The Double-Play

[8/3/17] Jeff Auxier looks for double-plays too (don't know what he means by triple-play though)

[2/14/06] Seth Jayson chimes in with a couple of made-up examples.

[6/27/05] Nathan Parmelee writes about the Davis Double-Play, a situation where a company's earnings and p/e expand. I always thought it was a Peter Lynch concept (GARP), but perhaps not so. In any case, that's the kind of potential situations that I like to look for too.

Here's another way to word it. Buy relentless growers when they're cheap. (Another advertisement for Phil Durrell's letter.)

methods in valuing stocks

While researching DDM and DCF, I was led to moneychimp which led me to this article on valuing stocks, eBay in particular. It was interesting to note the different methods available and the assumptions that must be made in using them.

... Then while googling moneychimp, I stumbleupon.

AmeriTrade buys TD Waterhouse

will now become the largest online broker. I wonder if my commission rate will go down?

Creative Stock Scams

http://www.caseyresearch.com/displayArchiveArticleWwnk.php?id=158

To Everything There Is A Season

After taking some profits on PRASX Thursday, I dusted off Lichello's How To Make $1,000,000 In The Stock Market. Chapter 4 caught my eye. It was titled "The Reliefer Who Made A Fortune In The Stock Market" which was about a man on welfare who turned his $71 welfare checks into $21,000. (I suppose that was a lot of money back whenever the story was written -- especially considering that a year's worth of those welfare checks comes out to less than a grand).

One farmer is rich, the other poor, but they both have the same harvest ... It is not the size of the harvest, but the price you paid for the seed.

... Money is the seed, the stock is the soil. You do not plant in the fall, you do not harvest in the spring ... If you plant in the proper season, then even a small amount of seed will bring many crops.

Then I picked off my shelf John Train's The Craft of Investing and found a similar note. In the appendix is a chapter called "The Man Who Never Lost".

He equated stocks with buying a truckload of pigs. The lower he could buy the pigs, when the pork market was depressed, the more profit he would make when the next seller's market would come along.

... He took a farming approach to the stock market in general. In rice farming there is a planting season and a harvesting season; in his stock purchases and sales, he strictly observed the seasons.

Searching google, I see this chapter is reprinted in the book What Do I Do With My Money Now?

Turning to "Beating The Street", Lynch writes

After the Great Correction, when 508 points were shaved from the Dow Jones average in a single day, a symphony of experts predicted the worst, but as it turned out, the 1000-point decline in the Dow (33 percent from the August high) did not bring on the apocolypse that so many were expecting. It was a normal, albeit server, correction, the latest in a string of 13 such 33 percent drops in this century.

The next 10 percent decline, which may already have occurred since I've written this, will be the 41st in recent history, or, if it happens to be a 33 percent decline, the 14th. In Magellan's annual reports, I often reminded the shareholders that such setbacks were inevitable.

The story of the 40 percent declines continue to comfort me during gloomy periods when you and I have another chance in a long string of chances to buy great companies at bargain prices.

The book was written in 1993. The Dow declined from near 12000 at the beginning of 2000 to near 7000 in 2002. So I'd say that qualifies as number 14. I won't even mention that the Nasdaq declined from 5000 to around 1100 in a little over two years.

Berkshire IV

jkish who maintains intrinsivaluator says Berkshire is trading at 83% of IV. (That's the conservative calculation. His webpage defaults to the optimistic IV of 153860, so at the current price of 83,520, it would be 54%.)

The discussion conjectures that if BRK can grow IV at 8% a year and can close the gap on IV in three years, that would work out to a 15% compounded return.

should you listen to the news?

Though Ritholtz says no, in the second breath he says it can be a great contrary indicator.

So in my book that means yes. He also references an article by Gary B. Smith which found that after an initial response to disastrous news, "the markets resume whatever their prior trend was". In other words, buy on bad news, assuming that the prior trend was up.

Panning for Gold

Rich Smith offers 7 Steps to finding hidden gems (small-caps).

Apprenticed Investor

There is more to investing than just picking stocks explains Barry Ritholtz in a new column.

Who is Nicolas Darvas?

I came across this guy's book, How I Made $2,000,000 in the Stock Market as an Amazon recommendation probably because I had bought William O'Neil's book years ago.

