My Last Post on Baldor, I think...for awhile, & More on Recession.

Cramer and Baldor CEO John McFarland on Mad Money last Friday:

http://www.cnbc.com/id/15840232?video=780431599

Because I don't have any stupid sound effects developed yet.


So yesterday I spoke about this quote from a Fortune article:

"...the Fed remains skeptical that high commodity prices will ripple through the
economy, leading to broad price hikes and big wage increases. "The committee
expects inflation to moderate later this year and next year," the Federal Open
Market Committee said in holding the fed funds rate steady at 2%, though it did
note that "uncertainty" remains high and suggested inflation concerns could
rise."

I wanted to elaborate on the subject a little more. I work for a commodity-based product company and we are in fact completely increasing our pricing due to ripple effects in costs on all of our products and passing that cost onto our customers which will then pass that problem onto the public. We are doing that right now. Also, we are expecting large wage increases next year due to an recession with inflation environment. Additionally, if Buffett is suggesting this as well, I would damn near listen, not because Buffett is the man but because Buffett knows commodities.

Buffett typically purchases companies that are simple, balance sheets make sense, products are straight forward, and they are selling at a value at the time. Those types of companies are commodity based by default, well most of the time. When Buffett goes buying these stocks, he tends to buy enough to get someone on their board of directors, or at least get access to the companies financial situation. So it can be surmised that he is seeing this type of development in most of his investments across a large swath of products and businesses and is just speaking up. Meanwhile, our Fed is holding its breathe and hoping for the best.

Snap out of it people, we are already in the recession and high inflation is occurring and rippling through the pricing right now. If companies aren't doing this yet (i.e. airlines), then their survival may be limited. Open your eyes.

Thoughts for the week: 6/29-7/4

A few links and thoughts for the week:

Remember my post a few days ago about "Recession with High Inflation", well apparently Buffett agrees and is telling it to Bernanke. And here is a quote from it that scares the crap out of me:

...the Fed remains skeptical that high commodity prices will ripple through the economy, leading to broad price hikes and big wage increases.

"The committee expects inflation to moderate later this year and next year," the Federal Open Market Committee said in holding the fed funds rate steady at 2%, though it did note that "uncertainty" remains high and suggested inflation concerns could rise.

Determined to find some good values in the market (and keep the mind sharp), I did some good old "Magic Formula" stock screening this weekend and noticed some sectors with good stock values, at least according to the screen. They are:

Airline equipment manufacturers: LMT, NOC, RTN, GD, BA
Electronic circuit equipment manufacturers: VSEA, KLAC
Furniture manufacturers: MLHR, KNL

I am currently doing research on each and may do updates this week on each identified sector and its stocks. Most of these companies are name brands for their business sector and probably have some good long term upside. I guess I will see when I go through them.

Some other good looking stocks on the screen that came up is Garmin (GRMN) which I think I may cover, and one of Mike's (w/Rational Speculation) recently covered stocks Pfizer (PFE). I like Mike's thoughts on the company, but have recently seen PFE mentioned everywhere as a value stock potential. That can be a good or bad thing.

More thorough stuff later this week...

More BEZ: Cramer catching up...

Well I was looking into buying more BEZ today (I didn't, I think it may go a little lower again), and noticed that about a week ago Baldor's was Cramer's pick. Frankly, I am flattered. Now I am going to get away from talking about Baldor for a while, but I do think that it is funny that he recommended the stock after a run from 25.68 (April 14th) to 36.46 (April 17th). It is only a dollar down from his recommendation day, but at the time I saw the run occuring and thought a correction was coming. Regardless, it's fun to be ahead of the curb for once. Even if I think Cramer is a little bit of a tool, I do think he is funny to watch (if you ever saw theknot.com episode where the bull proposed you know what I am talking about) and fairly informative for the masses.

Anyways his thoughts:

here and here

Have a nice weekend, it is going to be beautiful in KC. (Anyone notice I use a lot of parentheses?)

The big win and the big loss...

Well just a couple of weeks ago I recommended Rockwell Automation (around $54 per share at the time) and it has subsequently tanked to a level today of $43. That sucks and I was wrong, Rockwell (ROK) committed a bad no-no and dropped 2008 expected earnings. Well it's really not a no-no as much as seeing the truth hurts. That was a mistake and I will strive not to do so again.

Herman Miller (MLHR) however has just reported profits up roughly $.71 a share for its 4Q and seen a big boost in a day of bad losses (+ ~$1.50 per share). Since mid-April it is now up nearly $3 a share. That makes me happy, I am curious as far as what to do with this stock. Their furniture is for rich people and big business so they could be insulated from the market some, but I just don't see how they will keep growing in profits in this environment. I may get out and take profits.

