Is this the tip of the iceberg? The price of the Bush/Obama adventursim in indiscriminate spying. I am pulling out of all American cloud companies for now.  See

http://finance.yahoo.com/news/swisscom-builds-swiss-cloud-spying-151807267.html

See also
http://www.informationweek.com/cloud-computing/infrastructure/nsas-prism-could-cost-us-cloud-companies/240159980

Tags: Cloud, competition, spying

ESRX options looking good

A put at strike $65 for Jan 2015 is priced at about $9.12.  For a stock with a fair market value of about 80+ in a defensive sector, I find it quite attractive.  There are other shorter term options too expiring around May 2014 that look quite attractive.  I have personally preferred this strategy instead of buying and owning the stock, given all the macro uncertainties governing the US market --  despite the market performance now that may make people like me look overly cautious and missing an opportunity.  If you don't wish to be that cautious, this may also be a good time to buy the stock and write a covered call for something above 67.5 for Jan 2015.

2008 will fade away, but watch out

Soon, the 5 year performance metrics of all stock funds will start looking better.  Well the 5 year window will drop the dreaded period when all hell broke loose in 2008.  But don't be misled.  Check the holding and their quality before you load up on any fund.  I am not alone in feeling this way.
Check out this page: http://news.morningstar.com/articlenet/article.aspx?id=611810

Something worth reading

http://news.morningstar.com/articlenet/article.aspx?id=609806

This lady Benz has written many very useful columns, and the above is really Finance 101.  If you didn't have to read it, you are one of the lucky few.  There are however very few who can claim to be mindful everything mentioned in this article.

Patience pays

I am still patiently watching on the sidelines except for some of the PUTs I have written on AAPL and MT.  The following quote taken from an article in smartmoney.com gives the sort of things that make me cautious.

 "If you need a bearish thesis on stocks, just follow the money. Over $17 billion in capital fled exchange-traded funds in August, the biggest month of outflows in the history of the ETF industry, according to Index Universe. The details are even more disturbing, with a whopping $14 billion pulled out of the flagship SPDR S&P 500 ETFSPY +0.10% , the single-biggest proxy for retail investors."

The crowd sourced information on budget cuts and downsizing at various companies that I discern from my friends and contacts seem to suggest that despite outside posturing, many are bracing themselves for a grim 2014.  So, for now, I continue to remain mostly a spectator only.  More later.

Keep this in mind when it comes to international investing

http://news.morningstar.com/articlenet/article.aspx?id=609359

The correlation between corruption and poor performance is so high that it can make a big
difference on how international investments perform.  So, I pay attention to where a fund invests etc
from a variety of perspectives.  Thought this list will guide you too in your choices.

AAPL update

This Einhorn-induced euphoria on AAPL may not last since a 1B stake in a 400B company does not amount to much.  So I took profits on many of my AAPL puts for now (eg. sold at 68, bought back at 28).  May get back later if AAPL goes down temporarily with the rest of the market and when Einhorn gets his nose stubbed, since I remain bullish for the long term with a price target of 600+
For now, I want to stay out the rink to avoid being crushed by the gorillas, that is all.

Time to load one's canons - My first set of actions

If you followed me in bailing out of the market, now is the time to start identifying what you want in your portfolio when you are ready to jump back in.  Here is a candidate worth looking at.  I have written some puts (promises to buy) on MLM (Martin Marietta) at 90 and 85 based on (a) the asserted fair market value of 110 for the stock, (b) its market share in materials, and (c) the fact that sometime sooner than later, the governments will have to plunk in money into public works to increase employment.  I doubt the PUTs will get exercised and I may have to buy the stock.  You may wish to read

http://seekingalpha.com/article/1627902-martin-marietta-a-rare-fair-priced-materials-company-for-the-long-term-investor?source=yahoo

and whatever else and find out more.  In any case, this is one stock in my list for a future portfolio.

Why get worried ?

http://www.moneynews.com/MKTNews/Massive-wealth-destruction-economy/2013/06/20/id/511043/?promo_code=13E5C-1&utm_source=taboola

ESRX -- Important ! Take note !!!

