The Dow and S&P Finish Positive For The Week!!!

It was a first in sometime that we ended up for the week. While the market has gotten pummeled over the last few weeks we had a nice lift going into the weekend. While the markets have bounced around vigorously this has given way for much opportunity. While the markets could go lower remember to stay focused on the long term. No one can pick bottoms or tops that's why it is important to stay invested.

Enjoy the weekend folks and Happy Halloween

Cheers!

A Few More Ben Graham Nuggets

• These stocks come very close to meeting Ben Grahams criteria:
  
  All issues mentioned have a current ratio better than 1.5, a book value under 1.5, a p/e ratio under 15, positive eps growth over last 5 years, very low or no debt, and pay a dividend. 8 out of 10 companies have earned money for last 10 years straight while 2 companies have been positive for at least 8 of those 10.
  
  Abercrombie (ANF)- A specialty retailer catering towards the younger crowd. This one surprised me to be on this list. Has a high ROE that has averaged over 30+ % for last 10 years.
  
  Ashland Inc.(ASH)- A well run diversified chemical company trading at a sales ratio of .17 and 43% of book value.
  
  Bel Fuse(BELFB)- Manufacturers electronic components trading at 2x cash.
  
  Movado(MOV)- Another retailer that manufacturers and markets fine watches and jewelry.
  
  Nam Thai Electronics(NTE)- Electronics company that has increased cash flow over last 6 years straight. Value investors the Kahn Brothers (Irving Kahn served as teaching assistant to Ben Graham in the 1930's) have stake in company.
  
  Seaboard(SEB)- Insiders own 72% as well as the Kahn Brothers.
  
  Thor Industries(THO)- The largest manufacturer of recreation vehicles and a major builder of small buses. Insiders own 36%.
  
  
  These are not recomendations but ideas to further study before investing
  
  STOCKMANMARC

Last Minute Reversal In The Dow!

The Dow Jones Industrial Average had a change of heart reversing nearly 400 points in the last several minutes of trading finishing at 8990.96 down 74 points for the day. Just 2 hours after the Fed cut rates by a half a point. The rate cut was already factored in. Then what spooked the market in the last few minutes of trading? Many traders on the floor of the NYSE think that it was comments coming from GE's CEO Jeff Imelt However after yesterdays run up of 10% it could be bigger players unloading some positions. Who knows? One thing is for sure the market seems to have a lot of elasticity to it lately.

YAHOO! HAS PRIME REAL ESTATE!!!

That's right Yahoo! (YHOO)has prime real estate, no not sky scrapers or waterfront properties but Internet real estate presence. They rank #1 and #2 respectively for Top Global and U.S. sights. Yahoo's finance page called "finance.yahoo.com" is also the most visited site in investing.
You would think with all their Internet presence they would be trading much higher, but like the market in general they are trading well off their highs. So what is this Internet behemoth worth anyway? Earlier in the year Microsoft(MSFT) made a bid of $33 per share which Mr. Jerry Yang Yahoo's Co-Founder and current CEO turned down. Yahoo is currently trading at $11.50 per share. In 1998 Yahoo's sales were 203 million with a book value of 38 cents per share and 435 million in cash with a stock price of $16.35 per share. Today in 2008 Yahoo does over 7 billion in sales with a book value of $8.33 per share and 3.6 billion in cash with a stock price of $11.50 per share. Book value has increased over 2000% since 1998 while revenues have increased over 35 fold. With its stock trading at 7x cash flow and 10x free cash flow it wouldn't be to surprising to see Microsoft or another suitor to come back into play. Shareholder activist Carl Icahn has a vested interest while management still has 20% itself. Even if no takeover or merger materializes these shares still look under valued. With 3.6 billion in cash Yahoo might do a little hunting itself and acquire some smaller players on the Internet landscape.