Baldor (BEZ) is still one of my favorite companies, they simply make stuff that is needed no matter what the market is doing. It was a classic Buffett style stock, essentially undervalued, and can make a profit in a variety of climates. Today however it has fallen significantly (roughly $3 a share) and I don't know why. No real news out there other than its peers not doing so well (see ROK). However since I recommended it on 4/29 @ $32.40 (I bought it for $27.50 a week prior) it has jumped up $3.50 a share ($6.50 a share yesterday). Honestly it has been flying and needed a pull back. I still think it is a good stock, and will continue to do well and it may be a good time to pick it up at the recent pull back, although I will wait it out for a while.

Otherwise, the market looks bad right now. Unless I find another Baldor like company I am sticking to purchasing my three ETFs (PBD, PXE, PWV) on their low days. Someone please tell me what to do with FTO. (Nevermind sold off FTO 6/27)

Tenure?!?

A question I hear quite a bit now a days is how my generation's work force (I am just shy of 30) has no company loyalty. Well here is why:

Everyday I have seen the 20-30 year veterans of the various famous US companies given plaques for their service, and soon after, shown the door. Along with them priceless knowledge of the company that you may never have available again. My generation has seen their fathers and mothers booted after years of hard work and modest increases in pay. How many of you have been a part of major moves to a new town in your childhood only to see your parents let go by that company 6 months later. When I saw that as a child, I thought, "what is the benefit?" It didn't improve them. Now that I am older, I see that the business system is a pyramid, lots of jobs at the bottom and fewer and fewer at the top. As you progress through a company it is only logical that you may have less and less likely a chance to continue with the company.

Lay-offs suck and seeing people get tossed out really makes you wonder about who you work for. Reality is that my generation will continue to look, if they are smart, every 3-5 years. I know of 3 examples of people I know that switched companies, increased pay by 20% and like their new job better. I am not saying that I condone it (I say stay long enough to keep the company matched retirement benefits and then start looking), but I definitely understand it.

To all the "early" retirees out there, good luck, it may be a difficult road ahead for you. My dad found some luck working in small towns after years in HR in the city and my mom went into work for herself, maybe that helps.

My arm is itchy...

That is all. Go here for some hysterical and historical comic genius.

"Recession with High Inflation"

A conversation with someone very important today revealed that our company is planning on the title comment. The second comment was that Dow's 20% increase on prices is doing everyone a favor.

Look the point is that everyone is holding their breathe hoping that this thing is going to turn around, and it's not. Dow finally has said enough is enough, US dollar value is down, steel is up, oil is up, copper is up, raw materials are up, and farming related products are up. So in the next two months you are going to see the ripple effects of these costs finally incorporated into everything you do and everything you buy. You can't expect that these prices are going to go down now, we've gone too far.

There is only one way to calm this economical climb now, stop buying gas, ride a bike, commute, and car pool. It's a pain but until we reduce the demand for the current oil supply loads, nothing will change. It's like we all are a bunch of smokers. Stay with me here, smokers are probably taxed more than any other group of people out there, and each time the tax goes up, they just shell out more money.

"How much for a pack, f@<* that's crap! Well Carl, see you tomorrow."

The green technology isn't quite here in the mainstream yet and will take I think a couple more years to mature nicely, so in the meantime, it's those normal simple things that will help. Things like buying a smaller car, moving closer to work, and not eating out are what will really make a difference.

So recession is here, inflation will be high, and enjoy the next two years. You heard it here 121st.

ROK looks cheap...

Market had a big fall on Friday and one huge loser was Rockwell Automation (-$3.02 per share). I spoke about them before when I revealed how I found Baldor, and I liked them then and still like them now. ROK stock value has been faultering ever since they missed analysts predicted earnings last quarter. Here is what baffles me the market reacted to analyst's predictions not the company's. If you review their last call you will quickly find out that there was siginificant revenue growth not only in every business category, but in every geographical location as well. Not many companies can say that and yet it has loss over $12 per share since the beginning of the year.

Take a quick look at the charts and it has been nearly three years since this stock has been this low and it is a better company now than it was then. Again the things I like are the good ROA, strong growth, ~2% dividend, extremely robust and strong product (Allen-Bradley Controls), and their firm commitment to the growth of that product by intelligent acquisitions. I should talk about the A-B product a little more, although I did cover it thoroughly before. It is a great product in the current economic climate, the controls are modular and are considered the best in the business. The controls are prodominately used in PLC applications in all sorts of industries from factories to oil rigs to building temperature controls. The whole world is modernizing these industries right now and the modular setup of A-B controls allows both new and old equipment to talk and work more efficiently.

Final thought, I'm buying tomorrow!