Monday, January 19, 2009

U S Physical Therapy/Buffett/CIBER/Re-start of Short term Trading/More Madoffs?/BAC & DFS

The following is a link to a recently published post on U S Physical Therapy Seeking Alpha
That article, written by John DiStanisiao, contains a great deal more detail about USPH than I put in my previous post discussing my buy in late December.  DWS GLOBAL COMMODITIES (GCS)/ U.S. PHYSICAL THERAPY (USPH) BUY/TCs Ex Interest/PFX SOLD
In fact, I will probably never discuss a stock in these posts with the same amount of financial details as contained in DiStanisiao's post in Seeking Alpha.  His post is better than mine on USPH. 

I am not exactly sure what Uncle Warren means by an economic Pearl Harbor. Warren Buffett's Dateline Interview with NBC's Tom Brokaw: The Complete Transcript - Warren Buffett Watch -  Yahoo! Finance  I just hope the U.S. economy is not the Arizona in his analogy.  It does appear to me that the U.S. is in the fear phase of an economic downturn, and fear is just feeding on itself.  At some point, more people will see economic opportunity resulting from the downturn than continued gloom and doom.  Others will just grow weary of being scared or worried.  I think that it will help to have a new President that at least inspires confidence in many Americans. And, as Uncle Warren says, the light will come and the darkness will end.  The darkness will lift when we realize once again, in the immortal words of FDR, there is nothing to fear but fear itself. 

There has to be a great deal done in the meantime to restore faith in the market and our financial institutions.  A vigorous mandate for SEC enforcement by the new Obama administration and an adoption of rules designed to prevent market manipulation will help to restore confidence in the stock markets.  Most of the rules promulgated by the SEC under Chris Cox that aided and abetted market manipulators need to be repealed, including the rule permitting shorting on downticks and a lax view of naked short selling.  The SEC's focus needs to change from protecting Wall Street to its original mission of protecting investors, with  an extremely vigorous enforcement of  its rules and regulations, particularly vigorous enforcement of full disclosure rules in SEC filings which I do read. 

 Replacing the senior management and Board of Directors in most of the major financial institutions, including Bank of America and Citigroup, would be just a start in restoring confidence in the financial institutions.  It would also be helpful to have compensation more tied to long term results with serious clawback provisions for yearly bonuses.  The Harvard Law School Corporate Governance Blog » “Clawbacks” of Executive Compensation
I noticed in the research report section of Barron's this week a summary of Roth Capital's buy recommendation on Ciber.   I do not have access to the full report Research Reports -  The firm did lower its target from 9 to 8 due to adverse foreign currency exchange rates and the economic downturn.  It reduced its earnings estimate to $. 52  from $.57.   I discussed my buy last Friday on Ciber in an earlier post. Buy of 50 Cyber/Starting Position in CSCO  I did not have access to the reduction in the earnings estimate forecast by Roth Capital at that time. The consensus estimate for 2009 is $.55 as of today, and I do not know if that includes the changed estimate from Roth yet.  None of the foregoing changes my assessment of this small company or my opinion that it is undervalued at my buy price of $4.5.

Normally, I do not read a Value Line issue cover to cover.  I did do that this weekend to see how many companies in an issue hold some interest to me for a possible purchase under the current environment.  I found only two in the VL issue 8 dated January 16, 2009.  The two that I would consider buying now are Hospira (HSP) and Novartis (NVS).  I gravitated to those two names based just on my personal assessment of their prospects and current valuations plus a belief that their respective businesses would not be materially impacted by the current recession.  I do not own either NVS  or HSP.   Eli Lilly and Wyeth almost made the cut and I am interested in monitoring Cubist Pharmaceuticals (CBST), a new edition to VL and I just placed in my small cap monitor list.   I was thinking about gearing up my trading operation again, where any buy is meant to be a short term hold, trying to clip a quick 10% or so. I would stick to names that I would not mind owning for the long term, meaning any period over a year, in 
case the short term profit did not materialize.  If successful, there would be a constant churn of about $10,000 in the selected names throughout the year. Basically, I need to keep my mind active since I am barely doing much of anything anymore in the market, waiting for clarity and calm to return.  This just makes sense for my personal psyche. Some other names that I have put on this rotating list of short term trades, possible long term holds, include Johnson & Johnson, Proctor & Gamble, Pepsico, AT & T, and Coca Cola, none of which are currently owned but all were previously owned prior to 2008 with A T & T and Pepsi being the only ones owned and sold in 2008.  Others that I might add on further weakness include MMM and CAT.  

