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Old 01-12-2012, 11:10 PM   #151
BrianTheMick
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Re: Value Investing and Longer Term Investing

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Originally Posted by ahnuld View Post
I would not buy FRD at these levels. If I still owned it id sell now above 12.
Explaining why you would be willing to hold onto something you wouldn't be willing to buy would be helpful.

Please explain.
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Old 01-16-2012, 09:54 PM   #152
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Re: Value Investing and Longer Term Investing

Feel like rse is a good investment. Opinions?
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Old 01-16-2012, 10:27 PM   #153
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Re: Value Investing and Longer Term Investing

Not sure if this is the right thread, but feels like it is:

Is there any good argument against Greenblatt's formula? Are there many people who think it's got flaws or anything I should know about?
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Old 01-26-2012, 02:22 PM   #154
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Re: Value Investing and Longer Term Investing

been looking at RAI (yeah, i kind of feel like a doucher). its been trading in a very narrow range the last 2 months (~40-42). its at the bottom of that range now and seems like there is strong support at 39.75-40. dont think there is tons of value here, but R/R seems pretty good. solid dividend, too.

any opinions?
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Old 01-26-2012, 10:02 PM   #155
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Re: Value Investing and Longer Term Investing

NTDOY...so juicy
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Old 01-28-2012, 02:14 AM   #156
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Re: Value Investing and Longer Term Investing

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Originally Posted by WutRUTryin2Hit View Post
Not sure if this is the right thread, but feels like it is:

Is there any good argument against Greenblatt's formula? Are there many people who think it's got flaws or anything I should know about?
Don't know much about it, but saw this list. It looks like it picks good stocks to short. Graph the stock prices since the recommendations -- mostly bad news.

http://www.fatpitchfinancials.com/21...magic-formula/
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Old 02-01-2012, 05:18 PM   #157
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Re: Value Investing and Longer Term Investing

Here's a theory I'm toying with. Please poke holes in it.

The theory is to use PEG ratio on large or mega cap stocks (10 bill+) making money hand over fist to decide on a long.

http://en.wikipedia.org/wiki/PEG_ratio

I've used Yahoo Finance for PEGR, which is measured over 5 years, which is a pretty good range to see company growth. The idea is that mega cap stocks that are making lots of money tend not to be super volatile, which is one of the problems of PEGR. If the megacap stock has been growing over the past five years and their PEGR is between 0 and 1, then they are most likely to be undervalued, and, barring any particular bad news about the company to the contrary, can pretty much be autobought and held until the PEGR approaches 1 again, whereupon it reaches fair value and can be sold.

A caveat that I will add is that stocks that have been hyped up in the news or have displayed ridiculous volatility in the past should be discarded.

A quick glance from that metric provides the following:
AAPL, BMW.DE, BAC, CAT, C, and GOOG to name a few well known examples.

From that list, AAPL and GOOG strike me as being very hyped in the news, so they should be ignored. BAC and C are probably too volatile and violate the "making money hand over fist" rule, so those are discarded.

BMW.DE is interesting, because I don't see anything about them in the news really, good or bad, though they are not particularly making absurd amounts of money. It may be a good long.

CAT strikes me as a very good long based on that metric.

I don't think investing could be this easy, so what is wrong with this?
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Old 02-01-2012, 09:41 PM   #158
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Re: Value Investing and Longer Term Investing

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I don't think investing could be this easy, so what is wrong with this?
The only hole that matters is that buying low PEG ratio stocks doesn't outperform the market.
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Old 02-01-2012, 10:30 PM   #159
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Re: Value Investing and Longer Term Investing

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The only hole that matters is that buying low PEG ratio stocks doesn't outperform the market.
I don't think this statement is true. If you picks stocks based on fundamentals like price to book value, pe, or dividends you will generally beat the market.
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Old 02-01-2012, 10:38 PM   #160
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Re: Value Investing and Longer Term Investing

Nice run up from GRVY lately. Open beta test is Feb 22 with commercial launch (hopefully) set for March now.
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Old 02-01-2012, 11:25 PM   #161
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Re: Value Investing and Longer Term Investing

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I don't think this statement is true. If you picks stocks based on fundamentals like price to book value, pe, or dividends you will generally beat the market.
It is true. Try running a backtest over multiple time periods using good data. No fair just looking at recent data. No fair just looking at data that doesn't include companies that have gone busto.

p/b worked a few decades ago in relative performance.

p/e never worked (except for short periods) in relative performance.

