Can Turtles Fly?

I remember a time, perhaps not even 2 years ago, when I was looking at Motorola (MOT) as an investment opportunity, and wondered if Nokia (NOK) is the type of company that would never "get cheap." At that time, and even to this day, Motorola was going through serious problems in their mobile phone division. In contrast, Nokia seemed to be sailing smoothly, gaining market share throughout the world. My, how things have changed. Nokia's shares hit a decade-low this week, after Nokia's guidance came in weaker than expectations. In particular, the market appears to have voted that Nokia is going to lose the smart phone market. Given how smart phones are forecast to be the ubiquitous mobile phones in a decade, this is a big deal for Nokia. Given the big decline in share price over the last few years, I felt this was a good contrarian opportunity to investigate. Here is my very preliminary, early, look at the company. My goal has been to avoid investing in mega-caps (s...

Does anyone out there believe that Ambac will survive? I am specifically referring to the insurance company (and not the holding company). Well, I ran across an interesting investment opportunity thanks to a write-up on ValueHuntr . A potential opportunity lies in the liquidation of a company called Alliance Semiconductor (PK: ALSC). Needless to say, anything that is uttered in the same breath as Ambac is a very high risk investment. I'm not going to do a thorough write-up here (if you are interested read the ValueHuntr post, along with my long comment I left on that blog) and will simply summarize the situation. Overview Alliance Semiconductor, a tiny microcap worth less than $10 million, is undergoing liquidation. It has managed to liquidate everything except about $60 million of Auction Rate Securities (ARS). Unfortunately, the ARS market locked-up last year and the company was unable to sell its ARS. To make matters worse, the ARS securities were issued by entities called Ancho...

Does anyone have any thoughts on Expedia (EXPE)? It looks attractive to me and am thinking of taking a postion after further research. For those not familiar this used to be the #1 online travel agent (OTA)--it's sort of is still #1 but Priceline (PCLN) has the momentum--whose business is centered on allowing customers to purchase airline tickets, hotels, and so on, through the internet. I looked at Expedia a few years ago (not on this blog) and found it way too expensive so just added it to one of my watchlists. The stock has sold off sharply in the last year and is inexpensive now. Some of the decline is likely due to permanent loss of market share to competitors and potentially decline margins. Nevertheless, it looks like the stock is cheap even under some mildly conservative estimates. If anyone has any opinions--good or bad doesn't matter--feel free to leave your comments. I wrote up a long comment on the gurufocus.com message board outling my preliminary thoughts and I...

A Canadian listed fund, Sprott Molybdenum Participation Corporation (TSX: MLY), which set up a fund two years ago to invest in molybdenum assets is being wound down ( official press release here .) There is an opportunity for investors to make some money from the liquidation but it may be a bit too late right now, given how the stock has run up. Nevertheless, it is worth watching. Note that this is a Canadian-listed security and it is unlikely to be worth it for foreigners unless they can hedge the Canadian dollar exposure. The currency fluctuation may wipe out any potential return. The Globe & Mail has a summary of the situation : Sprott Molybdenum Participation Corp. said Friday that following a strategic review announced last month, its board of directors has determined that distributing its assets to shareholders would be in their and the company's best interests. The company, which went public at $5 a share in April, 2007 – raising $189-million in its IPO – said its net a...

Thanks to reader hpm for pointing me to Bill Miller's special market overview conference call from October 29th of 2008. If you are a Bill Miller fan, I recommend that you sit through the 1+ hour call. He covers various topics including the mistakes he made and why his fund is performing so poorly; how he thinks the government made the situation worse by seizing Fannie and Freddie and letting Lehman fail; what his future outlook is; various thoughts about stock market crashes as we are experiencing, including some comments about some stuff said by John Maynard Keynes, who was actually a good investor; and so on. I think Bill Miller is way too optimistic and relies too much on positive things happening from government intervention. I don't share his hope. However, I share similar views when it comes to the low valuations. As Miller points out, Buffett did ring the bell at the bottom. But do keep in mind that, except for a few who bought close to the bottom in 1974, the stock m...

We all know how executives at financial companies, who incidentally were paid gross sums, didn't know what they hell they were doing. Sadly many still don't know what they are doing. Well, at least they have some excuses such as being distracted by the beauty of the ski slopes or by the elegant meal at the finest restaurants while the lending and derivatives businesses they were overseeing were getting out of control ;) But it's amazing how some commodity business executives have poorly run their businesses. Mike Shedlock refers to a couple of cases of oil&gas companies seemingly facing cash flow problems. The two examples cited, Chesapeake (CHK) and Petrobras (PBR), are not some junior companies with weak balance sheets. Indeed they are not. What we have are two of the largest companies in their field--Petrobras is a supermajor; while Chesapeake is the largest natural gas producer in the US--being mismanaged and running out of cash, at least for the time being. Compan...

