If you are a first timer, please read the following pieces first. It will provide you with important background information.
1. Why I created this blog?
2. How am I going to operate this blog?
The following is a speech I gave at a local toastmaster club.
I received an email last Thursday for the citizenship interview. I am going to be a United States citizen.
Becoming a US citizen is really hard for an immigrant from China like me. It took me 12 years. Actually, if I earned something really hard, I will treasure it. And often, if I get something out of nothing, I trash it. That's human nature.
According to a Gallup survey last year, 37% Americans consider China to be the world's leading economic power; only 39% choose the United States. I am waiting for the 2010 numbers. And Americans as a whole are pulling their investment dollars from domestic equity funds and putting them into China fund and other emerging markets last year. They voted by their dollars.
In 2009, all my savings stay in the United States. I voted by my dollars and my application for the US citizenship. I believe in the long run, the United States will maintain her status as the number one economic powerhouse because she has a wonderful self-adjusting system. The self correcting system will ensure long term prosperity despite the current economic difficulties.
Three recent events strengthened my faith in the system.
Event number one: The presidential proposal to reestablish the great wall between commercial bank and proprietary trading.
After lessons from depression, people learned that unchecked greed backed by other people's money will cause disaster. And congress passed laws to separate commercial bank and speculative trading. The United States is depression free for 50 years until people began to take it for granted. In 1996, the great wall was torn down. And after only 10 years, the United States had her first real encounter with depression over more than half a century. To save time, I don't even want to dive into the serious conflict caused by peeking into your clients' trading account while trading for your own account.
Event number two: The new healthcare reform.
The link between health insurance and employment is preventing employees from becoming entrepreneurs. If I can find affordable health insurance without pre-existing condition restraints outside my employment, I am more likely to set up my own business and hire people.
Event number three: The election of Scott Brown.
Although the healthcare reform has many potential benefits, the huge cost and pork barrel spending in a high deficit environment worry most people. People elect Scott Brown to break the super majority enjoyed by Democrat in the Senate. And the congress has to reduce the scope of healthcare reform and hopefully eliminate all the pork barrel spendings.
I see a pattern. After fixing a problem, the system goes on smoothly for a while. And then it goes astray and has another problem. Then the system finds a solution to fix the new problem with minimal social and economic cost. Of course, after a while, the system will go strayed again. And I believe, it will find a solution and fix itself again.
Sunday, January 31, 2010
Bought FNF
If you are a first timer, please read the following pieces first. It will provide you with important background information.
1. Why I created this blog?
2. How am I going to operate this blog?
I bought 500 shares of FNF at $12.99 on January 28, 2009. Since I moved my account from Scottrade to Wellstrade, I get 100 commission free trades annually.
I had a little history with FNF. I first bought 400 shares at $15.85 on December 12, 2007. And I sold all my FNF at $18.32 on February 5, 2009. During the holding period, I received $420 dividend. I paid about $14 for the two transactions. All in all, that is 21.96% annual return in 2008. Not too shabby. At the time of selling, I wrote to myself:
"FNF is the largest title insurance company. It acquired the third largest player Land America, which landed in the bankruptcy court in the 2008 financial storm, on the cheap cementing its top spot in this industry. Its management focuses on returning value to shareholder. You can see this through its series buying and selling businesses. It pays a healthy dividend. It maintains the highest margin in the industry through tight cost control. It is a great bargain if I can buy it at a big discount of its book value (about $12.72 per share). It was sold at $18 per share at a reasonable gain."
Fast forward to Sep 2009, its book value grew to $14.09. The company has not reported its 4th quarter results yet. But I will not be surprised if their book value is around $15 at the 4th quarter 2009. I am buying at about 15% discount at its book value. To finance its purchase Land America, FNF sold shares at $19. So how much does FNF worth now? I believe its intrinsic value is somewhere higher than its book value, maybe around $19.
1. Why I created this blog?
2. How am I going to operate this blog?
I bought 500 shares of FNF at $12.99 on January 28, 2009. Since I moved my account from Scottrade to Wellstrade, I get 100 commission free trades annually.
