Glen Doth Know

Dario,

Yahoo is priced to grow at 11.5% by my calculations. I know they have had deals with Microsoft and Google and neither have worked as far as I know. It’s been growing revenues at 6% to 8% and earnings growth is also questionable. Everyone knows google’s a better search engine. I’d rather own the best in class. There is a PE ratio discrepancy of about 22 to 19. That’s no question. Unless you know about some deal that Yahoo’s got up it’s sleave. Owning it and not google at this point in time is in my opinion like paying the same price for a moped when you could get a BMW. But, hell, if gas mileage turns you on. Go for it.

I don’t know anything about banks. I figure, I’d rather not try and read financial statements that are produced by banks (the institutions that in my opinion can manipulate them the most). JPM has a PE of about 18. It’s priced to grow at 11%. I have no idea. Well, finally: “(JPM) has just announced it will be making changes to about $110 billion in mortgages to help its borrowers” That’s good news.

I have other companies that I’d rather own. 1 Year targets are stupid, but analysts set them. There’s all sorts of bad measurements out there. That said, I reference them each time before I buy.

All things considered, I don’t own either.

Glen

From: Dario Visnjic
Sent: Friday, October 31, 2008 2:39 PM
To: gbradfor
Subject: Stocks

Hey

I have some shares of JPM, and yahoo is showing that its 1-Year Target is like 46. Does that mean I should sell at $46 or what. Also when do you think I should sell JPM?

Thanks

Labels: JPM, YHOO

Todd,

The 2nd Quarter is usually their strongest quarter, so I expected earnings to fall from 1.044

It fell to 0.80, analysts expected 0.81.

Then of course they lowered their full year outlook (cause of the $0.99 UK currency hedge 1-time cost –--no brainer)

They’re still up Year over Year, That’s good, but I think their crane backlog is likely to be down from the last quarter. They hid those details by mentioning that it’s up Year over year. Crafty.

“The sequential decline in Manitowoc's crane backlog from the second quarter
of 2008 reflected slowing demand for tower cranes in Europe, and a delay in
opening the 2010 order book until material price forecasts and customer
pricing arrangements can be finalized.”

“Crane backlog at
September 30, 2008 was $3.3 billion, nearly 26 percent higher than the
third quarter of 2007 and down slightly from the second quarter of 2008.“

Of course they don’t tell you what the Q2 figure is. Make you look it up.

“For the nine-month period of 2008, net earnings were $210.4 million or $1.60 per share, down from $237.4 million or $1.87 per share in the previous year period.”

That even reflects the $1.00 per share currency hedge. Looks like they’re kicking butt to me.

Haha, This next quote’s funny

“People and Organizational Development: Research shows that engaged
employees care about the future of the company and have a direct, positive
impact on a company's financial performance.“

Research shows that engaged employees care… priceless. So, there’s a lot of filler in their statements.

Alright, I’ve seen enough. This company is still a Buy on my list. It’s too damn cheap. And.. even though this quarter is lower than the last quarter, we are in “tough times” and… it’s up Year over Year. Incredible.

Glen


From: Todd.Johnson
Sent: Tuesday, October 28, 2008 10:57 AM
To: gbradfo
Subject: RE: MTW

Thanks Glen,

If you would, send me your thoughts when they post results after the bell today.

Thanks again,

Labels: MTW

Todd,

“The $2.7-billion acquisition will establish Manitowoc among the world's top manufacturers of commercial foodservice equipment. Manitowoc said it is also is one of the world's leading producers of cranes and innovative lifting solutions for the global construction industry.” (referring to Edonis).

------------Side note: (the point is to illustrate that a lot of construction companies are going to break trends.. and are priced to do so, but some are strong --- even still)

Breaking a long-running trend, Terex posted a decidedly disappointing third quarter. Net earnings slipped by 34% to $93.8 million, even as net sales increased almost 15% to more than $2.5 billion. The total backlog of pending equipment sales, a crucial forward indicator, fell 14% just since the second quarter. Backlogs for Terex's aerial work platforms and construction equipment fell by more than 60% and 40%, respectively. In contrast, Terex reported an 8% increase in backlogged crane orders, and only a 9% drop in pending sales of mining equipment.
Bucyrus, meanwhile, enjoyed another knockout quarter with a 124% increase in net earnings, a 380-basis point expansion of EBITDA margin to 17.9%, and a whopping 74% increase in total sales backlog to $2.5 billion. The company's entry into the underground mining equipment business with last year's acquisition of DBT lends limited value to year-over-year comparisons, but nonetheless this was a rock-solid quarter for Bucyrus.

