Saturday, March 7, 2009

Alcoa has the beef!

Interesting blurb about Alcoa owning cattle in Australia

Here's the link:

Here's the actual story:

MELTING POT: Alcoa beefing up its operations

Alcoa Inc. is cashing in on what may be the world's last bull market: it is planning to auction off 700 weaner steers online.

In what is a little-known fact, the Pittsburgh-based aluminum producer, via its Alcoa Farmlands, owns the largest beef breeding herd in southwest Western Australia. The cattle are expected to weigh between 615 and 750 pounds apiece, according to Australia's Weekly Times. Alcoa Farmlands has about 11,000 beef cows, including 2,200 Angus breeders and 1,400 Angus cross Murray Grey and straight Murray Grey...

Thursday, February 5, 2009

Should Dow Chemical (DOW) Purchase Rohm & Haas (ROH)

Here is a link to an article about some rich guy telling Dow Chemical (DOW) to complete the merger with Rohm and Haas (ROH). I'm still learning the blogging thing so if there is no hyperlink (sorry) just copy and paste the address into a browser window.

WHAT A JACKASS! My first question is why is it news? If the purpose is to show HOW SHELFISH THE GUY IS then cool. I guess for that I am grateful for the report.

The story is that he owns almost 10% of ROH and has a big paper loss with the expectation that he will have an actual loss if DOW does not go through with the purchase of ROH. Oh well bro, the deal didn't go through and in my opinion should not go through with the current terms. In arbitrage there is always the possibility that a deal dose not go through. I assume you way the odds of success and failure and calculate profit potential and loss potential. If the possible profit justifies taking the risk of loss then do the arbitrage transaction.

Hey rich guy, you took the gamble and maybe you lose this time. Send a letter to DOW saying do the deal even though paying 15 Billion (1.5 times DOW's 9 Billion market cap) for a company that has 9 Billion in revenue and 700 Million in profit seems pretty steep especially in the current market. You just look like a selfish jerk. DOW do the deal even though your major source of funding fell through and now you have to borrow most of the 15 Billion. Yeah rich guy makes no sense but if DOW can make you richer without you even investing in DOW why shouldn't everyone be cheering for the deal.

In my humble opinion you rich guy are the definition of a JACKASS!

Friday, January 2, 2009

Interesting Long Term View for Harley

I'm new to blogging so I hope I do this right. I found this opinion piece about Harley.

Here's the link:

In 2009: Be a HOG!!!.

Take a look at the post and the comments, there's a lot of divergent opinions of Harley. I agree that if we look at the economy today there are reasons to be pessimistic about HOG or most companies for that matter but in 5 years, 10 years, 50 years is Harley going to be making bikes and more of them than today?

I own Harley and I bought in at close to the low for 2008 so I have a nice return so far (30 something %) so I could sell now and feel good but I will not. In times of extreme pessimism about the general economy and specific companies it is very hard to see good times ahead. The thing is that pessimism will slowly change and eventually we will be back in the good times, the economy will be growing and Harley will be making more bikes than ever.

Below is part of the post (I included the blog title and links to the story and comments)

In 2009: Be a HOG!!!

January 02, 2009 – Comments (6)

A lot of companies have been beaten down by the economy, we all know that. But I am an eternal optimist when it comes to the American economy and its ability to come back with a vengeance. In my opinion right now is one of the greatest, and maybe the greatest, time to buy undervalued companies in the last half a century. One company that I have recently added to my portfolio (a little disclosure there) is Harley Davidison (HOG). If there is a company that I can see being around 50 or even a 100 years from now, this is one of them. Here are the following reasons why:

1. Brand Power - Everyone knows what a Harley is and nearly everyone would love to have one.

Wednesday, November 26, 2008

Harley Davidson in a Different Light

HOG closed on Wednesday 11/26/2008 at $17.06. Based on that close the Market Capitalization is 3.97 Billion. If I could convince everyone that owned the shares to sell me theirs at that close I could buy HOG for 4 billion dollars.

A lot of money for sure but let's look at a few other numbers before we make our decision. The company had sales revenue in millions of 6,143.04, 6,185.58, 5,673.83 and 5,320.45 in 2007, 2006, 2005, 2004. So 6 billion, 6 billion, 5 billion and 5 billion during its most recent fiscal years. Sure their sales could drop and probably will in most recessions but they will also go back up. How many 40 year olds, 50 year olds, even 30 year olds do you see on crotch rockets? If I bought a bike I'd buy a Harley and so would you right.

The whole company is selling for less than their yearly revenue the past 4 years! It gets better.

HOG made the following in millions (NET Income) in 2007, 2006, 2005, 2004: 933.84, 1,043.15, 959.60, 889.77. So they made about 1 billion, 1 billion, 1 billion and 0.9 billion during the past 4 years.

So for our 4 billion purchase of Harley we get 5.5 billion in sales and 1 billion of income using the past 4 years numbers. Again, in a recession these numbers are going go down. But by how much? Are older men and women that can afford and want a motorcycle going to disapeer? Are they going to swith to crotch rockets? Harley is an American Icon!

If you got an extra 4 billion laying around I say lets do it. If not buying small pieces of the company at these low prices looks like a bargain to me. What do you think?

Monday, November 24, 2008

New Investments

I bought 4 positions on Friday 11/21/08. I figured with the large drop in the market on Thursday 11/20 it was time to start buying. The general market had a large rise in the afternoon but I bought these stocks in the morning.

I used 2 basic criteria to make these decisions.
1. Low Price to Earnings Ratio.
2. High Dividend Yield.

My 4 stock picks are:
1. Harley Davidson (HOG)
2. General Electric (GE)
3. Dow Chemical (DOW)
4. Alcoa (AA)

All 4 of these companies have PE rates below 10 using average earnings over the last 10 years (although with the current share price for GE the PE rate rose above 10). All 4 companies have dividend yields over 8% (again with the current price for Alcoa the yield dropped below 8%). As long as these companies stay below these 2 criteria I would say they are priced right.

My thinking on these picks comes from The Intelligent Investor by Benjamin Graham. Paying a low price for established succesful companies and diversification.

Any thoughts?

Thursday, November 13, 2008

Value Investing

The copy of The Intelligent Investor that I have is the 4th Revised edition, Copyright 1973. In the appendix is an article by Warren Buffett called The Superinvestors of Graham-and-Doddsville. It's a great article and if you get a chance check it out. There is one simple and powerful message that really stood out to me and basically summarizes Value Investing. If you could pay $.40 for $1 would you do it?

Simple right but why is it so hard to apply in the stock buying universe? I think my biggest problem in the past trying to understand the concept was trying to value a stock based on the future expectations of a company. If sales and income are going up 100% or whatever #, then a stock selling at a high Price to Earnings ratio should make sense to buy. My experience buying these companies is generally the future expectations do not work out like planned so the high P/E ratio becomes excessively high and the stock price soon drops. So how do I pay 40 cents for a dollar bill?

The first criteria I came up with is low P/E ratio based on average earnings for the last 5 years and the current stock price. I defined low as P/E around 10. So to use some simple numbers, if a stock sells at $10, the average earnings for the last 5 years should be around $1. My thinking goes like this: I'm receiving $1 in earnings from this company for every $10 I'm investing. If the company is running its business well some of those earnings will come back to me in dividends and some will be reinvested to build the business so it can earn even more money for me in the future.

Here's what i'm trying to say using big fancy words. I want to buy stock in companies with higher intrinsic value than market capitalization value. One simple criteria to begin identifying these companies is by using the P/E ratio.

Thursday, November 6, 2008