In 2005, Berkshire Hathaway bought about a million shares of Lexmark. I haven’t followed this story closely, but I assume the stock was purchased by Lou Simpson rather than Warren Buffett. I have only two reasons for believing this: the total purchase was small relative to Berkshire’s investable assets and the Lexmark purchase is typical of Simpson’s investment philosophy (or at least, what little I can glean about his investment philosophy from his past purchases). Regardless of who actually makes the purchases, a new Berkshire holding always draws a lot of commentary.

The commentary on Lexmark has been almost uniformly negative. Even many value investors have a very dim view of Lexmark at these prices. Now, I am not a contrarian investor. Psychology and sentiment do not enter into my considerations at all. I’ve bought stocks trading near five year lows, and I’ve bought stocks trading near five year highs. I just try to be rational. I’m not afraid to agree with the consensus, if it’s an accurate representation of reality. Here, it isn’t. The model of Lexmark that has emerged in my mind over the past few weeks bears little resemblance to the Lexmark I’ve seen described elsewhere.

Most of the negative comments about Lexmark have focused on the consumer segment. Yet, more than 75% of Lexmark’s profits come from the business segment. The business segment is Lexmark’s franchise. There, the company has managed to build a moat, not a very wide moat, but a moat nonetheless. Lexmark is the only focused, integrated printing company of any consequence. It understands its business customers’ needs, and provides specially tailored solutions that none of its competitors can offer. Worldwide, some very large companies use Lexmark’s products for some very specialized tasks. Among these are retailers, banks, and pharmacies. Lexmark has complete control of their product including the printing technology itself and the software used to manage its printers (i.e., to interface with the user’s computer). Businesses that care about getting these specialized tasks done right (and getting them done cheap) use Lexmark.

Even Lexmark’s competitors have to concede the fact that Lexmark knows printing better than anyone else. Lexmark is the only company that develops its own ink - jet, monochrome, and color laser technologies. It is a vertically integrated printer business like no other. The two competitors most often mentioned as threats to Lexmark are HP and Dell. While everyone will suffer from deep price cuts; I think it’s HP and Dell who should be scared.

Lexmark has the much stronger competitive position. For years to come, it will be launching the best printing products for high ink consumption tasks. Lexmark hasn’t been focused on competing directly with these companies in the consumer segment; that’s going to change because of the emerging photo printing market.

Lexmark isn’t interested in selling hardware. It’s interested in selling ink. Now that there is real demand emerging for high quality printing within the home, Lexmark is going to start going after the consumer market. Over the next few years, Lexmark will be selling more printers in this segment. A few years after that, the company will see strong recurring revenues from ink sales.

Generic ink cartridges are the biggest threat to the high margin printing business. However, I believe, of all the players in this industry, Lexmark will be the least affected. Its highest margin sales are its most insulated sales. Its lowest margin sales, in its least dominant businesses, are where generic ink will hurt the most.

There is also some concern that Dell could always move away from using Lexmark printers. Let them. From what I can see, sales to Dell will not be a particularly significant high free cash flow margin business. There’s no benefit to the Lexmark brand either. That brand is going to become stronger over the next decade, because the quality is already there. Lexmark simply hasn’t been that visible to consumers. The Dell deal doesn’t help build the Lexmark brand. Honestly, I wouldn’t be terribly troubled if Lexmark’s sales to Dell dropped to zero tomorrow. Such an occurrence would not materially affect my valuation of Lexmark.

As far as I can tell, Lexmark’s management is excellent. They understand the printer business better than anyone (they also happen to understand the science of printing better than anyone - CEO Paul Curlander has a PhD in electrical engineering from MIT). Lexmark’s management also sees highly profitable opportunities in printing long - term, despite a very competitive situation short - term. I agree with that assessment.

Within the printer business, there is a real danger of ferocious price competition. However, I do not believe there is a real danger of prolonged ferocious price competition. Lexmark is the company best positioned to weather the storm. It will generate tons of free cash flow, none of which has to be siphoned off to other lines of businesses, as it does at all of Lexmark’s competitors. Lexmark’s high free cash flow margin recurring revenue stream will supply it with more than enough ammunition to outlast its competitors. They may be deep pocketed, but eventually, they will have to answer to Wall Street. Long - term, they can’t compete with Lexmark. It will take them some time to realize that. But, Lexmark has the time.

That’s my assessment of Lexmark on qualitative grounds. How does the stock look quantitatively?

The stock is selling for about 15 times earnings and 10 times cash flow. Right now, a dollar of Lexmark’s stock buys you a dollar of sales. I think that’s a bargain. Not many companies of this caliber sell at a price - to - sales ratio of one.

For the last ten years, Lexmark’s return on equity has not fallen below 20%. During the same period, the company’s return on assets never fell below 10%. The free cash flow margin has generally been in the 5 - 10% range.

I wouldn’t be surprised to see Lexmark’s ROE and free cash flow fall substantially in the next few years. However, long - term, I believe a return on equity of 15 - 20% and a free cash flow margin of 8 - 10% are sustainable. In fact, if I was forced to pick an exact ROE that Lexmark could sustain I would pick 20%. But, I would also caution you not to expect that for the next five years or so.

The important estimate is the 8 - 10% free cash flow margin. That’s the best way to value Lexmark. At one times sales, you have an 8 - 10% yield, if you think sales can be sustained. If you think sales can grow, you have to factor that into your analysis. At present, a discount rate of 8% seems appropriate.

I never do a discounted free cash flow analysis on this blog, because I feel the variables that go into are something you have to decide on for yourself. I don’t want to slap an exact figure on the value of a company, because I don’t want to suggest that kind of precision. But here, you can clearly see how I’d value Lexmark. I gave you what I think Lexmark’s free cash flow margin will be (8-10%), you know what Lexmark’s sales are ($5.4 billion), and I gave you the discount rate I thought was most appropriate (8%). The only necessary variable I haven’t provided is a sales growth estimate, and I’m not going to provide that, because I don’t want you to think it has anything to do with the next five years.

