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The Stingy News Weekly (08/28/2011)


"The important thing is to keep playing, to play against weak opponents and to play for big stakes."
- Warren Buffett


New @ StingyInvestor

The merry-go-round beats the roller coaster
"I have fond summer memories of rushing through the gates of my local amusement park and riding the roller coasters all day long. Up and down, round and round. It was grand fun. Alas, advancing decrepitude makes riding the metal monsters an exercise in nausea these days. They're almost as bad as the stock markets which are currently providing a wild enough ride of their own. If you're also turning a little green, I've some good news. You can hold placid lower-risk stocks and still achieve market-topping returns."


Stingy Links

Why McDonald's wins
"Employees and analysts say he's guided by a zeal for satisfying customers, even if it comes at the expense of his own ideas and preferences. A few years ago the company did extensive testing on new coffee-cup lids and rolled out a version that consumers liked -- and that Skinner, who happens to drink a lot of coffee, really didn't. Rather than overrule the masses, Skinner came up with his own solution: He keeps a stash of the old lids on hand."


Tales of when legends leave
"The founder of a successful corporation steps down. Then what? At Ford Motor Co. and Walt Disney Co., long periods of stagnation or decline, followed by renewal. At Wal-Mart Stores Inc., continued success for a time, then new challenges. Now it is Apple Inc.'s turn, following Steve Jobs's resignation as CEO on Wednesday."


Too hefty to handle
"Three years ago, just one out of every nine mortgage-holders borrowed more than 80% of the value of their homes. Today, it's one in six. These are verifiable facts whether they add up to a bubble, I can't say. But given the data and the terrible consequences of real estate bubbles, the Harper government could - at the very least - stop pumping air into the property market. And that means reining in the Canada Mortgage and Housing Corp., the vehicle through which you, dear taxpayer, have assumed the risks for these urban bidding wars and the jumbo mortgages they create."


Buffett’s BofA Stake
"Warren Buffett may have earned $1.3 billion in one day on his $5 billion investment in Bank of America Corp. (BAC)"


Bank of America
"Still I am bullish on BofA at these prices. Very bullish. I think the politically driven finance bloggers (Yves Smith at Naked Capitalism) should be seen for their (I think justified) anti-bank agenda. Most of the rest are fitting their analysis around the stock price. There is an awful lot of stock-price doing the analysis here."


Bond market signaling recession? Should we care?
"It’s certainly possible that the current decline will tip over into official bear market territory. But that shouldn’t be surprising since bear markets have historically been clustered. More importantly, a bad economic environment does not equate to a bad investment environment. An economy that looks to be in its darkest days often gives birth to terrific investment opportunities. While we haven’t seen widespread indiscriminate selling of stocks – as in 2008 - many great opportunities have emerged. When hunting for investment opportunities, portfolio manager Geoff MacDonald is happy to invest in businesses even if their growth prospects are low or moderate. The key, he says, is not paying for the growth. And there are many quality businesses today that are growing – and should continue to grow – but are priced for zero or negative growth."


Value investors snap up stocks
"Mr. Chou, who recently pared the cash in his U.S.-focused Chou Associates Fund to 20 per cent from 30 per cent, has been buying U.S. financial stocks and retailers. While he would not discuss specific purchases, his fund’s holdings at March 31 included warrants on Bank of America Corp. and Wells Fargo and Co. Warrants are options to buy a stock at a preset price. Mr. Chou once avoided many U.S. banks because of their opaque financials and alarming use of derivatives, but he believes that the U.S. government is unlikely to let major financial institutions fail, while surviving banks will benefit from any economic recovery."


Advice from Irving Kahn
"At Columbia Business School, Kahn served as an assistant to economist Benjamin Graham, the value-investing guru whose principles of caution and defensive investing inspired a cadre of disciples that includes Warren Buffett. It’s an investment strategy born of the beating Graham had taken in '29, and Kahn adopted it as his own. “I stopped wasting time on what people claimed a stock was worth and started looking at the numbers,” he says. “This may surprise you, but there were a large number of valuable buys during the Depression.”"


My Response To Buffett And Obama
"Governments have an obligation to spend our tax money on programs that work. They fail at this fundamental task. Do we really need dozens of retraining programs with no measure of performance or results? Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country? Do we really need all the regulations that put an estimated $2 trillion burden on our economy by raising the price of things we buy? Do we really need subsidies for domestic sugar farmers and ethanol producers? Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all? Here's my message: Before you 'ask' for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you'll need less of my money."


The ugly truth
"Based on past behavior of fiscal policy makers, businesses understandably regard the debt ceiling agreement and the political outcome of negotiations between Congress and the president with the suspicion akin to how the British humorist P.G. Wodehouse regarded his aunts: “It is no use telling me there are bad aunts and good aunts,” he wrote. “At the core they are all alike. Sooner or later, out pops the cloven hoof.” It will be devilishly difficult for businesses to commit to adding significantly to their head count or to meaningful capital expansion in the United States until clarity is achieved on the particulars of how Congress will bend the curve of deficit and debt expansion and the “cloven hooves” are revealed. No amount of monetary accommodation can substitute for that needed clarity. In fact, it can only make it worse if business comes to suspect that the central bank is laying the groundwork for eventually inflating our way out of our fiscal predicament rather than staying above the political fray – thus creating another tranche of uncertainty."


