Follow a stock long enough, and when something crazy happens and the stock takes a dive, you sit back, take a breath, and as long as the fundamentals have not changed, you go all in. I only wish I could have bought more.
Recently, NBG traded as high as $11.25 on very bullish news of the company's 30% per year growth forecasts for each of the next 3 years; strong results in their new markets; and lots of positive sentiment.
Naturally, after such a huge run up, NBG took a little breather, and fell down to $11.10 or so. However, the real shock came today, this morning, when NBG traded as low at $10.30, down 7.2%. The decline was spurred by a rough day for European banks and some reports of instability and attacks in Iran and Afghanistan. The US major indicies were also down 1%-1.5%
Nothing has materiallty changed and I took the opportunity to buy more at $10.38 - too bad it is now back at $10.60 and will likely run back to $11 sooner rather than later (I actually had my order in for $10.41, but ETRADE was nice enough to get me a slightly better price). I was especially intrigued by the relatively low volume on the decline, which made me feel even more confident in my decision to buy more.
This is what I call "The Price of Greatness". It correlates to Warren Buffet's quote to be greedy when others are fearful and fearful when others are greedy. Short and sweet, it is the response to days like this - to put more money on the table when it's hard to do so or take it off and take some profits when it really has had its day in the sun, but greed likes to tell you it can't go down.
Thus far, with NBG at $10.61, my decision to buy at $10.38 looks genius. We'll see - but I think I am right.
Tuesday, February 27, 2007
Saturday, February 24, 2007
National Bank of Greece 2007-2009 Business Plan & Buy Anywhere Up to $12
National Bank of Greece (NYSE: NBG) announced their 2007-2009 business plan. The plan outlines their strategy and projections for the next 3 years.
NBG is a huge winner and I estimate this one being $13-$15 by the end of 2007 and my 3 year price target is $24-$28. Short term, NBG may come off its recent run, especially after hitting $11.24 on Friday, up 3%+ in a single day. Regardless, I am GOING DEEP on this one and am raising my slash and burn target to $12. That's right - anything under $12 is an instant buy, from both a long term and a relatively short term standpoint.
The things I like about NBG:
1. 30% Annual Income Growth
They are forecasting 30% growth in their net income each year in 2007-2009. If we can look that far out, that would be NBG is trading at about 9.1 times 2009 full year earnings, if I did the math right.
2. 24% Return on Equity
NBG is looking to significantly bump their ROE to at least 24% during this 3 year span. This is a huge jump from its current 14% ROE. How are they going to do this? Well, lots of factors come into play here. The biggest factor is their acquisition strategy. They are now well positioned in Turkey and the Balkan States. They are also looking to expand into Ukraine. NBG's growth has been driven by the retail boom in Greece the past few years, which is still strong, but is slowing somewhat. That same boom is just starting in the Balkans and Turkey and will fuel NBG's growth in the coming years. Additionally, NBG's current market penetration in these other countries is relatively small and should make it more likely that NBG can grow their presence and penetration in these countries very aggressively over the next couple of years.
3. Lots of Cash
Apart from producing lots of cash and having their margins increase, NBG has a ton of cash on hand and is not planning a special return of capital to shareholders for 2006, payable in the Spring 2007. They will most likely pay out the regular annual dividend (2%-2.5% yield), though. Last year, in the Spring 2006, NBG paid their regular dividend plus a special return of capital payment to shareholders. NBG will be holding on to their cash and pursue more acquisitions.
4. Lots of Buying
I have watched this trend since I started getting into this position. Typically, there are no more than a few hundred shares on the bid, but I have seen big blocks of shares - 10,000-50,000+ on the ask that need to be chewed away to push the stock up. Remember, it's all supply and demand. Well, so far, it has not mattered how many shares are posted for sale on the ask or at what price, they have all been bought away. There has been no indication that this trend will stop and ultimately, I think the sellers will go away before the buyers do.
NBG is a huge winner and I estimate this one being $13-$15 by the end of 2007 and my 3 year price target is $24-$28. Short term, NBG may come off its recent run, especially after hitting $11.24 on Friday, up 3%+ in a single day. Regardless, I am GOING DEEP on this one and am raising my slash and burn target to $12. That's right - anything under $12 is an instant buy, from both a long term and a relatively short term standpoint.
The things I like about NBG:
1. 30% Annual Income Growth
They are forecasting 30% growth in their net income each year in 2007-2009. If we can look that far out, that would be NBG is trading at about 9.1 times 2009 full year earnings, if I did the math right.
2. 24% Return on Equity
NBG is looking to significantly bump their ROE to at least 24% during this 3 year span. This is a huge jump from its current 14% ROE. How are they going to do this? Well, lots of factors come into play here. The biggest factor is their acquisition strategy. They are now well positioned in Turkey and the Balkan States. They are also looking to expand into Ukraine. NBG's growth has been driven by the retail boom in Greece the past few years, which is still strong, but is slowing somewhat. That same boom is just starting in the Balkans and Turkey and will fuel NBG's growth in the coming years. Additionally, NBG's current market penetration in these other countries is relatively small and should make it more likely that NBG can grow their presence and penetration in these countries very aggressively over the next couple of years.
3. Lots of Cash
Apart from producing lots of cash and having their margins increase, NBG has a ton of cash on hand and is not planning a special return of capital to shareholders for 2006, payable in the Spring 2007. They will most likely pay out the regular annual dividend (2%-2.5% yield), though. Last year, in the Spring 2006, NBG paid their regular dividend plus a special return of capital payment to shareholders. NBG will be holding on to their cash and pursue more acquisitions.
4. Lots of Buying
I have watched this trend since I started getting into this position. Typically, there are no more than a few hundred shares on the bid, but I have seen big blocks of shares - 10,000-50,000+ on the ask that need to be chewed away to push the stock up. Remember, it's all supply and demand. Well, so far, it has not mattered how many shares are posted for sale on the ask or at what price, they have all been bought away. There has been no indication that this trend will stop and ultimately, I think the sellers will go away before the buyers do.
