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Archive for March, 2010

At 91, the man Warren Buffett famously dubbed a “superinvestor” is still picking unloved stocks.

Walter Schloss has lived through 17 recessions, starting with one when Woodrow Wilson was President. this old-school value investor has made money through many of them. What’s ahead for the economy? he doesn’t worry about it.

A onetime employee of the grand panjandrum of value, Benjamin Graham, and a man his pal Warren Buffett calls a “superinvestor,” Schloss at 91 would rather talk about individual bargains he has spotted. Like the struggling car-wheel maker or the moneylosing furniture supplier.

Bushy-eyebrowed and avuncular, Schloss has a laid-back approach that fast-money traders couldn’t comprehend. he has never owned a computer and gets his prices from the morning newspaper. a lot of his financial data come from company reports delivered to him by mail, or from hand-me-down copies of Value Line, the stock information service.

He loves the game. Although he stopped running others’ money in 2003–by his account, he averaged a 16% total return after fees during five decades as a stand-alone investment manager, versus 10% for the S&P 500–Schloss today oversees his own multimillion-dollar portfolio with the zeal of a guy a third his age. In a day of computer models that purport to quantify that hideous and mysterious force called risk, listening to Schloss talk of his simple, homespun investing methods is a tonic.

“Well, look at that,” he says brightly, while scanning the paper. “A list of worst- performing stocks.”

During his time as a solo manager after leaving Graham’s shop, he was a de facto hedge fund. he charged no management fee but took 25% of profits. he ran his business with no research assistants, not even a secretary. he and his son, Edwin (who joined him in 1973), worked in a single room, poring over Value Line charts and tables.

In a famous 1984 speech titled the “The Superinvestor of Graham-and-Doddsville,” Buffett said Schloss was a flesh-and-blood refutation of the Efficient Market Theory. this hypothesis holds that no stock bargains exist, or at least ones mere mortals can pick out consistently. asked whether he considers himself a superinvestor, Schloss demurs: “Well, I don’t like to lose money.”

He has a Depression-era thriftiness that benefited clients well. his wife, Anna, jokes that he trails her around their home turning off lights to save money. if prodded, he’ll detail for visitors his technique for removing uncanceled stamps from envelopes. those beloved Value Line sheets are from his son, 58, who has a subscription. “Why should I pay?” Schloss says.

Featured in Adam Smith’s classic book Supermoney (1972), Schloss amazed the author by touting “cigar butt” stocks like Jeddo Highland Coal and new York Trap Rock. Schloss, as quoted by Smith, was the soul of self-effacement, saying, “I’m not very bright.” he didn’t go to college and started out as a Wall Street runner in the 1930s. Today he sits in his Manhattan apartment minding his own capital and enjoying simple pleasures. “Look at that hawk!” he erupts at the sight of one winging over Central Park.

One company he’s keen on now shows the Schloss method. That’s the wheelmaker. Superior Industries International (nyse: SUP – news – people ) gets three-quarters of sales from ailing General Motors (nyse: GM – news – people ) and Ford. Earnings have been falling for five years. Schloss picks up a Value Line booklet from his living room table and runs his index finger across a line of numbers, spitting out the ones he likes: stock trading at 80% of book value, a 3% dividend yield, no debt. “Most people say, ‘What is it going to earn next year?’ I focus on assets. if you don’t have a lot of debt, it’s worth something.”

Schloss screens for companies ideally trading at discounts to book value, with no or low debt, and managements that own enough company stock to make them want to do the right thing by shareholders. if he likes what he sees, he buys a little and calls the company for financial statements and proxies. he reads these documents, paying special attention to footnotes. one question he tries to answer from the numbers: is management honest (meaning not overly greedy)? that matters to him more than smarts. The folks running Hollinger International (other-otc: HLGAF.PK – news – people ) were smart but greedy–not good for investors.

Schloss doesn’t profess to understand a company’s operations intimately and almost never talks to management. he doesn’t think much about timing–am I buying at the low? selling at the high?–or momentum. he doesn’t think about the economy. Typical work hours when he was running his fund: 9:30 a.m. to 4:30 p.m., only a half hour after the new York Stock Exchange’s closing bell.

Schloss owns a prized 1934 edition of Graham’s Security Analysis he still thumbs through. its binding is held together by three strips of Scotch tape. In the small room he invests from now, across the hall from his apartment, one wall contains a half-dozen gag pictures of Buffett (the Omaha sage with buxom cheerleaders or with a towering stack of Berkshire Hathaway (nyse: BRKA – news – people ) tax returns). Each has a joke scribbled at the bottom and a salutation using Schloss’ nickname from the old days, Big Walt.

