Investing in Bp after the Oil Spill

I bought BP shares this past month. In some ways the decision was dead easy, in other ways I must admit that I am still questioning my choice- but not for the regular reasons. Let me explain to you first why it was an easy decision (my rational side) and then lets talk about why it was a tough decision (let’s call it my emotional side).
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Waiting for Great Companies

I always have a running list of great companies I would buy if they were priced a whole lot differently- my wish list you might say. Being value investors we all spend a lot of time trying to differentiate between garbage and gold. Usually when I am looking at a company it has hit my screens because it is suddenly cheap – my job is to find out if there is a good reason or a bad reason for this, and invest accordingly. This activity can take some time, days, sometimes even weeks. Some opportunities simply don’t last that long though, they can dry up in a matter of a day, an hour or even mere minutes.
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Greece Debt Default

Greece is in a bad state, there is no doubt about it. When a country builds up a billion dollars in debt (some estimates are 30% of GDP) and shows no mechanism to repay there is little good that can be said about the circumstance. Without the continued assistance of an EU German backed bailout there is a very good chance Greece will be forced to default on its debt. If you were to believe the general media this is tantamount to the outright failure of the nation which can result in nothing short of the entire country descending into chaos and likely taking the rest of Europe and the West with it.
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Actively Managed ETFs, ETFs, and Mutual Funds

A few years back the SEC licensed a new class of ETFs called actively managed ETFs. Being a big fan of the ETF area I thought it would be worth saying a few words about this new class.

ETFs are usually passive investments, some of my favorites are those that model an entire market like the S&P 500 or the S&P TSX. These funds emulate the components of the S&P 500/TSX allowing an investor to gain a diversified exposure to the market at a very very low cost or MER. In these traditional ETFs there isn’t a fund manager making a decision about which stocks to select- which is the chief reason for the low MER.
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Learning to Invest- Reading Buffett’s Letters

Taking the time to read the time to read Buffett’s letters to shareholders is, in my opinion, the best investment of a few hours a young investor could possibly make. It provides the unusual opportunity get behind the scenes and get a look at the some of the thinking that goes into some of Berkshire Hathaway’s largest buys and sells. It also provides the opportunity to learn from the mistakes made by one investor in the hopes that you won’t repeat them in your own investing experiences.
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Interesting Links

For your reading pleasure a few interesting articles from around the globe about dividends, stocks, the market and other just plain interesting finance or economic oriented articles- enjoy!

• Fear of Money
• How bubbles grow
• Bonds in Danger Zone?
• How Texas avoided the meltdown
• Mr. Distress is Ready to Buy
• A star fund manager gets cautious
• Citi to return TARP

Insider Trades: 3/22/2010

Back by popular demand… Below is our list of the top 10 ‘interesting’ insider trades for the week of 3/22/2010. These are companies that have been selected by the buyingvalue filter application. Read more about our value filters here. The companies selected are those that have cleared the first filter in the last 7 days and are the highest ranked filter 2. See here for more about the current selection criteria.
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Is Now the Time for US REITS

Every industry faces periods of rise and periods of decay. The last few years have, not surprisingly, been a period of decay in the REIT Area. But like nuclear stocks after 3 mile island, or banks after the savings and loan scandal, or bonds after the junk bond era, after a sector has been decimated what is often left are the high quality well managed companies that will rise to dominate the sector in the future. Is now the time for REITs?
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Interesting Links

For your reading pleasure a few interesting articles from around the globe about dividends, stocks, the market and other just plain interesting finance or economic oriented articles- enjoy!

• Great Chart Showing how the recession has impacted workers with differing education levels
• A dangerous omen looms for bonds
• Sony Sets Aggressive 3D goals- good investment of bust?
• Cisco oversells the hype and it costs them
• 10 Key Charts to See before you buy a home

Anticipating Dividend Increases

I am a big fan of companies that make it a regular habit of dialing up a dividend. This is why I have been such a proponent of the dividend aristocrat group. Nothing perturbs me more though than to buy into a 2% dividend stock that I believe will crank up its rate only to be forced to wait multiple years before seeing that increase. To counteract this here is a simple parachute that can increase your confidence that a rate will increase.
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Interesting Reading Links

For your weekend reading pleasure a few interesting articles from around the globe about dividends, stocks, the market and other just plain interesting finance or economic oriented articles.

• Tim Hortons Brews an Expensive Drip and SPP
• A change in the Yuan
• Top 100 Commodity, Materials and Energy ETF’s
• Dividend Aristocrat or Champion?
• Emerging Markets?
• Blockbuster: Back to the Drawing Board

Buffett Gets a Bullseye

I have written about the benefits of boring businesses in previous posts. I thought Buffett summarized some of the arguments quite well in his latest letter to shareholders:

“Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be. In the past, it required no brilliance for people to foresee the fabulous growth that awaited such industries as autos (in 1910), aircraft (in 1930) and television sets (in 1950). But the future then also included competitive dynamics that would decimate almost all of the companies entering those industries.Even the survivors tended to come away bleeding.
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Three Key Ratios For Investors

if you could only have four ratios to evaluate a company what would they be? This is a fun question that is popular in investing circles. For a laugh I’ll take my shot at it, what would you pick?

