Stock Festival

Welcome to a highly fueled edition of The Festival of Stocks #48! There are some great articles in this weeks Festival of Stocks. Let's get to the submissions.


Eric Schleien presents The Dark Side Of Warren Buffett posted at ValueSeeker.Net. I really enjoyed this article about Warren Buffett. It keeps perceptions of him in perspective and shows that he is human and has made mistakes among other things.


Leon Gettler presents The bear turns global posted at Sox First. The fallout from the US mortgage mess continues to hurt the US market and beyond. Clearly, issues once specific to the US are now flowing through to other markets as banks force borrowers to sell assets and investors scramble away from risk. And it will get worse.


George Courtney jr presents Despite Volatility, Stocks Are a Good Deal posted at The Authentic Bartender Blog.
Makes the case though stocks are still near all-time highs, they are nevertheless bargain-priced. Second, the credit crisis that has triggered the recent volatility really isn't all that threatening.


FMF presents Another Vote for Index Funds posted at Free Money Finance. Another reason to invest in index funds. Looks at what legendary fund manager Bill Miller has to say and makes some good common sense conclusions about index funds vs. actively managed funds.
I myself like index funds/mutual funds plus a handful of quality stocks for the competent individual investor.


Babak presents Time To Consider The Battered Financial Sector posted at Trader's Narrative. Time to scoop up cheap and beaten down shares in the financial sector (banks, brokers, insurance co's). After the recent market weakness this sector has gotten very cheap. Time to buy great companies like Goldman Sachs, Citigroup and the like at fire sale prices.


James presents Analyzing Some of the New Top 25: Shoes,Oil,and... His site that I highly recommend College Analysts. Here he looks at Steven Madden (SHOO), Valero (VLO), and New Frontier Media (NOOF), all of which he believes are solid buys given their low valuations. These are from a model that does a quantitative evaluation of about 1,500 stocks. The model generates a power ranking of stocks. The model is very useful for generating leads into some excellent and potentially under-priced businesses.


Blake Morphis presents Mad Money - Defense - ATK and RTN | Mad Money and Fast Money Recap & Fan Site posted at Mad Money and Fast Money Recap & Fan Site. Given the recent market volatility, Jim's recent recommendation on the new bull market in defense stocks.


Silicon Valley Blogger presents Shrug Off A Stock Market Slide! 7 Surefire Ways To Handle A Market Fall posted at The Digerati Life. Some good advice on how to handle these falling markets. Just a couple of the topics hit on are to not listen to the media hype and think like a contrarian. Excellent article here.


The Mad Money Analyst presents Option Premium Valuation: Time and Intrinsic Value posted at The Mad Money Analyst. A good review of how to effectively evaluate options premiums. This gives investors a clearer view of what exactly effects prices and premiums of options. Markets have lately been increasingly volatile and this will help you find those right entry points and calculate volatility profitability. Make more on your investments.


Super Saver presents 7/30/07 Stock Purchase Update - After The Carnage posted at My Wealth Builder. Some recent stocks they picked up during the market fall. This article like so many others in this weeks festival have a recurring theme that lower stock prices are sometimes a welcomed opportunity for the intelligent investor. A depressed Mr. Market can give us great opportunities sometimes in good businesses like Ben Graham said.


Steve Faber presents - Make Gains From the Chinese and Indian Markets Without Actually Investing There posted at Debt Free.


Matthew Paulson presents When You Invest at the Bottom, When Do You Sell? posted at Getting Green.


Eric Stanley presents Two Investment Mistakes posted at Personal Finance Blog Articles. Are you finding good investments for your new money? Or are you doing the right thing and also finding better investments for your OLD money?

Shadox presents SEC Fines? Double Whammy for Investors posted at Money and Such. Some SEC fines just don't make sense, since they are punishing the victims of the crime. This article is my analysis of the situation.

Personal Finance

Tim Ramsey presents How to Pay Off Credit Card Bills posted at My Debt Relief Blog. Trapped in credit card debt? You can get out of the credit card trap with my sure-fire way to pay off those pesky bills.


