Our Financial Uproar Stock Picks

January 6, 2012

See cube, eat cube

 

One of the few personal finance bloggers who remains on speaking terms with us is Nelson Smith at Financial Uproar, who’s hosting a stock-picking contest. We were told to submit 4 stocks by December 30. We’ll regroup 359 days from now, assuming we can stave off nuclear war with Iran, and see who gained the most.

We had to pick stocks, as opposed to other investments, otherwise we’d have loaded up on “Mitt Romney will be elected” futures at InTrade. They currently pay 8-to-5.

Of course, entering a stock-picking contest is different than investing. As any poker player knows, the game changes drastically when there’s real money on the line. So knowing that finishing dead last will hurt nothing more than our egos, we were fairly aggressive. With a couple of caveats:

1. We’re not going to win this thing. 

Seriously, we won’t. Not that we don’t believe in ourselves, but intelligence and discretion will only take us so far here. Luck is a huge variable, both as a noun and an adjective. Again, if we could buy futures as part of this contest, we’d look long and hard at buying one called “The winner will have chosen 4 penny mining stocks on the TSX Venture Exchange”. 

But that depends on how many entrants Nelson gets. (12, including himself.) The more entrants, the greater the chance of luck being the biggest determining factor (and rendering our research worthless.) If the objective is to make money, then you don’t have to win this contest to win, if you catch our drift.

2. We’re not looking for long-term investments. We’re not even necessarily looking for stocks that we think will instantly skyrocket. The window is specific: 1 year. A stock whose acceleration will top out in 2 months, or 24 months, won’t do us much good. Heck, if we can get a 25% return out of this contest, we’ll consider ourselves winners. Nelson probably won’t, but we will.

That’s enough qualifying, don’t you think? On with our picks. Our strategy is the same as it is in our real lives: look for temporarily wounded value. A stock with good fundamentals but bad (in the short run) publicity is ideal. A low price-earnings ratio, and either negative or non-existent headlines.

NETFLIX

This fits our criteria almost perfectly. The company took a public relations hit this past summer when it told customers they were going to have to suffer through the barbaric ordeal of having to hold separate accounts for renting DVDs and for streaming videos online. Customers swore they’d never return, and a movement took hold.

We don’t patronize Netflix, never have and never will, but couldn’t understand why customers decried a company that seems to offer selection, speed, and value.

The stock traded at $304.79 in July and is now at $79.30. Cash flow is positive, and profit increases by 50% or so annually. That can’t last forever, but all the indicators are good. Netflix is one of those companies that does better the less it charges. In its early days, memberships cost 4 times what they do today. A company that succeeds on both high markups and low markups will get our attention every time, especially when it’s the undisputed market leader.

FORD

A strikingly low price/earnings ratio, barely over 6. A stock price at an 18-month nadir. And an implicit guarantee that the taxpayers will be there with billions to prop up the company if necessary. Which it won’t be, but investors like to keep these things in mind.

The industry itself is as close to a staple as we have in this society. Ford’s competitors remain in even worse shape than it.

Ford’s worst days are behind it. Yes, its liabilities are greater than its assets, but the numbers are going in the right direction. And the company is profitable. There’s no way we’d invest in Ford until its financials improve a little more, but to enter a stock-picking contest with no downside? Sure.

(NOTE: Not to hedge our bets, but the two of us had to flip a coin on this one. Ford vs. Toyota. If it turns out that a Toyota pick would have ended up winning the contest for us, blood will be shed.)

SEACUBE

This is one of those under-the-radar companies that you never heard of until 2 seconds ago, yet that impacts your life greatly. As the name implies, and as its NYSE ticker symbol (BOX) reinforces, SeaCube deals in shipping containers. The company is on every continent, and just about every freighter.

SeaCube doesn’t even make the containers. It only buys and leases them. Revenue is stable, with a couple of anomalous items distorting the 2009 numbers. Profit margins are enormous, 22%. The company paid out a dividend last month, with a dividend yield of 6.3%.

What gets us excited is its price/earnings ratio, currently under 8. Its peers average thrice that. Because a container lessor can’t expect gigantic growth year-over-year, the only remaining legitimate reason for SeaCube’s low P/E is simply that it’s undervalued. The price is low with regard to sales, with regard to book value…

So why isn’t it more expensive? It’s carrying a lot of debt, although that debt is relatively stable year-to-year. This is one we might buy in the real world, too.

TOYOTA

Alright, fine. We were going to go with GlaxoSmithKline but it’s trading at 40-something times earnings and pharmaceutical companies (or more specifically, reaction to and regulation of them) can be fickle.

Instead, the car manufacturer whose 2011 was as bad as anyone else’s in Japan. The Tōhoku earthquake and resultant tsunami didn’t just kill 20,000 people, they did a number on every manufacturer in the country. No hydroelectric and nuclear power meant no way to build cars, and a damaged seaport meant nowhere to send and receive shipments. Toyota’s sales numbers suffered, and the stock price tumbled accordingly. A positive, at least as far as stock-picking contests go.

