Austrian Wonder

So Magical...

noreply@blogger.com (The Austrian Wonder) — Thu, 20 Nov 2008 21:29:00 +0000

See more funny videos and funny pictures at CollegeHumor.

Carl Schramm at the Schumpeter Symposium

noreply@blogger.com (The Austrian Wonder) — Mon, 03 Nov 2008 08:57:00 +0000

The Return of Terry Tate - Vote baby!

noreply@blogger.com (The Austrian Wonder) — Wed, 22 Oct 2008 08:42:00 +0000

The Final Countdown

noreply@blogger.com (The Austrian Wonder) — Mon, 20 Oct 2008 10:13:00 +0000

Haha...

noreply@blogger.com (The Austrian Wonder) — Mon, 20 Oct 2008 10:04:00 +0000

http://view.break.com/589473 - Watch more free videos

How to lose a million bucks!!

noreply@blogger.com (The Austrian Wonder) — Wed, 15 Oct 2008 09:42:00 +0000

The Country is Fundamentally Sound

noreply@blogger.com (The Austrian Wonder) — Wed, 15 Oct 2008 09:40:00 +0000

Barney Frank & Cronies are Clueless (and Dangerous)

noreply@blogger.com (The Austrian Wonder) — Wed, 01 Oct 2008 21:25:00 +0000

I shit you not.... literally 1 minute ago on CNBC, Barney Frank said (and forgive me if it's not word for word) that "Republicans are responsible for the current mess we are in because they opposed regulation," implying that he wanted more regulation on companies such as Fannie and Freddie.

Please watch this video and please give me one good reason why this guys deserves ANY respect or should be in ANY position of power. If someone like him exists in government and can be considered successful and powerful, I guarantee you that there are others like him... he's not an anomaly.

I am so pissed off right now... Barney Frank deserves to [insert very bad thought here].

Oh, and don't even get me started on Frank Raines... God help us if Obama is elected and this guy is put in any position of power.

Hitler Gets a Margin Call

noreply@blogger.com (The Austrian Wonder) — Wed, 01 Oct 2008 19:01:00 +0000

Long Longs - A Lesson In Optionality

noreply@blogger.com (The Austrian Wonder) — Wed, 01 Oct 2008 18:48:00 +0000

In a market as volatile and unpredictable as it is these days, the difficulty of finding potential investment opportunities is limited at best. The best way to maximize your return, in my opinion, is by using a concept called optionality. Of course you can use actual options, but the idea is more about limited downside risk for your particular bet. For instance, earlier this year the yield curve was flat, and there might have been a great reason for that, but due to economic woes, it was more likely to steepen than invert itself again. The small probability of it inverting again would give you limited downside risk on your play that the yield curve would steepen again, in essence getting optionality.

Recently there has been a great example to illustrate optionality. A famous face during the past year or so has been Bill Ackman of Pershing Square Capital, a hedge fund. He correctly predicted problems in the bond insurance companies (MBIA and Ambac, which he was short) and continues to express concern for the economy and the way the situation is being handled by the government. Some might believe that he is a perma-bear, but if you looked more closely at his portfolio (which anyone can do quarterly by looking online at the SEC website for a 13-HF’s), he is more long stocks than he’s short.

On August 4th, Pershing Square filed a SC-13D (which is mandatory once any entity or individual gains a stake of 5% or more in a public company) in a company named Longs Drug Stores (NYSE:LDG) for 8.8% of shares outstanding. The filing was for an action completed on July 23rd so we can assume most of the stock was bought at a price below $46.50. This had piqued my interest because I subscribe to the RSS feed of Pershing Square, but did not look into it more.

Needless to say, on August 12th, CVS made a bid for the company at $71.50 per share in a tender offer. This is where things get really interesting. The tender offer agreement is unique for the fact that it’s open for a whole year – meaning that CVS can buy shares from shareholders at the offer price for one year. They need to reach a share count of 2/3 of the outstanding shares in order to complete the buy-out. While this is going on, the company would still be paying its normal dividend, which pays for owners to wait.

August 14th – LDG is already trading above the buy-out price and closed at $71.55. When this happens the market is indicating that a higher bid is likely to occur, because normally shares trade slightly lower due to risk of the bid falling through, and that’s where merger/buy-out arbitrage happens.

After a few days news began to trickle out as to what was really going on. Mr. Ackman began to publicize concerns that CVS and LDG management were undervaluing Longs’ real estate. The firm owns about 200 of its 500+ stores, all of which are in California and Hawaii – some of the highest priced real estate in the country even with the recent market troubles. It was disclosed by CVS that they had put a “conservative” value of $1 billion on the stores, 3 distribution centers, and 3 office buildings. CVS also planned on making money by either selling the assets or generating cash through a sale-leaseback transaction.

