Warren Buffett’s Buying Stocks
October 17th, 2008 | Posted by stockWarren Buffett is buying U.S. stocks. As he wrote in the New York Times today:
I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up.
And he warned investors against keeping holdings in cash:
…a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.
But what is Buffett buying?
Jon C. Ogg of 24/7 Wall St. has some theories, including Buffett favorites Wells Fargo (WFC), General Electric (GE) and of course his very own Berkshire Hathaway (BRKA).
And how much does the stock market care?
Not much, I think. Yes, Buffett’s op-ed might brighten the market’s psychological state a bit. But I didn’t see a significant bump this morning for most of the stocks Ogg identifies.
Buffett has never claimed to have great timing. And the stock market in the past month has been pulled down (and occasionally pushed up) by investors with an extremely short-term outlook. Unlike Buffett — and me and probably you if you’re saving for retirement — they don’t care where stocks will be in five or ten years. They care where the market will be in a month, a day or even an hour.
Fifteen California Wines for Under $25
October 16th, 2008 | Posted by innovConsumers trying to find wine values have perhaps one of the more difficult paths to success in California than in any other wine region in the world. Prices for most of the finest cabernet sauvignons, chardonnays, and pinot noirs are well north of $20 to $25, which is the break point for what I consider value vs. expensive wines. In addition, areas such as Napa and Sonoma, the Santa Cruz Mountains south of San Francisco, and even farther south, Santa Barbara, are glamour regions, and their wines fetch very high prices.
Nevertheless, California bargains still can be found, and here are some that are just too good to pass up.
87 points
2006 Beringer Chardonnay Napa
Beringer’s 2006 Chardonnay Napa is a heck of a bargain. Crisp and lean, with copious amounts of lemon oil, guava, and nectarine aromas, it is a medium-weight, dry, refreshing white to enjoy over the next one to three years. $16
87 points
2006 Pavilion Winery Pinot Noir
A wonderful discovery, Pavilion appears to be making some terrific wines at incredibly low price points. It is hard to find a pinot noir equaling the quality of the 2006 from Pavilion for under $30 a bottle. Blended with 13% zinfandel from Edna Valley, the wine has briery, berry fruit, and forest floor-like characteristics that are offered in a medium-bodied, silky style to enjoy over the next one to two years. $15
87 points
2007 Round Hill Chardonnay Oak Free
The 2007 Chardonnay Oak Free, a tank-fermented and -aged offering, displays crisp orange and lemon blossom characteristics, medium body, good fruit and purity, and surprising character. It is remarkably low-priced for a wine this good. Drink it over the next 12 months. $11
88 points
2006 Beckmen Vineyards Cuvée Le Bec
An excellent source of high-quality as well as value-priced Rhône Rangers, Beckmen produces one of the wine world’s finest bargains, the Cuvée Le Bec, a blend of Rhône varietals. The 2006 consists of 50% grenache, 28% syrah, and the rest mourvèdre and counoise. It is medium-bodied and soft with plenty of pepper, sweet cherry, herb, and spice characteristics. An ideal bistro red, it is a delicious, personality-filled, bargain-priced effort to enjoy over the next one to two years. $18
88 points
2007 Grayson Cellars Chardonnay
The 9,000-case cuvée of 2007 Chardonnay from Grayson Cellars exhibits elegant pear and lemon blossom characteristics, medium body, good acidity, a hint of wood, and an attractive finish. Drink it over the next several years. $10
88 points
2005 Summers Cabernet Sauvignon Andriana’s Cuvee
Finding a good 100% Napa cabernet sauvignon for under $50 a bottle is no easy task. Finding an excellent one is almost impossible. But that is exactly what the elegant, tasty, black currant, cedar, licorice, and spice box-scented 2005 Cabernet Sauvignon Adrianna’s Cuvée delivers. Classic cabernet aromas are followed by a medium- to full-bodied wine with loads of fruit, soft tannin, and a long finish. It should drink well for five to eight years. $22
89 points
2006 Cartlidge & Browne Sauvignon Blanc Dancing Crow
One of the premium purveyors of value-priced California wines (believe me, there are not many that offer high quality at low prices), Cartlidge & Browne continues to provide rewarding and surprisingly tasty drinking. Their brilliant 2006 Sauvignon Blanc Dancing Crow is a medium-bodied white loaded with melony fruit notes, crisp acidity, freshness, and a true sauvignon character. Drink it over the next year. $12