See the news below.  Usually, these are not good.  I am getting out of ESRX now at a reduced gain.  Like I said, I ain't taking any chances especially in this jittery market.

Express Scripts says Jeff Hall will no longer serve in the role of CFO
The Company announced that it is initiating a CFO transition process. As part of that transition, Jeff Hall will no longer serve in the role of Executive Vice President and Chief Financial Officer of the Company, effective as of July 30, 2013. Mr. Hall will continue his employment with the Company in a different role through September 1, 2013 in order to facilitate a smooth and orderly transition. The Company has commenced a search for a permanent successor as Chief Financial Officer and will make an announcement once a successor is appointed. Express Scripts also announced that effective July 30, 2013, Matthew Harper will serve as the Company's interim Chief Financial Officer until such time as the Board has appointed a permanent successor to Mr. Hall.

WHY AM I SILENT ?

There is a saying, "Fools rush in where angels fear to tread."  I have no illusion of being an angel but I certainly would not like to be a fool.  So, I have been busy booking profits and parking money in cash.  With gains handsomely over 20% during the last year and the number of uncertainties in the market, I would rather hold onto cash now and wait for a better opportunity to buy.

I have with regard to some stocks, like AAPL and MT, taken some PUT positions where an execution of the PUT would result in my buying the stock at values any sane person would consider significantly below fair values.  But other than that, I am out, out of even stock mutual funds for now.  And who wants to be in bonds today?  I don't trust the FED can put off the bad news for too long, and Uncle Sam can't go on borrowing either.  May be I will miss out on the tail end of a rally, but honestly I am willing to take that risk as opposed to the risk of losing my shirt and waiting many years to get clothed again.

The trillion dollar questions are: Will the dollar hold as the reserve currency?  How does one hedge that risk that is getting bigger by the day?

I will post the results of my own research as days go by.  For now, I say: let the titans and fools duke it out for now.   I don't want to get trampled in the riot to come.

Something for the Young

http://www.morningstar.com/Cover/videoCenter.aspx?id=603699

Retirement may look far away, and one may have an attitude "Who cares?"   I am sure some baby boomers who felt that way in their twenties, thirties and forties are now regretting that attitude. They probably didn't know about the power of compounding.  If they were new immigrants, they simply had greater pressing priorities.  Now, without the safety nets even they had, the younger ones are in greater risk in their later ages.  Pass on the above link to your younger ones for them to see .

AAPL : Watch the action after hours today (Tuesday, 7/23); signficantly up.    Ready to make up prior losses?   Next quarter is the most critical to determine where this goes in the next 12 months.
Watch if you can access it:
http://www.morningstar.com/cover/videocenter.aspx?id=603935

EXPRESS SCRIPTS (ESRX) - voila !

I did a stock screen on Morningstar where I have a premium membership with the following criteria:  Wide Moat, Price < 0.95* fair value estimate, fair value uncertainty <= medium,
growth grade >= B+ , and guess what?  The only survivor in their entire Wide Moat list turned
out to be ESRX.  I have high regard for Morningstar ratings and thought you would like to know the results of my above screening.

Arcelor Mittal (MT)

MT continues to test one's patience, but the waiting is somewhat mitigated by the
dividend yield.  I treat this only as a long term hold and don't expect any miracles in the short run, anyway.

http://www.thestreet.com/story/11974396/5/5-hold-rated-dividend-stocks-cwh-ns-arcp-hta-mt.html

Stupid comments on AAPL

http://tech.fortune.cnn.com/2013/07/08/apple-29-dumb-comments/?

http://techpinions.com/apple-cant-innovate-anymore-my-a/19583

This is a nice read.  I continue to be bullish.

ESRX update

http://seekingalpha.com/article/1534922-express-scripts-has-more-upside-potential-than-you-might-expect?source=email_rt_article_readmore

AAPL: Mass hysteria ?

