BreitBurn Energy: Playing the Commodities Crash

By Joe Ponzio on February 2, 2010  |  10 comments

And the blogging returns. Thanks all for your patience. It has been a wild few months, between market crashes and rebounds, a business "split" so that my partner and I could each focus on our core competencies (yes, it was friendly; and, no, there's no juicy back story), and so much more.

Late in December, SeekingAlpha asked me to do an interview about my "highest conviction pick" in our portfolios. Surprisingly, it was a tough interview because I felt good about all of our positions. (The only position that had me biting my nails was Jackson Hewitt, which we ended up dumping around $4 when it seemed clear that they would not get RAL funding. A discussion for another day.)

In any event, the interview was just published today. The summary:

Profiting from Fear

By Joe Ponzio on September 28, 2009  |  35 comments

I often tell clients and investors: "If I can find one or two opportunities a quarter, I'm ecstatic." As we close out the third quarter of 2009 in a few days, I'd like to share with you some of the investments we've made. As I mentioned in this post, I simply don't have the time to maintain an F Wall Street portfolio, but that doesn't mean I haven't been investing!

We'll start with a position taken on July 27, 2009 — Volt Information Sciences. It's the company to which I alluded in this article, and then mentioned in this comment. Below is the text of an e-mail I sent to clients shortly after I bought the stock. After the text of the e-mail, I'll provide some thoughts.

Buffett May Not Have Sold JNJ

By Joe Ponzio on February 18, 2009  |  22 comments

In its recent end-of-quarter filing, Berkshire Hathaway reduced its stake in Johnson & Johnson by 54%. As is often the case, the media automatically assumed that Buffett turned sour on Johnson & Johnson and was dumping the stock. Before you run off and sell 50% of your JNJ stake because Buffett is allegedly dumping his year-and-a-half old investment in the company, let's look at the sale logically.

Wells Fargo and Wachovia, by Quarter

By Joe Ponzio on February 11, 2009  |  42 comments

This is a continuation of Wells Fargo and Wachovia Together

It's the first quarter of 2008 and the proverbial you-know-what is hitting the fan. The credit crisis has begun; the recession has started; Bear Stearns will be a distant memory by the end of the quarter. Wellsovia sets aside $4.86 billion for credit losses this quarter, more than half of what it had set aside in the entire year 2007 if it were a combined entity.

Wells Fargo and Wachovia Together

By Joe Ponzio on February 11, 2009  |  2 comments

So, I bought a bank. I know...I know. I said I wouldn't. Then again, that was a year or two ago, when I couldn't understand what the hell these guys were doing to make money. CDOs. Sub-prime mortgages. I would try to read the annual reports, and they would make my head spin.

Fortunately, the days of "creative" investing is over...for now. I have full faith that Wall Street will ensnare the markets in another mess in the next ten or twenty years. Still, banks will eventually return to "normal" for at least a while. (That is, of course, once they get through this "panic" mode.)

In a "normal" environment, banks aren't all that difficult to understand. The lend money; the sell investments and financial products; they make money on interest rate spreads. With blood pouring through the streets in the banking sector, much of it for good reason, we'll look at Wells Fargo and Wachovia, separate and together.

Grab a cup of coffee. This is a long one, broken down into two parts, each one being ridiculously long. Then again, we're expanding our sphere which ain't light reading.

Why Banks? Why Wells Fargo? Why Now?

By Joe Ponzio on January 28, 2009  |  16 comments

The other day, I said that I had purchased Wells Fargo to the tune of 10% of the F Wall Street portfolio. As it continued to sink, I made another purchase in the $16s to bring the total Wells Fargo investment back up to 10% of the portfolio's assets.

The natural question, of course, is: Why? Why a bank? Why Wells Fargo? And why now?

American Eagle Ouch

By Joe Ponzio on October 27, 2008  |  31 comments

In this comment, I had said that I was "way wrong" on American Eagle Outfitters, and that sparked some good questions. Namely: The price is down some 60%; but, what happened in the business that makes me feel like I was "way wrong"? The short answer: The business is taking a step back (due largely to the economy) before it can leap forward; so, I was wrong on my assessment of value and overpaid for the company.

If you want the long answer...

Apple Added to the F Wall Street Portfolio

By Joe Ponzio on September 18, 2008  |  17 comments

Yesterday I added Apple to the F Wall Street portfolio to the tune of 10% of our portfolio. I started watching it as it dropped below $160 on September 5th — the low end of my estimation of Apple's intrinsic value. Let's take a look at the purchase.

Do As I Say, Not As I Do

By Joe Ponzio on May 29, 2008  |  30 comments

On October 15, 2007, I took a look at Nutrisystem (NTRI) about two weeks after a 25% drop. Running a fairly conservative analysis (in my opinion), I pegged the company as a $38 or so company. Add in a little uncertainty and a 50% margin of safety, and I said I'd consider investing under $19.50 a share.

Then, it fell off my radar.

