MUST READ

Norm Rothery's Benjamin Graham Screener for US Stocks 2008

Marty Whitman's annual letter to shareholders

This elderly genius' track record is remarkable.

I recommend reading his annual letter for its insight into the long term opportunities available now. Read it here.

My next post will talk a bit about how the small retail investor should approach riding the coat tails of gurus like Mr. Whitman. Blindly following them is likely to disappoint....

"Pursuing contrarian strategies is a little bit like having your arm broken on a regular basis."

December-21-2007
The Maelstrom Continues. Ignore it.by Todd N Kenyon

If you are an investor, ignore the rest of this post.Still here? You'll be sorry! I am about to toss out a stomach-churning mess of conflicting statements and data that, if you're not already out of the market might just chase you out.How is one supposed to filter through all the noise out there right now? Are we going into a recession? Is inflation back? What is the Fed doing? Will they rescue us? Can they rescue us? Should they rescue us? Do we even need rescuing? Should we even care? I don't have answers, but here are some of the things I am hearing lately.Yesterday we hear that Greenspan thinks the risks of a recession are growing, so he has upped the odds to 50%. I will simply respond by quoting Laurence Peter:"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today."Then I see an interview with Jack Bogle, venerable founder of Vanguard and index fund cheerleader. Very uncharacteristically, Jack said, with a glint of fear in his eye that if he were a speculator, he would be completely out of the market. This from a gentleman who has built his career on the premise that active management is a waste of time. Hmmmm.A couple days ago Buffett was heard to exclaim that if employment slips a recession is certain. Probably true, but Buffett himself has said that:"To the extent that we have any thoughts about macroeconomic factors, short-term market moves, etc., we do our best to ignore them."Next there is inflation. The last two days have seen major jumps in PPI and CPI, especially the headline numbers. Even the so-called core numbers were hotter than expected. This brings up the core vs. headline debate. Core has energy and food prices stripped out, which makes it relevant when we all finally stop driving, heat our houses with firewood and go back to hunting and gathering (or grazing on our lawns) for sustenance. The reason food and energy are removed is because they are inherently volatile, so their volatility can mask trends in real inflation. Fine, but if food and energy prices continue to trend upward over time, (and they have been for a LONG time) we better start paying attention to the headline number. Our wallets certainly are, and so is just about every company I follow.Inflation certainly seems like a concern, yet the media is rife with "Fed whiners" sobbing that Ben let us down on Tuesday (and then Wednesday) by not dropping the funds rate enough (which of course shouldn't be dropped at all if inflation is lurking). Further, no one really seems to know what to make of the Wednesday announcement regarding central bank auctions. He whose name shall not be spoken (ok- Cramer) was in full whine mode on Wednesday, going as far as to suggest that the Fed is clueless and isolated in their ivory tower, and that they probably believe it is "unseemly" for poor every day folks to make money in the stock market. This would be absolutely hysterical if so many folks didn't hang on what's-his-name's every word. He is no dummy, but his short-termism and insatiable thirst for immediate gratification and self aggrandizement frequently stymie his intellect.Interest rates, as defined by the Fed funds rate and 10-yr are low. Period. But as some other Directors have posted here recently, the Fed seems to have little control over real interest rates and less over the so-called liquidity crisis. Libor, mortgage rates, and corporate debt rates could care less about the Fed it seems. I don't think there is a dearth of liquidity out there but there is clearly a paucity of trust. Dick Bove, a veteran bank analyst currently at Punk Ziegle, has a very interesting plot of M3 (no longer an official measure of the money supply because, according to him, it shows what is really happening) that indicates that liquidity is exploding. If the financial institutions can get past being afraid of their own shadows rates will drop and liquidity won't be an issue.What the heck, as stock guys, are we supposed to do with all this information? Nothing. Ignore it. Invest in some good companies at good prices and fuggedaboudit. Take a trip to Mars and check it when you get back. All this noise and wrenching daily volatility are enough to drive anyone crazy.Thing that look cheap keep getting cheaper. Let's not forget that this phenomenon is subject to a self-fulfilling effect for the rest of the year. Tax loss selling, and rampant shorting by myriad hedge funds unhindered by the uptick rule will probably ensure more pain to come in the short term. However, I would much rather be buying those stocks that are already pricing in a recession than those that are priced for perfection and keep going up. Recession or not, cheap stocks should ultimately outperform. Cyclical stocks priced as if this time it really is different and cyclicality is dead? Not so much.James Montier, who recently released a seminal book on behavioral finance, said that "pursuing contrarian strategies is a little bit like having your arm broken on a regular basis." In the short term there is no discernible or quantifiable difference between being wrong and being a contrarian. But as Olstein said recently, if you are concerned about short term volatility, then you are speculating, plain and simple.

