CAPS pick hamper: BAM, NBG, MSFT, NE, NFLX (short)

December 22, 2010 § Leave a comment

Yeah! More CAPS picks! I love doing these. For me it’s the beginning of formulating potential investment theses while also setting up a track record for myself. Sometimes they actually result in my real portfolio buys. But most of these are just values that I see. It’s somewhere between a watchlist and a real portfolio.

Ok, first on the list is Brookfield Asset Management, or BAM. I’ve picked them purely because they have a fantastic management team that did a lot of buying of property during the financial crisis. You know, that time when the price of property basically plummeted. I’m convinced they at least got some good deals and will be rewarded for it. Plus their ticker is BAM! So fun. BAM! Picked em up at $31.37 (which sucks because I’ve been thinking about them and wondering if I should buy them when they were back at $20. Bah! I’m suck a purchasing-chicken! Actually, that is probably a good thing.)

Next is National Bank of Greece. Picked em up at $1.76. You can read all about my NBG misadventures (and reasons for buying) here.

Third is Microsoft (MSFT). People think Microsoft’s days are numbered and. I think a bit differently. I think Microsoft’s sexy days are behind it. It’s still got a pretty good moat. For example, I can’t buy Jae Jun’s (from Old School Value) awesome spreadsheets simply because I’m on a Mac and his excel files are for Windows. It remains to be seen if Google’s Chrome computers will eat into the marketshare, but for now I see Microsoft being destined to be the unsexy but stable computing company out there. The fact that they have a dividend that seems to be growing at a steady rate leads me to believe that they understand that they aren’t seen as the hot sexy tech darling anymore and want to move into the venerable blue chip company category. Fine by me. I love dividends!

Still rather expensive from a P/B standpoint and from a P/E standpoint, and I have yet to run any DCF or CROIC numbers on them. In other words, I haven’t done any legwork to see if I want them for my portfolio, but they are definitely CAPS worthy. Picked em up at $27.95

Third up is Noble Corp (NE). This one is pretty easy. They are a drilling company who (like anything with the word “oil” associated with it) got hammered during the BP spill. People are concerned that government regulation is going to hurt the oil industry. Which is, if you know anything about the oil industry and the political sphere, crazy talk. Plus NE got some new South American contracts too. Ariba ariba! Picked em up at $34.99.

Lastly I have a short to report. I’m not a huge fan of shorts in my real portfolio (actually, since I have a Canadian TFSA, I can’t short.) And I swear I decided to short them before Whitney Tilson published this. (Fun fact: I once applied to be a personal assistant to Whitney Tilson as I both love value investing and education reform, plus he could take me in as his apprentice and mold me into a little market guru, poised to take over the kingdom one day, like a Simba-Mufasa thing except without the wildebeest trampling, but I never heard back from his secretary.)

Anyway, Netflix is an amazing business, having manhandled Blockbuster in the whole movie rental deathmatch. But they are now moving into Hulu, Apple and free streaming (who doesn’t Megavideo? Honestly!) country. They could compete for sure, but at a 68 P/E they are being priced as if they can cure one legged puppies.

Lil brudder

Not about the size of the dog in the fight...

But they can’t. Netflix is no help to Lil Brudder. Sure they are here to stay, but their monopoly days are over. They now have to compete with the battleship, the car, the dog, the top-hat and (the crappy piece I always get) the iron. Good luck to em, but they’re not staying that expensive. I don’t know when everyone else will figure it out (another reason to not love shorts) but I’m confident in time the numbers will show that $180 is bonkers.

(Oh, and Mr. Tilson, if you’re still looking, I’m a fantastic PA and a good candidate for mentorship. And it won’t get all Obi Wan/Vader either.)

Full Disclosure: No position in BAM, MSFT or NFLX. Long on NE and NBG


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