It doesn’t. I’m looking at this company well beyond that point, and I like what I see. Lexmark will strengthen its brand (with consumers), and people will still be printing. So, yes, I am projecting revenue growth for Lexmark; and yes, it is enough to suggest Lexmark is worth substantially more than $5.5 billion.

Posted by admin as Better Investment at 3:06 AM CST

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One question almost every investor asks at some point is whether it is possible to achieve above market returns by selecting a diversified group of stocks according to some formula, rather than having to evaluate each stock from every angle. There are obvious advantages to such a formulaic approach. For the individual, the amount of time and effort spent caring for his investments would be reduced, leaving more time for him to spend on more enjoyable and fulfilling tasks. For the institution, large sums of money could be deployed without having to rely upon the investing acumen of a single talented stock picker. Many of the proposed systems also offer the advantage of matching the inflow of investable funds with investment opportunities. An investor who follows no formula, and evaluates each stock from every angle, may often find himself holding cash. Historically, this has been a problem for some excellent stock pickers. So, there are real advantages to favoring a formulaic approach to investing if such an approach would yield returns similar to the returns a complete stock by stock analysis would yield.

Many investment writers have proposed at least one such formulaic approach during their lifetime. The most promising formulaic approaches have been articulated by three men: Benjamin Graham, David Dreman, and Joel Greenblatt. As each of these approaches appeals to logic and common sense, they are not unique to these three men. But, these are the three names with which these approaches are usually most closely associated; so, there is little need to draw upon sources beyond theirs.

Benjamin Graham wrote three books of consequence: “Security Analysis”, “The Intelligent Investor”, and “The Interpretation of Financial Statements”. Within each book, he hints at various workable approaches both in stocks and bonds; however, he is most explicit in his best known work, “The Intelligent Investor”. There, Graham discusses the purchase of shares for less than two - thirds of their net current asset value. The belief that this method would yield above market returns is supported on both empirical and logical grounds. In fact, it currently enjoys far too much support to be practicable. Public companies rarely trade below their net current asset values. This is unlikely to change in the future. Buyout firms, unconventional money managers, and vulture investors now check such excessive bouts of public pessimism by taking large or controlling stakes in troubled companies. As a result, the investing public is less likely to indulge its pessimism as feverishly as it once did; for, many cheap stocks now have the silver lining of being takeover targets. As Graham’s net current asset value method is neither workable at present, nor is likely to prove workable in the future, we must set it aside.

David Dreman is known as a contrarian investor. In his case, it is an appropriate label, because of his keen interest in behavioral finance. However, in most cases the line separating the value investor from the contrarian investor is fuzzy at best. Dreman’s contrarian investing strategies are derived from three measures: price to earnings, price to cash flow, and price to book value. Of these measures, the price to earnings ratio is by far the most conspicuous. It is quoted nearly everywhere the share price is quoted. When inverted, the price to earnings ratio becomes the earnings yield. To put this another way, a stock’s earnings yield is “e” over “p”. Dreman describes the strategy of buying stocks trading at low prices relative to their earnings as the low P/E approach; but, he could have just as easily called it the high earnings yield approach. Whatever you call it, this approach has proved effective in the past. A diversified group of low P/E stocks has usually outperformed both a diversified group of high P/E stocks and the market as a whole.

This fact suggests that investors have a very hard time quantifying the future prospects of most public companies. While they may be able to make correct qualitative comparisons between businesses, they have trouble assigning a price to these qualitative differences. This does not come as a surprise to anyone with much knowledge of human judgment (and misjudgment). I am sure there is some technical term for this deficiency, but I know it only as “checklist syndrome”. Within any mental model, one must both describe the variables and assign weights to these variables. Humans tend to have little difficulty describing the variables - that is, creating the checklist. However, they rarely have any clue as to the weight that ought to be given to each variable. This is why you will sometimes hear analysts say something like: the factor that tipped the balance in favor of online sales this holiday season was high gas prices (yes, this is an actual paraphrase; but, I won’t attribute it, because publicly attaching such an inane argument to anyone’s name is just cruel). It is true that avoiding paying high prices at the pump is a possible motivating factor in a shopper’s decision to make online Christmas purchases. However, it is an immaterial factor. It is a mere pebble on the scales. This is the same kind of thinking that places far too much value on a stock’s future earnings growth and far too little value on a stock’s current earnings.

The other two contrarian methods: the low price to cash flow approach and the low price to book value approach work for the same reasons. They exploit the natural human tendency to see a false equality in the factors, and to run down a checklist. For instance, a stock that has a triple digit price to cash flow ratio, but is in all other respects an extraordinary business, will be judged favorably by a checklist approach. However, if great weight is assigned to present cash flows relative to the stock price, the stock will be judged unfavorably. This also illustrates the second strength of the three contrarian methods. They heavily weight the known factors. Of course, they do not heavily weight all known factors. They only consider three easily quantifiable known factors. An excellent brand, a growing industry, a superb management team, etc. may also be known factors. However, they are not precisely quantifiable. I would argue that while these factors may not be quantifiable they are calculable; that is to say, while no exact value may be assigned to them, they are useful data that ought to be considered when evaluating an investment.

There is the possibility of a middle ground here. These three contrarian methods may be used as a screen. Then, the investor may apply his own active judgment to winnow the qualifying stocks down to a final portfolio. Personally, I do not believe this is an acceptable compromise. These three methods do not adequately model the diversity of great investments. Therefore, they must either exclude some of the best stocks or include too many of the worst stocks. It is wise to place great weight upon each of these measures; however, it is foolish disqualify any stock because of a single criterion (which is exactly what such a screen does).

