Stock Analysis BEZ and ROK

I look for stocks in several different manners, I do screens, I read the news to understand so called expert opinions, and I look for trends. I am definitely a value investor but also have been known to make purchases based on dividend investing (largely influenced by my friend Grant). A past simple example of a trending purchase included Microsoft before it released Vista and Office 2007. The stock was cheap and new programs were coming out that would significantly affect there bottom line. In my mine easy money.

Well a current trend that my own job is closely tied to is the modernization of manufacturing. Over the past 10 years the costs for modernizing a production facility has significantly decreased due the wider availability of new efficient electronic controls. Two companies that should do well going well into the future are Rockwell Automation (ROK) and Baldor (BEZ). These two are interrelated somewhat due to recent sale of Reliance motors and Dodge gearboxes and bearings from Rockwell to Baldor. More on that later.

Rockwell Automation owns a key product that will provide profitable business for years to come, namely Allen-Bradley. Allen-Bradley is the Cadillac of the PLC Factory controls world. They are the most expensive, most well made, most utilized PLC setup for most factories in the US. Their programming is straight forward, their controls are extremely durable, and system is modular by design and easier allows for constant updating of a manufacturing process. So what you say, well based on that ease of use companies are willing to shell out more money for a safe, reliable product. Let's put it this way, you own a factory making 1,000,000 widgets a day. Well every minute that line is under repair you are losing a roughly 700 widgets that could possibly be made. So every minute counts, and when every minute counts an engineer or a maintenance department can justify Allen-Bradley equipment really quickly due to its proven reliability, its wide availability and modular integration (aka less downtime).

Analysis of the stock shows that they failed to meet analysts predicted profit this last quarter and the price of the stock has fallen significantly. Personally, I am sitting back and waiting for the stock to even out. Over the long term this should be a good stock with good ROE 12.5%, nice divided yield 2.10%, and strong international earnings potential. As stated before they sold their Reliance and Dodge brands to Baldor this last year and now should see some benefits from concentrating on the programing and controls part of the business. Also, it previously (before the latest quarter) had shown up on my two favorite screens, earnings momentum and the Magic Formula.

Funny enough, through the analysis of ROK is when I found Baldor. Baldor makes motors, lots of them, in all sorts of useful sizes and types, and most importantly, at high electrical efficiencies. Baldor happened to be the last three motor purchases for my factory due to their competitive pricing, excellent customer and technical service, and a robust, reliable product that is made in the USA. Their acquisition of Reliance and Dodge was an excellent move. They essentially bouught their biggest competitor and doubled their business. Baldor typically made small to medium size motors, Reliance made medium to large size motors, it was a real good fit for both parties with only a little bit of overlap. Additionally, Reliance was known for all of the same things as Baldor (reliability, pricing, service, made in USA). The Dodge gearbox and bearing acquisition was brilliant as well, due to most of these Baldor and Reliance motors being directly fitted up internally with these bearings and to gearbox at the end user's factory.

Why do I think Baldor is great purchase for a long time? Easy, factory conversions from DC Motors to AC Motors. What's that you say? Forget the literal electrical stuff and I will explain it in simple terms. Lots and lots of processes run on variable speed electric motors. Examples of variable speed applications could be belt speeds on a conveyor belt, turning speed of a farm's irrigation system, or rpm speed of a milling machine. A lot of the equipment that is still utilized today were originally designed and built in the 80's and 90's with DC Motors. It was the only option available at the time that allowed for adjustable speed. Consequently DC Motors over time get really dirty and eventually fail. They can be rebuilt several times over, but that can be quite costly, or they can be replaced with new DC Motors which can be quite costly, or they can be replaced with new AC drives and motors which is quite costly. The “drive” is the electrical control that commands the motor, if you switch from DC to AC then a new drive has to be purchased as well. Why a switch from DC to AC? AC setups are 20-40% more efficient electrically and have minimal maintenance costs, usually no more than a bearing change every few years.

Enter Baldor's product line. First they are one of the few remaining companies that produce new DC Motors, and as such, they charge a premium. Second, Baldor and Reliance make high efficiency AC motors and drives that are among the best in the business. These motors and drives are well priced as well (not the lowest and not the highest). Third, the leaders in the drive market is still considered to be Allen-Bradley owned by Rockwell Automation. Well because Rockwell Automation is no longer in the motor business but recently sold the Reliance motors to Baldor, they still sell their AC motor and drive package with Reliance Motors and they charge a premium price. Which should means that Baldor may lose a sale on a drive but should still retain the same profitability of the motor.

