Month-End, September 2008:

Bye Bye September...

It was an ugly end to the month and third quarter today with the TSX Composite off 18.8% and S&P500 down 9.1% for September and I don't even want to look at the results for the entire third quarter.

I managed to eek out a gain of 2.5% for the month in my Value Portfolio and a 4.8% loss in my Dividend Growth Portfolio. My RSP was up 5.4% but when I take out the currency appreciation and the 20%+ performance of Wells Fargo (WFC) the results were down on par with my Canadian dividend portfolio (DivG).

I've updated my portfolio information on the side sidebar with my Top 10 holdings for DivG as follows:

See Google Doc Sheet:


Today I re-initiated my positions in Sunlife Financial (SLF) and Thomson-Reuters (TRI) after selling both for a tax loss in August. I have Canadian National Railway (CNR) remaining on my list to complete my acquisition phase of this portfolio.

Other activity this month included initiating new positions in Fortis (FTS) & Atco Limited (ACO.X), adding to my holdings in Calloway REIT (CWT.UN) and re-initiating my position in Russel Metals (RUS).

Tune in next month when I publish two posts that give readers insight into my Dividend Growth Portfolio including each of my holdings, my rationale for the individual stocks and how I determined the construction of the portfolio.


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My Short-term Plan II:

This is a continuation of my 10 part series on the core concepts I am focusing on in this difficult market environment. (Part I)


Number 2:

In any business you have to make money and margins determine the difference between a profit and a loss. In an environment such as this I’m not concerned at all with companies who lose money - period. A company’s earnings may decline year over year due to lower demand or higher input costs, but they have to make a profit and concentrate on their margins when they can.

I want to focus on stocks that can sustain or protect their margins against cost erosion regardless of what market they’re in. This goes back to my belief that no company is recession proof, but instead recession resistant. It’s what you can do in the hard times that often show which companies have the superior management.

If a company can focus and sustain their margins than they should be able to stand up against the expectations of the market fairly well. What the market has clearly demonstrated as of late, regardless of long-term fundamentals, is intolerance for companies who mismanage their margins. Now that’s not to say that an investor should discount solid long-term fundamentals, but you have to be aware that the market will have little patience for those who announce pricing pressures.

You want to focus on companies that have perpetual demand across their entire portfolio of products or services and benefit from a sustainable competitive advantage that protects their margins from industry compression. The industry may drop prices due to lower demand, but your company will continue to profit because their margins are higher due to their SCA.

Bottom Line: If you notice margins coming down significantly without management addressing the problems publicly or providing an adequate explanation then sell. If a company doesn’t make a profit in back to back quarters – SELL IT.

Suggested Stocks I Own: Proctor & Gamble (PG), General Mills (GIS), Campbell Soup (CPB) & Baxter (BAX)


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My Short-term Plan:

It might or might not be a surprise to investors that the US Bailout Plan was voted down today and the market reaction was swift, decisive and clear: down...significantly

The TSX closed down significantly today after being down over 900 points at one point as nearly everything dropped without discretion.

There are a lot of investors, friends and family who have recently asked me what they should do in this current environment. It’s easy to say that someone should stick to a certain investing style, stick with quality or maintain their asset allocation and plan. But when you watch your portfolio bleed red week after week and hear such dire perspectives in the media it’s difficult to know if you’re doing the right thing. When I provide unbiased advice to someone I usually try to put it into perspective for them by demonstrating how I apply what I know to suit me best as an investor.

Over the next ten days I’ll share with readers 10 core concepts that I’m focused on at the moment and let you decide if any can be applied to your situation in order to better protect your investments from risk during this difficult period and suggested stocks that meet each criterion.

Number 1:

Low or negligible debt and strong cashflow is going to be a necessity in a market such as this. Even if politicians decide to agree and some government sponsored plan is implemented companies are going to encounter financing troubles regardless. We are in a tight credit environment because financial institutions are hesitant to loan other companies money because of the lack of transparency that exists in the market.

Company A doesn’t know if Company B is able to pay them back on the terms that they agree on and this freezes up the market as a lack of trust emerges. While capital positions might appear strong, banks and other lenders have now seen goliaths fail and are nervous about the underlying quality of capital in question.

Low debt and cashflow are vitally important. Cashflow is the bloodline of a business and supplies what it needs, where it needs it and when. Companies with excess cashflow or adequate cashflow to meet their operating needs won’t need to borrow expensive credit or risk shutting down parts of their business to conserve cash.

If you can generate cashflow to pay off your debt or significant strength in your balance sheet then you have the ability in the face of your competition to receive financing at a much cheaper cost than other companies or the general market. While this isn’t a sustainable competitive advantage it is still an important advantage in the interim. Financing might mean the difference between survival and failure as we’ve seen recently with large failures. Cashflow pays the bills and if a company has excessive debt that is costly to repay or difficult to service/refinance than their financial health is severely impaired. No individual knows how long this might last and very few companies will either.

Bottom Line: Don’t invest with companies that have significant debt or inadequate excess cashflow from operations to fund that debt conservatively.

Suggested Stocks I Own: Manulife Financial (MFC), Russel Metals (RUS) & Saputo (SAP)


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Taking Stock in RUS:

Russel Metals is a distribution and processing company that operates in three main business segments: metal services, energy tubular products and steel distributors. Through these three business segments Russel Metals sells a variety of products for industrial and construction applications.

Metal Service Centers:

• Generic Products that include hot rolled & cold finished steel bars, tube & piping, stainless steel, meshes, chains & Specialty Products

Energy Tubular Products:

• Distribute OCTG (Oil Country Tubular Goods), pipes, tubes valves & fittings to the energy and mining industry in Western Canada and the United States that are used in the construction and operation of major oil & gas companies

Steel Distributors:

• Act as master distributors of large volume steel to other steel service centers and equipment manufacturers for large scale OEM applications

Russel Metals has its roots deep in Canadian history when in 1785 John Russel, an immigrant from Scotland, set up a business known then as John Russel & Co. In 1866 John’s great nephew Hugh began an iron trading business in Montreal and later grew into what was then an innovative steel warehousing company. By 1947 the company had regional offices in Vancouver, Winnipeg, Windsor, Toronto and Saint John with their main warehouse located in Montreal. Through 1960-2003 the company was well positioned for growth and stands as a significant operator in North America.

When you examine Russel Metal’s management structure one theme becomes immediately evident: experience. Among the top six managers of the company (excluding the Board of Directors) the cumulative number of years of experience with the company stands at 131 years. That’s an average of over 20 years experience for people in a position to make daily and long-term decisions of the company and the length of employment among senior stakeholders parallels that found at Manulife Financial. Not only do management understand the challenges of their business and industry, but they have a powerful grasp of what makes their company successful over the long-term and where it needs to go to remain competitive. Their succession planning for internal management and the ability to attract and retain talent for long periods of time adds increased stability to the operating functionality of the business.

Since 2000 ROE for the company has averaged 17.8%, book value has grown annually by 15.7% and Russel Metals has been one of the most prolific dividend growers with an average growth in their dividend of 45%.

