So if you could only choose one?

Coming back from the Philippines I realized that the world smokes. Smokes cigarettes that is. I know it is a bad thing, and I don't do it, but that doesn't mean I won't invest my future on someone else's habit.

With all that said, if you could only choose between investing in two stocks in the world, what would you choose, Altria [MO] or Philips Morris International [PM]? This whole thought process was triggered in my brain when I saw something on Bernanke again and remembered this guy only invested in one stock his whole life, the old Philips Morris company. So I began researching what Philips Morris has become today, Altria and PMI. What I found is that it is truly a tale of a value stock versus a business with a bright future.

Altria (~$21 per share) is now basically just the US cigarette market, lawsuits and all. To me the stock looks really good, it's trading at a $1 over one year lows and has an annual dividend of $1.16 (5.5%). Their story over the long term would seem to look as a long growth stock. It has been anchored down by lawsuits and government taxes in the states for the past 10-15 years now and it has affected the stock price. However, this is a S&P 5 star rated stock, which typically is tied to a low price to earnings, a good credit rating, and a strong cash flow, which this stock has. The US is a mature marketplace, and they do predict a slight fall in sales volume, but they have been diligent on price increases, stock buy backs, and seem to be still a hugely profitable company. Two aspects I look for in stocks are a good return on assets, 24.5% here and profitability, 21%. I tend to think these are good measures of efficiency for a company. Anything over 15% for both measures is really, really good. Some analysts are speculating a price per share of $26 in a year which is 23% increase from the current price plus a 5.5% annual dividend, that is 28.5% increase in value over a year. I know that is a really positive outlook, but the potential is there. The downfall is that Altria is now basically a new company again, and they haven't been always known as being the most truthful company in the past (although I have never really heard of them lying about their financials), so all of this could be just a big promotion to get investors investing. Another note is the wondering of whether the US marketplace will really grow at all or just level out. If that is true then think about this company as a pure dividend play that isn't a bank, energy, or oil company.

Philips Morris International (~$55.50 per share) is basically cigarettes around the world. The company was split from Altria so that it would be insulated from lawsuits and really grow from the rapidly expanding world market. I perused their most current financial reports and really only care about one thing, year over year revenue growth in each of the various geographic marketplaces. See when a company is this new, I don't trust the basic financial figures other than net revenue and growth. Look at it yourself here, notice the year over year net revenue increases of over 20% for Eastern Europe, Western Europe, and Latin America, and 13% for Asia. Asia being the biggest potential for huge growth in the next 10 years. Combine that with a decent dividend (3.3% currently) and a 4 star S&P rating, and the company looks like it has some potential. However, PMI recently purchased Rothman's Inc, a major player in cigarettes in Canada. It now makes this 'legal insulated' company now susceptible to lawsuits. I think that the current stock price is a little high, but after a pull back, it may be an excellent Bernanke-ish play for the long term.

So if you had to choose between these two stocks, which would you choose? Ben?


Missouri Joke

How do you know you left Missouri?

The gravel ends.


A word on modern manufacturing

So after writing my article on the problems of America’s “new” obsession, I realized that there is a lot of good things that come from new products. No I’m not talking about these so called green products but just our everyday stuff. To build more stuff and make it cheap, well you can export the processes to someplace where the labor is cheap, but eventually the manufacturing process will get better. Think about it, we use more wood from a log than we ever have before. 2x4’s, plywood, and MDF can all be made from that one log and in a lot of ways is better than the materials we were making the past. 60% to 80% of most steel and aluminum materials are from recycled metal. It is cheaper and easier to melt the recycled metal than it is to work over the raw ore. Leather is laser cut now so that more of it can be used on more stuff. I doubt any of those things are taken into account into all of this new green talk, but higher efficiency and doing more with less energy is always good.

As an engineer in a factory, and as I’m sure most engineers in most factories, I try to reuse / retool old equipment, improve processes, and recycle what isn’t usable as much as I can. It is a required part of my job to be cost conscious and make the factory work at its highest efficiency. So all of the new stuff that is made is typically made in the most green way that it could be.

One last thought, higher efficiency equipment and recycled goods would not be made without an economy demanding and then purchasing them.. So “new” isn’t all bad, it can be a pretty good proponent of green as well.