To sum up, if you need a DC Motor, Baldor has a strong chance at a sell, if you want to switch to an AC motor and drive, Baldor has high likely hood of at least a new motor sale, and heck if you want to repair your DC motor, Baldor may even be your supplier of spare parts. This is the kind of market that even a Buffet fan would love. This DC to AC motor conundrum will probably continue to occur for the next 3-10 years until the majority of the equipment is AC driven. High usage DC Motors need overhauls every 3-5 years, so every overhaul is a good possibility of money in Baldor's pocket. That will provide a constant stable income for Baldor during these difficult economic situations in just repair sales. When you add that to strong OEM sales, an excellent quarterly reporting last week (23% increase net income), and decent dividend of 2.01%, it looks great for a long term prospect, especially when the economy turns up again. The one bad thing is Baldor's stock has increased ~10% since the quarterly report and may be a little high right now. I purchased shares $27.50 last week and already the stock is at $33.88, but I still think there is room to grow.

Good luck and in this market, happy hunting.

Hiatus Over, Good Stocks Found...

Sorry for the delay, I have had trouble finding stocks to recommend or time to finish entries. I think that I have roughly 10 started. Regardless, big update later today. Hope you all enjoy it.

Coming in the next two weeks:

How to save the American factory and Rules from the Machine Shop (not Fight Club).

Regards,
Management

An Interesting Sports Economy

I witnessed an entire economy this past weekend that I didn't ever expect to see. The lifestyle of the ticket scalper lauded by some and hated by many, but what I came to find out was that the true profiteers to any sports event is actually a familiar face in the sports world. A hint, it's not the NCAA.

I have been going to the Big 12 (and previous Big 8) tournaments since I was 8 years old and this year was no exception. It has always been an annual pilgrimage for my dad and me, but occasionally we get graced with the presence of my brother, uncle, girlfriend, extended family, college friends or dad's college friends. For this year, my brother, my girlfriend, my dad, and I all experienced some of the best basketball that we have ever seen this past weekend.

Typically in years past, we would get scalped tickets and see the tourney each day on the cheap, but this year due to the tourney being held in the new Sprint Center and advent of StubHub and the like we played it safe and purchased tickets for the entire tourney from my uncle (a season ticket holder for Colorado, thus gets first dibs on tourney tickets). For the first two days on our walk to the building we observed the various ticket scalpers loaded with tickets. Curious, I asked for prices which varied from session to session but ranged from $80-150 per ticket. These people were hustling and running all over the place, clearly we were in their office.

Just like any good job, there seems to be a required uniform. While bankers wear suits and ties and mechanics have their blue collar shirts with their names on them, scalpers wardrobe consist of large coats, Timberland boots, and various clothes by Fubu, South Pole, or Roca Wear. Some may actually be wearing collegiate clothing, but unfortunately Morehead State, Miami U, and UCLA are not members of the Big 12. They all wore the same type of clothes no matter if they were tall, small, big boned, skinny, white, black, purple, blue, or yellow. Hint to the scalpers though, no one thinks you actually 'need tickets' when your sign is laminated and your counting your wad of cash on the side of the street.

Personally I could give a crap how scalpers make money. As a matter of fact, in years past I have been able to pay for my own tickets through just buying and selling tickets for the tourney, so I really don't deserve the right to complain. This year though I saw more scalpers with more tickets with more money on hand then I have ever seen before. With more money, I thought man these scalpers are really making some serious cash. One thing I noticed was that each day the eyes of the scalpers became more red and blood shot, and each seemed more and more exhausted. This must be from all of their hard work.

Reality set in on Saturday when my girlfriend's sister wanted to go out that night and revealed the 'bank' so to speak for all that scalped money. That location was the casino. That's right the casino where people go to bet on games, bet on players, bet on anything. Nearly all of the scalpers that I saw that day were in the casino losing there hard earned cash on craps, blackjack, and roulette. No wonder they were getting more and more tired each day that I saw them, they had to work harder and harder to get that money they originally made back and then some more. Sucks when the house wins most of the time. Next year my suggestion for these guys will be for them to invest the money more wisely. Perhaps property like chrome wheels, gold chains, and pimp cups would at least hold their value a little longer.

