Caterpillar, Inc. (CAT) is the fifth and final stock you should be looking at for the long-term. This stock has been beaten to within an inch of its life because the implosion of the housing market. This company produces construction equipment, mining equipment and engines that run on diesel and natural gas. Many investors view this company as dependent on the housing market, particularly new home sales to drive its revenue. Less than 10% of this company’s revenues are actually tied to the housing market. This is a company that is involved in many different markets and because of the overselling of this stock over the past year, it is currently sitting at a bargain price.
It is currently trading a few dimes shy of $30, which is a few bucks off its low of about $21 and change. Its 52 week high was in the mid-$80’s, which I think was a little too high, but it was still riding the housing high that started in 2004. The current dividend yield is 5.7% and the EPS is at about 5.5, which is extremely low for this company. Also, the dividend has been increased each and every year since 1992, with no missed dividend disbursements. Through thick and thin, this company always delivers that all important dividend.
Three catalysts will drive this stock back up. First is the Stimulus Plan. A major part of this plan is to create jobs by strengthening the country’s infrastructure. Once this gets started, equipment sales should skyrocket. This, however, is contingent on the second catalyst, which is the loosening of the credit market. Once financing is available, Caterpillar’s customer base (the ones who survived the debacle) will start purchasing at the same levels they were before the economy went bust. These guys will be trying to boost their production and grab up market share left by the ones who had to shutter their operations. Lastly, the housing market will turn around (assuming the credit market loosens) and all the bums who thought this company was dependent on the housing market will begin buying up shares.
Two big red flags for this company is that currently it is loosing money, but that will be short-lived when the three catalysts kick in and the second is the $30+ billion in debt it currently has on its books, with only $1.5 billion in cash. If the growth prospects for this company weren’t so great, I would normally steer clear of a balance sheet like that. This baby has nowhere to go but up, however, be cautious, because it could still dip a few bucks. Again, this risk can be reduced by buying in slowing and building a position while the stock is underpriced. Remember, this company should not rise at the same rate it declined in the fall. Be patient and think with your head and put your emotions on the back burner. Actually, take your emotions and put them in the garbage and take the garbage out to the curb. They have no place here!
Thursday, March 26, 2009
Friday, March 20, 2009
Five Top Stocks For The Long-Term: Stock #4
Exxon Mobile Corp. (XOM) is stock #4 of this five part series. Yeah, yeah, I know, everyone hates the oil companies. I say, “If you can’t be ‘em, join ‘em!”. Also, even with demand having slowed considerably, the company continues to set new quarterly net profit records each and every quarter. When the price of oil is low, the company still makes a ton of money and when the price is high, the company still makes tons of money. Even better, when the price of oil drops, the average idiot investor sells his XOM lot, for fear of the stock nose diving. Bitch Please!! The stock has dropped nearly 30% since its high of $96 during last summer. Revenue and earning for XOM are down about 30% each, but management has still been able to have the ROA and ROE return 20% and 39% respectively.
Another huge reason to love this company besides the fact the stock is trading far below it’s 52 week high is that it has about 3.5 times the amount of cash in its holdings as it does total debt. Also, the price to sales ratio is under 1, which is another indication that this stock trading at just shy of $70 is priced right to buy. The current dividend yield on this stock is about 2% and with all that cash in its holdings, the company can easily raise that dividend every year in the foreseeable future.
Since the dollar appears to be heading for a downward spiral in the short-term, the price of oil should start to creep up, which again will help XOM gain more folks buying the stock. Be smart and start building your position before the late arrivers being to buy up the stock when oil starts to surge up.
Remember to buy incrementally and not go all in. This is not No-Limit Texas Hold-Em. The movement of this stock is directly affected by the price of oil. It may move more or less relative to the movement of oil, but the relationship between the two is direct. Even though oil is low right now, it will most likely move up in the future, however, it could fall even further down into the low 30’s or even the high 20’s should demand continue to decline. OPEC has price controls on this and can at least choose a bottom on price by cutting supply, but it is still a good idea to buy smaller chunks periodically in order to minimize risk. Yes, you will leave some gains on the table, but you will also mitigate potential losses as well, should your timing be less than ideal.