89 points
2006 Château St. Jean Fumé Blanc (Sonoma)
Readers looking for fabulous values in dry, aromatic, crisp, fruit-dominated whites with personality and soul should check out the wines from Château St. Jean. A killer value, the 2006 Fumé Blanc exhibits beautiful melony, honeysuckle, and orange-zest aromas offered in a crisp, dry, light- to medium-bodied, tasty personality. Enjoy it over the next 12 to 18 months. $13
89 points
2007 Gallo Family Vineyards Pinot Gris Sonoma Reserve
One of the better pinot gris wines I have tasted from California, this exhibits fresh citrus, a hint of apple skin, medium body, light, dry flavors, and surprising intensity for a relatively lighter style of wine. The fruit is pure, and the wine impeccably made. Drink it over the next year. $17
89 points
2006 Kendall-Jackson Vintner’s Reserve Chardonnay
There are some terrific values in this portfolio, none better than the 2006 Vintner’s Reserve Chardonnay. It is certainly one of the best chardonnays for the money. This wine, which all comes from coastal vineyards owned by Jackson, is 90% barrel-fermented and put through 100% malolactic fermentation—which is remarkable given the quantity of wine made. The wine is also consistent unless it is beaten up in the distribution chain or by retailers with questionable storage. Crisp orange marmalade and lemon oil notes as well as some tropical fruits and zesty acidity in a fresh, lively style always characterize this wine, which seems to show very little evidence of oak. It’s a remarkable value. $15
89 points
2007 Wyatt Pinot Noir
It is virtually impossible to find a high-quality pinot noir that actually tastes like pinot noir for under $25, but wholesaler/importer Polaner Selections in New York accessed a blend of fruit mostly from Carneros with the rest from the Sonoma Coast, Russian River, Sonoma County, Mendocino, and even the Central Coast. This wine is a real winner, tasting like a delicious Côte de Beaune. Earthy, ripe currant, strawberry, and spicy notes jump from the glass of this pinot with a fragrant, sensual style. Medium-bodied, with decent acidity, ripe tannin, and a plush mouthfeel, this is a rather remarkable wine value for a pinot noir, which is always a fickle grape as well as expensive to produce. Drink it over the next two to three years and buy it by the case. $18
90 points
2007 Foxglove Chardonnay
Perhaps the great value in chardonnay in the marketplace today, this wine—made by the highly talented folks at Varner Winery in the Santa Cruz Mountains—comes from fruit accessed in Edna Valley. With malolactic fermentation blocked but with lees stirring, this 25,000-case cuvée provides terrific notes of tropical fruit and poached pear in a fleshy, medium-bodied style with obvious minerality and precision. This is a remarkable effort that is fresh, lively, and best drunk over the next one to two years. $16
90 points
2006 Wyatt Cabernet Sauvignon
This super bargain wine from Polaner Selections shows impeccable attention to detail and a thorough knowledge of some admirable fruit sources. The 2006 cabernet sauvignon is a blend of 81% cabernet and 19% merlot. It is a knockout wine, deep ruby with some purple nuances, offering up loads of sweet fruit, medium body, velvety tannins, and a heady finish. This beauty should drink well for five to seven years. $13
91 points
2005 Tablas Creek Côtes de Tablas
Tablas Creek’s Côtes du Rhône effort is the exceptional 2005 Côtes de Tablas, a blend of 43% grenache, 24% mourvèdre, 18% syrah, and 15% counoise. There are 3,900 cases of this delicious, deep ruby/purple-hued offering. Aromas of smoke, roasted herbs, meat juices, black currants, and cherries are followed by a medium- to full-bodied wine displaying beautiful purity, fruit, and depth. Drink it over the next five to six years. $22
91 points
2006 Windsor Sonoma Vineyards Chardonnay Russian River
The 2006 Chardonnay from Windsor Sonoma Vineyards is classic Californian in its display of assorted tropical fruits, full-bodied opulence, superb purity, good acidity, and long finish. Drink it over the next one to two years. $20
October 15th, 2008 | Posted by stockApparently the financial crisis was just taking a ‘power nap.’
Today the Dow Jones Industrial Average dropped 7.87%, or 733.08 points, to 8,577.91.
That’s the largest percentage drop in the Dow all year, and we’ve had a 7.3% drop on Oct. 9 and a 6.98% drop on Sept. 29.
In fact, it’s the largest percentage drop in the Dow since the 1987 stock market crash — when the Dow fell 22.6% on Oct. 19 and 8% on Oct. 26. Before 1987, you need to go back to 1937, 1933, 1932, 1907 and especially 1929 to find daily drops in the Dow this large.
