I was exploring some ideas for my watch list, and one of the companies that surfaced was Ebix (EBIX), a world-wide provider of custom software solutions for the insurance industry. It was recently ranked the third-fastest growing company in the world by Fortune magazine.

Now I’ve said many times that those who trade stocks and bet on the stock market are confused and bewildered. Nor do they have a clue as to what any stocks will do tomorrow. And, of course, that confusion is compounded by the contribution that technical analysis makes to the mix. As an example to bear out my conviction, I would offer the following two excerpts about Ebix from the Investors Business Daily, each appearing within three days of the other.

Read more…

Ellis Food for Thought, Fundamental Investment Views, How to Invest, Investment Concepts, Successful Investing buying stocks, common stocks, fundamental analysis, investing, Investors Business Daily, successful investing, technical analysis

My mission, when I started this blog, was to persuade my readers that “investing,” is not what the securities industry has spent gazillions convincing everyone it is: betting on the stock market, which is risky and unpredictable. Rather, “investing” is a simple means of earning money with your money. It can make you wealthy and is virtually risk-free. For at least this week, we’ll return to our roots and stick to the mission, both in this post and in Thursday’s on-line “radio” show.
Read more…

Ellis Fundamental Investment Views, How to Invest, Investment Concepts, NAIC Veterans' Lounge, Successful Investing fundamental analysis, investing, making money, money, securities industry, technamental, technical analysis

When it comes to the stock market, you’re either a gambler or an investor. You simply can’t be both. Gambling and investing are two entirely different things. And, they’re mutually exclusive.

You either think like most folks do, that investing is betting on the stock market—with, at best unpredictable, at worst disastrous, results. Or you understand that it’s putting your money to work for you in successful businesses—letting it earn more for you with little or no risk. You just can’t have it both ways.

In fact, as it happens, one group usually buys from, or sells to, the other.

Over the past 25 years, I’ve had the joy of knowing a whole lot of folks who not only “got it,” but were eager to share their convictions and their knowledge with others. So grateful were they to have learned from other willing mentors, they took pleasure in passing it on. But I can no longer find them. No longer does there seem to be anyone whose convictions—that they were right and the rest of the world wrong—move them to stand up and be counted.

It would be tragic if this commonsense, simple and successful approach to investing were to be lost to the world! But it will be, unless those of us who know what we know have enough conviction go out of our way to take sides and speak up.

It’s well past time we screamed bloody murder because a greedy and unscrupulous securities industry continues to get away with enticing the public into thinking they can get something for nothing—which is exactly what trading and buying stocks for the short term is, and what the whole business of derivatives and other speculative activity involves.

What’s as important, is convincing the public that there is a better way, and that there are some of us who are ready, willing, and able to show them how.

Ellis Food for Thought, Fundamental Investment Views, How to Invest, Investment Concepts, Successful Investing gambling, investing, stock market, teaching

Whether you celebrate Christmas, Hanakkuh, Kwanzaa, or whatever, there’s an almost universal commonality among faiths—and non-faiths—that this is the season to give.

In that spirit, I’ve spent some time putting together as concise a summary of our investment approach as I could. And, because it’s so simple, I’ve been able to cram everything I think anyone needs to know about investing into my thirty-minute broadcast on Take Stock with Ellis Traub this evening at 7:30PM Eastern (6:30PM Central).

As you know, my intent is to separate as many folks from “the herd” as I can; and I’m hopeful that this offering might help them to understand why our way works and the herd’s doesn’t. Read more…

Ellis Food for Thought, Fundamental Investment Views, How to Invest, Investment Concepts, NAIC Veterans' Lounge, Successful Investing gift, giving, holiday, investing, the herd

All of us know that it’s not smart to put all of our eggs in one basket. It just makes good sense.

What makes no sense to me. after all these years of being  advised to diversify by industry and by company size, is the potential dilution of return that this practice produces. So I quit doing it! For the same reason I don’t invest in index funds or EFTs.

I’m looking for a return of as close to 15% as I can get. Therefore I invest in companies whose operations are capable of consistently producing the highest earnings growth possible. And, once I own them, I’m happy to let their managements do their jobs and keep that performance rockin’ until they can’t do it any more.

Diversification, for me, is nothing more than having enough of those excellent companies in my portfolio.

Warren Buffet says that six are enough for him because, once he’s found that many good companies, he’d only dilute his return by adding others that are not quite so good. I find it more comfortable to have at least eight, but no more than fifteen in my portfolio.  I don’t dig into the research nearly as diligently as he does [understatement of the week], so I accept a little sacrifice in my return, just to have enough to cover me when the inevitable Enrons and Worldcoms come along to prove that the “rule of five” works.

Any other effort to diversify by market sector or size—to compensate for down markets—tends to produce a lackluster return over time. Certainly investing in indexes, EFTs, or other broad “market baskets”—even mutual funds—guarantees you  no better than the average return, which is lousy, compared with the performance of the undiluted cream of the crop!

You don’t need to compensate, you just need to be patient!