The bull case for SEB Seaboard Corp- A solid, safe value play

(from Yahoo Finance) "Seaboard Corporation operates in the food processing and ocean transportation industries in the United States and internationally. It primarily engages in the production and sale of fresh, frozen, and processed pork products, such as loins, tenderloins, and ribs; and further processed pork products primarily consisting of raw and pre-cooked bacon under the Prairie Fresh and Daily's brand names to further processors, foodservice operators, grocery stores and other retail outlets, and other distributors. The company also markets wheat, corn, soybean meal, and other commodities worldwide; and involves in milling and grain processing activities. In addition, Seaboard Corporation provides containerized cargo shipping service to approximately 25 countries between the United States, the Caribbean Basin, and Central and South America. As of December 31, 2006, its fleet consisted of 10 owned and approximately 29 chartered vessels. Further, the company engages in the production and refining of sugar cane; the production and processing of citrus fruits; and processes jalapeno peppers. The sugar products are primarily sold in Argentina to retailers, soft drink manufacturers, and food manufacturers; and the citrus products are primarily exported to the global market. Additionally, Seaboard Corporation operates as an independent power producer in the Dominican Republic."

so..... it's:

• boring
• small to mid-cap
• diversified
• global
• a century old
• family owned (3 generations!) with huge insider ownership 72%
• thinly traded (relatively) and low profile
  

Value assessment of SEB's financial profile:

• P/E 8 (near 5 year lows) *note* B. Grahams' value equation P/E x P/B<22 value =" 11.8
• P/B 1.36 (ditto)
  
• P/S 0.62 lowest of comps (strongest variable on future stock price appreciation as per Fisher)
• EPS 1 year growth 85% 10 year growth 1057% yet share price down 51% from 52 week high
• P/FCF 6.2 (lowest of comps)
• Enterprise value/revenue 0.56 (very low and that's good)
  
• minimal debt Current ratio 2.86 Quick Ratio 1.6 LT debt<< total assets
  
• Quantitative evidence of good management 5 year ROE17 ROA 9.4 ROC 14.4 all at least 50% higher than comps
• Qualitative evidence of good management-- last conference call CEO warned that stock was at a short term spike in a long term uptrend (and he was right, of course).
• Guru Irving Kahn bought $30 M worth of stock (he recently added 40% to position in Sept 2007 when share price was > $2000-- it currently trades at $1440/share)

There is a general consensus that agribusinesses have an excellent long term potential for growth world wise, particularly as the evolving south and east Asian middle class demands better quality of food. It should also be noted that Chinese demand for pork and seafood is much higher than other areas of the world and appears to be growing. SEB is well positioned for further EPS growth.

Despite the high share price, the fundamentals suggest that this stock is cheap and has an acceptable margin of safety due to easily manageable debt and excellent cash flows as well as an established very long term track record and a very large insider stake. It will definitely be a good long-term stock to study. I plan to start a position at $1400 for a few shares.

All in the family

When I discussed Columbia Sportswear COLM in another post below, I mentioned that insiders owned 60% of the share float.

The graph above shows a correlation between the relative ownership of the insiders (often families) and the stock performance over time. Pretty impressive, eh?

One can speculate that when the executives who run the company think like company owners rather than employees, they are motivated to act in the shareholders best interest. After all, isn't that human nature?