But didn’t stocks surge on Monday? Yes, but that obviously wasn’t the ‘all clear signal’ for investors. On Oct. 13, the Dow rose 11.1%, or 936.42 points. According to Stock Trader’s Almanac (from which I’m getting a lot of these figures), that was the best percentage rise in the Dow since 1929 and the early 1930s.
It should tell us something that the last big surges in the Dow occurred during the Great Depression. An 11.1% jump in the Dow is not evidence that the market has hit bottom.
Thanks to today’s drop, only a 1.5% fall in the Dow would put it right back at its lowest point of the year — its closing price from Friday, Oct. 10.
These are extreme times. It will be a long time before we know that the market has actually hit bottom. And even an 11% cushion is no guarantee that stocks won’t tumble yet again to new lows.
October 9th, 2008 | Posted by innovAustralia is the home of the so-called fruit bomb—decadently fruity, bold, exuberant, in-your-face wines that are hard to ignore. Elitist wine geeks hate them (too much flavor), but most consumers love them. Here are some of the great values from Down Under.
88 points
2007 Penfolds Koonunga Hills Shiraz-Cabernet Sauvignon
Penfolds’ 2007 blend of 75% shiraz and 25% cabernet sauvignon from Koonunga Hills was aged for eight months in seasoned oak. Purple-colored, it has an expansive perfume of blue and black fruits. On the palate it is supple-textured, ripe, and layered. This surprisingly elegant wine will evolve for several years and provide pleasure through 2017. $12
90 points
2005 Aramis Shiraz
The 2005 shiraz from Aramis is purple-colored with a fragrant bouquet of smoke, cedar, game, and blueberry. This leads to a full-bodied wine with a plush texture, layered black fruits, and enough structure for two to three years of development in the bottle. Drink it through 2020. $22
90 points
2006 Black Chook Shiraz-Viognier
Black Chook’s 2006 dark-ruby-colored shiraz-viognier is a crowd pleaser. Aromatically the nose receives uplift from the 6% viognier component. Aromas of smoke, plum, and blueberry are enticing and lead to a full-bodied wine with a smooth texture, ripe flavors with depth, and a long finish. This hedonistic effort can be enjoyed now but will blossom with another year or two of bottle age. $18
90 points
2006 Fetish Playmates
Fetish is a joint venture between Joshua Tree Imports and noted winemaker Rolf Binder. The 2006 Playmates is composed of 92% shiraz, 5% mataro, and 3% grenache. Opaque purple-colored, it exhibits aromas of toasty oak, leather, lavender, and blueberry. This leads to a medium- to full-bodied wine with plenty of ripe fruit, excellent depth and concentration, soft tannins, and a long finish. It will evolve for three to four years but can be enjoyed now. $22
90 points
2006 Jim Barry The Lodge Hill Shiraz
Jim Barry’s 2006 The Lodge Hill Shiraz was aged for 11 months in seasoned French and American oak. Purple-colored, it has a fragrant nose that reveals violets, mineral, spice box, and a hint of eucalyptus. This is followed by a full-bodied wine with lots of savory fruit, plenty of spice notes, good depth, and a lengthy finish. Give it a year or two to evolve and drink it from 2010 to 2018. $20
90 points
2006 Jip Jip Rocks Shiraz
This 2006 shiraz is purple-colored with aromas of black pepper, spice box, blueberry, and blackberry. Savory and ripe on the palate with layers of flavor, this nicely balanced wine will drink well for four to six years. $15
90 points
2006 Thorn-Clarke Shiraz Terra Barossa
Opaque purple, Thorn-Clarke’s 2006 Shiraz Terra Barossa has an enticing spicy perfume of blueberry and blackberry that jumps from the glass. Plush and ripe, it tastes like shiraz selling for three times the price. It has outstanding depth and length and, best of all, it can be enjoyed now. $14
90+ points
2006 d’Arenberg The Footbolt Shiraz
The d’Arenberg portfolio is loaded with values. The winery works with more than 140 growers to fashion their superb blends. Their 2006 The Footbolt Shiraz (which contains a bit of grenache) offers fragrant aromas of wood smoke, game, and blueberry. Layered and balanced, it will evolve for several years and drink well through 2017. $19
91 points
2007 Cat Amongst the Pigeons Shiraz
Opaque purple-colored, this 2007 shiraz has an enticing perfume of spice box, blue fruits, and smoked meat. This leads to a savory, ripe, full-flavored wine with layered fruit, excellent balance, and a lengthy close. Drink it over the next four years. $17
91+ points
2006 Rolf Binder Wines Shiraz-Grenache Halliwell
Rolf Binder’s 2006 Shiraz-Grenache Halliwell (composed of 70% shiraz and 30% grenache) offers scintillating scents of truffle, earth, blueberry, black cherry, and kirsch liqueur. Layered and full-flavored, with excellent depth and concentration, it has enough structure to evolve for several years. It should drink well through 2016. $22
