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I have 17 consecutive profitable trades of 15% or better. How is this possible? Every day there are hundreds of stocks setting new highs, no matter what happens in the overall market. Many of these stocks are still at very reasonable valuations. Afraid of buying stocks at their highs? Think of it this way: a new high is really a future floor for companies with solid financial underpinnings. Quantitative momentum modeling makes it easy to identify stocks that can continue this upward momentum trend. Why does this happen? It's really very simple..ask me about what investors and cows have in common. I am $$$ MR. MARKET $$$. I AM HUGE!!! Bring me your finest meats and cheeses. You can join in on the fun. Register for free and you'll be able to post messages on this forum and also receive emails when $$$ MR. MARKET $$$ makes his own trades. ($$$MR. MARKET$$$ is a proprietary investor and does not provide individual financial advice. The stocks mentioned on this forum do not represent individual buy or sell recommendations and should not be viewed as such. Individual investors should consider speaking with a professional investment adviser before making any investment decisions.)
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  1. #11
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    Quote Originally Posted by skiracer View Post
    what do you think of NJR and KO?
    KO - Always nice to see revenues and net income increase every year, and accounts receivables are not increasing at an alarming rate. I see a jump in goodwill from 4.2bn to 11.6bn from 2009 to 2010, and total debt increase from 12bn to 23bn. My guess is that this was due to a significant acquisition. I can't say with certainty without checking out the 10K (which I will not be doing for most of my analysis)

    KO uses a much noticeably smaller portion of its cash from operating activities than the previous NJR, around 25% per year. This is well reflected in KO's better return on equity numbers and ability to pay significant dividends, as well as increases in shareholder equity. Other than that, I don't see any other numbers that raise an eyebrow.

  2. #12
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    Quote Originally Posted by peanuts View Post
    OK, here's a fun one. You'll love to see this debacle. Yes, it's bad, but I think it will give us a great opportunity to see your analysis.

    ZANE

    And then, on the opposite side of the fundamental spectrum, check out this one:

    USLM
    ZANE - Sorry to burst your bubble, but this one actually isn't fun. It has been losing money, and cashflow has netted flat over the past 4 years. There's nothing else worth looking at for ZANE. A company must make money, otherwise, it's not worth investing in.

    USLM - This one is more interesting, although probably something that I shouldn't analyze since it's has roots in commodities. The reason is because I don't properly understand the accounting for companies like this. For example, inventory for oil companies is accounted for based on the "replacement price", rather than the traditional LIFO or FIFO. Then, there are things like the right to mine/drill in an area, and assets on the balance sheet which reflect an estimated amount of commodity in the location.

    With that said, let's look at the numbers. As a company that isn't expanding operations, doesn't pay dividends or repurchase stock, it's important to see the cash balance increasing, which it does. I don't see significant movements in revenues, net income, accounts receivables, which makes me think the company is not growing. This is fine, but would be nice to see it start paying dividends. Otherwise, you'll start seeing its return on equity and assets drop, as the money can probably earn a higher return elsewhere. Its return on equity and assets are ok, nothing to rave about. Company is definitely viable, but probably not a star.

  3. #13

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    Meteoraln...I love this thread. It's great to see some fundamental analysis. We have some terrific technical analysts here so this really gives us some reflection. Stick around!
    =============================

    I am HUGE! Bring me your finest meats and cheeses.

    - $$$MR. MARKET$$$

  4. #14
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    Quote Originally Posted by skiracer View Post

    What about the fact that it has practically doubled in the past 1 1/2 - 2 years. But I like your approach to it and your numbers are pretty much on.
    Well, I wouldn't say NJR has doubled.... looking at the chart, it went from a low of around low 30's right after the housing crisis to a high 45, perhaps a 50% increase.

    I can't really say much about the movement in the price of any stock except for this. The market price can fluctuate wildly as people's emotions and feelings change. Fear had caused the prices of many stocks to unjustly drop during the housing crisis. With 20/20 hindsight, we see that there are businesses that were minimally affected by the the crisis, although their stock price had been a roller coaster ride.

    Intrinsic value however, is something that changes very slowly. The problem with looking at intrinsic value is that it is not readily available like market value. Intrinsic value is also different for everyone. The intrinsic value for a company depends on what you feel is a reasonable rate of return.

    Let's say there's a company that earns 3 dollars per year consistently for the past 50 years. How much should you buy it for? Given that you can put 100 in some type of bank account to earn 3 dollars per year in interest, there's no reason why you should buy this company for more than 100 dollars. If you were to pay 100, then it means you are happy receiving a 3% return. For someone who wants a 20% return, they cannot purchase this business for more than $15. In such a scenario, $15 would be the intrinsic value of the company. The market price would be what he is able to purchase it at. In the event that the market value is lower than the intrinsic value, you can be confident making a purchase knowing that you will be receiving a good rate of return.

  5. #15
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    Excellent thread. Thanks for posting, and I look forward to more.
    Hide not your talents.
    They for use were made.
    What's a sundial in the shade?

