Now that we have launched the Tim Melvin Deep Value Newsletter
and Banking on Profits we have seen a steady flow of subscribers and I think
over time we will grow this service. I have been told that if I would be more self-promotional
and dramatic about my offerings we could probably accelerate the sales process.
I am just not that guy. Even if I wanted to pose in front of fancy cars with
half naked women all gained as a result of my terrific trading advice I am pretty
sure my wife would kill me for even suggesting it. The fact that I drive an old
Jaguar that fits me like a glove and I refuse to part with might also hamper my
efforts in that type of marketing.
I am not going to make shrill dramatic pronouncements about
my ability to make you millions of dollars in minutes a day. Value investing
does not work that way. This is a long term approach to the markets that puts
margin of safety first and lets the upside take care of itself. It works but it
won’t make you rich overnight either. It is a service for investors who are
tired of the hype and the promises and want a way to earn solid returns over
time and build their net worth the way private equity and other long term
investors do it by buying cheap assets and selling them when they are fully valued.
Rather than try to convince you to subscribe to my
newsletters with hype and promises I am just going to run on my track record. Listed
below are comments dating back to 2006 that were recorded in my personal blog
or published on Real Money, Daily Speculations or one of the other sites where
my work has appeared over the years. This is value investing at work over the
long run. It runs through the credit crisis when investors were losing a
fortune ,the late 2008-2009 period when everyone was terrified to buy and up to
2011 when we started to feel like the worst was behind us. Judge for yourself
if my approach to investing makes sense for you and is worth the small cost of
an annual subscription. I think it is and hope you will join me by subscribing to
the newsletters and putting deep value investing to work for you.
Good luck to us all,
Tim
12/05/2006
You might be able to sell me the fact that this market is
fairly priced, providing I’ve been drinking heavily, but undervalued, I can’t
see it. The bond market and the dollar are telling you it’s just not that good
out there right now. We have rallied almost 12% since August without a real
pause of any length and anybody who is not cautious now pretty much deserves
what they get.
April 1, 2008
Even if I am dead wrong here I think the risk of being fully
committed to stocks carries too many risks for the idea of a margin of safety
to exist. I am willing to miss this run up to protect capital. There appears to
be very little common sense being used on Wall Street these days when it comes
to the overall economic and financial matters, as well as a total lack of fear.
Bottoms are accompanied by fear and loathing not cheerleading and bottom
predictions. The bullish arguments are laughable. Anyone who does not clearly
see that the recent pullback in gold and other commodities is deleveraging by
hedge funds in light of recent volatility is not looking close enough. Anyone
who thinks that the bank write offs are at an end has just simply lost their
mind. Yes, eventually they will write all this crap down too far and it will
create an opportunity. I particularly look forward to moves like that of UBS to
separate the bad assets into separate vehicles as this will create huge pools
of underpriced and unloved mortgage assets that no one wants to own,
reminiscent of the Texas bad Banks of the late 80s and early 90s. But that time
is not now. Small community banks will thrive and benefit from the tighter
credit conditions and steeper yield curve. But not yet. Patient investors will
see one of the best buying opportunities of their lifetimes. But it is too
soon.
June 20,2008
Interest rates are starting to rise. I continue to think
that only an illiterate deaf mute kamikaze could be aggressively long the US
stock market. Of course there are lots of those around. We call them mutual
fund managers.
11-20-2008
As for the market itself there is a fortune to be made over
the next several years. I see companies that are profitable trading for less
than 3 times E/EBITDA. I see an ever growing list of companies that sell for
less than cash in the bank. We are fast approaching the depths of an ugly bear
market and there is money to be made. I am buying DAR, HDNG, DOW,ASH and other
like a crack addict at a rock convention.
3-14-2009
You can buy stocks like ADPT, TECD, and ESIO for less than
the value of the company’s liquid assets. You can literally build a portfolio
of 40-50 of these that have a good credit scores, viable businesses and
excellent recovery prospects. That’s enough to make me salivate at the
possibilities for gains over the next several years.
