Wednesday, October 31, 2007

More trades to place

It's strange, but I'm finding the need to place quite a few trades recently. I rarely find the need to place this many orders unless I'm cleaning house and on a bunch of losers.

Anyhow, I placed limit orders to buy more VASCO Data Security VDSI and Cognizant Tech CTSH. Will see whether I get tomorrow.

I'm a little concerned that exposure to India might be growing too large given sizable holdings in both CTSH and INFY, but these stocks haven't moved in quite a while, but the underlying business continues to be strong and they just seem cheap to me right now. At some point I think the underlying business growth has to push CTSH and INFY higher imho.


Big News on Garmin front today. Announce excellent earnings, but market reacts negatively to Garmin's bid to purchase Tele Atlas, a digital mapmaker who is already in purchase deal with competitor Tom Tom.

Here's a link.

The next time you see a comparative chart...

...think of this article.

It's good comparison of the stock charts prior to the 1987 crash and current markets. Every few months I come across an article saying that the charts look just like they did before insert your favorite market correction here. This reminds us that the framing of the data can actually change the discussion completely.

Tuesday, October 30, 2007

Ceradyne CRDN

I'm placing an order to sell my remaining shares of ceramics/body armor company Ceradyne CRDN. It's no longer the type of growth stock I have a feel for, although I can see it still appealing to value investors. I sold most of my position back in August, and this sell represents the rest. CRDN has been a holding for over two years, so I'm saying goodbye to a longer term hold.

Crazy ending to a Football Game

Just watch

Saturday, October 27, 2007

Rice Terraces

Put this in the category of "how did I get to be so old without knowing about these?"

I'd never heard of these, but check out these photos of the mountainside Banaue rice terraces in the Philipines. Per the link all of these built by hand about 2000 years ago.

Friday, October 26, 2007

Added to Infosys INFY

Quick post: I added to my Infosys INFY position today. It hasn't really moved much in a long time but the business seems solid to me. Valuation is looking good to me.

Thursday, October 25, 2007

Let's look at a high flier VDSI

Let's look at VASCO Data Security VDSI, one of my holdings. Quarterly results were announced today. Earnings were up 78%, revenues were up 60%, and the stock was down 34% on the day. I'm almost back to where I started on this one. I haven't read the conference call transcript yet, but apparently the business seems to be slowing a bit.

I guess best I can do is shrug my shoulders, but this is an extreme case of how the market trades on expectations and the wide fluctuations companies like this can see. These hyper-growth stocks are difficult to value, but I think even 35% sustainable revenue growth with sustainable margins (which have been expanding) makes this company attractive.

My rule is not to immediately buy after a big spike down like this, but I'll keep on my radar for potential adds. I like the company and it feels oversold, but I'm learning to listen to what the market tells me and let the air clear.

Wednesday, October 24, 2007

Vote For Trish!

If you haven't heard, my wife Trish has one of her favorite books in a contest. It's about a woman who due to dark/secret government experiments has inherited invisibility... and now that they know she inherited it her life will never again be her own!!! Exciting stuff, including lots of X-Files type conspiracy theories.

Anyhow, the winner of this contest gets the book published. The first stage of the contest is for "Best First Line". If you like it, vote for Trish Milburn's "Out of Sight" here. She's the sixth one down.

Investing Books

I finished reading Phil Town's "Rule #1" and while I'm still struggling with some of the technical analysis he talks about (I'm trying to figure out how to program the signals and back-test), I think it's a pretty sound approach and is very close to what I do in terms of stock selection. Again, I'm withholding judgment on the technical analysis/trading section of the book because I'm not sure it works in most of the cases I've examined for the stocks I select, but I'm still investigating.

With the addition of this book, I figured I'd list my favorite investing books. I don't think I've posted this before, but I found the following books to have been very useful for me in learning to invest.

Buffettology - Mary Buffett and David Clark. I've worn the library out reading my fair share of investing books, but this book contains much of the basis for how I value companies. It emphasizes consistency, predictability, and valuation. Maybe it was the culmination of alot of other things I'd read, but as I worked through Buffettology I had one of those "aha" moments that underlies much of my thinking about investments.

One Up on Wallstreet - Peter Lynch. I haven't read this one in a long time, but it did a great job of educating me back in college when I was starting out. Lots of real-life examples in here.

A Random Walk Down Wallstreet - Burton Malkiel. Another college read. Anybody who's picking stocks is trying to do what this book says can't be done, but it's good to see where the efficient market hypothesis is coming from, and why low cost indexing is so successful.

Super Stocks - Kenneth Fisher. I read this back in the mid-90s and found it valuable in evaluating fast growing tech companies that don't yet have earnings but have some type of competitive moat. If you're into tech stocks this is a must read imho.

