might be the best one left.
A Merrill Lynch analyst, David W. Anders, is recommending cruise stocks as a contrarian play. He joins the ranks of at least one Motley Fool.
I know from the cruise news in my travel blog, that the cruise industry gets lots of attention and most of it is positive. I agree with analysts who say that the market in America is growing and will continue to do so. Risks include more bad news in terms of viruses and disappearances, higher oil prices, terrorism, bad weather, and stricter environmental regulations (cruise ships run on diesel and murder the environment).
Are the stocks really undervalued when you consider not only the current valuation and potential growth but also the risks? What are the chances that the stock will outperform the broader market by a large enough margin to make up for the risk of underperformance? Since I can't answer these questions, I'm not buying cruise stocks.
With interest rates ready to rise, stocks are on the way down. This Bloomberg article has a nice summary of declines in Japan, Korea, and Europe.
What surprises me most is the drop in metals:
Copper prices in London have dropped 13 percent in the past four days, the biggest decline since June 1996. Metal for three- month delivery on the London Metal Exchange fell as much as 4.1 percent to $6,750 a ton today, the lowest since April 25. Gold prices dropped below $600 an ounce for the first time in almost two months.There should be a buying opportunity here somewhere. All we ahve to do is find it.
This is a very attractive industry, and VSE will be the only "pure play" (at least for the next few weeks) since companies like ADM (the market leader in the US ethanol market) are divirsified. Anyway, this is a profitable company in an attractive industry so everything's good, right? Well except for the high debt. Anyway, we've got articles from Motley Fool (they warn that the industry and its companies are in flux), BusinessWeek (here we learn that the cost of their new plant is estimated to be 280 million - more than the 190 they are expected to raise from the IPO - meaning that this company will be further in debt soon), and many others.
One Motley Fool writer is bullish (long-term) on Carnival and Royal Caribbean. He argues that Carnival would be the better investment since they are already bigger, growing faster, and have higher profit margins.
Royal Caribbean caters to more discerning clientele, making them the right choice for your next vacation but the wrong choice for an investment. I would like to think that the better product (Royal Caribbean) would be the better investment. However, I'm not sure that either product is very strong right now.
Each company has received their share of bad press lately. From Carnival offering extraordinarily bad cruises (and kicking people who complain off the ship) to people missing from Royal Caribbean cruises, I would say investing in either company would be investing in a tarnished brand.
Thursday, MasterCard shares will begin trading at 39.00 a share.
I see some similarities with Google since both companies started trading lower than expected. MasterCard is expected to raise more than Google's 1.7 billion in 2004, but one wonders if it will see the significant gains made by Google.
MA, the ticker symbol for MasterCard, is being priced below expectations because of antitrust concerns (650 million from the IPO is being put aside to cover future legal expenses) and protests by retailers that fees are too high. However the 39.00 starting price on MA shares is hardly exclusive and we are talking about a very well-known brand with an excellent moat.
Shinsegae is acquiring Wal-Mart Korea for 825 billion won ($882 million) in a move which should benefit both companies. Investors agree that it's good for Shinsegae, up 6.6 percent to close at 460,000 won ($484).
Shinsegae will significantly strengthen it's E-mart brand while Wal-Mart gets a good price for a business that was seeing sluggish growth and sales last year in South Korea that totaled 750 billion won ($787 million).
I'd like to know how much of that $787 million was profit, but have been unable to find that information. With the limited information I have, I see this as a plus for Wal-Mart stock. Also, the deal still needs to be approved by the Korean overnment.
Many analysts believe that we need some more inflation-friendly data, data that will indicate the Fed needn't raise rates for a bit, in order to see a significant rebound in the markets (which lost 4.4% in 6 sessions). There may be a small bounce that isn't very meaningful:
"We've had a very abrupt correction, down to an area that provided support for the market in February. You can expect a bounce here," Russ Koesterich, senior portfolio manager at Barclays Global Investments, said. But, "if you get a modest bounce next week on low volume, you really can't attribute much to it."
Personally, I don't try to time the market so I won't be giving advice about when to invest. Who knows if this week, next, week, or next month will be best?
I suppose it's no surprise that Motley Fool says we have to try to beat the market. If everyone started indexing, they'd all be out of jobs, after all.
So the argument goes that we can follw the "cear path" set by Benjamin Graham, Warren Buffett, Walter Schloss, and Bill Miller (if we listen to Motley Fool). You see, it all very simple:
Figure out what a company is really worth.Actually, I'm thinking that's a little bit harder than that. I know a few Fool subscribers. None of them are rich...
Determine how much the stock market is asking for the business.
Invest based on the difference between No. 1 and No. 2.
Wait for the market to realize and correct its mistake.
By the way, if you're curious they are recommending First Data [NYSE: FDC], Federated Investors [NYSE: FII], and Lloyds TSB [NYSE: LYG]. I actually like Lloyds and its 6.1% dividend.
Fidelity's Anthony Bolton, one of the UK's top fund managers is preparing for a setback in the UK stock market. Since he correctly called the bull market in summer 2003 (UK stocks have close to doubled since March 2003) this warning does carry significant weight.
The Fidelity Special Values trust said in a statement to the stock exchange: "The manager... believes that after three years the bull market in the UK has now entered its final stage. The number of stocks that meet the manager's investment criteria have fallen."
Environmental Power Corp. (ticker symbol EPG) is in the business of generating
electricity from farm wastes. EPG has first-mover advantage in developing market for large-scale biogas production through renewable resources such as cattle manure. That's according to Merriman Curhan Ford & Co. who set a "buy" on 8/18/2005.
I checked S&P and Market Edge, but neither follows this stock. I suppose it's hard to find research on a stock when the company has a market cap of 86.29 million. Anyway, I like the industry but have little information on the company. I'm not invested in this company but am looking for more info on it.
Change #1: Lower commissions: $9.99 commissions on Internet stock and options trades ($0.75 options contract fees apply).
Change #2: No more maintenance fees, no matter your balance.
This is probably a good move for Ameritrade. It seemed that with their low commissions, they were targeting smaller investors. The maintenance fees probably kept some away.
