Ross812

I would rather buy companies with well established pricing power. I have a problem investing in what I see as "fad" type companies. Coh, Tif, and Deck can go in and out of fashion. I may get berated for this, but what happens if Apple has a flop? I have a problem investing with the company with a business model of producing the next greatest thing or keeping up with the latest fad. What companies provide goods and services that we cannot live without, or would not mind paying a little bit of a premium for? Who switched from Coke to Sam's Choice durring the recession? Buffett likes Coke, Kraft, Railroads ect... Two companies with pricing power that come to mind quickly (not necessarily good investments!) are Microsoft and Southwest Airlines. Are companies going to continue to pay for the new versions of Windows? You bet. Southwest can control prices for much of domestic air travel. I need some time to come up with some more names. I do agree with Starbucks though, because they are often the only place to get a decent cup of coffee in many communities. Though I would never buy the stock, NFLX does have pricing power; I'm now paying $9.99 a month up from $7.99 and I'm not sure I was notified of the change! Am I going to cancel? No way. Bronco, I apologize in advance for my AAPL comments!

Optionshouse.com is my favorite. There is no fee for foreign stocks, and trading fees are really low.

I think it is overreaching to make blanket statements like humans are not meant to run marathons, or power is more important than endurance. I think you have to take into account the natural genetic variation between individuals. Thousands of years ago hunter gatherers used whatever techniques worked best to find food. Hunters on the hot Serengeti of Africa could outlast many animals in a foot chase because of humans’ ability to sweat and not overheat while giving chase. In cooler climates, where endurance hunting would not work, it became an advantage to be more rugged (stronger and carry more fat). If you take a Mastiff on a marathon run, you are going to kill the dog. By this logic, it must be a bad idea to take a dog on a marathon run. A Husky on the other hand would be dragging you across the finish line. The Arthur De Vany article is absolutely ridiculous. Points 1 and 2 are not even worth mentioning; 5 and 6 refer to the same chemical. You can prove anything by taking little bits and pieces from scientific research. If you want to be healthy there are only two things you need to do: eat right and stay active. I’ve found the easiest way to eat right is make sure to eat 3 fruits and 5 vegetables every day. The rest of your diet will take care of itself, because you won’t be hungry enough to overeat on other less nutritious foods. An active lifestyle is all you need to stay fit. You have to find activities that are fun to you and do them often. Tennis, golf, basket ball, running, lifting, and my favorite rock climbing are all ways to stay active. Exercising for exercise sake can only last so long. You can use a program to get in shape, but an active lifestyle doing healthy activities you love several times a week is the only way to maintain it. On topic: I see the tentra cup as an inefficient means to get your caffeine fix. Starbucks needs to be much more innovative and come up with a technology to directly inject their drug of choice. I propose calling for Steve Jobs to sit on the Starbucks board for a while. :-)

I am young, 24, but have a decent amount of capital to invest. 70% of what I buy are deep value companies I feel can double or more when a catalyst is presented; I have held a few of these deep value companies for several years. The remaining 30% are short term miss pricing and arbitrage plays. I am very selective of short term plays and only buy when I am confident I will make 10%. I would buy jockey stocks if they are selling at attractive valuations which is often not the case. I have only owned two jockey stocks which I bought back in 2009; Bidvest BDVSY and Danaher DHR (DHR was just called away from me). I may start investing in jockey stocks when my capital grows to a point where it becomes difficult for me to deal with the high volatility of a concentration in small caps. I seem to have a problem scaling. Instead of now investing 10k in an idea where I would have invested 5k two years ago when I had half the money, I tend to still invest 5k in twice as many companies. For some reason this makes me feel more comfortable but finding twice as many ideas becomes harder and harder. I will say my returns are not outlandish because I hold 30%-50% cash most of the time. It is close to 60% right now. Does anyone have any ideas on scaling your investments. I am not sure I lack confidence because I often double down, but I reach a point where i feel enough is enough and I don't feel comfortable allocating a huge portion to one idea. I own 12 companies right now. Bidvest is my largest holding but only because I can't find a reason to sell it yet.

I know there was discussion about Visa on the board a month or two ago. Any ideas how the 12c cap will affect the business model? http://www.streetinsider.com/Corporate+News/Mastercard+(MA)+and+Visa+(V)+Slammed+As+Federal+Reserve+Staff+Discusses+Debit+Card+Fee+Cap/6168387.html

Largest flop of 2010 was GXDX. In at $29 watched it go up to $38 then crash down to $17.50 where I sold. I learned to never invest in a business model that can be copied easily (no moat). My entry point on BAX at $56 was pretty terrible. But I had plenty of time to get my average down to $44 when it went to $40. I am still holding BAX. MFRI was my biggest winner with a cost average of $6.30. If the price of oil stays high this little company can earn a $1 per share and is still trading below a TBV of $11.50. I am looking for this to return to $15 in early 2011. My recommendation for 2011 is ESI. If the government doesn't hurt them, ESI will be going back over $100 for a easy double. If their bottom line is slashed I don't see much downside at the current market price.