I had a little history with FNF. I first bought 400 shares at $15.85 on December 12, 2007. And I sold all my FNF at $18.32 on February 5, 2009. During the holding period, I received $420 dividend. I paid about $14 for the two transactions. All in all, that is 21.96% annual return in 2008. Not too shabby. At the time of selling, I wrote to myself:
"FNF is the largest title insurance company. It acquired the third largest player Land America, which landed in the bankruptcy court in the 2008 financial storm, on the cheap cementing its top spot in this industry. Its management focuses on returning value to shareholder. You can see this through its series buying and selling businesses. It pays a healthy dividend. It maintains the highest margin in the industry through tight cost control. It is a great bargain if I can buy it at a big discount of its book value (about $12.72 per share). It was sold at $18 per share at a reasonable gain."
Fast forward to Sep 2009, its book value grew to $14.09. The company has not reported its 4th quarter results yet. But I will not be surprised if their book value is around $15 at the 4th quarter 2009. I am buying at about 15% discount at its book value. To finance its purchase Land America, FNF sold shares at $19. So how much does FNF worth now? I believe its intrinsic value is somewhere higher than its book value, maybe around $19.
Thursday, January 21, 2010
Sold KMX
If you are a first timer, please read the following pieces first. It will provide you with important background information.
1. Why I created this blog?
2. How am I going to operate this blog?
On Friday, Dec 18, 2009, Carmax (KMX) reported a good quarter.
From its earning release, it states,
"Net sales and operating revenues increased 19% to $1.73 billion from $1.46 billion in the third quarter of last year. Comparable store used unit sales increased 8% for the quarter. Total used unit sales rose 9% in the third quarter. The company reported net income of $74.6 million, or $0.33 per diluted share, compared with a net loss of $21.9 million, or $0.10 per diluted share, in the third quarter of fiscal 2009."
It took the market by surprise. Its share shoot up 7% or $1.53 in one trading session. I sold all my shares at $23.22 and paid $7.24 for this transaction. I bought KMX first in December, 2007 and added in June 2008. In the two years holding period, I made about 39.48%, satisfactory but not extraordinary. KMX has a unique business model, a strong balance sheet and a great management. It stands to benefit from current environment grabbing more market shares from its competitors. Its margin expanded, its sales increased and its cost reduced. Moreover, I don't think its current valuation, at almost two years high, is too rich.
I am selling primarily for portfolio management purpose. I am raising cash at my taxable account for a bigger opportunity, a more undervalued opportunity and a more controllable one.
A friend has asked the merit of stop loss order. Here is what Seth Klarman said in his famous and expensive book -- "Margin of Safety".
"Although this strategy may seem an effective way to limit downside risk, it is, in fact, crazy. Instead of taking advantage of market dips to increase one's holdings, a user of this technique acts as if the market knows the merits of a particular investment better than he or she does."
1. Why I created this blog?
2. How am I going to operate this blog?
On Friday, Dec 18, 2009, Carmax (KMX) reported a good quarter.
From its earning release, it states,
"Net sales and operating revenues increased 19% to $1.73 billion from $1.46 billion in the third quarter of last year. Comparable store used unit sales increased 8% for the quarter. Total used unit sales rose 9% in the third quarter. The company reported net income of $74.6 million, or $0.33 per diluted share, compared with a net loss of $21.9 million, or $0.10 per diluted share, in the third quarter of fiscal 2009."
It took the market by surprise. Its share shoot up 7% or $1.53 in one trading session. I sold all my shares at $23.22 and paid $7.24 for this transaction. I bought KMX first in December, 2007 and added in June 2008. In the two years holding period, I made about 39.48%, satisfactory but not extraordinary. KMX has a unique business model, a strong balance sheet and a great management. It stands to benefit from current environment grabbing more market shares from its competitors. Its margin expanded, its sales increased and its cost reduced. Moreover, I don't think its current valuation, at almost two years high, is too rich.
I am selling primarily for portfolio management purpose. I am raising cash at my taxable account for a bigger opportunity, a more undervalued opportunity and a more controllable one.
A friend has asked the merit of stop loss order. Here is what Seth Klarman said in his famous and expensive book -- "Margin of Safety".
"Although this strategy may seem an effective way to limit downside risk, it is, in fact, crazy. Instead of taking advantage of market dips to increase one's holdings, a user of this technique acts as if the market knows the merits of a particular investment better than he or she does."
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