Along these lines of thinking, I'm planning to analyze another publically traded company with very high insider (family) ownership stakes and rock solid financials: Seaboard Corp SEB

Benjamin Graham's stock screen for today's markets

read about it here

To catch a falling knife

Owch.

If you haven't done it, you've not been investing long enough or you're simply lying to yourself.

This colorful metaphor describes buying a company when its share price is in free fall. It's not finished falling when you "grab" (buy) it and you're definitely going to get hurt (financially).

If you are a value investor, it's difficult to resist buying companies that you've admired for a long time that suddenly become attractive on paper because the fundamentals we watch so carefully (i.e. the P/E ratio) go the "right" direction. Unfortunately, there is usually a good reason for this--- cheap stocks are usually cheap for a legitimate reason. Efficient market theory is often correct (more so over the long term, but that's a different topic).

If you want an example of a falling knife look at PIR's chart for the past 5 years at the top of the page. Guess who bought several million shares at $16 a few years ago and then capitulated at around $7 for a huge loss last June? Mr. Buffett, himself. I'm certainly not one to criticize as I jumped in there at $6.00 and managed to sell at a minuscule profit before it continued it's downward slide to $3 range.

If WB can make this mistake, anyone can. He has said many times that he only expects to be right in 6/10 of his choices so you should not set such high standards for yourself.

Here are some strategies to reduce the need for palmar suturing:

1. DO NOT RUSH. Force yourself to study a stock for 2-4 full weeks before buying it. Opportunities that need you to act immediately are more often than not based on incomplete information or even out in out scams.

2. KNOW EVERYTHING YOU CAN ABOUT THE STOCK. Read at a minimum the last annual financial report and the last quarter's conference call transcript before you buy. As I've mentioned elsewhere, if you're pressed for time (don't be), read the CFO's presentation and the Q&A grillfest the analysts put the execs through at the end. That usually avoids all the hype/salesmanship and gets right to the cold, cruel numbers you need to know.

3. VOLUME MATTERS. Watch the "volume" numbers (shares changing hands) on a day to day basis. The actual number isn't important-- it's how it compares from day to day. As capitulation hits and the last few shareholders give up on a rebound and finally sell their shares, the volumes drop off for a while (days to weeks, depending on how high profile the stock is). When the price starts to rise while increasing volumes, the value investors have stepped up to the plate with conviction. This is the time to pull the trigger. Having said that, I don't think I have EVER successfully picked a stock's true bottom.

4. BUY IN INCREMENTS. Unless you have very strong conviction or you're only buying a small number of shares (all you can afford), then divide your capital into thirds and buy in minimum one week intervals, hopefully at slightly lower prices each time.

5. BUY ON LONG TERM VALUATION. It's ok to ignore short term reverse catalysts like lawsuits or war. If a stock is falling because it was previously overvalued and it's long term opportunity for growth may be decreasing, then stay away. SBUX (Starbucks) may be a recent example of this.

6. IGNORE THE MEDIA PUNDITS AND THE ANALYSTS. With a few exceptions, they are momentum oriented. A quarter or two of positive or negative stock movement and then they'll change their mind--- too late to the party as usual.

7. STUDY THE GURUS and THE INSIDERS. Only when they put their money where their mouth is. If their stake is in the multimillions, they have conviction. Don't pay too much attention to hedge fund gurus like George Soros. They change their positions more often than their underwear. If Dreman, Whitman, Buffett, Dodge & Cox, Tweedy & Brown, Brian and John Rogers, Cunniff etc take a position, factor it in to your decision making. Always keep in mind that you will be getting this information up to 3 months after the fact. Don't chase the gurus. If the stock is dropping AFTER they bought it (USG is a great example) and it meets other criteria, that's helpful. Always keep in mind that there are many great opportunities that the gurus cannot buy that you can because of the scale of their investments compared to yours (often small to mid caps are not an option for them)