Earnings per share for the six months of 2008 totalled 97% of full 2007 EPS with strong growth demonstrated in all major markets. The cash balance of the company stands at 1.3x long-term debt with 82% of total assets listed on the balance sheet as current assets and strong cashflow that more than adequately covers the dividend, payment of debt and operating expenses.

The company announced on February 18th of this year through a NCIB (normal course issuer bid) that they intended to buy back up to 10% of the common stock or 61 million shares that will extend to February 21st, 2009.

The company has been active on the acquisition path with the recent 100% purchase of JMS Metal Services on September 4th, 2007. JMS is a full-line distributor of steel & aluminum products with processing & distribution facilities in Alabama, Arkansas, Georgia, Kentucky & Tennessee. JMS was purchased for $125M CDN with annual sales in 2007 of $200M CDN. The company’s long-term debt sits at $175M of senior notes due March 1st, 2014 bearing interest of 6.375%.

Russel Metals holds one of the highest common dividend yields of any stock found on the TSX Composite Index at 7.2% (for a price of $25) and the company recently announced a $0.05 supplementary dividend after an excellent quarter. Management has been clear and transparent over the years in stating their intention that they intend to pay out the majority of earnings in the form of an increasing dividend. The operations of the company are strong and management continues to look for strategic acquisitions that make sense with the long-term objectives of the company.

The analysis of Russel Metals as a prospective investment isn’t a difficult task. The management of the company is strong and established, the company operates in an industry that continues to consolidate, products that remain in high demand and a strong financial position to continue acquiring key operating businesses while maintaining a high dividend.

Normally a stock with a yield over 5% immediately sparks speculation among investors of an unsustainable dividend, but when you take the time to analyze Russel Metals what becomes immediately clear to me is that the company is easy to understand, predictable in what management states and undervalued based on any metric I can utilize. As part of a balanced portfolio of equities Russel Metals provides impressive cashflow for a taxable investor and the potential for long-term capital gains at a current forward price to earnings ratio of around 9.0x.

(Disclosure: I hold equity positions in RUS & MFC)

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The AGF Puzzle:

There was an interesting article in the National Post on Thursday that has me thinking about one of my Value holdings, AGF Management.

AGF (AGF.B) is a Canadian mutual fund company that recently has slid under $20 per share which puts their current valuation at under 10x forward earnings and a dividend yield of 5%.

In most instances a company with strong cashflow and a depressed market valuation would look towards buying back shares aggressively as a prudent method of increasing shareholder value.

AGF had previously announced a $60M plan to buy back some of its share for cancellation, but in the most recent quarter no shares had been acquired under the plan.

The article by David Pett can be found here.

This is a prime example of an opportunity I advocate to add new information into my SWOT to review on a regular basis on any company that I own. While not buying back shares isn't the end of the world for a company or its shareholders, I have to wonder what motivation AGF management currently has in not utilizing the current buyback plan at this current market valuation.

One possibility is that they could be in private negotiations for an acquisition or sale and this is influencing their current decision.

(Disclosure: I hold shares in AGF.B)

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25% Skim on RIM:

The market reaction wasn't pretty in response to Research In Motion (RIM) today after releasing their earnings Thursday evening after the market closed when concerns over margins were raised as gross margins fell.

RIM is an interesting stock for a number of reasons:

• It's the stock I got burnt on badly in a stock picking contest in business school back in 2000
• I have two close friends who work as engineers at the Waterloo, Ontario based company
• The fundamentals of its business model are very strong and growing

Despite significant competition in the consumer market, job losses and cuts in spending by financial institutions on the corporate side of business, RIM continues to meet both revenue forecasts and new subscriber targets in each successive quarter. The premium on this growth stock has recently dropped dramatically as a number of investors consider the short-term effects of various risks.

But RIM makes a superior business product, has a dominant software infrastructure and their market share outside of North America is still low and growing. The company has proven that it can continue to innovate and meet the demands & expectations of its customers with new products and has diversified itself away from just one product line.

At a conservative target of $3.55 EPS for 2009 RIM currently trades around 21x forward earnings which does seem high at first glance. But there's been no tangible decrease in demand, costs continue to meet management's targets and the company's products continue to penetrate the consumer market. As consumers begin using features of a blackberry that they've never had access to before early adoption is leading to more useage of their products.

While I continue to see RIM as over-valued I will likely take some time this weekend to examine the company more closely. Friends employed with the company have on more than one occasion hinted at various products in development at the company and that the upcoming product pipeline is has both depth and diversity for its target markets.

This is a wonderfully managed company with strong relationships with its target market and although many investors view this as a one-stock-show (AAPL vs. RIM) I continue to see strength in the operations of both.

The consumer market is difficult to predict on frequent occasions, but RIM does a good job of always leaving consumers wanting just a little more in the next updated Blackberry. They have the unique ability to capture a market and then keep them using their products for sustained periods of time. Competition is healthy for any company and RIM certainly has lots, but at less than 20x 2009 EPS this value investor might begin to raise an eyebrow towards RIM as a prospective investment for 2009.

See it on Seeking Alpha

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Addicted to Dividends:

"...I am a Dividend-a-holic and I am Addicted to Dividends."

Warning: The following post may be difficult for some readers. Reader discretion is advised.

My name is Brad and sadly, I am addicted to dividends...

In the face of the current economic uncertainty I felt it would be therapeutic to write a post where fellow investors can confess their dividend sins in the hopes of being cured of various afflictions guiding their investing activities.

Some peers have even recently submitted confessions of being dividend addicts:

Augustabound:
“Hello, my name is Paul and I'm a dividend-a-holic.”

Dividend Growth Investor:
"I love dividends. Getting more money from your stocks every month/quarter/year to put to work into the market is one of my favorite moments."

the moneygardener:
“Hi, my name is MG and I'm also addicted to dividends....Dividends are prevading every corner of my life. I see them in my dreams, I use them to pay for home heating appliances, I even think about them in the shower and while running...I'm glad to hear that there are others out there like me.”

While a tragic addiction that many investors fall prey to, being a dividend addict has significant side effects that include:

• Seeking high quality dividend paying stocks that increase their dividends on a yearly basis
• Seeking tax-efficient cashflow in uncertain market environments
• Using dividends to re-invest into more shares of dividend paying companies
• Ecstatic exuberance when dividends are paid quarterly into our investment accounts which sometimes causes us to lose focus of our chores, jobs and children

If you are a fellow Dividend-a-holic and are addicted to dividends I invite you to share your story and support each other in our struggles.

If you know of a loved one who is suffering from a dividend addiction please share with them this online support group.

Only through understanding can we hope to diversify away from these dividends into growth stocks, speculative investments or 100% taxable securities.

Sincerely,
Dividends Anonymous.

Milk That Cow Every Quarter:

I don’t know if I’ve told readers this before....(ok maybe almost a hundred times)....but I LOVE DIVIDENDS!

In a market such as this, where volatility rules the day, dividends are the solstice in my investing activities that reminds me why I enjoy being paid to wait. Even if the market drops 20%, I’m not nearly as exposed to losses as indexed investors when my portfolio yields a hefty 4% of tax efficient dividends. Not only that but my tax-efficient cashflow is growing anywhere between 5-8% per year at a minimum and in depressed markets I’m simply adding to already undervalued shares with the prospects of a stress-free retirement with unlimited possibilities to keep my occupied.

