Articles

Articles Written by Validea Founder John Reese

3/21/2017

John Reese Globe and Mail Articles
The Globe and Mail

Five Stock Picks Inspired by 3G Capital and Buffett Strategies

The Brazilian billionaire partners at the private-equity firm 3G Capital have often been compared to Berkshire Hathaway billionaire Warren Buffett. The two big investors have teamed up on some high-profile deals, notably the acquisition of H.J. Heinz and the subsequent merger of Heinz and Kraft, not to mention the recently abandoned approach by Kraft Heinz to buy Unilever. But while Berkshire Hathaway's portfolio is weighted heavily to stocks of consumer-goods companies and - owing to a big bet on Apple and IBM - technology, 3G's stock holdings include a heavy dose of energy, basic materials and telecommunication shares.

3/20/2017

John Reese Forbes Articles
Forbes

Is The Market Expensive? Buffett Says No

"Frothy." "Pricey." "Stretched." These are among the adjectives used to describe the stock market--and they're not even the most ominous. When you consider the cardinal rule of investing-buy low, sell high-such descriptors could discourage the most intrepid investor. Unless you subscribe to the view of one of the greatest investors of all time, that is. Warren Buffett not only believes that the U.S. stock market is a good bet, he declared in a recent CNBC interview, "If there's a game it's very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it-is a terrible mistake."

3/20/2017

John Reese Globe and Mail Articles
The Globe and Mail

Warren Buffett Pushes Back at Critics of Stock Buybacks

Warren Buffett's Berkshire Hathaway currently has $86-billion (U.S.) cash at its disposal to acquire companies or take bigger stakes in existing stock holdings, as it did with Apple shares in the final three months of 2016. Shareholders and followers of Mr. Buffett have come to expect big moves from the billionaire, who is known for focusing on the long term. But in his annual letter to shareholders last month he spent some time trying to talk readers into accepting a practice that has been vilified for encouraging short-term thinking: share buybacks.

3/10/2017

John Reese TheStreet.com Articles
TheStreet.com

4 Value Stock Picks for an Elevated Market

If you ever shopped for a DVD in a video store you would typically walk past a bin of cheap movies on the way to the new-release rack. The new titles would be pricey, so you might turn to the jagged bargain pile, the top layer picked over because it was too hard to rummage through without work gloves and a lot of patience. But if you committed to scouring carefully and systematically, you could sometimes find a jewel. The bargain-bin pickings in today's market are slim, to be sure, but that doesn't mean there are none to be found. True value investors understand that shopping for good deals goes much deeper than the sticker price.

3/9/2017

John Reese TheStreet.com Articles
TheStreet.com

General Motors 1 of 6 Picks for Main Street Investors

President Trump's promise to "Make America great again" -- by creating jobs, pushing for tax reforms and deregulation, and renegotiating trade agreements with a view toward strengthening domestic businesses -- has brought Main Street back into focus. According to the 2017 Business Leaders Outlook survey from JPMorgan Chase, optimism is at its highest level (and pessimism at its lowest) since 2010. Michael Hartnett, chief investment strategist for Bank of America Merrill Lynch, recently told WealthTrack's Consuelo Mack that the past decade of slow growth, low interest rates and nonexistent inflation was "great for what the rich people buy and own."

3/7/2017

John Reese Forbes Articles
Forbes

6 High-Dividend Picks For The Careful Income Investor

You should never take a job for the money, borrow from friends or date someone based solely on their bank account. Similarly, you should never reach for just any high-dividend stock. In recent years of low rates and paltry returns, yield-hungry investors have been drawn to dividend stocks which, at one time, traded at discounts to the rest of the market. However, this valuation advantage has since diminished, raising the question of whether these stocks have become overbought.

