Stock Picking - A Nine Factor Model

Our decisions matter. We can change the world. Keynes economic prescriptions reveal that as we make decisions we do change the world.
Peter L. Bernstein, Against The Gods - The Remarkable Story Of Risk, p. 230

At the time of this writing there are 3,860 securities to pick from in Canada on the Consolidated Toronto Stock Exchange. If you live in the United States there are way over 10,000 securities to choose from on the three major markets. If you go into the pink sheets there are several thousand more to choose from. And the Oracle of Ottawa has heard that there is a ton of low hanging fruit still to be found on any given day.

Just Roll'em...

The Oracle of Ottawa cannot tell his Dear Readers from around the world, how many times he has held his fresh, new and very expensive copy of Investments by Bodie, Kane and Marcus in his left hand and his latest brokerage statement in his right hand only to be told by the standard book that what I did last month is totally impossible! Some day the Oracle of Ottawa is going to read that book and do it the "right way", but not today.

As a public service to my Dear Readers from around the world, the Oracle of Ottawa has decided that he is going to share with you basically how he picks a stock. It is a nine factor model of data that is commonly available on the internet for free. The Oracle of Ottawa has never paid for investment advice in his life, and neither should you Dear Reader.I will present my nine favorite factors with a link that will take into more detail. And some brief comments, that I have learned from having my own skin in the game for a number of years.

1./ Share Price: The lower the better! Contrary to the assumed wisdom, you will not make very much from buying Apple at over $500.00 a share. The Oracle of Ottawa has found that the sweet spot is between two to ten dollars a share. As a matter of fact my first ten bagger was on a two dollar stock. The Oracle of Ottawa loves two dollar stocks. If you are tempted to follow the crowd, ask yourself, what will double first, a two dollar stock or a one hundred dollar stock? Think about it.

2./ Price/Earnings: Lower the better. Buy a dollars worth of earnings for as little as possible. There is no law against it, and forget the textbook.

3./ Dividend Rate: The higher the better. New studies by the people of the book have recently found that that high yielding stocks do the best! Never buy a stock in a company that doesn't comp you with a nice fat rate for just waiting. Contrary to the book, high yields abound in the markets, all you have to do is discover them. And yes there are many free lunches to be had in capitalism, Who knew?

4./ Price/Sales: The lower the better. A low price sales ratio is a great indication of vigor. In Canada it is not uncommon to find price sales ratios way under 1.00. Would you believe 0.05 to 0.50 is pretty common? It is.

5./ Price/Book: The lower the better. There is nothing wrong with buying a dollar for fifty cents or even less. And contrary to the text book, these stocks are still out there in the market waiting to be discovered. So much for the Efficient Markets Hypothesis!   

6./ Volume: The higher the better. Steadily rising daily volume is very bullish from my experience.

7./ News: More positive news the better. A company with a clearly defined mission is very bullish indeed.

8./ Price/Cash Flow: The lower the better. (See the link...) The more money that is flowing through the company the better. A low ratio indicates wicked vigor.

9./ Beta: Doesn't make any difference. Beta is a lot like mutual fund performance. Past history is no indication of future performance. Trust the Oracle on this one. The Beta of a stock has made no difference to the Oracles historical performance. Don't let it get in your way.

The Oracle of Ottawa hopes that this will perform a much needed public service. And be very wary of academics who write about stocks and even win the Nobel Prize, and yet have never owned a stock in their own name in their life! Read their books for a laugh, then study the people who have actually went out and did it. You can't go wrong with those guys.

What Is The Peasants Republic of China On?

Better a small piece of a big pie, than a big piece of a small one.
Calouste Gulbenkian, (Mr. Five Percent...)

It is Victoria Day here in Canada, the first long weekend of the summer season. And it was a perfect, pretty, blue and cool day. The Oracle of Ottawa thought that that was a most generous gift of the Gods, but it all got better as the Oracle of Ottawa watched his local old time vulgar media lunch time news. It was that clip from the daily State Department Press Briefing that announced the indictment of a wack of military officers from the great Peasants Republic of China. Needless to say it made the Oracle of Ottawa's day.

No Disneyland for you Wong Dong...

 After the laughing stopped, the Oracle of Ottawa was pretty sure how the State Department actually linked each face to each computer. The stupid peasants left their web cams on as they were vandalizing assorted large American sites for for a free lunch. Yes Dear Reader, way out of control and way too much Deer Penis Wine, that shit will get you every time. 

