Thoughts on the Market
My investments philosophy's biggest underlying principle is to never pay for more than a company is worth. I do not believe that investing is overly complex or extremely risky. It just takes patience and cool headedness.
It is always dangerous to follow the herd, and one should stick to looking for good companies whose value has not been fully realized by the market for the following reasons:
--they are too small for analysts to follow
--they are experiencing short term difficulties, but the underlying business and earnings are still strong but are being punished by the market because of the
irrationality of buyers and sellers.
--they are experiencing a turnaround after years of underperformance.
I should also let you know that I am a typical tortoise and hare investor, hence I am not bothered by short term occurences. I do not believe in quick money in the market ( that was the 90s bubble and its over)--but I believe in doing much better than the S&P 500 over a period of 1, 3, 5 years and greater. That is where the real money is.
While some made money during the gung-ho years of the bubble, most have nothing to show for it now, and the realization of
thorough analysis has set in again.
Here are some companies that have caught my attention recently:
1. First Health : FHCC
17% profit margin along with consistent stock buyback
to reduce the effects of stock options dilution.
Intrinsic value using earnings: Calculated using current earnings of $138,700,000—last reported. I calculated using a conservative growth rate of 13%--even though the company has grown earnings at a rate of 24 and 23% in the last reported numbers--along with a discount rate (cost of capital of 13%). This gave me a current valuation of $38.30/share. FHCC currently sells for $24.75 which is a good buy price.
2. General Dynamics: GD
information systems and technology, combat systems, marine systems and aerospace, as well as a smaller resources group.
--Current concerns about weak demand for its Gulf Stream jets..but I believe that is a short term problem..It's current price in the 60s makes it a great buy.
--Other parts of the business are doing great and are growing steadily.
3. Activision : ATVI
This is a riskier play, with a long term horizon of 3-5yrs, but barring the weirdest circumstances, you stand to make a lot of money… Current price of about $12.26 makes it a great buy for those wtih a long-term--greater than 2 years-- horizon.
**These companies are only recommendations. The choice
of what to buy or sell is at the discretion of the
reader.
sheguno@yahoo.com
Insights
My investments philosophy's biggest underlying principle is to never pay for more than a company is worth. I do not believe that investing is overly complex or extremely risky. It just takes patience and cool headedness.
It is always dangerous to follow the herd, and one should stick to looking for good companies whose value has not been fully realized by the market for the following reasons:
--they are too small for analysts to follow
--they are experiencing short term difficulties, but the underlying business and earnings are still strong but are being punished by the market because of the
irrationality of buyers and sellers.
--they are experiencing a turnaround after years of underperformance.
I should also let you know that I am a typical tortoise and hare investor, hence I am not bothered by short term occurences. I do not believe in quick money in the market ( that was the 90s bubble and its over)--but I believe in doing much better than the S&P 500 over a period of 1, 3, 5 years and greater. That is where the real money is.
While some made money during the gung-ho years of the bubble, most have nothing to show for it now, and the realization of
thorough analysis has set in again.
Here are some companies that have caught my attention recently:
1. First Health : FHCC
17% profit margin along with consistent stock buyback
to reduce the effects of stock options dilution.
Intrinsic value using earnings: Calculated using current earnings of $138,700,000—last reported. I calculated using a conservative growth rate of 13%--even though the company has grown earnings at a rate of 24 and 23% in the last reported numbers--along with a discount rate (cost of capital of 13%). This gave me a current valuation of $38.30/share. FHCC currently sells for $24.75 which is a good buy price.
2. General Dynamics: GD
information systems and technology, combat systems, marine systems and aerospace, as well as a smaller resources group.
--Current concerns about weak demand for its Gulf Stream jets..but I believe that is a short term problem..It's current price in the 60s makes it a great buy.
--Other parts of the business are doing great and are growing steadily.
3. Activision : ATVI
This is a riskier play, with a long term horizon of 3-5yrs, but barring the weirdest circumstances, you stand to make a lot of money… Current price of about $12.26 makes it a great buy for those wtih a long-term--greater than 2 years-- horizon.
**These companies are only recommendations. The choice
of what to buy or sell is at the discretion of the
reader.
sheguno@yahoo.com
Insights
posted by Shegun at
5:09 PM
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