I am retired and take educated guesses on all things financial.

August 28, 2008

August 28, 2008: My Plasma TV, Refrigerator and The Wife For A Car: America's Car-Mart

Well, probably not a wife, but America's Car-Mart is one of those smaller ($225m cap) niche companies that know how to creatively make a buck.

America's Car-Mart was founded in 1981. They presently have 92 locations in Arkansas, Alabama, Oklahoma, Missouri, Kansas, Kentucky, Indiana, Tennessee and Texas, Car-Mart (CRMT)provides affordable used vehicles for the proletariat. With over 36,000 customers (many repeats, according to Car-Mart) this company has managed to maintain success by operating in smaller towns, internally financing most of the vehicles it sells and fostering unique sales system that at times borders on barter.

At CRMT, buyers can pay their vehicle loans weekly, biweekly and monthly. If the buyer is short on cash, Car-Mart will place the vehicle in a layaway plan that allows payments of up to six weeks on one's down payment. Car-Mart trades for just about anything of value, from electronics, to household appliances, even farm animals, making this one-of-a-kind company part auto dealer, part loan company, part pawn shop and part rendering factory. Perfect for the small-town southern and south central U.S.

Smart management makes this business model work. CRMT is actually more highly rated by a majority of analysts covering the used vehicle sector than any competitor - including Car Max. Located in Bentonville, Arkansas, Americas Car-Mart has control over almost all the pieces of their business - kind of like the "other" Bentonville, Arkansas company. CRMT recently opened two new lots, in Lexington, Kentucky and Stillwater, Oklahoma - growing slow and steady. President Hank Henderson, on the eve of announcing CRMT earnings on September 4th, stated that America's Car-Mart has the best selection of quality used vehicles in their 25-year history. Business is brisk.

Trading at $19.00/share on August 28th, CRMT has had a fifty-two week price swing of $9.02-21.33/share. The PE is about 14.5 with no dividend. Their are 11.7m shares outstanding with a reasonably active daily trade record.

If you think that the average southern American will shun high-priced,smaller hybrids for those low-priced "mature" SUVs, Oldsmobiles, Pontiacs, Chevys and Fords that can be financed or bartered through a small town car lot with locals running the show (making money on all the angles), CRMT may be worth your speculation. My bet is that the red states will purchase within their financial means (a lesson yet to be learned on the coasts) and continue to grow America's Car-Mart business.This stock may hit $25 soon if earnings beat the street estimate next week.

You just have to cheer on a company that will take a cow and a refrigerator as boot for a 2001 Chevy Blazer.

The Author has not traded farm animals, appliances or his children for CRMT stock at this time.

August 26, 2008

August 26. 2008: Lessons Learned, Ready To Buy Construction Related Stocks

A few weeks ago, I compared the cost of purchasing a new Hybrid vehicle you did not need a crowbar to fit your body and passengers into vs. a 2005-6 SUV. It was no contest. Even at $4.25/gallon, the SUV won hands down because they are priced to extinction.

I put my theory to the test, and two weeks ago purchased a fully equipped 2006 GMC silver Envoy with 23,400 miles for $13,150 - and the dealer threw in a brand new set of tires to boot. The Envoy had MSRP'd for over $32,000.00 when it was leased in January of 2007. And there is still the GM warranty through 36,000 miles.

The point being, don't fall for the latest gimmicks, rumors, political correctness or conventional thinking when you decide where to place your hard-earned cash.

In the midst of the present housing crisis, I formed a North Carolina LLC to build moderate income housing in an area where luxury homes were languishing - and contractors and their subs were having to find work to make ends meet. I am selling in this supposedly horrific housing market more homes than I can construct. Why? Because they are priced cheap ($124g-160g) and detailed with things people want (tile, 48inch showers, open floor plan and other attractive features. Going green? For most builders, going green for them means another buyer rip-off. Our green recommendations, which save about 35% of energy costs, include R-11 insulation, energy star inexpensive appliances, water saving shower and spigot heads, an energy miser water heater and caulk. Who in the heck needs a $40,000.00 green package when about $700.00 in additional costs saves that much energy? Reminds me of the SUV vs. the Hybrid.