Another huge reason to love this company besides the fact the stock is trading far below it’s 52 week high is that it has about 3.5 times the amount of cash in its holdings as it does total debt. Also, the price to sales ratio is under 1, which is another indication that this stock trading at just shy of $70 is priced right to buy. The current dividend yield on this stock is about 2% and with all that cash in its holdings, the company can easily raise that dividend every year in the foreseeable future.
Since the dollar appears to be heading for a downward spiral in the short-term, the price of oil should start to creep up, which again will help XOM gain more folks buying the stock. Be smart and start building your position before the late arrivers being to buy up the stock when oil starts to surge up.
Remember to buy incrementally and not go all in. This is not No-Limit Texas Hold-Em. The movement of this stock is directly affected by the price of oil. It may move more or less relative to the movement of oil, but the relationship between the two is direct. Even though oil is low right now, it will most likely move up in the future, however, it could fall even further down into the low 30’s or even the high 20’s should demand continue to decline. OPEC has price controls on this and can at least choose a bottom on price by cutting supply, but it is still a good idea to buy smaller chunks periodically in order to minimize risk. Yes, you will leave some gains on the table, but you will also mitigate potential losses as well, should your timing be less than ideal.
Monday, March 9, 2009
Five Top Stocks For The Long-Term- Stock #3
Hello again! I know you've been waiting with baited breath for the third installment of this series. So far, we have a retailer and a company that lives off of discretionary spending. You must be thinking that these two companies are terrible choices, because the current economy has changed the spending habits of the average American, so that we are no longer a nation of hedonistic whores. This is precisely why these are great companies for the long-term. They've been kicked around pretty badly and when the dust settles from this economic meltdown, slowly but surely, the old spending habits will return to the previous norm.
To all of you who are still non-believers, I shall bestow an energy stock on you, so that you can relax and get on board. Terra Nitrogen (TNH) is the energy stock of the future. This stock is as volatile a mid-cap (middle size company) as I have ever seen, however, despite the craziness going on in the market, it has remained relatively stable. What does this mean? I haven't a clue, because the market is as irrational as ever and nothing makes a bit of sense. Everything nowadays is so uncertain, it is difficult to pick a stock. Remember this, good companies will come out on top in the end.
TNH is an alternative energy company specializing in nitrogen energy products for industrial and agricultural use. By having both sides of the equation covered in terms of clients, this gives the company excellent stability and growth prospects for the future. Since it is an option to oil as a fuel, it poses an excellent position for the long-term, when oil becomes scarce. It is also a wonderful alternative fuel for all of you hippy, tree-huggers out there worrying about the health of the planet.
TNH has traded as low as the mid-$70's and as high as the low-$170's during the past twelve months. It is currently just shy of $120 per share, so you can argue that in terms of valatility it is in the middle of it's price range. The key factors are that this company with a market cap of about $2.5B has no debt and is currently paying a dividend of $11.88 annually, which at the current price is just under a 10% yield. It is a solid company with a future and wonderful balance sheet that pays a dividend equivalent to a junk bond and not near the same amount of risk.
Another attractive aspect of this stock is that it trades at just 8 times earnings, which for an alternative energy company with huge potential for growth is extremely cheap in my opinion. The management is exellent and simply the fact that the company is able to flourish in this market is proof enough it is a strong company. The only possible bump in the road for this company is that it has to make some changes to its plants in order to comply with the Clean Air Act. Luckily, these expenses are relatively low and the competition has to undergo the same changes.
Remember, this stock is volatile and make sure that you do your due diligence and if you do not have tons of money, buy in small increments to lessen the risk. Until next time.....
To all of you who are still non-believers, I shall bestow an energy stock on you, so that you can relax and get on board. Terra Nitrogen (TNH) is the energy stock of the future. This stock is as volatile a mid-cap (middle size company) as I have ever seen, however, despite the craziness going on in the market, it has remained relatively stable. What does this mean? I haven't a clue, because the market is as irrational as ever and nothing makes a bit of sense. Everything nowadays is so uncertain, it is difficult to pick a stock. Remember this, good companies will come out on top in the end.
