Monday, October 18, 2010

Dumpster Diving

There is a dumpster across from my apartment. Luckily it's nicely enclosed by a fairly well designed brick structure so I don't have to look at the garbage that's often spilling over into the parking lot. There are some kids that like to play around this dumpster; it's weird. They hide behind it and wait for people to throw stuff away then make a game of finding out what they threw away. Contrary to popular belief, these kids are not homeless. But, the other day I saw them play a little role reversal. In fact, I had to double take. One of the kids was throwing stuff away! Four perfectly good tennis racquets. Part of me wanted to go grab them, but the more sane part of me said I make over 1000 dollars a year, I'm not going to rummage through a dumpster (eventhough the things were already on top). Now, this may be gross, but let's say you could sell those for 5 bucks each. That's 20 dollars with very minimal effort, just because someone was dumb enough to throw stuff away that still had value. Not to mention the two couches I have seen out there in the last couple days, one of which I took for my apartment.

This all made me think, how much money could you make from reselling stuff other people throw out just because they are too lazy to go through the effort of finding someone to buy it from them? Just sell the stupid junk on ebay. Technically, you are getting an undefined return on your investment if it costs you nothing. Talk about a good reward/risk ratio...infinty.

I have decided from now on if I see someone throw out junk, I'm going to put my ego aside and take it. Let's say I find 10 bucks worth of stuff a week for a year and invest the $520. Then, I continually add $520 bucks every year assuming I continue to find people's worthless crap (worthless is relative here, it's actually worth something if I can sell it) I'll have over 14 grand by the time I'm 34. And that's just from selling other people's stuff. I'm going to go ahead and thank my neighbors in advance. They may provide me with a downpayment on a house. If possible though, I'd really appreciate it if they just set their stuff next to the dumpster, rather than dropping it to the bottom. It will make my life much easier, and much less smelly.

These posts are not meant to be taken as investment advice. Everything written is solely the opinion of the poster.

Wednesday, September 29, 2010

You're just a Doorman, Doorman....Doorman.

There are no real standards as to which direction doors should be placed in a frame. This is fairly strange to me. I mean looking at the door in my bedroom, the handle is on the right and it opens into the room. Looking at my bathroom, to which the door also opens inward, the handle is on the left. However, it really gets strange when I think about how neither one feels awkward, eventhough I am opening the doors the same direction with handles on opposite sides (both open inward, one handle is on the right, one is on the left).

Now, the Blockbuster near me, like so many typical buildings, has two sets of doors you have to walk through to get in. So why is it that every time I manage to push on the hinges side of at least one of these doors? I thought by now I would figure it out but alas, I am stuck trying to push the door down instead of push it open. Oh wait, I know, because they have no HANDLE! There is no way to tell (not by trivial means at least) which side is hinged and which is not. It's just basically a flat pane of glass with a metal frame that stands in ones way and is called a door because it happens to open the first time if you guess correctly which side to push. As if it's not bad enough that RedBox has pretty much played the trump card on all video rental businesses, now Blockbuster is successfully locking me out without actually having to lock their doors.

This door opening extravaganza may seem trivial, but is in fact quite annoying. Just find a door that doesn't open intuitively (which, believe me, is probably easier to do than you think) and you will probably find it pushes your buttons too. Maybe this is my calling; a standard in the door assembling industry. My money making idea. In fact, I encourage OSHA to adopt some standards before I run head first into a door, thinking it's going to open when I push on it.

My apologies if you now overanalyze every door that you do open, and they all begin to feel weird.

Sunday, September 19, 2010

Why Are People So Narrow Minded?