In an interview on CNBC, Mr. Ackman talked about LDG and that CVS was grossly underestimating the value of the real estate. He believed that the real estate was closer to the value of the buy-out offer, and in a sense you were getting their prescription benefit management business (RxAmerica) for free. In that interview he saw the real value closer to $90 to $95 per share or higher.

The premise is valid and the trade turns out to be a phenomenal opportunity. With shares hovering just above $71.50, anyone had the ability to buy shares for a price slightly above the buy-out offer. For instance, I paid $71.60 per share, which is 10 cents above the buy-out price, giving me a 10 cent option on a higher bid and have really smart people working for my money. The most I could lose was 10 cents – although if the buy-out did not go through then I could lose money, but I gave the chances of that happening virtually zero because based on what I had learned, there would be other bidders.

On September 11th, Pershing Square sent a letter to the board of Longs. There it is revealed that they have a total exposure of 12.3 million shares (9.2 of which are through private transactions), which equals about 34% of the shares. That amount in effect blocks the buy-out because CVS could never buy the 2/3 it needs in order for completion. In the letter, they also state that they have identified “four potential buyers including two separate strategic buyers, a REIT and a real estate private equity investor.”

September 13th – Walgreens (NYSE:WAG) sends in a bid to the board of Longs for $75 per share, including the $100 million break-up fee from the CVS agreement. LDG closed at $75.70, indicating again that there would be a higher bid for the company.

It’s not really worth going into much more now, but Walgreens, Longs and CVS have been sending each other letters, which you can read on EDGAR. There is also another fund, Advisory Research that owns about 10% of the company and also believes there is a better offer out there. CVS also reported how many shares had been tendered in about a month of the bid being open; only 4% of shares were tendered.

The idea of optionality is great to think about during tough times. All you need to do is enough research in order to understand the situation so you can place odds on the trade. If the odds are in your favor, then be confident and back up the truck. Hey, Longs might even still have some legs left in it.

Full Disclosure: I am Long Longs. I am not an investment professional, so don’t trade off my advice. If you want to join me, do your own due diligence.

A-List #25

noreply@blogger.com (The Austrian Wonder) — Sun, 28 Sep 2008 08:04:00 +0000

It's been since May, but better late than never right? This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Terra Industries Inc. [TRA]
BP Prudhoe Bay Royalty Trust [BPT]
Lockheed Martin Corp. [LMT]
CF Industries Holdings, Inc. [CF]
Versant Corporation [VSNT]
Watson Wyatt Worldwide Inc. [WW]
VAALCO Energy, Inc. [EGY]
Questcor Pharmaceuticals, Inc. [QCOR]
Hasbro, Inc. [HAS]
Aeropostale, Inc. [ARO]
Occidental Petroleum Corporation [OXY]
Cal-Mine Foods, Inc. [CALM]
Darling International Inc. [DAR]
The Gap Inc. [GPS]
Hess Corp. [HES]
North American Galvanizing & Coating [NGA]
QLogic Corporation [QLGC]
ViroPharma Incorporated [VPHM]

Dropped: DEPO, ELNK, GD, FIX, LLL, MLHR & TTWO

Adding to this most up-to-date list is an overview of how the portfolio has fared since inception (minding that between the end of May and about the beginning of September there has been no activity whatsoever... I wish I had time to do it.) Here is a graph depicting the returns:

Overall the portfolio has held up pretty well, while hinting at more outperformance at the end of May, but we will never know. As with the whole market, lately has been a wild ride.

It is interesting to note that there has been a consistent flow of more large cap stocks in the screen, while small- and micro-caps have been rare (right now NGA is the smallest I believe, and might be worth a look).

I could go on and on about the current situation but the situations are so complicated I am not going to try right now to fully understand everything, instead I think observation is the best strategy - while picking spots for arbitrage and optionality.

In the next few days I should have a write-up about a major play on which I pulled the trigger. It's probably one of the best opportunities out there, or was...

Make Informed Decisions

noreply@blogger.com (The Austrian Wonder) — Sat, 27 Sep 2008 11:01:00 +0000

If you are reading this blog, please take 10 minutes out of your day and watch this video. I don't care what kind of politics you agree with, but facts are facts. And don't make any pithy comments about spin or whatever because that is not the point of this, although I would like to know how anyone could vote for a person who is such a politician, and hints at nothing of a statesman - remember that every vote should be taken seriously, I know I do. Now, I'm not saying that the other candidate is the most optimal choice either, but he dominates on topics that really matter. Alright, enough of this, just watch the video with an open mind - most importantly you should learn how the current financial problems actually began.

