Wax Ink

Todd Buys a Toaster

2012-05-27T09:06:00.000-05:00

The market continues to be less than cooperative for the average investor, as it reacts to rumblings in the eurozone over the economic troubles of Greece, Spain, and to a lesser degree, Portugal.

Additional economic data playing into the direction of markets were durable goods orders which were just shy of expectations, and initial jobless claims, which were as expected, but still high at 370,000.

Portfolio Commentary
The Wax Ink portfolio was unchanged for the week. By comparison, the Dow was up 0.7%, the Nasdaq was up 2.1%, the S&P 500 was up 1.7%, and the Russell 2000 was up 2.5%. This puts the weekly equilibrium change for the indices at 1.9%.

Year to date, the Wax Ink Portfolio is up 0.5%, while the Dow is down 0.5%, the Nasdaq is up 6.8%, the S&P 500 is down 4.7% and the Russel 2000 is down 2.1%.

Over the past several weeks I have made the case that it may be a good time to add shares to existing positions. Such was the case in the Wax Ink portfolio during the past week, as I added shares to our position in electronics manufacturer Maxwell Technologies, Inc. (Nasdaq: MXWL).

Also as I noted in a recent article, I added a new position to the portfolio, taking a position in electronics manufacturer, International Rectifier Corporation (NYSE: IRF).

Market Commentary
The Facebook (Nasdaq: FB) IPO has done more to scare away new individual equity investors than anything that comes to mind since the great market implosion of 2000.

Actually the villain, or in this case villains, at least to me, are none other than bankers that took the company public and underwrote the IPO.

I admit that I don't like bankers, the very word makes me want to throw up. Bankers should never be trusted to do the right thing, for the right thing is simply is not a part of their business DNA. What matters to bankers are profits and they don't really care who gets crushed in the process as long as there are profits to be had.

The Wall Street Journal had the story. It seems that while investment bankers and lead underwriters Morgan Stanley were trying to prevent the stock price from sliding into the crapper, fellow assistant underwriters at Goldman Sachs and JP Morgan were lending out shares so the stock could be shorted.

Nobody at Goldman or Morgan cared that they had helped take the company public, that people across America were putting their life savings into this IPO based on the road show they and Morgan Stanley had put on, or that shorting the stock would place a huge financial burden on Morgan Stanley who was trying to keep the stock price propped up.

Nope, none of that mattered, none of it at all. What matter were profits.

In the end, there will be some uproar, a few candidates for one office or another, assuming the profits they made via the Facebook IPO cannot come to light, will call for hearings and investigations and blah, blah, blah.

But in the end, nothing will be done, no hearings will be held, the term accredited investor will never come up, and the quest for profits at any cost by America's banks, will continue. In short, it will be business as usual.

Equity Commentary
Holdings in the Wax Ink portfolio once again found it tough going in the markets with electronics manufacturer Maxwell Technologies, Inc. (Nasdaq: MXWL), down 14%, business equipment company Verifone Systems, Inc. (NYSE: PAY) down 13%, and aerospace company AAR Corporation, (NYSE: AIR), down 6%.

Attempting sustainable upward moves were building materials company USG, Inc. (NYSE: USG, up 12%, industrial metals company USEC, Inc. (NYSE: USU), up 11%, oil and gas company, Holly Frontier Corporation (NYSE: HFC), up 8%, and small tools company The L.S. Starrett Company (NYSE: SCX), also up 8%.

Political Commentary
There is no political commentary this week and I could not find the sounds of bugs farting in a pond, but I did find the sounds of politicians at a cookout, doing what politicians do best.

Wax

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Wax Ink is comprised of individual investors, NOT licensed or registered with ANY government agency. Please obtain the advice of a registered investment professional BEFORE considering any information obtained from this site.

Robert Ropes a Racoon

2012-05-21T03:55:00.000-05:00

It was another week of misery for the average investor, as the markets reacted to the minutes from the FOMC meeting which once again proved to anyone with two brain cells that connect, the when it comes to things economic, the government simply has no clue.

One opinion, admittedly my own, is that if the government and the central banks and all the rest of the retreads attempting to "steer" our economy would simply get the hell out of the way, the economy will fix itself. Welcome to the wonders of supply and demand.

Portfolio Commentary

The Wax Ink portfolio saw its biggest single weekly decline of the year last week, dropping 6.0%. By comparison, the Dow was down 3.6%, the Nasdaq was down 5.6%, the S&P 500 was down 4.5%, and the Russell 2000 was down 5.7%. This puts the weekly equilibrium change for the indices at -5.0%.

Year to date, the Wax Ink Portfolio is up 0.5%, while the Dow is up 0.2%, the Nasdaq is up 4.6%, the S&P 500 is down 2.9% and the Russel 2000 is up 0.5%, putting the annual equilibrium changes for the indices at 0.3%, or 0.2% better than the Wax Ink portfolio.

Market Commentary

Equities are simply not the place to be according to the large money houses. Nope, the place to park your investments now is in Treasuries. The yields on Treasuries varies from 0.05 for a 90 day Treasury to 2.8 for a 30 year Treasury. Regardless, by the time the big money houses take their cut, the average investor will simply end up with soiled underwear.

Such an investment may appeal to some, and if you happen to be one to which it does, I wish you all the best. But to me, and the rest of us at Wax Ink, now is the time to update the due diligence you have done on your watch list of stocks, and start to put some cash to work.

Certainly there are issues with world economy, what with Greece, Spain, and Portugal considering a possible exidous from the EU. But so what? Does that mean there will be no more commerce conducted in those countries? Will they become outcasts in the eyes of the rest of the world? Is that any reason to invest in T-Bills?

Oil ended the week at $91.51 per barrel after touching new 2012 lows. Does that mean that an investment in Exxon Mobile Corporation, (NYSE: XOM), or Chevron Corporation, (NYSE: CVX) would be ill advised?

There was additional market weakness in the trucking and auto parts industries last week. Does that mean investments in Arkansas Best Corporation (Nasdaq: ABFS) or Dorman Products, Inc. (Nasdaq: DORM) should be sold immediately?

What it means is simply that investors that have taken the time to put forth the effort needed to make an informed investment decision will add shares to existing equity positions as appropriate, and add new equity positions when appropriate, regardless of the pundits, the analysts, and the rest of the Wall Street and CNBC crowd, recommend.

Equity Commentary

Holdings in the Wax Ink portfolio were again reduced to ground beef in the markets last week, with uranium producer USEC, Inc. (NYSE: USU), down 18%, sheetrock and general building materials manufacturer USG Corporation (NYSE: USG) down 17%, and specialty chemical manufacturer W.R. Grace and Company, Inc., (NYSE: GRA), down 14%.

Moving from the crapper to the sink were auto parts company Dorman Products, Inc. (Nasdaq: DORM, unchanged for the week and conglomerate General Electric (NYSE: GE) also unchanged for the week.

Political Commentary

There is no political commentary this week and I could not find the sounds of bugs farting in a pond. But I did find this, which is just as good as any political commentary I have ever heard.

Wax

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Bob Looses a Tooth

2012-05-12T13:01:00.000-05:00

I often wonder what it will take to make the average investor believe that there are liars, thieves, and cheats throughout the markets, perhaps on a grander scale than can be found in banking and politics. As I noted last week, being an investor at the moment, is extremely painful.

But fear not, this should all come to an end, in my opinion, about late September or early October of this year. My time frame does assume of course, that the liars, thieves, and cheats in the markets, expect to have a joyful holiday season.

Portfolio Commentary

The Wax Ink portfolio dropped 0.8% for the week. By comparison, the Dow was down 1.7%, the Nasdaq was down 0.8%, the S&P 500 was down 1.1%, and the Russell 2000 was down 0.2%. This puts the weekly equilibrium change for the indices at -1.0%

Year to date, the Wax Ink Portfolio is up 6.9%, while the Dow is up 4.9%, the Nasdaq is up 12.6%, the S&P 500 is up 7.6% and the Russel 2000 is up 6.6%, putting the annual equilibrium changes for the indices at +7.1%, or 0.2% better than the Wax Ink portfolio.

Market Commentary

It seems that the good and honorable bankers at JPMorgan Chase and Company (NYSE: JPM) may have failed to completely understand their own hedging strategy. As a result those good and kindly bankers, took it in the old wazoo for $2 billion.

Shortly after this announcement, I mean...JPM sort of had to say something, along comes Bill Gross, the managing director of PIMCO who bill themselves as "Your Global Investing Authority" and tells the world what a well run institution JPM is.

Are you kidding me? Had the fine upstanding bankers at JPM found a way to cover up the loss, that's exactly what they would have done!

