Tuesday, August 20, 2013

Forensic Investing: Why We Were Long on JCP

The principles of forensic investing is knowing more than what is on the company's financial statement. Forensic investing is experiencing what the company offers. For example, if you think Starbucks is a great company to buy, maybe you should go to a few locations, buy a few products and experience for yourself whether this company has a future. This method of analysis is absolutely valid for backing-up your fundamental analysis. If you are fed-up with the long lines at Walmart or tired of cold McDonald's Big Macs, chances are, other people are too. Keep in mind though, it is important to increase the sample size in your exploration to avoid the misleading of an outlier. Chances are, outliers are more prone to sway investors for larger corporations, especially those like Starbucks that can be found on any street corner in the world.

The point of this is to explain the importance in knowing the company's operations, so when company news events are published, it will seem viable to you. This morning, JCPenney released earnings that shocked many it opened nearly 8% higher than yesterday's close. While the company is not in great shape, many investors believed it was worse than it truly is. Run of The Bull did forensic investigating, which entailed a "customer experience" at the department store. We noticed that the store's inventory was turning, lines at the checkout were rather long and the store itself was recently redone. Comparing it then to Macy's and Nordstrom and even other JCPenneys, we were confident that Wall Street was undervaluing the company's ability to perform. Of course, the company has had turbulent trading days with news on CEO Bill Ackman stepping down, but the forensic investing that went into our analysis ignored the hype on this event and focused more closely on how the company would continue to perform.

Summary: Forensic investing is key for analyzing a company when fundamentals cannot be trusted and technical analysis is misleading.


Wednesday, August 14, 2013

For Newcomers

Hello all! For all of you new comers, please review the stock suggestions and feel free to leave your comments.

Also, please review the customer agreement for terms of use. Thank you and stay tuned for more stock suggestions!

Monday, August 12, 2013

Tech Comapany Stock Picks For 2013: Cisco and NetApp

Special attention on this upcoming week when both Cisco and NetApp release their earnings. These companies have been performing beyond analyst expectations quarter after quarter and we feel that 2Q results will not be disappointing. These two companies offer much of the technological "infrastructure" that is needed for growing and expanding economies such as BRIC and EMEA nations with particular emphasis on increased demands from China and African nations.

This quarter we are expecting increased revenues from both companies. For Cisco, revenues from governments around the world are going to boost sales, and although we can acknowledge that Cisco has more competitors now than it ever has, its established reliability is worth the price for customers. Another attractive aspect is Cisco's relatively low P/E ratio.

NetApp has been growing in market share modestly over the past few years. This quarter we expect increased revenues and lower expenses. While Oracle and EMC are challenging competitors, truly the demand for these services have increased and all companies will experience growth. When it comes to data management, NetApp has established itself among the competitors and offers unique product differentiation.

Suggestion:  Buy CSCO, Buy NTAP


Let's Follow the Sun, Westbound! A Real Estate Analysis

Economic expansion in the southwest region of the U.S. is expected to continue its recently observed growth throughout the next decade, allowing a great investment opportunity. Economists conclude the key driving factor in this growth is the prevalence of new jobs. Amongst the top ten states with highest amounts of  net jobs include: California, Washington, Arizona, New Mexico, and Nevada. California, although it experiences +9% unemployment, has a net job growth of 4% this year and is expected to increase by another 8% next year. In addition, studies have proven that salaries in the New York City Region are recently falling short of those similar salaries offered in San Francisco. We can conclude that indeed wealth is moving westward into these states, but how are we going to capture it?

Our first suggestion is Taylor Morris (TMHC) which has recently been laying its foundation in Arizona as a home developer that we should keep our eyes on. In a recent post, we discussed the opportunities in the real estate market in Arizona  but this suggestion offers a new point-of-contact for investors to harness the boom. Taylor Morris is a recent IPO and has been offering award-winning eco-friendly home designs that have stunned the Jones next door. We expect to see this company experience growth in the next few quarters and we should watch for obvious indicators for valuation: P/E ratio being most important.

