In Benjamin Graham's tomb to value investing, Chapter 7 presents three strategies that can offer low risk and strong returns.
Strategy One: The Unpopular Large Company
The idea is simple; companies that are experiencing short term troubles tend to fall out of favor. Using the safety of large cap stocks, an investor can pick-up these temporarily troubled companies at a discount. Today this strategy can be observed in Dog of the Dow and Dog of the S&P portfolios. The S&P strategy can leave an investor concentrated in specific sectors. At the moment, these sectors include regional banks, and real estate/construction related businesses. The Dow Dogs can offer safer companies, larger yields, and a level of diversification. Here is the current portfolio:
Citi (C)- 5.07%
Pfizer (PFE)- 4.77%
Altria (MO)- 4.11%
Verizon (VZ)- 3.77%
AT&T (T)- 3.43%
Strategy Two: Buying Bargain Issues
To Graham, a true bargain was a stock selling at a +50% discount to it's value. This strategy was easier to employ in the post-Depression markets which Graham invested but opportunities still exist. His criteria for bargain issues was finding prices below a companies net working capitol. This means an investor can buy a company and pay nothing for fixed assets. An excellent resource for this strategy can be found at this blog.
Net Working Capital = Current Assets - Total Liabilities
Strategy Three: Special Situations
This strategy covers a broad range of possible investments. One is merger arbitrage; Company A offers to buy Company B for $20 a share but B trades a discount of $18. That's a 10% return and depending on the closing date that could happen in a matter of months. This is a simplified example that can be furthered studied in The Warren Buffet Way or at Fat Pitch Financial.
Monday, October 29, 2007
Monday, October 22, 2007
Following the Big Guys
The Other Lampert Play: Auto Zone
If uncertainty has no place in your portfolio, the Sears Holding Group won’t fit your selective tastes. SHLD is the popular way to play off the genius of Eddie Lampert. His hedge fund consists of 72% SHLD. That’s a huge bet on Sears but the company isn’t anywhere near “Best of Breed”. The truth is Sears consists of a failing big-box retailer (K-Mart) with thin margins and another retailer tied heavily to housing (Sears).
The other option is investing with a different position that ESL Investments holds. AZO is the firms second largest position (19.5%) and the company has better profit margins than Sears (9.7% vs. 2.9%). These margins mean there is more relative cash to do what ESL does best: regular and huge buybacks. These buybacks are Lampert’s biggest tool in creating shareholder value. AZO has reduced its shares outstanding by 43% over the past 10 years. ESL Investments controls a 33% stake of Auto Zone and that should give an individual investor the faith to follow Lampert on another great long term buy.
In the Media
If you’re a fan of buybacks, Jim Cramer recently brought up Cracker Barrel (CBRL). Over the past ten years, shares out has reduce 61%. More importantly, it has reduced by 51% over the past two years.
On the subject of famous investors; Marty Whitman is interviewed in the most recent issue of Fortune. His Third Avenue Value Fund (TAVFX) has returned 22.5% over the past five year annualized. The most interesting thing is his turnover rate: 10%. That means he hold a stock on average for 10 years! That’s long term investing.
His three picks: BAM, RDN, FCE.A
Brookfield Asset Management is a great buy and forget stock that we want to look at more deeply. They hold global, illiquid assets including real estate, timber, power plants, and infrastructure; all great long term places to be.
If uncertainty has no place in your portfolio, the Sears Holding Group won’t fit your selective tastes. SHLD is the popular way to play off the genius of Eddie Lampert. His hedge fund consists of 72% SHLD. That’s a huge bet on Sears but the company isn’t anywhere near “Best of Breed”. The truth is Sears consists of a failing big-box retailer (K-Mart) with thin margins and another retailer tied heavily to housing (Sears).
