The Guru Investor

Doug Kass of TheStreet.com’s RealMoney, who successfully called both the market decline in late 2008 and the rebound in March of 2009, is becoming wary of the current rally. Kass feels that the current valuation of the market is pricing in a much more favorable economic environment and is not taking into account the probability of more negative outcomes.

Continue reading ‘Kass: Market May Be Getting Ahead of Itself’

Corporate insiders are not among the many groups of people who expect this rally to stall, according to Mark Hulbert of Marketwatch.

Insiders have actually substantially upped their purchases of their own stock in recent weeks, indicating that they are bullish about the future prospects of their companies. The ratio of insider sells to buys calculated by Vickers has fallen from a reading of 4.52 three weeks ago to 1.96 in the most recent week. The 1.96 figure is also slightly below the long-term average, meaning that insiders are slightly more bullish than normal. Hulbert notes that this figure can be a bullish indication, despite the fact that sells outnumber buys, because insiders often sell for reasons not related to their level of optimism for their stocks, such as changes in their personal circumstances.

Schwab Chief Market Strategist Liz Ann Sonders, who correctly predicted the recent recession in October 2008 and its end in June of 2009, remains optimistic about the economic future of the US. In an interview with Yahoo Tech Ticker, Sonders explained that she thinks we are already in the “V” portion of a V shaped recovery and that that she expects the economy to flatten coming out of this period, but she does not anticipate a double dip recession. Sonders believes that the Fed is currently looking for an exit strategy from the current near zero percent interest rates and believes that rising rates would not necessarily be a bad thing for stock market investors. She also does not feel that the continued rise in unemployment indicates that an economic recovery is not occurring, since a peak in unemployment usually follows the end of a recession by six months.

John Dorfman, the well respected Bloomberg columnist and chairman of Thunderstorm Capital, discusses Ben Graham’s contribution to investing and his value-based investment approach. 

Dorfman outlines Graham’s strategy, which includes looking for stocks that trade for less than book value and less than 12x earnings. Graham, according to Dorfman, also wanted to see “earnings power over a prolonged time span” (7-10 years). By looking at earnings over a longer period of time you can feel comfortable that a firm’s earnings power is sustainable through all different types of market environments. 

By combining these criteria, Dorfman comes up with four of stocks that Graham might buy should he be alive today.

Continue reading ‘Dorfman: “Channeling Graham” in Search of Value Stocks’

In a recent update made to her best selling book The Snowball: Warren Buffett and the Business of Life, Alice Schroeder has added a new 31 page section that outlines both the positives and negatives of Warren Buffett’s handling of the recent financial crisis.

Although Buffett became a public symbol of prudence during the crisis, Schroeder also details some of his moves that potentially made Berkshire a weaker company financially. In an excerpt from the new book section posted on CNBC.com, Schroeder discusses how Buffett’s public role during the crisis may have hurt his business performance. According to Schroeder “He filled the role of America’s statesman and father figure during the financial crisis, but he had also fallen into the trap of competing for attention instead of trusting that his sterling record would bring it to him.” Schroeder also discusses Buffett’s exposure to Financial companies and his sale of index puts, both of which she says played a major role in the loss of Berkshire’s AAA credit rating, as well as his purchase of a convertible stake in Swiss Re, which raised many eyebrows given that it was General Re’s largest competitor.