Monday, November 01, 2010

1 November 2010 Sittin’ on Ready


1 November 2010 Sittin’ on Ready

While we heard neutral or even positive economic news today, everyone is sittin’ on ready for the election results and the FOMC announcement on Wednesday.. As of an hour ago the educated guess is the GOP will pick up 52 seats in congress. Some of the key senate races might not be as successful as the GOP was hoping. As of this morning, it appears as though the once “stick a fork in him he’s done” Harry Reid has taken on certain Lazurious (don’t worry I made that one up.) qualities and will live to spend another day. If you, like me are tied of all the political blah blah, I will move on.

We do not believe in coincidum (Croninism for multiple codincidences.) As we have mentioned, we are blessed to be on distribution of many economic and investment newsletters. Some of the best come from Credit Suisse and UBS (Thanks Tim). Today there was a great piece from UBS we just finished reading by Thomas Berner and Jeremy Zirin. We will not bore you with the details and if I did, my supplier might cut me off, but it is a great article. They mange to lay some very pertinent data points which imply we are currently on a solid rode to recovery be it a very flat road with about a 2.2% Grade. In other words that would be our GDP growth into 2011. If you can get a hold of this publication, I suggest it as a good guide for the next month or so.

There was similar message in the Credit Suisse blast today but felt the USB edition was superior. The Credit Suisse did have a nice smorgasbord of equities to play with tonight. Here is a list of companies I have found to have a nice safety of margin. My definition of a nice safety of margin is a company that has at least three analysts with published target prices and the current price of the stock is 20% or more below the average target price.

Here are few that we have found. We do not won these YET, there is a lot more homework to do, but this is a good starting point.

CNX CONSOL Energy Inc. engages in the production of multi-fuel energy and provision of energy services primarily to the electric power generation industry in the United States. The company involves in the mining, preparation, and marketing of steam coal primarily to power generators; and metallurgical coal to steel and coke producers. Its current price is 36, its target price is now 44 down form a 52 range. It is a coal and Gas play. This is one of the most attractive, but I will be reading the recently published 10Q to get the dirt. If you want to play along, here is the link and you can check it out yourself. If you want cliff notes, drop me an e-mail and I’ll send you highlights with my comments.

ACI Arch Coal, Inc. engages in the production and sale of steam and metallurgical coal from surface and underground mines to power plants, steel mills, and industrial facilities in the United States. As of December 31, 2009, the company operated 19 active mines; and owned or controlled approximately 3.9 billion tons of estimated proven and probable recoverable reserves. Yes another coal play, but their current price (CP) is $26 and it target price (TP) is 31 (almost 20%).

UFS Domtar Corporation engages in designing, manufacturing, marketing, and distributing uncoated freesheet paper; papergrade, fluff, and specialty pulp; and lumber and wood products in North America. This one got my attention because there are TPs out there in the 125 range and the CP is $76. After some checking, TPs are all over the plave, but even the lowest provides about a 16% margin of safety. DO YOUR HOMEWORK

RSH RadioShack Corporation engages in the retail sale of consumer electronic goods and services through its RadioShack store chain and non-RadioShack branded kiosk operations. We know who they are, but I was surprised to see how far below their TPs the stock is trading. The stock trades around 20 and most of the TPs are in and around $25. Their forward looking P/E is under 10 and their debt seems manageable. I want to tear apart the balance sheet before committing, but you might want to consider plugging this thing in.

From a Halloween about 10 years ago

Daughter and Son, Kristin and Jack

Ok, I know, your thinking, he has resorted to showing family photos on the blog.  Hey its hard to find photos that lend themselves to clever captions without getting sued over who owns the pictures.  Fortunatley, I ran across a relevant photo of a voting poll in a congressional district that has not been infleunced by the millions of dollars of ad campaigns this year so I will close with that photo.

 Salve Lucrum


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