Wednesday, February 21, 2007
NBG - Financial Results; ASHG Acting Up; Other Notes; Lessons Learned
This morning, National Bank of Greece (NYSE: NBG) posted their 2006 financial results. Results were very impressive. Net income rose 36% from 2005 to $1.29B. Results were towards the upper end of the analyst estimate range, but fell short of the high estimate by about 1%. Hence, the stock did not blow up today, but actually did end close up by a modest 0.3% after spending most of the day in the red. This activity is not uncommon. The financial results of NBG were being watched like a hawk by the world marketplace and anticipating a very strong showing. The market then 'prices' this activity in for the most part, so if it ends up where everyone thought it was going to go, it tends to not move much or even decline, sometimes sharply. Tomorrow, on Feb. 22, NBG, will be presenting its 2007-2009 3 year outlook, which is supposed to continue to be very positive as already indicated by NBG, though we will not see full details until tomorrow. Long term, NBG is a great buy and when I say long term, I could be talking several years and I do not believe it will disappoint in 2007. While I do not see a double in 2007, I think NBG getting to $14-$16 sometime before the end of the year is possible. I am considering adding to my position.
It is officially dividend time for Ash Grove Cement (Pink Sheets: ASHG). This stock does not trade very often or at least post trades. I think that this stock trades daily behind the scenes, but the market makets will only post a trade in 100+ share blocks. So, I often think the 100 share blocks is a consolidated trade posting of many small trades. Anyway, activity always picks up around dividend time, which is the first week of March. ASHG is pretty sneaky about this - I am able to see their dividend declaration information at www.pinksheets.com, but it is not anywhere else to be seen. For 2007, dividend is $0.42 per share, a 5% increase over 2006, so that is good stuff.
Anyway, although trades may not occur, the inside market, or bid vs. ask spread, will sometimes change during the day. This is indicative of someone stepping in to buy or perhaps some trades took place behind the scenes and are not yet posted. There are very, very few shares out there, so 5-10 share trades, that seem to be invisible to the market, can effect the spread. I know this because I have personally experienced and seen this first hand. So, yesterday, Feb 20, ASHG opened up the morning at $217 x $220. During a meeting at work, I noticed the spread ticked up as high as $250 x $350!!! I almost lost it and took every ounce of sanity to keep my clothes on and to restrain from humping the desk.
Today, the stock closed as $280 per share, up 24.4% to an all time high. The closing spread was $240 x $272.50 (the bid ticked up from $230 to $240 in some small increments through the day) and the only trade that posted was 125 shares at $295. Now, I have seen the inside market change with some rigor during dividend times, but NEVER like this in the nearly 2 years I have owned and followed this security.
I think this one will pull back some post March dividend, but we will see. I still plan to add to my position, regardless, and somewhat regret not adding more than I did along the way, but again, it's always better to wish you bought more than wish you bought less! I am not sure what is in store for ASHG tomorrow or even for the rest of the year - I thought reaching $240 would take all year - I was wrong. Next year? Who knows....5 years? $700 per share. This is a fantastic retirement investment.
Seaboard Corporatiion (AMEX: SEB) had a very strong day. Up 2.6% to an all-time closing high of $2,154 and touched on an all time high of $2,190 today. Volume today was very strong - double than usual. I am not sure of the activity, but in 7-10 years, do not be surprised to see this one at $6,000-$8,000 per share. There is certainly long term value here and I am considering adding more to my position, but it's tough, because 1 share at this stage chews up $2,154 of capital, which is well, a lot. If I were to buy more, it would be for the real long haul. At some point, the appreciation on this one will have to take a breath and slow down, at least short term. I am trying to figure out what the deal is with this one in terms of the short-term activity and what is means long-term for the stock. Perhaps it is institutions loading up for the long haul as dry bulk shipping, one of SEB's divisions, was very hot today thanks to a mention on CNBC. There is no question SEB is going higher, but under what terms? Timeframe? Retracement? Short and sweet, I like the shareholders equity and cash this beast produces.
On other notes, I added to my positions in INFT at $3.57 and WNC at $16.99. INFT has disappointed me thus far, but it just has to go somewhere. I know, famous last words, but the last time I had that feeling, I was buying up shares of CECE at $3.75-$4.25. It took many years, and I was fortunate to start adding shares just in time, but the metrics said CECE absolutely had to go higher. It did...and ran to $12 last spring and today closed at an all time high of $17. I sold out last spring on the way up to $12.
Watching CECE today - I ALMOST jumped back in at $8-$9 several weeks ago, but I didn't. I wish I did, but honestly, the money I took out of CECE (and others that maybe I sold too soon) I put into other winners:
SVVS: in at $10, out at $17; now at $48.
ASTE: in at $23, out at $34; now at $39.
Thinking about this, did I miss the boat? Well, yes and no, but not really. I took the bulk of my CECE, SVVS, and ASTE proceeds and invested in big winners like ASHG, NBG, SEB and what will hopefully become big winners, like INFT and WNC. My patiences for investments has grown tremendously. I am amazed that I have held and accumulated ASHG for 20 months now, which is a world record for me. It is tough at a young age to have a huge time horizon mentality. Plus, with the in your face of 'gotta have it now' and my need to fend off my other situation, well, as much as I would have loved to have waited the extra year for CECE to turnaround, but honestly, last spring, I didn't have a year.
Going forward, it is important to look at the scope of your investments. Of course, you can never predict the market, but sometimes, bigger gains are out there if you can open your mindset to maybe waiting 3-5 years. I have somehow been able to do that with ASHG. I think part of that has to do with the lack of activity the stock has. Unlike other issues that move up and down, I am better able to keep the fear and greed out of my decision more than the others. Regardless, it is important to set your own price targets and goals - but more importantly, how long you are willing or might have to wait. Are you willing to wait 1 1/2 years for a 75% return? That is what it would have taken for ASHG. A 300% gain requires 18 months? Well, that is SVVS for you.
Opportunities for huge gains are out there, so look for them, and if you have to wait it out, then wait it out. Of course, never underestimate the power of taking profits and successfully re-investing the proceeds in other big winners. Plus, there is only so much capital to go around. If I would have kept my hands on CECE and didn't bother buying more ASHG or SEB, I'd be feeling just as silly, but, I'd really be in the same place I am now from a numbers standpoint.
Simplistically, if you take money out of an investment, make sure you have a solid purpose for it - specifically, another investment that you feel will perform well. If you sell, that's fine, just don't piss it away, because that is when seeing the stock 100% higher than you sold it at will get to you.