Eric Hudin presents My Estate Planning Career Blog » Blog Archive » Selecting a Good Trustee - Factors to Consider When Choosing a Trustee posted at My Estate Planning Career Blog. Wills and Trusts are an important financial vehicle for transferring wealth. But who should manage your trust? I'll tell you how to pick the best person.


Aaron Wakling presents Credit Cards - A Necessary Evil posted at The Credit & Credit Card Blog. Well you probabaly already know the answer to this one. I cover good uses for credit cards and bad ones. Its a good article for anyone concerned about if they should use their credit cards to make purchases.

Options and Trading

Dax Desai presents Fundamental Rule of Day Trading: Preservation of Capital posted at Dax Desai. Explains the importance of Preservation of Capital when day trading and gives examples of right/wrong ways of day trading.


Nabloid.com presents The Power of Options » Nabloid on Investing posted at Nabloid on Investing. Takes a look at the advantages of options.


Dax Desai presents Fundamental Rule of Day Trading: Preservation of Capital posted at Dax Desai. 1st in a series: Rules of Day Trading - Preserve Capital


Alvaro Fernandez presents Lifelong Learning for Top Performance posted at Brain Fitness Blog. Great advice from a trading guru.



Submit your best articles on stock market related topics for future festivals. This concludes another edition of the Festival of Stocks.

Baby Boomer Timeshares - Silver Leaf (SVLF)

Originally written November 2008, before the private equity buyout Silver Leaf Resorts is another timeshare and potential baby boomer stock like ILX that I mentioned in yesterdays article. Silver Leaf grew revenue in the first quarter this year at a little over 30% and diluted net income per share came in at $.17 a share vs. $.16. They grew shareholder equity 4% year over year. Earnings have been growing a little better than ILX over the past few years.

They have a bit of long term debt with notes payable and capital lease obligations of $276.765 mil. They have 6% $3.796 mil notes due this year,10.5% notes due in 2008 of $2.146 mil and $24.6 mil at 8% in 2010. They have a healthy current ratio of 1.44.

The stock has been in full bull mode and they haven't hesitated in issuing stock options and buying back shares because of it. This I don't like. They have been issuing shares which are currently at about $37 million from $11 million in 97'. Management has done a pretty good job over the last three years growing net margins, shareholder equity and earnings. The stock is up over 400% since early 2004.

The stock is currently trading for about $6.45 a share and has a trailing PE multiple of about 11 and a forward multiple of 9. It is trading for about 1.5 times book value. The valuations look compelling and the industry demand good. Baby boomers are retiring and not looking to spend money outside of the US with the weak dollar. In an interview on theStreet.com the CEO said they are in close driving distance with customers and gas prices aren't a big factor in the business.



disclosure: no position in Silverleaf Resorts, Inc.(SVLF)

Festival of Stocks #44

Welcome to the 44th edition of the Festival of Stocks! A blog carnival dedicated to highlighting bloggers best posts on stock market related topics. It is my pleasure to host the Festival of Stocks for the first time at Treasure Hunting Quest.


This Week’s Submissions

Leon Gettler presents Top 15 rules of investment posted at Sox First. about the top 15 rules for investing. And you can start off by checking the gray hairs on your financial advisor. If you see any, it means they've been around for a few cycles. Also, save your loyalty for your football team, not stocks.


Fat Pitch Financials presents Valuing the Tyco Spinoffs posted at Fat Pitch Financials. An estimate of the intrinsic values of the three companies
that formed from the recent Tyco International spinoff.


Matthew Paulson presents Single Stocks or Mutual Funds? posted at Getting Green. that shows which vehicle is more appropriate by weighing the risk and rewards for individual investors in choosing funds vs. stocks.


Average Joe presents Stock Analysis - Helix Energy Solutions Group Inc (NYSE:HLX) posted at Investment Jungle a look at Helix Energy Solutions Group (HLX) which is trading at a deep discount based on their analysis.