A PUT with strike 400 and expiry Jan 2015 is priced at $69 and change today.  At $331, I would buy AAPL anytime between now and 2015 and don't believe for a second that AAPL is going to stay below 400 for long.  Plus there are two Thanksgiving-Christmas seasons between now and expiry of this PUT.  Look also at some other famous stocks that have missed a quarterly forecast or two and suffered a big drop of very high magnitude and see where they were within a year.  Mark this as something to revisit in January 2015 and see in the rear view mirror for a worthwhile lesson, whichever way it goes.

Update: MRK, Gardasil: Needs a careful watch

While the FDA and the government appear to continue to recommend use of the vaccines in all girls aged 9 to 26, there are lingering questions on serious adverse effects including death.  I plan to watch all news concerning these issues as long as I hold MRK and am glad that I also wrote a call on the stock.  Perhaps, someone in the industry and knows the science better could check out and write me a note ?  [No, I won't reveal your identity.]  The author of the article below does not have the type of scientific credentials I would feel comfortable with, but yet the alleged settlements are something to be concerned about.

http://communities.washingtontimes.com/neighborhood/stress-and-health-dr-lind/2013/apr/10/us-court-pays-6-million-gardasil-victims/

MRK: So, did I do anything with it ? Why?

Saw someone had placed a big order of the size of some 5 million either early today or after hours yesterday.  [One place you can see this is http://www.freestockcharts.com.  Go there, enter MRK, and choose something like 2 minutes in the graph so that you can pick out large individual trades.]  If it is good
for some smart money on a day when every one's (except the long term value investor's perhaps) stomachs are churning, then I am even more enthused.  So, I bought some at about 46.5 and wrote a 2015 call for 55 priced at $1.64.  With a 4% dividend on the stock, I reckon even if my call gets exercise, I am not doing badly.  The hedge is not a lot since it covers only a 3.5% or so tumble, but I am not worried about the long term given all my research into the stock.  Who cares if it does slide further in the short run?

GARDASIL, MRK etc. - What did I find out ?

I found out quite a bit. You can find the general details by doing a google search on Gardasil.

Wikipedia also has an article.  But it appears there is also another drug due to Glaxo Smith Kline called Cervarix which vies for the same maket.  So, check out Cervarix also.

Merck’s total revenues in 2012 were about $47 billion of which about $1.6 billion came from Gardasil. Thus about 3.4% of the revenues are accounted for by Gardasil.  Gardasil also seems to have had an increase of 35% in sales in 2012.  Given all this and the current news item, it is fair to expect some significant increase in sales of Gardasil in the USA and Europe  Since by now most R&D expenses would have been amortized, I would guess that this drug will probably give a much bigger increase to the net revenue of MRK although the drug may today account for only 3% of the total revenue of MRK. 

Compared to Gardasil, Cervarix seems to have hit only a 0.5 Billion revenue figure.  Gardasil seems to have gained ground quite a bit.  For example, the government plans in UK seem to have adopted Gardasil.

Per MorningStar on which I rely much, MRK enjoys a wide moat, sells now at  46.31 and is assessed to have a fair value of 51.  Its acquisition of Schering-Plough is considered a big plus.  MRK appears in the top 10 holdings of several very successful mutual funds with excellent returns over the long horizon.  It also appears in several of the screens for selecting stocks.

All that makes me quite interested in MRK for the next few years.   I am inclined to believe that the news today will be a shot in the arm for MRK.  Even if it is not that great, as a company this is one that I would like to have in my portofolio for the longer haul.  Let me just hope that the smart money has not moved in tonight and pushed the price of MRK much higher.

Merck: Did you hear and see what I did ?

      An important news item today was how data show that although only 1/3 of the teen-agers got vaccinated against HPV (human papiloma virus) that causes cervical cancer, cervical cancer rates have come down by 50% in the USA.  Statistical analysis seems to show that it is directly attributable to the vaccine.  Ask yourself what it means for the vaccine (Gardasil) use in the USA and the manufacturer Merck (MRK).  The one thing that of course remains is to figure out what various percentage increases in demand for the vaccine will do to the bottom line of the company since this is not the only thing that it makes.  OK, we got some work cut out for us, right?  [Recall my goal in these columns is not to give buy/sell advice but to increase knowledge, and ability to read signals].  Download the last annual report for Merck from its site and the investor relations page or wherever else you can find it, and do some digging before all this gets priced in.
The timing is great since everything including MRK is taking a beating now.

