Brookfield Asset Management (BAM on NYSE and BAM.A on TSX) is heading towards 52 week lows. I've been waiting for an opportunity to enter a position in this superbly managed commercial real estate/timberland/utility/infrastructure holding company with $75 Billion worth of global assets under its control. The co has been aggressively acquiring undervalued companies and other assets recently, particularly in Brazil. It has been compared to Berkshire Hathaway many times; however, it has outperformed BRK handily over the last 5 years.
I'll do a full analysis later. I feel that the downside risk is very low and the long term upside potential for capital gains is excellent at this point. Marty Whitman (amongst many other gurus) is a major stakeholder and admirer of Mr. J. Bruce Flatt.
I strongly recommend studying this stock carefully.
l
Wednesday, January 30, 2008
Sunday, January 27, 2008
Saturday, January 26, 2008
WTS and OXM-- dropping them from my study list
Oxford Industries met all the Graham criteria and I've been watching it closely. I'm discarding it at least temporarily because of several recent events:
1. One of the board of directors resigned abruptly
2. A new CFO was hired
3. The company decided to take on more debt to finance a share buy back of 14% of the float--- a maneuver that is more likely to reward management's stock options than shareholders margin of safety during a tough time for retailers.
I'm putting WTS on the backburner because I can't convince myself that the management is prudent and experienced enough to take the company forward in a global sense. I won't rule it out but for the current period I think the safer approach would be to buy a water services ETF like CWW: more here.
1. One of the board of directors resigned abruptly
2. A new CFO was hired
3. The company decided to take on more debt to finance a share buy back of 14% of the float--- a maneuver that is more likely to reward management's stock options than shareholders margin of safety during a tough time for retailers.
I'm putting WTS on the backburner because I can't convince myself that the management is prudent and experienced enough to take the company forward in a global sense. I won't rule it out but for the current period I think the safer approach would be to buy a water services ETF like CWW: more here.
More on AMEX: Best of Breed in a Triopoly
An erudite explanation by James Cullen here.
I also want you to see the way the CEO Ken Chenault (one of the best in the world today, by the way) is paid at AMEX: he doesn't get paid unless YOU (the shareholder) get a minimum return on your investment details here
I think that based on AMEX's stellar ROE, juiciest net margins, lowest subprime/write-down exposure in the biz and global growth, Ken isn't worried about his future cash flow-- he will be cashing out one day with a 9 figure pile of greenbacks.
If it dips into the high 30's, I intend to buy some shares and hold them for the long term in my RRSP. I'm hoping the stock price will continue to fall even further over the next few quarters so I can gradually add to the position.
American Express meets all of Buffet's "Thinking like an owner" principles (and in fact he owns 13% of the float):
1. the biz is simple and easy to understand how they make their money. 2.5% on every transactions plus cash advances at varying rates.
2. biz has a consistent operating history and has weathered several financial crises
3. biz has favourable long-term prospects and a global footprint
4. Management is rational. See AXP's last conference call for a cool analysis of current and future conditions. I like how the CEO refuses to speculate in the short term and instead refers to prior similar circumstances (i.e. early 2000's, 1990) and the lessons learned.
5. Management is candid with shareholders.
6. Management resists the institutional imperative
7. Double digit return on equity over the long term (high 30's!)
8. Profit margins highest amongst comps (13%)
9. creates at least one dollar of market value for every dollar retained via dividends and capital gains
10. Has a higher intrinsic value than market designates and can be bought for a significant discount. Currently trading in the low 40's and fair market value per morningstar mid 60's.
I think it is highly probable that American Express will weather this economic storm and continue to grow at a moderate pace. I think that the margin of safety is excellent.