Meanwhile as the stock price of JPM heads for the crapper, financial websites are going bonkers. Article after article mention the $2 billion in trading losses and then mention the stock price and then tell folks that now is the time to take a position in the stock and on and on and on.

Are this people idiots? Sure the price of JPM may well rebound, even passing its all time highs. But my what a gamble the individual investor is taking? What happens the next time a group of bankers try and develop a hedging strategy they don't understand? Will it lead to profits or losses?

I mean at the end of the day these cats are bankers, not investors. And because they are bankers, they will lie, cheat, steal, or just generally do whatever it takes to make the world believe they are above reproach, that they are the single most brilliant investors of all time.

In my experience I don't believe I have every met a banker without an ego so huge it would fill the heavens and blot out the sun.

Yet on website after website, in article after article, individual investors are repeatedly being told that now is the time to buy JPM.

Never mind that not one single website, not one single article, not one single chartered analyst, not one single anything, has the foggiest idea what the intrinsic value of a share of JPM actually is. Heck they don't even know what the tangible value of JPM is! Yet they all seem to think, know is the time to buy.

I wish those investors that buy shares of JPM with no idea of the what the stock's reasonable value is, the very best of luck. Over a lifetime of investing, they are certainly going to need all of the luck they can get.

Equity Commentary

Holdings in the Wax Ink portfolio again charged toward mediocrity with aerospace and defense contractor, the subject of a recent recommendation Ducommun, Inc. (NYSE: DCO), down 8%, trucking company Arkansas Best Corporation (Nasdaq: ABFS) down 8%, e-commerce facilitator Verifone Systems, Inc., (NYSE: PAY), down 6%, and building materials company Griffon Corporation (NYSE:GFF), down 6%.

Rising from a squatting position this week were rubber and plastics company Myers Industries, Inc. (NYSE: MYE) up 7%, and paper company Schweitzer-Maudit International, Inc. (NYSE: SWM) up 3%.

Political Commentary

Every week I try and include some bit of humor regarding politics at the end of my post. Over the course of the past few months that has become as difficult as watching CNBC. I admit, to me politics is without equal when it comes to boring, since in the end it almost always come down to which politician can out promise the other one. How dull.

As a result, I have decided to stop putting down my few observations about politics, devoting the space instead to the sounds bugs make when they fart in a pond.

Wax

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Performance - Week Ending 05/04/2012

2012-05-05T11:40:00.000-05:00

I wish I could say that at Wax Ink we are so brilliant that we saw this current market weakness coming and are currently reaping the rewards of that brain power, but saying that would just put Wax Ink in the same category as bankers and politicians.

The simple fact is that at the moment, being an investor is very painful, and in my opinion, it is going to continue to be painful through most of the summer months.

The Wax Ink portfolio dropped 5.0% for the week. By comparison, the Dow was down 1.4%, the Nasdaq was down 3.7%, the S&P 500 was down 2.4%, and the Russell 2000 was down 4.1%.

Year to date, the Wax Ink Portfolio is up 7.8%, while the Dow is up 6.7%, the Nasdaq is up 13.5%, the S&P 500 is up 8.9% and the Russel 2000 is up 6.9%.

***

Non-farm payrolls rose 115,000. At first the markets didn't pay much attention. Then the guy that sweeps up the floor of the exchange noticed he was out of sweeping up stuff. He called his assistant on the super secure and very secret sweeping up radio and asked that the assistant bring him the needed supplies.

It was at this point that the guy that sweeps up find out that the porter position, the position under the sweeping up guy's assistant, had been eliminated. The guy that sweeps up also learned that his assistant was doing the washroom attendant's job because the washroom attendant had been laid off some months ago.

This meant that if the guy that sweeps up truly needed supplies, he would have to retrieve them, himself.

Standing close to the guy that sweeps up was the guy that turns the lights off. Hearing only one side of the radio conversation because it was being broadcast on the super secret sweeping up radio in stealth mode, the guy that turns the lights off called his buddy on the super super secret shirt collar phone and told him that the porter and the washroom attendant has been laid off.

This conversation was heard by the beanie weenie trader who was in the can at the time of the conversation, and so could confirm that indeed the assistant to the guy that sweeps up was performing the duties of the washroom attendant.

So with it confirmed that the exchange was not only reducing staff, but also unable to purchase cleaning supplies, the crap hit the fan and the selling began.

On the political front [sigh]. I read through more bullshit this week than a matador sees in a lifetime. I have finally decided that in the end, politics, like mad cow disease is for losers.

It started with numb nuts, governor good hair Rick Perry, requesting the help of a supreme beingand continues with George Clooney stumping for Obama votes as opposed to humping for Obama votes, North Carolina preparing for a vote on gay marriage, "Quimgate" continuing with Senator Vitter who knows something about quim sellers being interviewed, Speaker Boehner being deeply disturbed that blind a China dude living in China went back to China, and last but not least that Ann Romney, wife of multi-millionaire and presidential hopeful Mitt Romney, owns a $990 shirt.

Wax

***

Leading the charge to the bottom of the porcelain swirl machine via the Wax Ink Portfolio were aerospace and defense contractor Ducommun, Inc. (NYSE: DCO), down 15%, ecommerce facilitator Verifone Systems, Inc., (NYSE: PAY), down 14%, iron and steel company Insteel Industries, Inc. (Nasdaq:IIIN), down 13%, and finally aerospace company Kaman Corporation, (Nasdaq: KAMN), down 13%.

Thundering to towards the mountain tops for the week was housewares and accessories company Libbey, Inc. (AMEX: LBY) up 7%.

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The Wax Ink Portfolio - Week Ending 03/30/2012

2012-03-31T09:52:00.000-05:00

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Wax Ink

The Wax Ink portfolio declined 0.3% for the week. By comparison, the Dow was up 1.0%, the Nasdaq was up 0.8%, the S&P 500 was up 0.8%, and the Russell 2000 was unchanged. All in all not exactly a stellar week for the portfolio.

Year to date, the Wax Ink Portfolio is up 15.2%.

***

What can I say? It sucked to be in the markets this week, even though the S&P did manage an advance for the eleventh time this year.

For the most part, the markets seemed to be focused on energy. At one point I actually heard an energy analysts saying that oil prices had fallen to a new monthly low of $102 a barrel. Are you freaking kidding me? A new monthly low?

Also this week nobody seemed to be paying much attention to the new corporate tax hike that goes into effect the end of the month, pushing corporate tax rates to a maximum of 39.2%. What America's politicians hope to gain from this is beyond me. In the end, the only thing that is going to happen is more profit dollars will move out of this country and into other countries where they will become investment dollars.

The saddest part of all of this, at least to me, is that the American voter will once again elect a group of politicians that are better at picking dirt out of their rear ends than understanding the economy. So going forward, the changes that folks are looking for will simply become the proverbial turd in the punch bowl.

Well maybe we all enjoy the smell.

Meanwhile on the comedy front, Rick Santorum said the word bullshit, Sarah Palin urges Rick Santorum not to pull out, Vice-President Biden still can't pronounce the word paper, Herman Cain has a stuffed rabbit fetish, 41 is making a come back as a singer, and Arlen Specter likes to watch porn movies.

***

Leading the way to mediocrity in the Wax Ink Portfolio were industrial metals company USEC, Inc. (Nasdaq: USU), down 12%, government communications company Ducommun, Inc. (NYSE: DCO), down 9%, oil and gas refiner HollyFrontier Corporation (NYSE: DCO), and rubber and plastics maker The Goodyear Tire and Rubber Company (NYSE: GT), down 6%.

Hepling to boost the portfolio were auto parts maker Dorman Products, Inc., Nasdaq: DORM), up 7%, iron and steel industry company Worthington Industries, Inc., (NYSE: WOR), up 7%, and communications company Tellabs, Inc., (Nasdaq: TLAB), up 4%.

Wax

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The Wax Ink Portfolio - Week Ending 03/23/2012

2012-03-24T09:47:00.003-05:00

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Wax Ink

The Wax Ink portfolio declined 0.9% for the week. By comparison, the Dow was down 1.1%, the Nasdaq was up 0.4%, the S&P 500 was down 0.5%, and the Russell 2000 was down 0.15%. All in all not exactly a stellar week for the portfolio.

Year to date, the Wax Ink Portfolio is up 15.5%.

***

The profit takers moved in during the week, deciding as usual that a bird in their pants is more fun than one they can't catch. This week the one that investor's couldn't catch was China.

It seems that the movers and shakers in the metals industry noted that China's steel production seemed to be leveling off. Nobody actually knows for certain what China's steel industry is doing, but it could be slowing.

Anytime something could be happening, investors, being the wise old pocket pool players that they are...sell. It seems that all of this steel stuff in China was reinterpreted in America as the world economy has stalled.

