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    « April 2007 | Main | June 2007 »

    May 31, 2007

    Altucher on USA Mobility

    James Altucher writes about "Top Dividend Stocks You've Never Heard Of" in TheStreet.com. One of the stocks he names is USA Mobility (USMO/NASDAQ), which has a 13.3% yield:

    True, these payments are often couched as "one-time dividends" by the company because it does not want to be obligated to make future payments. But that said, it has been pretty consistent about those payments. USA Mobility provides one-way and two-way wireless messaging services to the health care, government and emergency-response industry, an industry that Wall Street perceives as a dying one. However, the company keeps spinning off massive cash and has proved a healthy investment.

    As of the end of the first quarter of 2007, my USA Mobility position was very slightly underwater. But I have hopes that it will prove to be a good performer when all is said and done.

    May 30, 2007

    Witmer Pick Navistar is Smoking

    Regular readers know I'm a big fan of Meryl Witmer and her firm, Eagle Capital Partners. She consistently makes the most interesting picks in Barron's annual roundtable. I have at times put money in her recommendations -- such as 3i Group (III/LN) and Imagistics International (subsequently bought by Oce).

    Sometimes I pass on an idea Witmer offers because by the time it appears in Barron's, the stock price has already shot up. I made that mistake with Chaparral Steel. And again this year with Navistar, which Witmer named back in January.

    As Terry Kosdrosky reports in The Wall Street Journal:

    Navistar International Corp. has been delisted from the New York Stock Exchange, faces a slowdown in its core truck market and is feuding with one of its major customers.

    Despite these headwinds, its shares are up about 85% since the beginning of the year, as takeover rumors swirl and investors focus on projected good times ahead and a significant potential military contract.

    The company's share performance demonstrates how investors are increasingly willing to ignore issues that in previous eras might have made them turn up their noses. In a market reaching new highs amid big mergers and access to inexpensive capital, Navistar offers to many an opportunity to get in while a cycle is trending downward, with the potential for an upward swing. Meanwhile, the merger speculation underscores the potential appeal of the U.S. market, particularly for makers of larger commercial trucks, despite signs of softness in some parts of the economy.

    Watsa "Romancing" Value

    Here's another report on Prem Watsa's remarks during the value investing conference in Canada last week, this one from the Financial Post.

    The most noticeable bit focuses on Fairfax Financial's (FFH/NYSE) stake in Torstar. Watsa pointed out that the Toronto Star newspaper only accounts for 20% of Torstar's profits, insinuating that the newspaper business isn't what attracted him.

    What did?

    The rest of the company, he pointed out, includes divisions such as Harlequin Enterprises, a publisher of romance novels. "I recommend the books to you," he said, to a laugh from the audience.

    May 28, 2007

    Sohn Conference

    One of the pieces in this week's Barron's is about the 12th annual Ira W. Sohn Investment Research Conference, held in New York. The event is "named for a Wall Street trader who survived a childhood cancer but succumbed at age 29. A related foundation has raised millions for pediatric cancer causes and is expanding its efforts with prizes for research oncology."

    So it's for a good cause. And the article has some interesting stuff.

    One notable item is that Wilbur Ross likes US coal producers and owns International Coal Producers (symbol: ICO) a small, West Virginia outfit.

    Another is James Chanos recommending shorting Macquarie Bank. Shorting is something I don't engage in generally and I confess to having no idea whether the Aussie bank is a good short candidate or not. I don't know that much about Chanos, except he supposedly said at another conference a while back that Fairfax Financial (FFH/NYSE) was "a zero" and gave as one of his supporting reasons that Prem Watsa had been previously dubbed "the Warren Buffett of Canada."

    I believe Fairfax's performance since then has proven Chanos wrong. But anything could happen and I could still end up with egg on my face, I suppose. Yet whether Fairfax goes on to become a zero or not will have nothing to do with some journalist previously hyping Watsa as the Buffett of the north.

    Lastly, Mason Hawkins appeared at the Sohn conference:

    Mason Hawkins, chairman of Southeastern Asset Management, closed the day's proceedings. He offered no picks, but plenty of sage advice: Have the discipline to say no and the patience to wait for the right opportunity; make decisions even when no one agrees with you, and take advantage of others' fear and greed. Oh -- and be a prolific reader of the financial press.

    Regular readers of Controlled Greed.com know I've been doing more selling than buying since last fall. Actually I haven't bought anything -- though I am hoping that will change. But in the meantime, Hawkins' advice about being patient is prudent.

    Fairfax Braces for "Hundred-Year Storm"

    The Toronto Star has an article on Prem Watsa of Fairfax Financial (FFH/NYSE) addressing the first annual Intelligent Investing Conference. The event was organized by the Ben Graham Centre for Value Investing at the Richard Ivey School of Business in London, Ontario.

    Fairfax's US$16-billion investment portfolio is braced for what Watsa calls a "hundred-year storm." Three quarters of the portfolio is in government bonds and Treasury bills. Common stocks account for 15%, and half of that is hedged by shorting the S&P 500 Index. The portfolio holds no oil stocks.

    Watsa owns roughly 8% of Fairfax, which accounts for 95% of his personal wealth.

    "Buy when you hear the sound of canons, sell when you hear the sound of trumpets," he said, first in French and then in English. Then he added: "We hear the sound of trumpets."

    "The music may stop again," he warned. "You have to be really, really careful."

    Good advice.