TNH is an alternative energy company specializing in nitrogen energy products for industrial and agricultural use. By having both sides of the equation covered in terms of clients, this gives the company excellent stability and growth prospects for the future. Since it is an option to oil as a fuel, it poses an excellent position for the long-term, when oil becomes scarce. It is also a wonderful alternative fuel for all of you hippy, tree-huggers out there worrying about the health of the planet.
TNH has traded as low as the mid-$70's and as high as the low-$170's during the past twelve months. It is currently just shy of $120 per share, so you can argue that in terms of valatility it is in the middle of it's price range. The key factors are that this company with a market cap of about $2.5B has no debt and is currently paying a dividend of $11.88 annually, which at the current price is just under a 10% yield. It is a solid company with a future and wonderful balance sheet that pays a dividend equivalent to a junk bond and not near the same amount of risk.
Another attractive aspect of this stock is that it trades at just 8 times earnings, which for an alternative energy company with huge potential for growth is extremely cheap in my opinion. The management is exellent and simply the fact that the company is able to flourish in this market is proof enough it is a strong company. The only possible bump in the road for this company is that it has to make some changes to its plants in order to comply with the Clean Air Act. Luckily, these expenses are relatively low and the competition has to undergo the same changes.
Remember, this stock is volatile and make sure that you do your due diligence and if you do not have tons of money, buy in small increments to lessen the risk. Until next time.....
Sunday, March 1, 2009
Five Top Stocks For The Long-Term- Stock #2
Yeah baby! Ticket Master is the shizznit! Unfortunately, I hate ticketmaster, but as a business, it has a natural monopoly that the government has overlooked. Anyhow, to make it better, Ticket Master's stock has gotten crushed recently and it looking better than ever at less than 3 times earnings. The reason why it has been destroyed lately is because people have stopped shelling out $350 clams for Billy Joel type acts. Pearl Jam had it right about 15 years ago, when it took Ticket Master to task for inflating concert tickets. Remember back in the day when you could go see a top notch band for less than $20? Those prices pre-date 1995, but Ticket Master ruined it all. However, when Pearl Jam cannot get the "man" to change it's evil ways, you must concede. It's basically, "If you can't beat 'em, join 'em!" I think of this company the same way I think of Exxon.
Because people are idiots as a whole (present company exclued), they will eventually pick up the pace of purchasing from Ticket Master, once they get used to the garbage economy that we have, will go back to their hedonistic ways as reinflate the company with overpriced purchases of tickets for entertainment. Let's put it this way, the last concert I was at was in 2004, when I went to see Deftones in front of a crowd of less than two thousand people a MCC's hockey rink for $17 and the icing on the cake was a duet with Chino and Stan from Linkin Park who was playing the following night at Blue Cross Arena in Rochester, NY. Ticket prices are out of f'ing control. Look at Hanna Montana ticket prices. People are remortaging their houses in order to finance those ticket prices. Ok, ok, enough of the complaining. I'm endorsing this company for good reason and here's why.
1. As already mentioned before, the P/E ratio is below 3, which is ridiculous.
2. Price/Book ratio is at .21, which, again, is ridiculous. Think about it this way. You pay a two dimes for every dollar of assets. Don't use this stat by itself, because companies who are having problems could fall this low before going out of business. Think about it this way as well, this company is still making money and is trading at 1/5th it's book value. This would be an excellent company to buy bonds from, because if the company goes out of business, you would be ahead in line of the shareholders to collect on your money.
3. It has nearly 30% of its shares held by insiders, so you know they feel the value and the company's financial health are good. On the flip side, only 1.5% of the shares are being shorted, which shows that investors know people are stupid and would rather go to a show than feed their kids.
4. This type of business is cyclical and this stock will be down for as long as the economy is down. Once unemployment recedes and people start spending again, this stock should take off. This is a good time to buy as just so you know, I do not own this stock.............yet.