Schloss first met that more famous value hunter at the annual meeting of wholesaler Marshall Wells. The future billionaire was drawn there for the reason Schloss had come: The stock was trading at a discount to net working capital (cash, inventory and receivables minus current liabilities). that number was a favorite measure of value at Graham-Newman, the investment firm Schloss joined after serving in World War II. Buffett came to the firm after the Marshall Wells meeting, sharing an office with Schloss at new York City’s Chanin Building on East 42nd Street.

Schloss left the Graham firm in 1955 and with $100,000 from 19 investors began buying “working capital stocks” on his own, like mattressmaker Burton-Dixie and liquor wholesaler Schenley Industries. Success drew in investors, eventually rising to 92. But Schloss never marketed his fund or opened a second one, and he kept money he had to invest to a manageable size by handing his investors all realized gains at year-end, unless they told him to reinvest.

In 1960 the S&P was up half a percentage point, with dividends. Schloss returned 7% after fees. one winner: Fownes Brothers & Co., a glovemaker picked up for $2, nicely below working capital per share, and sold at $15. In the 1980s and 1990s he also saw big winners. By then, since inventory and receivables had become less important, he had shifted to stocks trading at below book value. But the tempo of trading had picked up. he often found himself buying while stocks still had a long way to fall and selling too early. he bought Lehman Brothers (nyse: LEH – news – people ) below book shortly after it went public in 1994 and made 75% on it in a few months. Then Lehman went on to triple in price.

Still, many of his calls were spot-on. he shorted Yahoo (nasdaq: YHOO – news – people ) and Amazon before the markets tanked in 2000, and cleaned up. after that, unable to find many cheap stocks, he and Edwin liquidated, handing back investors $130 million. The Schlosses went out with flair: up 28% and 12% in 2000 and 2001 versus the S&P’s –9% and –12%.

The S&P now is off 15% from its peak, yet Schloss says he still doesn’t see many bargains. He’s 30% in cash. a recession, if it comes, may not change much. “There’re too many people with money running around who have read Graham,” he says.

Nevertheless, he has found a smattering of cheap stocks he thinks are likely to rise at some point. High on his watch list (see table) is CNA Financial, trading at 10% less than book; its shares have fallen 18% in a year. The insurer has little debt, and 89% of the voting stock is owned by Loews Corp. (nyse: LTR – news – people ), controlled by the billionaire Tisch family. he says buy if it gets cheaper. “I can’t say people will get rich on it, but I would rather be safe than sorry,” he says. “If it falls more, I won’t worry about it. let the Tisches worry about it.”

Schloss flips through Value Line again and stops at page 885: Bassett Furniture, battered by a lousy housing market. The chair- and tablemaker is trading at a 40% discount to book and sports an 80-cent dividend, a fat 7% yield. Schloss mutters something about how book value hasn’t risen for years and how the dividend may be under threat.

His call: Consider buying when the company cuts its dividend. Then Bassett will be even cheaper and it eventually will recover.

If only he had waited a bit to buy wheelmaker Superior, too. It’s been two years since he bought in, and the stock is down a third. But the superinvestor, who has seen countless such drops, is philosophical and confident this one is worth book at least. “How much can you lose?” he asks.

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Warren Buffets superinvestor pal interviewed by forbes

I mean. Warren Buffett is the oracle of Omaha and he is usually very good with prediction..

why don’t people invest in companies that Warren invest in? does he keep it secret or something?

Why don’t people buy stocks that Warren Buffet buys?

Got no time to read the thousands of pages between the cover of The Snowball: Warren Buffett and the Business of Life by Alice Schroeder? perhaps you have time to read this article at [www.pophistorydig.com] entitled “Celebrity Buffett”:
Warren Buffett, the businessman-inves- tor who is known in some circles as “The Oracle of Omaha” for his stock picks and investment strategies, is one of the wealthiest persons on the planet. in 2008Forbes magazine estimated that Buffett was then worth about $62 billion, a value that has since taken a hit in the economic downturn, but is still in the neighborhood of $40 billion or so.