Warren Buffett knows the value of cashflow, both personal and corporate. In the news yesterday Goldman Sachs announced that Berkshire Hathaway, Buffett’s investing vehicle, will purchase $5B worth of perpetual preferred shares with a 10% dividend being paid in return for exclusive use of this capital injection. Not only does Berkshire get a dividend nearly double that of Canadian bank issued perpetuals, but the holding company also receives warrants to purchase $5B of common stock at $115 during the next five years.

This effectively sets a floor price on the common stock of GS and gives them a much needed credibility boost in a market of much uncertainty. Buffett has already established a comfortable margin of safety in his investment even if the warrants are never exercised. With extensive experience in unwinding derivative positions in General Re Securities back in 2002, Buffett is likely to begin exerting significant pressure on Goldman management behind closed doors right away to limit its exposure to “toxic waste.” If Goldman balks at the move, the market will likely see Buffett exercising the warrants on the common in a move to send a clear message to both the market & company that he means business.

Buffett doesn’t invest with any intention of losing money and he’s given Goldman Sachs a rare opportunity to clean up their act with a vote of confidence from an investor revered as the best in the world. He buys for the long-term and has learned from past mistakes to take opportunities he can create in his favour to better position Berkshire for the future.

The Oracle’s been busy buying in recent days & weeks and I find comfort in this behaviour as I myself have seen these market troubles as opportunities to buy quality companies at much cheaper valuations that I would have otherwise expected.

Scott asked me earlier this morning, “Who better to navigate this minefield than Warren and Charlie?” and an investor has to wonder if we’re better off simply buying shares in BRK.B at this time of market uncertainty then attempting to navigate the cluttered minefield of exposed companies on our own.

As a keen student of Buffett and other value investors I’ve learnt a great deal that starts with the basic foundation of how to be successful when investing. I follow my Value Rules, buy quality companies that pay me a dividend and when I have an adequate margin of safety I buy some more. I might not always get the cheapest price than other investors, but over the long-term I believe I’m much better off buying a company that pays me every quarter to invest in their business. Over time I can reinvest those dividends into more shares of the same company or others and accelerate the compounding nature of my investments for the long-term.

Here's one thought for readers: Buffett’s the milkman and he never forgets to deliver.

(Disclosure: I hold shares in GS)
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15 Simple Solutions:

This article originally appeared on The DIV-Net on September 15th, 2008.

A frequent topic I’m asked or receive emails about from individuals looking for advice on investing focuses on what simple strategies one can follow in order to become a better investor.

Investing shouldn’t be a complicated process despite the lack of initiative found in the financial industry to properly inform the public and educate clients of the simplicity in creating individual wealth over time. Each investor begins their journey anxious to start a path to wealth immediately, but with seemingly unlimited amounts of information in so many locations it’s easy to become overwhelmed, confused and frustrated on where to begin.

My view of investor education is identical to my approach of patient education. When I speak with a patient about their health I provide the best tools necessary for educating and empowering them to make positive changes in their life. When I discuss blood pressure with a patient I don’t start by providing only a medical definition, assume that they know how to interpret the numbers or expect them to understand all the impacts to their health right away. I take the time to explain what everything means in simple terms, how changes to your lifestyle can positively impact your body, the repercussions of not doing so and where they can receive additional information or resources. The information may be a simple review to a patient who knows a lot about blood pressure already or something completely new that provides insight into a topic that they may have been unaware of before.

My belief is that when someone is properly informed (medically or financially) they are able to make better decisions that affect the lives of themselves and those around them. Just as with educating patients, investors can benefit from simple information that helps them to develop clear objectives and avoid excessive complications. Investing isn’t difficult, but investing with some common sense can go a long way to improving returns over the long-term.

Here are fifteen fundamentals for an investor to remember and reviewed on a regular basis:

1. Focus on What You Do Best

In an earlier series I shared with readers one of my Value Rules that focuses on companies that do one thing as best as they can. As a new investor you will slowly find a comfort zone that you lean towards in a style of investing that builds confidence into your investing activities over time. There’s always room for improvement where you lack confidence or ability, but concentrating on a core focus has many benefits that allow an investor to set clear objectives and attain measurable results. Find a comfort zone and go with it. Instead of trying to do many things at once that you don’t do well or understand, attempt to concentrate on one or two that you can perform to the best of your ability and expand from there.

2. Know Your Limitations

Not only should an investor focus on what they do best, but they should also be aware of their individual limitations. It’s important to recognize what your limitations are so that you can minimize mistakes that lead to losses or diminished returns. If you don’t have the time, knowledge or desire to invest on your own then likely you should seek a certified financial professional. You can always work on areas you feel need improvement over time, but investing should always focus on your main core competencies to achieve the best results possible.

3. Consider the Benefit of Cashflow

There are three main methods of growing your investments: capital gains, income (interest or dividends) and savings. Investors often focus solely on investing what they save and the gains from those investments, but a passive method of increasing the value of your portfolio in all market environments is to consider the benefit of cashflow. The portion might be small or appear insignificant at first, but over time both dividends and income (when considering taxation) can lead to meaningful increases in your annual returns that pay dividends over the long-term.

4. Incorporate a Balance of Active & Passive

The couch potato portfolio draws on effective simplicity and the fact that the majority of professional managers (mutual funds) fail to outperform their respective index on a short or long-term basis. While you may enjoy picking individual equities or mutual funds for various reasons, investing a portion of your portfolio in passive investments (ETF’s & index funds) will help you to benefit from the long-term performance of the markets in a very cost effective manner.

5. Look to Minimize Cost

Cost is a major factor that many investors fail to recognize in the first few years of investing. Cost is important because it creates drag on an investors’ ability to generate returns through a number of methods. These can include paying for advice, professional management or transactional costs of purchasing your investments. If you invest in a mutual fund that charges a 2.5% MER (management expense ratio) for 10 years over that time frame the potential return that you would have lost would be an astounding 25%. Where did this go? Right into the pockets of the professional managers who you paid to invest money on your behalf. If a fund out performed its index and peers by 50% over that time frame then 25% may be worthwhile, but the majority of the time managers fail to outperform. Whenever possible an investor should consider the impact of expenses (MER), commissions (DSC fees & trading costs) and taxation.

6. Keep it Simple

This follows the “Keep it Simple” analogy. Too often an individual will complicate the investing process by trying to get fancy with a strategy or group of investments to the detriment of their returns. There are a number of times when the simplest strategy is the easiest to implement and rewards an investor with the best returns. An individual investor can’t match the financial resources that professional experts have access to, but often that abundance of information simply muddies the water so that a clear decision is difficult to make. When you keep your investing objectives, process and activities simple the returns often will take care of themselves.

7. Let Money & Debt Work for You

Here is an opportunity for an investor to maximize efficiencies by looking at how money and debt work for them. There’s always the hard way, the easy way and then the smart way when investing. Each individual’s situation will differ, but what you want to do is look for methods to increase the efficiency of how you put your hard earned money to work to minimize debt, taxation and to increase your ability to save. Debt shouldn’t be an insurmountable obstacle in your financial plan and knowing how to maximize tax benefits, pay yourself first and pay off debt in a manageable and timely manner can go a long way to improving your long-term financial situation.