Actually the Oracle of Ottawa has been simply awed and amazed at the recent actions of the Peasants Republic of China in days as of late. What the hell are they trying to prove by strong arming a semi submersible off shore oil rig into hot contested waters off of Vietnam? Does it make any sense to anybody at all? It reminds the Oracle of Ottawa of a big yella dog that chases cars. If the car actually stops, what is that big yella dog going to do with it? Such are the risks of chasing the hubcaps of global hegemony!

Chinese HD-981 off of Vietnam..

  As the Chinese are finding out at a very rapid rate, it sure sucks to be a peasant master of the universe. Who knew it would all be so much work and effort? Of course if the Peasant Republic wanted to really bring it, they would have formed a sweet joint venture with all the locals and played straight up. The Oracle knows this is true, you can learn a lot of things from Armenians of the recent past, see epigraph above.

But the part of the story that kept the Oracle of Ottawa glued to You-Tube for the last couple of days was the reaction of the "weak state" of Vietnam! They sure got the Peasants Republic of China's attention didn't they? It was all pretty unfortunate about the misidentified Koreans and Taiwanese though, but it proves the Oracle of Ottawa's point, even to Asians, they all look alike. If they can't tell each other apart, how would it be possible for a an old Gajin like the Oracle of Ottawa ever to learn? Ho! Ho!

The Oracle of  Ottawa has taken a lot of heat in recent times of late as to opinions of the true motives of the Peasants Republic. Why some people have even hurt the Oracle of Ottawa's feelings by insisting that he was a bigot! Ouch, that hurt's. But today was the day when it all came together and proved that the Oracle of Ottawa was right all along. It would be all really great if this was the end of the matter, but the Oracle of Ottawa must inform his Dear Readers, that this is all just the start of much graver matters.

Goodluck (!?) Jonathan

Politics is frequently associated today with self-seeking behaviour, hypocrisy and 'public relations' activity geared to selling particular policy packages.
David Held, Models Of Democracy, Third Edition, p.259

It is with wondrous dread that the Oracle of Ottawa continues to hear about certain school girl kidnappings in the third world state of Nigeria. The Oracle of Ottawa is also amazed at how much one can learn from just watching. How does a guy that comes from a family of canoe builders end up being President of Nigeria? This also begs an even bigger question; how does a canoe builder and / or a president of a third world country end up with a net worth of damn near two million U.S. dollars? That is a hell of a lot of canoes!

Goodluck - Setting the price...

Since the Oracle of Ottawa is not owned by big media or any nation state, he feels it his public duty to promulgate his wise and penetrating observations as a public service to his world wide readership. The Oracle of Ottawa deeply respects his Dear Readers. Why did Goodluck Jonathan wait for over two weeks before doing anything about the recently suffered acts of terrorism? What information becomes rapidly apparent from observing the facts?

The first fact of revelation from the good President's silence is that none of the abducted girls were of Goodluck Jonathan's tribe! As one can easily find out today, the great president of Nigeria, at the time of this writing, of course, is a member of the Ijaw ethnic group. This ethnic group of course contains very many tribes and / or clans to numerous to mention.  

And of course, for those of us who know of such things, Africa is not run like North America or the European Union, is it? No business is conducted, much less completed, with out someone of the driving tribe getting his palms and off shore bank accounts greased. Is the Oracle of Ottawa right or is he right? It seems readily clear and most striking to the Oracle of Ottawa that someone in Nigeria is presently selling of the rights to girls schools of other numerous ethnic groups like burger franchises are sold here in the free world!

It may come as a surprise to my Dear Readers that Nigeria and Canada have a few things in common. Nigeria is a lot like the Department of Transportation in one of Canada's Atlantic provinces. At every election all the staffs change at the Department of Transportation! It should all become clear when you discover that good old Goodluck is up for reelection in 2015.

The second fact of revelation is that nothing slows down the political opposition at campaign time as the personal loss of a daughter. A most unfortunate and untimely tragedy. But the Oracle of Ottawa strongly suspects that certain daughters will "escape" (or not), if certain fathers reevaluate their immediate political futures. Such is the politics of a third world tribal country.

Of course Dear Readers you will hear of much bravado of the greatest and most powerful nation states of the world today sending high end secretive "aid" to catch the bad ass terrorists. Well all the Oracle of Ottawa can recommend is don't hold your breath. Our nation states are balls deep into the corruption of said above mentioned third world country.(s)  They are fishing for the big billion dollar contracts for their home companies, that just happen to be major campaign contributors of most all civilized western countries.

The Oracle of Ottawa can only suggest that the solution to this most pressing problem is up to the people of Nigeria, and most unfortunately it will not be solved at the ballot box, but rather in the old fashioned way; the street.

Where Are All The Hudak Supporters?

