Dear Diary,
I read that I bought shares of Medtronic (MDT) at $49.85 plus a minimal commission this morning. This stock should reasonably hit $60.00 this year and has a bright future.
What I'm doing is getting diversified into at least 5 stocks that show serious promise of price appreciation in 2008 and 2009. That I've been only able to invest in three companies, as of now, shows how overpriced the market is right now. Diversification is not that big of a deal for us Buffett folks, but King Solomon promoted the idea in the book of Proverbs, so I interject just a bit into my work out of respect for my upbringing.
Gene
Monday, December 31, 2007
Friday, December 28, 2007
Medtronic (MDT)
Dear Diary,
I am setting up a purchase of Medtronic (MDT), now selling at a nice discount to relative value to the long bond ($70.58).
All the ratios look positive, and they are "the world's largest manufacturer of implatable biomedical devices," according to "Value Line." I'm impressed with the numbers!
Gene
I am setting up a purchase of Medtronic (MDT), now selling at a nice discount to relative value to the long bond ($70.58).
All the ratios look positive, and they are "the world's largest manufacturer of implatable biomedical devices," according to "Value Line." I'm impressed with the numbers!
Gene
Monday, December 17, 2007
PAYX Balance Sheet
Dear Diary,
After a full evaluation of the most recent annual report of Paychex (PAYX), I see on the balance sheet that current assets are not the minimum of $2 for every $1 in current liabilities, required in my work. I also see that shareholder equity on the balance sheet is not at least half of total assets, as required. PAYX will be an interesting observation to see if their economics ever come into line with my expectations for an investment.
I see that Harley Davidson (HOG) has good numbers on these topics as well, just a hair under the ratio of shareholder equity to total assets described above, but we'll be OK for now.
American Eagle Outfitters (AEO) has flawless numbers in the matters we discuss above.
I called for several financial reports today on companies in the health care industry.
Gene
After a full evaluation of the most recent annual report of Paychex (PAYX), I see on the balance sheet that current assets are not the minimum of $2 for every $1 in current liabilities, required in my work. I also see that shareholder equity on the balance sheet is not at least half of total assets, as required. PAYX will be an interesting observation to see if their economics ever come into line with my expectations for an investment.
I see that Harley Davidson (HOG) has good numbers on these topics as well, just a hair under the ratio of shareholder equity to total assets described above, but we'll be OK for now.
American Eagle Outfitters (AEO) has flawless numbers in the matters we discuss above.
I called for several financial reports today on companies in the health care industry.
Gene
Wednesday, December 12, 2007
HOG/ FED
Dear Diary,
Harley Davidson (HOG) reported a $0.30 dividend paid yesterday. The stock is trending downward today.
The Federal Reserve lowered the long bond to 4.25% from 4.5% yesterday. This generally causes the relative value of stocks to go up in price a bit. The market was not impressed, seeking a half point move rather than the quarter point drop they got, so overall, stocks actually went down some.
Mr. Buffet is reported in the news as wanting to pay more taxes. I applaud him for wanting to pay more taxes. I think people who can make tons of money in the stock market should be happy to cover more of national expenses. After all, this stuff is pretty easy to do. We could replace the current income tax on the labor of working people (slavery) with one on increase from assets, similar to the biblical tithe concept. Of course, it needs to be constitutional.
Gene
Harley Davidson (HOG) reported a $0.30 dividend paid yesterday. The stock is trending downward today.
The Federal Reserve lowered the long bond to 4.25% from 4.5% yesterday. This generally causes the relative value of stocks to go up in price a bit. The market was not impressed, seeking a half point move rather than the quarter point drop they got, so overall, stocks actually went down some.
Mr. Buffet is reported in the news as wanting to pay more taxes. I applaud him for wanting to pay more taxes. I think people who can make tons of money in the stock market should be happy to cover more of national expenses. After all, this stuff is pretty easy to do. We could replace the current income tax on the labor of working people (slavery) with one on increase from assets, similar to the biblical tithe concept. Of course, it needs to be constitutional.
Gene
Saturday, December 8, 2007
HOG "Value Line" Update
Dear Diary,
In the November 16, 2007 "Value Line" presentation of Harley Davidson (HOG), I find the projected target price in 2010 to be between $80 an $130 per share, unchanged from the August 17, 2007 presentation.
The recent stock price is listed at $48.70 per share, p/e ratio is 12.6, Net Profit Margin is 16.0%, down from the 2006 number of 18.0%. While I am a value investor, I've noted over the years that the slightest move in Net Profit Margin (NPM) has been the best indicator of stock valuation over the short term. With an expected NPM of 15.0% in 2008, I think paying more than 10 times next year's expected earnings or $37.50 would be pricey.
I noted by combining earnings per share and dividends that the total pretax monetary gain appears as $4.75 for 2006, $4.81 for 2007 and $5.15 for 2008, a continued upward trend.
Given that HOG will not fully recover before the new motorcycling season in the Spring of 2008 and could take much longer, I feel that 10 times 2008 expected earnings and dividends ($5.15) or $51.50 is the most a value investor could justify for this stock at this time.
