Elon Musk offers to buy all of Twitter

Elon Musk is reported to have made a takeover offer for all the stock he doesn't already own in Twitter. The offer price is $54.20, compared to the current price of $45.85, an 18% premium. This level of offer makes it hard for the board to turn down. Interesting times ahead, the Twitter board looks as if it will have to recommend Musk's takeover.

Navinder Singh Sarao - Flash Crash

Somehow, the story of Navinder Singh Sarao fascinates me. He is said to have caused the Flash Crash of 2010. But then, having made so much money he was then a sucker for wide boy scammers who took his money off him.

He's banned from financial trading now, but here's an idea, why don't the authorities put him under close supervision and have him go to work to earn the money back? Then anything left over gets split 50/50 charity and Sarao, so he does get rewarded for his efforts beyond serving time for his crime and pays to repair society. Just an idea, having him sit in his parents house and unable to pay the money back seems like a waste of time if you ask me.

Here's an article on Sarao https://www.livemint.com/Money/TYUUtwYOj0VIPhFFyLICQM/How-flash-crash-trader-Navinder-Singh-Sarao-went-from-genius.html

Crash 2018

Only a month ago I said that I was negative for 2018 and I told you why.

>> See Here <<

Now we have a crash across all stock markets. It was to be expected. Too much uncertainty exists in the global arena, and too much wealth concentrated in a few hands. Plus we have not had structurally meaningful reforms to economies. All that happened post the GFC was bail outs and doubling down. Inefficiency and incompetence was rewarded.

For the value investor, right now is a golden opportunity. Have you been a frugal investor and kept your cash in the bank? Yes? The next few weeks is the time to venture out and begin looking for bargains. Study my portfolio from the following site;

http://www.siliconinvestor.com/portfolio.aspx?fid=521

My suggestion is to look for companies that everyone else thinks are too boring for words. If your neighbours have never heard of them, then maybe that's a good thing and you should check them out - the company that is, not your neighbours.

[Update @ 03/04/2019 - this portfolio is still ahead 28% despite the 2020 COVID-19 Crisis. That's testament to conservative investment strategy. The real crash wasn't 2018, but 2020, but with my strategy it doesn't matter ]

Greenbrier Companies Inc (NYSE: GBX)

My latest stock pick is railcar and marine manufacturer Greenbrier Companies Inc., based in Lake Oswego, Oregon.

Check them out here: https://finance.yahoo.com/quote/GBX?p=GBX

I make no secret if my liking for solid industrials like these. But one thing to note is many pundits are picking them to collapse. I don't see that happening and expect them to do well.

[Update @ 20/11/2019: now solidly in the buy range for bargain hunters ]

Portfolio Performance

It's been a year since I posted my portfolio on this blog. As a whole the portfolio is up 54%, with Oshkosh up 107%. Two other favourites of mine, Trinity Industries and Caterpillar are also up more than 70%.  If you want more picks like these then I suggest my readers subscribe to the Stock Tip Hotline.

Check out the portfolio here http://www.siliconinvestor.com/portfolio.aspx?fid=521

Stock Tip Hotline explained here http://kenhorlor.blogspot.com/p/stock-tip-hotline_18.html

We are investing now as well, so if you've got a good business to sell, let me know. Even if it doesn't meet our strict requirements, we may offer the business on our blog to our very wide readership.

Investing now explained here http://kenhorlor.blogspot.com/p/investment.html

Snap Inc

We've seen the hype, Snap has listed on the NYSE and the company now has a market capitalization of around 28 billion dollars. It's not a profitable business, so why the backing from investors? The only answer must be that investors are taking a punt, or gambling in other words.

By market cap, Snap is now worth more than Terex (3.51), Genesee & Wyoming (4.60), Martin Marietta Materials (14.22), Navistar (2.38) and Winnebago (1.14): they all add up to 25.89 billion. Call me old fashioned but I just ran off a list of companies that actually do something. Snap lets you do silly things with photo's and you share them. Fun yes, but is this a real thing with real value?

