|
Of the three Wish List selections outstanding High Liner Foods is the only company that Todd and I would own (at less than or around $10/share) for a decade without worrying about stock price (which is probably the right way to look at High Liner given that its shares rarely trade). As for the other two companies on the Wish List, the Caldwell turnaround has been ongoing since December 26, 2001 and is complete, and the Hancock turnaround really hasn’t started. As with any turnaround story the investor needs to reanalyze their position on a regular basis.
Suffice to say, with thousands of companies to choose from the Wish List owns 3-companies (and two are Canadian). How did the Wish List – which originally aimed to offer “an in-depth analysis of particular investment prospects” – reach this sorry state of affairs?
In an attempt to answer this question you need only consider how the companies that have been removed since early 2003 have faired since being removed. With the exception of Dimon all have performed well, essentially killing any possible reinvestment opportunity.
 |
 |
 |
 |
 |
If blaming rising stock prices for the lack of Wish List production seems like a cop-out, it is. To be sure, finding quality companies is easy but finding quality companies with attractively priced stock prices is extremely difficult right now. Buffett is having a similar problem, and voiced his eagerness to buy something soon in Berkshire’s Annual report.
“What Charlie and I would like is a little action now. We don’t enjoy sitting on $43 billion of cash equivalents that are earning paltry returns. Instead, we yearn to buy more fractional interests similar to those we now own or – better still – more large businesses outright. We will do either, however, only when purchases can be made at prices that offer us the prospect of a reasonable return on our investment.”
Although it is difficult to use the word as effectively, Todd and I also ‘yearn’ to buy more undervalued stocks, and we will be do plenty of yearning before this months Wish List report is released. As always, member suggestions and feedback are welcomed, although not always followed.
What Will Bring Undervaluation Into View?
With so many extreme situations present in the markets today, it is impossible to know beforehand what will be the trigger for a stock market decline. Quite frankly, inflation is said to be the main threat one day (commodity prices continue to scratch at 24-year highs), but any increase in long-term interest rates could quickly lead to stagflation fears. As for the declining U.S. dollar; it alone has the potential to derail the stock market recovery, send U.S. interest rates higher, and completely change the Feds mandate. Given that the dollar is currently a market moving topic – and that the trade balance data is due out this Friday – the dollar deserves some attention.
One of the most watched technical areas in any market right now is 80 on the U.S. dollar index. Not only is every gold bug in the world conscious of this level, but bond market/commodity market participants are as well. For lack of a better way of putting it, the feeling is that once, and if, 80 USDX is broken on the downside the gates of hell will open up.
 |
Technical analysis is not exactly the value investor’s most trusted weapon. Nevertheless, it is worth remembering that if market participants believe that a trading level is important enough self-fulfillment can take over as watched trading levels are broken.
Not only does the head and shoulders formation (above) appear to be near completion, but the triple bottom test also looks near (the story being that double bottoms hold and triple bottoms do not). In recent years triple bottoms have marked new down legs in the dollar.
A dollar crisis may not be what finally brings stocks down. Regardless, patience continues to be the buzz word, at least until today’s warning signals finally materialize in some manner to disrupt perfectly priced equity markets. |
