Company name Paladin Holdings, Inc.
Stock ticker PLHI
Live stock price [stckqut]PLHI[/stckqut]
Confident Investor Rating Poor

The following company description is from Google Finance: http://www.google.com/finance?q=plhi

Paladin Holdings, Inc. (Paladin), formerly Bad Toys Holdings, Inc., and its subsidiaries (Motor Cycle Division) operate an integrated line of business activities for the motorcycle industry, including frame, girder and component parts manufacturing. Paladin also manufactures production and custom complete motorcycles, sprint car chassis, and pedal and motorized go carts with styled bodies. Paladin operates a custom motorcycle manufacturing and service facility, and a custom auto restoration and fabrication shop in Kingsport, Tennessee. The Company also owns American Eagle Manufacturing Company, Inc., a motorcycle manufacturing facility in Oceanside, California, where it is developing a line of standardized motorcycles for resale through dealers. The Company owns Bad Boyz Toyzz, Inc. On February 1, 2007, Paladin completed the spin-off of 75% of its ownership interest in its subsidiary, Southland Health Services, Inc., which provided ambulance services, to the Company’s stockholders.
Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in Paladin Holdings, Inc. It is not possible to confidently invest in a company that is not currently profitable.
If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

Company name KBR, Inc.
Stock ticker KBR
Live stock price [stckqut]KBR[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Fair
Sales growth Poor
EPS growth Poor
P/E growth Good
EBIT growth Poor

ANALYSIS

Confident Investor Rating Poor
Target stock price (TWCA growth scenario) $31.65
Target stock price (averages with growth) $43.73
Target stock price (averages with no growth) $41.49
Target stock price (manual assumptions) $32.64

The following company description is from Google Finance: http://www.google.com/finance?q=kbr

KBR, Inc. (KBR) is a global engineering, construction and services company supporting the energy, hydrocarbons, Government services, minerals, civil infrastructure, power, industrial and commercial markets. The Company operates in four segments: Hydrocarbons, Infrastructure, Government and Power (IGP), Services, and Other. As of December 31, 2011, the Company conducted its business in over 70 countries.

 

Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in KBR, Inc.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

For owners of my book, "The Confident Investor" I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.

In a 8 year time frame from January 3, 2006 to December 31, 2013, eBay [stckqut]EBAY[/stckqut] increased 38.4% if you would have implemented a pure buy-and-hold strategy. If you would implement the investing system that I explain in my book, The Confident Investor, you would have seen a 253.2% return on your investment. This is a 658.8% increase on the profit percentage.

To put it into actual dollars, suppose you invested $10,000 in eBay on 1/3/2006. With the investing system that is explained in The Confident Investor, you would have exited the market on 12/31/2013 with $47,522.94 . With my investing system, it is not uncommon for you to need a bit more cash available to cover the ongoing trades. Therefore, rather than $10,000, you would have needed $13,454.01. You would have 689 shares which were purchased with other people’s money and still have your original $10,000.

To be fair in our comparison, the buy-and-hold investing system if calculated with $13,454.01 would have ended up with  $18,625.32  and a respectable 38.4%. You would have purchased 342 shares but your original $13,454.01 would be tied up in the stock and not available for other investments.

The profit on the buy-and-hold investing system in this scenario is  $18,625.32 .  The profit using my investing system, GOPM (Grow on Other People's Money), is  $47,522.94.  That means the increased profit on eBay in this time frame was $28,897.62 . This means your profit INCREASED by 253%!!

Understanding the differences in the investing system

Understanding buy-and-hold investing system is easy. You have a given amount of money, in this case $13,454.01. You buy 342 shares at the start of the test period. At the end of the test period, you sell the shares and the profit (or loss) is the standard that any other system must beat.

Understanding the GOPM investing system is a bit more complicated without reading my book, The Confident Investor. Before you even start to invest, the investing system teaches you to look for incredibly well-run companies and only invest in those companies. While eBay may or may not have qualified for this status in 2006, it does in 2014 so we are simply back-testing against a currently well-run company. While past performance doesn't guarantee future performance, it is probably the best tool that we have to understand investment methodologies.

After you find a well-run company, you are going to buy $10,000 worth of shares when the technical indicators tell you that the stock has upward momentum. You are then going to sell those shares when that momentum slows down or reverses.  The profit that you make on that transaction, you will keep in the stock (in other words, you are not going to sell those shares). You are going to keep the $10,000 ready for when the stock has the correct momentum. If there is any excess profit (e.g. less than the value of a full share after keeping the $10,000) you will just stick that into your money-market account in this example. It is possible that you could invest this excess amount but we are going to simplify this example and just hold that money.