1) Current Ratio

Current Assets / Current Liabilities

Why?

This ratio keeps track of the company’s ability to pay its short term debt. If a company doesn’t have safety money to deal with debt then they might not be in business tomorrow and I don’t need any of that.

2) Dividend Yield

Annual Dividend Per Share / Price Per Share
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Microsoft Pirates Arrr

I had a fellow investor tell me one day that they would never buy shares in Microsoft (MSFT) as their software is so widely pirated. I’m not a big fan of Microsoft stock but I’ve heard that reason given before and it is just silly- let me tell you how it works.

Microsoft widely subsidizes licensing for high schools, universities and colleges. They also provide university bookstores with deeply discounted licenses for their products to sell to students. This puts the product front and center and forces students to learn it or face failing their courses. After four or more years working with the product students in all ranges of study become proficient users. This indoctrinates users into Windows’ users. The cost of retraining these people would be tremendous, so the net effect is that it forces future employers to buy Microsoft products.
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Reading Links

For your reading pleasure a few interesting articles from around the globe about dividends, stocks, the economy, the market and other just plain interesting finance or economic oriented articles.

• P&G entering the retail business… kind off?
• An interesting take on the US budget
• DGI gives an argument on Why to choose Div Growth over Div Yield
• What will the US use after the humvee- possible investing opportunities?
• Office Depot in big trouble?
• Has Whole Foods Turned the corner?

Dell- a Dud

Before any investment in a company I try to do business as a consumer with that company. Balance sheets can only tell you so much about the “true” story of a business. When the option came up to buy a new laptop for my wife I thought, Dell (NASDAQ:DELL) stock has been interesting to me for some time, let’s give them a go.

Let me tell you, it wasn’t pretty. After going through far too many pages and a number of strange web errors on the dell site my order was lodged. Content to write off these bizarre website errors I went over to the track order page. To my surprise I discovered my estimated delivery date for an off the shelf, uncustomized, mass manufactured, laptop was over a month away.
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Weekend Reading Links

For your weekend reading pleasure a few interesting articles from around the globe about dividends, stocks, the market and other just plain interesting finance or economic oriented articles.

• GlobalEconomicAnalysis: Short Canada
• Gothamist: Stock for Steak
• Barelkarsan: Figure Out who is with you
• The DividendGuyBlog: Dividend Stocks Have Their Limitations
• DailyFinance: Berkshire Joins the S&P 500
• TheBigMoney: The Secrets of the Mexican Wave

The Effects of Layoffs on a Business

A recent mass layoff at my company has given me a fresh perspective on layoffs. Normally, as an investor, we see layoffs as a courageous way to drive profits forward by shaking off some areas of weakness. I have personally invested in companies shortly after a mass layoff if I believe that such changes will benefit the profitability of the business. From a purely financial perspective viewing a company as a machine is an easy thing to catch one’s self doing. However there are some soft costs involved in layoffs to a company culture that I wasn’t really aware of until the week after I witnessed fellow employees walking out the door for the last time:
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Check your Sources

It has become formulaic that when a movie comes out one of the advertisements will feature reviewers comments like “riveting”, or “one of the must see movies of the year” and of course my favorite “an instant classic”. The point, obviously, of these reviews is to convince you, based on some other expert’s testimony, that you need to see this movie.
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Patience

The largest struggle I have as an investor is not researching companies, or finding and analyzing data, or even pricing a stock; it is having the patience to do all of these things properly.

Patience serves as a protection against wrongs as clothes do against cold. For if you put on more clothes as the cold increases, it will have no power to hurt you. So in like manner you must grow in patience when you meet with great wrongs, and they will then be powerless to vex your mind.
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Taking Advantage of a Day Off

A day off from US markets is a great opportunity. With the world being what it is markets are not entirely driven by internal factors. Use your day off today to read international business news.  This news can certainly give you a heads up as to what you should expect from the markets in the next day.  This trick helped me immensely during the early days of the credit crunch.  Bad news would break crashing out European and Asian markets while US markets were closed for holidays- guessing what the US market would do the following day?


Today is a good day to look closely at the Google vs. China story. While China’s business accounts for very little of Google’s bottom line, as the story evolves we have certainly seen market fluctuations. Maybe today is a good day to setup a buy if you have been looking for some weakness, or maybe if you think the market will overreact to Google leaving China (if stories today point that way), and today is a good time to plan your exit from Google. Your call read the news and see what you think.