US Stocks

[Edmond Dantes]

....

But when we're talking about co's experiencing 20%+ revenue growth (even bluest of blue chips having double digit growth) - a short blip on my purchase price is wiped out, especially for my long term holdings. It's amazing how many high growth co's there are out there with proven track record already, it makes me wonder why I even entertain from time to time the more speculative stocks. Guess I just get carried away every now and again with the 'story' and potential. *sigh*

Exactly. If time is on your side and one can handle big fluctuations, these companies are and will be winners. I've mentioned it before, but lost money buying BIDZ (and many others) whereas I could've bought solid, proven-track-record companies. Even though I won't be making thousands short term with speculative stocks, I know that it is most likely that I will at least maintained my hard earned money in the future.

 

[Intrinsic_Value]

True.

Another factor worth observing is a gradual increase in net profit margins (%) along with earnings and revenue ofcourse. This usually means the company has got some economic moat thereby allowing it to increase its profit margin and still grow its earnings and revenue.

(PS: Again this is just one of the factors I look at to determine if the company has some kind of economic moats. Not the only one.)

Cheers,
Oracle.

yes good points, these appear lower down in my filters. Not so much net profit margins as these can ebb and sway (however i do like to see reasonable net profit margins over long periods of time, they can go up, go down, but the average must be reasonable and there must not be periods of negative or very low margins which imply a cyclical based company).

Revenue growth is important because this cant be manipulated (in conjection with the other filters, in isolation it is meaningless). Companies can manipulate their EPS to show growth through financial engineering, but sustainable EPS growth is only sustainable in the long term if sales are also increasing.

I dont need fast sales growth, but i do need some sales growth (not necessarily consistent yoy but definately over say 5 year rolling balances)

 

[Intrinsic_Value]

Where did you guys start learning about shares? .

Yes its definately more complex than property. My suggestion is to search for a school of thought about shares that suits your thinking and then try to become as proficient as possible in that school of thought.

So many people loose money in shares because they try to be a jack of all trades, changing between different methods depending on the state of the market.

 

[steveadl]

Revenue growth is important because this cant be manipulated (in conjection with the other filters, in isolation it is meaningless). Companies can manipulate their EPS to show growth through financial engineering, but sustainable EPS growth is only sustainable in the long term if sales are also increasing.

I dont need fast sales growth, but i do need some sales growth (not necessarily consistent yoy but definately over say 5 year rolling balances)

In my reading over the last few days I came across a company (can't remember name off hand) which apparently has cash pouring in so fast that their cashflow statement shows more money coming in than their revenue statement in recent quarters. Something about them only booking the revenue once they've provided the service, but the clients have already paid up front and sitting in a backlog. If I get time today will try and dig up the name.

 

[intrigued]

The grand kids will either love or hate me.

getting into

AIB (Ireland)
MTU (Japan)

but I feel they have to get on top of things eventually.

 

[Television]

Yes its definately more complex than property. My suggestion is to search for a school of thought about shares that suits your thinking and then try to become as proficient as possible in that school of thought.

So many people loose money in shares because they try to be a jack of all trades, changing between different methods depending on the state of the market.

I appreciate the advice IV, the problem is that I wasn't even aware that there was different schools of thought? :S

 

[steveadl]

Nice one Intrigued! You're a braver man than I. Hopefully they'll do well for you.

Continuing my search for strong growth blue chips. Recently topped up my AAPL and honing in on ISRG at the moment.

 

[Edmond Dantes]

Top 19 Most Profitable Large Cap Stocks

http://seekingalpha.com/article/246497-top-19-most-profitable-large-cap-stocks?source=yahoo

 

[steveadl]

hmmmm not holding any of those, fundamentals and growth levels not high enough for my liking.

Closest I come is a holding in PEP which I chose over KO.

 

[Intrinsic_Value]

Top 19 Most Profitable Large Cap Stocks

http://seekingalpha.com/article/246497-top-19-most-profitable-large-cap-stocks?source=yahoo

own visa and oracle.

China Telecom is interesting because the its a protected industry such as telstra used to be. But here is the catch? what will happen if the government one day allows it to be subject to competition????? A future telstra in the making?????
ps i dont have the answer, but something to ponder.

For the drug stocks, one needs to keep an eye on when their major patents are expiring. Alot of the majors have patents expiring soon. Hence the current cheap PE's.

BHP: cyclical industry with potentially high point or near high point in cyclical revenues. Revenue reverts back to someform of long term average, margins will be compressed.

A little rule with cyclicals: dont look at PE to determine buy in points. The market can correctly price cyclicals on a low PE when they believe that earnings are at cyclical highs. The naive value investor just looks at the PE and says low PE buy: potential value trap.

Potential area of interest: healthcare sector: really beaten up sector at the moment on changes in US healthcare laws (some of which havent been even passed yet).

 

[Archer]

Value investors do not use P/E's to determine intrinsic value so it would be of little significance.

As you would be aware IV, return on equity is the important factor in driving company value.

 

[steveadl]

Recently topped up my AAPL

Talk about a roller coaster overnight in Apple! Close of trade on Friday in US was $348. They announced on Sun/Mon that Steve Jobs is again taking sick leave and stock plummets on open last night to $328, then gradually recovering to $340. Then they announce their Q1 figures about an hour ago after close, smashing all analysts estimates out of the park and have gone as high as $354 in after hours trading. Currently around $345 again.

