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I Heart Luby’s (LUB)

admin — Sun, 20 Jul 2008 05:05:12 +0000

Right now, my largest stock position by far is in a Texas cafeteria chain called Luby’s. Unless you’re from Texas, you most likely have never heard of this company. Your average trader/investor on Wall Street certainly knows next to nothing about this company, which makes me feel like I have an advantage over the market. Here are the four main reasons I have most of my cash parked in Luby’s stock:

1. Luby’s is ran by Texas’s most successful restaurateurs, the Pappas brothers. Again, if you’re not from Texas, you probably have never heard of Pappasitos, Pappas Seafood House, and Pappadeaux. But if you are from Texas (especially the Houston area), these names are legendary. The Pappas brothers started buying stock of Luby’s about eight years ago and are now the CEO and COO. The brothers own over 30% of the shares outstanding, and they’ve been BUYING lately too. While many were quick to dump the stock over a few bad quarters, the Pappas were buying. Hmmm, who am I going to side with. Some random Wall Street trader who knows next to nothing about the stock, or the men who know the company and the Texas restaurant business inside and out. I think it’s simple.

2. Luby’s has a solid growth plan. Luby’s has a new model in place for its cafeterias. Its new model has a more modern appeal. Additionally, it sells higher margin items through its coffee bar (besides coffee, they offer smoothies and ice cream). These newer models have shown to outperform the traditional Luby’s cafeteria model, likely due to the overall enhanced customer experience. As Luby’s builds more of these types of cafterias and replaces its current cafeterias with these models, we can expect higher revenues and profits.

Additionally, Luby’s has been expanding its culinary contracting business. Basically, it serves foods at hospitals and other health care facilities. Luby’s food has always been a hit with the geriatric crowd, so there is more growth opportunity for this small segment of the company too.

3. Luby’s has valuable real estate holdings, which I believe are underappreciated by the market. Luby’s owns the land on more than 90 of its 128 cafeterias. Many of these cafeterias were built 20-30 years ago. On its balance sheet, Luby’s lists its land assets at cost, so its land values as listed on its books are grossly undervalued. Currently, Luby’s is trading at its book value. Putting two and two together, I think it’s safe to say that Luby’s is trading well below its true book value. I’d venture Luby’s may be even trading at or below its liquidation value.

4. Did I mention the company has no debt?

Disclaimer: Authors owns shares of Luby’s (LUB)

Why I’m Shorting Microsoft (MSFT)

admin — Tue, 27 May 2008 00:24:42 +0000

The classic tech behemoth, Microsoft, has both a consumer and business customers. Most of us are familiar with its consumer side, though its business side is actually which brings in most of its revenues. Most of my knowledge is about Microsoft’s consumer side, whose prospects are looking increasingly atrocious in my opinion.

On the consumer side, Microsoft makes money from its desktop applications (such as Microsoft Office) as well as its search engine portal, msn.com. The price it charges for its desktop applications is currently exorbitant. To get a full Microsoft Office suite, you are staring at a $400 price tag currently. Microsoft used to be able to get away with this since everyone had to have Microsoft Office, Word and Excel were the norm

Now, however, there are increasingly viable, cheap alternatives. Google docs, its free online service, is almost identical to Word/Excel, except you don’t have to pay a dime. Also, since it is saved online, there is no worries that your computer may crash. You can also access these documents from any computer, as well as easily collaborate on them with other people. In the past, I did all of the accounting for my businesses on Excel. Now, I use Google Docs because it is both free and superior in my opinion.

In addition to Google Docs, the increasing use of Macs should be cause of concern for Microsoft. Right now, Apple is the “hot” brand and people can’t get enough of these types of computers. No Mac user in his right mind will shell out $300+ for Microsoft Office for Mac, when he can get Apple’s version for about $89.

I also don’t see Microsoft expanding its online presence anytime soon. Few people use the msn.com search engine, and it’s likely not going to attract anymore users anytime soon. There’s simply no reason to, as Google is still the superior search engine. Its portal, msn.com, is also vulnerable if Google starts a portal site similar to it. Google is already moving into the portal space, with the launch of its beta finance site (finance.google.com), as well as the success of Gmail.