Who is he? He was ballroom dancer who turned $25,000 into $2.25 million between 1956 and 1958 and made the cover of Time Magazine.

*** [4/14/10]

I bought this book from Borders on the mainland when I went up to California for Timmy's graduation. I recently posted it on paperbackswap and somebody requested it. But now I see you can get it on the web for free (though I still kind of find a book more convenient than reading it on the web. Well maybe if I had a Kindle or IPad..

Joe Oddlot

Do you need formal training to pick your own stocks?

decency or freedom

Wal-Mart chooses decency.

When would Buffett sell?

When would Warren Buffett sell a business? (and many other items)

Three Weeks Tight

Keep an eye out for the "three weeks tight" chart pattern. This means the stock has closed virtually at the same price for three straight weeks or even longer. Studies of big winners show it can appear virtually anywhere throughout the run-up.

I wonder what they're saying about the WMT five year tight pattern?

You ain't missed nothing yet

Jim Cramer's top 10 "you ain't missed nothing yet" stocks (stocks that should have moved up but haven't yet) as seen on his 5/18/05 show.

10.  ZMH
 9.  CMCSA
 8.  UNH
 7.  MCD
 6.  ADP
 5.  C
 4.  CD
 3.  YHOO
 2.  INTC
 1.  UPS

Here's Cramer's somewhat overlapping list of stocks that it's not too late to buy. (Actually it's the same ten in a somewhat different order.)

McDonald's (MCD)
Citigroup (C)
Comcast (CMCSA)
UnitedHealth Group (UNH)
Automative Data (ADP)
Cendant (CD)
Yahoo! (YHOO)
Zimmer (ZMH)
Intel (INTC)
United Parcel (UPS)

Intel's three challenges

Intel is attempting a right hand turn under new boss Paul Otellini.

When is big too big?

Speaking of large-caps, Bill Miller writes on why he tends to avoid the largest cap stocks citing a paper from J.B.S. Haldane.

In 1927, British biochemist J.B.S. Haldane published a volume called Possible Worlds and other essays. In it was a paper titled ''On Being the Right Size.'' Haldane begins that essay by noting that differences of size are the most obvious differences among animals, but that little scientific attention seems to be paid to them. ...

Perhaps more pertinent to readers of this piece is that Haldane's essay offers insights into why we own none of the top five companies sized by market capitalization in the S&P 500, and why Internet stocks may be better values than conventional thinking might assume [and why Miller owns AMZN vs. WMT].

Small- and mid-cap managers explain that their universe of companies can grow faster than very large companies. Large-cap managers note that smaller companies are riskier and have higher failure rates than very large enterprises, perhaps negating whatever advantage may arise from the putatively faster growth rate. Small animals have shorter life spans, in general, just as small companies do. Is that a coincidence?

When is big too big, anyway? How much, if any, of a disadvantage is GE's market capitalization of $288 billion? Is it a coincidence that GE, Microsoft, Wal-Mart, Pfizer, and Exxon, the top five companies in the S&P 500 by market capitalization, all are worth between $244 and $288 billion, despite their being in five different businesses?

Is the market currently overvalued or undervalued?

According to Morningstar's fair value ratings (which uses a DCF analysis), the S&P 500 is currently worth 1212 as compared to its price of 1170 (so I'm guessing the calculations are as of May 11). So by this measure, it is 3% undervalued. This compares to late December, when the fair value estimate was 1160 when the market was trading north of 1200, 4% overvalued.

Interestingly, the largest 25 stocks are now 10.9% undervalued. While the smallest 250 stocks are 5.3% overvalued. This compares to the December numbers, when the largest 25 were only 3.2% undervalued and the smallest 250 were 19% overvalued.

Six of those largest 25 stocks have 5-star Morningstar ratings (meaning they are the most undervalued). They are MSFT, WMT, AIG, KO, UPS, and HD. BRK.B also has a five star rating. (Though BRK.B is not in the S&P 500, it would be the 12th largest company if it were.)

(Note: the article was referenced in a post over in the Chucks_Angels group.)

Add 2% to your performance

Mauldin presents Rob Arnott's study that cap weighted indices underperform [link corrected 12/2/15, only 10-1/2 years later, it had been pointing to oprah.com] almost any other index you can think of.

[6/10/05] Here's Nathan Parmalee's take.