2/27/2017

John Reese NASDAQ Articles
NASDAQ.com

Five Investments for the Common Sense Investor

Is a corporate culture that encourages "the type of kindness that compels you to let someone know they have something stuck in their teeth even though it's a little awkward" a good investment opportunity? The description comes from Snapchat Inc.'s S-1 filing for its upcoming IPO. In the document, founders Evan Spiegel and Bobby Murphy emphasize the company's focus on providing employees the space and courage to create in a supportive environment as well as its belief in giving back to society. The filing also reveals that the company has no headquarters (operations are "dispersed through various cities"), doesn't like the media, and that the IPO will offer no voting stock. Last but certainly not least, the financial information reflects net losses of $522 million.

2/26/2017

John Reese Globe and Mail Articles
The Globe and Mail

Six Stock Picks For The 'Joe Six Pack' Investor

When I hear "Davos Man," I expect to see a chiselled superhero swooping down to the rescue within nanoseconds of intergalactic calamity. Not even close. Coined by political scientist Samuel P. Huntington, the term Davos Man was originally meant to identify attendees of the World Economic Forum in Davos, Switzerland, but the term has evolved to represent unscrupulous bankers and Wall Street bigwigs - hardly the embodiments of a superhero.

2/24/2017

John Reese CNBC Articles
CNBC

Why It's Usually OK When Warren Buffett Violates His No. 1 Rule of Investing

Warren Buffett's No. 1 rule of investing is "never lose money," followed quickly by his second rule - "Repeat No. 1." But it's OK to bend this rule - ignore it during times when a stock is purchased at a price that may seem high and make a short-term decline more likely. Berkshire Hathaway does when it buys stocks of companies that pay hefty dividends and buy back their shares. Berkshire owns 81 million shares of IBM and another 61 million shares of Apple, a stake that was increased considerably in the fourth quarter. Some consider Berkshire's interest in IBM and Apple a curiosity. Both of these technology giants are leaders in their sectors but many believe their best days are behind them.

2/24/2017

John Reese Forbes Articles
Forbes

IBM And Apple: The Truth About Buffett's Technology Buys

So far this year, the Nasdaq composite has been the best performer out of the three major indices. Investors seem to be warming up to tech, particularly some of the larger players in the technology space, and while it might seem like a disconnect to talk about technology and Warren Buffett, the Oracle of Omaha has broken his longstanding "no tech" rule with major investments in both Apple (AAPL) and IBM (IBM).

2/21/2017

John Reese Forbes Articles
Forbes

4 Legendary Investor Picks For The Trump Rally

It may seem counterintuitive to talk about shopping for value stocks when the market isn't exactly full of bargains. The Trump rally continues, with U.S. stocks reaching new records yet again this week, and market volatility has dropped to the lowest level in ten years. Continued optimism around promises of tax reform, deregulation and super-sized infrastructure spending is keeping things upbeat. But whether or not the market is overbought shouldn't matter to a true value investor.

2/14/2017

John Reese NASDAQ Articles
NASDAQ.com

Finding the Gems in the Dow

In late January, the Dow Jones Industrial Average hit 20,000, a milestone that was met with plenty of fanfare. Like many stock market-related headlines, however, the Dow's big day should be taken with a grain of salt. Yes, it represents a rise in the index, and that's not a bad thing, but the number itself really isn't significant. As a matter of fact, breaking 20,000 isn't even that remarkable when you consider the trajectory of the Dow since its inception in 1896. It took over a decade to reach 100, then 66 years to reach 1,000, then another 41 years to make 15,000 (in May 2013). In fact, it hovered around 10,000 for a decade:

2/8/2017

John Reese Globe and Mail Articles
The Globe and Mail

What Warren Buffett's Breakfast Routine Can Teach Us About Strategy

Markets have a psychological effect on spending habits, even for billionaires, it seems. When markets are up, confidence rises and people are apt to spend a little more. They feel they can splurge on that trip or go out to an expensive restaurant. Conversely, when markets are down, confidence wanes and people tend to rein in spending. In a new documentary from HBO titled Becoming Warren Buffett, we get insights into the many habits and traits of potentially the greatest long-term investor of all time.

2/8/2017

John Reese TheStreet.com Articles
TheStreet.com

Want to Profit by Investing Like a Great Contrarian? Here's How

Kiplinger once referred to value investor David Dreman as "the consummate contrarian." Author of five books, a Forbes contributor, and the founder of Dreman Value Management, this against-the-grain investor has built a long and successful career by following his own path.