8. FOCUS ON THE COMPANY'S MANAGEMENT OF DEBT. Don't get freaked out by big debt numbers-- compare it to comparable (by market cap and sector) competitors. Certain cyclic industries and banks require leverage to grow. Value investors love to buy quality companies in distress due to short term self limited problems (usually due to external factors outside the company's control). The goal is for you to determine if the company has enough liquidity to weather short term debt (i.e. interest coverage and/or short term mandatory debt payments due over then next 12 months). Fortunately accountants have determined measures to help you assess this- my favourite is the quick ratio (like the current ratio but takes inventory out of the equation-- many inventories are not liquid). A QR of greater than 1 is reassuring. Some industries commonly have QRs less than 1 (retail) and still perform well for shareholders. To analyze these companies further you need to delve into detail about how rapidly the co can sell its inventory when needed (without "channel stuffing") and how many slow paying customers it has (accounts-receivable turnover) as well as interest coverage ratios. Personally, I leave this stuff to high powered securities analysts and stay away investing in them. Better to put those stocks in the "too hard" pile.

l

Most mutual funds suck

Most people now know that as mutual funds grow (and they always do) they become the market. Performance over time for 80% of actively managed funds = the relevant index's performance minus the fund's MER (management expense ratio).

Ergot, you have a 1/5 chance of picking an actively managed fund that beats the market. Some conclude that the smart thing to do is to buy the market as cheaply as you can with a non-specialized ETF or index mutual fund, shopping around for the cheapest MER you can find. This is reasonable IMHO. I think that for the majority of investors who are not into this kind of thing (investing), the "couch potato" portfolio of low cost ETFs is the way to go. Minimal effort and a long term performance that beats most of the pros.... tough to argue with this approach, eh?

I own only 2 mutual funds. One is from PH&N (known for their low turnover and low MERs) and another from Chou Funds. Francis Chou is a fascinating but low key fellow and a Canadian version of Benjamin Graham. His fund performance over the last 20 years has systematically destroyed most high priced hedge funds' results, most of whom have much shorter track records. If you're interested, you can do more research about him and his funds (he doesn't advertise) via a google search. I don't want his funds to get much bigger than they already are so I definitely don't want to promote him either! (lol)