[12/2/15] Here's a more recent article by Arnott (summary: not a fan of cap-weighted indices)

It guess it sort of makes sense from a value perspective. When a stock goes up in price then it's automatically becomes higher weighted in the index. But what you should be doing is sell some when the stock price goes up and buy more when the stock price goes down, all other things being equal. Or from the value investor perpective, sell some when the price overruns its value and buy more when the price underrepresents its value.

[12/2/15] And (via roberts420) another article by Arnott

Well, I diverged from my main point, which was that over the 15-year period 2000-2014 a blindfolded monkey outperformed the S&P 500 index by an annualized 8 percentage points, with an annualized return of 12% versus 4% for the S&P.  I then got off onto how I would weight the holdings in an index fund if I were not weighting by market cap.  Would I use equal weightings, fundamental weighting (weighting by sales, earnings and cash flow), volatility weighting or what?

Robert Arnott published an amusing article on this question in which he backtested 13 non-market-cap weighted index funds over the period 1964-2012.  All 13 outperformed the market cap weighted S&P 500 index.  Of the 12 funds that were not equal weighted he found that in 11, including his own, the performance was improved if the fund inverted their weightings, i.e., if they instead weighted the most heavily weighted holdings the least.  In his own case, the fundamental index, the fund as weighted outperformed the S&P 500 by an annualized 2 percentage points, but when the weightings were inverted it outperformed the S&P 500 index by an annualized 4.5 percentage points.

http://rvwinvesting.com/wealth-wisdom/RAFI_Monkey_Paper.pdf

We all have to decide how to weight the holdings in our portfolio, whether we are constructing an index fund or managing our personal portfolio.  The question is, “How do we choose our weightings?”  Most individuals and professional portfolio managers alike choose weightings qualitatively.  We estimate the expected return for each stock, the potential downside, and, importantly, our confidence in our analysis for each stock.  Then we decide on a weighting.  The question is, “How well do our weightings correlate with the future returns of our individual holdings, and is there a way to improve our return by weighting differently?” 

Is that growth stock a good bet?

TMF Bane presents an example on how he might decide whether to place his bet

valuing Walgreen

According to VectorVest's methodology, Walgreen looks attractive, despite having a relatively high p/e and PEG (30 and 1.9 according to quicken.com).

Looking at the VectorVest report, it doesn't look quite as attractive to me. The report says it's "only" fairly valued with a current value of 47.97 compared to its current price of 43.78. It's given an excellent RS (relative safety) rating, but only fair relative timing, and is rated a hold.

eBay has never looked cheap

but it still has risen 16 times in value in the last 6-1/2 years

Three investors in an uncertain market

What Bill Nygren, Bill Miller, and Wally Weitz are doing in this market.

The Stock Clock

Schwab's Jeffrey Mortimer, in a 2004 issue (September or October?) of Schwab Investing Insight, uses the concept of a stock clock to illustrate the market cycle. He believes "we're around 9 o'clock, when the economic recovery is gathering steam as investors climb a wall of worry".

Writing now in the March 2005 issue, Mortimer still maintains we're still around 9 o'clock and are in a bull market that still has another leg to go.

How long do these cycles take. Back to the earlier issue, Mortimer says it take as little as three years or as long as a decade. It's been five years so far since the last top. "It's possible we could stay at 9 o'clock for a long time."

EV/FCF > P/E

Nathan Parmalee says, like a batting average, the p/e ratio is a limited statistic. He prefers onbase percentages and enterprise value-to-free cash flow, as well as discounted cash flow analysis

Spotting earnings disappointments and surprises

How to Spot Potential Earnings Disappointments: There is no sure
fire way to spot stocks that will fail during earnings season.
However, there are ways to improve your odds. In general, stocks
that have disappointed in past quarters are more likely to
disappoint in future quarters. Plus stocks that have seen lower
expectations leading up to their announcement date also tend to
fall short of the mark more often. The clues to both of these
items can be found on the Estimates research report. Here is
the link to see that page for IBM and you can go from there to
research any of your stocks http://at.zacks.com/?id=1504.

How to Spot Potential Earnings Surprises: This is the inverse
story from above. Those stocks that have reported positive
surprises in the past are more likely to do so in the future. In
addition, earnings estimate increases leading into earnings
season is a very good indication as well. However, the simplest
way to find these winners is by following the Zacks Rank which
concentrates on these same variables. You can either look at the
full list of Zacks #1 Ranked stocks at
http://at.zacks.com/?id=1551. Or screen for Zacks #1 Ranked stocks with the highest past earnings surprises through our
custom screener at http://at.zacks.com/?id=1535.