5. FYI-this stock does not currently pay a dividend and also, it's 52 week high was $27 and it is currently trading at just under $5. Be sure to do your homework before buying or selling.
Peace, and I'm out!!
Because people are idiots as a whole (present company exclued), they will eventually pick up the pace of purchasing from Ticket Master, once they get used to the garbage economy that we have, will go back to their hedonistic ways as reinflate the company with overpriced purchases of tickets for entertainment. Let's put it this way, the last concert I was at was in 2004, when I went to see Deftones in front of a crowd of less than two thousand people a MCC's hockey rink for $17 and the icing on the cake was a duet with Chino and Stan from Linkin Park who was playing the following night at Blue Cross Arena in Rochester, NY. Ticket prices are out of f'ing control. Look at Hanna Montana ticket prices. People are remortaging their houses in order to finance those ticket prices. Ok, ok, enough of the complaining. I'm endorsing this company for good reason and here's why.
1. As already mentioned before, the P/E ratio is below 3, which is ridiculous.
2. Price/Book ratio is at .21, which, again, is ridiculous. Think about it this way. You pay a two dimes for every dollar of assets. Don't use this stat by itself, because companies who are having problems could fall this low before going out of business. Think about it this way as well, this company is still making money and is trading at 1/5th it's book value. This would be an excellent company to buy bonds from, because if the company goes out of business, you would be ahead in line of the shareholders to collect on your money.
3. It has nearly 30% of its shares held by insiders, so you know they feel the value and the company's financial health are good. On the flip side, only 1.5% of the shares are being shorted, which shows that investors know people are stupid and would rather go to a show than feed their kids.
4. This type of business is cyclical and this stock will be down for as long as the economy is down. Once unemployment recedes and people start spending again, this stock should take off. This is a good time to buy as just so you know, I do not own this stock.............yet.
5. FYI-this stock does not currently pay a dividend and also, it's 52 week high was $27 and it is currently trading at just under $5. Be sure to do your homework before buying or selling.
Peace, and I'm out!!
Friday, February 27, 2009
Five Top Stocks For The Long-Term- Stock #1
Before I begin this five part series, I’d like to remind everyone that I do not recommend you invest in any of the five companies I’m going to mention. You have to come to that decision yourself based on research you have done and the investment goals you have set for yourself. Remember that calling something a good investment is a relative term. What is good for one person could be bad for another person. This is simply an analytical exercise show the pros and cons of five different companies from five different industries whom I think are good investments for myself, based on my research and investment goals. So, on to company #1, Cherokee, Inc. (CHKE).
Many of you have probably never heard of Cherokee, Inc. If you’ve ever shopped at Dick’s Sporting Goods, Target and/or Eastern Mountain Sports, this is where you would find the products Cherokee makes. I call this my “Hippie Company”, because it gears towards sportswear and equipment for hikers, mountain climbers, rock climbers, campers and any other outdoor activities associated with nature.
I first bought this stock back in July 2006, when it was trading in the high twenties. It reached a high of about $38 per share during the summer of 2007. It currently is trading at just shy of $15 per share, but the great thing about this company is one, it is small (Market Cap of $130M), which means that it has room to grow. Again, I am long-term on this stock, so I can wait. If you are looking to make quick money, this is not the stock for you and you will end up broke before long anyway going for the quick hits and trying to turn over stock as fast as possible. This is when you slip into the world of the day trader. Chances are almost guaranteed you will be busted within a couple of months or less choosing this strategy.
Here are some more pros concerning CHKE.
1. No Debt- What I mean by this is no “long-term debt”, every company carries some debt in the form of accounts payable for example.
2. Only 2 analysts follow this stock- Analysts are idiots and their rankings of companies are typically driven by the investment companies they represent, which poses a huge conflict of interest. However, if they down grade a stock, the herd takes note and follows suit. The fewer the analysts, the less attention is paid to the company, which limits the volatility.