Contrary to other views, I am finding home supply stores - including Home Depot and Lowe's - and builder supply companies, offering significant discounts on materials. I am finding as much as a 35% difference in cost by simply price shopping and demanding a discount to meet the best price. Another important point: labor is cheap now. Very cheap.Large general contractors ans McMansion builders are not providing work. Niche builders like our company provide steady work and great working conditions, including timely payments and hands-on encouragement. Tradesmen appreciate that.

Buyers need to be in good credit standing. Hooray!! Finally!! I appreciate that, because qualified buyers are much easier to find buying a home I build that they can afford. The smoke and mirrors of inflating a poor credit risk to prosperity through artificially raised home prices for a home the buyer cannot afford initially (thanks in large part to Realtors who want top dollar for the commission and the appraisers who still routinely ask "What value do you want to extract from your home?" instead of giving an honest price point) is receiving a long overdue farewell.

Opinions aside, I am a strong proponent of stocks that will benefit the home rehabber, remodeler, international construction and, needless to say, infrastructure.
I don't think that going green is going to be cause to let our road and bridges return to nature.

Here are a few picks:

USG (US Gypsum) - cheap, and vital to almost all construction and many infrastructure projects.
Vulcan Materials (VMC) - the basics of basic construction, and a takeover candidate in my opinion.
Wells Fargo (WFC) - still financing at excellent rates.
National City (NCC) - everybody wants to hate this large lender...that is a mistake.
Canadian National Railway (CNI) - transporting the basics and the stock is cheap.
Weyerhauser (WY) - wait and watch this security. Land, land,land.
Lowe's (LOW) - a better business model that Home Depot, increasingly friendly to contractors and homeowners looking for great appliance prices.
Wal-Mart (WMT) - lots of things to buy for the home at rock bottom prices...and contractors shop there for a number of items.
iShares Global Infrastructure ETF (IGF) - for everyone's needs.

If you are looking for the best cost-effective water saving devices for your home, google Niagara Conservation Efficiency Kits. Home builders hate this site, because you can save lots of money and water usage for practically nothing.

August 21, 2008

August 22, 2008: Foreign Currency CDs and more, A Good Idea

Marc Faber recently stated that his personal holdings included foreign currency. I haven't really explored this investing island for a long time. If you are tired and stock-heavy in an internationally volatile market, perhaps foreign currency cd's and a few other eclectic foreign currency basket cd's are in order.

A very active market in these type of investments comes from EverBank ( EverBank offers WorldCurrency CDs for many countries: Australia dollar, Brazil real, British pound, Canadian dollar, Chinese renminbi, Czech korune, Danish krone, Euro, Hong Kong dollar, Hungarian forint, Icelandic krona, Indian rupee, Japanese yen, Mexican peso, New Zealand dollar, Norwegian krone, Polish zloty, Singapore dollar,South African rand, Swedish krona and Swiss Franc.

WorldCurrency cd's are available. If diversification is an important goal with currencies, look no further.Take advantage of EverBank's variety of single cd's comprised of multiple currencies - each strategically designed to focus upon a specific regional strength, and/or geographic and economic development. Cds are available in such areas as commodities, new world energy, prudent central banks, geographic - the list features almost twenty of varying degrees of sectors and/or regions. Look within their web site for all the details.

For US bulls, there are DollarBull cd's, which has the investor "borrow" money from a foreign country and benefit if the US dollar appreciates against the currency. These are available in all major currencies.

For US bears, there is the WorldCurrency Access Deposit Account, which is the correct choice if the investor seeks to diversify a financial portfolio globally against a depreciating US dollar without locking into fixed terms. This is also a smart business solution if you require a cost effective account to manage foreign currency exposure.

All in all, EverBank offers numerous effective ways to avoid the vagaries of stocks for the safety of interest-bearing cd's with the ability to hedge against currency fluctuation using EverBank's blanket approach of currency in varied determined scenarios.

In this market, I advise investor's - and myself - to utilize holistic diversification beyond stocks and bonds. This creative bank may assist the average investor find interesting opportunities to make a zloty or two.

August 20, 2008

August 20, 2008: Happy 91st, Mr. Frank Boker

I think everyone should have at least one teacher that not only taught superbly, but was there to encourage - and demand - maturity, loyalty and passion to their subject, to be a White Knight when things were not going well at home, in school or with other scholastic relationships.

A lifelong friend of almost fifty years (in itself an achievement, but that is for another day) e-mailed to inform me that a number of alumni of this teacher's training were intent upon inundating him with 91st birthday wishes.