The other option is investing with a different position that ESL Investments holds. AZO is the firms second largest position (19.5%) and the company has better profit margins than Sears (9.7% vs. 2.9%). These margins mean there is more relative cash to do what ESL does best: regular and huge buybacks. These buybacks are Lampert’s biggest tool in creating shareholder value. AZO has reduced its shares outstanding by 43% over the past 10 years. ESL Investments controls a 33% stake of Auto Zone and that should give an individual investor the faith to follow Lampert on another great long term buy.
In the Media
If you’re a fan of buybacks, Jim Cramer recently brought up Cracker Barrel (CBRL). Over the past ten years, shares out has reduce 61%. More importantly, it has reduced by 51% over the past two years.
On the subject of famous investors; Marty Whitman is interviewed in the most recent issue of Fortune. His Third Avenue Value Fund (TAVFX) has returned 22.5% over the past five year annualized. The most interesting thing is his turnover rate: 10%. That means he hold a stock on average for 10 years! That’s long term investing.
His three picks: BAM, RDN, FCE.A
Brookfield Asset Management is a great buy and forget stock that we want to look at more deeply. They hold global, illiquid assets including real estate, timber, power plants, and infrastructure; all great long term places to be.
Thursday, October 18, 2007
Book Reports Due at End of Month.
Read these over the weekend and turn in you reports on November 1st.
Look at this info on crowded herd trading that can't go on forever. The chart is frightening.
Here are some small cap stocks with attractive P/BV Ratios.
If you're looking a simple value "Magic Formula", try this screen and the books a decent read too. He basically guarantees to beat the market over the long haul.
PowerShares offers an interesting portfolio of intelligent ETF's. These are a good way to skip high mutual fund expenses or cherry pick ideas. We like the Deep Value Portfolio and the Buyback Achievers Portfolio.
Kiplinger has 15 low risk stock ideas in this months issue.
I know its dry but, here are some ways to fight inflation with bonds, which seems to be inevitable.
Another fundamental explanation for rising oil prices is the lack of meaningful production increases. Add that to a weak dollar and huge global demand and you have a bull market.
If you like the explosive moves in Biotech but don't fully understand the industry just copy Insiders Buying patterns in this portfolio.
Ever wish you could drive an ATV across your long term investment?
MSN Money's Harry Doshman screens for stocks to buy and forget. This article is old so see if his picks hold up so far.
Finally, check out the only book recommended by Warren Buffett about Warren Buffett.
Happy reading. Don't forget to double space and no Cliff Notes.
Look at this info on crowded herd trading that can't go on forever. The chart is frightening.
Here are some small cap stocks with attractive P/BV Ratios.
If you're looking a simple value "Magic Formula", try this screen and the books a decent read too. He basically guarantees to beat the market over the long haul.
PowerShares offers an interesting portfolio of intelligent ETF's. These are a good way to skip high mutual fund expenses or cherry pick ideas. We like the Deep Value Portfolio and the Buyback Achievers Portfolio.
Kiplinger has 15 low risk stock ideas in this months issue.
I know its dry but, here are some ways to fight inflation with bonds, which seems to be inevitable.
Another fundamental explanation for rising oil prices is the lack of meaningful production increases. Add that to a weak dollar and huge global demand and you have a bull market.
If you like the explosive moves in Biotech but don't fully understand the industry just copy Insiders Buying patterns in this portfolio.
Ever wish you could drive an ATV across your long term investment?
MSN Money's Harry Doshman screens for stocks to buy and forget. This article is old so see if his picks hold up so far.
Finally, check out the only book recommended by Warren Buffett about Warren Buffett.
Happy reading. Don't forget to double space and no Cliff Notes.