-----------------End Side note:

My opinion is that Analysts still need to lower expectations for MTW, but I’m concluding that they’re waiting on earnings to come out before they do it. BUCY is another one of my favorites. TEX used to be, but I took it off the table when I compared TEX and MTW and figured MTW was better… not to mention a couple on campus interviews. You’d be surprised what company reps will tell you if they think you’re looking for a job with them and you ask them for the three things that they think their company can improve on and the most because you want to know if you can help.

My opinion on MTW could change if they come out with Q3 results and I see significant weakness. Remember that investors are dumb and 1-time costs generally hurt the stock price over the next year. That said, MTW could soar. Low risk situation if you ask me. I don’t see it getting whooped much more since it already took a beating when TEX came out weak.

Glen


From: Todd.Johns
Sent: Wednesday, October 22, 2008 3:56 PM
To: gbradfo
Subject: RE: MTW

Thanks Glen,

I believe that it is being punished without cause due to the overall market sell-off and especially in the small-cap segment. I like it for 3 reasons.

1. More tied to large government/energy infrastructure projects, not residential/commercial construction.
2. Diversified internationally, especially in some of the developing, high-growth, countries.
3. Good management and cost controls.
4. oh I forgot, they started in the crane business just short of the Great Depression…if they survived that, they can certainly make it through this economy

Labels: BUCY, MTW

Hey Nate,

I’ve tabled this one, cause I have no idea about how the currency exchange rates will impact the company. Here’s the Q2 transcript: http://seekingalpha.com/article/89211-central-european-distribution-corporation-q2-2008-earnings-call-transcript

A few highlights I just found:

“we continue to see in Poland and in Russia, of course with the higher GDP growth of Russia, certainly trade-up opportunities are higher that also we are seeing coming through with the pricing of value over volume which we get to a little bit later, which certainly be the aspect of bode well for a strong currency.”

Alas, you’re question: “The zloty has continued to appreciate around 5% of the second quarter, and another 2% so far year quarter to-date this third quarter. The Rubles are relatively flat this quarter, third quarter, and maybe only about a 1% appreciation in the second quarter, but relatively up flat to the dollar and the euro.”

James Archbold is the man with the answer to this question.

http://people.forbes.com/profile/james-archbold/17140

Contact:
Jim Archbold,
Investor Relations Officer
Central European Distribution Corporation
610-660-7817

I haven’t called CEDC yet, it sounds like you know more about their currency situation than I do. I look for consistent companies with growth potential on the cheap. CEDC ridiculously fits my model right now. Buffett and Lynch love cold calling. My advice is you give it a try. Let me know what you find out.

Glen


From: Nate Tabak
Sent: Sunday, October 26, 2008 2:43 AM
To: gbradfo
Subject: CEDC

Hey Glen,

How much of an effect are the collapses of the zloty/forint/ruble going to have on CEDC's fundamentals and future earnings? I've been buying into the stock's weakness, partially with the hope that the currency situation could be a boon for company since it will be able to make Eastern European investments and acquisitions at a steep discount using its USD reserves. Furthermore, do you have any idea to what extent CEDC hedged against currency declines?

Thanks,
Nate Tabak

Labels: CEDC

Greg,

That’s hard. I hate picking just one. For the sake of using macroeconomics, China’s my favorite country and they aren’t hurting fundamentally as bad as we are. My favorite “ultra-high” risk play is GHII. It’s a penny stock that is trading at 11 cents and in my opinion is worth about $2 or more. Please give it a PE of at least 10.

If you like options, buy 2010 January Calls on CEDC.

