By:
On:
In: Commentary
Tagged:
With: 0 Comments

I have reviewed Apple [stckqut]AAPL[/stckqut] on this site before.  I rank it as a Good Company that you should consider for your portfolio.

Currently, the Internet is buzzing with guessing about the number of iPad’s that were sold in the first day of orders. The best estimate that I see is about 120,000 units. While this is an impressive number of units, it DOES NOT mean you should buy or sell the stock of Apple!

You should only invest in companies that have a history of doing well. They need to be consistently listening to their customers, developing products that their customers want to pay for, and selling those products at a profit. The fact that Apple is a Good Company is indicative of this long trend. You should buy the stock because they consistently deliver – not because they came out with a cool product.

Disclaimer: Since I trade in and out of stocks depending on the activity of the market, I may or may not own Apple Computer at the time that you read this but since they are a Good Company, I am definitely considering being a stock holder. If you want to know more about my trading practices and how it relates to this site, please read my disclosure page.

By:
On:
In: Commentary
Tagged: ,
With: 0 Comments

DailyFinance.com has a great article on the new jobs outlook for the US that was reviewed by BloggingStocks.  I think that they only thing that is missing is the acknowledgement that is nearly impossible to get zero unemployment.  In fact, it would probably be bad for the economy to have zero unemployment!

What is the perfect unemployment rate? Ask 10 economists and you will likely get 12 answers.  Most of them will likely say a number between 4-7%. When the country gets below about 4% then entry level jobs become quite expensive and inflation is almost guaranteed to happen. Once you are above 7% then the country starts to feel real pain in that large ticket items are harder to purchase.

We are currently just under 10%, that means we are about 25-30% above our optimum level. While this is not great, it does have a significant advantage for those industries and businesses that rely on a large workforce to create product.

As the unemployment rate drops, pay a bit more attention to stocks of companies that create bigger ticket items (e.g. automobiles, planes, vacations, computers, homes). As long as the unemployment is a bit high, be careful of those big ticket items and look for companies that make low cost items or items of necessity or need a large, cheap workforce (restaurants, grocery, food production).

While I have not reviewed Kroger [stckqut]KR[/stckqut] on this site, it is a good example of a company that will slightly benefit from high unemployment or at least not be hurt as dramatically as others like Ford [stckqut]F[/stckqut]. Kroger recently released a fairly strong quarterly earnings report.

By:
On:
In: Commentary
Tagged:
With: 0 Comments

Does the news of Simon Property Group (NYSE:SPG)[stckqut]SPG[/stckqut] mean that we are really out of the economic downturn? There is no question that this is a good sign. When companies try to use their bankroll to take advantage of companies that are less fortunate, it means that they are setting themselves up for future growth and expansion.

I haven’t commented on Simon on this site but I wouldn’t buy the stock before this event. My rule on avoiding major M&A activity (more than 10%) now comes into play here, I would avoid Simon for at least a year.

Simon Property Group Inc, the largest U.S. real estate investment trust, made on Tuesday what it called a $10 billion offer for the bankrupt General Growth Properties Inc that would pay creditors back in full and end one of the largest U.S. bankruptcies on record.

Simon said it would offer $6 per General Growth share, or roughly $1.9 billion, plus a stake in property assets it valued at about $3 per share.

The offer would provide a 100 percent cash recovery of par value plus accrued interest and dividends to all General Growth creditors, an amount which totals about $7 billion.

Simon’s shares were roughly flat in premarket trading at $72.07 per share. They closed on Friday at $72 per share.

By:
On:
In: Commentary
Tagged:
With: 0 Comments

There is a great article in today’s Wall Street Journal regarding BHP’s decision to hold on to its cash rather than waste it on vastly increased dividends.

BHP Billiton may have brushed off the recession, but investors are now grumbling at the mining giant’s reluctance to indulge them with fatter dividends and a big share buyback. But BHP boss Marius Kloppers is right to stand his ground. With the global economic recovery far from assured, maintaining a cash cushion to protect long-term capital spending and to be able to pounce on acquisition opportunities make sense.

Despite the recession, BHP reported underlying earnings down just 6% in the six months to June 30 thanks to buoyant copper prices and record iron ore and coal output. As a result, net debt is now equivalent to a little more than a third of annualized earnings before interest, taxesl depreciation and amortization, a fraction of its nearest rivals. Yet Mr. Kloppers raised the interim dividend by just two cents to $0.42. There is no plan for more share buybacks. Nor has BHP taken advantage of industry distress to make substantial acquisitions during the downturn.

I haven’t reviewed BHP for this site yet but, in general, I don’t think it is a very good investment. The reason is not because of their lack of dividends though but rather their lack of solid sustained growth in the categories that matter:

  • Sales
  • Earnings per share
  • EBIT
  • Price per Earnings

Taking profits from the corporation to give to the owners doesn’t make a better company – it makes owners happy in the short term but it doesn’t make the company better in the long-term. While I don’t begrudge a corporation the right to pay dividends, I do think that they should only do this when they have got the rest of the company in order.  In the case of BHP, they should spend some of that cash on improvements that will make BHP a Good Company.

By:
On:
In: Commentary
With: 0 Comments

I have heard various versions of this over the years. I am not proposing that you use this legend as a way to invest your money. In fact, quite the opposite, you should only invest best on solid analysis of the company and have some mathematically pure methods of estimating the pricing points. However, with the game today, it is fun to think about this.

I don’t know what the outcome of today’s game will truly bring. The Indianapolis Colts are one of the oldest teams in professional football as they were originally part of the NFL as the Baltimore Colts. This lineage says that they should be a NFC team but today they represent the AFC. The Saints are an expansion team and have always been in the NFC. So with the legend, they would both be considered NFC teams – so maybe the bull market is a sure thing!

I think that I know some mutual fund managers that have not predicted the market as well as this technique though!

I picked this up over at Snopes.com.  You can go there to read more about what they said.

Want to know if the bulls or bears will be rampaging through the market this year? Popular wisdom says look to the Super Bowl for the answer because a seemingly startling correlation appears to exist between who wins the big game and how the market will perform in that calendar year. According to the “Super Bowl Indicator,” a triumphant team from the old American Football League (now the American Football Conference, or AFC) foreshadows a down market, but a winner from the old NFL (now the National Football Conference, or NFC) means dust off your red cape, because the bulls are coming.

The Super Bowl Indicator (SBI) has been on the money 32 years out of 40, which represents a success rate of 80%.1 Between 1967 and 1997 it was accurate 28 times out of 31 (a better than 90% average); it then hit the skids, going 0-4 between 1998 and 2001, but rebounded by being correct 4 years out of 5 between 2002 and 2007.2

Due to league expansion, franchise moves, and conference shifts, the SBI has posed some interpretive problems in recent years as fewer and few Super Bowls pit former AFL teams against old-line NFL teams. Both the 2003 and 2004 championship games featured post-merger expansion teams (the Tampa Bay Buccaneers and Carolina Panthers) and the 2007 contest was waged between two original NFL teams (the Colts and the Bears).