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Dilemma of a value investor


Guest Bronco
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Obviously, the tide is taking up all stocks. 

 

For a self proclaimed value investor (but who really knows, maybe just an idiot) - I am finding it tough to deploy new funds in this market.  If I liked a business and it was trading at $10, why would I buy it at $12?

 

I was fully invested (and not that y'all care), but I rolled over an old 401k and now manage my wifes 401k.  So I have cash that eventually needs to get invested.

 

I know patience is the key, and I am patient.  But for someone that loves the market, it gets boring.

 

I am constantly looking for new ideas, which is why I am on this board.  And there are some great posters here and some opinions different from my own which is good (and challenges one's thinking).   

 

Anyone else feel the same way? 

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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?       

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I agree.  It can be tough to buy a cheap stock when just a little bit ago it was REALLY cheap.  It's hard to avoid anchoring bias.

 

For what its worth...if you are comfortable with the big banks they have not participated in the recent rally at all and are fighting another round of bad press.

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peter lynch jr. - you are probably barking up the right tree.  Two things though:

 

1) It seems that state governments let you rent a house for free now, just take out a mortgage and don't pay it.  Not good for the banks.

 

2) It is very tough for me to value these things - all the investments I dont know about.

 

That being said, I will probably revisit these if the stocks get hit again b/c of point #1.  Hudson City is something I might buy calls on.

 

 

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Im down to 4% of cash  ;D and just bought some stuff today. I need to raise some now though. I still think we are ranged bound and getting near the upper end of the range. I think you are a choosy Susie, but thats a good thing inmo.

 

Making money vs keeping it are 2 very different things.

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peter lynch jr. - you are probably barking up the right tree.  Two things though:

 

1) It seems that state governments let you rent a house for free now, just take out a mortgage and don't pay it.  Not good for the banks.

 

2) It is very tough for me to value these things - all the investments I dont know about.

 

That being said, I will probably revisit these if the stocks get hit again b/c of point #1.  Hudson City is something I might buy calls on.

 

 

 

If you guys are remotely interested in banks, you should check out the TARP warrants. The stock might have to go up 30% or so before you make a profit. But, they are very long term, like 8-9 years. I'd hope the bank stocks go up 30% over the next decade!

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Guest broxburnboy

If you and the other members of this board are having a hard time finding value out there.. the US markets are probably overbought and probably front running more QE. Sitting out in cash is almost a sure loser, given the ongoing QE in the US. Ergo.. perhaps you should be looking for value in other markets and countries.

The case for precious metals stocks has been made several times but many aren't yet comfortable with the implications of that move...

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Broxburnboy - it sounds like you are suggesting they are devaluing are almighty dollar! Nonsense.

 

 

Sarcasm aside - Tariq and BronxBomber - any foreign stocks you consider value right now (since you brought up the topic)????

 

 

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Bronco, it's tough but I would recommend you just be patient...no need to go outside the US, or jump into commodities or other things that may be outside your circle.  Things are better for corporate America, but there will be more shocks to the system. 

 

Investors have to feel confident enough to act when others are fearful, and then be confident enough to build the cash hoard back up again when others are optimistic.  We were buying a few months ago when everyone thought Depression 2 was a day away, and now we are starting to lighten up again on some positions that have moved up closer to intrinsic value. 

 

That is the benefit of the stock market and the privilege you have as a disciplined investor - the opportunity to exploit the folly of others, when they let fear or greed influence their behavior.  Cheers!

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If you guys are remotely interested in banks, you should check out the TARP warrants. The stock might have to go up 30% or so before you make a profit. But, they are very long term, like 8-9 years. I'd hope the bank stocks go up 30% over the next decade!

 

You got some ticker symbols or links I can look up?

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Maybe I am the only fool that is fully invested and wished he had more cash.  Myth sounds like he maybe close.  I have found stuff in the media space (radio and cable cos and movie theatres), gaming cos and some shipping.  Not too exciting but steady.  With 20%+ FCF yields I hope I am not missing something.

 

Packer

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Hurricane season is over.  There isn't enough energy left in the Gulf to support a major storm.  A whole slew of good to great Bermuda RE's plus SUR are trading for 15% to 20% FCF  and  earnings yields with high quality assets, short tail liabilities and high quality underwriting earnings.  What are you waiting for?  Many of these are net/nets with major buybacks in process.  A field of diamonds in the open that's finally beginning to be noticed!

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Maybe I am the only fool that is fully invested and wished he had more cash.  Myth sounds like he maybe close.  I have found stuff in the media space (radio and cable cos and movie theatres), gaming cos and some shipping.  Not too exciting but steady.   With 20%+ FCF yields I hope I am not missing something.

 

Packer

 

 

Packer, do any of your favorites have low debt or no debt?

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twacowfca,

I hope you are right about the hurricane season, but Paula is still hanging around.

 

Like TariqAli mentioned, there are some special situations that provide some nice fat pitches.  The oil spill in the GOM took down Noble (NE) disproportionally.  They are an outstandingly well run company with a solid balance sheet and they have profited from this situation by the acquisition of a smaller competitor that has solidified their relationship with Shell and provided them with some cover during this dark period.  In 5 years this will look like such a no brainer.  There is also ESI in the for-profit education industry.  The industry has been beaten down, but the great companies find a way to turn it around.  There is a separate thread about ESI.

 

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They all have some debt except MGAM and LACO.  The lowest debt is in SURW, SGA, and FLL.  LACO is selling for less than its tangible net worth and is generating positive FCF.  The real question is how much are the Indian Casino receivables worth?

 

Packer

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Parsad, you are most likely correct, however, I fear my circle of competence may be small, perhaps a circle of incompetence. 

 

It sounds like others are having trouble finding the bargains...I guess it makes sense since the market is less attractive as it rises. 

 

I bought some goog for my wife's account, which should make her happy (at least for a fleeting moment).

 

It feels to me hue market may correct soon...We'll see.

 

Perhaps it is the sleep deprivation caused by 2 week old son, but biglari is starting to look attractive as an investment.  But even with that, I remain patient, waiting for the right price.

 

 

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Someone here may have nailed it.  Banks may be the next value play. 

 

HCBK is on my radar. 

 

I am short some BAC and JPM with put options but may plan on buying shares soon.  To be continued.

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Someone here may have nailed it.  Banks may be the next value play.

 

I just started looking into a micro cap regional bank holding company MCBC

 

The bank exhibited all the problems of excess that many back had back in the 2000-2006 and they suffered greatly for it. They then changed out most of their management and I am wondering if they are a good value play at this point.

 

Welcome any thoughts or feedback.

 

This back operates in my back yard and many of my clients use/owe them money.

 

SmallCap

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twacowfca,

I hope you are right about the hurricane season, but Paula is still hanging around.

 

Like TariqAli mentioned, there are some special situations that provide some nice fat pitches.  The oil spill in the GOM took down Noble (NE) disproportionally.  They are an outstandingly well run company with a solid balance sheet and they have profited from this situation by the acquisition of a smaller competitor that has solidified their relationship with Shell and provided them with some cover during this dark period.  In 5 years this will look like such a no brainer.  There is also ESI in the for-profit education industry.  The industry has been beaten down, but the great companies find a way to turn it around.  There is a separate thread about ESI.

 

 

 

Thanks for the ideas.  The drillers look interesting.

 

 

Paula did reach hurricane status, but Paula's energy content was only about 5% of the energy content of the bigger storms in the Atlantic this season.  :)

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