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
Thursday, November 29, 2007
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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