Were all conditions perfect with the economy and HOG, I might pay relative value to the 30 year treasury bond for HOG, given its strong name brand, excellent 10 year economic track record and billion dollar earnings per share, if nothing else presented a better opportunity. The long bond is at about 4.5% currently, so with next year's expected earnings at $3.75, we are looking at $83.33 as relative value to the long bond ($3.75/ 4.5% = $83.33). No way I'd pay it today, however.
In the November 16, 2007 "Value Line" presentation of Harley Davidson (HOG), I find the projected target price in 2010 to be between $80 an $130 per share, unchanged from the August 17, 2007 presentation.
The recent stock price is listed at $48.70 per share, p/e ratio is 12.6, Net Profit Margin is 16.0%, down from the 2006 number of 18.0%. While I am a value investor, I've noted over the years that the slightest move in Net Profit Margin (NPM) has been the best indicator of stock valuation over the short term. With an expected NPM of 15.0% in 2008, I think paying more than 10 times next year's expected earnings or $37.50 would be pricey.
I noted by combining earnings per share and dividends that the total pretax monetary gain appears as $4.75 for 2006, $4.81 for 2007 and $5.15 for 2008, a continued upward trend.
Given that HOG will not fully recover before the new motorcycling season in the Spring of 2008 and could take much longer, I feel that 10 times 2008 expected earnings and dividends ($5.15) or $51.50 is the most a value investor could justify for this stock at this time.
Were all conditions perfect with the economy and HOG, I might pay relative value to the 30 year treasury bond for HOG, given its strong name brand, excellent 10 year economic track record and billion dollar earnings per share, if nothing else presented a better opportunity. The long bond is at about 4.5% currently, so with next year's expected earnings at $3.75, we are looking at $83.33 as relative value to the long bond ($3.75/ 4.5% = $83.33). No way I'd pay it today, however.
Gene
Tuesday, December 4, 2007
PAYX Interesting
Paychex, Inc. (PAYX) presents very interesting economics. It's durable competitive advantage appears to be its ability to execute in taking over payroll work of small businesses. With ever increasing Marxist enslavement of small businessmen and women to do more and more complex tasks for government, I see excellent growth opportunities for PAYX for many years ahead. The only things that could stand in the way of outstanding growth is bad management coming in or a change in government at the federal level stopping the federal income tax, perhaps a Ron Paul of Mike Huckabee. Complexity in government is the key to PAYX's future success!
In a study of the stock, I found "Value Line" expressing a current ratio of about 4, while Standard and Poor's (my broker's source of information) expresses a current ratio of 1.11. Minimums for a current assets are generally $2 for every $1 in current liabilities. There are some exceptions (Advo), but I'm not ready to trust them yet. See "The New Buffettology" for more on this topic.
I called PAYX yesterday, and they indicated on the phone that "Value Line" carried a similar difference from another online presentation of Yahoo, Inc. Their internal email from their CFO, I understand, is being mailed to me hard copy with the investor kit I requested from PAYX.
My stock broker is sending my concerns up the line to his boss to find out why there are two different current ratio presentations.
Gene
In a study of the stock, I found "Value Line" expressing a current ratio of about 4, while Standard and Poor's (my broker's source of information) expresses a current ratio of 1.11. Minimums for a current assets are generally $2 for every $1 in current liabilities. There are some exceptions (Advo), but I'm not ready to trust them yet. See "The New Buffettology" for more on this topic.
I called PAYX yesterday, and they indicated on the phone that "Value Line" carried a similar difference from another online presentation of Yahoo, Inc. Their internal email from their CFO, I understand, is being mailed to me hard copy with the investor kit I requested from PAYX.
My stock broker is sending my concerns up the line to his boss to find out why there are two different current ratio presentations.
Gene
Thursday, November 29, 2007
Buying AEO
I'm buying more American Eagle Outfitters (AEO) today at 12 times current earnings.
Harley Davidson (HOG) is still headed clearly downward from $48 per share (12 times current earnings) with the sub prime mortgage crunch still impacting credit for big purchases of Harley Davidson motorcycles; however, should it drop closer to ten times next year's projected earnings per share of $3.65 ($36.50), I'll continue to load up on it.
Not much else is on the horizon for a value investor right now, so it appears we are in an over valued market, presently. I noted that they announced a 10% overall correction took place yesterday from market highs. That's good news for those of us seeking lower prices for stock purchases. We are entering a bear market for a while. Excellent!
Gene
Harley Davidson (HOG) is still headed clearly downward from $48 per share (12 times current earnings) with the sub prime mortgage crunch still impacting credit for big purchases of Harley Davidson motorcycles; however, should it drop closer to ten times next year's projected earnings per share of $3.65 ($36.50), I'll continue to load up on it.
Not much else is on the horizon for a value investor right now, so it appears we are in an over valued market, presently. I noted that they announced a 10% overall correction took place yesterday from market highs. That's good news for those of us seeking lower prices for stock purchases. We are entering a bear market for a while. Excellent!
