Defense contractors

[no_free_lunch]

5 hours ago, dealraker said:

One of the things I've done for years and years is simply buy the defense, rail, insurance broker, or whatever industry laggards, the ones that are discounted for whatever reason.  The outcome has been about 14%, maybe 14.5%, or simply way above what I'm shooting for in what was a very low inflation world and now one of somewhat higher.  For years I did this in the drug stocks but stopped that a long time ago.

 

As I mentioned above, it always-always-always to me seems that BOA (where I have accounts as I do Wells) is promoting whatever is blasting ahead in price action.  I may be wrong on this though, but it has registered that way to me.

 

Again, I'm not Parsad and seeking 19% is something I have never done and that sort of performance honestly makes me very uncomfortable.  I basically invest where I'm 99% certain over time I'm not going to lose and hope for some upside.  

 

Recently on another forum that I read because it was the only forum 25 plus years ago and I really enjoy forums, the crowd was blowing out of Berkshire to buy Dollar General.  The DG type stocks are precisely what I would never buy at any price at any time.  I consider whatever advantage or moat-no-competition sustainability they have to be completely temporary.  But they guys with DG, although they are down terrifically, are in my view nowhere near Parsad in skill....but they are seeking that big alpha outcome.  Ben Graham said, "The worst investor mistake is in late cyles to sell quality to buy lesser quality at chaper prices."  

 

Far-far-far away from my game.  Recently LHX at an average now of about $180 and NSC at $197 have my $ and vote.  I'd be happy and sleep well with 100% of my money there although LHX is less than 1% and NSC is about 2.5% of my total.  I'd not owned LHX but am delighted to be there now.  With LHX I'm buying as it descends; with NSC I have had the stock in 1976 and for the first time since then bought at $197.

 

 

You could do an awful lot worse than LHX although I think NSC is the real winner here.  Some good picks, simple to understand, reasonably safe, moat.

 

I have tried this industry laggard strategy you mention without as much success but I wonder if you are leaving out some type of qualitative filter.   It seems, now that I have a bit of a record to look back on, that it's almost always the high quality names, when bought beaten down, that turn out ok.  Neither LHX or NSC are low quality, these are gems you are picking out.

Edited September 16, 2023 by no_free_lunch

[dealraker]

30 minutes ago, no_free_lunch said:

You could do an awful lot worse than LHX although I think NSC is the real winner here.  Some good picks, simple to understand, reasonably safe, moat.

 

I have tried this industry laggard strategy you mention without as much success but I wonder if you are leaving out some type of qualitative filter.   It seems, now that I have a bit of a record to look back on, that it's almost always the high quality names, when bought beaten down, that turn out ok.  Neither LHX or NSC are low quality, these are gems you are picking out.

Yes-yes...I hope no_free_lunch that I'm not choosing the poorer quality of these things and thus far that hasn't panned out.  Spek had bought, then sold, WTW and he did that based on the plain simple and obvious fact that it is clearly the underperformer of the insurance broker related bunch.  I bought, actually added, at the same time and have no plans to sell.

 

But my expectations of that outlay of $ are not high, but also not terribly low either.  WTW is what it has been and will be - and that is a slower performer but better than cash over time and honestly pretty bomb proof in my view.  

 

It all falls into my realm and model where while others are seeking serious alpha I'm seeking a probability of near zero poor performance and hopefully more.  In the end I've let Mr. Market, not by superiority (which doesn't exist), tell me which stocks and businesses are superior.  So far given my decades of holding BRK and AJG which are now 80% of my holdings, those are his choices.

 

I've just lived with the results!  LOL.  

Edited September 16, 2023 by dealraker

[sleepydragon]

7 hours ago, dealraker said:

One of the things I've done for years and years is simply buy the defense, rail, insurance broker, or whatever industry laggards, the ones that are discounted for whatever reason.  The outcome has been about 14%, maybe 14.5%, or simply way above what I'm shooting for in what was a very low inflation world and now one of somewhat higher.  For years I did this in the drug stocks but stopped that a long time ago.

 

As I mentioned above, it always-always-always to me seems that BOA (where I have accounts as I do Wells) is promoting whatever is blasting ahead in price action.  I may be wrong on this though, but it has registered that way to me.

 

Again, I'm not Parsad and seeking 19% is something I have never done and that sort of performance honestly makes me very uncomfortable.  I basically invest where I'm 99% certain over time I'm not going to lose and hope for some upside.  