This 2007 lecture by Francis is worth watching: Francis Chou

Growth is Cool, Value is for Nerds by Todd Kenyon

Growth is Cool, Value is for Nerds
posted on: December 05, 2007

It's true. To be a value investor, you must be a Wall Street outcast. You are required to be a member of the chess team and the audio-visual club. You spend prom night at the mall's video arcade. Amazingly though, value strategies have beaten growth strategies again and again throughout history (come to think of it, most of those high school nerds probably way outperformed the "cool crowd" later in life). Think of just about any of the most famous investors of all time. Yup, they're nerds. RICH nerds.
Value investing may be simple, but it's not easy. Growth or momentum investing is far easier psychologically, since you typically follow the crowd and hang out with the popular stocks. By definition, to get bargains you must buy stocks that the market ignores, dislikes, misunderstands, or all of the above. In essence, you must go in and buy companies while the market, incorporating thousands or even millions of intelligent and experienced individuals, screams at you that you are an idiot. At the very least, you're not one of the "in-crowd". Worse yet, Mr. Market may continue to berate you for months on end. That nerd thing again.
How does one define growth versus value anyway, other than by where their respective practitioners sit in the Wall Street cafeteria? Just ask Wall Street - it loves to slice and dice things into neat little categories. Stocks are commonly divided into sectors, industries, market cap, and growth or value categories among others. Mutual funds are crammed into "style boxes", and so on and so on. A lot of this has to do with figuring out ways to get more of investors' money into more different products: "What - you mean you don't have any East Asian micro-cap core growth exposure? Are you nuts? Better put some cash into our fund!"
I have a much simpler system: good investments and bad investments. As a true value nerd and I have tried to explain in prior posts what that means to me. It really refers to the process I use and the way I look at investing. It does not mean that I look for "value stocks" and avoid "growth stocks" - arbitrary classifications that mean nothing to me. I simply look for good companies selling at bargain prices. Since I attempt to estimate an investment candidate's intrinsic value, I think I know when I am getting a bargain. But here is the key regarding growth vs. value. They are mutually dependent - you can't talk about one without considering the other.
Value is heavily influenced by growth. If a company is able to grow its cash flows for a sustained period, it will be much more valuable than the same company with no growth. Any value investor will tell you that the true value of a business is the discounted sum of future cash flows. So to the extent that there is more cash being generated each year, the value is greater.
We can look at a very simple example using a basic valuation equation known as the dividend discount model (nerd alert!). This model simply says that the value of a company is the cash it will generate next year, divided by your required return less the long-term expected growth of the company's cash flows. Let's say a company is expected to generate $100M in free cash, and you believe it can grow this cash stream at a 7% annual rate. You require a 12% return on your investments. The DDM says this company is worth $2B. What if the company has very little growth left? Say the best it can hope to do is grow at 2% annually. The DDM now tells us the company is only worth $1B. Clearly the growth rate makes a huge difference in intrinsic value.
The danger here is assuming that very rapid growth in the past will continue unabated. If you plug 11% growth into the above equation, the model values the company at $10B, or 100x free cash! You may be asking yourself what good is a model that throws out such a huge range of values depending on your assumptions for one variable. This is a very valid question - the DDM or the related discounted cash flow model can be used to justify any valuation (and frequently do in sell-side research reports) depending on growth and return assumptions.
I love to find companies with robust growth prospects, with one caveat. The less I have to pay for that growth, the better. I simply will not base my valuation models on heroic assumptions about growth. I ideally want growth to be a "free call option": if it occurs, it's free upside. The economy's long-term nominal growth is about 6% (GDP + inflation). So be cautious when assuming a company will grow much faster than that.
In a recent letter to shareholders of his Third Avenue Funds, esteemed octogenarian value investor, Marty Whitman, described what Wall Street really means by growth:
"Buy growth, but don't pay for it. In the financial community, growth is a misused word. Most market participants don't mean growth, but rather, mean generally recognized growth. In so far as growth receives general recognition, a market participant has to pay up." - Marty Whitman Of course Buffett has a thing or two to say about this. For example, the oft-cited, "You pay a high price for a cheery consensus".
So there it is. So-called growth stocks are frequently expensive, because the market has already priced in the growth. In fact, there is often a "popularity premium" thrown on top, making these stocks even more expensive relative to intrinsic value. Unfortunately, mid-teens and higher growth rates are rare and usually fleeting. So-called growth stocks typically have had a good run, and if you hopped on, you might be doing well. The problem is that this momentum-chasing works fine until it doesn't. When it stops working, it's too late to do anything about it, as many market participants found out in the tech bubble. I am not "smart" enough to know when it's about to stop working - if a stock is trading well above intrinsic value, it can only be hope or greed that keeps me invested.
This reminds me of a technology conference I attended in late 1999, sponsored by one of the big brokerage firms. One day during lunch, four of the hottest technology mutual fund managers spoke to a standing-room only crowd. Amazingly, they all as much as admitted that their funds' holdings were grossly overvalued, and that one day it would come to an ugly end. "It'll be like 10 large gentleman trying to abandon a sinking ship through a single porthole all at once", said one of them. They knew that their holdings had no valuation support, yet they felt they had no choice but to keep holding these stocks, as it was their mandate to invest in tech stocks. It had worked fabulously for the past few years. I wonder if they each secretly thought that they would be the one "large gentleman" to make it off the sinking ship safely. None of them are still managing mutual funds as far as I know.
The bottom line, in my book, is that stocks priced with "no visible means of support" eventually fall to earth. By support I am talking about intrinsic value. And when they fall, there is usually no advance warning. Hence I always want to know that a stock's price is supported by its true value. Otherwise, I am speculating or gambling, not investing. If I can't rationally see how the valuation numbers works, I won't touch it.
Buffett again:
"... we think the very term "value investing" is redundant. What is investing if it is not the act of seeking value at least sufficient to justify the amount paid? Consciously paying more for a stock than its calculated value -- in the hope that it can soon be sold for a still-higher price -- should be labeled speculation (which is neither illegal, immoral nor -- in our view -- financially fattening).
I should add that growth's affect on value can work both ways. A stock which appears cheap based on say a low PE ratio or low Price-to-book ratio may be just as grossly overpriced as that racy Chinese internet stock, or even more so. If the company has negative growth prospects, it may be worth much less than its apparently cheap market price (the dreaded "value trap"). And let's not forget about those companies that burn cash - they too may be worth very little even if their accounting earnings show some growth.
I believe that the stocks in my portfolio are all undervalued, most of them greatly so. Several of the stocks I've been buying during the recent panic are near or below the levels I paid, and some are only slightly higher. Hence I believe there are some great ideas in there for my subscribers, including some well known names and some more unusual picks. Subscribers can easily see the prices I paid for my holdings and thus determine if they are currently even cheaper than when I purchased them. That said I have no idea if these stocks will approach fair value next week, next year, or even many years from now. There are no guarantees in the stock market, but to me value investing is the best way to improve your odds.
Let's face it, if this value stuff was easy or popular, everyone would do it and hence there would be little chance for excess returns. I will end another lengthy post with a cautionary quote from Jim Grant, editor of Grant's Interest Rate Observer:
To suppose that the value of a common stock is determined purely by a corporation's earnings discounted by the relevant interest rate and adjusted for the marginal tax rate is to forget that people have burned witches, gone to war on a whim, risen to the defense of Joseph Stalin, and believed Orson Welles when he told them over the radio that the Martians have landed. Investors are prone to be bullish at the top of the market when prices are high, and bearish at the bottom when prices are low. Like war, speculation is a social activity. It is carried out by groups.

