What seems like many lifetimes ago, I was a banker. I ran branch banks, wrote operating manuals, and did business development. But the most fun I had was in business development and financing… I loved roaming the county, talking with all kinds of businesses — from those which needed money to buy equipment or inventory — to developers who wanted to borrow funds to build high-end residential properties or commercial buildings. #-ad_banner-#My time in banking came with a silver lining that I didn’t really appreciate until I left the industry — analyzing financial statements. Over the course of eight years… Read More

What seems like many lifetimes ago, I was a banker. I ran branch banks, wrote operating manuals, and did business development. But the most fun I had was in business development and financing… I loved roaming the county, talking with all kinds of businesses — from those which needed money to buy equipment or inventory — to developers who wanted to borrow funds to build high-end residential properties or commercial buildings. #-ad_banner-#My time in banking came with a silver lining that I didn’t really appreciate until I left the industry — analyzing financial statements. Over the course of eight years financial statements became almost second nature to me (especially banks). I could quickly determine the stability of a company and determine which ones were destined to fail. That knowledge came in handy when I moved on to the brokerage business on Wall Street as a securities analyst. Because of my banking experience, it was only natural that I — at first — specialized in the finance industry. I wrote my first official analyst report about 13 brokerage houses, including the biggies, Bear Stearns, Charles Schwab, Merrill Lynch and Paine Webber — all of which I sold short. It was a… Read More

As irksome as Wall Street’s fickle nature can be, it’s often of great benefit to long-term investors.  #-ad_banner-#When the Street exits high-quality stocks en masse because of some transient headwinds, it allows value seekers to swoop in and buy at deep discounts — and then make a killing when shares rebound. There’s just such an opportunity right now, and it involves one of the nation’s leading sporting goods retailers.  Shares of this company, which has 566 stores in 46 states, are down more than 20% this year because of a rough fiscal second quarter related mainly to weakness… Read More

As irksome as Wall Street’s fickle nature can be, it’s often of great benefit to long-term investors.  #-ad_banner-#When the Street exits high-quality stocks en masse because of some transient headwinds, it allows value seekers to swoop in and buy at deep discounts — and then make a killing when shares rebound. There’s just such an opportunity right now, and it involves one of the nation’s leading sporting goods retailers.  Shares of this company, which has 566 stores in 46 states, are down more than 20% this year because of a rough fiscal second quarter related mainly to weakness in two key categories — golfing and hunting equipment, which together account for 30% of sales. At this point, the stock is trading at nearly $46, not far off its 52-week low of $42.33. However, it seems the Street is already beginning to realize it was wrong about this market leader — Dick’s Sporting Goods (NYSE: DKS). Indeed, the stock is up nearly 6% in the past month and shares have been trending solidly upward during the past week, as well. The reason for this apparent change of heart is anyone’s guess. It could have been the realization… Read More

When he buys a stock, Warren Buffett places more emphasis on one factor above almost any other. Since 1986 he has mentioned this single trait more than 20 times in his annual shareholder letters. He calls it “essential for sustained success.” #-ad_banner-#However, you won’t find it listed on a company’s balance sheet. Its value doesn’t rise and fall with the market. And even if a company reports great earnings, the worth of this one advantage still can’t be calculated. But that doesn’t keep it from being a company’s most valuable possession. Take the nasty bear market of 2008 and 2009. Read More

When he buys a stock, Warren Buffett places more emphasis on one factor above almost any other. Since 1986 he has mentioned this single trait more than 20 times in his annual shareholder letters. He calls it “essential for sustained success.” #-ad_banner-#However, you won’t find it listed on a company’s balance sheet. Its value doesn’t rise and fall with the market. And even if a company reports great earnings, the worth of this one advantage still can’t be calculated. But that doesn’t keep it from being a company’s most valuable possession. Take the nasty bear market of 2008 and 2009. From its peak to trough, the S&P lost more than 55%. No investment completely avoided the downfall. Well, almost no investment. Of the 500 stocks in the S&P, only nine made money during that period. Of those nine stocks, six of them (two-thirds) had this advantage. But this advantage also helps these stocks beat the market in uptrends, too. After all, Buffett has made billions thanks to companies with this trait. So what single advantage can capture the attention of Warren Buffett… help a stock beat the market in an uptrend… and help it fall less in a downtrend? That… Read More

You may or may not have heard of renowned money manager Joel Greenblatt. Over an illustrious career spanning more than twenty years, the Gotham Capital hedge fund manager racked up annualized returns of 40%, eclipsing the success of even his mentor, Warren Buffett. Investors who were on board with Greenblatt for his entire tenure at Gotham would have seen a $10,000 investment balloon to more than $8 million, earning 800 times their initial stake. #-ad_banner-#His remarkable track record didn’t happen by sheer luck, but rather through his focus on investing in a unique group of companies that shared one commonality. Read More