This teacher, my elementary and junior high school Band Director and first private instructor on clarinet and saxophone, was my inspiration and God for the years of his direct contact with me and for my life. He taught me well...years of Solo Clarinet in the Illinois All-State Band and Orchestra (they gave me the option of which one), a nifty stint of four years as concertmaster of a major university band, orchestra and wind ensemble, professional musician and then on to other endeavors after a bout with Bell's Palsy stopped a music performance career dead in it's tracks at age twenty-two.

Coming from a poor area of close Suburban Chicago, this teacher raised my personal expectations, goals, objectives and morale all the time, unconditionally. He led me in the appropriate direction, taught me to accept compliments, and even more importantly, criticism and disappointment gracefully and to always inwardly prove doubters and foes wrong by deeds and not words or worse.

In short, he was and is my hero. So, Mr. Frank Boker of LaGrange Park, Illinois, here's to a great teacher and mentor. I hope you enjoyed my gift, Gunther Schuller's book, The History Of Jazz - The Swing Era. And I thank you with highest regards for your being there for me and many others who still remember you 45 years and more after you touched our lives.


August 18, 2008

August 18, 2008: U.S. Gypsum, Speculate With A Necessity

Although I have made very good money in real estate this year, especially in rentals and apartment renovations that have come to banks via foreclosures, I understand the reluctance of investors to get back on board with securities that represent companies belonging to the real estate-related sector. However, one commodity that all aspects of construction from foreclosures to rehabilitation to renovations to additions to modern updating to new construction must have is wall board (and related construction materials).

U.S. Gypsum, a Chicago-based manufacturer and distributor of building materials, produces a range of products for use in residential, non-residential and repair and remodel construction, as well as products used in industrial processes. The company is divided into several entities:

USG Mexico has been a leading supplier of wallboard and related components in Mexico since 1969. This division also exports products to Central America and the United States.

USG Interiors was formed by USG in 1986 to serve the multi-billion dollar commercial interiors market. It is a leading manufacturer of acoustical ceiling panels and ceiling suspension systems. It holds the #2 position in market share for these products in the U.S. USG Interiors continually introduces innovative products such as the recent award-winning "compasso" curved suspension ceiling, metal ceiling panels and unique three dimensional panels.

United States Gypsum Company was incorporated in 1901, formed by an alliance of thirty firms that produced gypsum rock and plaster. It is North America's largest manufacturer and marketer of gypsum-based products.United States Gypsum Company created the world's first commercially viable wallboard called "Sheetrock" in 1917. It receives gypsum rock from 14 mines and quarries in the U.S., Canada and Mexico. This subsidiary also operates a fleet of cargo ships based in Bermuda, seven paper mills that produce high quality wallboard paper from 100 per cent recycled paper and the largest plant that produces fiber board in, of all places, Gypsum, Ohio.

L&W Supply Corporation was formed in 1971 to provide efficient distribution and a service network for independent builders and contractors. L&W is the nation's largest distributor of specialty gypsum wallboard, operating a fleet of almost 1,500 light and heavy-duty trucks to deliver product around the country. This entity specializes in transporting and stocking wallboard,joint treatment, acoustical ceiling panels,ceiling suspension systems, drywall steel, insulation, roofing products and other building materials.

CGC is the leading gypsum wallboard producer in eastern Canada, and is the country's leading producer of ceiling grids. CGC markets, delivers and stocks materials in a similar fashion to L&W.

And, USG Corporation itself was established in 1985 as the holding company for subsidiaries and for research and development - primarily in Libertyville, Illinois outside Chicago.

Trading at $27.38/share, USG has seen a 52-week range of $23.12-40.54. The company beat Wall Street expectations recently, but it still lost money. With a market cap of $2.7b and trading actively at almost 1 million shares per day,USG, rated a SELL by many analysts, represents a very interesting speculation at this time.

USG caters to every facet of the building industry by providing essential products that are used throughout all types and standards of construction. Although new homes are not being built in great numbers, one can be sure that rehabbers, renovators and other users of USG's core products are not going away. If commodity prices continue to drift down in price, I believe that USG could be back in the $40/share range sooner than the analyst's expect.

USG is an excellent way to play every angle of property enhancements. And, a excellent speculative buy vs. other building supply and real estate sector companies at this time.

