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November, 2008: 1 10 25
Disclaimer - IMPORTANT - Read this first!
| Investor's Journal is a diary focused strictly on investments and personal finance issues, primarily from a contrarian and retiree point of view. Follow along with an average guy's failures and successes as he learns, by trial and error, the fine art of value investing. |
11/1/08-Since the last entry, our Classic Value (CV) pick, ORI, purchased on 10/29/07, has been held over a year. It will be sold at the early market price Monday morning. It will then be removed from the CV open positions portfolio, and its closed position info recorded, based on the 10/29/07 to early 11/3/08 per share performance. Through the close of trading on 10/31/08, after subtracting a commission (while not counting any dividends), ORI had been down 36.43% in the past 12(+) months.
My top-ten equities for mention today are: AEO; FRD; GIFI; HCC; LECO; NTRI; PLFE; PTEN; TIE; and WSM.
The focus this time is on a new Classic Value (CV) selection, Friedman Industries (FRD) (recent price $5.14). FRD's trailing price to earnings ratio is just 5.06. The asset's market-capitalization size is nano-cap: $34.95 million. Friedman Industries has a trailing 6.10% dividend, with a dividend payout ratio of 0.32. The price to sales ratio is 0.18. FRD's price to book value is low, at 0.71. There is positive free cash flow. The price to cash flow is only 4.30. Return on equity is 15.05%. Debt to equity is 0.00. The current ratio is 2.82. The shareholder equity to total assets ratio is 0.73. This stock has low price to earnings, low debt, low P/Bk, low price to cash flow, and an exceptional dividend in its favor. Friedman Industries' shares currently meet Ben Graham value plus safety bargain stock criteria.
FRD will be added to our CV tracking portfolio at its market price early on Monday, 11/3/08.
I continue to believe we are in a marvelous buying opportunity for equities. However, since the prospects for the economy as a whole remain subdued by several factors, and the stock market likely has not yet discounted all of these negative variables, it seems reasonable to exercise caution and not jump in whole hog but rather to just gradually purchase new shares. Five or ten years from now, and possibly even in just one or two, the markets will likely be up considerably from here. But as we do not know just when a new sustained bull market will commence, and stocks may also be much farther down before this bear market is completely behind us, it appears prudent to hold back some reserves, in case there are even better buying opportunities in future.
It will not surprise me if the market rises significantly after the upcoming US presidential campaigns finally climax (hopefully with a clear victory next week by one or the other major candidate), but then declines again in coming months as the import of a long and deep recession is better realized.
11/10/08-Since the last entry, our Leapin' Lizards (LL) pick, PCR, purchased on 11/5/07, has been held over a year. It will be sold at the early market price Tuesday morning. It will then be removed from the LL open positions portfolio, and its closed position info recorded, based on the 11/5/07 to early 11/11/08 per share performance. Through 2:00 PM (Central) today, after subtracting a commission (while not counting any dividends), PCR had been down 71.87% in the past 12(+) months.
My top-ten equities for mention today are: CIR; DCO; ESV; FRD; GIFI; LECO; MEI; SCHN; VR; and WSM.
The focus this time is on a new Classic Value (CV) selection: Schnitzer Steel Industries, Inc. (SCHN) (recent price $27.31). SCHN's trailing price to earnings ratio is just 3.16. Its forward P/E is estimated at 6.64. The asset's market-capitalization size is small-cap: $759.05 million. Schnitzer Steel Industries, Inc. has a .30% dividend, with a dividend payout ratio of 0.01. The price to sales ratio is a mere 0.21. The PEG ratio is 0.54. SCHN's price to book value is only 0.77. There is positive free cash flow. The price to cash flow ratio is just 2.30. Return on equity is 28.53%. Debt to equity is only 0.19. The current ratio is 2.26. Shareholders equity to total assets is 0.63. This stock has low price to earnings, low price to sales, low price to book value, low P/CF, and low debt in its favor. It meets Ben Graham's value and safety bargain stock criteria.
Schnitzer Steel Industries, Inc. will be added to our CV tracking portfolio at its market price early on Tuesday, 11/11/08.
Incidentally, although not practical for our hypothetical Classic Value portfolio, the performance calculations of which require definite quotes at given times, in our own nest egg I have found it useful, while we are experiencing so much market volatility, to place good-till-cancelled limit purchase orders, the limit set up to 5% below the current market price. In most instances, this has resulted in our acquiring the desired securities at an even greater discount to value than the assets already have, the executions usually occurring within a few days of the orders being placed.
As it is unknown how long the market downturn will last or which type equities might rebound first, I am now buying a few larger capitalization stocks, to supplement the generally smaller-cap Classic Value bargains featured here. Criteria for these other purchases include that the companies appear to have stability, no substantial debt, good earnings prospects, and reasonably priced shares. Recent buys along these lines, for instance, include WAG, SYY, and MDT.
11/25/08-Since the last entry, our Classic Value (CV) pick, PLAB, purchased on 11/12/07, has been held over a year. It will be sold at the early market price Wednesday morning. It will then be removed from the CV open positions portfolio, and its closed position info recorded, based on the 11/12/07 to early 11/26/08 per share performance. Through the close of trading on 11/25/08, after subtracting a commission (while not counting any dividends), PLAB had been down 96.40% in the past 12(+) months.
My top-ten equities for mention today are: AEO; AXS; BRK/A (BRK/B); CDI; CIR; CMI; DCO; GIFI; MEI; and WSM.
The focus this time is on a new Classic Value (CV) selection: Cummins, Inc. (CMI) (recent price $23.62). CMI's trailing price to earnings ratio is just 5.11. Its forward P/E is estimated at 5.93. The asset's market-capitalization size is mid-cap: $4.76 billion. Cummins, Inc. has a 2.70% dividend, with a dividend payout ratio of 0.12. The price to sales ratio is only 0.31. The PEG ratio is 0.29. CMI's price to book value is below average at 1.16. There is positive free cash flow. The price to cash flow is just 3.50. Return on equity is 25.68%. Debt to equity is only 0.17. The current ratio is 1.83. This stock has low price to earnings, low price to sales, low price to cash flow, below average price to book value, above average return on equity, and low debt in its favor. It meets Ben Graham's value and safety bargain stock criteria.
Cummins, Inc. will be added to our CV tracking portfolio at its market price early on Wednesday, 11/26/08.
This is a frightening market. Despite my best efforts and precautions, we are now down over $200,000 for the year. If we had had significant margin debt, the losses would doubtless have already been horrendous. As it is, we have still lost about 23% in portfolio value since the end of 2007.
Since even my best selections are still being battered within days of purchase, it is understandable if investors feel it is best not to do any buying at all these days. However, it is also true that few if any can exactly and repeatedly time when the bottom of a market will occur. So, the best bet seems to be to buy a little at a time of assets that seem likely to maintain good value over the long haul. I am not certain Cummins, Inc. falls into this category, but, aside from Berkshire Hathaway, it comes closest among the stocks I can find that offer good value for their current prices.
I hope everyone has a good Thanksgiving holiday.
Disclaimer and Disclosure Statement
Neither I nor Investor's Journal will be responsible for losses by anyone who obtained ideas from this site.
This diary is intended for personal interest and general information only. You are advised to do your own research (as well as to consult highly compensated professionals) before spending money on anything.
I know of no reason anyone should take my financial musings seriously. At best I am a dedicated amateur providing a bit of investment-related insight and entertainment, at worst an amusing diversion.
My wife, Fran, and I may at times own shares of some of the assets mentioned here. But neither of us receive any benefit from reference to them, unless you count the mutual misery when we get it wrong, or the opportunity to gloat when we get it right.