 

Recently on another forum that I read because it was the only forum 25 plus years ago and I really enjoy forums, the crowd was blowing out of Berkshire to buy Dollar General.  The DG type stocks are precisely what I would never buy at any price at any time.  I consider whatever advantage or moat-no-competition sustainability they have to be completely temporary.  But they guys with DG, although they are down terrifically, are in my view nowhere near Parsad in skill....but they are seeking that big alpha outcome.  Ben Graham said, "The worst investor mistake is in late cyles to sell quality to buy lesser quality at chaper prices."  

 

Far-far-far away from my game.  Recently LHX at an average now of about $180 and NSC at $197 have my $ and vote.  I'd be happy and sleep well with 100% of my money there although LHX is less than 1% and NSC is about 2.5% of my total.  I'd not owned LHX but am delighted to be there now.  With LHX I'm buying as it descends; with NSC I have had the stock in 1976 and for the first time since then bought at $197.

 

 

 

Buying quality stocks at a bargain price, in a diversified portfolio, makes investing such a happy endeavor of life. bring so much pleasure. Really hate my baba now!

 

[sleepydragon]

watching on YouTube the CNBC interviews with the CEOs with these defense companies -- all old white men..  

[Dinar]

16 minutes ago, sleepydragon said:

watching on YouTube the CNBC interviews with the CEOs with these defense companies -- all old white men..  

Your point being?  Microsoft, Alphabet, Facebook, Amazon, Berkshire, and the list goes on were all created by white men.  

[sleepydragon]

1 minute ago, Dinar said:

Your point being?  Microsoft, Alphabet, Facebook, Amazon, Berkshire, and the list goes on were all created by white men.  

my point is they all looks, talk the same on TV -- except some are exceptional (like Buffett, Iger, Bezo etc.. who has a strong energy when talking on TV). The others talk like old men  especially these defense ceos.

[Spekulatius]

36 minutes ago, Dinar said:

Your point being?  Microsoft, Alphabet, Facebook, Amazon, Berkshire, and the list goes on were all created by white men.  

The CEO of Northrop Grumman is a woman (Kathy Warden). Former Lockheed Martin CEO was  Marylin Hewson until the current CEO took over in 2021, I believe. GD’s current CEO is a woman too Phoebe Novakovic.

https://www.politico.com/story/2019/01/02/how-women-took-over-the-military-industrial-complex-1049860

 

Anyways, what’s the point. The most successful Chinese companies are all run by Chinese men.

[dealraker]

6 hours ago, sleepydragon said:

 

Buying quality stocks at a bargain price, in a diversified portfolio, makes investing such a happy endeavor of life. bring so much pleasure. Really hate my baba now!

 

On the China plate I have tiny investments in NOAH and FANH.  NOAH is a good deal below where I'm in.  But it is not a bad buy if things ever recover.  I may have one more small holding there but I can't think of it now.  FANH keeps getting reset by gov regulations,  it is an insurance broker.

[UK]

On 9/16/2023 at 3:21 PM, dealraker said:

Recently on another forum that I read because it was the only forum 25 plus years ago and I really enjoy forums, the crowd was blowing out of Berkshire to buy Dollar General.  The DG type stocks are precisely what I would never buy at any price at any time.  I consider whatever advantage or moat-no-competition sustainability they have to be completely temporary.  But they guys with DG, although they are down terrifically, are in my view nowhere near Parsad in skill....but they are seeking that big alpha outcome.  Ben Graham said, "The worst investor mistake is in late cyles to sell quality to buy lesser quality at chaper prices."  

 

I know nothing about DG, but generally I think this is very true and important. It is also one of the main mistakes I unfortunately had to learn from myself, especially if that lower quality also involves leverage. Ironically for me it also involved moving somewhat from BRK to make such a mistake a last time. Now I am almost afraid to touch it in order to buy "something better":)

 

I have saved this quote as one of my top checklist item: "The chief losses to investors come from the purchase of low quality securities at times of favorable business conditions"- Benjamin Graham

 

This is maybe also very interesting to consider in terms BRK vs FFH, as currently their valuations is still quite diverge, while quality is seemingly converging. I think and hope that the term "low quality", especially speaking of their insurance operation, is not applicable to FFH anymore. So far I did not yet sold any BRK to buy FFH, as there were better candidates. 