2/7/2017

John Reese Forbes Articles
Forbes

Apple And 3 Other Warren Buffett Fat-Pitch Stocks

In the HBO documentary "Becoming Warren Buffett," the Omaha native takes the viewer down a hallway of his Berkshire Hathaway office, pointing to a framed New York Times front page from 1929. "I wanted to put on the walls days of extreme pain on Wall Street," he explains, "just as a reminder that anything can happen in this world. It's instructive art." Throughout the countless sound bites, interviews, articles and quotes attributed to the billionaire legend, the consistent message is how Buffett has always remained steadfast in his, well, steadfastness. A staunch believer in level-headed, well-informed investing, Buffett argues, "There's a temptation for people to act far too frequently in stocks, simply because they're so liquid." He says, "If you're emotional about investing, you're not going to do well. You may have all these feelings about a stock, but the stock has no feelings about you."

2/1/2017

John Reese Globe and Mail Articles
The Globe and Mail

These Three Stocks Fit Peter Lynch's Investment Philosophy

Peter Lynch's remarkable run as manager of Fidelity's Magellan fund throughout the 1980s made him a household name, and he was often called on to talk to investment groups and the public about his secret to picking stocks. In his 1993 book Beating the Street, he wrote down a list of maxims, which can be summarized along three broad themes: Do your homework, invest for the long term and only buy what you understand. Mr. Lynch was big on doing research before investing, and he emphasized keeping a clear head about it. He developed a way to measure the value of stocks by dividing a stock's price-to-earnings ratio by its long-term growth rate. When a company generates healthy growth, an investor should be willing to pay a little bit more for it. With slow-growing stocks, he also looked at some other measures, including sales against inventory and debt over equity. He also examined free cash flow as it related to the stock price, with anything over 35 per cent being a buying opportunity.

1/31/2017

John Reese Forbes Articles
Forbes

Four Retail Stocks That Could Perform Well Under Stress

The retail industry has seen some rough sledding over the past year or so, with many segments experiencing depressed sales and major department stores such as Macy's and Sear's announcing dozens of store closures. The industry contends with a laundry list of challenges, including fickle customers, malleable consumer tastes, consistently declining price expectations and an ever-increasing shift toward e-commerce. Add into the mix President Trump's promise to raise import taxes, and you have a formidable threat to already thinning margins. While these hurdles have led to a battering of retail share prices, they could also present value opportunities for well-informed, careful investors.

1/31/2017

John Reese NASDAQ Articles
NASDAQ.com

A Fundamentally Focused Momentum Stock Model

Momentum investing, or buying stocks that have been performing well based on the assumption that they will continue to do so, is counter-intuitive and often misunderstood because it resembles performance-chasing, an investing no-no. In fact, however, investors subscribing to a momentum strategy are really capitalizing on the emotional and irrational reactions of performance chasers by systematically identifying and buying stocks that are on the rise. Momentum investors, while gravitating toward well-performing stocks, are doing so in; (1) a rule-based manner with entry and exit plans in place, and (2) with a view toward the short- and intermediate- term, rather than the long-term view of value investors.

1/24/2017

John Reese TheStreet.com Articles
TheStreet.com

Billionaire Warren Buffett Loves These 4 Small-Cap Stocks, Should You?

Becoming Warren Buffett, a HBO documentary that chronicles the life of the legendary investor, will air on Monday. A few weeks later, his much-anticipated letter to Berkshire Hathaway shareholders will be released, no doubt flush with insights on macro issues and updates on the holding company's myriad business interests. Neither event will probably be terribly revelatory, however, at least not with respect to the origins of Buffett's fortune. He dipped his toe into the insurance business in 1967 when, two years after purchasing the ailing textile company Berkshire Hathaway, he bought National Indemnity. And that is where the seeds of his success remained firmly planted.