Finally, there is Joel Greenblatt’s “magic formula”. This is the most interesting formulaic approach to investing, both because it does not subject stocks to any true/false tests and because it is a composite of the two most important readily quantifiable measures a stock has: earnings yield and return on capital. As you will recall, earnings yield is simply the inverse of the P/E ratio; so, a stock with a high earnings yield is simply a low P/E stock. Return on capital may be thought of as the number of pennies earned for each dollar invested in the business. The exact formula that Greenblatt uses is described in “The Little Book That Beats the Market”. However, the formula used is rather unimportant. Over large groups of stocks (which is what Greenblatt suggests the magic formula be used on) any differences between the various return on capital formulae will not have much affect on the performance of the portfolios constructed. Greenblatt claims his magic formula may be used in two different ways: as an automated portfolio generation tool or as a screen. For an investor like you (that is, one with sufficient curiosity and commitment to frequent a site such as this) the latter use is the more appropriate one. The magic formula will serve you well as a screen. I would argue, however, that you needn’t limit yourself to stocks screened by the magic formula, if you have full confidence in your judgment regarding some other stock.

These four formulaic approaches (the three from Dreman and the one from Greenblatt) will likely yield returns greater than or equal to the returns you would obtain from an index fund. Therefore, you would do better to invest in your own basket of qualifying stocks than in the prefabricated market basket. If you want to be a passive investor, or believe yourself incapable of being an active investor, these formulaic approaches are your best bet. In fact, if I were approached by an institution making long - term investments and using only a very small percentage of the fund for operating expenses, I would recommend an automated process derived from these four approaches. I would also recommend that 100% of the fund’s investable assets be put into equities, but that is a discussion for another day (in fact, it’s a discussion for Tuesday; my next podcast is devoted to the dangers of diversification). If, however, you believe you have what it takes to be an active investor, and that is truly what you wish to be, then, I would suggest you do not use these approaches for anything more than helping you generate some useful ideas.

If you choose this path, you need to be clear about what being an active investor entails. Read this next part very carefully (it is correct even though it may not appear to be): I have never found a screen that generates more than one buy order per hundred stocks returned. Even after I have narrowed the list of possible stocks down by a cursory review of the industry and the business itself, I have never found a method that can consistently generate more than one buy order per twenty - five annual reports read. Here, I am citing my best past experiences. In my experience, most screens result in less than one buy order per three hundred stocks returned, and I usually read more like fifty to a hundred annual reports per buy order at a minimum. You may choose to invest in far more stocks than I do. Perhaps instead of limiting yourself to your five to twelve best ideas as I do, you might want to put money into your best twenty - five to thirty ideas. Do the math, and you’ll see that is still quite a bit of homework. That’s why remaining a passive investor is the best bet for most people. The time and effort demanded of the active investor is simply too taxing. They have more important, more enjoyable things to do. If that’s true for you, the four formulaic approaches outlined above should guide you to above market returns.

Geoff Gannon writes a daily value investing blog and produces a twice weekly (half hour) value investing podcast at Gannon on Investing.

Posted by admin as Better Investment at 9:51 PM CST

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Una de las muchas formas de perder dinero en fondos mutuos no basados en ndices es la trampa de los impuestos. Podra tener que pagar impuestos hasta cuando su fondo mutuo pierde dinero! Para muchas personas esto se convierte en algo dolorosamente inesperado. As es como sucede este comportamiento contra-intuitivo. Si el administrador del fondo vende una accin por ms de lo que le cost comprarla, se genera una ganancia. A esta ganancia se le llama ganancia de capital y es tributable a impuestos. Las ganancias de capital son grabadas con una tasa de impuestos comn, que est entre el 28% y el 38.6% para la mayora de los inversionistas si el fondo mantuvo la accin por menos de un ao. Si la accin se mantuvo por ms de un ao, en otras palabras a largo plazo, el impuesto es del 20%. Aunque por ley, los fondos mutuos no pagan impuestos, estos cargos se los pasan a usted, el accionista del fondo mutuo. Hay un par de razones por la que los fondos mutuos pagan impuestos. Si el fondo tiene un bajo rendimiento los inversionistas se marcharn. Los administradores del fondo mutuo tienen que vender acciones para pagar a los inversionistas que se marchan. Aunque usted no sea uno de los inversionistas que salta del barco, de todas formas tendr que pagar su porcin de los impuestos de las ganancias capitales.

Los dividendos son otra razn por la que hay impuestos. En los dividendos se paga el impuesto en la distribucin de ganancia por accin que las compaas obtienen de en sus ganancias trimestrales. Muchos inversionistas les piden a sus fondos mutuos que automticamente reinviertan sus dividendos. Esto quiere decir que el fondo utiliza el dinero para comprar ms acciones en su nombre. Aunque reinvierta y nunca vea ni un centavo de sus dividendos, estos estn sujetos a impuestos, de acuerdo con Hacienda (el IRS). Otra razn por la que quizs le llegue un recibo de impuestos se debe a una alta tasa de rotacin. La rotacin mide la frecuencia con la que un administrador compra y vende acciones, algunas veces en la bsqueda de la prxima accin de alto vuelo o acciones de bajo precio al borde de despegar. De acuerdo con Lipper (compaa de analisis de fondos mutuos), el fondo promedio en el 2000 mostr una tasa de rotacin del 122%. Esto significa que la cartera entera cambi entre enero y diciembre, y 22% de las acciones de reemplazo cambiaron también.

Esta es la forma ms comn de timar a la gente! Simplemente tiene que entender que cuando invierte en un fondo est comprando un impuesto a las ganancias. La mejor manera de evitar algunos de estos impuestos es restringir sus compras de fondos mutuos en su plan de jubilacin (401 (k) ) y tratar de comprar slo fondos mutuos basados en ndices como lo es Vanguard 500 (VFINX).

