I've been in GLW for 4 years now. My total return is 7%. Obviously spectacular, but certainly not a money loser. I am prepared to hold for a while, reinvesting dividends, awaiting a 2x - 3x pop over time.
It will take patience, but the market eventually does normalize good companies to at least fair value. As others noted, GLW has been under valued for a decade, not least because we've been in a secular bear since 1999. But, fundamentals are strong, both for GLW & the greater economy.
GLW has excellent cash flow, balance sheets, and a solid enough moat in diverse industries. It's not as sexy as over-hyped and over-valued cloud computing companies...which will get severely corrected...but value investing patience will ultimately win here. It may take another 3 years, but when the smoke clears, GLW should soundly trounce the S&P500.
TRN has long been one of those undervalued gems. I bought in a few years ago in order to get deeper into a railroad supply chain. The catalyst was Warren Buffett investing heavily into BNI. Since all the American rails went up, I was too late & had to look in how to capitalize on positive secular trends in rail.
A little research bought me not only to TRN, but also CNI. I got lucky in 2 great companies being cheap. They've returned 68% and 97% respectively since 2007 or so. Both are fair buys right now, but not cheap anymore. Still, I'm holding forever & will keep reinvesting my dividends.
The key is to apply this kind of thinking to a range of industries. First & foremost, apply value investing. Secondly, when a great investor piles in, look into the supply chain or find comparative values. That's how you find companies like TRN, NOV, PNM, and CNI, which don't always command attention.
In a way, this is following the money. However, apply value investing. Trust, but verify. Best of luck.
I already put in $5k at $86.92. I am thinking of another $5k - $10k purchase. Why? Because I sense value in a blue chip with a serious business moat.
The PE is 13. Historically, it is typically higher. An eyeball glance at PEs since 2003 indicates 16 - 18 most of the time. Obviously I am disregarding the impact of the 2008 crash. The PB = 3.2 and PS = .89. Not bad.
The debt is not insignificant at $40 billion, with net free cash flow of operating activities at $5.2 billion. This seems concerning. However, I read that most of this debt is tied to CAT financing the sale of its goods & services to customers. It's hard to compute a probability of delinquency here. However, given CAT's business moat & fundamentals, I am inclined to think it isn't high.
CAT is the best in class for getting things out of the earth. Consider also that our crust & mantle contain many commodities to keep going for, from what I've read, thousands of years. If anybody is going to continually innovate energy efficient ways to get at this, it should be CAT.
I also think that China & India, among other societies, will simply keep developing. They have a long way to go. There might be lows, but linearly they will trend higher in using CAT goods & services across time. It's a historical inevitability.
Lastly, Bill Gates went in big on CAT. This is compelling, given his association with Buffett. Again, this is another value signal for me. I'm just thinking I might get in at an even better price. I still don't know if I should hold out for a short term opportunity...or go relatively soon in again at what seems to be a cheap price.
Any thoughts here? Thanks in advance.
This is a very interesting question. I didn't investigate this in depth. But based on how richoncat responded, the probability of delinquency is low. This metric is important in computing loan risk. Additionally, composite credit ratings of the borrowers would be illuminating...which I guess would be high, as I imagine federal & local governments are key customers.
Don't get me wrong. Leverage is important, as you note. But the "quality" of debt is critical as well. If the quality of debt is high enough, sure, my initial answer is that historical PEs should be the norm.
Thanks man. I will take a look.
Even our small chat with various participants here proves that although value investment is simple enough...it sure takes some time & labor!
In the short to mid term, I agree that commodity cycles matter. But for the long term, meaning over 3 years, I'm not sold on what some pundits posit as the end of the "commodity super-cycle".
As I mentioned earlier, China & India won't stop developing. They have legions of people under the poverty line that require infrastructure development and, by definition, commodities. As I also believe we are at peak oil, even with emerging North American tight oil & tight gas exploitation, there will be a premium going forward on removing & refining commodities from the earth.
I'm comfortable with CAT in the long haul. Mr Bill Gates evidently is. I've never been good at short term forecasting, which is why I am soliciting advice here, among other places.
Do you have any short term commodity analysis that might indicate how CAT might swing in the next 18 - 36 months? I'd definitely love to give it a look.
