"Time to recap all my investment tenets onto one blog page. Also a couple of Pharma picks"

Dow Jones Industrial Average 13,009.68  (UP) Week Ending 11-23-2012

Cornelius Vanderbilt, shipping and transportation magnate, and pictured to the left on the stock certificate of his The New York Central Railroad surely had established ideas about the best business practices to be successful. 

Over the last 157 blogs, I have worked to establish consistent best practices for stock purchasing based on fundamental analysis of businesses which will facilitate the best total return over a 1 to 3 year period. The following are my rules all together in one place for the first time:

Rule #1. Never buy a stock that is priced under $5.00. Most mutual funds have rules in their charters that do not allow them to purchase stocks under $5.00. It is very tempting to want to buy these shares.

Rule#2. If you trade a stock twice, and have gains both times, do not go back to the well and buy it a third time. 

Rule#3. Only buy stocks that have earnings above $0.10 per share annually. This will keep you out of a lot of bad places.

Rule#4. Try to buy companies that are not loaded down with debt, or even better yet, have zero debt.

 Rule#5.  Purchase only stocks with a Return on Equity of 15% or higher

 Rule#6. Purchase only stocks that have a PEG Ratio of less than 1.50 .

These are the six that are in place at the current time as of this writing and others may be added in the future. So here are a couple of pharma stocks that meet all these rules.

Shire PLC ADS (Symbol SHPG, $86.63), is a Dublin, Ireland based pharmaceutical company with very good performance numbers. It meets our criteria with a
Return of Equity of 28.01% and a PEG ratio of 1.18.

Earnings per share are projecting for 2012 at $5.92 per share and for 2013 looks like $6.54 per share. Shire PLC can be bought right here at this price, quite a bit off its 52 week high of $108.79. The company has had 5 year sales growth of 23.69% and 5 year earnings growth of 231.08% and yet only trades at a current PE ratio of 14. 

Alexion Phamaceuticals Inc. (Symbol ALXN, $94.71) feels expensive here. But the PEG ratio on the stock is 0.99, so they must be growing their business very rapidly. It also meets my criteria for Return on Equity at 15.80. 

The fact is that ALXN has had a 5 year sales growth of 199.32%. Their projected earnings growth long term is 35.5%. (All stats from Smartmoney.com). The high price for the year is $119 per share, so you probably should phase into this stock with small purchases because it could have a lot of volatility here in the next few months. This stock is no secret and there are a lot of traders in this stock that come in and out, so just be careful on your entry points.  The 1 Year Total Return on the stock is 48.29% and the 3 Year Total Return is 324.52%, so you have a good track record here with ALXN.

So if you cannot afford to start your own shipping company like the "Commodore" ,Cornelius Vanderbilt, or your own railroad like "The New York Central" ,  you can start building some capital by investing some money in these two profitable pharma companies. 

I wonder what Cornelius would be investing in now if he was still around? Maybe US Energy companies or the railroads or pipelines that transport their fuels?

 Happy Totensonntag to my German and Lutheran readers out there today. We all think about our loved ones that are gone, this time of year.

Guten Nachmittag,

Freewilly






 

"Time to grab some Total Return with an investment in Microsoft at $26.50"

Dow Jones Industrial Average 12,588.31 (DOWN) Week ending 11-16-2012

"And you can fly, High as a kite if you want to,
Faster than light if you want to,
Speeding through the universe,
Thinking is the best way to travel"
Moody Blues ... The best way to travel

Isn't it amazing that you can move in your mind from one end of the investment universe at speculation to the far other end at very conservative in your investment thinking.  You just need to think about it. So, this week, I move back to the airspace of the very conservative stocks and will talk about a products we use everyday and don't think about much, from Microsoft Inc. Thank you to the Moody Blues for running that song through my  head , "The Best Way to Travel". (some lyrics above)

Microsoft Corp. (Symbol MSFT, $26.52) is a company that sits as we speak, with 66.6 billion dollars in cash on their balance sheet. I believe that with the tax rates changing next year here in the USA, that Microsoft may make one of those "one time" special  dividend payments. 

  So what I am looking for here is a possible special dividend, to go along with the regular dividend of 3.47%, plus the stock moving up to the $31-$32 dollar range with the new introduction of the Windows 8 operating system. You get a lot of chances for success here with this stock,  to accumulate a nice 25-30% total return.

MSFT has a PEG ratio of 0.85% and a Return on Equity of 23.99% so it fits my investment criteria parameters. 2013 earnings per share are looking like $2.92 per share and 2014 earnings of $3.25 per share. 

The company has a great balance sheet but only has 5 year sales growth of 4.39%.  Hopefully with Windows 8 we get a little more growth. Also Microsoft should take some of that cash and invest it with his friend Warren Buffett and buy some Berkshire Hathaway shares and let him invest it. Warren is just going to give his money back eventually to the Bill and Melinda Gates Foundation anyway!

This company did almost 74 Billion dollars in revenue last year so there is really only the risk here that nothing miraculous happens.  At some point though, someone in this company is going to start investing that money and start buying some small high technology companies and then you will get some nice earnings growth going again.

Short and sweet and now back to watching the football game.

Have a Happy Thanksgiving Day. Eat some Turkey.

Freewilly

"Happy Veterans, Remembrance and Armistice Day to all the war veterans around the world. Looked for a defense stock and was led to this great value play."