Bronco: Some examples of what I felt were good deals recently: Your idea of IBAL (buy order in at $0.55) ESI when phoenix recommended it and still a good deal now. BAC warrants at $6 (great board idea till a few days ago) LPS <$30 (all October) NE at $32 (June-Sept) CORE at <30 (may-september) TNDM under $12 (all august and September) (I have been adding since $16) MC was under $200 6 times May through September! I still think MFRI, MU, and IPSU are undervalued

1% increase in S&P = 0.042% increase in GDP 1.47*(10^13)*(0.042%)*(1/100%)= 6.17*(10^9); 6.17 B ________________________________________________ The math is correct but does not matter! As stated in the article (and a blaring red flag to any reader) stock market increase does not CAUSE GDP increase. Let us back up for a second and think about this; If a 1% S&P increase causes (0.042%+.035%) increase in GDP, then a 1% increase in GDP corresponds to ~13% increase in the S&P. GDP has grown at 2% rate nearly linearly over the past 100 years; the market has not grown anywhere near the rate of 26% over the last 100 years. I don't know where anyone is getting their numbers but the entire argument seems pointless. Munger, Assuming every company in the market is over valued is quite short sighted unless you subscribe to the efficient market hypothesis. I agree that the S&P at a P/E of 22 is overvalued but so what? As a value investor you are looking to buy companies at a discount on the dollar. What is the discount? Your margin of safety. If you feel the market is overvalued then you should require a higher margin of safety but stating that buying any equity is a fools game is laughable. I think you should have some respect for your fellow value investors to select companies they feel are trading at an acceptable margin of safety. An over valued market does not mean their are not deals out there; it just means you have to look harder to find them. Parsad was right in asserting that big money would start moving into equities looking for yield. He did not give a time frame nor state he could divine the markets. Now lets listen to Hawks and get back to some value investing. Complaining the market is overvalued is just whining and rationalizing to yourself why you shouldn't put in the work to find a good investment. PS: I'm terrified of precious metals, AAPL, NFLX, and spiders (the eight legged kind)!

You might want to google eee pad and see what you think. It looks like a cross between an I-pad and a netbook.

I would recommend chou funds and oakmark.

BIP, Brookfield Infrastructure is owned primarily by BAM. BIP owns timber assets in the northwest and is currently only exporting douglas fur to Asia. BIP management says they are exporting at a 70% sustainable rate while prices are depressed so they can export at a 120% rate when prices come back.

I can second the Asus eee netbook. I've had mine for two years and I still use it almost daily. I take it with me when I am on business trips, and it sits on the coffee table at home so I can get on the net when my gf chooses a bad television program :) . I stay very current with technology as I build computer systems in my spare time; in my opinion the Asus has the best price/performance trade off of any manufacturer. HP and Sony also make good netbooks, but they are roughly $100 more than Asus for the comparable model. Asus is not a cheap manufacturer by any stretch; I have used their motherboards for years without any problems. As for the Kindle question, I think a tablet/kindle has the advantage of being treated more like a book you can pull out and read vs a netbook which requires you to find a comfortable way to use it. I had some time to play with a Kindle DX and I'll be making a purchase soon. If you need a device for the purpose of reading pdf's then the kindle is the best bet. If you plan on watching movies and listening to music the I-pad would make more sense. If you need to do some work (typing anything longer than a paragraph) then the netbook is you weapon of choice. I'm excited to hear others using linux mint! Its a great operating system!

Just a thought. Aren't warrants issued by the company? I thought the reason WFC bought a portion of the warrants back was to prevent dilution. Is it important to include the dilutive effect from warrant exercise into the models being built? I thought I would add (if not already shares) Chou bought 1.2 million BAC A warrants prior to his 6/30 report at 5.96 a piece. 1.9% of his portfolio.

Unless Prem bought more as of 6/30/10 his dollar cost average is: OVERSTOCK COM INC DEL COM $54,695,000 3,388,774 about $16.14 per share Source: http://www.nasdaq.com/reference/ownership.stm - Search: Fairfax

I think its hard to make YTD comparisons. Sometimes it takes the market a long time to weigh a company correctly. I think performance over 5 years is much more accurate for a value investor. If you make a good call, as a value investor, you are rewarded handsomely, but often you have to under perform while you're waiting for fair value.