8. Learn to Think Outside of the Box

Creative thinking is the hallmark of my approach and benefits the investor who has the ability to look outside the box by asking questions, looking to different options and investigating innovative methods. Developing an ability to see the big picture comes over time, but making a habit to look for alternative/contrarian views or opinions will help to expand your perspective on a number of topics and create your own individual confidence.

9. Understand Risk

Risk has the potential to decimate returns and the credit crisis of 2007-2008 is a great recent example. Investing is a balance between risk and reward and an individual investor needs to identify their risk tolerance before ever investing. Many investors find that early it’s easy to state that they’re willing to lose a certain amount of their capital only to later determine that their risk tolerance was much, much lower. Very few investments are risk-free, so an investor should examine all internal and external factors of an investment before placing money into the markets.

10. Know What You Are Investing In

If risk is an important element of investing that an individual should identify and understand, then knowing what you’re investing in becomes an absolute necessity. Whether you’re investing in mutual funds, ETF’s, individual equities or another investment you should always have a good grasp of what you’re investing in and understand it to the best of your ability. Even GIC’s, bonds and money market funds should be investigated by yourself or through a financial advisor in order for an investor to develop a comfort level and knowledge of where their money is going. If you don’t understand the security, industry or type of business then you have no business investing there no matter the implied return.

11. Diversify

Every investor has probably heard the line “don’t put all your eggs in one basket”, yet many forget the importance of diversifying appropriately across different assets, countries, currencies or sectors in attempt to best minimize risk. An investor doesn’t want to over diversify their investments, but the focus here is to gain adequate exposure to a number of areas so that your returns will be balanced no matter what occurs in the markets. Sticking to only one or two sectors, exclusively investing in one asset group or placing all your money into one investment can lead to substantial risks that have the potential to impact your returns negatively.

12. Develop a Discipline

Discipline is a difficult task for any investor to embrace, but structure allows an individual to focus on objectives, develop and then implement a specific plan. Discipline allows an investor to avoid the temptation to invest into areas outside their comfort zone or expertise and should protect you from risk to some degree. Have the convictions to stick to your plan and you’ll be rewarded over time if the fundamentals of that decisions remain sound.

13. Patience & Time

One of the biggest difficulties for any investor in the beginning is to develop patience in all aspects of their investing activities. Whether investigating a stock, determining a buy/sell price or sticking to a strategy; we all want to see results sooner than later and can become antsy when things take longer than we anticipate. Remember back to the Rule of 72: compound interest is your best friend as an investor and over the long-term your returns will take care of themselves. Focusing on the short-term and attempting to micromanage your portfolios will likely add more harm to your returns than benefit. Patience isn’t something everyone comes by naturally, but it’s important to understand the impact that adjusting your strategy continuously can have on your potential for sustained long-term returns.

14. Focus on Quality Rather than Quantity

Whether you plan to invest in 10 stocks or 100 stocks focusing on quality has many benefits. While an ETF or index fund may give you exposure to an entire sector, market or index an investor should realize that within those investments are good and bad stocks in some unknown proportion. While indexing is a great long-term strategy that is cost-effective and simple, focusing on the best quality investments is likely your best choice for risk-adjusted returns.

15. Self Evaluate

Whether you choose to do this annually, semi-annually or quarterly, evaluating your individual performance can have many benefits for adjusting your future habits, activities and preventing mistakes when investing. Each investor should take the time to identify their individual strengths, weaknesses, opportunities and threats in an attempt to better understand how their investing activities have progressed and where they can improve in the future. Far too often investors ask the questions of why an investment or strategy has continued to under-perform only to continue making the same mistakes that negatively impact their returns. An investor doesn’t necessarily need to overhaul their approach each and every time, but gaining a better sense of where you can make improvements is a habit that many investors should consider as an important element of their activities.

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The Great Subscriber Giveaway - Result:

And the winner is....

Kimberly from Spruce Grove, Alberta

Congratulations to Kim on winning a copy of The Snowball: Warren Buffett And The Business Of Life by Alice Schroeder.

For those interested I received 14 entries to the contest and I will be sending out a copy of the book when it arrives from Chapters after September 29th.

Kim could please email me with your 4 digit PIN # with your address.

Thanks to everyone who entered the contest.

Norbert's Market Rant:

Regular readers will know that I enjoy at times highlighting information that I feel offers value to investors on stocks in the news, potential investments and market insight. As a regular reader and contributor at the Financial Webring Forum I had the opportunity to read a very interesting post today by Norbert Schlenker.

I would encourage readers to view the post and seek what independent insights they can into the current financial/credit crisis being covered extensively in the media.

--------------------------------------------------------

From: A Rant
By: Norbert Schlenker

Please excuse me. This is going to be a long winded ramble about what's happened over the last week. Rather than sprinkle comments in a bunch of threads, I figured I would just collect it all in one place. I made a couple of acid comments Friday re a rigged game and my mood as a result being apoplectic. I have been asked for an explanation and feel obligated to reply.

To start, let me say that I am a very prosaic investor in real life. I am long only and have a very diversified portfolio. I don't short anything outright to make a profit, although I will occasionally employ a short sale on a very short term basis in order to accomplish something else, e.g. converting currency to avoid being jacked around by a bank.

I believe (broadly) in market efficiency. I acknowledge that there are pricing anomalies, but I have little faith in my ability to identify or exploit them, particularly when it comes to equities. I accept market prices as a good faith and unbiased estimate of "true value". I am unwilling to stake my long term financial goals on the assumption that I am somehow smarter or more visionary than anyone else with intelligence and capital. In the end, I know that I must rely on the market to turn an investment into spendable cash. I have no power to force liquidation at my own estimate of true value. At the far end of my investment horizon, a very simple truth holds. Realizable value turns entirely on what others think. Not true value. Not my beliefs. Consequently, I am also willing to accept that, if I'm buying today, today's market value is someone else's realizable value, unlikely to be true value, perhaps too high, perhaps too low. Someone is making a mistake, either me as buyer or someone else as seller. A hundred years from now, we'll know who. But I don't know today and, quite honestly, I've got better things to do than worry about it.

Why the short selling restrictions enrage me
A market is, first and foremost, a price discovery mechanism. I rely on markets - we all rely on markets - to set reasonable prices on goods. Reasonable. Not perfect. Just reasonable.

(There are other ways of setting prices in economies. We've seen them tried. Our luck is that we've seen them tried mostly in other countries because then someone else somewhere else bore the burden of a mechanism that generally slows economic growth, fails perhaps gently and sometimes catastrophically, and enriches the politically connected. I'm one of the lucky beneficiaries of not having been subjected to such ridiculous experiments. Believe me, I count my blessings.)

Part of the price setting mechanism in a free market is people selling something that they believe is overvalued. The market isn't going to produce an unbiased estimate of the true value of any good, whether it's avocadoes or shares, if sellers are prevented from offering goods that are priced above true value. If we decree* that no seller be allowed to act on her own judgment that an avocado or share is trading above true value and thus offer it for sale, with the seller bearing the financial consequences of his judgment, the market price is no longer an unbiased estimate of true value. The market price of avocadoes becomes a joke, something to be gamed by those in the know.

