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Yep, good call alright! I have already missed out on 15%-18% since you mentioned it. That's why I wanted to know if you thought it had legs left. Thanx for you thoughts!
My guess appears to be getting some substance.
Oshkosh Truck receives $878M U.S. Army contract
Friday February 23, 11:14 am ET
Oshkosh Truck Corp. has been awarded an $878 million contract that enables the company to continue producing heavy tactical vehicles for the U.S. Army.
The contract from the U.S. Army's Tank-Automotive and Armaments Command covers the supply of 1,857 new vehicles and 2,599 new trailers. The contract covers new production of heavy expanded mobility tactical trucks and palletized load system vehicles and trailers. The vehicles and trailers are designed for logistics support roles in the Army and transport everything from fuel and water to ammunition and supplies.
The contract also calls for the remanufacture of 1,130 of the heavy tactical trucks.
"The award of this contract ensures the uninterrupted production of the U.S. Army's heavy vehicle fleet," said John Stoddart, Oshkosh Truck executive vice president, and president, defense. "Oshkosh's heavy tactical trucks have proven critical to military operations in theater, and their continued production is important to ensure that readiness remains at a high level across the fleet."
Oshkosh Truck has produced the heavy expanded mobility tactical truck since 1982 and the palletized load system vehicle and trailer since 1993. There are nearly 25,000 of these trucks and trailers in the U.S. Army inventory today.
You gave exactly what I was asking. For in depth DD and research, you get paid!
Buffett Bets On Housing (Again)
James Altucher, Formula Capital 02.22.07, 9:25 AM ET
Warren Buffett filed the latest update to his holdings recently, and it's always interesting to follow his new additions, the positions he's increasing and the positions he's reducing. Most people consider Buffett a deep value investor in the style of his mentor Benjamin Graham, but this couldn't be further from the truth.
Instead, Buffett is a broad demographic investor. He looks for what he feels are going to be decade-long or even century-long trends and places his bets accordingly. Right at the beginning of the housing boom in the early part of this decade, he was buying more furniture companies, building parts companies and other companies related to the housing boom that was about to occur. Before oil soared past $40 (and on its way to a high of $77), he was buying pipeline companies and other energy companies, particularly when they were all hit as a group by the Enron scandal.
So what is he buying now, and what can we learn from it?
First, he's once again making the bet that housing and construction might be in a medium correction but not a long-term slump.
He added to his USG, Wells Fargo and US Bancorp positions and bought building parts manufacturer Ingersoll-Rand as a new position.
Buffett's stake in US Bancorp went from 6.11 million shares as of March 31, 2006, to 23.31 million shares by year-end.
US Bancorp is an interesting case. Many commercial banks have had trouble because of the two-fold problem of a flattening yield curve as well as the slump in housing. The flattening yield curve means the interest paid on bank deposits goes higher and the interest the bank gets from making loans goes lower, reducing the net interest margin. In fact, USB's interest margin declined 32 basis points last quarter compared with the prior quarter. And the decline in housing means in general there are more write-offs of bad loans. Each write-off affects the balance sheet and is added to the losses for the year.
However, Buffett's been buying quality banks since the mid-1960s and it's worth looking at what he's looking at. For one thing, despite the housing slump, USB's write-offs of bad loans actually declined last quarter--even though most banks' write-offs have gone significantly higher. This shows that USB has kept a very high discipline on the credit quality of its loans. USB executives also said that credit quality would not go down over the next year and that write-offs would continue to slide. For one thing, USB has not participated at all in the craze in subprime lending, which is now burning many banks and mortgage real estate investment trusts.
Additionally, USB's return on equity is a massive 23%, compared with the usual 10% for banks. This shows that the integration of smaller bank chains it has acquired is going smoothly and is contributing to reduced costs. Additionally, it shows that the company is not spending too much money on additional services it offers customers to attract deposits.
With the decline in the subprime market and with many subprime lenders going out of business, it makes perfect sense for Buffett to be buying quality lenders like USB and adding to his Wells Fargo purchase.