Dyslexics Untie! #1: Whistle While You Work

As this blog becomes a further menagerie of my thoughts, I thought I might touch on the subject included in the title of this blog, dyslexia. Or rather being a dyslexic in the working world. I wanted to share some things that have allowed for me to focus on my job and improve my work output. I won't begin to believe that this is a bible for people to live by (although it may sound that way), but instead processes and attitudes that I have followed to “function” in the working world.

Know what you are good at.

I am a hands-on individual, and my job is the same way. I need to touch things and visualize things to complete my work. So I never go looking for employment that is strictly a desk job. If I worked in a mousetrap factory my hands would be all torn up. In interviews I make these facts known so they don't get the wrong impression. That doesn't mean you don't grow your skill set, it is just setting the foundation of what could be a successful career for a company.

I also ask for flexible schedules. I always work in periods of high productivity and then in low productivity. If I am in a highly productive state, I will just keep working right along until the problem is solved. I will ignore eating lunch for hours just because I am making progress on a project, it's just my nature. Alternatively, sometimes I will have to grind away for hours just to make a little bit of progress. Either way a flexible schedule helps get work done, and sometimes let you go home early.

Know what management styles work for you.

I don't handle micro managers well, nor do I handle narrow focused management well. I need a work place that encourages creativity and allows for you to speak your mind. That doesn't mean I don't enjoy mentoring, because I do, it means I need a manager that allows some space for me to work on my own. Some dyslexics prefer the opposite as they can keep you in line and on target for project completion dates. The key is to know what type of management works for you.
Work inside the box.

I have seen it happen more and more where “hip” businesses think open, quarter-office cubicles lead to greater sharing of ideas and a sense of camaraderie. It's crap, I think it leads to massive distraction and people who aren't doing their own work watching and critiquing yours. To me it is like school all over again, look at the guy who does things different therefor it must be wrong. If you can find an office with a door or at least a high walled cubicle that is shared with no one, protect it with your life. Otherwise, share cubicles with quiet, mousy people. They typically don't care what you are doing and will leave you to your own devices.

Put clocks and calendars up.

Dyslexics are known to never have a good sense of time, but unfortunately the rest of the world doesn't care.. I counteract that issue with several large clocks that are within my constant vision. A big clock rests right now on the wall just behind my monitor. Right next to it is a three month calendar that is nice, big, and bold and can constantly remind me of due dates. Without those two simple tools I would miss meetings, miss dates, and probably miss my job.

One notebook to rule them all.

I carry one notebook around everywhere I go. I carry it so much that if I forget it somewhere people instantly know who's notebook is left behind. I carry only one notebook for a reason, if you keep things on the computer, and have a notebook for this project, and a notebook for that project, what is keeping you from not looking from one thing to another? One notebook means I will consistently see the same pertinent information over and over again, nagging me to get things done, preventing me from ignoring work to be completed.

Shut up and listen!

I tend to jump the gun on solutions whenever someone is going over something with me. I think my input needs to be shared immediately and end up blowing off whatever a coworker has to say next. I will tell myself, “just listen, just listen, just listen”. Their input is important, and I need their feedback. Again people don't care that you are dyslexic. This behavior is seen as rude and that you really don't care about their words. Know when you are doing this and remember to shut up.

Take notes and listen!


Now that you are listening, make sure you are processing your coworkers ideas. I take notes about whatever anyone is telling me. This makes sure that I, the dyslexic, am listening and comprehending the words being spoken. Those notes will come in handy when you are trying to remember that information later.

Make yourself heard.

Now that you have actively listened, make sure people hear your input. Don't be afraid to share, don't be afraid to convince people that your ideas are right. Dyslexics tend to see the big picture or maybe the whole process at a different angle. If you don't speak up, no one will guess what you think is right.


That's it for now, what else has worked out there? If you have any other good practices please don't be afraid to email with your ideas.

What's in your toolbox #2: Manufacturing Engineer's Toolbox

The last time I posted about this we just threw out the basics (and most important items) of what I use day to day. This time around I will concentrate on the down and dirty, essential tools necessary for a manufacturing / factory / process engineer. So enjoy:

The second line of defense (aka more crap for you desk):

Machinery's Handbook
The greatest book ever, also known as the Machinist Bible. This book is the go to place for screw size, tap size, drill size, dimensioning, slip fits, compression fits, material properties. tooling, machining, fasteners, and more. It's just a handy, handy book. I learned the power of the book back in my machinist assistant days and still use it when designing tooling. Any edition ever made is a good edition, I have the 25th addition at work and the 13th edition that I bought from an old Ford machinist at home in my toolbox. Go to Ebay and get yourself one today...