Dow Jones Industrial Average 12815.39 (Down Big!)   Week Ending  11-09-2012       

   I tried to find a defense stock to write about in honor of Veterans Day,  but I could not find one that I was totally crazy about for a 1 to 3 year investment on fundamentals.  What I did fine though was a stock that does not fit my investment rules and it is a stock under $5.00 per share.  I feel though that this company has a very bright long term future and that as a speculation stock, I would present it to this audience.  Sometimes you just need to go off the grid when a really good value presents itself.

Bombardier Inc. CL. B
(Symbol BDRBF.PK (OTCQX exchange), $3.40 US) 

Speculation (ROE and PEG rules not applied)

Joseph-Armand Bombardier was a mechanic who dreamed of building a vehicle that could "float on snow". In 1937 he designed and produced his first snowmobile in his small repair shop in Valcourt, Quebec.

Bombardier's technological breakthrough in the design of bush vehicles came in the mid-1930s when he developed a drive system that revolutionized travel in snow and swampy conditions. In 1937 Bombardier sold 12 snowmobiles—named the B7 and, in 1942, created l'Auto-Neige Bombardier Limitée company.

The stock is currently down from the last earnings report but their are many positive developments.

Bombardier Learjet announced November 10th that its unionized employees in Wichita, members of the International Association of Machinists and Aerospace Workers (IAMAW), have voted to accept a proposed contract agreement, ending a strike action that began on October 8, 2012. Employees may return to work as early as November 12, 2012.

2nd, Bombardier has a Strong backlog of $58.6 billion, compared to $53.9 billion as at December 31, 2011 

3rd, Their C-Series program making solid progress with first flight now scheduled by the end of June 2013 

4th, Bombardier is also opening up a new Monorail plant in Brazil

which is a great development. They also make lot's of other cool stuff like ATV vehicles. 

Actually the PEG ratio on this stock is 0.59 currently and the stock was trading above 6 dollars as recently as July 2011.  Also the Return on Equity is 41.23

CNBC shows that this stock a 0.10 cent dividend which would be a 3.06 % yield , but I would want to verify this info.2013 earnings are looking like 0.50 cents per share which would be a very reasonable PE ratio to the current price.

Bombardier Inc. is a manufacturer of transportation equipment, including business and commercial aircraft and rail transportation equipment and systems, and is a provider of related services. The Company operates in two segments: aerospace (BA) and rail transportation (BT). Aerospace is engaged in the design and manufacture of aviation products for the business, commercial, specialized and amphibious aircraft markets. Transportation is engaged in the design and manufacture and and support of rail equipment and systems, offering a range of passenger railcars, locomotives, light rail vehicles and automated people movers. It also provides bogies, electric propulsion, control equipment and maintenance services, as well as complete rail tranportation systems and rail control solutions. BA's aircraft portfolio includes a line of business aircraft, commercial aircraft, including regional jets, turboprops and single-aisle mainline jets and amphibious aircraft.

I believe that the smaller jet market should have very good growth over the next 5 years. 

I don't know if you have ever flown a short city hop in one of their jets but they ride smooth as silk , and you don't even hear the engines running.

So this is my pick for this week. What do you think?

Freewilly

"The trading weeks keep getting uglier, especially for the tech stocks. Time to bring on an old war horse that made it through the depression.

Dow Jones Industrial Average 13,118 (UP)  Week ending 11-02-2012

Thank you Hurricane Sandy for snapping off my 40 foot Pine tree like a twig and depositing it on my neighbors garage. They especially liked it since they have their house up for sale right now. But, I can't complain. New York and New Jersey probably have 80,000 people or more homeless from the storm between the two states. Staten Island, Long Island, NY, PA, and the New Jersey Coast communities all sustained major damage.

The stock trading week with the exception of one day was plug ugly. The NY markets were closed for two days because of flooding in New York City and Northern New Jersey with salt water flooding in the subway tunnels closing down trains. The New York Marathon an international event was first a go, then cancelled because resources were needed for the storm victims. So with all this turmoil, I turned to a stock that seems to always be steady regardless of market conditions or who is elected president.

BorgWarner Inc.  (Symbol BWA, $66.35) Return on Equity 18.76% PEG ratio 0.80

 1928 - Borg-Warner Corporation is formed. Founding companies include Borg & Beck (Holley carburetors), Marvel-Schebler, Warner Gear and Mechanics Universal Joint. The company was one of the ones that made it through "The Great Depression" of 1929 and came out on the other side to prosper.

Currently the company is projecting at $4.99 per share for 2012 and for 2013 it is looking like $5.61 per share.

Although this company's stock is down (4.81%) , the 3 year Total Return on the stock is a lofty 108.36%. The 5 year earnings growth here is a turbo-charged 16.35%  and the 5 year sales growth has been 6.71% percent which is a good pace for a company with 7.1 billion dollars in sales. 

One interesting note here for a hardware company, "Inventory Turnover" has run 11.57 turns a year, which is excellent operationally. 

Nov 6 (Reuters reported) - BorgWarner Inc will attract $2.3 billion in new business from 2013 to 2015 as automakers around the world rely more heavily on turbochargers and other fuel-saving technologies to meet stricter gas mileage and emissions requirements.

About half those sales will come from Asia, which accounted for 35 percent of BorgWarner's new business from 2010 to 2012, the U.S. auto parts supplier said on Tuesday. China, the world's largest auto market, will make up about one-third of new sales.

The largest two shareholders are:  The VANGUARD GROUP, INC. and JP MORGAN CHASE & COMPANY currently.

All in All , a good quality stock that meets our Return on Equity and Peg ratio criteria. 

Election day Tuesday , 11-6 in the USA, so lots of news to follow next week.

Make sure to vote!

Freewilly