Average Joe presents Dividend Analysis - Washington Mutual Inc (NYSE:WM) posted at Dividends Matter an analysis of Washington Mutual Inc. which currently has a dividend yield of 5.03%.


The Skilled Investor presents Lifetime investment assets of renters -- with investment cost improvements posted at THE SKILLED INVESTOR Blog as Fran and Fred expect to pay investment costs that are typical of an average investor. This graphic is one of the reasons why The Skilled Investor keeps harping about reducing investment expenses. Even average investment costs are simply outrageous, and they can be the difference between success and failure of a family's lifetime financial plan.


Silicon Valley Blogger presents Our Investment Portfolio Update: Strong Gains Due To Stock Market Record Performance posted at The Digerati Life.
How their portfolio has fared in the stock market and discussion of their stock market investment strategies.


Rick Konrad presents Value Creation or Destruction-As Simple as (1), (2), (3)- Finding the Value Direction! posted at Value Discipline. It is about developing some insight into value creation or destruction by looking at three components of free cash flow.


Tyler presents Home Sweet Home Depot posted at Dividend Money. A look at Home Depot as a long term dividend growth investment.


KCLau presents Why Invest in Land? posted at KCLau's Money Tips. Most people think that land investment is only for real estate developers, who buy big parcels of land for commercial, or residential development. But actually, investing in land is one of the sound investment strategies available for common investor, both large and small.


Eric presents What is a Value Stock? posted at Stock Market Prognosticator with a theoretical argument on what constitutes a Vaue Stock.


Mark submits Lessons in Contrarian Investing from Peter Lynch posted at College Analysts.A look at one of famous portfolio manager Peter Lynch's investment decisions and what stocks might qualify today. James who runs College Analysts is a value investor himself.


Well, thats it for this weeks Festival of Stocks. I hope you enjoyed the submissions. Next weeks Festival of Stocks will be at Five Percent Stocks. Support future festivals as a host or contribute here.



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Nyer Medical Group Inc. (NYER) Below Net Current Assets NCAV

I found this company when I was looking in the Pharmacy industry awhile back. It was up 12% today on about triple usual volume. Nothing particular jumped out when I found them weeks ago looking at some basic figures except that it was reasonably priced and I was looking for a small-capper rather than a giant like CVS,WAG,RAD,WMT.

NYER has been paying long-term debt down all of 06' and 07.' EBITDA 8 times enterprise value, insiders have 30% stake. On that note about insider ownership, many acclaimed and smart investors take it into account. But who cares? Many investors pay close attention to insider ownership along with their buying and selling and try to size up the company as a worse or better investment because of it. First, on the buying and selling, it is trivial unless one knows for a fact what reason management sold or bought. Maybe they sold to pay their kids tuition. Would that effect the decision to buy the company? Maybe management is blinded by their own vision of the company even if it has no chance of success and they pick up a huge block of shares.

Isn't it a messed up society if we assume that only the managers with large stakes in the companies they manage will look out for shareholders? How about integrity, work ethic and honesty? Where has it gone? I still believe there are great management even if they don't have a large ownership or any at all for that matter.

Disclosure: no position in NYER

Lessons in Contrarian Investing from Peter Lynch and Chrysler

This article is about famous portfolio manager Peter Lynch who headed the Fidelity Magellan Fund from 1977 to 1990. He began with $20 million in assets and grew into the largest fund with $13 billion in assets and still delivered over a 2,700% return during his time at the helm, over a 29% annual return. With such a large fund he may have actually bought more stocks than Samuel L. Jackson has starred in movies. Maybe. He is mistakenly known for his small-cap growth stocks. He invested in all kinds of industries and companies. Many of his investments like buying Volvo when it was selling for only its cash in the bank would be considered more value oriented. One of his keys to his success, he told Louis Rukeyser of Wall Street Week was he saw 200 companies and checked out 700 annual reports a year.