TRI Pointe Homes (TPH) is a different option for investing in home builders, but this company focuses its target market strictly in California. This company is another recent IPO venture that went public at the beginning of the year. TRI Pointe Homes offer a similar product to Taylor Morris in its TRI-e3 design homes. These homes are fabricated with efficient sealants and make an attractive buy for those who can afford them. Similarly, we should look for increased operating revenues and decreased selling/admin expenses.

Capitalizing on the real estate boom in the SW is important and for all of those investors who are emotionally straying away from real estate since the last boom, know this: play it smart, don't play it based on emotion.  Let the statistics help: the Case-Shiller index for the 20 biggest cities rose by 12% year on year this May, the largest rise since March 2006. Yes, the sun is shining, so let's follow it!



Sunday, August 11, 2013

Adding an Upcoming REIT to Your Portfolio

One great way to diversify your portfolio is to include a real estate investment trust. In doing so, you hedge the equity market fluctuations with the real estate market which typically are not highly correlated. If you are not familiar with REITs however, do your research. You need to be sure you understand how they operate before you invest and understand the unique tax implications such as what is return of capital? Also keep in mind that the financial statements cannot be analyzed similarly to our standard companies. The most important piece of information on the income statement is the funds from operation. This is similar to a company's operating income.

One REIT suggestion that Run of the Bull offers is American Residential Properties (ARPI). This recently had its IPO and might experience dramatic upcoming volatility, but its growth potential is armed with low-interest loans and a desperate real estate market. "American Residential Properties, Inc. (ARPI) is a fully integrated and internally managed real estate investment company that is organized as a real estate investment trust. We acquire, renovate, lease and manage single-family properties in select communities nationally. We currently operate in 12 states." As the real estate market continues to gain traction, this company will be right in the heart of the gains.

Watch For: increased funds from operation, possible dividend release.

Chart forAmerican Residential Properties, Inc. (ARPI)

To learn more about this company visit their website:

In summary, yes, there are ways to capitalize on the up-coming real estate growth without having to pick up a paintbrush or hammer.


Thursday, August 8, 2013

Mining a Mind of Mines

“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” -T. Boone Pickens

Sometimes there are two paths to choose from, and sometimes there are thousands. Either way, decisions need to be made based on the desired direction, not on an emotional pull or spontaneous chance. Being true to your own principles is your fuel for a safe voyage. 


Wednesday, August 7, 2013

And That's the Way the Cookie Crumbles...

Investing, quite often, is a bitter-sweet relation of regret and fortune. Today, we will focus on the sweet and leave the bitter scraps for the ignorant.

Crumbs Bake Shop, Inc. offers baked goods in the United States and offers a range of cupcakes, cakes, cookies, and muffins, as well as hot and cold beverages, such coffees, espresso-based drinks, whole-leaf teas, and hot chocolate under the ‘We Proudly Service’ Starbucks coffee program. It is also involved in the wholesale distribution of cupcakes to retailers, which are concentrated in the food service and amusement industries; sale of products for delivery to homes and businesses through its e-commerce division at crumbs.com; and provision of catering services.

Today's buy suggestion indeed is Crumbs Bake Shop. From a technical analysis standpoint, the stock is upward trending and I am putting special emphasis on the rapid decline that we witnessed three months ago when Q1 earnings were released. Our analysis expresses the rapid decline was over-emotionalized and the security changed from over-valued to under-valued within a week. This is an important "green light" for a value investor, but it does not justify a purchase. The selling point in CRMB is the crusade to market their product as a culture more so than a cupcake which increases potential for an acquisition, especially while the company's traction is still in a "pre-heat" stage.

This one, from the bull's mouth, is a buy. But do not wait too long, take the opportunity while it's hot!

CRMB Summary Re-direct