Ellis Fundamental Investment Views, How to Invest, Investment Concepts, NAIC Veterans' Lounge Buffett, consumer non-cyclicals, defensive investing, diversification, investing, portfolio return, the herd

PE Expansion—big deal! Lots of talk about it recently among “our kind of investors.” More than I think it warrants.

The price/earnings ratio or PE is a unit cost—much like the cost of a pound of coffee or a gallon of gas—which allows one to assess a price by comparing it with a typical, historical unit cost. You can certainly tell if a pound of coffee or gallon of gas is higher or lower than normal.

In this case, it’s the cost of one dollar’s-worth of that company’s earnings. And PE expansion is an increase in that cost—and a very good way to illustrate the difference between the intelligent investor and the herd.

The intelligent investor knows what his share of stock is worth because he’s aware of its “normal” PE. We actually quantify this multiple as the mid-point of PEs over a significant historical period. Assuming the company continues to operate satisfactorily and grow its earnings as expected, prices (and therefore PEs) should fluctuate comfortably above and below this midpoint.

When we buy shares in a company, we’re concerned mostly with buying our shares at a reasonable price—at or below that “normal” PE—so our investment will grow as earnings grow going forward. If, however, we find that the shares are selling at a lower-than-normal multiple, we can happily add the benefit of PE expansion to our estimated return and consider it a bonus or a discount!

Want to chat about this? Join me on Take Stock with Ellis Traub, Thursday evening at      7:30PM Eastern (6:30PM Central). Call (347) 857-3608 to listen.
Dial “1″ to join the conversation.

Ellis Fundamental Investment Views, Investment Concepts, NAIC Veterans' Lounge, Successful Investing fundamental analysis, investing, long-term investing, NAIC, the herd

Well, it finally happened! Now, every kid in  the U S of A is virtually guaranteed the ability to retire a millionaire!

Do the math!

A kid who starts earning the minimum wage ($7.25) on her fifteenth birthday, does so for 40 hours a week ($290), and puts aside only the normal deduction for Social Security and Medicare (7.65%, or $22.19) each week, for the next 45 years, can be a millionaire at age 60.

Leaving it to compound, it would take an average return of less than 10%—that of the S&P 500—for that investment to produce a million bucks by the time that child reaches age 60!

Because investing our way consistently beats the S&P 500, this means, without ever saving any more than what’s taken from every working person’s paycheck for Social Security and Medicare, a kid who invests as we propose can realize the American Dream and then some, with no risk, and without ever doing anything but flip hamburgers!

And, of course, Congress will handle (read "contribute to") inflation by increasing the minimum wage to compensate for it. What a fantastic country we live in!

Ellis Current Events, Food for Thought, Investment Concepts, Successful Investing investing, kids, millionaires, minimum wage, no risk, S&P 500, teens

The third installment of a series contributed by Mark Robertson, founder and managing partner of Manifest Investing. Mark’s investment methods and some elements of his philosophy differ slightly from those I advocate; but they are minor differences, the significant points on which we whole-heartedly agree being far more important.

QUALITY [kwol-i-tee]

Noun 1. an essential or distinguishing characteristic, attribute 2. grade of excellence

Adjective 1. having superior quality 2. Producing or providing products or services of high quality …

Quality. We all pretty much know it when we see it. What is the role of quality in strategic long-term investing and what is it worth? www.investorwords.com has a powerful definition: “Quality is, quite simply, a measure of excellence.” Excellence and respect are related. Excellent companies often exhibit consistent, credible growth and better results.

Read more…

s Fundamental Investment Views, NAIC Veterans' Lounge Fundamental Investing, George Nicholson, investing, Manifest Investing, Mark Robertson, quality companies

Welcome, like-minded long-term investors, to this discussion, exploration and tribute to some  time-honored principles that can be part of a successful lifetime of strategic fundamental investing.

It seems fitting that we launch this series on the heels of  Memorial Day – because it is important and appropriate that we remember the contributions made by the late George Nicholson, Jr. CFA to his “Grand Experiment” known as the National Association of Investors Corp (NAIC), our Better Investing (BI) methodology and the modern investment club movement.

The introduction to the text shown here reads, “[this learn-by-doing manual] is unlike any stock study book you have ever seen. It shows you how you can take the vast amount of information that comes to the attention of investors and put it into a simple picture that tells you a great deal about the investment potential of a particular company.”

Read more…

s Fundamental Investment Views, Investment Concepts, NAIC Veterans' Lounge Better-Investing, fundamental analysis, George Nicholson, investing, Manifest Investing, Mark Robertson, NAIC

As I said in my last post, each quarter you should analyze growth from last year to the current year and do it in the same order the items appear on the income statement. I submit that the best bet is to compare the sum of the data for the last four quarters with the similar period the year before. That way, it will take a down trend or a significant decline—more than just a single quarter—to get your attention. Read more…

Ellis Fundamental Investment Views, Investment Concepts, NAIC Veterans' Lounge earnings, earnings growth, fundamentals, investing, judgment, long-term investing, pre-tax profit, quality companies, return, revenues, the herd, well-managed companies, when to sell