Investment Common Sense

News & Views   

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May 1, 2020

Since we're all nervious about the market direction, I decided that the best approach to bargain hunting is to look for low EV/EBITDA. In other words how many dollars of earnings can we buy for each dollar we spend?

For that reason, I changed the sort order of the Top 10% page to rank the company stocks by EV/EBITDA rather than total value factors score. That way, you can spot companies that look like bargains a little easier.

Just remember three things:

Do your homework. How will the Covid-19 lockdown really effect this company's future earnings? I see some stocks that look like pretty good long term bets in this week's list. I personally plan to concentrate my limited purchases to US companies with low EV/EBITDA and high Total Yield

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May 1, 2020

The market is showing signs of life, but I keep remembering the 2007 downturn and how long it took for the recovery to really start. What I particularly remember is how suddenly allmost all listed companies earnings went to hell; especially the banks. I keep remembering the quote - now attributed to Rahm Emanuel but probably not original with him, "Never waste a good crisis".

A good downturn is a chance to - in my words - "take the big bath". A good time to clean up all the little GAAP fudges that keep your quarterly earnings looking good.

Not saying anybody does this, but in the immortal words of Reese's Candy, "Not Sorry".

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March 30, 2020

Pretty slim pickens again this week. Only 6 stocks in the top 10 value stocks with postive momentum and not a single US stock among em. Remember the 2000 downturn took 30 months to bottom out and the 2007 took 21 months. That's not to say there are no good deals now, but with Covid 19, will the stimulus package give the markets a boost right away? Your guess is as good as mine. I did some careful buying - a REIT and a Tech ETF - and that with the few investments I retained have put me back on the road to recovery (+5%), but still a long way to go.

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March 1, 2020

I hope you all sold all your stock two weeks ago, but if like me, you just continued being conservative and reinvesting, you got killed in the market the last two weeks. The only satisfying thought is that those REITs and Preferreds that I bought in the last two months for their 5% plus yields still yield 5% to me, and even more to you if you buy them now.

REITs don't show up on my lists, primarily because they do not score very high using the O'Shaugnessy methods. I am working on a method of rating them that makes sense to me, but I do not have the resources to "back test" whatever I come up with. So whatever rating system I might propose on this web site should be taken with a large dose of skepticism. In the mean time, I'm kinda liking preferred stocks for the yield, and sporting goods.

Why do I like sporting goods? Old farts like me who are into healthy activities - I just turned 81 - are still into fitness like Pickle Ball, golf, goat yoga and other gym workouts. We can afford to buy fancy equipment. I have done pretty well with Dick's Sporting Goods, and I notice Shoe Carnival, Hibbett, Foot Locker and G-III Apparel in this week's list.

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January 18, 2020

Here's another bit of wisdom based on a stupid decision. Do you remember I said "don't buy Russian (or China) stocks". Their accounting is suspect and they don't have a SEC to look after naive investors. Well, I bought some Lukoil (LUKOY) because it has persistantly remained toward the top of the Watch List. Guess what? I quickly lost a couple grand. Now that's bull shit. Why does LUKOY stay in the top of the six months momentum list? I'll tell you why. That's so that whoever is manipulating that SOB can make regular profits from ignorant investors like me.

On another subject: I notice that Mallinckrodt PLC (see my blog on this page for November 2018) is now trading around $3.00. Makes me wonder why I did not have the courage of my conviction and short that beauty. My favorite for short of the year 2020 is Acco Brands (ACCO). I don't think they are as deceptive as Mallinkcrodt, but mighty strange looking balance sheet and not many new products in the last few years. Maybe Google calendar won't replace AT-A-GLANCE, but I would not bet against Google.

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January 14, 2020

I'm still not quite used to 2020, and to be truthful, I didn't think I'd live this long. However, that's not going to prevent me from trying to make as much money as I can. Here's a little planning advice for you younger investors. When you and your family members achieve a certain age - lets say over 80 - you spend a lot more time and money in doctor's offices than you used to. I read the Economist and most of my reading used to be done on the eleptical machine at the gym, but now the doctor's waiting room is giving the gym a run for it's money.