Well known and even famous in the business community since the 1960s, Buffett at that time was not generally famous elsewhere. Even through the 1970s and 1980s, Buffet was not the “rock star” he has become of late. However, in recent years, Warren Buffett has “crossed over” from purely business stardom to more full-blown, mainstream celebrity. It’s not clear precisely when this arrival occurred, but the process probably began in the 1980s as his name became more prominent on theForbes 400 “richest Americans” list. in the mid-1990s, a book on Warren Buffett’s investing method, published by another author, became a national bestseller, raising Buffett’s visibility among millions of exist- ing and would-be stock market investors. However, prime-time “Buffet celebrity” grew to a much higher level around 2003 or so, and reached a crescendo of sorts in mid-summer 2006 after he announced plans to give away most of his billions in wealth through a series of donations – the biggest share of which would go to the bill and Melinda Gates Foundation. more on that later.

By 2008 there were other signs of Buffett’s growing celebrity. he appeared, for example, on the September 7th, 2008 cover of the widely circulated Parade magazine, the Sunday supplement magazine that typically features a Hollywood celebrity of some kind on its cover. Parade is found in tens of millions of American homes every Sunday morning. the cover story promised to reveal Buffett’s secrets “that can work for you.” mr. Buffett’s rising celebrity, however, has not yet made him a Saturday Night Live host, but he has made cameos in a TV soap opera, and in 2008 he began making a cartoon series for kids to help teach them about money. Buffett has also appeared on countless business magazine covers, as well as avant garde publications such as Vanity Fair’s special-edition Africa issue of June 2007 (above and below) which featured various combinations of Annie Leibowitz-photographed celebrities on some 20 different covers.

Read the real thing

Celebrity Buffett

The oracle of Omaha, Warren Buffet, sold half of his stake in Johnson & Johnson (JNJ).

Mr. Buffett’s Berkshire Hathaway has just reported its holdings as of December 31 2008. the company slashed its position in JNJ to 28.6 million shares down from 61.8 million the previous quarter (a 54% reduction). Johnson & Johnson peaked in September 2008 and dropped about 20% by the end of the year. It is not at all like the Omaha oracle to sell stocks in a decline.

Buffet made a high profile market call in October of last year saying that he’d be buying US equities in his account. many believed that Buffett was calling a market bottom. he notably purchased $5 billion of Goldman Sachs preferred shares in September and $3 billion in GE preferred in October. both transaction proved to be very costly as GE and GS have been in virtual freefalls.

1. Six Flags goes under; Seeks Chapter 11 Protection
2. Sell in may and Walk Away

Did Warren Buffet Just Capitulate?

Alice Schroeder’s the Snowball: Warren Buffett and the business of life

Alice Schroeder has scored one of the most coveted assignments in financial journalism, writing the first authorized biography of the world’s greatest investor and one of its richest men, Warren Buffett. This is an incredible score, especially considering Schroeder is not a journalist but a noted insurance industry analyst and former managing director at Morgan Stanley. This is no fawning profile of a sainted figure. This is the warts and all story of a very complex human being. As much as there is to admire about Warren Buffett the investor, his personal life leaves a lot to be desired.

This is a great book and one that I highly recommend. Alice was great and stayed for about 40 minutes. We started with the personal side of Buffett because that was most revealing in the book. Fifty odd books have been written about Buffett the businessman. Buffett may be the most written about individual in American business in the past 30 years. it is safe to say that nobody has ever had this kind of access to him, his friends, family and business associates.

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(EMAILWIRE.COM, March 17, 2010 ) Dallas, Tx – Wal-Mart Stores, Inc. (NYSE:WMT) went up 1.10% to $56.03 on 18.46 million shares. The company said it will open its financial services arm called Money Centers in 500 stores in 2010. The MoneyCenters offer services such as check cashing, bill payment and money transfers.

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The Gap Inc. (NYSE:GPS) added 1% to $23.30 on 7.21 million shares. The stock hit an intraday high and an intraday low of $23.30 and $23.01 respectively. In the last six months the stock went up over 6%. The Gap, Inc. is a global specialty retailer offering clothing, accessories and personal care products for men, women, children and babies under the Gap, Old Navy, Banana Republic, Piperlime and Athleta brands.

Limited Brands, Inc. (NYSE:LTD) advanced 4.22% to $24.71 on 8.79 million shares. The stock hit an intraday high and an intraday low of $24.85 and $23.99 respectively. In the last six months the stock went up over 49%. Limited Brands, Inc. is a specialty retailer of women’s intimate and other apparel, beauty and personal care products and accessories under various trade names. The Company sells its merchandise through the retail stores in the United States and Canada, which are primarily mall-based, and through its Websites and catalogues.