It is officially dividend time for Ash Grove Cement (Pink Sheets: ASHG). This stock does not trade very often or at least post trades. I think that this stock trades daily behind the scenes, but the market makets will only post a trade in 100+ share blocks. So, I often think the 100 share blocks is a consolidated trade posting of many small trades. Anyway, activity always picks up around dividend time, which is the first week of March. ASHG is pretty sneaky about this - I am able to see their dividend declaration information at www.pinksheets.com, but it is not anywhere else to be seen. For 2007, dividend is $0.42 per share, a 5% increase over 2006, so that is good stuff.
Anyway, although trades may not occur, the inside market, or bid vs. ask spread, will sometimes change during the day. This is indicative of someone stepping in to buy or perhaps some trades took place behind the scenes and are not yet posted. There are very, very few shares out there, so 5-10 share trades, that seem to be invisible to the market, can effect the spread. I know this because I have personally experienced and seen this first hand. So, yesterday, Feb 20, ASHG opened up the morning at $217 x $220. During a meeting at work, I noticed the spread ticked up as high as $250 x $350!!! I almost lost it and took every ounce of sanity to keep my clothes on and to restrain from humping the desk.
Today, the stock closed as $280 per share, up 24.4% to an all time high. The closing spread was $240 x $272.50 (the bid ticked up from $230 to $240 in some small increments through the day) and the only trade that posted was 125 shares at $295. Now, I have seen the inside market change with some rigor during dividend times, but NEVER like this in the nearly 2 years I have owned and followed this security.
I think this one will pull back some post March dividend, but we will see. I still plan to add to my position, regardless, and somewhat regret not adding more than I did along the way, but again, it's always better to wish you bought more than wish you bought less! I am not sure what is in store for ASHG tomorrow or even for the rest of the year - I thought reaching $240 would take all year - I was wrong. Next year? Who knows....5 years? $700 per share. This is a fantastic retirement investment.
Seaboard Corporatiion (AMEX: SEB) had a very strong day. Up 2.6% to an all-time closing high of $2,154 and touched on an all time high of $2,190 today. Volume today was very strong - double than usual. I am not sure of the activity, but in 7-10 years, do not be surprised to see this one at $6,000-$8,000 per share. There is certainly long term value here and I am considering adding more to my position, but it's tough, because 1 share at this stage chews up $2,154 of capital, which is well, a lot. If I were to buy more, it would be for the real long haul. At some point, the appreciation on this one will have to take a breath and slow down, at least short term. I am trying to figure out what the deal is with this one in terms of the short-term activity and what is means long-term for the stock. Perhaps it is institutions loading up for the long haul as dry bulk shipping, one of SEB's divisions, was very hot today thanks to a mention on CNBC. There is no question SEB is going higher, but under what terms? Timeframe? Retracement? Short and sweet, I like the shareholders equity and cash this beast produces.
On other notes, I added to my positions in INFT at $3.57 and WNC at $16.99. INFT has disappointed me thus far, but it just has to go somewhere. I know, famous last words, but the last time I had that feeling, I was buying up shares of CECE at $3.75-$4.25. It took many years, and I was fortunate to start adding shares just in time, but the metrics said CECE absolutely had to go higher. It did...and ran to $12 last spring and today closed at an all time high of $17. I sold out last spring on the way up to $12.
Watching CECE today - I ALMOST jumped back in at $8-$9 several weeks ago, but I didn't. I wish I did, but honestly, the money I took out of CECE (and others that maybe I sold too soon) I put into other winners:
SVVS: in at $10, out at $17; now at $48.
ASTE: in at $23, out at $34; now at $39.
Thinking about this, did I miss the boat? Well, yes and no, but not really. I took the bulk of my CECE, SVVS, and ASTE proceeds and invested in big winners like ASHG, NBG, SEB and what will hopefully become big winners, like INFT and WNC. My patiences for investments has grown tremendously. I am amazed that I have held and accumulated ASHG for 20 months now, which is a world record for me. It is tough at a young age to have a huge time horizon mentality. Plus, with the in your face of 'gotta have it now' and my need to fend off my other situation, well, as much as I would have loved to have waited the extra year for CECE to turnaround, but honestly, last spring, I didn't have a year.
Going forward, it is important to look at the scope of your investments. Of course, you can never predict the market, but sometimes, bigger gains are out there if you can open your mindset to maybe waiting 3-5 years. I have somehow been able to do that with ASHG. I think part of that has to do with the lack of activity the stock has. Unlike other issues that move up and down, I am better able to keep the fear and greed out of my decision more than the others. Regardless, it is important to set your own price targets and goals - but more importantly, how long you are willing or might have to wait. Are you willing to wait 1 1/2 years for a 75% return? That is what it would have taken for ASHG. A 300% gain requires 18 months? Well, that is SVVS for you.
Opportunities for huge gains are out there, so look for them, and if you have to wait it out, then wait it out. Of course, never underestimate the power of taking profits and successfully re-investing the proceeds in other big winners. Plus, there is only so much capital to go around. If I would have kept my hands on CECE and didn't bother buying more ASHG or SEB, I'd be feeling just as silly, but, I'd really be in the same place I am now from a numbers standpoint.
Simplistically, if you take money out of an investment, make sure you have a solid purpose for it - specifically, another investment that you feel will perform well. If you sell, that's fine, just don't piss it away, because that is when seeing the stock 100% higher than you sold it at will get to you.
Sunday, February 18, 2007
The Lost Art of Ownership
"Well, I appreciate the opportunity you're giving me Mr. Cromwell as the single largest shareholder in Teldar Paper, to speak....Now, in the days of the free market when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake....You own the company. That's right, you, the stockholder."
For those of you that have seen Wall Street, you will know the above is the scene were Gordon Gekko is addressing the shareholders at the company's annual meeting.