Posted by admin as Better Investment at 8:12 PM CST

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Visitor numbers to the towns around Ostuni have witnessed a sharp increase this summer, mainly due to its unique position between the 2 international airports, closeness to the sea and the wonderful undulating countryside. It is not only the English and Irish who seem to be increasingly drawn by the lure of Puglia property- English, Irish, American, French and Spanish accents can now be easily detected in Ostuni, Martina Franca, Cisternino or Alberobello, irrespective of the time of the day. It provides ample proof that Puglia is now firmly established the map not only as a tourist area but also a place to purchase property for long-term investment, as an overseas home or even as an ideal retirement location.

The significant growth in property buyers traveling to Puglia as well as casual visitors to the beautiful south eastern tip of Italy has certainly moved the price of property for sale in Puglia out of the bargain basement area onto the ground floor level. Italian Property expects that over the next 12 months, property prices in Puglia will rise further, and figuratively speaking, possibly move up another 2 floors.

In fact, Italian Property suggests potential property buyers that if they are looking for a good, reasonably priced property inclusive of land, then they should seriously consider buying the property within the next 6 months. The rise in demand for properties in Puglia can also be attributed to individuals as well as companies showing an intent to buy properties with pension funds.

Posted by admin as Better Investment at 9:35 AM CST

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Shorts. Let’s see. If there are shorts there must be longs. Which is best? Longs or shorts?

If you are trading in the stock the stock market experts like longs better than shorts. If you are “long” that means you own stock and that is “good”. If you are short you have sold stock and that is “bad”. At least that is what Wall Street preaches. And why do they want to make you believe this and is it true? Let’s examine the facts.

Today I hear stories on the financial news and there are articles in the paper that people who are “short” driving the market down. They have sold more stock than they own and this is causing the market to collapse. I even hear that Congress is trying to pass a law that will not allow people to sell short. They are blaming hedge funds who are allowed to sell short. The basic flaw in this concept is when a short sale is initiated it must be done on an up tick. That means the stock must be going up in order to make a “short” sale. No short sale may be made to pressure the market down. That is a fatal pin in the balloon of that lie.

There are reasons people will make the sale of a stock. If you own it you may just need the money now or if it is going down you may not want to lose money should the downward trend continue. There is on old saying in the market - “the trend is your friend”. If you see a stock that is declining you may want to sell it first and when it declines further you will buy it back at a lower price later on. This actually puts a floor under that stock because some time in the futures you MUST buy it. Whoever is doing the shorting does not matter whether it is an individual or a hedge fund. They are actually doing two things that are both good for the market. They are providing a future buy to support the price at a lower level that keeps it from going lower and they are providing liquidity to the market.

When you buy long you want it to go up so you can sell it later at a profit. When you sell short you sell it now with the idea of buying it back after it declines. Both are driven by the profit motive. How can one be good and the other bad? It is like saying there is good electricity and bad electricity.

If company CEOs don’t want people to short their stock I suggest they look in the mirror to find out who is at fault. The CEO is not running his company properly and that is why the stock is declining. No outside person or group can drive a stock lower that is making a good profit. There is a good reason for the price decline.

Buying short does not put the market down. The ultimate outcome of a short sale (covering the short) is very positive for the market.

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Copyright Albert W. Thomas All rights reserved. Author of “If It Doesn’t Go Up, Don’t Buy It!” Former 17-year exchange member, floor trader and brokerage company owner.

Posted by admin as Better Investment at 12:42 AM CST

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Canadian Research Analyst Forecasts Severe Uranium Supply Crunch for Next 10 Years

Rising Uranium Price May Consolidate Exploration Sector, Driving Intense Takeover Activity

Legendary stock picker James Dines recently compared uranium stocks to the high-flying net stocks of the halcyon days of the Internet expansion era. While the much-hyped and fleeting Y2K crisis never materialized, the U.S. energy crisis for highly sought uranium has been developing for more than twenty years. Still early in the current bullish uranium cycle, investors are scoring triple-digit returns on what some are calling a ‘renaissance in nuclear energy.’ Just as investors caught the curve of a new paradigm in communications and commerce with Internet stocks, many early birds have already begun investing in the nuclear energy story. It describes a rapidly evolving global scramble to satisfy an inevitable worldwide surge in electricity demand. The growing consensus is that fission-based nuclear power may become the significant stop-gap energy alternative for this century and possibly until reliable technologies can effectively provide the means for renewable-sourced energy.

Nearly 2 billion people across the planet have no electricity. The World Nuclear Association (WNA) believes nuclear energy could reduce the fossil fuel burden of generating the new demand for electricity. The WNA forecasts a 40-percent jump in worldwide electricity demand over the next five years. The world’s most populated countries, China and India, are in the process of creating the largest energy-consuming class in the history of earth. Both plan aggressive nuclear energy expansion programs.

In a nutshell, global utilities are going to need uranium to help feed the increasing number of nuclear power plants proposed over the next twenty years. Uranium is now in shorter available supply for civilian energy use than ever before. Over the next decade, as demand continues to outstrip supply, analysts are predicting utilities will snap up known uranium inventories sending spot uranium prices to record highs. During this launch phase, investors have taken notice, chasing up the stock prices of many uranium producers and exploration companies.

Uranium Prices May Reach “Unbelievable Highs”

Toronto-based Sprott Asset Management research analyst, Kevin Bambrough, told STOCKINTERVIEW.COM, “There is a good possibility of a supply crunch that could drive uranium prices to unbelievable highs.” Various analysts predict price targets for spot uranium, in the near-term, above $40. Canadian Augen Capital Corp’s managing director David Mason speculated, “$100 (US) a pound is within reason within the next year or two.” Sydney-based Resource Capital Research is half as generous, forecasting $50/pound by 2007, explaining another 40 percent jump in spot uranium prices will be “driven by end users in the power generation market which is urgently trying to secure supply into the future.”