Monday, January 21, 2008
Cheap and Bright: PHG
Koninklijke Philips Electronics NV
Profile: Large cap globally positioned Euro-based electronics company.4 divisions: Medical Systems, Domestic Appliances and Personal Care, Consumer Electronics, and Lighting. Medical Systems segment offers X-ray, magnetic resonance, and computed tomography products; nuclear medicine; patient monitoring and ultrasound systems; defibrillators and other cardiac care technologies; picture archiving and communications systems; medical transcription services; and customer services. Domestic Appliances and Personal Care segment provides shaving and beauty, domestic appliances, health and wellness, and oral healthcare products. Consumer Electronics segment offers flat TV; home theater in a box systems; DVD, DVD+RW, and hard-disc recording systems; voice over Internet protocol (VoIP) cordless digital phones; HD and Internet protocol TV set-top boxes; remote controls; digital photo displays; peripherals and accessories, such as headphones, cables, and recordable media, as well as amBX peripherals—accessories; and VoIP phone with Skype and MSN. Lighting segment provides incandescent and halogen lamps, compact and normal fluorescent lamps, gas-discharge and special lamps, automotive lighting products, luminaires, electromagnetic and electronic ballasts, and solid-state components, modules, and systems. The company sells its products to customers primarily in Europe and Africa, North America, Latin America, and the Asia Pacific. Koninklijke Philips was founded in 1891 as Philips & Co. and changed its name to N.V. Philips' Gloeilampenfabrieken in 1912. Further, it changed its name to Philips Electronics N.V. in 1994 and to Koninklijke Philips Electronics N.V. in 1998. The company is based in Amsterdam, the Netherlands.
Financials:
- P/E (trailing 12 mo) 8, PEG 0.49 P/B 1.29 EV/Revenue 0.91. (unbelievable numbers v.s competitors; however, distorted by one time profit from divestiture of Taiwan Semiconductor shares-- i.e. not from organic growth)
- QR 1.00 CR 1.5 (manageable debt but definitely not debt free)
- Gross margins of 37% (same as comps) but post-tax 5 yr avg margins over double competitors at 4.2 (8% last quarter) and projected by CFO to increase to 10% by 2010
- ROI over 5.5x comps (about 10%)
- Dividend 1.9% and promise to increase this by 17% in 2008. Payout ratio only 9% (sustainable).
- Exploding Growth in emerging markets-->Q4 increased profit by 20% v.s. Q4 '06 from these countries
- Share price is approx 25% down from 52 week highs
Advantages:
- global reach and scale
- recent acquisition of two excellent US companies: Respironics (which I know well) and Genlyte, the largest light fixture manufacturer in North America-- both excellent fits for PHG
- LED expertise will have company well positioned to supply large quantities with acceptable quality to a cascade of countries expected to legislate LED use (prohibit incandescent light bulbs) by 2010ish
- management focusing on controlling costs and integration rather than rushing into poorly planned M&As or taking on more debt
The stock is very cheap v.s. competitors even discounting the one time large divesture mentioned above distorting the results somewhat for 2006 (that's why you'll see on some websites that the P/E is only 4) and I can't see why it should be. I'm not convinced that Philip's
management is necessarily exemplary like I would consider American Express, USB, HOG, CX or BBSI to be; however, unlike in the past, they are executing their strategy and doing so in tough times.
The green energy catalyst could bode well for this company. I think that the business risk and downside potential is low, even with the current economic market in mind. The health care component will also hedge against recession associated downturns.
l
Sunday, January 20, 2008
Morningstar's Best Value ETFs for 2008
If you don't like doing the ongoing research for individual stocks and want to diversify as well as keep investing costs to the absolute minimum, buying an ETF is the way to go.
Read this excellent analysis of the top ETFs.
l
Read this excellent analysis of the top ETFs.
l
Livin' Large Index
15 High-End Stocks with Lots of Potential Upside
posted on: January 20, 2008 | about stocks: AXP / COH / EL / ELY / HZO / JWN / OEH / RCL / SKS / STNR / SWRG / TIF / TOL / TPX / WYNN / XLY
Print Email The U.S. economy may be slowing, but the spending habits of wealthy Americans has bouyed the performance of high-end consumer stocks.
Saturday, January 19, 2008
Comments about this week
In approximately 96 hrs the US and Canadian stock markets gave back all the gains they made over the past year, despite the Bush administration's economic incentive package.