Small AA Maglite
I have three of these, they are just powerful enough to shine bright in large empty room and still fit into a small pocket. Notice mine has some hockey tape on the end, that's for biting with your teeth.

Small Torpedo Level
It's something you just learn to have due to equipment installs. Seems like every piece of large equipment I have installed, needs to be level for proper usage. Mine has a magnetic side which is handy for steel equipment and storage upside down on my desk.

30 ft Tape Measure
This will be a constant theme for my tools, equipment to measure crap with. Some days all I do is measure out areas for new equipment, new rooms, ducting locations, electrical runs, and more. Buy two cause everybody will be borrowing this one. Don't forget to put you name on them, something like stolen from ___. This one is my loner.

Magnetic Pickup Tool
What can I say, I am lazy. Had a employee that worked in one of my areas who was 'older', this was his way to keep up with the young guys. Ever the expert, no bolt got away from his assembly cell. This was the one he gave me, pretty neat.

20 in Toolbox
Bought this on special at Sears for $10. It is the perfect size for me. I have seen engineers with full size tool carts before, but I tend to think that if I am hauling around something that big I should just give in and become a full on maintenance guy. So for me, I don't want to be any bigger than this or I need to find a new company to work for.

A quick note on the tools I keep at work. You won't be impressed, there isn't any Snap-on and just a few Craftsman tools for that matter. The reason is simple, at work tools walk away. Everything I have works fine, its above the quality of Harbor Freight, and some may look a little beaten up, but that is all on purpose. As the maintenance manager here says, it's just enough stuff to get me in trouble. The measurement tools however, usually are pretty nice because I need accurate readings for accurate parts.

The top of the box

30 ft Tape Measure
This is the nice one, the one I don't loan out. It is a Craftsman, if it breaks, I can replace it for free. Alternatively, if it is stolen, it costs me $10 to replace. That is why it is the nice one.

100 ft Surveyor's Tape
For outdoor usage and times that 30 ft of tape isn't enough. Handy for laying out a space for large installs on the factory floor.

Sonin Laser Targeting Range Finder
Work bought toy, very cool. Excellent for finding ceiling heights, or wall to wall lengths. Has a little laser targeting device that helps make sure you have the right distance in mind.

T-square
Handy if you need to cut up extrusion, wood, metal tubing, and bar. Nothing like a nice straight line. Has 45 degree side as well. Heck, I've pulled the metal ruler off sometimes just to use as a straight edge. Just another handy measurement tool.

Complete Screwdriver Set (#0, #1, #2, #3 Phillips & from small to really large Flat-head)
Needed items, really just self explanatory. Get the big Phillips and Flat-head kind as well, you will thank me later.

6 in, two 8 in, and 12 in Crescent Wrenches (aka Third World Combination Wrench Set)
No I don't carry a combination wrench set at work, it's one of those things that I think is overkill for an engineer. My box isn't big enough, and frankly I never know what I will need. Also, you'll learn that factory stuff gets beat on all day anyway, so these won't affect the already rounded nuts you find everywhere. Important though is the two 8 in Crescents, it will be the most common size you encounter. No doubt will be used on a bolt on one side and nut on the other situation.

Crappy Pocket Knife
Good for cutting stuff, duh. By being crappy, it will stay in my box (see the theme).

Needlenose and Regular Pliers
Both come in handy quite often. The needlenose in particular are handy for the electrical work since they typically incorporate the wire cutters in the design. The regular pliers are good for the already rounded nuts you find everywhere.

Wire Strippers
This is the newest addition to the box. At my latest job, I find myself stripping wires a little more than my past experiences. These are the nice Klein brand kind and work infinitely better than the old cheap standby.

Paint Pen, Permanent Marker, and China Marker
Great for marking stuff, duh. Remember sometimes the stuff you are working on is colored black, white, red, etc or it can be greasy or dry, so keep a variety of marking tools on hand to cover your needs.

Standard and Metric Allen (Hex) Key Set – Folding
Just a set I keep on hand to handle all the hex cap screws. I really prefer the L-shape sets, but this ensures that all of mine stay together in one place.