 

Edited September 18, 2023 by UK

[dealraker]

3 hours ago, UK said:

 

I know nothing about DG, but generally I think this is very true and important. It is also one of the main mistakes I unfortunately had to learn from myself, especially if that lower quality also involves leverage. Ironically for me it also involved moving somewhat from BRK to make such a mistake a last time. Now I am almost afraid to touch it in order to buy "something better":)

 

I have saved this quote as one of my top checklist item: "The chief losses to investors come from the purchase of low quality securities at times of favorable business conditions"- Benjamin Graham

 

This is maybe also very interesting to consider in terms BRK vs FFH, as currently their valuations is still quite diverge, while quality is seemingly converging. I think and hope that the term "low quality", especially speaking of their insurance operation, is not applicable to FFH anymore. So far I did not yet sold any BRK to buy FFH, as there were better candidates. 

 

There's guy in my investment club who chants buy what goes down the hardest because it comes back the hardest.  He's a CPA (big small town firm) and somewhat of a silly nut case (his CPA son has been all over the local media for defrading small businesses he's a part shareholder of- he's a high class drug addict).  But in his tax free account which he shows us, in the down times, the bad times not the good, he's sold Brk to buy other things.  And yes it has worked very well for him as he's well ahead of if he had just held Brk.  But again, he's sold Brk to buy other stuff during big market sell-off's when at least initially Brk is slower to go down.

[UK]

1 hour ago, dealraker said:

There's guy in my investment club who chants buy what goes down the hardest because it comes back the hardest.  He's a CPA (big small town firm) and somewhat of a silly nut case (his CPA son has been all over the local media for defrading small businesses he's a part shareholder of- he's a high class drug addict).  But in his tax free account which he shows us, in the down times, the bad times not the good, he's sold Brk to buy other things.  And yes it has worked very well for him as he's well ahead of if he had just held Brk.  But again, he's sold Brk to buy other stuff during big market sell-off's when at least initially Brk is slower to go down.

 

Together with China's big tech (and some added leverage) I sold more then half of my very over sized (>60 per cent) BRK position last year to buy UMG, META, GOOGL, AMZN and to add substantially to FFH and JOE, and a few smaller things. DIdn't plan for this, but after unexpectedly quick reversal, I am almost out of magnificent and similar stuff, except for still owning some 60 per cent of initial META position. But after exiting margin first, instead of bying back BRK, this year I mostly only added to JOE and even more so to FFH. So for the first time FFH is larger position for me than BRK and substantially, so I hope that the statement about their quality stands:) 

 

Edited September 18, 2023 by UK

[dealraker]

21 minutes ago, UK said:

 

Together with China's big tech (and some added leverage) I sold more then half of my very over sized (>60 per cent) BRK position last year to buy UMG, META, GOOGL, AMZN and to add substantially to FFH and JOE, and a few smaller things. DIdn't plan for this, but after unexpectedly quick reversal, I am almost out of magnificent and similar stuff, except for still owning some 60 per cent of initial META position. But after exiting margin first, instead of bying back BRK, this year I mostly only added to JOE and even more so to FFH. So for the first time FFH is larger position for me than BRK and substantially, so I hope that the statement about their quality stands:) 

 

Exactly.

[Spekulatius]

I think WEB does not like defense for political reasons (or avoid political discourse) and except in a GD special situation when he front run tender offers, he stayed away from them. Other than that, I think they meet the Buffet test of being around 15x earnings (or close) and very likely to be earning more in 5 years than they do now.

 

Producing weapons was probably one of the first human activities before even taming fire and may well be the last. I don't see much of a terminal value risk there.

Edited September 18, 2023 by Spekulatius

[Spekulatius]

Strange that the defense contractor stocks just made 52 week lows again a couple days ago and now this…

 

Some thing change and some don't

[UK]

4 hours ago, Spekulatius said:

Strange that the defense contractor stocks just made 52 week lows again a couple days ago and now this…

 

Some thing change and some don't

 

A picture is worth a thousand words:). Why do you consider today's reaction as strange? 

[Dinar]

@Spekulatius, why do you think defense stocks should go up on this?  Heck, if the Israelies are smart, which I doubt, they would hardly need to replace any equipment.  Ammunition yes, but no tanks, planes, artillery, et all.  Just blockade Gaza, and watch it surrender, tactics used successfully for millennia.

[no_free_lunch]

16 minutes ago, Dinar said:

@Spekulatius, why do you think defense stocks should go up on this?  Heck, if the Israelies are smart, which I doubt, they would hardly need to replace any equipment.  Ammunition yes, but no tanks, planes, artillery, et all.  Just blockade Gaza, and watch it surrender, tactics used successfully for millennia.

They are now threatening to execute hostages.  Throws a wrench in the plans.   I guess Israel can just ignore the threats in which case Hamas is really screwed but I'm not sure that's palatable. 