The fact that we are often narrow minded is probably a bigger cause for problems than we realize. People do a great job of finding ways to support their argument, but are incredibly bad at considering other people's arguments. Proving you are right is relatively easy; just find facts to support your arguments. Unfortunately, though, finding facts to support your argument is not enough to consider your opinions to be facts themselves in most aspects of life. There is not only 1 correct answer. If you are going to be safe, isn't it only rational to look at the other side of your argument to try and prove yourself wrong? Only after you have done that and have been unable to prove yourself wrong can you ever say with almost 100% certainty that you were right in the first place. I say almost 100% because there is always the possibility of the unpredictable (which is actually more common than you may think). However, proving to yourself you are wrong is not only difficult, but why would anyone ever want to do that? I'd say most people are perfectionists in one way or another. Being wrong to most people means they initially lacked some sort of knowledge, and worst of all means you have just proved to yourself, in one way or another, that you have failed. No wonder people want to avoid looking at the other side of an argument; because looking into the other side is admitting to yourself what you don't know is more important, or at least of equal importance to that which you do know. And who wants to admit they don't know something about something that they think they know everything about?! Ignorance is bliss.

However, if you want to better yourself I feel it is invaluable to try and prove youself wrong because in doing so, you may just prove to yourself you're right.

These posts are not meant to be taken as investment advice. Everything written is solely the opinion of the poster.

Saturday, September 11, 2010

Why do successful people fail in the market

I view myself as a fairly successful human being as far as society defines "successful". Graduated college, have a job, no debt, have my 5 basic needs (there are 5 right?) etc. So why is it successful people have such trouble investing? I'm not implying I'm successful in the market, but in my attempt to become successful I'm looking at what other people do wrong and I try to do the opposite. If that is combined with trying to replicate what others do right, the odds of success should be pretty good...theoretically. Afterall, if 5 years of failure while learning allows me 30 years of success, I think I can live with that.

There are lots of theories about why investing is difficult. Why can the average, or even above average, professional be a below average investor? My opinion is this: in a "typical" career, work is given and one uses current information and current and past knowledge to complete the present task. The keyword here is present. Results are (relatively) immediately seen. When investing, current information and current and past knowledge is used to predict the future direction of a company. Immediate results are not seen which is completely contrary to what everyone is so used to when putting work into anything. Not to mention no matter what the available current information, the future will always hold things one cannot possibly know ahead of time. Let's face it, human's just aren't that great at predicting the future. Combine that with the fact that there are a lot more shitty companies than good ones, it makes it pretty evident why people have so many problems. The conclusion I have drawn from the above is this -- everyone is so used to seeing immediate results, that when they have to wait to see them, they are immediately convinced something is wrong. It's what their job tells them, it's what society tells them (if you aren't doing x or y or z at time a b or c in life, somethings wrong) and that is the battle each person fights when the longer term market crosses paths with the immediateness of every day life.

These posts are not meant to be taken as investment advice. Everything written is solely the opinion of the poster.

Thursday, September 9, 2010

Goal Setting Actually Is Important!

Recently I have finished the book Predicatably Irrational by Dan Ariely. I read it to see if any of the irrational things human's do could benefit me financially. Well what do you know, I learned something. Actually, I learned many things, but one of which is that human's procrastinate. Yes, everyone knows this already, but what not eveyone knows is the following: By giving yourself the option to set intermediate "due dates" that are part of a greater goal, you will procrastinate less than if you are told a specific date for all goals to be complete. The experiment within the book doesn't use the example of goals, per say, but instead uses due dates on multiple papers throughout the semester. I incourage you to read the book if you want to know the details of the experiment.

I began to see the parallels between the due dates for papers and setting short/long-term goals for myself. At this point what people preached to me about setting goals when I was in elementary school suddenly had some sort of validity to it. Maybe I should read more often. I have discovered the key is finding something you like to read. I have been told this before (after all, I'm in my mid-20's) but it never really clicked until I realized what I like to read could help me with something I like even more--money.

So, here are my current goals. I will try to update these as much as possible as I come up with new goals or modify existing ones.