Today, at 2pm, I will be at the annual meeting at the Pelican Yacht Club in Fort Pierce. Granted, this is nothing to compare to say the huge annual meetings of companies like Warren Buffet's Berkshire Hathaway or other large American entities like Disney, Ford, etc. But, nevertheless, it is an annual meeting, and it is the same principle. The board of directors will provide a year in review for 2006 and discuss the goals and challenges for 2007. The board of directors will be addressing the members - members who actually are sharholders and own a share of the corporation that is the Pelican Yacht Club. Granted, this is a little different as there are no dividends, stock splits, etc., but regardless, the people at this meeting are owners. Unfortunately, the vast majority of the owners will not be present. Of the 350 or so owners, I estimate maybe 100, tops, will be represented in person or via proxy.
I think today the art of ownership is lost - or at least misunderstood. I am guilty of this myself, too, on many levels, but when you purchase shares of stock in a company on the stock market - any company big or small - you become an owner. That purchase makes you an owner of the company, just as if you owned your own company. You are legally entitled to all sorts of privileges, such as the right to vote, rights to profits. Also, as an owner, you also have responsibilities, such as to learn as much about the company as you possibly can - remember, your money is at stake.
The other day, I was in the car on I-95 and passed a semi-truck. On the rubber flaps that are behind the tires, I was astonished to see the logo of Wabash National (NYSE: WNC) on the flaps. It told me that the the trailer hitched on the rig was made by Wabash National. Since then, I have seen several trucks with this same characteristic. Why should I be surprised? I shouldn't be. WNC is the #1 manufacturer of truck trailers in the country and an acquisition during 2006 of the #10 manufacturer only strengthens their position. So, from a probability stand point, I should see more Wabash National trailers than any other individual trailer manufacturer.
Seeing the logo, I felt pretty good about my position in WNC. From a performance standpoint, only time will tell if it was a good decision to buy (it appears to be so far), but I recognized the logo and felt good about it. I felt that I took pride in my ownership of WNC and that I understood it. Who knows how many WNC trucks I have seen through the years, but just was not paying attention. Now I am and I felt good about being an owner - being entitled to company dividends, sharing in the success and rewards as the company does well, and being like..."hey, my company made that trailer."
In the previous sentence, the latter may be a little zealous, but I think we have to think that way. I think we have to get beyond thinking that a share of stock is a piece of paper that has an arbitrary value that goes up or down. Sure, we all want our stocks to go up because we want to own something that increases in value over time. But, owning a stock should not be looked at as only having the right to sell it when you feel like it or when it reaches a certain price. Yes, we are all stewards of our own little nest eggs, regardless of how big or small, and we have the responsibility to make good financial decisions, but owning stock is far more than "buy low, sell high."
I think of companies in my portfolio like Seaboard Corp (AMEX: SEB) and Ash Grove Cement (Pink Sheet: ASHG). The founding families of these companies own huge blocks of the company. I estimate that the Bresky family controls 70%-80% of SEB stock and that the Sunderlands control anywhere from 80%-90% of ASHG. The latter is difficult to figure out because they not required to report ownership, but SEB is more clear. Additionally, in both cases, I suspect that both companies and families purchase additional shares of the company's stock on the open market or in private transactions and are further willing to buy what you are selling.
SEB, for instance, since they have to file with the SEC and information is more readily available. The founding family's stake is worth about $1.8B. However, they don't sell it. The CEO, Steven Bresky and member of the founding family makes a $1.5M/year salary and the Bresky family takes home about $2.6M in dividends. So, yes, that is a ton of money, but $4.1M per year is only about 0.2% of their entire SEB worth. The situation at ASHG is likely very similar, though I do not have exact #'s. The point is, nearly of the families sell their stock to buy big houses, big lifestyle, etc. They maintain their ownership where it is at, even acquire more - despite them not having access to that full amount of cash and fronting their own cash to buy more.
The above stories are a little extreme, but compare to the other extreme, say at our company in Vero Beach. Most everyone who works there owns shares of stock and/or stock options. I am towards the upper end of the spectrum in terms of # of shares I own, which is nice, though the shares are worthless. However, not a day goes by where a discussion of "I can't wait for the company to sell so I can dump my shares" comes up. Understood - you have to diversify and god knows I'd be likely to do the same under the same circumstances, but what happened to valuing the ownership? Why would anyone want to buy the shares from you if they know all you care about is getting rich off them and selling them to build a big house, buy a fancy car, etc. My question is, where is the honor and pride of ownership anymore?
Yes, in any given time frame, whether it be 1 month, 1 year, 10 years, or 100 years, there will always be one stock or company that does the best in terms of providing returns to shareholders. Someone has to be #1 and I think often, especially with the greed that circles around the stock market, we feel we have to be #1 all of the time. So, people move their money around from stock to stock - forgetting the art of ownership. But, even saying being the #100 performing stock of 2006 is pretty good about still puts you in the top 1% Even if your stock you owned was the #1000 performer, you would still be doing very well in terms of building wealth.
So, yes, we are here in the stock market to make money, but the #1 thing to remember is that you are an owner, so act like one. Understand where your money is because your money is at stake. Participate in annual meetings - submit your ideas and proposals to the board of directors, though do so with tact and informed expression.
There is nothing worse than the guy with 10 shares at the Ford annual meeting that just crassly screams out "RAISE THE DIVIDEND". Trust me - this happens - I have been to the Harbor Federal (now National City, NYSE: NCC) annual meetings. Dividends are great, yes, as they are returns of actual cash to the investors and owners - but, if the board feels that money can be better used by re-purchasing stock or retaining for acquisitions or other corporate purposes, then so be it. If you want more dividends, write a business case as to why you feel the cash can do better if in the hands of the owners (shareholders) rather than the company and acquire support for it, whether it be by lobbying the board members, other stockholders, or just buying all of the stock yourself.
Make the most of your ownership rights. You don't have to go crazy, but at the very least, participate in elections of directors, proxy statements (if you cannot physically attend the meeting), and act like an owner. It's hard to do all the time, especially as a stock goes down or up, but it's a good thing to keep in the back of your mind.
For those of you that have seen Wall Street, you will know the above is the scene were Gordon Gekko is addressing the shareholders at the company's annual meeting.
