There are three types of value investors:
- Cigar-butt investors
- Fair value investors
- Business owners
Cigar-butt investors look for liquid-able assets selling on the cheap. This is often referred to as net-net investing, popularized by Benjamin Graham.
Fair value investors are those who buy stocks when they are trading at a discount to fair value and they sell them when they become overvalued.
Finally, business owners are the investors that treat more »
Over the past 12 months, investors could have bought Apple (NASDAQ: AAPL) shares for $450 in January 2012, $700 in September 2012, and again for $450 in the past week. These enormous fluctuations, to the tune of hundreds of billions of dollars, are a stark reminder that Ben Graham's favorite allegory – Mr. Market – lives on. As Graham explains him, this colorful character shows up every day to buy or more »
I get it. "Shares Slide on Demand Worries... Apple (NASDAQ: AAPL) Dips Below $500." I woke up this morning to repetitive, bearish Apple headlines. But thanks to Wall Street's shortsightedness, there is a deeper story here. At these levels, Apple is turning into the ultimate dividend stock.
There are three things income investors look for to identify solid dividend investments:
- A nice yield
- Pricing power
- A relatively low payout more »
Apple's (NASDAQ: AAPL) conservative valuation means that any meaningful growth in earnings in 2013 could drive the stock upwards. Though growth can come from many different areas, three potential growth drivers cannot be ignored when analyzing Apple's prospects: an Apple television set, growth in China, and continued pricing power.
An Assault on the Living Room
If Apple isn't doing market research for a potential Apple-branded television, they more »
Typically, software companies have meaningful net profit margins, earning them premium valuations. Rosetta Stone (NYSE: RST), on the other hand, manages to earn investors losses. In turn, the stock is dirt cheap, trading at just 1 times sales. With a valuation like this, there is quite a bit of room for upside in the case that Rosetta Stone begins to earn a profit. Even better, Rosetta Stone's catalyst for more »
As investment guru, Bruce Greenwald, said in his book, Competition Demystified, "formulating effective strategy is central to business success." In light of strategy's importance in business, there is an old and simple business school approach to identifying the strategies that are most relevant to the company's competitive landscape: A SWOT analysis. The SWOT acronym stands for the company's internal Strengths and Weaknesses and the company's external more »
In late January, Apple (NASDAQ: AAPL) will announce its first quarter results, marking the first quarter in which the iPhone 5 was available for the entire quarter. During the quarter, Apple introduced a handful of new products, including the iPad Mini, the 4th generation iPad, and the iMac. As Tim Cook noted in the Q4 earnings call, Apple expects approximately 80% of Q1's revenue to come from new products more »
On Black Friday, overall online sales in the U.S. were up 26%, year over year. Cyber Monday saw even better results, with online sales up 30%. These numbers were touted by the media as good signs--and they were. But the biggest winners were the middlemen, or the payment franchises like eBay's (NASDAQ: EBAY) PayPal. As eBay CEO John Danahoe outlined in the 2011 annual shareholders letter, "Commerce is more »
Disney's (NYSE: DIS) recent $4 billion acquisition of Lucas Film definitely adds depth to Disney's portfolio of film franchises and trademarks, including Star Wars and Indiana Jones. But this is just one small piece of Disney's $89 billion empire of TV and media properties, movie studios, and theme parks. Even more impressive, when Disney's business segments are closely examined there is a clear trend of increasing more »
A good investment meets three criteria. It should have:
- Understandable business economics
- A durable competitive advantage
- A margin of safety
For a business to have understandable business economics it must fall within an investors circle of competence. Though some investors have specific circles of competence, some industries are naturally easier to understand than others: e.g. railroads (easier) vs biotechnology (more difficult).
Once investors understand the economics of the business more »
It took Warren Buffett four decades before he decided Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) was trading at a price that was worth repurchasing. But now Buffett is so eager to buy back his own company's stock that he has raised the requirement for repurchases from 110% of book value to 120% of book value. Even more important, he is following through; Yesterday Berkshire announced that the company had more »
Pandora (NYSE: P) exceeded Wall Street's expectations on both earnings and revenue on Dec. 4. But shares plunged 15%. Why? Pandora slashed their guidance, estimating a loss of 9 to 12 cents per share in fiscal 2013. Analysts were expecting guidance for a loss of just 6 cents per share. Disappointing investors is nothing new for Pandora. It's down over 40% from its IPO price last year. Does more »
In an interview with the Financial Crisis Inquiry Commission, Warren Buffett said that “The single most important decision in evaluating a business is pricing power." If any one coffee business has pricing power, it would have to be Starbucks ). Starbucks introduction of the $7.00 grande cup of Costa Rica Finca Palmilera coffee yesterday served as a stark reminder to its competitors and potential market entrants: Starbucks has pricing power more »
With a likely tax increase on U.S. dividends just around the corner, many companies are declaring special dividends. Special dividends are simply irregular dividends that are typically much larger than regular dividends. As an irregular payout to shareholders, they are difficult for investors to predict and can sometimes slip under the radar in fundamental analysis. Furthermore, investing in stocks for special dividends can be tricky business if you've more »
Apple (NASDAQ: AAPL) is firing on all cylinders, but its stock has lost its flame. In fact, it's down over 15% since its high of $700 just two months ago. An Apple Maps hiccup, weaker than expected iPhone 5 sales in FQ4 (though still a 58% year-over-year unit sales growth), and a general decline in the market have weighed heavily on the stock. But is there merit for such more »
Douglas Ehrman did a great job outlining a few of Amazon's (NASDAQ: AMZN) "hidden" sources of revenue. But I'm going to have to politely disagree that these "hidden sources" and Amazon's "growth prospects" make it a "buy" at today's astronomical valuation. Don't get me wrong, I think Amazon is an incredible company. But Amazon's growth prospects are already priced into the stock.
Warren Buffett more »
The $87 billion casual dining market is struggling. Growth in the market has been on the decline since 2004 as a result of "fast casual" concepts like Chipoltle Mexican Grill (NYSE: CMG) and Panera Bread (NASDAQ: PNRA). To compete with this new niche, casual restaurants need to differentiate through a lot more than food choice. Every casual dining restaurant is trying to adapt in their own way, but one restaurant more »
Apple (NASDAQ: AAPL) stock is down 21.5% from its September high of $700, losing over $130 billion in market value.
After Apple's recent sell-off, it's time to return to the fundamentals and value the stock. To no surprise, $543 for Apple's stock offers a great opportunity for investors to purchase a stake in the iBehemoth.
Discounted cash flow valuation: A brief background
The value of any more »
The process of hydraulic fracturing, or "fracking," has led to a natural gas boom, resulting in a severe decline in demand for coal. In fact, for the first time in history, electricity generated by natural gas has surpassed electricity generated by coal. This poses a problem for railroads, who generate high-margin business from coal shipments. A closer look will help us see how the coal decline will affect railroads and more »
With 2008 still fresh in my mind, I'm always looking for stocks that can endure the storms. If there is anyone who has consistently picked out winners that can last for decades, it would have to be Warren Buffett. In his typical straight talk, Buffett breaks it down for us: "In business, I look for economic castles protected by unbreachable 'moats.'" In other words, Buffett invests in companies with more »
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