Those are my two favorite ideas right now. CEDC is way too cheap, I sold my stock and bought the options @ $30. I could be an idiot, who knows… but at least I’m basing it on the fundamentals and probabilities.

Glen

From: tubertini
Sent: Sunday, October 26, 2008 10:30 PM
To: gbradfo
Subject: one stock

Glen,

I have a discretionary account in which I have set aside for risky but potentially lucrative investments. If you had to pick one stock that has been beaten down but has the most potential to sky rocket once the bank failures and poor economy is behind us what would it be? By the way, great articles on Stockpkr.

Greg Tubertini

Labels: CEDC, GHII

Dario,

It has to do with rules of thumb applied to discounted cash flows of future earnings. The stock is CEDC.

A few “calculators”

http://www.moneychimp.com/articles/valuation/dcf.htm

http://www.creativeacademics.com/finance/dcf.html#what

Basically, when the PEG ratio < 1; the Price that you pay for current earnings is less than the anticipated growth rate of the company. It took me a long time to wrap my brain around this one. A book titled Buffettology by Mary Buffett is a good book to get your feet wet.

Present value = SUM[ (Future cash flows) / (1 + interest rate) ^ (Future year) ]

My friends are always getting caught up in multi-linear regression and covariance and neural-networking logic. Most of the time in real business, it’s just being able to see the easy way to make money; few can do it. I try to keep it simple. I find companies with consistent track records and use their track record to project their future and then discount their expected future to price the company. Then, I try and find reasons not to invest (high debt, slowing cash flows, higher delinquency rates {see accounts receivable and days outstanding}, bad analyst news, anything).

Glen

From: Dario Visnjic
Sent: Saturday, October 25, 2008 5:30 PM
To: Bradford, Glen
Subject: RE: Stocks

Alright
thanks

If CEDE should be $175, why would you sell it at $75?

And could you explain when you said "annual growth rate (5 year projected) gets close to the PE ratio OR PEG ratio > 1,"

Labels: CEDC

Dario,

PCP and MTW are the two of those that I trust the least. I’m waiting on earnings on MTW, but PCP is pretty much hoping that the Boeing strike will end soon. I’ve got a pretty long time horizon and history is telling me to be optimistic. When the market bottoms (if it hasn’t already) it could either surge up, or just meander around and not go anywhere. There’s a lot of fear in the market, more than most market commentators “have ever seen.” According to Ben Graham, the market price of a stock can be broken down into three factors:

1. Intrinsic value (fundamentals on balance sheet)
2. Future growth expectations (income statement projections)
3. Market factors (fear, technical analysis, etc) --- Hugely over weighted in times of widespread panic and fear --- like now.

I try to find companies that have very strong 1 and 2’s and very negative 3’s. I figure companies that make a lot of money and should only be helped by the changing socioeconomic tides should eventually reflect that in their share price; but I don’t expect them to reflect this in their price very soon. Am I selling? No; but it may appear so. I’m assuming that the fear will have dissipated 1 year from now. I’m slowly leveraging my portfolio for a bull run by slowly shifting from stock to long calls (January 2010) on a select few companies in my portfolio.

There’s still a lot of overpriced companies out there; just try not to own any of those.

CEDC should be worth $175, but I’d consider selling at $75
AOB should be worth $20, but the asian stocks are all tracking around ¼ of the value of the rest of the stocks (why, I don’t know, so I’m overweighted now in asian stocks)

For the rest, a good rule of thumb is when the annual growth rate (5 year projected) gets close to the PE ratio OR PEG ratio > 1, sell. But make sure to watch the financial statements for signs of weakness.

Hope this helps?

Glen

From: Dario Visnjic
Sent: Friday, October 24, 2008 6:15 PM
To: gbradfo
Subject: Stocks

Hey Glen

Just read all your article on your website and Stockpickr. Thanks for all the recommendations. I read about the Buy Google and Apple and you said sell Google at $500 and Apple at $160, if am not mistaking. I own some stock that you had in your articles and when do you recommend that I sell AOB, VDSI, PCP, KCI, MTW, and CEDC. I got those from your articles. Also I own JPM, JpMorgan & Chase. When od you think I should let it go.

If you coudl please write back and let me know what you think.

