Sell Tejon Ranch (TRC)

This isn’t so much a negative judgment on Tejon Ranch (TRC) as it is on the state where all its real estate is located: California.

 The state’s politics are completely dysfunctional. Its tax system is broken. It’s vaunted quality of life—that once included such things as the best state university system in the country with a quality at many campuses that equaled much more expensive private universities—is decaying. The value of real estate depends on the quality of the public infrastructure and California’s crisis makes the land that Tejon Ranch owns less desirable. Read more

10 stocks for the next 10 years from a portfolio up 58% in its first year

Buy and hold isn’t dead, but its DNA sure could use a bit of genetic engineering.

Buy and hold was never intended as buy and forget, but a great bull market run like the one that stretched from 1982 to 2000 made it seem like all an investor had to do was buy and then remember to add up the profits from time to time.

The bear markets that began in 2000 and 2007 have demonstrated exactly how dangerous buy and forget could be. In the first bear, from March 2000 through October 2002 the Standard & Poor’s 500 fell 47%. In the second bear, the one that began in October 2007 and may have bottomed (let’s hope) in March 2009, the S&P 500 lost 56%.

The experience of those two bear markets have left many investors reluctant to buy stocks at all—for most of the rally in 2009 off the March lows individual investors have been busy withdrawing money from stocks and putting it into bonds. And it’s left most of those willing to buy stocks as skittish as whitetail deer in hunting season: Never able to relax and always ready to bolt for escape.

But the original advantages of long-term investing aren’t extinct. Long-term investors can still take advantage of temporary panics and mis-pricings to build positions at low costs. They can still put time to work for them by buying the stocks of companies with a high return on invested capital and letting those companies compound those returns over the years. They can still catch long-term trends that can power a company’s stock for years without being sidelined by worries about catching the best price.

All that buy and hold needs is a transformation from buy and forget to buy and review. Even a review as infrequently as annually will do the trick, I believe.

So as we start this new decade I’m going to give you ten stocks for the next ten years. Read more

Update State Street (STT)

Jubak Picks 50 portfolio member State Street (STT) is gradually finding its way back to its core business of collecting fees for managing assets that belong to others and away from an ill-fated build up of its own investment portfolio. At the height of that past strategy State Street’s investment portfolio had climbed to 50% of total assets, according to Morningstar. That strategy rested on a base of cash raised in the short-term markets, was sometimes invested in complex instruments that carried more risk than advertised, and led the company into using off-balance sheet accounting gimmicks to diminish reported risk. All that blew up on State Street in the global financial crisis. And as a result the company has spent quarters rebuilding its capital through a $1.5 billion equity offering, moving $23 billion in assets back onto its balance sheet, and setting aside $618 million in reserves to cover investor lawsuits.

 But as I wrote in my December 15 post, the financial companies that now show the most promise as investments are those reformed sinners who came out of the crisis not undamaged but just less damaged than competitors. (http://jubakpicks.com/2009/12/15/reverse-goldilocks-bank-stocks-the-best-buys-werent-really-terrible-or-really-good-but-just-bad-enough/ )

It’s that reformed sinner status that has let State Street go back on the acquisition trail picking up fee-paying assets from more damaged competitors. Read more

Update Accor (ACRFF.PK)

In a very controversial vote Accor’s (ACFF.PK) board of directors voted on December 15 to split the company. The issue will go to a vote by shareholders no earlier than June 2010 and no later than the end of the year.

The board’s vote would split the company into two businesses. Accor Hospitality would focus on the company’s hotels and Accor Services would focus on voucher and pre-paid services.

Because the way this decision was reached makes me uneasy, I’m going to put Accor on review as a possible sell in my annual update of the Jubak Picks 50 portfolio. Read more

Update Corning (GLW)

The recent past was much better than expected. The near term future is uncertain. And the long-term looks great.

That’s about the way I’d sum up Corning’s (GLW) second quarter report released before the opening bell on July 27.

For the quarter just completed–the recent past–the company reported earnings of 39 cents a share versus Wall Street expectations for 32 cents a share. Revenue climbed to $1.395 billion for the quarter. That was an 18% decline from the second quarter of 2008, but a big 41% increase from the first quarter of 2009.

Corning saw strength across its product line with a 66% increase in total LCD glass for TV screens and similar uses from the first quarter of 2009 and a 14% increase in sales from its telecommunications business on growth in demand for optical fiber from China and in North America from the roll out of fiber to the home from companies such as Verizon (VZ). That latter business is getting a boost from a new Corning technology, bendable fiber, that makes it much easier to get optical fiber to homes and businesses.

Gross profit margin climbed to 41% from 27% in the first quarter.

But Corning said that the third quarter, while strong, wouldn’t show anything like the quarter to quarter growth the company saw from the first to second quarter of 2009. Glass shipments in the third quarter, for example, will be flat or slightly up in comparison to second quarter levels, said CFO James Flaws. Read more