Todd Kenyon

DELL-- watch it closely over the next quarter

If you follow the short term froth of the markets like I do, stop right now before it drives you insane!

You probably saw the huge (14% in one day!) sell-off of this household name's stock last week. Investors are sick and tired of waiting for Michael Dell to execute the turn around of this wayward former superstar despite the fact that:

• it's been less than a full year since Dell re assumed his CEO status
• the company is making lots of money-- maintaining high levels of FCF and minimal debt and lots of cash in the bank ($12 Billion! v.s. 760 M in debt) for planned share buy-backs
• the Q3 results showed that sales and earnings exceeded expectations and there was a considerable improvement of gross margins to just short of analysts' expectations of 19%
• it's at a historical low for P/E (forward = 14)
  

This stock is clearly oversold. Yes, there is an expense issue--- Dell needs to reduce their head count amongst other fat-trimming measures. The business plan is evolving from the prior approach with more brick and mortar sales via kiosks and Staples/Walmart big box stores and more emphasis on customer service. The management is not doing it fast enough to keep the Street happy. We've seen this happen to Dell in the past and when Michael has the pressure on, he consistently shines and comes through for the shareholders. DELL is one of the best performing securities in history.

For those of us who are don't mind buying and forgetting about it for a while, this would be one of the safer bets, IMHO. Personally, I'm hoping that the Street beats it up a bit more and I can pick it up in the New Year in the high teens or low 20's.

You can do the full analysis easily for yourself.

l

Sum Up for COLM

There's evidence that Columbia has the balance sheet and management quality to weather the ongoing economic storm in North America. It has significant potential for organic growth worldwide. The current inventory excess is being carried in products that have a strong replenishment demand. Management has plans to route these products via the company's own retail outlets, so this may decrease concerns about further deterioration in the historically healthy margins.

IMHO, the sudden drop in free cash flow is the single most significant issue to worry about, particularly with respect to assessing the company's potential to survive a recession or depression. It appears that Q3 and Q4 drop of FCF is related to the one-time charges of an acquisition and ongoing costs of increased staffing of the new stores which should partially decrease over time.

