In early April, Harley-Davidson (HDI) will open its first dealership in China amid a flurry of festivities. Harley-Davidson named Beijing Feng Huo Lun as its first authorized dealer in China. The dealership, located just outside downtown Beijing, will have a staff of 14. It will operate under the Beijing Harley-Davidson name.
The dealership will sell Harley-Davidson motorcycles, parts, and accessories. Harley-Davidson apparel and collectibles will be sold as well.
Harley-Davidson’s management believes the move into China represents a long-term opportunity. Progress will be gradual. Ownership and riding restrictions remain impediments to the company’s growth. Disposable income is still too low in China to support a large “premium, heavy-weight” motorcycle market. The company hopes that ownership and riding restrictions will be reduced as disposable income continues to grow.
On Friday, Harley-Davidson’s share price rose $1.88 to $51.07. At their closing price, shares of Harley-Davidson offered a 6.68% earnings yield.
Over the last ten years, Harley-Davidson’s book value per share compounded at a 17.78% annual rate. During that same period, annual EPS growth was 21.92%.…
A new podcast episode entitled “Buffett Businesses” is now available. This podcast wraps up Buffett week.
Enjoy the show.
Summary: The entire show is a discussion of the kind of business Warren Buffett looks to invest in. The discussion focuses on owner’s earnings, return on equity, and earnings growth.
The “Navigate Directory” section will remain at the top of your screen after you pick a new category. To navigate the directory, simply click on a category and then scroll down to see the listings within that category.
After you click on a category, the “category tree” will remain at the top of your screen; however, the listings below will change. Therefore, you need to remember two things: 1) Scroll down to see the listings 2) Choose “deeper” sub-categories to refine your search. For example, there are fewer listings in Blogs > Investing Blogs > Value Investing Blogs than there are in Blogs > Investing Blogs, because all value investing blogs are also listed as investing blogs.
The directory now includes 5 new listings. First, let me discuss the submission process. Then, you can view the list of new additions.
Submissions
To submit a site for inclusion in the Value Investing Directory please send an email to [email protected] with the site’s URL. All submissions will be evaluated within 48 hours; however, most submissions will be rejected.
Prospective sites are evaluated on the basis of utility alone; neither reciprocal links nor payment is required. Linking to the Value Investing Directory (or any other part of the Gannon On Investing website) will not affect the evaluation process.
If you would like to propose a new category, request a change to your site’s listing, or request the removal of any site, please send an email to [email protected]. All reasonable requests will be considered; however, I reserve the right to list and describe sites in whatever manner I deem to be most useful.
General Electric (GE) defeated Johnson & Johnson (JNJ) in the most recent round of the Widest Moat Contest voting. I was surprised by how wide the margin of victory was. They were both very good picks.
Once again, I received some excellent email votes. Remember, the person who picks the company that ends up winning the contest isn’t the only one who will win a copy of Benjamin Graham’s Security Analysis. The author of the best email vote will also receive a free copy of Ben Graham’s magnum opus.
Thank you to everyone who voted.
The Widest Contest will end with a true clash of titans. The three finalists are General Electric, Coca – Cola, and Microsoft. You can vote for one of these companies right now. I will accept votes submitted as comments to this post as well as email votes.
This final round of voting will conclude at 11:59 p.m. on Monday. The winner of the contest will be announced on Tuesday. At that time, I will also select the best email vote of the contest.…
I’d like to introduce you to a new investment blog network called Wall Street 2.0.
Three of my favorite blogs (Absolutely No DooDahs, The Enterprising Investor, and The New Wall Street) are part of the Wall Street 2.0 Network. Wall Street 2.0 is an invitation only network of investment blogs. Each of the blogs has a clean, uniform look. The content is, of course, anything but uniform. The network also includes message boards.
Wall Street 2.0 plans to add additional blogs over time. But, the network will remain selective. I highly recommend this fine collection of investing blogs.