A few random thoughts while out on vacation

  • There are only two types of public trash cans in Manila: Recyclable or Biodegradable. That's it. No generic trash. Think about that for a minute, is everything you throw away recyclable or biodegradable?
  • What if instead of pumping more money into higher wages, stay with me here, and instead make cheaper more sustainable housing. Would the value of the dollar be greater? The thought is brought to you by the hardest working employees of fast food chains that I have ever seen in Manila. To quote a friend, "I would hire these people anywhere!" They don't make much, only 250 pesos or $25 a day, but they work really hard. It is probably cultural, but that is considered okay money, so they work hard. I am taking a guess that because cheap housing is readily available, then that small peso amount can be pretty valuable in that country.
  • Up yours snooty people! As the world marketplace is becoming more global with more languages trying to speak and understand one another, the more basic English is being spoken. I can go most places in the world now and say, "Where is your bathroom?" and they will know exactly what I am saying or want to do. Now try to go to those same foreign parts of the world and say, "Can you please point me into the direction of the nearest toilet?" and you may get the same look from them that your dog gives you when you make a funny noise. So all those language snobs that over the years that have corrected your imprecise speech can shove it. I frankly never cared that it is "anyway" and not "anyways" and most of the rest of the world could care less too. I can only speak basic Spanish when I really need it, just as some other nationality can barely speak English. If we are both patient with each other then we can figure it all out. I am not going to tell a vendor in the Philippines about how "frugal" I am, I will tell them that I am "cheap". They understand that and no one is embarrassed.
  • I'm going to start a paper company in the Philippines. I didn't bring a laptop and am writing on some computer paper that I bought at the hotel. I bought six pieces of paper for 25 pesos. Next time I am bringing a whole gross of legal pads. I'll make millions (of pesos).
  • Filipinos love the sweets. Everything here is sweet or has some sweet aftertaste. Sio Pao (pronounced shoe-pow!) is the native sandwich. It is a sweet roll with some sort of pork or chicken in the middle, very good. There is also Tusino (pronounced like casino with a T) which is a sweet cured ham that is fried and served like bacon here, also very good.
  • All of the national airlines in the Philippines have the throwback hot stewardess thing going on. I would say more but I have a GF that I love.
  • I just wanted to take a moment to say that I am up ~35% since I bought into Baldor (BEZ) and ~8% with Herman Miller (MLHR). I am honestly considering though to becoming a Bogle-head and start purchasing shares of VTI, VEA, and VNQ for my Roth IRA. More on the strategy later.

A good joke that I heard...

What does DNA stand for?

National Dyslexics Association.


#1 way to “help” the green movement: Reuse

(This is one of the articles I wrote while on vacation last week, so I am no longer in the Philippines even thought I am referring to it. I am excited about what I wrote over there and should have a new update everyday this week, so come back daily)

While waiting in Manila for a flight to Dumaguete, I have been reading the latest Dwell Magazine. This issue is about the popular topic of green building / sustainability and one article in particular sparked my thoughts about what is the most green thing one can do with building or buying anything. The article, about someone’s modern expansion and makeover of a home with new green, recycled, processed, and organic materials and its design process. It’s a very beautiful home but I can’t help think about all of the energy used to make these new recycled panels, parts, and materials, not to mention of the fuel needed to power the equipment used to build the house. Sure they utilized biodiesel fueled trucks, processed hay, denim insulation, special insulating windows, solar panels, and low-VOC paint but what if first they took a trip down to the local recycled materials store (KC Restore, etc) first for windows, doors, sinks, wood, flooring, and tubs. Reusing what isn’t “new” is the best way to keep trash out of dumps and not use time, money, and energy to produce a product. This obsession with “new” is what is truly wrong with the American lifestyle. We all are obsessed with “new”, you suffer from it, and I suffer from it. If we all just stopped at the thrift store first for some clothes, not all, but some, it would reduce some of that time, money, and energy needed to produce new clothes. Just being satisfied with the furniture we have or with the current layout of our kitchen, should be considered just as green, if not more so than some LEED’s certified property built from the ground up. Okay truly if we have to build something new, then using and investing in these new recyclable or more sustainable materials is great and needed, but not reusing older, perfectly fine materials and goods is just reckless, snobby, and wasteful.

Go back just 100 to 200 years ago to America and farmers would use as much wood as they could from the old barn to build the new barn, the old bath tub in the old house would get transferred over the to the new house, the old sink was the new sink, and on and on. The products were typically more robust then, usually made to last a little better than our current throw away society. Somewhere in Americana, we all started to want “new” and more “new”, and in order to afford the variety of more “new”, we needed cheaper and cheaper stuff. First came the old Sears and Roebucks and then came out Wal-Marts, providing us with all of the crap we want as cheap as it can get. At one time the little closets in the old houses Americans owned fit all of the clothes that a person held, all of them. Now we need so much stuff that huge closets and rooms are needed to pack all that crap in. More stuff, more crap, more space, and it all has to be “new”, that is the problem. Enjoying what we have, or reusing someone else’s perfectly good stuff, is the best, most green solution. Magazines may never write about it, media may never promote it, but there really is just no better thing to help the green movement than to reuse.


On Vacation...

...and am loving it.

I typing on a sticky keyboard on a slow computer is Bais City in the Philippines. Sorry ahead of time if this doesn't make sense.

I really like it here and took a bath with a wash bucket tonight, really cool! I have written, literally written on paper, five blog posts about stuff ranging from the American obsession with new to a comprehensive engineering study of urinals. I can't really write it anywhere here but prepare to be amazed when I get back. I didn't realize how much that I enjoy writing until I got some free time away from work. It has gotten me thinking about starting a side business, and how I can't wait to get back to a finished bathroom at my place.

Take care USA, I will be home in a week. Try not to elect McCain while I am away.