Thanks
________________________________________
When your life is on the go—take your life with you. Try Windows Mobile® today

Labels: AOB, CEDC, MTW, VDSI

This company looks really good, priced to grow at 2.8% and has been crushing around 30%. Everyone agrees with me. I haven't researched it enough to write about it or buy it... yet

Labels: NPK

How's it going,

I looked into it. You were probably advertised this company because:

Peabody Energy Corp. Raises FY 2008 Earnings Outlook
Thursday, 16 Oct 2008 08:02am EDT

Peabody Energy Corp. announced that for fiscal 2008, it has raised EBITDA guidance to be in the range of $1.75 to $1.85 billion and earnings per share (EPS) from continuing operations is targeted at $3.00 to $3.25. According to Reuters Estimates, analysts on an average were expecting the Company to report EBITDA of $1.70 billion and EPS of $2.86 for fiscal 2008.

I looked into the past few years of data. It pays a quarterly dividend of 6 cents. That's less than 1%

The prices of commodities have fallen recently. This hurts their earnings.

I'm not willing to bet on any commodity companies until their underlying demand rally's again. There are cheaper companies out there.

http://www.forbes.com/feeds/ap/2008/10/21/ap5583990.html

Glen

-----Original Message-----
From: Lyn
Sent: Tuesday, October 21, 2008 6:11 PM
To: Bradford, Glen Richard
Subject: Hello

Hi, Glen - You asked if anyone had a stock for you to look up - and I do.
It comes from the
"Bottom Line" flyer which I get every week. BTU - Peabody Energy
Corporation. It is
a coal company - and I don't even know if it pays dividend??? Thanks for
checking this out
for me - and I surely wish you and all buyers a good week.

Labels: BTU

Todd,

It is definitely priced below the current forecast and what’s reasonable. There are a lot of companies priced like this right now. There are also a lot of companies that are overpriced in my opinion. My objective is to only own the companies that have little if any debt, consistent revenues and earnings, and are still expected to outperform what they are priced to do, with a good margin.

Out of these companies, I find the ones with the most upside. MTW is just one of them. I think that there’s a lot of money being thrown around out there right now and the PE of the S&P 500 might still be too high. But, I’m all in (on the really cheap companies that meet my requirements). I just wish my time outlook was a bit longer.

Glen

From: Todd.Johnson
Sent: Monday, October 20, 2008 4:14 PM
To: gbradfo
Subject: RE: MTW

Thanks Glen,

So based on your information below, ‘MTW is priced to grow at -1.2% over the next 5 years./ Analysts have it growing anywhere from 7% to 26%’, the current price is well below the current forecast, correct? I see they declared the .02 quarterly dividend today, so that’s good news.



Todd A. Johnson

Labels: MTW

Todd,

MTW is priced to grow at -1.2% over the next 5 years. Their Crane group does about 80% of their revenues.

From their last quarterly transcript: “This trend was reflected in our crane backlog, which stood at $3.5 billion at June 30, an increase of 70% over the same period in 2007.”

“The solid backlog also reflects the pay back of our innovation strategy as well as the success of our new products in the marketplace. Our outlook for the Crane segment remains strong through at least the end of 2010, despite the recent decline in U.S. housing market, the softening of commercial in some mature markets and slowing residential construction in Western Europe. We expect to offset these trends as demands for our higher capacity cranes particularly those serving infrastructure and energy application continues to grow in both developed and emerging economy.”

It’s trading way below where it usually does as far as historical price and growth trends are concerned. (As you’re probably aware).

I measure leverage as the ratio of ROA to ROE and then I look at historical debt. By those metrics, they are 31/13, and in the same neighborhood as their competitors.

Fuel prices are lower, commodity prices are lower, demand is probably going to be lower in the near term.