The reality is that China's economy simply needs some breathing room so it can absorb its production. Tweedle Dee and Tweedle Dum, Fed Chairman Bernanke and Treasury Secretary Geithner respectively, didn't help the markets when they offered little in response to the gathering news that China's PMI, like Europe's PMI, appeared to be declining.

Who knew purchasing managers had so much stroke?

Meanwhile on the political front, Mitt Romney was impressed with big lava lamps, an Etch-A-Sketch seems to be all that's needed to get the economy back on it's feet, Rick Santorum admits he isn't a pretty sight, Vice-President Biden thinks he is a lubricated Irishman, Robert DeNiro tried his hand at comedy and flopped, and we learned that the First Lady apparently had a son out of wedlock that is named...Bo.

***

Leading the way to a poor week this week in the Wax Ink Portfolio were aerospace supplier AAR Corporation (NYSE: AIR), down 13%, industrial metals company USEC, Inc. (Nasdaq: USU), down 8%, iron and steel company Insteel Industries, Inc. (Nasdaq: IIIN), down 7%, and government communications company Ducommun, Inc. (NYSE: DCO), down 7%.

Trying to get it up and keep it up were rubber and plastics company Myers Industries, Inc., (NYSE: MYE), up 6%, and building materials manufacturer USG Corporation, (NYSE: USG), up 4%.

Wax

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The Wax Ink Portfolio - Week Ending 03/16/2012

2012-03-17T11:57:00.003-05:00

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Wax Ink

The Wax Ink portfolio gained 1.3% for the week, in line with the 1.6% gain of the Russell 2000, but worse than the 2.4% increase in the Dow. It was also a worse showing than the 2.2% increase in the Nasdaq and the 2.4% increase in the S&P 500.

The Wax Ink Portfolio is up 16.6% year to date.

***

A smattering of domestic economic issues through the week never seemed to get investor's attention, with the lower consumer sentiment number and flat a flat industrial production number pretty much non-events for the markets this week, as was the FOMC leaving fed funds target rate at 0.0% to 0.25%.

On the employment front, initial jobless claim numbers continue to fall, down 14,000 for the week. While certainly not a direct correlation, coupling the jobs claim numbers with the increase in the Empire Manufacturing Survey number to its highest level in more than a year, may just be the impetus that traders need to give the markets moving upward.

Of course then some junior government employee will innocently say something to a friend about inflation, and faster than the President can get his bust added to Mt. Rushmore, lookout Rutherford, traders will send the markets into selling hell, which make us wonder; Where is Jack Burton when America needs him?

Meanwhile on the political front, Newt Gingrich, thinking he was a tortoise last week now loves life, Chris Christie is getting ready to go a few rounds with an ex-Navy seal, Rick Perry still can't remember what the third thing is, and House Speaker John Boehner has finally figured out that the he is speaker over a House divided, having finally realized that some of the members are the dumbest and some of the members are the smartest.

What wasn't clear is where the speaker fits into the mix since he is consistently on one side or the other.

***

Showing the way in the Wax Ink Portfolio this week were building materials manufacturer USG Corporation (NYSE: USG), up 23%, wire mesh and rebar maker Insteel Industries, Inc. (Nasdaq: IIIN), up 8%, payday loan company Moneygram, Inc. (NYSE: MGI), up 6%, and conglomerate General Electric (NYSE: GE), up 6%.

Sputtering to the down side was uranium enrichment company USEC, Inc., (NYSE: USU), down 5%, and reconstituted tobacco manufacturer Schweitzer-Maudit International, Inc., (NYSE: SWM), down 4%.

Wax

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The Wax Ink Portfolio - Week Ending 03/09/2012

2012-03-10T09:36:00.001-06:00

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Wax Ink

The Wax Ink portfolio gained 1.5% for the week, in line with the 1.8% gain of the Russell 2000, and better than the -0.4% decline suffered by the Dow. It was also a better showing than the 0.4% increase in the Nasdaq and the 0.1% increase in the S&P 500.

The Wax Ink Portfolio is up 15.0% year to date.

***

Economic issues in the Eurozone opened the week, but finally fell to the side of the road as US employment numbers came out, showing a general improvement in the jobs picture.

The announcement at first caused Wall Street to drop its collective knickers and with legs spread wide, writhe across the floor of the exchange moaning in ecstasy.

At the peak of their writhing, it seams one of the writhees pointed out that such continued improvement may reduce the need for any further economic stimulus or monetary policy changes.

That news slowed the party. Bummer!!

Finally all of the writhing participants pulled up their knickers and headed to the can to wash their hands, thus ending the opportunity for continued advancement in the markets for the week.

Meanwhile on the political front, Ann Romney doesn't consider herself wealthy, Newt Gingrich thinks he is a tortoise, Mitt Romney killed a bug, the President shutdown the only north/south freeway in Houston for two hours, and Rush Limbaugh, holder of a $400 million employment contract, called what's her name a slut. Insert cricket sounds here.

***

Leading the charge in the Wax Ink Portfolio prices for the week were packaging maker Myers Industries (NYSE: MYE), up 7%, housewares and accessories maker Libbey, Inc. (NYSE: LBY), up 6%, business transaction company Verifone Systems, Inc. (NYSE: PAY), up 6%, and refiner Holly Frontier Corporation (NYSE:HFC), up 8%.

Contributing to the down side was aerospace communications company Ducommun, Inc., (NYSE: DCO), down 9%, and rubber and plastics manufacturer The Goodyear Tire and Rubber Company, (NYSE: GT), down 6%.

Wax

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The Wax Ink Portfolio - Week Ending 03/02/2012

2012-03-03T09:23:00.000-06:00

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Wax Ink

The Wax Ink portfolio was down 2.0% for the week, worse than the no change posted by the DJIA and worse than the 0.3% change posted by the S&P 500. In short, it sucked to be us even though the portfolio is up 13.3% year to date.

Economic issues in the Eurozone continue, with the request for additional financial safeguards requested before the IMF coughs up any further coin falling at first on deaf ears.

Finally the main Eurozone countries that needed the handouts agreed, and everybody decided to hump and have some wine.

Oil which at one point during the week was above $110 per barrel, was also an issue. Not because it reached $110, but because it closed the week at $106!

I really don't understand the issue here, $110 or $106, I mean what difference does it make? The average family trying to keep their heads above the drowning mark doesn't care that oil is where it is, what they care about is putting fuel in the tank.

But wait!! Gingrich says that he is going to lower fuel prices after he becomes president. Knowing that? I'm sleeping like a baby with a semi-clean diaper.

Leading the fall in the Wax Ink Portfolio prices for the week were airplane repair company AAR Corporation (NYSE: AIR), down 4%, packaging company Myers Industries (NYSE: MYE), down 5%, business services company Deluxe Corporation (NYSE: DLX), down 7%, payday lender Moneygram International (NYSE: MGI), down 7%, and heavy construction company Layne Christensen Company (Nasdaq: LAYN), down 8%.

Contributing to the upside was drywall maker USG Corporation, (NYSE: USG), up 6%.

Wax

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The Wax Ink Portfolio - Week Ending 02/24/12

2012-02-25T08:23:00.003-06:00

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Wax Ink

The Wax Ink portfolio was down 0.3% for the week, slightly worse than 0.3% gain posted by the broader market. Year to date, the portfolio is up 15.6%.

Economic issues in the Eurozone continue, but investors seem to be tiring of that particular pissing contest, at least for the moment, and are instead now starting to wring their hands over the recent run up in the broader markets.

With the Dow at a four year high, the NASDAQ at a point not seen in 10 years, and the S&P near a 10 month high, investors have decided there is another shoe about to drop called consolidation.

Simply put, the spineless big money investors, the investors that actually drive the market with their folly, have now decided that markets have moved as high as they can go and need to consolidate before they can continue their journey upward.

That means for the average everyday investor just tying to make a little extra for braces, or college, or a backyard pool, the markets are probably going to back up next week and take a big colon cleansing dump right in the middle of their parade.

I'm not saying they will, I'm just saying the gas is starting to accumulate in the right places and a blowout could be forthcoming.

Leading the charge to falling Wax Ink Portfolio prices for the week were rail, construction, and utilities contractor LB Foster (FSTR), down 11%, diversified electronics maker Maxwell Industries (MXWL), down 6%, building materials company USG Corporation (USG), down 5%, and rubber and plastics company Myers Industries (MYE), down 5%.

Contributing to the upside was URS Corporation, up 9%. Other than that, I got nothing.

Wax

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The Wax Ink Portfolio - Week Ending 02/17/2012

2012-02-19T07:40:00.001-06:00

The Wax Ink portfolio was up 1.3% for the week, in line with the 1.4% gain posted by the broader market. Year to date, the portfolio is up 15.9%.

