| To: Tom Veale who started this subject | 5/22/2001 8:53:28 PM |
| From: aptus | Read Replies (2) of 18531 |
| |
Hello Everyone, here are the notes from Day 2 of the AIM 2001 conference in Las Vegas.
Tom gave a fantastic presentation on Value Line.
Before he started, however, he mentioned that Tom said that the last time he was at the money show there were very few talks about value investing. The focus was on momentum.
This time, however, there are many, many talks. Funny how that works.
AIM is a little like Gill Netting. It doesn’t matter which way the fish are swimming, if they don’t fit through the holes in the net, they’ll be caught.
And then he launched into his presentation about Value Line...
1. COGNEX (CGNX) develops machine vision systems. Why would Tom want to own this stock? He went through his reasons by walking us through a value line data sheet on CGNX.
2. The Highs and Lows in the 52 week period has a very wide spread, however its BETA is only 1.15.
3. Stock’s Price Stability is 20. Tom likes a range of 20 to 25. 100 is a very stable stock. The exact calculation will be posted to Tom’s web site a little later.
4. He also correlates the Insider sales with options. If a good correlation, that’s okay. But he starts to worry if there are many sales without corresponding options. If people are buying, however, he doesn’t worry about that.
5. Tom recommended a book called, “101 ways to make money in the stock market.”
6. He also looks at book value. Over the past 10 years book value has grown at 29%, over the past 5 years it grew 26% and the estimate for 97 to 99 is 14%.
7. Tom likes to see book value double every 5 years or less.
8. He’s not too concerned with earnings. As long as you have a good book value and good revenue, then the earnings will come.
9. If you wait for the earnings, then it might be too late to make a large profit as the stock will already be widely purchased.
10. He also looks for significant ownership of insiders. CGNX is 15.9% which is a good position.
11. NAIC likes directors to own 1 year’s salary worth of stocks. (Tom didn't think that options were included in this.)
12. CGNX has no debt. Tom doesn’t like to see too much debt, but understands when companies raise debt when debt is cheap. If they can borrow at 5% and turn 15% in productivity, that’s good.
13. Unless of course debt is way out of line with their peers.
14. Value line projects 3 to 5 years out. In CGNX’s case it’s 45 to 65.
15. Tom only looks at things he considers facts, not opinion in the value line reports.
16. The value line target prices are not particularly accurate, but they’re not too bad.
17. Tom’s then showed graphs of his portfolio from 1998. The William’s R % correlates nicely with AIM’s buying and selling. When buying, we’re below 20% and when AIM’s selling it’s usually above 80. It appears to be a confirming (rather than leading) indicator.
18. Earlier Tom ran out of cash when buying on a weekly or less basis. However he knows this company very well and has now spaced his buying to once a month -- he ran out of cash at the appropriate time.
19. 236% return since 1994. In addition he has many more shares.
20. CHIRON (CHIR). Stock’s price stability is 35 (about as high as Tom likes).
21. Insiders own only about 3%. However the officers and directors own many shares of Novartis which owns 42% of CHIR.
22. 330% return since 1992.
23. Beta is 1.0.
24. Also likes the idea that one of these days Novartis will exercise its option to purchase the rest of CHIR. So he expects a bump up in price at that point.
25. JABIL Circuit Inc. (JBL) Beta 1.7. Stock’s price stability is 10 out of 100 (about as low as you’ll see, Tom likes this very much). Book value doubled about every two years. Revenues expected to double in two or three years. Officers and directors own 22% of outstanding shares. Debt is 2% of capitalization. Sales growth is 28% over 5 years. Book value growing 53% over past 5 years and expected to be 22% (above Tom’s 14% minimum). All in all a good AIM candidate.
26. VITESSE Semiconductor (VTSS): 1499% gain since 1993. Beta is 1.6 (reasonable). Stock’s price stability is 10 (again very good). Large spreads between year highs and lows (nice large ranges). Officers and directors only own 2.4% (not so good), but it has heavy institutional investment (good). 40% debt. Book value projected to be 11 ½, currently 6.5. Doubles every 2 years or so. Revenues are growing rapidly too. Can we live with some debt if they are growing so quickly? They’ve borrowed at 4% and are growing at 77%. That’s a good use of debt. Book value expected to be 20% (above Tom’s 14% minimum).
27. Tom went over the investment pyramid model. The lower layer is the most stable investments (such as house, cash, insurance, etc.) The next layer consists of growth stocks. They’re a little more volatile, but not too risky. These two layers have the most volume. The top layer (and the smallest volume) is reserved for the riskiest stuff. It is the smallest piece of the pyramid. If you don’t have a strong and stable foundation, your pyramid will not be stable.
28. Barry Savage recommended a book called, “Financial Freedom on $5 a day.”
29. Value line has an opinion page that looks at entire industries (such as semiconductors) and Tom gives this more weight than the opinion on individual stocks.
30. Value line is $575US per year and you can subscribe to an online version. The printed version and the online version are the same. Value Line can also be obtained from most libraries.
31. From 1998 to present, VTSS was very active. Lots of buys and sells.
32. Genesis Microchip (GNSS) Very small company. 69% gain since Oct. 1999. Stock is only up 10%.
33. STAKE TECH LTD. Very small company (almost a penny stock). Up 100% from 1997.
regards,
Mark. |
