Comments on: What You Should Be Looking For http://www.fwallstreet.com/article/142-what-you-should-be-looking-for Value Investing Blog Thu, 09 Sep 2010 02:28:59 -0500 http://wordpress.org/?v=2.9.2 hourly 1 By: Joe Ponzio http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1956 Joe Ponzio Wed, 23 Jul 2008 17:31:09 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1956 People are definitely tightening their belts, and that is a good thing. At some point, all of these companies become so cheap that they make sense. CAKE might lose 10% or 20% (or 30%) of its traffic, but it will still have a very loyal following. When the markets are pricing these companies as though they are going away, I'll buy. I'm not crazy about restaurants, but I'm not crazy against them. They are just there for me (like most industries). If the company gets cheap enough and it is strong enough, I'll buy. That said, I would not get as excited over a CAKE as I would if a Coca-Cola type franchise was being given away. The consumer? The consumer is cutting back, and will likely continue to do so. Still, the companies that can adjust to this, but are priced like they are going away -- that's where we'll find great opportunities. People are definitely tightening their belts, and that is a good thing. At some point, all of these companies become so cheap that they make sense. CAKE might lose 10% or 20% (or 30%) of its traffic, but it will still have a very loyal following. When the markets are pricing these companies as though they are going away, I’ll buy.

I’m not crazy about restaurants, but I’m not crazy against them. They are just there for me (like most industries). If the company gets cheap enough and it is strong enough, I’ll buy. That said, I would not get as excited over a CAKE as I would if a Coca-Cola type franchise was being given away.

The consumer? The consumer is cutting back, and will likely continue to do so. Still, the companies that can adjust to this, but are priced like they are going away — that’s where we’ll find great opportunities.

]]> By: Bootstrap http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1942 Bootstrap Sat, 19 Jul 2008 14:23:40 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1942 Hi Joe, Thanks for the post. Like you, I rooting around in unloved sectors. I recently did a post on Cheesecake Factory, Inc. on my blog - how do you feel about consumer discretionary in general - and restaurants in particular. Two things I'm worried about. Being (too) early is the same thing as being wrong. And the eventual pricing power that restaurants may have. Thanks again, and keep posting! Hi Joe,

Thanks for the post. Like you, I rooting around in unloved sectors. I recently did a post on Cheesecake Factory, Inc. on my blog – how do you feel about consumer discretionary in general – and restaurants in particular. Two things I’m worried about. Being (too) early is the same thing as being wrong. And the eventual pricing power that restaurants may have.

Thanks again, and keep posting!

]]> By: Joe Ponzio http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1915 Joe Ponzio Thu, 10 Jul 2008 15:14:45 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1915 joe: When you are watching the news and markets all day, you can become somewhat attuned to the market extremes. The Dow was 13,000 and the talking heads were rejoicing that the worst was behind us and that we were on the brink of a turnaround. In my view, we still had some tough times ahead. 13,000 was overly optimistic. 11,800 seemed more realistic, but I'm not 100% confident that we are necessarily oversold at 11,200. BPal: I try to make smart business decisions and look to invest when others are doing foolish things. It's no different than when Buffett is buying or selling options against the markets or engaging in workouts or arbitrage. 80% of what I do in the stock market is look for underpriced companies that I can hold forever, or at least until price approaches my estimation of value. 40% of what I do is look for opportunities made available by the fear or folly of others. Read the post again - particularly the paragraph that starts with the discussion of Apple. As a stock trader/speculator, I have proven (to myself) time and time again that I am a miserable failure with absolutely no tolerance for price fluctuations. Because of that, I do not trade or try and profit from short-term fluctuations. That said, when opportunities arise where people are doing foolish things and I have an opportunity to profit, I don't think according the name "speculator" is appropriate just because things can happen fast. What is the difference between going long in an underpriced business and shorting a doomed-to-fail business? Very little. Why would Buffett sell puts against the S&P or I short the DJIA? He bet a small portion of Berkshire's assets that the markets would move very little or up; I bet a small portion that they would move down. We both made educated gambles based on rational business decisions because we felt that people, as a group, were being foolish. Make sense? joe: When you are watching the news and markets all day, you can become somewhat attuned to the market extremes. The Dow was 13,000 and the talking heads were rejoicing that the worst was behind us and that we were on the brink of a turnaround. In my view, we still had some tough times ahead. 13,000 was overly optimistic. 11,800 seemed more realistic, but I’m not 100% confident that we are necessarily oversold at 11,200.