[Dinar]

3 minutes ago, no_free_lunch said:

They are now threatening to execute hostages.  Throws a wrench in the plans.   I guess Israel can just ignore the threats in which case Hamas is really screwed but I'm not sure that's palatable. 

Why?  Ground invasion will cost a lot more in casualties than all the hostages.  By the way, here is a take from a Russian paper: 

https://www.gazeta.ru/army/2023/10/09/17706481.shtml

 

For those who do not read Russian, the military observer for the paper states that the only solution is to destroy Gaza and deport the entire population, otherwise this continue forever.  

 

By the way, if you read interviews with people from Gaza and West Bank, they don't want just Gaza and West Bank.  They want the entire state of Israel, including all the territory that UN assigned to the Jewish state during the partition.  I don't know what the Israeli government is thinking, but how can peace be possible with people who consider themselves occupied as long as one inch of the Holy Land is in Jewish hands?   There will always be war unless either all the Jews are kicked out of the Holy Land or all the Muslims are kicked out of Israel, including Gaza and the West Bank.   

 

Look, Czechoslovakia deported all Sudeten Germans post WWII, King Hussein did the same during Black September (although he killed like 25K).  It is not as if this is without precedent.

[Xerxes]

for some reason I cannot find Israel War thread. Maybe it got moved ? 
 

where do I write my mumbo-jumbo ?

[no_free_lunch]

1 minute ago, Xerxes said:

for some reason I cannot find Israel War thread. Maybe it got moved ? 
 

where do I write my mumbo-jumbo ?

Did it get deleted?

[Xerxes]

1 minute ago, no_free_lunch said:

Did it get deleted?

was driving home for +2 hours back from Thanksgiving. Logged back in and then it was gone 

[Spekulatius]

1 hour ago, Dinar said:

@Spekulatius, why do you think defense stocks should go up on this?  Heck, if the Israelies are smart, which I doubt, they would hardly need to replace any equipment.  Ammunition yes, but no tanks, planes, artillery, et all.  Just blockade Gaza, and watch it surrender, tactics used successfully for millennia.

There is no direct impact on defense contractors business - I don’t think Israel needs any US assistance either, assuming this does not escalate into a real war ( this more like a terrorist attack than a real war right now). I do think it highlights the risk we live with and the need to keep defense spending. We have seen now Ukraine and now this being another reminder that’s security is not a given. It seems at odds to me that some defense contractors were going to 52 weeks lows (presumably on the house speaker mess that lead to concerns about another government shutdown ) at odds with the performance of the business as well as with geopolitical security situation.

Edited October 9, 2023 by Spekulatius

[no_free_lunch]

8 minutes ago, Dinar said:

Why?  Ground invasion will cost a lot more in casualties than all the hostages.  By the way, here is a take from a Russian paper: 

https://www.gazeta.ru/army/2023/10/09/17706481.shtml

 

For those who do not read Russian, the military observer for the paper states that the only solution is to destroy Gaza and deport the entire population, otherwise this continue forever.  

 

By the way, if you read interviews with people from Gaza and West Bank, they don't want just Gaza and West Bank.  They want the entire state of Israel, including all the territory that UN assigned to the Jewish state during the partition.  I don't know what the Israeli government is thinking, but how can peace be possible with people who consider themselves occupied as long as one inch of the Holy Land is in Jewish hands?   There will always be war unless either all the Jews are kicked out of the Holy Land or all the Muslims are kicked out of Israel, including Gaza and the West Bank.   

 

Look, Czechoslovakia deported all Sudeten Germans post WWII, King Hussein did the same during Black September (although he killed like 25K).  It is not as if this is without precedent.

I don't disagree with much you said. I, Canadian perspective, just don't want to get involved.  Risk of Iran involvement. 

Edited October 9, 2023 by no_free_lunch

[Dinar]

15 minutes ago, no_free_lunch said:

I don't disagree with much you said. I, Canadian perspective, just don't want to get involved.  Risk of Iran involvement. 

Iran is already involved.  Keep in mind, as Hamas figures have stated before, Israel is just the first domino.  The rest of the world is next.  

[no_free_lunch]

13 minutes ago, Dinar said:

Iran is already involved.  Keep in mind, as Hamas figures have stated before, Israel is just the first domino.  The rest of the world is next.  

That domino seems to be doing OK.  They have nuclear weapons and a huge advanced military.  If it seems like they will get overrun maybe we should help but otherwise clearly not our fight.