The Gorilla Game - Geoffrey Moore. Another must read for tech investors. What produces a sustainable long term advantage when thinking about technology stocks? The book fails to aid us in valuing technology Gorilla companies and alot of Gorilla gamers got hurt in the tech bubble bust as a result, but I like the way of thinking about how network effects contribute to competitive advantage.

Rule #1 - Phil Town. I just read this one, but it's gotta go on the list as it's so close to what I do. Not sure about the technical analysis pieces, but this method will turn up a lot of the same companies I invest in.

The Millionaire Next Door. Thomas J. Stanley and William D. Danko. The authors made a career out of studying millionaires. They find that often the secret to accumulating wealth is not how much you make, but simply living within your means. Great read.

Manias, Panics and Crashes. Charles Kindleberger. They're hard to spot when you're in them and they can persist, but this book helps us understand bubbles.

Tuesday, October 23, 2007

Carcinogens and Natural Foods

Sorry for the lack of posts. Haven't been feeling well. Here's one I bookmarked a few weeks back.

Here's a different line of thinking. About 5-6 minutes of a lecture, but I found this interesting regarding unintended consequences.

Friday, October 19, 2007

Price activity and the future

The TraderFeed Blog first got me interested in how short term price activity is not necessarily random as I had expected. Like a point guard who goes right or a center who pump fakes, the market does seem to have predictable tendencies. The theme of many of the TraderFeed articles on this topic reinforces contrarian aspects of price behavior - that going against the crowd has rewards.

Here's a good article on how 20 day highs in down markets tend to be followed by subpar returns, while 20 day highs in up markets aren't much to worry about. 20 day lows in down markets tend to be followed by strong short term returns.

Here's another similar article looking at similar themes put in different time periods.

The theme for index moves - be contrarian and buy the lows. Now I'm not ready to expand this to individual stock selection and I may do some similar investigation on individual stocks, (I actually expect that an individual stock going down is probably more likely to keep going down, or at minimum exhibits more volatile tendencies - so we need to be careful with interpretation - but at least in aggregate the market has a reversion to the mean tendency.

Thursday, October 18, 2007

Lame 80s lyric of the day

I was listening to one of my Pandora internet music radio channels - one geared to play 80s music I grew up on - and was cracking up to the lyrics to a Def Leppard song.

Don't call me gigolo; don't call me Cassanova
Just call me on the phone and baby come on over...

Yep - some of the music I listened to when growing up is that embarrassing. Not exactly Robert Frost, but at least it rhymes - sortof.

Excellent points on Health Care

I found this post on Marginal Revolution excellent reading as the health care debate heats up in the campaign.

Some key points:
- spending more $ does not increase health result outcomes in many cases, so be wary of a plan proposed that does this. The US is a huge spender and does not produce commensurate result. (Does this sound somewhat like the conversation around our approach to education also? Lots of spending without as much result?)
- pharmaceuticals are one area where spending does seem to produce results.

Saturday, October 13, 2007

...but I wanted a puppy

These are funny letters to God by kids. There are over 20 - click through them all.


Dear God, Thank you for the baby brother, but what I prayed for was a puppy. Joyce

Wednesday, October 10, 2007

Short Note

Surprisingly all the trades I made yesterday went through. It rarely happens that way.

- sold 40% of HANS
- sold 50% of BLUD
- opened a new position in ASFI

Going to go and figure when to re-build the HANS position. I really like what the company has going on, it's just value concern right now.

Why Asta Funding ASFI?
It's always fun when I find a new stock that I've never seen that pushes most of my buttons. I don't know if I'd ever considered Asta as a holding before, but everything fell into place when I was evaluating last night.

Some of the things that I liked

Book Value has been growing at around 25% annually
6/07 $16.16
9/06 13.51
9/05 10.72
9/04 8.58
9/03 9.76
9/02 4.16
9/01 2.86
9/00 1.77

Return on Equity
6/07 25.9%
9/06 27.8
9/05 23.9
9/04 21.5
9/03 18.4

While sales per share have not been as consistent on an annual basis, we've still seen revenue more than triple over the past 4 years.

The PE on this is 10. A similar company that I like PRAA Portfolio Recovery trades at a multiple closer to 15. Many stocks appreciate via PE expansion and the opportunity is here.

Big fat net margins - over 40% for the past 3 years

Free cashflow - this is a cash business. No heavy investments in plant or equipment required.

Tuesday, October 9, 2007


I haven't looked seriously at transactions recently, but I just placed some limit orders for tommorrow - we'll see what happens. Cramer always says take some off the table after a long run-up, so that's what I'm doing.

I put in an order to sell half of my Immucor BLUD position. They sell blood tests and blood test equipment. This holding has good momentum going for it, but I think it's getting close to fair value and want to ease out a bit.