Analysts have it growing anywhere from 7% to 26%. As far as being relatively liquid, in the short term, they can pay current liabilities and really have been paying off long term debt over the past few years.

http://www.forbes.com/finance/2008/08/07/manitowoc-bucyrus-terex-pf-ii-in_ja_0807soapbox_inl.html

http://seekingalpha.com/article/87831-manitowoc-co-inc-q2-2008-earnings-call?page=2

You’re asking the right questions,
Glen

From: Todd.Johnson
Sent: Friday, October 17, 2008 4:37 PM
To: gbradfo
Subject: MTW

Glen,
I saw your article today, “How to take advantage of bad times” and your thoughts on MTW. Closing @ 11.89 today with a P/E multiple of 3.77, it looks really cheap. I was not aware that they typically are conservative on their earnings forecasts, so thank you. What are your thoughts when they report Q3 at the end of the month? Does their sales pipeline look pretty good right now, even with the slowing global economy? Do they depend on very much leverage, or are they relatively liquid? Thanks and have a great weekend.
Todd A. Johnson

Labels: MTW

For the record:

My dad is questioning my judgment on my picks, pointing to the fact that they are down. The entire market is down and if the market is a grocery store, it would be on fire and everything would be selling at 50% off. Some of the merchandise is indeed damaged, but everyone is afraid to come to the grocery store because they read the news and know it's on fire. My goal is to always own the companies that will appreciate the most, and in times like this, it takes balls.

You have to make the fundamental decision, even if the investors that know very little about company valuations are trying to get rid of it like it's a disease. Where they see a downward trending price, I see a company that's priced to go out of business, but is growing revenues and net incomes at remarkable levels and is impacted positively by the government bailouts. There's a discrepancy. What do I do? I call up the company and ask questions.

It never hurts to ask around, maybe they are on fire. Digging for gold never was easy, but when you find it, it doesn't make sense to sell it to the guy down the road for the price of a hamburger. Maybe you should hold onto it... and wait for the guy down the road to realize that gold is valuable. :-)

M,

You’re correct. But, to be honest, that doesn’t matter much. It’s cool, but look at the liabilities. The liabilities are 4x their cash. Sales figures for properties in china are really bleak right now. SELLL SELL SELL! Is what they’re saying. Mean’s a great buying opportunity for those who think that there will continue to be some level of construction in china over the next 5 years. The downside to XIN is that it does high turnover. The upside is that it operates in Tier II.

The way I figure, if you write off all their property under development down by 50% (worst case scenario) about 300, and add cash about 160,

You’ve got assets backing liabilities still. Doesn’t seem nearly as risky as it’s priced. I’m not selling my shares, but I’m not buying more. It’s in my top 4 positions, which is good enough for me. (I probably should be buying more and would be if I wasn’t playing with college money.)

Glen

From: sagges
Sent: Thursday, October 09, 2008 10:53 AM
To: gbradfo
Subject: XIN

Glenn,

Still hanging in with XIN?

Unless I am reading the balance sheet incorrectly their cash position is twice their market value.

I understand the total instability of the world markets but this looks like a ridiculous opportunity.


M

Labels: XIN

Jaime,

I am not concerned. The markets are falling and those perceived as the riskiest are sold off the fastest. XIN is perceived as risky because it’s real estate, it’s in china, and it’s small (compared to other companies that most people trade). I’m not really concerned. The concern that usually comes up as prices go down is a private takeover. There are a lot of companies trading unreasonably cheap. This is one of them. Selling a brick of gold at $1 just cause everyone else is never made sense to me.

I don’t think a private takeover is likely, because I imagine that most of the owners and management of XIN realize that it’s actually a flourishing company. In this kind of market, I try to allocate into the cheapest companies, which keep getting cheaper. But, I came in with a lot of “stalwart” companies. I have a few left to push into the small caps at huge discounts, and will do so over time.

I’m not sure about delisting. I just don’t really care where it’s traded. I expect it will be traded somewhere.

Glen

From: salc
Sent: Thursday, October 09, 2008 8:29 AM
To: gbradfo
Subject: XIN

Hi Glen,

I have been watching XIN get hammered in the last month. I firmly believe the stock is worth much more that the current price and will probably quadruple over the next year.

My concern is that if it trades lower, is it in danger of being "delisted" by the exchange?

What are your thoughts?

Jaime

GHII: Gold Horse International, Inc.