In my opinion, Microsoft’s failed attempt at buying Yahoo is a sign that the company has run out of ideas and is desperate to remain a player in the consumer sphere. Microsoft’s products are no longer cutting edge; the main reason people use them is simply because they have been using them in the past. With Google and the increasing competition from Apple, Microsoft is increasingly on the defensive, and I expect its stock price to take a hit over the next couple of years.

Disclosure: Author is short Microsoft (MSFT) and Yahoo (YHOO) and long Google (GOOG).

Some Thoughts On Google (GOOG)

admin — Thu, 01 May 2008 06:29:38 +0000

One stock I bought during the March freefall was Google (GOOG). I bought some originally at around $520 and then after it dipped, some more in the $420-$450 range.

After outperforming in its recent quarter, the stock is trading around $575 right now. I’ve taken a bit off the table, but I still have about 80%+ of my shares. I’m still deciding what sort of price I’d sell it at. To me, it was an obvious and clear buy when it was in the low $400′s, but now I’m not so sure. Here are my pros and cons:

Pros:

Google is the clear tech leader in the web industry, period. Other companies are 5+ years behind. Everything Google does is better than its competitors. Some of this has more monetization possibilities than others. For example, as someone who uses adsense, I can tell you that no other advertising network can match its quality (and its Adsense program makes up about 30%+ of its income). To match Google, an advertising network would need to A) serve ads contextually how Google does and B) draw advertisers as effectively as Google does. The technology really isn’t that difficult to do A, but most networks still seem to struggle (Yahoo can’t seem to roll out its YPN network out of Beta). As for B, that is the most difficult to replace, giving Google the biggest moat.

As for search, I don’t see anyone catching up to Google. Even if other search engines can get almost as good as Google, people are so used to using Google that they will likely continue. It seems Google has won the search engine wars for good. Google’s main threat is people stop using search engines, or use them less in the future.

I see web advertising just getting bigger in the future. Web advertising has the capability of being much more targeted than TV or radio advertising. You know your audience’s general demographic, as well as their exact location (using IP addresses). You can test conversion far better as well. With the expansion of broadband, video ads will become more common (though annoying). I believe we’ll begin to see more traditional branding campaigns on the Internet, instead of just advertisers just looking for leads. Well, I suppose people have been saying that for years, but with the advent of DVRs and such, it will happen more and more.

Cons:

PPC is currently very high on the Google ad network. This is of course because when everyone thinks of web advertising, they immedietly think of Google. We have to assume that most advertisers are already paying top dollar for their ads. This might not be the case in 3-4 years as other advertising networks have viable alternatives.

It’s not clear how much more Google can grow. Yes, it can stay on top, but how else will it expand its revenues? Some of its programs, like Google Analytics, are amazing, but it’s not clear if Google will ever be charging for these programs. Gchat/Gmail are great, but how value added are they really?

Taking all of these things into account, I think Google’s a hold for me for a year or so (unless it hits like $750 or something and becomes a tad overvalued). We’ll see how everything plays out. Should be very interesting!

Disclaimer: Author owns shares of Google, (GOOG)

Why I Sold My Apple Shares Today

admin — Fri, 25 Apr 2008 23:56:19 +0000

I had a nice little run with Apple stock in the past couple of months (ticker symbol AAPL). In the midst of a Wall Street panic, I was able to pick up shares in the $130-$135 range.

I was attracted to Apple because of its brand. Right now, Apple is hot. It’s iPhone is the coolest phone the market. Mac sales are soaring (because Mac is cool). Ipod sales are slowing, but that’s because everyone already owns an iPod. Pretty much anything Apple sells, there’s going to be a demand for the product.

Apple is now trading just shy of $170. It was previously trading at $200 during its October highs, and it may get back up there. With Apple being the hottest brand on the market, who knows how much it will beat Wall Street estimates. Why did I sell then?

Well, quite frankly, it’s because Apple’s brand is hot right now doesn’t mean its brand will continue to be hot in a few years. Right now, everyone needs an iPhone. People who have absolutely no practical reason to shell out $400 for an iPhone are buying them. I use an Iphone and love it. But I run an Internet business, so I have a reason to check my email every 5 minutes. My little sister in college wants an iPhone or at least a blackberry (she was whining at my parents to buy her one). I told them, under no uncertain terms, should they shell out the money for one since she simply does not need it.