Has anyone looked into LPS? Lender processing services appears to have taken a dive with the bank stocks with the recent foreclosure problems. They are used by the majority of banks to process mortgage paperwork. The company has insisted in two press releases they have done nothing wrong that would affect operations regarding the foreclosure scandal.

I feel the same way you do. I had some longish term holdings (feb-may 09) I sold in this recent run up and now I am sitting with 60% cash and looking. This is killing me. I log onto CNBC and see negative news premarket then like clockwork, the market continues to gain. Patience has always been one of my problems but I am going to try and sit on my hands until I see attractive valuations. I need to act a little more like munger on this board! Right now I am waiting for: LIFE, V, BDVSY, and PWCDF to trade at more attractive valuations. I would like to buy back into BIP and MKL but they are both a too expensive for me right now. 10% Mu and 30% DHR are my only two holdings and DHR looks like in may get called away from me at 42.50 so I may end up with a big wad of cash in the near future. Is it wrong that I check the market everyday hoping to see the beginning of a correction?

Great article. The couple has some nerve and it has been paying off finding a niche like they have. Its going to get interesting if they go toe to toe with amazon!

I did a write up on Micron a few days ago. It should be a couple pages back on the board. It's up 10% since I posted but it is still undervalued.

I would argue that WoW could just "die" It takes ONE hit morpg to dethrone WoW. Please study Final Fantasy XI or what was it again..... oh, EverQuest? 12 million players can evaporate in 2 years if another firm comes out with the *new thing. Comparing WoW to Coke is naive. I was stating how Coke would lose market share if they discontinued a cola. WoW has no where near the moat of the beverage. Colas are given to young children and the affinity for the beverage is developed throughout life; Buffett still loves Cherry Coke. The majority of WoW players are young and start playing in their teens. At some point the majority of these gamers have to grow up and enter the real world. Blizzard relies on a steady stream of new users to replace the old retiring players. Membership is growing right now, but what happens when the membership is saturated? Furthermore, what happens if the young players get hooked on MORPG II instead of WoW? I agree that ATVI is innovative but the lions share of their revenue comes from one source. If they had three or four games with 3 million players a piece and growing (with additional games in the pipeline) I would be much more comfortable with the investment. You are investing in a pharma and your blockbuster drug patent IS going to expire sooner or later.

Micron released earnings yesterday for Q4 2010. Income was 342 million from net sales of 2.5 billion. This compares to a net income of 939 million Q3 10 but 488 million were from the one time sale of a subsidiary Numonyx. DRAM shrank 14% and Flash 9% from Q3. Gross margins shrank slightly to 37% from 40%. Cash and investments now equal 2.9 billion. For FY10 1.9 billion in earnings (1.85/share) off 8.5 billion in revenue. 950 million in capital was invested and debt was paid down by 640 million. As of Q4 2010: EPS Q4- 0.32 Cash- $2.93/share Tangible Book Value- $8.17/Share Samsung and Micron signed a patent agreement and Samsung agreed to pay Micron $275 million by March 31, 2010. This should give a nice .27/share boost in Q2 11. The Micron rep in the conference call was a little evasive when answering questions about what Samsung wanted. The rep replied the agreement was beneficial to both companies. The .32/share result missed consensus by .06/share but shares jumped 6.75% today. I was actually hoping I could pick up more in the $6 dollar range but I guess irrational exuberance is today’s market for you. I was struck by how commodity based Mu seemed in the conference call. The company expressed it would like to increase its foot print in the consumer market to increase margins. I was neutral on the outlook for Q1 11. DRAM production bit growth- Up mid single digits. NAND production bit growth- Up mid to high teens. Total DRAM (think actual memory sticks not GB size) down high teen (should reflect conversion from DRAM to 25 nm NAND). Trade NAND (excluding INTC) down mid to high single digits (this may mean they are using more of their own NAND….). DRAM cost/bit- Down mid to high single digits. NAND cost/bit down mid to high teens. The company expressed in the conference call that production cost would likely fall in the mid single digits. This looks like more of the same to me… I thought they predicted neutral to perhaps a little poorer outlook from Q4 10 which is alright because the company is so undervalued. Capex for FY11 is expected to be 2.4-2.9 billion; there was a question about this on the conference call and I remember thinking the answer was fine and made sense but I can’t remember it right now for the life of me! I think it is going to come down to the Rambus court case resolution to really get this thing moving. This company is worth 14-17 billion if all goes well. *Note: Nodnub, I thought you would like this article. It seems Micron is providing flash to Hitachi for a Hybrid SSD/HDD. “Micron's 25nm NAND process technology delivers 8-gigabytes (GB) of storage in a single device, enabling new applications that require high capacity storage in space constrained designs. The initial portfolio of HLDS Hybrid Drives will be offered in a range of embedded flash memory capacities including 16GB, 32GB and 64GB. Higher NAND capacities of the Hybrid Drive will be available in future versions.” http://investors.micron.com/releasedetail.cfm?ReleaseID=513642

I really like Visa and with the recent court battles it seems to be trading at a lower valuation. I just have a really hard time paying more than 20x earnings for something. It hurts. Does anyone think the expected growth is worthy of the steep P/E? The only expensive stock I own is DHR but I only buy when P/E <18. Should I follow this plan when trying to buy V? Even at the height of the court battle uncertainty V only got down to 20.5x earnings. Is V just too expensive to offer a margin of safety?

