Celadon Group A RISK on Mexico and NAFTA

I was driving from Arkansas visiting my grandchildren and passed a truck with this name on the side. Well that was a new name to me. Then I began to notice several of them. My making money antenna registered it and I made a note to study the company. To my surprise that the company was fundamentally sound. So here is the study for your consideration. 


This is the public relations blurb on their web site. www.celadon.com


Celadon is one of the largest and most progressive transportation and logistics companies in North America. Founded in 1985, Celadon has grown continuously for over 28 years and now employs over 4,000 associates worldwide. We have the newest equipment operated by the most skilled drivers on the road; our expertise means reliability and dependability. As one of the top truckload carriers in North America, we have international resources strategically located within the United States, Canada, and Mexico. In addition to international business, Celadon also offers a range of truckload transportation services within the United States, including long-haul, regional, local and dedicated. Our facilities allow us to provide a total transportation solution. Celadon Logistics provides freight management services, less-than-truckload consolidation and freight brokerage services. Celadon Dedicated Services offers supply chain management solutions, such as warehousing and dedicated fleet services. You can count on us for solutions to all your transportation and logistics needs.

They acquired Tango Trucking in 2015, Teton Transportation in 2012, and FTL this year. They are a risk considering they receive most of their income from trips to and from Mexico or Canada because of NAFTA. 

How do they do they do with Better Investing standards?

1. Sales have grown 8% over the past 10 years and it is a small capitalization company.

2. Pretax profit on sales in 6% and just over the industry average of 5%. 

3. 12% earned on equity is under the industry average of 19%. This is a concern.

4. Historic earnings are 18% over the last 10 years. This is good.

5. The upside/downside ratio is really skewed at -13 to 1. It is really below the buy zone.

6. It pays a small dividend but less than half of the earnings per share.

7. It is in the low of the buy zone. 

This investment is a speculation. It is low. It is strong in the past. It is challenged to find drivers, adjust to the new environment created by the anti-Mexico rhetoric politically. A venture. 


We will buy 100 shares for our fantasy portfolio. 

WE paid $769.00 for 100 shares. 

CGI cost basis $769.00 value is $865.00 = +96.00 (01/08/2017)
STRC cost basis $7,719 value is $7,938.00 = +$219.00 
LULU cost basis $6,855.00 value is $6,827.00 = -$28.00
GNTX cost $1,856.00 current $2,052.00 .... +196.00
BNS paid $5,408.00 value $5,788.00 = +$380.00
TSCO paid $6,667 value $7,516.00. = + $849.00
KMX paid $5,444 value $6,540.00 = + $1096.00
LCI paid $3,238 value $2,225 = - $1,013.00
JLL paid $9,699 value $10,673.00 = + $974.00

Stericycle a disposal services company.

www.stericycle.com

Stericycle is a compliance company that specializes in collecting and disposing regulated substances, such as medical waste and sharps, pharmaceuticals, hazardous waste, and providing services for recalled and expired goods. 

It meets all the criteria of the Better Investing method of stock picking. 


1. It has 15% growth in sales over the last five years and is a Mid Cap company (one between 1 and 10 million in sales). It had 2 million in sales last year.

2. Pre-tax profit on these sales is just under 20% and compares to the industry at just under 10%.

3. Earned on equity is just above 16% compared to the industry five year average of just above 5%.

4. Historic earnings per share was 13.5% over the past five years.

5. It is a growth company and does not pay a dividend.

6. It is 14 to 1 upside/downside ratio.

7. It is in the BUY zone which is  $73 - $94.

Some cautions:

1. It had a disappointing year in 2015 however 2016 is on target and they have predicted strong growth in 2017.

2. It went from 1 million in debt in 2014 to 3 million in 2015. This is due to acquisitions.

3. "Evolving environmental rules and regulations remain another headwind that alter its current method of doing business and ultimately increase costs and compress margins further. The recent spate of acquisitions is leading to higher overheads and integration-related expenses, which are weighing on margins.” Zacks evaluation of this company as of December 16, 2016.

