Each week I track which stocks are moving in and out of the top 30 Magic Formula Stocks for companies with a minimum market cap of 50 and 2000 million. Here are the moves for the week ended 5-31-09.

Top 30/50 Million:

In:

• Innophos Holdings, Inc. (IPHS)
• Universal Travel Group (UTA)

Out:

• Airvana, Inc. (AIRV)
• Ulticom, Inc (ULCM)

Top 30/2000 Million

In:

• Biovail Corporation (BVF)
• CGI Group, Inc  (GIB)

Out:

• Diamond Offshore Drilling, Inc. (DO)
• Joy Global, Inc.  (JOYG)

First of all, from what I have read there is a split among “gurus” as to where we are in the economy. Some like Warren Buffett, believe tough times are ahead. Others like Ken Heebner, believe we have gone through the worst.

There’s a lot of pessimism about the economy. What’s your take?
My view of the world is quite different. I think people are very concerned about our economy, they’re starting to realize there could be higher inflation to come. The consensus is that we’ll bring the rest of the world into our recession. But my view is we’ve probably seen the weakest period of economic activity. The economy may not be robust in the next year, but it’s seen its low point and at some point will move higher.

I hope so! I have not made public what I do besides going to school and visiting investing sites. About one year ago, my father purchased the business he had worked for the past 25-30 years ago.  My father had always wanted to own his own business and the opportunity was right. Basically, I handle operations, while he provides his knowledge. We are in a business where we are heavily dependent on steel prices and the housing industry. Sounds fun eh? What’s even better is we bought the business at the same time housing peaked. Now, if there’s someone out there who can tell you about the economy and anything related to the chemical business I might be that person.

My Take On The Economy
Its bad out there. March and April were the worst months I have been in. We were in the red (I handle accounting) and cut our working hours by half. If my father and I did not believe in job cuts, without a doubt our employee(s) would not have a job. Starting in late April, things started to pick up and we had our best months in May and June. So far July has started off really bad but that could change as I am close to closing a big job. Now, I have the opportunity to talk with many businesses and delivery drivers and everyone says the same thing; “things are bad and there are no signs of light:. I honestly believe if we did not have outstanding numbers in May and June, we would be out of business. And this is coming from a business with an estimated 90% of the Southern California market.

What The Fed Needs To Do

The Fed needs to lower these [expletive] commodity prices. It’s tough to sell something when the price of steel keeps going up every day! Our monthly fuel bill used to be in the neighborhood of $350. Now its $850-$900. I know its peanuts compared to some other business but the impact is the same. I was considering investing in new machinery but the increase in fuel has put those plans aside. Everything and I mean everything is being affected by rising fuel prices. Everyone I know wants to invest and expand in their business but with high commodity prices, it’s nearly impossible. Its like trying to swim with handcuffs on, you will not go very far.

The Future

Nevertheless, I know from personal observations, Americans are some of the best workers around. Despite every bad headline, we still get up and go to work and do something productive. I hope this slowdown will be over sooner rather than later but we need every help we can get, starting with high commodity prices.

It all changed when I read the forward by Warren Buffett in The Intelligent Investor in which he states:

To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.- Warren Buffett

Let those two sentences sink in for a while.
Indeed, value investing is simple but not easy. At its core, value investing is searching for that dollar that is available at fifty cents. Trust me folks; it is easier said than done. Reading 10-K’s is not the most entertaining read. For every United Rentals (URI), there is a Vineyard National Bancorp (VNBC) (stupid management). But that is part of the game. In the end, if I my correct calls outnumber my bad calls, I shall be fine. This past month the Garcia Value Fund was ranked in the top 25% for the first time (out of 80k or so virtual mutual funds). What I am more proud of is I am outperforming the m100 (purple line), which represents the best of the best on marketocracy.com. So how did a kid from East Los Angeles get off to a tremendous start?

1. Read, Read, Read- I read two newspapers every, have ordered a ton of books on Amazon, and visit a ton of websites/blogs. In February, I wrote about four underrated value investing books that are informative and a great read.

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time – none, zero. You’d be amazed at how much Warren reads – at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”-Charlie Munger

2. Do not copycat anyone- My motto: “Model yourself after Buffett, but do not be a Buffett clone.” Find a style, modify it and constantly improve it. After all, whats the fun in copying someone else?

3. Be Positive- Economists will always make it seem as if Armageddon has arrived; One has to be confident that each morning millions of Americans will wake up and go to work. Slowdowns, recessions, etc have been around for centuries, and guess what? They will continue to be around for centuries.

