SuperValu LBO Update

Several quarters ago, SuperValu was discussed on this site as a potential opportunity for regular investors to participate in what looked like a leveraged-buyout type investment play. A few months after that article, shares were higher by about 25%. But today, shares of SuperValu can be had for 20% cheaper than their price when that article was published, even though the company is less risky now than it was then!

Mirage Of Rimage's Cash

Last year at this time, Rimage looked like an attractive stock. It had both a ton of cash relative to its market cap, and a steady source of cash flow such that it could generate a great return for shareholders. But as discussed here, what it lacked was a corporate structure conducive to creating wealth for shareholders. As a result, today the stock sits some 20% lower, and the value of the company has probably fallen by more than that.

The Upside Of Irrationality: Chapter 6

Through a series of experiments, Dan Ariely documents the many ways in which humans behave irrationally. By understanding these human tendencies, we can both learn to behave more rationally when it is to our benefit, and better understand why those around us are behaving in the way they are.

The Upside Of Irrationality: Chapter 5

Through a series of experiments, Dan Ariely documents the many ways in which humans behave irrationally. By understanding these human tendencies, we can both learn to behave more rationally when it is to our benefit, and better understand why those around us are behaving in the way they are.

More PE10 Shortcomings

The PE10 is a useful ratio that aids the investor in determining the relative price level of the aggregate stock market. But as discussed on this site a few days ago, the metric is far from perfect, as the arbitrary use of a 10-year period can bump up or push down the measurement for normalized earnings, thereby biasing the ratio. Another major weakness of the PE10 as a tool for making historical comparisons has to do with a change in how corporations have returned money to shareholders.

Intimidation Tactics In The Market

More frauds are being uncovered in China. This article tells the story of one hedge fund manager who is being sued for what appears to be a factual report. Some snippets:

Understanding The PE10

The PE10 is increasingly becoming a common method for value investors to determine whether the broader market is cheap or expensive. Not only does this method have a logical appeal to it, but data suggests that the magnitude of the market's subsequent 10-year returns is related to its PE10 level.

Revisiting The Forgotten

Some time after you've purchased a stock, you probably have a pretty good idea as to whether you made a good decision or not. This is because you likely follow the stocks you have purchased fairly closely. This feedback mechanism allows you to fine-tune your stock purchase criteria so that you don't make the same mistakes again. But often, some of the best lessons to be learned come from the stocks you didn't buy, but considered buying!

Be A Smart Pro

SmartPros (SPRO) provides training solutions for various markets. As per Google Finance, "[i]ts customers include professional firms and companies of all sizes who purchase the courses for use by their employees, and individuals who purchase courses, programs or subscriptions on a retail basis." This is a small company that trades for just $10 million, but has $6 million of cash and no debt, and has generated $1-2 million of annual free cash over the last few years (excluding acquisitions).

The Upside Of Irrationality: Chapter 4

Through a series of experiments, Dan Ariely documents the many ways in which humans behave irrationally. By understanding these human tendencies, we can both learn to behave more rationally when it is to our benefit, and better understand why those around us are behaving in the way they are.

The Upside Of Irrationality: Chapter 3

Through a series of experiments, Dan Ariely documents the many ways in which humans behave irrationally. By understanding these human tendencies, we can both learn to behave more rationally when it is to our benefit, and better understand why those around us are behaving in the way they are.

Investment Management Out Of Favour

In the last couple of months, two investment management firms have been discussed on this site as potential value ideas, Janus and Artio. This is not a coincidence, as money management firms appear to be out of favour. Consider the assets under management (AUM) to market cap ratio of these managers over the last few years:

Artio Outflows = Investor Upside?

Artio (ART) is an investment manager, earning revenues from assets under management (AUM). Lately, investors have been in no mood to invest, causing outflows at Artio that have reduced AUM from $53 billion at the end of 2010 to just $30 billion today. But while this represents a 40+% decline in AUM, the stock price has declined by over 70% over the same period, which could offer an opportunity to investors.

UFP Technologies Shows Promise

UFP Technologies (UFPT) has been coming up on value screens lately. The designer and manufacturer of packaging solutions (e.g. the plastic or foam that surrounds your consumer electronic device when you buy it) has generated free cash flow approaching $10 million in each of the last two years, but trades for just $90 million despite a net cash position of $24 million!

hhgregg: Back in Value Territory

Shares of hhgregg (HGG) fell off a cliff last week after the company reported preliminary numbers from its all-important holiday quarter that were below expectations. But is the company really only worth two thirds of what it was worth last month? It appears likely that hhgregg's price fluctuates to a far greater extent than its actual value, which could provide an opportunity for value investors.