We will buy 100 shares today at $77.12 so we will have $7,712 shares and paid $7,719. 

STRC cost basis $7,719 value is $7,938.00 = +$219.00 (01/08/2017)
LULU cost basis $6,855.00 value is $6,827.00 = -$28.00
GNTX cost $1,856.00 current $2,052.00 .... +196.00
BNS paid $5,408.00 value $5,788.00 = +$380.00
TSCO paid $6,667 value $7,516.00. = + $849.00
KMX paid $5,444 value $6,540.00 = + $1096.00
LCI paid $3,238 value $2,225 = - $1,013.00
JLL paid $9,699 value $10,673.00 = + $974.00

Contrarian in Real Estate

A review of John D. Spooner's book provides market insight from this former executive at Salomon Smith Barney. He is a Harvard graduate and lives in Boston.

"Sometimes it is good to buy into America's most hated companies" is one of his chapter titles. He describes his contrarian view. Out of favor good companies when down provides great buying opportunities.

I can illustrate this in my wife's retirement plan at Fidelity. When the housing market tanked we started putting her new money into a real estate mutual fund they offered. It grew 30.51% the first and 5% last year and 3.38% this year. Not bad. A great average being a contrarian. No one wanted in the housing market at that time but it rewarded timeliness and well as time in the market.

Real estate investments are sometimes called REITS or Real Estate Investment Trusts. They usually pay exceptional dividends but grow slowly. Our investment club would not buy REITS because we are looking for growth companies. REITS usually own businesses, apartment complexes, shopping centers, industrial properties and sports complexes.

Why Invest in Stocks

Why do I do what I do? I started in 1998 buying stock in what one of my buddies suggested. I did not do very well and would have quit but I began to go to meetings where I worked. They had an investment committee and met many investment leaders from some very good investment firms in California, New York, St. Louis and Oklahoma City just to name a few. I studied and listened and read the slick books they presented. I was a sponge.

In 1998 I was the interim pastor of a great church in central Oklahoma and three men in that church heard of my interest in investing. So they asked me to fill an empty spot on the Central Oklahoma Investment Club of Chickasha, they limit it to 15 members. I attended and then joined the club. My caveat was that I wanted to invest to a certain limit but wanted to use the club as a vehicle for making charitable gifts. They understood and I got involved. I did not want to just pile up money but to invest for ministry. The remainder in the club I plan to use to fund increase a DAF (donor advised fund) that my children can use to fund ministry after my death. I plan to set up the DAF in the near future with appreciated assets from a personal account.

Since that time, I have reached the limit and went beyond four times. The earnings in stock appreciation the club transferred at my request to The Baptist Foundation of Oklahoma to make gifts to Falls Creek for the Sake of the Call, a youth camp in southern Oklahoma, to Church Renewal International for mission ministries in India and the Philippines and gifts to the building fund of Snow Hill Baptist Church in Tuttle, Oklahoma, the endowment at South Lindsay Baptist Church in Oklahoma City and to an endowment fund at First Baptist Church in Minco, Oklahoma. Those gifts I perceive as coming 1. from God 2. but using the knowledge learned at the Investment club and 3. willing to take risks. God does not promise to make investments grow and will not protect the portfolio from going down just because one plans to give to ministry. However, I believe with proper study, trusting the combined wisdom of investment partners and making routine small deposits, usually $100 per month to the pool that I have found my vehicle for giving beyond the tithe for the last 20 years.

I grew up in South Oklahoma City. Spent most of my time on 29th street on car row and worked at a grocery store on the south side for 9 years. I did not know anyone who did stocks much less think I would ever be doing anything like this. No one in my family ever did this and many of them see it as gambling. That is possible. I call it taking measured risks based on information. I have lost at times but usually when I have departed from the discipline I know through Better Investing, the tool of investment clubs nation wide.