“Any man who is a bear on the future of this country will go broke.”-J.P Morgan

Well Billy, the people have asked for the second part and we now have to deliver. Below are 3 questions we received from the forum. This question came from Buffettclone:
“Ask him about his earlier business ventures and how they influenced him?”
In first grade, I bought a pack of baseball cards for 5 cents and one kid in school offered me a quarter for Sam McDowell, a Former Cleveland Indian pitcher, I took the money and bought 5 more packs and have bought and sold sports memorabilia on and off for the past 40 years. The return on investment is “lights out” and for those investors with less than five thousand dollars,I recommend sports memorabilia over stocks because of the high rates of return provided you have someone like me being your”buyer”. Email me at ticketbill@aol.com if interested in using my expertise, contacts and buying power to compound your money and be my”partner” with my”risk free” program.
Selling tickets, sports betting service,vitamins ,golf balls,insurance, advertising have all helped me being a better investor because of being a businessman.Buffett has said something to this effect as well and like is stated in my book ,every investor should sell something they enjoy buying for the tax savings and the experience of having to sell something.

What does Billytickets think of Short Jester submitting all winning trades?
As many of you know shorting stocks is nothing billytickets has ever done personally. Short Jester and myself have mutual friends that are in the same circle. He prefers to be judged on his results and not his obvious disdain for most people. He decided to help out when we started this website to provide a different perspective. Certainly 19 or 20 consecutive winning trades and no losing trades has certainly opened a few eyes as evidenced by his thread’s continuing success. Steven Walthall’s options thread and my bargain bin thread have all done well this year despite the poor overall market in 2008 so far. Many of the “younger guns” such as YOU Alex Garcia,135713yd and the 30ish Italian dynamic duo of Vooch and Value sniper have helped provide a mix of people with different styles but all are great listeners and the constant dialogue has helped all of us improve as investors as well of having a helluva lot of fun in the process.

And the last question came from Ahmed, “When do I sell?”
For it me it depends. If the stock is a core holding such as JNJ , MO BRK or BNI those stocks are held until the PE gets to be over 25 or the fundamentals would somehow change. Walmart and USG are both stocks that have been bought and sold after 10-20% returns in less than 3 months,similar to my bargain bin thread on my forum. Buy and hold has worked real good for me, but others such as Steven Walthall, have made over 7 figures doing it his way so certainly there is no exact science. You need to see what works for your personality.

Below is a list of 10 words/ name. In 5 words or less, write the first thing that comes to mind.

1. Munger Invert 1994 Speech at USC
2. William Spetrino Jr- Shameless self promoter:disciplined value investor.lol I used 6 words I am no good with rules.lol
3. Fat Pitch- BNI at 77 in 2008
4. Buffett- 50 years of compounding at 26%
5. Dreman- Contrarian bought with MO in 2000
6. Technical Analysis:nothing I do
7. Margin of Safety: misleading term,only as good as person judging it
8. Graham;chapters 8 and 20 in Intelligent Investing
9. Walter Schloss-cigar butt king proven winner
10. Beatles-Mccartney and Lennon greatest songwriters

Your first book has been selling like crazy,especially since we left the “other”site. Now your working on your second book. Can you give everyone a taste of what to come? A release date? Expectations for it?
Book 1 is really all you need to become a millionaire.Book 2 will be totally about investing and will have sections about options and short selling, as well as more about the psychology of investing and “outside the box’ investing like sports tickets and memorabilia. It will be 2 or 3 times longer than the last book and my guess is that it will be done by the middle of June.

My personal style of investing is “boring” and does not resonate with most people. What is ironic is on another forum many said my investing style lacked imagination. In reality my investments in sports memorabilia and tickets is not only “outside the box”, but much more profitable than buying small caps ,especially those “traditional investments”with a “margin of safety” like Delta Financial (DFC).More importantly all my sports memorabilia has a 100% money back guarantee which is especially important for a person with under 10 thousand dollars. There will be a chapter about this in the book with core details but those who are interested “pre release date” can email me at ticketbill@aol.com . Alex your blog here is a fantastic base of knowledge for investors of ALL knowledge levels. Keep promoting it my friend.

William Spetrino Jr (a.k.a. billytickets), a disciple of the great Warren Buffett has been managing money and been self employed for 22 years now. He has spent the last 22 years buying and selling assets with one major focus. To buy dollar bills for less than a dollar. He wrote his first book on becoming rich titled Consume Consume and Consume More: Spend More Work Less. His text while unconventional is one a few that takes an investor from point zero to millionaire status provided they do one thing :follow the program. He can be reached at ticketbill@aol.com and at his forum.

William Spetrino Jr owns stock in Burlington Northern Santa Fe (BNI) and Altria (MO), Johnson & Johnson (JNJ), Berkshire Hathaway (BRK.A)

Billy you have a book that has had great reviews from fellow Value Investors and everyday people, why do you think the book has been a great success?

The book has been a success because 1) It is Short 2) Its specific with formulas and filters 3) Duplicable, Everything in the book can be duplicated if the reader has the self discipline and desire to do it.After chapter 3,the book more than pays for itself in true value investor form.

