Two mentions

I was interviewed by Kyle Schnare on his blog.

My Create a DCF spreadsheet article was included in the Carnival of Personal Finance; this week on Fat Pitch Financials.

Quotes:

"Wide diversification is only recquired when investors don't know what they are doing."

-Warren Buffett


A little enlightening quote from Charlie Munger (board member of Costco & Warren Buffett's partner) on Costco:

"I'm such an admirer of Costco culture and the Costco system I'm not sure I'm totally rational. I love the place. That isn't so bad in life, to find a couple of things you love."

Have a great week!

-Mike

Dont for get to:

Portfolio Updated

I updated the portfolio today.

It is currently up 8.7%, and 1.9% during the past week, mostly due to:

• Costco up 2% on its quarterly dividend announcement
• Fairmont up 6% on no real news, but increasing resistance to the Icahn takeover offer
• K-Swiss up 6% on no news
• Pfizer up 4% on FDA approval of Inhalable Version of Insulin
• Paxar up 2% on no news

Other than this Collins didn't move much, I still, haven't received cash for JBOH and Lazare Kaplan went down 4% on natural micro cap volatility.

I'm going to the SLC library now, and will have different names for "currently reading" later on today.

-Mike

I own stock in all of the above mentioned companies. This article is not meant as a recommendation of any security, do your own research before buying any stock.

Updated the web site

I updated the price of my portfolio on the website, click here to see the update.

Not much total change this week. I've created a Yahoo! Group to help me archive my site, and the files, etc.



Click to join rightpriceinvesting
Click to join and simply state your name and reason for wanting to join (learn, stock picks, investing articles, etc.) and there shouldn't be a problem joining.

-Mike

Portfolio Posted

I just posted my portfolio, and write-ups for the companies in it, in the stock research section of my site.

Eventually I hope to start a subscription newsletter, and then a hedge fund, based on the actions I take in the portfolio, but for now I will attempt to build my track record by weekly updating the portfolio and providing commentary when necessary.

-Mike

Updated Books section

I posted Book recommendations for beginners on my site.

During the next week I'll add books for intermediate, and advanced investors, as well as books for "strengthening your mental models."

-Mike

I will post site updates here for now on.

Update

I've improved the blog a lot today during this holiday.

In my last post I talked about a forum, the link to it is now ---> on the sidebar. To get this without all the ads it would cost $56 per year, I don't have that to invest in the site now, but I will put a up a "donate to paypal" thing soon if people would like to donate to make the messageboard ad-free.

I've also updated my "Currently Reading list" on the sidebar with the three books I'm currently reading.

The quotes are:

“Don't waste your time with people whose ideas you immediately know to be stupid.”

“Think about it a little bit more and you'll agree with me, because you're smart and I'm right.”

-Charlie Munger

Last, but not least, I'd like to introduce my new website, Right Price investing. I will post all of my stock research and investing articles, along with reccomended books, etc. on this site.

-Mike

Blog Forum

I started a forum for this blog, click here to visit it.

Please post a lot, and when you post post in the corresponding thread, or if your post doesn't have anything to do with one of the started threads start one ;-)

There should be a link in the side bar soon.

-Mike

Lazare Kaplan Notes

Lazare Kaplan is a company at which I’ve been looking (how ‘bout that for not ending in a preposition ;-). Their main business is polishing rough diamonds, and selling them under the brand name “Lazare Diamonds.” The reason I’m interested is: to buy this company now you’re paying 75% for it’s current assets* (minus all liabilities) and getting a potentially great business thrown for free.

CC
Press Release

Here are my notes from LKI’s conference call. (This is not a transcript, just my notes)

-Fiscal quarter 2, 2006
-Intro, disclosure, blah, blah, blah
-Industry continues transformation from supply driven to demand driven
-Demand remains good in US, new markets opening
-Sensitive to broad econ. factors
-Rough prices impacts on:
-Margins (prices have run ahead) in transformation from rough to polish
-Deliberately slow down purchases
-Continues to be pleased, but disappointed w/ results
-Increasing uncertainty surrounding diamond business
-Substantial increase of diamonds sold to market
-Taking steps to brace against a market shift, in polished sales (negatively effected results in last quarter)
-Remain focused on 4 elements:
-Manage Conservatively
-Expand Strategic projects in rough diamonds
-Focus on high quality diamonds (increase share by strengthening internal org.)
-Globalization
-Supply from Diamond trading company continues to grow
-Relationship in Russia continues (operations remain stable through reorganization In Russian -\diamond econ.)
-Brought buying prices, of rough diamonds, into equilibrium, w/ polished – worsened ST results
-South Africa Manufacturing facility operational
-Good progress in discussion w/ Little Jon
-Consider policy of strengthening sales & marketing
-Growing acceptance of high quality jewelry line
-Constantly trying to increase market share
-Expanding participation in US and Overseas markets
-Looking at new markets (China India etc)
-This quarter successful implantation of strategic policies discussed in past
-Sales – quarter and 6 months - $96.3 mm $235, compared to 93.2, 171.5
-Increase of 37% six months
-Polished diamond quarter 37.7mm, from 38.9
-6 months 79.7mm, +9% over prior period
-Reflects increased sales of buying cut commercial stones
-Rough 58.6 mm, 54.3
-6 months 155mm, 98.5mm
-sales from rough trading operation began 2nd quarter
-Gross margin ¼ 16.5%, 6months 14.4% - prior year 17.8%, 17.5%
-shift in sales mix, increase in rough diamond prices effected gross margin
-rough gross ¼ -.3%, 2.1% prior year
-6 months 2.3%, 5.3% prior year
-Increased rough costs, fees charged by diamond producers
-SG&A ¼ 6.4mm, 5.7 prior
-Six months 13.1mm, 11.4 prior
-Increased personnel and cost
-Interest expense .3mm,
-Increased interest rates
-Receivables 98.4mm, prior year - 87mm
-Working capital 139.6mm
-150mm in borrowing facilities
-12.6mm CFO
-38,015 OKI Treasury 8.97 per share, 507,060 shares owned, average purchase - $8.07
-Conditions in rough & polished environment?
-A lot of speculative trading in rough market
-Resulted in negative rough margin
-Better level in purchases
-Rough prices running ahead of justified price, happens in commodity business

Please realize my notes aren’t complete, and my analysis may not be that great either ;-), mm means million (just incase I was using the wrong abbreviation)

Conclusion

I like how management assures they are preparing for the future, but doesn’t offer any growth projections – this shows they know it’s not possible to predict growth precisely, and it also shows they can resist the “institutional imperative.” The bottom line on management is, they know what they’re doing, and have a great plan for the future – also they prepare for the future, even though it’s hazardous to their ST results – we just need to see if they can come through with their promise.

The stock went down 8% today on 7x average volume, I’m happy because I only bought a third this weekend.

-Mike

* They are trading ~25% less than their Net Net working capital, which is defined here as Current Assets minus Total Liabilities

-
Disclosure: This article in no way represents a recommendations to buy or sell any security, do your own research before making any investment decisions. At the time of posting – though it could change at any time – the author, Mike Price, owned shares of Lazare Kaplan International

Update

I just posted Part Two of my special situations series.

I don't have time now, but in the next few days I'll write my review for the book I'm currently reading (Julian Robertson : A Tiger in the Land of Bulls and Bears).

Also check out the new quote,

"The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather is a lack or will." - Vince Lombardi

Which has been my TMF profile quote for a while.

Also check out Alex's new post on NCAV plays (I new him before he was famous :-)

Have a Great Week!

-Mike