An idea that should be propagated

Sempre é bom dar uma olhada no retrovisor

The article talks about a study that found that stocks have some kind of inertia, i.e. the best stocks in a given year probably will be good performers in the next year.

That is one of the most stupid ideas I ever read, so it should be propagated.
That way the Intelligent Investors can work in a less competitive environment.

Buffett's thought about net income

From BERKSHIRE HATHAWAY INC. SHAREHOLDER LETTER - CALENDAR YEAR 2010

"Let’s focus here on a number we omitted, but which many in the media feature above all others: net income. Important though that number may be at most companies, it is almost always meaningless at Berkshire. Regardless of how our businesses might be doing, Charlie and I could – quite legally – cause net income in any given period to be almost any number we would like."

The Intelligent Investor knows that net income isn't so important as analysts make it sound.

Is SANB11 cheap?

baIs there an oportunity in Santander (SANB11)?

P/book value: 1,16
Book value: 64.877.000.000 BRL
ROE: 5,9%

Would't be reasonable that Santander's ROE will at least get close to it's peers ROE?

Considering that SANB's ROE gets to 15% in 10 years from now, wich would result in a P/E of 7,67, would it be a good investment?

Well, it must be taken in consideration that BBAS3 current P/E today is 7,15 ... so why take the chances with Santander?

Crazy Analysts

See how amazing this experts are.

In 2008, after almost reaching US$150,00 a barrel, oil prices was devalued by more than 70 percent at the end of 2008. So it's was time for the "experts" make their predictions, saying that price will go down further, reaching US$20,00, blah, blah...

Now, with middle east conflicts, oil has reached US$100,00 and we can watch new crazy predictions, totally different.

Petróleo pode atingir US$ 200; valor mais alto desde a Guerra do Golfo

So, what's the use of this "experts"???

Behavioral finance at work

Infomoney this morning:

Analistas mudam visão para Cielo e Redecard e papéis disparam na última semana.

Two sentences show behavioral finance at work:

"Embora o cenário não tenha sido substancialmente alterado, a leitura é de que o próprio mercado exagerou. Daniel Malheiros, analista da Spinelli, lembra que o fluxo de notícias para as duas empresas estava muito negativo, com constantes deteriorações das projeções por bancos e anúncio da entrada de novos concorrentes no mercado, como a Credicard."

How much would I pay for BBAS3

At wich price would BBAS be a safe investment?

First, I must enphasize that my margin of safety is 50% and my discount rate is 7% (I increased 0,5% because of the political influence in the management).

That said, it's important to choose the initial earnings to start with. I used the last 3 years average, wich is around 10,000 millions (in R$).

The payout is 40%.

The initial growth will be 8% a year (that's the double of what seems to be the speed limit for the brazilian economy at the present rate of savings/GDP. I doubled it because it's expected that the financial sector will increase it's share of GDP, and there's plenty of space for it), for 10 years.

After 10 years the growth will be 2%, because it's the average growth rate of brazilian economy during the bad times of the 80's and the 90's, before the current period of bonanza.

The results: 10,000 millions x 40%, growing 8% for 10 years and 2% thereafter, divided for 2 (margin of safety) equals to .... 65,834 millions, wich dividend by 2.860.729.247 shares equals to R$ 23,01.

BBAS3 closed yesterday at R$ 29,35.

Orbe is selling CTKA4

Look this Comunicado ao Mercado.

Orbe now has only 6,48% of Karsten's preferentials (CTKA4).

Brazil may be heading for a subprime crisis

Financial Times published today that Brazil may be heading for a subprime crisis. Finally somebody realized that "borrowing in Brazil is punitively expensive". We have to look to debt service burden in relation to disposable income, instead of just saying that loans to GDP is “only” 46 per cent:

For consumers specifically, the ramifications are serious as the debt service burden has risen to 24 per cent of disposable income and is set to rise further as rates push higher. We expect the burden to rise to an exorbitant 30 per cent by 2012. To put this into context, the US consumer “blew up” when the debt service burden hit 14 per cent (with a current read of approximately 12 per cent). In other words, the Brazilian consumer has twice the debt load from a cash flow perspective relative to a US consumer who is still widely regarded as being over leveraged.

Keep it Simple!

I have been convinced, in my investment story, that it was not necessary a deep analysis to buy a stock in the market. You should look for general indicators, like profitability, margins, competition, market multiples (P/E, Yield) and so on, and start to buy when the asset reaches a nice price, keeping the amount low to the hole portfolio (my portfolio usually doesn't have more than 8-10% of one stock). 