Two objections often get raised at this point, first that avocadoes are qualitatively different from shares, second that sales are not the same as short sales. I deny the first absolutely.** I deny the second as well but that requires an argument. The objection usually turns on the abstract nature of a short sale, offering to sell something you don't own. There is something viscerally wrong with a short sale. People go to prison for selling things they don't own. If you see a car for sale in the want ads, call the advertiser, go visit, hand over your money, drive away in the car only to find that you can't register it because it wasn't the advertiser's to sell, you expect to see someone go to jail. If your son Tommy hands a dollar to Joey in the schoolyard expecting to get a couple of chocolate bars and Joey stiffs him, then you expect unpleasant consequences for Joey.

But that's not what a short sale is about. Short sellers have to deliver the goods.*** Forget avocadoes and shares for a minute. Take something simpler, say a sofa. You can walk into a furniture store and buy a sofa off the floor, a display model. Hand over your cash or credit card and you can have the sofa delivered the next day. More likely though, you walk in, see a style you like, but the fabric is wrong. You want this style but the fabric on the one over there. Or the fabric in some book of swatches the store hangs on a rack in the back. The probability is near zero that you will have a sofa tomorrow. You pick your style and your fabric. The store will have your sofa built. You will wait two months. You will also put down a deposit today, probably for at least half the value of the sofa.

Did the store sell you a sofa today? I don't think so. The store has just made a short sale. They have taken your money for a product they don't own. It's even more egregious than a short sale of shares. When someone sells shares short, they'll borrow them to deliver. It's not as if the shares don't exist. This sofa you just "bought" can't be borrowed. It doesn't even exist.

Should the furniture store be legally barred from selling you a sofa that doesn't exist? I don't think so. I'll bet you don't think so either. Vast swaths of the economy operate on the basis that sales of items that don't even exist at the time of sale can be sold. Sofas. Airplanes. Ships. New houses. They're all short sales. Think about the effect of banning short sales of new houses by home builders. The effect on you. The effect on the economy. How many houses would get built if every house was required to be a spec house?

So what's so special about the shares of financial institutions that it's reasonable to decree that they can't be sold short? I submit that there is no good reason for this. Don't get me wrong: I think there's a reason it's been done. I just don't agree that it's a good reason. It's an attempt, which will ultimately fail IMO, to paper over the rot on bank balance sheets. In the end, there's a simple fact that can't be papered over. The banks have crappy assets. They did it to themselves. They must bear the consequences themselves. Creating a temporary (?) rule to prevent people who believe that the banks have crappy assets from selling the bank's shares is somewhere on a continuum from folly through delusion to criminal.

No one should believe the share prices at Friday's close on those 799 institutions that the SEC protected. I'm not saying that the mid-day Thursday crash low prices are correct, either. But if I were a betting man, I would bet that Thursday mid-day is a better estimate of true value than Friday's close. Thursday afternoon and all of Friday were a government induced ramp job, one of the greatest pump-and-dump operations ever seen.

And everybody's going to pay for it except the people who should.

The Paulson rescue plan
The US government, either as Treasury or the Federal Reserve, has already spent**** close to a trillion dollars keeping the financial system running this year. Thursday, the Secretary of the Treasury and the chairman of the Federal Reserve went to Congress to ask them for another trillion dollars. (Hundreds of billions have been mentioned in public. Trust me, it will be a trillion at least.) The legislators are said to have exited the meeting white as sheets. They probably had reason to be shaken.

There are real liquidity problems, which the Fed has been trying to handle over the past year. Bernanke made his bones on the causes of the Great Depression, much of which was due to undue contraction of liquidity in the US economy. The Fed has been beavering away trying to keep that from happening again. In the process, they've ballooned their balance sheet. The Fed is now levered about twice as far as Bear Stearns and Lehman when they collapsed. In theory, there is no limit to the Fed's balance sheet. However, this is not a theoretical world. Put enough pressure on the Fed and something has to give.*****

Liquidity problems are breaking out all over. Short T-bills traded through zero last week. LIBOR and the TED spread spiked because no one was willing to lend to anyone other than the Treasury itself. Money market funds collapsed, generally not because their assets were actually bum, but because they had promised absolute liquidity on their liabilities and liquidity disappeared for their assets. I'm of two minds about the measures Paulson announced re MMF guarantees. It's a misuse of the $50b slush fund****** he has sitting around but the system was sufficiently seized up that something had to be done. Maintaining liquidity happens to be the Fed's job but, as noted above, they are overstretched already. I can live with it. Paulson had legal authority (not that he should have such authority in the first place IMO, but that's another story) and, with sand in the gears and no more oil at the Fed, he did what he had to do. In the end, it will be a complete ballsup, because only the MMFs with crap on their books will pay the insurance premium, i.e. if your MMF is in the program, you know it's larded with crap. Investors will flee and the Treasury******* will get the bill.

However, the problems don't end with lack of liquidity. Lack of liquidity is a symptom, not a disease. The problem is solvency. Large parts of the US financial system are not just illiquid. They are insolvent. Their liabilities exceed the fair value of their assets under any fair mark. The problem is not that they can't sell their paper because the market is illiquid. The problem is that they hold paper on their books at a dollar or 75 cents when it is actually worth a nickel. Not bid a nickel. Worth a nickel. Banks in the hot real estate markets of two years ago are stuffed to the gills with mortgages that are not paying and will not pay. When you wrote second mortgages or extended lines of credit at the top and the collateral is worth half what you lent, your dollar asset is worth a nickel.

People were paid big money to put those "assets" onto the books of US banks (and through securitization, investment banks and pension funds and mutual funds worldwide). Those assets are impaired. They were impaired from the word go but the chickens have finally come home to roost. The people who got paid the big money? They're gone, pockets full. There aren't enough jails to hold them all or prosecutors to send them to jail. They got off scot-free, top to bottom. From the high school dropouts who made hundreds of thousands a year telling people that real estate could only go up or that this teaser loan was way better than a fixed rate, to the CEOs who made hundreds of millions shopping asset backed paper that was really toilet paper, they lived large. Lucky them. There were no losers.

Oh, there were whiners, the people who complained about being priced out of houses, the skeptics about house prices, the people who just couldn't keep up with the Joneses down the street with the Hummer and the BMW and the ATVs and the big screen and and and. Screw them. Nothing ever got done with a negative attitude like that. Screw them. Look at the GDPeeeeee!

And here we are today. Everybody is whining now. So what happens? Paulson is going to produce a plan over the weekend and Congress is going to ram it through.******** It's designed to help the whiners. I urge you to follow the money, both where it comes from and where it goes. It's going to come from everybody. US taxpayers and lenders to the US, many of whom are outside the US these days, are going to pony up the money. If they can't find the money there, they'll print it, i.e. it will come out of US hides in the form of inflation.

Where's the money going? There is no plan yet so it's hard to be certain but it's a fair guess that it will be used to buy the crap assets out of US financials. There can be no winner here. If Treasury pays too little for those assets or even fair value for those assets - which the talking heads will insist is going to happen - then banks are going to fail. Lots of banks. Big banks. Banks today have liquidity problems because they've got nickels that they're calling dollars and no third party will fund that fairy tale. If Treasury takes the asset worth a nickel off their hands for a nickel, their liquidity problems are over but the bank is finished. So it seems to me exceedingly unlikely that nickels will be swapped for nickels. The Treasury will get a nickel worth of paper and the bank will get fifty cents of cash. And the bank, while weakened, will survive.