Short term (1 month)
  -come up with a checksheet to follow when researching to take the emotion out of purchasing stocks
  -Read all of Buffett's Letters to the Shareholders and take notes divided into topics he covers
  -Find 1 stock that I believe may be better than my worst holding now

 Short term goals (1 year)
  -Have 10,000 dollars in savings by the end of 2011
  -Have 12,000 dollars in 401k by end of 2011.
  -Not have to sell any equities because of something I missed that was available at the time of my research
  -Beat the market at end of 2011

Long Term goals (10 years)
  -Have $100,000 in liquid money (stocks, cd's, savings acct etc)
  -Have $150,000 in 401k (Final goal is 3+ million by age 60, that would be $5600 added a year with a  12% interest rate compounded annually)

These posts are not meant to be taken as investment advice. Everything written is solely the opinion of the poster.

Sunday, August 29, 2010

Management and Fundamentals colliding

Another company I like is Universal Travel Agency (UTA). As of late though, there have been some....interesting...things materializing which makes it very hard to make a decision with regards to buying in or not, especially on this huge dip it's taken. Taking a look at management first, there are a lot of negatives lately in terms of decisions.

First, they issued more shares at $7ish in order to help pay for aquisitions. There reason I see this as a bad decision is two fold. First, because they were in the middle of a quarter in which they made $0.33/share. That puts them easily over a dollar EPS this year which means the stock should fall somewhere between 10 and 15 dollars per share depending on the P/E ratio. Possibly more if this growth rate gives a higher P/E which it may. Well, if that is the case they are effectively aquiring a company but paying double what they should by using cash raised from shares that are worth half of the company's intrinsic value.  The second reason is why dilute shares when you have $43.5 million in cash? Just use the cash you have on hand for the aquisitions and do a buyback, thus increasing the price of your stock closer to fair value. And why is there no insider buying if this is potentially a triple based on forward EPS? The way they are handling these aquisitions worries me because they are doing pretty much everything Buffett says management should not do if managment cares about the stock price.

There is also some discrepancy about reported earnings, along with the fact that they had to ammend their 10Q because of an expense being put under the wrong business segment. This mistake didn't effect overall earnings, but I don't blame people for wondering if there are other mistakes.

Now on to the positives. Fundamentals are great, huge EPS, and clearly a growing company. Also, despite the offering of more shares, float is still very low around 20 million. Management are obviously looking to expand and the kiosks for booking trips are a great option in China, where personal computers aren't as prevelant. They also have a recent partnership with Agoda, a subsidiary of Priceline, which allows UTA to access their hotel network. This in turn, will allow Agoda to increase exposure in China.

UTA still has 16% margins for the MRQ, despite the fact that they included the numbers of two aquired companies in their 10Q that have the lowest margins of the 4 aquisitions they are planning on closing. A P/B < 1 doesn't look too shabby either. Finally, subtracting out their 43.5 million in cash from their current market cap gives them an enterprise value of around 56 million or an effective P/E of 2.8.

UTA definitely has potential to show big jumps in PPS, but not without management showing more concern for the share price. They may be forced to do this, however, if they plan on paying for aquisitions with stock. That said, I am not buying more until I see how management handles the remaining 2 aquisitions, but I am not selling because I see upside potential. That is my stance, as of now.

These posts are not meant to be taken as investment advice. Everything written is solely the opinion of the poster.

Wednesday, August 25, 2010

Stock Market different than the mall...Why?

Ever been to TJ Maxx? I have bought countless polos from there for less than 50% of their original price. So why is it when a stock is priced at 50% of what it should be (or less) people freak out? I see posts online titled "WHAT'S WRONG?!?" "WHAT AM I MISSING?" etc. First off, don't "type scream". It's unhealthy. Besides, decible level is not controlled by font size. Second, I can't wait for the day someone storms out of TGX yelling WHY IS THIS SHIRT HERE FOR THIS CHEAP PRICE!? kicking the door open, and leaving their mom standing there sweating, holding 10 back-to-school bags, and crying because she couldn't buy her son the $50 abercrombie shirt he really wanted.

If you liked the stock at $10 and nothing changes except the price, you should like it more at $5, and even more at $3. Don't be afraid of deals. Buy them like you would any other deal.

That is all.