In the Spring of 1982 most professional money managers thought Chrysler the then number three auto maker was going to go bankrupt. Lynch thought otherwise and was not scared to go against the crowd. He did an enormous amount of scuttlebutt in companies. Seeing $1 billion on Chrysler's balance sheet in cash and government loan support, combined with great new products he bet against other investors fears in the hated automaker. He put the maximum 5% of his assets into Chrysler common stock. He said he would have put up to 15 to 20% if he could have.

Chrysler doubled after eight months thanks largely to the first mini-van and was a 50 bagger(increased 50 fold) by 1987. What can we learn from all this? By not making decisions based on what others are doing and using good fundamental analysis to find cheap beaten down stocks is a good foundation to investment success.


"Stockpicking is both an art and a science, but too much of either is a dangerous thing. A person infatuated with measurement, who has his head stuck in the sands of the balance sheets, is not likely to succeed. If you could tell the future from a balance sheet, then mathematicians and accountants would be the richest people in the world by now."

-Peter Lynch

World Equity Markets

Right now I'm bearish on the U.S. equity markets over the next 1 to 3 years. With escalating commodity prices, inflation, rising bond yields, unfavorable interest rates and likely Fed tightening I think the US markets and economy will flat-line or grow slightly. Of course lower stock prices mean better bargains and as investors flee short-term a wise investor buys long-term. Every bull market has its bear. The more overextended the bull is the more devasting the fall. History doesn't repeat itself, but it does rhyme.

I believe Americans are slightly underexposed to foreign markets. Is it a coincidence that the majority of their investments are in the country that gains from this allocation? All the huge long-term future growth is in emerging markets like India,China,Russia,Latin America and parts of Asia. Furthermore, the U.S. equity markets have returned around 7% this year compared to almost double that in other countries. The U.S. GDP is growing at around 3%. China's GDP is growing at 12-13%. Bursting of a bubble in China will present great long-term buying opportunities. This closed end fund Claymore/BNY BRIC (EEB) has no U.S. holdings and is allocated heavily in Brazil 47% of assets, Hong Kong 26%,India 13, China 7, Russia 5%. This all India vehicle isn't an etf but a debt security that tracks the Indian index. iPath MSCI India Index ETN NYSE:INP. It is not actively managed and is one of the best vehicles to invest in India. A guy in India just recommended to me ICICI Bank and a construction company DLF. To bad DLF isn't an ADR.

Lazare Kaplan International Inc. (LKI)

Maybe a hidden gem? Lazare is in the diamond business and is selling for less than its current assets minus all debts. About half of those assets are diamonds I assume in inventory and surely they have some worth in these assets. So if the company is selling for close to these hard assets not even including any other claims or plant property and equipment isn't the future growth of earnings and cash flow for this company basically free here. Looks like it could be a steal at $8.05. They've had some trouble with a joint venture and earnings recently came in lower than expected at a $.01 a share. Probably not a long-term setback.

*not recommending as a buy here.

Boss Holdings BSHI

In looking for a red tag sale on Wallstreet recently I've come across some interesting companies selling for less than their current assets minus all liabilities. Most of them don't make money consistently so maybe you could make the argument that they don't deserve to sell for book value. This company, however has been profitable more consistently. The business is pretty straight forward they sell gloves, boots, and rainwear products primarily to retailers, including convenience stores, mass merchandisers, and hardware and grocery stores; and industrial customers comprising companies operating in the agricultural, automotive, energy, lumber, and construction industries. They've been in business for decades. The only major macro obstacle I could foresee is if companies that manufacture with cheaper labor say in China and kill their margins. They are working on improving margins though and sales are more flat than hugely down with the exception of one segment that is growing. At $7.35 it is selling for a cheap valuation, however, it looks more attractive at $6 or $5. Had one picked up a company I wrote about, RCMT at $6.60 there was a 20% return in just some weeks.

