Tag Archives: JNJ

Capitulation! Throwing in the Towel to Ride the Bull

Ride the BullWMTForget owning gold bullion and “cheap” precious metals mining companies  that are priced for bankruptcy or dissolution. The pain of temporary underperformance is too great. I have always liked franchise-type companies and now it is time to ride the trend. I will buy these companies this morning. How will I fare over the coming years?





How do you think these investments will turn out? Why? Will this happen?

FALLING OFF TRHE BULLNot a chance with the Fed guarantee of any buy the dip strategy. What alternative do you have than buying Fed-juiced stocks?

See Video below. Schiff gets laughed at for suggesting gold.

When the Fed gets the economy to “escape velocity” then it will be able “exit” QE-to-infnity. Yes, when we see a herd of elephants flying over New York City, then we will know that day has come.

I don’t want to be like Seth Klarman–foolishly conservative: http://www.zerohedge.com/news/2013-05-05/seth-klarman-expains-when-investing-its-hardest-and-why-he-not-joining-momentum-trad

Most U.S. investors today have a clear opinion about what everyone else has no choice but to do. Which is to say, with bonds yielding next to nothing, the only way investors have a chance of earning a return is to buy stocks. Everyone knows this, and is counting on it to remain the case. While economist David Rosenberg at Gluskin Sheff believes government actions could be directly or indirectly responsible for as many as 500 points in the S&P 500, or 30% of its current valuation, traders have confidence in Ben Bemanke because betting that his policies will drive equities higher bas been a profitable wager. Bernanke, likewise, is undoubtedly pleased with these speculators for abetting his goal of asset price inflation, though we all know that he will not call them first when he decides to reverse direction on QE. Then, the rush for the exits will be madness, as today’ s “clarity” will have dissolved, leaving only great uncertainty and probably significant losses.

Investing, when it looks the easiest, is at its hardest. When just about everyone heavily invested is doing well, it is hard for others to resist jumping in. But a market relentlessly rising in the face of challenging fundamentals–recession in Europe and Japan, slowdown in China, fiscal stalemate and high unemployment in the U.S.– isthe riskiest environment of all.


Buffett’s Investments in Franchises

A long-term durable competitive advantage in a stable industry is what we seek in a business.

I look for businesses in which I think I can predict what they are going to be like in ten to fifteen years’ time. Take Wrigley’s chewing gum. I don’t think the Internet is going to change how people chew gum.

—Warren E. Buffett

Old, established and Predictable

Predictable products equal predictable profits. It seems Buffett loves OLD, ESTABLISHED companies. Note the proclivity in his private life to repeat what he likes—burgers and Cherry Coke with Sees’ Candies frenzy as desert.

(Read/listen to Buffett discuss Coke and P&G during his lecture at the University of Florida: http://wp.me/p1PgpH-1N and the videos start: http://www.youtube.com/watch?v=ogAxzPaU5H4

Note the difference between Buffett’s style and Venture Capital investing:
Two VC’s explain their company: http://www.youtube.com/watch?v=3iQTvJIGArc&feature=related

We are studying competitive analysis in case studies to help us determine the strength and durability of a company’s future cash flows (depth and width of moat). Eventually we will circle back to tie franchise analysis in with valuation.

Warren Buffett selectively buys stocks when others are rushing to sell. And he has cash when others don’t as in 1973/74 thanks to his closing up his investment partnership in 1969. When Berkshire had $37 billion in cash, he pounced during the crash of 2008/2009.

Note the franchise and non-franchise companies

EPS       EPS          EPS              EPS
Year              Coke       JNJ          Ford     Adv. Micro Dev.
2011              $3.85     $4.85       $2.00           $0.55
2010              $3.49     $4.76       $1.66           $0.64
2009              $2.93    $4.63       $0.86            $0.45
2008              $3.02     $4.57     -$6.50          -$4.05
2007               $2.57     $4.15      -$1.43          -$5.09
2006              $2.37    $3.76       -$6.72          -$0.28
2005               $2.17    $3.50       $0.86            $0.37
2004              $2.06     $3.10       $1.59           $0.25
2003               $1.95     $2.70      $0.35          -$0.79
2002               $1.65     $2.23       $0.19           -$3.81
2001               $1.60      $1.91     -$2.95            -$0.18
TOTALS  $27.66  $40.16  -$10.09      -$11.94

Johnson & Johnson http://www.scribd.com/doc/78158910/JNJ-35-Year-Chart

Advanced Micro Devices http://www.scribd.com/doc/78159095/AMD-35-Year-Chart

Ford: http://www.scribd.com/doc/78159068/Ford-35-Year-Chart

Coca-Cola: http://www.scribd.com/doc/78158885/Ko-35-Year-Chart

Now, the charts do not imply that purchasing a franchise company at any price is wise, but look how profitable growth puts time on your side vs. the non-franchse companies.

When the market crashes, Buffett isn’t buying the Grahamian bargain he cut his investing teeth on. Instead, he is focusing on the exceptional businesses–the ones with a durable competitive advantage (DCA).


A few readers preface their remarks with an apology for disagreeing with my comments. Don’t. The purpose is to learn not be right.  If you reason with logic and facts you will convince like this: http://www.youtube.com/watch?feature=fvwp&NR=1&v=1jQP0Y2T2OQ

There is no point in discussing an opposing view with a person who acts on blind faith or belief rather than reason: Frailty: http://www.youtube.com/watch?v=Y_rVU40BTw4&feature=relmfu

Please feel free to disagree, but I warn you the last person to do so met this fate: http://www.youtube.com/watch?v=QHH9EYZHoVU  And I want….. http://www.youtube.com/watch?v=WcxiEOqk_w4

Remember today is Friday the 13th; be careful.