The Upside Of Irrationality: Chapter 2

Through a series of experiments, Dan Ariely documents the many ways in which humans behave irrationally. By understanding these human tendencies, we can both learn to behave more rationally when it is to our benefit, and better understand why those around us are behaving in the way they are.

The Upside Of Irrationality: Chapter 1

Through a series of experiments, Dan Ariely documents the many ways in which humans behave irrationally. By understanding these human tendencies, we can both learn to behave more rationally when it is to our benefit, and better understand why those around us are behaving in the way they are.

Predictably Irrational: Chapter 13

Dan Ariely is a behavioural economist who refutes the idea that we are fundamentally rational. Through empirical data, experiments and anecdotes, he illustrates that our irrationality can actually be predicted. He then presents ways in which we can make more rational decisions, both as investors and as people.

Longing The Shorts

A few weeks ago, potential sources of stock ideas were discussed on this site. The post made reference to contrarian indicators that signal that a stock is hated; this hatred can result in a low price, which value investors love. One such contrarian indicator is a stock's short interest.

Tracking Insider Ownership In Canada

This post is aimed at investors in Canadian stocks, so for the 80% of you that ignore this market, you can skip now.

Value Research

Analyst research is generally focused on the short-term. Price targets are set only about one year out, and discussion focuses mostly on issues that will affect the company over the next quarter or two. (As an aside, follow @ShitAnalystsSay on Twitter for some analyst parody. Please hold off on the hate mail - I'm not the guy behind that account!)

But Ultimate Value Finder does not provide that kind of research. This monthly newsletter is value-focused, and offers three high-conviction value ideas per issue.

The Power Of Inside Knowledge At Canam

There is a great deal of evidence (one example here) that company insiders (e.g. senior managers) who trade in the stock of their firms do beat the market. Theoretically, this shouldn't happen, as insiders may only trade as long as they are not in possession of material, non-public information. But this is a difficult line to define, as recent events at Canam Group illustrate.

Bank Of...Internet?

I generally stay away from banks, but for value investors who do dabble in the highly-leveraged financial companies, Bank Of Internet (BOFI) may be worth keeping an eye on.

Predictably Irrational: Chapter 12

Dan Ariely is a behavioural economist who refutes the idea that we are fundamentally rational. Through empirical data, experiments and anecdotes, he illustrates that our irrationality can actually be predicted. He then presents ways in which we can make more rational decisions, both as investors and as people.

Predictably Irrational: Chapter 11

Dan Ariely is a behavioural economist who refutes the idea that we are fundamentally rational. Through empirical data, experiments and anecdotes, he illustrates that our irrationality can actually be predicted. He then presents ways in which we can make more rational decisions, both as investors and as people.

Karsan Value Funds: 2011 Q4 Results

Karsan Value Funds (KVF) is a value-oriented fund, as described here. Due to securities regulations, the fund is not open to the public at this time. Should that change in the future, there will be an announcement on this site.

Regulations vs Money-Printing

As recently as three or four decades ago, companies in the US were wary of buying back their own shares because this could be considered illegal price manipulation. In 1982, the SEC enacted a rule that gives companies repurchasing shares safe harbour from prosecution for price manipulation, and this has been a major contributor to the growth of buybacks. But regulations restricting the flow of capital continue to hamper the productive flow of capital, as the following are among the conditions for safe harbour protection, as set forth by the SEC in Rule 10b-18:

Strong ROIC = Lucky or Good?

Companies with strong ROIC and strong ROE numbers may have competitive advantages. On the other hand, there could be many reasons for high returns which could trick the investor into believing a competitive advantage is present. Therefore, it's important for the shareholder to identify the competitive advantage before accepting it as true.

Buyout Offer At Manhattan Bridge

On Thursday, Manhattan Bridge (LOAN), a stock that has been discussed a few times on this site as a potential value investment, received a buyout offer. The stock closed up some 22% on the news, but it probably shouldn't have.

Predictably Irrational: Chapter 10

Dan Ariely is a behavioural economist who refutes the idea that we are fundamentally rational. Through empirical data, experiments and anecdotes, he illustrates that our irrationality can actually be predicted. He then presents ways in which we can make more rational decisions, both as investors and as people.

Predictably Irrational: Chapter 9

Dan Ariely is a behavioural economist who refutes the idea that we are fundamentally rational. Through empirical data, experiments and anecdotes, he illustrates that our irrationality can actually be predicted. He then presents ways in which we can make more rational decisions, both as investors and as people.