Things look bleak. The only markets that have done well in 2008 are the Ukraine and Brazil--- not the kind of markets most folks would be comfortable betting the farm on in the long run (although I wouldn't mind owning a Brazikrainian ETF).
If you go completely into cash, stagflation will eat into your holdings as your money becomes worth less and less.
If you go long/short as a hedging strategy, this adds complexity to your portfolio that most people are uncomfortable with. Note: if you are prepared to research this further and (like me) want to avoid investing on margin, have a look at the Horizon Beta Pro series of ETF funds. You can stay "long" your favourite strong, well capitalized equities currently on sale for the long term and still make money over the short/intermediate term as the stock market bottoms out with one of the Bear Plus funds giving roughly 200% of the S&P index (either US or CDN) returns if that market drops. Unfortunately, if the market rallies, you lose 200%; however, your long stocks should go up at least that amount if they are carefully chosen and somewhat diversified.
If you stay 100% in equities/bonds and stay long, buying more fundamentally strong equities on the way down to the market bottom, whenever and wherever that will be, you will need a strong stomach but I suspect you will have the best long term results.
Stocks that I am studying carefully and considering adding to or starting a position in over the next 8 weeks:
1. Cemex- CX. Big Cap with excellent Dividend and low payout ratio. Global and market leader with excellent management and admirable balance sheet. Leveraged into the infrastructure boom worldwide. Despite management's recent announcement that profits would EXCEED expectations for Q4, stock keeps dropping. I will consider myself lucky if I can get more in the low 20's (hoping for high teens.... but I'm not sure that even Mr. Market is that crazy)
2. Harley-Davidson HOG. Big Cap with moderate dividend low payout. Increasing global footprint and decent balance sheet. Big time insider buying (one officer bought $5 million worth of stock in November), guru buying (John Rogers bought approx $100 Million worth Dec 31) a large share buyback. Expect short to intermediate pain as company shakes out excess inventory and FCF/margins suffer accordingly. Adding more bought in the low 30's would make me happy.
3. American-Express AXP. Large cap Buffett stock with excellent management who anticipated the subprime debacle. Lowest exposure to low FICO clients of the big 3. Solid balance sheet, good dividend low payout ratio. Lowest P/E seen for many years. Large cash settlement in lawsuits v.s. VISA and M/C. Short term pain almost certain. I'll start a position when it hopefully hits the high 30's as more bad news comes in.
4. Seaboard SEB and Columbia Sportswear COLM. These two are well positioned global mid-caps with minimal-no debt, big time insider ownership and excellent management. I don't think SEB will drop much unless corn prices (to feed the hogs) spike and continue to squeeze margins. If it drops below $1350, I will buy more. COLM will likely drop further as it is dragged down by a hated retail sector. I would find it difficult to resist buying more at less than $30 if it gets there.
5. Moody's MCO. Another Buffett stock, part of a duopoly and plagued by a class action lawsuit it will handily win (again). Very well managed and global exposure. Short to intermediate pain that could drag out for as long as 5 years as the SIV/ABCP detritus washes up to the surface should make it an even more attractive long term opportunity.
6. DELL. Increasing market share and back to good management. Extremely low client/investor expectations--- easy to beat. Very strong balance sheet particularly FCF and debt (virtually none). New product pipeline finally formulating. If the price hits the teens, I will definitely add to my position.
7. BBSI. See my analysis in a previous post. Although the management and financial strength of this company are very impressive, this stock represents the riskiest investment of all the equities mentioned in this post. Why? With a market cap under 200 million, it's a very small cap company and it does not have global exposure. In fact the US states it is most active in (California and Nevada) are being hit very hard by the sub prime fallout. Micro cap companies can become insolvent in wink of an eye and banks are not happy to lend to anybody these days, let alone a small company. Fortunately, big insider ownership, no debt, good FCF and a dividend make the stock very attractive. What also makes it very attractive to me is the superb business plan and the upside potential reward down the line IF the company can survive the downturn. I think it will but I'm guessing. If I can buy it at $15 or less, I will take a small position and add to it carefully.