His new position in Ingersoll-Rand also expresses a belief that he thinks the slowdown in construction is going to reverse itself. Additionally, while the stock might have slumped during the year due to the slowdown in residential construction, it is worth noting that IR is a diversified machinery company, selling its products and services to industrial builders as well as residential ones.
And even with reduced guidance on its last call, the company is trading at just 11 times forward earnings and has a clean balance sheet with $1.6 billion in cash flows--more than sufficient to pay down $2.8 billion in debt.
Buffett is not the only investor who thinks IR is cheap. The company itself is buying back $2 billion of its own shares, a factor that will ultimately drive up its earnings per share. Buffett's new position in IR is small, a tad less than $25 million, and I'm assuming he's legging in while building a much larger position, particularly on any dips.
Buffett's filing also revealed a new position in UnitedHealth Group. Buffett takes a long-term view and is not fooled by any minor slump in the company's stock due to the options backdating scandals.
Everything is going in UNH's direction. Revenues and profits are both up by double-digits. The company, meanwhile, trades at a forward price-to-earnings ratio of just 13. The company has over $2.3 billion in net cash, which is more than enough to deal with any troubles from the options scandal. And the company itself is using its cash flow to buy back stock (just like IR); it recently authorized up to $6 billion to use in a share buyback program.
Considering that cash flows will top a record $6 billion this year, UnitedHealth should have no problem quickly maxing out this buyback program. In addition to Buffett, Forbes columnist David Dreman has been a buyer of UNH shares. Dreman has a fund that's up an annualized 19% over the past three years. (Click here to check out Dreman's top positions and new positions.)
Although Buffett likes to say he is a buy-and-hold "forever" type of investor, he does regularly reduce and even sell entire positions outright. Most notably in this filing, he sold off all of his holdings in Target--while maintaining his holding in Wal-Mart Stores--and also reduced his stake in H&R Block. The Target sale probably reflects his belief that the U.S. economy could go through a slowdown and that Wal-Mart does better in such periods. The HRB sale also probably reflects a belief that broader demographics (consumers doing their taxes online, for instance) will ultimately hurt HRB's competitive edge.
Certainly not an in depth effort at DD but just a shoot from the hip opinion on my part.
Thanks again for your assessment, Investorman.
BAM has been good to us.
I think OSK will continue to recover. The US is wearing out trucks in Iraq at a good clip and new products should do well in the future. The dip in price last fall was caused by many trucking companies ordering trucks last year to avoid the new emission regulations this year. When that smoothes out a normal ordering pattern should resume. They have also been acquiring new companies to expand their product line.
Have I mentioned that I LOVE this stock? LOL I know I have, but it's worth repeating. Up about 55% in a little over a year. BTW, your recommendation of OSK proved to be a good one in the last few months. I had put it on a watch list, wish I had just gone ahead with it. Think it's future is still rosy from here?
BAM has been doing nicely. OSK has been looking good for the last 3 months also. Don't forget the dividends these little buggers are cranking out.
1 year chart looking good. Great call on this one......
Brookfield's profit surges
Fri Feb 9, 2007 9:08 AM ET
OTTAWA, Feb 9 (Reuters) - Brookfield Asset Management Inc. posted a surge in fourth-quarter profit on Friday, bolstered by growth in most of its operations and realization gains reflecting appreciation in the value of its underlying operations.
Brookfield, an asset manager with interests in the real estate and power generation sectors, said net income for the quarter ended Dec. 31 rose to $611 million, or $1.51 per share, from $151 million, or 36 cents per share, in the same quarter last year.
Closely-watched cash flow from operations increased to $859 million, or $2.13 per share, from $252 million, or 61 cents a share, in the same period last year.
Revenue increased to $2.9 billion from $1.74 billion.
The company also said its board approved a 12.5 percent increase in the quarterly dividend. The dividend of 18 cents per class A share is payable May 31, to shareholders of record on May 1.
Take a look at the OSK board.
Thanks for your thoughts, Investorman. It kind of reinforces my inclination to look elsewhere. Where is BAM "junior" when you need it? :)
I think LUK is ok but I also think there are better choices out there.