Trying to research everything is, at least, impossible. And it's counter-productive, you have to apply to much time and there's no way to know if you're not wrong, or if something could not goes wrong.

Ibovespa Today

I selected in Fundamentus all the companies most traded, with liquidity bigger than 10 million (market loves this metrics). For the total of 86 I calculated the followings parameters:

Total Companies	86
Median Yield	2,0%
Yield > 5%	11,6%
Yield > 3%	31,4%
Median P/E	13,9
P/E < 10	15,1%
P/E < 12	32,6%

That is, for this group we have a median P/E of 14 and a median yield of 2,0%. Or we can say that for the most "popular" stocks, approximately 2/3 are now trading at a P/E bigger than 12 and a yield lower than 3%.

Sure it's not a bargain!

Behavioural Finance

I'm an advocate of Behavioral Finance, the study of the influence of psychology on the behavior of financial practitioners and the subsequent effect on markets. I think it's even more important then hard analysis.

The most important principle in this field, in my opinion, is availability bias, a major error in which people assess the importance of an event by the ease the event can be brought to mind. In this way, recent news are considered very important, because they are vividly present in our memory, seeming to us something specially important.

Berkshire Hathaway in Brazil ?

Berkshire Hathaway, de Buffett, entra na BR Foods

The Valor Econômico Newspaper published today that, according to Brasil Foods executives, Berkshire Hathaway managers visited the company and started buying its stocks.

Another Example of Market Mood Swings

After PETR4 fall down 23% in 2010, Infomoney announced today that optimism increased, and the stock has soared up in response.
Otimismo com a Petrobras aumenta e ações respondem com valorização na bolsa
And, what's really unbelivable, all the analysis was made because PETR4 gone up by just 1.37% in the period!
For these guys even an insignificant move like that has to a meaning.
Amazing!

COMGAS - CGAS5

BB Investimentos revisa preço-alvo e recomenda compra para Comgás

Today the brazilian investing news website Infomoney stated that BB Investimentos revised the target price for COMGAS to R$ 60,00 and upgraded it to BUY. They listed a bunch of reasons to be optimistic about COMGAS and iadaiadaiada.
Well, I bought COMGAS at R$ 30,00 - 35,00 more than a year ago. Didn't the analysts see that COMGAS was a good investiment then, when it was selling for 30% less?
I definetly LOVE the analysts!

The swings of Mr.Market

Ibovespa sobe; ações da Cielo e Redecard lideram altas no dia

The Valor Econômico Newspaper stated this thursday: CIELO and REDECARD are up 7,33% and 5,81% today. The market exagerated on the fall and is now revaluating the companies, wich are very solid, cash generators and operate in a growing market, said Jacqueline Lison, analist of Banco Fator.

I bought CIELO at 11,10 a few days ago. And you?

Long-Term in Investments. Again.

Today we have another news that goes against what an intelligent investor should pursue. Exame published that after Bovespa has gone down about 10%, investiments in fixed income reached their biggest value since june 2010:
Queda de ações faz fluxo para renda fixa ser o maior desde junho


See what says Graham:

Basically, price fluctuations have only one significant meaning for the true investor. They provide him with an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times he will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies.

Long-Term in Investments

Yesterday, tuesday 15, Infomoney, a supposed news investing site, announced that USA future market was lower because of indicators disap­pointments.
Bolsas dos EUA em baixa, pressionadas por decepção com indicadores

Today, the same site says that now USA future market advances exactly for the opposite reason: good indicators!
Bolsas dos EUA avançam com olhares voltados para indicadores e resultados

CTAX4 - Contax

Look at who bought CTAX4:

"Rio de Janeiro, 02 de fevereiro de 2011 - De acordo com o estabelecido no Oficio Circular CVM/SGE/001/03, de 22 de janeiro de 2003, e no artigo 12, caput, da instrucao CVM n. 358, de 03 de janeiro de 2002, a Contax Participacoes S/A ("Companhia") (Bovespa: CTAX3 e CTAX4) comunica ter recebido de SKOPOS
ADMINISTRADORA DE RECURSOS LTDA. e SKOPOS INVEST - ADMINISTRADORA DE RECURSOS INTERNACIONAIS LTDA., correspondencia datada de 02 de janeiro de 2011, na qual informam ter atingido participacao relevante de 15,99% das acoes preferenciais da CONTAX PARTICIPACOES S.A, passando a deter 5.867.100 acoes dessa especie, o que nao altera a composicao do controle ou a estrutura administrativa da mesma."