The discovery of happiness, like the discovery of new territory, is usually oblique.
John Kay, Obliquity, p. 23 

The hands down event of the week, without a doubt, has had to be the kick-off of the 2014 Ontario provincial election. It of course gained, right from the start, saturation old style vulgar media coverage. The Oracle of Ottawa loves that. That means that he can cover the said train wreck from the comfort of his secure bunker, located somewhere in Ottawa South. This is by far the greatest venue for a rock and  roll roving reporter.

'Chain Gang' Tim Hudak - Party of One...

Right from the get - go the Oracle of Ottawa could not help but notice the actual excitement caused by the homily Kathleen Wynne. Damn! You would think she was a rock star or something. Every one of her events has scads of supporters in attendance. And they are not captive employees of some party member from the donors list. Why, one of the first places she came out to after the campaign started was Ottawa South, to the old riding office of Dalton McGuinty! The Oracle of Ottawa thought that was right bold. But you didn't hear the words "Gas plant", not even once. The ample excited crowd formed in over an hour in advance.
 

Andrea Horath - D'Ohhhh...

 And it wasn't shit luck Dear Reader, the next day she packed out another event in downtown Ottawa at that new conference center. From the adulation that was being shown, the Oracle of Ottawa can only conclude that she was once Pierre Elliot Trudeau's old girl friend from the 1970's! But no Dear Reader, she just has that something. And she can get the voters out and up for it. It was great watching the clips of her sassing the 'Harper Government'! All in, a hell of good start to her majority government.

 One of the biggest faux-pas's of the week had to go to Andrea Horwath, at the staged set up in the Tim Horton's coffee shop, somewhere in Ontario. The Oracle of Ottawa caught the gaff right away and just couldn't believe it. Your average awesome Canadian is about six feet tall, plus or minus a couple of inches. In Canada it is really really rare that you ever see a midget. It is even rarer still to see a midget from Asia, even in Ottawa!  But if you are in a Tim Horton's and there are nine Asian midgets from the Phillipines behind the counters, barely tall enough to see over the cash register, you know right away that you are in a Tim Horton's staffed completely by Temporary Foreign Workers! That looked great to the Oracle of Ottawa. That once, the party of the working man, was now pitching in a business establishment that profits from indentured labour! What is the NDP staff on?

Earlier this after noon that Oracle of Ottawa was returning from his coveted Saturday routine, only to see on CTV News Network, the never ending clip of a "poll" of 825 Ontario voters that concluded that 'Chain Gang' Tim Hudak was leading in popularity for Premiere of Ontario! And that this was correct to an accuracy of +/ - 4%!! What was no doubt mentioned by the pollster was that it was only Tim Hudaks riding that was polled! Oh, and by the way, the undecided was pulling a strong fourth at 16%. When you are down to that desperate Hail Mary move in only the first week of the Campaign you are essentially  fucked.

Right from the start the Hudak campaign faltered. The press was (rightly) all over the little man. There were no supporters in attendance. Just 'Chain Gang' Tim and his rag ass band of fart catchers. And that head fart catcher was so creepy that that the Oracle had to reach for his Ether and Nitrous Oxide mask! I had that Blue Velvet fear, all of a sudden. But the Oracle is alright know after a stern reading of a few chapters of Revelation... If all it cost to save Ontario from this moron, was a billion dollar gas plant move, the Oracle of Ottawa can only conclude that it was money very well wasted indeed.

Godzilla Pukes It Up!

We deal with complex systems whose structure we can understand only imperfectly.
John Kay, Obliquity, p.13

It was while watching the Blue Jays just crush the Phillies last night a mere 10 - 0, that the Oracle of Ottawa caught that new Fiat Godzilla commercial on the MLB Network,  while the Oracle was checking up on the live look ins between innings. After seeing it and laughing so hard that I darn near did personal damage to myself, the Oracle of Ottawa was amazed that somehow that commercial got onto the air.

Godzilla has standards too!

  A little research will tell you that that the original Godzilla was created in 1954 and the said creature was a metaphor for nuclear weapons. Ever since then Godzilla has become what is known as a pop icon, whatever that is. The latest rendition of 2014 has carried on the tradition along with all the marketing and "merch". The Oracle of Ottawa finds it quiet a reach what Godzilla has to do with Fiat automobiles.

But it became very clear to the Oracle of Ottawa that even Godzilla has standards and there are certain things even Godzilla will refuse to eat, and it has nothing to do with having four doors. Due to all the politically correct laws of writing and other media, the Oracle of Ottawa can safely so no more...But you Dear Reader can watch for yourself and make up your own mind.   
 