Today, at 2pm, I will be at the annual meeting at the Pelican Yacht Club in Fort Pierce. Granted, this is nothing to compare to say the huge annual meetings of companies like Warren Buffet's Berkshire Hathaway or other large American entities like Disney, Ford, etc. But, nevertheless, it is an annual meeting, and it is the same principle. The board of directors will provide a year in review for 2006 and discuss the goals and challenges for 2007. The board of directors will be addressing the members - members who actually are sharholders and own a share of the corporation that is the Pelican Yacht Club. Granted, this is a little different as there are no dividends, stock splits, etc., but regardless, the people at this meeting are owners. Unfortunately, the vast majority of the owners will not be present. Of the 350 or so owners, I estimate maybe 100, tops, will be represented in person or via proxy.
I think today the art of ownership is lost - or at least misunderstood. I am guilty of this myself, too, on many levels, but when you purchase shares of stock in a company on the stock market - any company big or small - you become an owner. That purchase makes you an owner of the company, just as if you owned your own company. You are legally entitled to all sorts of privileges, such as the right to vote, rights to profits. Also, as an owner, you also have responsibilities, such as to learn as much about the company as you possibly can - remember, your money is at stake.
The other day, I was in the car on I-95 and passed a semi-truck. On the rubber flaps that are behind the tires, I was astonished to see the logo of Wabash National (NYSE: WNC) on the flaps. It told me that the the trailer hitched on the rig was made by Wabash National. Since then, I have seen several trucks with this same characteristic. Why should I be surprised? I shouldn't be. WNC is the #1 manufacturer of truck trailers in the country and an acquisition during 2006 of the #10 manufacturer only strengthens their position. So, from a probability stand point, I should see more Wabash National trailers than any other individual trailer manufacturer.
Seeing the logo, I felt pretty good about my position in WNC. From a performance standpoint, only time will tell if it was a good decision to buy (it appears to be so far), but I recognized the logo and felt good about it. I felt that I took pride in my ownership of WNC and that I understood it. Who knows how many WNC trucks I have seen through the years, but just was not paying attention. Now I am and I felt good about being an owner - being entitled to company dividends, sharing in the success and rewards as the company does well, and being like..."hey, my company made that trailer."
In the previous sentence, the latter may be a little zealous, but I think we have to think that way. I think we have to get beyond thinking that a share of stock is a piece of paper that has an arbitrary value that goes up or down. Sure, we all want our stocks to go up because we want to own something that increases in value over time. But, owning a stock should not be looked at as only having the right to sell it when you feel like it or when it reaches a certain price. Yes, we are all stewards of our own little nest eggs, regardless of how big or small, and we have the responsibility to make good financial decisions, but owning stock is far more than "buy low, sell high."
I think of companies in my portfolio like Seaboard Corp (AMEX: SEB) and Ash Grove Cement (Pink Sheet: ASHG). The founding families of these companies own huge blocks of the company. I estimate that the Bresky family controls 70%-80% of SEB stock and that the Sunderlands control anywhere from 80%-90% of ASHG. The latter is difficult to figure out because they not required to report ownership, but SEB is more clear. Additionally, in both cases, I suspect that both companies and families purchase additional shares of the company's stock on the open market or in private transactions and are further willing to buy what you are selling.
SEB, for instance, since they have to file with the SEC and information is more readily available. The founding family's stake is worth about $1.8B. However, they don't sell it. The CEO, Steven Bresky and member of the founding family makes a $1.5M/year salary and the Bresky family takes home about $2.6M in dividends. So, yes, that is a ton of money, but $4.1M per year is only about 0.2% of their entire SEB worth. The situation at ASHG is likely very similar, though I do not have exact #'s. The point is, nearly of the families sell their stock to buy big houses, big lifestyle, etc. They maintain their ownership where it is at, even acquire more - despite them not having access to that full amount of cash and fronting their own cash to buy more.
The above stories are a little extreme, but compare to the other extreme, say at our company in Vero Beach. Most everyone who works there owns shares of stock and/or stock options. I am towards the upper end of the spectrum in terms of # of shares I own, which is nice, though the shares are worthless. However, not a day goes by where a discussion of "I can't wait for the company to sell so I can dump my shares" comes up. Understood - you have to diversify and god knows I'd be likely to do the same under the same circumstances, but what happened to valuing the ownership? Why would anyone want to buy the shares from you if they know all you care about is getting rich off them and selling them to build a big house, buy a fancy car, etc. My question is, where is the honor and pride of ownership anymore?
Yes, in any given time frame, whether it be 1 month, 1 year, 10 years, or 100 years, there will always be one stock or company that does the best in terms of providing returns to shareholders. Someone has to be #1 and I think often, especially with the greed that circles around the stock market, we feel we have to be #1 all of the time. So, people move their money around from stock to stock - forgetting the art of ownership. But, even saying being the #100 performing stock of 2006 is pretty good about still puts you in the top 1% Even if your stock you owned was the #1000 performer, you would still be doing very well in terms of building wealth.
So, yes, we are here in the stock market to make money, but the #1 thing to remember is that you are an owner, so act like one. Understand where your money is because your money is at stake. Participate in annual meetings - submit your ideas and proposals to the board of directors, though do so with tact and informed expression.
There is nothing worse than the guy with 10 shares at the Ford annual meeting that just crassly screams out "RAISE THE DIVIDEND". Trust me - this happens - I have been to the Harbor Federal (now National City, NYSE: NCC) annual meetings. Dividends are great, yes, as they are returns of actual cash to the investors and owners - but, if the board feels that money can be better used by re-purchasing stock or retaining for acquisitions or other corporate purposes, then so be it. If you want more dividends, write a business case as to why you feel the cash can do better if in the hands of the owners (shareholders) rather than the company and acquire support for it, whether it be by lobbying the board members, other stockholders, or just buying all of the stock yourself.
Make the most of your ownership rights. You don't have to go crazy, but at the very least, participate in elections of directors, proxy statements (if you cannot physically attend the meeting), and act like an owner. It's hard to do all the time, especially as a stock goes down or up, but it's a good thing to keep in the back of your mind.
Wednesday, February 14, 2007
SEB, DVY (New), IIBK (New), ASHG, NBG, et. al.
Man, today was just freaking huge. The markets opened up quiet and waited on the comments from the Federal Reserve about the state of the economy. It is incredible how the words of one person, federal chairman Bernanke, can impact the market so sharply. The biggest discussion was Bernanke saying the economy is 'ok' and interest rates are not going anywhere anytime soon. What this means is that interest rates will not increase, as many feared or even expected.
