If you are going to give money to your friend or cousin or any other family member, you are investing your money in loan debt. You are actually loaning your money to another person, therefore you are investing your money in loan debt. However, if you loan a huge amount of money to a corporation or any big institution, you become a shareholder of that company. If you invest in equity and get good profits on that you can use that money for payday loan settlements. Now, this kind of investment is known as equity investment and is considered to be much better than loan debts.

How investments help

There are various kinds of investments that may help you earn good profits; and if you are able to earn good profits, you will be able to use that money for various debt pay off purpose like payday loan settlements, credit card consolidations, repayment plan payments and so on.

However, if you really want to get good return s on your investment, you will have to have good knowledge on the investment vehicle you are investing your money in. So, if you are going to invest your money in loan debts, you will have to think twice if you want to earn profit. There are many disadvantages of loaning money to your family members or friends. You may not be able to take interest on that and you can even lose the total money. If you are really attached to the person you are going to give your money, it is better to give away that money to him or her.

In case of investment equities, you may be able to earn good profits. However, there are higher risks of investing in shares of a company. You can even lose your money if the corporation or business fails. Actually, which kind of investment is much better depends on the investor. If you think that you are ready to take along high risk investments, he may invest his money in equities.

However, if you don’t want to risk your money it is better to stick to low risk investments. Like if you have very less money, if you are going to retire recently, it is better to avoid investing your money in high risk investment vehicle like the equity investment. If you want to do good investment, you can consult an investment counselor.

This month has been a bit hectic. For one, school is in full swing. While my schedule is not as hectic as other times, I still have my fair share of homework and projects to take care of. I also have to start to prepare for what I am going to do post-graduation. Secondly, I have become a regular contributor at Gurufocus.com.  I have been a regular forum participant for almost 3 years now and I thought their new writers program would allow me to gain some exposure. I’m also using Gurufocus as a place to write about individual stocks. Whether it be here or Value Investing Pro, I have tried to do my best from talking about individual stocks. For one, I like to keep my best ideas for myself.  Secondly, I find value investing to be more about the process of waiting for fat pitches than looking at every stock.

Value Investing Pro

One thing that I have gained from Gurufocus is a tick up in traffic over at Value Investing Pro. With the extra traffic, I also re-gained my motivation for blogging on a regular basis again. I was becoming a  bit unmotivated with my blogs and traffic was seriously starting to tail off.  Anyway, the extra traffic has re-motivated me to get these puppies updated on a regular basis and with that has come a surge in subscribers through RSS and my Youtube Channel. I have big plans for Value Investing Pro, which will probably happen around July of next year. I want traffic to stabilize a bit and I have some smaller projects to launch before I start launching the major fireworks.

Joel Greenblatt Week

Last week was unofficially Joel Greenblatt week. There were two great appearances which are must sees if you follow the magic formula system like I do. Check out both appearances below.

Joel Greenblatt On CNBC

Joel Greenblatt On Bloomberg

Value Investing Stocks: Where are they?

One thing I like about a rising stock market is the % gains. But, I also hate the fact bargains are a bit tougher to find. I have found a couple in the mega caps, but the true fish are in the microcap arena where most mutual funds are simply too big too fish there. While the  market’s run up is nice, I’m becoming very cautious. For one, I’m looking around my neighborhood and I honestly don’t see signs of a recovery. Secondly,  I believe the market has risen too much, too soon. If the market does fall, I’m sitting on some cash, about 25%. Not so much because I’m fearful of a falling market, but I simply haven’t found too many ideas. As a matter of fact, in the past 3 months, i have found 1 bargain that I would seriously put money into.

Warren Buffett U

A while back, and I seriously mean a while back, I started a Warren Buffett site. I simply lost motivation, but now “im feelin it”. I’m restarting things this week. So if you’re interested in Warren Buffett head on over at Warren Buffett U. I  was even going to restart the site’s Youtube Channel but uploading the same thing to two different channels becomes a hassle.  I follow Warren Buffett on a daily basis so I don;t have anything to lose. I have the domain so why not give a try for at least 3 months. If the site gains traction, I will continue updating, if it doesn’t o’well, I can’t say I didn’ t try. That’s pretty much how I got started in this online business, I throw stuff at the wall and I see what sticks.  I still have work to do their, but you get an idea of how the site will look.

Is the stock market undervalued?

Prior to the crash, I didn’t pay much attention to broad market valuations. I put more emphasis on individual holdings and try to get a range of the company’s intrinsic value and if it’s a bargain, buy. I still hold that belief, but I will admit, I take a sneak peak at market valuation every once in a while. I use two tools 1) Morningstar’s Market Valuation Graph 2) Gurufocus Total Market Cap/ GDP. I won’t go much into how these graphs are derived as their sites do that, but just simply looking at the two graphs we can see the market how quick the market became fairly valued.

Morningstar Market Valuation

Gurufocus Total Market Cap/ GDP

Where to find value stocks?

