What can I say, one of my best stocks picks of 2007 has turned into one of my worst of 2008. Valero Energy(NYSE: VLO) the largest independent oil refiner in the United States has experienced shrinking profit margins as oil prices have continued to climb throughout the year.
It was reported in the Associated Press that a Wall Street analyst at Friedman, Billings, Ramsey & Co downgraded his expectations for the major oil refiners Wednesday. In regards to VLO, analyst Eitan Bernstein lowered his price target from $77 to $65.
Analysts are notoriously optimistic and I myself would not hazard a guess picking a number out of thin air given the number of variables to consider, but I would go as far as to say this downgrade makes me laugh.
The stock closed yesterday at $41.25 and is trading down further today around $40. But this is considerably lower then anyones price targets for the stock so perhaps this is a case where the downgrade is actually an upgrade.
This is a company with a price-to-sales ratio of 0.43 and a price-to-book of 1.42 that accompany a P/E of 7 and a yield of 1.41%. I may have been caught in the downdraft of a cyclical stock recommending it last December, but I sure do feel more comfortable recommending to readers that they examine VLO today.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.DISCLOSURE: I currently own shares of VLO.
One of my more avid readers and obviously another believer in Huaneng Power Intl ADS (NYSE: HNP) asked why the stock price was so erratic lately. I find that question strange given the following two year chart that indicates it is not behaving any different than it always has, it fluctuates.
The transaction will close as of trading on Tuesday, June 10. Lorillard is being distributed to the public via a two-tier process involving: 1) the retirement of the tracking stock Carolina Group (NYSE: CG), in exchange for which approximately 62% of Lorillard's common stock will be issued, and 2) an offer in which shares of S&P 500 constituent Loews Corp. can be exchanged for the remaining shares of Lorillard
It was a smart move by Loews company management to separate the tobacco company from its other interests in hospitality, oil exploration, real estate and insurance.
The stock market was down today and the financial sector was hit as hard as anything else. These are the days you want to have your watch-list ready or perhaps your stock alerts triggered. I have been watching Wells Fargo (NYSE: WFC) for quite some time. Today at $27.00 I received an alert and decided to buy some.
As a value investor I am seeking not to just make a profit but to have as large a margin of safety as possible. That means I do not want to just buy a discounted stock but I want to "steal it". Patience is always in order, and usually is rewarded. That was the case when we watched Tiffany & Co. (NYSE: TIF) go from the low $40's to $57 per share and think we had missed the train, only to keep our eyes open as it fell back down to $36 where we pulled the trigger.
Last week TIF did us proud (see: Chasing Value: Tiffany's -- all that glitters) and although I am wrong way too often, I would be greatly surprised to see TIF anywhere near $36 ever again. It has reached $50 since we purchased it in April. The following chart illustrates the recent path of Wells Fargo.
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and Berkshire Hathaway (NYSE: BRK.B) too. It has been painful to have to report each month that I was being bested. However, since I have not seen anything contradicting my original rationale for my eight picks I stood my ground.
Moving into positive territory by pennies was Loews Corporation (NYSE: LTR). Among its holdings is a 51% stake in Diamond Offshore Drilling, Inc. (NYSE: DO) that has been doing well as the world remains desperate for more oil and natural gas.
Bunge Limited (NYSE: BG) was the other stock to cross the line into the black, while Valero Energy Corp. (NYSE: VLO), although improving, remains my worst performer. It is still down almost 28% after five months.
After a tough day yesterday Chasing Value: Intuitive Surgical confounds Wall Street and closed down to a recent low of $274.75. It opened up today on the news and is currently trading up about 4% to $285 per share, in a market that is trading down across the board.
The following five-year chart illustrates the rapid rise of this highly specialized company that produces a robotic surgical device called the "da Vinci System". They own all the patents for the hardware, software, replacement parts, and service contracts too. That is one big moat around this company.
If you were following my post last year you might have read Serious Money: You asked about Intuitive Surgical? when ISRG was trading in the low $120's. Since that time it has reached $359.59 -- not a bad return. I have been following ISRG since the beginning and own shares at $7.70 the lowest entry point possible post IPO.
