Sponsored Links

Support Controlled Greed.com Today


Your email address:

Powered by FeedBlitz


  • < ? Market Blogs £ >

August 2007

Sun Mon Tue Wed Thu Fri Sat
      1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31  

Stock Market Blogs

  • 10Q Detective
  • AAO Weblog
  • Alchemy Of Trading
  • AnumatiNews
  • Bankstocks.com
  • Between the Hedges
  • Big Picture
  • Bill Cara
  • Bill Rempel, a.k.a. NO DooDahs!
  • Buffett Blog
  • Buffetteer.com
  • Burnham's Beat
  • CANSLIM Investing
  • Capital Chronicle
  • Cheap Stocks
  • China Net Investor
  • China Stock Blog
  • CXOAG Investing Notes
  • Fat Pitch Financials
  • Footnoted.org
  • Gannon On Investing
  • Graham Investor
  • Herb Greenberg
  • Infectious Greed
  • InvestorGeeks
  • Jeff Matthews Is Not Making This Up
  • Kirk Report
  • Lloyd's Investment Blog
  • MaoXian
  • ModernGraham.com
  • Monty's Bluff
  • Online Trading
  • Peridot Capitalist
  • Permanent Value
  • PhatInvestor
  • Random Roger's Big Picture
  • Real Returns
  • Roberto's NasdaqTrader
  • Rocks and Boulders
  • Rule #1 Blog: Phil Town on Investing
  • Seeking Alpha
  • Stock Picks Bob's Advice
  • StockBlogs.com
  • Stockcoach's Corner
  • TaylorTree
  • Technically Speaking
  • The Stalwart
  • Ticker Sense
  • Trader Mike
  • Trading Diary
  • VInvesting.com
  • Vitaliy’s Contrarian Edge
  • Wealthcast Blog

Additional Blogs

  • Capital Spectator
  • Chicago Boyz
  • DealBreaker.com
  • EconoPundit
  • EllisBlog
  • Free Money Finance
  • Howard Lindzon
  • Mises Economics Blog
  • Samuel Brittan
  • StockDigg
  • Techdirt
  • TheCorporateCounsel.net
  • Under The Counter
  • What A World!

Financial Media

  • Australian Financial Review
  • Barron's
  • Bloomberg
  • Breakingviews
  • Economist
  • Financial Times
  • Forbes
  • Google Finance
  • Grant's Interest Rate Observer
  • International Herald Tribune
  • Kiplinger's Personal Finance
  • Privateer
  • Reuters
  • Schiff's Insurance Observer
  • Wall Street Journal
  • Yahoo! Finance

Currently Reading


  • Welcom to Hulian -
Powered by TypePad

« August 2006 | Main | October 2006 »

September 30, 2006

Festival of Stocks Reminder

This week's edition of the Festival of Stocks is being hosted by My 1st Million At 33. This will be the fourth edition of this Festival, which always has great stuff of interest to investors of individual stocks. So be sure to swing by My 1st Million At 33 on Monday and check things out.

Scaling Back Comcast

I reduced my Comcast Corp. (CMCSK/NASDAQ) holding by 25% on Friday. I sold at $36.42 and the Special Class A shares closed the day at $36.81.

I still like the company and its management. The stock has gained 37.7% since being recommended here last November at $26.73 and I simply want to take some chips off the table.

September 29, 2006

Kerkorian's Move to add up to 12 Million GM Shares

That means Kirk Kerkorian would control as much as 12% of General Motors (GM/NYSE), making him GM's second-largest shareholder. He's already among the top five.

John D. Stoll and Monica Langley report Kerkorian's latest move in this Wall Street Journal report:

Mr. Kerkorian's plans could face a hitch. To increase his stake, the Las Vegas investor -- who owns his GM shares through his investment company, Tracinda Corp. -- could use the auto maker's blessing. GM's backing would make it easier for him to obtain the regulatory approvals he would need to exceed a 10% stake in the company. Because GM's General Motors Acceptance Corp. unit has certain banking and insurance subsidiaries, exceeding the 10% threshold would require the approval of two state insurance agencies, the Office of Thrift Supervision and the Federal Deposit Insurance Corp.

On the face of it, this looks like Kerkorian adding clout to his push for the GM-Renault-Nissan alliance.

You know I'm neutral about the alliance. If it happens and GM's stock price skyrockets, great. If it doesn't happen and GM's price still increases, great.

My gut has been telling me the alliance won't happen. One reason is that news reports I've read indicate the benefits would be greater for Renault-Nissan than for GM. But you know I'm not a party to the negotiations.

You also know I am a GM shareholder. I expect to continue holding my stake for a while yet, because I think the position will enjoy further growth.

Patience continues to be a virtue. And in the meantime, I'll gladly bide my time by reading excellent articles like the one by Stoll and Langley in the Journal.

September 28, 2006

3i Group Realisations Better Than Expected

Portfolio holding 3i Group (III/LN), Europe's biggest listed private equity firm, said its realisation proceeds, excluding its fund portfolio, totalled 627 million pounds in the five months to August 31, above its expectations. You can read about it in this Reuters report.

3i's realisation proceeds are the money it makes from the sale, refinancing or flotation of businesses in which it has a stake.

More from Reuters:

"Realisations continue to benefit from a favourable market environment and have been stronger than anticipated at the time of our annual results announcement in May," Chief Executive Philip Yea said in a statement on Thursday.

"The overall performance of the group for the six months to September 30, 2006 is anticipated to be in line with its return objectives," the firm added in trading update ahead of first-half results on November 9.

3i, which has investments in more than 1,000 companies, said it invested 568 million pounds in the five months to August 31, down from 578 million in the same period last year.

You know I'm a big fan of this company and its management. They're shareholder-friendly folks for sure. You can read my original rationale for buying the stock here.

Seth Klarman on Deep Value Investing

Guru Focus summarizes Seth Klarman's value approach here. Note the author of the article states upfront:

This digest of Seth A. Klarman’s investment strategies and practices is mainly based on a guest lecture by superinvestor Seth Klarman at Columbia Business School and his book, Margin of Safety. Many sections here are not Klarman’s exact words, but our digest of the distilled essence of his investment methods.

That said, it's good stuff.

You'll find a link to Klarman's Margin of Safety (with its outrageous price) among the books in the menu at the lower right of this page.

And in the "for what it's worth department," I noticed Baupost was a shareholder of Walter Industries when researching the company.

September 27, 2006

Buying Walter Industries

I bought stock in Walter Industries (WLT/NYSE) on Tuesday. The shares closed the day at $43.21.

I’ve been mulling over buying Walter Industries for some time. In fact, you might remember that when I purchased Mueller Water Products (MWA/NYSE) in July a reader commented that Walter was a better buy. I replied that I’d been looking at the company and might eventually add it.

And now I have.