Back when MLS was around 51.00 I wrote that I was considering selling. I didn't, and now MLS has fallen on hard times.
Recently some good news pushed the stock over 31.00/share so you can see I've endured quite a beating. The good news is that Farallon (a hedge fund) has bought a 5.6% stake in MLS. Of course that was after lots of bad news (including an SEC investigation) cause the stock price to tumble.
Exxon Mobil shareholders are unhappy about the 98 million being paid to their ex-CEO. The rest of America is unhappy that Exxon Mobile set a record for profitability as gas prices rise.
The argument makes sense. Lee R. Raymond took over a healthy company and didn't have to do anything extraordinary so why does her get an extraordinary amount of money?
Sure, he's been with the company 43 years but are we really talking about company loyalty? I imagine that lots of Americans end up working for a company for a long time and still need to worry about their pension when they retire...
I see why the stockholders are upset as well. That money could go toward a higher dividend or share buybacks but in the end I don't think this will have a real lasting impact on Exxon Mobil stock.
American Home Mortgage Investment Corp (AHM) is a mortgage REIT engaged in the investment, origination, resale and servicing of residential mortgages in the U.S. Morningstar gives it 3 stars and a 12 month target of 30 (basically where it is now). Dividend yield is just over 11%.
Thornburg Mortgage TMA is a single-family residential mortgage lender focused principally on the jumbo segment of the mortgage market. Morningstar gives it 4 stars and a 12 month target of 28 (currently around 26). Dividend yield is 10.2%.
The high dividends fit nicely into my investment strategy: I like my non-IRA investments to generate income without the need to trade (tax time is miserable if I've been an active trader). I can't help but notice that TMA has a dividend coming up while AHM has just passed a dividend payout. S&P thinks AHM has a sustainable dividend, but I do think that the TMA dividend may be more stable and am leaning in that direction. Comments and advice welcome!
Strong earnings from Alcoa couldn't push the broader market up as the aluminum producer sareported 69 cents a share versus 30 cents a year ago. Analysts surveyed by Thomson Financial thought it would earn 51 cents per share and Alcoa is up $1.84 to $34.67, more than 6 percent.
The boader market, however, is in decline thanks to more geopolitical uncertainty. The Iranian president claims that Iran will soon have nuclear technology. Oil threatening to reach 70.00/barrel didn't help either.
Not all companies can blame Iran and oil for their stock prices; some declines come from bad news. Merck is down $0.37 to $34.05 because a jury awarded 9 million dollars to a man who had a heart attack after taking Vioxx. The jury said Merck deliberately misrepresented the dangers of its painkiller Vioxx. I originally mentioned Vioxx in 2004 and it also relates to my complaints about US laws on class action lawsuits.
Another decliner with an obvious cause is Bausch & Lomb (down $9.73 to $47.71 - 17 percent). They are no longer shipping ReNu contact lens solution because some users suffered serious eye infections.
I thought this article from CNN/Fortune on how companies outperform if their CEO is also their founder. The article has this to say regarding companies with founder-CEOs in the Fortune 500:
The stocks of these 26 companies (plus Liberty Media, whose founder John C. Malone stepped down as CEO March 1, but remains chairman) returned an average of 18.5 percent annually from year-end 1995 through 2005, which is seven percentage points better than the FORTUNE 500's average return over the same period. Their profit growth has been superior, too, increasing at an average rate of 19.6 percent a year from 1995 to 2005, vs. 11.7 percent for the FORTUNE 500.In the end what you may be most interested in are the companies that have had the best returns over the past 10 years - percentages are average annual stock returns:
1. Whole Foods Market 36.6%In the end, what I love about this article is that it offers some concrete advice regarding management. Everyone always says to examine the corporate leaders when choosing an investment, but most of us are short on specifics. Here's one direction - founder-CEOs.
2. Kinder Morgan 31.6%
3. Capital One Financial 27.4%
4. EchoStar Communications 24.9%
5. Apple Computer 24.6%
Fresh Del Monte is down over 1.50 (more than 7%) on lower than expected earnings. FDP reported a fourth-quarter loss of $3.5 million, or 6 cents a share, down from a year-ago profit of $19.1 million, or 33 cents a share. On an adjusted basis, excluding charges from asset impairment and restructuring activities, the Coral Gables, Fla., produce distributor lost 2 cents a share in the latest quarter. Sales fell in the latest three months to $757.9 million from $818.2 million in the same period a year earlier.
The company blames lower banana pricing and increased competition in Asian markets, weak sales of gold pineapples during the holidays, and increased competition in the U.K. prepared food business. The average estimate of analysts polled by Thomson First Call was for a profit of a penny per share in the December period on sales of $849.8 million.
Jeremy Siegel Ph.D. compares a value investment in Standard Oil of New Jersey (now ExxonMobil) vs. a growth investment in IBM. Assuming the investment was made in 1950 and that all dividends were reinvested in the company stock, which would have been the better investment?
Although both stocks did well, investors in Standard Oil earned 14.46 percent per year on the shares from 1950 through 2005, almost 1 percent percent per year ahead of IBM's 13.09 percent return. Although this difference looks small, $1,000 invested in the oil giant in 1950 would be worth over $1,800,000 today, while $1,00 invested in IBM would be worth $867,000, less than one half the amount in Standard Oil.The conclusion the author reaches is to avoid the "growth trap" because stocks with better valuations are better long term investments. This is true even with stocks that have small dividend yields if they do share buy backs (a company will be able to buy back more shares if its stock is not inflated by groeth investors).
Stocks that have the brightest prospects and are expected to grow the fastest are not necessarily the best investment. It all depends on the price you pay for the value you are getting. In fact, I will show in subsequent columns that it is growth relative to expectations that is the key determinant of investor returns.
Vanguard Energy VIPERs (VDE) is an ETF that seeks to track the performance of the MSCI U.S. Investable Market Energy Index. With an expense ratio of .26% it's quite reasonable.
The top holdings consist of well known names such as Chevron, ConocoPhillips, Exxon Mobil, and Halliburton.