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Stock Market Update on Apparel Retail Stocks Gainers (WMT, GPS, LTD)

Fuld and Buffett spoke on Friday, March 28, 2008. They discussed Buffett investing at least $2 billion in Lehman. two items immediately concerned Buffet during his conversation with Fuld. first, Buffett wanted Lehman executives to buy under the same terms as Buffett. Fuld explained to the Examiner that he was reluctant to require a significant buy‐in from Lehman executives, because they already received much of their compensation in stock. However, Buffett took it as a negativethat Fuld suggested that Lehman executives were not willing to participate in a significant way. second, Buffett did not like that Fuld complained about short sellers. Buffett thought that blaming short sellers was indicative of a failure to admit ones own problems.

Following his conversation with Buffett, Fuld asked Paulson to call Buffett, which Paulson reluctantly did. Buffett told the Examiner that during that call, Paulson signaled that he would like Buffett to invest in Lehman, but Paulson did not load the dice. Buffett spent the rest of Friday, March 28, 2008, reviewing Lehmans 10‐K and noting problems with some of Lehmans assets. Buffetts concerns centered around Lehmans real estate and high yield investments, lending‐related commitmentsderivatives and their related credit‐market risk, Level III assets and Lehmans securitization activity. on Saturday, March 29, 2008, Buffett learned of a $100 million problem in Japan that Fuld had not mentioned during their discussions, and Buffett was concerned that Fuld had not been forthcoming about the issue. The problems Buffett saw in the 10‐K along with Fulds failure to alert Buffett to the issue in Japan cemented Buffetts decision not to invest in Lehman.

At some point in their conversations, Fuld and Buffett also discovered that there had been a miscommunication about the conversion price. Buffett was interested only in convertible preferred shares. Buffett told Fuld that he was willing to agree to a $40 conversion price per share, while Fuld thought Buffett was offering to buy in at up‐ 40, or 40% above the current market price, which would have been about $56 per share. on Friday, March 28, 2008, Lehmans stock closed at $37.87. Fuld spoke to Lehmans Executive Committee and several Board members about his conversations with Buffett. Lehman recognized that an investment by Buffett would provide a stamp of approval. However, Lehman already had better offers for its April capital raise, and Lehman did not think it could give a better deal to Buffett at the same time it gave a less attractive deal to others. on Monday, March 31, 2008, before Buffett could tell Fuld that he was not interested, Fuld called Buffett to say that Lehman could not accept his terms.

Last‐Ditch Effort with Buffett

[Hugh Skip E. McGee, III, the head of Lehmans Investment Banking Division] contacted [President David L. Sokol, president ofBerkshire Hathaway's MidAmerican Energy] again in late August or early September 2008 and outlined Lehmans Gameplan for survival, specifically SpinCo. During a subsequent telephone call with Sokol, McGee explained the good bank/bad bank scenario and stated that Lehman would need an investor. Sokol believed the e‐mail and call were intended to induce Sokol to pass that information on to Buffett, so Sokol briefed Buffett on SpinCo. Buffett thought the idea would not solve Lehmans problems.

Sometime during the week prior to Lehmans bankruptcy, McGee again reached out to Sokol with what both Sokol and McGee described to the Examiner as a Hail Mary pass. McGee asked, Do you have any ideas to save us? Sokol, who was bear hunting in Alaska at the time, told McGee that he did not.

'Hail Mary' to Warren Buffett: Untold Details of Lehman's Fall

Written by Tyler |

Last week we took a look at the fundamentals for Southern Peru Copper (PCU). now we will take a quick look at the technical picture. the daily and weekly charts for PCU can be found here.

As we can see, there is a technical support level at about $43.00 and a ceiling of resistance at about $50.00. if one is buying for dividend yield alone, the $43.00 level would be an ideal entry point at this time. however, the technical analyst and momentum trader, would like to see the stock break into the $50.00 barrier and close above $50.00 on heavy volume.

Heavy volume is defined by some technical analysts as being 150% greater than average volume and would indicate the possibility of an uptrend in the stock price because of renewed accumulation of the stock by institutional investors.

If we notice the grey bars in the volume area of the chart, it shows several weeks of buying on about average volume. This signals that some accumulation is taking place and we should be watching for that “breakout” day where volume shoots skyward and the stock closes at new highs above the $50.00 resistance area.

This is just my couple of pennies, I’d love to know what you think! Please feel free to leave a comment of contact me anytime!

Have a great day.

Big Dividend and Big Growth: Southern Peru Copper (PCU)

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By Matt Andrejczak, MarketWatch

SAN FRANCISCO (MarketWatch) — Railroad stocks have been on a roll ever since the stock market turned around a year ago, gaining momentum last fall on Warren Buffett’s hefty bet on the sector when he engineered an acquisition of Burlington Northern.