    - Benjamin Franklin

  6. #16
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    Dec 2004
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    Quote Originally Posted by meteoraln View Post
    Well, I wouldn't say NJR has doubled.... looking at the chart, it went from a low of around low 30's right after the housing crisis to a high 45, perhaps a 50% increase.

    I can't really say much about the movement in the price of any stock except for this. The market price can fluctuate wildly as people's emotions and feelings change. Fear had caused the prices of many stocks to unjustly drop during the housing crisis. With 20/20 hindsight, we see that there are businesses that were minimally affected by the the crisis, although their stock price had been a roller coaster ride.

    Intrinsic value however, is something that changes very slowly. The problem with looking at intrinsic value is that it is not readily available like market value. Intrinsic value is also different for everyone. The intrinsic value for a company depends on what you feel is a reasonable rate of return.

    Let's say there's a company that earns 3 dollars per year consistently for the past 50 years. How much should you buy it for? Given that you can put 100 in some type of bank account to earn 3 dollars per year in interest, there's no reason why you should buy this company for more than 100 dollars. If you were to pay 100, then it means you are happy receiving a 3% return. For someone who wants a 20% return, they cannot purchase this business for more than $15. In such a scenario, $15 would be the intrinsic value of the company. The market price would be what he is able to purchase it at. In the event that the market value is lower than the intrinsic value, you can be confident making a purchase knowing that you will be receiving a good rate of return.
    I always like a good conversation supported by factual evidence. But what I don't agree on with your arguement is that you are seldom going to find "market value" lower than "intrinsic value". Also what you want as far as return is something that is conjured up in your own mind and what you think you should or must get as a return on your money. Buying and holding because of what you think are fundamentally sound financials are never going to work in that respect because the markets perform according to the mentality of the money being brought into them with respect to the people behind that money. Also the sentiment of the economy has much more to do determining the trend of the markets in general than the true value of any specific stock at any given time.
    I'm not advising against buy and hold over the very long term with stocks paying significant dividends, and there are a number of them available, but unless you can specifically make the determination of market trend, either up or down, then relying on the fundamental aspects of any stock only results in what has happened to Ernie's trade in NTES. A great company with a great product line and fundamentals but caught in the abyss of market sentiment.
    Probably 75% of the available stocks in the stock universe follow the market regardless of what their fundaments suggest they should be doing. In a strong market and economy where the trend is definitely up you could throw a dart at any number of stocks and see them appreciate only because that is the direction of the market and a very high percentage of those stocks will follow the market trend. And in a bad economy and market, like we are experiencing today, it's one step forward and two steps backward, but over the longer haul the line is heading down regardless of their fundamentals or whatever their return may be. Dividends can counter balance that to some degree but they will not counterbalance price action relative to market trend and sentiment.
    We have been thru this numerous times here over the past 5 or 6 years and I am still convinced that you cannot rely on the fundamental aspects of any stock in any given market environment. Strong fundamentals and ROI are always meaningful but determining market trend and following it are more important in my opinion. Trading over a short period of time according to the market trend and the technical aspects of any stock and having a specific strategy and plan will produce much better results than relying strictly on the fundamentals and ROI.
    I also think that locking yourself into any specific strategy only inhibits your opportunities and the percentage of them available to you. Relying on only one or two indicators or fundamentals takes away numerous opportunities that have nothing to do with whether or not the stock is fundamentally sound in some specific area.
    THE SKIRACER'S EDGE: MAKE THE EDGE IN YOUR FAVOR

  7. #17
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    Quote Originally Posted by wooish View Post
    How about NYB and HOV two of favorite stocks of this board.
    NYB - I really shouldn't be doing this one... it's a bank and I can't analyze it well. This is how banks work. We deposit money into the bank, the bank lends out money, and in return, receives a securitized mortgage. This securitized mortgage then shows up as an asset on the balance sheet, I'm guessing the Net Loans line in msn. So the problem is.... I don't know what% of this number represent loans in default. And if a loan is in default, I don't know how much of the money can be recovered when the house is sold, and whatever related fees are paid for. Since I can't do this, I can't figure out what the assets total really is, meaning I have no idea what the shareholder equity total is. Bank of America has engaged in the practice of not foreclosing homes that have defaulted loans. By not kicking out the tenants, BAC does not have to pay property taxes, and does not have to write a loss on the loan.... yet. This can be very helpful to them if they have more houses than they can sell. Maybe they're waiting out the housing crisis before selling... who knows...

    Anyway.... with all that said, Google finance didn't have the statements so I had to go to msn. Assuming the numbers on the statements are accurate, there's a 500m jump in debt for 2008, which is probably bailout money. There is also significan dilution of the stock, from 323m to 435m shares outstanding from 2008 to 2010. The bailout money probably wasn't enough capital. There's a 716m spike in change in working capital for 2010, need to look at the 10K for that one. Earnings have been increasing, largely due to a reduction in interest expense. This can't last forever since interest rates are basically 0 right now.