I also came across a Motley Fool article from jan. 3 2006 which details the authors IRA: Vanguard Total Stock Market (VTI) which has a cost of .07% a year. Vanguard Emerging Markets (VWO) has an expense ratio of 0.30%, and tracks the performance of the Select Emerging Markets Index. The top holdings include Israel's Teva Pharmaceutical (TEVA), Korea's Kookmin Bank, and China Mobile. It has outperformed the S&P 500 by a wide margin in the past year.
Then there's the iShares S&P MidCap 400 (IJH) ETF. The average company in the index has a market cap of just $3.4 billion. It has outperformed the S&P 500 over the past 5 years but the charts look very similar. This ETF seems to give you a shot at outperforming the broader market, but doesn't truly diversify your portfolio.
Speaking of diversification, some would recommend Vanguard REIT Index VIPERs (VNQ), but a chart to chart comparison shows that while outperforming the S&P 500, VNQ still follows most of the broader markets ups and downs. Of course if terrible things were to happen to stocks, real estate investments (and VNQ) might hold more of their value than stocks.
Even Vanguard Materials VIPERs (VAW) seem to go up and down with the broader market when you compare the charts. I still feel that gold (for example streetTRACKS Gold Shares - GLD and iShares COMEX Gold Trust - IAU) is the most certain way to diversify. Other metals like silver would be a nice play as well but there is no ETF focusing on silver (when there is I would expect silver prices to increase even more quickly than they are doing now due to increased demand). That's why I have CEF in my IRA.
CEF is a closed-end fund limits its amount of shares. Because closed-end funds limit their shares, they can trade at a premium or discount to their net asset value. I believe that currently CEF is trading at a premium to its net asset value.
Steven Thorley, Associate Professor and Finance Group Leader, the Marriott School at BYU, wrote an interesting paper in 1999. He argues that markets are inefficient. An inefficient market is one in which stock price does not always reflect fair value. Investors make money in an inefficient market by finding and investing in these "mistakes", these stocks that are valued incorrectly.
The conclusions he draws are rather interesting. One is that making money as an active investor will become more difficult:
If active investing is a skill-based game, then skilled players will be worse off when lower skilled investors choose not to play. As an active investor, your ability to outperform the indexing alternative (be better than average) depends on the participation of players with below average skills. Someone has to buy the stock you want to unload at a higher than justified price, and sell the stock you want to buy at a bargain. Someone has to be wrong in order for you to be right.The author believes that many active investors don't realize this. Some simply don't understand that the stock market is a competitive place where some people have to lose in order for other people to win. Other people realize this but continue investing actively because overconfidence blinds investors to the fact that about 2/3 of them would be better off indexing.
Thorley's argument that markets are inefficient (and that investing is a competition won by skilled players) also shows the folly of investing in actively managed mutual funds:
In fact, when a given category of investor, for instance, mutual fund managers, consistently underperforms the market by more than can be accounted for by the extra costs of active investing, then some other category of investor must be consistently outperforming the market. The percentage of actively managed mutual funds that underperform the market has been reported as high as 95 percent. If this number is accurate and persists over time, then it is evidence that the market is a skill-based game, and that active mutual fund managers, as a group, have below average skills. If investing is a skill-based game, then prices in the stock market are not efficient.The Great Mutual Fund Trap by Gregory Baer and Gary Gensler, former officials of the U.S. Treasury covers the topic of actively managed mutual funds in great detail while arguing that passive investing is the right approach for individual investors. The argument is a convincing one: over every five-year period only about 20% of actively managed mutual funds perform well enough to make up for their fees and expenses.
That doesn't mean, investors should go pick one of the few funds that has outperformed the past 5 years. Picking a winning fund is not so simple. The authors show that funds that outperform for one five-year period are likely to underperform for the next five years! By the way, The Great Mutual Fund Trapalso calls for investors to avoid day trading, and stock-picking. Instead, investors should buy funds with low fees and expenses. The Vanguard Total Stock Index and 500 Index funds are the authors' favorites. They also encourage investors to consider ETFs, focus on asset allocation, buy bonds directly from the government, and invest in tax-advantaged accounts like Roth IRAs for retirement and 529 plans for education expenses.
Thorley also notes that active investing is a more expensive game to play than passive investing. Transaction fees, capital gains tax (not an issue for some retirement accounts), time and effort (you either do the research yourself which may come with expenses such as using Morning Star or Motley Fool or you pay someone else - like a mutual fund manager - to do the stock picking for you). Active investors have less diversification and therefore, greater risk.
Of course, to be fair, we have to mention the benefits of active investing. It's more fun, especially if you win (although when you lose it can be awfully stressful), than passive investing which is always boring. People with inside information can beat the market (this may not be legal, but it's not uncommon). So can people who are more skilled than 2/3 of active investors. Here the author reminds us that 80% of drivers feel they are among the top third in driving skill. Thorley argues that most active investors make a similar mistake when it comes to evaluating their investing skill.
There is one final point to consider: size.
Size may be the one competitive advantage of the individual investor, because pricing errors on very small or illiquid stocks can not be exploited by large institutional investors. Either the market order itself will be so large that the pricing error evaporates as the order is executed, or the position taken will be too small to materially affect the bottom line of a large pool of money. The significance of this individual investor advantage is debatable, given the relatively high costs, both research and transactions, of active management in the small-cap market.This means that maybe a small investor can take advantage of a situation that an insitutional investor would never bother with. To do your own research, buy The Great Mutual Fund Trap and check out Thorley's paper online.
I've been nervous about getting into the energy sector for a while now, but considering the last few days, I have to wonder if this is a buying opportunity. I must stress that I'm only beginning to look into this and have done nothing yet.
Encana Corp (ECA) is down to 42.75 from around 48.00 a few days ago. There business includes exploration, production, and marketing of natural gas, crude oil, and natural gas liquids (NGL) in Canada, the U.S., Ecuador, and the United Kingdom.
CHK, Chesapeake Energy Corporation has also had a rough few days. CHK engages in the acquisition, development, exploration, production, and marketing of oil and natural gas in the United States.
Diito for Valero Energy Corporation, VLO, which operates as a refining and marketing company. It also produces a slate of gasolines, distillates, jet fuel, asphalt, petrochemicals, low-sulfur diesel fuel, and oxygenates.