The impacts of this are the treasury yields staying about the same mean that for the time being, we live in a world where yields of dividend paying stocks are very close to what you would get if you invested in a U.S. treasury bond. When I stock about dividend paying stocks, I am not talking about the egregiously high yielding stocks, like oil royalty trusts - I am talking about blue chips. PFE sports a 4.4% yield, Altria (NYSE: MO) is at 4%, and Washington Mutual (NYSE: WM) is at 4.9%. My point is, if you get 4.8% from a U.S. Bond, why wouldn't you just buy WM, collect the 4.9% return on your investment via dividend and then own the stock? Exactly - you wouldn't - the 'guaranteed' return is about the same and you have a chance for stock ownership.
So, today, with rates staying the same, and that gap between dividend yields of blue chips and treasury yields remaining relatively small, money flowed into stocks today - especially blue chips as the Dow Jones closed at an all time high. It seems that this trend will continue as long as the environment is the same. Eventually, the yields of these stocks will go from say 4% for MO to maybe 3.2%-3.5% yield. Then, people see that difference between a treasury and a dividend yield and are less inclined to buy stock. But, that slowdown won't take place for a bit and stocks will continue to rise, especially blue chip stocks, creating a larger gap between the yields.
In light of that, I'd like to introduce you to NYSE: DVY. The symbol is fitting as this is an 'exchange traded fund' (ETF) and is the Dow Jones iShares Dividend Index. This 'fund' trades like a stock and invests in blue chip companies that have histories of strong dividends and consistent dividend growth over 25+ years. I like this one a great deal for my IRA and I took a position in this one in my IRA account. I think the ETF will perform well from a capital appreciation standpoint and yield about 3% in dividends. This fund supports my discussion above regarding the interest rate environment and I think is perfect for an IRA account.
I am a little more aggressive in my main portfolio, but oddly enough, I am very conservative in my IRA. Why? I mean, can't you get tax deferred growth in your IRA? Well, sure. But, I remain conservative. The key to the IRA, especially at a young age like me, is the time value of money. It is more important for me to have years generating 10%-12% returns, year after year, without exception. When stocks struggle, the dividends will help support. Over time, and with maxxing out my annual contributions, this is what will make the thing big. Taking big risks in the IRA? Well, what if a big risk doesn't grow or suffers serious depreciation? You are literally wiping out what could take you years to recover. I will stick to aggressive in my portfolio, where I can move the money, stomach a loss if it happens, and take gains out to use for my own lifestyle if need be. As long as I can get a nice, steady return in my IRA year after year, I will be fine when I can actually use the thing. Short and simple, implicit in the strategy and purpose of the IRA is to get that residual time value of money - very slow and steady. In my day to day stuff, I'll take bigger whacks at things looking for 50%+ gains in a 12 month period.
Speaking of monster gains, Seaboard Corp (AMEX: SEB) was my best performer today, up 6.2% to $2,107 per share. I started buying at $1,289. I expected it to crack $2,000 today, after yesterday's strong close, but today, in the last 30 mins. of trading, it just blew up and traded as high as $2,135. SEB is still worth $3,000+ per share - it continues to produce lots of cash and shareholders equity. Plus, their business model, especially their marine chartering business, will benefit from the opening up of Cuba. SEB has a great conglomerate going, but SEB risks never reaching full valuation because lack of coverage by the big institutions. In the mean time, remember, there seem to be no shares out there available for sale and there are buyers - supply and demand - demand is high, supply is low, and price goes up. SEB is not done yet, but it might take a breather over the next couple of days, but short term, heading to $2,300 is not out of the question. SEB will shortly be releasing its earnings report, so we will see what comes to pass in terms of EBITDA, Cash Flow, Shareholders Equity, etc. I think we will see another uptick in all of those categories for SEB and the market may be anticipating that.
National Bank of Greece (NYSE: NBG) performed strongly today, too. 2 days ago, it fell down to $10.01 (from $10.40) on the news they lost the bid for a Ukrainian bank and were looking at a bank in Russia. I almost pulled the trigger and bought more, but my adding threshold was $9.90. I wish I got more, as it is now back up to $10.51 and less than a nickel off of its 52-week high of $10.55. From a chart standpoint, this appears to be good news, especially if it can break through its old high. It broke through $10.40, the past recent high it hit before falling to $10.01 and it is higher than it was at this time last year. NBG pays its dividend annually, so there tends to be some selling come dividend time, since I guess people do not like to wait all year, so once they get it, they sell out and get back in later I guess. I do not think we will see a 20% decline post-dividend like we did last year.
Ash Grove Cement (Pink Sheet: ASHG) hit an all-time high today of $215 and is currently offered at $220. I added more in my IRA the other day and ASHG will shortly announce its dividend, payable around the first or 2nd week of March. We will see if they raise the dividend from $0.40 per quarter to something higher, as they have done the past few years. I like ASHG long-term, mostly because of market dynamics and their unique position as largest American owned cement company in the country. Their capital expenditures in 2006-2007 should start to yield some serious results starting in 2008, so the future looks bright for this cement producer. At the very least, this is a very solid long-term holding.
Finally, let me also introduce you to Idaho Independent Bank (OTCBB: IIBK) - it is trading at $34.55. I found this bank because they are my finalist for the new direct stock purchase plan for my girls and I as the program has no fees to participate. IIBK pays an annual 7% stock dividend - no cash dividend. Interestingly enough, although you can count on this 7% dilution every year come November, the additional shares has not hindered their EPS growth or hurt the supply/demand dynamics of IIBK's market. IIBK is a relatively small bank with only 10 branches and their focus is businesses, rather than consumer. Their ratios are stellar, boasting a 2%+ return on assets and very well positioned from a cash/debt standpoint. My only fear is that they may be richly valued already, trading at 3+ times book value, which is high for a bank. However, the x-factor here is the situation and the stock dynamics.