Tuesday, October 16, 2007
Owner's Earnings
Warren Buffett popularized a calculation called Owner’s Earnings. This calculation is used to determine how much actual cash a company can produce for a true owner. It accounts for non-cash entries like goodwill, depreciation, or huge pension returns. These discounts should be considered buy signals for companies with consistent growth. The discounts means very little for inconsistent growers and heavily cyclical companies. Here are some example calculations 9using Oct 8 prices):
Company Ticker: DEO
1) Operating Profit - 1,556
2) +Depreciation - 210
3) +Amortization of Goodwill - 0
4) -Average Federal Income Tax - 678
5) -Cost of Stock Options - 0
6) -Essential Capitol Expenditures - 300
7) -Extra Income from High Pension Returns - 0
= OE
8) x Discount Rate (8-10%)
63.04 Million = Est. Market Cap
58.53 Million = Actual Market Cap
7.15% = Discount (Premium)
Company Ticker: PCL
1) Operating Profit - 317
2) + Depreciation - 128
3) + Amortization of Goodwill - 0
4) - Average Federal Income Tax - 13
5) - Cost of Stock Options 0
6) - Essential Capitol Expenditures - 87
7) - Extra Income from High Pension Returns - 0
345 = OE
8) x Discount Rate (8-10%)
27.6 Billion = Est. Market Cap
7.52 Billion = Actual Market Cap
72.75% = Discount (Premium)
Company Ticker: FII
1) Operating Profit - 197.73
2) + Depreciation - 24.11
3) + Amortization of Goodwill - 0
4) - Average Federal Income Tax - 113.72
5) - Cost of Stock Options - 0
6) - Essential Capitol Expenditures - 4.75
7) - Extra Income from High Pension Returns - 0
103.37 = OE
8) x Discount Rate (8-10%)
8.27 Billion = Est. Market Cap
4.17 Billion = Actual Market Cap
49.57% = Discount (Premium)
Company Ticker: JOE
1) Operating Profit - 51.02
2) + Depreciation - 40.36
3) + Amortization of Goodwill - 0
4) - Average Federal Income Tax - 25.16
5) - Cost of Stock Options - 0
6) - Essential Capitol Expenditures - 14
7) - Extra Income from High Pension Returns - 0
52.22 = OE
8) x Discount Rate (8-10%)
4.17 Billion= Est. Market Cap
2.53 Billion = Actual Market Cap
39.32% = Discount (Premium)
Company Ticker: DEO
1) Operating Profit - 1,556
2) +Depreciation - 210
3) +Amortization of Goodwill - 0
4) -Average Federal Income Tax - 678
5) -Cost of Stock Options - 0
6) -Essential Capitol Expenditures - 300
7) -Extra Income from High Pension Returns - 0
= OE
8) x Discount Rate (8-10%)
63.04 Million = Est. Market Cap
58.53 Million = Actual Market Cap
7.15% = Discount (Premium)
Company Ticker: PCL
1) Operating Profit - 317
2) + Depreciation - 128
3) + Amortization of Goodwill - 0
4) - Average Federal Income Tax - 13
5) - Cost of Stock Options 0
6) - Essential Capitol Expenditures - 87
7) - Extra Income from High Pension Returns - 0
345 = OE
8) x Discount Rate (8-10%)
27.6 Billion = Est. Market Cap
7.52 Billion = Actual Market Cap
72.75% = Discount (Premium)
Company Ticker: FII
1) Operating Profit - 197.73
2) + Depreciation - 24.11
3) + Amortization of Goodwill - 0
4) - Average Federal Income Tax - 113.72
5) - Cost of Stock Options - 0
6) - Essential Capitol Expenditures - 4.75
7) - Extra Income from High Pension Returns - 0
103.37 = OE
8) x Discount Rate (8-10%)
8.27 Billion = Est. Market Cap
4.17 Billion = Actual Market Cap
49.57% = Discount (Premium)
Company Ticker: JOE
1) Operating Profit - 51.02
2) + Depreciation - 40.36
3) + Amortization of Goodwill - 0
4) - Average Federal Income Tax - 25.16
5) - Cost of Stock Options - 0
6) - Essential Capitol Expenditures - 14
7) - Extra Income from High Pension Returns - 0
52.22 = OE
8) x Discount Rate (8-10%)
4.17 Billion= Est. Market Cap
2.53 Billion = Actual Market Cap
39.32% = Discount (Premium)
Monday, October 8, 2007
Why Trading Rarely Works
The simple reason short-term trading rarely works? You have a brain.
