June 8, 2006
Valuable Ideas
I see a couple areas of that market that have a lot of value, and I’m happy to share my ideas. Please leave a comment if you think I’m wrong, dumb, crazy, etc.
Financials: I think AIG and Mercury General are cheap… so are Citigroup, Washington Mutual, and Old National Bancorp… maybe Eaton Vance too.
Healthcare: Merck, Pfizer, Abbott Labs, and Bristol Myers are all bargains.
Oldies but Goodies: Home Depot, McDonald’s, Wal-Mart.
Boring old megacaps all, I know, but boy do they look cheap to me.
Cat: | Time: 12:20 pm (utc+8)
June 8th, 2006 at 6:12 pm
How do you define “cheap?”
June 8th, 2006 at 7:36 pm
Scott: The same way Uncle Morty does, using that old fashioned green eyeshade stuff: PEs, Yields, etc.
June 8th, 2006 at 9:02 pm
Everyone is just waiting for the megacaps to pop again…. let’s wait and see
June 8th, 2006 at 9:09 pm
Cheap? Maybe. But I bet after the next few months, they’ll be even cheaper. Especially the three retail-oriented stocks you mention last.
June 8th, 2006 at 9:38 pm
I agree… and I have stocked my portfolio with many of these “boring” names. I’ll let everyone else chase the oils and commodities. Give me a PE in the mid-teens and a 4% dividend any day of the week.
I notice a similar trend among value managers - portfolios are really tilting towards large cap and away from small cap.
It’s a pretty universal viewpoint out there right now, which actually makes me a little nervous…
June 8th, 2006 at 10:32 pm
anybody reading bill cara ? he is fond of buying gold and i think it starts to look promising now…(a technical observation: there’s a little bullish wedge forming on the dailys, lower TL comes in at around 612)
June 9th, 2006 at 2:21 am
I’d say HD definitely goes lower. It stayed afloat vs. Lowes only because of the volume of new home sales/ re-mortgages. (i’m good at spelling) even though the valuation may be fair, it still has a lot of downside news of slowing sales to go through. its loss of market share in the home improvement market will become more evident as our housing market deflates.
Why don’t you put more ads on your site? This is the most tasteful blog i read.
June 9th, 2006 at 2:59 am
Because if it had more ads it wouldn’t be the most tasteful anymore.
June 9th, 2006 at 4:21 am
but it would make it more worth Mao’s while
June 9th, 2006 at 6:54 am
Thanks for the comments, guys.
DT: I don’t make any money from the Google ads because my number of visitors is so small, but I do like tracking my pageview numbers via AdSense.
This guy made CA$901,773.04 from AdSense last month (actually two month’s revenue). I made about .01% of that.
June 9th, 2006 at 7:06 pm
Yeah, but that was Canadian dollars. That’s, like, play money, isn’t it?
As it so happens, my day job is “that old fashioned green eyeshade stuff” (and, I’m talking really, really green). Glad you think so highly of it. Most people find it to be b-o-r-i-n-g (me included, more often than I’d like).
June 9th, 2006 at 9:02 pm
Scott: Last I looked, the CD was approaching parity (yes, it’s looking a lot like the 1970’s), but you’re right, he “only” made US$ 807,715.
I am an extremely boring CPA myself and did that conversion in my head. ;-)
June 14th, 2006 at 3:05 am
By Citigroup and Eaton Vance, do you mean the big ones, C and EV? Never having researched either, I did a symbol search on both, and came up with many entries (unit trusts and other OTC symbols).
June 14th, 2006 at 7:02 am
Moon: Right, C and EV are both cheap (and getting cheaper every day). ;-)
June 16th, 2006 at 8:02 am
What do you think about this trade: Long Ebay, short Yahoo
Here is my reasoning:
Ebay market cap: 43 Billion
Cash: 2.7 Billion
Debt: 0
07 revenue estimate: 7.48 Billion
07 earnings estimate: 1.29 a share
Yahoo market cap: 43 Billion
Cash: 2.4 Billion
Debt: 750 million
07 rev estimate: 6 billion
07 earnings estimate: .71
(ebay and yahoo have approximately the same number of shares so the EPS numbers are comparable)
source: yahoo finance
I think yahoo’s cap ex will have to go up big time next year to keep pace with MSFT and GOOG, this will hurt FCF, IMO
June 16th, 2006 at 2:46 pm
KS: Numbers aside, the people I know who used to be big sellers on eBay all quit in disgust years ago, and I still use MyYahoo! having made it my start page back in 1996? (The Peter Lynch School of “Analysis”)
I’m more comfortable buying and holding the dozen or so names I mentioned above than I am about guessing the winners and losers among megacap net stocks.
June 18th, 2006 at 1:27 pm
[…] It’s not a bad time to be bullish, I think, and these are the kind of stocks I’ve been putting money in of late. […]
June 19th, 2006 at 8:59 pm
Do you take the 50day moving average of ISEE as your indicator, i.e. the reading of 144 indicated sentiment at worst levels since March 2003?
June 20th, 2006 at 2:37 am
[…] There has been a plethora of of commentary on whether we’re in a correction or the start of a bull market. Those who advocate buying on dips are touting this as a great opportunity to load up with undervalued stock. Ken Fisher believes that rates will have to ramp up a lot more to kill the bull market. But as Barry Ritholtz in his The Big Picture blog notes, in the New York Times Mark Hulbert outlines a simple market-timing system that is very bearish. What’s certain is that in this market growth investors, particularly momentum/CANSLIM types, will struggle. It’s comforting to know that if the market turns there is plenty of time to hop on board the new trend. Bull market correction or bear market, the signals indicate a cautious stance. […]
June 20th, 2006 at 6:49 am
hassan: No, I just look at the raw number every day.
June 26th, 2006 at 10:38 am
[…] Nevertheless, I’ve put quite a bit of money to work in the past few weeks since it pays to buy when others are panicky. I’ve mainly been buying stocks that I think have a large “margin of safety,” so I’m not too concerned about precise timing. […]