Economic issues in the Eurozone continue to impact global markets.

It is sad that Greece can't seem to drop a load or get off of the pot, as their inability to go seems to be constipating the entire Eurozone when it comes to investment.

Even though China recently made some overtures regarding investment in Europe which did help European markets a bit, nothing definitive has happened at this point.

In the end, the Greek politicians, along with the leaders of Spain, France and the UK, need to quit play political grab ass, make the hard decisions and wipe so the rest of Europe can at least have a go at a more normal economic life.

Contributing to the weekly increase in the portfolio were aircraft repair company AAR Corporation (AIR), up 5%, rubber and plastics company Myers Industries (MYE), up 7%, industrial metals company USEC (USU), up 9%, general building materials company Griffon Corporation (GFF), up 6%, wholesale materials company LB Foster (FSTR), up 6%, communications equipment maker Tellabs (TLAB), up 6%.

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The Wax Ink Porfilio - Week Ending 02/10/12

2012-02-11T08:50:00.001-06:00

The Wax Ink portfolio was off 1.7% for the week, and is up 14.5% year to date.

It is unfortunate that Greece's lack of fiscal responsibility is having this much of an impact on global markets, and to be blunt, on the Wax Ink Portfolio.

One day, perhaps, we will all wake up and discover that the turd in the punch bowl was a gift from the pompous politicians we seem so keen to re-elect.

But until then, such is the world we have all contributed to building and such are the market reactions we are faced with accepting.

Contributing to the downward portfolio movement for the week were building materials company USG Corporation (USG), down 8%, business services company Deluxe Corporation (DLX), down 5%, industrial metals company USEC (USU), down 21%, cylinder manufacturer Worthington Industries (WOR), down 7%, and small tools company The LS Starlett Company (SCX), down 11%.

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The Wax Ink Portfolio

2012-01-28T08:06:00.003-06:00

The Wax Ink portfolio gained 5% for the week, and is up 16.4% year to date.

Strong movement by Dorman Products (DORM), W.R. Grace (GRA), Agrium (AGU), Schweiter Maudit (SWM), Verifone (PAY) and Kaman Corporation (KAMN), were the chief reasons for the strong upward weekly trend.

We continue to be slightly optimistic that the current macro economic trend is sustainable, even though there are huge global uncertainties at this time.

Most accredited investors have been through such upheavals many times, and while never comfortable with these events, understand the opportunities that are often presented.

We invite you to follow the Wax Ink Portfolio as we continue our journey through the world of passive blue collar investing.

To enlarge the worksheet, please click on the image.

Monsanto - A Wax Ink Worksheet

2012-01-25T03:29:00.016-06:00

Monsanto Company, along with its subsidiaries, is a leading global provider of agricultural products for farmers. Their seeds, biotechnology trait products, and herbicides provide farmers with solutions that improve productivity, reduce the costs of farming, and produce better foods for consumers and better feed for animals.

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Value Thoughts - Sanderson Farms, Inc.

2011-08-26T03:52:00.000-05:00

Sanderson Farms, Inc. (Nasdaq: SAFM), incorporated in Mississippi in 1955, is a fully-integrated poultry processing company engaged in the production, processing, marketing and distribution of fresh and frozen chicken products.

The company sells ice pack, chill pack, bulk pack and frozen chicken, in whole, cut-up and boneless form, primarily under the Sanderson Farms® brand name to retailers, distributors, and casual dining operators principally in the southeastern, southwestern, northeastern and western United States, and to United States based customers who resell frozen chicken into export markets.

During its fiscal year ended October 31, 2010 the company processed 405.0 million chickens, or approximately 2.57 billion dressed pounds.

Basis

Financial information presented herein, is based on the company's most recent SEC Form 10-K filing for year ending October 31, 2010, as filed with the Securities and Exchange Commission on December 14, 2010.

Short-Term Investment Valuation

The stock closed recently at $40.34, with First Resistance at $44.50, a 10% increase from the recent close, and Second Resistance at $44.86, an 11% increase from the recent close. Should the stock price breakout above second resistance, the next resistance level is $49.47, a 23% increase from the recent close.

The stock should find Support at $38.177, a 5% decline from the recent close.

Earnings Growth Valuation

Earnings growth valuations are based on the spread between year over year earnings growth and the current PE.

In the case of Sanderson Farms, Inc., the company had a year over year earnings growth of 53%, ending FY10 with earnings of $8.45 per share.

With a trailing twelve month PE currently at 5, the spread between earnings growth and the PE is 11.4, meaning that for an investor focusing on earnings growth, the stock should be trading at $136.47, a $96.13 increase from a recent close.

Fundamental Investment Valuation

Liquidity: The company ended FY10 with a Current Ratio of 3.23, a Quick Ratio of 1.55, a Cash Ratio of 0.69, and a Cash Conversion Cycle of 42 days. In addition, with Goodwill and Intangibles comprising 0.0% of Total Assets, and the company ended the year with a Book Value of $29.22 and a Tangible Book Value of $29.22.

Profitability: FY10 found the company with a Gross Margin of 18%, an Operating Margin of 13.5%, a Net Operation Margin After Taxes (NOPAT) of 9.7%, a Return On Invested Capital (ROIC) of 28%, and an Effective Tax rate of 35%.

Debt: The company ended FY10 with Total Debt of $65.2 million, a year over year decrease of 43%. Additionally, the company paid an average annual Interest Rate 4.14%, a year over year decrease of 4.3%, had a Debt to Cash Ratio of 0.89, and a Debt to Equity Ratio of 0.10.

Cash Flow: The company's FY10 Operating Cash Flow was $10.58 per share, a year over year increase of 19%. The company also ended FY10 with Free Cash Flow of $3.39 per share, a year over year decrease of 52%.

Dividends: During FY10 the company paid a $0.63 per share dividend, a 9% year over year decline.

Fundamental Valuation: Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $67-$72 range. To download a free copy of our Raw Value worksheet for this company, please click here.

Value Thoughts

Considering a Recent Close of $40.34, an estimated Merger and Acquisition payback of 3.5 years (assuming EBITDA remains the same), and year over year earnings growth of 53%, we think on a fundamental investment basis, the stock is currently UNDER PRICED, and a candidate for additional research for the Wax Ink Portfolio..

Wax

Disclaimer

We have no position in Sanderson Farms, Inc., and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

The Downgrading of Americans

2011-08-06T10:30:00.000-05:00

Yesterday evening, the S&P credit rating service downgraded the debt of the United States from AAA to AA+.

The financial websites have gone ballastic, blaming the rating agency for playing politics. Many websites are reminding visitors that S&P missed the entire housing bubble, that there was a mistake in the company's rating data, and on and on.

The government's response has been accusatory. CNN and Fox News are attempting to find any evidence they can about who knew what when. Rupert Murdock is probably at this very moment hacked into Blackberry's across the country.

The Republicans are blaming the Democrats and the Democrats are blaming the Republicans. It is complete and utter stupidity!

The simple fact is that the credit rating of the United States was not downgraded yesterday, the American people were downgraded.

It is the American people that for decades have simply bent over, stuck their collective rear ends in the air, and ask the politicians for more.

We, ALL of the eligible voters in America, we, have allowed every bit of what is happening to happen.

We have allowed government to spend us into the poor house. We have allowed government to "borrow" all of the money from the Social Security Trust Fund. We have allowed governent, to do the things they have done, and we have gladly accepted it all.

Now that the demise of Uncle Sam has begun, the politicians are jumping up and down blaming one another, the cost of money will probably increase, any economic recovery will probably come to a halt, and the American voter will remain completely uninterested in the process.

Oh!, we American's will bitch, since Americans' view being able to bitch as a fundamental right. But that is all we will do, bitch, because we simply will not put for the effort to hold government accountable.

And so it will continue, until eventually...America is no more.

Wax

Value Thoughts - Lawson Products, Inc.

2011-08-01T03:33:00.000-05:00

Lawson Products, Inc. (Nasdaq: LAWS), is a North American distributor of products and services to the industrial, commercial, institutional, and governmental maintenance, repair and operations marketplace.

The company also manufactures and distributes production and specialized component parts to the original equipment marketplace including the aerospace, off-road equipment, military, and oil and gas exploration industries.

During 2010, the company discontinued operations of two of its subsidiaries, Assembly Component Systems, Inc. (ACS) and Rutland Tool & Supply Company (Rutland).

The company was incorporated in Illinois in 1952, and re-incorporated in Delaware in 1982.

Basis

Financial information presented herein, is based on the company's most recent SEC Form 10-K filing for year ending December 31, 2010, as filed with the Securities and Exchange Commission on February 17, 2011.