BPal: I try to make smart business decisions and look to invest when others are doing foolish things. It’s no different than when Buffett is buying or selling options against the markets or engaging in workouts or arbitrage. 80% of what I do in the stock market is look for underpriced companies that I can hold forever, or at least until price approaches my estimation of value. 40% of what I do is look for opportunities made available by the fear or folly of others.

Read the post again – particularly the paragraph that starts with the discussion of Apple. As a stock trader/speculator, I have proven (to myself) time and time again that I am a miserable failure with absolutely no tolerance for price fluctuations. Because of that, I do not trade or try and profit from short-term fluctuations.

That said, when opportunities arise where people are doing foolish things and I have an opportunity to profit, I don’t think according the name “speculator” is appropriate just because things can happen fast.

What is the difference between going long in an underpriced business and shorting a doomed-to-fail business? Very little. Why would Buffett sell puts against the S&P or I short the DJIA? He bet a small portion of Berkshire’s assets that the markets would move very little or up; I bet a small portion that they would move down. We both made educated gambles based on rational business decisions because we felt that people, as a group, were being foolish.

Make sense?

]]> By: Jae Jun http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1913 Jae Jun Thu, 10 Jul 2008 09:19:58 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1913 I believe the definition of value investing to mean taking advantage of market inefficiencies. This could refer to stocks, funds, indexes, bonds, work-outs and even shorts. Anyways, we all have our own clothes, and no one is forcing anyone to wear theirs. I believe the definition of value investing to mean taking advantage of market inefficiencies. This could refer to stocks, funds, indexes, bonds, work-outs and even shorts.

Anyways, we all have our own clothes, and no one is forcing anyone to wear theirs.

]]> By: BPal http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1912 BPal Thu, 10 Jul 2008 07:10:43 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1912 You claim to be a value investor that looks for companies he could in theory hold "forever" (i.e. a buy-and-hold investor). Yet you talk about shorting stocks and engaging in work-outs, which are speculative market plays more in-line with a trader mentality. So which are you? A wolf in sheep's clothing? You claim to be a value investor that looks for companies he could in theory hold “forever” (i.e. a buy-and-hold investor). Yet you talk about shorting stocks and engaging in work-outs, which are speculative market plays more in-line with a trader mentality. So which are you? A wolf in sheep’s clothing?

]]> By: joe http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1906 joe Tue, 08 Jul 2008 03:17:53 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1906 Hey Joe, thanks for another great post. So how were you to determine that the Dow was overpriced and may drop to 11,800? Hey Joe, thanks for another great post.

So how were you to determine that the Dow was overpriced and may drop to 11,800?

]]> By: Rene http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1901 Rene Fri, 04 Jul 2008 18:15:32 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1901 When Buffet bought BAC a while back when it was selling in the 50s, I took notice. When the stock fell to $37 I was tempted, but couldn't pull the trigger. I've been salivating over both BAC and WFC ever since, but even at the low 20s I just can't seem to do it. The thing is, I'm either passing on the Horn of Plenty or Pandora's Box, if only I could figure out which. When Buffet bought BAC a while back when it was selling in the 50s, I took notice. When the stock fell to $37 I was tempted, but couldn’t pull the trigger. I’ve been salivating over both BAC and WFC ever since, but even at the low 20s I just can’t seem to do it. The thing is, I’m either passing on the Horn of Plenty or Pandora’s Box, if only I could figure out which.

]]> By: Amit D. http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1899 Amit D. Wed, 02 Jul 2008 16:43:39 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1899 Im seeing plenty of opportunities since the credit crunch and companies such as MHP, WFC, Moody's look like some companies to look into at their current price. I thought it would be interesting to compare their prices(july 08) to where they could be whenever the "dust settles". Im seeing plenty of opportunities since the credit crunch and companies such as MHP, WFC, Moody’s look like some companies to look into at their current price. I thought it would be interesting to compare their prices(july 08) to where they could be whenever the “dust settles”.

]]> By: Rene http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1898 Rene Wed, 02 Jul 2008 15:35:18 +0000 http://www.fwallstreet.com/article/142-what-you-should-be-looking-for#comment-1898 "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only." It's the best of times for value investors. I do believe, however, that the best deals you can find today will be better in a few months. I guess that makes me the most foolish of all "investors", a market timer. “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

It’s the best of times for value investors. I do believe, however, that the best deals you can find today will be better in a few months. I guess that makes me the most foolish of all “investors”, a market timer.

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