Dividend yield worked for decades at a time and didn't work for decades at a time. Has done wonders recently in relative performance.

Price to sales was super awesome a while back in relative performance.
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Old 02-01-2012, 11:27 PM   #162
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Re: Value Investing and Longer Term Investing

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The only hole that matters is that buying low PEG ratio stocks doesn't outperform the market.
Blind picking low PEG ratio stocks will not. But what about using it to handicap large and megacap stocks as a predictor of them being undervalued, as I noted?

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Nice run up from GRVY lately. Open beta test is Feb 22 with commercial launch (hopefully) set for March now.
Yep, can't wait to see how everything turns out. Hoping for a nice multi bagger from the current price.
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Old 02-01-2012, 11:52 PM   #163
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Re: Value Investing and Longer Term Investing

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Originally Posted by Mori****a System View Post
Blind picking low PEG ratio stocks will not. But what about using it to handicap large and megacap stocks as a predictor of them being undervalued, as I noted?
It definitely works sometimes.

You are depending on the growth continuing, which 5 years of past growth won't tell you.

IF you can figure out why no one else believes the growth will continue (the real reason why low PEG ratio stocks occur), and you can figure out why they are wrong, you have a reasonable bet that you will outperform.

The problem of limiting yourself to large and megacaps, you are trying to out-think a ton of people. Most of your competition will have read about PEG ratios...
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Old 02-02-2012, 02:07 PM   #164
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Re: Value Investing and Longer Term Investing

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What do you guys think of CME? Looks like a great buy opportunity to me.
so far so goot.
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Old 02-03-2012, 12:05 AM   #165
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Re: Value Investing and Longer Term Investing

I hope DWA gets a chunk cheaper, I'm getting a little itchy to increase my position in it.
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Old 02-03-2012, 03:36 PM   #166
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Re: Value Investing and Longer Term Investing

Margin of safety on TSRA been vanishing before my eyes. Sold 1/4 of the position already and am prolly gonna sell more @ $21.
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Old 02-03-2012, 04:47 PM   #167
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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.
feel like pitching why you think DWA is a good buy other than you think it is cheap? What is everyone else missing?
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Old 02-03-2012, 05:09 PM   #168
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Re: Value Investing and Longer Term Investing

They make films that make franchises.

In 2010 they had 1 TV show (Penguins of Madagascar). In 2011 they had 2 (Penguins of Madagascar and Kung Fu Panda: Legends of Awesomeness). This year they will have 3 when their How to Train Your Dragon show starts airing on Cartoon Network.

Their film library's value, which is substantial, isn't anywhere on the balance sheet.

The things that are depressing the stock are declining US box office #s, rapidly declining DVD business, and the uncertainty of their distribution.

The US box office market isn't quite as robust as it has been in year's past but overseas numbers are getting better and non-US countries is quite a big market.

A while ago VHS numbers declined but people then bought movies on DVD. Although DVDs aren't selling like they used to, companies still want to watch to distribute the content and people still want to view it. Less people are buying DVDs of their movies than they used to, but more are buying them on iTunes, renting them on a roku, or trying to stream them through netflix (which they will be able to soon).

I don't know how the situation will play out with them having to find a new distributor or distributing the films themselves, but I don't think it's a big enough problem to make their current valuation reasonable.
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Old 02-03-2012, 06:29 PM   #169
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Re: Value Investing and Longer Term Investing

Also looking at what Disney paid for Pixar, which makes films that are under twice as successful on a per film basis (success defined here as worldwide gross - budget. $473 million on average to date for Pixar, $287 million on average for DWA), 1/2.5th as often as DWA puts out a movie, makes the valuation the market has on DWA look rather small.
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Old 02-03-2012, 09:18 PM   #170
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Re: Value Investing and Longer Term Investing

I'll do some research I have to dig into the numbers more in terms of what I believe DWA's earning power really is. In comparison with Pixar (I don't know if I'm being a fanboy), but I would argue that the quality of the ingenuity is not on par. DWA makes money by abusing their succesful franchises (4 Shreks, 3 Madagascars, each one worse than the previous one by leaps and bounds). In the past it's been hard for me to value a company like DWA cause earnings can be so lumpy.
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Old 02-04-2012, 06:40 AM   #171
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Re: Value Investing and Longer Term Investing