Headwinds for U.S. equity markets
"Despite theoretical ambiguities, U.S. equity values have been closely related to demographic trends in the past half century. There has been a tight correlation between population dependency ratios, such as the M/O ratio, and the P/E ratio of the U.S. stock market. In the context of the impending retirement of baby boomers over the next two decades, this correlation portends poorly for equity values. Moreover, the demographic changes related to the retirement of the baby boom generation are well known. This suggests that market participants may anticipate that equities will perform poorly in the future, an expectation that can potentially depress current stock prices."


Fewer
"At that rate, according to some back-of-the-envelope calculations by The Economist, it would take about 25 generations for Hong Kong’s female population to shrink from 3.75m to just one. Given that Hong Kong’s average age of childbearing is 31.4 years, it could expect to give birth to its last woman in the year 2798. (That is some time after its neighbour, Macau, which has a higher reproduction rate, but a much smaller population.) By the same unflinching logic, Japan, Germany,Russia, Italy and Spain will not see out the next millennium. Even China, which has a recorded history stretching back at least 3,700 years, has only about 1,500 years left—if present trends continued unbroken."



DOW 30 Value Screens

High Dividend Yield StocksP/EP/BP/SYield
AT&T (T)5435
Verizon (VZ)1345
Merck (MRK)1415
Pfizer (PFE)1425
Intel (INTC)5315
General Electric (GE)4545
EI DuPont (DD)3234
Johnson & Johnson (JNJ)2214
Kraft (KFT)1434
Travelers (TRV)4554
Notes | More Info...


Low Price/Earnings StocksP/EP/BP/SYield
Hewlett-Packard (HPQ)5552
JP Morgan Chase (JPM)5533
AT&T (T)5435
Chevron (CVX)5444
Intel (INTC)5315
Travelers (TRV)4554
Microsoft (MSFT)4112
Exxon Mobil (XOM)4342
Wal-Mart (WMT)4353
General Electric (GE)4545
Notes | More Info...


Value Ratio StocksP/EP/BP/SYieldV.R.
AT&T (T)54351.43
Intel (INTC)53152.13
Chevron (CVX)54442.63
Travelers (TRV)45542.69
JP Morgan Chase (JPM)55332.81
Verizon (VZ)13452.94
Hewlett-Packard (HPQ)55523.16
General Electric (GE)45453.17
EI DuPont (DD)32343.59
Exxon Mobil (XOM)43423.70
Notes | More Info...


US Stock SummaryYieldP/EV.R.
AT&T (T)YYY
General Electric (GE)YYY
Intel (INTC)YYY
Travelers (TRV)YYY
Chevron (CVX)YY
EI DuPont (DD)YY
Exxon Mobil (XOM)YY
Hewlett-Packard (HPQ)YY
JP Morgan Chase (JPM)YY
Verizon (VZ)YY
Johnson & Johnson (JNJ)Y
Kraft (KFT)Y
Merck (MRK)Y
Microsoft (MSFT)Y
Pfizer (PFE)Y
Wal-Mart (WMT)Y
Notes...



S&P/TSX60 Value Screens

High Dividend Yield StocksP/EP/BP/SYield
Yellow Media (YLO)1555
Enerplus (ERF)1415
Penn West Petroleum (PWT)3525
Sun Life Financial (SLF)5555
Canadian Oil Sands (COS)5225
BCE Inc. (BCE)3245
TransAlta (TA)3445
ARC Resources (ARX)1315
Husky Energy (HSE)4445
Power Corp of Canada (POW)5555
Notes | More Info...


Low Price/Earnings StocksP/EP/BP/SYield
Research In Motion (RIM)5450
Brookfield (BAM.A)5542
Inmet Mining (IMN)5521
Sun Life Financial (SLF)5555
Nexen (NXY)5431
Magna (MG)5553
Canadian Oil Sands (COS)5225
Iamgold (IMG)5211
Canadian Tire (CTC.A)5553
National Bank (NA)5334
Notes | More Info...


Value Ratio StocksP/EP/BP/SYieldV.R.
Sun Life Financial (SLF)55551.45
Canadian Oil Sands (COS)52251.70
Power Corp of Canada (POW)55552.18
CIBC (CM)42352.34
TransAlta (TA)34452.39
Bank of Montreal (BMO)44342.43
Penn West Petroleum (PWT)35252.49
National Bank (NA)53342.51
Husky Energy (HSE)44452.53
Enerplus (ERF)14152.71
Notes | More Info...


Canadian Stock SummaryYieldP/EV.R.
Canadian Oil Sands (COS)YYY
Sun Life Financial (SLF)YYY
Enerplus (ERF)YY
Husky Energy (HSE)YY
National Bank (NA)YY
Penn West Petroleum (PWT)YY
Power Corp of Canada (POW)YY
TransAlta (TA)YY
ARC Resources (ARX)Y
BCE Inc. (BCE)Y
Bank of Montreal (BMO)Y
Brookfield (BAM.A)Y
CIBC (CM)Y
Canadian Tire (CTC.A)Y
Iamgold (IMG)Y
Inmet Mining (IMN)Y
Magna (MG)Y
Nexen (NXY)Y
Research In Motion (RIM)Y
Yellow Media (YLO)Y
Notes...



The Rothery Report
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The Rothery Report provides research on select deep-value stocks in North America. Discover overlooked and undervalued stocks in quarterly investment reports which provide detailed analysis of Canadian and U.S. stocks. Weekly email news and additional updates keep subscribers informed about new opportunities and developments.

Rothery Report Performance
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Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More...