This can become an obsession so I try to temper it with lots of engagement with people as a volunteer now that I am retired. That balance makes me a person with a mission statement but allows  me to slow down to meet my age energy level. I also cook for my wife who is still working and try to be a good house husband. That is my number one mission. She is awesome.

So my vehicle is found here: www.betterinvesting.org. You can use this tool as well. That is the basis of these blog studies. Nothing new under the sun.

A LULU to buy!

Lululemon athletica inc., an athletic apparel company, together with its subsidiaries, designs, distributes, and retails athletic apparel and accessories for women, men, and female youth. It operates through two segments, Company-Operated Stores and Direct To Consumer. 

As of January 31, 2016, it operated 363 company-operated stores under the lululemon athletica and ivivva athletica brand names in the United States, Canada, Australia, New Zealand, the United Kingdom, Singapore, Hong Kong, Germany, and Puerto Rico. lululemon athletica inc. was founded in 1998 and is based in Vancouver, Canada. (From Yahoo Finance)

www.lululemon.com


This company has an outstanding financial record and is a way to have some international exposure, since it is a Canadian company, in your portfolio. It is a consumer discretionary company and has cyclical ramifications.

Our investment club would buy this madcap company if we need one this size and in this sector. Diversification means that we are careful not to have too many stocks in any one sector, or any one size, or any one industry. We try to have 15 stocks with 25% small cap (under 1 billion in sales), 37% mid cap (between 1 and 10 billion in sales) and 37% large cap (over 10 billion in sales). The rest is cash.

Here are the numbers on this company.

1. It has grown over the last 10 years at a rate of 33.7%. Not bad. It had sales last year of 2 billion.
2. Pretax profit on sales was 24%. Excellent with the industry average of 10.30%. Some in the industry are Children's Place, Express, Under Armor.
3. Earned on shareholders equity was 27.57% over 5 years. That is just under Express with 30.82% but over the industry average of 24.88%. At this point in our study we would make a note of Express to do a future study.
4. Earnings per share is 43.4% moving at more than sales but not too much more in my opinion.
5. It pays no dividend and earnings are put back into opening more stores or enhancing products. That is good. WE are seeking growth not income.
6. It has a 4.7 to 1 potential to grow. That is what we call the upside downside ratio.
7. The stock went down today and is in the middle of the buy zone. I actually bought some earlier and it went down another $1. My track record at times. Sometimes that happens. It is not short term we seek. That zone we determine to be 41.6 to 81.7.

Any negatives?

1. They stay with current products alone and not develop new products.
2. It is a trend company and the trends could change in fashion.
3. Canadian companies have an international tax that creates filing headaches for your accountant or for you if you do your own taxes. This is an ADR so it trades on the New York Stock Exchange as an American Depository Receipt (ADR).
4. The UK exposure is subject to the downturn if it occurs with Brexit.

Well we are buying 100 shares today for our fantasy portfolio. So here is what we did and where we are:


100 shares of LULU cost basis $6,855.00 value is $6,848.00. (reflects the $7 commission)
GNTX cost $1,856.00 current $2,027.00 .... +171.00
BNS paid $5,408.00 value $5,870.00 = +$462.00
TSCO paid $6,667 value $7,672.00. = + $1,005.00
KMX paid $5,444 value $6,193.00 = + $749.00
LCI paid $3,238 value $2,495 = - $743.00
JLL paid $9,699 value $10,313.00 = + $614.00

Well LCI is doing much better. We were down over $1,200 at one point. Looks like our gain at this point is 5.75% or $2,251.00 growth since September. We are experiencing unprecedented growth in the markets in this political climate. Enjoy. It comes down also. Put on your seat belts.

Trump Market

Barrow thinks the Trump election has caused investors to go with gut instinct. What Keynes called "animal spirits."

"Steve Barrow, currency and fixed-income analyst at Standard Bank, said in a Wednesday research note “whatever fears might exist in some quarters about Trump’s win, some sort of animal spirits might have been spurred.” So-called animal spirits is an oft-used term on Wall Street coined by famed economist John Maynard Keynes to describe gut instinct. Or as Keynes explained, “a spontaneous urge to action rather than inaction,” in his book The General Theory of Employment, Interest, and Money."