Walter Industries market capitalization is more than $1.9 billion, of which over $1.2 billion is Walter’s stake in Mueller Water Products. That leaves Walter’s coal and home building businesses valued by the market at just $673 million -- ridiculously low.

Walter Industries pays a small dividend and its price-sales ratio is 0.59. The company plans on spinning off its remaining Mueller shares later this year, and may eventually spin off its home building and financing segments as well.

Walter’s traded as high as $70 back in April. The shares have fallen back to the low-to-mid $40s after hedge funds began dumping the stock when the coal business failed to perform up to expectations this year. Hedge funds are largely “fast money” outfits and I take a longer view.

The company’s coal business not performing as well as thought is a short-term negative. One causing the shares to decline and thereby giving long-term investors the opportunity to buy a fine company that’s undeniably cheap on a sum-of-the-parts basis.

If you’re a regular reader of value investing sites, you’re probably familiar with the Walter Industries story. I’ve decided to jump in and become a shareholder (I probably should have been one for a while now, but there you go). Just be sure to do your own research before doing any buying of your own.

September 26, 2006

New Order Placed

I've placed an order to buy stock in a diversified company that's cheap on a sum-of-the-parts basis. And that should benefit from infrastructure spending in America over the coming years.

As always, a limit order is being used. I'll post my rationale for purchasing the stock later today or tonight -- assuming the order gets filled.

September 25, 2006

Taking More Profits in Deckers Outdoor

I sold some of my position in Deckers Outdoor Corporation (DECK/NASDAQ) early Monday at $46.80. The stock closed the day at $48.09.

This is the second time I've taken profits in this company. I first bought Deckers in October 2005 at $20.92 per share. Then I sold part of my stake in December 2005 at $30.08.

With this last sale, I've gotten my original capital out of the investment and Deckers Outdoor becomes a free ride. It remains a full position in the portfolio -- accounting for more than 4% of total assets.

I still like the company and its management. But its stock isn't the bargain it was in the Fall of last year.

ArmorGroup Wins Bomb Clearing Contract in Lebanon

On the heels of my last post, comes news this afternoon that ArmorGroup International (ARG/LN or AMGPF/OTC) has won a $5.6 million contract to clear a battle area in south Lebanon of unexploded bombs and landmines.

This is good news on two fronts:

First, this demonstrates that the company continues making progress in diversifying its business away from Iraq.

And second, this shows the company is making some progress in diversifying its business operations. The vast majority of ArmorGroup's revenues stem from its protective security services. Its other two segments are security training and weapons reduction and mine clearance, both of which have opportunities for growth.

We should note that the bulk of the $5.6 million revenues will only be seen in the firm's accounts next year.

ArmorGroup Continues Diversifying Away from Iraq

Portfolio holding ArmorGroup International (ARG/LN or AMGPF/OTC) released results for the first six months of the year last week. It was a mixed bag, pretty much what was expected.

The bad news is that a lucrative Iraq security training contract has been completed and that rising administrative costs have reduced operating profits, even while sales rose by 30%.

The good news is that the company reports halting the decline in profit margins in Iraq despite the fierce competition among Private Security Companies in the country.

More good news is that sales of ArmorGroup’s protective security services rose sharply in Iraq, Afghanistan and Nigeria -- where the company works for oil companies. ArmorGroup’s solid experience in working for oil companies leaves it well-placed to grow business in the sector. And the same may prove true for other extractive industries as well.

Plus, non-Iraq business now accounts for 48% of ArmorGroup revenues, up from 40% last year.

Yes, there are still challenges facing the company. But it has an excellent reputation, works for high end clients, and has a global footprint. All that, and the market capitalization is only about $58 million.

I’d be delighted to see ArmorGroup continue growing its business while reducing costs, making strategic acquisitions, and see its share price rise accordingly. Yet its market cap means it could easily get bought by a bigger PSC -- perhaps an American one.

That's not a prediction. Just a very distinct possibility.

You can read my rationale for buying this stock here.

September 24, 2006

Festival of Stocks Reminder

This week's installment of the Festival of Stocks is being hosted by Value Investing, and a Few Cigar Butts. The fun is scheduled to begin Monday, so make a note to swing by and check it out.

As you know, the Festival of Stocks is a new blog carnival that highlights bloggers' best recent posts on stock market related topics. Many blogs discuss smaller and lesser known stocks in great detail. This Festival provides a single site where the best such posts -- plus other stock market related pieces -- are collected and presented to readers who wouldn't otherwise have the chance to read them.

September 22, 2006

3i Group Powers Up

Portfolio holding 3i Group (III/LN) has three gas and power industry investments in its pipeline and hopes to confirm at least one in the coming months, according to a report in the Financial Times:

The team's areas of interest include bio-fuel producers, which is enjoying a fast-expanding international market being fed by high oil and gas prices and environmental concerns. European wind farm development is also a potential area of further investment.

A private equity/venture capital firm, 3i made its first move into the power sector in April. That's when it bought the wind farm construction and maintenance division of Gamesa of Spain. 3i set up an infrastructure business last year and has the flexibility to invest in either upfront development or project financing of gas and power projects.

Mike Sibson, head of 3i's oil and gas team, is telling energy companies seeking investment that new business models are needed to address changes to the structure of the industry:

Key among these are the increasing financial strength and technological competence of national oil companies, and the increasing importance of Asian markets.

"We will need to work with businesses which can operate in countries where reserves are," said Mr Sibson. That means service companies will have to be able to deal direct with national oil companies rather than throughintermediary international oil corporations.

About 90 per cent of global oil reserves and 70 per cent of gas reserves are controlled by national oil companies.


Increasing demand for power in south-east Asia means that gas reserves left undeveloped in the 1980s are now attractive and last year 3i invested £11m in London-based Salamander that is building up an exploration and production portfolio in the region.

Interestingly, 3i is not looking at any energy investment in China. But Sibson believes that opportunities will arise for both funding Chinese service firms and assisting European companies in linking up with Chinese companies as they acquire oil assets abroad.

Anthony Bolton, Again

In July, I posted about a neat piece in The Spectator on famed British fund manager Anthony Bolton.

He's spent the past 27 years managing the UK Special Situations fund and will be retiring next year.

Bolton pens this column in London's Daily Telegraph reflecting on lessons learned over the past quarter century:

Like much in life, investment is a cyclical business. If I cast my mind back to the start of my career in the 1970s, I see many similarities with today's investment climate. Then, as now, the London stock market was playing host to a succession of overseas natural resources companies amid a boom in commodity prices. Whereas 30 years ago those companies hailed from South Africa, today they are more likely to come from parts of the former Soviet empire.

You and I can agree or disagree. But I think this is a terrific piece.

Even though Bolton writes from the perspective of someone living in the UK -- he's writing for a British audience in a British newspaper -- his words should strike a chord in investors everywhere.