Investorman, I appreciate your analysis of LUK, and any opinions are welcome. Of course, I'm aware of it's past performance, which overall "ain't too shabby". My problem is that I bought in at a high (30.26, my own fault), so it's been a long road back. I'm simply not sure that, long term, my dollars in LUK couldn't be better utilized elsewhere. The jury is still out for me.
LUK's share price is up 17.6% for the year and it has paid a dividend of just under 1% this year giving a total return of about 18.5% which isn't bad.
It had a 2 for 1 forward spilt back in June and insiders were buying in August at around $25 and change per share.
The company has a Gross Margin of 41.30% and a Net Profit Margin of 11.78%. Those are pretty good numbers.
The share price took a bit of a dip after the split but so did most stocks during that time. It seems to be recovering at this point.
I haven't checked the future projects so I will try to get a handle on that to see how future prospects are looking.
Sorry for the wrong message number. Let me know if you think there's anything particulaly interesting going on with LUK. Frankly, I strongly considering bailing.
It was message #16 and I had forgotton about it. I'll have to take another look at LUK to see what has been going on with it.
Your mention of Leucadia was way back(message #14). You were comparing both Leucadia and Brookfield with Berkshire Hathaway's similar approaches to investing and holdings, I believe. At the time, LUK looked pretty good. I think I may have waited until the peak was over before I got in. Who knows though, maybe it will continue to gain as it has recently. It certainly is due for some upward movement if you believe in "cycles".
I don't remember discussing LUK. I am not familiar with it. You may be confusing it with ROK which we talk about off and on.
Yeah, I've gained roughly 35% in the past year on this stock. I would have to see something really catastophic to want to sell this one. I plan to buy more during a dip to offset my profit sell off (at 25%)a few months ago. Big mistake. Normally, I sell profit at that level to hedge against huge losses. But I may change that philosophy on this one. As you say, the long term charts speak for themselves. Not sure when I'll get the chance to buy again though. There haven't been many dips lately. Not that I'm complaining. :)
I saw in some of your earlier posts that you had considered Leucadia (LUK) also. Did you buy? I bought some maybe 6 months ago. Have not been particularly pleased so far. Nowhere near the solid kind of performance of BAM, although it seems to be perking up a bit of late. Anyway, good to know of fellow investors in this rather unknown winner.
It is kind of an unkown stock that we ran across a while back. It doesn't take much insight to look at the long term chart and realize that this stock has been a great performer over the long term.
We are hoping that it continues in the same fashion in the future.
Nice to have someone else on the board.
You guys seem to have this board to yourself! :) I just wanted to quickly say that I have owned this stock for about a year and I wish I knew of ten more with the solid performance of this one. My only regret is selling of some profit a few months back. Glad to know of others in the BAM club. :)
Brookfield to Sell Stock, Boosts Outlook
Monday December 11, 7:53 am ET
Brookfield Properties Raises 2007 Guidance, Plans to Sell 30 Million Shares
NEW YORK (AP) -- Commercial real estate company Brookfield Properties Corp. on Monday said it plans to sell about 30 million shares to pay down debt, and raised its earnings outlook for 2007.
Brookfield Asset Management, which currently owns about 51 percent of Brookfield Properties' outstanding shares, intends to buy about 11.3 million shares in the offering, according to the company.
Brookfield Properties said it will use proceeds from the offering to repay outstanding debt from the acquisition of Trizec Properties Inc., a real estate company, and its Canadian arm, Trizec Canada Inc. The company created the U.S. Office Fund to invest in the acquisition of Trizec, and said it will also use proceeds from the offering to pay down debt used to finance an additional investment in the fund. Brookfield will also use proceeds for general corporate purposes, including repaying lines of credit.
Brookfield said it expects 2007 funds from operations per share -- an adjusted measure of earnings that excludes special items -- to total $2.10 to $2.20, 17 percent higher than the current forecast for 2006. The projection for 2007 factors in the completion of the stock sale, growth in operating income from established properties of 4 percent to 5 percent and similar conditions for residential land sales and lot sales as seen in 2006.