Bargains still exist, you just have to look a bit harder and be a bit of a contrarian. I recently wrote about 7 Magic Formula Health-care Stocks. I am also looking at non-magic formula stocks in that arena. Finally, a couple of Warren Buffett stocks might be undervalued if you examine his portfolio carefully. Johnson & Johnson comes to mind and I know Burlington-Northern was purchased in the $80′s and averaged down to the mid to low $60′s. And of course, there’s the ol “fish where no one is fishing” small cap arena. These puppies might be a bit more tougher to research, but bargains still exist.

Below are some great videos I have found and uploaded to the  Value Investing Pro Youtube Channel. I only upload quality stuff and try keep track of the better known fund manager/economist that have a great track record.

Warren Buffett On Ben Graham

Jim Rogers

Marc Faber

When and If

If there is one thing I have never relied on is market timing. For one, I straight out suck at it. Every “guru” out there claims he or she could figure out when to jump in or out of the market, but very few, if any, individuals have done so in the past, and very few if any will do so in the future. So, knowing that I’m no good at market timing, I do my best to buy a company’s stock at a discount.

I’d rather be approximately right than precisely wrong.” Warren Buffet

The next obvious question will be, how do I know what a stock is worth so I know I am getting a discount?  The most common way of valuing a company is by doing a discounted cash flow analysis or DCF.  Over the years individuals and corporations have developed complex discounted cash flow spreadsheet’s that try to pinpoint exactly what a company is worth. In my opinion, this is baloney. For one, you are trying to predict the future and something will go wrong and that’s why I rarely rely on a DCF. If I do, a pen and paper will do the trick.

• Sidenote: Google “Free Discounted Cash Flow Calculator” and you will find some good ones

Ok  dummy, what do you use? Free Cash Flow Yield and Earnings Yield (Magic Formula Investing)

Formulas:

Free Cash Flow Yield: FCF/ Price

Earnings Yield: EBITDA/ EV

Are we overvalued?

I primarily uses the following tool gauge whether the market it undervalued. One, (image below), tells me its still a great time to purchase stocks despite the recent rally. This is a great way to know where we are in the long term scheme of things.

Take It On A Case By Case Basis

Due to higher priorities, I have narrowed down the stock screens I use every weekend. I still continue to screen for the magic formula every week. I am now getting a handful of companies to analyze and the best “Tip” I can give you is take it slowly and more importantly be patient. Some stocks have doubled/tripled off their lows and thus might be fully valued. At the same time, just because a stock has doubled, doesn’t mean it cannot be a bargain. Take company ‘Blue Widgets” which you figure could be worth somewhere between $30-$42. In March, it could have been trading at $10 and currently trades at $20. Would you purchase it? What are the alternatives?  Why is it going to be wroth $30? What if it goes down, will I buy more?  Are other companies in the sector equally undervalued?

The Good Ol’ Value Traps

If one thing is certain during market run-ups , is that bargains become scarce and we are left with value traps. There 1001 ways to define a value trap, but my definition is “there is no catalyst”. For example, newspapers currently do not have a catalyst that will overcome free online readership.Or, there is no reason for me to purchase a CD when digital music is available. Two value traps: UNTD and ELNK, which both appeared on the magic formula screen this week.

United Online is an Internet service provider (ISP). You might be familiar with Classmates.com or Netzero. The stock has not gone anywhere in the past 3-5 years. Quite frankly, with the company not having any broadband strategy , I see no reason why its stock will go up. And here’s the deal, DSL is quickly becoming a thing of the past with internet providers such as Verizon / Time Warner Cable offering faster and faster speeds at lower and lower prices.

The same could be said for ELNK”

ELNK) has reassessed its strategic direction and eschewed investment in its municipal Wi-Fi network and wireless phone business. The progression from dialup Internet access to broadband has inherently rendered the dialup segment a declining industry with no growth prospects.”- Morningstar

Value Investing Fund

I’m starting a Value Investing Fund from scratch. I’m hoping to create some kind of track record as graduation is in the near future. I’m in no financial position to be purchasing stocks, so I’m hoping this gives me an extra pinch of help when applying for a job. It’s going to be fun, and I hope someone learns one thing.

Paul Sonkin Video

Yes, the membership site I created has shut down after one month in business. Did the business fail?  Far from it. I had a death in the family and I feel as a whole guerrilla has fallen on my back. Rather than offering a mediocre service and charge people for money, I have decided to shutdown the site. Below are some stats

• The site has 19 paying members and 3 free members
• Traffic averaged about 200 people a day coming through various sources
• VIP had 32 RSS subscribers
• The site ranked as high as 14 for the word” magic formula investing”. Which was not the word I was targeting
• The 19 paying members were acquired through FREE advertising. The advertising budget never reached $1
• Our Youtube Channel has 25 subscribers (http://www.youtube.com/user/valueinvestingpro)

Value Investing PRO Portfolio

I decided to build a Value Investing Portfolio from scratch as I felt it would be fun and would provide a true performance for the site. I purchased four stocks which I thought and still believe are bargains. Below are the four companies and their purchase price.