Why do the markets like a Trump presidency?

1. No uncertainty. Election is over.
2. Tax reform.
3. Real job growth.
4. Infrastructure spending.
5. Pro growth, pro markets people in his administration. 

Concern of the markets?

1. Will he keep his promises or waffle on some?
2. Will he create a counterproductive trade war?

3. Inflation leading to higher interest rates.
4. Infrastructure spending. He could spend too much.

"Now, with the GOP controlling the House as well as the Senate, traders see real economic growth on the horizon, not just a Fed-induced stock-market bubble where interest rates are so low, there’s no other place to put your money."

"What, specifically, does the market like about Trump’s plans? His promise to cut both corporate taxes and red tape will translate into higher corporate profits so businesses can expand and create jobs. Real unemployment can finally decline not because people are dropping out of the workforce but because they’re actually working again."

Charles Gasparino is a Fox Business Network senior correspondent.


Our portfolio is doing well today. I wish I could do this well on a regular account. We are up to a gain of 3.64% over three months. That's a great quarter. Tractor supply is lights out good with a 14.31% gain. We have a paper gain of $1,204.50 in the overall portfolio even with a paper loss of $838.00 so far on Lannett (LCI) which we watch carefully. 

A Michigan Company GNTX

Michigan playing Ohio State and thought I would do a study between time outs. This is a slow grower but has some upside potential in a long term portfolio. A Michigan company. Ugh. Michigan lost in double overtime. 

Gentex Corporation GNTX

Here is a Michigan company that makes America great and is solid "yeses" in the Better Investing universe with conservative estimates. They have a footprint in transportation, fire protection, defense and traffic safety. 
Here is a yahoo description of the company.

Gentex Corporation designs, develops, manufactures, and markets automatic-dimming rearview mirrors and electronics for the automotive industry; dimmable aircraft windows for the aviation industry; and commercial smoke alarms and signaling devices for the fire protection industry worldwide. It offers automotive products, including interior and exterior electrochromic automatic-dimming rearview mirrors, automotive electronics, and interior and exterior non-automatic-dimming rearview mirrors with electronic features for automotive passenger cars, light trucks, pick-up trucks, sport utility vehicles, and vans for original equipment manufacturers, tier one automotive mirror manufacturers, and various aftermarket and accessory customers. The company also provides photoelectric smoke detectors and alarms, audible and visual signaling alarms, electrochemical carbon monoxide detectors and alarms, and bells and speakers for use in fire detection systems in office buildings, hotels, and other commercial and residential establishments. Gentex Corporation sells its fire protection products directly, as well as through sales managers and manufacturer representative organizations to fire protection and security product distributors, electrical wholesale houses, and original equipment manufacturers of fire protection systems. The company was founded in 1974 and is headquartered in Zeeland, Michigan.

Positive Indicators:

1. Sales growth last five years 11%. It is a small/mid company with just over 1Billion in sales.
2. Pre-tax profit on sales was 27% and easily leads the industry.
3. Earned on equity though is 17.6% which is just average for the industry.
4. Historic earnings per share is greater than sales but not too drastic with 19.7%.
5. Dividend has gone from .24 to .36 over past five years but not more than 1/2 of earnings per share of $1.21.
6. Upside is 3.6 to 1.
7. This puts price in high of buy zone. Probably should wait for total market pullback before buying this. 
8. This is a President Trump stock. It will move with auto industry and defense spending.

Negative Indicators:

1. Market as a whole is due a pullback.
2. Insiders only have 3% ownership indicticating a bearish mood. 
3. It is at a 52 week high. 


We will buy 100 shares at yesterday's price. 

Bought 100 GNTX (a Nasdaq stock) @ $18.49. Cost basis $1,856.