Trust me, I'm feeling the pain. I'm averaged in at $72.85 and down "only" 53%. This was definitely one of my stupider investments. I went on a hunch instead of applying my usual value investing methodology.
I just can't psychologically bear to lose 50%, which is why I hang on in forlorn hope. Irrational. Once I'm losing
It's interesting. I agree that housing construction probably might see short term lull. But energy & travel infrastructure is another matter. I expect oil to keep increasing in price, putting pressure on governments to be more efficient...highways, waterways, power plants...even improving rail lines, which offer the lowest cost per mile of travel.
It's not easy to make a short term assessment.
But for now, I'm holding out looking for a lower entry point. I feel that CAT at least won't surge and leave me averaging higher. I admit it's nothing more than an intuition, mostly due to short term trending of macroeconomic data in Asia. Not exactly scientific, eh?
Fingers crossed for a better entry point in the next 2 months.
I disagree with your characterization of PE as useless, even in the context of a fast growing company. To make a long story short, history is littered with fast growing companies that cost bag holders serious money. Wall Street is often collusive in such hyping, generating positive sentiment from companies that paint nice non-GAAP earnings.
The fact of the matter is that GTAT depends on a solar market that still doesn't show signs of short term recovery. Nor is it certain that the sapphire market will crystallize, pardon the pun, in the short term as well. Making money matters in this context. It always does in fact.
I'm a disciplined value investor. Nevertheless, I occasionally make a luxurious bet. GTAT is one of them. In fact, as of today, I am up 70%. I might even have owned this for over a year, giving me capital gains tax rates if I sell.
But I have no illusions that GTAT still is a risky bet. Sure, like you, I'm holding out for $25 a share. Again, I know this is nothing but sentiment...and perhaps some common sense, but certainly not as quantitatively derived as my value investments in GLW.
I put $5,145.75 in GTAT, which is now worth $8,682.50 in less than 1 year. I put $24k in GLW which is now worth $25k over 2 - 3 years. However, I really expect GLW to safely double, perhaps triple, in the next 3 - 5 years. GTAT could conceivably go back down & get bought out for an okay gain...maybe even run out of money, depending on solar & sapphire.
Value matters...but as I say this, I'm holding GTAT...and seeing how far this has grown, I might put in another $5k. Sentiment also matters, although it's much more nebulous.
The PE range of good company might be tight across business cycles. I believe this is the case for companies like KO & IBM. Their value metrics typically move significantly only when we have serious outlier events, like irrational exuberance that drove them up in the 1990s...or the crash of 2008 which drove them below a reasonable trailing standard deviation.
My value investing is simple in this context. If a good company falls below its range, I investigate, making sure I don't catch a falling knife. In fact, if we're lower in the business cycle and PE is ranging lower, that's a good buy signal...as opposed to a lower PE for fundamental reasons.
Future earnings? I don't weigh this too much. I make a common sense assessment...assuming current metrics quantify value...that the company will continue to sell goods & services into the future. In this case, I believe if heavy earth equipment is to be sold, CAT will command a serious % of it...and I believe earth will continue to be moved.
Sounds like you need to develop reading comprehension skills. I explained that that I am a value investor. Now ponder that...and at some point you will understand why my value investing methodology doesn't allow me to chase growth when value metrics are poor.
In contrast, I put $10k in KO in 2006 when it was valued at a PE = 16. Today it is back to its historical 18 - 22 valuation. With reinvested dividends, it's worth $24k, a %120 return.
With companies like KO, there is surety in a PE normalizing. Not so with a TEX. As I said, I occasionally allow myself a gamble amidst my value investments...which I can do because overall I am way up. But this time it failed.
As a last note, I invested $5k in GTAT around 1 year ago and am now up 70%. Another gamble. I just happened to get lucky. Doesn't make me a genius. Won't make me an idiot if it significantly goes down & I don't average down...as it is not a value investment.
Have a good day.
GLW illustrates how the market can be irrational. It's a classic case of when patient investors come in & bide their time. It is a very well run company, great R&D, product & market diversity, excellent cash flow & balance sheets.
I wouldn't read too much into its returns since 1999, which is when the current secular bear market we're in started. A lot of companies languished since then, culminating in the crash of 2008. Even elite companies like MSFT and CISCO are down relative to their highs in the late 90s.