A really hard question

One of the subscribers wrote to me to ask, "More than buying, what do I do after I buy ? When do I sell?"
For me, that was the weak point really in the past.  I mostly sold too early (e.g. AAPL at 112, COST at 91 thinking I had made enough of a profit) and sometimes held too long (e.g. BAC only to see that it was becoming a bottomless pit.)  I have gotten better.  Here is a nice video that really gives some very good perspectives similar to what I got in my own one-on-one training with MorningStar.

http://www.morningstar.com/cover/videocenter.aspx?id=600192

The question that you will probably ask is how do you know what is fair value?  Stock valuation is not at all easy, and this is an area where we are better off listening to the experts.  I have a Premium subscription to MorningStar which is now priced at $199/year, and among the many many valuatble pieces of information I get is a thorough analyst report and their estimates of fair value, when it is a bargain to buy, and when one may consider selling.  My own experience is that MorningStar is very conservative on the fair value and rarely do you get a chance to buy at what they call "Buy At":price.  So, use this as a first place to start, look at other stocks which are competitors and what price they command, read about the company's future growth potential, factor in general macro trends that may impact the company, and you have a better handle.

A not-to-miss interview

See this especially if you are just considering stock investing.  One more reason why I post.  I want to be honest to myself first about my abilities.

http://www.morningstar.com/Cover/videoCenter.aspx?id=599730&lineup=MUTUALFUNDS

APPLE (AAPL) - my take now 6/15

The bad sentiments about AAPL continue unabated, and now the big complaint is that Tim Cook did not walk on water in the developers' conference.  The developers themselves were either pleased or at least not disappointed, it appears.  What do I think?

Were I the CEO of AAPL, would I be dumb to put out the best things I am doing, right now just to please a handful of analysts and a few big mouth large investors with an ax of their own to grind?  Or, would I put it out just before the Thanksgiving/Christmas season when interest in my products is at its peak?  Plus, if I have announced a stock buy back and can buy, why not let it slide, and pick up as much as I can without driving the market myself?

You decide if I am day dreaming or thinking as a corporate strategist.  This, I think, is a great time to WRITE some PUTs on AAPL at or below 425.  I'm indeed doing it and will tell you in April 2014 how well I did.  By the way, I don't do very short term options and am looking only at April 2014 and Jan 2015 expiries.

OPTIONS - A quick review

An Option is what is called a derivative.  Think of it as a bet made on a stock.  So, its payoff depends on what the stock does; hence it is a derivative.  There is a large variety of options, and many details on how they are priced, traded, etc.  We will cover some basics only here.  (This is by necessity a very incomplete account.  Do read the last paragraph.)  Also, we discuss only the American versions of these.

Two most common forms of options are the CALL and the PUT.

Note: Each CALL or PUT is a contract on 100 shares !  Also, you need to be qualified by your broker to be able to trade options.  Go to http://www.cboe.com and you can find out more than you may ever want to know about options.

CALL:
A call is a right to buy a specific stock at a specified price (strike) on or before a specified day (expiry) for which you pay up front a price (premium).

Example: Suppose I believe that Apple (stock symbol AAPL) is really beaten down at 430.50 at the end of 6/14/2013 but believe it will rise higher, to say, 525 by the end of the year.  I could buy 100 shares of AAPL and wait to the end of the year to see what happens.  But then I need a capital of $43,050 and am risking a big amount.  What if I buy a call on AAPL with strike 450 and expiry Jan 14, 2014 ?  We can see that it is priced at $25.59 today, and to do this we only need $2,559 (plus trading costs of course; my broker charges me 7.50 for a trade and an additional few cents for each contract).   As an example of a place where you can get information on option prices, I cite http://www.finance.yahoo.com.  Go there just enter the ticker name AAPL for getting a quote, then click on the left margin for Options, choose an expiry date and out comes a table; it is that simple.  WARNING: the price you get may not be exactly what you see here since option prices change fast, and there is a spread between "ask" (what sellers want) and "bid" (what buyers are willing to pay)

Suppose I buy such a CALL.
Now essentially I have the right to buy 100 shares of AAPL at 450 by exercising my CALL anytime between now and the expiry date or do nothing at all and let my investment on the option go to waste.