So, yeah, I encourage you to read it all. And note his ending:

Yes, investment is a cyclical business – this latest commodities boom will, sooner or later, burst. But the globalisation trend is irreversible. Were I 30 years younger and asked to launch a new equity fund today, then I would not confine the portfolio exclusively to UK shares: a more international outlook is more sensible. We are all global now and should embrace the opportunities the new era brings.

NipponKoa Insurance

This piece from the Motley Fool came across my desk today. It examines the three stock pickers managing the Longleaf Partners International Fund -- Mason Hawkins, Staley Cates and Andrew McDermott.

The fund's top 10 holdings are:

NipponKoa Insurance 8.2%
Dell 7.9%
Shaw Communications 6.4%
Philips Electronics 6.3%
Renault 5.7%
Olympus 5.7%
Millea 5.2%
Cheung Kong 4.9%
Cemex 4.9%
Vivendi 4.9%

The only one of those I own is NipponKoa Insurance. Longtime readers of Controlled Greed.com know that the "Current Holdings" menu at the right only lists stocks I have either bought or added to since launching this blog in April 2005.

The stocks in the "Current Holdings" menu make up the vast majority of my portfolio. There are only three stocks I hold NOT in that menu -- NipponKoa Insurance, Korea Electric Power and Audiovox. Some investors consider the last two bargains now. They may be. But I've owned them for several years and sold half of each position as the stock prices appreciated.

Put simply, I cannot recommend in good conscious that you buy something I've been selling. Due your own due diligence and make up your own mind.

Back to NipponKoa. I bought Koa Fire & Marine Insurance in 1998. It later merged with Nippon Fire & Marine Insurance to form NipponKoa. I love the company. I admire its management.

And I expect to continue holding it for good long while yet.

But I haven't been adding to my position in the company. If I do, you'll read about it here. And then it will take its place in the "Current Holdings" menu.

Report: GM Alliance Talks "Bog Down"

The Detroit News published an exclusive report Thursday that talks between General Motors (GM/NYSE) and Nissan-Renault have bogged down. The thrust of Bill Vlasic and Christine Tierney's reporting is that GM has been dragging its feet since alliance talks began on August 28.

Moreover, teams from Nissan and Renault reportedly are frustrated. They want to explore an alliance that would be wide ranging in scope while the GM team wants the focus to be much narrower.

Many think that GM CEO Rick Wagoner doesn't want any alliance -- though Vlasic and Tierney quote an unamed GM insider disputing that.

One factor that The Detroit News piece didn't mention -- but one you've read here repeatedly -- was mentioned in The Wall Street Journal's article on this:

But if Mr. Wagoner's management team concludes there is little benefit to be had, that may not be the final word. Investor Kirk Kerkorian, who owns a 9.9% stake in the Detroit-based auto maker through his Tracinda Corp. investment vehicle, had urged the GM board to do its own examination of the merits, independent of the company's management. Tracinda could renew that demand and could get support from other shareholders.

Read that last sentence again.

Regular readers of this blog know that GM's top six shareholders own the majority of company stock.

One of those shareholders is Southeastern Asset Management, managers of the Longleaf Partners funds in Memphis, Tennessee. GM is held in the flagship Longleaf Partners Fund, while Renault is in the Longleaf Partners Internatial Fund.

None of these folks are commenting in public. But it sure would be fun to know what they're saying behind closed doors.

September 21, 2006

I've Never Shorted a Stock in My Life

And I doubt I ever will. It's a skill I don't possess.

You see, even if I was right in determining a stock to be overvalued -- there's no reason it couldn't become even more overvalued.

I remember reading an interview with Walter Schloss years ago. He said a friend came to him and said, in effect, "Walter, tell me which stocks are overvalued so I can short them." And Schloss answered that he didn't really want that, that shorting was a different game.

Some folks know how to play that game -- and bless 'em. I hope they make a mint.

Except when it comes to Fairfax Financial Holdings (FFH/NYSE), that is. ;-)

But if shorting happens to be your cup of tea, you might be interested to know that Bloomberg columnist John Dorfman is holding his annual "Short Sellers Don't Have Horns" contest.

Comcast Reaches One Million Digital Voice Customers

As you know, I first recommended Comcast Corp. (CMCSK/NASDAQ) last November. Key to my rationale was that the nation's largest basic cable firm would be adding subscribers to it menu of high-speed internet, digital phone service and other products.

Comcast's strategy is working. Wednesday the company announced it has added one million digital phone customers in less than two years.

This news comes on the heels of recently announcing it had become the first broadband provider to cross the 10 million high-speed internet customer threshold.

All this, and CEO Brian Roberts has been aggressively buying back stock.

This holding has been in the portfolio less than a year. And perhaps it's premature to reach conclusions.

But, gosh, it sure seems that Comcast's management one shareholder-friendly outfit.

September 19, 2006

Emerging Markets Heavyweight Goes Underweight in India

Templeton's Mark Mobius was interviewed Monday by CNBC in India:

According to Mobius, oil prices are likely to come down to $40 a barrel in the next three or four years. Mobius believes that the valuations of Indian large caps look slightly expensive though he is not in a hurry to exit the Indian market. He also adds that Indian oil companies look a lot more attractive since they face the price control problem.

"In the case of India, we've got lower oil prices and Indian oil companies look a lot more attractive because they have the price control problem and a lower price of crude oil is better for them. And of course, in India, prominent oil companies like IOC are looking very good with prices coming down," he said.

Another interesting paragaph:

"We are looking at mid caps in India and also small caps. We have a new small cap fund being launched in November, so we'll be taking a look at those companies in India. There could be a better value in small caps and mid caps in India."

Mobius says he's underweight India in his BRIC Fund. Most of that fund is invested in Brazil, followed by China and Russia, with India bringing up the rear.

I don't do a lot of stock-buying in the emerging markets. But regular readers know I enjoy following his thoughts because he applies a value approach in a sector largely flush with go-go money.

Will Koizumi's Exit KO Japan's Economy?

Bloomberg columnist William Pesek thinks it might when Shinzo Abe replaces Junichiro Koizumi as Japanese prime minister this week.

He worries that the country may lapse back to its old ways under Abe. This despite the fact that Abe is Koizumi's hand-picked successor:

There also are worrying signs that Japan Inc. is making a comeback. One is how the Japanese establishment circled the wagons to halt recent hostile takeover attempts. It has prompted a renewal of the practice of companies buying each other's shares as a protective measure.

Over the past 12 months, cross shareholdings have been increasing, according to Jesper Koll, chief Japan economist for Merrill Lynch & Co. "It's the corporate culture. Why are we getting Abe after Koizumi? It's back to the old ways. You're going back toward more cross shareholdings and lifetime employment at a blue-chip company.'"

I think Pesek's concerns are valid. And with Japan's powerful LDP party the dominant player in the nation's politics, there was always the concern that "Japan Inc." would creep back.

