I was surprised to see that S&P put LRCX on credit watch, one step away from junk status (S&P Puts Lam Ratings on Watch). I didn't understand it as they have virtually no debt. Does that mean they're not paying their bills? Is it related to the internal study on options being done by Lam? I took a look and they have fallen off all lists. It is because their 2nd quarter results have no detail as they undergo their review. They would most likely be high on the lists as they had a tremendous 2nd quarter from a sales standpoint. I still don't understand the credit rating. Not sure if it really impacts them, but if they want to borrow money (say to buy a competitor) it could be costly.
BBSI and VPHM come up one their one year anniversaries in early September. BBSI is up 30% for me and VPHM is down 17%. They're both on the top 25 list, so I expect I'll keep 'em both for another year. I should buy some more VPHM to bring it back to "par". I do know VPHM has been a wild ride. I bought 'em at $12.11. They got up to $18.39. Then dropped as low as $7.51. How do you spell relief? R-O-L-A-I-D-S.
Finally Cramer had opinions on quite a few MFI stocks. He actually profiled AEO and said to buy them (finally).
Cramer does like American Eagle Outfitters (AEO - Cramer's Take - Stockpickr - Rating).
When looking at retail stocks, Cramer keeps an eye out for insider buying and low evaluations. Cramer found both of those in American Eagle, which he said is "worth buying."
The company's total sales were up 17% to $703.2 million in the second quarter year over year, and it trades at 12 times next year's estimated earnings.
Cramer said that American Eagle is undervalued but not yet at its low point. Investors should wait until next week at the earliest to decide about buying in. The price Cramer has in mind is somewhere between $22 and $25.
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4 comments:
I've been having MFI doubts lately. Reasons:
1.) If we're aware of Gleenblatt's book, it's guaranteed that every hedge fund manager in the world has read it.
2.) From the quant fund action over the past several weeks, it's obvious that MFI stocks are heavily owned/influenced by hedge funds.
3.) I reread Ken Fisher's 3 Questions book last week. Man, is that a great book. His early claim to fame was using Price/Sales ratio as a way to identify cheap stocks and increase gains.
I'm afraid that MFI is completely out of the bag and that future MFI gains will be a fraction of what JG predicts. I know he claims that since it's a ranking system, it should continue to work, but that wasn't true with Fisher's P/S ranking system. Everyone eventually became aware of it and it got priced into the market.
The bottom line is that if there are too many MFI investors, and all it would take is several large hedge funds and/or mutual funds, that there will be an artificial price floor that prevents MFI stocks from becoming dirt cheap and that will really hurt returns.
Ahhh ... my waivering faith in MFI. I'm a perfect example of why JG predicts that few people will stick to it. I'm not giving up on it, not by a long shot, but I'm far from drinking the cool aid.
Actually, I think the absolutely worst thing that could happen to MFI is that it is wildly successful in the first several years after JG's book was published. I think that would guarantee it's demise.
Marsh, enjoy your blog, especially during wild ups and downs of market lately. I started MF investing a year ago and did quite well with first series of stocks, ok with second batch in February, and terrible with latest. But on average the MF method (and I just use random picks) seems to find better stocks than my financial advisor (Ameriprise) does. We will see over the long term, and I look forward to your blogs.
Mike - thanks for the nice comment.
Ryan - I know exactly what you mean, I too am starting to have seeds of doubt. Not ready to toss in the towel, but I can say that if in another year I am still lagging the benchmark I may have to try an alternate approach
Folks, no time to panic. First, stick with Greenblatt for the three years before making a decision. Second, there's an extremely low probability that Fundies will ruin our party for exactly the reasons Greenblatt discusses in his book.
Consider this: Ben Graham's approach for picking stocks was published how many years ago? And how many investment professionals have managed to stick with it? A very, very small number. And those folks have done extremely well.
Greenblatt's approach is fundamentally the same as Graham's. Viewed another way, your reaction in effect proves the point that TMF will continue to work. B/c you're in a down cycle, you're already considering pulling the ejection handle. Likely most others are thinking the same. So everyone flees to a "new" strategy, leaving me behind to make $.
Later, if I can find it, I'll try to post or link to a great article Buffet wrote years ago, in which he describes that Graham's way of making money (buying high intrinsic value companies for cheap) has been well publicized for decades, and yet the herd doesn't seem interested. He then goes on to talk about a half dozen fund managers that use the same approach, and how they've quietly outperformed everyone for decades.
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