Friday, July 9, 2010

Embrace the Fear

Double-dip recession?  I've heard lots of talk about it lately.  The fear (at least prior to this week) was palpable in the headlines and you could tell by watching the tape.  Nouriel Roubini was on TV again, and they were pulling other various people who are always bearish out to give us some scary headlines (Dow 5500, Dow 1000 etc).  I found a nice post on this over at Barry Ritholtz's Big Picture, titled Can the Crowd Forecast a Double Dip Recession? 

The economy is recovering.  The recovery may not be particularly strong, but it is happening.  Todd Sullivan at Value Plays has been laying out an excellent analysis of this during the past week.  Economic indicators such as auto sales and rail traffic have been improving.  And its not like the market is pricing in some huge V-shaped recovery.  It may have been heading that way in late April, but it certainly isn't now.  As long as we continue on a path of recovery, I think stocks will be very attractive.  With rates this low, the massive amount of cash on the sidelines will work its way back into the market.

So if you're a value investor who is interested in purchasing "companies" at discounts to fair value, you should embrace the fear, as it will allow you to make even better purchases.  Too many people let the market or the headlines tell them how the economy is or whether or not they should make this or that purchase.  I try not to operate this way, but unfortunately its just the world we live in.  Its important that we use this to our advantage.

I've been adding to a handful of names over the past two weeks, and will continue to do so it valuations become even more attractive.

Friday, July 2, 2010

Adding to Current Positions

Lots of panic out there this week.  As value investors, we welcome this type of action.  All the talk of double-dip recession, another depression, etc.  I'm sure you've heard all of it.  With my time horizon, and hopefully yours, I'm quite confident the stocks I hold will be much, much higher by the time I'm ready to sell them.  The problem is we're becoming more and more programmed for instant gratification, and thus time horizons have become shorter and shorter.  This all plays into Wall Street's hands by the way.  More trading = more commissions.  The key as always, is spotting value in companies and taking advantage of a market that is full of fear and is ignoring these stocks.  But you do, however, have to know what to look for.

I added General Growth Properties (GGP) Wednesday in the mid 13's.

Late today I added Tii Network Technologies (TIII) at 1.48, and Pfizer (PFE) at 14.15.

Tii completed what appears to be a good acquisition that will immediately add to earnings.  The stock is still trading at less that half of book value.  Lightly traded stock, so you have to deal with that.  I'll continue to buy if it stays under 1.50.

Pfizer hit a fresh 52 week low today, and I bought it near that low.  I see plenty of value here.  Trading at 6.2x forward earnings?  Even if those estimates are a bit optimistic, this thing is cheap.  I know they have some drugs patents expiring in the next few years, but this stock is cheap.  Throw in a 5% dividend, I'm happy to park some money here while we wait for the market to recover.

I'll do my best to post more to the blog.  I always post when I make a transaction, but I would like to pass along more info about the specific names I own or am looking at, and will make more of an effort to do so.

Happy Independence Day!















Disclosure: Long GGP, TIII, PFE