PORTFOLIO TOTALS

GNTX cost $1,856.00 current $$1,849.00 .... -7.00
BNS paid $5,408 value $5,394 = -12.00
TSCO paid $6,667 value $7,461. = + 794.00
KMX paid $5,444 value $5,838= + 394.00
LCI paid $3,238 value $2,290 = - 948.00
JLL paid $9,699 value $10,019 = + 320.00

Paper gain since September of $539 or 1.67%. We will receive dividends and can absorb any pullback. Long term investments. Timers would sell some gainers but that is a poor strategy. We have good companies with good fundamentals so we forget fluxuations (volatility). Investing is a mindset and conviction. LCI is a mystery but still solid mathematically. We will see. 

THE BANK OF NOVA SCOTIA a little international flavor

THE BANK OF NOVA SCOTIA

The Bank of Nova Scotia provides various personal, commercial, corporate, and investment banking services in Canada and internationally. It offers financial advice, solutions, and day-to-day banking products, including debit cards, checking accounts, credit cards, investments, mortgages, loans, and related insurance products to individuals and small businesses; and commercial banking solutions comprising lending, deposit, cash management, and trade finance solutions to medium and large businesses comprising automotive dealers and their customers through a network of approximately 1,000 branches, 3,900 automated banking machines (ABMs), and commercial relationship managers. The company also provides a range of financial products, solutions, and advice to retail and commercial customers in Latin America, the Caribbean, Central America, and Asia primarily through a network of approximately 2,000 branches and offices, 4,600 ABMs, in-store banking kiosks, and specialized sales forces. In addition, it offers wealth management services through 100 offices, including asset management and advisory services for retail and institutional investors. Further, the company provides solutions to corporate, government, and institutional clients, which comprise corporate lending; transaction banking, including trade finance and cash management; investment banking, including corporate finance, and mergers and acquisitions; fixed income and equity underwriting, sales, trading, and research; prime finance comprising prime brokerage and stock lending; foreign exchange sales and trading; energy and agricultural commodities trading and hedging; precious and base metals sales, trading, financing, and physical services; and collateral management. It also offers its products through mobile, Internet, and telephone banking. The Bank of Nova Scotia was founded in 1832 and is headquartered in Halifax, Canada.

Why include international stocks? We are in a global community and international exposure provides a hedge against American volatility. This bank has been around since 1832. When interest rates go up in the US these stocks will benefit.

Well here are the Better Investing stats on this one. It is all yesses in our criteria.

1. It is a 12 Billion large capitalization company with 8.5% sales growth over 5 years.
2. It had pre-tax profit of 39% and is 10% above the industry average or 29%.
3. It earned 17% on stockholder's equity and surpassed its industry rate of 8%.
4. It earned 5% earnings per share a little less than sales.
5. It pays a dividend but within the acceptable parameters.
6. It is 9.5 to 1 which is an excellent upside downside ratio.

CONCERNS

1. 5% growth is low.
2. It may be a slow mover.
3. Change in NAFTA may hurt Canadian economy.
4. There may be better Canadian banks like The Bank of Canada.

We will invest in this company today in our educational portfolio.

We bought 100 shares of BNS @ $54.01 or $5,408 including $7 commission.

So where are we today on 100 shares of each?


BNS paid $5,408 value $5,401= -7.00
TSCO paid $6,667 value $7,375.00 = + 708.00
KMX paid $5,444 value $5,632= + 188.00
LCI paid $3,238 value $2,165 = - 1,073.00
JLL paid $9,699 value $10,048= + 349.00

So we have gains of $165 since September or .52% gain. We will watch and learn.