You may or may not have heard of renowned money manager Joel Greenblatt. Over an illustrious career spanning more than twenty years, the Gotham Capital hedge fund manager racked up annualized returns of 40%, eclipsing the success of even his mentor, Warren Buffett. Investors who were on board with Greenblatt for his entire tenure at Gotham would have seen a $10,000 investment balloon to more than $8 million, earning 800 times their initial stake. #-ad_banner-#His remarkable track record didn’t happen by sheer luck, but rather through his focus on investing in a unique group of companies that shared one commonality. Industry leaders like American Express, Liberty Media, Allstate, Expedia and Kraft Foods all carry this trait. And they each helped Greenblatt and fellow investors make millions… These companies are just a few of a long list of spin-offs that all once belonged to larger parent companies. And they all flourished after leaving the nest. Take spin-off biopharmaceutical maker AbbVie (NASDAQ: ABBV) for example. Since officially leaving its parent company, Abbott Laboratories, in January 2013, ABBV has risen more than 65%… beating the market by roughly 30%. Here’s another example. Just over two years ago, ConocoPhillips separated its upstream oil and… Read More

On December 20, 1922, a surveyor — J.G. Tierney — made his way along the Colorado River by barge. Tierney, who worked for the U.S. government, was surveying a remote spot in the Mojave Desert called Boulder Canyon. Boulder Canyon sits in the middle of some of the most unforgiving land in America. #-ad_banner-#During the summer, temperatures frequently top out near 120 degrees. Less than five inches of rain fall each year. Rattlesnakes and scorpions hide under rocks. And the sharp cliffs are near-impossible to scale. And yet, this canyon in the heart of the desert holds one of the… Read More

On December 20, 1922, a surveyor — J.G. Tierney — made his way along the Colorado River by barge. Tierney, who worked for the U.S. government, was surveying a remote spot in the Mojave Desert called Boulder Canyon. Boulder Canyon sits in the middle of some of the most unforgiving land in America. #-ad_banner-#During the summer, temperatures frequently top out near 120 degrees. Less than five inches of rain fall each year. Rattlesnakes and scorpions hide under rocks. And the sharp cliffs are near-impossible to scale. And yet, this canyon in the heart of the desert holds one of the greatest investments in U.S. history… one that has generated billions of dollars in wealth and is practically guaranteed to keep doing so for decades. But it wasn’t without its costs. In total, 112 men — beginning with J.G. Tierney, who on that December day drowned after falling off the barge that carried him and his equipment — died to create this investment. I’m talking about Hoover Dam. Before I get too far… no, I am not recommending that you invest in the Hoover Dam. Even if you wanted to, it’s fully owned by the U.S. government. There’s not a stock… Read More

Have you ever been shopping and found one of your favorite items marked down to a price you couldn’t pass up?  #-ad_banner-#Then you know how value investors feel when they spot a small-cap stock with double-digit growth expectations trading well below its intrinsic value.  Investment guru Peter Lynch famously coined the phrase “10-bagger,” referring to an investment that returned 10 times its initial purchase price, by using a specific methodology to identify undervalued stocks. From 1977 to 1990, his flagship company, the Magellan Fund, netted average annual returns of 29.2% using his innovative investment formula. … Read More

Have you ever been shopping and found one of your favorite items marked down to a price you couldn’t pass up?  #-ad_banner-#Then you know how value investors feel when they spot a small-cap stock with double-digit growth expectations trading well below its intrinsic value.  Investment guru Peter Lynch famously coined the phrase “10-bagger,” referring to an investment that returned 10 times its initial purchase price, by using a specific methodology to identify undervalued stocks. From 1977 to 1990, his flagship company, the Magellan Fund, netted average annual returns of 29.2% using his innovative investment formula.  The criteria for finding a deeply undervalued stock are simple. It should have a price-to-earnings (P/E) ratio below the averages for its industry and the broader market. Its projected five-year growth in earnings per share (EPS) should be high, but less than 50% to weed out unsustainable growth. Finally, the stock shouldn’t have a debt load that could prevent it from growing.  PC Connection (Nasdaq: PCCC) meets all Lynch’s criteria for value. It has a current P/E of 14.5, under the industry average of 15.4 and well under the S&P 500 average of 19.3. EPS growth forecasts for the next… Read More

Business development companies (BDCs) that lend to small and mid-size businesses and pay out most of their income as dividends often find their way onto my income screen — but they’ve gotten no love from the markets this year.  #-ad_banner-#​BDC shareholders have been punished with a nearly 4% decline in prices across the category against a 6% rise in the S&P 500. Even the stock I’m going to discuss today, while it has outperformed its peer group, has had to fight an ever increasing onslaught of short sellers. Some of the recent weakness is understandable. The U.S. Read More

Business development companies (BDCs) that lend to small and mid-size businesses and pay out most of their income as dividends often find their way onto my income screen — but they’ve gotten no love from the markets this year.  #-ad_banner-#​BDC shareholders have been punished with a nearly 4% decline in prices across the category against a 6% rise in the S&P 500. Even the stock I’m going to discuss today, while it has outperformed its peer group, has had to fight an ever increasing onslaught of short sellers. Some of the recent weakness is understandable. The U.S. economy actually shrank 1% in the first quarter, and the International Monetary Fund just cut its 2014 outlook for GDP growth to 2%, saying the country would not likely return to full employment until 2017.  That doesn’t sound like the kind of environment for business development, and investors are worried that the high dividend yields offered by BDCs are unsustainable. (In a recent look at his favorite BDC, my colleague Adam Fischbaum identified yet another factor in the sector’s slump.) The problem with this thesis is that the economic environment has improved drastically over the past couple of months and… Read More

