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Occupy Wall Street vs. Aesop

It appears that the Occupy Wall Streeters have a new spokesperson: Starbucks CEO Howard Schultz.  According to a Wall Street Journal article published this morning, Mr. Schultz implied in a blog post that Nobel Prize-winning economist Milton Friedman was “old-school” for his view that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.”

The article states that the occupiers’ chief complaint is “that business is falling short of its social responsibility.”  To summarize the current drumbeat (pun intended), capitalism no longer works.

So, is capitalism dead and Mr. Friedman just an interesting guy from a previous generation?  Only if you believe that principles become outdated! Continue reading

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Mr. Buffett, BofA, and Mr. Buffett’s Secretary

The stock price of Bank of America (ticker BAC) is up 17% since Warren Buffett, the Oracle of Omaha, announced his deal last week and I find that silly.  After all, Warren Buffett used his reputation to extract a favorable fixed-income investment; he did not make an equity investment in BofA. 

Why did BofA’s stock price go up?  Continue reading

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New Value Stock: Telefonica S.A. (TEF)

Telefonica is the most recent addition to the Gracor portfolios.  What follows is an outline of the decision structure and a summary of the analysis.

Value investing is based on Benjamin Graham’s work on the principles of investing and investor behavior.  I hope that that this posting will help you understand how Gracor applies those principles.

Value Investing vs. Bargain Hunting

It has become fashionable for professional value investors to say that their style is to buy great businesses for 60 cents on the dollar.  Really?  Granted, this is a marketing statement and not a white paper on the subject, but I believe it is important for you to understand what is missing from this statement.

The missing part is why you are able to buy at such a significant discount?  Remember, it is not true that the market randomly coughs up a dollar bill for 60 cents.  To get a significant discount, something negative, and typically unforeseen, must occur to scare the market into overreacting.

Before buying such a bargain—even before in-depth valuation analysis—value investors should do the following two things.  First, they must understand the nature of the negative event.  Second, regardless of the nastiness of the event, they must ensure that the company has the financial and managerial resources to make it through.

What good is the most elegant spreadsheet on the company’s future valuation if it doesn’t recover?  As Benjamin Graham put it in his book, The Intelligent Investor, it is not as important for the buyer to be enthusiastic over the company’s long-run prospects as it is for him or her to be “reasonably confident that the enterprise will get along.”

Telefonica vs. Spain

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Benjamin Graham on Market Volatility

Benjamin Graham on Market Volatility

Wild market volatility in the last couple of weeks has noticeably enhanced investor emotions.  So I thought it timely to review Benjamin Graham’s view on market volatility, especially as it pertains to “true” investors.  Remembering that, from Graham’s point of view, a “true” investor is one who is prepared not just financially, but emotionally, so that they can not be “stampeded” out of their allocations.

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Are We Evil for Owning Oil Companies?

Are We Evil for Owning Oil Companies? Wow, I didn’t know I was evil for buying Exxon and BP for Gracor portfolios.  But after watching the Senate hearing with the big 5 oil companies, I came away feeling, at a … Continue reading

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