DIS trade for about two thirds of my appraisal value. That
is provided we give no value at all to the film library or character rights and
price the parks as raw land and put a 5 multiple on after tax earnings .DELL
trade for less than two cash. HTH is a pile of cash in the hands of a proven
investor in distressed banks and other financials. As a bonus the company
landed a back door bank charter and will be able to bid on distressed assets
and institutions. Southwest Airlines is stupid cheap, trading below tangible
book value. Oil service companies like RDC and PTEN trade below net asset value
at these levels. I like the idea of buying the Forest City senior debentures at
a 30% YTM and what looks to be more than adequate asset coverage. Whitman has
been a buyer and although struggled with everyone else last year, he is one of
the best credit analysts and distressed guys around.
1-16-2010
This is the type of trade I am hoping begins to develop in
earnest in the first half of 2010. As commercial and real estate woes continue
to fall I am looking for the market to wake up to the problems facing the small
banks. When it starts the stock market, being the bastion of irrational
insanity that it is ,the baby will go out with the bathwater. This type of activity
created a situation back in the early 1990s that allowed many people to
literally get rich over the next decade. When the good get sold with the bad I
am looking to buy up a portfolio of small banks below tangible book value that
have low loan losses and adequate reserves. As real estate improves-and it will
someday- we will start to see a wave of mergers and acquisitions in the banking
community. These transactions will occur at multiples of book, not at a
discount. Those solid bank stock bought in this next sell off will show
tremendous gains for those bold enough to step up.
August 8,2011
The current turmoil in the markets is creating some
opportunities. Any type of corporate disappointments is leading to a steep and
drastic sell off. Right now foreign banks are god-awful, point of maximum
pessimism cheap. I like two of the larger Japanese banks, Mitsubishi UFJ (MTU)
and Mizhou (MFG). Both sell at a fraction of tangible book value and for an
investor with a time horizon of five years or more should be very profitable.
The same is true for Royal Bank Of Scotland (RBS). The stock is at 40% of
tangible book and management has a solid plan to de-risk the balance sheet and
return to profitability. As a final foreign excursion the shares of Dutch
insurer Aegon (AEG) are also very, very cheap. They have repaid the Dutch
government for the emergency funding and should pay a dividend again starting
next year.
Here at Home Hudson City Bancshares (HCBK) have sold off
sharply. After the reorganization of the balance sheet the bank should do very
well going forward and at a discount from tangible book and yield of 4.40% it’s
an attractive long term investment. First Bancorp (FBNC) is also cheap and
replacing the TARP funding with Treasury Small Business program funding will be
an enormous boost to the bottom line. Locally Shore Bancshares(SHBI) has been a
severe disappointment as loan losses have continued to mount. I am going to
hold that name and add Severn Savings (SVBI) at this price. I have a lot of
faith in the Hyatt families’ strong desire not to lose the millions they have
invested in the bank. Insiders have been buying so it’s worth a shot at one
third of book value.
Force Protection (FRPT) missed earnings and is now trading
at very cheap prices. This company should have sold out last year and now I
think it is just a matter of time. They have a decent business but will
function better as a division of a larger defense contractor. LB Foster has
decent earnings but there is a product liability claim with Union Pacific involving
1.6 million rail road ties. The question becomes is that worth the 50% of
market cap the stock shed? They will be a huge winner when we finally get all
this crap behind us and our economy is once again growing to the point that
infrastructure spending resumes. Demand for computers and other tech products
may be slow but it will come back when the economy does. That makes Micron
Technology (MU) a screaming long term buy at 75% of book value in my opinion.
I like the idea of buying a small package of mortgage REITS
here. I would buy a little Annaly (NLY) and a little Invesco Mortgage (IVR)
here with the idea of building the position over an extended period of time.
You are likely to get a chance to buy lower based on conditions and volatility
in the bond markets going forward. However they are cheap and the yields of 15
and 20% respectively make them worth a shot here.
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