After writing about the risks inherent with China Telecom (CHA) I sold. After a 17% gain, I saw too little upside and too much downside risk.
I'm also considering taking some profit on OVTI which is up around 66% for me. I wrote about it being undervalued back in July 2004 and how it reminded me of the tech bubble. While it seems like a good time to take some profit, the PE is still a reasonable 21 and the PEG is a very nice 0.72 according to Yahoo Finance.
"We don't think it's reasonable to assume we're going to gain a lot of share from Google," Chief Financial Officer Susan Decker said in an interview. "It's not our goal to be No. 1 in Internet search. We would be very happy to maintain our market share."
This has aroused some criticism: "It kind of makes you wonder about how serious they are about search," said Danny Sullivan, editor of London-based SearchEngineWatch.com, which tracks the search industry. "It really ought to be their goal" to be No. 1, he said. "Whether it's realistic or not."
I say we take it at face value - Yahoo is not going to try to win 21% more of the search market from Google (Google has 60% while Yahoo has 19%). The search market might be the most profitable niche, but it's not the only one. While this is certainly good news for Google stock (nice to have a wide moat), it may not be bad news for Yahoo stock.
I've written about CHA before and readers may remember that I invested in CHA at around 33. Now that the price is up to around 38, it is time to consider selling. Reading the Morning Star report on the stock, I see that they call the business risk "above average".
CHA does have a narrow moat, but is seeing increasing competition. More importantly, the Chinese Government is the majority shareholder. China Telcom may do things that are seen as good for China even if they may not be good for the company. One example is if China Telecom uses a new Chinese developed technology for 3g mobile services.
Finally, CHA has a history of relying on debt for funding. So far operating cash flow is covering interest and capital needs. Considering these risks, it seems like time for me to take my profits and run back to the safe index funds and dividend paying (CHA does pay a dividend) stocks I prefer.
Whole Foods (WFMI) is a stock that doesn't often make the news but is making headlines now. Whole Foods, the biggest U.S. natural-foods grocer, said that it's making a "historic" purchase of renewable energy credits from wind farms to offset 100% of the energy it projects it will use in 2006 to run its stores, facilities, bake houses, distribution centers, offices, and headquarters in the U.S. and Canada.
Whole Foods spokeswoman Ashley Hawkins declined to disclose the purchase price. Clearly, investors need to consider how costs might influence profits at WFMI, shares of which currently trade at close to 79 times earnings. WFMI has historically traded at very high multiples.
At first, Whole Foods reminded of of the Washington Post because it has a wide moat. That is, its position in the market is dominant and new competitors are unlikely to show up, much less prevail. However WPO has a PE around 23.5. I suppose Starbucks (SBUX) is a better comparison with its customer loyalty and its PE over 50.
Personally, I don't understand why stocks like WFMI and SBUX trade at much higher price to earnings rations than a stock like WPO. With WPO shares down to 771 (down over 18.00 or 2.3%) WPO is a stock I have to reconsider. For those of you keeping track, the stock price was around 750 when I mentioned it on Nov. 20, 2005. At the moment I am not invested in WPO stock.
A week or two ago I heard a stock pundit talking about legacy carriers, traditional US-based airlines like AA as a contrarian stock pick. Maybe, but how do you pick one that's not about to go out of business?
Independence Air (FLYi) has flown its last flight, but Southwest and Jetblue seem to be doing better than the legacy carriers and this is reflected in their stock prices. A profitable US airline is so exciting that JetBlue Airways Corp. (JBLU) is trading with a PE of 97 and a 1 year estimated forward PE of 77. Southwest Airlines Co. (LUV) has a more attractive PE around 26 with a forward PE of 24.
AMR Corp. (AMR), US Airways Group Inc. (LCC) and Continental Airlines Inc. (CAL) are losing money while ticker symbols say it all for DELTA AIR LINES INC (Other OTC:DALRQ.PK) and Northwest Airlines Corp. (NWACQ.PK).
Contrarian picks? Certainly. Good investments for a retirement nest egg? No. Airline stocks are trouble because they can't control geopolitical uncertainty or oil prices. Both of those things can wreck profits. The US based legacy carriers are in a mess to begin with...
Having gained some ground last week after boosting its dividend, Pfizer had more good news for investors: a win in their lipitor patent suit. This means that there shouldn't be any generic competition until 2010.
However, investors worry about issues like patent expirations, stagnating sales, competition for key products, and a pipeline that may not be strong enough to propel growth. Investors have to weigh the expected lack of growth and the risk of negative news with the fairly nice dividend. AP Business shares the two opposing views:
"It's not like they (Pfizer) got a huge windfall of revenues we didn't expect, said Jason Napodano, an analyst at Zacks Investment Research. He predicts Pfizer's revenue will decline this year and jump only 1 percent in each of the next two years.As for me, I'm holding. I see no need to dump the stock at a loss (though I would strongly consider doing this if I needed to offset capital gains) because I can live with the risk of negative news, and like the dividend.But Bert Hazlett, an analyst at SunTrust Robinson Humphrey is upbeat about the company's long-term prospects. He noted that Lyrica, a pain medication launched earlier this year is off to a strong start. Next year, he expect Pfizer to introduce Sutent, a cancer drug. Exubera, which is inhaled insulin, and Indiplon, a sleeping aid, may also hit the market.
Still Hazlett concedes he doesn't see noteworthy earnings growth until 2008, even though the dividend may prompt investors to buy the stock. "You are being paid to wait for growth," he said.
AP Business Writer, Ellen Simon writes that investors have too many fears for there to be a bull market despite strong 2005 corporate earnings:
Strategists' 2006 predictions for stocks range from tepid single-digit increases to a handful of highly qualified hopes for a mid-teen jump.Of course the fears are significant:
1. Short-term interest rate hikes could lead to recession.
2. Budget and trade deficits.
3. Consumer debt.
4. The possibility of another Enron.
5. Exogenous shocks like terrorist attacks.
6. Little room for growth (An early 2006 end to interest rate hikes is already priced into the market, Tim Hayes, global stock strategist at Ned Davis Research, said. And stocks fourth quarter increase has left little room for growth).