So by my measure Snap is not something to invest in.

Three or more Essential Reads for Investors

If you read nothing else in relation to investing then these are my picks, in order of importance, read them in numerical order:-

1. The Intelligent Investor by Benjamin Graham.

Get the edition with a forward by Warren Buffet and annotated by Jason Zweig. It is a timeless classic full of practical advice. You may have heard of it and discounted simply because it isn't trendy, or some such, well don't, the book is as good as people say. Follow the advice and you'll rarely go wrong.

2. Common Stocks and Uncommon Profits by Philip A Fisher.

The 'father' of growth investing, Fisher follows the 'scuttlebutt' approach. Find a good business and learn about it, check it out in the flesh, how is it run, is this a good business is it? Of course you don't believe rumour and all that crap, but there are things to take notice of and Fisher tells you how. Ben Graham references Fisher and points out how talented he is, and so the readers of both should take note; follow Graham for soundness and when your skill improves or you're very talented, then you may graduate to Fisher.The truth lies somewhere in the middle, be a Ben Graham type with room for some of Fisher in there somewhere.

Special note here for Peter Lynch's Beating the Street; it is a very valuable book too and could be read in conjunction with 'Common Stocks', it shows how keeping it simple can be a real winner. I only add it as a mention as you don't have to read it if you've got 'Common Stocks' on hand.

3. Freakanomics by Steven Levitt and Stephen Dubner

This will make you think about everything. Basically, if you provide the incentives, you will get it, even if you didn't intend to.

Special note: for the real estate fanatics an often overlooked book that is the first and last word on investing in real estate: Jones on Property by Bob Jones. The short message is; there is glamour in industrial. This book covers everything any real estate investor needs to know. It was published in 1977 in New Zealand and covers that market and Sydney Australia. The author is a successful investor, now Sir Robert Jones.

Head over to the forum to discuss the best investment reads.

My 3 Rules for Stock Market Investment

Boiled down I have three broad rules related to stock market investment.

1. Boring is best

If the industry is out of date, no-one wants to know about it any more, isn't sexy, isn't highly technological, people laugh if you mention it or better still, have never heard of it and have no idea what it does exactly, then I'm interested in it.

2. Don't pay too much

That great company may be the bees knees, have great management, reasonable debt levels and has been making solid profits for a hundred years; but if it's over-priced it's still a no go.

3. It must be solid

The company must be respected, well managed, have a dominant position within its market, have brands that resonate, and been around quite a while.

My advice: take your own advice and use these three rules, then you'll likely do better than any investment adviser. Want a snapshot of how good returns can be? Check this out >>Do Not Click Here<< Nah, go on you can click it, what it shows is that by applying my three rules you can achieve better than a 40% return in less than a year.

To discuss please visit the forum. Your ideas are valued.

Update: Advantages of Investing in Stocks

I have pointed out how investing in stocks or shares can achieve outstanding returns. I tipped Bradken (ASX: BKN) back then, you can read about it here >>>http://kenhorlor.blogspot.com/2016/06/advantages-of-investing-in-stocks.html

Check out Bradken now; AUS$3.19

Jan 21 they were AUS$0.38

Jun 9 they were AUS$1.22

As at Nov 30...they are AUS$3.19

That's just one year; AUS$50,000 invested upon my tip on June 10, would have acquired 40,000 shares (rounding and allowing for brokerage and such), and that stake would now be worth AUS$127,600.

Also, check my portfolio tracker, now up 48% this year. http://www.siliconinvestor.com/portfolio.aspx?fid=521

My favourites, Oshkosh (NYSE: OSK ) and Trinity Industries (NYSE: TRN)  are up 103% and 72% respectively

NYSE: Harley-Davidson

Is Harley-Davidson (NYSE: HOG) a good buy I keep asking myself.