    HOV - I see red everywhere... losing money the past 4 years, shareholder equity has dipped into negative. Total assets keeps dropping, especially inventory. I don't know if this is due to writing down inventory or slowing of production. I have no idea how they will pay off their debt, since they don't have enough cash flow. This company is currently insolvent if liquidation occurs, meaning the common stock will be worth zero.

  8. #18
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    Quote Originally Posted by mrmarket View Post
    Meteoraln...I love this thread. It's great to see some fundamental analysis. We have some terrific technical analysts here so this really gives us some reflection. Stick around!
    Thanks for the support!!

  9. #19
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    Quote Originally Posted by skiracer View Post
    I always like a good conversation supported by factual evidence. But what I don't agree on with your arguement is that you are seldom going to find "market value" lower than "intrinsic value". Also what you want as far as return is something that is conjured up in your own mind and what you think you should or must get as a return on your money. Buying and holding because of what you think are fundamentally sound financials are never going to work in that respect because the markets perform according to the mentality of the money being brought into them with respect to the people behind that money. Also the sentiment of the economy has much more to do determining the trend of the markets in general than the true value of any specific stock at any given time.
    I'm not advising against buy and hold over the very long term with stocks paying significant dividends, and there are a number of them available, but unless you can specifically make the determination of market trend, either up or down, then relying on the fundamental aspects of any stock only results in what has happened to Ernie's trade in NTES. A great company with a great product line and fundamentals but caught in the abyss of market sentiment.
    Probably 75% of the available stocks in the stock universe follow the market regardless of what their fundaments suggest they should be doing. In a strong market and economy where the trend is definitely up you could throw a dart at any number of stocks and see them appreciate only because that is the direction of the market and a very high percentage of those stocks will follow the market trend. And in a bad economy and market, like we are experiencing today, it's one step forward and two steps backward, but over the longer haul the line is heading down regardless of their fundamentals or whatever their return may be. Dividends can counter balance that to some degree but they will not counterbalance price action relative to market trend and sentiment.
    We have been thru this numerous times here over the past 5 or 6 years and I am still convinced that you cannot rely on the fundamental aspects of any stock in any given market environment. Strong fundamentals and ROI are always meaningful but determining market trend and following it are more important in my opinion. Trading over a short period of time according to the market trend and the technical aspects of any stock and having a specific strategy and plan will produce much better results than relying strictly on the fundamentals and ROI.
    I also think that locking yourself into any specific strategy only inhibits your opportunities and the percentage of them available to you. Relying on only one or two indicators or fundamentals takes away numerous opportunities that have nothing to do with whether or not the stock is fundamentally sound in some specific area.
    You've said many things that are right. It's definitely not easy finding companies where market value is below or even near intrinsic value, providing that you are conservative enough.

    There is however, a good way to determine what a "reasonable" rate of return is. The market has averaged between 8%-12% per year historically. Granted that you often hear people make the claim that you can't beat the market (and they're right most of the time) it makes sense that you require that your reasonable rate of return be higher than 12%. I've chosen 15% as that magic number, as have others. Honestly speaking, if you can't beat the market, just buy an index fund and at least you won't do any worse.

    The thing is, while market values can fluctuate wildly, they will eventually return near some kind of fair value. Management can always do something to make the market value move closer to intrinsic value.

    Imagine a simple company with no earnings or operations, just a bank account with 100 dollars and 1 share of stock. Let's say the price of the stock is 200, which doesn't really make sense since you will have a claim on a bank account containing only 100 dollars. What should the company do? Well, it should issue more stock. If it sells 1 more share at 200 dollars, that money goes into the bank account. There are now 2 shares of outstanding stock, with a 50% claim against a bank account of 300 dollars. Fair value is now 150 per share. Do it a few more times and fair value will come closer to the market value of 200, or the market value will fall due to an increased supply of stock.

    Let's take the reverse. The market value is only 50 dollars, but has a claim on 100 dollars. Management could pay a dividend. Buying this stock at 50 and then receiving a dividend of 100 is pretty nice, though an extreme example. This is why I find it important to only get into good companies. The odds are in my favor if the company is building shareholder equity and management is looking out for the shareholder and willing to do these necessary tasks.

    I've found only about 4 new companies to trade for this whooooole year. And even after I found them, they couldn't be traded yet because I wanted to wait for price drops. This is definitely not a way of trading if you aren't able to hold a stock for years if necessary.

    It would be wrong to say that I don't trade frequently though, I've done about 300 or so trades for the year, mostly shorting options to collect premiums I'm actually pretty impatient myself.

  10. #20
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    Jan 2005
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    Default Mako?

    I had a total hip replacement this past Jan. The doctor asked me to take part in a trial with a robotic navigational device assisting him in the procedure. I agreed, asked many questions & found the company was MAKO. I initially got in around 17.00 a share & have bought more at around 24 & will hold this for awhile rather that sell at the usual 15% gain. Could you please do the research on this, I here rumors that this will be a 60 - 75.00 stock by the end of the year.
    Thanks from a smooth walking stooge!
    99 percent of Politicians give the rest a bad name.

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