Many people do not know you did not go the typical route to become financially independent,by that I mean you did not go to a university, get a corporate job,etc.. Yet, you are able to garnish outstanding returns on your investments in the stock market, what separates you from someone who goes the “usual” route?

I was an accounting major but we learned EMT (Efficient Market Theory) in school. It was very simple .Since 1993 I made 100% of my income from allocating capital in sports memorabilia ,tickets and stocks. When your wrong ,your family does not eat, you are not as quick to lose your capital.If you are not good at it, then you go broke and need to get a job. I was not great when I started but each year got better.

At what point in time in your investing career did value investing hit you?
I always believed in value investing , When you are using “eating money” or “scared money” you will not be reckless .If you are too reckless you need to get a job. 3 other guys I know started with me. All are now working for someone else except me.

Best piece advise you can give to someone starting out in the stock market?

Best advice for someone starting out is to read my book and follow it step by step. I parlayed $9,000 into a heck of a lot more and it was “virtually risk free” ironically.

What is the best book on investing you have read?
Warren Buffett will be angry but I loved Buffettology. Decide which stocks you want to own and decide which price to own it. The actual formula in Buffetology is flawed. My books formula is much better but the concept of Buffettology was great. I also liked Chapters 8 and 20 from The Intelligent Investor but do not recommend the rest of the book to a novice.

Your forum has had a tremendous growth in activity. It’s a place I visit once a day. Has the forum met your expectations? Any plans to expand it in the future into a complete website?

Yes after I was banned from Gurufocus I set out to create an environment that would have more posters and an intelligent dialogue that encourages dissent among “stock choices” but no personal attacks. In a capitalistic society the consumer will decide what is in he or she’s best interest. My partner Steven Walthall ( Doctor Options) will decide if and when he wants to do that. He is knowledgeable about computers ( and options) unlike me.lol

Any stocks you are looking at right now?

I am looking at all my bargain bin picks listed at the website but have bought heavily into Burlington Northern (BNI),especially between 77 and 79 over the past week or so.It is a no brainer.

Assuming you were forming an investing partnership and had to choose between Charlie Munger and Warren Buffett who would you choose?

Buffett no question,everyone lies to say Warren Buffett could make 40% on a million dollar portfolio. Warren Buffett could do it but no one else could. Charlie is smart too but Warren Buffett has made over 125 billion and Charlie admits that Warren Buffett is better at this than Charlie is.

Some people claim their value investors, but when everyone is selling everyone runs towards the same exit. What separates Warren Buffett, David Dreman, John Neff from the rest?

What separates Buffett is that he does not sell unless the fundamentals change. Dreman is a contrarian and a great investor and he was a voice of reason when I bought Altria (MO).But like Bill Miller and other “great gamblers” they take too many chances in my opinion. Buying Washington Mutual (WM) was a huge error. I am more like Buffett, I only own 5-7 stocks but those stocks have little downside risk .

You made a killing in Altria (MO), what did you see? What was your thought process? Can you go into that investment in detail?

When I bought Altria in 2000 and 2001 there was talk that smoking would become illegal in the US and the lawsuits that saw multi billion dollar verdicts that could bankrupt the company. My “theory” was that all the talk about smoking being illegal in this country was not valid and these lawsuits would be overturned on appeal. Would a country that was 6 trillion dollars in debt “bankrupt” the largest taxpayer to the US Treasury? Would the legal system be able to handle all the lawsuits that would surely flood the system? Even if this did happen Kraft was worth about what I paid for the entire company and International tobacco would be “basically” free. The 9.5% dividend yield was MORE than covering my debt service. Since 1957 18 of the top 20 performing S&P stocks were either pharmaceutical or consumer staples companies if reinvested dividends were factored in. This information and the low PE, High ROE and High Dividend yield (read past articles to “recap” how important these traits are) made me feel that with #1 US food company #2 Beer company and #1 cigarette producer with the discount price from averaging down provided a sufficient margin of safety. The “uncertainty” in this instance was actually more “imagined” than real.
For more info about real and imagined fear read this http://www.atfreeforum.com/billyticketswin/viewtopic.php?t=9&mforum=billyticketswin

Thanks for the interview Billy

William Spetrino Jr, a disciple of the great Warren Buffett has been managing money and been self employed for 22 years now. He has spent the last 22 years buying and selling assets with one major focus. To buy dollar bills for less than a dollar. He wrote his first book on becoming rich titled Consume Consume and Consume More: Spend More Work Less. His text while unconventional is one a few that takes an investor from point zero to millionaire status provided they do one thing :follow the program. He can be reached at ticketbill@aol.com and at his forum.

William Spetrino Jr owns stock in Burlington Northern Santa Fe (BNI) and Altria (MO)