Jones Lang LaSalle

Jones Lang LaSalle 
www.jll.com






Jones Lang LaSalle Incorporated or JLL is a professional services and investment management company specializing in real estate. It is headquartered in Chicago, Illinois. They have 60,000 employees. They offer a range f real estate services, including agency leasing, project and development management/construction, capital markets, property management, corporate finance, real estate investment banking/merchant banking, energy and sustainability services, research, facility management outsourcing, strategic consulting and advisory services, investment management tenant representation , lease administration, transaction management, logistics and supply chain management, valuations, mortgage ordination and servicing, and value recovery and receivership services. The company also provides investment management services in institutional and retail investors, including high net worth individuals. It offers its services to real estate owners, occupiers, investors, and developers for various property types, including, cultural, educational, government, healthcare, laboratory, hotel hospitality and sports facilities; industrial, warehouse, office, residential, and retail properties.; critical environments, data, and transportation centers; infrastructure projects; military housing, and shopping mall.

This company was just bought by our Mustang Investment Club in October we paid $114.90.

Here are the statistics:

Positive Considerations:

1. 14.4% sales growth over the past five years. It is a mid capitalization company with 6 billion in sales in 2015.
2. Pre-tax profit on sales is 8.02% and that leads the industry average of 6.27%.
3. It has a 13.43% earned on stockholders equity that also leads the industry of 6.04%.
4. Earnings per share is 28.8% which is a little higher than sales. We like for it to be close to the same as sales. So this one is questionable. Not a deal breaker though.
5. It pays a .62 dividend which is less than half of earnings so they are spending on growth not tweaked to pay income.
6. The upside/downside ratio is invalid to 1 because the price is below the low end of the buy zone.
7. It is below the buy Zone at $96.98. The buy zone is $115-194 so it appears to be a bargain at this price.


Concerns:

1. They reported third quarter  EPS of $1.42 down from $2.56 last year and below adjusted estimates of $1.99.
2. Most analysts think this is an anomaly although they cannot explain what has happened.
3. In June of this year they acquired BRG ...the leading corporate Real Estate technology and management firm. This settled in July so not sure how this is going to factor into the bottom line. It is also a reason for the discrepancy in earnings and sales. Uncertainty.

We will purchase today 100 shares at 96.92. So we paid $9,699 with the $7 commission.

Here is where we stand:

TSCO $7,205 we paid $6,667 so gain of $538
KMX $5,689 we paid $5,046 so gain of $245
LCI $2,425 we paid $3,238 so loss of $813
JLL $9,692 we paid $9,699 so loss of $7

Loss of $30.

Tractor Supply More Than Tractors

I am writing this at McDonalds the day after the historic election. Since the rural white working class guys got out to vote without being surveyed by the pollsters I decided to tip my red cap to one of the places many of these do-it-yourself guys hang out.

It is none other than Tractor Supply. The ticker or symbol used to identify it on the Nasdaq Market is TSCO. How do you know it is listed on Nasdaq and not the Dow Jones Market the other trading marked used for stocks? It is the difference in 3 and 4. Nasdaq listed companies have 4 letters in the ticker and Dow companies have 3. That's it.

www.tractorsupply.com


TSCO has 1,575 stores in 49 states. Their mission is to supply the lifestyle needs of recreational farmers and ranchers and others who enjoy the rural lifestyle, as well as tradesmen and small businesses.

It meets all of our Better Investing criteria. Over the past five years:

1. Sales grew by 10.2% ... With 6 Billion with a B in sales it is a large cap company.
2. It leads the industry in pre-tax profit with 9.6% compared to a roughly 6% industry average.
3. It leads the industry in earnings on equity with 27.1% compared to 9%+ for the industry.
4. Earnings grew by 18.7%
5. Its upside downside ratio is 10.1 to 1. Anything over 3-1 is considered a good stat.
6. Its dividend has grown from .22 to .76 in those years. We are more excited about companies that don't pay a dividend so they spend cash on growth. It just increased its dividend to .96.
7. It is currently in the BUY zone at $66.60. The low of the zone is $60 and high $84.20.

Positive factors:

1. Last month it increased its pet supply inventory by purchasing Petsense. Pet food and supplies is a major industry.
2. The oil business will get a boost in a Trump presidency taking away some of the downward pressure on earnings created by energy dominated economies like Oklahoma.
3. It has a healthy 21.5 price to earnings ratio.
4. It just announced a stock buy back that will boost the stock price. A psychological move but usually not good long term.
5. It increased its dividend another move to boost the current price. Short term move. Positive if earnings and sales improve.