1/23/2017

John Reese NASDAQ Articles
NASDAQ.com

Four High-Quality Stocks with 3% Dividend Yields

When Warren Buffett is looking for strong companies to invest in, he employs both qualitative and quantitative tests to find the best candidates. Durable competitive advantage and strong management are among the key qualitative measures, and a go-to quantitative metric in the Oracle's arsenal is return-on-equity. The formula for ROE is simple-net income divided by shareholder's equity (total assets minus total liabilities)-and tells an investor how much cash a company is generating from its existing base of assets. For example, if the ROE is 15%, then 15 cents of assets are created for every dollar originally invested. A steadily increasing ROE is a clue that management is putting its investors' capital to good use.

1/16/2017

John Reese Forbes Articles
Forbes

How To Profit From The Quarter Of A Million Dollar Price Tag Of Raising Kids

When a couple learns that a baby is on the way, the range of ensuing emotions is vast and far-reaching to be sure. Typically, however, a price tag exceeding a quarter of a million dollars isn't at the top of the list. When a couple learns that a baby is on the way, the range of ensuing emotions is vast and far-reaching to be sure. Typically, however, a price tag exceeding a quarter of a million dollars isn't at the top of the list. But the expense of child-rearing extends well beyond basic care-and-feeding. In our society, businesses view children as consumers and, in fact, encourage them whenever and wherever possible.

1/15/2017

John Reese Globe and Mail Articles
The Globe and Mail

Three Stocks That Score High In 'Margin Of Safety' Strategy

Buying something for less than it is worth would seem like the most basic of rules, but it wasn't until Benjamin Graham popularized the concept of a "margin of safety" that it sank in with investors. Mr. Graham's margin of safety described the difference between a company's actual value - its net-working capital minus debt - and the value at which its shares sold in the market. Presumably the shares were selling for lower, and the bigger the gap, the more limited the downside risk of the stock to the investor. This concept was a way of helping investors overcome their individual biases and avoid major mistakes. If you could acquire a company's hard assets and the goodwill on its books for free and sit back and wait for the upside in the stock knowing it probably had very little downside, why would you pass up the chance?

1/11/2017

John Reese TheStreet.com Articles
TheStreet.com

Here Is Why These 5 Emerging-Market Picks Are Poised for Growth

Toward the end of 2015, while flying under the investing world's radar, Brazilian billionaire Luiz Alves Paes de Barros bought a large stake in Magazine Luiza. Shares of the Brazil-based retailer had hit a record low but became one of the largest holdings of his investment company Alaska Investimentos. Since that time, the stock has surged by more than 1,000% to become one of the Brazilian stock market's top performers, according to a recent Bloomberg article. Rob Arnott, chief executive of Research Affiliates, thinks that emerging-market stocks offer an attractive combination of depressed currencies, low valuations and strong momentum, according to a recent InvestmentNews article. Even though valuations have swelled since he first recommended the asset class a year ago, he thinks that it shouldn't deter investors.

1/9/2017

John Reese Forbes Articles
Forbes

Dodd-Frank Repeal Could Be Boon For Small, Regional Financials

Former Fed Chairman Alan Greenspan called it a "disastrous mistake." A Georgetown University professor called it a "deeply flawed bill that contains many different laws thrown together." A former U.S. senator called it a "sound regulatory foundation to protect consumers." There may be as many opinions about the Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd-Frank) as there are pages in it (which number in the thousands). Signed into law by President Obama in July 2010, Dodd-Frank was created with the intention of avoiding a financial crisis like that of 2008. By many accounts, however, the reform has ended up creating a hornet's nest of regulation that has effectively crippled many financial institutions, particularly smaller ones such as community banks.

12/28/2016

John Reese Globe and Mail Articles
The Globe and Mail

The 10 Most Fundamentally Attractive Stocks in the S&P 500

At a time when the Standard & Poor's 500 index is beating records on a regular basis and most professional managers are underperforming it, it might seem impossible to beat the benchmark merely by holding the same exact stocks within it. But long-term data suggest you can beat the market by doing exactly that. As its name suggests, the S&P 500 holds 500 stocks, but each is held in proportion to its market capitalization. That makes it skewed toward large companies, such as technology giant Apple and the energy stalwart Exxon Mobil.