As a quick example, you invest $10,000 in a stock trading at $50 per share so you have purchased 200 shares.  Over the course of the next several days or weeks, the stock price increases to $55 which is where you decide to sell. To get your original capital of $10,000 back, you sell 182 shares resulting in $10,010 in your account and 18 shares that are essentially free since they were purchased with Other People's Money. You now have your original capital of $10,000, 18 free shares and an additional $10.

Using this investing system, you will make several trades per year and may even be trading weekly. Therefore, to make this model fair, I need to account for stockbroker fees and commissions.  In this example, I am using $8 for every sell and for every purchase. You may have a better fee from your favorite broker but $8 seems fair for a test. Frankly, if you are paying more than $10 for each transaction then you probably need to be looking at another broker!

Using this technique, by the end of the test on 12/31/2013 you would have 689 shares of eBay that cost you $3,454.01. Those 689 shares were acquired for $5.013 per share! This is significantly cheaper than today's stock price and no matter what happens to eBay you could probably sell these shares for a profit at any time! You would still have the original $10,000 in your bank account! This is because you have purchased these share with Other People's Money.  This is why I call my investing system GOPM - Grow on Other People's Money.

If you would have invested in eBay as described in this article, you would have doubled your investment by November 12, 2010.

The rest of this article shows each buy and sell transaction for those 8 years. It shows the date, the assumed purchase price on that day (taken from Yahoo - the purchase price is the average of the opening and closing price on that day) and the profit or loss. If you haven't read my book, The Confident Investor, then you may not understand the timing of the trades. In fact, if you haven't purchased the book and registered here on this site as a book owner then you won't be able to see those individual trades. If you have registered and cannot see the trades, make sure you are logged in and refresh your browser.

Which brings me to the big set of questions. Shouldn't you own this book? Does your investing system beat buy-and-hold? Do you even have a strategy for your investment system? If your strategy beats buy-and-hold, does it beat GOPM - Growing on Other People's Money?

You can purchase my book wherever books are sold such as AmazonBarnes and Noble, and Books A Million. It is available in ebook formats for NookKindle, and iPad. It may be available at your favorite bookstore as well but you may have to ask.

eBay 8 year chart from Google Finance

eBay 8 year chart

 

 

Company name General Electric Company
Stock ticker GE
Live stock price [stckqut]GE[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Poor
P/E growth Poor
EBIT growth Poor

ANALYSIS

Confident Investor Rating Poor
Target stock price (TWCA growth scenario) $17.21
Target stock price (averages with growth) $21.4
Target stock price (averages with no growth) $21.38
Target stock price (manual assumptions) $21.75

The following company description is from Google Finance: http://www.google.com/finance?q=ge

General Electric Company (GE) is a diversified technology and financial services company. The products and services of the Company range from aircraft engines, power generation, water processing, and household appliances to medical imaging, business and consumer financing and industrial products. It serves customers in more than 100 countries. In August 2013, General Electric Company completed the acquisition of the aviation business of Ario S.p.A. In February 2014, General Electric Co's GE Oil & Gas launched its new Downstream Technology Solutions business to supply equipment and services to the $10 bln refining, petrochemical, industrial and distributed gas segments. In February 2014, General Electric Company completed the acquisition of API Healthcare.

 

Confident Investor comments: At this price and at this time, I do not think that a Confident Investor can confidently invest in General Electric Company.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

For owners of my book, "The Confident Investor" I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.

Company name Ecolab Inc.
Stock ticker ECL
Live stock price [stckqut]ECL[/stckqut]
P/E compared to competitors Fair

MANAGEMENT EXECUTION

Employee productivity Poor
Sales growth Good
EPS growth Good
P/E growth Poor
EBIT growth Good

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $130.04
Target stock price (averages with growth) $158.95
Target stock price (averages with no growth) $116.75
Target stock price (manual assumptions) $126.96

The following company description is from Google Finance: http://www.google.com/finance?q=ecl

Ecolab Inc. (Ecolab) develops and markets products and services for the hospitality, foodservice, healthcare and industrial markets. The Company provides cleaning and sanitizing products and programs, as well as pest elimination, equipment maintenance and repair services primarily to customers in the foodservice, food and beverage processing, hospitality, healthcare, government and education, retail, textile care, commercial facilities management and vehicle wash sectors. The Company business segments include United States Cleaning & Sanitizing segment, United States Other Services segment, International segment, Water Services segment, Paper Services segment and Energy Services segment. In April 2013, it acquired Champion Technologies and its related company Corsicana Technologies. In August 2013, Ecolab Inc. sold all the capital equipment design and build business of its Mobotec air emissions control business to The Power Industrial Group.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in Ecolab Inc. as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

For owners of my book, "The Confident Investor" I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.