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Edwin Schloss Brings Down Curtain on Broadway Involvement

Edwin Schloss was the son in the father and son duo of Walter and Edwin Schloss Associates -- one of the very best investment partnerships. Walter Schloss started the partnership in the 1950s when he left Ben Graham and Edwin came on board in the 1970s.

This Bloomberg piece describes Edwin's adventures investing in Broadway productions. It doesn't equal his success in picking stocks but you can detect the guy's passion for the theater:

Schloss grew up in New York City, attending plays and musicals. Although he studied playwriting at North Carolina School of the Arts, he was unsure about his own talent and joined the investing firm founded by his father, Walter Schloss.

Warren Buffett, the billionaire chief executive of Berkshire Hathaway Inc., is a former colleague of the elder Schloss, who's now 90. Some 30 years ago, Buffett privately advised Edwin Schloss against Broadway investing.

"He told me, `If the music is wonderful, with the best script in the world and the most gifted cast, just shut your eyes and say no.' I should've listened to him,'' Schloss recalled.

Philip Boroff pens a neat article. Be sure to read it.

US Funds Adding Foreign Holdings

According to USA Today, the average American stock mutual fund holds 7.4% of its assets in foreign stocks -- up from 4.2% a year ago. But some funds hold much more. The article reports Marty Whitman's Third Avenue Value Fund having 59% of its portfolio in foreign stocks.

Getting Kicked by Foot Locker

Talk about timing. A few days after buying Foot Locker Inc. (FL/US) the company forecasts its first loss in six years and the stock hits its lowest price in 3-1/2 years.

There is some good news.

The company has officially confirmed hiring Lehman Brothers to advise it on selling itself. Foot Locker said in a statement that it has received inquiries from buyout firms, but a company spokesperson declined further comment.

Getting kicked by the stock price so soon after buying the company is no fun. But it's way too early to call this a stomping. ;-)

"Six Keys to Investing Buffett Style"

US News & World Report runs this piece by Paul J. Lim on the Oracle of Omaha. I like that it quotes people like Jean-Marie Eveillard, David Winters, John Rogers and others on the Buffett approach.

Festival of Stocks

This week's Festival of Stocks is scheduled to be hosted by the Stock Market Prognosticator. I submitted my post about buying Foot Locker Inc. (FL/NYSE). But, as regular readers of the festival know, there will be lots more stuff worthy of your interest. So be sure to stop by and join the party.

"The Sovereign Individual"

Wise words from Bill Buckler, who writes The Privateer market letter in Queensland, Australia:

You're one, I'm another. Forget senior citizens, baby boomers, or the X generation. Forget about age, class, race, sex, demographic, size, or shape. What matters is what goes on inside your head. And that's absolutely unique. It has never been duplicated and never will be.

Good advice for anyone. And especially for those of us applying an investing discipline requiring us to -- by definition -- go against the crowd.

The Market Sell-Off

The S&P lost 4.9% for the week, the Dow shed 4.2%. I have no idea if it will get worse or not. As you know, top-down stuff isn't something I even try doing.

I do know that it has been a while since we've seen a 10% or 15% correction -- or even a 20% one. And if your brokerage statement got bloodied up this week, well, expect more of the same if the market sell-off reaches double digits.

It's no fun. Not for you. Not for me. But if you've invested decently over the past few years you're still up.

And, as I pointed out in my post Everybody Wants To Go To Heaven, But Nobody Wants To Die, these market drops can offer bargains. In the face of seeing current positions taking a (hopefully short-term) hit.

Ideally, I'd like to see the broader markets continue selling off -- very dramatically and for the very short term. Just long enough for us to scoop up the type of bargains that come around once every few years. Then once we've stocked up the markets start rising for a very long time.

But that, as Sam Spade said in the movie, is the stuff that dreams are made of. The stock market can just as easily give us nightmares if we're not careful. So my course of action is to continue investing with a long-term time horizon and let your patience be the virtue it should be.  Nobody knows what's coming in the short term.

Foot Locker

As stated in my previous post, I bought Foot Locker Inc. (FL/NYSE) on Wednesday and the shares ended the day at $20.87. Foot Locker is the largest special athletic footwear retailer in the US and one of the largest in the world.

The stock has suffered recently because of unfavorable prospects for the industry in general, and because of weak results for Foot Locker itself. I see these as near-to-intermediate term challenges and anyone investing in Foot Locker with a time frame up to 5 years will be rewarded.

Foot Locker has a market cap above $3 billion with more than 155 million shares outstanding. The dividend yield is more than 2%. It trades for less than 1.5 times book value and for less than two-thirds annual sales. The company has a strong balance sheet -- the current ratio is more than 3-to-1 and there’s no debt net of cash.

Management seems committed to increasing shareholder value. This could be accomplished through share repurchases, boosting the dividend or a takeover.  That last option made news earlier this month when the New York Post reported Foot Locker is seeking to sell itself. According to the story, Foot Locker has hired Lehman Brothers to advise it on a possible sale. Apollo Management LP is supposedly considering an offer of $29 a share, and billionaire Mike Ashley, owner of Sports Direct International in the UK, is reportedly interested.

Foot Locker, Apollo and Sports Direct refused comment, as would be expected. The stock rose to $22.71 the day the Post story ran, but has since fallen back.

I didn’t buy the stock anticipating a quick sale of the company. I think that’s possible. And that possibility along with the other options available to management due to the sterling balance sheet makes the long-term prospects for Foot Locker favorable.

The main risks with this stock pick involve the possibility of worsening economic conditions and declining consumer discretionary spending. I believe those would prove to be near-to-intermediate term events, yet I could always be wrong. So be sure to do your own due diligence before buying this or any stock.

UPDATE 11/6/07: More shares were bought today at $13.73. The average cost of this position is $18.93.

Buying Foot Locker

I bought Foot Locker Inc. (FL/NYSE) and the stock ended the day (Wednesday, 7/25) at $20.87. I'm swamped this week with non-blogging duties and will post my rationale for adding this new portfolio position in the next day or so. But I wanted to alert readers of the purchase.

New Order Placed

An order has been placed with my broker. It's to buy the stock of a footwear apparel retailer. As always, a limit order has been used. But if the purchase gets made, I'll post my rationale for establishing this new portfolio position.