How do I make money?  You make money by either selling back the call itself since its value changes as the stock price changes. You can do this again through your broker.  Another way you could make money is by exercising your option.  Of course, you won't exercise your option unless the stock price is above the sum of your strike price (the price you will pay to buy the stock) and cost of the option, in which case you can make a profit by immediately selling the stock you are buying (again you have to factor in trading costs).  If the stock price is above strike on the date of expiry, your CALL will be automatically exercised without an active exercise on your part.  In practice, buyers of CALLS seldom exercise, they trade them and make their money.  Since options are highly sensitive, if the stock price goes up even by a small percentage points, the option holder can make a big percentage gain.  But he can lose big too although his losses are limited to the purchase price of the option plus cost of trading.  There are sites that give  estimates of the rate of change of CALL price for each dollar change in the stock (Delta, as they call it) and things like that.  So decisions like whether to buy, what to buy, with what strike and expiry, at what price, what to do with what you bought - all these require quite a bit of analysis parsing much information.  (Who said it is easy to make money?)

These are the essentials of a call and buying a call (going long).  The seller (who is going short) of the CALL gets his money immediately, but unlike you who have a right (you may or may not exercise), she ends up with an obligation to deliver the stock if and when you demand it.  Why would someone sell a call ?  May be they think  the stock won't hit the strike price before expiry and they can earn something on their holding which otherwise is doing nothing for them.  They may also be doing this to hedge (to give themselves a small cushion from drop in price of the stock) through the premium they have collected.

If the guy who writes (sells) the CALL has the stocks to cover it, it is called a covered call.  But some write CALLS without even owning the stock (a naked call), and wow, that is risky, is it not ?  What if someone wrote the above call for 450 and the stock went to 1000 dollars?  He may end up having to buy it at 1000 to satisfy your demand to get it at 450 since they have given a contract to sell at that price.  Naked calls etc are clearly in the realm of speculation.  I stay away from them totally.
====================
PUTS

A PUT is the opposite of a call.  The buyer of a PUT has the right to demand that the person who sold (wrote) the PUT buy the stock at a stipulated price (strike) anytime until the expiry'  For this right, the buyer has to pay a premium up front.  People buy PUTs on stocks they hold if they think stock price could go down, and they want to bail out with at least some minimally guaranteed sale price if that happens.  Buying a PUT is a bearish move - you believe the stock price will go down.

The details and logistics are very similar to that of a CALL except that payoffs etc work the other way.
========================
You can get a feel for how the prices of the above change by strike, expiry etc by looking at the options tables and comparing various entries.
=========================
A final word: Usually brokers won't authorize you to trade options unless you can demonstrate that you have some experience in investing and have the financial ability to take the risks associated with options.  This is unfortunate in some way because the small investor who may only want to use it for hedging (protecting oneself from big losses) through options is cut out.  But then, like many other things, some of these systems are geared to make the rich richer.  Stay away from options if you are not reasonably thorough with stock trading or if you are not willing to learn quite a bit about options and options trading.  Not losing money is more important than making it for successful investing; when I say this, I mean on your portfolio and not on every trade, since even the pros are unable to do the latter.

One for the Slightly Advanced Player: Ford (F)

Ford's fair market value is placed at 21 by Morningstar which also gives it a 4* rating.[Reasons: F is the only car maker who didn't need a bail out; quality improving; pent up demand for cars over the years; historically very large average age of cars on the road; employment in the US improving; now held back due to Europe but could do much better if Europe smiles, ...] It is a worthy stock even today but if I didn't hold it already, I am not sure I will be a buyer today.

But I bought one bunch I own at $9.12 .  On 6/13/13 it closed at 15.53 which is a solid percentage gain for me since I bought only in 7/12.  I am scared that if the market makes a correction from the current peak and also gets spooked by Bernanke, then a substantial chunk of my gain can get wiped out too.  Yet, I don't want to be out totally since there is still some upward chance in the longer run.  What do I do ? Here is a table I computed on how I would fare on 1/14/14 assuming I hold 100 shares now and can write 1 call or 1 put since each contract is for 100 shares.

