Pitfalls and Traps

On this site, the findings of various stock market analysts have at times been called into question. In the book Managing Investor Portfolios: A Dynamic Process, the esteemed authors discuss some of the traps analysts fall into when making their forecasts.

EnviroStar Trades Higher

Two years ago, EnviroStar (EVI) was brought up on this site as a potential value play. Since then, it has been further discussed a couple of times due its high ROE when adjusted for cash, and its potential revenue rebound. More recently, however, shares of EnviroStar traded more than 50% higher than they did back then, making it the latest stock to leave the Stock Ideas page for the Value In Action page.

Those Acquisitions Aren't MY Fault!

On this site, corporate managers have been berated for making risky acquisitions, especially at high multiples and especially when buybacks would generate strong returns for shareholders. But perhaps it's not always their fault. In an interesting find from Footnoted (a blog that you should check out if you haven't), we see that a public company was forced to make acquisitions by the mob!

It's Not Rocket Science: Part VI

Tom Bradley is a founder of Steadyhand, a different kind of mutual fund company that focuses on low-fee, low-turnover portfolios where managers are encouraged to seek value wherever it can be found. Bradley summarizes his thoughts on how to beat the market in his book It's Not Rocket Science, summarized below

It's Not Rocket Science: Part V

Tom Bradley is a founder of Steadyhand, a different kind of mutual fund company that focuses on low-fee, low-turnover portfolios where managers are encouraged to seek value wherever it can be found. Bradley summarizes his thoughts on how to beat the market in his book It's Not Rocket Science, summarized below

It's Not Rocket Science: Part IV

Tom Bradley is a founder of Steadyhand, a different kind of mutual fund company that focuses on low-fee, low-turnover portfolios where managers are encouraged to seek value wherever it can be found. Bradley summarizes his thoughts on how to beat the market in his book It's Not Rocket Science, summarized below

It's Not Rocket Science: Part III

Tom Bradley is a founder of Steadyhand, a different kind of mutual fund company that focuses on low-fee, low-turnover portfolios where managers are encouraged to seek value wherever it can be found. Bradley summarizes his thoughts on how to beat the market in his book It's Not Rocket Science, summarized below

Buffett and You

Though he studied under Ben Graham and has adopted many of Graham's investing principles, the world's greatest investor is not your typical value investor. He speaks of margins of safety and of buying companies at discounts, but over the years Buffett has shown a willingness to buy businesses for what appears to be full price, at least on a P/E basis. What allows Buffett to do this and still generate excellent returns is his ability to understand economic "moats" better than anyone else.

Janus Is Cheap

Janus Capital (JNS) manages and sells mutual funds to both retail and institutional investors. The management and performance fees these funds generate become Janus' revenues, and these revenues have provided the company with a steady stream of cash flow over the years (as seen over at frankvoisin.com).

Odds Required To Time The Market

Many participants in the stock market base their buy and sell decisions on attempts to time the market. The idea is to buy into the market just before prices rise, and sell before they decline. Many studies have shown that it is very difficult to correctly time the market. But assuming you had superior foresight, how often would you have to be right in order to beat a buy and hold investor?

It's Not Rocket Science: Part II

Tom Bradley is a founder of Steadyhand, a different kind of mutual fund company that focuses on low-fee, low-turnover portfolios where managers are encouraged to seek value wherever it can be found. Bradley summarizes his thoughts on how to beat the market in his book It's Not Rocket Science, summarized below

It's Not Rocket Science: Part I

Tom Bradley is a founder of Steadyhand, a different kind of mutual fund company that focuses on low-fee, low-turnover portfolios where managers are encouraged to seek value wherever it can be found. Bradley summarizes his thoughts on how to beat the market in his book It's Not Rocket Science, summarized below

Be Aware Of These Biases

Daniel Nevins is a managing director at SEI Investments. Not unlike Charlie Munger (whose discussion of human tendencies we have summarized), Nevins is a student of human biases which cause individuals to underperform as investors. In his paper titled Integrating Traditional and Behavioral Finance, Nevins notes the following biases:

Cash For Granted

As investors, we often take a company's cash and short-term securities for granted. Accounts receivable may be written down (who knows if all customers will pay, especially that major one!), inventories may not be worth their full value, but cash equivalents are worth their book value, right? Maybe they are most of the time, but that's not necessarily true.