Negative factors:

1. It recently reported earnings with a warning that sales will not meet analysts expectations over the near term and cites economies in the south hurt by the downturn in the energy industry.
2. It just announced a stock buy back that will boost the stock price. A psychological move but usually not good long term. This is in both lists. Long term it is negative if earnings and sales don't turn around.
3. It increased its dividend another move to boost the current price. Short term move. A negative if downward trend continues more than two quarters from now.

So for our test portfolio we will put in a buy market order and buy 100 shares at $66.60 or $6,660.00 plus $7 to the brokerage company. Cost basis (our cost at settlement) is $6,667.00. We lose $7. Ha.

We have the following stocks since September 22:

LCI COST US $3,238 it is now worth $2,020 ugh so -$1,212
KMX COST US $5,451 it is now worth $5,046 ugh so -$405
TSCO COST US $6,667 it is now worth $6,689 yea so +$23

Markets as a whole corrected in October in anticipation of the election. LCI was hit by the FDA with a declassification of one of its drugs. That one may need to be sold but it will go in a good direction in a Trump administration. We will see. If LCI reports earnings that follow our criteria we just hold our ground. It not it gets a new home.

CarMax Is Worthy of Consideration

My purpose in this blog is to offer information I am using to seek ways to make significant gifts to ministry causes on my heart. The best gift one can make is the gift of appreciated stocks. So if we are actually able to buy stock, have it appreciate over time beyond a year and not sell but give the stock we are able to do more. Of course that is assuming appreciation. So, I seek to use a proven method to analyze companies to give me the best opportunity for growth. It is a tool used in investment clubs since 1951 called the Stock Selection Guide. I have found another company for your consideration that meets the strict guidelines of the SSG.

Ticker: KMX 

CarMax is a $15 Billion company making it Large Capitalization in the Better Investing rankings. 

Sales grew at 11.6% over five years and earnings at a healthy 15.4%. Pre-tax profit on sales has been a steady 6.58% over that same period and earnings on equity was 16.38%. Its debt to capital is at 71% but car companies are always high in floor plan debt. In most companies we look for 33% or less. 

It is the leader in the industry over AutoNation, Group 1 Automotive and Penske Automotive Group in sales and earnings lag the group average some. 

It is currently in the high of the BUY zone at $56.5. That zone is $42-58. The upside/downside is 3.6 to 1.

CarMax is the nations largest retailer of used cars. It has 158 lots in 60 cities. It also has a profitable financing arm. In 2015 the average price per car was $19,917 and average profit per car of $2,109 a 10.6% margin. 

Positives:

1. It has enhanced its web sales development and has a major competitive advantage in this venue.
2. It has a wholesale vehicle auction that is 14.5% of sales. This allows an outlet for trade-ins and slower merchandise.
3. Greater number of drivers in the future and gas prices make automobiles more attractive. 

Negatives:

1. Car business is cyclical.
2. New cars are sometime easier to buy. 
3. Pricing has been more difficult and margins are trending lower

We are going to add to our portfolio 100 shares of KMX @ $54.44 or $5,444.00 minus $7 transaction fee so cost is $5,451.00. 

LCI $3,000 value ... $3,238 cost basis ... -240.00

KMX $5,444 value ... $5,451.00 cost basis ... -7.00

Sent from my iPhonehttps://www.carmax.com

Getting Started Now

The best time to start investing is NOW. Randy Thurman, a CPA and financial advisor, who taught my investment 101 class at Oklahoma City Community College told our class that the number one obstacle to financial success is procrastination. So start.

Where to start?

1. Contribute regularly to your company retirement plan. If they match at least contribute to capture that free money. You will not miss it.