I published a new watch list of my investments today. Results look pretty good, but I noticed that one darling - K Twelve (LRN) - where I had a nice profit in November took a dive this month. What happened? I guess that's what happens earnings go in the dumper. Shoulda caught that sooner. since they don't pay any dividend and its not even in the top ten list, I won't own it tomorrow.

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October 6, 2019, 2019 RE Charles Schwab Zero Trade Price et al

Either I am missing something - likely - or the Schwab hyperactive programmers have removed the new confusing Stock Trade page from their web site and gone back to the perfectly useful one that all us customers understood. It could be that I clicked a different button when I did some trading a couple of weeks ago or maybe they got enough complaints but the old, easily understood, page is back.

Now I do not care to say thanks to the aforementioned hyperactive computer wizards because it still pisses me off that they fixed it when it wasn't broke. and it was almost the final straw in a series of unpleasant surprises. To Wit:

  • Changed the stock trading page
  • Changed the number and order of columns on the account download report
  • My favorite service rep quit
  • Frequently voice mail is the only response when I call the one and only local office, and calls may not be returned for several hours or days
  • In Schwab's defense, their 800 number reps always answer and are very helpful
  • That said, I think I have outsmarted the Schwab computer wunderkinds by writing a new algorithm that searches their latest download format for keywords that tell me where the data that I want is located every month. They could screw this up by changing the words they use for the column headings, but they can add and move columns to their hearts content and my computer won't care.

    About the new zero trading fee. I sure hope it does not hurt their profits too much. I did not mind the $4.95 fee, and I sure want the custodian of my meagre (uninsured) fortune to continue to enjoy good financial health.

    In the interests of full disclosure, I recently rolled one of my accounts and my results were not so good. Following the "Trending Value" rules in this account resulted in an annual yield of minus 1.85% while the S&P 500 was up 1.27% for the same period. Now that I have achieved a certain age and have no pension, I need a certain income to maintain my moderately lavish life style of dining out frequently, golf and tennis at public facilities, modest chairitable donations and ever increasing medical expenses.

    Bond yields and minus 1.85% just don't cut it. S&P 500 tracking funds don't cut it either. So, I invest in REITs and ETFs that pay better. I notice that my favorite investment authority, Travis @ StockGumshoe has some REITs in his portfolio. If you follow my comments and watch my - infrequently updated - Watch List, you know I do not strictly adhere to the "Trending Value" strategy. I publish the list and use it to find bargains that meet my requirements. But the "Trending Value" calculations generally do not fit the REIT business model very well. For example, the P/E ratio is generally high enough to disqualify an REIT because REITs trade based on Free Cash Flow rather than Earnings. So I use other criteria to evaluate REITs and try to stick to business sectors that I am comfortable with. Right now these are Health Care, Data Centers, Prisons, Mini Storage. I just cannot bring myself to invest in Pot production facilities. It's not a moral issue; I just think the valuations are too bubbelicious.

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    September 30, 2019

    Just checked the results of my wife's IRA account, and I'm not too proud of the result. Using my crude evaluation method, start (value) minus end plus withdrawals divided by start value shows a loss of 1.85% while the S&P 500 for the same period gained 1.27%. It's not too hard to figure that I lost 3.12% vs the S&P 500.

    I pretty much stuck to the "Trending Value" portfoli0 on this account. So, there is no excuse.

    I think that there is a bubble in the markets in stocks like Uber and others that have never made a profit, but are still selling at incredible valuations supported by "programmed trading" and Venture Capital. For an old fart like me, income is more importand and that is why I am buying high quality REITs. When the bubble pops, all boats will sink, - a rising tide floats all boats and vice versa - but I am pretty sure that a stock that pays 5% dividends will sink less than a stock that is selling at 40 times estimated earnings three years hence.

