Wednesday, December 28, 2005

Capital Structure

When evaluating a company's merits as a possible investment, you should examine the components of its value and explore how it finances its workings. This is referred to as a company's capital structure. [via Russ]

Friday, December 23, 2005

Investing With the Stars

There are people out there who invest according to the stars, or according to patterns they see in stock prices, and sometimes even simply according to the calendar.

Wednesday, December 21, 2005

Google

[1/13/06] Google now has a larger market cap than IBM and Chevron [chucks_angels]

[12/22/05] Is the Google deal with AOL a good deal?

[12/21/05] What will stop Google's ascent?

[12/19/05] David Kirkpatrick says Google will stumble in 2006 (and 7 more predictions for tech)

[12/18/05] Rick Munarriz names Google as a stock to sell in 2006, with reservations.

[12/15/05] Does Google want to rule the world?

[12/6/05] David Meier faces the prospect of Google hitting $500.

[12/2/05] Google's greatest weakness

[5/9/05] Is Google cheap?

[5/7/05] I'm changing my mind as the stock goes up and it gets glowing reports from respected investors (including Jim Cramer and Ben Stein!). It may not be the greatest company. It may not be a Rule Maker. But it could be the next best thing.

[3/3/05] What's the greatest company in America? This Fool says Google (!)

(I have serious doubts on this call.)

[9/15/05] Google headed for $1 trillion market cap?

[1/3/05] How does Google make money?

[11/14/04] Is Google bringing back the bubble?

Sunday, December 18, 2005

Socially Responsible Investing

[12/23/05] Socially responsible investing (SRI) is a growing trend among investors.

[12/18/05] Fools duel.

Richard Rainwater

Rainwater is no crackpot. But you don't get to be a multibillionaire investor—one who's more than doubled his net worth in a decade—through incremental gains on little stock trades. You have to push way past conventional thinking, test the boundaries of chaos, see events in a bigger context. You have to look at all the scenarios, from "A to friggin' Z," as he says, and not be afraid to focus on Z.

[discussed at chucks_angels]

Saturday, December 17, 2005

To GAAP or not to GAAP

[12/17/05] Cash flow is a better indicator than GAAP earnings in determining how well a company is doing now.

[4/26/05] What's the difference between GAAP and non-GAAP earnings?

Thursday, December 15, 2005

10 Comeback Kid Stocks for 2006

Harry Domash picks 10 Comeback Kids stocks for 2006.

The stocks are
Company/Symbol   Recent price* Industry 52-week price change 
Symantec (SYMC) 17.99 Software -46.0%
Ford Motor (F) 8.53 Auto Mfg. -41.6%
General Motors (GM) 23.00 Auto Mfg. -39.8%
Fannie Mae (FNM) 49.43 Credit Services -31.4%
Avon Products (AVP) 27.49 Personal Products -30.1%
Biogen Idec (BIIB) 43.03 Biotech -29.5%
Dell (DELL) 30.42 Personal Computers -27.4%
Zimmer Holdings (ZMH) 62.50 Medical Appliances & Equip. -25.2%
Gannett (GCI) 61.49 Newspaper Publishers -25.0%
Boston Scientific (BSX) 26.45 Medical Equipment -23.7%

*As of Nov. 11, 2005

Thursday, December 08, 2005

Off-The-Wall Investments

You win some, you lose some -- nine off-the-wall investments that paid off, and four that flopped.

NEW YORK (FORTUNE) - They all laughed when Jefferson bought half the continent from France. Alaska was called "Seward's folly." Other "crazy" investments have worked out fine, too. But some oddball bets fell flat.

One of the surprising losers in our gallery is Warren Buffett, and there's a host of other investors profiled, both winners (the entrepreneur who bought the formula for a weird brown health drink called Coca-Cola) and losers (remember Webvan?).

-- from InvestorGuide (but I had to hunt down the URLs)

Wednesday, December 07, 2005

The Different Kinds of Companies

The fool.com describes the different kinds of companies in this primer.
In your reading, you'll run across many terms used to describe different kinds of companies. Here are some of the most common ones:

"Cyclical" companies are defined by how their businesses react to economic change. During recessions, people spend money more conservatively, putting off major purchases such as cars and refrigerators. Thus, manufacturers of large appliances are cyclical. Companies such as pharmaceutical firms that aren't so affected are "defensive." If you're taking heart medication, you're not going to stop because of an economic downturn.

"Seasonal" companies experience significantly different levels of business at various times of the year. Department stores, for example, see sales surge during the Christmas season. Swimming pool companies operate mainly in the summer.

