Just an update (not that I post very often):
Microsoft closed today @ $40.47 -
If you had bought on May 11, 2011 at $25.00, you would've earned an annualized return of 21.32%. (including dividends, pre-tax)
Corning closed today @ $21.16 -
If you had bought on Feb 2, 2012 at $13.50, you would've earned an annualized return of 25.64%. (including dividends, pre-tax)
Put simply: Value Investing works!
However, due to competitive reasons, I can no longer recommend either of the above companies.
The stock price may continue to go up, or they may decline.
Either way I believe there are now qualitative reasons that argue against holding either security.
Disclosure: I no longer own either MSFT or GLW.
Wednesday, April 9, 2014
Saturday, February 4, 2012
A second bite of Apple or Samsung, or anybody else who makes a good smart phone...
How?
Corning Incorporated. By now most people know that Corning makes Gorilla Glass, Gorilla Glass 2, etc. They also have big dreams for the future: http://www.youtube.com/watch?v=jZkHpNnXLB0&feature=youtu.be
Succinctly, right now, only Corning has the best glass in the world for smartphones and other touch screen devices. This could change, and isn't necessarily a durable competitive advantage for the long-run, but for the mid-term...
Did you also know that Corning is trading for less than book value? That once you subtract its debt, it has a net cash position of $4Billion? (The market cap is $20B) That it is currently trading at a P/E ratio of about 8? And that it is paying a dividend of over 2%? Everyone should know that.
Did you also know that they have several partnerships with other companies that are harder to value?
So, why is this company trading so cheaply? Well, apparently they are currently losing money on a glass project for Samsung LED TV's, their earnings guidance wasn't that great for the next couple of quarters, and people are scared of companies who supply Apple.
Nevertheless, here is a great company, which has been around for a long time, with some great products that is poised for a future where we use more and more glass.
I like companies selling at a discount that also have a tremendous upside. How tremendous? Well, just last year the stock was trading at $23.00@share. Today it is hovering around $13.50.
I'm not all in, but I am in.
Disclosure: Plan to go long GLW on Monday February 6th.
Corning Incorporated. By now most people know that Corning makes Gorilla Glass, Gorilla Glass 2, etc. They also have big dreams for the future: http://www.youtube.com/watch?v=jZkHpNnXLB0&feature=youtu.be
Succinctly, right now, only Corning has the best glass in the world for smartphones and other touch screen devices. This could change, and isn't necessarily a durable competitive advantage for the long-run, but for the mid-term...
Did you also know that Corning is trading for less than book value? That once you subtract its debt, it has a net cash position of $4Billion? (The market cap is $20B) That it is currently trading at a P/E ratio of about 8? And that it is paying a dividend of over 2%? Everyone should know that.
Did you also know that they have several partnerships with other companies that are harder to value?
Samsung Corning Precision Materials Co., Ltd (50% ownership) - $3.4 billion; Dow Corning (50% ownership) - $1.25 billion; Other - $245 million *courtesy Henry W. Schacht
So, why is this company trading so cheaply? Well, apparently they are currently losing money on a glass project for Samsung LED TV's, their earnings guidance wasn't that great for the next couple of quarters, and people are scared of companies who supply Apple.
Nevertheless, here is a great company, which has been around for a long time, with some great products that is poised for a future where we use more and more glass.
I like companies selling at a discount that also have a tremendous upside. How tremendous? Well, just last year the stock was trading at $23.00@share. Today it is hovering around $13.50.
I'm not all in, but I am in.
Disclosure: Plan to go long GLW on Monday February 6th.
Thursday, May 19, 2011
Microsoft - $25@share = 30% off
Well, this is my first Blog post, so I will try to keep it very simple:
If you'd like to get technical, just email me: jim.falbe@gmail.com
I'm recommending buying Microsoft.
For those who know me this is kind of funny as I hate investing in technology companies. Think about it. Technology companies are here today and gone tomorrow; they flower and fade like grass. Yesterday's magnificent ice hotel of Internet-connectivity, America Online, didn't last long when the sun of high-speed Internet dawned. In comparison, there are boring companies like Coca-Cola. Same ingredients, same business, and nobody gets excited about them. Nobody thought Coca-Cola would change the world, but you are drinking the same fizzy pop that your grandparents drank and your kids and grandkids will likely drink it after you. In short, technology companies aren't predictable - boring companies like Coca-Cola are.
With Investing, it's crucially important to know that the company you are buying into is going to be able to keep making money into the future (Assuming there is no Apocalypse or WWIII, of course), and the further forward you can look the better. In my future posts, be prepared for boring companies!
Sometimes, however, exceptions do roll along: Microsoft is one of them. Let's look at the numbers:
Earnings after Tax (Last 4 quarters): $21.7 B
Stock Market Valuation of Microsoft: $210 B
Cash on Hand (-8.5 Billion for Skype) $41.5 B
Amount you'd pay to buy the whole company: $169.5 B
(Stock Market Val - Cash on Hand)
This means earning a 10.33-12.8% Return on Investment AFTER TAX, depending on how you do the math. This is a Price-to-Earnings Ratio of less than 8. Companies that have grown their earnings every year for the last 15 (save for 2009, year of the Great Recession), usually trade at a P/E of about 20. 2011 looks to continue this trend of earnings for Microsoft. Feel free to look, but believe me that no other major company is priced this cheaply, though Intel may be a close second. In addition Microsoft will pay you the Stockholder 2.5% on your investment in the form of a dividend. Sadly, you must pay taxes on this money. Microsoft is also buying back stock, which at these prices is a very good deal for you and you don't have to pay taxes on this increase of your wealth. Please note that I did not talk about growth. Microsoft doesn't need to grow for you to make a lot of money at these prices. Any growth would be gravy, or nitrous oxide, depending on how you like to look at it. Personally, I do believe Microsoft will grow, though I could be wrong. At this price thankfully, I don't have to be right.
