Sunday, September 18, 2011

Light Commentary and Some Links

I'm going to try something a little different today.  Recently there's been a handful of interesting articles/analyses/press releases on companies I own, so I thought I'd provide the links and do some light commentary around them.

First there's Terra Nova (TTT).  As discussed in previous posts, the company is basically an investment vehicle for Michael Smith.  But since no acquisitions have been made, owning TTT requires a bit of blind faith in Smith.  In this vein, here's one of the best analyses I've found on his historical track record:

Then there's Sears.  They're spinning off Orchard Supply, started selling Craftsmen tools at Costco, and hired a new CFO.  Taken individually these may not sound like much, but taken together this may signify the beginning of a transformation from a retail operation to a brand/real estate/asset holding company.  Here's a good blurb on the Craftsmen part:  Here's the Wikipedia page on the new CFO:  Clearly, Schriesheim is a turnaround/restructure guy - my guess is Sears wouldn't have hired him unless this is their intent AND he wouldn't have accepted the job unless he judged there was a reasonable likelihood of succeeding.  And lastly, if you're sick of my bullish sentiments, here's a good commentary with a bit more of an even keel:

And what about JOE?  Well, regular readers know I'm a huge fan of Bruce Berkowitz.  In fact, his involvement with St. Joe is one of the main reasons I bought the stock (  Additionally, Berkowitz has been an investor in LUK (my largest holding) for 10+ years.  So what's the connection?  Well, LUK has done commercial/residential real estate development on the Florida panhandle, and JOE's recent appointments/hires of Brady, Bienvenue, and Keil all come from LUK.  Frankly, it wouldn't surprise me to see LUK and JOE partner up sometime in the near future.  Lastly, JOE has recently agreed to let Berkowitz acquire up to 50% of their shares (he currently owns 30%), so my guess is he's confident in their prospects.

Well, I hope you enjoyed the commentary and links!  And I always like hearing from my readers, so feel free to email me with any comments or questions (

Wednesday, September 7, 2011

Selling Cisco

Today I sold my 1,000 shares of Cisco.  I originally purchased it back in February ( because I viewed it as "significantly more attractive than holding cash."  So let's see, I purchased it at $18.88 (outlay of $18,875) and sold at $15.48 (proceeds of $15,476).  Whoops...

Anyway, the main reason for selling CSCO is last week I purchased JCP.  Basically, this was a sell-cheap-to-buy-cheaper trade out.  Additionally, after buying JCP the % of my portfolio in cash had fallen to the low 20's, and selling CSCO brought it back up to the low 30's (a level at which I'm much more comfortable given today's environment).

Questions?  Comments?  Email

Saturday, September 3, 2011

More retail? Great...

Many people, myself included, have a tendency to make investing a lot more complicated than it needs to be.  IMHO successfully picking stocks can be broken down to two simple guidelines, 1) don't overpay and 2) make sure you're aligned with a capable and intelligent management.

These opportunities are rarely black and white, so you're usually left navigating the grey (for instance, how many times have you said "this stock is really cheap, but there are a few things I'd change about management?").  However, every once in awhile there's a fat pitch right down the middle, the only trick is you have to be ready to swing.

With that in mind, on Friday I bought 625 shares of J.C. Penney (JCP) at a price of $25.47, for a total outlay of $15,924.  On a numbers basis alone, the price of JCP is somewhere between "cheap" and "reasonable."  However, the real draw for me is both management's talent and alignment with shareholders.

First there's Bill Ackman, the activist/value investor who runs Pershing Square Capital Management.  A little under a year ago he began acquiring shares, and now owns about 18% of the company. During this time he was also elected to the Board, and recently signed a new agreement that would allow him to increase his stake to 26% without triggering a poison pill.  This new agreement is significant - you have a great investor with insider knowledge wanting to buy more stock - it's not much of a leap to conclude the stock is cheap.  Then there's the alignment thing - Ackman's goal first and foremost is to earn a return for his limited partners at Pershing, so my guess is he's pretty focused on maximizing shareholder value at JCP.

Next there's Steven Roth, the chairman of Vornado Realty Trust (VNO).  Through VNO Mr. Roth acquired shares and was elected to the JCP Board in tandem with Mr. Ackman.  Vornado itself has an interesting history; it was a struggling retailer until Mr. Roth took control about 30 years ago.  He closed down the retail operations and transformed it into a REIT, and since then the returns for shareholders has been spectacular (  Like Vornado JCP owns a significant amount of real estate, so I wouldn't be surprised to see some sort of real estate play here (although I think that's just part of the story).

Last but not least is Ron Johnson, the newly elected CEO of JCP slated to start in November.  Mr. Johnson's claim to fame is the Apple retail store and the Genius Bar, but before Apple he was the VP of merchandising for Target.  Mr. Johnson made over $100MM through stock options at Apple and now he's invested $50MM of his own money in JCP (in the form of about seven million warrants with a strike price of $29.92 and an expiration date in 2017).

So what's not to like here?  In Ackman, Roth, and Johnson you have some of the most talented professionals in capital allocation, real estate, and operations/merchandising, respectively.  They've all invested significant amounts of their own money, and by buying JCP stock I've directly aligned myself with them.  Of course that's no guarantee of success, but I'd say the odds are tilted in my favor!

Questions?  Comments?  Email