I looked into this a few months ago. I thought the release of Starcraft II would really help earnings. Starcraft will be released as the core game and three patches so they are defiantly trying to gt their money's worth. The main reason I stayed away from the company is the World of Warcraft cash cow. What happens when the phenom is over? Their other games are not subscription based and their revenue is going to get very lumpy when WOW dies. I look at this as if I am buying KO but Cocacola will be discontinued in a few years. I mean sure, they have other soft drinks but what will be their new cash cow? Will Cola lovers start drinking Pepsi Cola instead?

Alright, I’m going to try to answer everybody! Myth, Sandisk is very similar to Micron but they only offer flash based technologies and have no exposure to the DRAM market. Sandisk developed their 32 nm flash in February 2010; so they are at least 12 months behind Micron in the flash race. Sandisk trades at a p/e of 8.5 in a soft semi market and 15 in a strong semi market. I think Micron will get the same treatment when all their legal battles are behind them. I have not looked in to Sandisk at length but I think it is interesting Intel chose micron for their joint partnership. Intel, the behemoth, wanted a company to supply raw materials at the lowest cost and chose Micron. Many of Sandisk’s product offerings (mp3 players, flash drives, sd cards ect…) do not require good flash. In order for Sandisk to really compete in the SSD market they are going to have to develop their manufacturing technology. A comparison of product offerings: Micron: http://www.newegg.com/Store/Brand.aspx?Brand=1455&name=Crucial-Technology Sandisk: http://www.newegg.com/Product/ProductList.aspx?Submit=ENE&Manufactory=1404&N=50001404&IsNodeId=1&SpeTabStoreType=0 Beerbarron, Micron lowers costs by joining with Asian distributors and manufacturers. In many cases, Micron buys controlling interests in the subject companies. I believe the large capex charges you are seeing are due to acquisitions and factory startups. Capex for micron may be elevated in the future because the company has plans to convert some of their DRAM facilities to NAND flash facilities. As far as return on capital, you’re right, it stinks. The DRAM market has not been a good place to be in the last decade which is why I think Micron is branching into the flash market. Flash memory pricing can also be very variable but I hope with increased demand because of SSDs demand will outpace supply. Flash has traditionally had higher margins because it is more of a consumer product than DRAM. Most individuals do not go out to the store and buy a stick of RAM; it comes from the OEM. I have no idea what is going to happen in 10 years, which is why Buffett stays away from technology. 10 years ago I was using a 1.8 GHz Pentium 4 with 256 megs of Ram. The new droid smartphones with the Intel Atom processor can run circles around that computer. I do know SSD will be big and I know micron/intel are the lead horses right now. Intel has a history of keeping their lead. I am hoping Micron can tag along and I think I can buy them today at a good price. Nodnub, This is the first time I have seen a hybrid drive. It is an interesting idea. A few problems though. It is more complex than either an SSD or HDD so the chance of failure is greater. The durability advantage of a SSD is negated by the inclusion of an HDD. The storage problem is solved but the speed is not going to be up to SSD specs. It sounds like the page file may be kept on the SSD and perhaps the ram will save to the SSD portion during hibernation mode. This will help the speed on resume and searching but will not help boot up or large program loading. The solution for desktops is to actually use two drives. One SSD and one HDD. Programs are stored on the SSD for quick access and media is stored on the HDD for economy. I am not too concerned with durability. Intel ran a test that simulated completely filling and deleting the data on their X25-M for 5 years without data loss. I have not noticed a problem with bit-torrents (when downloading only legal files  ) and I don’t think there are more writes by copying a file from a bit-torrent or from another source. I was under the impression the bit-torrent borrowed small portions of the complete file from each location and assembled the complete file on your computer on the fly. Ericd1, I’ll have to look at STEC when I have some more time. I too looked at it but that was more than a year ago…

In keeping with the theme- How many have actually read the date on their birth certificates? I was born outside of my present resident country and I cannot actually recall the date on the certificate. Actually, following GAAP, the date should be verified by an independent third party. I am beginning to think there could be rampant fraud in this poll. I am also beginning to think I may have problem for finding this thread entertaining.