I enjoyed the book "Growing Up Harley-Davidson" by Jean Davidson. It's the kind of book that grows on you over time. But something that struck me was how much motorcycles were part of everyday life back in the day. Motorcycles were used to get to work, go anywhere, and with sidecar they carried the family too.

Now in most of the developed world, motorcycles are a luxury item for the most part, maybe sport bike at times too, and tourer rarely.

Harley-Davidson sit at the top of the tree, they're big and hardly a sport bike. They're too expensive to be a family get around. They appear to be a status symbol with a loyal following. And that following is getting older all the time. Evidently the average age of people who attend the bike gathering at Sturgis in the northern Black Hills of South Dakota, is 52. All the hotties are professional models and shipped in and paraded around. Many of the riders haul their bikes in, ride them around for the event and then haul them behind their RV back to where they came from. A bit lame eh.

Where are all the young people getting into a Harley? Is the Fast and Furious generation interested in these bikes?

In the developing world the scooter or step-thru is the motorcycle of choice. They do everything on these bikes, but Harley-Davidson does not make anything like that. I read how sales of step-thu's are taking off in China. One example was of a gum boot manufacturer (Wellington's) setting up in China by taking over a bicycle factory. The workforce were all the previous bicycle workers and they duly arrived at work riding their push bikes. Within a year and on higher pay they had all bought a step-thu motorcycle.

If you think about all of Asia being like the above example, Harley-Davidson are missing out completely.

Then there are scrambles (Motocross) and trials bikes. Often they're two-stroke. Harley-Davidson has nothing in this segment either. They got out of Buell, which I understand fitted into the Enduro segment.

But following the Peter Lynch, Beating the Street type of thinking, the Harley-Davidson company may still represent value to an investor. The brand is worth a lot, and perhaps is not fully exploited (have they got a Kardashian on board?).

Currently it is hard to find an NYSE company that is sound and cheap. Harley-Davidson appears to be that at a P/E of less than 16. They also pay a dividend.

I'm of two minds and am interested in what you all think. Does Harley-Davidson need to broaden its offering?

Portfolio Tracker Update

Making a small adjustment, I've sold half of my under performing Freight Car America and bought Federal Signal. The loss on Freight Car I've reflected in the share cost for that stock holding (put the share cost up). 

Apple Inc

Is Apple Inc down and out? If you only read the responses to their latest earnings report then you'd be excused for thinking they were.

Check this out - the stock price for Apple Inc at the close of business Friday May 4, 2001 was $1.84. The price on May 4 2016 was $94.19. 

10,000 shares bought at 1.84 = $18,400

10,000 shares sold at 94.19 = $941,900

That's a capital gain of $923,500. I think you'll agree, a pretty nice return.

Naysayers can be found everywhere. They're often wrong. Apple was thought to have peaked in 2012. Their price then was $80.75.

Now I'm not guaranteeing staggering returns like these. But pick a good company and by sticking with it, you can do a lot better than with real estate or any other form of investment for that matter.

Check This Out

Check out this portfolio (see new adjustments), it may just impress. Not even a year has past and this portfolio is up more than 50%. The trick is to think old fashioned. Do you jump on all the latest bandwagons? Well don't, they almost always lose money. Are you excited by dirty metal bashing industries? Great, think like that. 

Here it is...http://www.siliconinvestor.com/portfolio.aspx?fid=521

Look at Trinity Industries, up over 70%. Caterpillar up 55%. Oshkosh up over 100%. You never hear people banging on about how great these companies are do you. Think margin of safety, I believe Trinity offers margin of safety based on its relatively cheap price compared to its peers. 