Finally got rid of the Horizons S&P/TSX 60 Bear Plus ETF (TSX: HXD). This is an ETF that returns 2x inverse of the S&P/TSX 60. I said this was a mistake but fortunately made a small amount of money on it. I came to the conclusion that I'm not cut out for shorting and have been thinking of unloading this at the first opportunity I get (I had opportunities to exit at a break-even price about a year ago and in January, but chose not to.) Although I'm still somewhat bearish on the TSX, I am selling out now since the markets are unpredictable (there is potential for a rally.) The return is poor, underperforms long bonds and is below my 20% ideal target (I never hit the 20%, it's just a target.) I sold with an annual return of around 8% (non-annualized return of around 13%). This is an example of a mistake that ends up working out, although not to the original expectations. The lesson I learned is that I'm not cut out for shorting. It's hard to rationalize a short...

This is just an idea... somewhat wild and risky, as usual. I'm not sure if I will do anything because this one trades on the over-the-counter Grey Market (extremely thin volume--not suitable for large investors or funds) and I'm not sure if I have access to it from my discount broker. Ideally I want to hold it in my tax-sheltered account but I don't believe that broker supports the Grey Market so I'm down to my normal one (not sure if that supports it at a reasonal commission.) I'm thinking of investing in a super-long-term junk bond. The bond in question is Sears Roebuck Acceptance Corporation 7.4% note due in 2043 . You can find the IPO prospectus here (For those not familiar, QuantumOnline is the best free site for exchanged-traded debt/preferred instruments.) Here are some details of this issue: Security: Sears Roebuck Acceptance Corp., 7.40% Notes due 2/1/2043 Ticker: SBCKO (over the counter Grey Market) Issuer: Sears Roebuck Acceptance Corporation (subsidia...

One of the my flaws as an investor is that I get interested in challenging stuff. Wish I simply invested to make money. Oh well. Anyway, here is a risky idea to consider: Russian rail companies. My view is that railways have good potential in developing countries since roads/trucking or airlines are not well developed in those countries. Here is an article talking about the potential for Russian rails. I think the private rails have a chance taking market share away from the state monopoly (assuming they don't start a battle with the politicians.) I came across Globaltrans, which is the largest privately owned rail operator. It is listed on the London Stock Exchange under the symbol GLTR. You can access the English investor relations site and check out the presentation for key facts. The risk with Russia is political risk. Who knows if this company is going to be attacked by the government but the pricing is starting to account for the risk. Very rough numbers seem to indicate t...

One of the worst industries for investors over the last 5 years has been the newspaper industry. If you ever want to know what seems like a value trap, this industry may be it. Just look at the chart below of some of the leading US newspapers, along with the Canadian TorStar (WPO=Washington Post; NYT=New York Times; GCI=Gannett; TS.B=Torstar): (source: bigcharts.marketwatch.com ) Needless to say, it has been disastrous for anyone that bought any of the newspaper companies back in 2004. But, rightly or wrongly, disastrous situations are what attracts me so it's time to consider investing in them. I have indirectly tracked newspapers for a few years. Initially because I was looking at newsprint/forestry stocks, such as Abitibi, whose main customers were the newspapers. Later on, I started looking into them because several value investors took positions in them (or at least were talking about them.) Finally, I have decided to take a deeper look and possibly take a position based on th...

I feel that Japan is one of the most undervalued markets out there, and have been looking for an investment in some Japanese company. I kept getting dissapointed with the low ROE of Japanese companies. For example, why even consider Makita (6586) when Black & Decker (BDK) has consistently had substantially higher ROE? If you do look at Japan, do note that a lot of companies are cyclical industrial companies (P/Es may look low near the top.) A couple of companies that seem attractive are Fanuc (6954) and Yaskawa (6506), two world-class industrial companies producing motors, factory robots, and the like. I decided to concentrate on Toyota Industries (TSE: 6201). I decided to look at it after seeing its stock price fall quite a bit over the year. Toyota Industries is a long-term Martin Whitman pick. I just started going through his shareholder report history and he first bought it in 1998 . He has been adding to it lately and I figured I should study this company further. Here are som...

Have you ever wondered if there was a possibility that you might invest in some criminal organization? Without knowing it, that is? Well, one of the Japanese companies I was following, Suruga (TSE: 1880), was recently outed as a business that thrived on corruption. Who knows what the final outcome will be but the CEO, who is also the majority owner of the company, just threw away his company. Crime does indeed not pay! I was looking at the chart of Suruga and couldn't figure out why the stock dropped so much. (source: Tokyo Stock Exchange) There were a few days where the stock didn't trade a few weeks ago. Being in Canada, it's hard to know what was happening but I finally found some news from Google. As a side note, news is one of the problems with investing in foreign stocks (although I will note that a small-cap like Suruga wouldn't generate much news even if it were Canadian.) It looks like Suruga's explosive growth over the last few years was due to the use o...