Note who gets the pony: the same people who already got paid for making those nickels look like a dollar get paid again to sell their nickels for ten times what they're worth.********* And who gets the shovel to walk around and clean up after the pony? That would be you and me.

What I'm going to do
In normal circumstances, I take market price as a fair estimate. If I want to buy bank shares, I would generally buy them at market. What does the short selling ban mean to me? It means that any observed market price is almost certainly an overestimate of true value. In these circumstances, I will lower my bid. I am but one investor among many and I'm not stupid or vain enough to think that what I believe here will change things, but I will lower my bid anyway. If it is decreed that certain people cannot sell, then the game is rigged. I will lower my bid. I will be a willing participant in blowing out the spreads. There are consequences to what the SEC has done. Up 1000 points Thursday and Friday is one consequence. But it's not the only consequence. I don't play rigged games. And in the long run, I doubt I will be alone. That +1000 will disappear. Short sellers had nothing to do with it. The jump at the end of the week is a short run thing and what they've done is unsustainable. (Think Dow +1000 means happy days? You haven't looked at the bond part of your portfolio, have you?)

In the long run, the real danger comes from the rescue plan. There's real trouble hiding in the banks. There's been a big party. Quite a few people enjoyed themselves immensely, but not everybody. Party's over. Time to clean up. We're not going to enjoy this nearly as much. And just about everybody gets to help, either through higher taxes or higher interest rates or inflation. Probably some of each.

I'm not happy. I was always at the fringes of the party, as were most investors. Buy and hold has been kind to us all. Sandwiches and punch made it out to the periphery and I was happy with what I got. But what a mess now. I'll do everything I can to minimize how much I have to shovel. I'm outside the US physically and I'll get what I can out of the US financially. To be honest, I don't know at this point where I'll go.

I am a generally happy investor, understanding that there's always a house rake on everything I invest in, content to live on what's left after management and the government have had their share. I understand those rules. I will play that game. I will live with the ups and downs of Mr. Market, because he's randomly insane either way and in the long run it will all work out. I will not play a crooked game, one where the rules get changed in the middle. I like symmetry. Everybody gets a turn on the pony and everybody gets a turn on the shovel. When the rules change so that some just get to keep riding on the pony, based on who you know, not what you know, i.e. politics, I'm a lot less interested.

I still have a bid. It's just gotten lower. A lot lower.

--------------------------

* I use "we decree" because the securities commissions act under authority we grant.
** I'm prepared to argue the point, but (a) I'm right, (b) you're wrong, and (c) this is too long already.
*** There's another objection in here regarding naked short selling, which is selling short with neither intention nor means of delivering. That's something different and I agree it should be penalized.
**** The press releases all say "loaned" or "invested", not "spent". We'll see.
***** Force me to guess and what has to give is the value of the dollar. Inflation is coming.
****** He used something called the Exchange Stabilization Fund.
******* Treasury (noun): A siphon into the wallets of the taxpayers.
******** I have little faith in legislation crafted in 72 hours. How about you?
********* I was watching CNBC for a short time Friday when they happened to have Bill Gross on. When asked if he'd be interested in helping out Treasury with the management of all this crap they're going to buy, there was no disguising the grin.

Norbert Schlenker is President and founder of Libra Investment Management.
See Norbert's Profile


(The preceding opinions are not those of Nurseb911)
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Capitulation Chaos:

Investopedia defines capitulation as "associated with giving up any previous gains in stock price as investors sell equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling."

If you've been watching the markets the past few days and are working hard to determine if this is the bottom...I'm afraid that I can't help you either.

What I do know is that the proverbial toilet is flushing and its not a very nice ride for investors with capital in the markets. Greed has led to fear and fear spooks the market into chaos. But whenever chaos exists in the market you can be sure that I'll find value.

I enjoy volatility not because it wrecks havoc with my portfolio, but because it creates opportunities for mispriced equities. I have no doubt that an individual watching their retirement savings dwindling before their eyes is a hard sight to witness, but as a long-term investor I look forward to these opportunities. I don't advocate to investors that they run out and buy anything that looks good, has a yield or is trading less than its intrinsic value. What I do encourage is for investors to be objective in their analysis, look to quality companies with strong fundamentals and do their homework on a stock they want to buy.

Over the long-term I have confidence that my equity positions will be worth substantially more tomorrow than they are today. Don't buy all at once in a mad rush to take advantage of deals, but participate in the market in measured steps. When capitulation occurs the market can move suddenly in any direction and that includes upwards. While it might be difficult to stomach over the short-term, for a long-term investor these are the times when you develop patience and want to practice it.

Whether you're buying your first position in a stock or mutual fund or dollar cost averaging into a position: stick to your plan, review it and when losses occur remind yourself that these movements are part of a healthy stock market. No stock can grow to the sky against gravity and you want to invest in companies with strong roots just like a tree.

When the wind blows, the river rises or the ground starts to shake what goes on above the surface can appear bleak. Yet over time the stocks with the strongest foundations will continue to be strong because they took the time to build strong roots.

When these stocks are cheap you want to take advantage even when the market tells you to be uncertain. We may have a ways to fall still or encounter further economic uncertainties in the next few months. Buy you can't replace quality very easily and that is where I believe the long-term investor should be concentrating.

A peer of mine has often said that, "The best time to plant an Oak tree was twenty five years ago. The second best time is now." I'd urge young investors to consider finding an acorn in this current market because the rewards years from now will be well worth the effort.


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Investing Carnival # 13:

Welcome to The Weekly Investing Carnival supported by the members of The DIV-Net.

Triaging My Way To Financial Success is proud to bring the September 16th, 2008 edition of The Investing Carnival, #13, for the first time. At The DIV-Net our members publish and welcome articles each week related to Value Investing, Dividend Investing and Long-term Investing.

The Investing Carnival encourages readers to submit content related to not only Value Investing, Dividend Investing and Long-term Investing, but also the stock market, real estate, commodities or other alternative strategies.

Featured Articles from: The DIV-Net

Dividend Growth Investor presented BP (BP) Stock Dividend Analysis
The Div Guy presented Stock Screen: Warren Buffett Picks
Disciplined Approach to Investing presented Dividend Investment Possibilities
Dividends4Life presented Stock Analysis: McGraw-Hill Companies Inc (MHP)
The Dividend Guy presented Socially Responsible Investing
the moneygardener presented CDN Banks Still Raising Dividends
The Stock Market Prognosticator presented Is Your Bank Next?


Dividend Investing:
Dividends4Life gives us Stock Analysis: Caterpillar Inc. (CAT)

the moneygardener presents Canadian clothing retailer Le Château of dividends announcing their recent dividend increase and history.

Dividend Growth Investor provides readers with a SYSCO (SYY) Dividend Analysis


Stocks:
Contrarian Profits gazes into the potential of alternative energy investments with Grab Early Wind-Power Profits with These 3 Stocks

The DIV-Net’s newest member, Barel Karsan, asks is HOG Losing Share...On Purpose?!