Revival

noreply@blogger.com (The Austrian Wonder) — Tue, 16 Sep 2008 10:14:00 +0000

I will be posting some updates soon on how the Value/Growth Portfolio has done over the summer... even with a lengthy period of time where the system was not followed, but it's been back in action for the past 2 weeks or so.

A-List #24

noreply@blogger.com (The Austrian Wonder) — Wed, 28 May 2008 00:42:00 +0000

Sorry, a day late... This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Raytheon Company [RTN]
Terra Industries Inc. [TRA]
BP Prudhoe Bay Royalty Trust [BPT]
Western Digital Corp. [WDC]
Lockheed Martin Corp. [LMT]
CF Industries Holdings, Inc. [CF]
General Dynamics Corp. [GD]
Versant Corporation [VSNT]
Exxon Mobil Corporation [XOM]
ENSCO International Incorporated [ESV]
Chevron Corporation [CVX]
Watson Wyatt Worldwide Inc. [WW]
L-3 Communications Holdings, Inc. [LLL]*
Energen Corp. [EGN]*
VAALCO Energy, Inc. [EGY]*
Questcor Pharmaceuticals, Inc. [QCOR]*
True Religion Apparel, Inc. [TRLG]*
Superior Energy Services, Inc. [SPN]*
TransDigm Group Incorporated [TDG]*

Dropped:
Hewlett-Packard Company [HPQ]
Systemax Inc. [SYX]
Johnson & Johnson [JNJ]
Precision Castparts Corp. [PCP]
The TJX Companies, Inc. [TJX]
Hasbro, Inc. [HAS]
Aeropostale, Inc. [ARO]
Occidental Petroleum Corporation [OXY]

A-List #23

noreply@blogger.com (The Austrian Wonder) — Sun, 18 May 2008 17:18:00 +0000

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Raytheon Company [RTN]
Terra Industries Inc. [TRA]
BP Prudhoe Bay Royalty Trust [BPT]
Hewlett-Packard Company [HPQ]
Western Digital Corp. [WDC]
Lockheed Martin Corp. [LMT]
CF Industries Holdings, Inc. [CF]
General Dynamics Corp. [GD]
Hasbro, Inc. [HAS]
Aeropostale, Inc. [ARO]
Occidental Petroleum Corporation [OXY]
Versant Corporation [VSNT]
Exxon Mobil Corporation [XOM]
The TJX Companies, Inc. [TJX]
ENSCO International Incorporated [ESV]*
Chevron Corporation [CVX]*
Johnson & Johnson [JNJ]*
Precision Castparts Corp. [PCP]*
Watson Wyatt Worldwide Inc. [WW]*
Systemax Inc. [SYX]*

Dropped:
Southern Copper Corp. [PCU]
L-3 Communications Holdings, Inc. [LLL]
Questcor Pharmaceuticals [QSC]
GrafTech International Ltd. [GTI]
Honeywell International Inc. [HON]
National-Oilwell Varco, Inc. [NOV]

10,000 B.C. - What a cinema miscarriage

noreply@blogger.com (The Austrian Wonder) — Sun, 11 May 2008 09:35:00 +0000

I just had to post about this...

Just finished watching 10,000 B.C. - my first intuition was, how can I put this politely? that it was going to be pretty much box office donkey shit - and it was.

What a horrible movie, there is really not much more you can say about it. The acting was a joke, the story line was incredibly ridiculous... I could probably go on and on about how much of a piece of horrible smelling rabbit shit this was... such a waste of my time - thank God I "paid" for it.

A-List Performance Update

noreply@blogger.com (The Austrian Wonder) — Sun, 11 May 2008 07:14:00 +0000

So..... I started a Marketocracy portfolio that updates every week after the A-List itself gets itself rebalanced. I decided to use a 4% weight for every new position because depending on how many positions there are that number seems like every company will be able to fit (the portfolio is not allowed to use margin). Currently there are 20 stocks, resulting in 80% of the portfolio being invested - I believe that this is the most since inception. Also, it does keep a good cash buffer on the portfolio, which reduces risk and can boost returns if the market falls because that's usually when the Magic Formula stocks begin to creep up the Get Rich With Growth screen, especially large caps.