How high could spot uranium prices run? Kevin Bambrough made a hypothetical case for uranium trading north of $500. “It’s a ridiculous price,” Bambrough confided. “It’s hard to speculate if this is even going to happen.” While he admits that price would not be sustainable, Bambrough makes an interesting point about the concerns facing utility companies, charged with providing us with our electricity. In his futuristic scenario, Bambrough speculated, “There’s a chance that some facilities will have to choose shutting down their nuclear plants (if they can not obtain uranium to fuel the facility).” On that basis, Bambrough calculated the operating costs of a nuclear facility versus the operating cost of a competing fuel, such as natural gas.

Bambrough explained, “Assuming that the coal-fired plant’s operating capacity, before you would basically shut down a nuclear facility, you would be comparing it to what you would have to bring on, which would be natural gas. If you were to shut off the nuclear capacity, and fire up more gas to replace it, it would send gas prices through the stratosphere.” And that doesn’t factor in the cost of shutting down a nuclear facility, itself an exorbitant process. The analyst said he reached his calculation of “north of $500/pound” for spot uranium, under an extraordinary emergency supply crunch, by answering this question: “How much would people pay before they shut it (a nuclear plant) down if there is a shortage of uranium?”

Despite the recent parabolic rise in spot uranium prices, Bambrough doesn’t foresee the uranium frenzy peaking until the years 2013-2015. What will happen then? “There’s a good chance that the HEU agreement won’t be renewed,” said Bambrough. “Russia may not be selling their uranium. The Russians may want to hold onto what they have.” And if they do sell, they may not sell to the U.S. In 2004, U.S. utilities imported more than 80 percent of their uranium supplies from foreign sources. “It could be that the Russians are interested in trying to build nuclear plants for other countries and be in that business,” he suggested. “That may go hand in hand with ‘we’re going to build you the facility and we can guarantee you supply.’ And Russia would be using the balance of that uranium for their domestic needs.” Bambrough also cited the problem of mines expiring in the face of a potential new demand. He concluded, “There are time lags to bring new production on versus what needs to be replaced in that 2013 period.”

The key yardstick in determining how much higher uranium prices will climb is by keeping track of the number of new nuclear facilities being constructed or proposed. Estimates vary wildly, from as few as thirty by 2020 to more than 150 before 2050. “A few years ago, when we first started investing in uranium,” Bambrough explained. “There were very few plants being proposed. The numbers have doubled for proposed facilities. And for every one you hear about, there’s a lot more being planned.” That puts uranium miners into an enviable position. Bambrough added that utilities have to secure their fuel supply for up to six years out, once they decide to build a nuclear facility. “The fact is the supply is just not there,” warned Bambrough.

Where Will the Uranium Come From?

In his September 2004 presentation to the World Nuclear Association, Thomas L. Neff of MIT’s Center for International Studies, stated, “The net result of nearly twenty years of inventory liquidation is that existing higher-cost suppliers were driven out of business, new mines were discovered from starting, and exploration was neglected.” Neff warned in his conclusion, “The problem is the one to two decades that will be needed to expand (production) capacity and build the flow of nuclear fuel that meet the expanding requirements horizon.”

The 1970s price spike in uranium was limited because existing uranium mines were quickly ramped up to supply utilities with fuel. Neff noted, “This is not the case today and a longer period of high prices could prevail.” In Neff’s analysis, uranium prices would have risen well above $100/pound in the mid 1970s, using constant 2004 US$. On that basis, Bambrough’s hypothetical forecast above $500/pound may be not too far out of reach. Neff summarized why the problem has reached a critical stage, “We are currently facing the consequences of what may be the largest sustained divergence between expectations and reality in the 60 year history of uranium.”

“For people who want to bring on new (nuclear) facilities and contract for it, it’s very difficult to do that,” said Bambrough. “You have to go to mines that are not even there yet in order to try and contract supply.” In this light, it appears the greatest opportunity will appear with the junior uranium companies, which obtained known uranium resources during the last down cycle, and whose operators abandoned such properties because of low prices. As Neff warned in his presentation, “Uranium prices have recently reversed a twenty year decline, apparently surprising many buyers and sellers.” Buyers will be combing the same company lists investors scan. Just as investors will be racing to find the best uranium juniors for investment purposes, utility buyers and uranium traders will be scrambling to identify which company could provide them with a long-term uranium supply.

How Can Investors Profit?

Bambrough recalled compiling a worldwide list, in 2003, of a mere 25 companies involving in uranium mining and exploration. “I cut the list down to around ten that looked to be promising,” said Bambrough. “I’d say that today there are still less than 30 uranium companies that present a good reward-to-risk ratio considering the massive move the sector has made.” Depending upon whose list you believe, the number of companies now mining or exploring for uranium stretches to about 200. The majority trade on either the Canadian or Australian stock exchanges.

What sort of companies has Sprott Asset Management invested in? Bambrough responded, “We have preferred to invest in companies that have acquired properties that were once owned and were actively being worked by majors at the end of the 70’s bull market.” He added, “The cost of uranium exploration is so large there is great value built into many of these properties. Specifically, millions of dollars worth of drilling work and data have been collected on some properties. In some cases, mining shafts have been built that only require rehabilitation at a fraction of the cost of starting fresh with a green fields project.”