Why I Bought (and Sold) Graham Corporation

By Joe Ponzio on May 14, 2008  |  17 comments

Thanks all for your kind words. Amazingly, my brother should make a full recovery after three and a half weeks in the hospital (including two weeks in intensive care). Without going to much into detail, he was blindsided by severe pancreatitis which almost ended his life. Thanks again for your patience and understanding. Let's make some money.

On April 17th, I discussed the Art of Selling Your Stocks and briefly mentioned my investment in Graham Corporation. In doing so, I caught some feedback and lashings from a few visitors. David asked if this was a "cigar butt" investment; (MikeR) posted a Charlie Munger quote about assiduity — the art of sitting on your ass and doing nothing because your companies are great or the markets are not offering any wonderful opportunities. Was GHM a cigar butt? Did I forget to practice my assiduity?

Amylin III - Seven months (and much heartbreak) later

By Joe Ponzio on March 5, 2008  |  9 comments

In late July, I posted an analysis of Amylin Pharmaceuticals (AMLN) that was not exactly a favorite of Michael's. I figured that my response belonged in a post rather than in the comments because it was more of a "noise vs. news" debate, and Michael responded in turn with some clarification. (It's not easy to debate online because (a) space is limited and (b) 90% or so of communication - the nonverbal - is non-existent so we must rely on that unreliable 10% - the words.)

The whole discussion revolved around two simple concepts. I believed that Amylin was like every other company out there - that it had an intrinsic value and that, although I couldn't peg the value, it was almost certainly less than $6 billion (the then market capitalization). Michael took a different side - Amylin was worth considerably more than $6 billion, and that smaller investors (operating within their own risk tolerance) should look to buy companies they know (Michael is a pharmacist by profession) before those companies make their billions.

We both approached the company rationally; still, we can't fight the law - price follows value. Know the value and you'll know what price to pay. Not sure of the value? Decision time: Move on? Or, leave your fate in the hands of the traders?

Owning a Slice of Adobe's Toll Bridge

By Joe Ponzio on February 1, 2008  |  12 comments

On Wall Street, growth and value are anything but joined at the hip. Stocks are typically split into two groups: growth and value. When a growth stock gets hammered down, it becomes a "real bargain" growth stock; when a value stock drops in price, it is a "better value" at the lower price.

So, is Adobe a real bargain, a better value, or a pass?

When Your Business Competes In Price, Advertising

By Joe Ponzio on December 19, 2007  |  3 comments

The retail sector has been getting crushed lately. Though that breeds panic in most, it presents wonderful buying opportunities for long-term investors. Let me preface with this: I have heard it grouped in the same conversation with sub-prime loans. Are we really to believe that people will stop shopping? Can we compare that to banks lending money to people who can't pay?

But I digress. Let's take a look at a business that seems underpriced, but may not be a buy just the same — even if it is down 75% for the year.

Abbott Laboratories: Typical

By Joe Ponzio on December 2, 2007  |  15 comments

Valuing companies and looking for deep discounts is pretty boring. For the most part, companies are generally priced right around their intrinsic business value which makes finding steals a difficult and often disappointing venture. In fact, it would make for a fairly boring TV show—even if you had bells, whistles, and mooing toys.

Such is the case with Abbott Laboratories.

Let's Look At Apple

By Joe Ponzio on October 23, 2007  |  14 comments

It is no secret that Buffett tends to shy away from technology companies. One one side, people say he simply doesn't understand them and can't predict the future with any degree of certainty or comfort; on the other side of the fence, people say the industry changes too fast and today's leader could be tomorrow's old news.

Is Nutrisystem Healthy?

By Joe Ponzio on October 15, 2007  |  3 comments

Is the Nutrisystem drop old news? In the stock market, you'd have to say yes because things happen so quickly. Still, we can learn lessons from virtually every event in the market. Once we get through the noise and look at the business, things begin to make a lot of sense.

Let's look at Nutrisystem from a business perspective:

Price Follows Value: Procter And Gamble

By Joe Ponzio on September 24, 2007  |  18 comments

Thanks all for your feedback—both in comments and e-mails. Let's start from the top: Babui asked for more examples on how price follows value and how buying and holding through drops can still allow you to come out ahead.

Today, let's look at another example: Procter & Gamble.

From A Mile Away: The Business of Alcatel-Lucent

By Joe Ponzio on September 14, 2007  |  4 comments

Washington Mutual has The Power of Yes; we have The Power of No—a much greater power that can be used to avoid major mistakes and horrible businesses. When you invest in mutual funds, you forfeit that power and put it into the hands of the mutual fund managers. And what do they do with that power?

Some of them own Alcatel-Lucent (ALU), and then act surprised and shocked when the company continues to shrink and choke.

Enron: Accounting Scandal or Bad Business

By Joe Ponzio on August 29, 2007  |  12 comments

I know—Enron is old news. If you don't remember the scandal, Enron was an energy and commodities trading company that went from massive to bankrupt in just 16 months. Once the largest marketer of natural gas in North America and the United Kingdom and the largest marketer of electricity in the United States, Enron was wrought with scandal and deception which resulted in a total loss to many investors.

