Reading Rule #1 by Phil Town, I was struck of how high multiples were back then (5 or 10 years ago).
For example, two of his favorites were WFM and HOG.
For WFM, PE has gone from 43.7 in 2001 to 34.0 in 2006 to 32.8 TTM. Well actually not that bad here. Looking at the ten year chart, the price has gone from under 20 to near 80 in late 2005 to 10 in late 2008 and is back near 60. Revenue growth went from 24% in 2001 to 19% in 2006 to 12% in 2010.
For HOG, PE has gone from 38 to 18 to 28. P/S has gone from 4.9 to 3.1 to 1.8. The price has gone from almost 50 to the 70s in 2006 down to 10 in early 2009 and is now at 38. Revenue growth 16, 16, 2.
Others.
MSFT. PE went 61, 26, 10. PS 14, 7, 3. Price around 36 ten years ago to 22 in 2002 back to 36 in 2007, down to 16 in early 2009 and currently 25. Revenue growth 10, 11, 7.
CSCO. PE -63, 29, 12. PS 6.5, 5.7, 2.0. Price 18 to 10 in 2002 to 33 in 2007 to 15 in 2009 to 26 in 2010 and currently 15. Revenue growth 18, 15, 11.
ORCL. PE 32, 25, 21. PS 7.6, 5.7, 4.6. Actually not bad. Price near 20 to under 10 in 2002 to over 35 early this year and currently 32. Revenue growth went from 7 to 22 in 2006 to 15 in 2010.
JNJ. PE 32, 18, 15. PS 5.5, 3.7, 3.0. Price has gone from 50 (which turned out to be the ten year low also reached in 2003 and 2009). It hit a high of 70 in 2008. Dipped back to 50 in 2009. And currently at 66. Revenue growth 13, 6, 0.5.
PG. PE 37, 23, 17. PS 2.8, 3.0, 2.4. PG has gone from the low 30s to the mid-70s in 2007, dipped down to the high 40s in 2009 and is back up to 64. Revenue growth -2, 20, 0.
Looking over the data, stocks look pretty cheap just looking at the multiples (but growth slowed too which probably explains a lot). And the second thing is that there were opportunities to buy and sell during the decade. Buy and hold wouldn't have worked as well (assuming you bought and sold at the right time).
Well let me add the growth data above too. Looking at it, the revenue growth really wasn't that high back in 2001. But it had probably fell off a lot already from 1999, 2000 levels.
Tuesday, June 21, 2011
Monday, June 06, 2011
Ten don'ts from Philip Fisher
I have taken a few wooden nickels during my investment career, although when I bought them I thought they were solid gold. As it turns out the gold was merely a thin veneer which covered a piece of rotting wood. Most of my "wooden nickels" were a result of not paying attention to Philip Fisher's "Ten Don'ts For Investors."
The more I read about investing the more I appreciate the philosophy and writings of Philip Fisher. His influence upon modern investment thought is extremely pervasive; many of the concepts that he wrote about five decades ago have become nearly ubiquitous among value investors. Bits and pieces of his philosophy appear in almost every synopsis or profile of every value investor or fund manager who is worth his salt.
Today's article deals with the famous don'ts that Fisher explained in precise detail in his classic work, "Common Stocks and Uncommon Profits." I will follow the don'ts with some personal analysis.
-- by John Emerson
The more I read about investing the more I appreciate the philosophy and writings of Philip Fisher. His influence upon modern investment thought is extremely pervasive; many of the concepts that he wrote about five decades ago have become nearly ubiquitous among value investors. Bits and pieces of his philosophy appear in almost every synopsis or profile of every value investor or fund manager who is worth his salt.
Today's article deals with the famous don'ts that Fisher explained in precise detail in his classic work, "Common Stocks and Uncommon Profits." I will follow the don'ts with some personal analysis.
-- by John Emerson
Friday, June 03, 2011
Arnold Van Den Berg recommends books
The books that I would recommend reading can be divided into three categories: investing, philosophy and health.
For investing, I would recommend reading "The Intelligent Investor." I also believe reading Berkshire Hathaway’s current and historical annual reports (located on the Berkshire website), "The Essays of Warren Buffett: Lessons for Corporate America" by L.A. Cunningham, and the "Cardozo Law Review Volume 19" is well worth the time. The late Philip Fisher wrote several books that are very good: "Common Stocks and Uncommon Profits", "Conservative Investors Sleep Well," "Pathways to Wealth Through Commons Stocks," and "Developing an Investment Philosophy." Seth Klarman’s "Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor" is a good book about risk. An easy, but good, read for those just getting started would be "Value Investing Made Easy" by Janet Lowe. Then there is Roger Lowenstein’s "When Genius Failed: The Rise and Fall of Long-Term Capital Management;" there are some great lessons in that book. And for a more in-depth understanding, lifetime study, and reference is "Security Analysis" by Benjamin Graham and David Dodd.