2. Set up a monthly contribution to your future. Start with $50 a month and lock it in automatically.

A. That may go to a brokerage company like TD Ameritrade, Scottrade or you choose. Open an account and start an automatic payment to that account and then forget it. Live life.

B. You may instead wish to open a dividend reinvestment plan and purchase small portions of one stock each month with the quarterly dividends going to purchase more shares. These usually require a $500 - $1000 start up investment. Click on link below.

https://www-us.computershare.com/Investor/3x/Plans/PlansList.asp?bhjs=1&fla=1&cc=us&lang=en

Or most mutual funds will allow you to make monthly contributions once you have established an account. I have used the Oakmark Funds. They also require a lump sum to star the account.

 http://www.oakmark.com/oakmark.htm

The key is to start. I will start my/our $50 savings plan? Most can be done online today.

Why Finance? A Drug Company to Consider

I am a retired minister. That should scare you. Most ministers are not thought of as financial minds. As a matter of fact, I was turned down one time by a prominent Oklahoma Oil Company for a company credit card on the basis that I was the pastor of a church. They did not say that but my cousin worked at the corporate office and when I asked why I was rejected she informed me that ministers do not have a very good reputation in the financial community. That was new to me a young guy, pastor of his first church, in a rural community with only one gas station. I just paid cash at Frank's store and Kerr McGee. Oh, I was not going to say the name but it does not matter because they are no longer in business. Poetic justice. I did not get over it.

This new blog is entitled:

τοποθέτηση χρημάτων 

Financial Investment in greek. 

The greek is to prove I do have a theological education (a doctor's degree) but this blog is not about theology. It is about making money in the stock market. I started to call the blog Dr. Deep Pockets or Dr. Deal but I don't feel like an expert on this subject. How does that work for you? I just study hard and use strategies I have gleaned from observation, experience, research, and through a discipline I learned in my  investment club of almost 20 years. The SSG or Stock Selection Guide. 

Each post will recommend a stock I or we are studying and recommending with thoughts as to why we or I think it is worthy of your consideration. I am not a broker, the son of a broker and all of the small print lawyers write to assure that I will not get sued for your taking my advise apply to this post. This is not advise just information. Take it or leave it. If you make money then give me credit and share my post. If you lose money then go cry to someone else. Not really. You can go talk to your pastor about it. He only works  two days a week. Ha. Inside joke. 

So the first stock to consider:

http://www.lannett.com


Here is what they say about themselves.

"Founded in 1942, Lannett develops, manufactures and distributes generic prescription pharmaceutical products in tablet, capsule and oral liquid forms to customers throughout the United States. Lannett markets its products primarily to drug wholesalers, retail drug chains, distributors, and government agencies."

Positives about the company:

1. It sells generic drugs. That's cheaper. Attractive product.
2. Baby boomers are aging. That's me. More demand.
3. Although it is a small capitalization company (one under 1 Billion in annual sales) it has grown sales in the last five years at a rate of 48% and earnings at a rate of 46%. These two aspects of a company growing at about the same rate is a great sign.
4. This company meets all of the criteria on the SSG stock selection guide for the Better Investing Community. It leads the industry in pre-tax profit on sales and earnings on stockholders equity. It is also in the BUY zone with a 4.6 to 1 upside down ratio. At $32.38 it is in the middle of the buy zone that is between $15.60 and $39.20.

Negatives about the company or economy:

1. The current political climate is not good for pharma stocks. Uncertainty in the election cycle where both candidates are questionable on how health care will go under their administration.
2. They are still absorbing the recent buyout of Silarx Pharma and some questions remain as to how that will settle out.
3. It has lots of current debt that spiked in 2015 to make acquisitions.


For this blog we will buy 100 shares today at the market price of $32.38 and will see how it does over the next 12 months compared to the other companies we will study. Follow along to see how this works.

So we currently own 100 (a round lot) of shares of LCI @ $32.38 or $3,238.00 - $7 transaction cost or a value of $3,231.00 with a cost basis of $3,238.00 so we have already lost money. Ha! That's investing.