August 17, 2008

August 17, 2008: Fill Up on World Fuel Services

Years ago, Money magazine interviewed a few celebrities and asked them what was their favorite stock. Since this was before the tech bubble burst, I recall that almost all picked a stinker, except one. Remember "America's Rich and Famous"? Host Robin Leach mentioned what at that time was to me a new, yet intriguing security. That security was World Fuel Services (INT). He stated that the world will always need fuel, and with a growing population, World Fuel Services was a long term holding for him. I owned this stock in the late 1980s, made a few bucks and traded it out.

INT is not a talking head favorite, but I like it now, even after a modest run.
World Fuel Services is engaged in the marketing and sale of aviation, marine and land fuel products and services worldwide. The company offers fuel and maritime services to a base of maritime customers, including international tanker and container fleets as well as time-charter operations. INT also sells fuel to the United States and other governments. INT aviation offers fuel to major commercial airlines and second and third tier air operations, cargo carriers, discount carriers, regional carriers, corporate and charter carriers, fractional owner carriers, military fleets and many governments. On land, it operates a significant petroleum distribution network that fuel distributors use to hedge shipment timing.

Based in Miami, FL, World Fuel Services currently trades at $29.61/share. The 52-week share price has ranged from $19.18-45.08, generally inversely tracking the cost of oil. With a market cap of $845m, INT sports a PE of only 12.4 and trades below its 200-day average - although it has bumped up over the past month. Analysts are mixed to slightly favorable on INT.

With carbon energy not in the media scarelines of doom at present, now is a great time to snap up INT for your portfolio. I think it may well reach into the mid-$40s in several months. G'Day, Robin. Well done.

The author recently purchased a position in INT for his Permanent Portfolio.

August 15, 2008

August 15, 2008: Real Estate and More Real Estate

Returning from an extended trip to Columbus, Ohio working on the 96 unit rehabilitation of an older troubled apartment complex and continuing to ramp up operations near Wilmington, North Carolina with affordable homes in a sea of premium priced luxury plantation settings (that are not selling).

It appears to me that some of the Property Management programs in place at the premium developments are really puffing up costs to make a quick buck. Out of state property owners are naive as to the hosing they are taking. Present owners are naive. A perfect storm for Property Management firms, their legal departments and some real estate brokers to make a financial killing. I believe that this out of control situation works to my advantage because any legitimate and reasonably priced construction and management entity looks mighty appealing once the management fees of many current outfits are exposed.

I maintain the strong appeal of cheap multi-family housing for banks to rehabilitate for future profits and individual investors to own. The rental market is strong in every area I have explored. Forget the beachy-coastal areas of Florida and California. They have many more social and money problems that will tax or frustrate owners to look elsewhere. I would not buy multi-unit housing in either state on a bet.

On the run here at a Columbus Marriott with a weak laptop battery.

Posts that have been sporadic lately will pick up significantly beginning next week. I have a lot of opinions to vent on the market and real estate.

August 10, 2008

August 10, 2008: Ready for Reddy: Dr. Reddy's Labs

India can be a nasty place to invest. Government bureaucratic nightmares that make ours seem paltry in comparison. Corruption, swindling, frequently changed regulations to suit political whims: check, check and check. Buying the Indian market through an ETF or sector mutual fund was popular - until the market hit the skids.

One stock I like now (other than ICICI Bank - IBN) is Dr. Reddy's Labs, RDY, as an ADR. This rather oddly named company is a diversified and aggressive pharmaceutical company with a presence in over one hundred countries. RDY has seen its share price have ups and downs, but I believe that now is a good time to enter the security with a target price of $34/share. Presently RDY trades at $14.76 with a market cap of $2.5b. As its 52-week high has only been slightly north of $18/share, one could question my sanity at making a bold calculation of a future price two years or less hence.

Although RDY saw earnings fall 26% at last report, they did beat most expectations. Importantly, RDY has been piling up pharma acquisitions with a lust to expand into the more profitable areas of medical treatment in developed countries and coastal China. Their operations in the Third World, while noble, are not anything to get excited about as an investor.

RDY's efforts at gaining approval of high-use generic drugs has been accelerated, most recently the FDAs approval of a generic form of Merck's Fosamex for osteoporosis. My mother at aged 98 takes this drug and feels that it has prolonged her agility without pain - along with nine raisins soaked in gin aged two weeks, as per the National Enquirer, for arthritis.