IIBK reminds me a little bit of Ft. Pierce privately held bank, Riverside National Bank, which has provided tremendous returns to shareholders and pays an annual stock dividend. Riverside's internal stock price has climbed year after year as it is governed by the financial results of the bank and the fact that there are not many 'sellers' of the stock. Sure, there is an active market, but there are more buyers than sellers. IIBK appears to have the same situation - closely held, strong growth in EPS and financial health, limited institutional holdings, and not a whole lot of people dumping shares. Only trades about 2,000 shares each day, so not a ton of liquidity or volume. The November 2006 2-1 stock split might loosen up the marketplace some, but IIBK is going up. I say $40-$42 by the end of 2007 and $50+ by end of 2008. Not a huge mover, by any means, but a great play from the direct stock purchase standpoint, especially with the 7% stock dividend and history of the additional shares not impacting the company's per share performance.
The impacts of this are the treasury yields staying about the same mean that for the time being, we live in a world where yields of dividend paying stocks are very close to what you would get if you invested in a U.S. treasury bond. When I stock about dividend paying stocks, I am not talking about the egregiously high yielding stocks, like oil royalty trusts - I am talking about blue chips. PFE sports a 4.4% yield, Altria (NYSE: MO) is at 4%, and Washington Mutual (NYSE: WM) is at 4.9%. My point is, if you get 4.8% from a U.S. Bond, why wouldn't you just buy WM, collect the 4.9% return on your investment via dividend and then own the stock? Exactly - you wouldn't - the 'guaranteed' return is about the same and you have a chance for stock ownership.
So, today, with rates staying the same, and that gap between dividend yields of blue chips and treasury yields remaining relatively small, money flowed into stocks today - especially blue chips as the Dow Jones closed at an all time high. It seems that this trend will continue as long as the environment is the same. Eventually, the yields of these stocks will go from say 4% for MO to maybe 3.2%-3.5% yield. Then, people see that difference between a treasury and a dividend yield and are less inclined to buy stock. But, that slowdown won't take place for a bit and stocks will continue to rise, especially blue chip stocks, creating a larger gap between the yields.
In light of that, I'd like to introduce you to NYSE: DVY. The symbol is fitting as this is an 'exchange traded fund' (ETF) and is the Dow Jones iShares Dividend Index. This 'fund' trades like a stock and invests in blue chip companies that have histories of strong dividends and consistent dividend growth over 25+ years. I like this one a great deal for my IRA and I took a position in this one in my IRA account. I think the ETF will perform well from a capital appreciation standpoint and yield about 3% in dividends. This fund supports my discussion above regarding the interest rate environment and I think is perfect for an IRA account.
I am a little more aggressive in my main portfolio, but oddly enough, I am very conservative in my IRA. Why? I mean, can't you get tax deferred growth in your IRA? Well, sure. But, I remain conservative. The key to the IRA, especially at a young age like me, is the time value of money. It is more important for me to have years generating 10%-12% returns, year after year, without exception. When stocks struggle, the dividends will help support. Over time, and with maxxing out my annual contributions, this is what will make the thing big. Taking big risks in the IRA? Well, what if a big risk doesn't grow or suffers serious depreciation? You are literally wiping out what could take you years to recover. I will stick to aggressive in my portfolio, where I can move the money, stomach a loss if it happens, and take gains out to use for my own lifestyle if need be. As long as I can get a nice, steady return in my IRA year after year, I will be fine when I can actually use the thing. Short and simple, implicit in the strategy and purpose of the IRA is to get that residual time value of money - very slow and steady. In my day to day stuff, I'll take bigger whacks at things looking for 50%+ gains in a 12 month period.
Speaking of monster gains, Seaboard Corp (AMEX: SEB) was my best performer today, up 6.2% to $2,107 per share. I started buying at $1,289. I expected it to crack $2,000 today, after yesterday's strong close, but today, in the last 30 mins. of trading, it just blew up and traded as high as $2,135. SEB is still worth $3,000+ per share - it continues to produce lots of cash and shareholders equity. Plus, their business model, especially their marine chartering business, will benefit from the opening up of Cuba. SEB has a great conglomerate going, but SEB risks never reaching full valuation because lack of coverage by the big institutions. In the mean time, remember, there seem to be no shares out there available for sale and there are buyers - supply and demand - demand is high, supply is low, and price goes up. SEB is not done yet, but it might take a breather over the next couple of days, but short term, heading to $2,300 is not out of the question. SEB will shortly be releasing its earnings report, so we will see what comes to pass in terms of EBITDA, Cash Flow, Shareholders Equity, etc. I think we will see another uptick in all of those categories for SEB and the market may be anticipating that.
National Bank of Greece (NYSE: NBG) performed strongly today, too. 2 days ago, it fell down to $10.01 (from $10.40) on the news they lost the bid for a Ukrainian bank and were looking at a bank in Russia. I almost pulled the trigger and bought more, but my adding threshold was $9.90. I wish I got more, as it is now back up to $10.51 and less than a nickel off of its 52-week high of $10.55. From a chart standpoint, this appears to be good news, especially if it can break through its old high. It broke through $10.40, the past recent high it hit before falling to $10.01 and it is higher than it was at this time last year. NBG pays its dividend annually, so there tends to be some selling come dividend time, since I guess people do not like to wait all year, so once they get it, they sell out and get back in later I guess. I do not think we will see a 20% decline post-dividend like we did last year.
Ash Grove Cement (Pink Sheet: ASHG) hit an all-time high today of $215 and is currently offered at $220. I added more in my IRA the other day and ASHG will shortly announce its dividend, payable around the first or 2nd week of March. We will see if they raise the dividend from $0.40 per quarter to something higher, as they have done the past few years. I like ASHG long-term, mostly because of market dynamics and their unique position as largest American owned cement company in the country. Their capital expenditures in 2006-2007 should start to yield some serious results starting in 2008, so the future looks bright for this cement producer. At the very least, this is a very solid long-term holding.
Finally, let me also introduce you to Idaho Independent Bank (OTCBB: IIBK) - it is trading at $34.55. I found this bank because they are my finalist for the new direct stock purchase plan for my girls and I as the program has no fees to participate. IIBK pays an annual 7% stock dividend - no cash dividend. Interestingly enough, although you can count on this 7% dilution every year come November, the additional shares has not hindered their EPS growth or hurt the supply/demand dynamics of IIBK's market. IIBK is a relatively small bank with only 10 branches and their focus is businesses, rather than consumer. Their ratios are stellar, boasting a 2%+ return on assets and very well positioned from a cash/debt standpoint. My only fear is that they may be richly valued already, trading at 3+ times book value, which is high for a bank. However, the x-factor here is the situation and the stock dynamics.