Base of the Box

Master Mechanic Socket Set (48-ish piece)
Okay everything I said about the justification of the Crescent Wrenches can be thrown out. I have a socket set to make sure that I have precisely the right size socket to fit whatever bolt I am playing with. This set isn't quite as well made and reliable as a Craftsman set but is pretty close. Also it fits in the toolbox. I will say however to get a “Guaranteed for Life” set because I constantly am replacing the ratchet. Or at least get a spare ratchet that is of higher quality. My set is both a 1/4” and 1/2” drive with small to medium sizes (4mm to 15mm on the metric side). When the job calls for bigger bolts, I usually borrow from the maintenance guys. They probably should be there anyway.

Allen (Hex) Head Socket Set
This set is standard, but I probably could use a metric one as well. Great addition to the regular set.

L-shaped Allen (Hex) Key Set
How did that get in there? These are the best for bolts. Long side for better torque, short side for twisting speed.

Mitutoyo 8 in Dial Calipers
Leftover from my machinist assistant days. I prefer 8 inch because well, it has the same accuracy of a 6 inch and I always seemed to need a measurement just over 6 inches. It's a machinist thing. Regardless, get one, I have bought one for every intern I've had. If you are looking for one don't buy the cheap-o, no-name brand. Go to Ebay, find gently used Starrett, Mitutoyo, Brown & Sharpe, Fowler, & Mahr calipers. I like dials over digital but each of the brands listed above make nice digitals that are oil resistant and highly accurate.

That's it, put something together like this and you should be good for years to work out on the factory floor.

So now that I have shown you my toolbox, what's in yours?

Safety First!

"Damn'it Dick, I thought you said these were Rose colored!"

Dear Microsoft, Don't screw up Yahoo!

Dear Microsoft,

If your business successfully acquires Yahoo, please do the following. I am a shareholder as well so I have a vested interest.

1. Don't screw with the content
2. Yahoo mail is better than Hotmail, Online Outlook, etc. It is the best web based email on the net! Please leave this alone, I know you won't you ruthless mongols, but I know where you guys are. Google Earth has everything on you.
3. DON'T MESS WITH MY YAHOO. I have everything just perfect in there, you mess with this, I will be forced to use Linux, I mean it!
4. DON'T MESS WITH YAHOO SPORTS. Again Yahoo is really about the content and their sports department is turning into something special. Have you read the King of the Road by Jason King (formerly of the KC Star), it's awesome. Don't screw that up. Yahoo could eventually replace all of the sports columns in the papers...it will be to our benefit I promise.
5. KEEP Yahoo Finance. I like it, I especially like The Best of today's Business by Harold Maass, although the guy who writes it is named Peter Weber. Maybe you should change that. The rest of the experts annoy me though, so do what you want with them. Keep the stock screener, get some damn experts on ETF's, and don't screw up the basic Yahoo finance stuff like stock info and what not.
6. I like OMG for the pictures when I am at work
7. You have a superior online map program with your Live Search, I am cool with that, but make it work well with Yahoo Yellowpages and Yahoo Local. It would be the greatest combo since PB and J.
8. Keep Yahoo content heavy, screw with the search engine part of it all you want, although I do Yahoo. It seems to work only remotely as good as Ask.com and on par with Google.
9. Again with the content, Yahoo could easily become a major media outlet, the Yahoo news writers on here are typically extremely insightful. Especially that sports department, they're awesome
10. Yahoo movie trailers are better than twin playmates who've had to much too drink and you're the ride home.

Well that's pretty much all I got for now Microsoft. Feel free to write back to me, I will accept software for bribes if you need my approval.

Love,

The Dyslexic Underdog, MJ

P.S. High fives and chest bumps for Visio, that program was done right!

P.S.S. It's 1:45 am and I should be sleeping, so sorry Microsoft

New Years Resolution Update #1

1. Buy a house for the misses and me.
2. Setup a truly easier lifestyle at said home.
3. Max out Roth IRA for 2007 (til April).
4. Begin a true side business.
5. Go on an extended vacation.

Sorry for no posts in awhile, work is pretty busy and at night, I am happy to report that my GF and I have found a home. Our offer has been accepted, and we are in the midst of inspections, evaluations, getting insurance, and sharing info with the lending institutions.

It's pretty hectic, but the payoff is going to be sweet. Me and the GF have been talking about making your own luck, this seems like the first step.