The three finalists in the Widest Moat Contest are General Electric (GE), Microsoft (MSFT), and Coca-Cola (KO). The tally so far: Microsoft (2), Coca-Cola (1), General Electric (1). Your vote could make the difference. Vote by clicking the “comments” link at the end of this post.
MarketWizWannabe votes for GE:
Basically, every “product” business that GE is in has a moat – aircraft engines, plastics (think, lexan), locomotives, nbc, power systems (turbines / nuclear systems), and healthcare (MR / CT products). They’re #1 or #2 in all of those products worldwide. That’s a pretty wide set of moats, and it gets my vote.
S. Chin votes for Coke:
My vote is for Coke. GE’s and Microsoft’s moat keep enticing a lot of competitors. Everyone wants to “extend” their brand into their markets like Google, Yahoo or Oracle. Microsoft is the incumbent, but there’s so many people knocking on their door. Same with GE — their financing division also has people reducing their margins and attacking them. NBC always has new lineups from FOX, CBS and cable. When is the last time someone tried to extend in the cola industry successfully. Snapple, Gatorade all tried, but never became a serious threat to the whole franchise. Although, there’s private label items – Coke continues its dominant market share, with a product that 1) does not become obsolete or outdated and 2) requires huge capital investments to produce. Plus, Coke’s has a longer track record… it has several World Wars and recessions under its belt and still going strong. Coke hands down.
Henry votes for Microsoft:
Out of the final 3 companies (GE, Coca-Cola, Microsoft), I’d like to vote Microsoft as having the widest moat. Their monopoly in multiple areas in the software industry is phenomenal. In addition, many people still aren’t aware that they are the biggest R&D; spenders in the industry as well. Microsoft today is no longer a pure software company and will expand rapidly into other areas.
Grant votes for Microsoft:
General Electric has the best managers in the world, Coca-Cola, one of the best brands, but what about Microsoft? It has a complex product with a large installed user base. It is not the fact that its product is complex that digs the moat, but that its intricacies are engrained with so many users.
If you are looking for a turbine, household appliance, or TV channel there are alternatives to suggest. Want a cold non-alcoholic beverage? There are some choices. Suggest to your company to stop using Windows and Office and you would be laughed at. That may be granting too much. The majority of people in the office work environment most likely cannot even imagine using a computer without Microsoft’s products.
Let us know what you think.
Who’s right? Who’s wrong? And which company has the widest moat?
The penultimate round of the Widest Moat Contest is a face-off between General Electric (GE) and Johnson & Johnson (JNJ). Which company has the widest moat? Send your vote via email; or, if you’d prefer, vote by commenting directly to this post.
The voting closes at 11:59 p.m. tonight.
Why should you vote? Obviously, to share your opinions with others, and to engage in a thoughtful debate about the competitive advantages of different businesses. But, for the less altruistic listener, there is one other reason to vote:
You can win a copy of Benjamin Graham’s “Security Analysis” (1940 edition)
The listener who sends in the most interesting email will win a copy of Ben Graham’s “Security Analysis”.
Google Finance launched yesterday. I have mixed feelings about the service. It looks to be a great finance portal. But, finance portals still have a lot of room for improvement.
Google finance begins with search. You enter the name of a publicly traded company into the familiar Google search box. The search is not limited to ticker symbols. Entering either the ticker symbol or the company name will immediately load a company page.
Entering a term like “restaurants” will return a list of relevant stocks and funds (in this case, 2,168 companies and 1 fund). A few of these companies are private; but, many are publicly traded.
The search results for generic terms (like restaurants) are fascinating. There seems to be a bias towards large cap stocks. By this I mean that large cap stocks that are somewhat related to the search term often get placed above highly relevant, smaller companies.
Google Finance’s search feature is very weak. Obviously, it’s an improvement over the other finance portals; but, the generic search feature is badly flawed. For instance, neither Electronic Arts (ERTS) nor Activision (ATVI) is among the top ten results for video games. On the other hand, terms like steel work pretty well.