Brookfield to Issue C$200 Million of Preferred Shares
Thursday November 9, 9:18 am ET
TORONTO, ONTARIO--(CCNMatthews - Nov. 9, 2006) - Brookfield Asset Management Inc. (TSX:BAM - News; NYSE:BAM - News) announced today that it has agreed to issue to a syndicate of underwriters led by RBC Capital Markets and CIBC World Markets Inc. for distribution to the public 8.0 million 4.75% Preferred Shares, Series 17. The Preferred Shares, Series 17 will be issued at a price of C$25.00 per share, for aggregate gross proceeds of C$200 million.
The Preferred Shares, Series 17 will be offered by way of a prospectus supplement under the short form base shelf prospectus of Brookfield Asset Management dated November 6, 2006. The prospectus supplement will be filed with securities regulatory authorities in all provinces of Canada.
The net proceeds of the issue will be added to the general funds of Brookfield Asset Management Inc. and be used for general corporate purposes. The offering is expected to close on or about November 20, 2006.
Brookfield Asset Management Inc. (TSX:BAM - News; NYSE:BAM - News), focused on property, power and infrastructure assets, has over $50 billion of assets under management and is co-listed on the New York and Toronto Stock Exchanges under the symbol BAM. For more information, please visit Brookfield's website at www.brookfield.com.
That oughta knock the crap out of the shareprice. lol!
Brookfield Asset Management Reports 29% Increase in Third Quarter Cash Flow From Operations
Friday November 3, 8:00 am ET
TORONTO, ONTARIO--(MARKET WIRE)--Nov 3, 2006 -- Brookfield Asset Management Inc. (TSX:BAM.TO - News)(NYSE:BAM - News) -
Investors, analysts and other interested parties can access Brookfield Asset Management's 2006 Third Quarter Results as well as the Shareholders' Letter and Supplemental Financial Information on Brookfield's web site under the Investor Centre/Financial Reports and Investor Presentations section at www.brookfield.com.
The Third Quarter 2006 Results conference call can be accessed via webcast on November 3, 2006 at 2 p.m. EST at www.brookfield.com or via teleconference at 1-888-789-0089, toll free in North America. For overseas calls please dial 416-695-5259, at approximately 1:50 p.m. EST. The teleconference taped rebroadcast can be accessed at 1-888-509-0081 or 416-695-5275 (password: 631633).
Brookfield Asset Management Inc. (TSX:BAM.TO - News)(NYSE:BAM - News) today announced a 29% increase in operating cash flow for the third quarter ended September 30, 2006. Operating cash flow totalled $368 million ($0.91 per share), compared with $286 million ($0.69 per share) reported in the same quarter last year.
Brookfield Completes Brazilian Homebuilding IPO
Wednesday October 25, 5:39 pm ET
Shares of Brascan Residential Properties S.A. listed on Sao Paulo Stock Exchange
TORONTO, ONTARIO--(MARKET WIRE)--Oct 25, 2006 -- Brookfield Asset Management Inc. (TSX:BAM.TO - News)(NYSE:BAM - News) ("Brookfield") today announced the completion of an initial public offering of 66 million common shares of Brascan Residential Properties S.A. ("BRP") at R$16 (US$7.45) per share for total proceeds of US$491.7 million. BRP sold 50.5 million common shares for gross proceeds of R$808 million (US$376.2 million) and a wholly owned subsidiary of Brookfield sold 15.5 million common shares of BRP for gross proceeds of US$115.5 million
.
Following the offering, Brookfield indirectly owns 110.7 million shares of BRP, representing a 62.7% interest (assuming the over allotment option referred to below is not exercised) in the company with a value based on the offering of US$825 million and will record a gain associated with the transaction in the fourth quarter of 2006. In connection with the offering, BRP has granted the underwriters an over allotment option for an additional 8,250,000 shares at R$16.00 (US$7.45) per share for a 30 day period until November 20th.
LOL! It is a big building about 3 blocks from Chase Field where the Diamondbacks play. Nothing special except that it is really tall - lol.
That's almost in one of your backyards. Every time you drive by, you can find comfort in knowing we own a piece of that puppy. lol!