Besides, Toyota already knows all about singular events hampering its stock price. In 2009 a series of Lexus owners testified on Capitol Hill that their vehicles were accelerating suddenly and without apparent impetus. What made that unusual was that it’s usually politicians lying through their teeth in D.C., not private citizens. The claims were unfounded: to keep it brief, these imbeciles all confused the brake pedal with the gas. Toyota stock sank to the point where the CEO flew over from Aichi headquarters to control the damage. The stock rebounded and then some, and Toyota maintained its healthy habits of keeping debt under control and buying back treasury stock. Which it continues to do today.

So those are our picks. We’ll keep you updated daily on what they’re doing.

No, of course we won’t. You shouldn’t look at your investments daily, either. We’ll check back on ours quarterly: enough time to see legitimate growth (or shrinkage) develop, without keeping us daily enslaved to a series of numbers beyond our control.

**This article is featured in the Baby Boomers Blog Carnival One Hundred Twenty-sixth Edition**

Filed Under: Capitalism, Education, Investments, Personal Finance Tagged With: , , , , , ,

Our big beautiful new site and GIVEAWAY

February 23, 2011

If our website was a human, it'd look like this

Or this.

It’s finally up, largely thanks to the prettier half of the Control Your Cash team. Remember that hideous amalgamation of ugly coding and open tags that we used to call a website?  Yeah, neither do we. Things we learned while putting this current site together:

-Joomla! is slow and counterintuitive, as least for us.
-Everyone hates their host, us included.
-Only hire a company named Graphic Intrigue if you want missed deadlines, forgetful salespeople, zero artistic vision and the kind of socially stilted programmers who fit the stereotype. Also, because our site’s called Control Your Cash, we’re not going to tell you how much money we flushed down that particular urinal.

But enough. The new site’s up and you can actually take it home to Mom and not be embarrassed. To celebrate, we’re giving away the figurative store. Specifically, the following stuff:

A $100 American Express gift card, from Ask Mr Credit Card.

A $75 Amazon gift card, courtesy of Jeff at Deliver Away Debt.

A copy of TurboTax Premier – the same program Len Penzo uses when paying his annual tribute to Uncle Sam.

A copy of TurboTax Deluxe from Jeremy at Gen X Finance.

A $25 Amazon gift card from Kevin at Invest It Wisely. (Note: while Kevin and his site are Canadian – you can tell by his repeated use of the phrase “soya sauce” – the gift card is denominated in U.S. dollars.)

$25 PayPal cash from Max at Maximizing Money. That’s right, he’s just going to give you (somebody) money.

A $15 Amazon gift card from Ray at Squirrelers.

A copy of Money Academy for Couples, the e-book by Neal Frankle of Wealth Pilgrim.

Another copy of Money Academy for Couples.

Would you believe a 3rd copy of Money Academy for Couples? You should. This is no ordinary giveaway.

And of course, autographed copies of Control Your Cash. (Or if you prefer, Kindle copies that can’t be autographed but are infinitely more convenient.)

Here’s how to win:

1 point – “Like” us on Facebook
2 points – Follow us on Twitter
5 points – Tweet about “ControlYourCash.com”
6 points – Comment on our blog, on a post dated after January 2011. “YOu’re blog is awsome” is not a comment.
7 points – Subscribe to our RSS feed. Yes, you get 7 points for performing the demanding task of clicking on that link.
20 points – Review our book at Amazon or BN.com. A real review, not one line about how awesome the book is. You don’t even have to say the book is awesome. Say it stinks if you want, just write a review that proves that you read it.
500 points – Book us for a signing at your bookstore (chain, independent, whatever)
1000 points – Book either of us for at least 2 segments on your radio show. A real radio show, not you on the internet with a tin can and zero listeners.
2000 points – Same thing for TV.
5000 points – Book either of us to speak to your group of at least 20. (We’re serious. See here.)
150,000 points – Hire a skywriter to spell ControlYourCash.com over a major American city.

Every point is an entry in our drawing; we’ll amass the totals March 19. Check back often: we might be giving away more stuff, conditional on the generosity of our fellow bloggers. And thanks again for making us the fastest-growing site in personal finance (a wholly unverifiable claim.)

Filed Under: Book Promotion, Finance, Healthy Living, Making Smart Choices Tagged With: , , , , ,

Trial and Error are Rotten Teachers

September 5, 2010

Almost as bad as her

The folks at Go Banking Rates are holding a contest among personal finance bloggers: write a post on the topic of education and wealth, and the lucky winner takes home the Readers’ Choice winner of Favorite PF Blog Writer! (exclamation point theirs.) Thanks to Go Banking Rates for accepting our entry, and may the most interesting and worthwhile post win.

