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Old 02-17-2012, 02:41 AM   #176
Morishita System
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Re: Value Investing and Longer Term Investing

I've recently entered into a new speculative position for SNBC.
This is more sports betting style like investment of coattail riding and figuring that the proposition is +EV from intangibles rather than actual analysis.
Please share any thoughts you may have.

Market Cap: ~$255 million
Book value: ~$308 million

It's a small bank that creates loans for businesses and homes in New Jersey. Already that sounds pretty scary.

However, Wilbur Ross has thrown a lot of his own personal cash into buying shares into this company, enough to take almost 25% ownership. Since these kinds of small banks and loan making businesses were the bread and butter of his fortune, this is the equivalent of Gordan Ramsay coming to your crappy restaurant, buying ownership and running the place. The restaurant could still fail, but it would have to require some pretty bad luck, so I think investing with Ross on this would be +EV.

Wilbur Ross seems to be doing a good job so far. Last quarter, they staunched the bleeding to a loss of 2c a share, which is a far cry from where they were a year before when they lost 4.48 a share for the year. They should soon be profitable again.

A lot of the insiders also believe in what Wilbur Ross is doing and have purchased massive amounts of their own stock. The dollar cost average for Wilbur Ross' purchases is around $2.85, which is not far off from the current prices. All of the insiders have conducted massive repurchases at or slightly below that price.

Worst case scenario: Wilbur Ross already mentioned that the primary risks are a double dip recession and having housing prices drop by more than 10% in NJ. If it does, this could plummet to zero very quickly.

Best case scenario: Wilbur Ross does a really good job in turning this company around, and it becomes more than a double bagger. From Wilbur Ross' track record, he usually makes such companies become triple to five baggers over a 4-5 year period.

Conclusion: I'm hoping for just 1.5x book, which is almost a double bagger, but it is quite possible that it can go up a lot more depending on how Wilbur Ross does. Unfortunately, if housing prices crash again, then this could blow up very quickly. However, I think the chances of that at this point are slim, and it's somewhat mitigated by the fact that it's trading at 20% discount to book. Overall it's probably medium risk and high reward. Therefore, I've made it only 5% of my portfolio at this time.
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Old 03-04-2012, 12:41 AM   #177
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Re: Value Investing and Longer Term Investing

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I looked at TSRA. Didnt pull the trigger because the founder owns a sizable chunck and doesnt seem to care to pay out dividends which is obviously what I would want.
Just declared a .10 (2.5% annual yield) quarterly dividend.

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The dividend record date is set for Thursday, May 24, 2012 with a pay date being announced as Thursday, June 14, 2012 and the ex-date is Tuesday, May 22, 2012.

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Old 03-04-2012, 02:43 PM   #178
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Re: Value Investing and Longer Term Investing

Thinking about buying BRP to get exposure to a housing recovery. Their Canadian segment is very profitable now and their American segment is breakeven at best. Once the housing recovery starts, profitability should double and so should the stock.

Also, selling ASFI has been crossing my mind more often. I think it's very cheap, but I have less confidence on what is going to be done with the cash and what time frame I can expect to see results.
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Old 03-05-2012, 04:28 AM   #179
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Re: Value Investing and Longer Term Investing

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I hope DWA gets a chunk cheaper, I'm getting a little itchy to increase my position in it.
Hey Xaston,

Interesting analysis. What is your target for a 'chunk cheaper'?
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Old 03-05-2012, 04:58 AM   #180
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Re: Value Investing and Longer Term Investing

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Hey Xaston,

Interesting analysis. What is your target for a 'chunk cheaper'?
If the market cap hits 1.2 billion I'll buy some more, most likely.
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Old 03-06-2012, 12:04 AM   #181
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Re: Value Investing and Longer Term Investing

Hello. I bought Ben Grahams Intelligent Investor, but its too hard for me to get thru, and to really pull the most out of it I think I would need to get my mba. could u guys recommend some books/blogs/etc on value investing? that would be cool thx
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Old 03-06-2012, 08:03 AM   #182
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Hello. I bought Ben Grahams Intelligent Investor, but its too hard for me to get thru, and to really pull the most out of it I think I would need to get my mba. could u guys recommend some books/blogs/etc on value investing? that would be cool thx
Read greenblatts "little books"
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Old 03-06-2012, 08:13 AM   #183
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Re: Value Investing and Longer Term Investing

you really dont need an mba for intelligent investor. greenblatts little books are as good choice, but even then at some point if you want to choose your own stocks you are going to need to do your own research which requires hour and hours of reading boring material. so start getting used to it.
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Old 03-12-2012, 05:15 PM   #184
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Re: Value Investing and Longer Term Investing

