Posts Tagged investment
Never Too Small To Be A Shareholder
Posted by Oksana Grebenjuk in Investing on Декабрь 10th, 2010
I am not sure about you, but nowadays, the only time my phone calls ever get picked up by a live human on the first try is when i’m calling my mom, bless her heart. So when i’m not calling my mom, i’m mouthing the message i’m going to leave on the voicemail as i dial. as investors, we’d love it if say, Google’s CFO picked up the phone when we call to answer our questions. Never say never, but i bet that’s never happened. however when you’re a small cap investor, «crazy» things do occur and i’m constantly surprised by how often i get a live voice whenever i call company management. And that’s the joy in researching small cap companies — you’re never too small to be a shareholder.
Regardless of whether you own ten, a hundred or a million shares, i’ve found that small cap company management will take your calls (and if they stop, that may clue you in to something too). as the CFO of a small cap tech company once told me, he was amazed by how few shareholders bothered to call. Now as a bottom-up research investor, i love talking with management because behind every stock price is a hot-blooded company run by real people. They are dealing with real issues all the time not just four times a year when most investors tune in to listen to the quarterly conference calls.
Stocks move based on expectations and when a stock goes up or down (crazy flash crashes aside), it’s because something unexpected happened. there are times when truly the unexpected occurs and there’s no way you would have know (or if you did, you’d go to jail for acting on inside information). Other times, the «unexpected» was there to be expected had you just followed up with management about something already disclosed in a company press release, something their customer/competitor/supplier had disclosed or a development in their industry. Read the rest of this entry »
Retail stocks have already priced in strong Black Friday
Posted by Oksana Grebenjuk in Fund Markets on Ноябрь 25th, 2010
As “Black Friday” approaches tomorrow, U. S. retailers are expecting a strong holiday season – at least, compared to the dismal performance of the past two years.
Indeed, retail sales rose a surprisingly strong 1.2 percent in October, despite persistently high unemployment, continued foreclosures and an overall fragile economy.
The National Retail Federation (NRF) forecasts that holiday sales for 2010 will increase by 2.3 percent to $447.1 billion, far better than last year’s 0.4 percent uptick and the 3.9 percent sales drop in 2008. In addition, retail sales have climbed in four of the past five months; while same-store sales have risen for fourteen consecutive months.
“This continued momentum is good news for the industry, especially with Black Friday… quickly approaching,” said NRF CEO Matthew Shay.
“While there is no question that consumer demand has improved, there are still questions about consumer confidence tied to high unemployment. We need to see improvement in key economic indicators to sustain any long-term growth.”
Indeed, retail stocks have surged the past few months, far outperforming the broader market, largely in anticipation of a robust Christmas shopping season. Read the rest of this entry »
Municipal bonds turn bearish as yields rise
Posted by Oksana Grebenjuk in Fund Markets on Ноябрь 24th, 2010
Yields on municipal bonds has risen recently, with long-term yields rising more sharply than those on the short-end since the beginning of the November.
R.J. Gallo, senior portfolio manager and head of the municipal bond investment group at Federated Investors, noted that the 30-year, AAA-rated municipal yield rose 76 basis points through November 17, producing a loss of about 6 percent for the 22-years-and-longer portion of the Barclays Municipal Bond Index.
Similarly, the 10-year AAA muni yield rose 50 basis points and the 5-year yield rose 28 basis points over the same period, producing estimated losses on the corresponding portions of the Barclays index of 2.5 percent and 1 percent, respectively.
“We believe a sharp deterioration in the balance of supply and demand for municipal securities are driving this bear steepener,” Gallo said. “Uncertainty about whether the popular Build America Bonds (BABs) program… will expire at the end of this year has prompted a near-term supply surge. Meanwhile, investor demand has slowed due to a number of factors, including an increase in investors’ risk appetite, the Fed’s new quantitative easing program (QE2), calendar effects and, to a lesser degree, concerns about municipal credit quality.”
