Sunday, October 16, 2011
ValueClick (VCLK) update
Monday, October 03, 2011
Closed out CVU
Looking at the market right now, I thought it was crazy when the 10 year US Treasury bond was yielding under 2.5%. Now it's at 1.79%. 30 year mortgages are at 4%. The powers-that-be are doing everything possible to push money out of hiding and lift the prices of everything.
I'm watching for opportunities.
Tuesday, September 27, 2011
Berkshire Hathaway stock says Buy Me
Buffett makes his thinking very clear in the everything he writes. It's extremely straight forward and rational. He's buying back shares because it's the best allocation of excess captial that he can find, given the limited opportunities available when dealing in billions. He's saying Berkshire stock is cheap, and he's probably the best or 2nd best person to make that judgment call (Charlie Munger is the other one).
I hope that I'm making the right call by holding out and keeping a high percentage of cash. I consider Berkshire to be a very easy 50% gain at this point. It feels crazy not to buy it.
I've found that things very often feel wrong when they're the right decision.
Monday, September 05, 2011
Senior IMF Economist Expects Hard Default For Greece. Soon.
This is what I've been expecting for some time. The first domino.
I expect a hard default definitely before March, maybe this year, and it could come with this program review,” said a senior IMF economist who is keeping close tabs on the situation. “The chances for a second program are slim.
Saturday, August 13, 2011
Goodyear Tire and Rubber (GT)
I stumbled into Cooper Tire and Rubber (sec) when scanning for stocks. That brings back very old memories from before I was ever an investor. That leads to GT as well as Bridgestone and Michelin.
Looking at the very long term chart is a strange thing. It goes back to around 1970. The stock has see-sawed wildly between then and now but has essentially gone nowhere. Considering that 1970s dollars were worth a whole lot more than today's dollars, the stock is seriously lower than it was back then. Japanese tires and probably Chinese tires lately. I remember reading Les Schwab's autobiography which covered the shift from Bridgestone to Toyo tires.
My interest in GT is to see if it's a stable company in order to take advantage of the wild swings in price that line up with economic downturns. I'm not looking for excellence, I'm looking for survivability.
243 million shares.
They operate all over the world. 56 manufacturing plants in 22 countries.
Also rubber related chemicals.
In 2010, Titan Tire bought the rights to sell Goodyear brand farm tires in Europe, Latin America, and the US.
Expect a $270 million charge from closing the Union City, TN plant. Was making 12 million tires per year.
Started closing a plant in France in 2009. $107 million estimated cost. High cost capacity. Was making 6 million tires per year.
Goodyear, Dunlop, Kelly, Fulda,Debica, and Sava brands. Also various house brands.
Cars, trucks, buses, aircraft, motorcycles, farm equipment, earthmoving, mining, industrial, etc.
Also retreads for trucks and aircraft and other stuff.
Mud flaps (presumably with sillouettes of reclining girls)
84% of sales are new tires. Mostly replacement tires.
Most of the revenues are in the US and Europe. 21% Asia.
Competitors are mainly Bridgestone (日本) and Michelin (Vive la France!).
Global alliance (75%) with Sumitomo 住友 Rubber Industries (25%) for selling tires in Japan.
I notice that Asia sales are fairly flat. Someone else must be winning there. Bridgestone? Michelin?
Raw material costs went up 12% in 2010, not surprising. They expect it to increase 25% to 30% in Q1 2011. Ouch.
2,400 patents in the US. 3,700 in other countries. License agreements. Zillions of patents among a small number of companies tends to lock them in as an oligarchy, which is fairly good for long term business. 1,700 trademarks.
72,000 employees. 39,000 in unions.
14 million stock options. $15.11 ave strike.
Revenues: (billions of dollars)
Hey wait a minute! They lose money just about every year. The only year they made money was 2007 and that was because they sold a business.
Operating incomes in 2008, 2009, 2010 were 17.6%, 16.6%, 15.3%.
Balance sheet is weak. Equity is almost gone. Lots of debt.
Cash flow looks weak. Capex burns up all the operating cash flow.
This company looks bad. I wonder if Bridgestone is any better?
Quick look at Cooper Tire and Rubber:
Balance sheet is way better.
Basically earned 50 cents for 6 months (not counting discontinued operations)
They actually pay a dividend.
62 million shares.
North America, UK, and PRC JV.
Revenues (billions of dollars), Earnings per diluted share
2006: $2.6, ($1.21)
2007: $2.9, $1.46
2008: $2.9, ($3.88), cost of goods sold issue (oil prices)
2009: $2.8, $1.54
2010: $3.4, $1.86
Cumulative earnings per diluted share: a 23 cent loss
International revenues are climbing substantially (1.9% in 2009, 28% in 2010), they're now half of the North American revenues.
Cash flow looks ok. Looks like earnings match free cash flow over a three year period without anything too ridiculous.
So is CTB worth $20? Needs more work.
Monday, August 08, 2011
Let's say someone puts their stock up as collateral for a loan. And let's say at first, the stock prices go way up. So they can borrow more against it. It's the same thing as the home equity ATM machine syndrome. When stocks drop, the ATM machine goes in reverse and it's looking for deposits, not withdrawals.
When you apply a lot of financial leverage, then money really does appear and disappear.
When you have a stock market bubble or housing market bubble or a tulip bubble, from what I've read, it needs large amounts of debt or it won't really have enough fuel to reach bubble status.
It's bad enough when you have a stock market bubble and you get a false wealth effect. It's much worse when you have a housing bubble because the dollar amounts are much bigger and the impact on lives is very direct. But what happens if you have a bubble where governments get very big and borrow massive amounts of money to keep running? It's the large banks that get hit. But I suspect there's a lot of collateral damage, so to speak.
Friday, August 05, 2011
It's not a question of whether the government will default. It's a question of whether the money you get back will be worth anything close to what you loaned out. And you should be expecting more back, not less, given that the money is on the sidelines for 10 years.
It makes no difference whether you can sell the 10-year note in less than ten years. The risk is still there and it seems to me that the market is seriously mispricing this stuff.
It makes no difference whether there's nothing better out there right now. Something tells me that will change long before the 10 years are up.
UPDATE Aug 6, 2011:
I wrote that less than 24 hours before S&P lowered the US Gov rating to AA+. Lucky timing.