Short-Term Investment Valuation

The stock closed recently at $18.67, with First Resistance at $19.51, a 4% increase from the recent close, and Second Resistance at $21.51, 15% increase from the recent close. Should the stock price push through Second Resistance, the next point of resistance is $27.21, a 46% increase from the recent close.

Negatively, First Support for the stock price is currently at $13.41, a 28% decline from the recent close.

The 13-week Relative Strength number is 20, with the stock price trending downward. However, the daily Relative Strength number is near 40 and seems to be indicating a slight upward bounce in the stock price. The upward shift could keep the stock price out of over sold territory for the immediate future.

Quarterly earnings, announced 07/28/2011, were $0.12 per share, an $0.08 decline from the same year over year period.

Earnings Growth Valuation

Earnings growth valuations are based on the spread between year over year earnings growth and the current PE.

In the case of Lawson Products, Inc., the company had year over year earnings growth of 150%, ending FY10 with earnings of $1.18 per share.

With a trailing twelve month PE currently at 16, the spread between earnings growth and the PE is 10, meaning that for an investor focusing strictly on earnings growth, the stock should be trading at $29.22, an $11.25 increase from the recent close.

Fundamental Investment Valuation

Liquidity: The company ended FY10 with a Current Ratio of 2.43, a Quick Ratio of 1.49, a Cash Ratio of 0.73, and a Cash Conversion Cycle of 140 days. In addition, Goodwill and Intangibles comprised slightly less than 12% of Total Assets. When adjusted to compensate for these items, the company's Book Value of $16.81, drops to $13.48.

Profitability: FY10 found the company with a Gross Margin of 63.5%, an Operating Margin of 5.4%, a Net Operation Margin After Taxes (NOPAT) of 3.16%, a Return On Invested Capital (ROIC) of 8.77%, and an Effective Tax rate of 42.5%.

Debt: The company ended FY10 with no Debt.

Cash Flow: The company's FY10 Operating Cash Flow was $1.96 per share, a year over year decrease of 16%. The company also ended FY10 with Free Cash Flow of $0.53 per share, a year over year decrease of 69%.

Dividends: The company paid dividends of $0.26 per share during FY10, a year over year decline of $0.06 per share.

Fundamental Valuation: Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $34-$40 range.

Our Thoughts

Needless to say, the company is not in one of the glamor industries, and while we agree that selling nuts and bolts may be a bit boring, we also recognize that without nuts and bolts, little, if anything, is going to be manufactured or assembled.

But selling nuts and bolts does have it's perils. In August 2008, the company entered into a Deferred Prosecution Agreement (DPA) with the U.S. Attorney’s Office in connection with representatives of the company improperly providing gifts or awards to purchasing agents through the company’s customer loyalty programs.

Pursuant to the DPA, the company agreed to a $30.0 million penalty. The company paid $10.0 million in 2010, 2009, and 2008 in accordance with this agreement and continues to comply with the terms of the DPA which expires in August 2011.

In addition, during 2009, the company identified that it had shipped a limited number of products in violation of certain state environmental regulations and reported its findings to appropriate regulatory agencies. The company also recalled a limited number of products and is working with state regulators to take appropriate remedial actions to comply with these environmental regulations.

As of December 31, 2010, the company has accrued $0.2 million for penalties and expenses related to environmental matters and at this time, the company cannot determine if any further expenses may be incurred.

Portfolio Thoughts

Considering a Recent Close of $18.67, an estimated Merger and Acquisition payback of 6.7 years (assuming EBITDA remains the same), year over year earnings growth of 150%, year over year free cash flow growth of (69%), and our reasonable value estimate of $34-$40, we believe that on a fundamental investment basis the stock is currently UNDER PRICED, and a candidate for additional research for the Wax Ink Portfolio.

Wax

Disclaimer

We have no position in Lawson Products, Inc. and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

Value Thoughts - Netflix, Inc.

2011-07-11T04:49:00.000-05:00

Netflix, Inc. (NYSE: NFLX), according to the company, is the world’s leading Internet subscription service for TV shows and movies with 20 million current subscribers.

Subscribers can instantly watch unlimited TV shows and movies streamed over the Internet to their TVs, computers and mobile devices and, in the United States, subscribers can also receive standard definition DVDs and Blu-ray discs, delivered to their homes.

The company's core strategy is to grow its streaming subscription business within the United States and globally, with a focus on expanding its streaming content, enhancing its user interfaces, and extending its streaming service to even more Internet-connected devices, while staying within the parameters of its operating margin targets.

Basis

Financial information presented herein, is based on the company's most recent SEC Form 10-K filing for year ending December 31, 2010, as filed with the Securities and Exchange Commission on February 18, 2011.

Short-Term Investment Valuation

On the positive side, the stock closed recently at $295.14, with Resistance at $297.35, a 1% increase from the recent close.

On the negative side, First Support can be found at $254.66, a 14% decline from the recent close, with Second Support at $210.68, 29% decline from the recent close. Should the stock break through Second Support, the next support level is $95.33, a 68% decline from the recent close.

The 13-week Relative Strength number is currently 37, with the stock price trending upward. More importantly the daily Relative Strength number is near 76 and it is also trending higher, putting the current stock price well into the overbought category.

Quarterly earnings, currently scheduled for release after the markets close on 7/20/2011, are expected to be $1.11 with the current whisper number at $1.17.

Earnings Growth Valuation

Earnings growth valuations are based on the spread between year over year earnings growth and the current PE.

In the case of Netflix, Inc., the company had a year over year earnings growth of 99%, ending FY10 with earnings of $9.05 per share.

With a trailing twelve month PE currently at 33, the spread between earnings growth and the PE is 3.0, meaning that for an investor focusing strictly on earnings growth, the stock should be trading at $322.66, a $27.52 increase from the recent close.

Fundamental Investment Valuation

Liquidity: The company ended FY10 with a Current Ratio of 1.65, a Quick Ratio of 0.90, a Cash Ratio of 0.90, and a Cash Conversion Cycle of less than 1 day. In addition, Goodwill and Intangibles comprised 18.6% of Total Assets. When adjusted to compensate for these items, the company's Book Value of $5.34, drops to $1.98.

Profitability: FY10 found the company with a Gross Margin of 53%, an Operating Margin of 28%, a Net Operation Margin After Taxes (NOPAT) of 23%, a Return On Invested Capital (ROIC) of 142%, and an Effective Tax rate of 39.9%.

Debt: The company ended FY10 with Total Debt of $236.2 million, a year over year increase of 7%. Additionally, the company paid an average annual Interest Rate 8.30%, a year over year increase of 5.57%. The company had a Debt to Cash Ratio of 0.67, and a Debt to Equity Ratio of 0.81.

Cash Flow: The company's FY10 Operating Cash Flow was $10.11 per share, a year over year increase of 45%. The company also ended FY10 with Free Cash Flow of $7.20 per share, a year over year increase of 148%.

Dividends: During FY10 the company did not pay a dividend.

Fundamental Valuation: Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $56-$60 range.

Our Thoughts

We think the stock is ridiculously overpriced. What's more, we think that at the current pace the vast majority of individual short-term investors, and those that have recently taken a position in the stock, are going to get smoked, waking up one morning and asking the dog what just happened.

It is not that we don't like the company, far from it. We just believe investors are listening to all of the hype and cow paddies that is Wall Street, and once the parade has passed, there simply will be no available shovels for them to use to clean up the mess.

As impressive as 99% year over year earnings growth may be, we simply do not believe such growth is sustainable, making us wonder why investors are willing to pay such an incredible premium to own a stock that currently has more downside than upside.

Portfolio Thoughts

Considering a Recent Close of $295.14, an estimated Merger and Acquisition payback of 26 years (assuming EBITDA remains the same), year over year earnings growth of 99%, year over year free cash flow growth of 148%, and our reasonable value estimate of $56-$60, we believe that on a fundamental investment basis the stock is currently OVER PRICED, and not a candidate for additional research for the Wax Ink Portfolio.

Wax

Disclaimer

We have no position in Netflix, Inc. and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

Value Thoughts - Whole Foods Market, Inc.

2011-06-24T04:51:00.001-05:00

Whole Foods Market, Inc. (Nasdaq: WFM) is the world’s leading natural and organic foods supermarket and America’s first national “Certified Organic” grocer whose core mission is devoted to the promotion of organically grown foods, food safety concerns, and the sustainability of the world's entire ecosystem.

The company has one operating segment, natural and organic foods supermarkets, currently operating 299 stores in the United States, Canada, and the United Kingdom. The company is based in Austin, Texas.

Basis

Financial information presented herein, is based on the company's most recent SEC Form 10-K filing for year ending September 26, 2010, as filed with the Securities and Exchange Commission on November 24, 2010.

Short-Term Investment Valuation

The stock closed recently at $61.17, with Resistance at $66.87, a 9% increase from the recent close.

