Invest like a young Warren Buffett
March 15, 2010
The following article contains a blueprint. The exact formula’s and functions to use with a stock screener to find stocks a young Warren Buffett would buy. These stocks are not just cheap, they have low debt levels, high quality management and strong profit margins.
A lot of us wish we could invest like Warren Buffett — and for good reason. Buffett and his partners acquired control of Berkshire Hathaway (BRK.A, news, msgs) in 1965. Since then, by taking positions in publicly traded companies such as McDonalds (MCD, news, msgs) and buying other companies outright, Buffett transformed Berkshire into, in effect, a closed-end mutual fund.
What Kind of Economic Recovery?
March 12, 2010
For the third month in a row the index of leading economic indicators rose. This is the first time this has occurred since 2004. And, it gives us some sign that maybe the economic recession that we have been in since December 2007 is reaching its climax. James W. Paulson, chief investment strategist at Wells Capital Management, is quoted in the Wall Street Journal as saying “We’ve got tons of information telling us we’ve turned the corner.” Ataman Ozyildirim, an economist at the Conference Board which produces the report, states that “The process of coming out of the recession, although still fragile, may be starting.”
EMCOR GROUP, INC. The Rebuilding Of America
March 11, 2010
President Obama’s stimulus package includes substantial spending on infrastructure projects. One company that stands to gain from the stimulus spending is EMCOR Group, Inc. (NYSE – EME.) EMCOR operates in the engineering and construction space. It is an electrical and mechanical construction and facilities firm with operations in North America, the United Kingdom, and the Middle East.
The Price Sales Ratio Revisited
March 11, 2010
The Price/Sales Ratio (PSR as commonly understood, is simply the subject company’s market capitalization divided by its most recent twelve months sales. The PSR was first popularized in Super Stocks in 1984 by Kenneth Fisher, the son of legendary investor Phillip Fisher. In subsequent years, studies have demonstrated the superiority of price/sales over price/earnings.
To be sure, Fisher never advocated the use of price/sales as a stand alone indicator of value. It is just one tool to use when in conjunction with other tools to estimate a company’s value. The PSR is particularly useful when looking at a company without earnings as the more commonly used P/E ratio is meaningless.
A Walk on the Supply Side
March 10, 2010
Keynesian demand-side economics still rules the minds of the policy makers in Washington, D. C. Their actions and their analysis continually point to their focus on aggregate demand and the “green shoots” that are expected to accompany an economic recovery based on the stimulus of spending.
For over a year I have been arguing that more attention needs to be given to the supply side of the equation. Yes, the growth rate of real GDP has been going down and the rate of employment has been going up. But, the rate of inflation, as measured by the rate of increase of the GDP price deflator has not declined since the fourth quarter of 2007. If it were just a demand side problem, this would not be the case.
Financial Well-Being and Regulation: the Obama Effort
March 8, 2010
Financial well-being is, in many ways, analogous to our physical well-being. We need periodic check ups and doctoral oversight, but in general true health is dependent upon the discipline and persistence and care that we bring to our own daily lives. However in other ways financial well-being in not the same. Our physical existence is limited to our natural selves: there are limits to how humans can grow and change. This is not true of the financial system.
In the world of finance we can innovate and change and find ways to get around regulation. This has been the modus operandi of the financial system during my entire professional career. Consequently, the financial system of today in substantially different than the financial world that existed in the 1960s. I have called the last fifty years or so the age of financial innovation. Regulation and oversight of the financial system does have to change. But, we need to be careful about the change in regulation and oversight that results and not just give in to populist calls to “put a stop to the greed on Wall Street”.
The Banking System and Bank Lending
March 5, 2010
The headlines in the Wall Street Journal shout out at us this morning, “Bank Lending Keeps Dropping” (See http://online.wsj.com/article/SB124019360346233883.html#mod=testMod.) The bank lending they are referring to is the lending at “the nation’s biggest banks”, the banks that were the biggest recipients of government money. The results: the biggest recipients of taxpayer money “made or refinanced” 23% less in new loans in February than in October, the month the Treasury kicked off the Troubled Asset Relief Program (TARP).
This is just one more piece of information that the banking system still has major problems.
Amdocs Downgraded
March 2, 2010
Amdocs (NYSE:DOX) provides software and service for communications, media and entertainment industry service providers. It develops, implements, and manages software and services associated with the business support systems (BSS) and operational support systems (OSS). Its software systems cover the range of revenue management, customer management, service and resource management, digital commerce and service delivery, and information management. The Company’s services portfolio includes consulting and systems integration services, managed services, delivery services and product support services.
This is not time to own semiconductor stocks
February 22, 2010
This is not time to own semiconductor stocks, either chip makers or equipment manufacturers. According to the Semiconductor Industry Association, worldwide sales of semiconductors were $14.2 billion in February, a decline of 30.4% compared to February 2008 sales of $20.3 billion. This is a continuation of the decline observed from the prior year. Sales were down by $1.1 billion from January 2009 levels of $15.3 billion.
A Short Story: Baxter International
February 9, 2010
I am taking a contrarian stand on Baxter International (BAX), a global diversified healthcare company. Baxter is a major manufacturer and distributor of medical devices, pharmaceuticals and biotech products. Products are used in healthcare facilities of all types including hospitals, nursing homes and specialized medical centers such as rehab centers and kidney dialysis centers.
The company is financially strong; sales growth is exceptional and earnings continue to surprise. Baxter has a solid balance sheet.
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