Apple had a great quarter because Mac sells soared. Apple’s brand and image led people to want to buy more Macs (my sister in fact begged my parents to buy her a mac). I have a Mac laptop, and it’s ok. But I chose a PC for a dekstop since, pound for pound, PCs are a far better value for the dollar right now (and shit, I’m rich!) People are buying Macs right now because they are cool, not out of any need.

Apple could leverage its brand into more fields and could continue to grow at a rapid pace. Apple TVs? Apple microwaves? Apple cars even!? Who knows. A hot brand sells. But, a hot brand can also cool off. In my opinion, unless Apple expands its product line even more, it’s going to run into growth issues.

Apple’s moat is its brand. A brand can be a great moat, but who knows how long a ‘hot’ brand will stay ‘hot.’ After all, the appeal of Apple’s products is a sort of quality/elitist sense. If everyone has an iPhone, I’m going to want to buy some sort of souped up Blackberry instead.

Disclaimer: Author is a former Apple shareholder at the time of his posting.

Taking Advantage Of The Early Market Drop

admin — Wed, 23 Jan 2008 03:32:38 +0000

After checking the futures over the weekend, I knew the market was going to drop a lot at the open. Like most people, I was happily surprised that the Fed decided to cut interest rates by .75%, which likely averted a market catastrophe.

What I found even more shocking though is that the market still open down almost 500 points. I knew that this was panic selling (a reaction to the foreign markets) and that cool heads would prevail soon during the day. I thought the market might even be higher for the day, which didn’t happen, but the market did bounce back considerably.

I took advantage of the drop to buy some stocks that I liked at very cheap prices. Here’s some bargains that I found, as well as the reasons I bought the stocks. In full disclosure, I obviously now own these stocks, so I’m biased in their favor. Don’t take my opinions as financial advice.

Jack In The Box (JBX): This major fast food company has taken a beating lately. I’m not exactly sure why this stock is down so much. Even if a recession hits, people aren’t going to eat fast food less. If anything, they’d eat more! I like JBX’s low price/sales ratio, and the company has excellent growth prospects. It’s flagship restaurant, Jack In The Box (it also owns Qdoba), still has a lot of room for expansion in the Eastern United States. Its ratios are all much smaller compared to peers like McDonalds and Burger King. For example, Jack In the Box’s P/S is .5, whereas Burger King is 1.34 and McDonalds is 2.67. These other companies do get much of their sales outside the US, and there seems to be a premium for international exposure in today’s market. But this huge of a gap is silly, especially considering Jack In The Box has much better growth capabilities in its home country. I was able to scoop up quite a few shares around 22.60 when it opened down by a few percentage points, and the stock ended up closing at 25.55 for the day.

Jamba Juice (JMBA):: This is a major smoothie chain that is based in California (where most of its stores are located as well). This stock has been beaten down a lot lately as well, off about 80% from its highs. From what I can tell, the legitimate arguments against the stock are that smoothies are a dying fad and that the company is not currently profitable (and it’s not clear when it will or ever be). Also, a recession caused by housing would likely hit California pretty hard, which might cause people to drink less smoothies.

Here’s the reasons I bought the stock though:

1. The whole smoothies are dying fad thing is well-priced into the stock at this point.

2. It’s difficult to tell what Jamba’s profitability prospects are. Gotta figure it can achieve it though; might just need to shut down some bad stores. After all, it doesn’t take a nuclear scientist to figure out how to run a profitable smoothie store.

3. What I like a lot is the enterprise value/revenue ratio. Jamba has a lot of cash, no debt, and a lot of revenue. It’s enterprise value/revenue is .28. Compare that to Starbux’s of 1.54! Granted, Starbux is actually profitable right now, but I’d find it hard to justfiy buying SBUX over JMBA. McDonalds Enterprise/revenue is 2.88 (Jack in the box is .64, which makes me want to buy more JBX as well.) There seems to be a weird market momentum where people are viewing Mcdonalds as a recession proof stock, but the declining housing market is going to stop everyone from eating at JBX and Jamba Juice. I just don’t think this is the case.

I was able to buy some JMBA at 2.15 (it had closed at 2.34 previously). The stock ended up closing up a little for the day, at 2.37. Sometimes, a sharp drop can provide good buying opportunities!