As for philosophical books, I would like to recommend several that have had a major influence on my life: "From Poverty to Power," "Eight Pillars of Prosperity" and "As a Man Thinketh." These are written by James Allen who is my favorite author. James Allen was a man who devoted his life to seeking the truth. He wrote many other books that are all worth reading. Each of these books has tremendous lifetime principles – you must read these books over and over because each time you do, you will get more out of them. I have been reading James Allen’s "From Poverty to Power" for more than 30 years. It’s only after you experience something that you can go back and say, “Oh! Now I understand this!”, so I prefer to read his and other good books many times over, rather than just reading more books that don’t seem to add more than the original great works.
A sub-category of philosophy is goal setting. Here, I would recommend "Think and Grow Rich" by Napoleon Hill, and "The Wisdom of Your Subconscious Mind" and "The Knack of Using Your Subconscious Mind," both by J.K. Williams. J.K. Williams spent over 50 years studying the subconscious mind.
In the area of health, I would recommend "The China Study" by Dr. Colin Campbell. It is my personal feeling that this book will be as important to health one day as "Security Analysis" is to stocks.
For investing, I would recommend reading "The Intelligent Investor." I also believe reading Berkshire Hathaway’s current and historical annual reports (located on the Berkshire website), "The Essays of Warren Buffett: Lessons for Corporate America" by L.A. Cunningham, and the "Cardozo Law Review Volume 19" is well worth the time. The late Philip Fisher wrote several books that are very good: "Common Stocks and Uncommon Profits", "Conservative Investors Sleep Well," "Pathways to Wealth Through Commons Stocks," and "Developing an Investment Philosophy." Seth Klarman’s "Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor" is a good book about risk. An easy, but good, read for those just getting started would be "Value Investing Made Easy" by Janet Lowe. Then there is Roger Lowenstein’s "When Genius Failed: The Rise and Fall of Long-Term Capital Management;" there are some great lessons in that book. And for a more in-depth understanding, lifetime study, and reference is "Security Analysis" by Benjamin Graham and David Dodd.
As for philosophical books, I would like to recommend several that have had a major influence on my life: "From Poverty to Power," "Eight Pillars of Prosperity" and "As a Man Thinketh." These are written by James Allen who is my favorite author. James Allen was a man who devoted his life to seeking the truth. He wrote many other books that are all worth reading. Each of these books has tremendous lifetime principles – you must read these books over and over because each time you do, you will get more out of them. I have been reading James Allen’s "From Poverty to Power" for more than 30 years. It’s only after you experience something that you can go back and say, “Oh! Now I understand this!”, so I prefer to read his and other good books many times over, rather than just reading more books that don’t seem to add more than the original great works.
A sub-category of philosophy is goal setting. Here, I would recommend "Think and Grow Rich" by Napoleon Hill, and "The Wisdom of Your Subconscious Mind" and "The Knack of Using Your Subconscious Mind," both by J.K. Williams. J.K. Williams spent over 50 years studying the subconscious mind.
In the area of health, I would recommend "The China Study" by Dr. Colin Campbell. It is my personal feeling that this book will be as important to health one day as "Security Analysis" is to stocks.
Inside Job
How did it happen -- the financial collapse that began in 2008 and cost millions of people their savings, their jobs and their homes? That is the question Charles Ferguson set out to answer in his award-winning documentary, Inside Job.
Costco Connection: Did you feel it was worse than you thought it was?
Charles Ferguson: Unfortunately, I did. When I started making the film, if someone had told me we'd find out that ... all of the investment banks has been secretly creating securities that they hoped would fail and then profiting against them, I wouldn't have believed it. I would have said, "That doesn't happen in the United States. We don't do that."
-- Costco Connection, March 2011
Costco Connection: Did you feel it was worse than you thought it was?
Charles Ferguson: Unfortunately, I did. When I started making the film, if someone had told me we'd find out that ... all of the investment banks has been secretly creating securities that they hoped would fail and then profiting against them, I wouldn't have believed it. I would have said, "That doesn't happen in the United States. We don't do that."
-- Costco Connection, March 2011