92 points
2006 Pillar Box Shiraz Reserve
Pillar Box has a powerful pedigree: fruit sourced from Henry’s Drive and winemaking consultation from the renowned Chris Ringland. The grapes for the 2006 Shiraz Reserve were selected from the best shiraz parcels used to make Pillar Box Red. They were aged in new oak, 75% French and 25% American. Opaque purple-colored, it offers up a classy bouquet of smoke, vanilla, saddle leather, bacon, and blueberry. This leads to a full-bodied, plush, seamless wine with no hard edges to its lengthy finish. It has the stuffing to evolve for two to three years, but I can think of no reason for delaying gratification. It is a great value. $19
94 points
2006 Mollydooker Shiraz The Boxer
Mollydooker’s 2006 Shiraz The Boxer is opaque purple. The compelling nose exhibits aromas of scorched earth, smoke, grilled bacon, blueberry compote, and blackberry liqueur. Full-bodied, thick, and rich, this layered shiraz is velvety textured and opulent. The finish lasts for nearly a minute. A sensational value, it can be enjoyed now but will evolve for several years. $20
October 8th, 2008 | Posted by stockThe current price vs the employee option strike price is critical to the base buyback purchases. With prices falling so quickly, options in the money are dwindling, so buybacks may be cut back further. Many (of the reported) average strike prices expiring this year are near their current price. The situation speaks more to Q4 and January (taxes), but reduced need in Q3 should also take its toll.
Also, i will be looking for issues that use existing shares (treasury) to satisfy options, therefore netting positive cash-flow from the event and avoiding the buyback expense and not having to go to the market for additional cash (getting money under the radar).
FYI – the full impact of the dividends cuts will be felt in Q4. I expect a strong single-digit decline (Q4,’08 vs. Q4,’07); last such decline was Q2 2003 at -1.54%, if more decreases materialize we could see a double-digit decline, last seen in Q3 1958 at -24.4%.
Stocks: An Unhappy Anniversary
October 8th, 2008 | Posted by stockThursday marks a rather depressing anniversary. On Oct. 9, 2007, major U.S. stock indexes closed at an all-time high. The broad S&P 500 index closed at 1,565.15. Today — on Oct. 8, 2008 — the S&P 500 closed at 984.94.
That’s a 37% drop in one year.
Even more sobering, from this point the S&P 500 would need to post a 59% gain to re-attain record levels.
In retrospect, the stock market’s peak last October looks bizarre. Problems in the credit market became apparent to fixed income investors in July 2007. While the full extent of the crisis wasn’t yet known, many experts were already very worried — and those credit market participants have remained pessimistic ever since.
Equity investors were far more optimistic at the start of the crisis.
While stock markets showed some concern in August 2007, by September many said the subprime crisis was probably “contained” and the market hit new highs in October. How wrong they were.
Change Your Process to Boost Profits
October 7th, 2008 | Posted by innovHere’s something to ponder: The only difference between a rut and grave is that a grave has four sides instead of three.
We mention this fact because if your innovation efforts are limited exclusively to products, you may be in a rut. At the very least, you are missing a golden opportunity to delight your customers, increase sales, and save some money along the way. Wherever there is interaction among your brand, your people, and your customer, there is an opportunity for service innovation and increased profits. That is absolutelly no small thing these days, when the bad economic news keeps coming in waves.
That’s even true in places where you would not expect. Consider, for example, Six Sigma and its focus on minimizing errors and maximizing quality. Lean Six Sigma followed and changed the focus to simplifying process and eliminating steps.
You could argue that McDonald’s (MCD) was a pioneer in Lean when it numbered its meal deals. Instead of ordering a Big Mac, fries, and a Coke, now all I have to say is a number. (“I’ll have the No. 1, please.” As a result of letting people order by number, McDonald’s saved people time, increased the flow-through at the drive-in, and made it easier for low-wage employees to do their jobs. That’s lean service innovation.
So, how do you serve up your products? What behavioral hoops do you make your customers jump through to get what they want? How much of how you are selling is due to tradition, habit, or a business model that has not been challenged?
I recently went to the bank to make a deposit. I had to find a parking place, find the right form, find my account number, fill out the form, stand in line, show an ID, and wait for a receipt. If I wanted my balance, the process would take even longer.