Things look bleak. The only markets that have done well in 2008 are the Ukraine and Brazil--- not the kind of markets most folks would be comfortable betting the farm on in the long run (although I wouldn't mind owning a Brazikrainian ETF).
If you go completely into cash, stagflation will eat into your holdings as your money becomes worth less and less.
If you go long/short as a hedging strategy, this adds complexity to your portfolio that most people are uncomfortable with. Note: if you are prepared to research this further and (like me) want to avoid investing on margin, have a look at the Horizon Beta Pro series of ETF funds. You can stay "long" your favourite strong, well capitalized equities currently on sale for the long term and still make money over the short/intermediate term as the stock market bottoms out with one of the Bear Plus funds giving roughly 200% of the S&P index (either US or CDN) returns if that market drops. Unfortunately, if the market rallies, you lose 200%; however, your long stocks should go up at least that amount if they are carefully chosen and somewhat diversified.
If you stay 100% in equities/bonds and stay long, buying more fundamentally strong equities on the way down to the market bottom, whenever and wherever that will be, you will need a strong stomach but I suspect you will have the best long term results.
Stocks that I am studying carefully and considering adding to or starting a position in over the next 8 weeks:
1. Cemex- CX. Big Cap with excellent Dividend and low payout ratio. Global and market leader with excellent management and admirable balance sheet. Leveraged into the infrastructure boom worldwide. Despite management's recent announcement that profits would EXCEED expectations for Q4, stock keeps dropping. I will consider myself lucky if I can get more in the low 20's (hoping for high teens.... but I'm not sure that even Mr. Market is that crazy)
2. Harley-Davidson HOG. Big Cap with moderate dividend low payout. Increasing global footprint and decent balance sheet. Big time insider buying (one officer bought $5 million worth of stock in November), guru buying (John Rogers bought approx $100 Million worth Dec 31) a large share buyback. Expect short to intermediate pain as company shakes out excess inventory and FCF/margins suffer accordingly. Adding more bought in the low 30's would make me happy.
3. American-Express AXP. Large cap Buffett stock with excellent management who anticipated the subprime debacle. Lowest exposure to low FICO clients of the big 3. Solid balance sheet, good dividend low payout ratio. Lowest P/E seen for many years. Large cash settlement in lawsuits v.s. VISA and M/C. Short term pain almost certain. I'll start a position when it hopefully hits the high 30's as more bad news comes in.
4. Seaboard SEB and Columbia Sportswear COLM. These two are well positioned global mid-caps with minimal-no debt, big time insider ownership and excellent management. I don't think SEB will drop much unless corn prices (to feed the hogs) spike and continue to squeeze margins. If it drops below $1350, I will buy more. COLM will likely drop further as it is dragged down by a hated retail sector. I would find it difficult to resist buying more at less than $30 if it gets there.
5. Moody's MCO. Another Buffett stock, part of a duopoly and plagued by a class action lawsuit it will handily win (again). Very well managed and global exposure. Short to intermediate pain that could drag out for as long as 5 years as the SIV/ABCP detritus washes up to the surface should make it an even more attractive long term opportunity.
6. DELL. Increasing market share and back to good management. Extremely low client/investor expectations--- easy to beat. Very strong balance sheet particularly FCF and debt (virtually none). New product pipeline finally formulating. If the price hits the teens, I will definitely add to my position.
7. BBSI. See my analysis in a previous post. Although the management and financial strength of this company are very impressive, this stock represents the riskiest investment of all the equities mentioned in this post. Why? With a market cap under 200 million, it's a very small cap company and it does not have global exposure. In fact the US states it is most active in (California and Nevada) are being hit very hard by the sub prime fallout. Micro cap companies can become insolvent in wink of an eye and banks are not happy to lend to anybody these days, let alone a small company. Fortunately, big insider ownership, no debt, good FCF and a dividend make the stock very attractive. What also makes it very attractive to me is the superb business plan and the upside potential reward down the line IF the company can survive the downturn. I think it will but I'm guessing. If I can buy it at $15 or less, I will take a small position and add to it carefully.