Initiated as part of the February 2009 federal stimulus bill, the BABs program provides municipal issuers with a cash rebate subsidy equal to 35 percent of a bond’s coupon rate on taxable securities, allowing issuers to offer taxable bonds without fully paying the higher interest cost. Read the rest of this entry »
When Average Earnings Are Not Representative
Posted by Oksana Grebenjuk in Business on Сентябрь 3rd, 2010
For various reasons, value investors are encouraged to use an average of several years worth of earnings as an estimate of a company’s earnings power. But when a company grows quickly (e.g. through the acquisition of a competitor), average earnings are no longer representative of earnings power. In such cases, other methods of estimating a company’s earnings may be more useful.
Consider Canam Group (CAM), a company that has gone on a buying spree in the last year or so. As competitors have been shutting down units to conserve cash, Canam has been strategically purchasing competitor plants at attractive prices. As many industries are currently at overcapacity, the benefits of these acquisitions won’t be seen for years. But the costs of these acquisitions (i.e. the cash used to finance the purchases) are seen immediately. How does one value the fact that future earnings will be higher than past earnings?
One method applicable to manufacturing companies is based on a company’s historical return on its fixed assets. If similar assets to the company’s current assets have been purchased, the company may be expected to generate the same type of returns on those fixed assets that it generated over the last business cycle. Of course, this exercise only results in a starting point for estimating future earnings. Adjustments may have to be made based on the age of the assets acquired, their quality, and a whole slew of other factors (e.g. geography).
When times are good, companies will often fall over themselves in bidding wars to acquire potential targets or business units. Value investors realize, however, that the best time for companies to acquire such assets is when business conditions are poor (financing in general is hard to come by, there is overcapacity in many industries, and sellers are desperate to raise cash), due to the great price discounts that are available. Read the rest of this entry »
Raising Money During The Summer Slowdown
Posted by Oksana Grebenjuk in Investing on Июль 6th, 2010
The streets are empty in NYC this July 4th weekend and it seems like everyone is at the beach. The Gotham Gal and I are getting ready to head to Italy for a week on Sunday night. Summer is here and I can feel the pace of work life and city life slow down.
Many of our companies experience a slow third quarter because people aren’t working at quite the same pace in July and August and it is hard to get it all back in September. And many entrepreneurs and investors I work with assume for the same reasons that the summer months are a bad time to be raising money.
I don’t think the summer months are a bad time to be raising money. It’s a different time to be sure, but not necessarily worse. We see a lot less incoming activity in the summer months so it may be the best time to get a VC’s attention. If everyone else thinks it is a bad time, then the contrarian in me says it is a good time.
I just did a quick query on our portfolio and we made our first investments in eight of our twenty-seven active portfolio companies during the third quarter. Three of our investments were closed in July. Three of our investments were closed in August. And two of our investments were closed in the first couple weeks of September.
Eight out of twenty-seven is thirty percent of our portfolio, and that is north of the twenty-five percent of the year that the summer represents. So our firm has been more active on new investments during the summer than we are on average. Read the rest of this entry »
4 Investment Ideas That Provide Income
Posted by Oksana Grebenjuk in Investing on Июль 1st, 2010
As of this moment, the S&P/TSX Composite index is down 384.58 point or -3.27% year to date. The S&P 500 is down 67.32 or -6.04% year to date. That is your market update. When the global economic outlook appears uncertain and on the brink of another recession, equity markets reflect this reality in terms of greater than normal volatility. In markets like these, what we should be looking for are non-correlated assets and managers that have demonstrated the expertise to preserve capital during uncertain times like today.
In addition, one should also be focusing their efforts on receiving some form of income while the economic climate sorts itself. The following 4 ideas should hopefully accomplish both those goals. While we cant speak to the best/worst time to buy/sell particular securities, as that depends on one’s personal circumstances, the approach we usually take, especially with closed end funds, is to purchase them when they are trading at the steeper than normal discount to their Net Asset Value (NAV). The only other thing we would like to add is that you should do you own due diligence.