Scenario 1: Keep stock and do nothing Scenario 2: Keep stock, but write a call for 16, expiring 1/14/14 at     premium 1.05 Scenario 3: Sell stock now, write put for 16 expiring 1/14/14 at  premium 1.78

Price on 1/14/14	Scenario 1	Scenario 2	Scenario 3
12.00	288	393	419.00
12.50	338	443	469.00
13.00	388	493	519.00
13.50	438	543	569.00
14.00	488	593	619.00
14.50	538	643	669.00
15.00	588	693	719.00
15.50	638	743	769.00
16.00	688	793	819.00
16.50	738	793	819.00
17.00	788	793	819.00
17.50	838	793	819.00
18.00	888	793	819.00

Given that I want to lock my gain and yet do better than selling now, I will opt for scenario 3. What is going on here is simple:  With scenario 3, I am essentially selling Ford for 16.78 and buying back at whatever price prevails on 1/14/14; of course I am ignoring time value of money and such in this quick and dirty argument. I do miss some opportunity if F goes to 17.50 or above by Jan 14.  But if I attach any high chance for this event, then why would I even worry now?  (Compute what percentage gain this represents).  So, I am wiling to take that chance and be content more by protecting myself on the wrong side of that number.

Think who has a better chance to make money?  The bear or the bull ?  I am neither; I am being a bear for selling my stock and cashing out.  I am also being a bull by selling a put. Ha, ha !

=============
For those who don't know or want to refresh:
Writing a Call is to  promise to sell at a fixed price at or before a given time for a payment now called premium which I get to keep irrespective of whether the call is exercised by the buyer or not.
Writing a Put is to promise to buy at a fixed price at or before a given time for a payment now, called premium, which I get to keep irrespective of whether I am forced to buy or not.
With this information, you can recreate the table with some minor effort.
Our lessons to appear in a different series will take you there gradually.
===============

PUTS revisited

Those who got the previous post on PUTS, now taken down, please ignore it and don't waste your time.
I took it down for 2 reasons: a wrong table was uploaded and resulted in all kinds of wrong things.  Secondly, I picked a very complicated example (behaving more like a straddle for the experts) that was
not a good choice for the first example.  We will anyway revisit PUTS etc more thoroughly at a later time.
Thanks to the subscriber who got back with some questions, otherwise I would not have noticed it myself.
Remeber my Warning: Don't trust anyone else; do your homework always.

ESRX: Update on 6/11/2013
Read
http://beta.fool.com/titans8904/2013/06/11/this-companys-widening-moat-swallows-competitors/36773/?source=eogyholnk0000001

SOME UPDATES ON 6/6/2013

1. Look out for our new blog series "STOCKS 101" outlining the basics about stocks and how I pick them and when I sell them etc.

2. CERNER split.  They may become the next big company in software.  Do keep an eye on this.  Read the news item below.  Imagine where we could be if we had invested in Microsoft or Google early on.  I will take a very very close look at their next annual report and financials to make sure there are no aggressive accounting gimmicks.  For now, I am betting on this horse.

3. Here are updates on some stocks I mentioned in earlier posts.  [I set alerts, get many reports and use my judgment on what appears reasonable.  A bad thing about internet based education is one can fall into the trap of selective reading, of only points of views that one likes and fail to see the reality out there.  So, please read other comments too as I always do.]

