So what are you buying?

[lswswein]

Since the market seems to be on a downward trend, what are the stocks that you are paying attention to? Or this too soon? Over the last few yrs I found very few stocks on sale. So I stuck to my Asset allocation and did nothing with the 5% individual stock account. I bought a few BRK.B sahres but that's about it. Now if I see the market fall some more and I find some bargains, I want to dip in. I have been doing a some home work and am looking at the following stocks.

1. BRKB,
2. WMT - I am looking at this a lot,
3. KO,
4. NEN - a mlp like real estate stock
5. TM - Toyota Motors
6. AESK.OB - A penny stock - American Ski Co, just sold Killington and owns Canyons in Utah
7. Also sell offs in energy and health care

So what are your ideas?
-h

 

[wabmester]

I bought MO and STON on the dip. We're going to have many more smokers soon, which will be good for both companies.

 

[brewer12345]

Financial institutions having anything to do with retail banking and/or mortgages are the cheapest they have been in perhaps a decade.

 

[Zathras]

If I had spare cash I would be buying Citi right now in addition to some of those mentioned above. Great dividend rate

 

[Empty Pockets]

I just keep dollar cost averaging the same amount every month into the same mix of funds that I do every other month. Some months I pay more, some less.

 

[terminator]

JNJ is a bargain now IMHO.

I like just about all of the banks although it's anyone's guess when their net interest margins will improve. I just wish I could better understand WaMu's subprime exposure. I read their latest SEC filings but still don't feel like I have a good grasp on their potential liability re: the lower tranches of their securitizations.

 

[maddythebeagle]

Ditto on JNJ and adding more right now...

 

[CCdaCE]

Financial institutions having anything to do with retail banking and/or mortgages are the cheapest they have been in perhaps a decade.

If I had spare cash I would be buying Citi right now in addition to some of those mentioned above. Great dividend rate

Is combining these two lines of thinking appropriate? ... and buying Vanguard Financials ETF (VFH)?

Top holding is Citi., followed by BoA and JP Morgan, AIG, Wells Fargo, Wachovia, etc.

-CC

 

[wabmester]

I just wish I could better understand WaMu's subprime exposure.

The subprime focus is just the beginning. Foreclosures are growing in prime ARMs as well.

I looked at banks too, but I don't know about the "cheapest in 10 years" bit. I seem to recall that price/book was still in the upper historic range.

 

[RedHawk]

I hope you guys are right about JNJ. I bought some yesterday at $61.

 

[brewer12345]

The subprime focus is just the beginning. Foreclosures are growing in prime ARMs as well.

I looked at banks too, but I don't know about the "cheapest in 10 years" bit. I seem to recall that price/book was still in the upper historic range.

There are attractive franchises trading at roughly book value or a little over. Stoopid cheap.

 

[lswswein]

There are attractive franchises trading at roughly book value or a little over. Stoopid cheap.

names please brewer - I will do my own DD, but am looking for some names to research. I am vary of financials because of all the derivaties time bomb talk by buffett. Also any links on how to analyze financials would be a great help.

thanks
-h

 

[CCdaCE]

names please brewer - I will do my own DD, but am looking for some names to research. I am vary of financials because of all the derivaties time bomb talk by buffett. Also any links on how to analyze financials would be a great help.

thanks
-h

Before reprising the remarks that probably got people most upset, let me just mention a couple of his (Warren's) statistics: Housing-oriented debt, which comprised only 5% of nonfinancial debt at the end of World War II and about 20% in the early '60s, has grown to 30% today. Of that debt, 40% is issued by Fannie Mae, Freddie Mac or Ginnie Mae. (The latter, as a government-backed institution, obviously has no credit risk, but the same is not true for Fannie and Freddie.) In addition, Fannie and Freddie are far more leveraged than FDIC-insured commercial banks.

(Editor’s note: Leverage, sometimes known as the leverage ratio, divides assets by total equity in a company and gives a sense of its ability to withstand shocks. Fannie has a leverage ratio of 63.1. Freddie’s is 38.0. The leverage ratio of the banks in the Standard & Poor’s Banking index is 11.3.)

... source

So, from this, Banks: good. Mortgage related: bad. ... not that the banks won't get drug along/down.

Don't take my advice, I'm not a pro. Just a talking point.

-CC

 

[wabmester]

I did a screen looking for cheap banks. Quite a few cheap regionals. What do you guys think of BHBC, for example?

Of the larger banks, only IndyMac looked cheap, but that's for a potentially good reason....

 

[JohnEyles]

Apologies is this is laughably stupid, but ...

I really want to increase my real-estate allocation (it's only
about 1% now) and everyone seems to think domestic stuff
(e.g. VGSIX/VNQ) is too high now. But what about foreign
RE, stuff like FIREX or IGR ? Anyone think now is a good
time to get into some of them ?

 

[terminator]

There are attractive franchises trading at roughly book value or a little over. Stoopid cheap.

Just curious, do you have an opinion on CORS? (One trading around book value because they have so many commercial loans for condo development -- especially in Florida.)