Trident Performance Corp.
This closed end fund is managed by CI Investments. Its investment objective is to provide tax-efficient risk-adjusted long term rates of return by obtaining exposure to a Global Macroeconomic Portfolio, advised by Trident Investment Management. Co-Founded in 1998, by Nandu Narayanan, Trident Investment Management seeks to exploit macroeconomic trends to generate attractive risk-adjusted rates of return with low or negative correlation to traditional ‘long’ investments. This is exactly what Mr. Narayanan did during the financial crisis, when the CI Global Opportunities Fund recorded positive performance of 109% in 2007 and 42.6% in 2008. Since inception in March 1995, the fund has averaged 19.69% as of the end of May 31, 2010. Read the rest of this entry »
Active money management or buy and hold?
Posted by Oksana Grebenjuk in Investing on Май 10th, 2010
With so much volatility in the stock market, investors saving for retirement must decide what investment approach may work best over the long term. Some market players question the wisdom of a «buy and hold» investment strategy, embracing active management instead.
The debate is not new, but perhaps it’s become more heated after the roller coaster ride of the past decade.
Before making fundamental changes to your investment approach, here’s what you need to know about active money management versus buy and hold.
The argument for active management
Supporters of active money management say that buy and hold is not a good long-term investment strategy for the small investor. They note that the most recent decade was not the only period of time that stocks — the assets favored in buy-and-hold portfolios — underperformed other, less risky, assets.
For example, from 1966 to 1982, the S&P 500 produced no real return (meaning it did not keep up with inflation), underperforming one-month Treasury bills by 0.2 percent per year. From 1966 to 1988, U.S. large growth stocks consistently underperformed one-month CDs. Read the rest of this entry »
Market myths
Posted by Oksana Grebenjuk in Fund Markets on Май 12th, 2009
What have we learned from the crash? Nothing lasts forever. Even bear markets.
Numbers can talk. And one of the key indicators of this year’s Fortune 500 — the companies’ stock market value — is absolutely shouting. It’s telling us that nothing is forever, and that people, businesses, and governments can no longer depend on rising financial markets to bail them out.
The talking number is $4.1 trillion — the amount by which the market value of the Fortune 500 companies with publicly traded shares fell this year compared with 2008′s list. The decline, 37%, is by far the biggest in both dollars and percentage since we started tracking the market values of America’s biggest companies 22 years ago. The two-year decrease, $5.3 trillion and 43%, is a record as well.
Since the 500′s peak valuation in spring 2007 — our stock market years end in late March — the global boom has been replaced by global doom, and economies throughout the world have gone south. And get this: The 500′s valuation is down 13% from 11 years ago. Thus, big-company U.S. stocks have been dead money for more than a decade. Had they risen at their historical rate after 1998, they’d be worth more than twice as much as they are now. So much for the myth that stocks as a group are a fundamentally reliable investment over the long term. Read the rest of this entry »
Buying High and Selling Low Continues for Many Investors
Posted by Oksana Grebenjuk in Investing on Май 4th, 2009
Ask even the most novice investor and I bet they can recite the words “buy low and sell high” to you. It’s an incredibly simple concept, yet most people can’t follow through with it. Human behavior plays an important role in determining actual investment returns. All of those numbers you see about gains, losses, and what the Dow is doing? They are important, but not as important as the decisions you make.
This morning I was catching up in my feed reader and I stumbled across a post over at Behavior Gap titled When Things Clear Up. If you haven’t been over to The Behavior Gap before, I suggest you check it out. Carl does an amazing job in pointing out the deficiencies in human behavior that lead the average investor to realize even worse returns than what their actual investments they hold return.
In Carl’s post about when things clear up I see a striking resemblance to the discussions I’ve been having more frequently in recent weeks. He points to an NPR story where a couple confesses to getting out of the market back in March, but are now ready to get back in because they think things have cleared up. Read the rest of this entry »
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