Nurseb911 asked is Reitmans Eyeing an Acquisition?

Stock Pur$uit gives us some Stocks For The Poor Economy: Auto Parts


Personal Finance:
Living Off Dividends gives us a Passive Income Update for August 2008

FutureNestEgg presents the “dirty, mean and sneaky tricks played by Credit Card companies in Top 5 Dirty Little Credit Card Tricks

The Shark Investor helps readers take notice of Investing in Yourself by examining Formal & Informal Education and Personal Development.

KCLau’s Money Tips gives readers helpful tips on How not to Spend that Money?


Investing:
Old School Value shows how to Profit From Special Situations – Stock Tenders

Personal Finance Start-Up Blog explains why Index Investing Is A No Brainer

The Financial Blogger asks the question Think investing in commodities is easy?

Cheap Lee Dot Com helps investors tired of losses in the market some tips on when it’s time to exit with Tired of stock market losses? 3 tips to know when to get out of the market

Surfer Sam gives us a great post on ETF’s in ETFs Are a Great Investment Strategy - How Long Before They Replace Mutual Funds?

Market Diligence gives us his Five Characteristics of a Great Business

Tough Money Love gives insight to readers on why they should Consider Municipal Bond Funds for your Fixed Income and Cash Investments

The Digerati Life asks readers So Why Aren’t You Opening a 401k?

The Iconoclast Investor gives us Here’s one of our best selling rules

Truthful Lending helps readers understand some of the more complex words of the mortgage market with Common Mortgage Terms Explained


Market View:
Bootstrap Investing conducts an insightful interview with Interview with Stewart Hsu: A Real Estate Investor

upsidetrader presents Let’s Talk Pennies and Rallies discussing the recent Freddie & Fannie bailout”

Fiscal Zen shows us some Stocks That Perform Well During an Economic Recovery


Real Estate:
The Baltimore Real Estate Investing Blog helps readers answer the questions Where Do I Start?

Tallahassee Real Estate Blog asks The Sign Is Up – Is Your Home Sold?


Thanks to everyone who submitted content and remember that past posts & future hosts can be found by visiting The DIV-Net Carnivals page.

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An Unbiased View:

While I am the author of The Foster Effect I feel it is important, as an author, to provide an unbiased view to readers from time to time.

Mr. Cheap over at Quest for Four Pillars conducts a book review and interview with Derek Foster who recently published his third book Money for Nothing.

I have not yet read the book, but I certainly intend to in order to ensure that my harsh views towards his first two novels are not unfounded. While I have my preconceptions of what this book will present I'll reserve judgement until I have my hands on a copy.

Mr. Cheap's interview can be found here.


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Reitmans Eyeing an Acquisition?

The other day while reading a post by the moneygardener on Canadian clothing retailer Le Chateau (CTU.A) a thought came to mind as I placed the stock on my DivG watchlist and began some initial research on the dividend paying stock. As a shareholder of Reitmans (RET.A) I naturally began drawing comparisons to Le Chateau's operating results, product portfolio and competitive inroads made in the retail space of Canada and the US.

As sales continue to lag at Reitmans and rise impressively at Le Chateau; would Reitmans possibly be eyeing an acquisition of the smaller Canadian retailer in order to fill a niche need among their current banners and operations?

Reitman's currently trades at a market cap of just over $1.1B with Le Chateau trading at $348M. Reitmans strong financial position certainly makes the thought interesting as they have only $13M in long-term debt and adequate cashflow to cover both the dividend and any additional debt. Le Chateau in recent years has been an impressive sales gainer with a 9.6% annualized increase over the past 5 years. Contrast that with Reitmans 4.8% increase in sales over the same time period and the incentive for growth becomes clear.

Reitmans operates 900 stores across Canada including the banners: Reitmans, Smart Set, RW & CO, Thyme Maternity, Penningtons, Addition Elle & Cassis. If you were to add Le Chateau's 209 existing stores in both the US & Canada and nearly 1 million square feet of retail space to Reitmans portfolio you'd immediately acquire exposure to a key demographic. Reitmans has a long established goal of being a dominant operation in Canadian retail and they've struggled recently with their Cassis banner to attract the younger, high discretionary spending demographic that Le Chateau & Lululemon have been making significant progress with. Le Chateau would further diversify their portfolio of banners and add consistently rising sales, cashflow and profits to Reitmans' bottom line.

The clear barrier for any of this happening is the dual class voting structure of Le Chateau where each B class share carries 10 votes per share in comparison to the one vote per share for the A class shares. Le Chateau pays an impressive 5% dividend and trades at a forward P/E of less than 10x 2009 earnings. Convincing any investor, let alone the management of the company, to consider an acquisition would likely require a substantial premium to the current share price: approximately $20 per share by my calculations.

That premium though in the context of what Reitmans currently is lacking could be of significant long-term value to the company considering the current concerns over retail sales and the ability of the consumer to spend. Acquiring Le Chateau in a down phase of the market would certainly be less expensive than if Reitmans were to wait for the consumer to rebound in the next few years.

Ultimately the two might not be a fit for each other, but sometimes thinking outside the box gives you a unique perspective that's worked out in my favour on more than one occasion. I wouldn't be surprised if we hear speculation in the next 12-24 months of increasing interest being expressed towards Le Chateau from market analysts.

What Do You Think: is Le Chateau is a fit for Reitmans?


Disclosure: I hold shares in RET.A

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GuruFocus

A number of regular readers here at TMWTFS have shared both publicly and privately that they enjoy following the investing activities, insights and thoughts of various investing professionals within the industry. During my early years of investing I studied a number of investing professionals in detail, focusing on their successes and failures to learn important lessons that have helped me become a better investor now and in the future. One website that I frequently visited during this time to see what the best known investors were up to was GuruFocus.com.

While I hadn’t visited the site in quite some time, I recently received an invitation to republish some of my content on the GuruFocus website after their Director of Research approached me recently after visiting this site.
See: Nurseb911

According to GuruFocus the website, “tracks the Stock Picks and Portfolio Holdings of Warren Buffet, George Soros and other guru investors...”

To the surprise of myself and peers the GuruFocus.com website now has a section dedicated to articles that aren’t necessarily specific to the guru genre. This feature adds appeal to a much wider audience than their original target market and something that I am eager to participate in.
Upon researching the site further I found eight features that I think readers might find worthwhile if you’ve been to GuruFocus before or are a first time visitor.

Features Include:

• Online forum
• Columns & News
• List of Investment Gurus including their recent individual Stock Picks for value investors such as Warren Buffett, Mohnish Pabrai & Bill Miller
• Scoreboard of Gurus 6 Month, 12 Month and Since Inception returns
• Real Time Picks
• Commentaries written by various Gurus
• A variety of Stock Ideas that include free basic tools and premium tools for premium members
• A list of established Investment Firms

Nurseb911/TMWTFS was not compensated in a monetary form for the generation or publication of this review
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September’s Slide:

Volatility...
Carnage...
Mayhem...
Fear...