7. Energy prices.
8. The mess in Iraq.
9. The dollar could fall further than expected.
10. Health care and pension costs for retirees may impact earnings.
10. Expensing options could hurt companies' returns.
11. What if the government raises trade barriers?
12. What if consumer spending falls off a cliff?
Korea's Financial Supervisory Service (FSS) will be requiring Korean companies to adopt an English disclosure system to attract more foreign investors into the Korean market.
Under the guideline, 34 companies like Kookmin Bank whose stocks are also listed on the overseas stock markets, will be required to adopt the English disclosure system as early as in October next year. The local stock market will fully adopt the English disclosure system by March 2007.
Centerpoint Energy (CNP) is a US utitlity with unispiring numbers: PE = 17.69, 1 year forward PE = 13.29, estimated PEG (5 year) = 2.13, dividend yield = 1.8%.
However, it is experimenting with what may be the next big internet growth area:
BPL, or broadband over power line, uses a unique new technology that provide a customer with the ability to access the Internet and receive other Internet-related services, over existing power lines that are BPL enabled. Due to the emergence of this exciting and viable new technology, BPL is being tested for commercial and utility purposes by a number of entities across the United States....I learned not to invest in hins I don't understand when I bought SUN Microsystems stock after someone told me that Java was the code of the future... Anyway, this is not a stock for me, but you may be interested in doing some resarch.Given that BPL technology uses existing electric power lines, it has the potential to reach every customer that is connected to the electric delivery grid. That’s practically every home and business in the United States! This is a marked advantage over cable and DSL broadband. If tests prove successful, BPL could be a viable alternative to DSL and cable for providing broadband Internet services.
A friend of mine recently did a stock screen on Morning Star looking for value stocks with wide moats. Interestingly, Joe Mansueto , the founder of Morning Star is a huge Warren Buffet fan and the Washington Post is the type of stock Warren Buffet likes (In fact Buffet sits on the board and owns a few shares).
Anyway, he said "Buffett looks for companies that have a "moat" that shields them from competition and allows them to earn high rates of return. The moat is something that creates high barriers to entry for would-be competition." The Washington Post has this - it's the most faomous newspaper in its area and does the best political reporting in the country. And no one seems likely to start up a newspaper that competes directly with the Washington Post...
So here's what my friend had to say about Washington Post stock. As always, we're not recommending any action other than you doing your own research.
At 750/share this stock seems to be discounted. The stock may be as much as 25% below its intrinsic value. Remember this is a value stock, not a growth stock. It's PE is 22.3 and PEG is 2.1. The newspaper is a mature business as is its cable division.
While the cable division has been one of the most profitable in the industry, it did lose 90,000 subscriptions due to Katrina. Subscription growth has been slowing anyway (competition from Direct TV has a lot o do with that).
So is there any chance for growth? Yes, there is a chance. The company is taking profits from its mature businesses and investing in Kaplan University online which has seen 23% growth this quarter alone. Still 40% of the company's income comes from advertising which is somewhat cyclical.
As a whole the company has been seeing revenue growth of 8%/year and its 17% operating margins are quite attractive. This company does not provide guidance or do conference calls with analysts (another thin Buffet likes since management is focusing longer term rather than quarter to quarter).
As always, this is just to get you started. You must do your own research.
Tyco's Chief Executive Ed Breen said on a conference call that "Should the valuation disconnect persist, we are prepared to additional actions to address this," Breen said.
Tyco has repurchased $300 million of its shares in the fourth quarter ended on Sept. 30 and an additional $200 million since then. It also spent $450 million to repurchase convertible debt securities during the latest quarter.
Tyco trades at around 13 times 2006 earnings (estimated) while the S&P averages around 15. I've been holding Tyco for years now, and got in at one of the worst posible times (the late nineties)...
Martin T. Sosnoff on Forbes.com writes that he is underweighting Microsoft and considering getting out of the stock altogether. He notes certain poor management decisions including dilution from options, poor choices with dividends, working capital, and investments.
For the fiscal year ended June, Microsoft bought back almost $8 billion in shares, about 3% in its equity base and half its cash flow. All this accomplished was the offsetting of dilution from options. You do what you have to do to keep talented management in place, but it is an incredibly high price to pay and doesn't go unnoticed.But he does have one reason for staying in Microsoft: "Gross margins are over 80%. There are no other businesses on this scale with $40 billion in revenue that sport this profile."
So the question is shoud investors own a stock that seems more inerested in taking care of managemen than investors. Considering that Microsoft shares were down 30% over the past five years ended June, I'm thinking hat this is not a stock for me.
SpaceDev and Starsys have signed a merger agreement, which is interesting to me because I used to be invested in Spacedev. If you look at the 5 year chart it's up about 50% and has easily outperformed the broader market. It's in an interesting market and has cool aims (affordable space travel) but the financials are not compelling unless you're convinced this industry is going to be big. I imagine it will be, very long term...
And info on the merger:
Under the terms of the merger agreement, Starsys, a private Colorado corporation with headquarters in Boulder, will merge with and into a newly-created, wholly-owned subsidiary of SpaceDev. SpaceDev will pay approximately $9 million, which is broken down into $1.5 million in cash and $7.5 million SpaceDev common stock at the effective time of the merger, subject to adjustment as provided in the merger agreement. SpaceDev will also pay off at closing approximately $4.6 million of Starsys debt and forgive a $1.2 million loan from SpaceDev to Starsys. Following the merger, Starsys shareholders may also be entitled to receive, based on the achievement of certain performance criteria for each of the fiscal years ending December 31, 2005, 2006 and 2007, additional earnout consideration valued at up to approximately $19 million, with approximately $1 million in cash and $18 million in SpaceDev common stock. The number of shares issued will depend on both the achievement of the performance criteria and the prevailing stock price at the time of measurement. Current holders of Starsys common stock will become holders of SpaceDev common stock following the merger. The merger agreement is subject to a number of conditions including but not limited to the effectiveness of a registration statement for the stock to be issued and approval of the shareholders of SpaceDev and Starsys.
