Equity Analysis: Is the Storm Over at Mattel?

Four days after Mattel CEO is ousted, the CFO and new Interim CEO had an investor call to outline the financial performance.  As a follow-up to the equity analysis from the previous articles, there is evidence that the storm could be over for Mattel and 2015 will face tailwinds and much easier comps as the company looks to recover from a disaster in 2014.  For a summary of the earnings call discussion and 2014 year end performance, click here.

Reconsidering REITs As An Investment In Today’s Environment

This article is an attempt at estimating frothiness in the US REIT market.  Looking at the previous 18 months of data, it is evident that the meteoric rise in REITs is largely attributed to falling 10-year government interest rates.

The alarming take-away is that REITs’ responsiveness to interest rates is nearly twice as large as the usually most responsive fixed-income group – long-term bonds.

For the full story, click here.

Lofty Dividends with MEGA Brands in Mattel’s Hands

Given the stock market’s increased interest in Mattel, Inc. and the fact that it has now reached my price target range from 12/25, I decided to play devil’s advocate (as anyone should when evaluating stocks to invest in) and take a closer look at MEGA Brands’ historic performance and Barbie’s decline in popularity.

Note, there is now a Portfolio Performance Tracker that can be accessed on the Value Portfolio menu bar.

To see the follow up article click here.  

What is value investing in the stock market?

Value Investing is the time-tested approach to simply evaluating the stock market and choosing the best individual stocks to invest in.  Value investing relies upon strong underlying fundamentals that set the stock apart from the rest of the stock market.  Value investments are conservatively valued and provide opportunity for strong total returns, with a strong “margin of safety” should adverse events occur.

Let’s be clear however.  As Graham points out in Security Analysis, it is not an exact science: “The essential point (of intrinsic value) is that security analysis does not seek to determine exactly what is the intrinsic value of a given security. It needs only to establish either that the value is adequate -e.g., to protect a bond or to considerable lower than the market price. For such purposes an indefinite and approximate measure o f the intrinsic value may be sufficient.” (Graham, p.66)

The premise behind value investing or picking the best value stocks is to minimize the risk of investment as defined by Benjamin Graham – permanent loss associated with acquiring a stock.  If the stock is conservatively valued when purchased and held, the investor should be indifferent to the overall stock market increasing or decreasing.

Labeling a stock a value investment does not make any assumption of its overall stock market outperformance over any defined period.  Never let anyone convince you that they can accurately predict what will happen in the market and which stocks will perform the best.  In some instances, value stocks perform worse than the overall market (its financial conditions deteriorate or simply the market speculatively favors other companies).

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