Bezos speaks

In Amazon's 2004 annual report, Jeff Bezos presents an example of how looking at earnings (vs. free cash flow) can be dangerously misleading.

The example is admittedly contrived, but maybe this Bezos guy might know what he's doing.

Mauldin looks into the future

Mauldin talks about

The Innovation Cycle

Secular Bull and Secular Bear Markets

Human Psychology

What Will Change

Demography

http://www.2000wave.com/article.asp?id=mwo042205

Buying when they say sell

As has been the case in past years, stocks with large proportions of "sell" recommendations from Wall Street analysts have lately performed better than those with plenty of "buy" or "hold" ratings and no sell ratings at all.

Get a Millionaire Mindset

Ten tips from Paul Farrell

Stock Madness 2005

Stock Madness begins.

The final four: Apple vs. Sirius Satellite, UPS vs. NetFlix.

S&P changes weightings

Standard & Poor's will change the weighting of many of its shares

Standard & Poor's on Friday will make one of the most significant changes to the prestigious S&P 500 index of stocks since its inception 80 years ago.

The S&P 500, a widely followed barometer of how the stock market is doing, will, after the market's close that day, change the weightings of many of its shares, effectively reducing the influence that some carry and increasing the clout of others.
S&P will make the same changes to its SmallCap 600 and MidCap 400 indexes.

All three indexes are "market-weighted," meaning their biggest stocks, by market capitalization, move the indexes more than those with lower market caps.

Under the new initiative, called the "full float adjustment," S&P aims to increase liquidity, or ease of trading, by reducing the influence of stocks with a lot of shares that are not publicly traded for reasons of their being held by a founding family or a government entity.

Stock Market Wisdom

A value investor views conventional wisdom.

Traits of Successful Money Managers

What Whitney Tilson has learned from studying successful money manager.

How did I find this story? It came from Tilson's article Where Are the Superinvestors?

Which came from Hedge Funds Explained.

Which was in yesterday's The Motley Fool's Foolwatch newsletter.

Where does the money go?

What does a company can do with their earnings?

Invest Like You Mean It

TMF Edible asserts that it doesn't matter where you stand (as far as value vs. growth investing), as long as you do, in fact, take that stand and do it with conviction and aplomb.

Get 400 times your money

Growth investors shoot for the jackpot

Tom Gardner interviews Philip Durrell

self-serving but interesting nonetheless

Five Simple Rules for Value Investors

Well, maybe four.

Thoughts for Phil Carret

Another giant of investing, though less well known, is Phil Carret. Carret started Pioneer, one of the first mutual funds, in 1928. His average annual return, calculated from 1928 to 1974, is estimated to be a solid, market-beating 14%. (That's enough to increase an investment's value 50-fold over 30 years.) Carret died in 1998 at the age of 101, but he left behind many thoughts on how to invest successfully.

Investing and Fantasy Football

Investment lessons from playing fantasy football

A Value Screen

Joseph Piotroski has devised a screen that has beaten the market by 7.5% over a 21-year period.

It chooses companies with low price-to-book value that are profitable, declining debt, and improving operational efficiency.

I suppose it makes sense, but it differs a bit from the kind of stocks that I look for. I don't worry about declining debt. If the debt is already zero, how can it decline? Improving efficiency is obviously good. But I'm satisfied if a company can sustain a steady level of efficiency year after year.

focusing on portfolio management

Whitney Tilson claims "the overwhelming majority of great investors that I'm aware of practice "focus investing".

Focus investing means buy infrequently, but buy big. On the other hand, a big hit to one stock in a focused portfolio will have a big impact. In that case, one should diversify. Russ Towne comments further in his blog.

Buffett on National Public Radio

audio presentations

What's Your Investment Strategy?

It may help you if you can write down your investment strategy.

http://tinyurl.com/6j4ln

Pigs of the Dow

This year's Pigs of the Dow.