Why does F trade for 2.5x EPS? Earnings at Ford are good, but their financials are a mess- and obviously their assets are hard to value. Could someone help me understand this stock, please?
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Old 03-14-2012, 07:01 PM   #185
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Re: Value Investing and Longer Term Investing

Here's a Graham Stock for you: ASYS

Current Assets: $151m
Total Liabilities: 63.7m
Market Cap: $82m

I bought it.
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Old 03-14-2012, 07:54 PM   #186
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Re: Value Investing and Longer Term Investing

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Originally Posted by Boris View Post
Here's a Graham Stock for you: ASYS

Current Assets: $151m
Total Liabilities: 63.7m
Market Cap: $82m

I bought it.
I actually looked at that a short while back, but I decided to pass.
Now I don't remember why. I think it didn't have enough of a safety margin for my taste.
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Old 03-15-2012, 04:06 AM   #187
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Re: Value Investing and Longer Term Investing

Quote:
Originally Posted by Boris View Post
Here's a Graham Stock for you: ASYS

Current Assets: $151m
Total Liabilities: 63.7m
Market Cap: $82m

I bought it.
I like this one and I live across town from their offices. I'm thinking field trip.
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Old 03-15-2012, 11:24 AM   #188
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Re: Value Investing and Longer Term Investing

Just a comment on these kind of investments:

You can't simply take the pro forma current assets and subtract all liabilities to determine if it is a Graham net-net. Graham & Dodd were looking at the liquidation value of the firm, so you need to make adjustments to receivables, inventory accounts, and account for current business prospects (cash burn, profitability estimates, etc). I can't remember if G&D selected stocks that traded 60-70% of NCAV to give themselves a suitable margin of safety, but they used a generous discount from the pro forma financials. If you're selectively buying cheap stocks based on liquidation value, you should also try to understand why the market isn't acknowledging the asset value of the firm.

Security Analysis and Bruce Greenwald's Value Investing give a good overview of liquidation valuation.
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Old 03-15-2012, 12:26 PM   #189
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Re: Value Investing and Longer Term Investing

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Originally Posted by Boris View Post
Here's a Graham Stock for you: ASYS

Current Assets: $151m
Total Liabilities: 63.7m
Market Cap: $82m

I bought it.
I remember reading somewhere that these solar panels (not certain if it pertains to this company) are sold with a long warrenty, and these companies are starting to see warranty problems. As far as i remember the heat from the sun is destroying a part of the product.


Also, solar energy isn't really going anywhere fast, it can't be implimented on a large scale.

You may want to look into this a bit further.
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Old 03-15-2012, 06:15 PM   #190
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Re: Value Investing and Longer Term Investing

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Originally Posted by KDuff View Post
Just a comment on these kind of investments:

You can't simply take the pro forma current assets and subtract all liabilities to determine if it is a Graham net-net. Graham & Dodd were looking at the liquidation value of the firm, so you need to make adjustments to receivables, inventory accounts, and account for current business prospects (cash burn, profitability estimates, etc). I can't remember if G&D selected stocks that traded 60-70% of NCAV to give themselves a suitable margin of safety, but they used a generous discount from the pro forma financials. If you're selectively buying cheap stocks based on liquidation value, you should also try to understand why the market isn't acknowledging the asset value of the firm.

Security Analysis and Bruce Greenwald's Value Investing give a good overview of liquidation valuation.

very true. I did a graham bankrupcty style analysis for freidman industries in september 2010. Heres a link to that writeup http://www.freenpv.com/?p=112

you can see how I adjusted all the items to come up with a floor value which equated to the market price.
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Old 03-16-2012, 10:52 AM   #191
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Re: Value Investing and Longer Term Investing

cehck out LACO it's an interesting small cap.
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Old 03-16-2012, 11:53 AM   #192
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Re: Value Investing and Longer Term Investing

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cehck out LACO it's an interesting small cap.
I held that for awhile, then dumped it because it's pretty much dead money until their new facilities are built in 2016. Dunno if that's still true.
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Old 03-16-2012, 03:00 PM   #193
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Re: Value Investing and Longer Term Investing

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I held that for awhile, then dumped it because it's pretty much dead money until their new facilities are built in 2016. Dunno if that's still true.
I started studying it last month, bought in recently in the 1.90s.

they have small pieces of 2 ohio casinos that are opening soon 1 in cincy and 1 in cleveland the cleveland one is opening May 14 -- and the cincy one next year (supposedly) Obviously as with any other stock trading so far under their asset value, there are negatives.