    This week's Weekly Table has some pretty good bets. I still do not like China or Russia stocks because their rules are different and their accounting is suspect. So if you want to buy Gazprom, I urge caution and due dilligence. Nothing more to report this week.

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    September 16, 2019

    This evening some of my friends reminded me that I forgot to update the web site this weekend. I think I forgot because Friday the 13th and the full "Harvest" moon occurred on the same day. That won't happen again until 2045 or some such year, and I won't be around for that. That is really not my excuse for forgetting. I had a lot of volunteer work and family celebration of one of our kids 40th wedding anniversary party. Do you know how old that makes me and my ever loving wife?

    But I digress. Last week was good to my portfolios. The news media seems fixated on forecasting a correction, but for the first time I can remember, the FED is talking about cutting rates in the face of soaring deficits, low unemployment, solid job growth and low inflation.

    I have some more thoughts, but it is too late tonight and I need to sort them out before making them public. Watch this space for more wisdom.

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    August 26, 2019

    Today, I updated my watch list; not because I plan any trades, I just have not updated it for a long time. After I updated it, I noticed that the "Sec Type" column contains numeric data rather than the data it should contain. The reason for this is because Charles Schwab's programmers have made another unnecessary change to the way their data is presented and downloaded on their Web site.

    I have pretty much had it with Chas Schwab. They do not answer the phone promptly at the one and only local office even though, when I drove out there, there were no customers and several employees doing nothing. The office is at a very inconvenient location for me, my former advisor is no longer there, and the receptionist who I liked is also gone.

    The final straw is that they keep changing the Web site. Just little things, but enough to be a pain in the neck for an old fart like me, and to cause my analysis programs to malfunction.

    Hey guys, "if it ain't broke, don't fix it".

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    July 22, 2019

    Well I think I should write something so you know that I'm still alive. I just got home from a trip to California's Central Coast where I had a reunion with my sister, brother and lots of nieces, nephews and their wives and kids.

    There does not seem to be a shortage of wealth in Cayucos, CA. A modest house on the beach that would sell for $3.2 Million and rents for around $2,800/week has plenty of parking for your Lexus, Cadillac, Tricked out GMC Yukon or Ferrari, and the best sticky cinnamon rolls you ever ate are available for only about $4.00 each.

    But, I digress. My experience so far this year is that the market is pretty flat and "value" stocks are not very popular. I have been straying from strict adherence to the Trending Value portfolio because I need more income than this strategy has provided recently to sustain my modestly lavish lifestyle - that included four days in Cayucos.

    If you are patient and have some time, there are bargains avialable. The Weekly List" includes over 70 stocks, a fair number of which are US companies. So far this year in the three portfolios where I generally follow the "Trending Value" strategy, I am making about 3%. Not great, but it's better than nothing. In my accounts where I am chasing income with some high yielding REITS I'm making about 5% on dividends and about even on capital gains. One of my REITs, - Core Civic - specializes in private prisons and other prpperties leased to governments. US congress has nothing better to do than second guess their contracts. So, it's selling at a price where the distribution yield is over 10%. I continu to think it's a good buy although I have a pretty good paper loss so far.

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    January 7, 2019

    There's not much to pick from if you have money to invest right now. The Weekly Table for this week has only 27 entries with postive or zero 6 month price momentum, and most of the comapnies listed there are not US companies. That means that of the more than 6 thousand stocks I screened this week, there are no more than 27 that meet the qualifications for investment in your "Trending Value" portfolio.

    I wish all my readers a prosperous 2019, and hope that you are keeping your powder dry. For an interesting and, I think, very insightful perspective RE the economy and markets, I recommend this article from "The Dismal Optimist" by Peter Treadway - my favorite economist.

    Sorry, I have not been keeping the site up-to-date. I got a new right knee for christmas and am not moving quite as fast as usual.