STOCKMANMARC

Author currently long MSFT, no positions in YHOO

SEARS NOT JUST YOUR AVERAGE RETAILER!?$$$

Many people think of Sears(SHLD)as that old line retailer who had those big thick catalogues that came out every year that offered a zillion items inside its pages. Those days have been replaced by the internet + other big box retailers such as Walmart and Target. What many people including investors don't realize that underneath this stodgy retailer breathe a different animal. Sure Sears is still a retailer with stores everywhere. But it is not just any retailer. Sears is comprised of Sears, K-Mart and Sears Canada(70% owned subsidiary). Sears is the leading home appliance retailer as well as a leader in tools, lawn and garden, home electronics , automotive repair and maintenance. Their main brands are Kennmore, Craftsman, and DieHard. They also have several different lines of apparel such as Lands' End, Jaclyn Smith and Joe Boxer, they also offer Apostrophe, Covington Brands and Martha Stewart Everyday products. Sears is the nations largest provider of home services, with more than 13 million service calls made annually. ESL Investments Inc a privately owned hedge fund run by famous value investor Eddie Lampert is the man running the show. Lampert has a 20 year track record of 20% annually. Besides being Sears Holdings largest shareholder he has sizable stakes in AutoZone(AZO), AutoNation(AN), Home Depot(HD), and Citigroup(C). Sears is ranked number eight in the U.S. for internet retail sales. Currently Sears trades at .60 book value (48.50 per share/ 80.80 book value per share). The company made 49 billion over last 12 months with a market cap of 6 billion. The company has 1.5 billion in cash with a low debt/equity ratio compared to its pier group. The company has been buying back shares in the open market which should further strenghten shareholder value. Lastly Sears sits on a huge real estate portfolio that is valued at $50 per share to over $100 per share.
Cash = 1.5 bil
Real Estate = 6 bil + (low estimate)
Lands'End = 1.5 bil +
Service Call Unit = 1.3 bil (13mil service calls a year @ $100 per call) low estimate

Total = 10.3 bil/126.4 mil shares = $81.50 per share

These figures do not include the values of the Kennmore, Craftsman, and DieHard brands that could be sold off or sold through different chains like Home Depot, Walmart, Target and AutoZone or different distribution channels which would increase revenue and put a much higher value on the company.

The author suggest further research before investing.

STOCKMANMARC

Fairfax Financial Holdings Looking Cheap!

I recently wrote an article that mentioned Fairfax Financial(FFH). Fairfax is an insurance holding company run in the same fashion as Warren Buffet's Berkshire Hathaway. They take the float from the insurance business and re-invest it in common stock, bonds, or whole companies. Fairfax is run by Prem Watsa who is looked upon as the Warren Buffet of Canada. Fairfax has sold off with the market in general reaching a high of $355 a share. Currently Fairfax is trading at book value of $252 a share with a market cap of 4.7 billion and sales near 8 billion. With over 6 billion in cash (which represents $333 per share) and a debt-to-equity ratio of only .35 this company is looking quite attractive. They have a high REO(return on equity) of 37% with a trailing P/E of 3.25 and pays 1.9% dividend. To boot they have a stock portfolio worth 3 billion.

The author suggest further research before investing.
The author is long FHH.

STOCKMANMARC

Missed Opportunity? and The Intelligent Investor

Stocks ended lower for the week with a global sell off. Once again the herd ran for the doors not wanting anything to do with stocks. Fear has set in and no telling when good times will return. But for the intelligent investor these are good times. This is when that simple saying comes into play "Buy Low and Sell High". Are we even at the low, who knows? Stocks have been routed across the board. Will we go lower??? Next week will show more of the puzzle.

The intelligent investor views this mess, crisis, or recession as an opportunity to by good companies at a good price. Where many investors are selling out, waiting for the storm to subside. I have got news for you, when the storm settles, chances are the market will be higher,then it will be to late.I hear plenty of people say I'll wait until we turn back up before jumping back end. That's when you miss the chance of making the big returns that Warren Buffet, Eddie Lampert, and Marty Whitman have made for themselves and their shareholders for years.

Your thoughts?


STOCKMANMARC

9 Ways to Make Money - Kiplinger.com

9 Ways to Make Money - Kiplinger.com

Thought this was an interesting article!

These 3 Stocks Have A Medicinal Touch

Another hedge for uncertain times is the health care industry. The industry has been beaten down with the rest of the market . Many of these companies are trading at low p/e multiples well below their norm. Three that come to mind are Sanofi-Aventis(SNY), Pfizer(PFE), and Merck(MRK). All three
are trading at p/e's under 13 with debt/equity ratio's under .25 and all sport dividends around 5% or better with Pfizer having a 7.5 % yield. You also have some added support by big name value investors buying in. Warren Buffets Berkshire Hathaway has bought into SNY and Bruce Berkowitzs Fairholme Capital has about 10% of their fund invested. Plus all three have growing free cash flow.

A 401K Issue

I have been ask the question several times recently, "Should I decrease the amount that I put into my 401k every month. Heck NO!!! Unless you need the money to live on, this is not a good move. Why? Number #1 this is money you are saving for retirement which means long term!#2 you are buying at a lower price now than you were a 1 month ago, 1 year ago, and probably 5 years ago. This means you are accumulating more shares at a lower price. #3 this money is tax deferred. and #4 your employer is probably matching your contributions up to a certain percentage which is like FREE money. In fact if you are not contributing the full 15% allowed you should consider bumping it up to the maximum allowed.Stay invested folks and stay the course.