Merck at minus 30.4%
Intel at minus 27.0%
General Motors at minus 25.0%
Pfizer (NYSE: PFE) at minus 23.9%
Coca-Cola (NYSE: KO) at minus 17.9%

http://tinyurl.com/3nt3f

Mauldin's 2005 forecast

The economy is going to be good, so I don't think we see the start (yet) of the next major bear leg, although this year will mark the high for what I think will be many years. This will be a frustrating year for stock market investors. You can always do well if you are a good individual stock picker, but broad indexes and mutual funds are not the place to be. The market is a sideways to down market, with the risk to the downside as we get toward the end of the year and a possible recession on the horizon in 2006.

And not to put too fine a point on it, I still think we are in a long term secular bear market. In a few years, we will look back and realize this was a bear trap - another sucker rally.

http://www.investorsinsight.com/article.asp?id=jm010705


What did he say last year?

This is a momentum market. The best way I can summarize my views is to tell you of a bet I made today. It is a small amount, to be sure, but ego is on the line. Let me emphasize this is a guess. I have no "model" or crystal ball.

If you add the closing year end numbers of the S&P 500 and NASDAQ together, I took the under for the year. That means I think the combined price of the indexes will decline. If the S&P 500 does indeed rise, I expect the NASDAQ to fall more. I would also take the over for May, as a further rally may be in the future. I think a continuation of this rally is quite possible, as earnings should do well, and investors seem to be happy with the short-term. But the upside does not seem to me to be all that great. I would buy value and yield and have a trailing stop loss. How close would depend upon your own particular circumstance.

It might be more helpful to give you the opinion of Richard Bernstein, the Chief Strategist for Merril Lynch, who sees the S&P 500 at 1010 at the end of the year. The technical analysts at UBS see a first half rally and a second half decline.

The S&P closed 2004 at 1211.92 after closing 2003 at 1111.92. Exactly 100 points!

The Nasdaq closed 2004 at 2175.44 after closing 2003 at 2003.37.

http://www.2000wave.com/article.asp?id=mwo010904

wildly overpriced stocks

Should you actually stay away from wildly overpriced stocks?

According to Jeremy Siegel, if you'd invested $1,000 in 1957 in the 100 stocks in the S&P with the highest price-to-earnings ratios, and rebalanced annually, you'd have had $56,700 by 2003; if you'd bought the 100 stocks with the lowest P/Es, you'd have had $425,700. [The S&P 500 index was created in 1957.]

[this article also appeared in the December 2004 issue of Money magazine]

2004: The Year That Was

TMF Edible takes a look in the rearview mirror

The Story of Nokia

TMF Bent relates his tale of Nokia

Great Companies

What Makes a Great Company Great?

When examining a company in which to possibly invest, make sure that the firm is a first-class operation. Here are some marks of great companies.

Powerful brands. Think of well-known brand names in America or, better yet, around the world. Brands such as Coca-Cola (NYSE: KO), General Electric (NYSE: GE), Nokia (NYSE: NOK), McDonald's (NYSE: MCD), Ford (NYSE: F), and Disney (NYSE: DIS) fit the bill. If most people don't yet know a company's name, then it still has a lot of work to do building its brand.

Significant products or services. Look for a company that's selling something people really need or really want. Pharmaceutical companies, for example, manufacture products that people will buy whether they're flush with funds or strapped for cash. Firms such as Apple Computer (Nasdaq: AAPL) and Starbucks (Nasdaq: SBUX) offer consumers things they love. Also appealing are repeat-purchase products -- things people buy over and over again -- such as express mail delivery, cheeseburgers, and shampoo, instead of items bought only sporadically, such as cars or trash compactors.

Strong competitive position. Ideally, a company will have advantages over its peers. These can include brand value, economies of scale (if it's making so much that its costs per item are relatively low), and bargaining power. (Wal-Mart (NYSE: WMT), for example, is so big that it usually calls the shots.)

Consistent, reliable earnings and sales growth, and robust profit margins. Look for sales and earnings to have increased steadily over past years, suggesting that management is planning and executing well. Stack your company's gross, operating and net profit margins up against those of its competitors to see who's wringing the most value out of each dollar of sales.

Lots of potential. A stellar past isn't enough. Make sure the company has much potential for growth. Is it expanding abroad? Is it coming out with exciting new products or services? Are its offerings taking the country by storm? Is it spending significantly on research and development?