My plan is to study the stock for the next quarter. If the price is dragged down by the general market into the low 40's or high 30's, I will buy some there. If not, I'll wait to see the Q4 results and if they are reassuring, buy then.

l

Bear case for COLM

1. dividend is insufficient to compensate for inflation over time
2. intense competition (i.e. North Face)
3. margin has deteriorated slightly over the last couple quarters
4. inventory has increased and backlog decreased up to and including Spring 2008 orders suggesting near term future earnings will be flat
5. European division has seriously underperformed the rest of the world, with a 18% decrease in revenue
6. Recent acquisition Pacific Trail has underperformed the rest of the product lines significantly.
7. costs are increasing slightly and will carry over into the next 1-2 quarters, mostly from SG&A plus personnel costs associated with new retail outlet openings
8. Free cash flow has turned negative for the first time since 2006 in Q3

The bull case for COLM Columbia Sportswear Company

COLM-->I believe that this small-mid cap 70 year old company shows the qualities I discussed in the post below, making it a stock worth studying over the next few months.

• sound fundamentals v.s. competitors: P/E 12 (30) P/tangible book 2 (6.22!) P/CF 10 (15)
• manageable debt: current ratio 5 (v.s. 2.3) leverage ratio 1.2 (v.s. 2.4)
• strong cash flow: P/FCF 24 (v.s. -59! for comp)
• rising dividend 1.2% with payout ratio only 15% (easily sustained)
• some share buy back activity (minimal)
• strong brand
• company has NEVER missed earnings expectations in its history as a public company (!)
  
• highest gross operating margin in the biz 44.6%
  
• all quantitative measures of management quality much higher than comps:

Management Effectiveness (%) v.s. comp
Net Profit Margin (TTM)	0.10	0.04
Net Profit Margin - 5 Yr Avg	11.60	5.10
Return on Assets (TTM)	11.90	4.50
Return on Assets - 5 Yr Avg	14.20	5.90
Return on Investment (TTM)	14.20	6.50
Return on Investment - 5 Yr Avg	17.50	8.40
Efficiency v.s. comps
Revenue/Employee (TTM)	477,242.00	169,078.00
Net Income/Employee (TTM)	48,797.00	6,910.00
Receivable Turnover (TTM)	3.50	6.30
Inventory Turnover (TTM)	2.50	3.00
Asset Turnover (TTM)	1.20	1.20

• VERY high inside ownership 62% with some low level insider buying November 2007
• trading 33% below 52 week high
• global footprint in 73 countries
• expanding in North America with its own retail outlet stores, carefully avoiding overlap with the whole sale customer base
• it looks like a colder winter than usual is upon us... this often predicts better than usual earnings in the short term (global warming- bah! humbug! ;-) )
  

A few comments on digging through the garbage can

Looking through the trash for discarded treasures is what value investors do. The retail and financial sectors are highly reviled amongst Wall Street mavens. With many good economic reasons for the US consumer to go in to torpor looming, it seems that these businesses should be avoided at all costs because their short and possibly intermediate term outlook looks miserable.

Booms and busts are finite by definition. To capture the recovery, a value investor needs to buy in the most hostile environment BEFORE the market accounts for the potential for recovery into the stock price. This effect almost always happens months before the actual recovery occurs as the "smart money" (institutions) knows the business cycle better than anyone. The edge that the retail investor has over the institutional one is that he can hold these positions for a prolonged period of time without answering to impatient clients and marketing divisions demanding short term results at the expense of long term gains.

Features of companies that will endure the economic storms and emerge stronger than before (the competition crushed) include those with an MARGIN OF SAFETY demonstrated by a stock price that is trading below a company's intrinsic value. Intrinsic value is unfortunately largely subjective regardless of the fancy mathematical modeling some analysts use to calculate the number. IMHO it's best to convince yourself of the strengths of the company as if you were thinking like a company owner-

You'd want a company with a:

1. strong balance sheet
2. strong cash flow
3. manageable or no debt
4. dividend that is sustainable, yet compensates for inflationary bite out of the ROI over time
   
5. strong brand
6. wide economic moat (i.e. no or weak competition and a high barrier to entry for other potential competitors)
7. experienced effective management with a track record during prior market slow downs
8. global footprint (arguable these days as the international markets seem to move in lockstep)