STOCKMANMARC

Buy American, Buffett Says. He Is. - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

Buy American, Buffett Says. He Is. - Mergers, Acquisitions, Venture Capital, Hedge Funds -- DealBook - New York Times

Warren Buffett has stated that investing is much like hitting is in baseball, you step up to the plate and you get 3 strikes before you are out. However the difference is we as investors can wait as long as we want before swinging at the pitch. The pitches are much sweeter than they were 1 year, 2 years and maybe even 25 years ago. Many investors have been stung pretty bad not ever witnessing a market as the one we are in today. But now is when that pitcher is throwing allot of lob balls and is giving us a chance to knock it out of the park. I do not know where the bottom in this market is and when it will end but being an old ballplayer the bat is not sitting idle on these shoulders nor the GREATEST INVESTOR OF ALL TIME WARREN BUFFETT.

check out the link above

STOCKMANMARC

Dow Jones Industrial Average (1900 - Present Monthly) - StockCharts.com

Dow Jones Industrial Average (1900 - Present Monthly) - StockCharts.com

I thought this was interesting, a graph of the Dow Jones Industrial Average over the last 100+ years. As you can see the market continues to climb upwards while stumbling every so often. Only one decade during this period had a negative return (-49%) and that was the 1930's known as "The Great Depression". However from a low of 41.22 in 1932 to a high of 194.4 in 1937 the DOW ran 371%. That's why it is important staying invested for the long haul and not trying to time the market. Is this decade turning into a decade similar to the 1930's or possibly 1970's where we went sideways for a decade with a total return of 5%, who knows? So far we are down for the decade but I suspect over the next 10 to 20 years we will see that graph higher.

Your Thoughts

STOCKMANMARC

3 Mini Berkshire Hathaways???

For those of you interested in purchasing Berkshire Hathaway stock (BRKA) A shares and (BRKB) B shares which trade at $111500 and $3710 respectively, but do not want to pay the price, here are 3 companies that operate in the same fashion as Berkshire Hathaway hence the title. Markel (MKL), Fairfax (FFH), and Alleghany Corp. (Y) all 3 are insurance companies just like Berkshire. They take the insurance float and invest it in common stock or buy the whole company. All 3 have a portfolio of businesses ranging from railroads to pharmaceuticals with Markel having the most diversified portfolio. All have very competent management in place. All take a value approach to investing. These companies are not in the limelight like Apple(AAPL), Google(GOOG) or Research in Motion(RIMM), so you are probably not familiar but all 3 have prodded along allocating capital (insurance float) into new businesses. It has even been rumored in certain circles that Tom Gayner the Chief Investment Officer of Markel could be in line to run Berkshire. All 3 trade in the triple digits MKL $315, FFH $285, Y $275, but keep in mind folks the price does not have anything to do with the valuation of the underlying business.

I hope this article was some what informative.

STOCKMANMARC

A Jumpstart For Investing

Dear Investor whether you are a beginner or seasoned pro here are some things to look for when you want to go shopping for some stock.

1) First of all don't think of it as stock, think of it as a share in business.

2) Look at a business or industry you understand, for example if you are a shoe salesperson look
at shoe retailers and shoe manufacturers, not at technology companies.

3) Do not go on tips(to-insure-prompt-service), tips are what you give your waiter.

4) Think independently, do your own homework.

5) Never quit learning, how do you think Warren Buffet became one of the richest men in the
world? He sits in his office reading annual reports all day.

Will cover more on this later.

Mohawk Industries-A Positive Spin on A Negative Industry

The housing market has been in a downward cycle since topping out in 2005 and it is anyones guess when it will end. On a positive spin their have been plenty of housing related stocks that have been sold off hard. One in particular is Mohawk Industies Inc.$MHK. Mohawk is a leading producer and distributor of flooring worldwide that has a 125 year history. They sell to both residential and commercial markets which include ceramic tile, rugs, carpet, hardwood as well as laminate flooring. Through acquisitions and internal growth Mohawk has become one of the worlds largest floor covering suppliers and the country's leading recycler of plastic soda bottles(which become polyester carpeting). At the end of 2007 Mohawk and Shaw Industries(part of Warren Buffets Berkshire Hathaway conglomerate) controlled a combined 45% of the U.S. flooring market. Since only a handful of companies manufacture flooring this gives them high pricing power. Mohawks current price is $50 and trades at 5.5 times earnings with a Debt/Equity ratio .044, REO is 14% and a current book value of $73 share. Further management has a 19% stake and to boot Fairholme Capital and the Sequoia Fund have significant stakes which are two highly reguarded money management firms.