Consider MSFT. I bought in 2006. I have a total return of 70%. That beats the S&P500 return of 28% during the same time. At a PE = 10, it was hardly a value trap...and neither is GLW.
It's a matter of "when" with GLW, not "if". It would take an outlier event to deny GLW being valued like blue chip, namely a PE between 16 - 20. A 7.5% total return is nothing big in 3 - 4 years with GLW...but as I said, I expect to double to triple in the next 3 - 5 years.
I actually think we're going into a secular bull market. This is will move the long languishing blue chips that got caught up in the secular bear since 1999.
Fingers crossed...and hopefully my notion of odds holds.
The S&P500 returned about 28% in total since 2006, according to Yahoo Finance. Moreover, for the S&P500 every 10 year avg annual return since 2004 has been in single digits. That I've gotten a 65% to 120% on KO, CNI, MSFT, TRN, & JNJ in this context is actually very good...not to mention credible.
Anybody can assert 55% a year. Even the best high frequency trader companies don't average that over a number of years. You doubled your money every 1.3 years? I wouldn't mind hearing how. Be precise, because I can be.
Here is my MSFT investment. The 1st investment is my basis. The rest are reinvested dividends.
date shares total_price price_per_share
05/08/2006 500.0 $11,831.95 $23.66
09/14/2006 1.726 $45.00 $26.07
12/14/2006 1.686 $50.17 $29.76
03/08/2007 1.813 $50.34 $27.77
06/14/2007 1.654 $50.52 $30.54
09/13/2007 1.746 $50.69 $29.03
12/13/2007 1.594 $55.95 $35.10
03/13/2008 1.959 $56.12 $28.65
06/12/2008 2.053 $56.34 $27.44
09/11/2008 2.112 $56.57 $26.79
12/11/2008 3.35 $67.12 $20.04
03/12/2009 4.062 $67.56 $16.63
06/18/2009 2.902 $68.09 $23.46
09/10/2009 2.752 $68.47 $24.88
12/10/2009 2.311 $68.82 $29.78
03/11/2010 2.383 $69.12 $29.01
06/10/2010 2.769 $69.43 $25.07
09/09/2010 2.895 $69.79 $24.11
12/09/2010 3.166 $86.36 $27.28
03/10/2011 3.397 $86.87 $25.57
06/09/2011 3.666 $87.41 $23.84
09/08/2011 3.34 $88.00 $26.35
12/08/2011 4.343 $110.67 $25.48
03/08/2012 3.475 $111.54 $32.10
06/14/2012 3.856 $112.23 $29.11
09/13/2012 3.701 $113.00 $30.53
12/13/2012 4.766 $130.80 $27.44
03/14/2013 4.71 $131.90 $28.00
I might have missed my last dividend payment. But my $11,565.15 basis is now worth $19,529.22, about a 65% gain. I can do the same for the others. Real numbers, easily corroborated.
And I can tell you I bought exactly because MSFT value metrics were solid. This includes PE/PB/PS. Great cash flow & balance sheets. Business moat around windows office.
It's obvious you don't understand what "value investing" means. Anyway, let's hear about your 55%.
As another example, I went into DOW in 2011. Here is basically how things have unfolded. Note that the 1st purchase is my basis, the rest are reinvested dividends:
date shares total_price price_per_share
08/23/2011 196.0 $5,024.59 $25.64
10/28/2011 1.705 $49.00 $28.74
01/30/2012 1.498 $49.43 $33.00
04/30/2012 1.458 $49.80 $34.16
07/30/2012 2.198 $64.21 $29.21
10/31/2012 2.224 $64.91 $29.19
12/31/2012 2.051 $65.63 $32.00
04/30/2013 1.966 $66.28 $33.71
07/30/2013 1.915 $66.91 $34.94
Today my $5,024.59 is worth $8,622.07. I am up 70% in 2 years, not a bad return. Why did I buy in 2011? Because I'm a value investor.
It was at a PE=12. Great company & brand. Nice dividend. There also seemed to be some secular trends I liked.
North American energy development compelled me into DOW. I'm betting on a resurgent North American manufacturing sector, which DOW will ride. I also am betting on DOW being in global food supply chains, as populations increase & water challenges arise.
DOW now has a PE=16. This is fair value, although from a glance I think the 10 year trailing PE ranges 18 - 20. Once again, value investing at work.