Could investors have avoided the loss altogether? Can we protect ourselves from accounting scandals?

On Buying Harley Davidson

By Joe Ponzio on August 27, 2007  |  26 comments

The two most important factors that go into buying companies are moat and margin of safety. You could, and likely will, be wrong on your future owner earning projections. You may be overly optimistic or overly cautious and end up buying too soon or passing on a great opportunity.

Your moat helps promote consistency. Your margin of safety helps minimize losses. Still, there's a business in there and we need to look at and understand it as well. Such is the case with Harley Davidson.

Looking At Wal-Mart

By Joe Ponzio on August 16, 2007  |  57 comments

I've been asked a number of times to analyze Wal-Mart. My goal here is not to offer stock tips; rather, I want you to be able to do it yourself. Still, I looked at (and bought) Wal-Mart for myself, so here it is:

Yesterday vs. Tomorrow: The Value of BNI

By Joe Ponzio on August 13, 2007  |  10 comments

Take one of my old spreadsheets (found elsewhere on this site), plug in BNI's past performance, and you'll get a per share value of $60.15. Mike and I both did it, and we were both perplexed. Did Buffett pay upwards of a 30% premium for BNI? Let's pick it apart.

Amylin II. Excuse The Sarcasm.

By Joe Ponzio on July 27, 2007  |  11 comments

I like to think that I'm doing some good here on the blog. Your emails, comments, and return visits have led me to believe that. That said, I don't think that I am a "guru" and that everyone else is wrong. My point on this site is simple: you can invest like Warren Buffett. Still, you don't have to. And some people clearly don't want to.

Yesterday, I got a comment that brought me back to 1999.

Waiting To Exhale: Amylin Pharmaceuticals

By Joe Ponzio on July 26, 2007  |  6 comments

$6.22 billion. That's what Wall Street is pricing Amylin Pharmaceuticals (AMLN) at these days. If you are a fan of Efficient Market Theory (Buffett isn't), then you believe that the company is worth that much. You'd also have to believe that the company was fairly valued at $5 back in 1998 and that the value of the business has grown eightfold in the past ten years. Me? I see things a bit differently.

Buffett. Coca-Cola. 1988. Now I Get It.

By Joe Ponzio on July 18, 2007  |  13 comments

Throughout 1988 and 1989, Warren Buffett acquired more than $1 billion of Coca-Cola (KO) stock. At the time, Wall Street thought he was downright crazy. After all, Wall Street scrutinized the purchase and deduced that Buffett has paid way too much for earnings and the stock price was high—having run up 18% a year for eight years.

In 1988, Wall Street said Coca-Cola was a bad stock to buy. Warren Buffett thought it was a wonderful business to own. The results speak for themselves; so, let's look at the reasoning behind Warren Buffett's most famous purchase.

Is there value in Berkshire Hathaway?

By Joe Ponzio on July 13, 2007  |  12 comments

You can't argue Warren Buffett's past. The man is an investing genius and has made millions upon millions of dollars for his investors over his 50+ year investing career. As he continues to discuss his retirement, make plans to pass on his fortune, and search for a replacement, one must wonder whether or not Berkshire Hathaway (BRK.A) is a buy today.

American Eagle Outstanding

By Joe Ponzio on July 12, 2007  |  45 comments

Okay. I gave you Johnson & Johnson. I analyzed the less-than-stellar 0.89% average annual return Coca-Cola has provided investors from 1996 to 2006. I've even talked about how easy investing should be if we follow Warren Buffett's lessons. Still, you have asked for something more exciting—a smaller company offering the potential for a ton of growth.

So, here it is.

Buying Johnson & Johnson, Part II

By Joe Ponzio on July 5, 2007  |  23 comments

Tim wanted a little clarification on how I came up with a value for JNJ's future cash of $201.7 billion using Excel^® (See the full valuation here). The following is a semi-intermediate discussion for Excel^® users.

Research In Motion Analysis

By Joe Ponzio on July 2, 2007  |  13 comments

You can't argue Jim Cramer's past success. The guy is a stock picking/gambling guru and he's hot on Research In Motion (ticker: RIMM). So much so, in fact, that he told his viewing public to buy it after Thursday night's earnings report. Why not? The stock ran up some 20% on Friday following giant earnings.

Let's take a look at RIMM's business to see if it is a wonderful company to own...or just a hot stock for now.

Buying Johnson & Johnson

By Joe Ponzio on June 27, 2007  |  138 comments

As of March 31, 2007, Warren Buffett's company, Berkshire Hathaway, reportedly increased its holding in Johnson & Johnson (ticker: JNJ) to 48.7 million shares-an increase of 24 million shares in three months. And it's no surprise. Forget Wall Street's earnings, JNJ knows how to generate cash!

The Blackstone IPO

By Joe Ponzio on June 25, 2007

It seems as though everyone is talking about Friday's Initial Public Offering of Blackstone Group (ticker: BX). With all the chatter, people are wondering: Should I buy it for the long-term? Is this thing going to grow like crazy?