Brookfield Real Estate Opportunity Fund Closes on Acquisition of 5.3 Million Square Foot Commercial Portfolio in U.S.
Tuesday October 3, 4:13 pm ET
TORONTO, ONTARIO--(MARKET WIRE)--Oct 3, 2006 -- Brookfield Asset Management Inc. (TSX:BAM.TO - News)(NYSE:BAM - News)("Brookfield") announced today that its Real Estate Opportunity Fund ("BREOF") has acquired from affiliates of JPMorgan Chase & Co. (NYSE:JPM - News), a 5.3 million square foot portfolio of commercial properties across the U.S. for $460 million.
The portfolio is comprised of 33 properties and banking centers located in 10 cities primarily in the Midwest, including the cities of Chicago, Phoenix, Dallas, Milwaukee and Baton Rouge. This geographically diverse portfolio includes recognized properties such as:
- Chicago - 300 South Riverside Plaza, a 1 million square foot office building under which BREOF earlier this year acquired the fee simple interest in the air rights;
- Phoenix - Chase Tower, the tallest building in Arizona, totalling 750,000 square feet;
- Milwaukee - Chase Tower, a 450,000 square foot downtown property.
As part of its continuing operations, JP Morgan Chase Bank, N.A. has signed long term lease back agreements for significant portions of the space.
"The acquisition of this unique portfolio represents the largest transaction for the Fund to date. Our long term lease back agreement with JPMorgan Chase as our major tenant ensures a stable cash flow stream. In addition, we believe we are well positioned to create value by proactively asset managing the portfolio, repositioning underutilized space and maximizing revenue through lease ups and managing expenses," commented David Arthur, President and CEO, Brookfield Real Estate Opportunity Fund.
Brookfield Asset Management Inc., focused on property, power and infrastructure assets, has over $50 billion of assets under management and is co-listed on the New York and Toronto Stock Exchanges under the symbol BAM.
For more information, please visit our web site at www.brookfield.com.
Brookfield Asset Management Reports 23% Increase in Second Quarter Cash Flow from Operations
Thursday August 3, 8:00 am ET
TORONTO, ONTARIO--(MARKET WIRE)--Aug 3, 2006 -- Brookfield Asset Management Inc. (TSX:BAM.TO - News)(NYSE:BAM - News) -
Investors, analysts and other interested parties can access Brookfield Asset Management's 2006 Second Quarter Results as well as the Shareholders' Letter and Supplemental Financial Information on Brookfield's web site under the Investor Centre/Financial Reports and Investor Presentations section at www.brookfield.com.
The Second Quarter 2006 Results conference call can be accessed via webcast on August 3, 2006 at 3 p.m. EST at www.brookfield.com or via teleconference at 1-888-789-0150, toll free in North America. For overseas calls please dial 416-695-5261, at approximately 2:50 p.m. EST. The teleconference taped rebroadcast can be accessed at 1-888-509-0081 or 416-695-5275 (password: 626906).
Brookfield Asset Management Inc. (TSX:BAM.TO - News)(NYSE:BAM - News) today announced:
- A 23% increase in operating cash flow for the second quarter ended June 30, 2006. Operating cash flow totalled $267 million ($0.64 per share), compared with $215 million ($0.52 per share) reported in the same quarter last year.
- $10 billion of assets under management were added to operations including:
-- $5 billion of core office properties,
-- $2.5 billion of transmission infrastructure assets,
-- $0.5 billion of power generation assets, and
-- $2.0 billion of fixed income and real estate securities.
- Continued growth was achieved in our management platforms across our property, power, timber and transmission infrastructure sectors.
Bruce Flatt, Managing Partner and CEO of Brookfield Asset Management commented: "Our results in the second quarter of 2006 reflect strong performance across almost all of our operations and success in advancing a number of our strategic initiatives over the last few quarters."
Not really, all I know is they've been selling one heck of a lot of the stuff during this housing boom. And my tool room experience, of course. lol!
And what the hell!
"USG emerged from Chapter 11 bankruptcy protection on June 20."
How in the hell can ya go bankrupt during the busiest 5 years in company history!
