It looks like Google will soon provide free real-time stock quotes! This was recently announced on the official Google blog and it appears that it’s not too far off. Now if only we could combine free real time quotes with Yahoo!’s charting we’d really have something powerful.
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This article, titled Rich Man, Poor Man, and written by Richard Russell has been available for quite some time but I came across it for the first time today. The article espouses the benefits of compound interest, in fact, its his Big Moat. But don’t worry, his Rule #2 is (and yes, it’s in all caps) DON’T LOSE MONEY. Of special interest are these few paragraphs:
The wealthy investor tends to be an expert on values. When bonds are cheap and bond yields are irresistibly high, he buys bonds. When stocks are on the bargain table and stock yields are attractive, he buys stocks. When real estate is a great value, he buys real estate. When great art or fine jewelry or gold is on the “give away” table, he buys art or diamonds or gold. In other words, the wealthy investor puts his money where the great values are.
And if no outstanding values are available, the wealthy investors waits. He can afford to wait. He has money coming in daily, weekly, monthly. The wealthy investor knows what he is looking for, and he doesn’t mind waiting months or even years for his next investment (they call that patience).
But what about the little guy? This fellow always feels pressured to “make money.” And in return he’s always pressuring the market to “do something” for him. But sadly, the market isn’t interested. When the little guy isn’t buying stocks offering 1% or 2% yields, he’s off to Las Vegas or Atlantic City trying to beat the house at roulette. Or he’s spending 20 bucks a week on lottery tickets, or he’s “investing” in some crackpot scheme that his neighbor told him about (in strictest confidence, of course).
And because the little guy is trying to force the market to do something for him, he’s a guaranteed loser. The little guy doesn’t understand values so he constantly overpays. He doesn’t comprehend the power of compounding, and he doesn’t understand money. He’s never heard the adage, “He who understands interest — earns it. He who doesn’t understand interest — pays it.” The little guy is the typical American, and he’s deeply in debt.
The lesson here is to not be the little guy.
Following up th/e previous post on Dress Barn’s numbers, we’ll take a look at how you would have made out investing in DBRN using Big Moat entries and exits.
Start Date: 1/1/2003
End Date: 10/19/2006
# of Trades: 29
# of Winning Trades: 10
# of Losing Trades: 19
$ of Profit: $9847.20
% Return: 98.47%
Largest Single Winning Trade: $8294.52
Largest Single Losing Trade: ($2857.20)
based on an initial investment of $10,000
Chico’s and Coldwater Creek are retailers that are favorites of many people looking for Big Moat companies. Today I saw that Dress Barn was one of Nasdaq’s most active stocks so I decided to run the numbers on DBRN.
The numbers look good and the stock closed at $24.46 today which was up almost $3 on the day. Looking at the YTD chart, the stock has been trading sideways most of the year and all three arrows are currently red. This is definitely a stock to watch but currently not quite a buy at this time.
A recent article in Business Standard from India takes a look at the stocks that pass a method similar to Benjamin Graham’s method of calculating the MOS for companies. Their overall conclusion is that this method is good for identifying undervalues stocks with a good margin of safety. This isn’t much of a surprise considering that Graham is considered one of the greatest investors of all time. To learn more I suggest reading Graham’s The Intelligent Investor.
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.
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.
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.
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.
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.
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.
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.
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!
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.
