Aerius (< 20)

Bill Fleckenstein on Fox

March 06, 2009 – Comments (3)

Bary Ritholtz had this video on a recent blog post at The Big Picture. It's Bill Fleckenstein on the economic situation. In my oppion he has an extremely well grounded understanding of what's going on economically these days. I found myself mostly agreeing with him on pretty much everything.

I think my favorite part was the watch list of stocks that he was following but not necessarily buying. I've been slowly searching around for the companies that I really think will come out strong at the end of a deflationary market. I'm not sure Fleckenstein's picks are exactly what I'd be looking for at this point. I thought I'd share 3 ideas and see what other CAPS members thought of them. Keep in mind that I'm not advocating "buy" just yet, just that if the opportunity seems right I'd consider accumulating.

Adobe (ADBE) - I think the reason I like them so much is that they run an extremely profitable, plane vanilla business and have $2 billion in cash with only a $9 billion market cap. Enormous profit margins (at the moment at least). I understand that they could take a profit hit, but bankruptcy is out of the question at this point.

Garmin (GRMN) - The flaws of this company are more than obvious at this point. They sell directly to consumers that probably won't want to spend hundreds of dollars on a discressionary item and as a result the stock is down over 85% from its peak. However, again market cap is $3.4 billion and they have $700 million in cash and no debt. Foward P/E is 7 (it's rising though), but revenue has been rising. I just can't see the demand for their products evaporating to the point that they go bankrupt especially given the mountain of cash they're sitting on.

Interactive Brokers (IBKR) - Largest financial firm of its kind not to receive government bailout money. Plain vanilla business again - just make markets in exchange traded securities. Nothing OTC. Revenue up YoY even in this market. Profit margin's 68%. Revenue per contract up... I honestly haven't found one thing I dislike about the company (other than the fact that they're only 10% public). This is a company I would probably buy and just keep forever as a cash cow if I had a few billion just sitting around waiting to be spent.

There you have it - my short list of "post recession/depression" stocks. I think the biggest thing is that a company be generating its own capital for reinvestment meaning low or no debt and a nice profit margin. All three meet that criteria at this point. Let me know what you think - even/especially if you think I'm wrong (although I'd ask that you be civil).