STAGFLATION!! RECESSION!! 1970's all over again
Thursday was lovely day in the stock market. The fear is palpable. The Fed whining is deafening. Bernanke doesn't seem to care that much, and maybe he shouldn't. It is not his job to worry about stock market psychology. It is his job to keep the economy afloat and stave off inflation. If easing 100 bp Friday will help accomplish that, then he should do it - but not for any other reason.
Wednesday, January 16, 2008
Monday, January 14, 2008
An argument to start a position in American Express
Read about Kenyon's analysis of AXP here.
He should have also mentioned that there is has been a large amount of insider buying going on since Sept '07
He should have also mentioned that there is has been a large amount of insider buying going on since Sept '07
Sunday, January 13, 2008
Net Payout Yield Technique for Stock Picking
A variant on the "Dogs of the Dow" strategy, accounting for stock buybacks as well as dividends paid to shareholders.
Read about it here
Read about it here
Saturday, January 12, 2008
The bull case for a Human Resources micro-cap: BBSI
Barret Business Services Inc.
This company has intrigued me for some time. It targets small to medium businesses in mostly the western USA, offering professional employer organization services in the areas of payroll and payroll taxes, employee benefits, health insurance, workers' compensation coverage, workplace safety programs, compliance with federal and state employment laws, labor and workplace regulatory requirements, and related administrative responsibilities. Many of these businesses are finding it makes economic sense to outsource these complex tasks to specialist firms like BBSI.
The company's financials speak for themselves:
Despite the perception of a negative economic outlook in the US, quarterly earnings growth is approx 13%.
Other points:
Main bear case:
I intend to study this one carefully and obtain a position within the next 2 months.
l
This company has intrigued me for some time. It targets small to medium businesses in mostly the western USA, offering professional employer organization services in the areas of payroll and payroll taxes, employee benefits, health insurance, workers' compensation coverage, workplace safety programs, compliance with federal and state employment laws, labor and workplace regulatory requirements, and related administrative responsibilities. Many of these businesses are finding it makes economic sense to outsource these complex tasks to specialist firms like BBSI.
The company's financials speak for themselves:
- P/E 10
- PEG 0.8
- P/S 0.68
- EV/EBITDA <>2
Despite the perception of a negative economic outlook in the US, quarterly earnings growth is approx 13%.
Other points:
- trading just above 52 week low
- >30% insider ownership, particularly the CEO
- Very strong management both qualitatively and quantitatively. CEO is highly respected, contrarian reprobate. I haven't met him but I like him because in the last conference call he told the analysts that if they keep selling the stock down to 5 x earnings he'd buy the whole f#$#ing company. ;-) ROE 17%
- long term demographic appeal- is helping match aging baby boomers to temp and part time positions for growing companies desperate for warm bodies.
- Guru Robert Olstein has a significant position, adding to it in Sept at a much higher price than trading currently
- A dividend! (1.9% currently with a sustainable payout ratio too)
Main bear case:
- actual or perceived tough economic times and tightening job market looks likely over the short term. This may push stock price down further over the short term. I think that these worries are priced into the stock now.
- does not have a global footprint
- is a microcap and subject to ++ volatility
I intend to study this one carefully and obtain a position within the next 2 months.
l
Friday, January 11, 2008
Wednesday, January 9, 2008
Update on some stocks discussed previously
Looks like 1990 all over again.
1. Georgia Gulf GGC-- may well be a falling knife as it falls below $4. Institutional investors don't like the long term debt from the Royal acquisition. Insider Sun Securities Fund and Sun Advisors has been buying up shares aggressively. I suspect that GGC will be acquired soon but it is possible Chapter 11 is the final outcome. Entry at this point is only for folks with cast iron stomachs. Lesson from this investment: when troubled economic times loom large, avoid smaller companies with recent acquisitions and large debt (even long term), particularly in cyclic business sectors.
