Archive for the 'Big Moat' Category

Label Obsession

Published
by
Brian
on November 17, 2006
in Big Moat and News
. 0 Comments

I came across an article that calls for a decline in value stocks because they have outperformed growth stocks in recent years. The main thing I got from the article is that people are obsessed with labels.

After reading the article you should see that Big Moat investing is great because you are looking for good value in a stock but that does not mean you are looking for ‘value stocks’. Big Moat methodologies work just as well with so-called value stocks, growth stocks, or any other kind of stock as long as they meet the Big Moat criteria.

The article also has a great “thanks for pointing out the obvious” sentence too: (emphasis mine)

It appears that yesterday’s growth stocks may be today’s value stocks, and vice versa. But no matter which category you aim to invest in, you’re dealing with a moving target.

Wallstrip Discussion: Berkshire Hathaway

Published
by
Brian
on November 6, 2006
in Big Moat and News
. 0 Comments

Today’s installment of Wallstrip covers Berkshire Hathaway, the company headed by Warren Buffett.

Buffett and his mentor Benjamin Graham provided the basis for Big Moat investing. No one can argue with the success of Buffett’s methodology, especially since Berkshire’s stock recently passed $100,00 per share.

Keep track of the latest news for your Big Moat Stock Investments

Published
by
Brian
on October 30, 2006
in Big Moat and Tools
. 0 Comments

One of the easiest ways to keep track of the news that is reported on the companies you’re following is to use RSS feeds. By using RSS you will no longer need to search through search engines and web pages to come across news for these companies. RSS makes it very easy to have the news filtered for you.

What is RSS?
RSS is an abbreviation for Really Simple Syndication. RSS feeds are a text version of the content available on news sites, blogs, and forums that can be read by software that is specifically made to read RSS feeds. By subscribing to an RSS feed, you can aggregate the content of most of the sites you read daily and not have to actually visit the site every day.

If a site has an RSS feed available, you will see the icon below in the address bar of the Firefox browser or in the status bar of Internet Explorer.

rssicon.png

How will I read RSS feeds?
For the purposes of this article, I’m going to use Google Reader as the feed reader which is browser-based. My suggestion is to make sure you’ve upgraded to Firefox 2.0 because the latest enhancements will make subscribing to RSS feeds even easier. Google Reader is not the most powerful or customizable feed reader available but Google provides this software for free and it will be sufficient for most people out there.

How do I create and subscribe to feeds?
Once you have your Google Reader account, you will need to find or set up the RSS feeds in order to receive the content. Since we’re focusing on finding news about our Big Moat companies we’ll start our search at Google News.

Because I’m interested in Fastenal, I’ll simply search for ‘fastenal’ and view the results. As you can see the first item is about Fastenal’s race-car sponsorship.

fastenal_only.png

Since I don’t want this type of news included, I change my search string to ‘fastenal -racing -indy –hamilton’. Now the results are focused on the company itself.

fastenal_filtered.png

If you look in the browser’s address bar, you’ll see the orange RSS icon. Click on this icon to bring up the subscription pane that’s pictured below.

firefox_subscribe.png

Make sure Google Reader is selected in the drop-down box and click Subscribe Now to add the subscription to your feed reader.

This process can be repeated to create a separate RSS feed for each of the companies you are following.

Give me your Big Moat suggestions

Published
by
Brian
on October 26, 2006
in Big Moat
. 0 Comments

Is there a specific stock you’re interested in? I’m looking for suggestions for the company you would like to see researched next. I’ll be doing a series of posts similar to what I did with Fastenal. I’ll also do the backtesting to see how much profit you would have made using Big Moat methods. Send me an email using the Contact Us page. Thanks!

Continuing the Wallstrip Conversation: Google (GOOG)

Published
by
Brian
on October 23, 2006
in Analysis, Big Moat and Risky Biz
. 0 Comments

Today’s stock at Wallstrip is Google so we’ll take a look at it from a Big Moat perspective. This is one company that we don’t even have to look at the Big 5 numbers to analyze: [begin analysis] All of the numbers are huge! [/end analysis] Of more interest for Google are the Margin of Safety and Sticker prices. The current stock price is approximately $460 and using the Big Moat calculator I get a sticker price of $1600 and an MOS price of $800. Look at that Google is on sale!