Many investors are no doubt licking their wounds as they’ve witnessed the financial and commodity heavy TSX Composite Index fall nearly 11.5% so far in the month of September. That’s a total of over 1570 points in just seven trading sessions and over 3000 points since the index’s all time high reached in June.

Does anyone smell opportunity?

For a patient investor with time on their side the conditions of this current market present an excellent long-term opening to take advantage of valuations of high quality equities you may not see for years to come. I’m not an investor who subscribes to the doom & gloom pessimism found in the media. While some perceive the current economic troubles as signalling a decade long recession or systemic failure of institutions or economies I continue to look for opportunities that make sense on solid qualitative fundamentals, strong balance sheets, resilient earnings and lucrative dividends.

There’s enough quality in the market with stocks demonstrating impressive strength to make me believe that this period of volatility, losses and fear is simply another opportunity for the long-term investor to take advantage of reasonably valued equities. I don’t suggest a young investor run blindly into the market throwing money at whatever drops 20%, but being rational and objective at this time has the potential to yield very rewarding results to those with the fortitude to enter positions periodically over the next few weeks & months.

I’ve been buying equities in spurts over the past twelve months knowing that periodic highs and lows will present opportunities. I’m adding to positions I feel offer long-term value in my RSP, Dividend Growth and Value Portfolios. Although I’ve taken hits and made some gains; the overall theme of quality has been the mainstay of my activities.

For DivG:
Today with this in mind I initiated another position in Russel Metals (RUS) and recently over the last two weeks have been purchasing more shares in Rogers Communications (RCI.B), Fortis (FTS) and TD Bank (TD).
Currently I am watching closely Atco (ACO.X), Enbridge (ENB) & Husky Energy (HSE).

For RSP:
Currently I am watching closely Exelon (EXC), Coca-Cola (KO) & United Tech (UTX).

“These are the times when rational investors take stock in the moment and ask themselves if valuations seem senseless and fundamentals remain. Stick with quality and you can’t go wrong.”- Charles.

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The Great Subscriber Giveaway:

In a shameless attempt to increase my RSS readership Triaging My Way To Financial Success is giving away one FREE, hardcover copy of the new Warren Buffett book, The Snowball: Warren Buffett And The Business Of Life, by Alice Schroeder, due out September 29th, 2008

Contest Rules:

• Must be an RSS subscriber or Join in the next 14 days
• Contact me with your name, location & self-created 4-digit PIN
• The winner will be randomly drawn from the list of contestants
• First name or alias announced in a Look Who Won post
• Be contacted via email for their mailing address details.
• Contest closes September 21st, 2008

See Description:

[…Here is the book recounting the life and times of one of the most respected men in the world, Warren Buffett. The legendary Omaha investor has never written a memoir, but now he has allowed one writer, Alice Schroeder, unprecedented access to explore directly with him and with those closest to him his work, opinions, struggles, triumphs, follies, and wisdom. The result is the personally revealing and complete biography of the man known everywhere as “The Oracle of Omaha.”

Although the media track him constantly, Buffett himself has never told his full life story. His reality is private, especially by celebrity standards. Indeed, while the homespun persona that the public sees is true as far as it goes, it goes only so far. Warren Buffett is an array of paradoxes. He set out to prove that nice guys can finish first. Over the years he treated his investors as partners, acted as their steward, and championed honesty as an investor, CEO, board member, essayist, and speaker. At the same time he became the world’s richest man, all from the modest Omaha headquarters of his company Berkshire Hathaway. None of this fits the term “simple.”

When Alice Schroeder met Warren Buffett she was an insurance industry analyst and a gifted writer known for her keen perception and business acumen. Her writings on finance impressed him, and as she came to know him she realized that while much had been written on the subject of his investing style, no one had moved beyond that to explore his larger philosophy, which is bound up in a complex personality and the details of his life. Out of this came his decision to cooperate with her on the book about himself that he would never write.

Never before has Buffett spent countless hours responding to a writer’s questions, talking, giving complete access to his wife, children, friends, and business associates—opening his files, recalling his childhood. It was an act of courage, as The Snowball makes immensely clear. Being human, his own life, like most lives, has been a mix of strengths and frailties. Yet notable though his wealth may be, Buffett’s legacy will not be his ranking on the scorecard of wealth; it will be his principles and ideas that have enriched people’s lives. This book tells you why Warren Buffett is the most fascinating American success story of our time…]

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Value Stocks in the News:

For the week ended September 6th, 2008,

TIBCO (TIBX) announced completion of their acquisition of Insightful Corporation

Siliconware Precision Industries (SPIL) reported quarterly profit of $0.13US per ADR for the second quarter of 2008. Sales and earnings were up 6.2% vs. the first quarter of 2008, including an increase in gross margin to 20.7%.

Oracle (ORCL) added another acquisition to its product portfolio & operations when it agreed to buy ClearApp for an undisclosed amount.
See: presentation & FAQ
Oracle VP Leng Tan had the following to say:
“As customers deploy more SOA-based applications, the task of effectively managing them becomes paramount. Oracle is focused on delivering the best solutions for managing such complex application environments by delivering solutions for end-user experience management, business services and application performance management, as well as application testing and quality management. With the addition of ClearApp's technology to the Oracle Enterprise Manager product family, our customers are expected to get continuous and uninterrupted top-down views of their business services and applications, helping them maximize service availability while reducing IT operations costs.”

Nokia (NOK) lowered its Q3 mobile device market share outlook on concerns over weakness in consumer confidence in numerous global markets.

Ingersoll-Rand (IR) took an opportunity to publicly announce its USDA tested and FDA compliant EMS (Environment Management System) that includes a suite of product solutions for customers in the food manufacturing industry. With recent North American concerns over food recalls & food safety, Ingersoll-Rand is well positioned to attract an increase in business from established and new customers.

In a move anticipated to help grow and retain assets under management, Canadian mutual fund company AGF Management (AGF.B) is launching an innovative online program available 24/7 called Changing Risk. The program is designed to assist financial advisors to better manage risk for clients and goes along with established programs at AGF under its Sound Choices Program.

BBVA (BBV) announced completion of its conversion of Second U.S. Subsidiary Bank to Compass Bank and its intention to complete its U.S. integration plan with the conversion of Laredo National Bank in November.

Coca-Cola (KO) is offering to buy Chinese juice company Huiyuan Juice Group Limited for $2.4B. While Coke has been operating within China since 1979 this acquisition is likely to help expand logistical operations, supply chain management and compliment existing sales channels for the company.

High gas prices and global demand continue to help Daimler AG (DAI) with their annual sales helped in large part to strong demand for the smart fortwo vehicles.

Exelon (EXC) announced its intention to buyback up to $1.5B worth of common stock and adjusted 2008 EPS guidance to $4.15-$4.30 per share.

Kimberly Clark’s (KMB) Kotex brand announced a partnership with Dot Girl First Period Products to offer educational content on the Dot Girl website.

Walmart (WMT) continues to highly target product offerings to customers by giving details about its’ plans to bring the Walmart Smart Network to 2700 stores across the US.

Whirlpool (WHR) is boasting its industry leading number of energy efficiency products and was named one of the “Best Places to Launch a Career” by Businessweek magazine.

Disclosure: I hold positions in all publicly traded stocks mentioned in this post.

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