Feb 2010
Bad News Buyer
February 08, 2010 12:16
In 2009 financial stocks recovered with a vengeance. Mike Koza has a knack for finding financial treasure among the trash.
One of the dangers with value investing is that the cheapest stocks are often cheap for good reasons. As with most things in life, you often get what you pay for. There is no formula that consistently sorts out the cheap stocks that are good investments from the other cheap stocks. But there are people who have made these judgment calls consistently well in the past. Mike Koza is one of those people.
As of Jan. 14, Mike Koza's TGF fund, a Marketocracy.com portfolio I've been tracking, has averaged 34.7% a year for almost nine years. Since it's inception on Feb. 25, 2001, it has gained 1312%, handily beating the 9% gain by the S&P 500 average and he is already up more than 14% so far this year. (Click here to see his track record.) This is why Mike is a member of my SWAN analyst team. SWAN stands for "Sleep Well At Night," and it consists of virtual money managers who have been successful in navigating bull and bear market moves.
Mike tells me he looks for low-forward PE stocks with growth potential, and for stocks of companies that may be losing money but have a future profitable book of business. He also looks for special situations such as forced selling, overreaction by the markets, misunderstanding of a news event and stock price declines related to stock issuance/dilution. A lot of value investors would say the same thing, but few have been able to make money throughout the financial crisis as Mike has.
In late 2007, Mike took a small position in the stock of Radian Group (RDN), a troubled mortgage insurer trading then at 1/4 of book value. By early July 2008, Radian's stock price had plummeted to less than 3% of book value. However, on July 3, Radian released some preliminary figures for the second quarter that indicated that delinquency trends were improving. The company also noted that it had no near-term liquidity issues. Mike concluded that the company was not going under anytime soon, and was seriously oversold. He substantially increased his position in Radian, which went on to become a five-bagger in a few short months. Read More...
One of the dangers with value investing is that the cheapest stocks are often cheap for good reasons. As with most things in life, you often get what you pay for. There is no formula that consistently sorts out the cheap stocks that are good investments from the other cheap stocks. But there are people who have made these judgment calls consistently well in the past. Mike Koza is one of those people.
As of Jan. 14, Mike Koza's TGF fund, a Marketocracy.com portfolio I've been tracking, has averaged 34.7% a year for almost nine years. Since it's inception on Feb. 25, 2001, it has gained 1312%, handily beating the 9% gain by the S&P 500 average and he is already up more than 14% so far this year. (Click here to see his track record.) This is why Mike is a member of my SWAN analyst team. SWAN stands for "Sleep Well At Night," and it consists of virtual money managers who have been successful in navigating bull and bear market moves.
Mike tells me he looks for low-forward PE stocks with growth potential, and for stocks of companies that may be losing money but have a future profitable book of business. He also looks for special situations such as forced selling, overreaction by the markets, misunderstanding of a news event and stock price declines related to stock issuance/dilution. A lot of value investors would say the same thing, but few have been able to make money throughout the financial crisis as Mike has.
In late 2007, Mike took a small position in the stock of Radian Group (RDN), a troubled mortgage insurer trading then at 1/4 of book value. By early July 2008, Radian's stock price had plummeted to less than 3% of book value. However, on July 3, Radian released some preliminary figures for the second quarter that indicated that delinquency trends were improving. The company also noted that it had no near-term liquidity issues. Mike concluded that the company was not going under anytime soon, and was seriously oversold. He substantially increased his position in Radian, which went on to become a five-bagger in a few short months. Read More...