RCM Technologies Inc. (RCMT

It looked pretty cheap by way of some valuation multiples when I found it a few weeks or so ago and wrote briefly on them. The stock has been pretty active in recent days, up 5% for one day and is trading for $7 and change from $6.06 in the past couple weeks or so. I like that they have free cash flow, profit margins aren't the best but I suspect customers may be loyal and revenue pretty consistent. This one deserves a closer look at the overall business and competition to see if people are missing something and it is in fact undervalued. It is a tiny company. I'm not sure what good it would do to compare its valuation to the larger competitors or use a discounted cash flow model because its operating results are pretty sporadic in such a competitive industry.

I've had a lot of success spotting undervalued larger companies with sustainable competitive advantages that are undervalued because often just by looking at the financial statements paying attention to obvious things and looking at valuation multiples like pe, pe/pe growth, roe, etc. you can get a rough picture about whether or not it is cheap because it is being avoided for good reasons or stupid reasons like short-term fears or following the herd.

Eternal Technologies ETLTQ Net Current Asset Value (NCAV) Bargain?

Benjamin Graham, one of Buffett's most influential teachers is famous for his net current asset stocks, he held as much as 100 in a portfolio in the years after the depression. Buying stocks at a discount to their net current assets less total liabilities placed no value on the fixed assets and is a rough liquidation value. A diversified portfolio of these cigar-butt investments; hold until you get a little price increase (last puff) and sell was lucrative for Graham with a portfolio of them dishing out double digit returns. They still can be nowadays though they are harder to find. Of course many of them are cheap for a reason and are perennially cheap. Here is an interesting one.

This company, ETERNAL TECHNOLOGIES GROUP, INC. (ETLT.ob) looks cheap here, especially considering their most recent quarter. They've delivered the steak but the stock hasn't sizzled and is not loved. I found them months ago thanks to The Mico-Cap Speculator I was skeptical and still am but I can't overlook a company that makes me go "Wow" when I look at it. A net current asset stock with an attractive balance sheet, income statement, cash flows, good history, new plans, management that delivers and a price on the stock market that is so cheap it may even be irrational.

Moving along to the most recent quarter net current assets of $41,949,326.00 against
as of May 15, 2007, 47,073,279 shares of Common Stock outstanding times current price of $.65 a pop = $30.5 mil market cap against net current assets of almost $42 million.

This is a huge discount, especially considering the liquidity of these assets.
Eternal Technologies Group, Inc. Reports Record Revenues and Record Earnings for the Year-Ended December 31, 2006

For the last quarter March 07 in this year 07' vs 06'

Income highlights
Agricultural and genetics sales $ 5,726,797 vs. $ 3,608,572
Medical devices sales and services 1,498,065 vs. 607,787
Land lease 297,245 vs. -

Total revenue 7,522,107 vs. 4,216,359

Gross profit 1,522,660 vs. 1,161,724

Net income per common share
basic and diluted $ 0.03 vs. $ 0.01

Cash Flows
Net cash provided by operating activities 11,025,082 vs 4,597,423

Cash and cash equivalents, end of period $ 25,299,565

They have a new project found on their website. The site is a little unorthodox.

"Thermal Tomography System is a wholly new detecting system, with a leading diagnostic technology which has not yet been reported in the world. At present, the main detecting methods are molybdenum target tube and Doppler imaging system.

This system, without physical contact, trauma, and suffering, is an advanced green detecting method.
This system receives information from surface temperature collected by infrared imaging. After automatic analysis, it receives the curve describing temperature. According to the contrast between it and model curve, the diagnostic conclusion can be received fast. During the detection, it is based on objective data, which avoids the inaccuracy made by people.