Update (@27/06/2017): I have adjusted the portfolio and decided to take most of my Caterpillar gains and invest those in Paccar which appears cheap for such a great company right now. My thinking here is that Caterpillar's restructuring will take some time while Paccar represents quality truck brands, and Paccar is still making money. I'm selling half of my Caterpillar shares, those that remain represent the bulk of what the 1,000 original shares cost in the first place. Think about that for a minute.....18 months after purchase, they've just about paid themselves off and I can go after another great company. Note that the performance of the whole portfolio now drops after this new position is taken, but the whole has grown by the gain made on sale from the Caterpillar sale. And think, where I'm based this capital gain is tax free.

Update (@13/08/2018): Note this portfolio is doing very well. If you check in from time to time you will see that each stock fluctuates, but over time they all do well. That's because they're conservative picks, run cautiously and adroitly. They're not the next big thing, which usually crashes soon enough.

Update (@2/09/2019): I have one bad performer, FreightCar America Inc., but we don't go along with selling in a panic, we're sticking with it.

Update (@20/03/2020): The markets have been severely impacted by the COVID-19 crisis, but this portfolio is still ahead, up 12.7% since inception. The lesson; hold conservative value stock like these. Caterpillar is still up 59%, Federal Signal by 102%.

(Note: These opinions are information only and do not constitute investment advice. If you need investment advice on these stocks or anything else for that matter, talk to your recognised and professional investment adviser. Better still, do your own research and act on it confident in your own ability.)

New Zealand Investors

I've been thinking long and hard about the Auckland house price inflation. The banks have a role to play, they're willing to lend on real estate almost exclusively. But the way the New Zealand investment landscape is structured also has a major part to play.

Broadly speaking a New Zealand investor has three options:-

1. Buy investment real estate,
2. Start or buy a business, and;
3. Invest in shares, bonds, bank deposits or government stock - passive investment in other words.

Before any of the three are implemented, paying off debt must be a priority. Assuming that is achieved (at least substantially), and the investor maintains a sensible retirement superannuation account, then the three options present themselves this way:-

1. The investor buys houses or residential flats and apartments. The ideal is to invest in industrial and possibly commercial real estate, but the reality is residential purchases are easy to achieve. It's easier for a small investor to get their foot in the door with residential property. For starters, they needn't be registered for Goods and Services Tax (GST).

2. Buying or starting up a business is limited by the experience of the investor and the size of the market. Some people can't run a business or they don't have skills in the right areas to do so. It's a risky option for most.

3. Then lastly, they can access the New Zealand and Australian stock exchange listed companies very cheaply and easily. They only pay tax on those gains that are realised (if long-term investment then only the dividends are taxed). Outside of that however, if the investor buys shares in companies listed on the NYSE, Nasdaq, LSE, Borse Frankfurt or elsewhere, then over a certain threshold they'll pay tax on gains when they occur, not only when realised.

Conclusion:

Investors are strongly encouraged to invest in real estate, which has to impact Auckland house prices, given the size of that market. Investors cannot start or buy a business as the opportunities are scarce, given the relatively small scale of commerce in New Zealand. Allied to that, investors are discouraged from spreading their net wider, effectively limiting their share investments to the local scene. No wonder then that investor money pours into Auckland housing and real estate in general.

Recommendation:

Allow investors to invest in shares outside of New Zealand, on the same basis as they invest in shares listed in Australia, that is, invest in any company listed on recognised exchanges in the USA, Canada, Japan, the U.K., and Germany (elsewhere by approval). By doing this, money would be diverted from the overheated Auckland housing market. The effect would be to lessen demand for Auckland houses, and prices would stabilise.

(The change to NZ's tax regime regarding investment in foreign shares has had a knock-on effect to the Auckland housing market. This is the law of unintended consequences)

Edit to add (off the topic but looking at investment as a NZer investing overseas)...

The following NZ Herald article traverses many of the issues a NZ investor faces when investing overseas...http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10738730

The article mentions hedging, and what I've done in the past is not very sophisticated but effective, I've maintained a US Dollar account with a NZ bank. You're not dealing with a foreign desk, but the money is effectively offshore. Many people do not realise they can have a US Dollar account with a NZ bank. The good part of this is you get higher level people within the bank with better advice attached (the down side is that over a certain amount your name gets on lists in New York and you'll be bugged by investment houses on Wall Street. This is a freedom of information thing, I recall an outfit by the name of Whale Securities was one such calling all the time - look them up they were on Wall Street - you have to develop a thick skin and know how to say no).