Invest In What You Know

admin — Fri, 11 Jan 2008 04:05:18 +0000

If you are going to beat the market, you will need to do something better than most investors out there. This is no easy task. Remember, most money is managed by professionals. To beat the market, you need to know something that most professionals don’t know about the stocks you trade.

What do I mean by this exactly? Well, look at it this way. There are always two sides to a trade. If you are buying a stock, then someone is selling the stock. You each are essentially making bets about the future of the security. The seller thinks it’s good for him to get out, while you think it’s time to pick up shares of the stock. Time will only tell who is right.

It’s difficult to beat the market by investing in large and mega-cap stocks like GE and Microsoft. Sure, these companies are generally safe investments for the long run. But it’s difficult for an average investor to tell which of these companies will have above-average returns. These companies have many analysts covering them, and the major institutions that invest in them do significant amount of research to know when it’s best to buy or sell these types of companies.

For an average investor to beat the market over the long term, he or she often needs to invest in under-followed companies, which are generally small caps. Since fewer analysts and professional investors focus on these companies, the chance for finding good bargains is higher. Of course, the chance for finding total duds is higher too, so small cap investing can be riskier.

How do you find good small caps? Well, generally, it’s best to start off with companies you know well. These companies may be locally-based or they may be in a field that you understand well. If you are in the web industry, then you may have a better understanding of web-focused companies and their prospects and risked, so you may be in a better position to make a calculated judgment about the future of a stock compared to most people in the market.

If you want to beat the market, then view your stock investments as bets. When you buy, do so because you think you know something or understand something that the seller doesn’t. The best way to do this is by investing in companies that you know well.

2007: What Worked, What Didn’t

admin — Wed, 02 Jan 2008 01:01:09 +0000

As we head into the first day of stock trading tomorrow, let’s recap what worked and didn’t in 2007:

On the whole, the market had a mediocre year. The S&P 500 was up 3.3%. Not a bear market, but well under normal historical returns. People who were invested in cash (and got fed funds rate) beat the market.

Financials got killed, largely as a result of the credit crunch and housing meltdown. Home builders and those that were exposed to the real estate market got smashed. Countrywide Financial was down by 79% for the year. Washington Mutual was one of the worst performing banks, down 70% for the year. Goldman Sachs, who had a short position to the real estate market, was up by about 8% for the year.

Tech had a good year. The QQQQ was up close to 19% for the year. The Nasdaq composite, which is a broader index, was up 8% for the year. Some tech leaders included Research in Motion, up 166% and Apple, up 133%.

Small caps underperformed the market this year, especially small cap value stocks. The Russell 2000 ended the year down 2.7% and IWN, a small cap value ETF, ended down 12%.

Stock Portfolio Management

admin — Sun, 23 Sep 2007 06:00:02 +0000

Stock portfolio management is the process of managing your stock portfolios to get the maximum profit with minimum risks. It is considered a highly dynamic process, as re-evaluation of investment plans is done continuously whenever market value changes.

For stock portfolio management services, you need the help of a financial advisor. He provides necessary information to meet your investment objectives. He assesses your holdings and develops a planned procedure to attain the goals. On the other hand, the investor should know certain things that help him take proper decisions. If there is more money, it is better to invest in different stocks and industries, because some investments are highly risky, and some are slow growing. Also, it is important to collect necessary details about the company before investing.

There are different levels of services in stock portfolio management. Updates are received along with reports, which mainly depend on the level of service selected. It is possible to track investments efficiently and analyze financial status on a regular basis. Security of portfolios can be monitored. Regular market updates and complete tax efficiency are the other advantages of this management process.

Stock portfolio management helps you reduce risks in investing. It manages the whole process of investing in stocks. Stock portfolio management acts as a catalyst to combine various ingredients into a successful investment strategy. To minimize the management processes, stock portfolio management software is also available. Stock portfolio management monitors prices and other factors involved in buying and selling of shares.