If my bank eliminated some steps with, say, SpeedPass technology, which would let me wave a tiny bit of technology containing all my account info over a scanner, it would save us both time. Moreover, the bank would get a chance to make me feel special, and I’d might go to the bank more often and give it more of my money to invest.
Service innovations are often disguised as product innovations. Think about the airline kiosk, where you check in yourself, and the wedding gift registry. These enabling technologies are all born of the insight that the buying process was too cumbersome. Technology made a transaction easier, but only after the experience was examined and challenged.
Which brings up an important point. The primary arguments against service innovation usually come from high-touch, service-minded people.
They will tell you that by adding technology, or simplifying the ordering process “you are dehumanizing our business” or “that is not the way this business is done”—or something like that. Don’t listen. Push your team to create a totally new experience based on what your customers are saying or how they are behaving.
Then test the new experience. You will know soon enough if you have made life better for your customers. If you choose, you can then add a halo of people to the mix to make the service more personal. Southwest Airlines (LUV) has kiosks. That does not mean it has used them to replace its incredibly well-trained and thoughtful employees.
Typically, when we think about innovation, it is on the product side. How can you introduce something new, or improve an existing product?
Both those things are vitally important. But if you miss (or forget about) the chance to improve the service portion of your offering, you are missing a huge opportunity.
What Happens When the Dow Dips Below 10,000?
October 6th, 2008 | Posted by stockBack in July, John Carter, president of Trade the Markets, predicted that the Dow Jones Industrial Average would dip below 10,000 by year end. Another unscientific Industry Standard poll finds that 85% of respondents think the Dow will go below 10,000 by December. (Even though it has happened, the poll is still open so cast your vote if you like feeling superior.)
Well, today is the day of reckoning. The Dow dropped below 10,000, a level it hasn’t seen in nearly four years. (The Dow first hit 10,000 at the end of March, 1999.)
Is 10,000 merely a psychological threshold, or is this just another nail in the bear market’s coffin?
October 6th, 2008 | Posted by stockPosted by: Amy Feldman on October 06, 2008
The market is in free fall. Friends are calling and emailing in a panic. My response: I’m buying.
Investors today seem as fearful as they’ve been since, perhaps, the Great Depression. And as Warren Buffett once famously said: “Be fearful when others are greedy, and greedy when others are fearful.”
As he always does, Buffett’s put his money where his mouth is, garnering stakes in Goldman Sachs and General Electric on the cheap as the $700 billion bailout plan was under debate. Yet the bailout’s passage has done little to quell the fears. Instead, fear seems to have turned to panic.
Today, the Dow plunged below 10,000 for the first time in four years. The broader S&P 500 index is off 27% since the beginning of the year.
Is the economy going to disappear? Are all businesses going to close their doors due to lack of credit? Is every single investment bad?
Maybe. But I’m willing to bet that’s not the case, at least not long term. So before the market closed, I took a deep gulp against the rising panic that tomorrow could be worse and sent cash to one of my lagging international equity funds.
SEPTEMBER WAS THE WORST MONTH FOR DIVIDENDS, BUT JANUARY MAY BRING INSULT TO INJURY
October 3rd, 2008 | Posted by stockBlue-chip dividend investors aren’t happy campers these days. Their favorite financial stocks have declined significantly, and cut or omitted their dividends. The insult to injury however may come next January, when they find out that since their company didn’t make any money, they didn’t pay any U.S. Federal income taxes, and therefore, the dividends that they were paid are not dividend qualified, meaning they have to pay 35% tax on them instead of 15%. On the bright side, since dividend investors usually hold on to their stocks for decades, many of them will still show a gain over the decades, that is if the company is still around.
For the record, 138 companies decreased their dividend during the third quarter of 2008, representing a 557% increase from the 21 issues that decreased their dividend during the third quarter of 2007. Reported dividend increases fell 21.2% to 346 from 439 reported in the third quarter of 2007. It was the worst September for dividends since S&P started keeping dividend records in 1956, with 60 issues decreasing their payment. During the second quarter companies were nervous and cautious; during the third quarter they took action, and that action took $22.5 billion out of the pockets of investors.
Financial issues accounted for about two-thirds of the dividend cuts and 93% of the dollar damage during the third quarter. Also, no longer is it just blue chip companies cutting dividends, now I am seeing smaller and more regional issues. The problem has trickled down.
However many issues are still increasing their dividend rate despite the massive number of dividend cuts, and given the uncertainty of the markets and the economy, they have to be extremely confident of their future earnings and cash flow to do so – we’ll see.
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