An interesting thing has been happening to the screen itself. Back when I started to use this hybrid, there were consistently about the same number of stocks coming out of each market cap limit. Currently most, if not all the stocks that are rated "A" are coming out of the $2B+ screen. Does this mean we are going to see consistent under performance by small caps? This could be because the Get Rich With Growth screen measures institutional buying, and if virtually none of the small caps are getting enough buying signals to get rated "A" then that might be a sign of continued under performance. We'll see.

Anyway, here is the chart from Marketocracy since inception (02/26/2008). AWVGF is the A-List Fund - it stands for "Austrian Wonder Value/Growth Fund:"

This is obviously not enough time to really see if the strategy will out-perform, but it is interesting that it usually moves with less volatility and many times against the indexes. It will be interesting to see it after a few more months and next year.

A-List #22

noreply@blogger.com (The Austrian Wonder) — Sun, 11 May 2008 07:05:00 +0000

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Raytheon Company [RTN]
Terra Industries Inc. [TRA]
BP Prudhoe Bay Royalty Trust [BPT]
Hewlett-Packard Company [HPQ]
Western Digital Corp. [WDC]
Lockheed Martin Corp. [LMT]
CF Industries Holdings, Inc. [CF]
General Dynamics Corp. [GD]
Hasbro, Inc. [HAS]
Aeropostale, Inc. [ARO]
GrafTech International Ltd. [GTI]
Honeywell International Inc. [HON]
National-Oilwell Varco, Inc. [NOV]
Occidental Petroleum Corporation [OXY]
Questcor Pharmaceuticals [QSC]
Versant Corporation [VSNT]
Exxon Mobil Corporation [XOM]*
Southern Copper Corp. [PCU]*
L-3 Communications Holdings, Inc. [LLL]*
The TJX Companies, Inc. [TJX]*

Dropped:
United Technologies Corporation [UTX]
Nucor Corporation [NUE]
Manitowoc Company, Inc. [MTW]
ENSCO International Incorporated [ESV]

A-Level Edition Turns 21!!

noreply@blogger.com (The Austrian Wonder) — Mon, 05 May 2008 08:09:00 +0000

Let's celebrate! The beloved Growth v. Value Screen turns 21 today! Although it's not been exactly every week, I did start a Marketocracy portfolio which more accurately follows the goings on in the screen. Next week I'll try to remember to post a snapshot of its performance.

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Manitowoc Company, Inc. [MTW]
Raytheon Company [RTN]
Terra Industries Inc. [TRA]
BP Prudhoe Bay Royalty Trust [BPT]
Hewlett-Packard Company [HPQ]
Western Digital Corp. [WDC]
ENSCO International Incorporated [ESV]
Lockheed Martin Corp. [LMT]
CF Industries Holdings, Inc. [CF]
General Dynamics Corp. [GD]
Hasbro, Inc. [HAS]
Aeropostale, Inc. [ARO]
United Technologies Corporation [UTX]
Nucor Corporation [NUE]
GrafTech International Ltd. [GTI]*
Honeywell International Inc. [HON]*
National-Oilwell Varco, Inc. [NOV]*
Occidental Petroleum Corporation [OXY]*
Questcor Pharmaceuticals [QSC]*
Versant Corporation [VSNT]*

Dropped:
Chevron Corporation [CVX]
Exxon Mobil Corporation [XOM]

The A's

noreply@blogger.com (The Austrian Wonder) — Mon, 28 Apr 2008 22:05:00 +0000

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Manitowoc Company, Inc. [MTW]
Raytheon Company [RTN]
Terra Industries Inc. [TRA]
BP Prudhoe Bay Royalty Trust [BPT]
Exxon Mobil Corporation [XOM]
Hewlett-Packard Company [HPQ]
Western Digital Corp. [WDC]
ENSCO International Incorporated [ESV]
Lockheed Martin Corp. [LMT]
CF Industries Holdings, Inc. [CF]*
Chevron Corporation [CVX]*
General Dynamics Corp. [GD]*
Hasbro, Inc. [HAS]*
Aeropostale, Inc. [ARO]*
United Technologies Corporation [UTX]*
Nucor Corporation [NUE]*

Dropped:
Energen Corp. [EGN]
The TJX Companies, Inc. [TJX]
JAKKS Pacific, Inc. [JAKK]
Herbalife Ltd. [HLF]
CGI Group Inc. [GIB]