Gene
Tuesday, November 27, 2007
Reliability
Dear Diary,
The whole of this study has to do ultimately with the 'reliability' of an investment; however, the primary indicator of this reliability that a particular stock is to be treated with the respect of a bond should be started with Benjamin Graham. Graham was Warren Buffett's professor at Columbia University, a profoundly important influence upon Mr. Buffett.
Graham believed that if a given company had positive earnings (no deficit) for the previous ten (10) years, it could be said that this business had 100% reliability. In other words, this business was not going out of business in the near future and would create a profit, all things being equal. I go one or two steps further in that I propose that an upward trend in earnings over these ten years with an identifiable durable competitive advantage and a 'mega cap' position in the market makes the business a 'consumer monopoly,' a term used by the man who taught me business investing, David Clark, co-author of "Buffettology" and "The New Buffettology."
The whole of this study has to do ultimately with the 'reliability' of an investment; however, the primary indicator of this reliability that a particular stock is to be treated with the respect of a bond should be started with Benjamin Graham. Graham was Warren Buffett's professor at Columbia University, a profoundly important influence upon Mr. Buffett.
Graham believed that if a given company had positive earnings (no deficit) for the previous ten (10) years, it could be said that this business had 100% reliability. In other words, this business was not going out of business in the near future and would create a profit, all things being equal. I go one or two steps further in that I propose that an upward trend in earnings over these ten years with an identifiable durable competitive advantage and a 'mega cap' position in the market makes the business a 'consumer monopoly,' a term used by the man who taught me business investing, David Clark, co-author of "Buffettology" and "The New Buffettology."
Gene
Monday, November 26, 2007
Relative Value
Dear Diary,
Relative Value, for our Warren Buffett styled investment purposes, means relative value to the 30 year treasury bond. For example, when I began buying Harley Davidson (HOG) a few weeks ago, it was trading at about $46.00 per share. The long bond was trading at 4.78%, as I remember. Earnings per share were estimated to be $3.65 per share in 2008. Now, $3.65 divided into 4.78% is $76.359.
What this means is that I bought a share of HOG for $30.359 ($76.359 - $46.00 = $30.359) less than I would expect to get for the most stable investment I could make (the 30 year treasury bond). What the investor must ask himself or herself is whether there is any reason to believe HOG to be less reliable than an investment in the 30 year treasury bond.
I'll begin to address reliability next.
Gene
Relative Value, for our Warren Buffett styled investment purposes, means relative value to the 30 year treasury bond. For example, when I began buying Harley Davidson (HOG) a few weeks ago, it was trading at about $46.00 per share. The long bond was trading at 4.78%, as I remember. Earnings per share were estimated to be $3.65 per share in 2008. Now, $3.65 divided into 4.78% is $76.359.
What this means is that I bought a share of HOG for $30.359 ($76.359 - $46.00 = $30.359) less than I would expect to get for the most stable investment I could make (the 30 year treasury bond). What the investor must ask himself or herself is whether there is any reason to believe HOG to be less reliable than an investment in the 30 year treasury bond.
I'll begin to address reliability next.
Gene
Thursday, November 22, 2007
Happy Thanksgiving
Dear Diary,
It's been several years since I shut this down in paper form to fight with the IRS and its immoral and illegitimate personal income tax (2nd Plank of "The Communist Manifesto). I've decided to go in the opposite direction of poverty and homeless shelters and rather reestablish my positive relationships with business leaders. Perhaps, we will still win the battle for Constitutional government and individual liberty.
Currently, I'm loading up on Harley Davidson (HOG) and American Eagle Outfitters (AEO) at 12 times current earnings per share and lower in a ROTH IRA I started a few weeks ago. I'm expecting that HOG should hit $96 per share and that AEO should hit $56 per share within the next 2 years, my horizon for a Buffett styled business investment.
A hay farmer in Montana expressed interest in me investing some of his profits in the stock market a few months ago. We'll see. My CPA is good with the idea but wants me to write up a good agreement to protect us both from heirs, should one of us pass away.
Happy Thanksgiving, Diary.
It's been several years since I shut this down in paper form to fight with the IRS and its immoral and illegitimate personal income tax (2nd Plank of "The Communist Manifesto). I've decided to go in the opposite direction of poverty and homeless shelters and rather reestablish my positive relationships with business leaders. Perhaps, we will still win the battle for Constitutional government and individual liberty.
Currently, I'm loading up on Harley Davidson (HOG) and American Eagle Outfitters (AEO) at 12 times current earnings per share and lower in a ROTH IRA I started a few weeks ago. I'm expecting that HOG should hit $96 per share and that AEO should hit $56 per share within the next 2 years, my horizon for a Buffett styled business investment.
A hay farmer in Montana expressed interest in me investing some of his profits in the stock market a few months ago. We'll see. My CPA is good with the idea but wants me to write up a good agreement to protect us both from heirs, should one of us pass away.
Happy Thanksgiving, Diary.
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