2. Harley Davidson HOG-- may be making political inroads into China which could open a huge market for the company. Large amount of insider buying (1 officer buying $5 Million worth of stock in November). I'm buying more at $40
3. DELL-- still hated by the street despite excellent cash flow, global footprint and very attractive product line and minimal debt. I'm buying more at $20.
4. COLM Columbia Sportswear-- has dropped to $38 for no rational reason other than being a midcap in a sector that is loathed (retail). Global, little debt, big time insider ownership. I will wait a few weeks to allow the dust to settle and add to my position for long term, hopefully in the mid 30's and a P/E of less than 8 (unheard of for a profitable brand name apparel retailer, at least in my memory!)
1. Georgia Gulf GGC-- may well be a falling knife as it falls below $4. Institutional investors don't like the long term debt from the Royal acquisition. Insider Sun Securities Fund and Sun Advisors has been buying up shares aggressively. I suspect that GGC will be acquired soon but it is possible Chapter 11 is the final outcome. Entry at this point is only for folks with cast iron stomachs. Lesson from this investment: when troubled economic times loom large, avoid smaller companies with recent acquisitions and large debt (even long term), particularly in cyclic business sectors.
2. Harley Davidson HOG-- may be making political inroads into China which could open a huge market for the company. Large amount of insider buying (1 officer buying $5 Million worth of stock in November). I'm buying more at $40
3. DELL-- still hated by the street despite excellent cash flow, global footprint and very attractive product line and minimal debt. I'm buying more at $20.
4. COLM Columbia Sportswear-- has dropped to $38 for no rational reason other than being a midcap in a sector that is loathed (retail). Global, little debt, big time insider ownership. I will wait a few weeks to allow the dust to settle and add to my position for long term, hopefully in the mid 30's and a P/E of less than 8 (unheard of for a profitable brand name apparel retailer, at least in my memory!)
Sunday, January 6, 2008
USB--- a big bank endorsed by Buffett and Morningstar-- with good reason
We bought some USB shares for my wife's RRSP.
Mr. Dorsey discusses USB and other well positioned banks for long term appreciation during the eventual recovery phase of the credit/mortgage mess and a juicy 5+ percent dividend to reward you during the wait:
Mr. Dorsey discusses USB and other well positioned banks for long term appreciation during the eventual recovery phase of the credit/mortgage mess and a juicy 5+ percent dividend to reward you during the wait:
Saturday, January 5, 2008
Update: Bargains galore as apparent danger looms
Everywhere you look, there's fear. $100++ oil, food prices skyrocketing, subprime and ABCP fiascos afoot and now we see unmistakable cracks in the world's largest economy. This week the number of new jobs created in the US dropped for the first time in years. To some bearish individuals, the recession is already here. Others are predicting a 1920's type global Great Depression.
There are 4 ways an investor can react to such news:
In such times, it's more important than ever to plan to be very, very picky: buying only companies that you would want to own for a long time, harbouring little or no debt and excellent long term management track record (having weathered many an economic storm such as this one). One would also hope for a nice dividend that matches the CPI to help keep inflation at bay and help out with the tax bill and a payout ratio for that dividend that is sustainable.
Today I put in lowball bids for the following securities:
DELL Dell computer--> this is a globally expanding cash machine finally changing its business model and has a genius at the helm now. It has laughably low debt, particularly for a tech company. Share buybacks. A slam dunk over the long term (just above 52 week lows) IMHO. Low risk, moderate reward.
HOG Harley Davidson--> major insider buying, manageable debt, good cash flows and global growth. Great management/margins/ROC. Large buy-back and increasing dividends over past 5 years. Low risk, moderate reward.
MCO Moody's--> duopoly & high barrier to entry, massive margins/ROC, 19% owned by Buffett, global footprint, gurus Cunniff and John Rogers adding to their positions. Investors hurt by subprime pain are launching class action lawsuit--Moody's has been down this route several times before... and always won in court. At risk of political retribution/forced deregulation although this has been threatened before and never happened. Moderate risk, high reward.