The irony of this story is that I also recommended Bear Stearns last year so my best stock pick ever is replacing one of my worst. Intuitive Surgical belongs on your watch list, and if it dips again during the sumer doldrums perhaps there might be another buying opportunity.
UPDATE: ISRG finished the day at $284.77 up $10.02 (+3.65%)
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of ISRG.
It was reported today that robotic surgery company Intuitive Surgical, Inc. (NASDAQ: ISRG) may not meet analysts average revenue expectations for 2008 and this is driving shares down $7.00 hovering around $281 per share.
Although the company guidance discussed figures around $850 million while the analysts were GUESSING $873 million temporary disappointment is affecting trading. Despite this, Eli Kammerman of Cowen & Co is maintaining his "Outperform" rating saying that he expects Intuitive to beat Wall Street expectations, and that the shares will outpace the market by 15 percent to 20 percent over the next 12 months.
So earnings might be in question, the stock is bouncing, the outperform rating is intact, and everybody still loves Intuitive -- but the stock is down so far on what is an up day. It was only a month ago I posted something similar Chasing Value: Intuitive Surgical drops on analyst disappointment after ISRG report actual earnings. If not for the analysts where would we find opportunity?
Is this a buying opportunity or signs of a week market? That answer involves more guessing, but if the stock trends down more, than it is more of an opportunity, which means you should have this world class medical device company on your watch list.
UPDATE: closing price $274.75 ,-$13.90(-4.82%)
EXTENDED HOURS:$289.00, +14.25 (5.18%) on news that ISRG will replace Bear Stearns in the S&P 500.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of ISRG.
Every once in a while I run a stock screen to see if anything passes some very stringent criteria, only to find nothing passes through. Yesterday something did come up: Gramercy Capital Corp. (NYSE: GKK). Here was my criteria on the screen, along with Gramercy's numbers:
One year sales growth had to be at least 20% (65%)
Minimum profit margin of 20% (49%)
Maximum Price-to-sales ratio under 3 (2)
Stock price between $10 ad $25 ($17)
Market capitalization under $1 billion ($900 million)
I could have added more criteria because to my pleasant surprise Gramercy is paying over a 14% yield, has a very low trailing P/E of of 3.34 and forward looking guess of 5.7. Furthermore, it has Return on Equity (ROE) Per Share of 29.84% and a Price-to-book of 1.26. So everything is looking good, but is it a value or value trap?
It's that time again! Time to refocus on "my pal Warren's" life's work, Berkshire Hathaway (NYSE: BRK.B), which closed yesterday at $4,119.50 and is trading lower, currently at $4,080. That is enough to get my attention after staying on the sidelines for months since I followed it up from our last buy-in around $3,600.
BRK.B shares reached a 52 week high of $5,059 last December and it has been bouncing around ever since with a trend downward.
This is not the time to pounce on the stock. This is the time to prepare yourself to pounce on the stock.
The current Price-to-Earnings (P/E) ratio is 16.4. which is slightly under the current market average, but this is no average company. It actually is rated AAA (for real!) and has been for a long time. Most investors would consider Berkshire a safe haven, unless of course they decided to buy it at the all time high.
It was only a few weeks ago I was thinking, how much higher can this one go but sure enough, Precision Drilling Services TR (NYSE: PDS), the Canadian Trust went higher. In my last report, PDS announced its monthly dividend distribution. The current yield is 5.6% down from the 10% range it was paying when I first recommended it, but still a good return.
Today PDS closed at $28.04, a new 52-week high, now 81.24% above the $15.47 it was five months ago. During the trading day it touched on $28.12.
Last month Precision reported a 33% loss and still the share price is moving up. This supports all the reports that keep popping up regarding the price differential between natural gas and oil suggesting the the NG prices are going up and that drilling companies like PDS will be swamped. Although PDS has had a rough trailing 12 months, creating the buying opportunity, the stock price is clearly being lifted by anticipation of a bright future.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of PDS.
During Thursday's trading, Anadarko Petroleum (NYSE: APC) hit an all-time high of $78.75 and closed at $77.62. Anadarko was one of my first recommendations after I started writing for BloggingStocks, and is nearing 100% appreciation from the $40 price tag it had when we acquired it.