But wait, you say, isn’t that an advantage? No, because your brain isn’t designed for trading, it’s designed for survival. You aren’t built to be a rational, calculator of outcomes; that’s why we invented computers. Emotions are controlled by hope, greed, fear, love, confusion; and emotions tend to control actions.
The study of financial psychology basically exists to create a long list of reasons that human brain fails at investing and trading. Every investor should know and understand these hard-wired quirks that keep us alive in the wild but returns down in the market.
Loss Aversion: A loss is twice as painful as a gain. A 5% gain doesn’t create an equal emotional reaction as a 5% loss. Rationally and mathematically this shouldn’t make sense but humans are made to avoid losses. This is not a bad trait but it doesn’t apply well to trading.
Sunk Cost Effect: People tend to treat spent money as more valuable than money in reserve. Poker players know this effect well. After pushing so many chips to see an unhelpful flop, a player finds it difficult to fold because capitol is already committed. We find it hard to let go of an investment even when the odds are stacked against us.
Disposition Effect: Traders tend to takes gains and let losses run. A quick 20% return makes most people sell and realize the quick gain even if the long-term prospects are just as good. A slow decline in price can suck a trader in and trick them into hoping for a turn around when the evidence isn’t there. We fear realizing a loss, making it permanent. We hope it turns around.
Outcome Bias: Improperly judging a decision based on gain or loss and not the QUALITY OF DECISION. The future is unknowable. The outcome is decided by the unknowable future, therefore judging the outcome is based on judging unknowable events. The only constant that can be judged is YOUR decision making process.
Recency Bias: The tendency to weigh recent data/outcomes more heavily than past data/outcomes. Losses this week effect actions more than gains from last month.
Anchoring: Relying to heavily on readily available information. This causes people to hold on too long or stay out too long.
Bandwagoning: Believing in things that the crowd hold as truths. The cause of bubbles.
But wait, you say, isn’t that an advantage? No, because your brain isn’t designed for trading, it’s designed for survival. You aren’t built to be a rational, calculator of outcomes; that’s why we invented computers. Emotions are controlled by hope, greed, fear, love, confusion; and emotions tend to control actions.
The study of financial psychology basically exists to create a long list of reasons that human brain fails at investing and trading. Every investor should know and understand these hard-wired quirks that keep us alive in the wild but returns down in the market.
Loss Aversion: A loss is twice as painful as a gain. A 5% gain doesn’t create an equal emotional reaction as a 5% loss. Rationally and mathematically this shouldn’t make sense but humans are made to avoid losses. This is not a bad trait but it doesn’t apply well to trading.
Sunk Cost Effect: People tend to treat spent money as more valuable than money in reserve. Poker players know this effect well. After pushing so many chips to see an unhelpful flop, a player finds it difficult to fold because capitol is already committed. We find it hard to let go of an investment even when the odds are stacked against us.
Disposition Effect: Traders tend to takes gains and let losses run. A quick 20% return makes most people sell and realize the quick gain even if the long-term prospects are just as good. A slow decline in price can suck a trader in and trick them into hoping for a turn around when the evidence isn’t there. We fear realizing a loss, making it permanent. We hope it turns around.
Outcome Bias: Improperly judging a decision based on gain or loss and not the QUALITY OF DECISION. The future is unknowable. The outcome is decided by the unknowable future, therefore judging the outcome is based on judging unknowable events. The only constant that can be judged is YOUR decision making process.
Recency Bias: The tendency to weigh recent data/outcomes more heavily than past data/outcomes. Losses this week effect actions more than gains from last month.
Anchoring: Relying to heavily on readily available information. This causes people to hold on too long or stay out too long.
Bandwagoning: Believing in things that the crowd hold as truths. The cause of bubbles.
Friday, October 5, 2007
Fear The Write-Off
In 2000, the bubble was burst. Chip makers, along with the entire tech world, were suffering from a dramatic down turn. Micron Technology was surprised and suffering from the down turn; inventory was up and useless.