Finally, consider how well you know the company and industry and how much you'd enjoy keeping up with its developments. A firm might have enormous potential, but if reading about it puts you to sleep, it might not be the best addition to your portfolio.

-- from The Motley Fool Investing Basics newsletter, 12/21/04

Charlie the dumb investor

Was it really dumb luck?

the stock screens of Kevin Matras

Every week, Zacks presents a stock screen by Kevin Matras. It always touts a very back-tested high return. (I suppose if it didn't output a high return, they wouldn't present it.) As far as I remember, the screen always has the Zacks ranks as one of the criteria (makes sense) and usually an indicator that the stock is moving up (momentum), so as such they probably should all be viewed as short term (three to six months or so) screens. This week's screen looks interesting.

"Cheap stocks and Big Returns"

This screen is one of Kevin Matras' favorites for when he's
looking for low priced stocks. The premise behind this screen
was to try and find cheap stocks (stocks at or less than $15)
that were trading at (or consolidating) just under their 52
week high, in an effort to `get on board' before they broke-out
to new highs.

In other words, Kevin wanted the stocks to be near their highs,
but most of all, he was looking for stocks that had been turned
back from their recent highs, had consolidated their advances
on their trek higher to those highs and were just now starting
to make a run at the 52 week high again.

Kevin is a big fan of getting into basing patterns (relatively
narrow trading bands) after an uptrend has been established.
Especially near recent price highs, since stocks making new
highs tend to make even higher highs.

He has found this screen to be an ideal strategy for finding
low priced stocks with a high probability of success.

Parameters:

- It searches for stocks trading at or below $15.

- They also have to have a Zacks Rank of 1.

- They have to be trading within 10% of the 52 Week high.
(Expressed as Current Price / 52 Week High greater than or
equal to .90) (Simply put, Kevin is looking for stocks high up
in their uptrend.)

- The % Price Change over the last 4 weeks has to be greater
than or equal to 10% but not more than 20%. (Kevin is looking
for stocks on the move, but not ones that have moved so much,
so quickly, a correction could be in store. Since 10% seems to
get people's attention while follow-thru at 20% typically
signals the beginning of a `trend' or a `breakout', Kevin
wanted to be alerted BEFORE a breakout was seen.

- And lastly, for good measure, he wants the Beta to be less
than or equal to 2. (Active stocks are good, but wildly
volatile ones are not.)

Results:

Kevin ran a series of tests over the last 4 year time span
(2001, 2002, 2003, and YTD 2004 -- thru 11/26/04) as well as a
series of tests for each of the last 4 years individually. He
rebalanced the portfolio every four weeks and started each run
on a different start date so each test would be rebalanced over
a different set of four-week periods. (This was done to
eliminate coincidence and verify robustness.)

Over the last 4 years, this strategy has shown an average
annualized gross return of 66.9% with an average win ratio
(winning periods divided by the total number of periods) of
74%. And it holds on average of only 3-5 stocks in your
portfolio each month.

In 2001, the average annualized gross return was 53.5%, with an
average win ratio of 71%. (This year's avg. # of stocks held
per period was 8.)

In 2002, the average annualized gross return was 36.2%, with an
average win ratio of 70%. (4 stocks / avg. per period.)

In 2003, the average annualized gross return was 167.2%, with
an average win ratio of 87%! (3-5 stocks on average.)

And so far, 2004's YTD (thru 11/26/2004) average annualized
gross return is up 45.5%, with an average of 3 stocks per run.
(The S&P is up 7.9% comparatively.)

As of Mon., 12/13/04, 5 stocks had qualified. They are

AKS AK Steel Holding Corp.
BABY Natus Medical, Inc.
CIB Bancolombia.
TZIX TriZetto Group, Inc.
UHCO Universal American Financial Corp.

Note: Even though this screen will generally produce on average
of 3-5 stocks per period, there will be times where literally
no stocks will qualify due to the narrowness of the parameters.

Tip: Since this screen has such a great track record and such a
high success rate, if nothing comes through on Kevin's first
pass, he'll run it day after day, until the screen spots
something.

(This is one of the reasons why Kevin runs so many backtests
using different start dates in my analysis. He wants to make
sure that the strategy has a history of picking good stocks
`at any time'.)

Since I don't do short-term trading, I have never tried any of these screens. But they do look like they have potential if you stick to the system.

[6/15/05] How have the picks done?