Tobin Tax: Push - Pull Implementation

The introduction of a substantial Government transfer tax on all transactions might prove the most serviceable reform available, with a view to mitigating the predominance of speculation in the United States. 
John Maynard Keynes, The General Theory of Employment, Interest and Money,  p. 160 

First of all, it should be called the Keynes Tax. But as James Tobin constantly pushed the idea through out his life time it came to be known in his name. The Oracle of Ottawa has provided the earliest reference of the idea. James Tobin first read Keynes book in 1936, and that is where he certainly got the idea. And it would be fitting that the idea of the greatest tax revenue generator of the future should go to it's true originator.

John Maynard Keynes

The main problem with implementing the Keynes tax is very strong resistance from the financial intermediaries. Better known to the average person as the banks. Of course they have darn near infinite resources and very strong lobbies at all levels of government. The very idea of someone else giving them a haircut sends them into total war mode. 

Much to the Oracle of Ottawa's surprise, the Keynes tax has been implemented in Sweden during the 1980's only to be repealed in the early 1990's. The financial institutions started rerouting the trades and flows around the single agent. Therefore it becomes clear that the tax must be pushed onto the financial institutions, and not just at one place, but at several key places all at the same time. At the time of this writing it is being planned by France and Germany together. If Canada and the United States came on board at the same time that would be it. It would get done.

The pull part of the implementation would come from government in the form of moral suasion. As the Keynes tax is introduced by representative governments, it must also in unison drop capital gains tax rates on the banks customers. Then the banks will have to fight the governments and their own customers! It will not be long before they see the light. 

Of course than you have deal with the next objection. What about the tax havens? Well Dear Reader, the thing about most tax havens is that the banking only benefits a very small number of people. And once the residents realize what revenues their respective governments are giving up, each tax haven will fall into line one by one. If worse come to worse they can also be dealt with with extreme prejudice.    

'Chain Gang' Tim Hudak - All Lost - Already!

Tyrants are rarely 'true navigators'.
David Held, Models Of Democracy, Third Edition, p. 24

There he was on the Oracle of Ottawa's Sony big screen, dressed up like a burger flipping Temporary Foreign Worker, the Oracle of Ottawa laughed so hard he damn near hurt himself. Then there was that awkward Global Television interview, where 'Chain Gang' Tim just walked off the stage with his doomed lot of spin doctors and fart catchers, all soon to be unemployed. The Oracle of Ottawa won't say that 'Chain Gang' Tim is nervous already, but did you check out the cement bags under his eyes Dear Reader? It appears to the Oracle of Ottawa that something is keeping little Tim up late into the night. What ever do you suppose that could be Dear Reader? And where are the throngs of excited supporters?

'Chain Gang' Tim Hudak - Farewell Tour...

Early into the campaign the laughs are coming a ton a minute. The next clip on the Oracles local supper time news was of Andrea Horwath, complete with the doomed deer in the head light stare. It appears to the Oracle of Ottawa  that some people just don't campaign very well at all. Perhaps her feet are still hurting from that self inflicted gunshot wound of bailing out of budget that appeared to the Oracle of Ottawa that was written by the NDP. Some people can't handle the pressure very well. And the Oracle was mortified when the lost Andrea was appearing in a empty staged event at a Tim Horton's, which appeared to the Oracle of Ottawa to be completely staffed by little TFW people from the Philippines all four feet nine inches each. That will work really good with the union vote!

Then we got to the good stuff. The Oracle of Ottawa is very impressed by the showing of Kathleen Wynne. Damn, she is a natural campaigner. She is like a pink battery bunny with a bass drum. There were no bags under her eyes or any trace of fear. She is on a mission and she even seems to be enjoying it, unlike her two opposites.A lot of people are so called change voters. But not the Oracle of Ottawa. The Oracle picks quality and sticks with it for ever. Ontario has finally got it's own Hurricane Hazel!

It has come to the Oracle of Ottawa's attention that the 2014 Ontario Election has stirred up some very, very large and powerful forces. The Oracle of Ottawa has included a video purpose made from one of the most powerful union leaders in the United States! Leo Gerard from the United Steel Workers of America! The largest all industrial union in America. Only about 860,294 members the last time they counted in 2009. He speaks about one of 'Chain Gang' Tim Hudak's promises of making Ontario a Right to Work province, just like an American right to work state. Doctor Gerard passes on some some chilling information, which you would be very wise to give a listen to...

