Tempur-Pedic Stock Crashes

Shares of mattress maker Tempur-Pedic (TPX) fell a whopping 48% yesterday after the company lowered its guidance for the quarter and the year. This consistent generator of high returns on both equity and capital now trades at a P/E (based on its newly-lowered expectations for the current year) of just 8! Does this represent an opportunity to buy a company with a competitive advantage at a great discount? Read more...

Here Are My Puts...So $CALL Me Maybe?

MagicJack (CALL) made an interesting move with respect to its share repurchase program last quarter. As reported by the Wall Street Journal, the company actually sold puts on its own shares. As a result, it increased its profits (through the sale of the puts) some 20%! (If you're not a subscriber to the WSJ, just Google the article's headline and you should be able to avoid the pay wall that way. The WSJ doesn't want you getting full article access when you click through this site, but will provide the full article when you click it through Google! I look forward to the day the WSJ breaks this anti-trust story!)

The WSJ basically sees this as a risky move for MagicJack, for if the company's share price had moved south, not only would the profit on the puts have disappeared, but losses on the puts could have been high. Fear is justifiably evoked when companies play around with their own stock or derivatives thereof, as it can lead to trouble ranging from price manipulation to insider trading to financial statement shenanigans that can topple companies (as seen at Enron, where company shares were used as collateral to guarantee the worth of the company's own assets, as described in The Smartest Guys In The Room). But I would argue that the sale of put options for MagicJack doesn't have to be particularly risky.

Symantec Looks Cheap

Shares of software security firm Symantec (SYMC) have fallen considerably over the last month, bringing the company's price to a two year low. As a result, the company trades just a few percent away from its March 2009 lows even though the company's revenues and profits are considerably higher now than they were then. The company now trades at a P/E below 10, despite having more cash than it does debt and despite a return on equity in the mid-teens over the last few years. Read more...

Hang In There!

It's well understood that value investors prefer the stock price to be as low as possible before they buy in. But what isn't so obvious is what is desired of the stock once the investment has been made. The natural inclination for almost all investors is to hope that the stock price rises immediately after purchase. But is that in the best interest of the value investor? Perhaps not!

Thinking, Fast and Slow: Chapters 4, 5 and 6

Nobel Prize recipient Daniel Kahneman authors this book on the behavioural sciences. Combining his own lifelong research with that of many other leaders in the field, he discusses some of the systematic mental glitches we experience that cause us to stray from rationality, often completely unbeknownst to us. Thinking, Fast and Slow is full of illustrative experiments and examples that you can even try on yourself!

Thinking, Fast and Slow: Chapters 1, 2 and 3

Nobel Prize recipient Daniel Kahneman authors this book on the behavioural sciences. Combining his own lifelong research with that of many other leaders in the field, he discusses some of the systematic mental glitches we experience that cause us to stray from rationality, often completely unbeknownst to us. Thinking, Fast and Slow is full of illustrative experiments and examples that you can even try on yourself!

Ridiculous Explanations of Market Movements

Next time you are frustrated that the market's direction is being driven solely by events in Greece, consider that your premise may be totally incorrect! Every day, the media seeks to explain why the market moved in the direction it did (e.g. "Market rises on confidence in Euro plan to avert crisis" or "Market falls on Greek contagion concerns"). But does the media really know why the market has moved a certain direction?