Now, why is Microsoft so cheap? Well, people believe that Google is and will kill them online, that Apple and Google are and will kill them in Mobile, and that even Windows is doomed as people shift from PC's to Tablets and other devices. This belief extends to thinking that Microsoft Office will die, businesses will cease using PC's, and that none of Microsoft's new initiatives: Windows Phone 7, partnership with Nokia, Bing, Xbox w/ Kinect, SkyDrive, Cloud Computing Options, Skype, etc. will be successful in anyway. (Funny, that several of them already are successful, and that there is still no legitimate alternative to Windows or Office, but we don't we need to fight about this) Maybe the naysayers are right, but in the meantime, Microsoft is reporting new records of income; and projecting even better things in the future. I can't say Microsoft will be here in 20 years, but I think it has at least a few years of life left in it, especially at these prices.
My estimate on Microsoft's Intrinsic Value: 300 - 500 Billion Dollars
Current Market Price: 210 Billion Dollars
Minimum Discount: 30%
In Stock Terms
Intrinsic Value: 35.50-60.00 @ share
Current Market Price: 25.00 @ share
Disclosure: My wife is long both Intel and Microsoft (She purchased both yesterday). If Microsoft remains below 25.00 @ share, I plan to acquire more over the coming days for both our joint and my own accounts.
(My info comes from: http://www.sec.gov/edgar/searchedgar/companysearch.html)
Happy Investing,
Jim
If you'd like to get technical, just email me: jim.falbe@gmail.com
I'm recommending buying Microsoft.
For those who know me this is kind of funny as I hate investing in technology companies. Think about it. Technology companies are here today and gone tomorrow; they flower and fade like grass. Yesterday's magnificent ice hotel of Internet-connectivity, America Online, didn't last long when the sun of high-speed Internet dawned. In comparison, there are boring companies like Coca-Cola. Same ingredients, same business, and nobody gets excited about them. Nobody thought Coca-Cola would change the world, but you are drinking the same fizzy pop that your grandparents drank and your kids and grandkids will likely drink it after you. In short, technology companies aren't predictable - boring companies like Coca-Cola are.
With Investing, it's crucially important to know that the company you are buying into is going to be able to keep making money into the future (Assuming there is no Apocalypse or WWIII, of course), and the further forward you can look the better. In my future posts, be prepared for boring companies!
Sometimes, however, exceptions do roll along: Microsoft is one of them. Let's look at the numbers:
Earnings after Tax (Last 4 quarters): $21.7 B
Stock Market Valuation of Microsoft: $210 B
Cash on Hand (-8.5 Billion for Skype) $41.5 B
Amount you'd pay to buy the whole company: $169.5 B
(Stock Market Val - Cash on Hand)
This means earning a 10.33-12.8% Return on Investment AFTER TAX, depending on how you do the math. This is a Price-to-Earnings Ratio of less than 8. Companies that have grown their earnings every year for the last 15 (save for 2009, year of the Great Recession), usually trade at a P/E of about 20. 2011 looks to continue this trend of earnings for Microsoft. Feel free to look, but believe me that no other major company is priced this cheaply, though Intel may be a close second. In addition Microsoft will pay you the Stockholder 2.5% on your investment in the form of a dividend. Sadly, you must pay taxes on this money. Microsoft is also buying back stock, which at these prices is a very good deal for you and you don't have to pay taxes on this increase of your wealth. Please note that I did not talk about growth. Microsoft doesn't need to grow for you to make a lot of money at these prices. Any growth would be gravy, or nitrous oxide, depending on how you like to look at it. Personally, I do believe Microsoft will grow, though I could be wrong. At this price thankfully, I don't have to be right.
Now, why is Microsoft so cheap? Well, people believe that Google is and will kill them online, that Apple and Google are and will kill them in Mobile, and that even Windows is doomed as people shift from PC's to Tablets and other devices. This belief extends to thinking that Microsoft Office will die, businesses will cease using PC's, and that none of Microsoft's new initiatives: Windows Phone 7, partnership with Nokia, Bing, Xbox w/ Kinect, SkyDrive, Cloud Computing Options, Skype, etc. will be successful in anyway. (Funny, that several of them already are successful, and that there is still no legitimate alternative to Windows or Office, but we don't we need to fight about this) Maybe the naysayers are right, but in the meantime, Microsoft is reporting new records of income; and projecting even better things in the future. I can't say Microsoft will be here in 20 years, but I think it has at least a few years of life left in it, especially at these prices.
My estimate on Microsoft's Intrinsic Value: 300 - 500 Billion Dollars
Current Market Price: 210 Billion Dollars
Minimum Discount: 30%
In Stock Terms
Intrinsic Value: 35.50-60.00 @ share
Current Market Price: 25.00 @ share
Disclosure: My wife is long both Intel and Microsoft (She purchased both yesterday). If Microsoft remains below 25.00 @ share, I plan to acquire more over the coming days for both our joint and my own accounts.
(My info comes from: http://www.sec.gov/edgar/searchedgar/companysearch.html)
Happy Investing,
Jim
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