Arrival Capital -- Market Commentary
Friday, September 19, 2003
Choppy Times
Markets were little changed today. Most of our account positions were down slightly. Happy that Service Master (SVM) closed up. No guarantee, of course, but the entry point during investor presentation, with $10 previously holding as support level, is a good example of our overall strategy. Position yields over 4%, low PE, high cash generation, and what seems to be back-to-basics style of management.
Apart from Service Master, we continue to monitor markets for opportunities. Drug stocks and energy appear to still be somewhat out-of-favor and undervalued. Working on natural gas plays that could once again spike next winter. Finally, we continue to try to spot little-known, small-cap stocks that show good value, similar to some of the plays that have worked this year (Central Parking, Tyler, Tupperware) for a segment of account positions.
Wednesday, September 17, 2003
The Importance of Entry Point
Arrival Capital bases investment decisions on fundamental analysis of company specifics, trying to gauge a company's intrinsic or potential value versus current market value. We don't do this in a vacuum, however. Finding the "right" company to invest in also involves finding it at the "right" price at the "right" time in the market's bigger picture. For weeks, we have been following the company Service Master (SVM). Plunging in, learning a company's story, getting a handle on its financials. That done, we wanted to buy in at a point the seemed supported by both fundamentals (a 4+% dividend) and market action. Today, after listening to a 3 hour company investor presentation, we went ahead and bought at $10.20. Under $10 would have been nice, but with a dividend looming, and the downside protection present, it was time to buy.
Tuesday, September 09, 2003
Margin of Safety
Today was a great example of why buying the best of out of favor sectors can provide the margin of safety in a down market. With most stocks in the red, the drugs, including Pfizer, were strong. As tech stocks look increasingly overbought here, we continue to look for the companies and industries that have not only stayed rather flat over the last few months but that contiue to look like great value plays for the months ahead. Specifically, we contiue to be intrigued by energy stocks, such as BP and RD. If the economy does pick up as everyone says, then certainly prices will stay high and pricing power will improve. All that and healthy dividends to boot. The food and restaurant stocks are also starting to look interesting, particularly Conagra and Darden. Finally, we continue to look for good entry points in business service stocks as well as some of the mortgage REITs. Again, we strive to grow client capital but at the same time avoid chasing the runaway techs, collect dividends on certain turnaround plays (Stanley Works, Tupperware), and keep some cash around for rainy day opportunities.
Wednesday, September 03, 2003
Outrage in Mutual Fund Land
Today's news about large, well-known fund companies unfairly letting hedge fund operators make a quick buck out of the hides of small investors once again casts doubt on the intentions and practices of large financial services firms. Fortunately, the market as a whole held up, and our value positions continue to move up, particularly the energy, drug and small-cap stocks we hold. The problem, of course, is not with the many good individual companies that deserve our investment dollars but with a financial service industry that has completely lost track of its role in guiding investors to good investments rather than making undeserved money. We at Arrival Capital strive to bring back a basic value proposition -- we do well over the long term only by carefully managing client capital, looking out only for your interests, and being satisfied with our 1% fee. No broker kick-backs, hidden payoffs, or self-dealing. We believe this is the only way to do business.
Tuesday, September 02, 2003
September Take-Off
September got off to a good start today in the equity markets. Value and Growth positions all moved up. September is supposed to be the worst month of the year, but it looks like investors are looking to add to the year's gains. We continue to stick to finding, buying, and holding good value positions. If the market does sell off this month, it seems likely that companies like Pfizer, Tupperware, Dow, etc. will weather the storm better yet still provide upside on good days like this. Accounts moved up well today, to be sure, but we continue to seek that margin of safety so we can all sleep more soundly.