The stock price should find First Support at $60.47, a 1% decline from the recent close, and Second Support at $52.29, a 15% decline from the recent close. Should the stock price break through Second Support, the next level of support is $33.96, a 44% decline from the recent close.

Daily Relative Strength is currently 61, with the stock price nearing an oversold condition.

Earnings Growth Valuation

Earnings growth valuations are based on the spread between year over year earnings growth and the current PE.

In the case of Whole Foods Market, Inc., the company had a year over year earnings growth of 40%, ending FY10 with earnings of $2.99 per share.

With a trailing twelve month PE currently at 20, the spread between earnings growth and the PE is about 2, meaning that for an investor focusing on earnings growth, the stock should be trading near $67.01, a $5.84 increase from a recent close.

Fundamental Investment Valuation

Liquidity: The company ended FY10 with a Current Ratio of 1.55, a Quick Ratio of 0.80, a Cash Ratio of 0.62, and a Cash Conversion Cycle of 0.62 days. In addition, Goodwill and Intangibles comprised 18.4% of Total Assets, and the company ended the year with a Book Value of $13.80 and a Tangible Book Value of $9.53.

Profitability: FY10 found the company with a Gross Margin of 38%, an Operating Margin of 7.5%, a Net Operation Margin After Taxes (NOPAT) of 5.7%, a Return On Invested Capital (ROIC) of 19%, and an Effective Tax rate of 40%.

Debt: The company ended FY10 with Total Debt of $508.7 million, a year over year decrease of 44%. Additionally, the company paid an average annual Interest Rate 6.49%, a year over year increase of 1.5%, and had a Debt to Cash Ratio of 1.1, and a Debt to Equity Ratio of 0.21.

Cash Flow: The company's FY10 Operating Cash Flow was $4.79 per share, a year over year decrease of 6%. The company also ended FY10 with Free Cash Flow of $1.12 per share, a year over year increase of 21%.

Dividends: During FY10 the company paid a $0.05 per share dividend, a 65% year over year decline.

Fundamental Valuation: Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $40-$44 range.

Value Thoughts

In May of this year the company announced its trading symbol had changed from WFMI to WFM, an event the markets seemed to appreciate. A few weeks later, the company announced it had retired all of its long-term debt, an event we thought was a very big deal. Apparently nobody else did. Sorta boring, huh?

Considering a Recent Close of $61.16, an estimated Merger and Acquisition payback of 15 years (assuming EBITDA remains the same), year over year earnings growth of 40%, as well as year over year free cash flow growth of 21%, we think, on a fundamental investment basis, the stock is currently OVER PRICED, and not a candidate for additional research for the Wax Ink Portfolio..

Wax

Disclaimer

We have no position in Whole Foods Market, Inc., and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

Value Thoughts - Costco Wholesale Corporation

2011-06-14T04:20:00.000-05:00

Costco Wholesale Corporation (Nasdaq: COST) operates membership warehouses based on the concept that offering its members low prices on a limited selection of nationally branded and selected private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover.

This turnover, when combined with the operating efficiencies achieved by volume purchasing, efficient distribution and reduced handling of merchandise in no-frills, self-service warehouse facilities, enables the company to operate profitably at significantly lower gross margins than traditional wholesalers, mass merchandisers, supermarkets, and supercenters.

The company currently operates 581 warehouses, 425 in the United States and Puerto Rico, 80 in Canada, 22 in the United Kingdom, seven in Korea, six in Taiwan, eight in Japan, one in Australia and 32 in Mexico. The company also operates Costco Online, an electronic commerce web site.

Basis

Financial information presented herein, is based on the company's most recent SEC Form 10-K filing for year ending August 29, 2010, as filed with the Securities and Exchange Commission on October 15, 2010.

Short-Term Investment Valuation

The stock closed recently at $78.30, with first First Resistance at $79.37, a 1% increase from the recent close and Second Resistance at $83.95, a 7% increase from the recent close.

The stock price should find First Support at $70.96, a 9% decline from a recent close, and Second Support at $53.41, a 32% decline from a recent close.

Daily Relative Strength is currently 42, with the stock price continuing to correct from an oversold condition.

Earnings Growth Valuation

Our earnings growth valuations are based on the spread between year over year earnings growth and the current PE.

In the case of Costco Wholesale Corporation, the company had a year over year earnings growth of 30%, ending FY10 with earnings of $4.52 per share.

With a trailing twelve month PE of 17, the spread between earnings growth and the PE is about 1.8, meaning that for an investor focusing on earnings growth, the stock should be trading near $86.25, a $7.95 increase from a recent close.

Fundamental Investment Valuation

Liquidity: The company ended FY10 with a Current Ratio of 1.16, a Quick Ratio of 0.56, a Cash Ratio of 0.47, and a Cash Conversion Cycle of 2.5 days. In addition, Goodwill and Intangibles comprised less than 1% of Total Assets, and the company had a Book Value of $24.28 and a Tangible Book Value of $24.28.

Profitability: For FY10, the company had a Gross Margin of 14%, an Operating Margin of 3.5%, a Net Operation Margin After Taxes (NOPAT) of 2.6%, a Return On Invested Capital (ROIC) of 16%, and an Effective Tax rate of 35.6%.

Debt: For FY10 the company had Total Debt of $2.17 billion, a year over year decrease of 7%. Additionally, the company paid an average annual Interest Rate 5.12%, a year over year increase of 0.43%, had a Debt to Cash Ratio of 0.46, and a Debt to Equity Ratio of 0.50.

Cash Flow: The company's FY10 Operating Cash Flow was $6.60 per share, a year over year decrease of 11%, and its Free Cash Flow was $3.48, a year over year decrease of 43%.

Dividends: During FY10 the company paid a dividend of $0.76 per share, a 13% year over year increase. Based on a recent close of $78.30, the Dividend Yield is 0.97%.

Fundamental Valuation: Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $50-$52 range.

Value Thoughts

In late April 2011, the company announced that the Board of Directors had authorized a stock repurchase plan of up to $4 billion, and that the plan would expire in April 2015. It should come as no surprise that we are not fans of this plan.

The main reason we are not fans of this plan is because the company has debt that we believe should be eliminated first. While we are aware that the vast majority (about $1.9 billion) of the company's debt is in the form of Senior Notes, half of which are due in March 2012 and half of which are due in March 2017, we simply feel such plans are an unnecessary drain on company cash, and serve no real business purpose.

Instead of a stock repurchase plan, we believe management should consider the shareholders by paying off the company's debt and then dramatically increasing dividends. Once those things are done, then consider a share repurchase plan.

With all of that said, considering a Recent Close of $78.30, an estimated Merger and Acquisition payback of 12 years (assuming EBITDA remains the same), year over year earnings growth of 30%, as well as year over year free cash flow growth of 43%, we think, on a fundamental investment basis, the stock is currently OVER PRICED, and not a candidate for additional research for the Wax Ink Portfolio..

Wax

Disclaimer

We have no position in Costco Wholesale Corporation, and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

Value Thoughts - Insituform Technologies, Inc.

2011-06-06T09:44:00.000-05:00

Insituform Technologies, Inc. (NYSE: INSU) is a worldwide provider of proprietary technologies and services for rehabilitating sewer, water, energy and mining piping systems and the corrosion protection of industrial pipelines.

Business activities include research and development, manufacturing, distribution, installation, coating and insulation, cathodic protection and licensing. Its products and services are currently utilized and performed in 70 countries across six continents.

Incorporated in Delaware in 1980, under the name Insituform of North America, Inc. the company's business model has evolved from purely licensing technology and manufacturing materials to performing the entire Insituform® CIPP (cured-in-place pipe) process and other trenchless technologies and rehabilitating and performing corrosion protection services for industrial pipelines in most geographic locations.

As of December 31, 2010 the company held 59 United States patents relating to the Insituform® CIPP process, the last of which will expire in 2027, and had 12 pending United States non-provisional patent applications relating to the Insituform® CIPP process.

In addition, the company has obtained and is pursuing patent protection in its principal foreign markets covering various aspects of the Insituform® CIPP process. As of December 31, 2010, there were 152 issued foreign patents and utility models relating to the Insituform® CIPP processes, and 104 applications pending in foreign jurisdictions.

Basis

Financial information presented herein, is based on the company's most recent SEC Form 10-K filing for year ending December 31, 2010, as filed with the Securities and Exchange Commission on February 28, 2011.

Short-Term Investment Considerations

The stock closed recently at $24.14, with first First Resistance at $25.08, a 4% increase from the recent close and Second Resistance at $25.63, a 6% increase from the recent close. Should the stock price breakthrough second Resistance, it should find a ceiling near $30.00, 24% increase from the recent close.

The stock price should find Support at $18.52, a 23% decline from a recent close.

