National Presto Continues To Fall

National Presto Industries (NPK) now trades with a P/E under 10, having dropped 50% of its share price in just the last year and a bit! Instead of discussing the company further, I'll point you to someone who has already done so at GuruFocus, but come back here when you're done because there are a couple of issues with that article that I want to dissect.

Done reading it? Okay good!

In my opinion

The Little Book That Builds Wealth: Chapter 11

Morningstar's equity research director authored this book on identifying companies with competitive advantages. Dorsey separates competitive advantages into four categories, providing a framework for understanding how wide a moat a company really has. The book is full of examples of companies Dorsey believes have moats, and the reasons why their moats are likely to last - or not!

The Little Book That Builds Wealth: Chapter 10

Morningstar's equity research director authored this book on identifying companies with competitive advantages. Dorsey separates competitive advantages into four categories, providing a framework for understanding how wide a moat a company really has. The book is full of examples of companies Dorsey believes have moats, and the reasons why their moats are likely to last - or not!

Mainstream vs Real Revenue Risk

The mainstream finance industry defines a company's riskiness by its stock price's volatility. For value investors, there is no such short cut; a company's riskiness is defined by a slew of factors that can affect the business. Previously, we have considered some items that can affect risk on the cost side. Today's post will discuss some items relevant to risk on the revenue side. The vast majority of analysts and investors are so focused on near-term results that they rarely think about these long-term business risks; investors who consider these are poised to generate better returns in the long-term.

Harbinger, Spectrum Marriage Back In Spotlight

In late 2010, Harbinger Group was discussed on this site as a potential value play because its holdings in Spectrum Brands exceeded its market cap! The discount did converge somewhat in late 2011, but it has now widened to even higher levels; since that article in November of 2010, Spectrum's stock is up almost 20% while Harbinger has been practically flat.

Volatility Unrelated To Performance?

The mainstream finance industry equates price volatility with risk and believes the market to be efficient. That is, prices of stocks are fairly priced, and therefore the only way to generate higher returns is by taking more risk (i.e. buying stocks with higher volatilities).

Xerox Has Long-Term Value

Xerox (XRX) has a P/E ratio of 7 and a P/OCF ratio under 5. As a result, it trades under book value (!) despite an ROE greater than 10% and operating margins in the high single digits. Before you dismiss this company out of hand as a dinosaur, consider that this is not your father's Xerox. Just as we've recently seen how Dell is no longer the PC company you thought it was (and therefore may be undervalued as well), neither is Xerox the copier/printer maker of yesteryear. Today, Xerox derives the majority of its revenues and profits from the sale of services (business process, IT and document outsourcing).Read more...