1. Vaalco Energy (EGY)@ $4.25
2. Pfizer (PFE)@ $14.65
3. Jacobs Engineering Group (JEC) @ $38.39
4. IMS Health Inc. (RX) @ $12.10

The one month performance doesn’t matter but basically it was flat.  I believe all stocks are trading at or around there original purchase price and still have a valid thesis to support the original purchase thesis

My Thoughts on Value Investing Pro

I was honestly giving it my all to make sure I was giving my subscribers all the information I have compiled over the years. The results through one month far exceeded my expectations. I expected to have 20 subscribers by the end of one year, I achieved that in a little over one month. But unfortunately, I just could not continue. I have so many thoughts on my mind that its wearing me down emotionally, physically and why not, financially. I honestly loved updating the site and couldn’t wait to write my weekly commentary. I had so many things on my mind that i built up throughout the week that once Saturday morning came around, I grabbed a cup of coffee and pounded away at the keyboard. I already have a couple of subscribers e-mailing me back asking whether I will re-open in the future, I don’t know. I honestly haven’t thought about it.

Warren Buffett On Goldman Sachs

Seems like the whole world has forgotten about Warren Buffett’s investment in Goldman.  Fox Business recently calculated a 40% return on its investment, or about a $2 billion profit, nice!!!

Warren Buffett Cartoon

I’m actually looking forward to this cartoon which teaches finances to kids.  Maybe it would serve useful to adults as well. I know I certainly could of used some help. As an example, I didn’t know how to write a check til my senior year in high school and that’s because I was part of the high school’s JRTC program.

Mohnish’s 650K Lunch With Warren Buffett

Apparently, Mohnish has been on a tear since going on lunch with Warren Buffett.  I thought this video was interesting.
Quick Story On Mohnish

I bought his book Mosaic for about $12. For some reason I didn’t like it and decided to resell it on Amazon for the same price.  It currently sells on Amazon for $100. Ouch…

Top 50/50 Million:

In:

• Bridgepoint Education, Inc. (BPI)
• Cherokee Inc. (CHKE)
• GP Strategies Corporation (GPX)
• GameStop Corp (GME)
• LoopNet, Inc. (LOOP)
• Universal Travel Group (UTA)

Out:

• Deltek, Inc. (PROJ)
• GigaMedia Limited (GIGM)
• MicroStrategy Inco (MSTR)
• Oncothyreon Inc. (ONTY)
• Pain Therapeutics, Inc. (PTIE)
• Pfizer Inc. (PFE)

Top 50/2000 Million

In:

• Cameron International Corporation (CAM)
• Amdocs Limited (DOX)
• Rockwell Automation, Inc. (ROK)

Out:

• Diamond Offshore Drilling, Inc. (DO)
• Pharmaceutical Product Development, Inc. (PPDI)
• Weight Watchers International, Inc. (WTW)

Top 50/5000 Million

In:

• Baker Hughes Incorporated (BHI)
• Murphy Oil Corp (MUR)
• eBay Inc. (EBAY)

Out

• Covidien plc (COV)
• Dr Pepper Snapple Group, Inc. (DPS)
• Laboratory Corporation of America Holdings (LH)

Top 50/50 Million:

In:

• Bio-Imaging Technologies, Inc. (BITI)
• Broadridge Financial Solutions, Inc. (BR)
• Deltek, Inc. (PROJ)
• Forest Laboratories, Inc. (FRX)
• GigaMedia Limited (GIGM)
• Lorillard, Inc. (LO)
• Oncothyreon Inc. (ONTY)
• Pfizer Inc. (PFE)
• SurModics, Inc. (SRDX)
• Perini Corporation (TPC)
• Virgin Mobile USA, Inc. (VM)
• ViroPharma Incorporated (VPHM)

Out:

• Cherokee Inc (CHKE)
• ClickSoftware Technologies Ltd (CKSW)
• Dell Inc. (DELL)
• Fluor Corporation (FLR)
• Jackson Hewitt Tax Service, Inc (JTX)
• KBR, Inc. (KBR)
• Korn/Ferry International (KFY)
• Mesabi Trust (MSB)
• QLT Inc. (QLTI)
• Qiao Xing Mobile Communication Co., Ltd. (QXM)
• Ulticom,Inc (ULCM)
• Viacom Inc (VIA.B)

Top 50/2000 Million

In:

• Biovail Corporation (BVF)
• Endo Pharmaceuticals Holdings Inc. (ENDP)
• Forest Laboratories, Inc. (FRX)
• Precision Castparts Corp (PCP)
• Weight Watchers International, Inc. (WTW)

Out:

• Expedia, Inc. (EXPE)
• Flowserve Corporation (FLS)
• ITT Corp (ITT)
• Polo Ralph Lauren Corp (RL)
• Rockwell Automation, Inc. (ROK)

Top 50/5000 Million

• n/a this week