Discovering Thomas Piketty

It is obvious that lack of adequate investment in training can exclude entire social groups from the benefits of economic growth.
Thomas Piketty, CAPITAL in the Twenty - First Century, p. 22

The Oracle of Ottawa first came across Thomas Piketty at his local Chapters retailer. There was a dozen  brand new hard cover copies of Capital in the philosophy section. Go figure, the Oracle of Ottawa can only surmise that Heather Reisman does not want what is between the covers to become common knowledge in Canada. The book is beautifully printed by the same publisher that published the works of John Rawls, Harvard Press. At just under 700 pages it could also hold up a pretty large window or stop a very large door.

Thomas Piketty at Cambridge...

The Oracle knows that the main push of the book is about economic inequality, but the Oracle of Ottawa bought the book for the insights into the actual mechanics of capitalism itself. As an avid stock picker you can't know too much about the actual workings of capitalism.The writing style is very easy to read and absorb.The two laws of capitalism are worth the price of the book.

At the time of this writing Capital is number two in Amazons Top 100 Books list! It was number one until just recently. It has come up in the Province of Ontario election already. Which is not hard to understand, since Kathleen Wynne is no doubt an avid reader. The NDP were too busy singing Koom By Ya and the Conservatives never read books at any time, hence Kathleen Wynne has a pretty big edge with this monster tome under her belt.

This Thomas Piketty lad has learned all about academia very young. He got his Phd. at the age of twenty two! He was awarded the prize for the most promising young economist in France in 2002. Just come up with a theory that cannot be entirely proved or disproved. You get to be a legend by default. Just like Sigmund Freud. Whatever works....

The Oracle of Ottawa's favorite economists are John Maynard Keynes and Karl Marx, as all my many international readers already know. They too were fascinated with wealth and inequality. They were also obsessed with how wealth was created. And to study the acquisition of wealth they actually tried it themselves. Especially John Maynard Keynes. He got so good at it that his original portfolio is still compounding in timeless bliss at Cambridge. There was never any doubt about Keynes, he had a ton of his own skin in the game all his life. Thomas Piketty should try that, maybe his next book will be about as long as The General Theory instead of the length of Das Kapital Buch Ein....

What Was Andrea Horwath On?

Far from the state playing the role of emancipator, protective knight or umpire in the face of conflicting interests, the state is enmeshed in civil society.
David Held, Models Of Democracy, Third Edition, p. 108

It all seems so long ago already. But in reality, it was just last Wednesday when the Ontario Liberal Minority Government tabled their budget. Of course there were the required media "leaks" to trial balloon everything and all, as per standard routine. The Oracle of Ottawa was mighty impressed. It seemed clear to the Oracle of Ottawa that the NDP under the steady hand of Andrea Horwath had all but written in the major points, such as making the rich pay, in that everyone earning over $150,000 in taxable income would pay a mere $500 more.

Oracle calls a majority Wynne government...

Then there was the astounding news of the Ontario Pension Plan that the Feds of the 'Harper Government' have refused, with the Province of Ontario going it's own way. After pondering all the leaks the Oracle of Ottawa could only conclude that the NDP wrote the budget! Make the rich pay, take care of the poor, and provide money to build what the people of Ontario were capable of building. Even the honking large and powerful Union bosses that still exist in Ontario were mighty impressed and stood to and said so right out loud. The Oracle of Ottawa suspected that it was all a slam dunk.

Andrea Horwath - Fatal error?

It was just after the market close in Toronto on Wednesday that Kathleen Wynne stood to her place at let the Finance Minister off his leash, and get it off. Then the first news come out on Power and Politics that Andrea Horwath was not in the House! Somehow it was nicely explained that the Orange Andrea had some how got her thong in a knot, and did not appear in the House in the Chair as the Leader of the Third Party. The Oracle of Ottawa could not think of another example where this has ever happened before in the Ontario Legislature.

'Chain Gang' Tim Hudak - Last time out?

As the week progressed, starting at the NDP news conference on Thursday morning, the imperious Andrea stated that she was miffed about something and that she would not or maybe would not support the Wynne Government on the May eighth budget vote. Needless to say the Oracle of Ottawa became somewhat alarmed. Is this NDP thingy going to risk the introduction of chain gangs in to Ontario? Is she willing to risk Ontario becoming a "right to work" province? Cause these things would surely happen if 'Chain Gang' Tim Hudak had a lucky day at the poles.     

Then it all donned on the Oracle of Ottawa. This is the process of democracy in action. It is an ugly process. It finds weakness and exposes it naked right away. It has to be that way, there is a lot at stake (steak?). It also shows great hidden strengths of character, as it did when Kathleen Wynne just walked down the Hall and went to see the Lieutenant Governor of Ontario and had the government dissolved! The election day is to be June 12, 2014. The Oracle of Ottawa strongly suspects a Liberal majority.