 

[Intrinsic_Value]

nice earnings announcement from GE.

Held this stock for a while now with an entry price around $13 (but at a lower AU$ conversion rate).

Still its nice to see the strategy working.

 

[Intrinsic_Value]

own visa and oracle.

China Telecom .

not interested at the moment, there was a comment somewhere by the CEO mentioning that its very hard to generate incremental growth.

No growth = no buy unless it comes with an incredible and sustainable dividend yld (say around 15% gross)

I dont need high growth, but i do need some growth even if its just 5% sustainable.

 

[Intrinsic_Value]

some interesting commentary by Jeremy Grantham:
http://www.gmo.com/websitecontent/JGLetter_PavlovsBulls_4Q10.pdf

Notice also the following:
S&P400 which tracks the 'midcaps', ie the S&P501-900 stocks if you like (after the S&P500).

Notice the second attachment, the S&P400 is now tracking above its 2007 highs.

Alot of money has been made on 'buying the recovery'. For how long this will persist i dont know, but thought needs to be given: how much of the recovery is already factored into these stock prices.

Just food for thought.

 

[Intrinsic_Value]

Found another company I like and have taken a position in for the long term.

Has the following characteristics:

- P/E of 27 so not cheap, but a high growth stock so to be expected.
- Gross margins of 85%+ and net margins of 30%+.
- Revenue growth over 20%pa over last 5yrs.
- Net profit growth almost 40%pa over last 5yrs.
- Virtually no long term debt.
- The industry leader in their field. Hundreds of patents worldwide.
- Majority of revenue (80%+) comes from licensing and royalties of others using their technology.
- Their IP used worldwide by numerous OEM's.
- Inventor/founder still owns 50%+ of the co. (I always like large insider ownership).
- Their technology is used in: tv, radio, mobile phones, game consoles and software, DVD/Bluray/CD, computer hardware and operating systems, cinemas, pretty much everything! Licensed that is, they don't manufacture too much themselves hence the high profit margins.
- Household name - as soon as you hear it you'll know them and what they do.

Can anyone work out which company I'm talking about? (Hint: No it's not Qualcomm which a few of the above characteristics would fit)

getting close to hitting the trigger on this one now.
2011 GAAP estimates of $2.57-$2.73 (non-gaap estimate higher)

 

[steveadl]

getting close to hitting the trigger on this one now.
2011 GAAP estimates of $2.57-$2.73 (non-gaap estimate higher)

Yes, beat expectations but getting hammered with lower guidance. Though only $20M lower from memory which illustrates how the co's with higher PE's get spanked when the skip a beat.

 

[oracle]

Yes, beat expectations but getting hammered with lower guidance. Though only $20M lower from memory which illustrates how the co's with higher PE's get spanked when the skip a beat.

Historically, very few companies have managed to grow at about 20%+ for a long time. So very rarely does it pay to pay a premium (higher P/E) to get into a growth stock.

Much better strategy is to identify good growth companies and be patient and ready to pounce when market presents you with opportunity to buy it at reasonable price. Some people call it GARP (Growth at reasonable price.)

Sure, at times you might never get to buy at cheap price and that is the risk you take with this strategy. But atleast when you buy cheap you know have some margin of safety by not overpaying and risking future returns if the company's growth slowed.

Cheers,
Oracle.

 

[steveadl]

Currently looking at Colgate and Reckitt Benckiser. Quite phenomenal how many everyday brands the latter owns.

One issue I have to sort out before I buy is whether to buy RB in the UK directly, or through the US ADR's. Any thoughts IV? My thinking is to buy the UK stock directly as it simplifies the currency exchange influences ie. AU-UK rather than AU-US-UK. Also not sure, but I don't think I'll be able to participate in the DRP if buying through the US, which is a big negative plus the ADR's aren't as liquid which whilst not a huge issue as a long term B&H stock - is something I'm aware of.

Is there any obvious downside I'm not seeing with buying the UK stock directly as opposed to US, or conversely a benefit of buying in the US instead?

 

[Intrinsic_Value]

Currently looking at Colgate and Reckitt Benckiser. Quite phenomenal how many everyday brands the latter owns.

One issue I have to sort out before I buy is whether to buy RB in the UK directly, or through the US ADR's. Any thoughts IV? My thinking is to buy the UK stock directly as it simplifies the currency exchange influences ie. AU-UK rather than AU-US-UK. Also not sure, but I don't think I'll be able to participate in the DRP if buying through the US, which is a big negative plus the ADR's aren't as liquid which whilst not a huge issue as a long term B&H stock - is something I'm aware of.

Is there any obvious downside I'm not seeing with buying the UK stock directly as opposed to US, or conversely a benefit of buying in the US instead?

I dont have much experience in this steve, so i could well be talking out of my backside. But i would assume that since your reference currency is AU$ it doesnt matter much if you buy the UK stock directly or through the US via ADR's.
The ADR will be linked through the exchange rate to the UK direct share, and your 'return' will be linked through the AU$/US$ exchange rate.

There can sometimes be small differences though. (several % points).