While crude oil futures dropped $US1.70 to $US63.05 per barrel, Deutsche Bank raised its rating on Dow-component Exxon Mobil to "buy" from "hold," saying oil supplies are likely to remain tight over the coming year.
I see no reason to dispute this. It seems like the 40.00/barrel days are long gone and one wonders if we'll ever see 50.00/barrel again. 60.00? Perhaps.
To me this means not only that oil companies will benfit but so will companies like Toyota which is leading the pack in terms of hybrid technology and Honda which has high quality fuel efficient automobiles. I ahven't looked at the financials of either comany yet, but I plan to do some research because their products are well positioned.
I wrote last year about why investing directly in airline stocks is risky; they have no control over two very important factors - oil and terrorism. We're reminded of this today:
The International Air Transport Association joined angry motoring organisations yesterday in a scathing attack on oil refiners for almost tripling margins on jet fuel from $US6 in 2003 to $US17 now.Many airlines are reducing profit forecasts and the airlines that are already losong money (the big US airlines) are set to lose even more. I've been avoiding airline stocks for a long time now...
Motley Fool has an interesting article on 3M and it's research into nanotechnology. This is a company worth researching. It has a long history of rewarding stockholders, a reasonable PE around 18.69, a forward PE of 15.56 and a PEG of 1.50 (all this from Yahoo Finance).
Also mentioned are Rule Breakers recommendation Harris & Harris (Nasdaq: TINY) and Motley Fool Hidden Gems selection Flamel (Nasdaq: FLML). These are riskier plays than 3M, but of course could see large percentage increses IF they succeed. TINY for example has a forward PE of 98.42. People like me who don't know much about nanotechnology probably want to stay away. Motley Fool has this to say:
I remain bullish on TINY's long-term potential, but with the dilution of existing shares and in the absence of any exciting news coming from its core holdings, I think TINY will continue to float slightly lower in the weeks ahead. Therefore, I would encourage would-be investors to sit tight and watch to see at what price the company itself offers its 3 million new shares.FLML is another stock I probably won't invest in. With a current PE of 288.92 I don't understand why analysts set a 1 year target of over 29.00 (FLML currently trades around 18.75). Perhaps if I understood the company I would understand the price target, then again, perhaps not.
I already use Ameritrade, but if any of you are unhappy with your current broker, you might consider switching. Now is a good time considering this special offer:
Ameritrade is having a summer celebration and we want you to be a part of it! Take a permanent vacation from managing your accounts with other brokers and we'll give you 50 commission-free Internet equity trades. Plus, you'll get $50 to help pay transfer fees. Just transfer your account to Ameritrade from another broker before August 19, 2005 (offer not valid for retirement accounts). The transfer has to be worth more than $ 15,000.00.I don't work for Ameritrade or have any affiliation (other than being a customer) so contact them for more details.
Another anonymous reader email, this one about Pfizer (a company I'm currently invested in). Please keep the emails coming to jtrotta@gmail.com
Since the pharmaceutical company Pfizer was founded in Brooklyn, New York in 1849 it has become and has continued to be one of the world's leading manufacturers of pharmacological products. In addition to the long established list of over-the-counter medicines that Pfizer has developed and continues to improve and manufacture, they can also boast an impressive list of life-saving and breakthrough prescription drugs. I've even seen my dog get Pfizer prescriptions.
Here's a little Pfizer history: With the development of their very first product, an intestinal worm treatment drug called santonin, the then-small company established itself as a pharmaceutical and chemical manufacturer to be reckoned with. Although santonin was already a known treatment for intestinal worms, few people were willing to ingest it due to its extremely bitter taste. Through tireless research, Pfizer's founders, German-born Charles Pfizer and Charles Erhart, found a way to combine the chemical with flavorings that made it much easier for patients to take, and santonin soon became a much more popular treatment. It is this kind of innovation and dedication that established Pfizer as a leading chemical and pharmaceutical manufacturer - a reputation that remains with the company today.
Research is the mainstay of pharmaceutical companies. A drug company's stock price will reflect not only its current product sales but also the strength or perceived strength of its product pipeline. Pfizer's focus on research has continued to produce breakthrough drugs and treatments that have not only saved lives, but have improved the quality of life for many consumers. In the early 1940's, Pfizer developed a way to mass produce penicillin through a fermentation process, which resulted in the drug being available on a much wider scale than was previously possible. The company's research also produced the first widely successful drug for erectile dysfunction in the 1990's - and for many males, quality of life was greatly improved.
I don't know when the next breakthrough will come but it seems likely to me that eventually Pfizer will come up with another blockbuster and stock prices will rise. I bought Pfizer nerly a year ago and am considering adding to my position at the moment.
Here's an anonymous reader submission about renewable energy stocks. Keep the submissions coming to jtrotta@gmail.com
You want to find a way to make your money work for you instead of you working for your money. One good way is to invest in stocks. You purchase stocks in what are called shares. When you buy shares from a company you are actually buying a portion of that company. So the more shares you purchase the more you will make when the company makes a profit. There are many different types of stock to choose from and it can be overwhelming to find a company to invest in. A good starting point is to think of something you have an interest in, for example the environment. An increasingly popular stock to
invest in is a renewable energy stock. So lets take a look at it. Renewable energy is energy that is continuously being replenished such as wind and
solar energy.
There are three sources investors could deal with. First is the sun, more utilities are being run by solar power. The solar power uses solar cells to absorb photons and loosen electrons, which in turn produces electricity. Then there is hydrogen the most abundant element. Hydrogen is being used frequently now by car manufacturers. Fortunately for investors most hydrogen-based companies are now public. The last source for renewable energy stock
investors is wind. Wind is a competitive alternative to coal and natural gas to produce electricity. Unfortunately for now there are not many public companies.
People today are using roughly two percent of renewable energy, making this appear to not be the best stock to invest in. Appearances can be deceiving, take a look at government and state incentives for cleaner air. Investing in renewable stocks can be a little risky. Some of the companies are fairly new and depend on government grants. Of course that being said, you always take somewhat of a risk when you invest in anything. You will see that investing in renewable energy stocks could be quite lucrative.
