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   Strategies & Market TrendsValue Investing

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To: petal who wrote (68309)8/12/2021 9:35:21 PM
From: Paul Senior
1 Recommendation   of 70374
Petal, regarding nice companies...

I own a few shares of CHD because we use their soap product every week. Stock is likely too expensive for a buy here if somebody expects anything other than very slow appreciation from this point. I'm not expecting anything, but I wanted a few tracking shares which I guess I'll just hold as long as wife and I use their product.

I have maintained a small position in Nike, NKE. Also I like Skechers, SKX. I've had a varying position for many years, and occasionally have added on its price drops. (There've been at least a couple of sharp drops upon earnings misses.) I've trimmed on rises too.
I am a sneaker head (but don't own any valuable ones). Fwiw, my wearing preference is Nike& Adidas over Skechers.

Actually my focus today has been on "bad" companies -- companies which capitalize on human weakness/frailties/poor decisions:

NVO. Stock keeps rising, but I'm too worried about adding more here. What to say? Obesity reigns.

No vac and no insurance (medical/mortgage/life)? Get sick, very sick or worse and have bills to pay? I add today to DOC (medical building reit) and ECPG (debt collection, etc.)

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To: Paul Senior who wrote (68147)8/13/2021 9:43:10 AM
From: E_K_S
   of 70374
Old Republic Declares A Special, One-Time Cash Dividend of $1.50 Per Share

Old Republic International Corporation (NYSE: ORI) today announced its Board of Directors has declared a special, one-time cash dividend of $1.50 per share. The dividend will be paid on October 6, 2021 to shareholders of record on September 15, 2021.

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To: Spekulatius who wrote (68146)8/13/2021 9:49:43 AM
From: Paul Senior
   of 70374
Thanks again for reminding me of ORI special dividend(s) when I was tempted to sell last month after looking at Yahoo's erroneous dividend yield on this stock.

Another special dividend declared this morning as you know.

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To: Paul Senior who wrote (68297)8/13/2021 11:58:23 AM
From: Madharry
   of 70374
i conitnue to hold my losing position in mro. I wonder if anyone has any thoughts about MSGE? just seems to be getting cheaper, and really does own a bunch of top tier entertainment venues.

I wonder how Softbank comments about holding off on new chinese investments will impact what china is doing. I wonder if there will be some added leverage in getting the chinese to approve arm sale to nvidia.
I too am standing pat with my softbank and china investments.

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To: Paul Senior who wrote (68314)8/13/2021 12:12:29 PM
From: Elroy
1 Recommendation   of 70374
Ok, so what if p/bv indicates a trading range? I want to buy at low point in range and sell at a high.

Don't we all. But this is a discussion of valuation, not value versus growth.

Value stocks and growth stocks both have high and low valuations relative to their book value at different times in their trading history. Just because a stock's at the lower end of it's own valuation trading range it doesn't mean that it is a value stock.

Sorry, I like my definitions of value and growth! Any other definition which doesn't incorporate the principals I wrote previously is wrong. There, how's that for friendly dialogue!

Meanwhile, the US is moving in the direction of placing tariffs on UAN imports from Russia. Go fertilizer, go!

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To: Madharry who wrote (68318)8/13/2021 12:35:39 PM
From: Paul Senior
   of 70374
MSGE. Adding a few shares as stock continues to fall.

It's a bet on "sphere" live entertainment venue being developed in Las Vegas.

...and a bet on the Dolan family.

...and a bet that Covid will decline, and people will once again go out for entertainment. Maybe more assuredly in 2022?

Company has lot of cash to work with -- $1.2B per Yahoo.

Pretty hard to put a value on iconic Radio City Music Hall. It likely makes up a good portion of any margin-of-safety, if such exists.

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To: Elroy who wrote (68319)8/13/2021 1:25:31 PM
From: Paul Senior
   of 70374

Do you sometimes use your definition of book value when making decisions about whether to buy or sell?

To me, your book value definition is unusable.

"I think it has have a low price to (adjusted) book value relative to the market (S&P 500) or relative to its peers. Relative To the market is a pure value stock, relative to its peer group means it’s the value stock in its peer group."

Those numbers mean or median open up so many stocks as a "value" compared to the S&P. Way too many to consider for buys without having some method to censor and reduce the numbers.

If you use "relative-to-its" peer group, who determines the peer group -- US statistical bureau definitions, industrial trade or professional group? Do they publish current data? Do you gather your own idea about who's in an industry? If you were looking at "auto manufacturers" would you include Tesla at 28x p/bk? Know to include or exclude MGA, which has plants that build (assemble) some Porsches, and in future, EV's?

If you say stock XYZ is a value stock, how can I confirm that? It's relative, but do you say exactly to what?
I search briefly "book value", "what is price to book value", "how to use price to book value". So... pretty easy to find definitions. How to use? Authors I've found say, "use in comparison to itself, it's history" or to "industry standards". End of discussion. Ok, "comparison to itself", that's pretty easy. Yahoo, any paid service. But "Comparison to industry"? Well where do I find such information or know what industry my stock is supposed to be in? Never discussed by the authors that I see.

I can say that I've used price/stated bv as a criteria for more than a few decades. The company to itself. I use price/bv to try to glean a profitable opportunity. Maybe nobody believes that works or will work for them. Two things though: It's simple enough bogey to determine, and people can verify my numbers (since it's easy enough to find historical p/bk for most companies).