AKS has gone from about 14 to about 7

BABY went from about 8 to 10.5

CIB went from about 12 to 16

TZIX went from about 9 to about 13.5

UHC went about 15 to near 24 today

All in all, it looks like the strategy worked out despite one pick losing 50% of its value.

How to Value Stocks (DCF)

[9/21/06] Tim Beyers runs through a DCF calculation

[12/12/04] VectorVest explains their methodology of valuing stocks. (Warning: contains math.)

VectorVest's formula

This Discounted Cash Flow Calculator explains the methodology behind it


David Meier explains DCF

[5/11/05] Another explanation

Quicken's intrinsic value calculation

types of investors

What type of investor are you? (see mia 9/14/04)

Or you could be a monster (see mia 10/28/04 comments on PLB)

Durrell interviews Dreman

Dreman talks about overreaction

Dreman is still bullish on MRK and FNM

[5/28/06] see also David Dreman and the Long View

Four value investors

Four value investors: Marty Whitman, Chris Browne, Jean-Marie Eveillard, Mario Gabelli gather in New York City

two questions

Two questions to ask when deciding on a investment

1. Is this a high-quality company that I'd love to own a piece of?
   
2. Is the price right to buy it now?

Average Broker Recommendation

Zacks.com is first and foremost a free resource to help you make more profitable stock picks. In this space each week, we will provide insights into various tools and data points provided on Zacks.com, and how to use them to improve your portfolios performance.

Average Broker Recommendation

Perhaps the most often used (and abused) stock research item is
the Average Broker Recommendation (ABR). Lets dig into the ABR
and learn how to employ this information to make better
investment decisions.

What is the ABR? It is a simple statistic that tries to
synthesize all Wall Street research into an easy to digest form.
Lets take a look at the example of the ABR for General Electric
(GE). Currently there are 17 brokerage firms that have a rating
on GE with 10 Strong Buys, 3 Buys, 4 Holds and 0 Sells. Now we
layer on a weighting system from 1 to 5 with Strong Buy being a
1. This adds up as follows

10 Strong Buys x 1 = 10
3 Buys x 2 = 6
4 Holds x 3 = 12
0 Sell x 4 = 0
0 Strong Sells x 5 = 0
Total points = 28

28 Total Points divided by 17 brokerage firms with ratings =
1.65 ABR

On the surface an ABR of 1.65 sounds pretty good as it is saying
that the average brokerage firm believes that GE is somewhere
between a Strong Buy and a Buy. However, before you place your
life savings in this stock you may want to read this next
paragraph

The ABR of a stock is virtually worthless in helping you pick
good stocks. Hows that? The usual assumption by investors is
that the better the ABR (closer to 1) the more likely they are
to profit with the stock. However, our studies over the years
show a very minor correlation between ABR and results. In fact,
when the market is going poorly, the stocks with the best ABRs
dramatically underperform the stocks with the worst ABRs.

We dont know the exact reason why this is the case, but the
general assumption is that when everyone on the street is
recommending a stock, then it will probably be priced too high
and more likely to fail miserably on any bad news. Conversely,
an out of favor stock will probably already be trading at a
steep discount and any turnaround will create a nice bounce for
the stock.

So, now youre probably thinking to yourself the key to eternal
happiness is to find stocks with the worst ABRs. Unfortunately
we dont recommend that either because over the long haul these
stocks will underperform the average stock (meaning that both
the best and worst ABR stocks underperform the market).

The good news is that we have indeed found an effective way to
invest using the ABR. Our research has uncovered that stocks
with the biggest positive change in ABR over the last month will
outperform the market. We call this the Piggyback Strategy.
Here are the results of the test for the 10 year stretch from
April 1992 to March 2002

Top 10% of ABR Changes = 18.3% average annual return
Average Stock = 10.7% average annual return
Bottom 10% of ABR Changes = 0% average annual return.

There are some great free resources on Zacks.com to take
advantage of these changes in ABR to find some potential winners
as well as stocks to avoid.