In fact, the pace of corporate governance in the Land of the Rising Sun has been frustratingly slow. Especially for those of us who started buying Japanese stocks in the 1990s. What's more, even with the recent improvement in Japan's corporate governance, investing in the country remains a company-by-company thing.

But I also think that change in Japan has been much more of a "bottom-up" phenomenon than many realize. Many of the boardroom battles taking place in the country involve Japanese shareholders as well as foreigners.

So, for the moment at least, I'll give Mr. Abe the benefit of the doubt.

And a tip of the hat to Mr. Pesek for a fine column.

September 18, 2006

Forbes Flint: Detroit on the Brink

Another Forbes column of note is from Jerry Flint -- who notes the continuing reliance on pickups and SUVs by Detroit automakers.

Yes, I'm still maintaining my position in General Motors (GM/NYSE). But you know I respect Flint immensely -- the guy has been covering Detroit since 1958. And his thoughts are always worth reading, even when they cause discomfort.

Some points from his latest (but take a few moments and reading the whole thing):

  • At GM, after all these years, the management hasn't been able to turn around the company. The improvements being made, and they are being made, could be washed away by a downturn.
  • I'm pretty sure that the proposed GM/Renault/Nissan confederation will not happen. I don't know about the possibility that Ford might team up with Nissan, especially with a new Ford chief executive and the problem of agreeing on whose name goes first in a combined company.
  • Detroit's luck has run out. A growing car market has covered up the failures of the past decade. Those days in all likelihood are gone for now. Saving the American industry will take dynamic leadership, energy, talent and a fighting spirit. Sure it's possible. We saw it once, when Lee Iacocca saved Chrysler.
  • Can today's managers at GM, Ford and Chrysler save their companies? I don't know the answer, but I keep thinking of the words of Oliver Cromwell to the Rump Parliament: "You have sat here too long for any good you can do. Depart, I say, and let us have done with you. In the name of God, go."

Jim Grant on Chinese Banks

In his latest Forbes column, James Grant of Grant's Interest Rate Observer observes banking in the Middle Kingdom:

The art of lending, a little like the art of piano playing, is practiced by many but mastered by few. The banking business is hard enough in a free economy. In China, where facts and evidence are routinely twisted to suit the needs of the Communist Party, the lot of a lender is treacherous indeed. "Due to limitations in the availability of information and the developing infrastructure of [the People's Republic]," said the Bank of China's prospectus, "nationwide credit information databases are generally undeveloped. In addition, financial statement disclosure and audit standards for corporate borrowers in the PRC may not be comparable to those in more developed countries."


The Texas savings and loan debacle of the late 1980s and the New York City banking crisis of the early 1990s each occurred in a market economy organized under the rule of law. How much worse would things have been in a one-party state? The Bank of China is listed on the Hong Kong exchange, where it trades at the very fancy multiple of 25 times trailing net income. But this isn't to say there is no way to invest in the future of Chinese banking.

Grant names HSBC and Shenzen's China Merchants Bank -- soon to list in Hong Kong -- as potential investments.

September 17, 2006

Kudlow on at 8pm This Week

CNBC in the US is making a switch to its lineup this week. Larry Kudlow's "Kudlow & Co." is moving from 5pm to 8pm ET. "Fast Money," a show hosted by Dylan Ratigan that normally airs Wednesdays at 8pm, will be on every day this week at 5pm.

I don't know if this move is going to be permanent or not. But chances are I'll be able to catch most of Kudlow's shows in this later time slot.

My schedule has only allowed me to see his show about once a week, if that. I've unfortunately NEVER been able to catch Kudlow when Barry Ritholtz appears as a panelist.

Yeah, I know Larry Kudlow has been tagged a perma-bull. And my impression is he deserves the label.

Perhaps worse, from my viewpoint, is that the last few times I've caught "Kudlow & Co." it was largely just another cable news talk show focusing on politics.

Maybe it's just a matter of the (admittedly) very few shows I've happened to watch. Or maybe it's because we're coming up on the mid-term elections. Either way, I hope Kudlow's lined up some decent guests from the investing world since he's in prime time this week.

That makes sense from a counter-programming strategy. Let's face it, the dumbest thing CNBC could do is make "Kudlow & Co." more of a political show, with a heavy dose of crime and tabloid stories thrown in. Bill O'Reilly of Fox News is on at 8pm and he owns the time slot.

No way CNBC is going to make inroads with Larry Kudlow -- or anyone else.

So let's see what's offered this week.

Festival of Stocks Reminder

On Monday, Gannon On Investing is hosting the second installment of the Festival of Stocks.

The Festival of Stocks is a new blog carnival focused on highlighting bloggers' best recent posts on stock market related topics. Many blogs discuss smaller and lesser known stocks in great detail. This Festival provides a single site where the best such posts -- along with other stock market related pieces -- are collected and presented to readers who wouldn't otherwise have had the chance to read them.

So be sure to visit Gannon On Investing for this week's edition.

September 15, 2006

Currency Hedging

Some managers like Mason Hawkins and Peter Cundill hedge their foreign holdings so that currency fluctuations won't impact portfolio performance -- for good or bad.

Like the Templeton folks, I don't hedge.

For one thing, it's not economical for me to do so. For another, studies show currency fluctuations even out over time.

This piece from the Toronto Star offers a good overview on currency hedging. Remember this is a Canadian publication and it considers the topic from a Canadian point of view.

Interestingly, some are for and others are against hedging. Then some think the matter of hedging itself is a matter of timing:

Gordon Pape, a financial author and commentator, thinks the time for hedging was three years ago and there's no point now.

"I suggest that investors should be very leery of this new flavour of the month," he said in a recent newsletter. "If the Canadian dollar drops against the U.S. dollar, hedging will erode any gains you make in New York or compound any losses."As for a currency-neutral fund, "Today, it seems like a case of applying a bandage to a wound that's already healed."

September 14, 2006

DirecTV, News Corp., Liberty Media, Rupert Murdoch and John Malone

CNBC broke the news today (Thursday) that News Corp. may swap its controlling interest in The DirecTV Group (DTV/NYSE) to Liberty Media in exchange for Liberty's stake in News Corp.

Regular readers of this blog and regular followers of Rupert Murdoch and John Malone have known for a good long while that the two have been looking to do a deal.

I always liked the idea of Murdoch's people running DirecTV because they know the satellite broadcasting business. But I also like him as a business operator and I don't see him gaining control in any way a negative.

In fact, Malone wanted DirecTV when it was being sold off by then-controlling shareholder General Motors -- but didn't see any point in getting into a bidding war with Murdoch.

My hunch is that DirecTV will continue increasing in value and will continue owning it.

I also hold both Liberty tracking stocks -- Liberty Capital (LCAPA/NASDAQ) and Liberty Interactive (LINTA/NASDAQ) -- resulting from my investment in Liberty Media. I consider them to be single portfolio position and will continue holding them as well.