I was searching the Japanese stock market (which still keeps dropping) for well-known brands and came across Seiko (TSE: 8050). I'm sure many of you have heard of Seiko, the Japanese watch company. The Japanese market continues to sell off and valuations keep getting cheaper and cheaper. The Japanese Yen has been strengthening and this is going to hurt exporters. Over the last few years Japan has relied on exports so their economy will take a hit. However, my feeling is that the lower valuations will compensate for any weakening of the economy. Seiko is one of the dominant players in the watch industry. I don't know anything about watches (I'm not into them at all) so it's not clear if Seiko has a competitive advantage in the marketplace. Apart from the super-luxury brands, it doesn't seem like there is a huge brand loyalty at the low-end to mid-end area. Furthermore, with all the fake watches floating around, the watchmakers will face a continuing threat. Neverthel...

I need to diversify my investments a bit and have been looking at the other big beaten-up sector in the US markets last year: consumer discretionary. Lately I have been looking for a good food products, clothing, or retail business. Sears Holdings (SHLD) is one option that I'm looking at. Another new one I'm considering is Kenneth Cole Productions (KCP). Kenneth Cole Productions is a small cap company that designs and sells shoes and apparel targetted at the fashionable middle-class. Like most clothing or shoe companies, it is down about 50% from its peak in the past year. The company has been on a downtrend for the last few years, with weak sales and earnings. There are a lot of other companies with similar characteristics so it's hard to say if this company is uniquely attractive. Ticker: KCP Market cap: appox $300 million P/E: 44.80 (depressed) Forward P/E: 16.59 P/S: 0.59 P/B: 1.24 ROE: 2.84% (depressed) Debt/Equity: no debt The chart below, courtesy Morningstar, shows ...

I don't consider myself as a pure value investor but if one was inclined towards value investing and was to blindly invest in a company, I can't think of too many better candidates than Sears Holdings (SHLD). It's amazing to see so many superstar value investors take a position in Sears (note: the list may have changed since then so we don't know the exact holdings). The list includes Martin Whitman, Jean-Marie Eveilard, Bruce Berkowitz, Mohnish Pabri, and...uh... Bill Ackman. For once, I'm on the same wavelength as Ackman ;) I don't invest blindly based on others (not only do you not have the same risk profile and investing time horizon, but you will also learn nothing (I'm trying to learn on my own :) )). But Sears is starting to look attractive on its own. If you are looking for something with a lower risk profile and don't ever want to hear the word subprime ever again :) Sears may be worth considering. Current Numbers Here is how Sears stacks up ...

I'm adding Thornburg Mortgage 7.5% Cumulative Convertible Redeemable Preferred Shares Series E (TMA-PRE) to the watch list. Anything to do with residential real estate is very risky so this is not for the faint of heart. Thornburg mortgage (TMA) is a mortgage loan company (a REIT without physical real estate holdings) concentrating on jumbo adjustable rate mortgages (ARM). In other words, it caters to the upper middle-class and upper class real estate buyers. It essentially makes money on the difference between in the cost of the mortgage and what it charges. I am attracted to the preferreds because they are convertible and have a decent yield (9%). I'm still trying to figure out what is a good return for me but my current thinking is that anything that yields 10% for the long-term is worth looking at. Stocks have a long-term return of around 10% so a bond that can beat that is worth considering. However bond/preferred coupons don't increase so inflation is a huge risk. To...

( UPDATE : added a minor comment and fixed the market cap (should be $250m not $25m) ( UPDATE 2 (Sat@9:39 PM) : I found out accidentally that bigcharts does have a log graph, so I updated the chart with a log graph) I'm adding Suruga (TSE: 1880) Corporation from Japan to the watch list. I looked at this a while ago when I saw the P/E ratio of around 4 but it turned out to be a mistake due to a stock split. I was thinking of researching Japanese small cap retail, food, and real estate companies (anything to take advantage of strengthening Yen and a possible resurgence in consumption. I came across this again and saw that it has sold off quite a bit since early this year--practically the whole Japanese small cap area is down quite a bit (it might be one of the cheapest on the whole planet). Just to quickly re-cap, Suruga is in the real estate sector. The whole real estate sector has been doing well over the last few years and Suruga is no exception. The question is whether it can kee...

I wasn't around back then but it seems like the current plague infecting financial stocks is similar to the savings & loan crisis. I have read books/articles where investors said that solid banks were being sold off along with the trash. I'm reading John Neff's book on investing and he was saying how Citigroup was literally being given away even though it was a solid company. I feel like the present situation is similar the way the market is treating companies like Merril Lynch (ML) and Countrywide Financial (CFC). Anyway, literally anything related to mortgages, debt, subprime, and the like, are being sold off sharply. The latest sub-sector seems to be debt insurers. These are companies that insure debt--similar to insurance companies. One company that caught my eye is Ambac (ABK), which is a very large debt insurer. (numbers from Yahoo Finance and may be misleading (need to double-check)) Market Cap (intraday)5: 4.47B Trailing P/E (ttm, intraday): 5.82 Forward P/E (fy...