Pre-Defined Screen: Best Change in Avg. Broker Rec 1 Week
http://at.zacks.com/?id=1501

Pre-Defined Screen: Worst Change in Avg. Broker Rec 1 Week
http://at.zacks.com/?id=1502

Profit Tracks: Upgrades and Revisions Strategy. These are stocks
that are enjoying both positive estimate revisions and brokerage
rating upgrades. This strategy has handily beat the market over
the last 4 years. Learn more at http://at.zacks.com/?id=1503

Analyst Recommendations Research Report: This research report
gives details on the break down of recommendations for any
stock. Here is a link to view the report for GE. Once there you
can enter any ticker symbol to get the Analyst Recommendations
report for the stock you want. http://at.zacks.com/?id=1504

Want more insight on the Piggybacking Strategy? Mitch Zacks
covers it in detail in his critically acclaimed book Ahead of
the Market. To learn more about this book and special 30%
discount go here http://at.zacks.com/?id=1505

-- From Profit from the Pros - 9/22/04

Hunting For Value

How Philip Durrell hunts for value

part 2

Phil Knight steps down

Phillip Knight will step down as CEO of Nike. Will remain chairman of the board.

betting on Lampert

My latest buys were Kmart and Sears this morning as detailed in my stockmarketeers group. The success of this transaction will lie on Edward Lampert's ability to find value in the combining of the two companies. Given his track record, I'd give him a better than 50-50 shot.

Here's more on Lampert.

New York Times story

More on the merger from fool David Meier.

Morningstar's Pat Dorsey chimes in with this analysis

Presidential Rally

The market has rallied furiously in the last couple of weeks pushed up in the last few days by the Bush victory. The Dow has gone from oversold to overbought with an RSI of 69.6 and stochastics of 93.28. While some are looking for a breakout, this hasn't happened the last three times it rallied from a valley. I'm looking to take some profits on overweighted positions that have run up in the rally.

10 Big Investing Mistakes

[5/10/06] 12 Common Investing Mistakes

[5/5/06] 8 Common Investing Mistakes

[11/6/04] Or are they?

early Halloween

The market took a hit today as the Dow fell 108 to 9758, the Nasdaq tanked 38 to 1915, and the S&P 500 lost 11 to 1096. The Dow is at the lower end of a declining channel line and RSI is down to 30.7. It could be ready to bounce like it did the previous three times. The $SPX and $COMPQ don't look as oversold. The RSI for the Nasdaq is flat neutral at 50.0.



Here's Band's take, excerpted from his hotline.

Halloween comes early to Wall Street! Stock prices declined again this week, with the headliner Dow Jones Industrial Average closing today at a new low for 2004. Record oil prices are clearly spooking investors.

But is the picture really so haunting? We don’t think so. For one thing, the NASDAQ actually gained a couple of points on the week. Relative strength by the tech-heavy NASDAQ has occurred at several important bottoms in the past two years. We also believe the election uncertainty is starting to lift, which should help the market. We continue to look for a final low very soon, to be followed by good November-December rally.

Catch The Low

from Richard Band's Journal

CATCH THE LOW
October 20, 2004, 10:28 am EDT

The stock market is forming a good, tradable bottom in here. Within the next couple of days -- probably well before the election results are known -- Wall Street should make its peace with the political forces at work and move on to the traditional post-election relief rally.

What makes me so sure there’s a rally coming? I’ve kept an eagle eye on one of the market’s most reliable contrary indicators -- the behavior of the traders in the options pits. Whatever investors may say to pollsters or the media, the options data tell us what folks are doing with their money.

Truth is, the options players have been buying an exceptional number of puts (downside bets) lately, compared with calls. In fact, we’re seeing essentially the same degree of pessimism that prevailed at the lows in March, May and August this year -- even though the major market indexes are hovering comfortably above those lows.

I foresee a rally of 5%-7%, maybe a little more, on the S&P 500 by year-end or early 2005.

Rukeyser steps down from TV

Louis Rukeyser has decided to suspend production of his television show

MWD, FNM send stocks lower

NEW YORK (Reuters) - Stocks were knocked lower on Wednesday after a U.S. government review questioned home finance company Fannie Mae's (NYSE:FNM - News) accounting methods, while investment bank Morgan Stanley (NYSE:MWD - News) reported a drop in quarterly profit.

The 10 Smartest Things Ever Said About Money

Money being the thing we think about more than almost any other; it's not surprising that an awful lot has been said about it. Much of it is mindless; some is even actively designed to deceive. But much else that has been said about money would serve us well, were we of a mind to listen.

-- Andrew Tobias, Paraade, 7/14/02