——————

April, 1976. 7-year old me, returning home from school. The teachers had set up a lunchtime hot dog cart. (It was a Catholic school, they raised funds however they could. This predates school-supply drives and the Department of Education.) I eat my lifeless baloney sandwich in silence, jealous of the moneyed kids waiting in line, flashing their quarters like so many engagement rings. Tube steak in a bun, 25¢. And as much as I can remember, my first practical exposure to the idea of money.

Me (trying to determine the family’s net worth in hot dogs): Mom, how much money does Dad make?
Her: (silence)
Me: MOM?!
Her: Don’t you have homework?

And so began a typical North American financial education.

Cannibalism. Atheism. My female teenage cousin’s illegitimate child. In my house, these were just a few of the topics considered more appropriate dinner-table conversation than was money.

Every transaction was a secret. Every dollar figure carried with it the potential for embarrassment. Give a kid even a general idea of his family’s finances, and the next thing you know he’ll be blabbing to the neighbors. We can’t have that. Etiquette should always trump knowledge, shouldn’t it?

1979. I have never read the money section of the newspaper, but the sports section is all mine. Nolan Ryan signs with the Houston Astros for an unprecedented $1 million annually. We have a baseline! My father must make less than that, so…$700,000, maybe? (NB: in his best year he probably made 5% of that.)

To high school. Where the extent of financial instruction consisted of an introductory bookkeeping course, in which we measured the debits and credits of fictional XYZ company and its competitor, ABC company. You know, because terms like “cost of goods sold” and “depreciation” were so relevant to the everyday life of an overloaded teenager who’s already dealing with acne, introduction to beer, football roster cuts, and watching girls’ breasts develop.

14, first job. Washing dishes in a restaurant for minimum wage. Mom exercises her parental right and keeps every check, possibly as partial payment for a lifetime of free room and board.

Fast forward to graduation, and an unsentimental introduction to the real world. Rent? Insurance? 401(k)? IRA? CD? FICA? ARM? S&P? P&L? Drowning in acronyms without a lifeline.

I’m one rung above poverty, which is fine for someone 17 and living on his own for the first time. Wages barely cover necessities, which include a futon and not much else. My one extravagance is books, organized on a bookshelf composed of air. Air, and a floorboard.

And then, those naïve unfortunates at American Express ease the pressure by sending me a credit card I didn’t solicit. The symbolism is overwhelming: plastic signifies my passage into adulthood far more convincingly than any driver’s license or wispy sideburns could. I can buy real furniture! Pick up some new clothes! Dig up the fake ID I’ve been using since the age of 15 and conceivably, rent a car!

Instinctively, I understand that addition is cumulative. A plus B, added to C = A+B+C. It’s one thing to know that in theory, another in practice. Yesterday’s purchase plus this morning’s plus this afternoon’s will look quite different 30 days from now than it does today.

The bill comes. $749.23, which might as well be a quadrillion. The statement contains a caveat that turned out to be a blessing: “PAYMENT MUST BE MADE IN FULL.” I knew this. It was in the agreement I signed and presumably read. No excuses, even though I was a minor.

My right brain tries to convince my left brain that I should become the first person in history to pretend he no longer lives at the address the creditor has on file. An airtight plan that D.B. Cooper himself would be proud of. Fortunately, the left brain wins.

How to get covered? Everyone I know (and who will take my calls) is as poor as me. The right brain thinks about requesting a payment plan, but gets outvoted by reality: a collection letter typed in boldface, immediate interest charges, and the destruction of a nascent credit rating before it even had a chance to grow legs.

Buying a car would have to wait (several years, it turned out.) Same thing for any kind of social life or vacation. A credit counseling company got American Express to take 70 or so cents on the dollar, and I got to start again at zero. Older but still not old, and wiser but still not wise.

What would I change? Nothing and everything (he said in Zen-like fashion.) Nothing, in the sense that I’m grateful that I got the inevitable mistakes out of the way early. Everything, in that sending a young adult out into the world with zero financial knowledge is irresponsible on the part of parents and teachers alike. I might have been one of millions in that situation, but that didn’t make it any easier.

Oh, and parents? Keeping your kids in the dark about finances really helps them out when it comes time to negotiate wages and prices.

It should be effortless to know what things cost – including one’s own labor. No one should have to enter adulthood without knowing the fundamentals of finance – how and where to spend, when and why to invest. If you can understand a savings account, then you can understand a checking account, a money-market account, and ultimately how to buy a car, buy a house, do your taxes and assemble your own S corporation. None of this is that complicated. Our blog proves it.

Epilog: Today, hot dogs cost about $2.69/lb. wholesale. That’s 34¢ a dog, and they retail for at least 79¢, meaning pay a 135% markup or cook your own.

Filed Under: Education Tagged With: , , ,