Thursday, October 07, 2010

7 October 2010 Books, Pens, Magic, and Bauxite


7 October 2010 Books, Pens, Magic, and Bauxite

The Good Book

He read it for the first time in 1950. He signed a first edition copy in 1973. He is a billionaire. The book was auctioned off yesterday for $25,250. It originally cost $3.50. The book, (mentioned here about a week ago) is Benjamin Graham’s, “The Intelligent Investor”. That is a 7,000% return. Cool.

The Rear View Mirror

I have to wonder is Lot’s wife would have turned into a pillar of salt if she had just looked into the rear view mirror of her car. But I digress. Here is a post from one year ago yesterday:

October 6, 2009 AA Heads up

“AA Alcoa is due to report tomorrow. I bought this is December 08 before I was “religious” about fundamentals. In May, I ran the numbers and was glad to get out with a dollar profit. (per share :’). They had burned through a billion dollars in cash in 6 months. They 2010 earning estimate creates a 26 Price per earnings ratio. That is more than 4 times the industry average. They still have a ton of debt, 9 billion I believe. Alum is going to have skyrocket in a short period of time to make this equity make sense above 15 a share. I don’t get it. This is at best a 8-9 dollar stock.”

Alcoa made it all the way to $17.60 before everyone figured out I was right (hey I can dream) and the stock came down to $9.61 a share. Today they reported 9 cents a share after a 3 cent charge off. So we have a winner. Bob S. was our winner with a calculation of 8 cents a share. And to prove great minds think a like:

From: Brian Cronin

Sent: Sunday, October 03, 2010 2:54 PM

To: Brian Cronin
Subject: AA Estimate
I think we will see a beat of 2 cents to 8 cents a share.

A copy of Jim Cramer’s “Real Money” is on its way to Bob. Thank you all for playing. I’ll pick out another one Sunday for you all to play.

Tic Tic Tic Tic. . . . .

The market started out kinda hot this morning then I thinkest there be some profit taking as the market were then down most of the day and then settled basically flat. Alcoa’s positive reporting (despite a sleepish aluminum price over the quarter reporting) should help kick start the market BUT (Behold the Underlying Truth), most seem poised to react to the crappy (a financial term meaning disappointing) job reports tomorrow morning. So run out to the all night McDonald’s nearest you, get your eggamuffin and café coffee and be ready tomorrow morning 5:30 AM PST and we shall all cry together.

Have you heard the news. . . .

Ok its not news it’s the rumor we heard two years ago, then a year and a half ago, then a year ago, and agin in January this year. Verizon will be launching the iPhone. No really this time its true, I think? So let’s go out and buy Apple and some Verizon. Go ahead without me. I need more Apple like I need a higher Body Mass Index and besides this rumor was built into the stock on the first day of their IPO, well maybe not that long ago but you get the point. Actually there is one more piece of evidence that this might be the real deal. The WSJ reporter Yukari Iwatani Kane has broken almost all the real AAPL stories over the last couple of years. (The real iPad story and pricing, Jobs liver replacement, and the iPhone recall.) She seems to have an inside track.

I read therfore I am. . . .

We have been telling you about a good book called the "Lincoln Lawyer", well I took a little break from it for one night, (last night) to almost finish a cool little book by Joel Greenblatt called "The Little Book that Beats the Market". It is a cute very easy read and if his magic formula system is as good as he says. It might be just the cup of tea for those who don’t have the time and interest to the necessary homework of selecting individual stocks. The book took about 90 minutes to burn through on my Kindle. He has back tracked this system for more than 6000 stocks for 17 years doing month to month year on year analysis and the results are spectacular. I could not do the system because it require you to do nothing but once every 12 months. It is based upon high earnings yield and high return on capital and low P/E ratio screening. Then he walks you through how to choose a bucket of 25 to 30 of the screened stocks and buy into them over the course of a year then sell the winner a few days before 12 month ownership period, sell the loosers a few days after the 12 month ownership period, then reinvest in a new group of 25-30 stocks in the same manner. Pretty broing if you aske me but the returns are scary good. The website is free and user friendly.

Here is a chart of The Magic Formulas against the broad S & P 600,

 You really should check this out if you don’t like reading financials and jerking around doing trades all week long. Here is the website

“It ain’t easy being green.”

Remember who said that? He was short. He had a weird voice. He was green. No it was not Paul Williams, it was Kermit the Frog.
Speaking of jerking around doing trades all week long. I had some action in the Salve Lucrum portfolio as I have a bit of green laying around. Here is the short version. We added to FLS, RINO, BA, C, VLCCF (more about that in a moment), CVX, UNG, PNG, NAK. We started a new position in TSCM, The Street,com, Mr. Cramer’s Company.
VLCCF, Knightsbridge is the capesize and smaller vessel company that had a good run up over the last couple of months. They purchased a new capesize vessel using stock for part of the payment dilluting existing shareholders positions. The stock went down about 20%, but we feel it was a good utilization of capital as the oil prices are on the rise. We bought on the big dip today. 
We also added to our position in CYBX. If you are paying close attention, you’ll note we took a little profit on that last week. We returned to our original position today as there was a bit of a sell off today.

The New Ball Points are here The New Ball Points are here: 

A couple of weeks ago I showed a picture of a troubled President Obama as he had but one pen left to sign bills sent to him by The Senate.  The good news is the new box of pens have arrived.  The bad news is the Senate does not seem to be passing many bills this session, or was that the good news? 

Salve Lucrum 


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