 

[brewer12345]

If you are scared of derivatives, stick to companies that make little or no use of them. As an example, look at WHI, which I own. They are a Puerto Rican bank that mostly does corporate credit loans, commercial real estate loans and dabbles in a few other things. The portfolio of loans and securities (mostly treasuries, GNMAs, etc.) generate interest income. They finance this stuff with deposits and borrowings, which costs interest expense. You net the two and then set aside some money for defaults in your loan portfolio ("provision for loan losses").

You then have some amount of fee income, and you have expenses realted to running branches, paying loan officers, etc. What is left over is pretax income, which after taxes is net income. The money they make can then be used to pay dividends, buy stock, or expand the balance sheet.

What to watch for:

Ideally, you want a bank mostly funded with deposits (not "brokered deposits") that has decent asset quality (not too many delinquencies or foreclosures), healthy capital levels (risk based capital ratio of 12+%), a decent net interest margin (2+% is good), reasonable expense base, decent growth opportunities and a solid dividend yield (3+%). Ideally, you would like to pay book value or a modest premium over book value (1.5X or less). In practice, you probably make some compromises. WHI is cheap, but has some credit issues. AF is squeaky clean, but lives on a modest net interest margin and sells at 2X book. OCFC is attractive in the extreme if you believe their yet-to-be-released accrual amount will be small (I think so).

It is also nice to pick stuff that is or could be an acquisition target, since banks get bought out all the time and usually you get a nice pop in the stock price.

And I cannot comment on many specific names, so don't feel unloved if I ignore a question about a specific institution.

 

[wabmester]

Brewski, are you betting on short-term rates dropping? All of the "cheap" banks I looked at without potentially serious problems are being squeezed by low margins.

 

[lswswein]

If you are scared of derivatives, stick to companies that make little or no use of them. As an example, look at WHI, which I own. They are a Puerto Rican bank that mostly does corporate credit loans, commercial real estate loans and dabbles in a few other things. The portfolio of loans and securities (mostly treasuries, GNMAs, etc.) generate interest income. They finance this stuff with deposits and borrowings, which costs interest expense. You net the two and then set aside some money for defaults in your loan portfolio ("provision for loan losses").

You then have some amount of fee income, and you have expenses realted to running branches, paying loan officers, etc. What is left over is pretax income, which after taxes is net income. The money they make can then be used to pay dividends, buy stock, or expand the balance sheet.

What to watch for:

Ideally, you want a bank mostly funded with deposits (not "brokered deposits") that has decent asset quality (not too many delinquencies or foreclosures), healthy capital levels (risk based capital ratio of 12+%), a decent net interest margin (2+% is good), reasonable expense base, decent growth opportunities and a solid dividend yield (3+%). Ideally, you would like to pay book value or a modest premium over book value (1.5X or less). In practice, you probably make some compromises. WHI is cheap, but has some credit issues. AF is squeaky clean, but lives on a modest net interest margin and sells at 2X book. OCFC is attractive in the extreme if you believe their yet-to-be-released accrual amount will be small (I think so).

It is also nice to pick stuff that is or could be an acquisition target, since banks get bought out all the time and usually you get a nice pop in the stock price.

And I cannot comment on many specific names, so don't feel unloved if I ignore a question about a specific institution.

Thank you that was useful. As long as you explain the basics I don' mind doing the work. I will add a few 10K to my reading and develop a basic framework. I still have a while to go before I start trading any of these and I might post a few ideas for comments then

-h

 

[maddythebeagle]

http://www.marketwatch.com/news/sto...4D8D-A908-3023A79AED8C}&siteid=yhoo&dist=yhoo

here some news.....looks like Thornburg and some others are already getting a bounce already....

 

[brewer12345]

Brewski, are you betting on short-term rates dropping? All of the "cheap" banks I looked at without potentially serious problems are being squeezed by low margins.

I think the Fed's next move is clearly a rate cut, especially if the RE market starts to come unglued. But I wouldn't want to put a big bet on it happening or try to pick the time and extent.

So take AF, which has been badly squeezed by the inverted yield curve. If the Fed lowers rates, it'll be happy times for them. If the pain goes on for too long or the Fed actually starts raising rates, they have a very obvious out: with a 68 YO CEO and no obvious successor, a sale is likely and this is one of the last great franchises left in a very attractive market. In the meantime, they will keep paying dividends and buying back stock.

 

[Animorph]

Rusty,

FIREX and FRESX both look like they're following the same trend. They're both up quite a bit. I'd wait before getting in just because they've run up so much in the lasst few years.

Dan

 

[LOL!]

Bought IWN at end of yesterday. I decided I was insane. Sold it at end of today. Profit will pay for going out to eat for the rest of March.

 

[Deetso]

These are the times when DCA shines.

Im sticking to all the same MFs as before.... stocks soar: i buy the same stuff... stocks plumment i buy the same stuff (and wish I had more to plug into them)

Not a very exciting answer... but its what Im buying!

 

[bssc]

Let see, just bought SNDK and OIS.