Dr. Reddy's Labs has been immune from Indian government and societal demands because it is a worldwide entity. RDY has entered as many as twenty-four different areas of pharma research and sectors which bodes well for future drug pipelines.

In short, RDY is at the cutting edge of worldwide market expansion, generic imitation and pharma research. Just where one would like to invest in this crazy market.

The author does not presently hold a position in RDY.

August 06, 2008

August 6, 2008: Ideas, Ideas. The Neural 25.

Blog readers from just about all corners of the globe have e-mailed me over the past several months looking for investments that may fit into their asset allocation and sector model(s). In this market, one is prone to reply "good luck". But that is a poor response. I have responded to each request as the situation presented itself.

Today, I am giving readers a list of twenty-five stocks that are known as the Neural Fair Value 25 Portfolio. These stocks are judged by several criteria to be undervalued and having a greater potential than other securities to recoup, making money for the astute investor.

Here they are:

ACN - Accenture Limited
ADCT - ADC Telecommunications
BIG - Big Lots
BMC - BMC Software
CHKP - Check Point Software Technologies
FTI - FMC Technologies
GD - General Dynamics
GPN - Global Payments
HLF - Herbalife
HPQ - Hewlett-Packard
LIZ - Liz Claiborne
LMT - Lockheed Martin
MHK - Mohawk Industries
NE - Noble
NOK - Nokia
NTAP - NetApp
OXY - Occidental Petroleum
RNR - Renaissance Holdings
SNE - Sony
SYMC - Symantec
THG - Hanover Insurance
URBN - Urban Outfitters
USTR - United Stationers
WDC - Western Digital
WXS - Wright Express

Some of these stocks make me cringe. Others may make sense. I am not recommending this Gang of 25 except for further research on your part.

August 05, 2008

August 5, 2008: Large Volume Increase ETFs to Examine

Back from a brief extended family outing in Niagara Falls, Canada. Nice to have USAF Maj. Tom and USAF Capt. Mrs. Tom (Jamie) and grandson Tom along. I highly recommend the serene Sterling Hotel and Spa off Ellen Street. Almost every spotless room in this one-year old eclectic hotel features multi-jet showers, a jacuzzi, plasma television, huge superb king-sized bed, hardwood floors and impeccable service. This quality is quite uncommon in Niagara Falls. For a couple of hundred bucks or less, you eliminate the riffraff stumbling down (or up) Clifton and the sounds,smells and Calcutta-type masses of humans mingled with small restaurant frying odors. It is also near the new Casino, which is friendly, smoke-free and easily accessible within a grand pavilion atmosphere.

My belief is that the US dollar is going to begin a gradual ascent, along with interest rates and a resultant recovery in the financial sector (wider spreads will do the trick after the remainder of the dirty bathwater is tossed out before the election). I am not a bull on Europe, especially "old Europe" and Russia. I am bullish on New Europe,the Pacific ex-China and the emerging Middle East. Modest commodity exposure remains essential. Certainly there are other areas that are interesting as well.

While having a few idle moments in my hotel room, I constructed a screen of ETFs that have had volume increases of over 100% compared to their 90-day moving average. Here are the eleven that made the cut:

PBE - PowerShares ETF Trust Dynamic Biot. and Gen. priced at $19.75.
PEJ - PowerShares ETF Trust Dynamic Leisure and Ent. priced at $13.45.
PJP - PowerShares ETF Trust Dynamic Pharmacy Port. priced at $18.17
PWB - Power Shares ETF Trust Dynamic Large CP. GR. priced at $16.80
PFI - PowerShares ETF Trust Financial Sector Port. priced at $22.50
RFG - Rydex ETF Trust S&P MC400 PURGR.priced at $53.07
RWR - SPDR Series Trust S&p Biotech priced at $67.76.
XBI - SPDR Series Trust DJWS REIT ETF priced at $69.20.
XOP - SPDR Series Trust S&P Oil Gas Exp priced at $51.20
XPH - SPDR Series Trust S&P Pharma. priced at $33.17
VPU - Vanguard World Utilities ETF priced at $76.35

A screen is what it is and none of the above are advocated for immediate purchase. They do indicate to me what areas are being traded for better or for worse. And money can be made if you are on the right side of the trade.