Relative Strength is currently 40, correcting from an oversold condition. With a ceiling and support at essentially the same levels, we have no short-term interest in this stock at the present time.

Fundamental Investment Considerations

Liquidity: The company ended FY10 with a Current Ratio of 2.69, a Quick Ratio of 1.69, a Cash Ratio of 0.66, and a Cash Conversion Cycle of 13 days. In addition, Goodwill and Intangibles comprised 28% of Total Assets. The company had a Book Value of $15.38 and a Tangible Book Value of $8.90.

Profitability: For FY10, the company had a Gross Margin of 28%, an Operating Margin of 12%, a Net Operation Margin After Taxes (NOPAT) of 9%, a Return On Invested Capital (ROIC) of 21%, and an Effective Tax rate of 27%.

Debt: For FY10 the company had Total Debt of $105 million, a year over year decrease of 10%. Additionally, the company paid an average annual Interest Rate 8.3%, an 1.04% year over year increase, had a Debt to Cash Ratio of 0.91, and a Debt to Equity Ratio of 0.17.

Cash Flow: The company's FY10 Operating Cash Flow was $3.14 per share, a year over year decrease of 52%, and its Free Cash Flow was $2.13, a year over year decrease of 65%.

Dividends: During FY10 the company paid a dividend of $0.01 per share, a 66% year over year decrease. Based on a recent close of $24.14, the Dividend Yiels is 0.04%.

Earnings Growth Valuation

Earnings growth valuations are based on the spread between year over year earnings growth and the current PE.

In the case of Insituform Technologies, Inc., the company had a year over year earnings decline of 50%, ending FY10 with earnings of $2.11 per share.

With a trailing twelve month PE of 11, the spread between earnings growth and the PE is about (4.4), meaning that for an investor focusing on earnings growth, the stock should be trading near $14.87, a $9.27 decrease from a recent close.

Fundamental Valuation

Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $39-$41 range.

Value Thoughts

Considering a recent close of $24.14, an estimated Merger and Acquisition payback of 8.1 years (assuming EBITDA remains the same), a year over year earnings decline of 50%, as well as a year over year free cash flow decline of 65%, we think the stock is currently UNDER PRICED, and a candidate for additional research for the Wax Ink Portfolio.

Wax

Disclaimer

We have no position in Insituform Technologies, Inc., and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

Value Thoughts - Medtronic, Inc.

2011-05-31T03:54:00.000-05:00

Medtronic, Inc. (NYSE: MDT) is a global leader in medical technology that helps to alleviate pain, restore health and extend life for millions of people.

The company was founded in 1949 and incorporated as a Minnesota corporation in 1957. Today the company serves physicians, clinicians and patients in more than 120 countries worldwide and functions in seven operating segments that manufacture and sell device-based medical therapies.

These operating segments are Cardiac Rhythm Disease Management, Spinal, CardioVascular, Neuromodulation, Diabetes, Surgical Technologies, and Physio-Control. The companies primary customers include hospitals, clinics, third party healthcare providers, distributors and other institutions, including governmental healthcare programs and group purchasing organizations.

Basis
Financial information presented in this report for Medtronic, Inc., is based on the company’s most recent SEC Form 10-K filing for year ending April 30, 2010, as filed with the Securities and Exchange Commission on June 29, 2010.

Liquidity
Both the company’s Current Ratio at 1.92, and Quick Ratio at 1.39, are below what we consider investment quality, while the company’s Cash Ratio at 0.74, slightly exceeds our investment quality threshold. Additionally, the company’s Goodwill and Intangibles comprise almost 40% of the company’s Total Assets, well above our 15% investment quality threshold.

Profitability
The company’s FY10 Gross Margin was almost 82%, its Operating Margin was almost 33.5%, its Net Margin (NOPAT) was almost 28%, and its Return On Invested Capital was just short of 33%.

The company’s FY10 Effective Tax Rate was almost 22%, while for prior tax years its effective tax rate was 23% for FY08 and 23% for FY09. With an average effective corporate tax rate at between 28%-35%, we think a better understanding of the company’s effective tax results is warranted prior to considering the company for investment.

Debt
The company increased its Total Debt during FY10, from $7.3 billion to $9.5 billion, an almost 30% increase. Not surprisingly, we believe the company’s debt level far exceeds its earnings capability and is gaining little for the additional debt management is adding to the company’s balance sheet.

We simply do not see FY11 earnings being much improved over FY10 earnings even though the company spent $620 million on acquisitions during FY10, not including providing an avenue for an additional spend of $150 million.

We see FY10 acquisition spending much the same as FY09 spending, a year in which the company spent approximately $1.25 billion during on acquisitions that lead to an increase in FY10 Total Debt of 30% and an increase in FY10 Earnings of 6%.

Cash
The company ended FY10 with $1.4 billion in Cash and $2.375 in Marketable Securities, putting available Cash at $3.40 per share. In addition, the company had Operating Cash Flow for FY10 of $5.05 per share, a year over year increase of 2%, generated Free Cash Flow of $3.66 per share, a year over year increase of 2%, and increase their Annual Dividend by 9%, from $0.75 in FY09 to $0.82 in FY10.

Short-Term Investment
The stock closed recently at $40.31, with first First Resistance at $40.66, a 1% increase from the recent close, Second Resistance at $43.33, 7% increase from the recent close, and First Support at $37.07, an 8% decline from a recent close, and Second Support at $30.80, 24% decline from the recent close.

With a Relative Strength Indicator near 40, we assumed the stock would be setting up for a jump in price. However the stock price seems to us to be vacillating, with no real movement up or down. Since we believe there is currently greater downward price volatility, we have no short-term interest in this stock at the present time.

Earnings Growth Investment
Our earnings growth valuations are based on the spread between year over year earnings growth and the current PE.

In the case of Medtronic, Inc., the company had year over year earnings growth of 6%, ending FY10 with earnings of $3.99 per share. With a current PE of 10, the spread between earnings growth and the PE is about 0.6, meaning that for an investor focusing on earnings growth, a current fair value for the stock is about $43.00, a $2.39 increase from a recent close.

Long-Term ( 5 Year Hold) Investment Valuation
Based on our review of the company’s latest annual financial information we think a Reasonable Value Estimate for the company is in the $43-$44 range. Assuming all due diligence was performed prior, we would set a Buy Target at about $26, a First Sell Target at about $51, and a Close Target at about $54.

In addition, based on our assessment of the company financial information that we reviewed, we believe a reasonable financial risk multiplier is 54. Accordingly, for the more risk averse value investor, we think a reasonable Buy Target is in the $14-$16 range.

Final Thoughts
Considering a recent close of $40.31, the financial information that we reviewed, an estimated Merger and Acquisition payback of 9.3 years (assuming EBITDA remains the same), year over year earnings growth of 2%, as well as year over year free cash flow growth of 2%, we think the stock is currently fairly valued, and not a candidate for the Wax Ink Portfolio.

Wax

Disclaimer
We have no position in Medtronic, Inc. and no plans to initiate a position in the next 72 hours. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

Value Thoughts - Aeropostale, Inc.

2011-05-15T15:46:00.001-05:00

Aeropostale, Inc. (NYSE: ARO) is a primarily mall-based, specialty retailer of casual apparel and accessories, targeting 14 to 17 year-old young women and men through its Aéropostale stores and 7 to 12 year-old kids through its P.S. from Aéropostale stores.

The Aéropostale brand was established by R.H. Macy and Company, Inc., as a department store private label initiative, in the early 1980’s. Macy’s subsequently opened the first mall-based Aéropostale specialty store in 1987. Over the next decade, Macy’s, and then Federated Department Stores, Inc. (now Macy’s, Inc.), expanded Aéropostale to over 100 stores. In August 1998, Federated sold its specialty store division to Aéropostale management and Bear Stearns Merchant Banking. In May of 2002, Aéropostale management took the company public through an initial public offering and listed its common stock on the New York Stock Exchange.

The company maintains control over its proprietary brands by designing, sourcing, marketing and selling all of its own merchandise and its products can only be purchased in Aéropostale stores and online.The company operates 965 Aéropostale stores and 47 P.S. from Aéropostale stores. In addition, pursuant to a licensing agreement, one of the company's international licensees operated 10 Aéropostale stores in the United Arab Emirates. The company also recently announced a second licensing agreement which will allow the licensee to operated 25 stores in Singapore, Malaysia and Indonesia over the next five years.

Basis
Financial information presented in this report for Aeropostale, Inc., is based on the company's most recent SEC Form 10-K filing for year ending January 31, 2011, as filed with the Securities and Exchange Commission on March 28, 2011.