Bambrough shared a few of his favorite uranium stocks. “Of the companies that we own, we own a larger percentage of Strathmore Minerals (TSX: STM; Other OTC: STHJF) than almost any other company,” said Bambrough. “We think they’ve got some great properties. They were guys who got into the game very early, and who have skills as they do with David Miller (president and chief operating officer of Strathmore Minerals) in understanding the uranium business. And they have a very large amount of databases, as does Energy Metals Corporation, which is extremely valuable in understanding the properties.” Both Strathmore Minerals and Energy Metals have properties in New Mexico and Wyoming. “I think the future for New Mexico is quite good,” Bambrough noted, “as well as ISLs in Texas and Wyoming.” Said Strathmore’s president, David Miller, “Strathmore is the only company to open an office up in New Mexico dedicated to bringing properties into production.”

Another Sprott Asset Management favorite is Tournigan Gold Corp (TSX: TVC). “You look at a past producing region,” Bambrough pointed out. “They went and got old mines.” Tournigan recently drilled the historic Jahodna uranium resource in Slovakia, once drilled by the Russians. The company also holds uranium properties in Wyoming and recently acquired uranium properties in South Dakota.

Where the Action Is

The more adventurous price action may be found in the ongoing consolidation within the uranium sector. Bambrough observed, “There appear to be a few aggressive junior uranium companies that seem to be moving forward and working to build a ‘major’ company.” In November, one uranium exploration company, Energy Metals Corporation (TSX: EMC) began takeover procedures to acquire two other uranium juniors, Quincy (TSX: QUI) and Standard Uranium (TSX: URN). Standard Uranium has since traded nearly 70 percent higher. “There are people who have neighboring properties, and it makes sense for them to come together,” advised Bambrough. “At least joint ventures, if not full consolidations, to take advantage of the extreme costs in permitting.”

In late December, another of Bambrough’s favorite uranium companies, Strathmore Minerals (TSX: STM; Other OTC: STHJF), announced it had “engaged National Bank Financial as its exclusive financial adviser to review transaction alternatives to maximize shareholder value from its uranium assets.” Questioned about this news release, CEO Dev Randhawa told StockInterview.com, “National Bank has the best technical team and will help us reach the right decision to maximize the benefit to our shareholders.” In a 2005 research report, the Cohen Independent Research Group set a price target of C$4.29/share for Strathmore Minerals, based upon the current spot uranium price.

How does Bambrough envision the uranium bull market unfolding for investors? “I think the market could really use more large cap uranium companies, since large fund managers currently can really only look to Cameco (NYSE: CCJ) and Energy Resources of Australia (ASX: ERA) to get exposure to the uranium market,” said Bambrough. “There are several junior companies that should come together to form large uranium companies to leverage their extremely valuable skilled personnel, lower the exorbitant costs of permitting and exploration, and achieving other economies of scale.” How soon would it be before a larger company, combining some of these promising juniors, reaches listed status on the New York exchange? “I would guess that a NYSE listing may not come until 2007 or 2008,” responded Bambrough. “I think that when the tap comes for a lot of these companies, it will come to those that are in production. You’ll be able to see a nice production profile, several projects, diversification, cash flows, and a nice pipeline of projects.”

As for the approximately 200 uranium exploration companies that have sprouted up in less than two years, Bambrough advised, “I don’t understand why people would put so much money into grassroots properties when there are properties that were (already) worked on, and you can continue on their work. The idea is we are continuing on those projects rather than going grassroots. It’s the logical place to go for me.” Bambrough is still enthusiastic about the uranium sector and closed his remarks, saying, “I expect that we will see a great out performance by quality uranium companies as they move their projects forward. We still see some incredible values and are still actively investing in the space. We are still in the early days of the uranium bull market.”

Posted by admin as Better Investment at 6:54 AM CST

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The Roth IRA is the simplest, easiest, most effective tax-free savings plan imaginable. Not only do your earnings accrue on a tax-free basis, but withdrawals are free of taxes as well.

If you’re confused about the myriad of retirement plans that you have to choose from, let me make it easy for you. The Roth IRA is probably going to be your best bet, hands down. It’s more flexible than a 401(k) or a traditional IRA and it will probably allow you to accumulate more money for retirement.

I can think of one exception where the 401(k) may be better. If your employer matches your contributions, you probably want to contribute to a 401(k). But contribute to it only to the point that your employer matches your contribution. Beyond that, put your money in a Roth IRA. And even if your employer matches your 401(k) contribution, it is usually the case that you have to stay with the company for a certain number of years before you actually own your account. If you don’t plan to be there that long, then opt for the Roth IRA.

Maximum Contributions

For 2005, the contribution limit to a Roth IRA is $4,000 if you’re under age 50 and $4,500 if you’re 50 over. However, there are proposals before Congress to raise that limitation or remove the limitation altogether.

Income Ceiling

If you’re single and your adjusted gross income is higher than $95,000, or $150,000 if you’re married, the amount you can contribute to a Roth IRA begins to decrease. It reaches zero for incomes of $110,000 for single people and $160,000 for those who are married. But there are proposals to remove the ceiling, making all Americans eligible.

Tax Advantage

The big attraction to the Roth IRA is the tax break it gives you. If you contribute to a 401(k) or a traditional IRA, you get a tax deduction in the year of your contribution, which reduces your taxes for that year. And you won’t pay taxes on interest, dividends, or capital gains while you’re working. But you will pay taxes when you go to withdraw the money at retirement.

With a Roth, you don’t get the tax reduction on contributions, but after that it’s completely tax-free. You never pay taxes on interest, dividends, or capital gains — not while it’s growing, not when you make withdrawals. Never. That’s a huge benefit.

No Distribution Requirements

Remember that a 401(k) account and a traditional IRA are just tax-deferred, not tax-free. The government wants its money when you make withdrawals. So you are required to start making withdrawals at age 70 1/2. But since Roth IRAs are tax-free, the government doesn’t care how long you let it grow. So if you don’t need the money you can just keep letting your account grow, free of taxes, for as long as you want.