If this deal gets done, it's sure to catapult Malone back to a position of prominence in the American media industry, several years after he sold cable giant Tele-Communications Inc. That might mean good things for Liberty shareholders.

CORRECTION 9/15/06 9:15 PM: The second sentence in the third paragraph should read: "But I also like Malone as a business operator and I don't see him gaining control in any way a negative." I noticed some reports today saying Wall Street wasn't excited over the news that Murdoch might be eager to get out of the satellite broadcasting business in the US. I still think Malone running the business is in no way a negative. That could change. But it may also be a case of the price Rupert has to pay to get Big John out of his hair.

September 13, 2006

Chernin: Fox News Channel set to Launch in 2007

It's now a matter of when and not if, according to this report from the MediaDailyNews. It quotes News Corp. President and COO Peter Chernin as saying the much-anticipated Fox Business Channel is on schedule to launch in early 2007 in 30 million homes:

"We just want to make sure we have all the distribution deals locked up...and we think we're getting pretty close to doing that," Chernin said yesterday at an investors' conference.

Then this:

Regarding the Fox Business Channel, about half of its initial 30 million homes are likely to be customers with DirecTV, the News Corp.-owned DBS service. News Corp. has a head start in launching new cable channels, since it can instantly give a new outlet distribution in 15.5 million DirecTV homes.

Since News Corp. acquired DirecTV three years ago, Chernin has said the company intends to use it to launch one new cable channel a year. So far, the launches have included the Fox Reality channel and Fuel. In addition to the business network, DirecTV will serve as a springboard next year for the launch of the Big Ten Channel, a joint venture between Fox and the vaunted athletic conference.

Since the news channel is all but launched, I'm wondering two things:

First, will Fox keep the programming slant the all-news channel forces "Your World" and its weekend business shows to follow on the new channel? I'm talking about how they bend over backwards to make general news topics fit business news -- and even stock picks by panelists. And many weekdays, "Your World" barely has one pure business/investing segment.

This isn't a slam at Fox. CNN dropped Lou Dobb's "MoneyLine" program several years ago and has him hosting a conventional news-talk cable program. Neil Cavuto is an excellent interviewer and, from what I understand, is one of the few talking heads who actually writes most of his stuff. I just hope that he gets to do more business and investing news on any all-news channel.

The second thing I'll be watching is to see if the Fox Business Channel leads Rupert Murdoch into bidding for Dow Jones or the Financial Times. Either would be a great content provider for any 24-hour business channel. (Yes, I know Dow Jones currently has an agreement to provide content to CNBC.)

Wiener Thinks Takefuji Could be a Winner

I'm not that familiar with Barnaby Wiener or the fund he manages -- the MFS International Value Fund.

But according to this MarketWatch article, the fund gained 17.8% for the 12 months ending on September 11. And it has averaged 24.5% annually over the past three years. The article doesn't give figures for a longer stretch of time, but Wiener's short-term performance is certainly top-notch.

One stock he likes is none other than Takefuji Corp. (8564/JP or TAKAF/OTC):

The Japanese consumer loan firm's stock has been a poor performer of late, hammered by regulatory pressures. Wiener describes Takefuji as a classic contrarian value stock, with both an "extremely attractive" valuation and a lot of bad news associated with it.

The recent death of the company's founder, Yasuo Takei, a major shareholder and Japan's richest man, boosted the shares. In 2004, Takei was convicted of ordering illegal wiretaps on journalists who wrote negative stories about the company.

"Although the founder was no longer actually running the company, I think that he was a major influence behind the scenes," Wiener said.

Takei's death will probably make it easier for the company to be taken over, or for its management to do something positive with the balance sheet, such as return some of the excess capital to shareholders, he added.

"Everyone thinks that their business is basically toast, and I think it's quite possible that we find it's not," Wiener said. Takefuji shares lost 37 cents in U.S. trading on Sept. 11 to $53.85.

I see that the consumer finance stocks have traded down a bit the last couple of days. The headwinds are still blowing against Takefuji, but we're early with this holding.

Let's see how it looks further down the road.

Dorfman Looks Abroad

You know I'm not shy about buying foreign (non-US) stocks. Though my hunch is that I'll always own mostly US companies.

But it is slowly -- too slowly it often seems -- getting easier for US-based investors to buy stock in foreign companies. Not as easy as I'd like it, but much simpler than compared to, say, 15 years ago.

Professional money manager John Dorfman considers foreign stock investing in his latest Bloomberg column. I don't own any of the names mentioned. I think one of them, Nam Tai Electronics of Hong Kong, has been a favorite of Kahn Brothers.

I believe every stock Dorfman discusses has an ADR trading in the US. Most likely the Bloomberg editors wanted it that way.

To find out how I buy shares of companies trading outside the States, see "How to Buy Stocks Listed on Foreign Exchanges" -- one of this site's more popular posts.

September 12, 2006

Cavuto on Fox Biz Channel: "We're Closer To It"

Courtesy of TVNewser comes this AP report on Fox News hiring former-CNBC personality Alexis Glick as number two business news executive behind Neil Cavuto:

Glick will help direct the network's business coverage and appear on-air if Fox owner News Corp. decides to start the business channel. That new channel has been talked about for years, but Fox chief Roger Ailes has said he won't pull the trigger unless he gets enough distribution on cable and satellite systems.

"We're not quite at that stage when we can do that, but we're close to it," Cavuto said."I'd be foolish, as the guy who does business news, not to prepare ourselves for the possibility."

Cavuto said he admired Glick because "she not only talks the talk, she has walked the walk."

Before getting into television, Glick, 34, was an executive director at Morgan Stanley, where she led New York Stock Exchange floor operations. She switched gears and became a reporter at the stock exchange for CNBC's "Squawk Box."

Media Holdings Looking Good

This CNNMoney.com article discusses two media stocks I own, Comcast (CMCSK/NASDAQ) and CBS (CBS/NYSE). It reminds me that for the most part, the media-related portion of the portfolio has been performing well lately.

Here's what the piece says about Comcast:

Speaking at Merrill Lynch's Media and Entertainment Conference in Pasadena, Calif., John Alchin, the co-chief financial officer of cable giant Comcast, said the company expects to see strong revenue growth in the latter half of the year as Comcast continues to sign up customers for the so-called "triple play" of cable, phone and Internet access products.

"Not only are we providing the best products and best value proposition to customers but in the course of doing this, it is driving financial results," Alchin said. Along those lines, Wall Street currently expects Comcast to report an 11 percent increase in third-quarter sales from a year ago and 12 percent jump in the fourth quarter.

Alchin said that Comcast would invest more in new technology, including its joint venture with wireless firm Sprint Nextel, as the company hopes to fend off competition for subscribers from phone companies AT&T and Verizon, which are both rolling out video offerings for their customers. He added that Comcast would probably not make any major acquisitions though.