"Blue chip" companies have been around a long time and are known for being solid, relatively safe investments. They're steady growers, usually paying dividends. Examples: General Electric, ExxonMobil, Johnson & Johnson. At the other end of the spectrum are "speculative" stocks, typically tied to young, relatively unknown and risky companies. Many promise great things but have yet to prove themselves. Examples include gold mines or companies trying to develop cures for cancer.

"Growth" stocks, favored by aggressive investors, grow faster than the market average. They often don't pay any dividends, using their cash to continue growing. Their stock prices often go up -- and down -- quickly. Some examples: Amazon.com, eBay. (Railroad and telegraph businesses were growth companies once -- fortunes change over time.)

"Value" stocks are favored by investors looking to buy the proverbial dollar for 50 cents. They seek promising companies that are out of favor.

"Income" stocks may not grow too quickly, but they pay fat dividends. In pre-deregulation days, utility companies reliably paid high dividends. Today many real estate companies do. Income stocks are often favored by those in or near retirement, who rely on the dividends to supplement pensions or savings.
Note that many companies will fit into several categories, and savvy investors will often seek firms with several characteristics, such as those that are both growing and valued attractively.

Peter Lynch places companies into one of six general companies: slow growers, stalwarts, fast growers, cyclicals, asset plays, and turnarounds.
  • Slow Growers: Large and aging companies expected to grow only slightly faster than the U.S. economy as a whole, but often paying large regular dividends. These are not among his favorites.
  • Stalwarts: Large companies that are still able to grow, with annual earnings growth rates of around 10% to 12%; examples include Coca-Cola, Procter & Gamble, and Bristol-Myers. If purchased at a good price, Lynch says he expects good but not enormous returns--certainly no more than 50% in two years and possibly less. Lynch suggests rotating among the companies, selling when moderate gains are reached, and repeating the process with others that haven’t yet appreciated. These firms also offer downside protection during recessions.
  • Fast-Growers: Small, aggressive new firms with annual earnings growth of 20% to 25% a year. These do not have to be in fast-growing industries, and in fact Lynch prefers those that are not. Fast-growers are among Lynch’s favorites, and he says that an investor’s biggest gains will come from this type of stock. However, they also carry considerable risk.
  • Cyclicals: Companies in which sales and profits tend to rise and fall in somewhat predictable patterns based on the economic cycle; examples include companies in the auto industry, airlines and steel. Lynch warns that these firms can be mistaken for stalwarts by inexperienced investors, but share prices of cyclicals can drop dramatically during hard times. Thus, timing is crucial when investing in these firms, and Lynch says that investors must learn to detect the early signs that business is starting to turn down.
  • Turnarounds: Companies that have been battered down or depressed--Lynch calls these "no-growers"; his examples include Chrysler, Penn Central and General Public Utilities (owner of Three Mile Island). The stocks of successful turnarounds can move back up quickly, and Lynch points out that of all the categories, these upturns are least related to the general market.
  • Asset opportunities: Companies that have assets that Wall Street analysts and others have overlooked. Lynch points to several general areas where asset plays can often be found--metals and oil, newspapers and TV stations, and patented drugs. However, finding these hidden assets requires a real working knowledge of the company that owns the assets, and Lynch points out that within this category, the "local" edge--your own knowledge and experience--can be used to greatest advantage.

I see that this Lynch page is on the web page of Peter A. Ammermann, Assistant Professor of Finance at Long Beach State. The content though was written by Maria Scott Crawford for the AAII Journal (she is or was the editor of the Journal). She also wrote an overview of Philip Fisher.

Monday, December 05, 2005

BlogShares

Hey, I see this blog is currently worth B$2,353,43 (whatever that B means) at blogshares. Not bad. Then again it was worth B$7,467.48 on November 15.

Seven Sins of Stock Picking

As the market bounces back and forth between heaven and heck, and fortunes are wagered on a wing and a prayer, it's a good time to check out the seven sins of stock picking, behaviors that can put a serious crimp in your upcoming earthly reward.

Friday, December 02, 2005

Lousy Offices, Great Investments

Bill Barker (TMF Lazarus) writes about Peter's Principle No. 7:
The extravagance of any corporate office is directly proportional to management's reluctance to reward shareholders.
Looking it up, I see that Principle is from Peter Lynch's book Beating The Street which discusses 20 Golden Rules as well as 21 Principles

Golden West (I owned this stock back in the 1990s - looking at the chart now, I should have held on to it!) came to mine when I (re)read the above principle. Looking it up, I see it was actually mentioned in a different chapter of that same book (chapter 11).
At Golden West Financial in California, a champion of productive penny-pinching and the lowest-cost operator in the S&L business, the role of the receptionist was taken over by an old-fashioned black telephone and a sign that said, "Pick up."