If the search term isn’t in the company’s name or the company is engaged in more than one industry, the results tend to be very poor. The search feature can’t really be used as an industry search unless you know the exact term that will work best. For instance, you’d have to know to use waste instead of garbage or trash; and poultry instead of chicken. It’s not exactly intuitive.
Some search terms will lead directly to a company page. This is a wonderful feature that lets you find a company without having to know the ticker. Here, Google Finance gets a little cocky. It’s always convinced it knows exactly what you’re looking for, even when it clearly doesn’t have a clue. For instance, the search term “video games” returns Navarre Corporation (NAVR). There are two problems with this. Obviously, a generic term like “video games” should not return a specific result. Also, while Navarre Corporation is a relevant result for the search term, it isn’t even close to being the most relevant result for “video games”.
Google Finance’s search feature doesn’t seem to be able to consistently return subsidiaries. This is very unfortunate, because my first thought upon seeing the Google search box was that users would be able to perform true subsidiary searches. That doesn’t seem to be the case – yet.
For instance, a search for Kentucky Fried Chicken returns Kentucky Fried Chicken Japan instead of YUM! Brands’ KFC corporation division. On the other hand, a search for Duracell does return the maker of the CopperTop. Strangely, Duracell’s (public) parent Procter & Gamble (PG) is not listed in the related companies section of Duracell’s company page.
These are understandable mistakes for a computer to make. But, …
Different sources define value investing differently. Some say value investing is the investment philosophy that favors the purchase of stocks that are currently selling at low price-to-book ratios and have high dividend yields. Others say value investing is all about buying stocks with low P/E ratios. You will even sometimes hear that value investing has more to do with the balance sheet than the income statement.
In his 1992 letter to Berkshire Hathaway shareholders, Warren Buffet wrote:
We think the very term “value investing” is redundant. What is “investing” if it is not the act of seeking value at least sufficient to justify the amount paid? Consciously paying more for a stock than its calculated value – in the hope that it can soon be sold for a still-higher price – should be labeled speculation (which is neither illegal, immoral nor – in our view – financially fattening).
Whether appropriate or not, the term “value investing” is widely used. Typically, it connotes the purchase of stocks having attributes such as a low ratio of price to book value, a low price-earnings ratio, or a high dividend yield. Unfortunately, such characteristics, even if they appear in combination, are far from determinative as to whether an investor is indeed buying something for what it is worth and is therefore truly operating on the principle of obtaining value in his investments. Correspondingly, opposite characteristics – a high ratio of price to book value, a high price-earnings ratio, and a low dividend yield – are in no way inconsistent with a “value” purchase.
Buffett’s definition of “investing” is the best definition of value investing there is. Value investing is purchasing a stock for less than its calculated value.
Tenets of Value Investing
1) Each share of stock is an ownership interest in the underlying business. A stock is not simply a piece of paper that can be sold at a higher price on some future date. Stocks represent more than just the right to receive future cash distributions from the business. Economically, each share is an undivided interest in all corporate assets (both tangible and intangible) – and ought to be valued as such.
2) A stock has an intrinsic value. A stock’s intrinsic value is derived from the economic value of the underlying business.
3) The stock market is inefficient. Value investors do not subscribe to the Efficient Market Hypothesis. They believe shares frequently trade hands at prices above or below their intrinsic values. Occasionally, the difference between the market price of a share and the intrinsic value of that share is wide enough to permit profitable investments. Benjamin Graham, the father of value investing, explained the stock market’s inefficiency by employing a metaphor. His Mr. Market metaphor is still referenced by value investors today:
Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you
A new podcast episode entitled “Buffett’s Letter” is now available. This is Buffett Week at the Gannon On Investing Podcast. So, feel free to leave a voice mail message about Buffett at 1-800-782-1687. If your comments are worth sharing with others, I will play them on the next podcast.
Enjoy the podcast.
Summary: A discussion of select passages from Warren Buffett’s annual letter to shareholders. The discussion focuses on general investing lessons rather than Berkshire’s performance.