I pretty much stopped my short term trading in the summer of 2008 due to my perception of the risks, and I need to start it back just to keep my mind from turning into mush.  And, maybe it is time to start it back up too.  Previously, I would include virtually any stock as candidates for a short term trade, based on a variety of factors including some technical indicators.  Now, I will just stick mostly to blue chips that I would like to own at the current prices and would be willing to hold for the long term in the event the short term trade fails.

Another hedge fund manager, Arthur Nadel, has disappeared according to a NYT
 story, and his clients are worried about the 350 million entrusted to him.  He was a prominent in the Sarasota social and charity circles according to the Herald Tribune in Sarasota. | Southwest Florida's Information LeaderThis comes just a few days after an Indiana investor management, accused of financial fraud, faked his own death by crashing his airplane after parachuting out of it. The New York TimesThis guy, Marcus Schrenker, tried to look the part of a successful investor, living in a 3 million dollar home, driving a silver Lexus, wearing Armani suits, flying his own aircraft, and throwing lavish parties.
  According to this article, he had bankrupted twice, once in 1991 and again in 2003.  If someone knew what they were doing, dressed in blue jeans and drove an old Saturn, then there would be no interest in allowing such a person to manage one's money, would there? Madoff appeared to be interested in helping charities, and then look at what he did to them.  A driver of a Lexus living in a big home with a beautiful wife appears to be successful and hence knowledgeable about investing.  But could his knowledge about financial matters withstand scrutiny by an experienced hand, or did he just look the part coming out of central casting?     Being seen as working for charities appears to be an essential element in convincing others that the scam artist is really a decent and honorable person.  Charity work is just part of their shtick and how many make their contributions to charity with the very money that others are entrusting them to invest. 

In commenting on the recommendation of DFS by Meryl Witmer, a Baron's Roundtable panelist, I said in a previous post that I had placed DFS on a monitor list when it as 16 even though I had no interest in buying it at 16, nor did I have an interest in it at 9.   BARRON'S ROUNDTABLE/Hedging Successes and Failures in 2008  I thought the arguments made in favor of purchase by Ms. Witmer were all well known.  What was unknown and unknowable now was the full extent of the credit losses coming in 2009.  The stock has since fallen to $7.5 from 9 after her recommendation, and my interest has started to perk up some. DFS: Summary for DISCOVER FIN SVCS - Yahoo! Finance I would want as much leeway in the price as I can
 can get to compensate me for the very problematic and unknowable credit losses about to be incurred by all credit card companies. I keep stocks on the monitor lists only if I have some interest in buying it at a particular price level, and DFS is still on a monitor list.   But, and this is a pretty big but, it would be reasonable to expect that the worse is yet to come for these companies. 

RBS Scotland may be outdoing most banks by reported a 2008 loss of 41.29 billion, including impairment charges, which is still serious money to most other than our Uncle Sam.MarketWatch
I suppose a cynic could say that at least our titans of finance spread losses from their improvidence around the globe, sort of a share the wealth in reverse.Share Our Wealth - Wikipedia, the free encyclopedia

Steven Davidoff, writing for the NYT, has the suspicion that BAC was unaware of the full scope of the problems at the time its shareholders voted on the merger.  Even if his suspicion is the case, I am not sure it is reassuring to say "probably unaware of the full scope of the problem"  I doubt it but I suspect that "full scope" is not the legal standard under the law cited by Mr. Davidoff. 

Has anyone taken a look at the BAC board?  Excluding of course the BAC employees serving at Ken's discretion, would you view this as a strong and knowledgeable Board?  Some may receive comfort knowing that General Franks is sitting on the  BAC Board but I am not one of them. Bank of America Corporation (BAC): Board of Directors - BusinessWeek  

Today's picture is of a couple very fit youngsters circa 1962.  As usual, the left brain one is on the left and elvis, the right brainer, and still with his hair, is on the right, in case anyone is having trouble keeping track. 

No comments:

Post a Comment