Like many other companies, the write-offs were massive: $261 million in the second quarter. To boot, this write down was considered a non-reoccurring event by investors. How wrong they were. The next six quarters held more write-offs in store.
Fast forward to this week. Citi, Merrill Lynch, UBS, WaMu, and Deutsche Bank all take huge write-offs and profit dips from holding sub-prime portfolios. Alarms should be going off in the Long Term Investor's skull. These write-offs warn of many potential issues.
We fear that companies like WaMu, Countrywide, and other highly-leveraged banks will continue to write-off their portfolio which is a sign of management's admition of acting with the short-term in mind. Banks this highly leveraged look great when on the way up but the drops are just as amplified and dramatic. Too dramatic unless you have nerves of steel. Most people don't.
Other concerns are banks that "fill the cookie jar". The Wall Street Journal pointed out that when the portfolios catch a rebound in the future, they will artificially inflate profits. With these portfolios taking understated positions on balance sheets, a bounce will look massive. When this happens, don't fall for the sudden and freakish improvement - their is virtue in slow, steady, and conservative growth in banks.
The greatest lesson from this cycle is what is learned about management. Compare the actions of the firms listed above (CFC being the most dramatic/news worthy) and the safe, well managed banks owned by Berkshire (STI, UBS, WFC, BAC). Wells Fargo, and their genius contrarian management, have just begun building up a mortgage branch with the cheap, fallen ruble of the over-aggressive, short sighted firms.
For income investors, these dividends can act as income for life if you don't fear concentration.
October 5, 2007
STI - 3.78%
UBS - 4.78%
WFC - 3.3%,
BAC - 4.89%
Average - 4.1875%
Like many other companies, the write-offs were massive: $261 million in the second quarter. To boot, this write down was considered a non-reoccurring event by investors. How wrong they were. The next six quarters held more write-offs in store.
Fast forward to this week. Citi, Merrill Lynch, UBS, WaMu, and Deutsche Bank all take huge write-offs and profit dips from holding sub-prime portfolios. Alarms should be going off in the Long Term Investor's skull. These write-offs warn of many potential issues.
We fear that companies like WaMu, Countrywide, and other highly-leveraged banks will continue to write-off their portfolio which is a sign of management's admition of acting with the short-term in mind. Banks this highly leveraged look great when on the way up but the drops are just as amplified and dramatic. Too dramatic unless you have nerves of steel. Most people don't.
Other concerns are banks that "fill the cookie jar". The Wall Street Journal pointed out that when the portfolios catch a rebound in the future, they will artificially inflate profits. With these portfolios taking understated positions on balance sheets, a bounce will look massive. When this happens, don't fall for the sudden and freakish improvement - their is virtue in slow, steady, and conservative growth in banks.
The greatest lesson from this cycle is what is learned about management. Compare the actions of the firms listed above (CFC being the most dramatic/news worthy) and the safe, well managed banks owned by Berkshire (STI, UBS, WFC, BAC). Wells Fargo, and their genius contrarian management, have just begun building up a mortgage branch with the cheap, fallen ruble of the over-aggressive, short sighted firms.
For income investors, these dividends can act as income for life if you don't fear concentration.
October 5, 2007
STI - 3.78%
UBS - 4.78%
WFC - 3.3%,
BAC - 4.89%
Average - 4.1875%
Thursday, October 4, 2007
Market Notes (CVA) (PVM)
Odd week.
Have you seen the weird and unsustainable rally in homebuilders and retail? All the pundits have their explanations but that's unimportant. The important thing is not to get caught up in it. We like (NVR), a homebuilder, but this shouldn't shake our conviction to get an even better price. We're waiting.
The retailers shot up big as well. Our (SHLD) shares are up 11.27% since the recommendation a week ago. This to is not sustainable in the short-term.
However, we are excited to see some life in our second pick, (BX). Blackstone is up 8.33%. This gain is also suspect but it is an important sign that BX's unexplained decline has in fact bottomed. I hate to brag but... called it!