IIBK reminds me a little bit of Ft. Pierce privately held bank, Riverside National Bank, which has provided tremendous returns to shareholders and pays an annual stock dividend. Riverside's internal stock price has climbed year after year as it is governed by the financial results of the bank and the fact that there are not many 'sellers' of the stock. Sure, there is an active market, but there are more buyers than sellers. IIBK appears to have the same situation - closely held, strong growth in EPS and financial health, limited institutional holdings, and not a whole lot of people dumping shares. Only trades about 2,000 shares each day, so not a ton of liquidity or volume. The November 2006 2-1 stock split might loosen up the marketplace some, but IIBK is going up. I say $40-$42 by the end of 2007 and $50+ by end of 2008. Not a huge mover, by any means, but a great play from the direct stock purchase standpoint, especially with the 7% stock dividend and history of the additional shares not impacting the company's per share performance.
Tuesday, February 13, 2007
Wabash National (NYSE: WNC) - Earnings Report
WNC, one of my holdings, announced their financial results for the 4Q 2006 and FY 2006 yesterday. This morning, I listened in on the company's conference call. The actual financial results were a little disappointing, though inline with expectations, but the conference call shed new light and I may add to my position.
WNC announced a net loss of $0.16 per share - excluding extraordinary items, they would have had a net income of $0.16 per share, which is right in line with analyst expectations. It is no secret that WNC has had a rough past year, and it has shown in the stock price. However, this is part of the reason why I like WNC - the worst seems to be in the past and already reflected in the stock price. This is good because as I have said before, the street is already expecting poor performance, so any 'meeting' expectations or downside surprise should have limited effect on the stock price. Furthermore, there is certainly a floor on this one as indicated by insider purchases by some of the officers as well as value investor and 10%+ holder, Gendell.
Some things I liked in the conference call....
1. Expenditures in the past.
In 2006, WNC spent a great deal of time and money on integrating an acquisition and a new ERP system to help counter increasing pricing pressure from suppliers and commodities. These two items were central factors in a poor 2006 for WNC and the expense is in the past and the foundation is laid for WNC to reap rewards from these developments.
2. Lots of Growth
WNC commented on lots of areas of higher-margin business sector growth. Their whole industry is not very exciting and under some pressure, but in many of WNC's new strategic avenues, they are seeing growth and new customers.
3. Share Buy Back
WNC bought back 700,000+ of their own shares during 4Q 2006 - average price less than $15 per share. This also serves as support as I imagine the buy back of WNC stock will continue. Most of this buy back took place towards the end of 4Q 2006, so we won't see this impact EPS #'s until 1Q 2007.
4. Huge Short Interest
Lots of short sellers out there and it would take 17+ days of trading at WNC average volume to cover the short positions. WNC is not going any lower, at least not significantly lower. I know, famous last words, but if WNC is to get their act together and put together a strong upside quarter, which I believe is at least 2Qs away, WNC will run and the shorts will be forced to cover, providing further buying pressure and further driving the stock up.
I also believe that lower oil prices will free up more money for trucking companies so they can purchase WNC products and we should see some good growth in trucking services over the next couple of years, likely starting in the summer of 2007.
This one is likely worth around $18-$19 today - and should reach $23-$25 within the next 12 months, and I figure that a great deal of that appreciation will take place during a very short period of time. I plan to add more to my position on weakness and collect the small dividend during the wait. It's a boring industry, but there are a great deal of dynamics here that could make WNC a big winner in late 2007. Of course, no promises, and WNC may remain in the weeds for a while, but I don't think we have a loser here - and the downside from $16 is $2-$3 per share and we have an update if $8-$10 per share....not a bad deal.
WNC announced a net loss of $0.16 per share - excluding extraordinary items, they would have had a net income of $0.16 per share, which is right in line with analyst expectations. It is no secret that WNC has had a rough past year, and it has shown in the stock price. However, this is part of the reason why I like WNC - the worst seems to be in the past and already reflected in the stock price. This is good because as I have said before, the street is already expecting poor performance, so any 'meeting' expectations or downside surprise should have limited effect on the stock price. Furthermore, there is certainly a floor on this one as indicated by insider purchases by some of the officers as well as value investor and 10%+ holder, Gendell.
Some things I liked in the conference call....
1. Expenditures in the past.
In 2006, WNC spent a great deal of time and money on integrating an acquisition and a new ERP system to help counter increasing pricing pressure from suppliers and commodities. These two items were central factors in a poor 2006 for WNC and the expense is in the past and the foundation is laid for WNC to reap rewards from these developments.
2. Lots of Growth
WNC commented on lots of areas of higher-margin business sector growth. Their whole industry is not very exciting and under some pressure, but in many of WNC's new strategic avenues, they are seeing growth and new customers.
3. Share Buy Back
WNC bought back 700,000+ of their own shares during 4Q 2006 - average price less than $15 per share. This also serves as support as I imagine the buy back of WNC stock will continue. Most of this buy back took place towards the end of 4Q 2006, so we won't see this impact EPS #'s until 1Q 2007.
4. Huge Short Interest
Lots of short sellers out there and it would take 17+ days of trading at WNC average volume to cover the short positions. WNC is not going any lower, at least not significantly lower. I know, famous last words, but if WNC is to get their act together and put together a strong upside quarter, which I believe is at least 2Qs away, WNC will run and the shorts will be forced to cover, providing further buying pressure and further driving the stock up.
I also believe that lower oil prices will free up more money for trucking companies so they can purchase WNC products and we should see some good growth in trucking services over the next couple of years, likely starting in the summer of 2007.
This one is likely worth around $18-$19 today - and should reach $23-$25 within the next 12 months, and I figure that a great deal of that appreciation will take place during a very short period of time. I plan to add more to my position on weakness and collect the small dividend during the wait. It's a boring industry, but there are a great deal of dynamics here that could make WNC a big winner in late 2007. Of course, no promises, and WNC may remain in the weeds for a while, but I don't think we have a loser here - and the downside from $16 is $2-$3 per share and we have an update if $8-$10 per share....not a bad deal.
Subscribe to:
Posts (Atom)