Comcast has been one of the better performing media stocks this year. Its shares have soared nearly 35 percent in 2006 as the company has racked up strong subscriber gains for newer products such as digital phone and high-speed Internet services.

Comcast was recommended here last November at $26.73. The Special Class A shares owned closed Tuesday at $34.87.

Here's what the piece says about CBS:

CBS' chief executive officer Leslie Moonves said it was encouraging to see the ratings increases at its CBS Evening News telecast since Katie Couric took over last week and that he expected more healthy results from its primetime lineup this season as well as from its thriving outdoor advertising business.

"No one can accuse us of being off the radar," said Moonves. "We are alive and well and thriving on every front."

Shares of CBS, which split from former parent Viacom in January, are up 17 percent this year thanks to strong ratings at the CBS TV network. Wall Street has also applauded the company's decision to sell some underperforming radio stations and its theme park business.

Despite this, Moonves said at the conference that he felt CBS's stock was still undervalued. In addition, he stressed that CBS would be a big player in "new media" going forward and that the company should be able to generate strong sales and profits from ads tied to its online and mobile shows as well as from video-on-demand fees.

"No mater where the programs go, the programs are ours and we're going to get paid for them," he said.

CBS was recommended here last January at $25.61. The Class B shares owned closed Tuesday at $29.35.

One company not mentioned in the CNNMoney.com article is The DirecTV Group (DTV/NYSE). That might be because of the "old media" thrust of the piece. Plus, DirecTV is controlled by News Corp. (which is mentioned).

DirecTV Group was recommended here in July 2005 at $15.50. The stock closed Tuesday at $19.77.

These are overall decent results -- though I think Comcast is doing pretty darn good. And as I repeatedly state, possibly to the point of annoyance, we're still in early innings with ALL these holdings.

Also, I'll quickly point out that the Media General (MEG/NYSE) position is underwater. The company publishes newspapers, owns TV stations and has internet operations primarily in the Southeastern US. I'm still optimistic it will eventually prove a profitable investment, though I could always be wrong.

September 11, 2006

Small Consumer Lenders in Japan Rush to Restructure

That's what this story in The Japan Times reports. Portfolio holding Takefuji Corp. (8564/JP or TAKAF/OTC) isn't a small lender, but is mentioned in the piece:

Consumer finance companies, particularly midsize and small firms, are expected to restructure their operations as the government considers lowering the cap on consumer loan rates.

While major players such as Aiful Corp. and Takefuji Corp. have not yet announced any specific restructuring plans, smaller firms, including Shinki Co. based in Tokyo, and Earth Co. in Sapporo, have come up with plans to streamline.

This further down:

As moneylenders have mostly depended on the gray-zone interest rates between these two ceilings, which can be imposed if borrowers agree in writing, the elimination of the gray zone is expected to harshly affect their earnings.

Large lenders handle small-business loans and unsecured consumer loans, and will find it difficult to substantially reduce staffed outlets.

But the big firms will eventually have to follow the lead of their smaller rivals, reorganizing branch networks and cutting personnel, said a lending firm official.

September 10, 2006

Kiplinger's Ranks Controlled Greed Among "Must-Read Bloggers"

The October issue of Kiplinger's magazine has an article entitled, "Must-Read Bloggers" and I'm flattered that the list includes Controlled Greed.

The piece is written by David Landis and its subhead reads, "These pundits skewer the experts and offer great investment insights."

Here's what the article says about this site:

"Controlled Greed is one of several Warren Buffett-inspired blogs. John Bethel, a freelance writer, tries to apply Buffett-style investing principles to his own portfolio, which is posted on the site. (The blog’s name is taken from a Buffett prescription for investing success.) Bethel launched the blog last year after visiting a few too many sites that focused on short-term investing. 'I’m a value investor and I wanted to give investors with a three- to five-year trading horizon another option,' says Bethel, who lives in Richmond."

This is one of 16 blogs listed and it's an honor to be included with the likes of Footnoted.org, The Kirk Report and Random Roger.

Congratulations to every blog on the list. And thanks to David Landis and the editors of Kiplinger's.

Festival of Stocks Launch

George over at Fat Pitch Financials will host the first edition of the Festival of Stocks on Monday:

"The Festival of Stocks will be a blog carnival dedicated to highlighting bloggers' best recent posts on stock market related topics. This will include research and commentary on specific stocks, industry analysis, ETFs, REITs, stock derivatives, and other related topics."

I see this as an excellent contribution to the idea of blog carnivals -- because it focuses on individual stocks.

So be sure to visit Fat Pitch Financials on Monday for the first edition. It's sure to have some great stuff.

September 08, 2006

Takefuji Takeover More Likely?

As a shareholder in Takefuji Corp. (8564/JP or TAKAF/OTC), this Bloomberg report makes very interesting reading:

Yasuo Takei, the founder of Takefuji Corp., made billions lending to Japanese consumers until he died last month. Now investors may reap a fortune from his company, and others like it, as predators start to circle. Speculation about takeovers by investment firms such as Goldman Sachs Group Inc. and Newbridge Capital Ltd. is helping revive shares of Takei's Takefuji, Aiful Corp. and other lenders.


Japan's consumer finance houses have become attractive targets because the declines have brought most share prices below the companies' net worth. They're sitting on loan books fat with high-interest credits at a time when consumer demand is driving expansion in the world's second-biggest economy. Once lawmakers set a new limit on consumer interest rates, the billionaire founding families may be unable to ward off suitors.

"Some overseas funds may have already started buying up shares,'' said Toru Komatsu, chief executive of Komatsu Portfolio Advisers Co., which advises fund managers in Europe and the U.S. and wealthy individuals in Japan. "Banks may move after that's decided,'' he said of the rate limits.

Shares of Kyoto-based Aiful, the largest Japanese consumer lender by sales, have slumped 48 percent this year, leaving the company with a market value of 726 billion yen ($6.2 billion.) The drop is the second-largest in a Topix index of 36 finance companies after a 53 percent decline in Credia Co., another consumer financier. Acom Co., the No. 2 lender, lost 30 percent and Promise Co., the third-biggest, dropped 31 percent. Takefuji, the fourth-largest, slid 21 percent.

This further down:

Takei's death Aug. 10 at the age of 76 prompted speculation that Takefuji may be sold.

The company has attracted overseas bidders in the past. Goldman, the second-biggest U.S. securities firm by market value, and Newbridge, an investment arm of Fort Worth, Texas-based buyout firm Texas Pacific Group, were rebuffed by him two years ago. They had sought to buy shares his family had to sell after a court ordered reduction of the family's holding to less than 25 percent. Spokeswomen for Takefuji, Goldman and Newbridge declined to comment on speculation about bids for Takefuji.