Perceptron Management Responds

A few weeks ago, I wrote about the value potential (and risks involved) of investing in Perceptron, a producer of measurement and inspection products. Its CFO, Jack Lowry, has responded to the article.

Ambassadors Group: Activism In Action

Ambassadors Group (EPAX) looks like a value stock, but with deteriorating fundamentals. A value investor appears interested in making some changes at the company, which could interest some catalyst investors.

Value Investing And The Groupon IPO

Value investors should stay away from IPOs for a plethora of reasons. Rarely are those reasons so well exemplified as they were in the case of Groupon's IPO, which occurred about two weeks ago.

Quality of Earnings: Chapter 12

Investors rely heavily on the financials that companies release. But managements have significant leeway when it comes to creating its results. In this book, Thornton O'Glove tells investors how to judge the quality of a company's earnings, in order to both protect against fraud and find value.

Quality of Earnings: Chapter 11

Investors rely heavily on the financials that companies release. But managements have significant leeway when it comes to creating its results. In this book, Thornton O'Glove tells investors how to judge the quality of a company's earnings, in order to both protect against fraud and find value.

Beyond The Financials

Value investors, myself included, tend to prefer financials to "stories" about why a stock should outperform. But good financials are often the result of policies instituted by management that are not as easy to measure and compare as are financials. Investors who can identify companies on this basis have an opportunity to profit before the financials of said companies betray their success, resulting in extraordinary gains.

hhgregg: Now A Much Fairer Price

Just over three months ago, hhgregg (HGG) was featured on this site for its ridiculously low price. Recently, it could be sold for 40% higher than its July price, and 70% higher than its low in October! As such, hhgregg is the latest stock to move from the Stock Ideas list to the Value In Action page. There are plenty of lessons to be learned from this value opportunity.

Media Worth Your Time

I've poked a lot of fun at the mainstream financial media over the course of this blog's short history, so it seems only fair to give credit to media sources when they deserve it.

Value or Not?

Analyst Barry Cooper believes Barrick Gold (ABX), a gold miner, is a value stock. He cites the stock's P/E ratio, which is under 10, and argues that "value investors will either step into the stock or there are no value investors left in the market". But intelligent investing is not just about isolating low multiples; for this reason, Cooper is wrong about his assertion on so many levels.

Startek's Star Customers

Startek makes for an intriguing value play. The company has $20 million worth of cash, but trades for just $38 million. Before the recession, this company was averaging more than $10 million in earnings per year.

Quality of Earnings: Chapter 10

Investors rely heavily on the financials that companies release. But managements have significant leeway when it comes to creating its results. In this book, Thornton O'Glove tells investors how to judge the quality of a company's earnings, in order to both protect against fraud and find value.

Quality of Earnings: Chapter 9

Investors rely heavily on the financials that companies release. But managements have significant leeway when it comes to creating its results. In this book, Thornton O'Glove tells investors how to judge the quality of a company's earnings, in order to both protect against fraud and find value.

Competition and Margins

We often talk about profit margins on this site. Analyzing the profit margins of a company can help you determine its profitability relative to its competitors. For example, if two competitors have equal net incomes but one has twice the profit margin of the other, then over time we may see the more efficient company steal market share and grow at a faster rate. (This can happen for several reasons

Just This Once, I Promise!

Companies are required to release their financial results according to GAAP. Often, however, companies will also release what they call "Pro Forma" statements, where certain "one-time" costs are often removed. These statements, managements say, better reflect the earnings power of the company. However, investors are urged not to take managements word, but rather to consider the "one-time" costs to make their own determinations as to whether these apply in the future.

Urbana Management Responds

A few days ago, a group of value investors (which included the authors of sites frankvoisin.com and pettycash.wordpress.com) sent a letter to Urbana's chief executive asking that the company be more aggressive in its share buybacks. Frequent visitors to this site may recall that Urbana has been discussed here as a potential value investment due to the rather large discount at which it trades to its (mostly stock) portfolio. Management's response was rather predictable.

MF Global A Buy

MF Global (MF) is a broker that trades for its clients and on its own behalf. Yesterday, MF Global filed for bankruptcy! On the day before its filing, three of the eleven analysts covering the company rated the stock as a "Buy"