Wednesday, January 26, 2011

new home sales rise

New home sales increased far more than expected, jumping 17.5% month-over-month (m/m) in December to an annual rate of 329,000 units, above the 300,000 rate forecasted and November's figure was downwardly revised to a 280,000 annual unit rate. The median home price rose 8.5% y/y and 12.1% m/m to $241,500. Inventory of new homes for sale fell to 190,000 units, the lowest level since January 1968, per Bloomberg. At the current sales pace, it would take 6.9 months to exhaust the supply of homes on the market, down solidly from November's 8.4 rate. New home sales are considered a more timely indicator of conditions in the housing market than existing home sales-which also jumped over 12% m/m in December-as they are based on signings instead of closings.

New home sales have rebounded further from the all-time low of 274,000 reached in August, due to high affordability and the recent improvement in consumer sentiment as economic data has improved as of late. However, for all of 2010, sales are down 14% compared to the last year, at a level of 321,000, which is the lowest level in data going back to 1963, per Bloomberg. Moreover, the housing market continues to be weighed down by reluctance by homeowners to make large purchases while still facing high unemployment and reduced ability to trade up, as nearly a quarter of all homeowners have negative equity in their homes.

Schwab's Chief Investment Strategist Liz Ann Sonders notes in her latest commentary, House of the Rising Sun: A Check-Up on Housing, that most measures of housing affordability have improved markedly, but the key to improving demand may lie on job growth as the prospects for employment and housing are likely more linked today than any time in history, given the severity of the crisis in both. Liz Ann also points out that housing has probably broadly bottomed, but the path up is likely to be relatively flat, elongated and volatile among geographic regions. Along with a downturn in the unemployment rate, other necessary ingredients for a health recovery in housing would be a further loosening of the credit environment, no significant (further) spike in mortgage rates, and general improvement to consumer confidence. Again, we believe the prospects for housing are improving, though certainly not stellar, but our optimism about the economic recovery could feed into better-than-expected housing news as well. Read the rest of the article and other timely commentary by Schwab experts at www.schwab.com/marketinsight.

Monday, January 24, 2011

Charlie Munger quotes

Spend each day trying to be a little wiser than you were when you woke up.

In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero.

Choose clients as you would friends.

The best armour of 0ld age is a well-spent life preceding it.

When you borrow a man’s car, always return it with a tank of gas.

If only I had the influence with my wife and children that I have in some other quarters!

Take a simple idea and take it seriously.

In business we often find that the winning system goes almost ridiculously far in maximizing and or minimizing one or a few variables — like the discount warehouses of Costco.

Don’t do cocaine. Don’t race trains. And avoid AIDS situations.

We look for a horse with one chance in two of winning and which pays you three to one.

You’re looking for a mispriced gamble. That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.

It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.

A great business at a fair price is superior to a fair business at a great price.

All intelligent investing is value investing — acquiring more than you are paying for.

You must value the business in order to value you the stock.

No wise pilot, no matter how great his talent and experience, fails to use his checklist.

There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash — and I don’t want to go back.

…it never ceases to amaze me to see how much territory can be grasped if one merely masters and consistently uses all the obvious and easily learned principles.

Once you get into debt, it’s hell to get out. Don’t let credit card debt carry over. You can’t get ahead paying eighteen percent.

If you always tell people why, they’ll understand it better, they’ll consider it more important, and they’ll be more likely to comply.

Spend less than you make; always be saving something. Put it into a tax-deferred account. Over time, it will begin to amount to something. This is such a no-brainer.

You don’t have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time.

Three rules for a career: 1) Don’t sell anything you wouldn’t buy yourself; 2) Don’t work for anyone you don’t respect and admire; and 3) Work only with people you enjoy.

I won’t bet $100 against house odds between now and the grave.

I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.

…being an effective teacher is a high calling.

I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart…

Without numerical fluency, in the part of life most of us inhibit, you are like a one-legged man in an ass-kicking contest.

In my life there are not that many questions I can’t properly deal with using my $40 adding machine and dog-eared compound interest table.


[from Canadian Value via gurufocus]

Thursday, January 13, 2011

Five for 2011

I'm too late for the chucks_angels Fearless Five contest, but I thought I'd throw in my picks here in writing.

I think I'll just pick some of my low P/E stocks and hope for a rebound this year (or one of these years). So let me take a look..

CECO. Forward P/E 7.4. Current price 21.17. Battered education firm showing recent signs of life. Actually I'd like to buy it under 18.

WFC. Forward P/E 11.4. Current price 31.99. It's well off the bottom, but still looks fairly cheap. Could gain further if they raise the dividend.

HPQ. Forward P/E 8.7. Current price 45.59. Has already recovered about half of last year's peak-to-trough drop. Wouldn't be surprised if it gets back to the 53 peak this year.

C. Forward P/E 11.1. Current price 5.07. Similar story to WFC, but more volatile. Actually already near the 52-week high.

ALL. Forward P/E 8.0. Current price 30.62. Has already doubled from the 2009 low, but the insurers still have a ways to go before hitting the pre-dive levels.

OK, check back in a year..

Thursday, January 06, 2011

buy low or buy high?

You may have heard the investment adage: Buy low and sell high. This is one of the oldest pieces of investment advice. However, putting this advice to work is easier said than done.

One of the biggest challenges is determining what is "low." We did some research and found surprising results.

By buying stocks at their 52-week low, you're more likely to own the wrong stocks most of the time. Buying at the 52-week high, however, showed promising results.

dividend stocks outperform

Over the last 36 years, dividend stocks outperformed the rest of the S&P 500 by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, all while paying out cash to their shareholders, according to a study from National Data Research.

Dividend investing is "a sustainable strategy that will be a key driver for performance and total return in 2011," said Lawrence Glazer, Managing Partner with Mayflower Advisors, in a recent appearance on CNBC. Glazer encouraged investors to reconsider top dividend-paying "Dogs of the Dow" such as Verizon(VZ), Johnson & Johnson(JNJ), Merck(MRK) and Kraft Foods(KFT), blue chips that have offered decades of dividend increases and sustainable payouts, many with stronger yields than 10-year treasury notes.