Early Withdrawals

Withdrawals from a traditional IRA or an employer-sponsored retirement plan before the age of 59 1/2 could led to taxes and penalties. That may not be true with a Roth IRA. You can withdraw the money that you contributed at any time without penalty. However, the earnings on your contribution may be subject to tax and penalties. So a Roth also has an advantage over other retirement plans if you plan to retire early since you can first remove your contributions without tax or penalty.

If you appreciate the tremendous advantages of tax-free savings and investing, the Roth IRA is hard to beat. Do you have one yet?

Copyright Larry Holmes

Larry Holmes invites you to visit http://www.Money-Management-Wisdom.com/
You will learn how to become debt-free, save and invest money, cut taxes, manage risk, and achieve financial freedom in a much shorter time than you dreamed possible.

Posted by admin as Better Investment at 8:18 PM CST

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According to Alexander Paul Morris, Top Trader and Creator of the Highly Acclaimed tymoraPRO Trading Platform, a big key to successfully trading the markets is having the best analytical, scanning, and execution tools available in one place, so that traders can quickly and easily assimilate all relevant information, and then be able to make an immediate trading decision with exacting precision. Many of the best trading opportunities occur at a moment’s notice. Without all the right tools in place, an active trader’s best trades could come and go in a blink of an eye.

Apparently, an increasing number of traders are taking notice of Mr. Morris’ efforts, as evidenced by David Penn’s highly positive product review in the November 2005 issue of Technical Analysis of Stocks & Commodities Magazine, which should just now be hitting newsstands everywhere. For those interested, a free issue of the magazine is available by visiting www.traders.com and completing a simple form, and for a limited time the article will be available for free download at www.yourika.com/tasc. Back in July, Mr. Morris was also featured in an interview with Dave Goodboy of www.realworldtrading.com, where they discussed what day trading techniques are currently working. tymoraPRO can also be seen live and in action at www.TheMarketVuShow.com.

Mr. Penn’s review describes many of tymoraPRO’s key features, and makes tribute to the software’s design by its amazing ability to manage such a tremendous real-time information “datastorm” and present it in a meaningful and actionable way. He also describes how tymoraPRO feels a bit like a “back to the future ride” with its ability to keep traders focused on all market timeframes right down to the micro-level of market-maker trading and tape reading. Mr. Penn concludes by reminiscing about day trading in times past, and remarks how more than a few of the next wave of active traders will likely be armed with tymoraPRO - and be grateful for it.

tymoraPRO is a complete advanced trading platform that generates sophisticated real-time trading alerts, offers proprietary charting algorithms, and provides a completely unique view and methodology of analyzing the stocks, futures, and forex markets. The platform is compatible with data vendors such as eSignal, and is also offered as a complete trading solution through affiliated broker-dealers. Direct access routes supported include NYSE’s SuperDOT/Direct+, the Chicago, Boston, Pacific/ARCX, and Philly exchanges, as well as SLIPS/ESSEX, INET, and BRUT. A limited time 14-day free trial of the platform is available to those visiting http://www.yourika.com.

Posted by admin as Better Investment at 2:26 PM CST

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Peak plays are very short term in nature and you have to be prepared to get in and get out very quickly. There are several reasons for Peak Plays, some of which are: rumors, earnings forecasts or reports, mergers, upgrades, merger speculation, stock splits and sometimes they occur for no noticable reason at all.

There are basically two ways to play a peak: a pullback and the peak itself.

Peak Plays

If there is still alot of pressure built up and you are fast, you can partake of the run up. If you feel the peak will hold for a quick play, get in at the open. If you are more of a risk taker, you can place your order before the open or if you are more conservative, then wait out the first 30 minutes of trading to verify the move. Often a stock that has a peak that continues for a second day will experience a small pullback at the open and then will reverse and continue up. One stategy is to place a limit order before the open at the closing ask price from the previous day.

Since this is the second day of the peak, you want to get in and out on the same day (maybe, even within an hour). More than likely the stock will top and pullback very soon. Always know your exit before you buy (Wade Cook) and once your buy order is filled, immediately place a limit order to sell ( this may be for a little as 1/4 to 1/8 of a point ). The biggest play on a peak occurs with the pullback, so if you are going to ride the peak, you have to do it quickly, this is not the time to get greedy! And remember if you cannot afford the stock, look to see if it has call options, probably at least two months out.

The Pullback Play

This is an easier play and the one that is used most often because the time frame is longer. A general rule for the biggest peaks is: the quicker and bigger the run up, the quicker and bigger the pullback.

On some peaks it will take a session or two before the pullback starts. The big question here is “when will the peak hit its top or will it even top out”? Sometimes the peak is just a quick move for a stock that turns into a rocket. Generally, if we are going to see a pullback, it will happen slower than the run up did. One way to help determine if the stock is reaching a top is to observe the volume. Look for a return to more normal trading volume with little or no upward price movement. And please don’t get greedy, you are not always going to hit the very top of the peak, if you try to do so, you risk not getting in on a quick pullback, you must be in position to participate.

Sometimes the pullback will occur the following morning of the peak, but more often we see it continue on for part of the following morning. If you can watch the stock, wait until it hits a resistance point and then open a short position (don’t forget put options). What if you cannot watch the stock? Simple, enter a limit order for your short position to be hit a little below where it’s currently trading. This way you avoid opening a position until the stock has definitely moved into the pullback.

You should not expect the pullback to give back more than half of the peak because this does not happen often, especially if the stock has been trending upward over a longer period. To ensure a solid return in a shorter time frame, don’t look for more than a 25% pullback from the original peak. By following this guideline you can move on to compound your money in another play.

What if you feel there is a larger, more gradual pullback coming? Then watch the openings very closely, if you see the stock opening above the previous days close, you should give serious consideration to buying to cover.