Talked to their CFO Adam Wasserman,

He just got back from Mongolia and was there to help them file their annual reports. The issue with GHII to him is the publicity: there is none. They’re going to get some though. But, they work really well with the community, built a jail, police station, building schools to lease back to the community, a few roads and other buildings and otherwise operate a hotel in the 2nd fastest growing city in China. Great balance sheet, PE of around 2 now. Should have a PE of at least 10 in normal market conditions.

I’m buying a lot of shares.

Glen

From: Hall, Douglas (MCOE)
Sent: Wednesday, October 08, 2008 2:33 PM
To: Bradford, Glen Richard
Subject: Got text

What’s the scoop?

Doug Hall

Labels: GHII

(Mr. Jonathan Blum, Director)

Hey Jon,

Just was curious if I could get some balance sheets/income statements for GHII as well as your opinion. It looks like a company that is fiscally responsible and really helps its rapidly growing community.

I don’t think GHII is in trouble, but it’s priced like it’s going bankrupt. Also, the PE is about 1 and it’s priced lower than book value; not bad for a growing company.

Thanks in advance.

Glen

Dan,

Making the decision to pay off debt or purchase investments is a common decision that companies make all the time. Honestly, it depends on your risk tolerance. The market’s at a relative low. Historically at times like this, it’s been a good time to invest. But, I thought it was a good time to get in 3 months ago, and I was wrong. In my opinion, any time you can get a great company with predictable future cash flows with the present value of future incomes at less than 20%... It’s hard to resist. Right now’s a fire-sale.

Two points:
1. Remember to factor in taxes, you probably need 10% before taxes to beat debt payoffs.
2. Don’t invest if a lot of your capital is getting eaten up by trading expenses.

There’s a lot of potential for a rebound. People sell everything when they are fearful. I see a lot of opportunities surrounded by varying levels of risk. There are highly profitable companies selling at less than book value. If I was you I’d do 50:50. Pay off debt but at the same time, buy undervalued securities. That said, if the Dow Jones and S&P continue to fall, I’d accelerate purchases.

If you look around, global governments are fighting this credit crunch head on. I think they’ll fix it.

If your short on time, look for mid-large companies with a low PEG ratio and high motley fool caps ratings.

Besides, I'm calling market bottom. The negative consensus is too high and the central governments around the world are pushing positive messages through the pipeline.

http://finance.yahoo.com/rss/headline?s=kci,ktii,kci,ebix,ande,tex,wab,sigm,vsec,aob,hurc,midd,ctsh,team,lxu,zumz,ezpw,sohu,mtw,apa,adm,beav,nvda,pcp,cedc,bucy,nihd

That’s one I read for updates frequently.


Glen


From: Dan
Sent: Monday, October 06, 2008 1:52 PM
To: gbrad
Subject: Starting Strategy ?

Glen,

This might be too basic a question for you, but I'd appreciate any feedback if you have time to provide it. My question concerns a starting investment strategy in the current market, given preexisting debt obligations.

Currently, I owe about 10k in credit card debt that I incurred after my wife took a year off work after the birth of our daughter. During the same time, we burnt through our small savings and currently are trying to figure out the best blend of investments/debt payoff. The good news is the debt is cheap at 5.9% APR & with my wife just starting working again, we have about $1000/month surplus that we can allocate to debt paydown and/or investments.

So, my question: Is it better to strictly target debt paydown, or to take a blended approach to take advantage of opportunities to buy into cheap stock. My phyche tells me to pay down the debt in a year, then start agressively putting money into stocks - ostensibly, it would "feel" better. Yet logic tells me that if I can beat 6% on my returns, then allocating at least some of the cash to securities is the way to go, given I'm providing myself a "head start" over the former strategy on generating profits.

So, given the instability of the market right now, how do I determine the best approach to this delima?

Aside:
I'm certain this is obvious, but just for the sake of disclosure,I am indeed a beginning investor, but am looking to make investing a major part of the rest of my life. Currently my only holding is a small stake in CTSH (I am an employee and participate in the ESPP). I also have Schwab online checking which will pay me 3% to sit on my cash in that account - less than I project the CPI to increase over the coming year, but better than nothing, I suppose.

Dan