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Wax Ink Watch List - July 4, 2009

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July 04, 2009 – Comments (5)

We have received lots of requests for copies of our watch list. Admittedly, we have no idea why someone would want it.

It contains 2625 stocks, of which 25 are foreign company stocks.

It can be a pain the ass to read, and because it's a PDF file, it is probably a major pain in the ass to search for a stock.

We hope that you will cuss us as you attempt to find a stock that you are interested in. And we hope that all that cussing...helps you find a winner.

Happy searching.

Wax

Download Wax Ink Watch List Here

5 Comments – Post Your Own

#1) On July 05, 2009 at 1:01 PM, streetflame (30.54) wrote:

Wax - Why don't you have green thumbs on XTO, DE, BIIB, BKE, CKH, OSG, CRMT, FLR, DBTK, SYNA, SIGM, GLW and others if your "expected value change" is over +50%?

Also why are your buy targets/modified buy targets/sell targets/etc. so complicated?  Do you think your clients like your methodology?

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#2) On July 05, 2009 at 11:05 PM, wax (97.62) wrote:

Streetflame;

First of all it really isn't as complicated as you think. The first thing you need to look at is the statement date. This date is the year ending date for the company. All of our worksheets are based on audited financial data, and that means the latest 10-K data. If the date there is 07, or 00, that means there has not been a worksheet done for that stock since one was done based on the listed statement date.

The expected change percentage is done using audited and unaudited data. It is just an easy way for us to take a quick look and see where things are.

To us, investing is far more than simply gambling on what may or may not be the future. We like to look at companies from the bottom up, not the top down. We have to wait longer to get one in our buy range, but generally they work out well over the longer term.

As to the targets, once you understand them just a bit, they are pretty easy.

We calculate what we believe is a reasonable value estimate (RVE) based on a company's latest 10-K SEC filing, but there is more to it than that. We also like to consider how a company is doing in its current fiscal year, and as a result, we also look at a company's last 4 unaudited quarters. The RVE is then a blend of the audited and the unaudited, with an extremely heavy weighting to the audited.

Once The RVE is determined we divide by 2 to give as our Buy Target. The Buy target is then multiplied by a factor to give us our first sell target, and the first sell target is multiplied by a factor to give us our close target.

The statement discount you spoke of is based on our perception of just how strong the financial statements were when we reviewed them.

For instance, we recently reviewed a company that had paid almost nothing during their fiscal year toward debt reduction, but by contrast had spent quite heavily on buying back the company's stock.

To us, this is not amusing. As the matter of fact we do not believe it is in the best interest of the stockholders.

We have also written numerous articles about companies whose total assets are made up of predominently goodwill and intangibles. One company we wrote about recently had more than 70% of their assets made up of goodwill and intangibles.

Many times companies have little to no free cash flow, or they have a high percentage of their cash listed as restricted cash.

The key here is that all of these things increase risk for the common shareholder. As a result, we believe that we should receive greater compensation if we are willing to take on this increased risk.

We quantify all of this with our Strength of Statement Buy Target. The less risk we find with the financial statements and the DEF 14A (management) filings, the less of an additional discount we want.

As to clients. Ahhh.

We are not now, nor have we ever been in the financial services industry. None of us has any background in accounting or financial research. We are investors sharing our research with other ordinary investors, who are simply looking for a starting point from which to begin their own research.

As I said, our watch list can be a pain in the ass to read and even more of a pain in the ass to search through.

When you find a stock you like, take the time to read the SEC filings, and attempt to get a feel for the company. Never buy on anyones recommendation but your own.

If you need a worksheet, just ask. If we don't have one, we are happy to make one for you. 

If you follow those simple rules, you should be well rewarded over a lifetime of investing.

Wax

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#3) On July 07, 2009 at 8:54 PM, Tastylunch (29.48) wrote:

Hey Wax

when you say "we", who does that consist of?

Just curious man.

Thanks for sharing your work, I always find it intriguing.

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#4) On July 08, 2009 at 8:49 PM, wax (97.62) wrote:

Tasty;

It was actually started about 10 years ago as a family investment club. Since everyone in the family knew I enjoyed learning about different companies they asked me to help and I said I would.

The investment club is still active and while we aren't making piles of cash, it's entertaining and sort of keeps everyone in touch. And believe me when I tell you they ALL have an opinion!

My oldest son has been banned from participating because the rule is no professionals and he has his own investment/money management company.

He and I talk often about the markets and the economy in general but he is not allowed to invest, offer investment opinions, or suggest stocks to research.

Over the years I have done some research for him and offered some investment opinions, as well as for several other independent money managers from around the country. They all know that I am not in the investment/financial industry.

Of course the caveat to all of this is simple. We are all value investors, with no real interest what the markets did on a given day, month, week, or year, and for the record, I personally could care less what Warren Buffett does.

We all believe that to be a truly successful investor requires a lifetime of investing, so that's the way we approach it.

Hope that answers your questions.

Wax

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#5) On July 09, 2009 at 12:43 AM, Tastylunch (29.48) wrote:

wax

Yes it does completely. Thank you.

What a nice story, money so often drives fmailies apart, it's nice to see investing help bring one together.

Sounds like a good rule to have for your oldest son, resolves all sorts of COI problems and allows for a more balanced fmaily life for him I'm sure.

I agree with you about Buffet, the man is no longer a pure value investor in my mind. He's more of a friendly corporate raider in the  mold of Carl Icahn (if he were nice and well liked). The opportunitities available to a man of Buffett's considerable stature and wealth aren't there for 99.9% of us.

Given the thorough nature of your analysis I could see why pros would want to hear what you might have to say.

Thanks again for your insight.

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