A-List

noreply@blogger.com (The Austrian Wonder) — Mon, 21 Apr 2008 08:48:00 +0000

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Manitowoc Company, Inc. [MTW]
Raytheon Company [RTN]
Terra Industries Inc. [TRA]
CGI Group Inc. [GIB]
BP Prudhoe Bay Royalty Trust [BPT]
Exxon Mobil Corporation [XOM]
Hewlett-Packard Company [HPQ]
Herbalife Ltd. [HLF]
Western Digital Corp. [WDC]
ENSCO International Incorporated [ESV]
JAKKS Pacific, Inc. [JAKK]
Energen Corp. [EGN]*
Lockheed Martin Corp. [LMT]*
The TJX Companies, Inc. [TJX]*

Dropped:
None

This Week's A's

noreply@blogger.com (The Austrian Wonder) — Mon, 14 Apr 2008 07:59:00 +0000

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Manitowoc Company, Inc. [MTW]
Raytheon Company [RTN]
Terra Industries Inc. [TRA]
CGI Group Inc. [GIB]
BP Prudhoe Bay Royalty Trust [BPT]
Exxon Mobil Corporation [XOM]
Hewlett-Packard Company [HPQ]
Herbalife Ltd. [HLF]
Western Digital Corp. [WDC]
ENSCO International Incorporated [ESV]
JAKKS Pacific, Inc. [JAKK]

Dropped:
National-Oilwell Varco, Inc. [NOV]
CF Industries Holdings, Inc. [CF]

The A-List

noreply@blogger.com (The Austrian Wonder) — Mon, 07 Apr 2008 01:07:00 +0000

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Manitowoc Company, Inc. [MTW]
Raytheon Company [RTN]
CF Industries Holdings, Inc. [CF]
Terra Industries Inc. [TRA]
National-Oilwell Varco, Inc. [NOV]
CGI Group Inc. [GIB]
BP Prudhoe Bay Royalty Trust [BPT]
Exxon Mobil Corporation [XOM]
Hewlett-Packard Company [HPQ]
Herbalife Ltd. [HLF]
Western Digital Corp. [WDC]
ENSCO International Incorporated [ESV]*
JAKKS Pacific, Inc. [JAKK]*

Dropped:
Amedisys, Inc. [AMED]
The TJX Companies, Inc. [TJX]
Cal-Mine Foods, Inc. [CALM]
Graham Corporation [GHM]

A-Team!

noreply@blogger.com (The Austrian Wonder) — Mon, 31 Mar 2008 06:03:00 +0000

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Cal-Mine Foods, Inc. [CALM]
Manitowoc Company, Inc. [MTW]
Raytheon Company [RTN]
Graham Corporation [GHM]
CF Industries Holdings, Inc. [CF]
Terra Industries Inc. [TRA]
National-Oilwell Varco, Inc. [NOV]
CGI Group Inc. [GIB]
BP Prudhoe Bay Royalty Trust [BPT]
Exxon Mobil Corporation [XOM]
Hewlett-Packard Company [HPQ]
Herbalife Ltd. [HLF]
Western Digital Corp. [WDC]
Amedisys, Inc. [AMED]*
The TJX Companies, Inc. [TJX]*

Dropped:
Energen Corp. [EGN]
Chevron Corporation [CVX]
ENSCO International Incorporated [ESV]
Southern Copper Corp. [PCU]
ICF International, Inc. [ICFI]

This Week's A-Listers

noreply@blogger.com (The Austrian Wonder) — Mon, 24 Mar 2008 10:51:00 +0000

This week's list of the stocks that are currently rated A in the Get Rich With Growth Screen, while at the same time appearing [$1M, $500M and $2B parameters] in the Magic Formula Screen:

Southern Copper Corp. [PCU]
ICF International, Inc. [ICFI]
Cal-Mine Foods, Inc. [CALM]
Manitowoc Company, Inc. [MTW]
Raytheon Company [RTN]
Graham Corporation [GHM]
CF Industries Holdings, Inc. [CF]
Terra Industries Inc. [TRA]
National-Oilwell Varco, Inc. [NOV]
CGI Group Inc. [GIB]
BP Prudhoe Bay Royalty Trust [BPT]
Exxon Mobil Corporation [XOM]
ENSCO International Incorporated [ESV]
Hewlett-Packard Company [HPQ]
Herbalife Ltd. [HLF]
Energen Corp. [EGN]
Chevron Corporation [CVX]
Western Digital Corp. [WDC]*

Dropped:
Laboratory Corp. of America Holdings [LH]
Lockheed Martin Corp. [LMT]
Comtech Telecomm. Corp. [CMTL]
Deckers Outdoor Corporation [DECK]