CERNER
http://www.ft.com/cms/s/0/7ae0e17c-cc68-11e2-9cf7-00144feab7de.html#axzz2VR7AOgGl

http://finance.yahoo.com/news/stock-split-cerner-182002374.html

MT
http://seekingalpha.com/article/1445861-insider-alert-are-these-5-stocks-poised-to-move-higher?source=yahoo

VMC
http://beta.fool.com/scavengerreport/2013/05/23/why-mdu-resources-should-continue-to-move-higher/33622/?source=eogyholnk0000001

On healthcare, digitizing, biotech, etc.
http://www.morningstar.com/cover/videocenter.aspx?id=596623

Apple: To bite, or not to bite

Apple (AAPL)
Price 445.15 (on 5/24 close)
Moat (eroding); Fair value (600); yield=2.49%

What is my take on Apple ?  I think the fair market value of 600 on this stock is conservative given its global opportunities even with existing businesses and hoardes of cash.  As a researcher myself, I can't subscribe to the dumb thought that their innovators will stop inventing great things, or that the passing away of one man can change all that much in that sphere.  As long as key inventors in the company stay on, this ship will right itself.

But on the negative side, the volatility of this stock requires one to have a strong stomach.  Of late, it is like almost every publication and analyst is against Apple probably demonstrating a herd mentality of their own.  Do we stay away and miss what seems to be a long term bonanza with high short term risk or do we jump in?  That is the real question.

My take has been this.  This is not a stock for the faint hearted or for someone who cannot think in terms of a multiple of 100 shares and cannot hedge with stock options.  A play that makes sense to me  today is:
A covered PUT at strike 450 for April 2014 priced today at 52.25

If it doesn't get exercised, you make a good percentage return on money parked.  If it does, then you bought it at an effective price under 400 at which I think it is a steal even if you consider some worst  case scenarios one can think of.  Add to this the fact that there is  buying going on, some appearing to make sure it doesn't go below 425 which appears to be forming as a strong support.

VMC, MLM: Along the road to recovery

Two other stocks I like are VMC (Vulcan Materials) and MLM (Martin Marietta).

VMC has a price of 55.06/fairvalue estimate 65 and a wide moat.
MLM sells at 99.53 and has a fair value of 119.
As noted earlier, the fair value estimates tend to be very conservative.

What is the story?
Between them they control most of the material for road building and construction.  If you agree the only way to provide large number of jobs is through construction, there you go.  I owned VMC bought at 29+ but sold it at about 42 and haven't got an opportunity to buy it back again; it has been going up steady.  Dumb me who needs to improve his selling strategy!  Their quarries near high population grow th areas, careful acquisitions, etc. position them very well.  VMC is highly leveraged (debt/ebitda ~6) and gets dinked for stewardship for that reason, and from that perspective MLM may look better.  They seem to control different resources and are not really in competition.  Last year MLM did try to acquire VMC but did not succeed.  Am I buying now?  No, but I am watching.  If a mrket correction brings them down, yes, I plan to buy some and forget it for a few years unless some fundamentals change.

My Investment Philosophy & Why I Post These

Disclaimer:  I am not a professional investment advisor nor do I have any formal credentials to be one.  Nothing  in these pages is to be construed as investment advice.  I am sharing ideas on what I consider as good bets for myself and bringing it to others as ideas for their own research.   You take my views at your own discretion.  Do your own research.  Over a period of time, you will yourself discover what you look for and you won't need me, hopefully.  You will probably also see I am distilling hours of research into a few snippets for you.

MY INVESTMENT  PHILOSOPHY

0. Money is necessary - even to do good, in fact if one wants to do much good - but is only a means and should never become the end.  The ability to earn it is a talent like any other (just like those that a great poet - Milton -lamented about wasting), and one should not waste it.  What makes it all right or wrong is how one earns it and what one uses it for.

1. Good investment involves protecting one's capital and earning a better return above inflation rates and major indices.  Anything else is speculative or being stupidly lazy.

2. I don't believe in parking money in an index fund or somewhere like that, or worse still delegating its management to someone else.  I don't want my returns to be average, I like it to be above it to make the exercise even worthwhile.

3. I am not going to let someone else "manage" my money to their benefit.  So, I will stay away from advisors like those at brokerages who have an obvious conflict of interest.  [Not all are bad, some are even very good, but I don't have the luxury of experimenting, nor do I want to get burned again -- and thank God I didn't have much to lose when I did stupid things like that long back.]

4. To succeed, you need to observe how the winners play the game and learn from them, and I do that on a continuous basis.

5. I solve very complex problems in my day to day work, am very analytic, etc.  Compared to everything else I do, managing my investments is not all that hard.  I refuse to be too lazy to learn the intricacies of that or to allow myself to be taken by anyone.