Here are a couple of clues to give you more of an advantage. Look at the chart on the evening of the peak. Look to see if the stock hit a price significantly higher than the closing price, if it did, this may be an early sign of a pullback. The second thing you should look at is a one year chart of your stock. Try to determine if it has been stuck in a range over the last month or two, if it has, look to see how many other times over the last year it had been in this support/resistance level. If it has visited this area several times before and also exhibits the first sign mentioned at the beginning of this paragraph, you have a great indication of a pullback coming!

Get in and get out quickly!

And keep in mind that on a pure peak play you are going to have a shorter window of opportunity (usually a one day play), the opening of the following morning is very critical and you cannot get greedy.

For the pullback play you are looking at a time frame of from two days to a month, keep an eye open for a return to more normal volume and price plateauing (these are topping signs) and don’t look for more than a 50% pullback from the original peak (be happy with 25% or less).

http://lb.bcentral.com/ex/manage/subscriberprefs?customerid=12826

Posted by admin as Better Investment at 7:29 AM CST

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The recovery from Katrina and Rita ushers in a new era of Disaster Recovery and Prevention. Governments and people are rethinking their response to disasters and the steps they can take to prevent or minimize the worst consequences. The biggest catalyst for this new era is the political fall-out from Katrina.

The slow response to Katrina was a black eye for the Bush administration. For Michael Brown, the ex-head of FEMA, it was a national humiliation. The fates of Louisiana governor Kathleen Blanco and New Orleans mayor Ray Nagin remain to be seen, but reports have pointed out their failures in prevention and response, and that will come into play at election time.

President Bush wants to make up for the bungled response (and restore some political capital)and has earmarked a recovery effort that may total $200 billion dollars. The early response to Katrina has become a cautionary tale for politicians and bureaucrats in federal, state and local governments, and you can be sure they will be pushing for more disaster prevention spending in their own particular fiefdoms. And the media is keeping watchnewspapers in California have been filled with stories warning about the lack of disaster (especially earthquake) preparation in the state.

The Army Corp of Engineers, burned by the lack of follow-through on their recommendation to raise the New Orleans levees, is now looking to repair vulnerable areas around the country. And they’re not the only ones.

New homes have multiplied along vulnerable coastal areas. From Florida to the Outer Banks up to The Hamptons and all throughout the east coast, coastal property values have soared. Dune Road, a sliver of land with pricey homes between the ocean and a bay in Westhampton, New York, was virtually wiped out by flooding little more than a decade ago. Now it has been rebuilt with even pricier multi-million dollar homes. You can be sure these homeowners will spend what it takes to protect their properties.

And they may need to because it looks like big storms are brewing. If many meterologists are correct, we may have entered a cycle of increasing frequency and severity of hurricanes.

Combine the measures slated for homeland security, rebuilding the Gulf coast and the ramp-up of disaster prevention around the country and you have a near permanent state of disaster recovery and prevention.

For some companies, let’s call them Hurricane stocks, the opportunity to take part in the Gulf recovery means a great deal of more business in the short term. For others, it may mean more business for many years to come.

Hurricane stocks are companies that are needed right now. For instance, the immediate need to help those whose homes have been destroyed or are unhabitable. Think of companies that provide temporary living and survival gear. Think of Coleman camping products, such as tents, sleeping bags, portable stoves, flashlights. Coleman is owned by Jarden (JAH:NYSE).

Manufactured homes have come a long way in the past decade, and will prove to be a good temporary solution for many and a permanent solution for others in the Gulf. Cavalier Homes (AMEX:CAV) has been contracted to build and deliver manufactured homes to the Federal Emergency Management Agency to house Gulf Coast residents displaced by Hurricane Katrina. The contract is expected to generate $58 million to $63 million in revenue for the company.

Some other compnnies in this sector include Champion (NYSE:CHB), which partners with nearly 3,000 independent retailers, builders and developers,
Fleetwood Enterprises (NYSE: FLE) and Coachmen Industries Inc. (NYSE:COA).

Oil and gas facilites in the Gulf coast also need emergency repair. The economy of the Gulf Coast and, to an extent, the economy of the U.S. depends on it. A number of drilling rigs were damaged in the storms, which means that a company like ENSCO (NTSE:ESV) which owns drilling rigs in the area, will be in big demand. Oceaneering International (NYSE: OII), which inspects and repairs underwater infrastructure of oil facilities, will be busy, as will Jacobs Engineering (NYSE:JEC), providing engineering and construction services to oil and gas companies.

Rebuilding the Gulf Coast

Rebuilding will include the big dogs in construction, like Halliburton (NYSE:HAL), The Shaw Group(SGR) and Caterpillar (NYSE:CAT). But many smaller companies will also take part, often as subcontractors. The Army Corp of Engineers has increased its task order from $10 million to $20 for Aduddell Roofing, a subsidiary of Zenex International, Inc. (OTCBB:ZENX). National Storm Management (NLST:PK), an expanding national construction company specializing in storm restoration management, will also do a good deal of restoration work in the Gulf Coast.

To build you need building materials. Home retailers such as Home Depot and Lowe’s will be seeing their orders increase, but so will companies that provide raw materials like timber. Take a look at Rayonier (NYSE:RYN)and Plum Creek Timber (NYSE:PCL), two REITs that own and manage timber properties.

Some Hurricane and rebuilding stocks have already jumped and retreated. But the point to remember is that while the hurricanes resulted in an immediate need to help those in dire need, they also ushered in a new era, an era when governments and people in the U.S. and around the world know they can do more to recover from disasters and minimize the consequences. So keep an eye on companies that will be at the center of the Disaster and Prevention theme for years to come.

Leon Altman founded http://www.InvestingIN.com and http://www.SmallcapRecap.com , two websites that offer news and commentary on stocks. Sign up for free newsletters on the sites.

Posted by admin as Better Investment at 6:40 AM CST

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