We are talking sheet rock here, aren't we?
Previous post was because I figuered you probably knew something about wallboard - lol.
Berkshire Hathaway Increases USG Stake
Thursday August 3, 5:28 pm ET
By Josh Funk, AP Business Writer
Buffett's Berkshire Hathaway Increases Stake in Wallboard Maker USG to 15 Percent
OMAHA, Neb. (AP) -- Billionaire Warren Buffett's Berkshire Hathaway Inc. now owns 15 percent of the world's largest manufacturer of wallboard, USG Corp., both companies confirmed Wednesday.
Berkshire's holdings in the Chicago company increased slightly as part of USG's rights offering, which concluded Friday, because Berkshire had agreed to buy any shares other USG shareholders did not purchase as part of the $1.8 billion rights offering.
A rights offering is when a company offers existing shareholders the chance to buy stock usually at a discount from market prices.
Before the rights offering, Berkshire owned 14.55 percent of USG, the wallboard maker said in a statement Wednesday.
In a filing with the Securities and Exchange Commission, Berkshire said it had acquired 6.97 million shares of USG for $40 a share on Wednesday.
Berkshire said in the regulatory filing that its shares in USG are held by a subsidiary company, National Indemnity Corp., which now holds 13.47 million USG shares.
Shares of Berkshire fell $200 to close at $91,300 on the New York Stock Exchange Thursday.
A Berkshire spokeswoman declined to comment on Thursday.
Berkshire, which is led by Buffett, owns a diverse mix of more than 60 companies, including furniture, insurance, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as Coca-Cola Co., Anheuser-Busch Cos. and Wells Fargo & Co.
USG said it plans to use part of the $1.8 billion proceeds of the rights offering to pay senior notes and other debt, plus accrued interest. Remaining proceeds will be used to make other payments and for general corporate purposes.
"We appreciate the ongoing support of stockholders, including Berkshire Hathaway, which has been a significant USG stockholder for more than five years," said William Foote, USG's chairman and chief executive.
USG emerged from Chapter 11 bankruptcy protection on June 20.
Shares of USG gained $1.57, or 3.4 percent, to finish at $47.44 on the New York Stock Exchange Thursday.
Berkshire Hathaway Inc.: http://www.berkshirehathaway.com
USG Corp.: http://www.usg.com
Consortium buying Hydro-Quebec Chile unit
Fri Jun 16, 2006 11:44 AM ET
TORONTO, June 16 (Reuters) - A consortium led by Brookfield Asset Management Inc. <BAM.N> <BAMa.TO> is buying 92 percent of Chile's largest electricity-transmission company from Hydro-Quebec for C$1.7 billion ($1.5 billion), the parties said on Friday.
The Brookfield consortium, which also includes the Canada Pension Plan Board, the British Columbia Investment Management Corp. and another institution, is also moving to buy the remaining 8 percent of HQI Transelec Chile SA in a separate transaction, the group said. A subsidiary of the World Bank owns that stake.
Hydro-Quebec said in a statement that the sale will bring it a profit of more than C$750 million.
"This is our crowning achievement in terms of monetizing our international assets," Daniel Garant, Hydro-Quebec's chief financial officer, said in a statement.
Transelec owns more than 8,000 kilometres (5,000 miles) of transmission lines and 51 power substations, delivering electricity to virtually all of Chile's population of 16 million.
Scotia Capital and HSBC Bank are providing $600 million in debt financing as part of the purchase.
Brookfield shares were down 39 cents at $40, on the New York Stock Exchange shortly after the announcement.
($1=$1.12 Canadian)
MSFT is trading at a 52 week low.
Gross Margin 85.90%
Net Profit Margin 31.60%
Microsoft set for continued strong free cash flow
Standard & Poor's Equity Research reiterated a "strong buy" on Microsoft
Standard & Poor's Equity Research reiterated a "strong buy" on Microsoft ahead of the company's fiscal fourth-quarter earnings report on Thursday.