Most 'experts' recommend using funds, such as unit trusts. My experience is they don't do that well. I'd guess my returns over a 20 or more year period would be about 1% annually going down that road. Don't be sold unit trusts.

Three Industrial Picks

On the back of my outstanding success picking my last industrial stocks, I thought I'd stick my neck out and give it a go again. This time won't be so easy, but each company has a lot going for it.

1. Emerson Electric Co (NYSE: EMR)

When I mention this company I always start by saying they make InSinkErator. Everyone knows that name, right? But they make so much more, this is a true industrial giant. The great Ben Graham liked this company and he goes on about them in his seminal book The Intelligent Investor. Think margin of safety here. There isn't much to go wrong. But over time your investment will grow in value if you hold and buy low enough. They're not real cheap, but with a P/E of 14.33, they're not expensive either.

2. Oshkosh Corp (NYSE: OSK)

Not a clothing brand. They make trucks, fire and access equipment, military gear, waste trucks. Think of those glorious airport fire tenders, or the front loading waste trucks, they make them. But also army trucks. There's a lot to like about this business, they make quality stuff. Their dividend yield is not as good as Emerson though, so go underweight in them for that reason.

3. Trinity Industries Inc (NYSE: TRN) 

Based in Dallas Texas, you never hear this company talked about. It's a great business. They make railway equipment, inland barges, and expanded shale for lightweight concrete. They also make transport equipment, such as those roadside barriers. This last area is where the story gets interesting, a private prosecution was successful (subject to appeal no doubt) in proving their Texas A&M engineering designed barriers were unsafe. Now I'm not going to say whether the result was correct or not, simply because I don't know. But what is worth mentioning here is that news like that punishes a company hard, and they're bleeding while still remaining profitable and comfortably so. They sit on a P/E of 3.99 at present. Can you believe that? What about buying the whole thing, lock stock? It's a bargain with a market capitalisation under 3 billion. Realistically that would work out at 5 as any takeover would lift the price. 

(Note: These opinions are information only and do not constitute investment advice. If you need investment advice on these stocks or anything else for that matter, talk to your recognised and professional investment adviser. Better still, do your own research and act on it confident in your own ability.)

Joy Global Tip and Deere

Earlier this year I added two companies to my tips, in addition to Caterpillar. They were Joy Global and Deere. If my readers had acted on this tip the next day, the following would have resulted by the close of trading on the 8th of April:-

Joy Global has returned 61.25% to investors in capital gain in just over two months.

Deere has returned 5.99% in capital gain.

Now I realise this is a very short time period. These are stocks to buy and hold for the long term, with Joy Global being the most vulnerable amongst the stocks I've tipped (biggest risk, also biggest gain, that's the way it goes, it could also flip the other way).

But get this, if you had invested an equal amount in each tip, you'd have made 50% excluding any dividend in just a few short months. 

I'm good at this, very good. 
(Note: These opinions are information only and do not constitute investment advice. If you need investment advice on these stocks or anything else for that matter, talk to your recognised and professional investment adviser. Better still, do your own research and act on it confident in your own ability.)

Caterpillar Tip

I tipped Caterpillar (NYSE: CAT ) back on Saturday Sept., 26 2015. If you read that post and acted on it the next Monday, then at the Friday April 8 close you'd have a 16.55% return on your investment through capital gain alone (not counting any dividend, one qualifying payment in that period).

(Note: These opinions are information only and do not constitute investment advice. If you need investment advice on these stocks or anything else for that matter, talk to your recognised and professional investment adviser. Better still, do your own research and act on it confident in your own ability.)