The author suggest current research before investing.

Stock Market News, Business News, Financial, Earnings, World Market News and Information - CNBC.com

Stock Market News, Business News, Financial, Earnings, World Market News and Information - CNBC.com

Buffett vs. Cramer Time to Buy or Sell: Tech Ticker, Yahoo! Finance

Buffett vs. Cramer Time to Buy or Sell: Tech Ticker, Yahoo! Finance: "Buffett vs. Cramer: Time to Buy or Sell?
Posted Oct 06, 2008 07:56pm EDT by Aaron Task in Investing, Newsmakers
Related: GE, GS, BRK-B, AAPL, UFS, MCF, CEG
Two of the most storied investors in modern finance are squaring off as the market gyrates.
On the one hand, legendary investor Warren Buffett has invested billions recently with investments in GE, Goldman Sachs and Constellation Energy, among others.
On the other hand, former hedge fund titan and market pundit Jim Cramer made a remarkable 'sell stocks if you need the money within the next 5 years' declaration on NBC's 'The Today Show' Monday morning.
The question for investors is which guru to follow? At the Value Investing Congress in New York Monday the answer was clear: Buffett. Value investors are licking their chops at opportunities to invest in quality stocks, including Buffett's Berkshire Hathaway, they believe are trading at incredibly attractive levels, as detailed in the accompanying video. (Meanwhile, Henry Blodget sees tremendous value in Apple.)
While it's fun to pair them off, the reality is Buffett might actually agree with Cramer about the next five years; it's unknown but pretty certain Buffett is thinking far beyond that time-frame. The Oracle of Omaha is the ultimate long-term investor, having famously describing his favorite holding period as 'forever.'"

5 Defensive Plays

Here are 5 stocks for uncertain times. Each company pays a dividend, has a PE ratio of 18 or less, a high return on equity, and debt/equity ratio of .52 or less. Four out of five companies have been in business for over 100 years.

P/E ROE Div% D/E ratio

Costco(COST) 18 14 1.2 0.25

Hormel(HRL) 14 16 2.3 0.21

Johnson&Johnson(JNJ) 13 26 3.3 0.30

Coca Cola(KO) 16 27 3.7 0.48

Proctor & Gamble(PG) 16 17 2.7 0.52

* prices as of 10/10/2008

Costco is a Big Box discounter that sells everything from, snack foods to home furnishings.
Hormel Foods sells meat products under various brand names such as SPAM, Dinty Moore, and Valley Fresh. Everyone knows Coke with its bright red cans and funny shaped bottles which serves up brands such as COKE, FANTA, and SPRITE. Proctor & Gamble is in the personal products industry and owns brand names such as Head & Shoulders, Cover Girl, and Gillette. While Johnson & Johnson has TYLENOL, BAND-AID, LISTERINE.


The author suggest further research before investing. The author does not hold positions in any of these companies except JNJ.

STOCKMANMARC

IS THERE BLOOD IN THE STREETS?

Is that the old adage? Yes, I would say their is blood in the streets, and is it ever red. This is when it's time to go fishing cause they're sure jumping. Warren Buffet once said "when the tide goes out you find out who has been swimming naked". That time has come, but have we've seen a bottom, who knows, not even Mr. Buffet. One thing is for sure folks we don't see times like this very often, maybe only every 35-70 years.

An Excerpt From The Intelligent Investor

• A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business with an underlying value that does not depend on its share price.
  
• The market is a pendulum that forever swings between unsustainable optimism (which makes stocks to expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists.
  
• The future value of every investment is a functune of its present price. The higher the price you pay, the lower your return will be.
  
• No matter how careful you are, the one risk no investor can ever eliminate is the risk of being wrong. only by insisting on what Graham called the "margin of safty" -never overpaying, no matter how exciting an investment seems to be -can you minimize your odds of error.
  
• The secret to your financial success is inside yourself. If you become a critical thinker who takes no Wall Street "fact" on faith, and you invest with patient confidence, you can take steady advantage of even the worst bear markets. By developing your disipline and courage, you can refuse to let other people's mood swings govern your financial destiny. In the end, how your investments behave is much less than how you behave.
  

a conversation with warren buffet

STOCKMANMARC: a conversation with warren buffet