BVMF3 - BMF Bovespa

Ações da BM&F Bovespa caem forte, com possível chegada de concorrente

That is another example of a good company being hammered by Mr.Market due to bad news. Will it eventualy become a bargain? I hope so.

The Intelligent Investor is waiting to catch this beauty if it becomes cheap enough to be a good investiment.

DTEX3 - Duratex

Duratex has just released its earnings for 2010.
Still very difficult to analyse, since in 2008 DTEX acquired Satipel.
But a simple calculation shows that the medium ROE for DTEX in 2005 to 2008 (before the fusion) is 16,6% (not considering the best 3 quarters). Applying this rate to the current net worth gives an earnings of 430 million.
If we allow an increase in margin because of the scale gain and consider then a normal earnings of 500 million, DTEX would be trading with a P/E of 15.
I think it's to much, because its sector is today booming!

What this guy is talking about?

You can't believe whatever you read. See, for example, what this expert says about IBOVESPA:

Luiz Fernando Figueiredo, da Mauá Sekular Investimentos, Ex-BC
EXAME.com - É interessante investir na bolsa neste momento?
Figueiredo - A Bovespa já caiu bastante neste ano enquanto as bolsas americanas subiram. Já estamos chegando em um nível em que a bolsa brasileira passa a ser interessante de novo. Com 62.000 pontos, o Ibovespa estaria sendo negociado a um múltiplo equivalente a 9 vezes o lucro das empresas incluídas no índice. Isso seria um sinal de que a bolsa já começa a ficar mais para barata do que para cara. Não estou dizendo que vai chegar a 62.000 pontos, mas que me parece interessante comprar nesse nível. O lucro médio das empresas da bolsa cresceu 27% em 2010. Neste ano, vai ser 17%, o que ainda é muito bom.

Melhora Global ofusca brilho do Brasil

Today in Estado de São Paulo: "As virtudes brasileiras foram exageradamente elogiadas nos últimos anos e as limitações do País foram pouco enxergadas", afirma Paulo Bilyk, sócio da Rio Bravo Investimentos.

One more example of the moody behavior of Mr. Market. He sees just what he wants to see. The herd just repeat the mantra of the moment.

USA x Brazil P/E

http://www.valoronline.com.br/impresso/investimentos/119/382768/nuvem-passageira

As stated by an article published today in the Valor Econômico newspaper , the diretor of Schroders Brasil, Beto Scretas, said that it doesn't make sense the brazilian market to be valued at a lower PE than the US market, because of the different growth prospects.

The intelligent investor knows: it's foolish to pay high for future growth.

Let's promote this kind of nonsense

Do you know a way to send spam? It would be very useful...

Conheça o HiLo Activator
"Como se vê, quando está acima dos candles (‘escada’ vermelha), o HiLo Activator serve como Trailing Stop de venda, e quando está abaixo (‘escada’ verde) utiliza-se em operações na ponta da compra."
"Entretanto, para realmente constatar sua eficiência, é essencial que o trader utilize as ferramentas de análise estatística para balizar cientificamente sua conclusão."

Bullshit! 

Presidente da Cielo diz: "Alguns dos movimentos de queda das ações se intensificam exageradamente"

Is the present moment the perfect exemple of a moment when a good company or setor falls in disfavor with the market, offering an unique oportunity to buy a bargain? Is the current succession of bad news enough to justify a company like Cielo or Redecard to be valued at a P/E of 8,5? Those are companies with a payout between 90 and 100% with little need for Capex (investiments or capital expenditures). The dividend yield today is 10% or more.

Benjamin Graham tought us that Mr. Market is prone to overreact on the ups and on the downs.

The intelligent investor waits until he sees a condition like this.

Big Consumer Cow

There are cash cows and there are also the big consumer cows, always thirst for more milk, like this one:

Termina hoje o prazo para participar de oferta da Magnesita

Average ROE for Banks in the past 5 years

Metrics	BBAS3	BBDC3	ITUB3
Avrg ROE last 20Q	23,4%	23,7%	25,1%
Avrg ROE worst last 16Q	19,4%	20,5%	22,6%
Expected earnings	9.366	9.460	12.910
Avrg P/E	8,80	9,62	10,22