CRHawk

I'm an beginning / intermediate investor who relies heavily on ValueLine and Morningstar. I have a few questions. 1) I understand that the "Line" on Value Line reports is essentially a regression to the mean valuation. If we assume that the market is rational when averaged over time the line is a reasonable valuation. Clearly you still have to do your own thinking to avoid $KO at 30 PE. When I take the average PE they state, average dividend, and a reasonable growth assumption, I can calculate the Dividend Adjusted PEG based upon the mean valuation. This leads to an interesting result. The average valuation implied DAPEG of something like $NSRGY is 2.57. For $DIS it is 1.17. If these are the average DAPEG values investors are buying at over time, doesn't that mean there is a HUGE premium put on the stability/dividend of $NSRGY? It seems to me that if I tended to buy when stocks drop below the Value Line aren't I *much* better off buying low DAPEG stocks like $DIS, $CVS, $SBUX, $SHW, $NKE rather than high DAPEG stocks like $KO, $PEP, $UL, $NSRGY? Is this just the effect of investors reaching for dividend yield, or does the market know something I don't? 2) Using reversion to the mean valuation implies the business is running at a fairly steady state - growth isn't changing. If I wanted to know if growth was slowing for a company like $SBUX or $NKE, what would I look for? 3) I know that using a reversion to the mean valuation isn't as useful for cyclical companies, very new companies, or companies that are more interest rate sensitive like REITs. I'm okay with that. I also avoid trouble by leaning towards high moat companies and low debt companies. I have enough sense to stay away from $KO trading at 30 PE even if that is the current Value Line. But is there something else I'm missing with my approach? 4) Reversion to the mean seems to imply something else interesting. Let's say you have two stable growth stocks. One "should/usually" trades at 15 PE, and another that trades at 25 PE. You can use DAPEG to value them. But if they tend to revert to the same PE, shouldn't you value them as (Current Difference from PE average) + (Dividend) + (Growth)? Meaning the *absolute* PE doesn't really matter? Only the difference from the average PE?

Bought some more DIS on Thursday.

In this speech: https://www.farnamstreetblog.com/2015/03/charlie-munger-academic-economics/ Charlie Munger says: "In this vein, I next want to mention a strange Latin American case of a dysfunctional economy that got fixed. In this little subdivision of Latin America, a culture had arisen wherein everybody stole everything. They embezzled from the company, they stole everything that was loose in the community. And of course, the economy came practically to a halt. And this thing got fixed. Now where did I read about this case? I’ll give you a hint. It wasn’t in the annals of economics. I found this case in the annals of psychology. Clever people went down and used a bunch of psychological tricks. And they fixed it." Any idea what country he is talking about? -Jeff

Thanks! It looks like at least two of these screen for puts. -Jeff

Thanks everyone! That helped. I have some further questions, but will probably need to speak with a lawyer for those. -Jeff

I figured the topic of potential liability for financial bloggers and Seeking Alpha authors would be well discussed on the internet. Obviously you need to avoid pumping and dumping, but I figure there are other issues, right? I've searched and can only find information about general liability insurance for bloggers. If I write up my investment idea for Seeking Alpha, and make $10, what is my liability? Why are so many people writing for Seeking Alpha, and this isn't discussed? Is it really not an issue? I see very few writers posting under the name of an company or LLC. -Jeff

I was wondering if anyone knew a method to screen options by yield? For instance if I wanted to sell a put option on Disney for a minimum of 5% APR is there a way to find that? -Jeff

Thank you all! Good stuff to think about and look at.

Some basics of asset protection and tax planning come up on Joshua Kennon's sites and Mr. Money Mustache. You might want to search those. -Jeff

I like ValueLine for this. It gives a very good visual presentation of cash flow changes in most cases. Morningstar is good too. Both of them can be accessed for free from many libraries. I can even get access online from my house with my library card or university login. -Jeff

I want to look at debt when I am comparing the quality of companies and looking to invest in higher quality companies. So far, the method I like the best is to compare debt and and cash to yearly earnings. I would think this measures a companies ability to pay down debt if it wants to/ needs to. So... (Numbers based upon Value Line reports) JNJ is about 1 x E for debt, and about 2.5 x E in cash. Great! AMGN is about 3.5 E for debt, and about 4 x E for cash. Nice. AGN is about 8 x E for debt and about .2 x E for cash. RED ALERT! DEO is about 3 x E for debt, and about .2 x E in cash. Hmmm.... Not great, but probably okay for consumer staples. WTW is about 40 x E for debt and about 5 x E in cash. Zoinks! I have doubts even Oprah can fix this. Is this a reasonable way to look at debt? I started doing this because it felt like % of capital was misleading when different companies / industries have such different needs for capital. I do know I need to look at when debt is due when things are marginal. Do you have a favorite way of looking at debt? Am I misleading myself? Thanks! -Jeff

Thanks! The link to the OTC market does help! As for the ADR, yup... I am aware of that :) Strangely I've found F ADRs harder to buy than Y ADRs. -Jeff

I really like Excel 1040 - Free and you can see what the heck the software is doing as it only does formulas. I've used it for years. https://sites.google.com/site/excel1040/ That said, this year I think I will need to go with a CPA due to sale of a house, marriage, my employer over-contributing to my 403b, etc.

So, I'm looking at the Google Finance chart on a thinly traded stock, to see if you get any unusually high or low trades... and I found some. But when I look at another source (say NASDAQ) I don't see a matching high/low for the day. In this case it is LDSVF on Nov 21, 2014. How do I found it if this trade really happened? Maybe it was a case of a trade that happened, and then got canceled afterwards? -Jeff

I just checked Value Line sheets for HSY, JNJ, UL, DEO... Margins I see are maybe a tiny bit high... maybe 10% over average by eyeball? I don't see a huge margin problem. Where do you see high margins?