Short-Term Investment Considerations
The stock closed recently at $21.57, with first Resistance at $24.43, a 13% increase from the recent close, second Resistance at $24.59, 14% increase from the recent close, and final Resistance at $31.31, a 45% increase from a recent close. First Support for the stock settled at $20.50, a 5% decline from the recent close.

Long-Term (5 Year Hold) Investment Considerations
In review of the company's latest annual financial information we note that the Current Ratio at 2.17, and the Cash Ratio at 1.23 were both what we consider investment quality. While close to where we like to see it, the Quick Ratio at 1.23 was not at what we consider investment quality levels. One very bright spot for the company was Return On Invested Capital at 94%. While down from FY10, given the very tough economic conditions retailers have faced over the past several years, we were pleased with this metric. We were also very pleased to see year over year growth in Free Cash Flow of 7%, and year over year earnings growth of 20%.

Earnings Growth Valuation
We are value investors, attempting to determine the value of an entire company based on its most recent audited financial information. As such, we simply refuse to pay for earnings growth and make no inclusion of it in our valuation estimates. However, we have come to realize that many investors focus on earnings growth, basing investment decisions on the spread between year over year earnings growth and the current PE.

In the case of Aeropostale, Inc., the company had year over year earnings growth of 22%, ending FY11 with earnings of $3.06 per share. With a current PE of 7, the spread between earnings growth and the PE is about 3, meaning that for a value investor considering earnings growth, a fair value for the stock is about $31.00, if the stock were purchased at its recent close.

Finanical Statement Valuation
Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $34-$35 range.

Assuming all due diligence was performed prior, we would set a Buy Target in the $20-$21 range, a First Sell Target in the $40-$41 range, and a Close Target in the $42-$43 range.

Based on our assessment of the company financial information that we reviewed, we believe a reasonable financial risk multiplier is 78. Accordingly, for the more risk averse value investor, we would set a Buy Target in the $16-$17 range.

Considering a recent close of $21.57, an estimated Merger and Acquisition payback of 4 years (assuming EBITDA remains the same), and Free Cash Flow of $2.61, we think the stock is currently undervalued, and a candidate for additional research for the Wax Ink Portfolio.

Wax

Disclaimer
We have no position in Aeropostale, Inc. and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

Value Thoughts - Kraft Foods

2011-05-06T03:45:00.000-05:00

Kraft Foods, Inc. (NYSE: KFT) is the world’s second largest food company. The company manufactures and markets packaged food products, including biscuits, confectionery, beverages, cheese, convenient meals and various packaged grocery products, selling to consumers in 170 countries. The company has operations in 75 countries, employing approximately 127,000 people, and operating 223 manufacturing and processing facilities.

Because the company is a holding company, their principal source of funds is from their subsidiaries, none of which are currently limited by long-term debt or other agreements in their ability to pay cash dividends or make other distributions with respect to their common stock.

Basis
Financial information presented in this report for Kraft Foods, Inc., is based on the company's most recent SEC Form 10-K filing for year ending December 31, 2010, as filed with the Securities and Exchange Commission on February 28, 2011.

Short-Term Investment
The stock closed recently at $33.85, with first Resistance at $34.00, a 0% increase from the recent close, first Support at $32.05, a 5% decline from the recent close, and second Support at $31.14, an 8% decline from the recent close. Should the stock price fall through second support, the next support level is currently $27.49, 19% decline from a recent close.

Long-Term (5 Year Hold) Investment
In review of the company's latest annual financial information we note that the Current Ratio at 1.04, the Quick Ratio at 0.58, and the Cash Ratio at 0.16, were all well short of what we consider investment quality. We also note that Total Debt at 4 times EBITDA and 2 times Net Fixed Assets, and Goodwill and Intangibles making up 67% of the company's Total Assets are additional metrics that were well below what we consider investment quality.

On the positive side, Return On Invested Capital at 21%, Free Cash Flow at $2.05 per share, an 18% year over year increase, and year over year Earnings Growth of 14% all exceeded our investment quality metrics.

Earnings Growth
We are value investors, attempting to determine the value of an entire company based on its most recent audited financial information. As such, we simply refuse to pay for earnings growth and make no inclusion of it in our valuation estimates.

However, we realize that many investors focus on earnings growth, basing investment decisions on the spread between year over year earnings growth and the current PE.

In the case of Kraft Foods, Inc., the company had year over year earnings growth of 14%, ending FY10 with earnings of $2.38 per share. With a current PE of 14, the spread between earnings growth and the PE is about 1, meaning that for a value investor considering earnings growth, a fair value for the stock is about $36.00, if the stock were purchased at its recent close.

Valuations
Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $28-$29 range.

Assuming all due diligence was performed prior, we would set a Buy Target in the $17 range, a First Sell Target in the $34 range, and a Close Target in the $35-$36 range.

Based on our assessment of the company financial information that we reviewed, we believe a reasonable financial risk multiplier is 72. Accordingly, for the more risk averse value investor, we would set a Buy Target in the $12-$13 range.

Considering a recent close of $33.85, an estimated Merger and Acquisition payback of 12 years (assuming EBITDA remains the same), and Free Cash Flow of $2.05, we think the stock is currently fairly valued, and a not a candidate for additional research for the Wax Ink Portfolio.

Wax

Disclaimer
We have no position in Kraft Foods, Inc. and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.

Value Thoughts - USA Mobility, Inc.

2011-05-02T04:10:00.000-05:00

USA Mobility, Inc. (Nasdaq: USMO) is a provider of wireless communications solutions to the healthcare, government, large enterprise and emergency response markets.

As a single-source provider, the company’s strategy is to focus on the business-to-business marketplace and to offer wireless connectivity solutions. The company operates nationwide networks for both one-way paging and advanced two-way messaging services. In addition, the company offers mobile voice and data services through third party providers, including BlackBerry® devices and global positioning system (“GPS”) location applications.

The company’s product offerings include customized wireless connectivity systems for healthcare, government and other campus environments. USA Mobility also offers M2M (“machine to machine”) telemetry solutions for numerous applications that include asset tracking, utility meter reading and other remote device monitoring applications on a national scale.

Basis
Financial information presented in this report for USA Mobility, Inc., is based on the company's most recent SEC Form 10-K filing for year ending December 31, 2010, as filed with the Securities and Exchange Commission on February 24, 2011.

Short-Term Investment
The stock closed recently at $15.45, with first Resistance at $15.90, a 3% increase from the recent close, second Resistance at $19.21, a 24% increase from the recent close, first Support at $14.64, a 5% decline from the recent close and second Support at $12.10, a 22% decline from the recent close.

Even though the stock price is trending upward, there does not appear to be any near term price breakout on the horizon, making a short-term investment impractical at this time.

Long-Term (5 Year Hold) Investment
In review of the company's latest annual financial information we note that the Current Ratio at 4.48, the Quick Ratio at 4.28, and the Cash Ratio at 3.74, were all what we consider investment quality.

In addition, Debt to EBITDA at 0.01, and a Cash Conversion Cycle of 13 days, were well within our investment quality parameters. Additional bright spots were ROIC at 131% and Free Cash Flow at $3.25. Although year over year free cash flow declined from $3.97, or about 18%, at this time we do not see the decline as the beginning of trend.

We also note that the company ended FY10 with Debt of $0.03 per share, and paid an annual dividend of $1.96 per share.

Earnings Growth
We are value investors, attempting to determine the value of an entire company based on its most recent audited financial information. As such, we simply refuse to pay for earnings growth and make no inclusion of it in our valuation estimates.

However, we realize that many investors care a great deal about earnings growth and base their investment decisions on the spread between year over year earnings growth and the current PE.

In the case of USA Mobility, Inc., the company had year over year earnings growth of (7%), ending FY11 with earnings of $4.52 per share. With a current PE of 3, the spread between earnings growth and the PE is about (2), meaning that for a value investor considering earnings growth, a fair value for the stock is about $6.50.

Valuations
Based on our review of the company's latest annual financial information we think a Reasonable Value Estimate for the company is in the $48-$50 range.

Assuming all due diligence was performed prior, we would set a Buy Target in the $29-$30 range, a First Sell Target in the $56-$57 range, and a Close Target in the $60-$62 range.

Based on our assessment of the company financial information that we reviewed, we believe a reasonable financial risk multiplier is 78. Accordingly, for the more risk averse value investor, we would set a Buy Target in the $22 to $23 range.

Considering a recent close of $15.45, an estimated Merger and Acquisition payback of 2.6 years (assuming EBITDA remains the same), and Free Cash Flow of $3.25, we think the stock is currently under valued, and a candidate for additional research for the Wax Ink Portfolio.

Wax

Disclaimer
We have no position in USA Mobility, Inc. and no plans to initiate a position in the next 5 business days. Additionally, we have received no compensation to write about a specific stock, sector, or theme.