RTCrawford's Weblog

I don't make this stuff up. I'm not that smart.

Archive for May 2008

Reversion To The Mean

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The question had to do with “Reversion to the Mean” in investment settings, but, in fact, it extends to management of firms, in general. Simply put, it sought a defense of reversion to the mean as a reliable and actionable model. The answer, in my view, requires an understanding of physics, psychology, philosophy, economics, and management. Here is the original question and my response.

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OOT — Out of Town This Week — Lam Research (NYSE: LRCX)

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I’ve been invited to do some work with the good folks at Martin Army Medical Center, Fort Benning, GA this week and will be out of town and away from this blog until at least the weekend. This is the first of several planned consulting trips this summer (Chicago and New York City in June and Charleston in July). If posting comments, there may be a delay before I’m able to approve them and get them posted for public consumption.

Next, we turn to analysis of Lam Research.

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Written by rcrawford

May 27, 2008 at 8:49 pm

Posted in General

Like a Hamster on a Wheel — Time Management Versus Innovation

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Reference: High School’s Worst Year?; For Ambitious Teens, 11th Grade Becomes a Marathon Of Tests, Stress and Sleepless Nights. Jonathan Kaufman. Wall Street Journal. (Eastern edition). New York, N.Y.: May 24, 2008. pg. A.1

I often wonder whether the “Life-Long Learner” is a conceptual myth. It isn’t that we can avoid intellectual growth as we age – it is all but compelled by the speed of change. Nor is it sustaining the love of learning that has me uncertain about whether the life-long learner remains viable. Instead, as the father of a high school junior, a teacher of undergraduates and graduate students, and as a consultant working with physicians, I see the problems from several informing perspectives.

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Proctor and Gamble (NYSE: PG) — Hold or Sell Decision

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I bought P&G on February 20th of last year for 64.75 (we will leave the number of shares blank to avoid unnecessary embarrassment). Since then, the shares have rocketed to $65.27 — a whopping $0.57 gain in a year. To be fair, I have been collecting dividends, currently yielding 2.4 percent. With any luck, I’ll have broken even after factoring in inflation but before considering buy and sell brokerage fees.

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Written by rcrawford

May 26, 2008 at 3:58 am

Posted in General, Investments

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BHP Billiton Ltd. (BHP) — Buy, Sell, Hold … May 24, 2008

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BHP Billiton Ltd. (NYSE: BHP) is a commodities play — Aluminium, Base Metals, Uranium, Diamonds and Specialty Products, Energy Coal, Iron Ore, Manganese, Metallurgical Coal, Petroleum, and Stainless Steel Materials -, and, most prominently, a China, India, and Brazil growth play. The longs view the commodities price increases of late as a secular bull market for commodities, while the shorts view it as a speculative bubble. While my wallet is rooting for the shorts, my brain understands international equilibriums. I understand that emerging markets want to emerge and, once started, government has little ability or desire to disappoint. All of this informs the business of BHP but it tells me nothing about the stock and its relation to fair value.

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Written by rcrawford

May 25, 2008 at 11:14 pm

Sears Holdings (NYSE: SHLD) — May 23, 2008

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Down from its high of $193 on April 17, 2007, the stock of Sears has been cut by more than half — despite stock buybacks (see graphic, below) and purchases by insiders.

Moreover, free cash flow and cash return on invested capital remain positive for the most recently reported year.

More recently, company prospects have taken a downturn along with the economy, as have other retailers. More importantly, the market has turned decidedly negative on the company, its management, and future prospects. When last reported, short interest has ballooned to 24,606,800 shares (19.31 % percent of float, a decrease of just 4.29 % over the prior reporting period), with days to cover at 12.7.

Given this pessimism, we are left to wonder whether a company which is evidently not a candidate for bankruptcy represents a short squeeze opportunity for long investors. So, let’s take a look at identifying intrinsic value, the financial health of the company, and whether there is a catalyst for a short squeeze.

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Written by rcrawford

May 24, 2008 at 8:42 am

Accuray, Inc. (NYSE: ARAY) — May 22, 2008

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My friend Stuart from the Yahoo message boards indicated recent consideration of Accuray, Inc. (NYSE: ARAY) as a stock investment. Stuart is a journalist by training, with a focus on healthcare, and his investing approach relies on in-depth research into the market, the economy, and the story behind those companies he is considering. My approach is that of a deep-discount value investor. Comparing the approaches struck me as an interesting exercise, which includes my quantitative/fundamental assessment of Accuray.

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Written by rcrawford

May 23, 2008 at 12:31 am