Google is a perfect example of a Risky Biz stock. There’s very little history and a huge upside if it continues to go up, but there is a lot of room for it to come back down. GOOG is definitely not a Big Moat stock, but one you would definitely want to consider if you’re looking for Risky Biz candidates.

Fastenal: How much profit?

Published
by
Brian
on October 20, 2006
in Analysis and Big Moat
. 0 Comments

Backtesting is one of those things that in a lot of cases doesn’t mean a whole lot, especially since there was no guarantee that you would have been looking at a particular stock at the time you are testing. In any case, we’ll take a look at how FAST performed if we were to make trades according to Big Moat indicators. For the purposes of our test all stock purchases or sales are made on the market open on the day after each of the indicators go green. The dates tested are January 1, 2003 - October 18, 2006 and the initial dollar amout invested is $10,000.

# of Trades: 27
# of Winning Trades: 10
# of Losing Trades: 17
$ of Profit: $1863.38
Total Return %: 18.63%

Largest Single Winning Trade: $2442.34
Largest Single Losing Trade: ($1636.04)

Continuing the Conversation: RIMM

Published
by
Brian
on October 17, 2006
in Analysis and Big Moat
. 0 Comments

Today’s Wallstrip converstation covers Research in Motion, the makers of Blackberry. Looking at RIMM from a Big Moat perspective, the first thing to notice is that RIMM is immediately considered a risky biz because of the lack of 10 years of history. Of all the numbers, Sales have been huge which is completely expected of a fairly new technology that is now called a Crackberry. Equity has been up and down with the most recent year being less than 10%. EPS has also been up and down over the time measured. Currently, RIMM is not considered a true Big Moat candidate, but the popularity of the technology cannot be denied so this may be a company you’re willing to invest in as part of your Risky Biz portfolio.

RIMM (green check means value > 10%, red stop sign means value < 10%)Click to view RIMM’s Big Moat Numbers full size

Recommendations for value investors

Published
by
Brian
on October 15, 2006
in Big Moat
. 0 Comments

Richard, over at Move the Markets, has several portfolio recommendations for value investors….especially those who think that daytrading is a fast trip to the poor house.

Richard’s Portfolio for Value Investors

…very funny stuff.

The 4 M’s of Fastenal: Margin of Safety

Published
by
Brian
on October 3, 2006
in Analysis and Big Moat
. 0 Comments

For the final post in the 4 M’s of Fastenal series, we’ll run the numbers and determine the margin of safety price for purchasing Fastenal stock. In a previous post, we’ve seen that Fastenal has a solid track record with all of the numbers except for cash flow. Looking more closely at the numbers though, we’ll see that Fastenal’s equity/BVPS has been decreasing steadily over the previous 10 years. Almost immediately, according to big-moat’s rules, this would rule out Fastenal as a Big Moat company.

After calculating the margin of safety, it looks like Fastenal has a MOS price of approximately $22 and the current price is $38.41. In this case, it looks like Mr. Market has the stock priced at full price. At this time, given the concerns over the decreasing equity and being nowhere near the MOS, Fastenal is not currently a Big Moat stock.

Mentally taking the risk

Published
by
Brian
on September 27, 2006
in Big Moat and Motivation
. 0 Comments

One of the good things about the Big Moat concept of investing is that once you do your research on a company, running the numbers and executing buy/sell orders using the tools takes a lot of the “thinking” out of investing. I imagine this is why Big Moat investing appeals to a lot of people who might not have traded in the stock market before or to people who may have not done so well with their investing in the past. The Big Moat concept works especially well in the minds of new investors when their first few trades go well, some people may even get the feeling that they can’t lose, and that’s a great feeling.

The problem arises when the first loss does roll around, and it will. There’s just no avoiding it. Hopefully it won’t be a big loss or, lord forbid, a overnight gap down like we saw with Chico’s as few weeks back. This one losing trade may be enough for many people to take all of their money out of the market and throw their hands up and scream that it doesn’t work. So what do you do to avoid this happening to you? In a post today, Brett Steenbarger offers a solution that is simple in its concept but will be difficult to actually follow. If his idea is something you can instill in yourself, it will allow you to become a better investor. His concept is to accept that you will lose money on the trade you’re about to execute. By making the loss the expected event, a winning trade will have much more significance which is the way it should be. If you’re expecting the loss and the trade is in fact a loss, then you got what you expected - no harm/no foul, just move on to the next trade when the tools show its time to buy.