Monday, August 23, 2010

My mistakes so far

Two quarters into the year I'm in the red... a lot. Well, unrealized looks worse than realized. I won't give an exact number because I don't care right now. I like my current picks and feel they will be up in the long term. I am all for value investing and if I make a quick buck while doing so, great. But value investing isn't synonmous with day trading; so many people seem to forget that. In fact, I stopped looking at my etrade portfolio tab. I'll follow my stocks via yahoo etc, but I don't want to know exactly how up or down they are. I am of the opinion that seeing a big red number will make me panic. I don't want to panic.

I'd like to take a look back at the picks I have made in which I realized losses and comment on them. I'm also going to comment on some picks I made that were stupid, but I realized gains on.

CPBY - First stock I bought. Did no real DD, didn't do my own share price estimate. Actually don't think it's a bad company. Just not as undervalued as others. In fact, didn't know what undervalued really meant. Price dropped, I had no estimate, didn't know what to expect. I panicked. I sold.
TRMD - BAH! Saw the dividend (when I bought). Great yield. Buy. Only problem, I knew nothing about the shipping industry...or the country they were based out of. I watched it trade flat while the shipping ETF went up. Then they cut the dividend...I sold at minimal loss. Could have been worse. Investing to learn, well I sure learned; seeing a dividend doesn't mean it will always be there.

SPKL - dumbest "investment" ever. Nothing pointed at a good company. I got lucky. Very lucky. In fact, I'm not even going to list everything that was wrong with it because I don't know what the max number of characters per post is. Let's just go with ridiculously high O/S, poorly run, brand that wasn't quite catching on. Oh yeah, and NO EARNINGS.

KERX- I'm going to analyze this just because I like this pick. I found it in the high twos before any news started coming out. Now it seems to be finding resistance in the high threes. I did much more research on this company. Slowly learned from the mistakes above. Lots of cash to fund trials, multiple drugs in the pipeline, and a potentially huge market across multiple forms of cancer with their drug perifosine. Am I a bit nervous due to the number of cancer drugs that fail in phase 3? Yes, but that's why I sold some of my shares in the 6's when the price jumped on some fast track news. Wasn't going to pass up an easy double. Holding the rest and hoping for some big gains.

I have a list of my mistakes on a piece of paper. When I buy stock in a new company, I make sure I don't repeat any of the mistakes above. I suggest you do the same. One thing I have realized in this short amount of time is, the more emotion you take out of it, the better you do. I think you'd be hard pressed to find someone that disagrees.

Sunday, August 22, 2010

You Are Your Own Enemy, Idiot.

People are impatient. There's no denying it. Think about the last time you were at a stoplight and the tard next to you was creeping forward before the light changed. Or maybe you were that tard. Congratulations sir, you arrived at your destination 2 seconds sooner than you would have otherwise. No need to rush; you aren't as important as you think you are. No one will miss you, I promise.

As I was traveling last weekend, I realized how impatient everyone in our society has become. In fact, it blows my mind. I was in the 5th row on an airplane and we had just landed and arrived at the gate. I looked back and 80% of the people on the plane were standing. The door wasn't even opened yet...I mean wasn't "disarmed" yet. Easy there speedsters, I know you have been sitting for an entire hour and a half, but 75 people have to get off before you so what's the big deal with sitting another 5 minutes? Not to mention the lady behind me who actually asked me "are you getting off?", as far as I could tell, only because I will still sitting. After I realized this was a serious question, I replied with "yes, after the people in front of me do." I was nice. Rheotorical or not, what a stupid question. What impatience.

This impatience is the fault of our society. Everything is based around making things faster, making things easier. At least that's how it seems in the U.S. When I was in Spain two summers ago we waited over an hour for our bill at lunch. Not because the server was being rude, but because they are in less of a rush on the other side of the pond. They don't always feel like they are missing something (as far as I could tell, atleast). I wonder, are they better investors?