3. Great Management- The ROA and ROE are 38% and 50%, which is pretty ridiculous in this current economy. Also, the insiders hold 15% of the outstanding shares, which shows they are confident in the company enough to put their own money out there.
4. High Dividend Paid consistently- the current dividend is yielding 11.8%, which is like a junk bond, but without the high risk. Remember 75% of your long-term gains come from dividends reinvested.
Here are some cons concerning CHKE
1. High percentage of shares shorted- Currently 13.7% of the outstanding shares are being shorted by institutions. This means that they are bearish on this stock, mainly because of the industry it is in and the current economic crisis.
2. Low Amount of Cash- Currently has $14M in cash. Relative to its market cap, that is a lot, but the company is undervalued in my opinion and with stockpile of cash in the bank, it limits its ability to grow or expand into other markets. It also limits its ability to buy back stock when the price is cheap.
Since the stock is roughly half the price of when I purchased it 2 ½ years ago, as an investor, you can assess the situation in one of two ways. You can look at it as a bad investment, because you have an unrealized loss of 50% of you investment or you can investigate further into the company and determine if it is a buying opportunity or if the fundamentals of the company have changed and you have confidence in the company to flourish in the future. I prefer the latter, because I do not dwell on “unrealized” losses or gains for that matter. You have to constantly reevaluate your stocks in order to make an educated decision on what to do next. I have been checking everything with CHKE and I like what they are doing and I do not see any red flags that would indicate anything is terribly wrong with the company. I see this as an opportunity to lower my cost per share by doubling my investment (don’t confuse this with doubling a position. Doubling your investment means doubling the dollar amount you invest. Doubling your position means doubling your number of shares). Here is how “Dollar Cost Averaging” works in this situation. Just as a reminder, I’m using approximate prices and not factoring in dividends reinvested.
July 2006- 10 shares @ $30= $300
February 2009- 20 shares @ $15= $300
Total 30 shares for $600= $20 per share
With this, my “unrealized loss” has gone from 50% to 25%, but remember that you now have twice as much money invested that you could possibly lose, but you also have the possibility of making twice as much money, should stock price increase. For example, if the price returns to $30, my profit would be $300 or 50%, because the market value would be $900 for my 30 shares, but again, this is an “unrealized gain”, so don’t get too excited if this happens to you. This means that you must decide if the stock is priced low, fair or high and act on the conclusion you come to.
Doubling your investment amplifies your investment much more than doubling your position. Here is the same example, but instead of doubling the investment, we’ll double the position.
July 2006- 10 shares @ $30= $300
February 2009- 10 shares @ $15= $150
Total 20 shares for $450= $22.50 per share
With this, my “unrealized loss” has gone from 50% to 33%, but remember that you now have $450invested instead of $300 that you could possibly lose, again, so the stakes are higher now. For example, if the price returns to $30, my profit would be $150 or 33%, because the market value would be $600 for my 30 shares, but again, this is an “unrealized gain”.
Buying incrementally like this helps lower the effects of a volatile market. Remember that you may run into a stock that you think is really low that you already own and you increase your investment and the stock tumbles even lower. Do not get discouraged and try to keep a level head. Remember that the stock market is not rational by any means. I attribute a mob or riot type mentality to the market. Perfectly law abiding citizens can get caught up in a riot and behave the opposite of what their values are, because they simply follow what the crowd is doing. Until next time…..
Many of you have probably never heard of Cherokee, Inc. If you’ve ever shopped at Dick’s Sporting Goods, Target and/or Eastern Mountain Sports, this is where you would find the products Cherokee makes. I call this my “Hippie Company”, because it gears towards sportswear and equipment for hikers, mountain climbers, rock climbers, campers and any other outdoor activities associated with nature.
I first bought this stock back in July 2006, when it was trading in the high twenties. It reached a high of about $38 per share during the summer of 2007. It currently is trading at just shy of $15 per share, but the great thing about this company is one, it is small (Market Cap of $130M), which means that it has room to grow. Again, I am long-term on this stock, so I can wait. If you are looking to make quick money, this is not the stock for you and you will end up broke before long anyway going for the quick hits and trying to turn over stock as fast as possible. This is when you slip into the world of the day trader. Chances are almost guaranteed you will be busted within a couple of months or less choosing this strategy.