I don't know what you are doing in using your definition.
I feel like I'm involved in an academic, non-productive discussion when I try to understand what results I might have if I used your definition.

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To: Elroy who wrote (68312)8/13/2021 1:54:07 PM
From: petal
2 Recommendations   of 70374
Quite often these absurdly exuberant days I find that some stock has had a P/B of say, 1, for 10 years. The last year, it's 1,5. To me, that indicates quite clearly that the stock is overbid, in all probability because of too-enthusiastic newcomers (Robinhoodies and the likes).

One might reasonably draw a cut-off line at some arbitrary point and say "above this line it is not a value stock". I used to do that at 1,5x BV until I realized how dramatically (as Paul pointed out) a company can misstate it's book value.

I pretty much only care about material book value. These days, I don't even trust that number when it pops out of a computer-generated ratio though. You have to look at it yourself, and remove "fake tangibles" if they are there.

One recent example is Swedish co. Clean Motion (CLEMO). P/Tang.B is same as P/B -- 1,3. Not too expensive, right? Well, I looked at their balance sheet only 0,25 % of tangible assets are Plants, Equipment etc. The rest is "Ongoing Product Development". What is this, you may wonder? Well, in reality, it is nothing else than R&D, which is obvious from the fact that the co. is currently facing reconstruction since it turned out that no-one wanted to buy that highly speculative "product development" (it is a startup).
So 99,75 % of stated TANGIBLE book value was highly uncertain if it had ANY value whatsoever. Turns out, by the looks of it, as if it hadn't.
And this isn't even illegal; indeed, doesn't even seem to be that frowned upon. PricewaterhouseCoopers, in a blog post, suggests this course of action, noting that "for an external prospective stakeholder, the company looks better with assets on the balance sheet, than with big losses". No shit Sherlock, but is it an accurate approximation of reality? (Which is of course the supposed goal of accounting. Although to me it seems like it's often used as a tool to do as much deception as possible.

Enron and Arthur Andersen is one example of how an "esteemed" firm can turn out to do a lousy job. SEC in pretty much any situation, but especially Madoff (see this hilarious and (appalling) 10-minute 60 minutes clip w/ Markopolos on Madoff scheme

Accounting firms such as Pwc, KPMG etc seem to me in many ways mercenaries, in the same way as S&P & Moodys provided "approval for a fee" for the housing bubble frauds. I think they don't even try to look. It's corruption, pure and simple, AFAICT. In my book anyway. The one hand knows what the other is doing, and who feeds it.
Furthermore, I think that the entire financial industry, which is so mysteriously bloated -- "why does it even exist, if it's so pointless and value-destroying?" -- exists for the sole purpose of providing an air of approval, implicit or explicit, so that if everything blows up, you can always say "we had hired gazillions of risk professionals, and they found nothing wrong with our 70x leverage!" (It's a SaaS thing -- Scapegoat as a Service.)

"Show me the incentives, and I'll show you the outcome."

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To: Paul Senior who wrote (68321)8/13/2021 2:09:24 PM
From: Elroy
   of 70374
Do you sometimes use your definition of book value when making decisions about whether to buy or sell?

No, never. I sometimes use cash per share when making decisions. Like, I've bought stocks for $3 when they have $4 cash per share and no debt, something like that. I am more oriented toward growth investing, technology stocks.

Don't ask me how I stumbled on UAN......

To me, your book value definition is unusable.

In my definition of value stock, I didn't provide a definition of book value, so I'm not sure what mean by my definition being unuseable.

I think a value stock is defined by it's "assets" being undervalued relative to some group - S&P 500 perhaps, it's peer group of stocks (staples, semiconductors, whatever) perhaps.

For example, if one semiconductor stock trades at 2x book while the average semiconductor stock trades at 5x book, I would say the first one is the value stock of the semiconductor segment.

I'm not making the definition precisely, others can do that. I'm just saying the concept of a value stock is one who's assets are undervalued relative to some meaningful peer group. The measurement of the asset number is usually some derivative of the book value - that's why I wrote "adjusted" book value. You can adjust the book value however you think makes sense.

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To: petal who wrote (68322)8/13/2021 2:17:10 PM
From: Elroy
   of 70374
I pretty much only care about material book value.

As I usually invest in technology stocks, the value of the company is often in the brains of the engineers, and it's not on the balance sheet. So....I'm not really a value investor.

I just like to talk about stocks, any stocks!

I don't do much balance sheet analysis in investing. I try to buy stocks where the revenues and EPS will go up, and hope the share price will follow. That's about it for my "investing style".

I trade much less than others here. People here make "tracking investments" and ladder into and out of positions. If I like a stock, I buy a lot of it, once, and then pray for good times.......

I'm not at all diversified. I own a lot of SIMO (semiconductors), a good bit of UAN (fertilizer, baby!!) and then decent but small in comparison chunks of GOOG (internet), QCOM, MCHP, ADI/MXIM (<- all semis), MMP-EDP-WMB (pipeline MLPs), and CIM preferred (8% yield!). I own about 40 stocks in my Roth, but all teeny tiny positions which I consider more like owning an index, they just sit there in my Roth, and I don't trade them.

SIMO's share price movement dominates my investment performance. The other stuff (after UAN) is irrelevant in comparison.

Everybody go buy a PC and cell phone please so SIMO can do well......

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