I put in an order to sell a portion of my Hansen Natural HANS position. I'll probably get burned on this one and it may keep on running up, but it's gone a long way fast and like the other, I want to take a bit off the table. Hopefully can add back to my position on a correction. This is a dangerous trade to me because I think it's likely HANS will be higher 1-2 yrs out... but going to see if I can take some off the table.

Opening a position in ASFI Asta Funding. They are a collections company - buy up past due debt at pennies on the dollar and try to collect.

We'll see what happens tomorrow.

Sunday, October 7, 2007

Online Ticket Sales

My sister-in-law tried to buy Hannah Montana tickets and was unsuccessful at face-value. They're "sold out." She could easily buy them online for many multiples of face-value though through various ticket re-seller sites. Here's the question: Why has purchasing tickets turned into a business where the resellers - or "scalpers" as they're more lovably known - often stand to make more on the ticket than the people putting on the show?

Since ticket sales have pretty much moved online it offers an opportunity for a new business model. Here's my proposal to Ticketmaster and other primary ticket-seller sites when you clearly have a show where demand exceeds supply.

Option 1: When tickets go on sale: instead of selling out all your tickets in 15 minutes at face value (demand is obviously more than supply at that price), why not go to a declining auction system? For instance, start ticket prices on sale at $1000 each and then start lowering ticket prices gradually throughout the day as folks bid on tickets as the price declines? There are many auction based sites that function fairly smoothly using an auction system, including ebay. People could watch in real time as seats sold out, see what prices, and know what the "market" for seats appears to be for a particular show. This is similar to the market-maker system in the stock market. Ticket sellers manually match supply with demand.

Option 2: Have a sealed bid auction system. Similar to purchasing stocks, folks could put in "limit" orders for how much they're willing to pay for a group of tickets. No need to sit and watch the auction, and if an outlet has 8000 tickets to sell, the top 8000 folks placing bids would get the tickets. People placing higher bids would get filled with the better grade seats closer to the stage/box seats/etc (a priority system could be devised for seats as every arena will be different but still allow a bidder to opt out of the priority seating if they preferred a lower priority seating but still wanted to make sure they got in.)

I think either of the above are better for the industry as a whole. The folks putting on the show capture more of the revenue for the show - capturing the value of the extra demand they've created, and at the same time folks that are willing to pay more than face price can still get a ticket without having to go through scalpers.

Purely conspiracy theory: I expect that there's some arrangement between the acts, the primary ticket sellers, and the resellers in any event involving kick-backs in lots of directions. The acts don't want to be seen as gouging their fans so they set below market prices, but they know the tickets are going to sell for far more than face value in most cases. Instead of just giving all that profit margin up to scalpers they're probably working to cut deals to capture the surplus. Same for the primary sellers with the resellers. The systems proposed above would probably just make all that activity more public than it currently is. Just a guess anyhow.

Here's a NYTimes article of you have access.

Friday, October 5, 2007

Space Tether video

I find this video very interesting.

Based on some web searches I guess it's possible that there's some video artifacts going on here given the shape of some of the objects seen here, kindof like maybe seeing reflections of stuff in your own eye sometimes when looking in a microscope, but I was engrossed when I saw this. Note how many of the objects appear to move behind the severed tether in the video. Here's an in-depth video analysis.

It's incredible footage and too easily dismissed with a shrug of the shoulders in my opinion. Very cool stuff. Way more interesting than a lot of stuff that's treated seriously. Doesn't it remind you of looking at pond water under a microscope?

Economic development and Rule of Law

Here's an interesting article on a driving force of economic success: the rule of law.

According to the study it's the social institutions - the rule of law - that create more value in an economy than the actual hard resources present.

So what? If the rule of law is central to a productive economy, the focus of aid to developing countries should be tied to strengthening the rule of law. As Colin Powell would say - it's a force multiplier. Working hard in a corrupt system doesn't pay, working hard under the rule of law does.

Thursday, October 4, 2007


Here's an innovative solution to your varmint problem. - Watch more free videos

Tuesday, October 2, 2007

Adding to Garmin

I missed the news yesterday, but Garmin dropped over 15% over the past 2 days due to Nokia purchasing digital mapmaker Navteq. Navteq supplies the digital maps for Garmin.

I put in a small order to add to my Garmin position following the drop. Here's an article from Seeking Alpha that aligns with my thinking. It's normally good to hold off on sharp declines, but I think this drop is based on a combination of panic selling, and alot of folks riding large profits willing to sell a big gainer easy.

Here's hoping panic is what's going on.

Also, Immucor BLUD announces earning tomorrow and I'm going to put in a limit order sell half prior to earnings. I haven't had this one long, but it's approaching fair value and I just want to take a bit off the table. It's had a good run and stocks with good momentum like this tend to keep running so I don't want to sell all.