Michael Sivy notes that analysts are basically split on the future of the US economy but leans toward the bullish view. He also feels that defensive stocks are overvalued.
In the end he advises investors to hold on to their defensive stocks and to add to their positions in growth stocks and inflation hedges (not REITs though) while slowly diminishing holdings in energy stocks (he sees declining oil prices sometime in the future).
In all, the advice is sound if a bit general. Perhaps most interesting is this: "The best inflation hedges appear to be producers of industrial metals and materials, such as aluminum and copper."
This email interested me because I used to be a TD Waterhouse customer. I switched to Ameritrade and have found over the years that their customer service is far superior to that of TD Waterhouse. Anyway, they will soon be one company:
This is an exciting time to be an Ameritrade client. As you may have heard, Ameritrade has signed a definitive agreement to acquire the U.S. brokerage business of TD Waterhouse. This means you will soon have more tools, more choices and more of the edge you need to be a power player in the financial markets.
You'll get the best of everything in one company named TD Ameritrade. We'll be taking the powerful robust online trading tools, advanced technology, and 24/7 service you expect from Ameritrade, and adding the extensive branch network, personalized investment services and financial advice that TD Waterhouse offers.
The future of trading and investing is on its way.
The proposed acquisition of TD Waterhouse will require regulatory and shareholder approval and this will take some time - probably six months. We'll then spend several months bringing the strengths of both companies together. During this time, you can continue to use all of Ameritrade's services and features just as you do today. There's nothing you need to do differently. You can keep informed of our progress at www.ameritrade.com and we'll contact you, in writing, well in advance of any changes.
A hint of good things to come.
You can expect many of the same benefits for which you chose Ameritrade, including:
An advanced trading platform
Quality execution, speed and pricing*
S&P® research
24/7 client service (excluding market holidays)
Real-time streaming quotes with the Ameritrade Streamer™
Market information including analyst recommendations, historical trends and company news
Plus, you can look forward to added features such as:
Enhanced, independent research and investment tools
A nationwide network of branch offices
Valuable portfolio planning services and access to investment advice provided by independent financial advisors
A wide range of investment products including online bond trading
You'll be the new power player in the markets.
We're committed to making TD Ameritrade the one place you rely on to make the most of your financial future.
Despite rising oil prices, stocks seem to be in reasonably OK shape. I wrote about Boeing a few days ago, and sure enough Boeing stock is on the rise following a few deals at the Paris Air Show. A stock I'm invested in is also making news; Phizer is ready to buy Vicuron Pharmaceuticals Inc. for $1.9 billion in cash.
Boeing has not walked away from the battle with Airbus and seems to be winning back some customers with its new fuell efficient plane:
First, he said Boeing was in talks with another 27 airlines over potentially 427 more orders for its new 787 Dreamliner - raising the prospect of nearly 700 orders for the fuel-efficient, long-range 250-seater jet.I saw a segment on BBC World News that this represents a different view on what airlines want: Smaller, more efficient planes vs. the huge plane like the Arirbus A380 with 555 seats. My money's on the smaller, more efficient planes. You never know when a natural disaster or geopolitical uncertainty will reduce flight passengers, making the 555 seat jets somewhat risky. Also, with the smaller jets an airline can operate more flights, providing customers with a more convenient schedule. And we all know how important fuel efficiency is today.
Airbus has so far secured 10 orders for its A350 twin-engined jet compared with 266 for Boeing's 787. It is due to announce 100 more orders this week, although there are now serious doubts about whether the Emirates and Qatar Airlines will go ahead.
The company keeps saying things are going well, but the stock doesn't perform that way.
Lifeline Biotechnologies (or LBTT.pk) has the dubious distinction of being a Pink Sheet stock. What does that mean exactly? It means that for whatever reason it doesn’t trade on a reputable exchange like NASDAQ or NYSE. Pink Sheets is a quotation service that publishes market maker quotes for OTC securities but not a Securities and Exchange Commission (SEC) Registered Stock Exchange or a broker/dealer. Pink Sheets and the OTCBB are competing quotation services for OTC securities. Pink Sheets is a privately owned company, while NASDAQ operates the OTCBB. Unlike on the OTCBB, issuers do not have to be fully reporting companies with the SEC to be quoted. Not being required to register annual and quarterly reports with the SEC does not sell a company as far as being dependable and a solid stock.
Having said that, Lifeline Biotechnologies is the inventor of the MastaScope, formerly known as the NippleScope, a tool used in mammary ductoscopies. A ductoscopy is a procedure in which a camera at the tip of a needle is inserted into the nipple in order to offer visual confirmation of the presence of tumors or cancer in the breast. The MastaScope’s potential is in the early detection of breast cancer. The procedure can be performed in the doctor’s office but cannot determine whether or not the tumor is malignant.
This product is the highlight of Lifeline Biotechnologies and its saving grace. The OvaScope is one of many products meant to enhance and accompany the productiveness of the MastaScope. With the continued sales of these products and after the recent reverse split of their stock, the company is hoping to make the move to the OTCBB after a Form 10K is declared effective and a sponsoring brokerage firm is secured. Additionally, they are hoping for the submission and publication of peer-reviewed science on the company's proprietary products and technologies to boost the stock value.
LBTT.pk stock currently trades at about 3 cents. I paid about 2 cents before the reverse split. They have quite a ways to go to bring any kind of profits to their stockholders, but if they do, there’s nothing like penny stocks for getting in on the ground floor. I'm not suggesting that now is the time to buy, but for me holding is a no brainer since I've already lost most of my initial investment and the fees for selling at this point would be too large a percentage of what the stock is worth.
The outlook for the aerospace sector’s stocks is healthy and currently undervalued, according to Pierre Chao, managing director of Credit Suisse First Boston.
The industry has been recovering for the past year from the failure of the satellite telephone company Iridium. Because of this, many investors decided to dump defense related stock in favor of higher-growth internet and communications stocks but recently investors have begun to return to the more traditional aerospace industry, boosting the sector’s stock prices.