The 10-year chart below indicates the strong long-term performance of Anadarko, rising about 500% and paying dividends to boot. I cannot say the stock is a bargain at recent highs, but I can emphatically state that this company belongs on your watch list.
As one who was greatly embarrassed by making a premature recommendation (being kind) that investors give consideration to acquiring shares in IndyMac Bancorp (NYSE: IMB) prior to its dramatic collapse; I can ill afford to suggest that folks jump in now. However, I might just do that.
Yesterday IndyMac jumped about 20% as it was reported that CEO says IndyMac has 'turned a corner' finishing the day at $3.97 a share -- still a long way from its 52-week high of $37.50. "Given the decline in our stock price, some people have questioned IndyMac's survivability in the current environment," Chief Executive Michael Perry said. "I am here to tell you that I believe we have turned a corner and that our business is improving. We are now achieving profitability with this new production model, with all of our nine regional wholesale centers and 104 of our 152 retail lending branches being profitable in March," Perry said.
The message is clear from the top, with negative earnings and corresponding negative P/E ratio just about any turnaround would make this stock cheap. Perry is correct that the stock is priced for failure. What should the price be if Perry gets IMB back to profitability by the end of the year? A lot more than it is now.
The stock moved way up at the opening bell this morning trading to $4.20, so there are a lot of investors who share my view ... and then it traded down, so then again...
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of IMB.
This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.
My riskiest stock pick Newcastle Investment Corp (NYSE: NCT) was down the most in March but recovered about 35% of the loss in April leaving Valero Energy Corp. (NYSE: VLO) the dubious honor of being my worst performer, down over 30% in the first four months of the year.
April showed improvement as many companies reported positive earnings reports or beat expectations.
Most of my picks improved. Higher food prices no doubt helped Bunge Limited (NYSE: BG) which recaptured losses moving up 23% from its recent bottom. My two winners Raytheon Co. (NYSE: RTN), the high tech defense contractor, and Reliance Steel & Aluminum (NYSE: RS) were joined by a third, Anglo American plc (ADR) (NASDAQ: AAUK) which had a 10% swing entering positive territory.
Watching one of your largest holdings go up in value is a vision of joy. The same is not true on the way down. Huaneng Power ADS (NYSE: HNP) is indeed way down from its high of $57.50. I recommended the stock last year at $26.50 and looked brilliant until last month when it completed retracing its upward trajectory back to that level.
The company reported an 80% drop in earnings attributed to higher coal costs Tuesday. However, today the value buyers must be back in droves because the stock closed up almost 16% as one of the day's big movers. The stock closed at $30.25, up over $4 per share. The following three-year chart captures the drama.
It should not come as a surprise to many that as crude oil pushed $120 per barrel and gas prices passed $4 a gallon at the pump Anadarko Petroleum (NYSE: APC) reached a new 52 week high of $71.12 and finished Tuesday at $70.07. The stock is up over 75% (not including the dividend) since I recommended it last year.
At the time I disclosed that I acquired the stock at $40 and suggested this was a keeper. I like the fact that the company has a substantial amount of its proven oil and natural gas reserves in North America. It also pays a modest dividend 0.52% while sporting a P/E under 9 (TTM). When last I posted on the subject -- Serious Money: great picks: Aluminum Co. of China & Anadarko -- about ten weeks ago, APC was trading at $55, down from its previous high, though still returning a nice gain. That was the time to buy on the dip if you were watching it.
What can I say, one of my best stocks picks of 2007 has turned into one of my worst of 2008. Valero Energy (NYSE: VLO) the largest independent oil refiner in the United States has experienced shrinking profit margins as oil prices have continued to climb throughout the year.
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and 
Last night 
It was 
It's that time again! Time to refocus on "my pal Warren's" life's work, 
It was only a few weeks ago I was thinking, how much higher can this one go but sure enough, 
During Thursday's trading, 
This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.
Watching one of your largest holdings go up in value is a vision of joy. The same is not true on the way down. 
McDonald's continues its coffee crusade
Cramer on BloggingStocks: Paulson and Bernanke step up to the plate
Google's $1.7 billion YouTube deal going down the tubes?