Apply this to TEX. It just isn't value, not by classic value metrics. Again, I think you are confused.
Read my other posts. I can provide many more such examples. I've basically managed to accumulate a $450k - $500k portfolio. Mostly on value investing, but also by dollar cost averaging into index funds. I did all this with about a $40k - $80k basis.
I expect to double every 4 - 6 years, especially as we leave the secular bear market that started in 1999. But, as I said, I'm open to hearing how I can average 55% a year.
I sure could use being exponential every 1.3 years.
One more. Here is my CNI investment from 2008:
date shares total_price price_per_share
5/14/2008 179.194 $10,009.13 $55.86 $8,241.78
7/1/2008 0.856 $40.57 $47.39 $46.61
10/2/2008 0.842 $39.18 $46.53 $46.58
1/2/2009 0.91 $34.25 $37.64 $58.43
4/1/2009 1.041 $36.48 $35.04 $69.55
7/1/2009 0.92 $39.87 $43.34 $53.83
10/1/2009 0.892 $43.50 $48.77 $47.35
1/4/2010 0.812 $44.65 $54.99 $38.05
4/1/2010 0.806 $49.30 $61.17 $32.79
4/8/2010 0.809 $49.48 $61.16 $32.92
7/1/2010 0.839 $47.49 $56.60 $37.96
10/1/2010 0.767 $49.14 $64.07 $28.98
1/3/2011 0.757 $51.21 $67.65 $25.89
4/1/2011 0.832 $63.32 $76.11 $21.42
7/1/2011 0.803 $63.92 $79.60 $17.87
10/3/2011 0.908 $59.37 $65.39 $33.11
1/3/2012 0.764 $61.11 $79.99 $16.70
4/2/2012 0.91 $72.28 $79.43 $20.40
7/2/2012 0.843 $70.91 $84.12 $14.95
10/1/2012 0.83 $74.02 $89.18 $10.52
1/2/2013 0.79 $73.42 $92.94 $7.04
4/1/2013 0.832 $82.88 $99.62 $1.86
7/1/2013 0.817 $80.27 $98.25 $2.94
This is worth $20,143.28 today, a 100% return. The PE was at 11 - 12 when I bought. Most rails were much higher. Buffett bought BNI, which prompted me to look at any value buys in rail supply chain. So I found CNI & TRN. Check TRN out.
If you don't think these are excellent returns...I'd say you are a liar or extremely lucky. Let's not get into what the odds favor here.
Total return my friend. Focus on total return. CNI returned 120% vs 22% for the S&P500 as of Jan 1 2008. MSFT returned 65% vs 32% for S&P500 as of May 8 2006.
These returns are excellent any way you slice it. I gave hard proof, in proper context. I discussed a range of value concepts. In contrast, all you offer is boasting.
I'm waiting for that 55% a year on average. Doubling your money every 1.3 years means you don't work, do you? Self described "godly" investors don't have to, right?
I cut and pasted results from my investment account, exactly because they crushed the indices. On significant enough dollar amounts. My results beats most "pros" in a difficult market. I have many more.
You for some reason keep obfuscating this. You clearly don't understand value investing, let alone apply its concepts to TEX.
Lastly, you simply don't talk like a successful nor decent person. Honestly, you come off as a base level internet troll. Remember, you called me an idiot to start. All because I lamented my losses in TEX, which I was genuine enough to admit. Knock yourself out
If you want to talk like a gentleman about investing ideas, I'll listen. I actually do get a good idea from time to time. But so far you've offered nothing. At least illustrate how you achieved 55% a year?
I hear you. I am less courageous for most investments. I just can't sleep at night if most of my money isn't invested in blue chip value. Because I still want to be indices, value investing works best for my psychology.
Those are nice results. I'll check some of them out. But I can only tolerate 1 or 2 investments like GTAT.
But as to GTAT, wow, I'm up 85% now. I sure hope we that solar & sapphire markets can surge and generate a magical run. I've never has a triple bagger in a short time, so this would be nice.
This is not true. I posted my results for MSFT, which are 65% return. Look at the minutia...which includes reinvested dividends.
I am up 2.x over the S&P500 on MSFT.
By the way, I read some comments by another jamesmarson3 alias. He actually presents some salient facts & analysis. Looks like you have some more apprenticeship.