Morningstar Fund Analyst Picks

Morningstar analysts are a very serious and committed group of investors. "While we each have our individual biases, more often than not, we agree about what makes a fund a good one. As such, a regular feature on Morningstar.com has been our Fund Analyst Picks, which represent our best ideas on a category-by-category basis."

So, what exactly does Morningstar look for in a Fund Analyst Pick?

In summary,
  • Consistent, Thoughtful Strategies
  • Experienced, Successful Management
  • Low Expenses
  • Good Stewards
  • Other Considerations

Gold Band

From Richard Band's Journal, December 1, 2005.
Golden Crest
Thu, 01 Dec 2005 17:17:30 ET

I don't often darken the door of a coin dealer's shop -- only when I'm selling. (I do most of my buying through the mail.) This afternoon, I saw on the Net that gold was trading at an 18-year high, just over $500 an ounce. That was Mozart to my ears. So I hopped in the old van and drove as fast as I could to a shop 45 minutes away. It was time to unload most of my cache of gold coins.

Am I nuts? The dealer probably thought so. After I sat down in his disheveled office and he began examining my Double Eagles, he advised me, in a low but firm voice, to keep my coins. 'Chances are, the price of gold will be higher a year from now,' says he.

I loved it. Indeed, I was hoping the dealer would try to dissuade me from selling. That's exactly the psychology that prevails at every major market top. Did your stockbroker tell you to sell your NASDAQ darlings in March 2000? At the top, the promoters will always try to stop you from selling.

My thoughts ran back to my last visit to a coin dealer's, in April 1987. At the time, silver was at the top of a roaring bull market -- and I wanted to dump my silver dollars. (They've never fetched anywhere near the same prices since.)

I sat down and the dealer picked up the phone to call his wholesaler for a quote. 'Well, what did he say?' I asked. 'Biggest demand for silver dollars since January 1980. Everybody's buying.'

I stifled a smile. January 1980? That was the manic top, when silver hit $50 an ounce. (Even today, 25 years after that peak, silver is down 80%.)

'Sure you still want to sell?' he asked. 'Yep.'

Gold could certainly gain another $10-$20 from here without disturbing me in the least. I'm focusing on the next $100-$150 move, which I expect will be down. In 2006, the Federal Reserve's tight-money policy will bite a wide range of markets -- and the ones that will fall hardest are those (like gold) that have benefited the most from the easy money of the past few years.

If you own gold or gold-mining shares, don't waste a lot of time celebrating your good fortune. History shows that the great selling opportunities in hard assets slip away quickly, with little or no warning. Consider yourself forewarned!
Band's report reminds me of Andrew Tobias' story of his 5000 silver dimes in his book Money Angles. (I knew it sounded familiar.) Tobias alludes to the story in a 2000 column.

* * *

[12/8/05] On the other hand, toddfinances over at chuck_angels thinks gold is likely to see 4 digits.

* * *

[12/11/05] Patrick Heller (I believe it's him writing anyway) says "in my judgment, there is little potential for a significant decline of 10% or more in gold and silver prices. There is a good possibility that we have already started the massive jump in precious metal prices similar to what we experienced in 1979-1980." He further makes the "mute"d forecast.

Gold: I think there is a 75% probability that gold will reach $600 by the end of 2006, a 50% chance that it will top $700, and a 25% chance that it could reach $1000. Even though these numbers might seem fantastic, I believe I am being conservative.

Silver: I expect silver to reach $10.00 by the end of March 2006. I give it a 75% chance that it will reach $15 by year end, and a one-third chance that it will pass $20.

As of November 30, the price for gold was $494.50 and the price for silver was $8.28. (This is from Liberty's Outlook, Liberty Coin Service's Monthly Review of Precious Metals and Numismatics where Heller is the Editor. I see that it's volume 11, issue 12. So by my calculations, that would make 132 issues that they have been bullish.)

VectorVest Special Reports

VectorVest reports by Dr. Bart DiLiddo

Feb 07 - Bottom Fishing: The Art Of Buying Low and Selling High

Dec 05 - Five Stock Market Myths

Sep 05 - Timing: The Ultimate Weapon

Aug 05 - Earnings Growth: The Golden Touch

Jul 05 - Timing: The Ultimate Weapon

Jul 05 - Beating the Odds (VectorVest and market timing)

Jun 05 - How To Pick Stocks (buy undervalued, safe stocks that are going up)

Jun 05 - Stock Valuation and Stock Market Cycles

Jun 05 - Stock Safety: The Missing Link

May 05 - High Growth vs. Low P/E Stocks

And more

[originally posted 6/16/05?]