 I usually get very excited when I see a stock that is incorrectly priced, this usually indicates a good buying opportunity. Every once in a while a stock comes along that is incorrectly priced the wrong way- namely massively overpriced. So overpriced are these stocks that I am at a complete loss to explain why any investor would buy them. Yahoo in its current state falls firmly in this bucket. In reviewing some of the company’s key stats I was shocked to see the poor condition of the business. Lets look at a few key statistics:
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 For part 3 of our series on Buffett’s investment filters it is time to look at “able and trustworthy managers”. There are two components to able and trustworthy managers, lets examine each individually.
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 Read any investment book, blog, or magazines and you will see a multitude of recommendations related to buying stocks. Unfortunately, little is written about selling the stocks that you already own.
I use three key principals in deciding when to sell a stock:
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- Principal 1: Don’t be greedy.
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 On Friday February 7th Puget Power announced the closing of the sale of its core business at $30 per share. Regular readers of my blog will recall that I recommended a purchase of PSD in November of last year at $18. If one includes the $.25 dividend payment from Jan 16th, and the pro rata dividend of $.04 this transaction returns $30.29, or a profit of an impressive 68%.
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Benjamin Graham had a great investment philosophy. Find great companies determine their intrinsic value and then only buy them when they are cheap. Or as Graham puts it:
apply a set of standards to each purchase, to make sure that he obtains (1) a minimum of quality in the past performance and current financial position of the company, and also (2) a minimum of quantity in terms of earnings and assets per dollar of price.
The Intelligent Investor P347-348 Harper Collins Edition 2003
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What I paid for it
$18.00
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What I like about it:
- Fair insulation from credit problems, and recession.
- Good dividend yield at 4.1% (distribution Dec 1).
- Company due to be purchased at $30 pending one final approval (this is the big one).
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