S&P Equity Research expects the software behemoth to earn 31 cents per share from operations on revenue of about $10.2 billion. "With our expectation of continued strong free cash-flow generation," the research firm said, "we believe that Microsoft (nasdaq: MSFT - news - people ) ended the June quarter with approximately $40 billion in cash and short-term investments, and no debt."
"With its shares trading at a discount to peers, or 17 times our calendar 2006 operating EPS estimate of $1.52, and with our 12-month discounted cash-flow-derived target price of $33, we strongly recommend purchase," S&P Equity Research said.
Morningstar.com
The Ultimate Investing Scoreboard
Monday June 12, 7:00 am ET
By Scott Burns
Lists are all the rage these days. People can't seem to get enough of lists like the "Top 10 Greatest Second Basemen" or "The 100 Greatest Movies". Lists make for great conversation fodder and you can argue endlessly about the qualifications of various list members and what their rank and order should be. So, it is somewhat surprising that the granddaddy-of-them-all list is the one that leaves some of the smallest room for argument. The list I'm talking about is none other than the Forbes billionaire list.
It doesn't get much simpler than what the Forbes list tries to accomplish. You take the wealthiest people in the world, calculate/estimate how much they are worth and then rank them. This makes the billionaire list the ultimate scorecard in the world of finance. The goal, after all, is to make money, whether it's investing or running a business, and nothing screams success like making it to the top of this list.
So, why my sudden interest in the billionaire list? Well, a funny thing occurred to me recently. When you look at the billionaire list and compare it to Morningstar's stock ratings, something will immediately jump out at you. A high proportion of the top 20 richest people in the world owe their wealth to companies that currently sport a 5-star (or near 5-star) Morningstar Rating for Stocks from our analysts.
In the Morningstar vernacular, our star rating system is a scale that measures the value (as calculated by our analysts) of a company against the market's perceived value. We issue 5-star ratings (consider buying) when we believe the market is significantly undervaluing the worth of a company relative to its prospects and risks and 1-star ratings (consider selling) when we think the market is significantly overvaluing a company. Given the preponderance of 5-star stocks that match the top 20 of the Forbes list, there is certainly a disconnect in the market between individual wealth and the perceived value of the companies that helped forge that wealth.
It is astonishing to see the market's lack of appetite for these companies. Is it possible that the market, in its collective wisdom, has turned its back on some of the greatest businessmen of our lifetimes? Do investors really think that Buffett, Gates, and Dell were just lucky all those years? Judging by the beatings the market has issued to some of these shares lately, it is clear that the general thinking is that these tycoons have lost their mojo and that they've run their businesses aground.
We at Morningstar obviously think this hogwash. All of these folks are uber-rich because they run the kinds of cash-generating, competitively advantaged companies that long-term investors should love to get their hands on at the right price. Rarely have investors had so many attractive opportunities to invest in some of the most successful businesses in the world.
The Billionaire List
#1 Bill Gates (also #6 Paul Allen)
Company: Microsoft (NasdaqNM:MSFT - News)
Rating: 5 stars
Analyst Says: With Windows Vista and Office 2007 on the horizon, Microsoft is at the cusp of a strong product introduction cycle that will add another chapter to the firm's long history of growth. Over the years, few firms can match Microsoft's financial record. Sales have grown from $6 billion a decade ago to nearly $40 billion in fiscal 2005, and returns on invested capital have averaged a staggering 77%. Analyst: Toan Tran
#2 Warren Buffett
Company: Berkshire Hathaway (brk.b.B)
Rating: 5 Stars
Analyst Says: A triumvirate of near-term concerns has recently depressed enthusiasm for Berkshire, creating a sizable opportunity for investors to augment their holdings at attractive prices. We think Berkshire's wide moat and growth prospects remain appealing, so we've increased our fair value estimate for the Class B shares to $4,052. Analyst: Justin Fuller
#3 Carlos Slim Helu
Company: Telefonos de Mexico (NYSE:TMX - News)
Rating: 4 Stars
Analyst Says: Telmex has some of the highest margins we've seen in the industry, leading to a large amount of free cash flow that is being used to buy back stock, increase the dividend, and make acquisitions. Analyst: Allan Nichols
#5 Lakshmi Mittal