You could argue that from a financial perspective exploiting a good film might be a good strategy. They make a few films/year, some of them will be kinda breakeven and some of them will be hits. And the hits allow the company to make some sequals with a high ROI.
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Old 02-04-2012, 11:44 AM   #172
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Re: Value Investing and Longer Term Investing

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You could argue that from a financial perspective exploiting a good film might be a good strategy. They make a few films/year, some of them will be kinda breakeven and some of them will be hits. And the hits allow the company to make some sequals with a high ROI.
It is a good strategy -- but it also means that they are already squeezing out almost everything they can. It's like the bear case for the gap... they've already cut out all the costs and optimized their profitability as much as possible at this pt. All they've got left is actually growing the business. Pixar on the other hand, you could argue even if they only made X, they had a lot more value left on the table to be had for an acquirer.
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Old 02-04-2012, 03:39 PM   #173
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Re: Value Investing and Longer Term Investing

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I'll do some research I have to dig into the numbers more in terms of what I believe DWA's earning power really is. In comparison with Pixar (I don't know if I'm being a fanboy), but I would argue that the quality of the ingenuity is not on par. DWA makes money by abusing their succesful franchises (4 Shreks, 3 Madagascars, each one worse than the previous one by leaps and bounds). In the past it's been hard for me to value a company like DWA cause earnings can be so lumpy.
I agree that the average Pixar movie is much more enjoyable for me than the average Dreamworks Animation movie.

You say each Shrek/Madagascar movie was leaps and bounds worse than the previous one but Shrek 2 grossed more than Shrek 1 and Madagascar 2 grossed more than Madagascar 1, so from the perspective of DWA shareholders they weren't leaps and bounds worse.

Quote:
It is a good strategy -- but it also means that they are already squeezing out almost everything they can. It's like the bear case for the gap... they've already cut out all the costs and optimized their profitability as much as possible at this pt. All they've got left is actually growing the business. Pixar on the other hand, you could argue even if they only made X, they had a lot more value left on the table to be had for an acquirer.
In the last 2 years Pixar has put out 2 sequels. Dreamworks Animation has put out 3 sequels and 2 original concepts.

This year Pixar will be putting out 1 original concept while Dreamworks Animation is releasing 1 original concept and 1 sequel.

Dreamworks Animation isn't just rehashing old stuff and running out of original concepts. They're outproducing Pixar at both sequels and original concepts.
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Old 02-04-2012, 04:00 PM   #174
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Re: Value Investing and Longer Term Investing

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I agree that the average Pixar movie is much more enjoyable for me than the average Dreamworks Animation movie.

You say each Shrek/Madagascar movie was leaps and bounds worse than the previous one but Shrek 2 grossed more than Shrek 1 and Madagascar 2 grossed more than Madagascar 1, so from the perspective of DWA shareholders they weren't leaps and bounds worse.



In the last 2 years Pixar has put out 2 sequels. Dreamworks Animation has put out 3 sequels and 2 original concepts. I bought a small position in RIMM and I would never in a million years buy a blackberry.

This year Pixar will be putting out 1 original concept while Dreamworks Animation is releasing 1 original concept and 1 sequel.

Dreamworks Animation isn't just rehashing old stuff and running out of original concepts. They're outproducing Pixar at both sequels and original concepts.
You know that sequels out earn the original even if they suck b/c A) they have built in fans B) the studios are willing to put more marketing $$ behind them b/c they know exactly what they've got.

Examples of this (IMO off the top of my head):
Transformers vs Transformers 2
Shreks....Madagascars...
Iron Man vs Iron Man 2..

Imo the only time Pixar produced a movie just to cash in was Cars 2 (and the movie was obviously crap even though it made $$). My point is Shrek was great (2,3 and 4 not so good) whereas with Toy Story 1 2 and 3 were all great. I guess I'm saying if Pixar and DWA were both standalone companies, I'd bet on Pixar being able to continue producing great money making movies for years over DWA (not that DWA is crap just not as great as Pixar). For what it's worth I did like How to train Your Dragon a lot.

Also Pixar was an easy fit for Disney, as prior to buying Pixar Disney was already partnered in movies by providing all the marketing.

this being said... i haven't yet actually looked into the numbers to see if DWA is for me.
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Old 02-04-2012, 04:07 PM   #175
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Re: Value Investing and Longer Term Investing

Again I agree with you that Pixar's movies on the whole are more enjoyable but I just don't think that our taste preference of one over the other should translate into such a valuation difference between the multiples Pixar got valued at and those that Dreamworks Animation are getting valued at.
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