Canadian financier Peter Cundill in June increased his holding in Takefuji for the second time this year, regulatory filings showed. The purchases raised investor speculation that local banks and overseas funds may seek to acquire Japanese consumer lenders. Cundill didn't return calls for comment.

Takefuji and the other players in the sector have always been controlled by founding families. But the article ends with one observer saying the game has changed:

"The only way these lenders can survive is by merging to cut costs or becoming bank affiliates,'' said Koei Takahashi, an analyst at Nomura Holdings Inc. "The founding families have resisted takeovers, but things are different now.''

September 07, 2006

Why Water Could Become More Valuable Than Oil

Portfolio holding Mueller Water Products (MWA/NYSE) was purchased in July for two reasons:

  1. I viewed the company as an inexpensive de-leveraging play.
  2. The company is poised to benefit from America's aging water infrastructure.

Those remain true. And, as Matthew Vincent writes in the current issue of Britain's Spectator, water is a growing concern globally:

It’s in ever greater demand and increasingly short supply. It’s becoming more and more costly to extract, process and transport. But it’s not oil — in fact, one City fund manager claims, what we’re talking about here ‘is far more important over the longer term than that’. Purely and simply, it’s water — or more to the point these days, impurely and problematically. So there’s no surprise that, according to the Financial Times, ‘investors are seeking to exploit a shortage of that most basic of commodities’.

This is particularly interesting:

A lack of clean water and basic sanitation is now a problem for up to 40 per cent of the world’s population and knocks at least $556 billion a year off the world’s economic growth, according to the World Health Organisation — equivalent to about 1 per cent of global gross domestic product. Even the US’s annual economic losses from drought are estimated at up to $8 billion, based on figures from the National Oceanic and Atmospheric Administration. For this reason, Unep says, ‘During the 21st century, water is destined to become as precious as oil.’

This is not because water is running out: there is exactly the same amount of water on the planet as there was a million years ago. The problems are those of distribution, contamination and consumption. An awful lot of water is not where people need it, a situation exacerbated by climate change — Canada, for example, has as much water as China, but just 2.3 per cent of its population. So some people sip bottled water by swimming pools while others go thirsty — what economists call ‘the Evian effect’.

Remember, this article is penned by a man in the UK for a UK publication. Mueller Water Products isn't mentioned. But the article provides us with another perspective on the importance of water -- and the equal importance of getting it to people needing it.

ArmorGroup International

Baron Rothschild is thought to have said (though I’ve heard it was actually Bernard Baruch) the time to buy is when there is blood in the streets. You could say that an investment in ArmorGroup International (ARG/LN or AMGPF/OTC) is a case of buying WHERE there’s blood in the streets.

You see, ArmorGroup has three business segments: Protective Security Services (PSS), Security Training (ST), and Weapons Reduction & Mine Clearance Services (WR). And it provides these services primarily in what it terms “regions of the world afflicted by diminished law and order or with a high risk of terrorism.”

Companies like ArmorGroup are generally known as PSCs -- Private Security Companies. Detractors deride them as “mercenaries.” But these firms have nothing in common with the legendary Bob Denard or the characters in Fredrick Forsyth’s novel, The Dogs of War.

PSCs play an increasingly important role for the over-stretched American and British militaries. Calling them “over-stretched” is NOT a political statement -- it’s an objective truth. US and UK armed forces simply couldn’t carry out operations in Iraq and Afghanistan without the support of PSCs.

ArmorGroup derives more than half of its revenue from Iraq. The company is working hard to diversify revenues and profits away from that country, though it remains an important market and likely will continue to be one for the foreseeable future.

PSCs are also working for private companies abroad, especially mining and oil and gas firms in places like Africa, Asia, Russia, former Soviet states and the Middle East. ArmorGroup reports increasing demand for its services in Nigeria, Afghanistan and the Middle East apart from Iraq.

PSCs are increasingly seen as a viable option for the United Nations and assorted NGOs. ArmorGroup was awarded a contract this summer by the UN to handle a land mine clearance program in Southern Sudan.

PSCs also provide security in the aftermath of natural disasters in the developed and non-developed world. ArmorGroup handled security, life support and logistical services for an engineering company in New Orleans after Hurricane Katrina hit.

So, I’m bullish on PSCs in general and think the sector will be around for many years to come.

But that’s top down, big picture stuff. What about ArmorGroup?

I like ArmorGroup because I’m convinced it’s undervalued. And I also like it because it is a British PSC.

As posted previously, ArmorGroup was purchased and closed Tuesday at the equivalent of US$1.03 per share. That’s just below the net tangible asset value of $1.06 per share, and well below the stated book value of $1.47. The current ratio is 1.90 and the quick ratio is 1.87. The dividend yield is more than 4%. The market capitalization is more than $50 million. There are more than 50 million shares outstanding -- but only about 30% trade freely. Several institutions, with about 10% held by company officers and employees, hold most of the shares.

ArmorGroup first listed its shares on the London Stock Exchange in late 2004 -- during the height of the “Iraq Bubble” for private security firms in Iraq. The shares went public and skyrocketed to more than 270 pence (over $5) in early 2005. The share price began plunging when some contracts in Iraq were delayed later that year. They have remained down over concerns of the amount of revenues currently stemming from work in Iraq, which is a “mature” market.

The Iraq Bubble has resulted in more than 20 PSCs of note in the UK. The bubble is deflating and, while there will continue to be work in Iraq, the sector will see substantial change and consolidation over the next five years.

I think ArmorGroup is poised to deliver good things for investors in any number of ways:

First, ArmorGroup has room for growth in diversifying its operations geographically (away from Iraq) and in diversifying and broadening its service offerings. Roughly 90% of revenues stem from its PSS segment, the company is looking to increase revenues from its newer ST and WR segments as well.

Second, ArmorGroup may make one or more strategic acquisitions. The company purchased a training firm, Phoenix CP, in late 2005 and it is performing ahead of expectations.

Third, ArmorGroup could be an attractive takeover candidate for another British PSC in the coming sector consolidation inside the UK.

Fourth, ArmorGroup could be an attractive takeover candidate for an American PSC. ArmorGroup has a history of working for the US government and American corporations. It has two bases in the US (Virginia and Texas) operating at full capacity. It may or may not mean anything that Stephen Kappes -- who left his job as Deputy Director of the CIA after a disagreement with then Director Porter Goss only to return to that post under the new director -- had been ArmorGroup’s Chief Operating Officer.

Continuing with this option, British PSCs have an excellent reputation in American government and commercial circles. Some American PSCs have sought to form joint ventures with British firms for certain US government contracts. Rumors are strong in the British PSC sector of American firms already making merger proposals. Whether these rumors are true or in any way relevant to ArmorGroup is unknown. Of course, it could always be that a British PSC acquires an American one.