6. I have equipped myself with quite a bit of training   through my own studies, from university courses, one-on-one coaching, etc., and from a lot of shadow boxing over a few years with investment ideas.  I continue to educate myself more.

7. I refuse to fall into the trap of becoming  over-confident and remind myself each day that for every one successful in this area, there are hundreds who have failed miserably.


WHY I SHARE MY IDEAS

1. That is my nature.  Plus it burns me to see otherwise bright and brilliant people getting burned or losing opportunities just out of  misconceived notions like: this is hard; I have no time; my work (and making someone else richer) is more important.

2. Life is going to be harder for the next generation without our safety nets of pension, social security, etc.  I am hoping my kids will take a greater interest in such matters as will their friends.

3. I am all too aware of the many studies that confirm the regression to the mean by each immigrant ethnic group to the USA and want to do my best for my cohorts and their kids to maintain the lead our generation has given them.

4. I am sure that if you see a good idea, you will pass it my way and give me yet another idea to research and add to my learning and possibly benefit financially too.

5. Posting my preferences publicly forces greater discipline of research on my part, and some day if I turn pro (most unlikely, though), you can judge if I am worth it.

Two more interesting ideas: CERN & ESRX

CERN &  ESRX

Cerner Corporaton (ESRX)
Price: 98.83 , 3 star;  MorningStar Fair Value: 100

Supplier of healthcare IT software, services, devices & hardware in a market shared mostly by Cerner and Epic.  Beneficiary of new laws (American Recovery Reinvestment Act) and its HITECH (Health Info Tech Economic & Clinical Health) provisions.  The 3 star, I guess, is only because it is now getting close to Fair Market value which in my view has always been overly conservative (with very  few but noticeable misses in the tech arena).

Have you noticed the increased automation in your doctor's offices, for example?  That is what made me research into this issue.  Enjoys a WIDE MOAT rating and decent free cash flow.  Switching costs for customers give it a stable clientele, and its own experience with all segments of the health industry give it a significant edge over the competition.   I like this for its growth potential as well as for its role as a potential defensive stock as a member of the healthcare family.  In short, a  good long term prospect.  I will add to my holdings if it dips anytime due to a general market but not stock specific correction.  If I didn't have any, I would buy some now and time average over the year buying at dips.

Express Scripts (ESRX)
Price: 63; Fair Market Value 73; 4stars; Wide Moat
A thing that earned big money for Peter Lynch ("One up on Wall Street") was keeping his eyes wide open right at home and happenings around him such as his wife buying up Rubber Maid products like crazy.  Are we ?  If so, how could you have not noticed Medco as the prescription provider with increasing presence?  With the acquisition of Express Scripts, they now hold a big market share.  Personally, I am impressed with how they come after you every time you buy a prescription elsewhere, their good service, and the incentives they give to use them.  Relative to peers, they enjoy a high margin and also benefit from various regulatory reforms.  Again, being in the healthcare arena and as one with a large and increasing market share, it also provides for stability in the portfolio in addition to high potential for growth.  Will revisit at the end of the year to review how this did and what 2014 may portend.

This steel is a steal

AN INVESTMENT I LIKE RIGHT NOW:

Arcelor Mittal (MT)
Price on 5/17/2013: 12.90
MorningStar Fair Market value: 35.00  Yield: 5.05%

Hurting in the short term due to European financial problems.  But pent up demand for steel will open up eventually   In the meanwhile, MT is showing tremendous stewardship in cutting costs, getting rid of less profitable properties, etc.  Its handling of the labor  issues in France was masterly.  EU may act soon to restrict Chinese dumping of steel which alone will give MT a great boost.  Even if it doubles in 5 years
(a 14% compound return), it is still below its fair market value and I am willing to wait it out.

A sophisticated play is to write a Jan 14 put for $13 at 1.50 or up.  If it gets exercised, you still paid less than the current price.  If it doesn't you have a return that is well over 10% in just 7 months for parking the money to cover your put writing.  Who gives you that kind of return in fixed income today ????