John Higginbotham, CEO of SpaceVest, a Reston, Virginia venture-capital firm specializing in space companies, expects the market to grow thirty times over in the next few years. Currently, aerospace stock is outperforming utility stocks and the broader market, recently rising 40-60% from their 52 week lows.
The challenge, according to Chao and Higginbotham, is getting good technology to new markets. Space tourism is one way in which aerospace technology usually reserved for defense programs can move into the public sector. Small steps are being taken to make that happen, but at the moment, there is more focus on the defense side of things. Investors, when they do offer their money for aerospace projects, have been focusing those funds on ‘sure things’ such as technology that will be utilized in the wars that the US is currently involved in.
Commercial space ventures have a huge potential for growth, government related space business doesn’t look as good. Because of the instability of government programs and the risk of Congress taking away money earmarked for aerospace programs, outside investors are disappearing with their money.
The issues that the aerospace sector is facing requires assistance from federal agencies in order to be overcome, but even without that, the markets are doing well.
Some of the most dynamic stocks in the aerospace sector include:
Boeing Co. (BA)
General Dynamics Corporation (GD)
General Electric Company (GE)
Goodrich Corp (GR)
Honeywell Intl Inc (HON)
Lockheed Martin Corporation (LMT)
Northrop Grumman Corporation (NOC)
Raytheon Co (RTN)
Sequa Corporation (SQA.A)
Textron Inc. (TXT)
United Technologies Corporation (UTX)
In this article, we'll look at US stocks with exposure to China as a possible alternative to directly investing in the Chinese market where information can be difficult to find.
Do you know enough to invest intelligently in China or any other foreign market for that matter? It depends. Are you doing your research? And if so, who are your sources and who are their sources? Media is difficult enough to trust on government actions in our own country, much less a burgeoning economy still building regulations.
Having said that, however, China’s economy grew by 9.5% and is expected to drop only to 8.5% in 2005 and then to 8.0% in 2006. Despite the fact that the growth is expected to decrease, it is still growth and therefore a money making venture. In fact, IMF has said that growth around the world is dependent on China as well as the United States.
The problem is that even in the United States, investors rarely rely on bits of information culled from the new when making investment decisions. They go online and examine quarterly reports and annual reports that US companies are required to file with the Security Exchange Commission. There are investment magazines and web sites and newspaper sections devoted to changes in corporations and their alliances. Do you have access to any of that information on any Chinese companies? And if you did, do you speak Mandarin or whichever Chinese dialect that the information is published in?
Chinese companies that open IPOs here are required by the SEC to file the same reports as a US company. If that is the case, then you do have access to some of their earning reports. However, China’s expansion is so new that chances are that you won’t find much of a history to research.
If you would still like to cash in on the great expanding Chinese economy, try something closer to home. There are plenty of American companies with a great deal of presence in China and around the world. You have well performing stocks including McDonald’s (NYSE: MCD), Coca-Cola (NYSE: KO), Microsoft (NASDAQ: MSFT), and Intel (NASDAQ: INTC) among many others to choose from.
A good idea is to limit any foreign investments to under 15% of your portfolio to mitigate unexpected losses. However, US companies like Microsoft would not normally be counted against that 15%. As always, remember that diversity is important for any investment plan but especially necessary when foreign markets are concerned, including China.
"What we're looking at is a giving up of hope on the part of investors," said Joseph Keating, chief investment officer of the asset management group at AmSouth Bank.
So the question is do the poor IBM numbers and the recent economic data really indicate an economic slowdown? I don't think inflation will be out of control, but I don't think it matters. Even a little inflation will increase already poor investor sentiment.
"Earnings are really the only hope for this market," said Brian Pears, head equity trader at Victory Capital Management in Cleveland. "If, on the whole, earnings can go up, then we might be able to overcome oil and inflation and all the other things."
I don't plan to put more money in stocks just yet. Investors will be looking for bad news in terms of inflation (consumer prices and producer prices) and I think that they'll find something that spooks them. The figures may not be real bad, but investors are spooked so it won't take much to send the markets even lower.
This information will be most useful to inexperienced investors who aren't sure what to look for when searching for investment opportunities. For the most part, I suggest passive investing to these types of people, but for those who want to learn more I have found a well written article that covers some important basics.
Advice in this article includes examining the industry anddetermining whether there is demand for the company's products and/or services and if that demand is sustainble long-term.
There's also inofmration on how to look at a company's financials with explanations of price earnings ratio, price earnings to growth ratio, gross margin, return on equity, and debt to equity ratio.
Here's a very interesting article from Motley Fool about identifying rule breakers. The focus is on defining "rule-brekaer" and giving examples.
Starbucks is one of the stocks mentioned. Sure it's not a new company, but who is #2? When there's no clear competition you might be looking at a rule breaker. Taser is another stock mentioned in the article. It's not a safe investment but it's another example where there is no clear #2.
While the potential returns are enormous, this is not a safe place for a big chunk of your portfolio. However rule breakers should be considered:
Researching this column, I ran some numbers. Turns out, when David officially shuttered his real-money Rule Breaker portfolio, he'd managed a 20.1% annualized return. That was in mid-2002, after the bear market. Compare that with 9.1% for the S&P and 7.3% for the Nasdaq over the same period.Put another way, the $87,500 invested in the real-money portfolio between August 1994 and April 2002 was worth more than $300,000 when the portfolio officially closed in February 2003 -- after the bear market had run its course. Those are the kinds of results that made legends of Peter Lynch and Bill Miller, and rightfully so.
James Brooke and Saul Hansell from the New York Times write that Samsung has a competitive advantage over Sony due to innovation. Sony is too slow to bring new products to the market:
When Sony was caught flat-footed with a late introduction of an Internet version of its 25-year-old Walkman, its profits from world audio sales fell a cataclysmic 48 percent in the final quarter of last year. Once again, Sony had coasted on an old technology, while competitors invested in new ones.Samsung recently unveiled a cell phone with a 7.0 megapixel digital camera built in. I predict that this will be a hot item; my wife wants one because it's better than our real digital camera (which happens to be a Sony)"Samsung is like the old Sony," said Gilder, who edits the Gilder Technology Report. "Samsung has much of the spirit of Sony 10 years ago."