LM Legg-Mason--> considered world's best asset manager although some of their highest profile managers (Bill Miller particularly) have underperformed of late. Very well managed. Some SIV exposure (indirectly exposed to subprime mortgage stuff). Dodge & Cox and Marty Whitman have a large stake and are adding to their positions since September. Deep discount to intrinsic value ($69 v.s. $120) but has some short term downside if Citi sells their stake and more assets under management flow out as investors predictably panic----- I'm watching this one carefully. Moderate risk, high reward.
I'm also analyzing WTS and OXM. I've put a lowball bid in for the latter. I'll publish a more detailed analysis of these two later.
Good luck with your own analysis ;-)
There are 4 ways an investor can react to such news:
- convert all investments into cash and hope inflation/stagflation and the tax bill doesn't eat away at your nest egg too much
- buy T-bills and government bonds +/- high quality corporate bonds, anticipating that the Fed/BoC will slash interest rates and increase the value of those bonds
- buy gold. Everyone else seems to be doing that, just like in the 80's (remember?)
- go bargain shopping!
In such times, it's more important than ever to plan to be very, very picky: buying only companies that you would want to own for a long time, harbouring little or no debt and excellent long term management track record (having weathered many an economic storm such as this one). One would also hope for a nice dividend that matches the CPI to help keep inflation at bay and help out with the tax bill and a payout ratio for that dividend that is sustainable.
Today I put in lowball bids for the following securities:
DELL Dell computer--> this is a globally expanding cash machine finally changing its business model and has a genius at the helm now. It has laughably low debt, particularly for a tech company. Share buybacks. A slam dunk over the long term (just above 52 week lows) IMHO. Low risk, moderate reward.
HOG Harley Davidson--> major insider buying, manageable debt, good cash flows and global growth. Great management/margins/ROC. Large buy-back and increasing dividends over past 5 years. Low risk, moderate reward.
MCO Moody's--> duopoly & high barrier to entry, massive margins/ROC, 19% owned by Buffett, global footprint, gurus Cunniff and John Rogers adding to their positions. Investors hurt by subprime pain are launching class action lawsuit--Moody's has been down this route several times before... and always won in court. At risk of political retribution/forced deregulation although this has been threatened before and never happened. Moderate risk, high reward.
LM Legg-Mason--> considered world's best asset manager although some of their highest profile managers (Bill Miller particularly) have underperformed of late. Very well managed. Some SIV exposure (indirectly exposed to subprime mortgage stuff). Dodge & Cox and Marty Whitman have a large stake and are adding to their positions since September. Deep discount to intrinsic value ($69 v.s. $120) but has some short term downside if Citi sells their stake and more assets under management flow out as investors predictably panic----- I'm watching this one carefully. Moderate risk, high reward.
I'm also analyzing WTS and OXM. I've put a lowball bid in for the latter. I'll publish a more detailed analysis of these two later.
Good luck with your own analysis ;-)
Tuesday, January 1, 2008
Oxford and Watts
I'm in the process of studying two Graham criteria stocks mentioned in the previous post: OXM and WTS. I'm impressed by their balance sheets, quality of management and potential for long term growth. I particularly like WTS' global exposure.
They are both small cap equities weathering a very tough market. This concern is priced into the share priced, and is possibly overdone by Mr. Market.
When I get a bit more time, I'll do a full analysis of both of these. There is likely to be even more volatility so there's no reason to jump into these investments with the full amount of capital you are willing to invest (i.e. buy 25% now--- they may be an even better deal soon).
In the meantime, I suggest you watch this video of a classic value investor's view of OXM
They are both small cap equities weathering a very tough market. This concern is priced into the share priced, and is possibly overdone by Mr. Market.
When I get a bit more time, I'll do a full analysis of both of these. There is likely to be even more volatility so there's no reason to jump into these investments with the full amount of capital you are willing to invest (i.e. buy 25% now--- they may be an even better deal soon).
In the meantime, I suggest you watch this video of a classic value investor's view of OXM
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