On a different note, we've been researching ETF's and indexing. Buffett, in recent years, has been promoting these instruments for small, retail investors. Average returns minus tiny, tiny fees equals better returns than investing in average funds with larger fees. Expand this strategy over decades and you've got a fortune saved.
In an attempt to juice this strategy, check out some "smart" ETF's that focus on value picks. These are the kind of ETF's that you can buy, forget and still get better than average returns.
Check out the portfolio of PowerShares Deep Value Portfolio. This is a great way to diversify, reduce risk, fees, and improve long-term returns with very little work. The portfolio is also a way to get investing ideas.
A stock to check out, (CVA). CVA has one of the greatest gigs in business. They get paid for raw material collection and paid for their final product. CVA collects trash in New York state (and fees), then they burn it and sell the electricity that's produced back to their customers. A hand full of companies do this with trash, used oils, and scrap recyclables. CVA is interesting because they are a recent IPO, have side projects in China and water facilities, and Sam Zell has a large stake. This company seems to have all the right stuff for long term, safe growth. We aren't adding it to our portfolio (yet). But, it's an interesting company worth putting on the "maybe" list.
Have you seen the weird and unsustainable rally in homebuilders and retail? All the pundits have their explanations but that's unimportant. The important thing is not to get caught up in it. We like (NVR), a homebuilder, but this shouldn't shake our conviction to get an even better price. We're waiting.
The retailers shot up big as well. Our (SHLD) shares are up 11.27% since the recommendation a week ago. This to is not sustainable in the short-term.
However, we are excited to see some life in our second pick, (BX). Blackstone is up 8.33%. This gain is also suspect but it is an important sign that BX's unexplained decline has in fact bottomed. I hate to brag but... called it!
On a different note, we've been researching ETF's and indexing. Buffett, in recent years, has been promoting these instruments for small, retail investors. Average returns minus tiny, tiny fees equals better returns than investing in average funds with larger fees. Expand this strategy over decades and you've got a fortune saved.
In an attempt to juice this strategy, check out some "smart" ETF's that focus on value picks. These are the kind of ETF's that you can buy, forget and still get better than average returns.
Check out the portfolio of PowerShares Deep Value Portfolio. This is a great way to diversify, reduce risk, fees, and improve long-term returns with very little work. The portfolio is also a way to get investing ideas.
A stock to check out, (CVA). CVA has one of the greatest gigs in business. They get paid for raw material collection and paid for their final product. CVA collects trash in New York state (and fees), then they burn it and sell the electricity that's produced back to their customers. A hand full of companies do this with trash, used oils, and scrap recyclables. CVA is interesting because they are a recent IPO, have side projects in China and water facilities, and Sam Zell has a large stake. This company seems to have all the right stuff for long term, safe growth. We aren't adding it to our portfolio (yet). But, it's an interesting company worth putting on the "maybe" list.
Tuesday, October 2, 2007
Additions to Markel Porfolio (MKL)
Markel, a Va. based insurer, has been called a 'mini' or 'next' Berkshire Hathaway. It's portfolio has returned an average of 14.7% annually, 6 points better than the S&P. This portfolio is much larger (diversity wise) than BRK so we will only list the new and dropped investments. The investments were made before June 30, the filings were release mid-September so you may have missed the best prices. Keep track of future changes with the SEC filings.