Their pieces in these 2 casinos should be worth appx $100 mill

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Old 03-17-2012, 10:17 PM   #194
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Re: Value Investing and Longer Term Investing

Thoughts on SBUX?

News of their at home coffee maker has pushed the stock to a 52week high. While I think this will be a serious money maker for SBUX, most importantly the cost/price of coffee has declined significantly. I had read/heard that generally price fluctuations in coffee will not benefit nor hurt profits until about a year later.

Do you guys think that the large decrease in cost can push SBUX higher and higher for the next few years?

*I do currently have a position in Sbux. Was hoping others were as confident as I am.
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Old 03-18-2012, 03:03 AM   #195
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Re: Value Investing and Longer Term Investing

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Thoughts on SBUX?

News of their at home coffee maker has pushed the stock to a 52week high. While I think this will be a serious money maker for SBUX, most importantly the cost/price of coffee has declined significantly. I had read/heard that generally price fluctuations in coffee will not benefit nor hurt profits until about a year later.

Do you guys think that the large decrease in cost can push SBUX higher and higher for the next few years?

*I do currently have a position in Sbux. Was hoping others were as confident as I am.
Looks more like a speculation than an investment.

The valuation is pretty rich so they're gonna need to keep growing quite a bit to actually be worth 40 billion.

Maybe they will, maybe they won't. Who knows though maybe they will be as big as Mcdonald's and it'll be worth 100 billion in 10 or 15 years. (looks like mcdonalds has about 160% the number of locations that Starbucks has)
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Old 03-19-2012, 09:53 AM   #196
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Re: Value Investing and Longer Term Investing

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Looks more like a speculation than an investment.

The valuation is pretty rich so they're gonna need to keep growing quite a bit to actually be worth 40 billion.

Maybe they will, maybe they won't. Who knows though maybe they will be as big as Mcdonald's and it'll be worth 100 billion in 10 or 15 years. (looks like mcdonalds has about 160% the number of locations that Starbucks has)
By the way i bought some DWA around $17 after doing some more in depth research. I ended up buying it despite some worries about short term headwinds (mainly dvd sales). I don't think there are any distinct short term catalysts for the upside, but around $17 the downside was so limited it was worth a reasonable sized investment.

(Still don't think the Disney/Pixar deal is a helpful means to value DWA since that deal was so unique -- you could have argued that Disney way overpaid since they already owned the rights to many of Pixar's characters and movies -- and yet, you could argue that Disney absolutely needed Pixar to reinvigorate the entire company. )
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Old 03-19-2012, 11:31 AM   #197
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Re: Value Investing and Longer Term Investing

Thinking about going long glre.
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Old 03-19-2012, 11:41 AM   #198
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Re: Value Investing and Longer Term Investing

Just took a 3% position in ANAT. I could use some help on this one, because I've gone through this for many hours now, and I can't fathom why they're so heavily discounted. They are a company that does life, health, property and causality insurance, with the proceeds invested into MBS.

They're trading at almost 50% discount to book, making money hand over fist and are paying out a consistent dividend that currrently yields about 4.3%.

Here are the only reasons that I could think of:

1) Management owns 70%+ of the company, making the float rather thin. Executive compensation is also high as a result...but, that did not prevent the company from trading at 10% discount to book in the previous years.

2) Mortgages may blow up again. In their annual earning report, a default rate of >1.2% may cause them to report a loss. However...during the fiasco of 2008, their losses were very small in comparison to most other insurance companies (66c per share), and their balance sheet was strong enough to weather it. Because of this possibility, most other insurance companies trade at 20% discount to book, so trading at 50% is rather unreasonable.

3) Rising intrest rates will cause their book value to go down. Again, that's priced in at most other insurance companies, so 50% discount is still unjustified. Further, when the interest rates go up, their margins for writing insurance will also go up (per their annual report), so it will probably be a wash.

I think this will eventually drift back up to book value as the economy recovers. The real question is will the rate that it drifts up beat the market, as they have been range bount for the past two years. However, as far as I can tell, there's very little downside.

I've bought a 3% position, and may add on throughout the year.

What do y'all think?
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Old 03-19-2012, 04:08 PM   #199
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Re: Value Investing and Longer Term Investing

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Thinking about going long glre.
Why?
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Old 03-19-2012, 04:39 PM   #200
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Why?
Low price to book and its investment portfolio is run by einhorn. I need to get comfortable with their underwriting before pulling the trigger though.
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