    Another bit from the article of interest is this:

    Access to cheap debt is fuelling a boom among the private investment funds that use a high proportion of debt to take over public companies, as in the anticipated bid for BCE Inc. But Watsa fears the support such deals provide for stock prices could evaporate if there is some shock to the world economy.

    That sentiment is taken to heart here. It's the kind of thinking that lead me to trimming the BCE stake by 25% on Friday. Controlling my greed, you know. ;-)

    May 26, 2007

    Happy Birthday, Duke

    Today marks John Wayne’s 100th birthday. He started in Hollywood when studios had actors making one movie after another. The result was that Wayne made some great movies and a whole lot of average (and below average) ones. The same is true for any actor of his era -- such as Humphrey Bogart, Cary Grant, and James Stewart, to name a few.

    While I’m more of a fan of the work of Bogart, Grant and Stewart, the Duke had real star power. Arguably the only figure in Hollywood with more star power was Clark Gable. (It’s been said that Spenser Tracy and Gable were friends, but that Gable envied Tracy’s acting ability and Tracy envied Gable’s star power.)

    Everyone has his or her Wayne favorites. Those movies you love coming across on cable TV and watching time and again. I’m particularly fond of The Shootist (1976). It was Wayne’s last picture.

    It’s poignant because Wayne plays an old gunslinger dying of cancer. Because the story takes place in Nevada at the turn of the century as the old west is dying out. And because Wayne, according to co-star Lauren Bacall, was in poor health and knew he would not live much longer himself.

    Red River(1948), The Searchers (1956), True Grit(1969) and others are objectively better pictures. But I have a weakness for The Shootist.

    Iain Johnstone has a remembrance of Wayne in The Spectator. He describes sailing up the Pacific coast of Mexico with him in 1976:

    He had an acting rulebook of his own, such as breaking up his sentences with an inserted caesura so the audience would wait for the point or draw attention to himself in the background of a scene merely by cracking open his rifle to see if it was loaded.

    That first night he asked me to dinner and personally barbecued the steaks. ‘These Mexican steaks are really tasty,’ I said. Duke drew himself up to his full six foot four. ‘These steaks came from the United States of America.’ As, indeed, did he. Like no American before — or since.

    Happy birthday, Duke.

    May 25, 2007

    Scaling Back BCE

    As I speculated in the previous post, I went ahead and trimmed the BCE Inc. (BCE/NYSE) position by 25% earlier today. The shares were sold this morning at $36.31. With the stock's appreciation since being recommended here in August 2006 at $23.01, BCE remains a full position even after this partial sale -- being just shy of 5% of the portfolio.

    It still looks like BCE will get bought and taken private. But I believe it is prudent to take some chips off the table. Especially if the private equity boom turns out to be a bubble that gets popped before the company gets taken over later this year. That's not a prediction, but a possibility.

    BCE Bidding Dance Continues

    The question for us shareholders is: will a full-fledged bidding war for the company break out?

    If, say, three entities want BCE that certainly increases our (shareholders) chances of getting a higher price. Sure, we could see that with two contenders. But if we're hoping, let's hope for more than two, right? ;-)

    This Bloomberg story about Cerberus recruiting the Hospitals of Ontario Pension Plan suggests events are going in that direction:

    The Toronto-based pension-fund manager signed a non- disclosure agreement with Cerberus and committed equity, according to Andy Moysiuk, managing partner of the firm's buyout unit. He declined to disclose how much equity was pledged.

    The Cerberus group is at least the third examining an offer, which would put Canada's most widely traded stock into private hands for the first time in more than a century. Other potential buyers are a group led by Canada Pension Plan Investment Board, which includes Kohlberg Kravis Roberts & Co., and the Ontario Teachers' Pension Plan, BCE's largest shareholder.

    The hospital fund's investment is "significant to HOOPP and significant to the consortium,'' Moysiuk said in a telephone interview. The fund manager oversees C$28 billion ($25.9 billion), he said.

    That said, we've seen a nice run up in BCE (BCE/NYSE) shares since recommending them at $23.01 last August. I'm tempted to take some chips off the table. And will report here if I do.

    May 22, 2007

    Longleaf in Kiplinger.com

    Steven Goldberg of Kiplinger pens a column about Longleaf Partners. The first half is probably familiar stuff to regular readers of value investing sites. Scroll down to the second for some comments by Staley Cates. A couple of bits pop out, starting with a view posted here for what seems like forever:

    Right now, Cates says, the market is fairly valued -- not cheap, not expensive. "But people are paying much higher multiples to take things private in this private-equity bubble. Short term, it's good for stocks, but long term it's going to hurt our productive capacity." Consequently, he doesn't see a lot of bargains. "As far as new 60-cent dollars, we don't have any." Cash in Partners is at just 7% -- which one stock would consume. Small-Cap has 16% in cash.

    Another bit:

    Cates is also bullish on Japan: "They've made unbelievable progress. Earnings have grown in double digits over the past several years." Japan has made huge strides toward remaking its sclerotic corporate structure. "It's still the early innings, but managers there are beginning to act more like owners."

    ArmorGroup Orders +20% in Two Months

    The reason is increased work in Afghanistan and Nigeria, according to a Bloomberg report:

    Orders stood at $239 million on May 18, compared with $199 million on March 20, Malcolm Rifkind, chairman of London-based ArmorGroup, said in a Regulatory News Service statement today. "We remain confident that the group will benefit from continuing strong market conditions over the coming year,'' Rifkind, a former British foreign secretary, said in the release.

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