This technology can be used for detection of many diseases, not only mammary gland, but also other organs of human body. At present, a research group led by Professor Li Kaiyang is researching ¡°process of normal cells into cancerous cells¡± with this technology. Once successful, this technology will play an epoch-making role in medical diagnosis."
-source, http://www.eternaltechs.com/prespective.asp


"Eternal is a major agricultural genetics and biopharmaceutical R&D firm operating in China with the support of the Chinese Government. Eternal's animal breeding division has a strong asset base, cash position and net income. Eternal has become one of China's leading institutions for biopharmaceutical and biotech research, pure breed cultivation and breed stock production. The Company has secured a key market niche by commercializing gene engineering technologies and providing superior breeding stock, allowing China's citizens the ability to improve their living standards. With the world's largest population, a double-digit national growth rate and entry into the WTO, Eternal Technologies has a playing field set for tremendous opportunity. As a prominent player in the agricultural genetics industry, cash in the bank and an untapped market, Eternal has the potential to become a major player in China's national growth."
-source, http://news.morningstar.com/news/ViewNews.asp?article=/BW/20070403005870_univ.xml&pgid=qtqnPress2

They obviously don't have a great investor relations department but is its current price below net current assets justified, ceterus peribus. I feel this is a great speculative contrarian opportunity for a small position in a portfolio.


disclosure: author is long Eternal Technologies (ETLT)

Taitron Below Net Current Asset Value NCAV

Taitron Components (TAIT)
Let's just say an interesting business. It is a very small company and is international. It is in the distribution and supply of brand name electronic components, and original designed and manufactured (ODM) electronic components like discrete semiconductors. They also provide ODM services, such as outsourced product design and manufacturing assembly services for contract electronic manufacturers and original equipment manufacturers. The company sells its products in the United States, Mexico, Brazil, China, Taiwan, Canada, and internationally.

The stock price has risen consistently overall to where it is today from a deep low of $1.51 in mid 2005.

At its current market price of $2.74 as of June 1st on the exchange it is selling for below net current assets (net current assets - total liabilities) coming from its most recent quarterly on the SEC's site. This should be pretty close to its liquidation value theoretically but isn't close to the floor for the stock. But is the market efficient? Checking out some other things, they've reduced their long-term debt for the past 3 quarters but surprisingly this year they started paying a dividend of $.10 a share that they plan on keeping for 5 years. I don't think they have the cash flows or the opportunity that warrants paying a dividend with the business currently at hand. They have grown book value over the years and have always traded at low multiples. Are they expecting something great this year or next? Interesting. I'll be updating over the next days with some other small-cappers that I think have even maybe more potential and leave me scratching my head.

http://www.taitroncomponents.com/

Fat Yield: Winthrop Realty Trust (FUR),LTC Properties (LTC),TC Pipelines, LP (TCLP),One Liberty Properties, Inc. (OLP),ProLogis (PLD)

Winthrop Realty Trust, Inc. (FUR)
3.5% div yield. A REIT that has grown nicely over recent years. Owns office buildings around the country.

LTC Properties, Inc. (LTC)
6% div yield. 12 times eps. A healthcare real estate investment trust (REIT) that invests primarily in long-term care and other healthcare related properties through mortgage loans, property lease transactions and other investments.

TC Pipelines, LP (TCLP)
6% div yield. dividend has 3% growth rate over last 5 years. Stock trades at $40 up from $15 in 2000. "TC PipeLines, LP is a United States growth-oriented Master Limited Partnership (MLP). It was formed by TransCanada PipeLines Limited to acquire, own and actively participate in the management of United States based natural gas pipelines and related assets."1


One Liberty Properties, Inc. (OLP)
6% div yield. Nice steady, slowly rising dividend going back at least 10 years. "One Liberty Properties, Inc. (One Liberty Properties) is a self-administered and self-managed real estate investment Trust (REIT). The Company acquires, owns and manages a geographically diversified portfolio of retail, industrial, office, health and fitness, and other properties, a substantial portion of which are under long-term leases."2

ProLogis (PLD)
about 3% div yield, 3% growth past 5 years. "ProLogis is a self-administered and self-managed real estate investment trust that operates a global network of real estate properties, primarily industrial distribution properties. It manages its business by utilizing the ProLogis Operating System, an organizational structure and service delivery system, which when combined with its international network, enables ProLogis to meet customers' distribution space needs on a global basis. The Company is organized into three business segments: property operations, fund management and CDFS business."3