And fifth, since ArmorGroup went public after an MBO, management could always take it private again if the share price continues to lag. What’s more, the European private equity arm of Baird holds 32% of the stock. Baird is a US-based investment banking and private equity firm. There’s a lot of private equity money sloshing around the globe and there’s always the chance that Baird -- by itself or in a consortium -- could make an offer to buy the shares not already held.

Now for some of the risks that could make this pick a loser:

  • The pipeline of projects in Iraq dries up BEFORE the company can diversify enough of its business away from that country.
  • New government regulations are enacted in various nations that might limit foreign-owned PSC activity.
  • Financial institutions (remember most of the stock is owned by a handful of firms) dump their ArmorGroup stock at once, crushing the share price.
  • ArmorGroup personnel engage in “war crime” type behavior that proves damaging to the company’s reputation.

I don’t think any of the above will happen -- but three of those four could easily trash the balance sheet.

That's it. ArmorGroup is an unloved stock right now. In a sector that's misunderstood or hated. And anyone owning it will need a strong stomach. But I think it's positioned to benefit from the coming shakeout in the British PSC sector.

Just make sure you understand that should you decide to take the plunge on this one.

September 06, 2006

Buying ArmorGroup International

I bought stock in ArmorGroup International PLC (ARG/LN) on Tuesday. The shares closed the day in London at US1.03. I made the purchase through Charles Schwab's Global Investment Services. (For more on buying shares on non-US exchanges go here.)

ArmorGroup provides protective security services, security training, and weapons reduction and mine clearance services. It primarily serves governments, major inter-governmental organizations and multinational corporations.

With Monday being a holiday, this is a short week -- but a hectic one for me.

Meaning? Well, meaning I don't have time right now to post my rationale for buying ArmorGroup stock.

But I wanted to report the purchase to Controlled Greed.com readers and will post more in the next day or so.

September 04, 2006

Value Partners

Value Partners is a Hong Kong-based management firm applying the value approach to stock investing in Hong Kong and Mainland China. I read an interview with Sir John Templeton a while back in which he said he'd invested US$100 million with them.

The Standard, a Chinese paper, is reporting that Value Partners may list on the Hong Kong stock exchange:

Value Partners was founded in 1993 by the present chief investment officer Cheah Cheng-hye, and partner Yeh V-nee, who is the deputy chairman of Hsin Chong Construction Group (0404). Over the past 13 years, assets under management at Value Partners have risen 700-fold to US$3.5 billion as of the end of July.

According to its Web site, the company offers six funds, with the Value Partners Classic Fund being the most representative. It also has managed numerous discretionary portfolios, private label funds and hedge funds for different individuals or groups.

Value Partners' only listed fund, VP China Greenchip Fund, had an unaudited net asset value per share of HK$26.72 as of the end of July.

You can find the Value Partners website here.

Altucher on Buffett in the FT

James Altucher has a killer first line in his latest Financial Times column:

I genuinely believe I’m not an inherently smart person.

Most people simply cannot read a line like that and resist continuing on. In this case we continue on to:

Therefore my best chance for success is to be around and learn from other intelligent people.

And if you're a regular reader of this blog, you won't be surprised who the intelligent person James makes the subject of his piece:

In 2005, working along those lines, I completed a study of Warren Buffett’s trading career (published by Wiley as Trade Like Warren Buffett) which detailed not Mr Buffett’s value investing but the other forms of investing Mr Buffett does – private investments in public equity (PIPEs), activism, merger arbitrage, convertibles, distressed debt, liquidations, and so on. So when Mr Buffett files a 13F-HR filing, it is usually something I pay attention to. I then try to pick it apart to see what is going on. This is the guy who was buying carpet companies and furniture stores immediately before the housing boom, and buying distressed energy companies right before oil spiked to what seems to be infinity.

The column discusses several of Buffett's latest moves. The last one:

Since Comdisco’s emergence from Chapter 11 on August 12 2002, the focus has been the orderly sale of its remaining assets. The company says it has $90m in unrestricted cash and $102m in assets. This equates to $23 a share – pretty good for a company with no debt and a market price below $16 a share. The profits made from the sales of assets are to be returned to shareholders. Eventually this stock will be worth $0 but by then shareholders will have received $23-$26 in dividends, depending on how well the sale of assets goes. If you like a potential 50 per cent return in the next few years, in our low-return environment this looks like a good pick.

Yet another reminder of the importance of payouts in calculating performance.

September 01, 2006

New Order Placed

After the markets closed this afternoon, I placed a new stock order. The company is an international provider of protective security services and security training.

As always, I placed a limit order. But the shares have been volatile, so there's always the chance the order won't get filled. If it does, I'll post my rationale for owning the stock.

Tim McElvaine

Morningstar in Canada is running a profile of Canadian fund manager Tim McElvaine. Like Francis Chou, McElvaine keeps a low profile but is a top-notch value investor. He runs the McElvaine Investment Trust and the McElvaine Limited Partnership:

McElvaine counts himself lucky to have about 500 investors who put up with his self-admitted idiosyncratic style . . . But investors can't complain. As of July 31, the four-star Morningstar rated McElvaine Investment Trust performed in the first quartile over five years, and second quartile on a three-year and 12-month basis.

McElvaine used to work with Peter Cundill. At one time Cundill had some personal money invested in McElvaine's firm. Whether that's still the case or not, I have no idea.

McElvaine runs a concentrated portfolio -- his top 10 holdings may account for more than 80% of one of his funds:

Before taking a position, McElvaine asks himself three basic questions. First, what is the value of a business versus its share price? Second, how volatile is the estimate of its worth? Third, is the company's board of directors aligned with shareholder interests?

A case in point is Indigo Books & Music, which McElvaine noticed two years ago when the firm was sorting out operational issues in its merger with Chapters Inc. and had a tolerable debt level.

"If they get margins that are similar to U.S. retailers, plus take advantage of tax-loss carry forwards, they could generate a lot of cash and earnings. It could be worth a lot more," McElvaine reasoned when he bought the stock at $4.50. He was right. Indigo now trades around $15.40.

You can find McElvaine's website here, which has his letters to investors.

BCE Plans C$1 Billion Telesat IPO

Portfolio holding BCE Inc. (BCE/NYSE) has done nicely since being recommended nearly a month ago at US$23.01 per share. It closed Thursday in New York at $24.99.

That doesn't mean much, of course, with the company being in the portfolio only a few weeks.

But what the heck, I have enough picks go south on me after buying. Let me enjoy this before taking time off during the Labor Day weekend, okay? ;-)

One of the factors in buying stock in BCE is the fact that management is taking steps to restructure the company. The latest of these has just been announced: an IPO of Telesat, the world's fifth-largest commercial satellite operator, valued at C$1 billion.

You can read the report here. As you'll see, some speculate BCE wanted to do an outright sale of Telesat, which the company denies.


Current Holdings

Search This Site

Essential Reading


  • Serviced Offices London
  • Student Loan Debt
  • Black Horse Loan


  • 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.