This is a reason I feel one must invest to learn when learning to invest. I read numerous books telling me wait for a pullback before you buy. Be patient. You won't miss it; if it's a good company you wont miss it. The only problem is, you haven't convinced yourself this is the truth yet. You're your own enemy. I'm telling you not to make this mistake. Either wait for the company to be severly undervalued, or find another company. There, I told you what not to do. Don't worry, you'll make the mistake anyways. I did. And I even waited for a pullback. CNAM took a huge jump to the 11 dollar range after it's uplisting. Then it pulled back to 7. Hey, pullback. BUY! So I bought. Only problem was, and what I didn't realize yet, is a pullback and being undervalued are two incredibly different things; especially when the company is still overvalued after the pullback! I still like CNAM despite the $0.02/share loss posted this recent quarter because I'm looking at the future. They have the means to be posting 400 million in revenues if the macro effects would stop playing their trump card. If that's the case, my original 7+ dollar order won't kill me. And I bought more on the way down so my cost basis is considerably lower. But, we'll see what happens. Could holding here be a rookie mistake? Maybe. Am I going to hold? You betcha. I like the future, I try to forget the past (especially if it's already priced in).

Don't be your own enemy, but I'm willing to bet at some point you will be. Hell, I'm willing to bet at some point I will be again. But, maybe one day I'll learn. At least that's the idea.

Friday, August 20, 2010

WOW! That's a Low Price!

There are some stocks out there that are just screaming, WOW! That's a low price. One that I love, that's seemingly getting zero attention is China Advanced Construction Materials (CADC). This company grew revenues 44% from 2008 to 2009 and grew net income by 100%. With China's alleged push to focus on being more green, it seems that CADC's business consisting of ready-mix concrete is in a great position to benefit from this. Not to mention goverment backing, as they have been given $7+ million in high speed rail contracts. In a recent press release their CFO blatantly stated that "companies stuck in the commodity building materials business model of just a couple years ago will not be able to compete in the new, high-tech, eco-conscious building materials paradigm rapidly evolving in Asia." This is perfect for China ACM, as their business model is not only built around what looks to be the future of China, but it is built around a segment of the concrete industry that has been showing 27% growth over the last 10 years and is expected to continue. Furthermore, in China 40% of their of concrete work is ready mix, 60% is on site. In so called "developed countries" this ratio is 80-20. Room for improvement and expansion of ready-mix in China? I think so!

When it comes to future earnings, as far as I can tell, this company currently has the means of cranking out around 60 million in revenue for 2010. While this may not seem like overly extreme growth from the 39 million in revenue of last year, the fact that their three business segments sales, manufacturing, and technical services produce margins of 10%, 40%-60%, and 90% respectively makes this number look more appealing. All my calculations were done by taking numbers in their July 2010 presentation on their website and using a fully diluted share count of ~18 million. I get an estimated EPS to be $1 per share give or take. That means right now CADC is trading around 3.5X forward earnings. And to that, I say,

WOW! That's a low price!

Thursday, August 19, 2010

My First Thoughts

I'm starting this blog because I enjoy investing. Am I someone you should take advice from? Frankly, probably not. But, I hope to become one. Everything I have become good at, dare I say great at, has been because I threw myself in the deep end. I am learning to invest, by investing. There is so much material out there reflecting on past experiences when it comes to the market. I want to take it from another angle. I want to express my ups and downs, good days and bad, gains and losses as they happen, not after they happen. And I invite you to follow me through it. Yes, even feel free to disagree with me, I won't get defensive (I don't think).

To be honest, I have often tried to understand why people get so defensive when someone disagrees with them. To date, I have become fairly convinced people get defensive only when they don't really understand what they are talking about. They can't open themselves up to listen to others because they can't even convince themselves of what they, themselves, are saying!(Contrary to popular belief, I do understand what I just wrote so I'm not quite a hypocrite yet). Once you understand your side, it gives you the ability to stop defending what you think and instead intelligently explain what you think as it relates to the thoughts of others.

That said, I welcome the bashers, the haters, the supporters, the pumpers the shorts and the longs. Challenge me to question my picks. Force me to be able to explain my reasons for owning a stock. Contradict me, not because I will always have an answer or argument from my side (remember, I'm learning) but because it will teach me how to think so I can beat the market.

Afterall, no matter your position, isn't that a goal we all have anyways?