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      Main | May 2005 »

      April 29, 2005

      Buying General Motors

      I purchased some General Motors Corporation (GM/NYSE) stock this week. In fact, GM closed Thursday at $26.75, which is the price I paid. In the interest of full disclosure, I should add that a while back I puchased some GM stock at $37 (before the Controlled Greed blog was launched). I think that GM was undervalued at $37, and even more so now.

      Of course, this could be a case of me "catching a falling knife." But I don't think so.

      CG believes that GM is worth more than twice its current stock price. For the quarter ended 3/31/05, the book value was $45.07 and the price/sales ratio was 0.08. And the dividend yield is over 5%.

      When will the market fully value GM? Who knows? But keep in mind that my holding period tends to run 3-5 years.

      GM stock was roughly $50 a year ago. The reason it has declined since then -- and dropped 26% in the first quarter of 2005 -- is because of lower sales and increased healthcare costs in North America. But CG takes the view that the company's value lies not in North America, but in GMAC and its international operations. Even with that, CEO Rick Wagoner (who purchased another 50,000 GM shares for his personal account a few weeks ago) and his management team are aggressively focusing on the challenges facing the company in North America.

      I do NOT think GM will end up filing for bankruptcy protection.

      To be sure, GM is a mediocre company in a cyclical and capital intensive business. Yet at current prices (and those even higher, I would argue) it looks extremely undervalued.

      April 27, 2005

      Welcome

      With all the talk about the blogging revolution, this is yet another one to join the party. It's called Controlled Greed (CG), it's about picking stocks from a value perspective.

      Right now, I'm holding a lot of cash. But the my portfolio will normally contain 20-25 positions. To give you an idea of the types of things I invest in, I currently hold Audiovox (VOXX/NASDAQ), MCI (MCIP/NASDAQ), and Korea Electric Power (KEP/NYSE). Please note that I am not currently recommending the purchasing of these -- those names are provided to give you a flavor of some of the things you can expect from this blog.

      Audiovox is a small cap electronics company. It doubled in price and I sold half my position some time ago. I continue holding it, for now, because it remains undervalued. MCI was purchased some months ago at $17 as a takeover candidate. Since then, of course, Verizon and Qwest have been in a bidding war for the company and I'm holding on for the ride. It's been trading in the mid-$20s. Korea Electric Power was purchased at $8.85 because the utility was cheap and somewhat of a special situation -- the South Korean government is in the process of privatizing it -- and is now trading in the $13-$14 range.

      But don't get the idea that every stock purchase works out. I've had my share of losers.

      For example, Friedman's (the jewelry store chain) was dirt cheap and profitable when its shares were bought. Then a combination of awful management and eroding finances saw the stock price plunge. When new management talked about bankruptcy I sold at a loss.

      Legendary investor Sir John Templeton said once that world class investors get 6 out of 10 ideas right over time. So take that to heart. I do.

      And I remind you of something said in this site's "About" page. That is, I personally own or am actively buying EVERY stock mentioned on CG. So if you follow this blog here's the deal: if I make money, you make money. If you lose, well, you at least have the satisfaction of knowing I feel your pain.

      Anyway, this is the beginning. There isn't too much to buy right now, but I will be talking about a few "buys" in the next few days. For now, welcome. And thanks for coming.

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        • All information posted on this web site has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Under no circumstances is this an offer to sell or a solicitation to buy securities discussed on this site. Past performance is no guarantee of future success. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. CONTROLLED GREED.com, its editor and/or related parties have positions in companies discussed. All data, information and opinions are subject to change without notice.