To say that the financial crisis changed the landscape of the banking industry would be a bit of an understatement.  #-ad_banner-#One of the biggest dangers to capitalism was the interruption of the investment flow that technological innovators require. As the banking behemoths teetered on the verge of collapse, capital market liquidity and business lending in the traditional banking channels pretty much evaporated.  Luckily, many business development companies (BDCs) stepped up to the plate. Basically, BDCs are simply pools of money that take investor money, lend it to businesses as some combination of debt and equity, and reward investors… Read More

To say that the financial crisis changed the landscape of the banking industry would be a bit of an understatement.  #-ad_banner-#One of the biggest dangers to capitalism was the interruption of the investment flow that technological innovators require. As the banking behemoths teetered on the verge of collapse, capital market liquidity and business lending in the traditional banking channels pretty much evaporated.  Luckily, many business development companies (BDCs) stepped up to the plate. Basically, BDCs are simply pools of money that take investor money, lend it to businesses as some combination of debt and equity, and reward investors based on the performance of the BDC’s investment portfolio.  Most of the companies that BDCs work with are what are referred to as mid-market companies: too big to be small, too small to be big. But many of these companies become bigger and often go public. That’s when the true value of the equity stake the BDC takes is unlocked. One of the more interesting names on my radar is Hercules Technology Growth Capital (NYSE: HTGC). With a market cap just shy of $1 billion, Hercules has set its sights on fast-growing technology and biotech businesses. As I’ve… Read More

Not many authors can lay claim to writing a book that fetches nearly $3,000 for a new copy. #-ad_banner-#Then again, not many authors have $1.3 billion in the bank either.  Seth Klarman, founder of Boston-based Baupost Group, has more than a few professional and philanthropic accomplishments to be proud of. His book, “Margin of Safety: Risk-Averse Investing Strategies for the Thoughtful Investor,” is a classic in the world of investing literature and has become one of the most expensive and hard-to-find books of its kind. With about $26 billion in assets under management, Klarman generated positive returns last… Read More

Not many authors can lay claim to writing a book that fetches nearly $3,000 for a new copy. #-ad_banner-#Then again, not many authors have $1.3 billion in the bank either.  Seth Klarman, founder of Boston-based Baupost Group, has more than a few professional and philanthropic accomplishments to be proud of. His book, “Margin of Safety: Risk-Averse Investing Strategies for the Thoughtful Investor,” is a classic in the world of investing literature and has become one of the most expensive and hard-to-find books of its kind. With about $26 billion in assets under management, Klarman generated positive returns last year that earned him $350 million. An in-depth scan of his current portfolio, outlined in his first-quarter Form 13F filing, has revealed some energy-focused high-yielders that are worth a closer look from growth and income investors alike. Alon USA Partners (NYSE: ALDW ) Alon USA Partners (NYSE: ALDW) is the king of the hill in terms of dividend yield for Klarman’s portfolio, with a current annual yield of 14.6%. The downstream oil company markets its products in self-branded convenience stores primarily in southern U.S. states like Texas and Arizona. With a market cap just north of $1 billion, Alon is a smaller player among refiners. Its Texas-based refinery… Read More

Barring some sort of apocalypse, these companies aren’t going anywhere. #-ad_banner-#Many have been around long before any of us were born — surviving and prospering through wars, recessions, flash crashes and financial panics. It’s not just the companies themselves that have stood the test of time… Investors who bought stock in these companies and held on for the long-term have done well, too. Even with the market roaring back from the depths of the Great Recession, this group of stocks has outperformed. See for yourself… Around the office we have a nickname for these stellar investments. We call… Read More

Barring some sort of apocalypse, these companies aren’t going anywhere. #-ad_banner-#Many have been around long before any of us were born — surviving and prospering through wars, recessions, flash crashes and financial panics. It’s not just the companies themselves that have stood the test of time… Investors who bought stock in these companies and held on for the long-term have done well, too. Even with the market roaring back from the depths of the Great Recession, this group of stocks has outperformed. See for yourself… Around the office we have a nickname for these stellar investments. We call them “Forever Stocks.” That’s because we think they’re such solid companies, they’re worth buying and holding onto for decades. These are world-dominating businesses in their respective industries. But the reason these outstanding companies succeed is because they all have one thing in common… They all own something that no one else can buy or create… or what I like to call “irreplaceable assets.” Whether it’s a hydroelectric dam, a massive land position, railways, airports — these are all irreplaceable assets that can’t be easily replicated. But the irreplaceable assets idea extends beyond just big, physical facilities. Some invaluable, irreplaceable assets… Read More