Company: Mittal Steel (NYSE:MT - News)
Rating: 5 Stars
Analyst Says: Mittal Steel's global presence, market position, and vertical integration have firmly established it as the leader of the consolidating steel industry and have earned the company a narrow moat. Analyst: Scott Burns
#12 Michael Dell
Company: Dell (NasdaqNM:DELL - News)
Rating: 5 Stars
Analyst Says: Dell has used ultra-efficient manufacturing and a direct sales approach to dominate the PC market. While competition is heating up in its core desktop PC market, Dell is rapidly winning customers in several new technology markets. We believe its low-cost advantage will continue to deliver market share gains and generate outsized returns on invested capital. Analyst: Mark Lanyon
#17 -#21 The Walton Family
Company: Wal-Mart (NYSE:WMT - News)
Rating: 5 Stars
Analyst Says: Wal-Mart still has plenty of room to grow. Its Supercenters are still highly concentrated in the South, the Midwest, and suburban and rural areas, leaving plenty of room to expand in the Northeast, California, and some major metropolitan areas. Overseas markets represent a ripe opportunity as well. Analyst: Joseph Beaulieu
As for the real estate market..... There are some obvious signs popping up. One condo project in Scottsdale must be having some trouble selling since I noticed that they are giving away a free 2006 Mustang with every condo they sell. You sure didn't see that kind of thing a year ago.
It isn't really difficult, there is just a lot of it.
When it comes to your money you are the best money manager you could hire since you have your own best intrests at heart. (Not to mention that you work for free on your own stuff.)
Thanks! I appreciate you sharing your knowledge. I'm picking up bits and pieces, here and there.
I think you've got it - LOL
The only bonds I have are in a Vanguard Ginnie Mae bond fund. I let them worry about when to buy and sell them.
I had planned on holding them to maturity. Now I can expect calls from my broker offering higher rate bonds....
And I suppose the chance of getting your bonds bought out from you early would be if interest rates were dropping and they can pay lower interest elsewhere.
Geeez. So obvious if I were to take the time to think. lol!
The trick is........
To be able to recognize when intrest rates are at their peak or at their bottom - lol. Easier said than done.
The simplest way to look at bonds is.......
When interest rates are rising, the principle value of existing bonds falls.
When interest rates are going down, the principle value of existing bonds rises.
Or...... Buy when interest rates are high and sell when interest rates are low.
Interesting. That just makes so much obvious sense. Now, if I can only retain that information longer than a week.... lol!
Interest rates will not affect bonds if you are holding them until maturity. It only affects them if you sell the bonds and have to take a reduced price due to your existing bonds having a lower interest rate than new ones available on the market.
The theory with bonds is to buy them when intrest rates are at their peak and falling. This makes the bonds you hold more valuable since they pay a higher rate of interest than the new ones that are available. Bonds decrease in value when interest rates are rising. None of this affects you if you are satisfied with the rate of interest rate you are getting and don't plan to sell them.
I too believe we are heading for trouble. And also like your assessment of real estate. I've been telling the wife for a while now we need to be locked and loaded for when the housing bubble bursts. Gotta wait for a buyers market when houses are sitting on the market for many months, instead of a few days.
I've got boatloads of bonds too. Interest rates won't affect what I've already got..... Will they?
I don't sell anything very often. A company has to have a sea change in its future outlook for me to dump it. This practice has caused a few second thoughts over the years but in the long run it has turned out very nicely. HRCT was a different thing since I knew they didn't have any earnings and it was just a momo play.
The easiest way to look at your portfolio is to go down the list and ask yourself, "Would I buy this stock today?" If not, consider selling your position in it and putting the money elsewhere. Bonds are in for big trouble in the near future since interest rates are rising. Which also means that inflation is raising its ugly head.
Depending on what they are, 10 - 15 stocks can keep you well divirsified and are a reasonable number to keep an eye on. Don't let one stock go over about 20% of the total cash value of your portfolio. Pick up real estate whenever the prices crash like they did in 1989 - 1991. Real eatate has these down cycles every 15 years or so. The key to real estate is buying low, not selling high.
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