Here are the recent New Purchases:
AIG - (AIG) Insurance
Cintas - (CTAS) Business services
Federated Investors - (FII) Asset management
Home Depot - (HD) Home improvement
Medtronic - (MDT) Medical equipment
Microsoft - (MSFT) Tech software/hardware
NuStar GP - (NSH) Oil/gas equipment & services
St Joseph - (JOE) Real Estate development (Gulf Region)
Recent Sells:
Abbott Labratories - (ABT) Pharmaceuticals
Nuveen Investments - (JNC) Asset management
Penn National Gaming - (PENN) Gambling Sites
Valero - (VLO) Refining, marketing
Markelcorp.com
Ranked 1,388 in Forbes Global 2000
Here are the recent New Purchases:
AIG - (AIG) Insurance
Cintas - (CTAS) Business services
Federated Investors - (FII) Asset management
Home Depot - (HD) Home improvement
Medtronic - (MDT) Medical equipment
Microsoft - (MSFT) Tech software/hardware
NuStar GP - (NSH) Oil/gas equipment & services
St Joseph - (JOE) Real Estate development (Gulf Region)
Recent Sells:
Abbott Labratories - (ABT) Pharmaceuticals
Nuveen Investments - (JNC) Asset management
Penn National Gaming - (PENN) Gambling Sites
Valero - (VLO) Refining, marketing
Markelcorp.com
Ranked 1,388 in Forbes Global 2000
Monday, October 1, 2007
North Virginia Ryan (NVR)
The Long Term Investor needs the vision to look past current market troubles and see what companies will survive and thrive. That said the homebuilders are amid a slow and seemingly bottomless decline. For an investor with guts and nerves of steel this is a great time to find the best of breed and prepare to buy.
TLTI has stepped up to the homebuilder plate with its lone suggestion: North Virginia Ryan (NVR). This homebuilder is unique because even during the housing boom, it stuck with its low risk strategy which includes controlling land via option contracts, and only building homes to suit. These strategies kept balance sheets trim, debt low, and risk minimal. NVR is now poised for the strongest return when compared to its inventory and debt heavy competitors. It was the only public home builder to actually have more cash than debt. It is that cash that allows NVR to repurchase its shares even in this economic climate. Since 1997, NVR has reduced shares outstanding from 11.1 million to 5.5 million shares. Even this July, NVR repurchased $300 million worth of stock. Buybacks during the lean times should be a sign that NVR has the shareholders interest in hand.
NVR is continuing to drop, creating new 52 weeks lows on a regular basis. Citi Group upgraded the entire sector today (10/1/07). Your best bet is to keep an eye on this chart and look for a quite, flattened, low point. The threat of US recession will damage this domestic company. It will get cheaper. Some analysts already have a buy rating but there is no rush. For advanced investors: buy this stock and collect fees by allowing others to short sell this stock; it has a huge short-seller following. Talk to a broker for more advice on this strategy.
Here is a breakdown of regional segments:
TLTI has stepped up to the homebuilder plate with its lone suggestion: North Virginia Ryan (NVR). This homebuilder is unique because even during the housing boom, it stuck with its low risk strategy which includes controlling land via option contracts, and only building homes to suit. These strategies kept balance sheets trim, debt low, and risk minimal. NVR is now poised for the strongest return when compared to its inventory and debt heavy competitors. It was the only public home builder to actually have more cash than debt. It is that cash that allows NVR to repurchase its shares even in this economic climate. Since 1997, NVR has reduced shares outstanding from 11.1 million to 5.5 million shares. Even this July, NVR repurchased $300 million worth of stock. Buybacks during the lean times should be a sign that NVR has the shareholders interest in hand.
NVR is continuing to drop, creating new 52 weeks lows on a regular basis. Citi Group upgraded the entire sector today (10/1/07). Your best bet is to keep an eye on this chart and look for a quite, flattened, low point. The threat of US recession will damage this domestic company. It will get cheaper. Some analysts already have a buy rating but there is no rush. For advanced investors: buy this stock and collect fees by allowing others to short sell this stock; it has a huge short-seller following. Talk to a broker for more advice on this strategy.
Here is a breakdown of regional segments:
FoxRidge Homes (Nashville, TN)
NVHomes (MD, VA, NJ, PA, WV)
Ryan Homes (NY, DE, OH, VA, MD, MI, NC, SC, PA, NJ, TN, WV)
Rymarc Homes (Columbia, SC)
Approximately 37% of its home settlements during the year ended December 31, 2006, occurred in the Washington, D.C. and Baltimore, Maryland metropolitan areas, which accounted for 52% of its homebuilding revenues in 2006. D.C. area tends to hold up long-term because of government based economy.
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