Here are some more pros concerning CHKE.
1. No Debt- What I mean by this is no “long-term debt”, every company carries some debt in the form of accounts payable for example.
2. Only 2 analysts follow this stock- Analysts are idiots and their rankings of companies are typically driven by the investment companies they represent, which poses a huge conflict of interest. However, if they down grade a stock, the herd takes note and follows suit. The fewer the analysts, the less attention is paid to the company, which limits the volatility.
3. Great Management- The ROA and ROE are 38% and 50%, which is pretty ridiculous in this current economy. Also, the insiders hold 15% of the outstanding shares, which shows they are confident in the company enough to put their own money out there.
4. High Dividend Paid consistently- the current dividend is yielding 11.8%, which is like a junk bond, but without the high risk. Remember 75% of your long-term gains come from dividends reinvested.
Here are some cons concerning CHKE
1. High percentage of shares shorted- Currently 13.7% of the outstanding shares are being shorted by institutions. This means that they are bearish on this stock, mainly because of the industry it is in and the current economic crisis.
2. Low Amount of Cash- Currently has $14M in cash. Relative to its market cap, that is a lot, but the company is undervalued in my opinion and with stockpile of cash in the bank, it limits its ability to grow or expand into other markets. It also limits its ability to buy back stock when the price is cheap.
Since the stock is roughly half the price of when I purchased it 2 ½ years ago, as an investor, you can assess the situation in one of two ways. You can look at it as a bad investment, because you have an unrealized loss of 50% of you investment or you can investigate further into the company and determine if it is a buying opportunity or if the fundamentals of the company have changed and you have confidence in the company to flourish in the future. I prefer the latter, because I do not dwell on “unrealized” losses or gains for that matter. You have to constantly reevaluate your stocks in order to make an educated decision on what to do next. I have been checking everything with CHKE and I like what they are doing and I do not see any red flags that would indicate anything is terribly wrong with the company. I see this as an opportunity to lower my cost per share by doubling my investment (don’t confuse this with doubling a position. Doubling your investment means doubling the dollar amount you invest. Doubling your position means doubling your number of shares). Here is how “Dollar Cost Averaging” works in this situation. Just as a reminder, I’m using approximate prices and not factoring in dividends reinvested.
July 2006- 10 shares @ $30= $300
February 2009- 20 shares @ $15= $300
Total 30 shares for $600= $20 per share
With this, my “unrealized loss” has gone from 50% to 25%, but remember that you now have twice as much money invested that you could possibly lose, but you also have the possibility of making twice as much money, should stock price increase. For example, if the price returns to $30, my profit would be $300 or 50%, because the market value would be $900 for my 30 shares, but again, this is an “unrealized gain”, so don’t get too excited if this happens to you. This means that you must decide if the stock is priced low, fair or high and act on the conclusion you come to.
Doubling your investment amplifies your investment much more than doubling your position. Here is the same example, but instead of doubling the investment, we’ll double the position.
July 2006- 10 shares @ $30= $300
February 2009- 10 shares @ $15= $150
Total 20 shares for $450= $22.50 per share
With this, my “unrealized loss” has gone from 50% to 33%, but remember that you now have $450invested instead of $300 that you could possibly lose, again, so the stakes are higher now. For example, if the price returns to $30, my profit would be $150 or 33%, because the market value would be $600 for my 30 shares, but again, this is an “unrealized gain”.
Buying incrementally like this helps lower the effects of a volatile market. Remember that you may run into a stock that you think is really low that you already own and you increase your investment and the stock tumbles even lower. Do not get discouraged and try to keep a level head. Remember that the stock market is not rational by any means. I attribute a mob or riot type mentality to the market. Perfectly law abiding citizens can get caught up in a riot and behave the opposite of what their values are, because they simply follow what the crowd is doing. Until next time…..
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