About the Author:
Portfolio Management (http://www.e-portfoliomanagement.com/) provides detailed information on Portfolio Management, Stock Portfolio Management, Project Portfolio Management, Investment Portfolio Management and more. Portfolio Management is affiliated with Stock Portfolios (http://www.portfolios-web.com/).
Tag: Stock Portfolio Management

[tag]Stock Portfolio Management[/tag]

Stock Portfolio – Eight Vital Steps To Build A Great Stock Portfolio

admin — Wed, 15 Aug 2007 13:18:28 +0000

A good stock portfolio is much easier to build today because of the wealth of investment information available on the Internet and the ready availability of online stockbrokers. The Internet has made it possible for you to have a trading desk in your own home, it is possible to deal in a wide range of securities stocks, options, warrants and currencies, all by using your own computer at home.

How ever you do need to be careful while there is a mass of good information available there is also a mass of poor information out there also, it is important to carefully vet any website you us to provide stock investing advice.

The internet is a great place to collect information about companies you may be planning to invest in, if you are serious about building a stock portfolio here are eight vital steps you should take to build a well structured personal stock portfolio.

1. Subscribe to a least one recommended financial website which specializes in analyzing company financial information. These websites are independent they do not receive any payment from the companies whose information they list, they earned their income from the subscription that you pay. I know no one likes paying for information on the web, when it seems there is so much freely available but when it comes to investment advice you get what you pay for!

2. Check out the specimen or model portfolios that these websites have listed and investigate the thinking they have used in creating these portfolios.

3. Study the report’s that are provided about each company’s stock, the graphs that are provided are particularly useful and will enable you to clearly see how the stock has performed.

4. Monitor each of the specimen portfolios over a period of time say three to six months, it should be possible to paper trade the stocks in the portfolio to give yourself hands-on experience of investing without risking any of your capital.

5. Compare how the published results for each of the specimen portfolios compared to your own results from the paper trading, if the results are very close this will give you confidence when you start investing your own money.

6. Having paper traded for some time you will hopefully have identified the specimen portfolio that most closely matches your requirements or alternatively you will developed the knowledge to enable you to modify the portfolio to exactly suit your needs.

7. Now that you are ready to take the first real steps in to building a live portfolio you need to subscribe to an online stockbroker.

8. It is best to monitor your stocks on a daily basis and compare the performance of your live portfolio against the model portfolio you used for your research.

By building a share portfolio in this way you will have an investment strategy that meets your objectives and will enable you to build real wealth over the medium to long term.

It is true to say you will never become rich just by listening to the advice of others by following the above advice you have taken a significant step towards your financial independence.

About the Author:
For practical new information about Building a Stock Portfolio visit http://www.stockinvestingforbeginner.com
Tag: Stock Portfolio

[tag]Stock Portfolio[/tag]

Personal Balanced Portfolios Guard Against Recession

arkiebrian — Sun, 05 Aug 2007 14:26:45 +0000

Creating an evenly balanced investment portfolio by dividing assets among such diverse classes as stocks both foreign and domestic, bonds, mutual funds, real estate, cash equivalents, and private equity can help guard against recessions. Determining how much to invest in each asset group depends upon the investor’s individual situation and future needs.

Throughout most of American history it has been more profitable to invest in stocks rather than bonds. However, there have been times when stocks are unattractive compared to other assets. For example, right before the tech bubble burst in late 1999 these stocks had prices so high earnings yields were non-existent. The wary investor could have weathered this situation by diversifying stock investments into real estate investments or other types proven to be less risky.

Making major changes in one’s portfolio should be done at various stages in the investor’s life. A young investor is less risk-averse, that is, he is less susceptible to market corrections for the simple fact that he has a lot of years left to make up for the losses. This investor is looking more to the long-term and wealth accumulation in the distant future. This investor’s portfolio would be mostly invested in the riskier assets such as carefully researched foreign and domestic stocks. Still, the young investor needs to have some balance to guard against market setbacks.

As retirement approaches, perhaps 10 years before, the investor should start diversifying holdings into income-oriented assets. These include government and corporate bonds that pay a fixed return rate on the investment. Certain blue chip stocks with long, proven track records of dividend payments can also be included as an income-oriented asset. Yearly, as retirement approaches, a larger percentage of the investor’s portfolio should be income-oriented until that total is 100% at retirement. After all, as an investor, the ultimate goal should be a comfortable retirement. Once at retirement the time to take risks is over and income must be guaranteed.