Now, industry analysts are on board with the idea that there’s still some steam left in the shares.

/quotes/comstock/13*!nsc/quotes/nls/nsc NSC 55.28, -0.40, -0.72% /quotes/comstock/13*!csx/quotes/nls/csx CSX 51.51, -0.34, -0.66%

On Friday, J.P. Morgan and Longbow Research joined other analysts in the past week who have raised 12-month price targets for Norfolk Southern /quotes/comstock/13*!nsc/quotes/nls/nsc (NSC 55.28, -0.40, -0.72%) , CSX Corp. /quotes/comstock/13*!csx/quotes/nls/csx (CSX 51.51, -0.34, -0.66%) and Union Pacific /quotes/comstock/13*!unp/quotes/nls/unp (UNP 73.24, -0.41, -0.56%) .

One reason for optimism is rail-freight volumes for grains and metals. They’ve improved from last year and are topping targets so far in the first quarter. Researcher Wolfe Trahan said volumes are up 5.8% quarter-to-date, compared to its 4.2% forecast.

J.P. Morgan analyst Thomas Wadewitz says “volumes are likely to remain at elevated levels for the remainder of 2010.”

He is eyeing the greatest upside for CSX shares over current share price levels. Setting a new target of $63, Wadewitz thinks the stock could advance 21%. he put a new price target of $81 on Union Pacific, implying 10% upside from present trading prices.

Longbow analyst Lee Klaskow upped his price target on Union Pacific to $85. CSX was lifted to $60 and Norfolk Southern to $63.

Railroad stocks have outpaced the 48% gain for the S&P 500 Index since last March. In the past year, CSX is up 104%, Union Pacific, up 85%, Norfolk Southern, up 76%.

Along with airline stocks, railroads are powering the Dow Jones Transportation Index /quotes/comstock/10w!i:djt (DJT 4,374, -48.77, -1.10%) , which is considered is gauge of underlying economic health.

The index is up 66% over the past 12 months.

Norfolk Southern Chief Executive Wick Moorman expressed his optimism for the railroad sector in his annual letter to shareholders issued Thursday. Traffic on the company’s rails has improved over the last six months.

“While the short-term economic outlook remains somewhat uncertain, the longer-term prospects for Norfolk Southern and the railroad industry remain very bright. We go into the new year with some positive momentum,” he wrote in the letter.

Some investors may take his sentiment with a grain of salt since CEOs tend to strike a positive tone in annual shareholder letters.

Railroads stocks all slid in late afternoon trading Friday. Union Pacific fell to $73.14. Norfolk Southern dropped to $55.20 and CSX slid to $51.36.

Matt Andrejczak is a reporter for MarketWatch in San Francisco.

Analysts: More steam left in railroad stocks

The Wall Street Journal is reporting Facebook will open up most if not all of their user-contributed data to developers at a developer event tomorrow. This has been long expected and will likely trigger a wave of third-party integration of Facebook streams with other popular feeds, most notably that of Twitter.

Should players such as Seesmic Desktop and FriendFeed roll out an integrated service, we will be a major step closer to a single stream of realtime events. This in turn will rapidly accelerate a convergence around micromessaging similar to the one around email when it achieved a critical mass following AOL’s opening up of the limited educational and government mail systems to average users.

Already the emotional reaction to the possibility of a swine flu pandemic has pushed Facebook back into the spotlight as people contact their family and friends over the private/public channel. while trying to track down a friend I missed chatting with this weekend at a live performance, someone used Facebook chat to ask what I thought about a Flu Emergency preparation list he’d compiled. Events were moving so fast that he published it before I could respond, but the tools will prove superior to Twitter direct messages, which have been intermittent in recent days according to some reports.

While Twitter has tremendous advantages for newbies, the depth of Facebook and FriendFeed is more and more valuable as we rely on these networks for fail-over instant communications. FriendFeed’s realtime direct messages will likely be duplicated in short order by Facebook, and the opportunity for meshing Facebook and Twitter together will prove irresistible to the hot Twitter client market, what with Tweetie for the Mac synchronizing with its leading iPhone app.

The debate on the network is between Dave WIner, who sees a thousand Twitters, and Jason Calacanis who says Twitter is dialtone. Tomorrow’s announcement suggests something between those two views, with a single aggregated feed managed by two or more of the players in a distributed cross-licensing model. Twitter will continue to own the celebrity growth, but those who look to harness this realtime platform for business and personal networking will quickly adopt the more powerful tools now available at FriendFeed and coming online from Facebook and perhaps Google.

Facebook Drops Other Shoe Tomorrow?